CHINA HONOUR SERVICE LTD v. LI YUET KWAN

DCCJ 4875 / 2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4875 OF 2004

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JUDGMENT

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1.  By way of the present action, the Plaintiff claims against the Defendant the sum of HK$564,206.11 as outstanding principal and interest under an oral loan agreement (“the Oral Loan Agreement”) reached between them in early August 1996. 

Background and the disputes

2.  The following are the background matters leading to the present dispute.

3.  Mr Lau Ying Wah (“Mr Lau”) was a director of the Plaintiff at the material time.  He was married to one Ms Li Yuet So (“Ms Li”) in about 1977.  They have a daughter called Ms Lau Yuen Sze (“Ms Lau”).  Mr Lau and Ms Li were divorced in about the middle of 2004.   

4.  Ms Li is the cousin of the Defendant.

5.  In about 1996 and 1997, the Plaintiff was provided with banking facilities by Kincheng Bank, which included credit line for opening letters of credit, trust receipt (“TR”) and overdraft. 

6.  The Defendant’s husband is one Mr Ng Kei Fen (“Mr Ng”).  Mr Ng and one Mr Zhang Yehui (“Mr Zhang”) set up a company known as Goodfine (HK) Ltd (“HK Goodfine”) in 1995 as a window company of a composite of companies also known Goodfine in Guangzhou (“the China Goodfine”).  The China Goodfine carried on, inter alia, the business of trading in vehicle paints.  HK Goodfine was set up to facilitate the trans-shipment of German vehicle paints that China Goodfine had purchased from Germany to China via Hong Kong.  Before 1995, Mr Ng ran his own trading business mainly with the Mainland.

7.  Before the present dispute arose, Mr Lau’s family and the Defendant’s family got together for social gatherings from time to time, and the relationship between the members had been a good one.

8.  There is no dispute that the Oral Loan Agreement was entered into through Mr Lau and the Defendant in early August 1996 whereby the Plaintiff agreed to issue a letter of credit in the sum (“the L/C Sum”) of HK$762,120 to one Chendge Group Ltd (“Chende”) for the purchase of 1,095 cases (13,140 bottles) of red wine (“the Wine”) in return for a payment of handling charge of HK$76,212 (being 10% of the L/C sum). 

9.  What is in dispute is that it is the Plaintiff’s case that the Oral Loan Agreement was made by the Defendant in her personal capacity, while the Defendant contends that in entering into the Oral Loan Agreement, she was only acting for and on behalf of HK Goodfine, and the Plaintiff through Mr Lau knew about that.

10.  Pursuant to the Oral Loan Agreement, the Plaintiff issued the letter of credit through Kincheng bank in favour of Chengde as requested on 13 August 1996.  Moreover, it is common ground that a written Chinese Agreement (“the Chinese Agreement”) dated 16 August 1996, which was intended to record the terms of the Oral Loan Agreement, was signed by the Plaintiff through one Ms Chan (“Ms Chan”) (the then secretary of Mr Lau) and the Defendant at the Plaintiff’s office.  It is again the Defendant’s case that she signed the Chinese Agreement for and on behalf of HK Goodfine.

11.  The Chinese Agreement provides as follows:

“協議書
	甲方：		李月群小姐 [i.e., the Defendant]/德輝(香港)有限公司 [i.e., HK Goodfine] (以下簡稱甲方)
	乙方：		華信服務有限公司(以下簡稱乙方)
		1.	乙方受甲方委託，代開出總金額HKD762,120 的信用証給乘德集團有限公司購買 CHATEAU SUAU, CUVEE PRESTIGE 1993。
		2.	貨物到港後，甲方辦理提貨等一切事宜，乙方負責簽出 CARGO RECEIPT。
		3.	甲方支付貨款10%即HKD76,212 給乙方作為手續費。
		4.	甲方須於90天內支付全部貨款HKD762,120連同手續費HKD76,212給乙方。
		5.	甲方承担提貨反銷貨等所有風險，並須依期支付貨款連手續費HKD838,332，逾期乙方有權追究法律責任。
		6.	本協議書受香港法律約束。
			1996年8月16日)”

12.  In the Chinese Agreement, the Defendant together with HK Goodfine were described as “Party A”, while the Plaintiff was described as “Party B”.  It was stated that “Party A” agreed to repay the Plaintiff the principal sum of HK$762,120 and handling fee HK$76,212 within 90 days.  In other words, the total sum (“the Sum”) repayable under the Oral Loan Agreement was HK$838,332.

13.  Upon and after the expiry of the 90 days, the Sum was not repaid in full.   It is the Plaintiff’s case that given that the Defendant was unable to repay the Sum on the expiry date as originally agreed, soon thereafter in November 1996, she further orally agreed with the Mr Lau (acting on behalf of the Plaintiff) to pay the Plaintiff compound interest on a monthly basis and at the rate of prime rate plus 3.5% (“the Interest Agreement”).

14.  The Defendant denies having made the Interest Agreement whether on her own behalf or on behalf of HK Goodfine.

15.  On the other hand, it is common ground that the following 9 cash repayments (“the 9 Repayments”) were made to the Plaintiff under the Oral Loan Agreement:

Date of Repayment	Amount (HK$)
13 Sept 1996	100,000
13 Jan 1997	150,000
7 Mar  1997	80,000
26 June 1997	40,000
23 Oct 1997	40,000
11 Dec 1998	30,000
15 June 1999	30,000
24 Nov 1999	20,000
5 Jan 2000	18,772

16.  It is however the Plaintiff’s case that the Defendant made a further payment of HK$5,000  (“the Alleged HK$5,000 Payment”) on 5 February 2002 in cash.  This is denied by the Defendant.  She says that there was never such a repayment.

17.  Other than the repayment made on 5 Jan 2000 in the sum of HK$18,772 (“the HK$18,772 Repayment”), it is common ground that all the other repayments (collectively “the Cash Repayments”) out of the 9 Repayments were made either through the Defendant’s own personal cheques or by her by directly depositing the money into the Plaintiff’s bank account.  

18.  For the HK$18,772 Repayment, the circumstances under which it was made, and the reason why such an odd figure sum was made, were hotly disputed at trial.  I will deal with the evidence in relation to this below. 

19.  The fact remains that a total of HK$508,772 in cash has been repaid to the Plaintiff between November 1996 and January 2000.

20.  In addition to the sum of HK$508,772, there is again no dispute that a total of 300 cases of the Wine had been delivered to the Plaintiff respectively on 16 December 1997, 20 July 1998 and 22 January 1999 for the Plaintiff’s use.  There is also no dispute that it was agreed between Mr Lau (for the Plaintiff) and the Defendant (on her personal capacity according to the Plaintiff’s case, and on behalf of HK Goodfine according to the Defendant’s case) that the purchase price of these 300 cases of the Wine would be used to set off the outstanding sum owed to the Plaintiff under the Oral Loan Agreement.

21.  The Plaintiff says the sales price as agreed between Mr Lau and the Defendant on various occasions are as follows:

For the 100 case (1,200 bottles) of the Wine delivered on 16 December 1997:

1,200 x RMB60/bottle @ exchange rate of 1.09 =  HK$66,055.00

For the 100 cases of Wine delivered on 20 July 1998 and 100 cases on 22 January 1999:

2,400 x RMB45/bottle @ exchange rate of 1.1 = HK$98,182.

22.  Thus, the Plaintiff says a total sum of HK$158,237 (HK$60,055 + HK$98,182) (“P’s Wine Set Off Sum”) should further be set off against the outstanding sum owed by the Defendant. 

23.  After taking into account of the 9 Repayments, the Alleged HK$5,000 Payment and P’s Wine Set Off Sum, it is the Plaintiff’s case that as at 15 September 2004, there was an outstanding balance of HK$564,206.11 (including interest) owed to the Plaintiff.  According to the Plaintiff, the interest has since still be accruing pursuant to the Interest Agreement.

24.  On the other hand, the Defendant contends that the total agreed sales price of the 300 cases of the Wine purchased by the Plaintiff was HK$329,560 (“D’s Wine Set Off Sum”).  This was arrived at in early January when she and Mr Lau agreed that HK Goodfine would charge the wine already delivered to the Plaintiff at RMB120 (being the wholesale price charged by HK Goodfine to other customers) at an exchange rate of 1.0486, but with a discount of 20% (i.e., 3,600x RMB120/1.0486 x 0.8) given their relationship and that HK Goodfine had delayed in making repayment.   It is also the Defendant’s case that the exchange rate was suggested by Mr Lau.

25.  In other words, after also taking into account of the 9 Repayments and the fact that there was never the Interest Agreement, the Defendants says all the sums owed under the Oral Loan Agreement had been repaid (HK$508,772 + HK$329,560 = HK$838,332).  In fact the Defendant says that is the reason why the HK$18,772 Repayment, being the last of all the repayments, was made in an odd sum: since it was the final balance of the outstanding sum after taking into account of the Cash Repayments and the valuation of the 300 cases of Wine, being D’s Wine Set Off Sum.

The principal issues between the parties

26.  Given the above, in summary, the Plaintiff claims against the Defendant for the sum of HK$564,206.11 with further interest accruing under the Interest Agreement, after taking into account to the repayments made through the 9 Repayments, the Alleged HK$5,000 Payment and P’s Wine Set Off Sum.

27.  Although the Defendant does not dispute the existence of the Oral Loan Agreement and the fact that she signed the Chinese Agreement, she denies liability on 3 principal bases:

(1)	The Oral Loan Agreement was entered into between the Plaintiff and HK Goodfine, and she acted only on behalf of HK Goodfine in all the transactions and negotiations, including her signing of the Chinese Agreement.  As such, she was not liable under it.
(2)	Further, there was never the Interest Agreement whether with Goodfine or, for the sake of argument, with the Defendant herself.
(3)	In any event, and if discounting any entitlement to interest, the Sum has already been fully repaid and thus there is no liability on the Defendant even if she were personally liable under the Oral Agreement.

28.  In light of the contentions between the parties, the main issues that fall for my determination at trial are as follows:

(1)	Whether the Defendant is personally a contracting party to the Oral Loan Agreement.
(2)	Whether there is the Interest Agreement.
(3)	Whether all the outstanding sum under the Oral Loan Agreement (but without the Interest Agreement) has already been fully repaid. Under this head, there are 2 sub issues:
	(a)	What was the agreed sales price of the 300 cases of the Wine sold to the Plaintiff by the Defendant or HK Goodfine.
	(b)	Whether the HK$18,722 Repayment was made in odd sum because it was a final repayment based on the final account taken between the parties at that time.

29.  In my view, of these issues, the question as to whether the HK$18,722 Repayment was made in odd sum because it was a final repayment is of particular importance.  This is so because my finding on this question would have a direct impact on some of the other issues: If I find that the HK$18,722 Repayment was in fact the final payment made as a result of taking of the final account by the parties as to the remaining outstanding sum (as said by the Defendant):

(1)	It would mean that the parties had proceeded to calculate the final outstanding sum in around January 2001 without taking into account of any interest.  This would point strongly to the fact that there was never the Interest Agreement.
(2)	It would also mean that the agreed price of the 300 cases of the Wine would be in the sum as contended by the Defendant, since it is only with that calculation that the HK$18,722 Repayment would represent a final payment.

30.  In the premises, in this judgment, I would first proceed to deal with the evidence and my finding on the question as to whether the HK$18,722 Repayment was made in odd sum because it was a final repayment based on the calculated outstanding sum through the taking of the final account between the parties at that time.

Was the HK$18,722 Repayment a final payment worked out by the parties

Evidence and finding

31.  Of all the 9 Repayments, only the HK$18,722 Repayment was made in such an odd sum, while all the other repayments were made in round figures.  This prima facie in my view lends some support to the Defendant’s contention that it was made in such an odd sum because it was a “product” of the taking of the final account between the parties (after taking into account of the valuation of the 300 cases of the Wine and the Cash Repayments).

32.  Mr Lau in giving his oral evidence for the Plaintiff at trial, sought to first explain why this repayment was made in such an odd sum as follows.

33.  He said while he and his wife was visiting her home in the Mainland in early January 2001, he met the Defendant (who was also visiting his wife’s family home too) and he chased her for repayment of the outstanding sum.  Upon his demand, the Defendant gave him HK$10,000 and RMB10,000 in cash.  He then exchanged the RMB10,000 with an underground exchange rate, which resulted in this repayment in the total sum of HK$18,722.  After coming back to Hong Kong, he asked his secretary, Ms Chan, to deposit the sum into the Plaintiff’s account.  He also asked Ms Chan to record this entry in the ledgers (“the Ledgers”) prepared and kept by her. 

34.  When asked by the Court as to when he met the Defendant in Guangzhou when this repayment was made, Mr Lau said firmly that the date should be 5 January 2001 as recorded in the Ledgers.  This is so since he did not want to take any advantage of the Defendant for the purpose of calculating interest, he therefore always asked Ms Chan to record the repayment date at the time when the Defendant gave the money to him or the Plaintiff, but not when the money was actually deposited into the Plaintiff’s bank.  As such, since the Ledgers show that this repayment was made on 5 January 2001, it was on this date that he must have met the Defendant where she gave him the money.

35.  When he gave the above evidence, Mr Lau was confident and firm in his recollection of the events.  He even said as he remembered that since they were visiting his wife’s home in Mainland around the time of Chinese New Year, and given that the Defendant was his wife’s cousin, that was why it so happened that they met each other there.  He also sought to give detail account as to how the Defendant offered to repay the HK$10,000 and RMB10,000 when chased by him at his wife’s family home. 

36.  However, Mr Lau’s above evidence is flatly contradicted and discredited by the fact that the immigration record of the Defendant shows that the Defendant was in Hong Kong on 5 January 2001.  Given that he was adamant in his evidence that the repayment must have been made on this date (in light of the record in the Ledgers), this shows that his account of how the payment was made in Guangzhou could not have been true. 

37.  Since the immigration record of the Defendant was only obtained after Mr Lau has given evidence (at my suggestion after Mr Lau gave the evidence that the repayment was made in such a manner in Guangzhou for the first time while at trial), Mr Lau was recalled by the Plaintiff to give an explanation as to this obvious inconsistency in his evidence.

38.  After being pointed out to him that the Defendant could not have been in Guangzhou on 5 January 2001, the date which Mr Lau still maintained was when the repayment was actually made by the Defendant in cash, he changed his evidence by saying that he actually received the payment of the HK$10,000 and RMB10,000 in Hong Kong.  He confirmed that he personally received these sums from the Defendant, and then gave it to Ms Chan for further handling.  He also said he made a mistake in his recollection when he said earlier in his evidence that the repayment was made in Guangzhou.

39.    However, Mr Lau’s changed evidence is once again flatly contradicted and discredited by his own immigration record, which was obtained and produced after he has finished giving evidence for the recall.  The record shows that he himself was not in Hong Kong on 5 January 2001.  In other words, he could not have, as he said he did in evidence, personally received the HK$10,000 and RMB10,000 from the Defendant as partial repayment.

40.  In light of the above, I have no hesitation in rejecting Mr Lau’s evidence as to why the HK$18,722 Repayment was made in such an odd sum.   It is clear to me that he made this up as he went along in answering questions in evidence as to why this repayment was made in the sum of HK$18,722.   

41.  Coupled with his demeanour in answering questions, I do not find Mr Lau a credible witness.

42.  The Defendant’s evidence as to how the HK$18,722 Repayment was arrived at can be summarized as follows.

43.  It is the Defendant’s evidence that for the 300 cases of the Wine purchased by the Plaintiff, she (acting for HK Goodfine) did not discuss or agree with Mr Lau the sale price of them as and when they were delivered.  They only came to an agreed price subsequently in the following circumstances. 

44.  In early January 2001, she went to Mr Lau’s home in Hong Kong to visit his wife.  At that occasion, she asked Mr Lau that perhaps it was time to take the final account between the Plaintiff and HK Goodfine as to what should be the then outstanding sum owed to the Plaintiff. At that time, the only outstanding unknown sum of repayment was the 300 cases of the Wine.  Discussions between her and Mr Lau then went on, and after confirming with her husband over the phone (who in turn confirmed with Mr Zhang), she agreed with Mr Lau that the unit sales price of the 300 cases of the Wine should be RMB120 with 20% discount.  She also said that she then agreed with Mr Lau that the exchange rate should be, as suggested by Mr Lau, 1.0486, a figure which she did not seek any further confirmation with her husband or Mr Zhang.

45.    Having agreed on the valuation of the 300 cases of the Wine, and given the Other Cash Repayments, the Defendant said that she and Mr Lau therefore came to the final calculation that HK Goodfine thus still owed the Plaintiff HK$18,722. 

46.  HK Goodfine then later caused the payment of this sum to the Plaintiff’s account to represent the final repayment of the remaining outstanding sum.

47.  The Defendant was consistent and firm in her oral evidence even under cross examination.  

48.  Mr Ng’s and Mr Zhang’s evidence supports the Defendant’s evidence.  In relation to this, again, Mr Ng and Mr Zhang were firm and consistent under cross examination.

49.  I find the Defendant, Mr Ng and Mr Zhang as truthful witnesses insofar as their evidence on this question is concerned.  Coupled with my rejection of Mr Lau’s evidence on this issue, on balance, I generally accept their evidence as set out above. 

50.  The Defendant’s case that the HK$18,722 Repayment represents the final repayment sum after the parties had taken the final account is also consistent with the fact that notwithstanding that there had been no repayment whatsoever since 5 January 2001  (other than the Alleged HK$5,000 Payment, which I will deal with later), the Plaintiff had not taken out any action to pursue for repayment until he issued the present claim in September 2004, some 3 years and 8 months later. 

51.  Insofar as the Alleged HK$5,000 Payment is concerned, given my rejection of Mr Lau’s evidence on how the HK$18,722 Repayment was arrived at, I also reject the Plaintiff’s case that the Defendant made the Alleged HK$5,000 Payment on 5 February 2002 as part of her repayment of the loan under the Oral Loan Agreement. 

52.  The Plaintiff relies on a copy of a deposit slip, which shows that HK$5,000 cash was deposited to the Plaintiff’s bank account, to support its case.  However, the deposit slip per se is at best neutral to the question as to whether this cash deposit was in fact made by the Defendant, since it does not show objectively who made the deposit.  

53.  In the copy of this deposit slip provided, there is the handwriting (which is said to be that of Ms Chan) stating that this payment is the Defendant’s repayment and that the interest rate is 8.625%.  Mr Jonathan Wong, counsel for the Plaintiff, relies on this to further support his submission that the Defendant did in fact make the Alleged HK$5,000 Payment as further partial repayment.  However, given that Ms Chan (who has emigrated to Canada since mid or late 2003 according to Mr Lau) was not called to give evidence, and thus has not been subject to cross examination by the Defendant, I put no weight to these handwriting as evidence in support of the allegation that this HK$5,000 deposit represents the Defendant’s partial further repayment of the loan due.

54.  For the above reasons, I therefore find that the HK$18,722 Repayment was a payment made to the Plaintiff representing the final repayment sum arrived at after the parties (through Mr Lau on one hand and the Defendant on the other hand) had taken the final account (including the valuation of the 300 cases of the Wine) as to the remaining outstanding balance under the Oral Loan Agreement. 

The agreed sales price of the 300 cases of Wine

Evidence and finding

55.  The Plaintiff’s evidence on the agreed sales price of the 300 cases of the Wine is as follows.

56.  As Mr Lau was at that time in association with others operating a karaoke bar in Beijing, and in order to help the Defendant in repaying the loan under the Oral Loan and Interest Agreements, he agreed with the Defendant to purchase the 300 cases of the Wine at three different occasions. On each of these occasions, they expressly agreed on the specific price (i.e., RMB65 for the first occasion, and RMB45 for the last two) and the exchange rate (as now alleged by the Plaintiff) for each 100 cases of the Wine.  There is no dispute that the wine had all been delivered.

57.  To support its case, the Plaintiff relies on 3 pieces of handwritten note (collectively “the Handwritten Notes”) which set out the calculation of each of the 100 cases of the Wine.  The calculations (which include the quantity of the Wine concerned, a figure of say RMB60 or RMB45 and an numeric figure said to represent the exchange rate agreed) set out on these notes are consistent with the Plaintiff’s case.  Mr Lau says the Handwritten Notes were all made by him immediately after he had come to an agreement with the Defendant on the price of the Wine.

58.  The Plaintiff also relies on a fax (“the Fax”) sent by the Plaintiff to the Defendant dated 14 January 1999, which set out in its body the delivery address of the wine.  At the bottom of the Fax, there is the following handwritten sentence:

“	price and quantity confirmed by Mr Lau in Beijing”

59.  The Plaintiff says this handwritten sentence shows that the price of the Wine was agreed before the delivery of the Wine, but not subsequently in early January 2001 at Mr Lau’s home as alleged by the Defendant.  However, Mr. Lau under cross examination confirmed and accepted that the handwritten sentence was only subsequently added to the Fax, and it was not there when the Fax was sent to the Defendant.

60.  The Plaintiff further produces one delivery note (“送貨單”) dated 25 November 1997 and one ledger entry voucher (“入庫單”) dated 10 May 1999 to show that the same brand red wine as that of the Wine was purchased at respectively the price of RMB60 and RMB45 in 1997 and 1999.  However, it has to be noted that the receipt and voucher do not relate to the purchase of any of the 300 cases of the Wine.  Moreover, under cross examination, Mr Lau accepted and confirmed that the wine purchased as recorded in the receipt and voucher was of a different vintage year than that of the Wine, and that wine of different vintages could well be of different sales price.

61.  On the other hand, the Defendant’s evidence is that the sales price of all the 300 cases of Wine was agreed at one go around early January 2001 (that is after the delivery of all of them) at Mr Lau’s home, when they sought to settle the final account between the parties.  She was however not certain as to the exact date of this meeting. The agreed sale price was RMB120 (which was the wholesale price that the Wine was sold to other customers) with 20% discount given the relationship between the Defendant (and Mr Ng) with Mr Lau and the fact that the loan under the Oral Loan Agreement had not been repaid for a while.  The agreed exchange rate was 1.0486.

62.  Further, the Defendant relies on a receipt dated 26 August 1997 (“Wine Receipt”) to show that 50 cases of the Wine (of the vintage year 1993) were sold to a customer at RMB120 per bottle.  This receipt is not challenged by the Plaintiff.

63.  After looking at the evidence in its entirety, I reject the Plaintiff’s evidence as to the agreed sales price of the 300 case of the Wine:

(1)	Given my view that Mr Lau is not a credible witness and my finding that the HK$18,722 Repayment represents the final repayment of the remaining outstanding balance of the sum owed under the Oral Loan Agreement, and given his answer in cross examination, I also do not put any weight to the handwritten sentence on the Fax.  It is a self serving sentence put subsequently on the Fax.  Given that it was put on the Fax after it was already sent, I am of the view that it serves no commercial reasons other than to bolster the Plaintiff’s case.
(2)	For the same reason, I also do not accept his evidence as to how the Handwritten Notes came about.  I do not accept that they were made and prepared contemporaneously as suggested by Mr Lau.  I therefore do not put any weight on the Handwritten Notes.
(3)	In relation to the delivery note and the ledger entry voucher relied on by the Plaintiff, in light of Mr Lau’s acceptance that the Wine (which is of a different vintage from the wine referred to in these documents) could be of a different market sales price, I do not find this piece of documentary evidence of any probative value to support the Plaintiff’s case.
(4)	Further, the Plaintiff has not been able to provide any documentary proof, such as receipts and accounts records of the Beijing karaoke bar or the Plaintiff to show the purchase price of the 300 cases of the Wine.  Mr Lau said the records of the Beijing karaoke bar were no longer available as he had sold the business long time ago.    However, that could not explain why there is no record whatsoever from the Plaintiff to show the value of the Wine.  It must be remembered that, although the 300 cases of the Wine were supposed to have been delivered to and consumed by the Beijing karaoke bar (which Mr Lau said the Plaintiff was not a shareholder), the payment of the price of the Wine was to be effected by setting off against the Plaintiff’s entitlement to repayment of the loan under the Oral Loan Agreement.  It is incredible that the Plaintiff has no accounting records to reflect and account for these sums.

64.  To the contrary, given the unchallenged Wine Receipt, and given my ruling under the issue of the HK$18,722 Repayment and my view that the Defendant, Mr Ng and Mr Zhang are credible witnesses on the issue of the HK$18,772 Repayment, I accept the Defendant’s evidence on the agreed value of the 300 cases of Wine.

65.  Insofar as to the evidence on the time when the Defendant went to Mr Lau’s home to discuss this is concerned, her immigration record shows that she was in fact not in Hong Kong in early January 2001.  However, given that the Defendant already said that she was not certain as to when exactly she met Mr Lau on this occasion, as submitted by Mr Martin Wong, counsel for the Defendant, I find that it is on balance more likely than not that she made a mistake as to the approximate time of this meeting, and in fact she met Mr Lau at his home sometime in late December 2000 (when she was in Hong Kong). 

66.  I therefore do not find her evidence that she met Mr Lau to discuss the final account between the parties to be inconsistent with or contradicted by her immigration record.

67.  Mr Jonathan Wong submits that the Defendant’s case on the valuation of the Wine is of suspect and should not be accepted because a 4 decimal figure exchage rate was simply never quoted or used by any underground or official money changers or banks.   Thus, as further submitted by Mr Jonathan Wong, the exchange rate of 1.0486 now relied on by the Defendant therefore be a fictitious figure worked out by her by calculation subsequently to “perfect” her case on the HK$18,772 Repayment. 

68.  However, throughout the trial, both parties sought to rely on various so-called underground exchange rates which are not supported by any documentation.  Both parties simply gave evidence as to what they said to be the then applicable exchange rates.  There is nothing to assist me to say which one is more likely the case than the other.  In these circumstances, I cannot say whether on a balance of probabilities it is unlikely that an exchange rate of 4 decimal figure would be used.  I am therefore only left with my general view on the credibility of the witnesses, of which I have already said I prefer the Defendant and her witnesses to Mr Lau.  As a result, I do not accept Mr Wong’s submission that on the evidence the exchange rate of 1.0486 could not have been true.

69.  For these reasons, I find that on a balance of probabilities:

(1)	The sale price of 300 cases of the Wine was agreed between Mr Lau and the Defendant (whether on her behalf or on behalf of HK Goodfine) at one go sometime in late December or early January 2001 at Mr Lau’s home.
(2)	The total agreed sale price of the 300 cases of the Wine was HK$329,560.

The Interest Agreement

Evidence and finding

70.  Mr Lau gave oral evidence that the Interest Agreement was arrived at soon after the Defendant had defaulted in making repayment under the Oral Loan Agreement (and Chinese Agreement) on the expiry date.  He said he told the Defendant that as the Plaintiff had to pay a higher interest rate of 3.5% above prime rate after 90 days of the issue of the letter of credit (because the advanced funds would be treated by the Plaintiff’s bank as an overdraft instead of under the letter of credit facility), the Defendant should also “compensate” the Plaintiff the interest charged by the bank.  He said he told the Defendant expressly on this occasion that the bank was to charge the Plaintiff compound interest and the Defendant agreed to that as well.

71.  Further, upon the Court’s inquiry at the beginning of the trial as to what was the additional consideration to support the Interest Agreement even assuming that the Defendant had agreed to it as alleged, the Plaintiff obtained leave (with the consent of the Defendant) to amend the Statement of Claim to plead that the consideration (which was absent in the original pleading) in support of the Interest Agreement was the Plaintiff’s promise to withhold its strict rights to recover the sum advanced under the Oral Loan Agreement.  Mr Lau then gave oral evidence to the same effect at trial.  He said he told the Defendant that if she agreed to compensate the Plaintiff the interest it had to pay the bank, the Plaintiff would not for that time being take any action to enforce its right to recover the loan from the Defendant.

72.  The evidence and case on the consideration was not contained in Mr Lau’s witness statement nor (as I mentioned above) in the Plaintiff’s original pleading even though the Plaintiff had all along been legally represented.

73.  Other than Mr Lau’s evidence, the Plaintiff also relies on the Ledgers (said to have been hand recorded by Ms Chan) which purport to record the outstanding sum owed by the Defendant to the Plaintiff since the date of the issue of the letter of credit.  The period recorded in the Ledgers is between 13 August 1996 and 31 December 2002.  They also purport to record all the interest accrued since November 1996, together with the outstanding principal on a monthly basis.  It is the Plaintiff’s case that every month, those parts of the Ledgers which have been updated to that month were faxed to the Defendant, and the Defendant has never raised any objection to the record.  The Plaintiff thus says this evidence shows the existence of the Interest Agreement. 

74.  In his first witness statement, Mr Lau says at paragraph 19 that all copies of the Ledgers (i.e., for the entire period recorded therein) had been faxed to the Defendant by Ms Chan. 

75.  However, upon inspection of the originals by the Defendant’s solicitors, it was found out that the latter period covered by the Ledgers for the period between 1 February 2000 and 30 June 2002 were in fact written on scrap faxed papers with fax headers bearing dates between July 2002 and November 2002.  It is thus clear that these parts of the Ledgers, which purport to cover the period between 2000 and mid 2002 could not have been prepared contemporaneously and could not have been faxed to the Defendant by Ms Chan on a monthly basis as and when they were prepared as alleged by Mr Lau.

76.  When this inconsistency in the evidence was pointed out to the Plaintiff by way of the Defendant’s supplemental witness statement, Mr Lau filed a supplemental witness statement to explain that in fact he only asked Ms Chan to “recalculate the interest near to the end of 2002” as he would like to ask his former wife, Ms Li, to assist him to collect the outstanding amount from the Defendant.  Ms Chan then used the scrap paper in the office to do the calculation and then she posted these parts of the Ledgers to Mr Lau’s daughter, Ms Lau.  

77.  Ms Lau gave evidence at trial that she had given these parts of the Ledgers to her mother and she was told by the mother that her mother had handed them to the Defendant.   It is also Ms Lau’s evidence that at a lunch meeting between Mr Lau, Ms Li and the Defendant at the East Ocean Restaurant “東海酒家” in early 2003, where she was also present, she heard her father demanding payment from the Defendant and the Defendant replied that, as he was bad to Ms Li, she would not make any repayment to him.

78.  Li did not give evidence at trial.

79.  The Defendant’s case is simply that there was never any mentioning of payment of interest by Mr Lau as alleged.  There is therefore simply no question of there being the Interest Agreement.   She has also never received any of the Ledgers whether by fax or through Ms Li as alleged. 

80.  Insofar as the meeting at East Ocean Restaurant is concerned, the Defendant’s evidence is that she was asked to join the meeting where Mr Lau was discussing with Ms Li their relationship problem.  When she arrived, Ms Li was already weeping and looked sad.  She therefore criticized Mr Lau in the way he was treating Ms Li, and Mr Lau retorted back and said it was not for her to “bad mouth” him and that that he had not yet calculated with her the sum owed to him for a long time.  The Defendant replied and said that the sum owed by HK Goodfine had already been settled for a long and Mr Lau was such a changing person.  After further arguments, the Defendant got angry and left the restaurant without eating anything.

81.  Under this issue, I do not accept the Plaintiff’s above evidence for the following reasons:

(1)	The circumstances as set out above which led to Mr Lau’s changed evidence on how the various copies of the Ledgers were provided to the Defendant adds to my view that he is not a credible witness.  He changed his evidence whenever it suited his case or whenever certain inaccuracy or inconsistency in his evidence was pointed out to him.  I therefore do not accept his evidence that copies of the Ledgers had been initially faxed to the Defendant, and subsequently handed over to her by Ms Li.
(2)	Given (a) my rejection of Mr Lau’s evidence, (b) Ms Chan was not available for cross examination by the Defendant’s counsel on this important factual dispute, (c) Ms Li was not available to give evidence or be cross examined as to whether she had personally handed part of the Ledgers to the Defendant, (d) Ms Lau’s evidence on this is hearsay, and (e) Mr Lau’s own evidence now that at least part of the Ledgers were only prepared subsequently but not contemporaneously, I therefore do not put any weight to these Ledgers.  I also do not accept that there is sufficient evidence to show that the Defendant was given at least part of the Ledgers either by fax or by hand.
(3)	Given Ms Lau’s acceptance under cross examination that there were arguments between Mr Lau and the Defendant during the lunch meeting at the East Ocean Restaurant about the relationship between Mr Lau and his wife, in the course of which the repayment of a debt was mentioned, it is not unlikely that Ms Lau might not have heard or not have been able to recollect the Defendant’s answer clearly.  This coupled with the facts that (a) Ms Lau is Mr Lau’s daughter, and (b) she has very little and limited personal knowledge as to the dealings between Mr Lau and the Defendant in this transaction, I attach no weight to her evidence insofar as it relates to what was precisely said by the Defendant and Mr Lau at this lunch meeting at the East Ocean Restaurant.
(4)	The Plaintiff has not provided a single document to show that it was in fact charged by its bank the P+3.5% interest for the L/C Sum advanced to open the subject matter letter of credit.  Given that according to Mr Lau, the whole background basis leading to the need to negotiate with the Defendant for the Interest Agreement was because of the Plaintiff’s liability to pay its bank this interest, I find this incredible that had that been the case, the Plaintiff would not have been able to provide any documentary evidence, such as bank statements, to show that it was in fact charged the interest by the Bank.
(5)	It is Mr Lau’s own evidence that, to protect the Plaintiff’s interest, he found it necessary to (a) reduce the Oral Loan Agreement into writing (i.e., the Chinese Agreement), and (b) to negotiate the Interest Agreement.  In these circumstances, I find it similarly incredible that somehow he did not regard it necessary to also reduce the Interest Agreement into writing, if there had in fact been such an agreement. I reject  his explanation that he did not find it necessary to reduce the Interest Agreement into writing because it involves a relatively small sum.  In insisting the Defendant to enter in the Interest Agreement as alleged, the Plaintiff through Mr Lau must have treated the interest payable thereunder as something not significant.
(6)	In light of the lack of evidence and plea on the necessary consideration in support of the Interest Agreement in the first place, and Mr Lau’s wholly new evidence at trial on his agreeing not to enforce the Plaintiff’s strict right to recover the Loan from the Defendant upon her agreeing to the Interest Agreement, I again find Mr Lau’s evidence not reliable.

82.  For the above reasons, on balance I prefer the Defendant’s evidence to that of the Plaintiff’s on this issue.

83.  I therefore find that there was no discussion between the Defendant and Mr Lau on the Interest Agreement, and there has never been the Interest Agreement.  Insofar as necessary, I also find that copies of the Ledgers have not been provided to the Defendant before the commencement of the present litigation between the parties.

Was Defendant personally liable under the Oral Loan Agreement

Assessment of the evidence and finding

84.  In light of my above findings, I would only deal with this issue briefly. 

85.  On hearing and weighing all the evidence, including the Chinese Agreement which the Defendant signed herself without any qualification, I find that the Defendant was personally a party to the Oral Loan Agreement, whether or not HK Goodfine was liable as well. This is so because:

(1)	It only makes commercial and common sense that Mr Lau would only have agreed to lend the L/C Sum to open the letter of credit on the basis that the Defendant herself agreed to be personally liable for the repayment.  It is incredible that Mr Lau would have agreed to lend money to HK Goodfine and trusted its ability to repay, when it is common ground that HK Goodfine had no valuable assets and there is nothing to suggest that it was able to repay to the money at that time.
(2)	In the Chinese Agreement, objectively and expressly, the Defendant was named as a party and she signed it personally without qualification.  Whether or not she signed it also for and on behalf of HK Goodfine is neither here nor there.  The objective evidence points clearly to the fact that she personally was a party to the agreement.
(3)	The fact that all the disclosed cheques that were used to make part of the 9 Repayments were the Defendant’s own personal cheque is also consistent with the case that she was a party to the Oral Loan Agreement and was personally liable under it.  I do not accept her evidence that, every time in making these repayments, she was first given cash (being money belonging to HK Goodfine) by her husband and she then deposited it to her own bank account before making out a cheque to the Plaintiff for repayment purposes.  Not only does this make no common sense, it is incredible that, if the money did in fact come from HK Goodfine in cash, she would have to put it in her own account first instead of depositing it directly with the Plaintiff’s bank account.

86.  It is therefore my ruling that the Defendant is personally liable under the Oral Loan Agreement for repayment.

87.  To avoid any doubt, I must mention that the fact that I do not accept the Defendant’s evidence (including that of Mr Ng and Mr Zhang) on this issue of whether she was a party to the Oral Loan Agreement does not affect my impression that they are credible witnesses on the above other issues.

Conclusion

88.  For the reasons mentioned above, I find that:

(1)	The Defendant is a party to the Oral Loan Agreement and is liable under it.
(2)	There is no Interest Agreement between the Plaintiff and the Defendant.
(3)	The Defendant has repaid the Plaintiff all the outstanding sums under the Oral Loan Agreement by 5 January 2001.
(4)	In the circumstances, the Defendant is under no further liability to the Plaintiff.

89.  I therefore dismiss the Plaintiff’s claim against the Defendant.  I also make an Order nisi that costs of the action be to the Defendant to be taxed if not agreed.  To avoid any doubt, I also give certificate for counsel.