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DCCJ 4086 & 5562/2018
(Consolidated)
[2024] HKDC 163
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 4086 AND 5562 OF 2018
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BETWEEN
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XIE JIA YUE
(also known as TSE JACQUELINE KAR YUE) |
Plaintiff |
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and |
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FUNG YUK CHING |
1st Defendant |
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THE ADMINISTRATORS OF THE ESTATE OF NGAN KENG HING (Deceased)
(Actions consolidated by the Order of Master Jacqueline Lee dated 20 January 2020) |
2nd Defendant |
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| Before: |
Deputy District Judge Joseph Vaughan in Court |
| Dates of Trial: |
4-7, 10 & 27 July 2023 |
| Date of Judgment: |
29 January 2024 |
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J U D G M E N T
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Introduction
1. This case is concerned with a dispute between the plaintiff, i.e. Madam Xie, and the estate of the late Mr Ngan Keng Hing (“NKH”) and his wife, Madam Fung Yuk Ching, i.e. the 1st defendant, related to certain alleged debts owed by the defendants to her, whereas the 1st defendant is also counterclaiming against the plaintiff for an alleged sum representing outstanding rental of a property.
2. There is no dispute that NKH and the 1st defendant have 5 children:
(1) Ngan Siu Wah Peggy (“Peggy”), now representing the estate of NKH as the 2nd defendant;
(2) Ngan Yuk Wah Ivy;
(3) Ngan Mei Wah;
(4) Ngan Hok Tim Terence (“Terence”); and
(5) Ngan Hok Leung Roger (“Roger”).
The parties’ cases
The 1st and 2nd Loans
3. To put the case in its context, it must first be mentioned that the plaintiff had been in a romantic relationship with Roger since around 2009, to the extent that they had been engaged, but the two of them had eventually gone separate ways in the lead up to the present proceedings.
4. Against this backdrop, the first part of the plaintiff’s case is that she had extended two loans to both the 1st defendant and NKH for the settlement of certain hospital bills of NKH. According to the plaintiff who testified at the trial, the first of the two loans was made on 16 September 2012 at the Hong Kong Sanatorium & Hospital, when both the 1st defendant and NKH had asked for her help to settle NKH’s interim hospital bill. The plaintiff says both the 1st defendant and NKH had acknowledged the loan and indicated to her that they would repay her afterwards. The Plaintiff then paid the interim bill of HK$4,000 by credit card (“the 1st Loan”).
5. As for the second of the two loans, the plaintiff’s case is that on 18 September 2012 at the same hospital, both NKH and the 1st defendant had again asked for her help to settle NKH’s final hospital bill before his discharge. Similarly, they both promised that they would repay the plaintiff. The plaintiff therefore settled the final hospital bill of NKH in the sum of HK$218,193 also by credit card (“the 2nd Loan”).
6. The plaintiff now claims for the repayment of HK$222,193 in total for the two loans with interest.
7. The 1st Loan is denied by both defendants. Their case is that neither the 1st defendant nor NKH had asked for help from the plaintiff. Although it is not disputed that the plaintiff had in fact settled the interim hospital bill of NHK, the case of the defendants is that they had offered to repay the amount of the bill to the plaintiff, but the plaintiff had declined to accept repayment. In other words, the plaintiff had voluntarily settled the interim bill out of good will.
8. As for the 2nd Loan, the defendants say that the plaintiff had not been asked to help settle the final hospital bill. On the contrary, it was Roger and Terrance who had agreed to pay for the medical bills of NKH instead.
The 3rd Loan
9. The plaintiff also claims for repayment of a third loan made to the 1st defendant in the sum of HK$120,000. It is alleged that on 2 March 2013, during a visit to the Ngan family home, the 1st defendant had asked the plaintiff for a loan of HK$120,000 to alleviate some short-term cash-flow problem of the Ngan family. The plaintiff agreed. The plaintiff says it was also agreed that the loan should be repaid within one month, after which a monthly interest rate of 2% would have to be paid by the 1st defendant. The plaintiff thereafter gave the 1st defendant a cheque in the sum of HK$120,000 on 3 March 2013, which was later cleared. The plaintiff now also claims for the repayment of the HK$120,000 with interest (“the 3rd Loan”).
10. The 1st defendant denies that she asked for the 3rd Loan and alleges that the HK$120,000 received from the plaintiff in fact represented outstanding rent due to her from the plaintiff and Roger for their use and occupation of the property situate at Flat C on 8th Floor of Block 9, Beverly Villas, No 16 La Salle Road, Kowloon (“the Beverly Villas Property”) which was purchased in the name of a company called Fordrise Limited (“Fordrise”), being a company held by the 1st defendant, at a monthly sum of HK$40,000.
The dispute over the Beverly Villas Property
11. The 1st defendant counterclaims against the plaintiff for HK$1,740,000 being the outstanding sum allegedly owed to her for allowing the plaintiff and Roger to use and occupy the Beverly Villas Property at a monthly sum of HK$40,000 as aforesaid, for 43.5 months from 1 September 2013 to 15 March 2017.
12. The plaintiff denies that there was any agreement made with the 1st defendant for her and Roger to use and occupy the Beverly Villas Property at a monthly sum of HK$40,000. On the contrary, she and Roger moved into the Beverly Villas Property on the 1st defendant’s representation that it was purchased as a gift to them instead. Relying on such representation, the plaintiff says that she had incurred expenses for the renovation and maintenance of the property, and for the purchase of furniture, as well as regular outgoings in the total sum of HK$642,295.28. As the 1st defendant now claims that the property was never intended to be a gift to her and Roger, the plaintiff says she has incurred such expenses to her detriment and in reliance of the aforesaid representation, and seeks restitution against the 1st defendant for the sums she had incurred by her counterclaim to the 1st defendant’s counterclaim.
The issues
13. The issues I need to decide on in this case are as follows:
(i) Whether the plaintiff had extended the 1st Loan to the defendants for settling the hospital bill in the sum of HK$4,000, or whether it was a gift to NKH as alleged by the defendants;
(ii) Whether the plaintiff had extended the 2nd Loan in the sum of HK$218,193 to the defendant as alleged, or whether there was an arrangement for Terence and Roger to pay the hospital bill as alleged by the defendants. The plaintiff further asks the court to consider, in the event the court finds that there was no related loan agreement, should the plaintiff nevertheless be repaid for the sum expended by her on the ground of unjust enrichment;
(iii) As for the 3rd Loan, whether the plaintiff’s payment of HK$120,000 to the 1st defendant was a loan to the 1st defendant or whether it represented outstanding rental for 3 months for the use and occupation by the plaintiff and Roger of the Beverly Villas Property as alleged (see (iv) below);
(iv) As for the 1st defendant’s counterclaim for the payment of outstanding rent in the total sum of HK$1,740,000, whether there was an agreement to pay rent between the plaintiff and/or Roger on the one part, and NKH and/or the 1st defendant on the other for the use and occupation of the Beverly Villas Property;
(v) Whether the plaintiff should be compensated by the defendants for the expenses spent on the Beverly Villas Property in reliance of the 1st defendant’s promise that the property was purchased as a gift to her and Roger.
Legal principles
On credibility
14. Since the determination of this case heavily rests upon the credibility of the witnesses, both parties have referred to the applicable authorities on this issue. The plaintiff submitted that in cases where credibility is important, the approach and principles outlined in Hui Cheung Fai & Anor v Daiwa Development Ltd & Ors, HCA 1734 of 2009, 8 April 2014 by Deputy High Court Judge Eugene Fung SC at paragraphs 77-83 would be applicable. It involves the consideration of the credibility or consistency of the witnesses’ evidence with regard to contemporaneous or other documents, the objective facts, the witnesses’ motives, and the overall probabilities and likelihood of the alleged happenings. Further, the more serious the allegation, the more cogent is the evidence required to prove it. In this regard, the defendants also referred to the recent case of Chan Kwok Hing trading as Chip Hing Machine Works v Chun Ming Machinery Engineering Ltd [2019] HKDC 875 at paragraphs 18-19 for the same principles of assessing the credibility of witnesses. In addition, the defendants pointed out that the court should caution itself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses or from the assessment of their character.
Secret recording
15. Mr. Liu for the defendants further pointed out that the evidence in the present case includes a secret audio recording made on or about 24 May 2017 by Roger during a meeting as will be referred to below, and disclosed by the plaintiff[1].
16. In Chau Yuet Ching Brenda v Chan Bo Ma William [2019] HKCFI 2778, DHCJ Le Pichon summarised at paragraphs 28-29 the relevant considerations to be taken into account when dealing with secret recordings:
“28. It should be noted that secret recordings of conversations have been held to be contrary to the right to freedom and privacy of communication under Article 30 of the Basic Law and carried with it significant elements of inherent unfairness. The weight to be placed on such evidence depended on how it came to exist, in particular the unfairness to the plaintiff that he had no opportunity to examine the footage to determine if any other passages should be put before court at all: see Chan Sung Lai v Chan Sung Lim Paul [2015] 4 HKLRD 268 at §§20, 22 – 23, 28 – 33.
29. The observations of DHCJ To made in Cheer Sky Ltd v Chan Yuet Sheung [2019] HKCFI 606 (HCA 939/2014, 7 March 2019) at§§48 – 49 are particularly apposite:
“48. … I am always sceptical about the probative value of such evidence. Such recording is certainly reliable evidence of what was said during the conversations, but not necessarily of its truth. The party taping the conversation must have certain purposes to achieve, including to induce the other party to say things which are advantageous to him or prejudicial to the other side. The other party who does not know that the conversation was being taped, may have unwarily adopted what was put to him without much thought. In assessing the reliability of the conversation, I would adopt the following approach. Anything said by the party taping the conversation which is against his interest would be given more weight. Anything that he said which is to his interest is self-serving and will be given no weight. Anything prejudicial said by the party being recorded would have to be tested against the totality of the evidence before weight is given to that piece of evidence.
49. In assessing weight to be given to a piece of conversation, it is always desirable to listen to the recording than to read the transcript. The intonation and tone of the speaker may give an impression which is very much different from that given by reading a transcript.” ”
17. In light of the above, Mr. Liu invited the court to consider the original voice recording made on 24 May 2017 as contained in the digital copy adduced as evidence in this case, and to assess the weight of the evidence with the above principles in mind.
Unjust Enrichment
18. The plaintiff’s counterclaim to the 1st defendant’s counterclaim asks for restitution on the ground of unjust enrichment as aforesaid. In relation to such a claim, reference has been made to Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at paragraphs 66-68 where Ribeiro PJ summarised the matters that should be taken into account, namely (i) whether the defendant was enriched; (ii) whether the enrichment was at the plaintiff’s expense; (iii) whether the enrichment was unjust, and (iv) whether any of the defences are available. These principles are trite and are not in dispute.
Background
The Ngan Family
19. At the material times, NKH, the 1st defendant and Peggy were living at a property at Flat A, 1/F Kadoorie Avenue Mansion, 205-207 Prince Edward Road West, Kowloon, Hong Kong (the “Kadoorie Property”). NKH was the one responsible for the finances of the Ngan family, which were derived from their toy business run in the name of a company called Hip Fung Industrial Company Limited (“Hip Fung”). Hip Fung had all along been run by NKH, and the profits earned by the company formed the predominant source of the income of the family.
20. NKH passed away on 12 April 2017.
21. According to the evidence of Terence and Peggy, NKH and the 1st defendant had always been financially independent, without any need for their 5 children to contribute to their maintenance. The 1st defendant has never been involved in running the business of Hip Fung. According to Peggy, she has not been in gainful employment since around 2011. She stopped working full time to take care of NKH when his health started to deteriorate. However, she started to help NKH in running Hip Fung in Hong Kong as his assistant since some time in 2015. She testified that she had started to represent NKH since April 2016 to manage the business of Hip Fung both in Hong Kong and the Mainland.
22. As for Roger, he has been employed by Hip Fung to oversee its business, taking care of its operation at the factories in the Mainland. According to him, he usually works in the Mainland during weekdays and only returns to Hong Kong on Saturdays to spend the weekend.
The financial situation of Hip Fung
23. It is not disputed that the business of Hip Fung started to take the downturn in 2014 since plastic toys were gradually being phased out, as a result of which Hip Fung had been taking on fewer business orders. The plaintiff says Roger has been working for Hip Fung at the time and should have direct knowledge of its operation. According to the plaintiff and Roger, the downturn in the business of Hip Fung was sped up by its loss of a major client that accounted for about 50% of its revenue in around 2011. Since then, Hip Fung has been struggling financially and has started missing payroll payments that led to a downgrade with its ICTI certificate. Eventually, the situation worsened and was Hip Fung wound up in 2017.
24. The court’s attention is also drawn to the following facts. Firstly, on 17 June 2010, there was an overdraft with DBS Bank for Hip Fung in the sum of HK$2,000,000 with the Kadoorie Property and Beverly Villas Property being used as security, and NKH and Hip Fung as guarantors. This will be further elaborated on below.
25. Secondly, on 29 November 2013, Hip Fung sold its offices at Tsuen Wan Industrial Building for HK$27.45 million. The plaintiff says that Hip Fung had to sell the offices because it was facing a dire financial situation and the company had become insolvent. They had no choice but to sell the offices, realising them for cash flow. She also said that the offices were sold below market price to a related party which shows how dire the financial situation of Hip Fung was in.
26. The plaintiff also highlighted to the court that on 19 September 2014, there was an increased overdraft facility held by Hip Fung that had been transferred to Citibank in the sum of HK$13,000,000 and US$150,000 with NKH, Peggy, Roger, and Fordrise as guarantors. The explanation given by Roger in his evidence for the transfer of these overdraft amounts to Citibank is that the previous banks had cut or cut down the facilities originally made available to Hip Fung, so they needed to borrow from Citibank by transferring the mortgage loan to them.
27. The parties have also gone through Hip Fung’s financial statements during the course of the trial, which show that there had been an increase in bank overdraft from 2011 to 2012, reflecting a negative cash flow of the company during that year. According to the plaintiff, this is also consistent with the proofs of debt later filed in relation to the liquidation of Hip Fung. These matters will also be further considered below.
The plaintiff’s claim on the 1st and 2nd Loans
The 1st Loan
28. There is no dispute that the plaintiff had indeed paid the deposit of HK$4,000 at the hospital upon the admission of NKH, and the final hospital bill of HK$218,193. Both payments were made by the plaintiff using her credit card.
29. According to the plaintiff and Roger, at around 10 am on 16 September 2012, Roger took her and the 1st defendant to visit NKH at the Hong Kong Sanatorium & Hospital by driving his car. The plaintiff’s evidence is that during the trip in the car to the hospital, the 1st defendant had asked the plaintiff if she could pay the hospital bill of NKH to save the 1st defendant from having to go to the cashier. The plaintiff says the 1st defendant had promised to repay her. When the plaintiff made it to the ward on that day and saw NKH, he specifically thanked the plaintiff for visiting him and also asked her to pay his hospital bill for him, and promised to repay her later. The plaintiff then went to pay the bill in the sum of HK$4,000 by credit card. She has produced the relevant payment slip.
30. Whilst being cross-examined, the plaintiff firstly re-confirmed her evidence that they were going to visit NKH at the hospital that morning, and that apart from herself, the 1st defendant and Roger, there was no other person in the car on the way to the hospital. Upon arrival at the hospital, the 1st defendant went up first to visit NHK and she and Roger stayed together whilst parking the car.
31. However, when the plaintiff was shown documents from the hospital which showed that NKH was in fact admitted to the hospital on the very day of 16 September 2012 at around 11 am, the plaintiff then said that she had made a mistake, and that they were in fact taking NKH to the hospital on that day in the car. She said that she has forgotten that he was in the car as NKH was not involved in the conversations on the trip. When she was asked about the Statement of Claim in DCCJ 4086 of 2018 dated 12 September 2018 where she pleaded that NKH was admitted to the hospital some days prior to 16 September 2012, and as to any reason why her memory now was better than when she gave instructions for her pleadings back in 2018, she was unable to give any explanation, but was nevertheless quick and adamant to point out to the court that she did not sign a Statement of Truth to confirm the correctness of the matters pleaded in the Statement of Claim. This, in my view, throws a bad light on her credibility as submitted by the defendants, as she had all along appeared to be a careful witness and had been very focussed on details. Her change of story when confronted with the documents showing the actual date of the admission of NHK to the hospital, and her response to questions about what she had pleaded in 2018, tend to bear down on her credibility.
32. Further, it would appear the HK$4,000 was actually a deposit paid upon the admission of NKH. It could not have been the case that NKH was admitted first and then the plaintiff went up to see him, when only then that the plaintiff was asked by NKH to pay for his admission fee. In all probabilities, the reality ought to have been that the admission fee was payable upon their arrival, whilst procedures and tests had to be done before NKH was taken to the ward.
33. As Mr Liu has also pointed out, when Roger realised he was asked about the morning of 16 September 2012, he immediately sought to explain out of his own volition that he was reminded about the correct admission date of NKH because of some documents that he had come across a few weeks ago, but then he was unable to pinpoint which documents he was referring to. He then said that he was reminded because of the question asked by counsel for the defendants, when in fact counsel had barely begun his questions before Roger sought to correct his witness statement. In any event, he denied the suggestion to him of having been told by the plaintiff about her evidence before he started his own testimony.
34. As for the evidence of the 1st defendant, she said that she and NKH were taken to the hospital by Roger by car on that day. The plaintiff was not present with them during the trip. Upon arrival, Roger went to handle the admission procedures, whereupon the plaintiff then suddenly showed up and Roger told them that she has paid the bill for the deposit. When they offered to repay the plaintiff, the plaintiff declined the offer. The defendants submitted that it is not inherently implausible that the plaintiff had volunteered to pay the deposit for NKH upon his admission simply as a gesture of good will. In any event, it is submitted by the defendants that the sequence of happenings on that day as the plaintiff and Roger have described was simply not credible, particularly in relation to the requests for the 1st Loan and the alleged circumstances under which the offer was made by each of the 1st defendant and NKH to repay the plaintiff.
35. The plaintiff, on the other hand, highlighted the fact that both the 1st defendant and Peggy have in their witness statements stated that the plaintiff had “further asked us to treat it as a gift”. Ms Chiang submitted that when the two of them testified, they denied that the plaintiff had actually said that. In any event, it is submitted by the plaintiff that the evidence is clear, that the plaintiff did not say something like that at all. One would not refer to payment of a hospital bill as a “gift”.
36. Having considered the evidence, I find that the events did not occur as described by the plaintiff in her evidence on that day. I find that she did not pay the interim hospital bill at the request of either NKH or the 1st defendant, but had paid it out of her own volition, or because she was asked by Roger to do so. I accept the 1st defendant’s evidence that the plaintiff had suddenly showed up at the hospital and Roger told her that the plaintiff had settled the interim bill for NKH. An offer was then made to repay her, but she declined the offer out of good will.
The 2nd Loan
37. In relation to the 2nd Loan, the plaintiff’s evidence is that she was asked to go to the hospital by Roger on 18 September 2012 to settle the bill of NKH as the doctors considered NKH to be fit for discharge. The plaintiff said Roger told her that the 1st defendant had invited her to settle the hospital bill. She went to the hospital after work, where she was requested by both NKH and the 1st defendant to settle the final hospital bill and that they would repay her afterwards. As a result, the plaintiff settled the bill by credit card accordingly.
38. The evidence of the 1st defendant is that she did not know Roger had requested the plaintiff to come to the hospital on that day when NKH was about to be discharged, and to settle the hospital bill. She was attacked in cross-examination when she said the plaintiff was not at the hospital that day, whilst this contradicted her witness statement as well as Peggy’s evidence. In any event, the undisputed fact remains that the plaintiff had indeed settled the final bill at the hospital.
39. The defendants’ case is that there was an arrangement for Roger and Terence to pay the hospital bills, and Terence had in fact paid HK$300,000 to Roger by his cheque dated 19 August 2012. This was discussed and agreed between NKH, the 1st defendant, Peggy, Roger and Terence at a family dinner gathering at home on 17 August 2012 when Terence indicated that he would bear the operation fees of NKH, and Roger also said that he would contribute as well. Terence has confirmed this in his evidence.
40. However, the plaintiff says Terence was evasive in his evidence and was not forthcoming when giving answers or details outside the scope of his witness statement. Ms Chiang submitted that he claimed he has no knowledge of various matters, including details about the business of Hip Fung, his father’s health situation, Peggy’s occupation, the source of income of his parents, and Roger’s role in Hip Fung. Further, although he gave evidence saying he knew that NKH needed an operation and offered to pay for the fees, under cross examination, he later seemed to be saying that the sum paid to Roger was for use by his parents, without making a reference to any specific purpose. He also admitted that he did not know how the sum was eventually used. Also, although he said that the medical bills would be split between him and Roger, and that the bill would amount to about HK$200,000, it is difficult to understand why he nevertheless had given a cheque in the sum of HK$300,000 instead to Roger, and never sought to find out as to the final and actual sum payable later.
41. On the other hand, Roger told the court that the cheque given to him by Terence was for the purpose of covering the wages payable by Hip Fung at the factories in the Mainland. The cheque was made payable to him because he was responsible for Hip Fung’s business in the Mainland and he would handle the exchange and remittance of the funds to RMB for Hip Fung. Further, Roger referred to some newly disclosed receipts and sought to rely on the same to prove that he was not at a dinner on 17 August 2012 when the payment of the medical fees by him and Terence was allegedly discussed, as he was buying living room ceiling lights elsewhere.
42. The plaintiff further submitted that it was not reasonable in the circumstances for Terence to have to pay Roger instead of the 1st defendant directly, or Peggy, if the cheque was indeed intended to cover NKH’s medical fees. This is because the 1st defendant and Peggy were living with NKH, whilst Roger works in the Mainland most of time and only returns to Hong Kong during weekends. As such, the plaintiff challenges the plausibility of such an agreed arrangement for the payment of the medical bills of NKH.
43. The defendants however pointed out to the court that the cheque dated 19 August 2012 from Terence is consistent with the date when NKH was seen and advised by Dr M K Chan on 13 August 2012 to have an operation by way of coronary angiogram and angioplasty. Further, the amount of the cheque was not inconsistent with the total amount eventually payable for the medical fees for NKH.
44. The defendants also submitted that there is no evidence to support the version offered by Roger, namely that the cheque given to him by Terence was for Hip Fung to pay for salaries in the Mainland. No objective evidence has been adduced to prove that Roger had caused the payment to him by Terence to be used to pay for salaries in the Mainland by Hip Fung.
45. A point was further made by the plaintiff that on 26 May 2017, she had through her then solicitors sent a demand letter to the 1st defendant for the repayment of the 3 loans. On 6 June 2017, the 1st defendant’s solicitors replied and raised a claim of outstanding rent. Under cross-examination, when the 1st defendant was asked about whether, when she received the letter from the plaintiff’s solicitors, she had asked Roger about the HK$300,000 funds received from Terence for NKH’s hospital bills, she agreed she never asked him. Neither did the 1st defendant in her solicitors’ letter in reply raise the matter that there was an arrangement for Roger to pay the hospital bill. This, the plaintiff now submits, would render the 1st defendant’s case in this respect incredible.
46. The same line of questions was also put to Peggy during cross-examination, and Peggy said she did confront Roger after receiving the letter. Her evidence was that she had put their lawyer Mr Chan on the speaker phone to talk to Roger together with her. According to Peggy, Roger cried and said he did not understand why the plaintiff is now framing the 1st defendant, as he did repay the plaintiff right after the surgery.
47. The plaintiff submitted that this was never raised before, and this allegation was also not put to Roger at the trial. It is submitted that this was a fabrication on the part of Peggy who was trying to make excuses as to why Roger was never asked or confronted about the HK$300,000. I do not find that Peggy was necessarily fabricating this assertion when she gave evidence, but I agree that since this assertion had not been put to Roger, little weight could be attached to it in any event.
48. I do not find Terence to be evasive in his evidence either. In fact, I find him to be a careful witness, but this does not mean he is incredible or is not a reliable witness. As he generally resides in Japan most of the time and has to travel a lot in his work, it is expected that he would not be privy to a lot of details concerning the daily happenings in the Ngan family, including the details of the family business of Hip Fung.
49. In my view, having considered the evidence on both sides, I find that in all probabilities, the cheque given by Terence to Roger in the sum of HK$300,000 was intended to be used to cover the medical or hospital expenses of NKH. I accept that this had been discussed and agreed at the family dinner on 17 August 2012 as described by Terence in his evidence. There is little evidence, apart from his own word, to support Roger’s assertion that the cheque of HK$300,000 was intended to be used to cover the business expenses of Hip Fung in the Mainland. If so, one would have expected at least some indication of the items covered by that sum. On the other hand, I accept the evidence of Terence that he has not been contributing, or contributing much to the maintenance of the family or the business of Hip Fung over the years, but it is perfectly normal that he helped with covering the medical fees for his father on this occasion because of his father’s health problem.
50. However, the matter does not rest there. The plaintiff further submits that even if I find for the defendants in this respect, namely that there was an arrangement for Roger and Terence to pay for the medical fees of NKH, the defendants should nevertheless be liable to repay her on the ground of unjust enrichment. She has not been reimbursed by anyone from the Ngan family for the said sum and this fact is not disputed by the defendants. It is further submitted by the plaintiff that under cross-examination, the 1st defendant admitted that the plaintiff should not be the one who pays the hospital bills, and there is no obligation for her to do so. The plaintiff has also produced a credit card receipt showing that she had previously paid for NKH’s medical fees at St Paul’s Hospital on 27 July 2014 in the sum of HK$17,070, and the plaintiff says she was subsequently repaid by the 1st defendant in cash for this bill. Similarly, the plaintiff says there is no reason why the two bills now in question should not be repaid to her.
51. Ms Chiang submitted on behalf of the plaintiff that as a general principle, as long as the material facts are pleaded that are capable of giving rise to a general restitutionary claim, the specific case of unjust enrichment need not be pleaded. The Court can find for such relief as an alternative cause of action if the evidence supports such claim (see Hong Kong Civil Procedure 2023, Vol. 1, at para 18/8/38). In this regard, see also Ng Po Yu & Ano. v Lam Kai On, the executor of the estate of Wong Mui, deceased, CACV 379 of 2018, 8 March 2021 (CA); [2021] HKCA 263 at paragraphs 40-52.
52. As the bills were paid for the benefit of NKH at the expense of the plaintiff and to her detriment, the plaintiff says the defendants should make good the payments by repaying her.
53. As I have accepted the evidence of Terence that the Ngan family had agreed that Terence would settle the hospital bill for NKH, with Roger also having indicated that he would contribute to the payment for the same, I do not accept the evidence of the plaintiff that the 1st defendant and NKH had requested her to settle the final hospital bill on 2 March 2013. It would not make any sense if the 1st defendant and NKH had already come to an agreement and was given to understand that Terence would be bearing the relevant medical bill. As such, since it is the plaintiff’s own evidence that she had initially been asked by Roger to settle the final hospital bill, the likelihood of what transpired in my view was that Roger had indeed made that request to the plaintiff, whilst having obtained the benefit of the cheque of HK$300,000 from Terence without the knowledge of the 1st plaintiff and NKH. In such circumstances, it would seem to me that it was Roger who had obtained an unjust enrichment instead of the defendants in this particular case, at the expense of the plaintiff upon his request. The proper person to pursue is Roger in the circumstances of this case.
54. I would therefore not allow the plaintiff’s claim on unjust enrichment against the defendants or either of them.
The 3rd Loan
55. In relation to the 3rd Loan, it is not in dispute that the plaintiff had paid to the 1st defendant by way of a cheque the sum of HK$120,000 on 3 March 2013. The cheque was cleared on the next day.
56. As referred to above, the 1st defendant’s case is that the HK$120,000 received from the plaintiff represented rental for three months payable to her for allowing her and Roger to use and occupy the Beverly Villas Property. As this claim is inter-connected with the counterclaim by the 1st defendant, I shall deal with the issue as to whether there was any rental agreement below when discussing the counterclaim by the 1st defendant, before deciding on the liability point in relation to the 3rd Loan.
57. At this juncture, it is appropriate to first consider the reason why the 3rd Loan was said to have been requested by the 1st defendant. According to the plaintiff, she was told by the 1st defendant that they were suffering from some short-term cash flow difficulties and she was worried about mortgage repayments, presumably referring to the liabilities of Hip Fung. If the mortgage repayments of the property could not be met, the Beverly Villas Property would be foreclosed and all the loans the plaintiff had made to the Ngan family and Hip Fung would not be repaid. According to the plaintiff, the 1st defendant had even promised to assign the property to her and asked her to take up the mortgage repayments. It was in such situation that the plaintiff said she agreed to lend HK$120,000 to the 1st defendant.
58. However, as the defendants pointed out, if one looks at the 1st defendant’s Hang Seng Bank passbook at the relevant time, i.e. 4 March 2013 when the cheque in the sum of HK$120,000 was deposited, and the subsequent balances of the 1st defendant’s bank account, one will see that the balance had increased in the subsequent months. It is therefore submitted by the defendants that the objective evidence shows that the HK$120,000 was neither used for alleviating any short-term cashflow problems of the Ngan family, nor to pay for mortgage repayments of Hip Fung.
59. Similarly, it is also submitted by the defendants that Roger’s evidence that the amounts paid by him to the 1st defendant between June 2012 and August 2013 were to alleviate his parents’ cashflow problems arising out of the financial difficulties Hip Fung was facing at the time is not credible either. Firstly, it is Roger’s own evidence case that he only had a modest income and could not afford to pay HK$40,000 per month in rent to the 1st defendant. It is simply incredible that at the same time, he was able to provide financial relief to his parents in the same amounts.
60. As for the financial situation of Hip Fung at that time, Mr Liu submitted that it was in any event not as bad as the plaintiff would like the court to find. Evidence of Hip Fung’s financial condition may be found in the profits tax returns and audited financial statements disclosed by the defendants for the financial years from 2010 to 2014. There was a drop in revenue of around 10% for the financial year ending 31 March 2011, and approximately 9% for the year ending 31 March 2012. The company still had assessable profits in the sum of HK$1,489,064 for the financial year ending 31 March 2011, and in the sum of HK$1,686,188 for the financial year ending 31 March 2012, whereas for the next financial year, i.e. the year ending 31 March 2013, the company had suffered a net loss of HK$472,710. In any event, the defendants say Hip Fung had retained substantial shareholder’s funds of HK$12,971,763 in 2011, HK$14,737,397 in 2012, and HK$11,065,678 in 2013. As such, it is submitted by the defendants that Hip Fung was only slowly declining around the relevant time of September 2012 and March 2013. There were still funds available for the 1st defendant and NKH and thus there was no real need at the time to request for the 3rd Loan.
The 1st defendant’s counterclaim
61. The 1st defendant counterclaims for HK$1,740,000 being the sum allegedly owed to her for allowing the plaintiff and Roger to use and occupy the Beverly Villas Property at a monthly rental of HK$40,000 for 43.5 months, from 1 September 2013 to 15 March 2017.
62. The plaintiff’s case is that both the 1st defendant and NKH had represented to Roger and her that the Beverly Villas Property was a gift to them upon their engagement. As Ms Chiang has pointed out, the plaintiff is not claiming that she is entitled to any relief on the basis that she has any beneficial interest in the property by reason of the gift, but only relying on her and Roger’s evidence to rebut the counterclaim, as well as to support her counterclaim to the counterclaim of the 1st defendant, where she alleges that she had expended sums in reliance of the aforesaid promise of a gift.
Purpose of the purchase
63. Roger testified that in 2010, around the time of the Chinese New Year, he told NKH that he had plans to marry. NKH told him to find a property near where they were living, with a budget of around HK$10 million, which he would buy for the plaintiff and Roger to live in. As a result, according to Roger, he then started to look for a suitable property. Eventually, he told NKH he would choose a flat in Beverly Villas and would use a shell company to hold the property.
64. The plaintiff said in her evidence that she and Roger were originally interested in Flat 8D of Beverly Villas but the owner raised the price when they expressed an interest, when they then noticed that Flat 8C was also put up for sale, and eventually went for that unit. During cross-examination, she said she had participated in the process of flat hunting but she admitted she was not present each and every time when Roger went to view available flats. In this respect, Roger also said in his evidence that he was the one mainly responsible for finding a flat, and he was the one who signed the forms to engage estate agents. As for the 1st defendant, she agreed under cross-examination that Roger took her to view the Beverly Villas Property and she had only viewed that one flat.
Property held by a shell company held by the 1st defendant
65. Eventually, the Beverly Villas Property was bought and held by a shell company, namely Fordrise, which was 100% held by the 1st defendant. According to the plaintiff and Roger, both of them had agreed to purchase the property in the name of a shell company as the both of them were often working overseas. The shell company was to be held by the 1st defendant so that she could handle the purchase for them.
66. Further, Roger testified that as he was then only recently discharged from bankruptcy, it would be difficult for him to obtain a mortgage loan. It would also be more convenient for the property to be transferred to the two of them in the future if it was held by a company. It would also save them from paying stamp duty in the event of a transfer. As a result, the 1st defendant, whom he trusted, became their nominee to hold the shares of Fordrise which in turn would hold the Beverly Villas Property.
67. Arrangements were then made for the purchase of the property in the name of Fordrise. In his evidence, Roger explained how he originally liaised with the solicitors to get a list of shell companies. He first picked two names out of the list, which he wrote down on a fax cover sheet. He then emailed the plaintiff and sought her view before finally picking the name “Fordrise”. After that, he called the solicitors to make an appointment to handle the relevant paperwork. He even wrote down the times available for an appointment on the photocopy of the solicitor’s business card. On the other hand, under cross-examination, the 1st defendant stated she was not conversant in English and appeared to agree that Roger was the one who actually picked the name of “Fordrise”, and that was the only name mentioned to her at the law firm.
68. On the other hand, the defendants submitted that, firstly, the need for frequently going on business trips is not a good reason for the use of a shell company. Secondly, there is no evidence of any intention, request or steps taken to transfer the Beverly Villas Property to Roger and Jacqueline at any time. Also, aside from the emails sent by Roger asking the plaintiff whether she liked the name “Fordrise Ltd” or “Semford Ltd”, there is very little evidence of the plaintiff being involved in the arrangement to purchase the shell company.
69. The defendants pointed out that in fact the email chain between Roger and the plaintiff dated 30 March 2010, which was disclosed one week before the trial, contradicts the plaintiff’s case that the Beverly Villas Property was a gift from the 1st defendant to them. It appears from the contents of the email exchanges between him and the plaintiff that Roger in fact made the representation that he was the one who was purchasing the Beverly Villas Property for the plaintiff and himself, possibly with a view to impress the plaintiff. Whatever the reason, the defendants say this would go directly against their case of a gift by the 1st defendant.
70. The defendants also pointed out that the 1st defendant in cross-examination has given detailed evidence of going to a solicitors’ office in Landmark in Central and how she asked Roger to help her choose a simple and easy-to-remember name for the shell company. Further, the fax from Kao, Lee & Yip is addressed to NKH, and the fax of the statement of account and other documents was addressed to NKH. Also, the defendants say that payment for the balance of the purchase of the Beverly Villas Property including the fees of Kao, Lee & Yip was made from the 1st defendant’s Hang Seng bank account.
71. In any event, it was submitted by the defendants that the use of a shell company is rather neutral, and is completely consistent with the purchase of the Beverly Villas Property as an investment property by the 1st defendant and NKH.
72. As for the payment of fees to the estate agent, Roger testified that he had paid HK$60,000 in cash to NKH to cover their fees. On the other hand, the defendants have produced a copy of a cheque in the sum of HK$10,000 that NKH had paid to Fordrise which was apparently related to partial payment of the commission to the estate agent. It is submitted by the plaintiff that in any event, the cheque does not contradict Roger’s evidence as in the end it should be NKH who paid the commission fees after receiving the sum in cash from Roger.
73. The defendants however maintain that the contemporaneous documents mentioned above suggest that NKH had in fact paid the estate agent’s commission, namely the temporary receipt dated 16 June 2010 issued by Centaline Property showing that payment was made by a cheque number 361589 of DBS Bank, and a photocopy of a cheque (number 361591) from NKH to Fordrise bearing the date of 7 July 2010. These documents, the defendants say, demonstrate that Roger did not deal with the estate agent when it came to the important aspect of making payment, and that it was in fact NKH who paid the estate agent’s commission, and it was him who put funds into Fordrise.
74. It is said that Roger’s explanation that he had paid NKH by cash because he only used cash and was frequently working in the Mainland is self-serving, and is contradicted by his own evidence in his re-examination when he revealed that he has an habit of keeping blank cheques in his wallet. In any event, the defendants say that had he wanted to, he could have contacted the estate agent when he returned to Hong Kong during weekends, as most estate agents are open during weekends.
75. Coming to another point, the plaintiff submitted that a mass of contemporaneous documents relating to the expenses incurred on the property has been produced by her. It is stressed that the dates of those receipts match her and Roger’s evidence that Roger had first moved into the property in around July 2010, shortly after the property was bought, which indicates that it is more likely that it was bought for them to live in. On the other hand, the timing was well before the alleged agreement to pay rent, which means the credibility of the alleged agreement to pay rent in 2011/2012 is undermined. Further, the plaintiff says that the receipts also show that she and Roger had been handling all the expenses related to the property. They had ordered furniture and set up utilities services right after the completion of the purchase. Thus, this also showed that the property was bought for them to live in.
76. The defendants say, on the other hand, that firstly, the reliance by the plaintiff on the payment of all management fees, government rates and rent as evidence supporting a gift is self-serving. The defendants say that the payment of government rates and rent, and management fees is not inconsistent with the 1st defendant’s case that the plaintiff and Roger were allowed to occupy the Beverly Villas Property on the condition of paying a monthly sum of HK$40,000 every three months to the 1st defendant. The defendants submitted that it is not unusual for tenants to have the responsibility of paying for government rates and rent, and management fees.
77. As for renovations, the plaintiff claims she had spent a total amount of HK$139,750 (which she is seeking to claim against the 1st defendant) on account of “Maintenance & Renovations for Water Leaks”, but no receipts or documentary evidence have been adduced to support this assertion. On the other hand, the 1st defendant did at least produce an invoice issued by Kin Wai Decoration Co Ltd dated 21 December 2010 with an acknowledgment of receipt of HK$72,350 showing that NKH through Hip Fung had engaged a contractor to undertake various renovations at the Beverly Villas Property. Thus, it is submitted by the defendants that the allegation that the plaintiff had renovated the property is neither here nor there in terms of the evidence.
78. It is further submitted by the defendants that the fact that the plaintiff and Roger had paid for utilities, furniture and household items while living at the Beverly Villas Property does not support their case of a gift either.
79. When one looks at the breakdown of the total amount incurred for furniture and household items in the total amount of HK$224,125 (see the Annex to the Counterclaim to eth 1st defendant’s Counterclaim), one can see that a significant proportion of the total amount was spent on things such as the purchase of television, home theatre, air purifier and de-humidifier. These are all items that do not improve the property, and could be taken away from the property. The defendants say that the fact they spent so much on such items does not in itself lend support to the plaintiff’s case of a gift of the Beverly Villas Property, apart from perhaps a handful of items like ceiling lights and the front door lock, but such evidence is in no way compelling.
Agreement by the plaintiff to pay rent?
80. The 1st defendant testified that she was told by NKH in 2011 that he had a discussion with Roger, who told him he wanted to get married and live in the Beverly Villas Property. NKH further told her that Roger had agreed to pay rent of HK$40,000 per month to settle the mortgage repayments of the property. The plaintiff submitted that it thus turns out the alleged agreement was made between NKH and Roger instead. Even if such an arrangement is proven and accepted by the court, it is still incumbent on the 1st defendant to prove that NKH and Roger had the intention to be legally bound by this domestic arrangement before the agreement could be said to be enforceable.
81. Further, the plaintiff submitted that the pleaded case of the 1st defendant (and as was also stated in her witness statement) is that the plaintiff and Roger had jointly and severally agreed to pay rent to her for their use and occupation of the property. This is different from the 1st defendant’s evidence in court where she repeatedly said it was an arrangement between father and son, that is NKH and Roger. It is therefore highlighted by Ms Chiang that the plaintiff and the 1st defendant were not considered as parties to the alleged rental agreement to start with. Even on the 1st defendant’s own case, she had all along expected to receive payment of the alleged rent from Roger, not the plaintiff.
82. In any event, the plaintiff submitted that since Roger and the plaintiff had altogether only given 6 cheques to the 1st defendant, allegedly representing rental for 18 months, and it is not disputed that Roger had lived in the property until it was eventually sold in March 2017, this means he had been living there rent-free for 43.5 months from 2013 to 2017. The plaintiff says this puts into serious question whether there was indeed an agreement to pay rent, and whether there was in any event any intention to create legal relations in this arrangement between father and son. Under cross-examination, the 1st defendant explained that the reason why she did not chase after Roger or sue him for the outstanding rent was because he was her son, and that she hoped he would repay her when he had the funds.
83. The plaintiff also seriously questions the real intention behind the 1st defendant’s counterclaim, saying that she never made such a claim until she received the letter from the plaintiff’s solicitors. It was obviously a retort to the plaintiff’s demand for repayment of the loans due to her.
84. The defendants say, on the other hand, that the plaintiff in any event would have known about the payment of HK$40,000 per month for occupying the Beverly Villas Property because Roger would say that it is to pay rent in her presence, when giving the cheques to the 1st defendant. The defendants say the payment of HK$120,000 by cheque dated 3 March 2013 is also evidence that the plaintiff had known about the requirement to pay rent for occupying the Beverly Villas Property.
The series of payments made by cheque
85. It is further submitted by the plaintiff that the 5 payments made by Roger and the one made by her to the 1st defendant (as set out in the table below) did not constitute a logical series of payment of rent as alleged by the 1st defendant.
|
Date |
Drawer |
Amount (HK$) |
|
1 June 2012 |
Roger |
120,000 |
|
1 Sept 2012 |
Roger |
120,000 |
|
5 Feb 2013 |
Roger |
80,000 |
|
3 Mar 2013 |
Plaintiff |
120,000 |
|
28 Apr 2013 |
Roger |
160,000 |
|
15 Aug 2013 |
Roger |
120,000 |
86. Save that the sums were in the multiples of HK$40,000, the payments appeared to be arbitrary in terms of timing, and there is no fixed pattern whatsoever. According to the 1st defendant, she accepted that she did not make any records of the alleged rental payments, and said that she does not actually know how to calculate the timing, but she simply counted the months. She also said in her evidence that Roger would not tell her which month the payments were for. She simply accepted whatever payment was made to her from time to time.
87. The 1st defendant’s evidence is that the first cheque was for payment of rent for March to May 2012. She explains that she counted backwards for 3 months when she received the cheque on 1 June 2012. This, according to the plaintiff, also does not sit well with her case that Roger had in fact moved into the property as early as in 2010, shortly after the purchase.
88. Roger’s evidence regarding those payments he made to the 1st defendant is that they were loans made to his parents to help with their cash flow problem when Hip Fung was struggling financially in 2012 and 2013. His evidence was that NKH had asked him to lend those sums for his personal use and to settle mortgage repayments. NKH told him to make those payments to D1, and he has no knowledge as to how the funds were eventually used. Pausing here, I do not find that this is a very convincing assertion by Roger. As is already discussed above, as it is Roger’s evidence that he only earned a modest income and could not afford to pay a monthly rent of HK$40,000, it is unbelievable that he would be giving a series of payments to NKH in multiples of HK$40,000 for a number of months.
89. The plaintiff submitted that if the court rejects the 1st defendant’s case that there is an agreement to pay rent for the Beverly Villas Property, then there is no defence to the plaintiff’s claim for the 3rd Loan.
90. The 1st defendant however says that she has a coherent explanation for why there was fluctuation in the payments. It is said by the 1st defendant that Roger and the plaintiff’s wedding (or a ceremony akin to a wedding) in December 2012 had caused some delay and shortfall in the payment, with Roger needing to pay for the ceremony. It is said the shortfall was settled later by Roger. In any event, she says that the existence of the series of payments by itself is already objectively consistent with payments for occupying the Beverly Villas Property.
91. As for the defendants’ position regarding the purchase of the Beverly Villas Property, the defendants highlighted to the court that the banking facilities extended by DBS Bank to Fordrise on 17 June 2010 by way of its facility letter shows the financing arrangements taken out by NKH and the 1st defendant. First of all, Mr Liu drew my attention to the fact that NKH and the 1st defendant had mortgaged their home, the Kadoorie Avenue Mansion Property, in order to purchase the Beverly Villas Property. It can be seen from the land search of the Kadoorie Avenue Mansion Property that it was purchased in the name of the 1st defendant in November 2004 for the price of $7,270,000 without any mortgage. Secondly, under the facilities letter, the Beverly Villas Property was also mortgaged, with and additional security in terms of an unlimited guarantee and indemnity executed by NKH and a guarantee and indemnity in the amount of HK$10,610,000 executed by Hip Fung. The facilities granted were (i) an instalment loan of HK$8,610,000 which went to pay the balance of the purchase price of the Beverly Villas Property, and (ii) an overdraft of HK$2,000,000.
92. Mr Liu further pointed out that there is no dispute that the purchase of the Beverly Villas Property was paid for by the 1st defendant’s own funds and the loan from DBS Bank. As can be seen, the net amount payable of HK$2,939,000, after taking into account all costs and expenses, stamp duty, the mortgage loan from DBS in the amount of HK$8,610,000, was deposited with Kao, Lee & Yip, solicitors, directly from the 1st defendant’s Hang Seng bank account number 260-0-014308.
93. Subsequently, there was a refinancing of the facilities through Citibank in September 2014 where the borrower was changed from Fordrise Limited to Hip Fung, whereupon there were four guarantors for the refinancing, namely NKH, Peggy, Roger, and Fordrise. Citibank then granted a revolving short-term credit facility up to HK$13,000,000 and US$150,000, and also a mortgage loan of HK$4,100,000. It is thus submitted by the defendants that the financing and refinancing arrangements with DBS Bank and Citibank are consistent with the defendants’ case that the Beverly Villas Property was purchased by the 1st defendant and NKH as an investment.
94. Such financing and refinancing arrangements are inconsistent with the allegation that the 1st defendant had intended to gift the Beverly Villas Property to the plaintiff and Roger at or before the time of purchase in 2010 for the following reasons as highlighted by Mr Liu:
(i) NKH and the 1st defendant had used their own funds and mortgaged their home in order to make the purchase. The Kadoorie Property was their only landed asset apart from Hip Fung’s assets. The idea of a gift to the plaintiff and Roger was certainly not a realistic one;
(ii) The two mortgages with DBS Bank over the Beverly Villas Property and the Kadoorie Property would have to be continued to be repaid. If the Beverly Villas Property was to be gifted or later transferred to the plaintiff and Roger, it is not clear as to who would continue making the mortgage repayments;
(iii) The overdraft and short-term credit facilities were not used by the 1st defendant or Roger. The banking facilities were obviously for NKH or Hip Fung;
(iv) The fact is that NKH and the 1st defendant had never consulted or even informed the plaintiff or Roger about the financing arrangements with DBS Bank;
(v) Roger was asked to sign as guarantor in the September 2014 refinancing, and the plaintiff did not know about the refinancing in September 2014. She only came to know about it later.
95. It is thus submitted by the defendants that in all probabilities there could simply not have been any agreement or promise that the Beverly Villas Property would be gifted to the plaintiff and Roger.
96. Apart from the above, it was further submitted by the defendants that the plaintiff’s and Roger’s evidence on how the promise was made is vague and without details. It was simply alleged that in March 2010 the 1st defendant had told the plaintiff and Roger that she would gift the Beverly Villas Property to them for their engagement. The defendants also pointed out that the plaintiff and Roger were not engaged until December 2012, so that the account by the plaintiff and Roger was inherently improbable.
97. Mr Liu criticised the plaintiff’s case, and for the matter the evidence of the both the plaintiff and Roger as overly simplistic and is thus hard to believe.
98. It was further pointed out that in cross examination, the plaintiff also said that the 1st defendant had made an express promise to her when they were getting out of the car after viewing properties in or around March 2010. This was a new allegation that was not mentioned in the plaintiff’s witness statement. It is thus doubtful whether such a conversation ever took place. Besides, it is the 1st defendant’s evidence which does not seem to have been seriously disputed, that she was not fond of the plaintiff, as she said she thought she was impolite. This would make one wonder how and whether the 1st defendant would have promised to gift the Beverly Villas Property, which was no doubt an asset of substantial value, to the plaintiff at all, Roger apart.
Sale of the Beverly Villas Property
99. As mentioned above, it is further submitted by the defendants that when the Beverly Villas Property was sold, the 1st defendant did not consult her nor Roger. They were just told that the Beverly Villas Property was to be sold and there were to be estate agents and potential purchasers to view the property. Eventually, both the plaintiff and Roger had moved out of the property without any objection. Further, the pre-action correspondence did not raise any allegation of a gift of the Beverly Villas Property to either the plaintiff or Roger. All these, say the defendants, would work against the credibility of the case asserted by the plaintiff.
100. Having considered the evidence and the submissions made, I find that in all likelihood the Beverly Villas Property could not have been intended as a gift to the plaintiff and Roger. The 1st defendant and NKH had to rely on that property for maintaining the credit facilities of the Ngan family and the business of Hip Fung. There is no evidence that they or Hip Fung had any additional or ready assets to cover the purchase of a property is such value as the Beverly Villas Property to be given to the plaintiff and Roger as a gift. Also, the fact that the Kadoorie Property had to be mortgaged to facilitate the purchase of the Beverly Villas Property says so much for the likelihood that the 1st defendant and NKH could not have intended to make it a gift.
101. Further, the method by which the property was purchased, that is in the name of a shell company, and the fact that the plaintiff and Roger had paid for some of the expenses related to the property (e.g. the government rates and rent, and management fees) are not matters that are determinative of the issue whether the property was intended as a gift.
102. On the other hand, given the fact that the plaintiff and Roger had only been dating for a limited amount of time at the time when the Beverly Villas Property was purchased, and given other pointers including the fact that the 1st defendant was not particularly fond of the plaintiff in any event, it is difficult to believe that the 1st defendant and NKH would have intended to make a gift of that property to Roger and the plaintiff.
103. In all the circumstances, I find that neither the 1st defendant nor NKH had made any representation to the plaintiff or Roger that the Beverly Villas Property was to be purchased as a gift to them.
104. The next question is whether the plaintiff and Roger were liable to pay rent for their use and occupation of the Beverly Villas Property at the monthly rate of HK$40,000 as alleged. In this respect, I note that on the case of the 1st defendant herself, she has maintained that the agreement was between father and son, that is between NKH and Roger. This would explain the fact that Roger had been paying multiples of HK$40,000 to the 1st defendant from time to time. I have already ruled out the assertion by Roger that he was providing financial support to NKH instead of paying rent to the 1st defendant. The fact that the series of payments might have appeared to be arbitrary was, to me, understandable as after all, Roger is the son of the 1st defendant, and the plaintiff has a point in questioning whether the agreement to pay for his use and occupation of the property, even if indeed made by Roger, had amounted to a legally enforceable contract instead of an informal understanding between Roger and his parents. In any event, my finding is that even if such an agreement was enforceable, it was made between Roger and his parents. The agreement, even if it existed, did not involve the plaintiff as a party. This was so even if the plaintiff had knowledge of the payments made by Roger.
105. In the circumstances, I find that the 1st defendant has not established her case that she is entitled to claim for rent from the plaintiff. This, however, does not mean that the payments made by Roger, and the sum representing the alleged 3rd Loan were not meant to be paid for the use and occupation of the Beverly Villas Property. As there was at least some sort of agreement or arrangement between Roger and his parents that he was to pay for his and the plaintiff’s use of and occupation of the Beverly Villas Property, I find that it is more probable than not that the sum representing the alleged 3rd Loan was in fact payment for the plaintiff’s and Roger’s use and occupation of that property instead of a loan. The fact that the plaintiff had arranged to pay the 1st defendant on that occasion did not necessarily mean that she has taken on a contractual liability to pay rent.
106. Having considered the evidence and the submissions of the parties, I accept the defendant’s submissions above that there was no real need by the Ngan family or Hip Fung for a loan at the material time, and also find that it is more probably than not that the sum of HK$120,000 representing the alleged 3rd Loan was intended to cover the agreed payment to be made for the use and occupation of the Beverly Villas Property by Roger and the plaintiff instead of as a loan as alleged by the plaintiff. This is also supported by the fact that the HK$120,000 deposited into the 1st defendant’s account was not shown to have been used or utilised for covering the mortgage repayments of Hip Fung, or for other needs of the family business. The payment was made on a voluntary basis and regardless of whether there was an enforceable agreement. As such, I find that the plaintiff has failed to establish her case in relation to the 3rd Loan.
P’s Counterclaim to Counterclaim of D1
107. The plaintiff is claiming for the expenses she spent on the Beverly Villas Property based on her detrimental reliance on the 1st defendant’s representation that the property would be gifted to Roger and her. In total, her claim is for the sum of HK$839,365 as listed out in her witness statement, included the following classes of expenditure:
(a) Management fees;
(b) Government rates and rent;
(c) Window inspection;
(d) House inspection;
(e) Maintenance and renovation for water leaks;
(f) Furniture and household;
(g) Utility charges; and
(h) Expenses incurred in vacating the property.
108. She says that she would not have moved from her own property at Shatin and incurred all those expenses but for the 1st defendnat’s promise. Her evidence was that eventually the Beverly Villas Property was sold at a profit because it was furnished and well maintained over the years by her. She has kept most of the receipts for her purchases, records of payments, and expenditure.
109. In this respect, the 1st defendant was indeed asked about the preliminary sale and purchase agreement entered into by her, which expressly provided that the property was sold with furniture and electrical appliances as listed. The 1st defendant confirms that, when the plaintiff and Roger moved out, she discovered that they had indeed replaced most of the furniture, leaving only the sofa, the dining table, the refrigerator and the stove as the original items included when the property was purchased.
110. On the other hand, the defendants submit that the plaintiff’s counterclaim to the 1st defendant’s counterclaim is premised on the alleged gift of the Beverly Villas Property. If the plaintiff fails in proving the alleged promise of a gift of the property, there would be no unjust element in the plaintiff having paid for the said items while occupying the Beverly Villas Property. The expenditure would be entirely voluntary and there would be no basis to claim against the 1st defendant based on unjust enrichment.
111. Thus, by reason of my findings above concerning the lack of a promise of a gift, the plaintiff’s counterclaim to the 1st defendant’s counterclaim should be dismissed.
Other points on credibility
112. The above rulings by me would have dealt with the issues to be decided, but I will also deal with below certain other points that I have taken into account concerning the credibility of the witnesses that have been raised by counsel.
Draft letter/ promissory note presented to the 1st defendant
113. The 1st defendant has disclosed a letter (or a promissory note) dated 25 May 2017, drafted by the plaintiff and given to the 1st defendant by Roger, seeking in terms that the 1st defendant should be personally liable for the outstanding loans owed by Hip Fung. The 1st defendant says this was prepared by the plaintiff who was seeking to force or lure her into signing the same.
114. In relation to this document, the plaintiff explained that she prepared it urgently right after she knew from Roger that Hip Fung’s liquidation papers were signed. She drafted it both in Chinese and English as she knew the 1st defendant could not read English, so she was not trying to trick or force the 1st defendant into signing it. She gave the document to Roger and asked him to pass it to the 1st defendant for her to sign, but she never talked to the 1st defendant about it. She further explained that her intention was to get the Ngan family to discuss with her about how to settle the debts owed to her, hoping that they would give her a proposal that someone would shoulder the debt, which she assumed to be the 1st defendant. This is particularly so as the 1st defendant had decided to sell both the Kadoorie Property and the Beverly Villas Property to save the company and to repay its debts in late 2016. This means that the 1st defendant would use her or her family’s assets to settle the liabilities of Hip Fung. Therefore, it was only reasonable that she believed that eventually the 1st defendant would be the one to repay her the debts owed to her by Hip Fung.
115. On the other hand, the defendants take the view that these were underhand tactics on the part of the plaintiff and Roger. Undisputedly, the defendants submitted that what this draft letter or promissory note does show is that the plaintiff would bend the facts, that is, to say that the 1st defendant instead of Hip Fung had borrowed the plaintiff, just so as to suit her purpose.
116. Whilst I do not find that any compelling adverse views about the credibility of the plaintiff could be drawn from the above evidence, I do think that this tends to show that the plaintiff had been somewhat desperate in safeguarding her position vis-à-vis her loans made to Hip Fung. However, as the defendants have pointed out, this would carry a tendency to be treated as some kind of underhand tactic on the part of the plaintiff, as she should have known that the loans extended to Hip Fung was not personal loans extended to the 1st defendant.
The secret recording of the meeting on 24 May 2017
117. Roger had secretly audio-recorded part of the conversation during a meeting on 24 May 2017 held between the 1st defendant, Roger, Peggy and the intended liquidator of Hip Fung, one Ms Kong, without the other participants’ prior permission or knowledge. This was confirmed by Roger in cross-examination. The duration of the secret recording was approximately 1 hour and 37 minutes. It is evident from the contents of the audio-recording that the purpose of the meeting was to discuss Hip Fung’s plans for liquidation considering its financial condition and operational difficulties. This is affirmed by Peggy in her cross-examination, where she describes the discussions as being solely on Hip Fung.
118. Mr Liu has set out the following outline of the topics discussed during the secret recording:
(i) Hip Fung’s current financial condition and prospects were discussed, including whether to go into liquidation or to continue its business operations;
(ii) The advantages and disadvantages of the timing of a liquidation, Hip Fung’s trade receivables, contract responsibilities, creditors, and employees’ compensation;
(iii) The process and procedures of putting Hip Fung into liquidation and the role of the liquidator, including creditors’ meetings and prudent measures to take beforehand to ensure the safety of the Ngan family;
(iv) Ms Kong gave her opinion on the matter of Hip Fung’s liquidation.
119. It can be derived from the record that Roger had during the course of the meeting told Peggy and the 1st defendant that Hip Fung had borrowed money from the plaintiff and her father Mr Tse Shing. In her response, Peggy had obviously considered the plaintiff as a creditor of the company. Further, Peggy expected money to be recovered from the liquidation process. Peggy also indicated that if there were any remaining outstanding amounts due to the plaintiff after the liquidation, Peggy believed that they could all sit down as a family and discuss possible repayment of the outstanding amounts owed by the Ngan family. As pointed out by Mr Liu, the important point is nowhere in the transcripts can it be said that there was any express recognition of personal debts owed to the plaintiff, including any hospital/operation fees.
120. When he was being cross-examined, Roger asserted that during the meeting on 24 May 2017, both company and personal debts were discussed, but he did not pinpoint any particular statements made at the meeting to support this allegation. Further, Roger also said in his supplemental witness statement that he was pressured by “various tactics” into signing a document to start the liquidation process of Hip Fung. However, as can be discerned from the recorded meeting, the participants had discussed the operational difficulties Hip Fung had been facing and its financial condition. Ms Kong described Hip Fung’s insolvency situation that Roger himself had recognised, stating that this situation already started 4 years back. Further, it can be discerned from the record that Ms Kong had advised that given Hip Fung’s financial condition, it was in everyone’s best interest to liquidate sooner rather than later to preserve a higher recovery of assets for distribution, as opposed to letting the situation worsen and allowing operational debts to pile up, thereby reducing the assets available for distribution.
121. In no way could Roger be said to have been pressured into signing off the liquidation. He had actively participated during the meeting by discussing the issues at hand, for example, the recoverable payments owed to Hip Fung, employees’ compensation, and the liquidation process. Neither does the record reveal anything confirming his allegation that Peggy and the 1st defendant had refused to leave the Hip Fung office until Roger assisted with the liquidation.
122. By reason of the above observations, it would appear that Roger had been exaggerating his evidence when he alleged that he was forced to sign off the liquidation of Hip Fung, and that he was not allowed to leave the meeting unless he did so and I have taken this into account when considering his overall credibility.
Conclusion
123. Based on my findings above, I make the following orders separately with related costs orders nisi:
(i) The plaintiff’s claims on the 1st Loan, the 2nd Loan and the 3rd Loan be dismissed, with costs to the defendants, to be taxed if not agreed, with certificate for counsel;
(ii) The 1st defendant’s counterclaim be dismissed, with costs to the plaintiff, to be taxed if not agreed, with certificate for counsel;
(iii) The plaintiff’s counterclaim to the 1st defendant’s counterclaim be dismissed, with costs to the 1st defendant, to be taxed if not agreed, with certificate for counsel.
124. Lastly, it remains for me to thank counsel for their helpful assistance.
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(Joseph Vaughan) |
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Deputy District Judge |
Ms M C Melinda Chiang, instructed by Brandon Luk & Co for the plaintiff
Mr Kelvin Liu, instructed by Marie Tsang, Dustin Chan & Co for the 1st and 2nd defendants
[1] The audio recording was first referred to in Roger’s witness statement dated 10 August 2022 at paragraph 12.
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