NGAI YING CHU JUDY AND ANOTHER v. LEUNG CHI LING VINCY AND ANOTHER

HCA 991/2015

[2019] HKCFI 1158

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 991 OF 2015

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REASONS FOR JUDGMENT

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INTRODUCTION

1.  In this action, the 1^st Plaintiff claims against the Defendant for repayment of loans in the total amount of HK$853,320, and the 2^nd Plaintiff claims against the Defendant for damages in the amount of HK$395,829.69.  The Defendant failed to appear at the trial of the action, which took place on 25 April 2019.  At the conclusion of the hearing on 25 April 2019, the court gave judgment to the 1^st and 2^nd Plaintiffs against the Defendant more particularly set out below, with reasons for the judgment to be given later, which I now do.

BASIC FACTS

2.  The 1^st Plaintiff and the Defendant were formerly secondary school classmates, and have known each other for many years.

(i) The 1^st Plaintiff’s loan of HK$300,000 to the Defendant

3.  Sun Honest Asia Limited (“Sun Honest”) was a company incorporated in Hong Kong on 1 June 2007. Its principal business was the retail sale of furniture.  The 1^st Plaintiff and the Defendant were the only 2 shareholders, with each holding 50% of all the issued capital, and directors, of Sun Honest.  Sun Honest was wound up pursuant to a winding up order dated 12 May 2010.

4.  At the time of the setting up of Sun Honest, the 1^st Plaintiff and the Defendant each agreed to contribute HK$500,000 to the working capital of the company.  However, the Defendant did not have sufficient funds to make the capital contribution. On or about 30 June 2007, the 1^st Plaintiff agreed to make a loan of HK$300,000 to the Defendant to assist her in paying up her share of the capital contribution to Sun Honest, and the Defendant agreed to repay the loan within 1 year.  The details of the loan were recorded in a handwritten note prepared by the 1^st Plaintiff dated 30 June 2007.  On 9 July 2007, the 1^st Plaintiff paid the sum of HK$800,000 into the personal bank account of the Defendant at Bank of China (Hong Kong).  The sum of HK$800,000 represented the 1^st Plaintiff’s own share of the capital contribution in the amount of HK$500,000 plus the loan of HK$300,000 to the Defendant.

(ii)   The 1^st Plaintiff’s loan of HK$553,320 to the Defendant

5.  At all material times, the 1^st Plaintiff was working in a company called Dongguan Dickson Furniture Factory Co Ltd at Houjie, Dongguan City, PRC, which was also the sole supplier of furniture products to Sun Honest, while the Defendant was responsible for the day-to-day operations and management of the retail business of Sun Honest in Hong Kong.

6.  Between September 2007 and December 2008, the Defendant made a number of unauthorised withdrawals from Sun Honest’s bank accounts in Hong Kong.  The 1^st Plaintiff first became aware of this matter in or about February 2009 when she made inquiries with the Defendant about the bank balances of Sun Honest’s bank accounts.  Eventually, the Defendant prepared and gave to the 1^st Plaintiff a table setting out the amounts that she had withdrawn from Sun Honest’s bank accounts during the period from September 2007 to December 2008, in the total sum of HK$553,320.  At a meeting held at the 1^st Plaintiff’s office in Dongguan on or about 10 February 2009, the 1^st Plaintiff and the Defendant agreed that the 1^st Plaintiff would repay the sum of HK$553,320 to Sun Honest on the Defendant’s behalf, and the same would be treated as a loan due and owing by the Defendant to the 1^st Plaintiff.

7.  On 16 February 2009, the 1^st Plaintiff paid the sum of HK$568,320, which included the said loan of HK$553,320, into Sun Honest’s bank account at Bank of China (Hong Kong).

(iii)  The Defendant’s written acknowledgements of the loans of HK$300,000 and HK$553,320

8.  By a loan note signed by the Defendant and dated 16 February 2009 (“the Feb 2009 Note”), the Defendant acknowledged that she owed to the 1^st Plaintiff two loans in the respective amounts of HK$410,000 and HK$568,320, and agreed to repay those loans to the 1^st Plaintiff during the Defendant’s lifetime (which meant, in my view, that the Defendant agreed that the loans were repayable on demand).  It is the 1^st Plaintiff’s evidence, which I accept, that the said amount of HK$410,000 included the loan of HK$300,000 mentioned in paragraph 4 above, and the said amount of HK$568,320 included the loan of HK$553,320 mentioned in paragraph 6 above.

9.  By a note signed by the Defendant and dated 12 March 2011 (“the 1^st Mar 2011 Note”), the Defendant acknowledged that, out of the repayment of HK$568,320 made by the 1^st Plaintiff to Sun Honest on 16 February 2009, the amount of HK$553,320 was attributable to loans that she had taken from the company.

10.  By another note signed by the Defendant and dated 12 March 2011 (“the 2^nd Mar 2011 Note”), the Defendant acknowledged that she owed to the 1^st Plaintiff (i) the sum of HK$300,000 in relation to her capital contribution at the time of the opening of the shop (that being a reference to Sun Honest’s retail business) in September 2007, and (ii) the sum of HK$553,320 which she borrowed from the 1^st Plaintiff in February 2009, and agreed to pay interest on the loans at the rate of 3% per annum.

11.  By a third document signed by the Defendant and dated 12 Mach 2011 (“the D678 Document”), the Defendant acknowledged and confirmed that she owed to the 1^st Plaintiff the sums of HK$410,000 and HK$553,320.  As earlier stated, the loan of HK$300,000 mentioned in paragraph 4 above formed part of the sum of HK$410,000 which the Defendant admitted she owed to the 1^st Plaintiff.

12.  Despite the 1^st Plaintiff’s demand for repayment of the loans in early 2014, the Defendant has failed to repay the same or any part thereof to the 1^st Plaintiff.

(iv)  The 2^nd Plaintiff’s claim for damages against the Defendant

13.  The 2^nd Plaintiff, Dickson Contemporary Furniture Ltd, was incorporated in Hong Kong on 27 April 2010 to continue the business of Sun Honest.  The 1^st Plaintiff and the Defendant’s husband (Mr Lee) were the only 2 shareholders, with each holding 50% of all the issued capital (comprising 2 shares), and directors, of the 2^nd Plaintiff.  As in relation to Sun Honest, at all material times, the 1^st Plaintiff was working in the PRC, while the Defendant and her husband were responsible for the day-to-day operations and management of the retail business of the 2^nd Plaintiff in Hong Kong.

14.  On 30 October 2013, Mr Lee resigned as a director of the 2^nd Plaintiff, and on 27 March 2014 he transferred his 1 share in the 2^nd Plaintiff to the 1^st Plaintiff.

15.  Between August 2010 and June 2013, the Defendant made a large number of unauthorised withdrawals from the 2^nd Plaintiff’s petty cash in the total amount of HK$321,335.89, full particulars of which are set out in a table (“the Table”) annexed to the Plaintiffs’ Re-Amended Reply dated 19 April 2017. According to the 1^st Plaintiffs, she first discovered the Defendant’s unauthorized withdrawals in July 2014. The monies withdrawn by the Defendant were apparently used for a variety of purposes, including cat foods, shoes, government rates, toothbrush, kitchenware, school fees, school uniform, student ID card, tissue papers, shampoo, shower gel, hair dye, lipstick, clothings, movies, haircut, makeups, cleaning items, shower curtain, shoe polish, carpets, toaster, cup noodles, meat, foods and other miscellaneous household items and expenses.  It is the 2^nd Plaintiff’s case that the Defendant spent the monies for her own purposes and not for any business purpose of the 2^nd Plaintiff.  The Defendant’s case, on the other hand, is that the monies withdrawn from the 2^nd Plaintiff’s petty cash were used for its business purpose.  The parties’ respective cases in respect of each item of the withdrawals are set out in the Table.

16.  After the commencement of this action on 5 May 2015, the Plaintiffs further discovered that between 2 December 2010 and 9 February 2011, the Defendant had drawn 21 cheques in the total amount of HK$74,493.80 upon the 2^nd Plaintiff’s bank account for payment of a variety of expenses for the Defendant’s own purposes.  The Defendant’s case is that the relevant payments were made for the 2^nd Plaintiff’s business purpose.

DISCUSSION

17.  The 1^st Plaintiff’s claims for the repayment of loans in the amounts of HK$300,000 and HK$553,320 are supported by contemporaneous documents, and the Defendant’s written acknowledgements.  The defences put forward by the Defendant that the loans were not due or had been settled in 2014, or that she withdrew monies from Sun Honest’s bank accounts with the knowledge and consent of the 1^st Plaintiff or Sun Honest, or that she signed the acknowledgements under duress, are not supported by evidence adduced by the Defendant (who did not attend the trial to give evidence), or any documentary evidence.  The defence that the claims are time-barred is also unsustainable in view of her written acknowledgements which were made less than 6 years from the date of the writ.   I am satisfied on the evidence that the 1^st Plaintiff advanced loans in the amounts of HK$300,000 and HK$553,320 to the Defendant, and the same are still due and owing to the 1^st Plaintiff.

18.  In so far as the 2^nd Plaintiff’s claim against the Defendant for damages is concerned, there is no dispute that the Defendant withdrew the relevant sums totalling HK$321,335.89 from the 2^nd Plaintiff’s petty cash, and drew 21 cheques in the total amount of HK$74,493.80 upon the 2^nd Plaintiff’s bank account.  I accept the 1^st Plaintiff’s evidence that the monies were used by the Defendant for her own purposes and had nothing to do with the 2^nd Plaintiff’s business.  I accept the 1^st Plaintiff’s explanations, and reject those advanced by the Defendant, in relation to the use of the monies in the total amount of HK$321,335.89 as set out in the Table. I also reject the Defendant’s defence that the monies in the total amount of HK$395,829.69, or any parts thereof, were withdrawn and used by her with the authority of the 2^nd Plaintiff. I am satisfied on the evidence that the 2^nd Plaintiff is entitled to recover the sum of HK$395,829.69 as damages from the Defendant.

DISPOSITION

19.  I give judgment for the 1^st Plaintiff against the Defendant in the sums of:

(1) HK$300,000 together with interest thereon at the rate of 3% per annum from 12 March 2011 to the date of judgment; and

(2) HK$553,320 together with interest thereon at the rate of 3% per annum from 12 March 2011 to the date of judgment.

20.  I give judgment for the 2^nd Plaintiff against the Defendant in the sum of HK$395,829.69 together with interest thereon at the HSBC prime rate from time to time plus 1% per annum from 30 June 2013 to the date of judgment.

21.  The Defendant shall pay the Plaintiffs’ costs of this action, including all reserved costs, to be taxed if not agreed.