LI HO MAN RAYMOND v. LI HUNG HON

HCA497/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.497 OF 2000

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J U D G M E N T

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1. This has been a very short trial with each party giving evidence in person and calling no other witness. The plaintiff's claim is essentially that about 7 August 1993, the defendant requested the plaintiff to lend to the defendant the sum of $1,000,000 - that sum was lent, at an agreed interest rate, but the principal and most of the interest has never been paid and remains owing. In evidence today, the defendant has admitted receiving that money as a loan. The defendant also acknowledged that he offered to pay, and it was accepted by the plaintiff that there would be, an agreed interest rate of $25,000 a month, being an annual interest rate of 30%.

2. The defendant's case is that he has repaid the loan and that he repaid it on 24 August 1993. In evidence as original Exhibit D1 and in the plaintiff's bundle as copy item B2, there is a deposit slip of the Hang Seng Bank Limited showing a payment of $1,000,000 in to the plaintiff's current account. This is a point which Mr Jason Wong, who has represented the plaintiff most attractively relies upon, as all subsequent payments which are admitted to have been made by the defendant to the plaintiff, were made in to the plaintiff's savings account.

3. So the issue between the parties is serious but short. Both accept that the loan was made. Both agree the terms of the loan. One says the loan was repaid, the other says he is still owed the money.

4. In evidence before me provided by the plaintiff are copies of a number of cheques paid either by the defendant or on the defendant's behalf to the plaintiff. In my judgment, it is significant that these cheques are in every case either individually, or by total, in round numbers precisely $25,000 or $31,000. For example, the defendant's case is that by a cheque in evidence, document B4, on 9 September 1993, his younger brother, Mr Li Hung Fu Redy, paid to the plaintiff a sum of $25,000. It is the defendant's case that that sum was paid as the interest on the agreed loan and upon him having already repaid the $1,000,000 on 24 August by the transaction which is evidenced through the Hang Seng Bank account. He says by the payment of the interest on 9 September that extinguished his total indebtedness to the plaintiff.

5. However, the matter does not stop there. On 14 October, there are two cheques one by a Mr Li Ming Tung in the sum of $22,120 and one in the defendant's own hand-writing drawn on his own account in the sum of $2,880. Those two cheques total the round number of $25,000. In the next month, there is another cheque in the sum of exactly $25,000 drawn by the defendant on his account payable to the plaintiff. The next month, in January, there was another cheque for $31,000 paid by the defendant to the plaintiff. In April 1994, the defendant uses the resources of a limited company called Open Centre Company Limited and signing as an authorised signatory a cheque for $31,000 was paid over to the plaintiff. (The additional $6,000 above the $25,000 was because of an earlier loan of $200,000, to which I refer later, but which is not otherwise an issue on the pleadings.)

6. The plaintiff's case is reasonably straightforward. It is that the defendant paid interest for the period from September 1993 up to July 1994. Some of those payments are evidenced by cheques, some are paid in cash. Thereafter, however, it is the plaintiff's case that the defendant failed to pay either the principal or the interest. This is subject to a variation, because the plaintiff acknowledges that he and the defendant were involved in some joint and other business, via an entity known as TW (which apparently runs some form of Boarding House in Yau Ma Tei). That from the cash flow from TW, the plaintiff abstracted significant but regular amounts (principally $25,000 a month) which he took as further part payment of the interest arrears said to be owed by the defendant to him. A document identified as Exhibit P5 shows that the plaintiff took the sum of $886,176.40 from the cash flow of TW as some form of loose set-off from 17 August 1997 up until January 1999. In evidence before me, the plaintiff acknowledged that that period would itself have only generated contractual interest at the total of $425,000, and the remainder some $450,000 odd, fell to be set-off against the plaintiff's claim for unpaid interest between July 1994 and September 1997. In the event in the course of the hearing, Mr Wong applied for and was granted leave to amend the Statement of Claim by substituting in paragraph 6(i), firstly the period of 36 months for the previous period of 37 months and the sum of $638,423.60 for the previous sum of $925,000. The total in paragraph 6 is now expressed as $913,423.60 and there is an identical amendment to the prayer in the Statement of Claim. The defendant had no objection to this which, on any view, can only improve his case if there is liability against him and is inconsequential if he were to succeed anyway. I ordered that re-service of the documents in all the circumstances, be dispensed with.

7. The plaintiff gave evidence before me. In the course of his evidence Mr Li Ho Man, Raymond introduced a number of documents which it must be said had not been produced in the course of the orthodox discovery exercise. I offered the defendant an adjournment if he required, but upon examination of those documents he accepted that he could not be disadvantaged by them and in essence his case was they had no relevance to him or to this particular claim. The documents produced by the plaintiff are in my view somewhat informative. It is apparent that on 24 August 1993 there were two interesting transactions on the plaintiff's Yau Ma Tei branch Hang Seng Bank bank account. Firstly, Exhibit B2 in the plaintiff's documents bundle shows that a cheque deposit of $1,000,000 was credited into the savings/TD account. This is the payment that the defendant says he made in total fulfillment of all indebtedness. But this transaction is followed immediately on the same day by a cheque numbered 650523 in the sum of $1,000,000 drawn from the account in favour of a company known as Hero Network Limited. This cheque is signed by the plaintiff. The plaintiff's case was that he and the defendant were at this stage good friends,老朋友, had known each other and worked in business together. But he said he gave cheque 650523 as a blank signed cheque to the defendant. The defendant filled in both the payee and the amount. As odd as that may seem, I believe the plaintiff on this issue. The defendant's case was that the plaintiff could not write English and the defendant was simply helping the plaintiff write the English parts of the cheque and all that was really happening was that the plaintiff was making an investment into the company called Hero Network Limited.

8. In evidence before me is the Memorandum and the Articles of Association of Hero Network Limited. Interestingly enough they show and the defendant admitted, that his younger brother Li Hung Fu really is a director and substantial shareholder of that company. It must be remembered too that Li Hung Fu already also signed cheques in favour of the plaintiff in this case.

9. I am completely sure that I have not heard the whole tale from either of the parties. This looks like it has all the intrigue of a standard Mongkok thriller, but based on all the evidence, I am able to come to the conclusion as to which witness I prefer. Before moving to my conclusion, however, I deal with other significant highlights in the evidence and my views of them. In many ways, this is a credibility case as Mr Wong said. I must decide which version I prefer. What is not in dispute is that the loan existed. What is not in dispute is that the interest rate was agreed. What is in dispute is whether the loan was repaid. The plaintiff says he gave a blank cheque to the defendant. The defendant insisted it had nothing to do with him. The defendant says it was simply an example of the plaintiff himself investing in the defendant's brother company.

10. It is difficult to escape that this case has as its highlights the numbers $25,000 and $31,000. They reappear in regular cycles, for example, if one looks at Exhibit P5, one can see that the sum of $25,000 appears approximately 10 further times. On the plaintiff's case, these are further payments in relation to the matter.

11. The plaintiff says, but the defendant denies, that there were earlier loans between them. The plaintiff in particular relies upon a loan of $200,000. There is an evidence before me today, a hand-written document which shows on the face of it, a loan of $200,000 to the defendant. Whilst it is undoubtedly a self-serving document and whilst it undoubtedly was not discovered in the discovery exercise and whilst undoubtedly it has some curious features, it does record that loan. I take it, together though with all possible circumspection, into account in deciding where the truth and credibility and reliability lies in this matter.

12. All the interest payments (which is the status alleged of them by the plaintiff) were paid into the savings account. But the $1,000,000 which the defendant says was the repayment of the loan, was paid into the current account and then straight out of it on the same day. There are in this case just too many coincidences : $1,000,000 in and $1,000,000 out! Round sums not denied at $25,000 and $31,000. The defendant's evidence was that these sums of $25,000 and $31,000 which were regularly paid on a monthly basis were indebtedness for mahjong debts. To me this absolutely does not have the ring of truth. The defendant would have me believe that he was indebted for mahjong sums and that these numbers had nothing to do with this claim. That is certainly an assertion of fact that I am unable, on any view, to accept. The defendant has failed in his attempts to have me believe that the considerable number of payments in the sum of $25,000 and $31,000 were merely evidence of periodic, cyclical mahjong debts.

13. The defendant's case has become considerably different than the way it was pleaded. Mr Wong is correct in observing that the defendant's case as pleaded, as it remains even now, (and, he had solicitors on the record throughout up until 9 October 2001, that is three weeks ago) is first of all, a bare denial that there was any money ever borrowed at all. (See his paragraph 1). Yet his witness statement would "seem", if I may use that interpreted Chinese expression(似乎), to cover all bases for it suggests that if there was a loan, indeed it was repaid. I do note and take into account that the plaintiff's own witness statement though, albeit dated 6 November 2000 does not appear to have been filed in court until 23 May 2001, and then by consent out of time by the defendant's then solicitors. The defendant's own witness statement dated 21 May 2001 is simply quite stunning as it is totally bereft of detail. I need to set it out. Paragraph 1 says he is the defendant in the action. Paragraph 2 says he has known the plaintiff for more than 20 years and they had co-operated to run various businesses. I now set out the remaining two paragraphs of this document which if one were to remove the intitulement of the action would occupy list than half of a single page. Paragraph 3 reads "I would say that the plaintiff wrongfully demands payment from me for the sum of HK$1,000,000. On or about 24 August 1993, I have been paid the sum of HK$1,000,000 to the plaintiff and also on or about 9 September 1993 paid to the plaintiff the sum of HK$25,000 being interest thereon." And paragraph 4 says "I further say that I never owed any money to the plaintiff at all."

14. This is a murky slightly saturnine case through which the court would never get to the bottom. The underlying enterprises and transactions appear to rest near the margin of commerce and law. It is apparent to me though that the commercial resonance of this situation is that there has been loans and borrowings by the defendant from the plaintiff on and off. Some sort of running account has been kept but in this case, the plaintiff has the advantage of a signed IOU in relation to this particular loan. Mr Wong is quite right in asking why the defendant would not have got the IOU back in 1993 if in fact the loan had been paid as he said. The nonchalance of the reply by the defendant on this point is simply not believable to me. In this case, the defendant has adjusted his ground as the case developed, whereas the plaintiff's case has been substantially unaltered, albeit it must be said neither party has added lustre to themselves by the way they have dealt with discovery. But this feature is, I find typical of the alternative accounting techniques employed by the plaintiff, but it is generally reliable. As occasionally happened in these cases, the accounting is elementary if not rudimentary. A friendship has gone sour. I find on the evidence that it was a function of the pre-existing relationship between them, that they thought they could deal with it on a more gallant and honourable basis than otherwise has turned out to be.

15. In the end, I have to decide where the truth lies, and I need to decide that on the balance of probabilities. I take into account that the defendant said he borrowed this money for the purposes of obtaining part of a deposit to purchase a piece of land in Tsim Sha Tsui. He gave evidence to me which suggested that a significant profit of about $10,000,000 was made on the sale of that property. He was entitled to about 30% of that profit. He clearly was desperate at the time in 1993 because he said unless that money could not be obtained from the plaintiff, he could not afford to partly finance the deposit and therefore the sale would have fallen through. That is no doubt why he was prepared to pay what otherwise may have seem to be a usurious interest rate of 30%. On his case, he said he only borrowed the money on 9 August and yet he repaid it 15 days later. I cannot believe that and I do not believe that based on my appreciation of the oral testimonies, their demeanours, the realities of the case and the supporting documents. It seems to me obvious on this case that the defendant got himself into financial difficulties. He admitted to me that a million dollars was not much to him in 1993 but was a very significant sum to him now. He clearly still is, as he says, in the property speculation business. He said he is not a property agent, he is a buyer, a seller, a wheeler-dealer of properties even now. In my judgment, he borrowed this money. He borrowed it at a very large interest rate. He paid some of it back slowly. He got into difficulties, albeit he has not told me that directly. Eventually, he and the plaintiff did some further and other business involving TW. In the course of that, the plaintiff has in a de facto set-off situation, claimed money back and I find that the plaintiff did, as he admitted, take out $886,000 odd from the cash flow in partial repayment. The plaintiff kept pressing for the bulk. It was not paid. Solicitors were instructed and I have already set out the defence that has been put forward a complete denial and an associated partial explanation. During the course of this case, as I said Mr Wong has modified the claim. I am prepared to give judgment to the plaintiff on this amended claim. In terms of the Statement of Claim, I give judgment to the plaintiff for the loan amount of $1,000,000. I give judgment to the plaintiff for outstanding contractual interest in the sum of $913,423.60. Interest at the judgment rate is to run on the combined total of those amounts, until repaid. And as there can be no argument, I make an order for costs in favour of the plaintiff on a party and party basis.

[To the parties]

16. I have given judgment in the sum of $1,913,423.60 in the plaintiff's favour, with interest to run, and the plaintiff shall also have the costs of the action.