LI JIA HENG v. GOLDEN WORLD MOTORS (INTERNATIONAL) LTD

DCCJ 2932/2020

[2024] HKDC 888

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2932 OF 2020

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JUDGMENT

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A.  Introduction

1.  This is an unjust enrichment claim. It gives rise to three interesting and important core legal issues: (a) the pleading requirements of such a claim; (b) whether the (admitted) enrichment in this case was unjust due to a total “failure of consideration” / “failure of basis”; and, if so, (c) whether the Defendant (“GWM”) has made out the defence(s) of change of position and/or bona fide purchaser.

B.  Factual Background

2.  Before delving into those three issues, I set out the following salient facts of this case, which (apart from §10(a) – (c) below) I also find as facts from the documentary and/or witness evidence before me.

3.  On 10 June 2019, the Plaintiff (“Mr Li”) went to 12/F, Auto Plaza, 65 Mody Road, Tsim Sha Tsui East, Kowloon.[1] GWM agrees that this address was / is its headquarters,[2] but adds that part of 12/F was rented by Golden Century Motors Company (“GCMC”), a company closely related to GWM, for GCMC’s office and operating its business.[3] GWM stresses that “GWM and GCMC were in different trades: GWM was selling brand new imported cars, and GCMC was selling used cars”, albeit that “GCMC would introduce a customer to GWM for a new car” (given their close relationship with each other),[4] and, “in the event of a successful introduction, GWM will pay an introduction fee to GCMC at a rate agreed by the parties in advance.”[5]

4.  Upon arriving there, Mr Li was greeted by a Mr Yau Kwan Yu (“Yau”),[6] who, GWM agrees, was employed as a Salesman Executive by GCMC on 4 September 2017, until his arrest in mid-June 2019.[7] Yau proactively led Mr Li to the vehicle depot / car park at the lower floor of Auto Plaza to see if there was any vehicle he was interested in; eventually, Mr Li decided to purchase a 2018 black colour Toyota Alphard 3.SSC vehicle with serial number GGH30-0029097 and with Registration number NB8887 (“Li’s Vehicle”) at a price of HK$640,000.00.[8]

5.  At this juncture, it is convenient to explore the arrangement mutually agreed upon between GWM and GCMC concerning GCMC’s referral or introduction to GWM of a customer for purchasing a new car from GWM (“Arrangement”):

(a)  GCMC’s staff members, including Yau, were actually authorised to refer or introduce such customer to GWM, in which even they were instructed to adhere to the following procedure.

(b)  The GCMC’s staff member should make ready all necessary particulars, for filling in GWM’s standard provisional agreement[9] (which the GCMC’s staff member was, therefore, authorised to do for and on behalf of GWM).

(c)  That provisional agreement (with the particulars filled in by the GCMC’s staff member) would then be presented by the GCMC’s staff member to Dai Tin Wah (“Mr Dai”, GCMC’s Director and General Manager[10]) for approval.

(d)  Mr Dai would then sign on the said provisional agreement upon approval.

(e)  Mr Dai would personally pass or ask a staff member to pass that provisional agreement to Mr Mak Fu Hung, GWM’s General Manager (“Mr Mak”).

(f)  Mr Mak would then sign it on GWM’s behalf, thereby causing the contract to take effect. Mr Mak would not accept or handle any provisional agreement which did not bear Mr Dai’s signature on it.[11]

6.  Returning to the case at hand, after having selected Li’s Vehicle in the vehicle depot / car park, Mr Li noted its serial number, and then followed Yau and went back up to 12/F to deal with the documentation related to the sale and purchase of Li’s Vehicle.[12]

7.  As discussed between Mr Li and Yau, Mr Li agreed to paying HK$640,000 for Li’s Vehicle, and that he would pay 50% of that i.e. HK$320,000.00 to GWM first as a deposit (“Deposit”), with the balance of the purchase price to be paid upon the delivery of Li’s Vehicle. Mr Li further agreed that Li’s Vehicle would be delivered to Mr Li by 20 June 2019.[13]

8.  Thereafter Yau produced a form (in the form of a GWM’s provisional agreement), filled up the particulars, and asked Mr Li to sign thereon. The price and the licence fee stated were respectively HK$640,000.00 and HK$7,764.00, which were written by hand thereon and which accorded with Mr Li’s agreement. Hence, Mr Li signed the form (“Agreement”), after which Yau kept a copy of it and gave Mr Li the original. The Agreement had GWM’s letterhead on it, and was chopped with GWM’s chop.[14]

9.  Later on the same day, Mr Li transferred the entire Deposit into GWM’s bank account with the Bank of China (Hong Kong) Limited. §4 of the Re-Amended Defence and Counterclaim (“RAD&CC”) admits that “[GWM] received a sum of HK$320,000 deposited into [GWM]’s Bank of China account number[ed] 012-355-0007088-8 by way of a bank transfer on 10 June 2019”, i.e. the Deposit (“transferred from a Bank of China (Hong Kong) Limited account number 012-875-2-019243-9 with the name of ‘LI JIA HENG’ [i.e. Mr Li] to GWM's Bank of China account”[15]).

10.  As it turned out, Li’s Vehicle was not delivered whether on 20 June 2019 (as agreed by Mr Li) or at all. Indeed, with regard to the Deposit transferred from Mr Li to GWM, GWM claims (and, for the avoidance of doubt, I state them as GWM’s allegations and make no finding on any of them) that:

(a)  “At the time of the above said transfer or thereafter, none of the GWM's staff [member]s… knew about who made the transfer of the said sum or what the said sum was for;”[16]

(b)  “Later, I was told by the staff [member]s of [GWM’s] accounts department that they had been informed by [GCMC] and passed with a transfer slip in relation to the said sum saying that the said sum was paid by a customer named Wong Sin Yan [(‘Wong’)] as part of the purchase price of a vehicle (Licence No.CN1888) [(‘Wong’s Vehicle’)]. According to the records of GWM, [Wong] was one of the customers introduced by GCMC to GWM. GWM has issued an official receipt number 15859 to [Wong] acknowledging receipt of the said sum of HK$320,000, though the accounts department staff remarked ‘Li Jia Heng’ in its internal receipt;”[17] and

(c)  “[Wong] has already taken delivery of [Wong’s Vehicle] on 12 June 2019.”[18]

11.  On 17 June 2019, Yau was arrested by the police for fraud. He was then convicted by HH Judge Frankie Yiu on his own plea of 10 charges of fraud, and sentenced to an imprisonment of 44 months: see [2020] HKDC 1072.

C.  Pleading Requirement for an Unjust Enrichment Claim

12.  Mr Li’s claim against GWM was originally primarily in contract, with an alternative claim in unjust enrichment, both based (factually) on the Agreement. In his written Opening Submissions, Mr Li formally abandoned the contractual claim (see §7), thereby leaving only his unjust enrichment claim. Similarly, GWM originally had a counterclaim against Mr Li based on fraud, arising from certain alleged private dealings between Mr Li and Yau, but in its Opening Submissions, GWM abandoned the counterclaim (see §8). Thus, this trial is solely concerned with Mr Li’s unjust enrichment claim (and GWM’s potential defences thereto).

13.  Against this background, whilst I was preparing for the trial the week before it started, I noticed that the Statement of Claim (“SOC”)’s plea on unjust enrichment comprised one single sentence (which was also the entire §12):

“Further and/or in the alternative, the Defendant has been unjustly enriched by the Plaintiff’s payment of the Deposit to the use of the Plaintiff.”

14.  I also noticed that §19(c) in Part C1 of GWM’s Opening complained (among others) that “there is no plea of any unjust factor in the SOC.”

15.  Conscious of the then remaining time and the importance of this issue (which was indeed now the only basis of Mr Li’s claim, and the focus of the trial) and my mandate “to secure the just resolution of [this dispute] in accordance with the substantive rights of the parties” (Order 1A, rule 2(2) of the Rules of the District Court (Cap 336H) (“RDC”)), I, of my own motion, gave paper directions on 19 December 2023 as follows:

“In view of Part C1 of the Defendant's Opening Submissions, the Plaintiff shall file and serve, by 4:30 pm on Wednesday, 20 December 2023, a copy of the Plaintiff's proposed Amended Statement of Claim (if any and if so advised), which shall initially be considered de bene esse. For this purpose, the Plaintiff is permitted to provide the same to the Court by fax initially, to be followed by the normal coloured hard and soft copies in the usual way. The Defendant will be provided with an opportunity to consider the same, and (if so advised) to respond by submission and/or consequentially re-amending its Defence and Counterclaim, at an appropriate juncture.”

16.  On 20 December 2023, Mr Li (and his legal representatives) amended the SOC, by adding one sub-paragraph under the existing §12, which remained unchanged (as quoted in §13 above):

“By reason of the circumstances set out at paragraphs [7] to [10], the Plaintiff is entitled to a claim of restitution of the Deposit as unjust enrichment as the consideration for the Plaintiff’s payment of the Deposit has wholly failed.”

17.  As can be seen, this additional sub-paragraph (a) specified the unjust factor (viz. a total “failure of consideration” / “failure of basis”), and (b) did not add any actual fact to the original SOC (and, thus, no additional evidence was necessary).

18.  By the start of the trial on 21 December 2023, GWM (and its legal representatives) had considered the Amended SOC (“ASOC”), and (to the credit of Mr Kevin Lau, its Counsel) the necessary consequential re-amendment to the Amended Defence and Counterclaim (“AD&CC”) had been swiftly produced, in the shape of the new §6A:

“Without prejudice to the generality of the defences pleaded in paragraph 6 above, paragraph 12(1) of the Amended Statement of Claim is denied. It is averred that:

(a) On the Plaintiff’s case, the consideration or basis which has allegedly wholly failed is the Agreement. However, the Agreement is not made between the Plaintiff and the Defendant. Paragraph 1 of this [RAD&CC] is repeated and for the avoidance of doubt it is denied that Yau had any authority to act on behalf of the Defendant.

(b) As such, the Agreement does not constitute a basis jointly understood as such between the Plaintiff and the Defendant. Accordingly, no claim for failure of basis is permissible.”

19.  In due course, Mr Tony Lo, Counsel for Mr Li, handed up his consequential re-amendment to the Amended Reply and Defence to Counterclaim (“AR&DCC”), in the form of the new sub-paragraph (1) of §9:

“The entirety of Paragraph 6(A) is denied. It is averred that the consideration for the Plaintiff’s payment of the Deposit is on the anticipated performance of the Agreement.”

20.  In the above circumstances, it was plainly just, expedient and appropriate for me to grant leave to amend the SOC “[f]or the purpose of determining the real question in controversy between the parties to [these] proceedings, or of correcting any defect or error in [these] proceedings,” and to grant leave consequentially to re-amend the AD&CC and the AR&DCC, as per §§16 – 19 above, pursuant to RDC Order 20, rule 8(1). I was also satisfied that giving such leave was necessary either for disposing fairly of this cause and for saving costs, under RDC Order 20, rule 8(1A).

21.  To GWM’s and Mr Lau’s credit, they, sensibly and properly, did not seriously oppose such leave being given. Indeed, that stance was consistent with GWM’s own position, articulated in §19(c) of its Opening, that “it is a pleading requirement to identify a specific unjust factor”, citing CRP/PE Munroe Street Owner, LLC v Junwei Consulting Trade Co, Ltd [2021] HKDC 71, §§52, 56, where HH Judge Herbert Au-Yeung said:

“I am of the view that the ‘unjust factor’ relied on by the plaintiff should be expressly pleaded in the Statement of Claim as part of the material facts…. The Statement of Claim is therefore defective.”

22.  This Mr Li has now accomplished in his ASOC. In any event, however, whilst I agree that a party maintaining a (counter)claim in unjust enrichment would generally have to make it clear in their pleading which specific unjust factor(s) they are relying on, I do not, with respect, think that there is an immutable or inflexible rule to the effect that unless a party explicitly spells out, in so many words, the unjust factor(s) relied on, the pleading must therefore be defective, and/or the party is ipso facto barred from maintaining the unjust enrichment claim based on such unjust factor(s).

23.  On the contrary, I respectfully consider that as long as the pleading, read fairly and as a whole, is sufficiently clear to show that one or more particular unjust factors are being relied on, that should generally suffice: see Wong Chi Hung v Lo Wing Pun [2023] 5 HKLRD 302, [2023] HKDC 1284, §41, where Deputy District Judge Gary CC Lam held that “while the phrase ‘a total failure of consideration’ is not expressly pleaded in the plaintiff's amended statement of claim,… the facts already pleaded… are clear enough to show this as the or another unjust factor. I do not agree… that the phrase ‘a total failure of consideration’ must be expressly pleaded in order to make good the case of a total failure of consideration, as it is not a must that the legal effect and the law should be pleaded: see Hong Kong Civil Procedure 2023 Vol 1, para 18/7/4”. See also Attorney General of Trinidad and Tobago v Trinsalvage Enterprises Ltd [2023] 1 WLR 4045, where the Privy Council reaffirmed (at §19) its previous decision in Samsoondar v Capital Insurance Co Ltd [2021] 2 All ER 1105, §18, that “[w]hile it may be desirable, it is not essential, that the words ‘unjust enrichment’ are used but the claimant must identify sufficient facts to show how those three elements [i.e. §25(a) – (c) below] are satisfied: see Goff and Jones, The Law of Unjust Enrichment…, 9^th ed (2016), para 1-38) [Now 10^th ed (2022), paras 1-40–1-41]. The important purpose of a statement of case is to ensure, as a matter of fairness, that the defendant knows the case it has to meet.”

24.  Lastly on pleading, I also made the usual costs order. The result can be restated thus:

(a)  Leave be granted to Mr Li to amend his SOC as per the amendment reproduced in §16 above;

(b)  Leave be granted to GWM to re-amend its AD&CC as per the re-amendment reproduced in §18 above;

(c)  Leave be granted to Mr Li to re-amend his AR&DCC as per the re-amendment reproduced in §19 above;

(d)  Leave be granted for the parties to file and serve their respective (re-)amended pleadings as set out in the above sub-paragraphs, which I understand the parties have done; and

(e)  Costs of and occasioned by these amendments be to GWM in any event.

D.  Mr Li’s Unjust Enrichment Claim

25.  The overall analytical framework for Mr Li’s unjust enrichment is well established. In the leading and oft-cited decision in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, §67, where the Court of Final Appeal asked four questions:

“(a) Was the defendant enriched?

(b) Was the enrichment at the plaintiff's expense?

(c) Was the enrichment unjust?

(d) Are any of the defences applicable?”

26.  §§17 – 18 of GWM’s Opening helpfully confirmed that GWM does not take issue with either (a) or (b), making (c) (and, if (c) is established, (d) also) the real live issue. To (c) I now turn.

27.  On (c), GWM referred to Goff & Jones: The Law of Unjust Enrichment (10^th Ed), §§13-02 – 13-04. I have considered these paragraphs fully; suffice for me to quote the following:

“The basis of the transfer must be jointly understood as such by both parties. It must be ascertained objectively, and the parties’ uncommunicated subjective thoughts are irrelevant. Hence, if only one of the parties has a particular basis in mind, and that basis fails, no claim arises in unjust enrichment…. The joint basis of the transfer should be assessed objectively—a purely subjective assessment would be both impractical and undermine the parties’ legitimate expectations. If, therefore, one party voices his understanding of the basis of a transfer, and the other apparently assents, that basis can be taken to be an agreed basis, whether or not the other party has some private reservations about it.”

28.  In Dargamo Holdings Ltd v Avonwick Holdings Ltd [2022] 1 All ER (Comm) 1244 (CA), cited in footnote 23 to §13-04, the English Court of Appeal (at §§79 – 80) gave the following illuminating guidance on the precise elements of this unjust factor:

“The core concept of ‘failure of basis’ is that a benefit has been conferred on a joint understanding that the recipient’s right to retain it is conditional. If the condition is not fulfilled, the recipient must return the benefit (see Goff & Jones at 12–01). Whilst failure of basis ranks alongside the unjust factors of mistake, duress and undue influence as a factor negativing consent, it differs in that it is concerned with qualification of consent, as opposed to impaired or vitiated consent (see Burrows The Law of Restitution (3^rd edn, 2011)).

It is common ground that the meaning of failure of basis extends beyond failure of promissory consideration payable under a contract or a failure of contractual counter-performance (see Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd… [1943] AC 32 at 48)…. The extended meaning is supported in An Introduction to the Law of Restitution (at p 223) (cited with approval by the Court of Appeal in Sharma v Simposh Ltd… [2013] Ch 23 (at [24])) where it is stated that:

‘Failure of consideration for a payment… means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself.’

The courts in both Roxborough [v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (HCA)] and Barnes [v Eastenders Cash & Carry plc [2015] AC 1 (SC)] adopted this extended meaning.”

29.  Among other authorities, Carr LJ (as the Lady Chief Justice then was, with whom Asplin LJ and Sir Timothy Lloyd agreed) surveyed (at §§99 – 101) a series of “what have been described as ‘the deposit cases’”, viz. “cases in which payment was made in circumstances where there was no valid and subsisting contract in place. Instead, the payment was transferred in anticipation of legally binding contracts being concluded”:

(a)  Chillingworth v Esche [1924] 1 Ch 97 (CA): “a purchaser agreed to buy land subject to a proper contract being prepared by the vendor’s solicitors, and paid a 5% deposit to the vendor…. [T]he purchaser changed his mind, and withdrew from the sale. His claim to recover the deposit succeeded on the basis of total failure of consideration”.

(b)  Yeoman’s Row Management Ltd v Cobbe [2008] 1 WLR 1752 (HL): “Mr Cobbe was [held] entitled to a quantum meruit payment for his services in obtaining planning permission. The services were provided in the expectation of becoming the purchaser of the property under an enforceable contract. The anticipated contract did not materialise but nevertheless a quantum meruit award in respect of his services was granted.”

(c)  Guardian Ocean Cargoes Ltd v Banco do Brasil SA (Nos 1 and 3) [1994] 2 Lloyd’s Rep 152 (CA): “payments made by the claimants to the defendant bank had been in anticipation of a refinancing deal being concluded between the parties; if no deal transpired, the bank would have no right to retain the money.”

(d)  Nu Line Construction Group Pty Ltd v Fowler [2014] NSWCA 51: “the appellant [was granted] restitution of payments made in anticipation of a contract for the sale of land which was not in fact concluded.”

30.  Dargamo Holdings Ltd was recently approved and considered by the UK Supreme Court in Barton v Morris [2023] AC 684 (with Carr LJ’s judgment praised as “comprehensive and scholarly”): see §§77 – 78, 92 and 102. Barton also reaffirmed the Supreme Court’s own earlier ruling in Barnes that “[f]ailure of basis does not necessarily require failure of a promised counter-performance: ‘it may consist of the failure of a state of affairs on which the agreement was premised’”, which “state of affairs… was fundamental to the agreement [and] had failed to sustain itself”: §81 (quoting Barnes, §§106, 114, 115).

31.  Applying these principles to the facts of this case, the crucial question is whether the Deposit “has been conferred [by Mr Li on GWM] on a joint understanding that [GWM]’s right to retain it is conditional”, or “the state of affairs contemplated as the basis or reason for [Mr Li’s] payment [of the Deposit to GWM] has failed to materialise”. I answer this question in the affirmative:

(a)  The intended transaction the subject-matter of Mr Li’s claim took place at 12/F of Auto Plaza, which was both GWM’s headquarters, and (partially) GCMC’s business place. Mr Li dealt with Yau, who, GWM admits, was GCMC’s employee (a Salesman Executive). Yau was present there that day to discharge his employment duties, viz as part of the workforce for GCMC’s business operations, which included introducing or referring customers to GWM to purchase new cars from GWM (which, if successful, would entitle his employer GCMC an introduction fee). This Yau precisely did to Mr Li that day, with the full authorisation, i.e. actual authority, of both GCMC (as his admitted employer) and GWM (by virtue of the Arrangement).

(b)  After Mr Li had decided to purchase Li’s Vehicle that same day, Yau produced a form i.e. GWM’s standard-form provisional agreement for purchasing a new vehicle (in this case, Li’s Vehicle), filled up the particulars, and asked Mr Li to sign thereon.

(c)  Yau did all of the foregoing according to the procedure for the Arrangement described in §5(a) – (b) above, which procedure had been agreed to by both GCMC and GWM, and regarding which he had been actually authorised (indeed, instructed) by both GCMC (as his employer) and GWM (by virtue of the Arrangement).

(d)  Later on the same day (and in reliance on the above), Mr Li transferred the entire Deposit into GWM’s bank account. Not only did GWM admit the transfer to it and its receipt of the Deposit, its own record even contained salient particulars of the transfer as having been made “from a Bank of China (Hong Kong) Limited account number 012-875-2-019243-9 with the name of ‘LI JIA HENG’ [i.e. Mr Li]”. I find that GWM actually knew that “LI JIA HENG”, i.e. Mr Li, had paid to it the entire Deposit, and that that had been communicated to it by Mr Li (through these particulars). This is reinforced by GWM’s own accounts department’s staff member’s remark of “Li Jia Heng” in its internal receipt dated 10 June 2019, as GWM itself admits.[19]

(e)  Nonetheless, GWM claimed that “[a]t the time of the above said transfer or thereafter, none of the GWM's staff [member]s… knew about who made the transfer of the said sum or what the said sum was for”, and that, later on, GCMC (through Yau[20] – thus once again demonstrating that, even on GWM’s own case, Yau was actually authorised to act in the Arrangement) informed GWM that the Deposit “was paid by a customer named [Wong] as part of the purchase price of [Wong’s Vehicle].” Even if GCMC / Yau had so informed GWM, GWM ought to have made reasonable inquiries to ascertain who “Li Jia Heng” was and what the purpose of his paying the Deposit was, in circumstances where there was no or no apparent or sufficient connection or relationship between “Li Jia Heng” and “Wong Sin Yan”, or why the former would (intend to) pay part of Wong Vehicle’s purchase price. This is borne out by GWM’s accounting department’s own internal remark in its internal receipt. GWM clearly had not made any such inquiries: GWM’s own evidence is that “none [on GWM’s behalf] has ever had contact with [Mr Li]”;[21] see also the letter from Edwin Yun & Co, GWM’s solicitors on record in these proceedings (“EY”), dated 27 November 2020, well after the fact, asking Wong to confirm whether “Li Jia Heng” was her agent or servant who made the payment of the Deposit on her behalf. Insofar as GWM suggests that it is not unusual / uncommon for a person to be paying (part of) the price of a new vehicle purchased in the name of another person or entity (see GWM’s written Closing Submissions, §27(b)), even if this was true (as to which I make no finding), I would not uphold it as a sufficient excuse for GWM. As an obvious example, GCMC / Yau could simply have made a mistake in so informing GWM (and, in this case, there was no explanation for Yau’s assertion to GWM that the Deposit paid by Mr Li was for Wong’s Vehicle). At the very minimum, there would have had to be some factual reason before it would have been rational for a payment by one person (and a substantial one at that) to be legitimately credited to someone else’s new car. Here, since GWM has failed to make any such reasonable inquiries, it does not lie in its mouth to deny that Mr Li had paid the Deposit to it on the basis that it was for his own purchase of a new car from GWM.

(f)  Given (i) my finding vis-à-vis Yau in sub-paragraph (c) above (albeit that Yau did not carry out or caused or procured to be carried out the rest of the procedure (see §5(c) – (f) above)), in circumstances where (ii) a fully concluded, legally binding contract (which would have come into existence had the entire procedure been followed through) is unnecessary for an unjust enrichment claim based on a total failure of basis (see Dargamo Holdings Ltd, §80, quoted in §28 above – indeed, such a contract (which forms the basis allegedly to have totally failed) would generally preclude an unjust enrichment claim for failure of basis: see e.g. Dargamo Holdings Ltd, §§115 – 116, 133); and (if and insofar as necessary) (iii) my finding vis-à-vis GWM’s receipt and treatment of the Deposit in sub-paragraphs (d) – (e) above, I conclude that, on the particular facts of this case, there was the “joint understanding” requisite for establishing a total “failure of basis”, viz. that the Agreement between Mr Li and GWM was or would become a legally binding contract.

(g)  Put another way, I find that the Deposit “has been conferred [by Mr Li on GWM] on a joint understanding that [GWM]’s right to retain it is conditional”, namely that the Agreement was or would become legally binding (and hence the sale and purchase of Li’s Vehicle thereunder would be completed), or “the state of affairs contemplated as the basis or reason for [Mr Li’s] payment [of the Deposit to GWM] has failed to materialise”, namely the Agreement turned out not to have been concluded (and that the sale and purchase of Li’s Vehicle contemplated thereunder never materialised).

32.  Further and/or alternatively, I reach the same conclusion as in the preceding paragraph on the basis that, as pleaded in §9(1) of the Re-Amended Reply and Defence to Counterclaim (see §19 above), the consideration (or basis) for Mr Li’s payment of the Deposit to GWM “is on the anticipated performance of the Agreement”, or, in other words, in anticipation of a legally binding Agreement being concluded between Mr Li and GWM (and performed), which basis has, in the event, wholly failed. In doing so, I bear in mind and apply “the deposit cases” explored in §29 above.

33.  Yet further and/or alternatively, I arrive at the same conclusion on the ground that the “state of affairs… fundamental to the agreement”, viz. Mr Li’s payment of the Deposit to GWM on the fundamental premise that the sale and purchase of Li’s Vehicle under the Agreement, which was or would become legally binding, would be completed, “had failed to sustain itself”.

34.  For completeness, my findings above, particularly in relation to Yau’s actual authority to conduct himself in relation to introducing or referring Mr Li to GWM as a customer to purchase a new car from GWM under the Arrangement, are not affected by GWM’s line of argument, relying on the so-called “Feb Agreement” (see GWM’s Closing, §7(c)(i)), that Mr Li had some (unspecified) private dealings with Yau, or that it would be irrational for Mr Li to have believed Yau had actual or apparent authority from GWM. First, insofar as such line of argument attempts to revive GWM’s now-abandoned counterclaim against Mr Li, I firmly resist such attempt. Second and in any event, my findings above are reached for all the reasons set out above, which are all independent of any alleged private dealings between Mr Li and Yau (if any, as to which I make no finding), and of any belief on Mr Li’s part or its rationality.

E.  GWM’s Defences to Mr Li’s Unjust Enrichment Claim

35.  Having thus resolved the issue of “unjustness” under §25(c) above, and consequently Mr Li’s unjust enrichment claim, in Mr Li’s favour, I now turn to the issue of whether GWM has made out any defence to his claim under §25(d) above.

36.  As foreshadowed, “[t]he relevant defences here are change of position and bona fide purchaser for value without notice. The burden of proof of establishing the defences lies on [GWM]”: Taihei Dengyo Kaisha Ltd v Zhao Yizhe [2024] HKDC 222, §66; see also Trinsalvage Enterprises Ltd, §18. GWM does not dispute this.

37.  As far as change of position is concerned, its key requirements have been summarised in Chitty on Contracts (35^th Ed), §33-200:

“The operation of the defence is founded on two fundamental principles.

(1) The mere fact of having spent money or delivered property does not suffice to establish the defence. Rather, there must be a causative link between the receipt of the benefit by the defendant and their change of position, so that, but for the receipt of the benefit, the defendant’s position would not have changed, either because the defendant no longer has the benefit received or because the defendant, in reliance on the receipt of the benefit, has changed their position in some other way. The defence will not be made out if the change of position would have occurred even if the enrichment had not been received.

(2) The defendant’s position must have changed in circumstances which make it inequitable for them to make restitution to the claimant. Specific principles can be identified to assist in the determination of what is equitable for these purposes.”

38.  Turning to the bona fide purchaser defence, GWM explained that “the analysis for the bona fide purchaser defence goes largely hand-in-hand with that of the change of position defence” (GWM’s Opening, §37; its Closing, §61). The core difference between the two defences in the present context is elucidated in Goff & Jones, §§29-12, 29-13: “the change of position defence only operates pro tanto, to the extent that the defendant has suffered detriment, whereas the bona fide purchase defence always operates as an absolute bar: provided that the defendant has given some consideration in exchange for the relevant property, the claim will fail completely, whatever the value of the consideration given.”

39.  In the instant case, both defences are essentially along the following lines (D’s Opening, §12; see also §29):

“(a) Pursuant to a Sale and Purchase Agreement dated 5 June 2019 (‘Wong’s SPA’), Wong agreed to purchase and [GWM] agreed to sell [Wong’s Vehicle]….

(b) On about 10 June 2019, [GWM] was informed by GCM[C] through Yau that the [Deposit] was paid on behalf Wong…. At the material time, a significant amount of the purchase price for Wong’s Vehicle was still outstanding from Wong. Additionally, [GWM] did not receive information from [Mr Li] that the [Deposit] was paid allegedly for his own account (and not of Wong’s)….. The [Deposit] was therefore booked into Wong’s purchase.

(d) On 12 June 2019, based inter alia on the [Deposit] having been accounted for as payment for Wong’s Vehicle, Wong’s Vehicle was released into the possession of Wong.”

40.  For the reasons below, I am not satisfied that GWM has discharged its burden of proving the facts (as summarised by GWM itself above) necessary for making out either defence:

(a)  Perhaps most tellingly, as Mr Li points out in his Closing, Mr Mak confirmed in his cross-examination (among other things) that: (i) he had never met Wong; (ii) there was no delivery note of Wong’s Vehicle; (iii) he did know when Wong’s Vehicle was actually delivered to Wong; and (iv) no documentary proof existed that Wong’s Vehicle was actually / physically delivered to Wong. GWM’s Closing also admits (among other things) that: (I) “[Mr Mak] ‘did not know’ if there was ever any payment made by Wong personally for purchasing Wong’s Vehicle”; (II) “[h]e had no knowledge of how there came to be a notation of [Mr Li]’s name in [GWM]’s internal records of receipt of the [Deposit]…”; and (III) “[h]e was not personally responsible for delivering Wong’s Vehicle to Wong” (§§27(b) and 28(b), (c)).

(b)  GWM did not invite any witness having knowledge of any of these matters to come forward to give evidence on such matter(s), or has produced any proof of actual / physical delivery of Wong’s Vehicle by GWM to Wong. This was so even though Mr Li had, as early as his AR&DCC filed on 20 October 2021, pleaded (among other things) that:

“(6) It is not admitted:-

(i) that [GWM] credited and booked [Mr Li]'s payment of HK$320,000 received as an outstanding amount payable by [Wong];

(ii) that a vehicle was released into the possession to [Wong] on 12 June 2019;

(iii) that valuable consideration, [in] the form of the said vehicle, therefore moved from [GWM] in consideration of the receipt of [Mr Li]'s HK$320,000 payment.

[GWM] is put to strict proof thereof.”

(c)  For these reasons alone, I find as a matter of fact that GWM has failed to discharge its burden of proving that it has actually / physically delivered Wong’s Vehicle to Wong. Given this, I also find that GWM has failed to establish the essential factual premise of its intended defences of change of position and bona fide purchaser, which must therefore fail as a matter of fact.

(d)  In any event, I add the following to the above analysis.

(e)  So far as the sale and purchase of Wong’s Vehicle is concerned, GWM relies on (i) the Vehicle Registration Document for Wong’s Vehicle, (ii) the invoice and shipping documents from Bigwave Co, Ltd, and (iii) Wong’s SPA (including the PSPA and SPA between Wong and GWM) itself (see GWM’s Opening, §29(a) – (d)). However, EY’s letter to John Lam, Law & Co (then Wong’s solicitors) dated 21 December 2020 stated (at §2) “[t]hat records show that GWM was the seller and [Wong] the purchaser of [Wong’s] Vehicle pursuant to the agreement of 5 June 2019; now it appears, pursuant to [Wong]’s particulars, that the parties had never entered into this agreement, the existence of which is the result of a fraud exercised by third party or parties”. GWM’s witnesses did not, in their written evidence (or otherwise), explain the apparent inconsistency between this and the version of events now relied on by GWM premised on Wong’s SPA being a valid and genuine agreement. Also, the Vehicle Registration Document for Wong’s Vehicle alone does not prove that GWM has actually / physically delivered Wong’s Vehicle to Wong.

(f)  As to GWM having been informed by GCMC / Yau that the Deposit had been paid on Wong’s behalf, I refer to my finding at §31(d) – (e) above. Additionally, GWM’s own Receipt Voucher dated 14 June 2019 for Wong’s Vehicle did not have any breakdown or item showing or recording the Deposit, but instead only a single entry “Deposit Rec’d… CN-1888 Deposit Contra with [Wong]… $400,000.00”. This Receipt Voucher was dated four days after the internal receipt respecting the Deposit with Mr Li’s name remarked therein. I consider it unclear how the Deposit was actually applied by GWM to Wong’s Vehicle’s purchase price, and, again, GWM’s witnesses did not, in their written evidence (or otherwise), explain this.

(g)  It is incumbent upon GWM, as the party relying on the defences, and consequently bearing the burden of proof, to explain these apparent inconsistencies and for that purpose to adduce sufficient evidence in discharging its burden. It is not to the point that GWM’s witnesses might not have been cross-examined on them: it is trite law that, where the burden of proof is on a party (here, GWM), “[i]t is open to [the other side (here, Mr Li)] to sit back and do nothing save make submissions, and if the evidence is not sufficient to satisfy a court on the balance of probabilities, [the party] will not succeed”: Griffiths v TUI (UK) Ltd [2022] 1 WLR 973 (CA), §86 (per Bean LJ, dissenting, who was upheld by the UK Supreme Court: [2023] 3 WLR 1204).

41.  Taking all of the foregoing into account, I conclude that GWM has failed to prove the essential factual premise of its intended defences, and each of them fails as a matter of fact.

F.  Conclusion and Relief

42.  Accordingly, I enter judgment for Mr Li against GWM on his unjust enrichment claim in the sum of the Deposit i.e. HK$320,000. I also award him interest at the normal pre-judgment rate, viz prime plus 1% per annum, until the date of this Judgment, and thereafter at judgment rate until full payment.

43.  I also dismiss GWM’s Counterclaim against Mr Li in its entirety.

44.  As to costs, I make an order nisi that GWM do pay Mr Li’s costs of this Action, including all costs previously reserved and his costs of resisting its now-abandoned Counterclaim (if any), such costs be taxed if not agreed, and that there be a Certificate for Counsel. This order nisi becomes absolute 14 days after it is made unless a party applies within the 14-day period for varying the same.