LI YUK MUI v. HENG HING METAL FACTORY LTD

DCCJ4316/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4316 OF 2002

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JUDGMENT

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The Plaintiff claims against the Defendant the sum of $200,000 for repayment of a sum lent by the Plaintiff to the Defendant on 5th July 1999.

2. The Defendant originally pleaded in the Defence and Counterclaim that if a sum had been paid to the Defendant on 5th July 1999, it only constituted a partial repayment of various loans made by the Defendant to the Plaintiff particulars of which are as follows:-

Particulars

Date	Amount (HK$)
09/06/1999	100,000.00
12/06/1999	100,000.00
21/06/1999	303,000.00
	503,000.00
	========

3. At the close of the Defendant's evidence, the Defendant's Counsel applied to amend the Defence and Counterclaim to state that the Defendant was caused to be transferred to the Plaintiff at her request and at the request of Kwok Wai Yee a total sum of $503,000.00 under the belief that it was used in connection with the Plaintiff's proposed acquisition of a landed property by Kwok Wai Yee. The amended paragraph further state, "It then transpired that the said sum was not used by Kwok Wai Yee to acquire his own property but used and received by the Plaintiff alone. The Plaintiff is under a duty to account the said sum to the Defendant on a money had and received basis". The application for amendment was made in an attempt to bring the Defendant's pleaded case in line with the evidence of the Defendant's witness in the witness box.

4. The Defendant counterclaimed against the Plaintiff for the sum of $303,000.00

5. The Plaintiff however stated that in fact the total sum of $503,000.00 payment of which had been particularised aforesaid consisted in fact of sums repaid to the Plaintiff for sums lent by the Plaintiff to the Defendant as follows:-

Date	Amount	Mode of Payment
3 March 1999	HK$100,000	transferred to
		Defendant's a/c NCB
		036-724-0-003428-9
3 March 1999`	HK$100,000	transferred to
		Defendant's a/c
		Hang Seng
		037-041314-001
occasions in 1998	HK$303,000	sums lent to enable
		Defendant to purchase
		items on behalf of the
		Defendant

6. The Plaintiff denies the counterclaim of the Defendant.

The Plaintiff's Evidence

7. The Plaintiff gave evidence and called Mr. Kwok Wai Yee and Ms. Chan Yee Kuen the former accountant of the Defendant to give evidence.

Evidence of the Plaintiff

8. The Plaintiff gave evidence that her educational background was up to Primary School level. She met Mr. Kwok Wai Yee a former director and shareholder of the Defendant at a Sauna where she was employed as a hostess. In 1993, Kwok Wai Yee introduced her to the other Directors and to his mother. She had by then cohabited with Mr. Kwok Wai Yee. In 1996, she left her work in the Sauna to work for Dong Guan Heng Hing Metal & Plastic Products Co. Ltd. (hereinafter referred to as Dong Guan Heng Hing), a P.R.C. Company which was a wholly owned subsidiary of the Defendant. She started work looking after the odds and ends of the business and learning the ways of the business. She was the personal assistant of Mr. Kwok Wai Yee. In April 1998, she was promoted to be a supervisor of the same company. She stated she earned a salary of $8,000 per month with overtime payment on top earned from time to time. At first, during cross examination she stated she had no other income apart from this. However when cross examination on how she could have the money to lend the Defendant, and on the deposits in her savings account, she stated that her total income included income from rental received from a flat owned by her situated in Tai Po from which she received between $5,000 to $5,500 p.m. She was also paid $6,000 pm by Mr. Kwok Wai Yee and when he made money through gambling, he would give her more money.

9. She stated that the Defendant Company was often short of cash and was unable to pay creditors that chased them for payment. She stated that in 1996, she had savings of between $300,000 to $400,000. She suggested to Kwok Wai Yee that she could advance sums to pay the creditors and make necessary payments. She stated that on numerous occasions in 1998, she lent money to the Defendant which by December 1998 totalled a sum of HK$303,000, to enable the Defendant to pay for polishing materials, staff meals and various miscellaneous expenses on behalf of Dong Guan Heng Hing.

10. She stated in oral examination in chief that at Dong Guan Heng Hing factory in about October, November 1998, there was a meeting attended by Kwok Kwong Fai, the technicians of the factory and Kwok Wai Yee and the factory foreman Mr. Wong Wing Kwong. In the meeting they stated that the accounts were unclear. In the meeting she and Kwok Wai Yee listed the sums to Kwok Kong Fai, technicians and the factory foreman. The meeting was not attended by Kwok Chan Fai. At the end of the meeting, the two Directors, Kwok Wai Yee and Kwok Chan Fai confirmed the sums submitted. Kwok Wai Yee told his younger brother and fellow director, Kwok Chan Fai, "here is the sum owed to Ah Mui. You have to repay it to her." Kwok Chan Fai agreed to that. Kwok Wai Yee told Kwok Chan Fai, "Now, Ah Mui has lent this money. You issue a cheque to repay her." The cheque was handed to her roughly in December 1998. However it was undated. Mr. Kwok Chan Fai said that "the Defendant does not have money". He stated, "do not bank it".

11. Subsequently on 8th March 1999, she lent another sum of HK$100,000 to the Defendant by a credit transfer from her deposit account no. 030-571-1-021029-0 with Kincheng Banking Corporation, Hong Kong branch to the Defendant's account no. 036-724-0-003428-9 with the National Commercial Bank, Limited at Kwok Wai Yee's request.

12. On the same day, she lent another sum of HK$100,000 to the Defendant by a credit transfer from her deposit account no. 356-8006393 with Hang Seng Bank to the Defendant's account no. 237-041314-00 also with Hang Seng Bank at Kwok Wai Yee's request.

13. In June 1999, she decided to purchase her own apartment in Hong Kong and she asked Kwok Wai Yee when the Defendant could repay the loans referred to above. Kwok Wai Yee informed her that he would discuss with the other directors of the Defendant.

14. The loan of HK$100,000.00 referred to in the above paragraph 7 was repaid by the Defendant on 9th June 1999 by a cheque dated the same day and drawn on The National Commercial Bank, Limited. The 2nd loan of HK$100,000.00 referred to above was repaid by the Defendant on 12th June 1999 by 2 cheques for the respective sums of HK$40,000.00 and HK$60,000.00 both drawn on The National Commercial Bank, Limited.

15. In relation to the cheque of $303,000.00, she put the cheque in a car which belonged to the Defendant which car had been driven by Kwok Wai Yee. A few days later, the money was banked into her account.

16. She used part of the moneys repaid by the Defendant to acquire an apartment in Fanling for my own use. She still had about HK$200,000.00 left after the purchase which was originally reserved for fitting and decoration of the flat.

17. In or around early July 1999, Kwok Wai Yee of the Defendant asked her whether she could lend the Defendant another HK$200,000.00 for a short period of time. By an oral agreement made on 5th July 1999 between Kwok Wai Yee, the then Director of the Defendant on behalf of the Defendant and her, she agreed to lend HK$200,000.00 to the Defendant once again to pay its operation expenses.

18. The loan was made by her through a credit transfer from her deposit account no. 356-8006393 with Hang Seng Bank to the Defendant's account no. 237-041314-001 also with Hang Seng Bank.

19. Under cross examination the Plaintiff stated that in relation to the sums which she lent to the Defendant that totalled $303,000, she gave sums of money to Kwok Wai Yee at different times for the Defendant's use. Kwok Wai Yee did not tell her how each sum was used. She only made a list of the total sum lent to the Defendant which totalled $303,000.00. She said Mr. Kwok Wai Yee signed it and acknowledged it had been borrowed by the Defendant.

20. Again under cross examination related to the meeting which was held in about October or November 1998 referred to above, she said that the meeting was in Dong Guan Heng Hing premises. At that meeting Kwok Wai Yee, Kwok Kwong Fai, another Director of the Defendant technicians of the factory, the factory foreman and she met to examine the accounts of the Dong Guan Heng Hing factory. She stated that Kwok Chan Fai was not there. Subsequently she said she handed the list she made of sums lent to the Defendant to Kwok Wai Yee and he handed it to Kwok Chan Fai. When questioned under cross examination that Kwok Chan Fai was not at the meeting how could the list be handed to him. She said he went to Dong Guan now and then. Subsequently she said when the list was handed over Kwok Chan Fai was there. Then she said the list was not handed over to Kwok Chan Fai at that meeting. She could not remember when it was handed over. She stated that Kwok Wai Yee said to Kwok Chan Fai that these were items of expenditure by Ah Mui, the Plaintiff. Kwok Chan Fai stated that there was no money. He put the list in his brief case. A few days later Kwok Chan Fai came to Dong Guan Heng Hing premises when Kwok Chan Fai handed the cheque to her. He told her that there was no money. Put it in the bank when there is money.

21. Her evidence related to why the cheque in the sum of $303,000.00 was put in the car was rather confused. Under cross examination she said that the cheque was originally in the car. She put the cheque back in the car and Kwok Wai Yee asked a Director to drive the car bring the cheque to the Defendant's office and to put the money in the bank.

Evidence of Kwok Wai Yee

22. His evidence shows that he is a founding Director of the Defendant. He stated that after the Defendant was incorporated, he went into mainland China and set up a wholly owned company of the Defendant in Dong Guan known as Dong Guang Hengshing Metal & Plastic Products Co. Ltd. He was stationed in Dong Guan most of the time and was in charge of the operation of the factory namely Dong Guan Heng Hing.

23. He adopted the contents of his witness statement into his evidence and confirmed the truth of its contents.

24. In his witness statement he stated that the Defendant was a private business at the material times and had a tight cashflow. Since Dong Guan Heng Hing only dealt with manufacturing of products, it did not have its own income. All sale invoices and receipt of payments had to go through the Defendant in Hong Kong. On numerous occasions in 1998, he, on behalf of the Defendant, had to borrow money from the Plaintiff in order that the Defendant could pay for polishing materials, staff meals and various miscellaneous expenses on behalf of Dong Guan Heng Hing. The Plaintiff lent money to the Defendant totalling a sum of HK$303,000.00 for the said purpose in 1998.

25. In or about October or November 1998, the other directors of the Defendant queried the management accounts of Dong Guan Heng Hing. The Plaintiff, Kwok Kwong Fai, and I met at the premises of Dong Guan Heng Hing, and examined the accounts of Dong Guan Heng Hing. The directors were satisfied with the accounts of Dong Guan Heng Hing and subsequently, in or about December 1998, Kwok Chan Fai of the Defendant verbally admitted on behalf of the Defendant that the said sum of HK$303,000.00 was owed by the Defendant to the Plaintiff. Kwok Chan Fai thereafter delivered a signed but undated cheque for the said sum of HK$303,000.00 to the Plaintiff as repayment of the said sum of HK$303,000.00. Kwok Chan Fai asked the Plaintiff not to present the cheque until the Defendant had sufficient fund in its account. As directed by Kwok Chan Fai, the Plaintiff presented the said cheque for payment on 21st June 1999.

26. He stated that in his home in Hong Kong which he shared with the Plaintiff they often have several $10,000.00's of dollars. He would bring these sums to the factory in Dong Guan as sums lent by the Plaintiff to the Defendant. The Plaintiff was not clear how the money was to be used. Sometimes he would tell her but not always.

27. He stated that at times they had to pay bribery money to Customs authorities. He did not have an invoice for such and only wrote on a blank piece of paper to state it was for entertainment. He stated that this money could not see light. Many times he had to make quick decisions to pay such as goods urgently required were detained and he paid such to get their release.

28. In 1998, he had to have a Directors' meeting to agree to the use of the funds. He had to account to the Directors. Subsequently under cross examination, he stated that he did not have a Directors' meeting about the $303,000.00 loan. He had a discussion with Kwok Chan Fai. He stated that the meeting referred to in para. 7 of his witness statement was a meeting related to a meeting in October, November 1998 related to a different matter. He talked with Kwok Chan Fai because there were many blank chits (白頭單). He had to talk to Kwok Chan Fai soon before they forgot because the Plaintiff needed to purchase a property. He had to ask Kwok Chan Fai to acknowledge these payments. He had to explain to the Directors where the money went. He could not remember who was at the meeting. Kwok Chan Fai and Li Yuk Mui were definitely there. He told Kwok Chan Fai that the Plaintiff took out a sum of money for use and asked him to authorize repayment by the Defendant. He stated that there were invoices issued by Customs for entertainment expenses signed by Customs Officers and himself. He could not remember the total amount. There was a list of expenditure totalling $303,000.00 written by the Plaintiff. The Plaintiff wrote a paper listing out date and items of expenditure and amount. There were blank chits (白頭單). He stated he did not sign. He handed this to them to look at. Finally it was handed to Kwok Chan Fai. He stated that Li Yuk Mui was present when the list was handed over to Kwok Chan Fai. Under cross examination, he stated that the meeting related to the $303,000.00 with Kwok Chan Fai was in Hong Kong. He stated that he wrote the document related to the amount owing. However when questioned whether the document was written by the Plaintiff as he had stated in the morning, he stated, "yes". Under cross examination he said there was a meeting at Dong Guan Heng Hing premises when Kwok Chan Fai was there. The Plaintiff was working in the factory. At the time no list had been prepared yet. He just told Kwok Chan Fai about it. Subsequent Li Yuk Mui prepared the list and was handed to Kwok Chan Fai a few days later in Hong Kong. There was this 2nd meeting in Hong Kong. Li Yuk Mui was in Hong Kong. He handed the list to Kwok Chan Fai to ask him to acknowledge. Kwok Chan Fai did not acknowledge the sum at the spot. The list was not signed either by him or Li Yuk Mui. Kwok Chan Fai took it to the Defendant Company to consider. He stated that the meeting referred to in paragraph 7 of his Witness Statement happening in October/November 1998 had nothing to do with this matter. He could not remember so much after so long.

29. He agreed to the question under cross examination that he had to obtain the agreement of Kwok Chan Fai to repayment of the loan by the Defendant to the Plaintiff. He stated he did not have to obtain the agreement of Kwok Chan Fai to borrowing money on behalf of the Defendant from the Plaintiff.

30. Kwok Chan Fai stated that there was no money. He took the list away to consider. Subsequently a cheque was written. Kwok Chan Fai said there is no money for the time being.

31. He stated the cheque at page 15 of the BD was written by the Accountant Ms Chan Yee Kuen but signed by Kwok Chan Fai. The cheque was issued in March or April. The cheque did not have a date on it when it was written. Later, they had to purchase the flat so the cheque was brought back to the Defendant's office. He took the cheque. They had a car. He usually goes to the Defendant's office in Hong Kong on Sundays. The cheque was kept in his and the Plaintiff's Hong Kong home and he asked the Plaintiff to put the cheque in the car. He went to the Hong Kong office. He saw Kwok Chan Fai there. He said, "Li needs money now. Could we pay it into her account." Kwok Chan Fai gave back the cheque to him with the date on the cheque written on it. After that, the cheque was left behind in the Defendant's office for it to be paid into the Plaintiff's bank account.

32. On 8 March 1999, the Plaintiff transferred $100,000.00 into the Defendant's bank account. There was an urgent need. He asked the Plaintiff to transfer money to the Defendant. Subsequently on the same day the Plaintiff made the second transfer of $100,000.00 into the Defendant's bank account. This happened when the Defendant's creditors chased him for payment of debts owed by the Defendant. The payment of $100,000.00 by the Defendant's cheque dated 9th June 1999 was in repayment of the Plaintiff's 1st loan on 8 March 1999. The payment by the 2 cheques in the sum of $40,000.00 and $60,000.00 dated 12th June 1999 was in repayment of the 2nd loan on 8 March 1999 of $100,000.00.

33. On about 5 July 1999 the Plaintiff transferred the sum of $200,000.00 to the Defendant's account. The property which she purchased had not been decorated. He said to the Plaintiff, the Defendant needed money, could you lend this sum to the Defendant. He, on behalf of the Defendant, asked a loan from the Plaintiff for this sum. When cross-examined as to whether he needed to ask Kwok Chan Fai before he informed the Plaintiff to lend the$200,000.00 to the Defendant, he said that he did tell them about it for this had to be entered in the accounts. This is the loan the subject of this claim.

Evidence of Chan Yee Kuen

34. She was the former accountant of the Defendant company. At the time when she was the accountant she was the only one who dealt with the accounts of the Defendant. She stated that the Defendant was always short of cash. When invoices were due for payment she would inform Kwok Wai Yee of this and ask him to find money to deposit into the Defendant's bank account to pay for it. In relation to the two credit transfers by the Plaintiff of HK$100,000.00 on 8th March 1999, she was not certain what the purpose of these was. The Plaintiff would deposit a sum into the Defendant's Hang Seng Bank account. Then the Plaintiff would telephone her and ask her to remit the sum to the Mainland for the Plaintiff to use. The purpose of remitting the sums to the Mainland, the boss did not inform her. Sometimes the boss told her it was for salary etc.

35. At another point, in relation to the deposits of the two sums totalling $200,000.00 by the Plaintiff on 8th March 1999, she stated that if the Plaintiff deposited money in the bank account of the Defendant, the Plaintiff would tell her. Chan Yee Kuen would write a credit entry stating "sums received from Ms. Li". Without looking at the loan account ledger for the Plaintiff of the Defendant's accounts she did not know if there had ever been debit entries in this ledger that shows that the Defendant had lent money to the Plaintiff. From memory, she did not know that the Defendant had issued cheques to the Plaintiff as loans.

36. In relation to the three cheques at pages 10, 12 and 13 of the BD, namely that in the sum of $100,000.00 dated 9th June 1999, in the sums of $60,000.00 and $40,000.00, both dated 12th June 1999, these were printed out from the Defendant's cheque printer. She did not know the purpose for these three cheques. It could be because Madam Lee, the Plaintiff, gave money and these were repayments.

37. In relation to the issue of the cheque of $303,000.00. The cheque was written because Kwok Wai Yee telephoned from the Mainland to her in Hong Kong to ask whether the cheque in the sum of $303,000.00 had been issued. He said this cheque related to money he had discussed with Kwok Chan Fai about. He said that there were documents. However she had not seen documents. He said that Kwok Chan Fai would come back to Hong Kong and he would authorize the issue of a cheque. She asked Kwok Chan Fai about this. Kwok Chan Fai stated "I have seen documents but do not know what he was talking about". Kwok Chan Fai said, "issue the cheque but do not date it. Pay it when there is money." When the cheque was issued it was to be for repayment of a loan. However there is no record of a loan. There was no documents to show the sum was a loan from the Plaintiff to the Defendant. She prepared a transfer voucher and asked Kwok Chan Fai to sign it. She told Kwok Chan Fai this sum was for repayment of a loan. The date on the transfer voucher was the date of the issue of the cheque. There was no evidence of cash lent or documents to show that. When the cheque was written by her, it did not have a date on it.

38. Kwok Wai Yee subsequently telephoned her and asked her if the cheque had been issued. Kwok Wai Yee stated that it is a sum which had been paid out on behalf of the Defendant. He had shown the documents to Kwok Chan Fai.

39. She stated that before she left the employ of the Defendant company, she received a solicitors' letter asking her to produce the company accounts. The next day she printed out all the accounts. She was cross-examined that before she received the letter from Messrs. Deacons the Defendant's solicitors, Mr. Kwok Chan Fai had asked her to print out the accounts and she had refused. She denied that. She stated that during the time when she printed out the accounts, Mr. Kwok Chan Fai asked his nephew to sit next to her as she prnted out the accounts. After she printed out the accounts she asked the Defendant to accept the accounts, but the Defendant refused to accept them. She telephoned the solicitors, Messrs. Deacons. No one answered her call. She instructed a firm of solicitors to write a letter to the Defendant to request the Defendant to receive the documents.

40. Under re-examination she stated that after she printed out all the accounts, she put all the documents in a box and sealed the box and signed it. Later the five brothers, the Directors of the Defendant seemed to be on good terms. Mr. Kwok Wai Yee asked Lo Kim Ching to receive the documents. Mr. Lo Kim Ching received the documents. All the documents were checked and signed. She kept the list of the documents receipt of which had been signed and put in her safe deposit box. She subsequently produced these lists marked Exh. P1 and P2.

Evidence of the Defendant

41. Kwok Chan Fai was the only witness who gave evidence on behalf of the Defendant. He testified before the Court that the contents of his witness statement was true. However, the witness statement contained facts or allegations which did not form part of the Defendant's pleaded case. Suffice it to note that in the background of this case are other litigation between the parties and allegations related to accounts of the Defendant but such are not part of this pleaded case. Before the Defendant Company was incorporated, he was responsible for seeking business for the Defendant. Subsequently he became a Director of the Defendant.

42. In relation to the sums allegedly lent by the Plaintiff to the Defendant in the total sum of $200,000 on 8 March 1999, he stated that before that date, no one informed him that the Plaintiff had lent the Defendant this sum. Neither he nor his brothers, the Directors would know apart from Kwok Wai Yee. Chan Yee Kuen would only be responsible to Kwok Wai Yee.

43. In relation to the events, the subject of this claim, he stated that around March 1999, Kwok Wai Yee came to the Hong Kong office of the Defendant and said to him that he wanted to buy a property. Kwok Chan Fai did not feel it to be a problem. This is because each of them Directors have purchased a property with the help of the Defendant and the property purchased was subsequently used as security to obtain loan facilities from the Defendant's bank.

44. At another point he stated, that it was in about June 1999 that Kwok Wai Yee stated he wanted to buy a property. He stated he had a habit of signing blank cheques in advance. Subsequently he found them issued to Li Yuk Mui. Later they heard rumours that Kwok Wai Yee purchased a property for the Plaintiff. That meant that Kwok Wai Yee was not the registered owner of the property. They enquired of Kwok Wai Yee about this. Kwok Wai Yee asked the Plaintiff to repay the Defendant $200,000.00. The balance $303,000.00, nothing was heard of it. We asked him to repay $303,000.00. Kwok Wai Yee was very annoyed and would not talk to us.

45. They felt that something was not quite right. He had not heard that the Plaintiff had lent $303,000.00 to the Defendant. He stated that Kwok Wai Yee had not accounted to him about this sum. He stated that Kwok Wai Yee did not need permission to issue a cheque.

46. He stated in relation to cheques signed in blank, in advance that he left such signed cheques with Chan Yee Kuen in case these would be required when he was away. He stated under cross examination that such cheques were signed for urgent use for shipping companies to release the goods. In relation to the cheques which had been signed in blank, he would not have intended such to have been used to pay the Plaintiff. When asked "Had you ever agreed to lend money to Li Yuk Mui?", he replied, "Li Yuk Mui has no relationship to our company. Why would we agree to lend money to her? When the question was repeated again, he stated, "We have never agreed." Subsequently in re-examination he stated that by "we" he meant himself and his three younger brothers. He stated that the total sum of $503,000 that went to Li Yuk Mui was never paid with his agreement. He stated that they used blank cheques to put her name as payee. He reiterated that they had no reason to lend her money. He stated under cross examination that they intended to lend money to Kwok Wai Yee to purchase property. The purpose of this was to use the property as security for financing for the Defendant. He stated that Kwok Wai Yee said that he wanted to borrow money to purchase a property. The accountant used the blank cheques to write in Li Yuk Mui's name as payee. When it was put to him that he had not previously stated in his witness statement about the accountant using blank cheques to fill in with Li Yuk Mui's name, he stated that "I tell you as you ask me now."

47. Subsequently under cross examination, he stated that if the Defendant had borrowed money from the Plaintiff he did not know of it. He agreed when it was put to him that the cheque in the sum of $303,000.00 signed by him drawn on the Defendant's bank account could have been used as stated by the Plaintiff to repay the 1998 loan alleged by the Plaintiff to have been extended to the Defendant, and he would not have known it. He agreed when it was put to him that he admitted that on 8 March 1999 Li Yuk Mui had transferred money to the Defendant. He agreed when put to him that it could have been a loan to the Defendant. However he stated that it could also have been a repayment of a loan from the Defendant. In response to the statement put under cross examination that the deposit of $200,000.00 by the Plaintiff into the Defendant's bank account on 5th July 1999 could be a loan to the Defendant which he would not know about, he said "yes, or it could be a repayment of a loan to us." Subsequently, he stated that Li Yuk Mui deposited this sum into the Defendant's bank account because the Defendant asked her to repay.

48. He stated that in 1998 and 1999, the Defendant was not in debt. The Defendant made a profit in 1999.

49. In relation to the accounts of the Defendant, he and his brothers felt that there was something not clear in the accounts. He asked Chan Yee Kuen about the accounts whether they could look at it. She would not allow them to look at the accounts because she had to answer to Kwok Wai Yee. Because the matter became urgent, they issued a solicitors' letter to request her to let them have the accounts. A few days later Chan Yee Kuen responded by her solicitors' letter. She gave them a list of documents and gave them several 10's of boxes of papers. She described the contents of each box to them. He did not know what was in the boxes.

50. He stated that the account documents given by Chan Yee Kuen had been given to the Court in Dong Guan, China in relation to a case between the parties there. After looking into the accounts they found duplication of entries between Hong Kong and Dong Guan.

51. Under cross examination, in relation to the cash flow of the company in 1998 and 1999, he stated that he did not know. He stated that the Defendant did have creditors. He knew that the Defendant needed to borrow money from the bank.

52. He stated that their solicitors in Dong Guan orally requested the return of the account documents from the Dong Guan Court for the purpose of discovery in this Court. The Dong Guan Court said they would not release them.

The Court's Findings

Background of the Case

53. This is a sad case involving differences and disputes between family members who formerly ran the family business. The said Kwok Wai Yee was the former Director of the Defendant and brother of the other Directors of the Defendant. As a result of the differences and issues that had come between them that are beyond the disputes in this Action, it is clear from the evidence of Kwok Chan Fai that relationship between the Kwok Wai Yee and other brothers had become sour. Bitterness and unhappy feelings have arisen and the working relationship between Kwok Wai Yee, the former founding Director of the Defendant and the remaining Directors have broken down.

54. In the background of this case are other litigations started in the High Court stayed in favour of proceedings in the Court in Dong Guan, in the P.R.C. However, the contents of other litigation have not been brought into evidence in this case and should have no bearing on this case and this case should only be decided within the confines of the pleadings of respective parties and on the evidence that has been adduced. Although ample opportunity has been given to the Defendant to amend its pleadings at the beginning of the trial in view of the submissions in support of the application of the Defendant to adjourn the hearing, the Defendant did not do so because they had no evidence to support the allegations of misbehaviour in relation to the Defendant's money and accounts, on the part of the Plaintiff, that had been hinted at in the Defendant's submissions in the application.

55. I have therefore to remind myself that in the pleaded case of the Defendant there is no allegation of misappropriation, misconduct or impropriety. Further there is no evidence related to that adduced in the course of the trial. Originally the Defence case is that the Defendant lent sums totaling $503,000 to the Plaintiff in connection with the proposed acquisition of a landed property. The Defendant counterclaimed repayment of $503,000.00. However by Amendment, the Defendant no longer pleaded the loans made to the Plaintiff but pleaded a claim based on money had and received in the sum of $503,000.00 in that such a sum was caused to be transferred to the Plaintiff at her request and at the request of Kwok Wai Yee under the belief that it was used in connection with the Plaintiff's proposed acquisition of a landed property by Kwok Wai Yee. The amended pleading then states, "It then transpired that the said sum was not used by Kwok Wai Yee to acquire his property. . . , and the Defendant claims that the Plaintiff is under a duty to account the said sum to the Defendant on a money had and received basis." The Defendant counterclaimed the repayment of the sum of $303,000.00, presumably after deducting the sum of $200,000.00 as claimed in the Statement of Claim.

56. In the cross examination of the Plaintiff's witnesses suspicion was generated of matters which was not the pleaded case of the Defendant and in respect of such the Defendant was not able to substantiate by evidence. Such suspicions could not be the basis for making findings and the atmosphere of suspicion has to be eradicated so as to make findings based on the actual evidence and on the case of the parties as pleaded. It is not for me to speculate what might ensue in the future as a result of litigation that has commenced in Dong Guan on the Mainland. The results of such litigation relates to the future and events of the future.

57. The Plaintiff's Counsel commented on the lack of discovery by the Defendant for accounting documents and the duty to discover. The Defendant had attempted to give evidence as to where these documents are and why he could not produce them to the Court or to the Plaintiff. There is no evidence to contradict what was stated in evidence related to these by Mr. Kwok Chan Fai. I do not discount his explanation as there is no evidence to contradict his explanation.

The Issues

1. Did the Plaintiff lend the Defendant the sums as claimed in the Reply of the Plaintiff?

2. What was the purpose for the transfer of the three sums by the Defendant to the Plaintiff of $100,000.00 on 9 June 1999, and $40,000/00 and $60,000.00 on 12 June 1999 and $303,000.00 on 21 June 1999?

3. Is the Plaintiff entitled to the sum as claimed?

1st Issue

58. I shall first address the sums transferred from the Plaintiff's bank account to the Defendant's bank account as referred to hereunder. The fact that the Plaintiff did transfer the sums as pleaded in the Reply cannot be disputed. There is clear evidence that the Plaintiff made the transfers from her bank account as follows:-

Date	Plf's Bank A/c No.	Deft's Bank A/c No.	Amount
8.3.1999	030-571-1-021029-1	036-724-0-003428-9	$100,000
8.3.1999	356-8006393	237-041314-001	$100,000
5.7.1999	2568006393	237-041314-001	$200,000

59. The evidence of the Plaintiff related to the purpose of the transfer is clear. I shall not repeat her evidence. The evidence of Chan Yee Kuen the accountant is also stated aforesaid. Chan Yee Kuen supports the evidence of the Plaintiff and Kwok Wai Yee that although the Defendant business was profitable yet it had cash flow problems and according to Chan Yee Kuen, at times they had to wait until they had funds before making a payment to the creditors. She stated that there were instances when the Plaintiff would deposit a sum into the Defendant's Hang Seng Bank Account, then the Plaintiff would telephone her and ask her to remit the sum to the Mainland for the Plaintiff to use. The purpose of remitting the sums to Mainland, the boss did not inform her. Sometimes, the boss tells her it is for salary etc. When she received sums from the Plaintiff she would write a credit entry stating "sums received from Ms. Li". In effect she stated that there were ledger accounts of the Plaintiff in the accounts of the Defendant that showed loans made by the Plaintiff to the Defendant. She stated that from memory she did not know that the Defendant had issued cheques to the Plaintiff as loans.

60. There is evidence adduced from cross examination of the Plaintiff that when money was remitted from the Defendant to Dong Guan Heng Hing, such money would sometimes be held by her or sometimes it would be held by Kwok Wai Yee. If held by her she would await instructions from Kwok Wai Yee to make payments on behalf of the Defendant as instructed by him. When she lent money to the Defendant, if she had transferred such loans to the Defendant's bank account, the money would be remitted to Dong Guan into a personal account of someone and this person would then withdraw money from the account and the factory foreman would collect such. This sum would have been exchanged into RMB. This sum collected by the factory foreman would be delivered into her hands or Kwok Wai Yee's hands and she would spend such sums as directed by Kwok Wai Yee for payments on behalf of the Defendant. There was no evidence of misuse of funds nor is there evidence from which such could be inferred. This is also not the pleaded case of the Defendant.

61. Kwok Wai Yee supported the Plaintiff's evidence that such money was lent to the Defendant by the Plaintiff at his request. He was the Director of the Defendant who was in overall control of the Defendant. The evidence of Kwok Chan Fai was that he did not know whether such transfers of funds from the Plaintiff to the Defendant were loans from the Plaintiff to the Defendant. He could not say whether they were loans or repayment of loans from the Defendant. However, he subsequently amended his case in that his case was no longer based on contractual loans from the Defendant to the Plaintiff. In fact he knew nothing about the transfer of funds to the Defendant's bank account.

62. It seems that there is no positive evidence from the Defendant to contradict the evidence of the Plaintiff or that of Kwok Wai Yee that the Plaintiff's transfer of the 4 sums referred to in paragraph 57 were loans from the Plaintiff to the Defendant. Her evidence was that such funds were used by her as directed by Kwok Wai Yee to make payments on behalf of the Defendant, as there is no evidence to show that such sums were not so used.

63. Two sums of $100,000 were transferred from the Plaintiff's account to the Defendant's account on 8 March 1999 before any of the Defendant's payments to the Plaintiff pleaded in the Defence and Counterclaim. It is clear that these two payments from the Plaintiff cannot be made for repayment of loans to the Defendant. I have no basis to find that the transfers for these sums to the Defendant were not for the purpose of loans to the Defendant. I find that these four transfers were loans made by the Plaintiff to the Defendant.

64. In relation to the sum of $303,000.00 the Plaintiff's evidence and that of Kwok Wai Yee is that the Plaintiff lent sums at different times to the Defendant and by December 1998 the total of such loans had amounted to $303,000.00. There is no evidence of the transfer of the sum of $303,000.00 to the Defendant. The credibility of the Plaintiff and Kwok Wai Yee and even Chan Yee Kuen had been challenged by the Defendant's Counsel in relation to the loan of $303,000 to the Defendant alleged by the Plaintiff. The challenge to the credibility of the evidence was strong. The credibility of Kwok Chan Fai in relation to his evidence on this issue as to other parts of his evidence has also been challenged by the Plaintiff's Counsel.

65. I shall start with the credibility of Chan Yee Kuen as she is an independent witness. In my mind, I have no doubt that although she had treated Mr. Kwok Wai Yee as her boss and the one to whom she was accountable as he was the overseer of the Defendant, she was conscientious in her responsibilities as an accountant. I have no doubt that she suffered in the falling out of the relationship between the brothers. As a result of these events even her professionalism as an accountant was put in issue. There was correspondence between her solicitors and the Defendant's solicitors related to the production of the accounts of the Defendant. It seems that the lack of comprehension or understanding of accounts of the brothers of Kwok Wai Yee, namely the other Directors of the Defendant has not helped matters. There is no evidence of any attempt made to seek professional help to decipher or read the accounts after they were printed out and handed to the Defendant by Chan Yee Kuen. Surely if the Defendant wanted to clarify matters in the accounts Directors of the Defendant should have done that? There was no evidence adduced in the trial to suggest that Chan Yee Kuen was lacking in credibility. I find her evidence related to the $303,000.00 to be credible. I so find because firstly, I find Chan Kwok Fai's evidence to be incredible. I shall refer to that hereunder. I find his suggestion that blank cheques signed by him and left with Chan Yee Kuen for stated purposes was used by her to issue this cheque without his knowledge to be unbelievable. Were she to do so, she would be using these cheque for a purpose other than the authorized purpose for the blank cheques. This would amount to a breach of trust. I see no basis to suggest that she breached the trust of Chan Kwok Fai and the Defendant. Secondly, Chan Yee Kuen's evidence referring to what Kwok Chan Fai stated when told that Kwok Wai Yee said he had discussed with him about this loan of $303,000 has a ring of truth to it. When she asked Kwok Chan Fai about what Kwok Wai Yee said, Chan Yee Kuen's evidence was that Kwok Chan Fai said, "I have seen the documents but do not know what he was talking about. Issue the cheque but do not date it. Pay it when there is money." I accept her evidence of this as true.

66. It seems therefore according to Chan Yee Kuen, Kwok Chan Fai had admitted that Kwok Wai Yee had approached Kwok Chan Fai with documents about this sum of $303,000.00. Though he did not fully understand what the documents were about Kwok Chan Fai had authorized Chan Yee Kuen to issue the cheque for $303,000.00.

67. Chan Yee Kuen stated that she had no documents to show a loan. Because of that she prepared a transfer voucher. One side was a credit side, the other side was a debit side. The transfer voucher credit side was Lee Yuk Mui's loan. The debit side was purchase on behalf of Dong Guan Heng Hing. She asked Kwok Chan Fai to sign it. Kwok Chan Fai signed it. She told Kwok Chan Fai that the cheque issued in the sum of $303,000.00 was for repayment of a loan and there was no evidence of cash lent or of documents. The date of the transfer voucher was dated the date of issue of the cheque. As she did not know about the date of the loan, she just put the date of the issue of the cheque. The cheque did not have a date.

68. The Defendant's Counsel submitted on the credibility of Kwok Wai Yee and the Plaintiff in relation to their evidence related to the issue of this loan. In respect of the oral evidence of both, in their witness statement they stated that the sums lent by the Plaintiff was for purchase of polishing materials, for staff meals and various miscellaneous expenses on behalf of the Defendant. However in Court the Plaintiff stated that she just let Kwok Wai Yee have the sums of money as he asked and she just kept a list of the sums lent but did not know how the sums were to be used. Kwok Wai Yee stated that these were in respect of blank chits （白頭單）used to pay bribes to Customs officials and could not see light. Further there was discrepancy in the evidence of the Plaintiff and Kwok Wai Yee as to whether the list prepared by the Plaintiff related to the sums lent by her stated the purpose of such payments (as in the evidence of Kwok Wai Yee) or did not contain such as in the evidence of the Plaintiff. There is discrepancy between the Plaintiff and Kwok Wai Yee related to the place of the meeting where the list was handed over to Kwok Chan Fai and whether the Plaintiff was present. Not only was there discrepancy but it seems their evidence was confused. Both the Plaintiff and Kwok Wai Yee stated they could not remember clearly. Was it merely a matter of memory loss owing to time or was it more as suggested by the Defence case that these events did not happen. In which event Chan Yee Kuen's evidence was a fabrication. I do not find Chan Yee Kuen's evidence to be untrue. I accept her evidence as true and reliable. Having considered the aforesaid weighing up all the evidence and the submission of respective Counsels' on the evidence, I find that, as stated by Chan Yee Kuen there was authorization by Kwok Chan Fai for the issue of the cheque in the sum of $303,000.00 and he also signed the transfer voucher in respect of the loan of $303,000.00 from the Plaintiff.

69. The evidence of Kwok Wai Yee and the Plaintiff in relation to the way in which the sums of this loan was used is irresponsible. To use such a large sum for bribes and also with little documentary proof of the way in which it has been used is not acceptable conduct on the part of a Director. However there is insufficient evidence to found an allegation of misappropriation nor is the Defendant's case one as such. The Defendant merely put the Plaintiff to proof that she had lent the money to the Defendant as alleged. Kwok Chan Fai, in my view and as found by me had ratified this loan and had authorized the cheque for repayment of such.

70. In my view, the evidence leads to the conclusion on a balance of probability the respective sums totalling $503,000 were loans made by the Plaintiff to the Defendant and I so find.

2nd Issue

71. In relation to this issue, the Defendant's Amended Defence states the purpose of the transfers made by the Defendant to the Plaintiff. The amendment of the Defence and Counterclaim came after Kwok Chan Fai gave his evidence. The amendment was to bring the Defendant's pleaded case in line with his evidence.

72. In relation to the evidence of Kwok Chan Fai, it is apparent that his credibility is greatly in doubt. This is not only because of his total change in evidence from his pleaded case, it is also from the manner he gave evidence as well as the content of his evidence. He displayed a lot of animosity towards the Plaintiff and Kwok Wai Yee. He displayed an attitude when cross examined that was fatal to his case in that he evaded direct answers and prevaricated when he was questioned almost in total disregard of truth or so it seemed.

73. He gave evidence in relation to the issue of the cheques to the Plaintiff in the sum of $100,000.00 and $40,000.00 and $60,000.00 in June 1999 and also the cheque for $303,000.00 issued earlier. He stated that they were not issued pursuant to his authority. He could not say who wrote the cheques. However at another point of his evidence he suggested it was Chan Yee Kuen who wrote it. He stated cheques previously signed in blank by himself and left with Chan Yee Kuen for urgent needs were filled in with the name of payee without his authorization. His evidence related to the cheque in the sum of $303,000.00 seemed to me to be an attempt to distance himself from the issue of this cheque. He agreed with the Plaintiff's Counsel that he had not mentioned about the cheques signed in blank by him having subsequently been filled in by another person without his knowledge in his witness statement. He stated in reply to cross examination that he told the Plaintiff's Counsel these facts as he was being asked as if these facts came to him in the course of his evidence.

74. Hence I have difficulty in accepting the contents of the evidence of Kwok Chan Fai and I do not accept it.

75. The Plaintiff's Counsel submits that the essential ingredients of money had and received to recover mistaken payments are :-

a. The Defendant held a certain belief;

b. The belief was mistaken, in that it was wrong or incorrect;

c. The mistaken belief caused the payment of money by the Defendant to the Plaintiff.

76. Even were Mr. Kwok Chan Fai's evidence accepted by me, as submitted by the Plaintiff's Counsel, the Defence case by their witness Kwok Chan Fai cannot establish that the mistaken belief caused the payment of money by the Defendant to the Plaintiff. The Defence case was that the Defendant and Kwok Chan Fai were not aware of the transfer of the total sum of $503,000.00 at the time when the transfers were made until later. According to Kwok Chan Fai, Kwok Wai Yee informed him that he wanted to buy a property. He had no problem with that. Then subsequently he found cheques to have been issued to the Plaintiff and later heard that the Plaintiff had purchased a property in her own name. The Plaintiff's Counsel submitted that Kwok Chan Fai's evidence was that it was not the belief of flat purchase by Kwok Wai Yee that caused the money to be transferred. The fact that pre-signed blank cheques were left lying around had enabled the money to be taken. In other words, the transfer of the sum of $503,000.00 was not caused by the mistaken belief that such a sum would be used for the purchase of a landed property by the Kwok Wai Yee as pleaded in paragraph 2 of the Amended Defence.

77. It is clear that the Defendant could not establish that it had paid money under the mistaken belief that Kwok Wai Yee would use the money to purchase a property in his name. The Plaintiff's Counsel referred to Kleinwort Benson Ltd. and Lincoln C.C. [1999] 2 A.C. 349 where Lord Hope of Craighead held that one of the essential ingredients for money paid under a mistake was the question "Did the mistake cause the payment?" at page 407H. His Lordship went on to explain that "it will not be enough for the payer to prove that he made a mistake. He must prove that he would not have made the payment had he known of his mistake at the time when it was made. If the payer would have made the payment even if he had known of his mistake, the sum paid is not recoverable on the ground of that mistake" page 408A-B. The Plaintiff's Counsel further stated that Lord Goff held that justice demands the repayment of money "which would not have been made to him but for the payer's mistake" at page 37B.

78. The Defendant's Counsel submitted in reply that there was a previous course of dealing when the Defendant financed the purchase of property by the Directors of the Defendant and hence the causation for the issue of the cheque can be found in this. However there is no direct evidence of a link between the mistaken belief and the issue of the cheques. Nor is there any evidence that the issue of the cheques was related to the previous course of dealings of the Defendant to lend money to Directors to purchase property.

79. It is clear that the Defendant has not shown that not only did it hold a mistaken belief in relation to the purchase of the property, but also that but for that belief, the payment to the Plaintiff would not have occurred. This the Defendant has to show to establish his case as pleaded.

80. In my view the Defendant has not established its pleaded case in its Defence and Counterclaim for a case of money had and received and hence the Counterclaim must fail.

3rd Issue

81. In the light of the finding in the 1st and 2nd issues I find that the Plaintiff has established her claim in respect of the sum of $200,000.00. I therefore so find on behalf of the Plaintiff in this issue.

82. I give judgment for the Plaintiff in the sum of $200,000.00 together with interest thereon at judgment rate from date of Writ to date of judgment and thereafter until payment at judgment rate. I dismiss the Counterclaim. I grant an order nisi for costs of the action to the Plaintiff to be taxed if not agreed. I grant Certificate for Counsel.