TSE HON SAU v. LAU KON AND ANOTHER

HCA 11748/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11748 OF 1997

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J U D G M E N T

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1. This is a claim brought by the Plaintiff against the 2 Defendants for the recovery of the sum of $260,000. The Plaintiff's case is that on or about 22 December 1992, he lent a sum of $300,000 to the 1st Defendant in pursuance of an agreement which was partly oral and partly in writing. In so far as the terms were recorded in writing, the agreement was contained in a note dated 22 December 1992. Apart from the written terms, the Plaintiff's case was that there was also a supplementary oral agreement whereby the 1st Defendant agreed to pay interest in the sum of $4500 per month which worked out to be 18% per annum.

2. The 2nd Defendant did not give any notice of intention to defend and accordingly default judgment was entered against her.

3. The 1st Defendant did not appear in the trial. I am satisfied that she had been duly notified of the date of the trial. Accordingly I direct that the Plaintiff should proceed with proving his case.

4. The Plaintiff gave evidence before me. He told me that on 22 December 1992, the 2nd Defendant brought the 1st Defendant to see him. The 1st Defendant was the mother in law of the 2nd Defendant whom he had known for many years. He was told that the 1st Defendant would require a loan of $300,000 and the 1st Defendant would offer to deposit the title deeds of a certain property as security for the loan. The 1st Defendant told him that she only required the money for a short period and she would be able to repay the amount in 4 months times and she might even be able to repay in 2 months time and that in any event, the money would be repaid in 6 months. The Plaintiff was prepared to lend her the money. The Plaintiff told the Defendants that at the time his bank was charging him interest on his overdraft at 15% and for that he showed the Defendants his bank statements. The 1st Defendant then said to him that she would be prepared to pay him interest of $4500 per month, whereupon in pursuance to the suggestion of the Defendants, the Plaintiffs issued 2 cheques to the Defendants in the sum of $100,000 and $200,000 respectively. The payees on the cheques were left blank so that the cheques were payable to bearer. The Plaintiff also made out a note in Chinese [exhibit P-1] recording the loan of $300,000. This note was signed by the Plaintiff and the Defendants. The note also recorded the deposit of the title deeds and the promise to sell to the Plaintiff the property if the debt was not repaid in 6 months time. The note made no reference to any promise for interest payment. The explanation given by the Plaintiff for this omission was that it was expected that the loan would be repaid very shortly and it was not thought necessary to record the promise to pay interest. I am satisfied that in fact the 1st Defendant had orally promised to pay interest of $4500 per month.

5. I am satisfied that the Plaintiff did lend the 1st Defendant the $300,000. I accept the Plaintiff's evidence that the 2 cheques were handed over to the 1st Defendant on 22 December 1992. The evidence from the paying bank is that the cheque of $100,000 was cashed by the 2nd Defendant and the cheque of $200,000 was paid into an account of the 1st Defendant with the Chiyu Bank. Notwithstanding that the 2nd Defendant was the person who cashed the cheque of $100,000, I hold that the whole amount of $300,000 were lent by the Plaintiff to the 1st Defendant. Indeed this is also the Plaintiff's pleaded case.

6. The 1st Defendant did not repay anything in 6 months time. In 1995, the 1st Defendant told the Plaintiff that she would require the title deeds back in order to raise money from the bank to repay the Plaintiff. Accordingly the Plaintiff gave the title deeds back to the 1st Defendant. 3 months afterwards, the 1st Defendant repaid only $15,000 to the Plaintiff. There were further repayment in the various small amounts in 1996. It was not in dispute that in 1995 and 1996 the 1st Defendant repaid a total sum of $40,000.

7. Judgment in the sum of $260,000 with interest having been entered against the 2nd Defendant, the Plaintiff entered into an agreement with the 2nd Defendant in relation to the discharge of the 2nd Defendant's liability for the loan and the judgment. I must say that from what I can see from the existing amended statement of claim, there is no cause of action pleaded against the 2nd Defendant at all. However, I am not really concerned with the default judgment as there is no application before me to set aside the judgment. In any case, the Plaintiff and the 2nd Defendant had entered into an agreement to regulate their "rights and liabilities" in relation to the judgment. Under this agreement, the 2nd Defendant agreed to pay the total sum of $160,000 in full and final settlement of all her liability to the Plaintiff. The parties agreed to apportion this sum of $160,000 such that the sum of $100,000 was to be treated as principal and the sum of $60,000 as interest. The principal sum of $100,000 was repayable by 5 January 1999 and the sum of $60,000 was repayable by 12 monthly installments. In fact the evidence was that the sum of $100,000 was repaid in December 1998. The balance $60,000 had also been repaid.

8. On the evidence, I found that there was a loan made to the 1st Defendant in the sum of $300,000. Although the parties had not expressly mentioned any percentage when discussing interest, I found that parties had also agreed that interest was payable and the effect of their agreement on interest was that interest at the rate of 18% per annum was payable. Accordingly, having regard to the amount repaid, I will give judgment for the Plaintiff in the sum $160,000. In relation to interest, I would have been prepared to award simple interest at the rate of 18% per annum on the outstanding principal. Counsel for the Plaintiff had however informed me that the Plaintiff would be prepared to accept interest at the Court Judgment rate (which is much lower than 18%) for the period since 22 June 1993. Having regard to the concession made by the Plaintiff, I will award interest on the principal sums at rate and for the period as set out below:

(a) Principal of $300,000 at the rate of 18% per annum from 22 December 1992 to 21 June 1993;

(b) Principal sum of $300,000 at the Court Judgment rate from 22 June 1993 to 9 November 1995;

(c) Principal of $285,000 at the Court Judgment rate from 10 November 1995 to 1 January 1996;

(d) Principal of $275,000 at the Court Judgment rate from 2 January 1996 to 28 February 1996;

(e) Principal of $270,000 at the Court Judgment rate from 29 February 1996 to 9 April, 1996;

(f) Principal of $260,000 at the Court Judgment rate from 10 April 1996 to 1 December 1998;

(g) Principal of $160,000 at the Court Judgment rate from 2 December 1998 to date of repayment.

9. As the Plaintiff had in fact also received another $60,000 from the 2nd Defendant, I will also direct that the Plaintiff shall give credit in the sum of $60,000 in relation to the interest awarded under this judgment. The Plaintiff will also have his cost of this action against the 1st Defendant.