YEUNG NGA LAI v. TANG CHUN LOK

DCCJ 2127/2015

[2018] HKDC 264

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2127 OF 2015

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JUDGMENT

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P’s claim

1.  The plaintiff and the defendant were lovers.  The plaintiff claims against the defendant for repayment of alleged loans totaling HK$128,800 (“the alleged loans”) together with interest and costs. 

2.  In gist, the plaintiff said that as per the defendant’s request she had lent various sums of money from November 2010 to December 2013 during the period of their cohabitation.  Out of the said amount of HK$128,800, five individual sums in the total of HK$25,800 were allegedly lent between 12 November 2010 and 14 July 2012 (“the 1^st Tranche”) and another five sums totaling HK$86,000 between 26 June 2013 and 2 December 2013 (“the 2^nd Tranche”) so as to enable the defendant to discharge his credit card debts.  And a separate amount of HK$17,00 was lent to the defendant in March 2012 for his purchase of a Honda Jazz (“the Honda Jazz”) from a friend of his (“the alleged car loan”).

3.  As for the 1^st Tranche, she transferred those sums of money from her HSBC account to the defendant’s Hang Seng Bank’s credit card account through ATM machine.  As for the 2^nd Tranche, she made similar ATM transfers from her Bank of China (HK) Ltd’s account to the defendant’s DBS Bank’s credit card account.

4.  The defendant denies they are loans.  Rather, the ten sums paid into his credit card accounts are in the nature of gift.  The defendant contends that he and the defendant had a common understanding at the time that they would jointly contribute to their common spending and those sums were paid to him for that purpose.   Whereas, the said sum of HK$17,000 was the plaintiff’s half share contribution to the price of the Honda Jazz (HK$34,000) which was purchased for their daily common use and enjoyment.

5.  The defendant’s fallback position is that even if any of the alleged sums are found by the court to be loans, they have already been settled and extinguished by way of a settlement agreement reached between the plaintiff and the defendant’s mother (Madam Ng Yuet Ying) (“Madam Ng”) in about February 2014 (“the Settlement Agreement”), pursuant to which Madam Ng subsequently paid HK$60,000 to the plaintiff to settle all the debts as claimed by plaintiff to be owed to her by the defendant.

The common ground

6.  At all material times, the plaintiff was a nurse working in a private hospital, and the defendant a fireman.   They got acquainted through the introduction of the latter’s friend and colleague, one Mr. Chan (“Chan”) around July 2010 on a pleasure boat trip.  Their relationship blossomed so fast that they fell in love with each other about 2 months later and the plaintiff also moved into the defendant’s apartment situated at Sau Mau Ping to cohabit with her boyfriend.  Though, that unit was registered under Madam Ng’s name.

7.  In about mid-2013, the plaintiff and the defendant decided to get married.  Since then, they had been preparing for such contemplated marriage as scheduled for May 2014.  On the plaintiff’s side, she told the defendant that she had borrowed HK$100,000 from her parents for discharging her expenses incurred for that purpose.  She had paid the deposit of HK$20,000 for booking the venue of wedding banquet, HK$12,000 for taking pre-wedding photos in Japan, HK$6,000 as deposit for wedding photo-taking service and another HK$3,000 deposit to book the cosmetician’s service for the wedding date.  On the defendant’s side, it was the unchallenged evidence of him that he had spent tens of thousands dollars to buy a wedding ring for the plaintiff.   And he would also need to pay HK$50,000 to the plaintiff’s parents as bridewealth (禮金).  In October 2013, they travelled to Japan (first to Okinawa and then Osaka) for about 12 days to take pre-wedding photos.  The plaintiff paid for the air-ticket and hotel expenses, whereas the defendant paid for the other expenses they incurred in Japan.  He also used his credit card to make some of such payments.

8.  Sadly, the defendant’s grandfather was diagnosed to suffer from terminal lung cancer in late December 2013. Things also unfortunately turned sour between the couple around that time.   On 19 January 2014, the plaintiff moved out of the defendant’s apartment after a quarrel.

9.  The relationship between the plaintiff and his fiancé came to an end in about February 2014.  Subsequently, the plaintiff got married with Chan in October 2014 instead.

10.  On 7 February 2015, the plaintiff’s solicitors sent a letter to the defendant demanding repayment of the alleged loans.

The law

11.  According to Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 384, a plaintiff bears the burden of proving an alleged loan, and as a matter of principle, an alleged loan is not sufficiently proved by merely adducing evidence of payment to the defendant of the amount claimed but without more.

12.  When the court is required to determine whether an alleged loan was created or not in the context of family relationship like that as between a married couple (which can equally be extended to unmarried partners), the court would also be particularly vigilant to discern whether the plaintiff can successfully prove the requisite intention of the parties to create legal relation with respect to the alleged loan.  Evidence establishing such requisite intention needs to be clear and convincing, and has to be objectively assessed.  See Gould v Gould [1970] 1 QB 275, Edmund Davis LJ at p.281. 

13.  Further, in Jones v Padavatton [1969] 1 WLR 328, Salmon LJ at p 332 had the following to say:-

“The court has to consider what the parties said and wrote in light of all the surrounding circumstances, and then decide whether the true inference is that the ordinary man and woman, speaking or writing thus in such circumstances would have intended to create a legally binding agreement.”

14.  In Balfour v Balfour [1919] 2 KB 571, Atkin LJ propounded a general rebuttable presumption that agreements made in the context of family or social relationships are not intended to be legally binding, and he sought to justify such presumption on policy reason.  The editors of Butterworths Common Law Series: The Law of Contract (4^th ed) neatly summarized the legal position at paras 2.173 and 2.174 as quoted below:-

“2.173 It will generally be presumed that agreements made in the context of family or social relationships are not intended to be legally binding. Atkin LJ in propounding this rule in Balfour v Balfour justified it on grounds of policy, recognising that such arrangements are unsuitable for legal enforcement, while if they were to be enforced, ‘The small courts of this country would have to be multiplied one hundred fold if these arrangements did result in fact in legal obligations’. The presumption is a strong one; it is, however, rebuttable and even a family agreement or an agreement between friends may be held to create legal relations and thus be enforceable as a contract if on all the evidence it is shown that, on an objective assessment, the parties did intend the agreement to be legally binding. The burden of proof is on the party who alleges that the agreement is binding, and is a heavy one. The evidence establishing such an intention must be ‘clear and convincing’.”

“2.174 Agreements between spouses The rule that agreements between spouses are generally assumed not to be intended to be binding was established in Balfour v Balfour. The same rule has been applied to agreements between unmarried partners.” (emphasis added)

Analysis of evidence

15.  After carefully considering all the evidence before this court, I am not satisfied that the plaintiff can successfully prove that the sums of money transferred into the defendant’s credit card accounts were loans for the following reasons.

Common spending and voluntary contributions and payments

16.  To begin with, it is undisputed that the defendant did receive the various sums of money in question from the plaintiff at irregular intervals.  The defendant contends that they were paid into his two credit card accounts by the plaintiff with a common understanding between herself and the defendant that they would each voluntarily contribute to their common spending during their cohabitation, and some payments were also voluntarily made to him appreciating the defendant’s payments for the other spendings incurred during their cohabitation. On the common spending, the defendant said both he and the plaintiff would not discuss about how to share the common expenses in advance.  Both of them would pay for the common expenditure without asking for contribution from the other afterwards[1].

17.  In this regard, is observed that the plaintiff agreed under cross-examination that a number of items of expenditure as shown in the defendant’s credit card statements were incurred for dining out and entertainment as shared and enjoyed by both of them and the defendant did not ask her to contribute for such expenses.  The defendant also testified that he would sometimes pay for these expenses by cash.  Likewise, the plaintiff also agreed that some of her own credit card expenditures included expenses which both parties had jointly incurred on some occasions without seeking contribution afterwards form the defendant.  Just to name some examples for illustration: she agreed that the gasoline bill of HK$342.80 was paid by her on 18 May 2012 for the Honda Jazz[2]. On another occasion, she purchased an Ikea sofa bed at HK$1,004 on 12 January 2011 for the benefit of the defendant’s household.[3]

18.  It is also the unchallenged evidence of the defendant that he was responsible for paying the daily household expenses (including buying food and necessities for the household) and he had not asked the plaintiff to contribute to all those expenses he incurred, though on the other hand she also voluntarily contributed HK$3,000 each month to Madam Ng during their cohabitation.  

19.  Apart from the aforesaid, the ex-couple had spent a number of holiday trips together.  In their first trip to Thailand in October 2010, the defendant paid for the hotel and air tickets as well as the entertainment expenses spent in Thailand.  After that trip, they travelled to Macau in September 2011, and had another 7-day trip to Malaysia two months later in November 2011.  They travelled to Seoul between 11 and 16 February 2012, and visited Oaska from 5 to 12 November 2012.  And as said, during 30 September 2013 to 12 October 2013, they flew to Japan hopping on Okinawa and then to Osaka for taking their pre-wedding photos.  It is common ground that the plaintiff had paid for the air-tickets and hotel expenses for these latter trips while the plaintiff would pay for the meals and entertainment expenses incurred at these holiday spots. 

20.  By considering the evidence as a whole, I am satisfied that there was indeed such a common understanding on their common spending between the parties as contended by the defendant.  It sounds inherently probable in light of their love and affection to each other as couple since their cohabitation.  As such, I also reject the defendant’s contention that the parties maintained wholly fenced and totally separated finances.

The 1^st Tranche

21.  In relation to the first sum of HK$7,500 which the plaintiff paid into the defendant’s credit card account on 12 November 2010, I accept the defendant’s evidence that he did not ask the plaintiff to pay such sum into his account to discharge the credit card debt.  It would appear plausible that the plaintiff paid such sum to lessen her boyfriend’s financial burden at the time appreciating that the defendant had generously paid for most if not all the expenses incurred in Thailand during the 7-day vacation.  This is especially so when this plaintiff’s act was considered in the undisputed context that she earned more than the defendant at all material times[4], and had more savings than the defendant on the evidence before me. 

22.  In relation to the other four sums under the 1^st Tranche, the defendant frankly admitted that he requested the plaintiff to deposit money into his credit card account when he was short of cash for making payment of the credit card debts.   But it is observed that the he made such requests irregularly, and on four occasions only within the first two years of their cohabitation, i.e. HK$9,300 (on 21 February 2011), HK$3,000 (on 14 October 2011), HK$2,000 (on 16 November 2011), and HK$4,000 (on 14 July 2012) for paying his credit card debts.  

23.  However, in my view, the mere fact of such requests being made and without more would not necessarily indicate an intention on the defendant’s part to treat those sums of money as loans in light of their common understanding on their common spending.   Further, given the then surrounding circumstances and in particular their intimate relationship as cohabitating couple at the material times, it would also appear that both of them would have lesser propensity to intend to create a legal relation by entering into legally enforceable loan agreements. 

24.  The defendant denied these four sums were loans throughout and it is observed that his evidence in this regard remains unshaken after cross-examination.  On the other hand, the plaintiff’s evidence about how the defendant made his requests for the alleged loans was general and vague, and more importantly, her evidence on the 1^st Tranche of loans is not supported by any contemporaneous documents and embedded with material discrepancies.  I therefore reject the same, and I shall return later to further discuss on the incredibility of her evidence.   Without prejudice to the generality of the foregoing, I also reject the plaintiff’s evidence that she had demanded the defendant for repayment of those sums under the 1^st Tranche before their relationship turned sour in January 2014.

25.  In light of the aforesaid and after carefully considering all the evidence before me, I accept the defendant’s contention and hold that there was no intention for the parties to enter into contracts of loan in respect of the five sums of money deposited into the defendant’s credit card account under the 1^st Tranche.  I also hold that all of them were paid by the plaintiff as gifts to the defendant.

The 2^nd Tranche

26.  As for the other five sums of money under the 2^nd Tranche, I would first deal with the first three sums deposited into the defendant’s DBS credit card account, viz HK$20,000 (on 26 June 2013), HK$9,000 (on 15 July 2013), HK$20,000 (on 21 July 2013).

27.  It is common ground that in about mid-2013, the defendant was admitted to Canossa Hospital (where the plaintiff was working as a nurse) to perform a simple operation to excise a wart at his sole, and to conduct a body check. According to the defendant, such operation and body check was done as per the plaintiff’s advice.  The medical fee was HK$35,000.   Appreciating that the defendant would incur substantial expenses for their contemplated marriage, the plaintiff took the initiative to pay the medical expenses on his behalf. Originally, the plaintiff had the intention to reimburse the plaintiff with the insurance proceeds from his medical insurance policy, and told her accordingly, but the plaintiff replied “不用還啦！嚟緊結婚都要錢！” As such, he did not take the defendant’s subsequent payments into his credit card accounts (which had effectively helped to lessen his financial burden) as loans.

28.  Whereas, the plaintiff’s pleaded case is that she transferred the aforesaid three sums totaling HK$49,000 to the defendant’s DBS credit card account in June and July 2013 to help him settle the medical fee.[5] The defendant promised that he would repay her after claiming the medical expenses from his medical insurance policy.  

29.  After considering the evidence before me as a whole, I prefer to accept the defendant’s version and reject the plaintiff’s.   

30.  First of all, it is observed that these three sums were paid to the defendant after the ex-couple had planned to get marry.  But by that time, the accumulated credit card debts were much more than at the time when the ex-couple fell in love back in November 2010.   As per the defendant’s Hang Seng Bank’s credit card statement issued in November 2010, the opening debit balance is HK$7,643.32.[6] By July 2012, the opening debit balance has increased up to HK$74,571.81[7].  Substantial credit card debts had also been accumulated under the defendant’s DBS Bank’s account.  According to his DBS Bank’s credit card statement issued for the month of May/June 2013, the opening debit balance of HK$62,137.79.[8]  

31.  In my view, such increase is explicable by observing the ex-couple’s lifestyle and spending pattern during their cohabitation.  They travelled about twice a year as mentioned in para 19 above.   Regular expenses would be spent on gasoline for the Honda Jazz after its purchase in March 2012.   As revealed from the parties’ credit card statements, it appears that they dined out and went for movies quite often.  At the material times, the plaintiff knew that apart from spending a substantial sum to buy the wedding ring for her, the defendant would also need to pay HK$50,000 to her parents as bridewealth (禮金).

32.  In light of the aforesaid, I agree with the submission of Mr. Frederick Chan (counsel appearing for the defendant) and find that the plaintiff and the defendant were indeed pooling their financial resources together in the context of a small family while they were contemplating and planning for their marriage in mid-2014. 

33.  In my view, it is plausible that in the course of doing so, the defendant was prepared to contribute substantial sums to the common financial pool for the overall benefit of the family unit as a whole.  In terms of inherent probabilities, there was not much benefit for the defendant to create creditor-debtor relationship with her husband-to-be at the time when they were busily preparing for their forthcoming marriage.   Rather, it would make more sense for her to put this young gentleman into a better financial shape for their intended marriage knowing full well that the substantial expenses he was going to spend, but only with the limited resources he had at the time.

34.  Given the broader picture outlined above, the defendant’s case and evidence would appear to be more plausible than the plaintiff’s.   Apart from that, I also reject the defendant’s account of lending money to the defendant for settling the medical fee of HK$35,000 by way of such three subsequent payments into his credit card account after having regard to the incredibility and unreliability of her evidence, which I am going to deal with at paras 39 to 48 below.

35.  As for the two sums of HK$2,000 and HK$35,000 paid by the plaintiff into the defendant’s DBS credit card account on 21 August 2013 2 December 2013 respectively, it is observed the latter sum was paid to the defendant after their 12-day trip to Japan for taking pre-wedding photos in September/October 2013, and his purchase of a Samsung smartphone at HK$6,686 for the plaintiff as her birthday present in November 2013.

36.  After considering the testimonies from both sides, and having particular regard to the matters as mentioned in paras 30 to 33 above and the incredibility and unreliability of the plaintiff’s evidence, I also hold that the parties do not have any intention to treat the last two sums under the 2^nd Tranche as loans either.

37.  As similar to the 1^st Tranche, I also reject the plaintiff’s evidence that she had demanded the defendant for repayment of any of the five sums under the 2^nd Tranche before the plaintiff separated from the defendant in January 2014. 

38.  In these circumstances, I reject the defendant’s account that the five sums under the 2^nd Tranche were loans.  Rather, I accept the defendant’s case and evidence that the plaintiff paid all these five sums into his credit card account either as her voluntary contributions to their common spending or as voluntary payments.  After considering all the evidence, I hold that the parties had no common intention to create contracts of loan in respect of all these five sums.  I hold that they were paid by the plaintiff as gifts to the defendant.

Incredibility and unreliability of the plaintiff’s evidence

39.  First, the plaintiff’s allegation of loans was in lack of contemporaneous supporting evidence.  In particular, although the plaintiff said in her witness statement that she had from time to time chased the defendant for repayment of the loans during their cohabitation, none of these alleged demands was documented in any form.  Although it is appreciated that it may be easier to demand formal documents from a stranger than it is from a relative or friend, but the fact remains that there is nothing apart from the plaintiff’s sheer oral evidence to support her contention that both parties intended to create contracts of loans at the time when they were still cohabiting in amity.

40.  Second, her oral testimony was contradicted by her own earlier written statements.  In giving answers to the Interrogatories as served upon her, she denied reaching the Settlement Agreement with Madam Ng.  The plaintiff said that the money she received from Madam Ng did not cover any of the alleged loans.  Also, she said that she never disclosed to Madam Ng that the defendant had borrowed from her to settle his credit card debts.  However, when answering the questions raised by this court, she seriously contradicted herself by saying that after she had moved out of the defendant’s premises she in fact told Madam Ng that the defendant had owed her monies in terms of (i) her loans to him for settling his credit card debts, and (ii) the alleged car loan. 

41.  Third, the plaintiff was also shifty in her position on the HK$60,000 she received from Madam Ng.   In her witness statement dated 20 April 2016, she said that such sum was paid by Madam Ng to compensate her for (i) some of the expenses she incurred for the intended wedding, (ii) HK$22,000 for insurance premium which the defendant asked her to pay on his behalf for the insurance policy subscribed for Madam Ng[9]. However, in her Reply filed on 8 September 2015, she pleaded that apart from the wedding expenses and insurance premium, Madam Ng also wanted to compensate her for the monthly HK$3,000 she paid as contribution to the family expenses.[10]   She could not offer any satisfactory explanation for such material discrepancy under cross-examination. 

42.  Fourth, in her statement given to the ICAC dated 17 November 2014, she told ICAC that the defendant owed her the various sums under the 2^nd Tranche without mentioning the 1^st Tranche of loans as still being owed at all.  Among other things, she said in such statement that “a few months after the development of their (romantic) relationship, the defendant began to borrow from me from time to time, ranging from a few hundreds to a few thousands. … At the beginning, Mr. Tang would repay (such sums) to me at a later time.”  Such account to the ICAC also substantially contradicts her case on the 1^st Tranche of loans in this action.   

43.  Under cross-examination, she sought to give an excuse for such discrepancy by saying that she did not have any HSBC statement at hands at the time of interview to properly identify those loans under the 1^st Tranche since she had not received any bank statements from HSBC.

44.  Such purported explanation sounds incredible as being repugnant to common banking practice for banks to send monthly bank account statements to their customers.   I have carefully observed her meticulous manner in handling this case and the way she presented her answers in court.  The plaintiff does not appear to be such kind of person who would simply be content with not finding out her banking position if the bank really did not send her any bank statement. I find her explanation unacceptable. 

45.  When being further pressed upon on this matter during cross-examination, she then gave another excuse that she had been busy in correcting some typos in her statement, so she omitted to correct the aforesaid mistake.   Such explanation is likewise incredible.  Not only that she had signed a declaration of truth in her statement to the ICAC acknowledging that she had been given a chance to read through the statement, if she was careful enough to spot the other typos, one would rhetorically ask why such material matter of alleged loans under the 1^st Tranche would skip her eyes.  This is especially the case when she said that she had been demanding the defendant for repayment of the loans in question both before and after their break up.  All these excuses of hers just add to the incredibility of her case and evidence.  

46.  Fifth, the plaintiff clearly pleaded at para 13 of her Amended Statement of Claim dated 14 May 2015 that she had made a complaint to the ICAC[11]. Nonetheless, after she had seen the Defence[12] pleading that the defendant had once agreed to pay to her HK$50,000 because of her threat to report the matter to the Fire Services Department (“the FSD”) and the ICAC, the plaintiff then materially changed her pleaded case by saying in her Reply that it was the FSD who referred the matter to the ICAC for investigation, and then she surprising received a call from the ICAC for interview.[13]  In my view, she could not really grapple with such discrepancy when she was being confronted with it under cross-examination.

47.  The aforesaid change was apparently made by the plaintiff trying to salvage her case on compromise with the defendant by refuting the defendant’s case of her imposing threats upon him to obtain the compromise agreement.  However, the more she sought to salvage or to improve on her own case, the more flaws revealed themselves in the other material aspects of her case and evidence.   

48.  In these circumstances, I also find her statement to the ICAC and her earlier email of 17 October 2014 sent to the FSD complaining that the defendant owed her various loans to be self-serving and in lack of credibility.  I also reject these evidence of the plaintiff in light of the above analysis.

The alleged car loan

49.  The defendant testified that it was the parties’ common intention to purchase the Honda Jazz for daily use, including driving the plaintiff to her workplace, and for their leisure purpose, and she contributed half of the purchase price whereas the plaintiff maintained that the defendant borrowed HK$17,000 from her to buy the car at HK$34,000. 

50.  In light of the young couple’s lifestyle as discussed above, it is likely that they would travel together by car quite often such as for dining out or for other leisure purposes.  It would make sense that the car was purchased for the common use and enjoyment at the time.  Further, the plaintiff was in a better financial position than the defendant, it would appear more fair to the young couple at the time that the purchase price would be contributed equally between themselves, rather than solely borne by the defendant.  

51.  Coupling with my above observation that the plaintiff is not a credible or reliable witness, and after considering all the evidence in this case, I accept the defendant’s case that the HK$17,000 was paid by the defendant to him as her contribution to the purchase price of the car, and reject the plaintiff’s case on the alleged car loan.   

Conclusion on the alleged loans

52.  Since this court has rejected the defendant’s case and evidence on the alleged loans, this is already sufficient to dispose of the plaintiff’s claim.

53.  However, for completeness sake, this court also needs to express its view on three further issues over which the parties have made substantial submissions. 

54.  The first one is whether the Settlement Agreement exists or not. 

55.  The second being whether another compromise agreement reached between the parties in August 2014 whereby the defendant agreed to pay HK$50,000 to the plaintiff (“the Compromise Agreement”) was obtained by the latter’s threat to ruin the defendant’s career and reputation (through messages passed on to him by his 3 firemen ex-colleagues engaged by the plaintiff as her representatives) that she would report the matter to the FSD and ICAC if he did not repay money to her.  The plaintiff did not seek to enforce the Compromise Agreement in this action, though she contends that the Compromise Agreement is evidence of the defendant’s admission of the alleged loans.

56.  The third point is one raised by the defendant’s counsel at the commencement of the first day of the trial, whether the communications between the parties through the ex-colleagues in relation to the Compromise Agreement was protected by without prejudice privilege.

The Settlement Agreement

57.  At the outset, I have to make it clear that the question of the Settlement Agreement would only arise if I am wrong in my above findings made in rejecting the plaintiff’s case on the alleged loans, and when any of the sums in question paid to the defendant was in truth a loan.

58.  It is trite that part payment by a third party, if accepted by the creditor in full settlement of the debtor’s liability, is a good defence to a later claim by the creditor for the balance.  There is a line of English authorities in support of such proposition.  See Chitty on Contracts (32^nd ed), para 4-128; Welby v Drake (1825) 1 C&P 557; Cook v Lister 13 C.B. (NS) 543 at 595;  Hirachand Punamchand v Temple [1911] 2 KB 330.

59.  In my judgment, the debt as between the creditor and the debtor would be treated as extinguished from the moment the compromise with the third party was entered into.  In the eyes of Equity, it would be unconscionable for the creditor to pursue such debt in blatant disregard of his earlier promise made to the third party to forego such debt.  The court should not lend its assistance to such creditor to break his contract with the third party, for it would amount to an abuse of court process.  In this connection, I would respectfully agree with the reasoning of Fletcher Moutlon LJ as expressed in Hirachand at p 339-340:-

“I am of opinion that by that transaction between the plaintiffs and Sir Richard Temple[14] the debt on the promissory note became extinct. I agree with the view expressed by Willes J. in Cook v. Lister. The effect of such an agreement between a creditor and a third party with regard to the debt is to render it impossible for the creditor afterwards to sue the debtor for it. The way in which this is worked out in law may be that it would be an abuse of the process of the Court to allow the creditor under such circumstances to sue, or it may be, and I prefer that view, that there is an extinction of the debt; but, whichever way it is put, it comes to the same thing, namely that, after acceptance by the creditor of a sum offered by a third party in settlement of the claim against the debtor, the creditor cannot maintain an action for the balance. That being my view, namely, that either the debt is extinguished, or that the Court will not allow the creditor to assert his claim … If a third person steps in and gives a consideration for the discharge of the debtor, it does not matter whether he does it in meal or in malt, or what proportion the amount given bears to the amount of the debt. Here the money was paid by a third person, and I have no doubt that, upon the acceptance of that money by the plaintiffs with full knowledge of the terms on which it was offered, the debt was absolutely extinguished.” (emphasis added)

60.  Madam Ng attended trial to testify on the Settlement Agreement.   She said that after the breaking up between her son and the plaintiff, she met the plaintiff on a number of occasions in February 2014 where the plaintiff told her that the defendant owed her money including those credit card debts which she had allegedly paid for the defendant.  Apart from such credit card debts, she also mentioned the wedding expenses, the overseas trips, wedding gears, and the payment she made in relation to the purchase of the car in a Table (making a total of HK$120,000 odd dollars) which had been sent to her by the plaintiff through WhatsApp. 

61.  Eventually, she reached an agreement with the plaintiff in the same month whereby she would pay the plaintiff HK$60,000 to settle all the debts as claimed by the plaintiff to be owed to her by the defendant, viz the Settlement Agreement.

62.  A salient feature of this settlement, according to Madam Ng and unchallenged by the plaintiff, is that she did not want her son to know about it. Madam Ng had explicitly requested the plaintiff to keep the Settlement Agreement secret, and the two of them should delete all the WhatsApp messages as related to such settlement agreement so as to avoid Chan and the defendant getting to know of anything about it.    

63.  On the plaintiff’s side, it was also her pleaded case that she had reached no settlement agreement with Madam Ng.  After the breakup of her relationship with the defendant, Madam Ng felt sad that the wedding was called off due to the defendant’s conduct, and felt sorry for what the defendant did to the plaintiff.  Madam Ng told the plaintiff that she wanted to compensate her for some of the wedding expenses, the insurance premium (for a medical insurance policy taken out for Madam Ng which the defendant had asked her to pay), and the said monthly sum of HK$3,000 which the plaintiff had contributed to the household expenses when she was financially capable to do so.[15]   The plaintiff did not ask Madam Ng to pay her anything, and the HK$60,000 was not an agreed sum between Madam Ng and the plaintiff.  Having said so, the plaintiff did agree that Madam Ng had told her not to reveal their discussions in February 2014 to anybody. 

64.  Overall speaking, Madam Ng impressed this court as a full and frank witness.  Her evidence remains intact notwithstanding vigorous cross-examination by the plaintiff’s counsel, Mr Chan Yip Hei.  Her case is also inherently probable.  As pointed out above, the plaintiff testified in court that she had indeed mentioned to Madam Ng about the credit card debts she had paid for the defendant, and the alleged car loan[16]. Prima facie, it would be natural for a caring mother to settle the debts as allegedly owed to the plaintiff once and for all if she was minded to settle for the benefit and welfare of her son, rather than leaving some unsettled alleged debt behind.  Doing the best she could, the mother could offer HK$60,000 to settle all the debts as allegedly owed by the defendant to the plaintiff.

65.  Madam Ng is also adamant that the Table does not include any insurance premium.  Under cross-examination, Madam Ng gave her answers on this matter in a clear and straightforward manner. She testified that she did not need such insurance policy, and she could go to see government doctors if she had any medical problems. One should also bear in mind that although the plaintiff had paid HK$22,000 as the first two years’ premium, the plaintiff would then be responsible to pay about HK$11,000 each subsequent year by herself, which would be a kind of financial burden to her when she already quitted her job to take care of her ailing parents and her father was struggling with terminal lung cancer.

66.  Further, I also find it unlikely that the defendant would incur such extra money to subscribe a medical insurance policy for her mother in light of his financial position at the time.   Given such a context, on balance, I do not find it likely that the plaintiff would raise the matter of insurance premium with Madam Ng in the first place, let alone Madam Ng would agree to compensate the plaintiff for such matter.

67.  Subsequently, Madam Ng indeed paid for the said sum of HK$60,000 pursuant to the Settlement Agreement by way of three instalments, i.e. HK$10,000 on 17 February 2014, HK$10,000 on 8 July 2014 and HK$30,000 on 31 July 2014 , which payments are well documented by the corresponding bank pay-in slips[17]. The plaintiff did not quarrel with her receipt of these payments from Madam Ng.

68.  That aside, the defendant’s contention of the existence of Settlement Agreement and that Madam Ng subsequently paid HK$60,000 to the plaintiff pursuant thereto are also supported by Madam Ng’s WhatsApp messages in reply to some messages as received from the plaintiff on 3 August 2014 (i.e. 3 days after she received the last instalment from Madam Ng) to press the defendant to repay another sum of HK$100,000.

69.  Madam Ng’s WhatsApp messages (including a voice message) in reply sent out on the same day show that she was so shocked and sadden to hear that the plaintiff had gone back against the settlement agreement they had reached earlier.  She really hoped the plaintiff could keep her promise and let go.   Given the close proximity of time between the plaintiff’s WhatsApp messages and Madam Ng’s messages in reply (with no immediate follow up rebuttal of its contents by the plaintiff), I find such messages of Madam Ng in response to be of good probative value to prove the Settlement Agreement.

70.  Madam Ng’s WhatsApp messages in reply sent out on 3 August 2010 read thus:-

“請你完結此事吧，你之前同意咗我提議嘅解決方案，我先至依承諾去做，你依家又反口，你係難為緊我，我做咁多嘢都係因為覺得一路以嚟大家都建立咗個關係，我亦都心痛你傷心，其實我真[係]可以乜都唔理，我真係好無辜，唔好再耍我喇，請讓此時告一段落吧。

我之前同你講話我自己俾咗你先，以後有機會先問佢攞返，你當時同意咗嘅，請你遵守承諾。你依家已重新擁有美好的生活啦，請你完結此事，無謂令無辜嘅我繼續要面對不能承受的困擾。”

71.  The transcript of her voice message to the plaintiff on 3 August 2014[18] is also undisputed and quoted below:-

“楊雅麗，楊雅麗，你當初係咪應承諾左我話我俾完呢筆數就大家了結左。我都同你講過話呢件事大家都有責任，大家都要分擔，大家都要承擔。我已經講左話我俾呢個係我上限···即你宜家至嚟講又話要講返轉頭咁你係咪反悔呢？你宜家係咪耍緊我呢即係。我呢件事上面我係最無辜既一個。我只係想息事寧人，唔想再搞咁多野。其實邊個啱邊個唔啱大家都 ···大家都有責任架。即係宜家你咁即係搞到我，我已經盡我能力做左我最好架啦。宜家你又要咁搞返轉頭咁你想點呢？我好無辜架你唔好咁搞我好唔好？你上次明明應承左我話呢個數就settle左，我都check個條數計返出嚟，其實好坦白講有好多野你計出嚟條數亦都係呀乜野嗰D化妝呀，咩禮服呀嗰D係都係為左呢件事上面。咁其實我肯定就話你話阿樂嘅咭數，個架車嘅一半我已經係俾足哂架啦。其餘我亦都負擔左部份個個婚禮嗰D損失。咁你都應承左我話Okay架喎。咁點解宜家又要反悔呢，你唔好咁耍我啦我好慘架我好辛苦架咁樣。點解要我咁無辜嘅我要一個人去受呢樣野呢？” (emphasis added)

72.  The plaintiff did not deny such settlement agreement in response. Rather she gave Madam Ng an impression that she was prepared to let go of the matter at that time.  The two ending WhatsApp messages of the plaintiff and Madam Ng are quoted below:-

“P: 點都好啦….既然過去左去就算啦希望你幸福。保重！

Ng : 多謝你肯體諒接受我的請求，希望此時真正告一段落，衷心祝福你永遠幸福快樂。”

73.  The plaintiff did not dispute with all these WhatsApp messages as disclosed in Madam Ng’s witness statement.  The next WhatsApp message from the plaintiff only came nearly a year later (i.e. on 24 July 2015, after the present litigation had commenced) when she said that what Madam Ng paid her only covers part of the wedding expenses and the two years’ insurance premium.

74.  After carefully considering all the evidence in this case, I prefer to accept Madam Ng’s account in relation to the Settlement Agreement and her subsequent payment of HK$60,000 made pursuant thereto, rather than the plaintiff’s account as referred to in para 63 above.  I also reject the plaintiff’s account insofar as it is inconsistent with Madam Ng’s account.

75.  As such, I find for the existence of the Settlement Agreement as testified by Madam Ng, and she agreed to pay and the plaintiff agreed to accept thereunder HK$60,000 to settle all the debts as claimed by the plaintiff to be owing to her by the defendant.  And Madam Ng did subsequently pay HK$60,000 pursuant to such agreement.

76.  I also hold that by virtue of Madam Ng’s payment of HK$60,000 made pursuant to the Settlement Agreement, the plaintiff can no longer pursue the alleged loans against the defendant even if any of the sums claimed by the plaintiff in this action was in truth a loan by virtue of the legal principle expounded in Hirachand case.  Though, I must stress that that my primary holding is that there are in truth no such loans as contended by the plaintiff. 

The plaintiff’s submissions on the Settlement Agreement

77.  Mr. Y H Chan raised two points on the plaintiff’s behalf to challenge the validity of the Settlement Agreement to extinguish the alleged loans. First, he submits that payment of a debt by a third party discharges the debt only when the payment is made with the intention of discharging the debt and with the debtor’s authority.  He argues that since the Settlement Agreement was hidden away from the defendant at the material times, Madam Ng did not have his authority to enter into such compromise.

78.  With respect, I cannot accept such argument.  The two authorities of DEX Asia Ltd v DBS Bank (Hong Kong) Ltd [2009] 5 HKLRD 160, and Crantrave Ltd v Lloyd’s Bank plc [2000] QB 917 as relied on by Mr. Chan clearly have no application to the present case.  Those two authorities are primarily concerned with a banking customer’s claim against the bank for wrongfully debiting the account of the customer in question (i.e. without the client’s authority) to settle his creditor’s debt.[19] As such, the question of want of authority from the customer to allow the bank using the customer’s money to settle the debt legitimately arose.   But in this case, Madam Ng was using her own money rather than the defendant’s to settle the debts as allegedly owed to the plaintiff, and I also find she had evinced a clear intention under the Settlement Agreement to settle all the ‘debts’ as she was told by the plaintiff to be owing by the defendant to her. 

79.  Most importantly, if any of the sums claimed herein was in truth a loan (though I have already found the otherwise), such a scenario would fall fairly and squarely within the four corners of Hirachand case.  Even according to the passage under para 18-023 of Chitty on Contracts (32^nd ed), v1, as quoted by Mr. Y H Chan, his argument cannot stand.  The learned co-editors at para 18-023 while discussing the doctrine of privy of contract acknowledged the legal proposition as expounded in Hirachand’s line of authorities as good law and the relevant part of the passage from Chitty reads thus:-

“… an agreement between A and B under which A accepts from B part payment of a debt owed by C to A in full settlement of that debt can benefit C by precluding A from suing C for the balance of the debt…”[20]

80.  Second, Mr Y H Chan submits that what Madam Ng purported to settle (or her intention to settle) was not certain or ascertainable. 

81.  However, by looking at Madam Ng’s evidence as a whole, although she could not recall the individual amounts provided by the plaintiff for each items in the Table, this would not per se render the terms of Settlement Agreement invalid for being vague or uncertain as the plaintiff contends.   As appeared to this court, Madam Ng’s evidence is clear enough (which this court have accepted)[21] that she agreed with the plaintiff to settle all the debts as claimed by the plaintiff to be owed by the defendant to her.  In para 78 above, I have also found Madam Ng’s intention to settle all such debts is clear.

82.  The aforesaid would still hold true even when the figure as provided by the plaintiff for the credit card debts which she had paid for in the Table was less than the amounts as she now claims in this case so long as it can be clearly and objectively construed from the settlement terms that the plaintiff intended to forgo all the debts as allegedly owed to her by the defendant by accepting the settlement sum to be paid by Madam Ng.  And I find this was so.

83.  Further, without prejudice to the generality of the foregoing, I am also of the view that the lesser amount of such ‘credit card debts’ stated in the Table was due to the fact that the plaintiff had been moving her target in claiming monies as allegedly owed by the defendant to her.  This can also be reflected by her reporting for a lesser amount of debts as allegedly owed to her by the defendant (than what she now claims) in her statement to the ICAC.

84.  For avoidance of doubts, I wish to point out, after considering all the evidence before me, I do not find the Settlement Agreement or the contents of the Table provided by the plaintiff to Madam Ng would serve as any effective evidence of the alleged loans.  Among other things, it is Madam Ng’s evidence (which this court has accepted) that all along she had kept away the matters in relation to the Settlement Agreement from the defendant at all material times. There is no evidence that Madam Ng had ever discussed with the defendant about such matter until the defendant informed her of the present litigation as brought against him by the plaintiff.[22]   Further, it is also Madam Ng’s unchallenged evidence that she did not know about his son’s financial dealings with the plaintiff before the Settlement Agreement was entered into.   

85.  In other words, Madam Ng did not verify with the defendant or otherwise in a positon to tell whether the defendant had indeed owed such alleged credit card debts to the plaintiff, or borrowed the alleged car loan from her.  

86.  By looking at the evidence in the round, I think the reason why Madam Ng would still be prepared to settle with the plaintiff under such circumstances is because, firstly, it is common ground that she and the plaintiff were good friends at the time and she trusted what the plaintiff had told her.  Secondly, she believed that his son should also bear part of the responsibilities in the break-up of his relationship with the plaintiff.   Thirdly, Madam Ng gave evidence (which this court accepts) that she entered into the Settlement Agreement with the plaintiff out of her concern for his son, who was a civil servant and it may jeopardise his job when he was being chased for repayment of money by his ex-girlfriend. 

87.  Apart from the aforesaid, although there was no intention of the parties to treat the various sums of money as loans when they were advanced to the defendant as per my above findings, there was nothing to prevent the plaintiff from changing her mind and desiring to treat them so after their breaking up.   But the mere subsequent change of intention on the plaintiff’s part alone would not render the previous sums advanced to become loans.  Since this is not part of the plaintiff’s pleaded case, it is unnecessary for this court to discuss along this line any further.

88.  For avoidance of doubts, I have also taken the aforesaid matters (as discussed in paras 84 to 87 above) into account before I reached the conclusion that there were no loans created in respect of all those monies which the plaintiff had paid into the defendant’s credit card accounts, as well as for the sum of HK$17,000 which the plaintiff had paid to the defendant in relation to the purchase of the Honda Jazz.

The threat imposed by the plaintiff to obtain the Compromise Agreement from the defendant

89.  I also accept the defendant’s evidence and find that the plaintiff via the defendant’s three ex-colleagues (who were mutual friends of the parties) told the defendant that if he did not repay money to her, she would send complaint letters to the fire station he stationed and other fire stations, and to the media as well to ruin his reputation.   

90.  I also accept the defendant’s evidence that he was under the influence of such threat that he entered into the Compromise Agreement with the plaintiff around mid-August 2014, because such threat if put in action could indeed create adverse impact on his career.   I find that it was owing to his desire to end such threatened actions hoping that she would not cause him any further trouble (rather than admitting he had borrowed the alleged loans) that he agreed to pay the plaintiff HK$50,000. 

91.  Before reaching the aforesaid conclusion, I have also carefully considered the plaintiff’s version of denial of making any such threat as she contends. However, the proper resolution of this issue would to a material extent depend on the credibility of the witnesses.  It has been discussed above why I find the plaintiff to be an incredible and unreliable witness.  As for the defendant, he explained in court that he refused to perform the Compromise Agreement afterwards because upon reflection he considered that he had owed nothing to the plaintiff and then stood firm to her unwarranted demands.   I find such explanation forthright and plausible.  Having said that, I am conscious of some discrepancies between such testimony of the defendant and his explanation for not performing the Compromise Agreement as given in his witness statement.  Nonetheless, when such discrepancies are considered against the background of this case and the evidence as a whole, I find overall speaking the defendant’s case and evidence on entering into the Compromise Agreement under threat remains to be plausible and credible.

92.  This is particularly so when the inherent probability of the defendant’s case on the Compromise Agreement is further considered thus.   

93.  First, I am of the view that the plaintiff was capable of carrying out such threatened actions into effect.  One should bear in mind that she had admitted that she had fallen in love with Chan (who was also a fireman) in June 2014[23] (i.e. a month following the original scheduled wedding date for the ex-couple) with whom she could easily consult if she wanted to implement the threat.   In this light, I also rejected the plaintiff’s pleaded case that she did not know what to do next after the agreed due date for the defendant to pay on 1 September 2014 had passed, so that she made a complaint to the defendant’s supervisor by email on 17 October 2014, and then made another complaint to the ICAC in November 2014.[24]

94.  Second, I also think that the plaintiff had the propensity to impose such threat upon the defendant so as to get back from him what she thought she was justified after their breaking up.  In my view, the motive for her doing so was fueled by the animosity she had against the defendant at the time.  Further, the contents of her written complaint to the FSD also shows that she knew clearly what she wanted and what to do, and such complaint was a planned action rather than coming to her as an ad hoc idea while not knowing what to do next at that time.

95.  According to the plaintiff, she was evicted from the defendant’s premises by the defendant after their quarrel while she thought that it was the defendant who was irresponsible in the first place as she described in para 17 of her witness statement.  She had incurred substantial expenses for their contemplated wedding which was now called off.  Her hatred towards the defendant at the time was also to a certain extent reflected from her subsequent complaints to the FSD and the ICAC.  In particular, in her email sent to the FSD, it was addressed to 23 recipient officers describing the defendant’s alleged behaviour of not ‘repaying the loans’ as promised as abhorrent, and this made her query the discipline and integrity of the FSD.  She also suggested the FSD to investigate into whether the defendant should be disciplined for bringing discredit to the FSD or whether he has committed any misconduct in public office.  She also indicated that she is expecting the FSD’s reply and resolution to her problem within reasonable time, and the possibility of contacting the media is not excluded. The overall tenor is quite telling that she wanted to wreck the defendant’s reputation and career.

96.  In light of my above findings and observation, it is also my view that the defendant’s subsequent Whatspp message in reply to the plaintiff’s pressing WhatsApp message for payment on 31 August 2014, which he said ‘Dun bother me I would pay N u hv to sign a agreement to prove that I hvnt owe anymore’ should be construed in the context of the Compromise Agreement being obtained from him under the plaintiff’s threat in the first place.  I do not find such statement of the defendant or the fact that he had entered into the Compromise Agreement under threat to be his admission of actually borrowing the alleged loans from the plaintiff after considering the evidence as a whole before me.

The without prejudice privilege

97.  At the commencement of the first day of the trial, Mr Frederick Chan submitted that the plaintiff could not rely on the Compromise Agreement as part of her case against the defendant and those passages in her witness statement concerning the evidence on the communications between the parties through the defendant’s ex-colleagues leading to the Compromise Agreement are inadmissible as they are covered by without prejudice privilege in view of the subject matter of the dispute, and the fact that she did not opt to enforce such agreement.  He cited Barneston v Farmlington Group Ltd [2007] 1 WLR 2443, at paras 22-35 in support.  Mr. Chan also made an application with this court to rule the relevant parts of pleadings and evidence from both sides touching upon this topic as inadmissible.

98.  The plaintiff opposed such application on the ground that the materials in question are not protected by without prejudice privilege and even if they are, the privilege was clearly waived by the defendant’s conduct by pleading in his Defence as well as giving his own evidence in witness statement as to how the Compromise Agreement was obtained by the plaintiff’s threat.  

99.  After hearing the parties’ submissions, I decided to hear the evidence from both sides in relation to the Compromise Agreement de bene esse, and reserved my ruling on such application to be delivered in this Judgment.   By doing so, I have had particular regard to the fact such application was made by the defendant only very shortly before the commencement of the trial by way of his counsel’s opening submission.  As appeared to this court at that time, the issue of waiver is plainly arguable.   Hence, it would be more just and convenient for this court to reserve its final ruling on such matter to be delivered in one go herein.

100.  However, in light of my above findings made in relation to the Compromise Agreement that it was obtained by the plaintiff’s treat under such circumstances discussed above, the determination on such matter would now become academic in the sense that it would not practically affect the outcome of this case, though it may have implication on costs.

101.  In any event, after going through all the authorities as submitted by both parties’ counsel, although I am of the view that the materials in question are covered by without prejudice privilege, I agree with Mr. Y H Chan’s submission and hold that such without prejudice privilege was waived by the defendant.     

102.  In light of the above evidential analysis and my findings, the communications between the parties leading to the Compromise Agreement reflects the plaintiff’s threat as imposed upon the defendant to obtain his agreement to pay HK$50,000 to settle those monies which she claimed to be owing by the defendant at that time.

103.  In order to prevent the plaintiff from putting such threat into action, the defendant would want to enter into an agreement with plaintiff to settle the dispute with her.   In light of my above findings, there was a dispute between the parties at the time in the sense that according to the defendant, no money was owing to the plaintiff whereas according to the plaintiff, there was.  What the defendant primarily desired at the time, as found by this court, was to avoid the plaintiff putting the threat into action that may ruin his career and reputation.   But in order to achieve that goal, he would need an agreement from the plaintiff to put an end to the dispute.  In this light, the communication in question between the parties leading to the Compromise Agreement viewed objectively could still be regarded as aiming at settlement, and hence they should attract ‘without prejudice privilege’. See Matthew & Malek on Disclosure (5^th ed), para 14.12; Kook Suh & Mi Jing Suh v Mace (UK) Ltd [2016] EWCA Civ 4, per Vos LJ at para 22.  

104.  As for the issue of waiver, it is obvious that the defendant consciously put in the subject materials in his pleadings and witness statement which he now claims privilege.  He had not taken any step to make his application until the commencement of trial while he had all along been represented by his legal team with the benefit of counsel’s advice.  Thus, it would clearly be unjust to allow the defendant to do so belatedly in such circumstances at the door of trial, as opposed to the situations where applications to claim privilege are made at the interlocutory stage.  See Matthew & Malek on Disclosure (5^th ed), para 16.43.  

105.  This is especially so when the plaintiff had all along been preparing her case legitimately expecting that such materials would be fully litigated.  Another weighty factor against upholding the privilege is that the defendant on the one hand had already revealed to the court all the material evidence on the communications in question including the impropriety of the plaintiff’s conducts, but now on the other hand his counsel sought to expunge those very materials which would effectively prevent the court’s proper examination of the issue of threat by maintaining the privilege.  If the privilege is upheld in these circumstances, serious unfairness to the plaintiff would in my view ensue.

106.  For completeness sake, Mr Frederick Chan quoted from Suh v Mace (supra) at para 42 and submitted that the objector’s response was not as quick thing as it might have been should not be held against him. 

107.  With respect, the ultimate test to determine whether there was any waiver of without prejudice privilege, as put by Vos LJ, would still require the court to form an objective evaluation of the objector’s conduct in the context of the purpose of the without prejudice privilege.[25] By applying such test, I am of the clear view that it would be unjust for the defendant to argue the materials in question were still privileged from production to the court at trial in light of his conducts.   Insofar as may be necessary, I would also find that the both parties’ intention to treat the without prejudice privilege as waived can also be inferred from the parties’ conduct as outlined above before Mr Frederick Chan made the subject application on his client’s behalf. 

108.  Although there was a similarity between Suh v Mace and the present case in that the objectors’ responses in both cases and those of their lawyers were provoked by the other party’s action in attempting to ignore the privilege that had now been held to exist, the material difference is that the matter does not rest here.  The defendant in this case further asserted impropriety on the plaintiff’s part in obtaining the Compromise Agreement from him, and this in my view should afford the plaintiff a chance to the properly ventilate her case and evidence to counter such assertion.  Though, this court has subsequently found against her on such assertion after considering all the evidence is another matter.    

Disposition

109.  Due to the above reasons, the plaintiff’s claim is dismissed in its entirety.

Costs

110.  Costs should normally follow the event.  I make a costs order nisi that that the plaintiff shall pay the defendant’s costs of the action, to be taxed if not agreed with certificate for counsel save and except that the costs of and occasioned by the defendant’s application to object the production of certain parts of pleadings and evidence basing on without prejudice privilege shall be paid by the defendant to the plaintiff to be taxed if not agreed with certificate for counsel.  The costs order nisi shall become absolute in the absence of any application to vary the same within 14 days from the date of this Order.

111.  The defendant’s own costs to be taxed in accordance with Legal Aid Regulations.

112.  Lastly, it remains for me to thank counsel on both sides for their assistance rendered to the court.