CHOW YU HEUNG ELSA v. LI MUK MING

DCCJ 6392/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6392 OF 2005

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D E C I S I O N

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Introduction

1. The plaintiff provided loans to the defendant and his wife.  The wife admitted that she had received the money and was liable to repay.  The defendant denied ever receiving the money or that he was liable.  The wife was then adjudged bankrupt.  The plaintiff now claims repayment from the defendant. 

The issues before this Court

2. I have to determine the following topics:

(1) The credibility and reliability of the evidence of each witness;

(2) Whether the defendant had entered into any of the loan agreements as a joint borrower;

(3) Alternatively whether the defendant had subsequently agreed to repay the outstanding sum under the loans;

(4) Alternatively whether the defendant should be liable for money had and received. 

The plaintiff’s case

3. The plaintiff and her husband (Yu Chi Fai) give evidence. 

4. In 1978 the plaintiff and the defendant’s wife were classmates in a secondary school. 

5. In 1986, both families moved to live in the same building within a few months.  Based on the friendship between the plaintiff and the defendant’s wife, their family members, including their husbands, would meet and get together from time to time.   

6. In 1997, the plaintiff’s family moved to another building in Tuen Mun.

7. In 1998, the defendant’s family moved to a different building in Tuen Mun.    

8. In April 2000, over the phone the defendant and his wife asked the plaintiff for a loan of HK$500,000 to run their new limited company.  They offered to pay a 15% p.a. interest and to repay in 3 months’ time upon being notified to repay.  The plaintiff discussed with her husband and accepted the offer.  The plaintiff made it clear that the loan was to them personally and not to their company.  The loan would be provided in 2 lots as they had to make the money ready.    

9. On or before 26 April 2000, the defendant’s wife went to collect a crossed cheque for HK$250,000 payable to her [p. 36]. 

10. In June 2000, the defendant asked the plaintiff to provide the rest of the loan, HK$250,000, by a cash cheque as the Company was in urgent need of cash.  The plaintiff issued a cash cheque dated 9 June 2000 for HK$250,000 payable to him [p. 37].  He presented the cheque for payment at the bank.  His identity card data were recorded at the back of the cheque [p. 42]. 

11. In May 2001, the defendant and his wife asked for another loan of HK$500,000.  The plaintiff discussed with her husband.  Both parties agreed to a 1% p.m. interest (i.e., HK$10,000 p.m.). 

12. The plaintiff transferred HK$100,000 into the defendant and his wife’s joint bank account at HSBC.  Upon the defendant’s request, she also issued a Citibank crossed cheque for HK$100,000[p. 43] and a Dao Heng Bank crossed cheque for HK$300,000 [p. 44], both dated 12 June 2001 and payable to the defendant.  The defendant collected the 2 cheques personally from her.  He then presented the said Dao Heng Bank cheque for HK$300,000 and had the amount transferred into their joint account at Dao Heng Bank at 13:03 hours on the same day.  His identity card data were recorded at the back of the cheque [p. 44]. 

13. The defendant’s side made repayments from time to time by cheques or by bank transfers. 

14. In April 2002, the plaintiff notified them to repay the entire loan by July 2002.  They arranged to meet her in a restaurant.  In the meeting, the defendant told her that they would repay as soon as possible by instalments. 

15. In November 2002, the defendant handed a cheque for HK$200,000 to the plaintiff’s husband in repayment of part of the loan.  The defendant asked to reduce the interest.  It was finally agreed at 0.6% p.m. (namely, HK$5,000 p.m.). 

16. From 13 October 2003 onwards, they agreed to repay HK$10,000 p.m. (namely HK$5,000 interest and HK$5,000 principal). 

17. In October 2004, the defendant and his wife arranged to meet the plaintiff and her husband in the plaintiff’s previous flat, which the plaintiff had left vacant at that time.  In the meeting, the defendant was absent due to an urgent matter.  The defendant’s wife asked them to reduce the instalment to HK$5,000 p.m.  They agreed but asked her to write out a cheque (“the subject-cheque”) for HK$712,207, the outstanding principal.  She issued a cheque of a joint bank account with her husband for that amount [p. 40].  The date was left blank as it was to be an IOU. 

18. A few days later, they phoned the defendant to request him to sign on the cheque as well.  He replied that there was no need to do so as the cheque was of a joint bank account with his wife.  He would be liable without signing the cheque.  The plaintiff and her husband consulted the free legal advice of the Duty Lawyer Scheme.  They were advised by 3 different lawyers that the joint holder of the same bank account would be liable for cheques issued by another holder.  As the defendant and her wife had continued with the repayment, the plaintiff and her husband did not so request the defendant again.         

19. The defendant’s side made 3 more instalments and defaulted, despite repeated requests by the plaintiff’s side.  She therefore put down a date, 12 July 2005, on the cheque and presented it for payment at the bank.  It was dishonoured.  They tried the debt collector but to no avail.  She later received the bankruptcy papers of the defendant’s wife, who took up the loan as her own.   

The defendant’s case

20. The defendant and his wife (Yau So Ling) give evidence.  Here I shall only refer to such parts of their evidence which are different from the plaintiff’s and her husband’s evidence. 

21. The defendant had only met the plaintiff or her husband occasionally at the plaintiff’s class reunions and as neighbours in the same building.

22. They were the only shareholders and directors of a company, Ying Cheuk Construction Limited (“the Company”).  They each held 1 share of $1 [p. 62 – 67].  The plaintiff was aware that they ran the Company.  The defendant had only F.1 education and was responsible for the works at site.  He had no idea of, and would not be involved in, the internal and accounting tasks of the Company.  Those tasks were in his wife’s sole charge.  She never told him about her personal financial affairs.             

23. They had 3 joint bank accounts.  He had his own bank account but she did not have her own bank account at the material times. 

24. On about 9 June 2000, she suddenly showed him a cash cheque for HK$250,000 payable to him [p. 37].  She told him that it was a loan from the plaintiff to ease the liquidity problem of the Company.  He asked her why it was needed.  She merely asked him to mind his own work and she would repay the loan.  He cashed in the cheque at the bank [p. 42]. 

25. On about 12 June 2001, his wife showed him a crossed cheque for HK$100,000 and another crossed cheque for HK$300,000, both payable to him.  She told him that it was a loan from the plaintiff to ease the liquidity problem of the Company.  He asked her about the previous loan.  She told him that she had already repaid it. 

26. The defendant had never represented to the plaintiff or her husband that he was to be jointly liable for the loans made to his wife. 

27. On 8 September 2005, the defendant’s wife lodged her own bankruptcy petition. 

28. On 18 October 2005, she was adjudged bankrupt. 

29. He later knew that on 12 October 2004, the sum due from her to the plaintiff was HK$712,207.  She issued the cheque as an I.O.U.  They had never requested him also to sign on the cheque as a joint borrower. 

30. On 16 November 2005, the plaintiff’s solicitors demanded him to repay the sum of HK$712,207 as a joint borrower.

My Findings

The credibility and reliability of the evidence of the defendant’s side

31. The defendant’s wife stated in her statement dated 3 May 2006, confirmed to be accurate, that she had never seen the 3 cheques payable to the defendant [para 17 p. 59].  However, she says in Court that she had shown the defendant those 3 cheques before the defendant presented them to the bank for payment.  She explains that her research subsequent to her statement had suggested to her that her statement was wrong.  I do not believe her.   

32. His wife says she had not requested the plaintiff to draw the cheque [p. 37] payable to him.  She did not know why it was drawn payable to him.  She just received it from the plaintiff like that.  I think that when the plaintiff drew a cheque to help her or the Company, she would have to ask who was to be the named payee.  The plaintiff could not just pick out or spell the defendant’s English name as the payee without asking the defendant’s wife.  Her husband’s surname might be spelled “Li” or “Lee”, not to mention any dialectic variations.  I do not believe her.   

33. The defendant says that he was very busy at work.  He did not bother with any internal or accounting tasks at all.  His wife singly handled them.  This cheque dated 9 June 2000 of HK$250,000 [p. 37] was a huge sum.  He did not cash this cheque.  However, when asked how his wife could hold his identity card to cash in, he changes his evidence and admits that he was the one who presented the cheque. 

34. He says he had just met the plaintiff or her husband 2 to 3 times at gatherings, and sometimes in the building as passing neighbours.  He was not familiar with either the plaintiff or her husband.  He had never spoken to the plaintiff alone.  He was surprised to hear that his wife had got the plaintiff’s loan for HK$250,000, which was a huge sum, to ease their Company’s liquidity problem.  He was not involved in the internal or accounting tasks of the Company.  He had often seen cheques of huge amounts, though.  He had no impression of having seen this cheque [p. 37] drawn by the plaintiff payable to him.  When he asked his wife why she got such a cheque, she merely asked him to mind his own work and that she could manage.  I do not think hers was an answer at all.  They were man and wife, and the only shareholders and directors of the company.  If the Company had an urgent need for, what he says to be, the huge amount of HK$250,000, there was no reason that he would fail to notice or to ask her for the details.  He adopted the same attitude in respect of the 2 further cheques, of HK$100,000 [p. 38] and HK$300,000 [p. 39] on about 12 June 2001.  I do not believe him.   

35. I find neither the defendant nor his wife credible.  I reject their evidence on all facts in issue. 

The credibility and reliability of the evidence of the plaintiff’s side

36. The defence submits [in para 19(a) of submission] on the discrepancy between the plaintiff’s and her husband’s evidence.  The plaintiff says that she communicated the consent to provide the loan to the defendant’s side over the phone.  The plaintiff’s husband says that over the phone, the defendant’s side made an appointment to meet the plaintiff’s side.  At the actual meeting in the plaintiff’s flat, the plaintiff’s side consented to provide the loan.   As I see it, the location where the loan was consented to by the plaintiff’s side is immaterial.  The plaintiff’s husband has never alleged that the defendant ever told him, be it face-to-face or over the phone, of joint liability for the loan.  I can see no advantage for the plaintiff’s husband to lie about the location.  Whilst I find that, to this limited extent, his evidence is not reliable, I do not find his credibility otherwise eroded.   

37. The defence submits [in para 19(b) of submission] on the discrepancy in the number of instalments the plaintiff says she had received after the subject-cheque was drawn by the defendant’s wife.  In her statement [para 17 p. 31] it was “2 more instalments”.  However, in her evidence in Court, she says it was “3 more instalments”.  She explains that it should be 3 instalments as she subsequently worked out into a schedule [p. 160 – 161].  I see no significance in this discrepancy.  

38. The defence submits [in para 19(e)] on the discrepancy between her evidence, at different junctures, of the April 2000 telephone conversation.  She first says in Court that she does not quite remember if the defendant said “they would be jointly liable”.  She later says that he did not say so.  I recall her subsequent evidence that she thinks that the message she got, and the way they talked, had indicated to her that they would be jointly liable. Putting her answer into this context, I do not find this discrepancy of significance.    

39. The defence submits [in para 19(h)] that in neither of their witness statements did the plaintiff and her husband mention the previous cheques issued by the defendant’s wife given as security or proof of loan.  I see no reason why they had to mention this.  The plaintiff has not relied on these in her case.  The defendant has not raised this matter before trial, or insisted on having these at trial. 

40. The defence submits [in para 19(i) of submission] that the plaintiff’s husband alleges that the defendant was present during those meetings where the security cheques were issued by the defendant.  There was no reason not to ask the defendant to sign on those security cheques as well.  I disagree.  Up to and inclusive of the time the subject-cheque was issued by the defendant’s wife, the defendant’s side had kept up the instalments as scheduled.  The plaintiff thought all previous security cheques had served their purpose, namely to get repayment.  Given the 3 lawyers’ advice on which they relied, they did not insist on the defendant’s signing on the subject-cheque.  I see nothing unreasonable on their part. 

41. The defence refers [in para 20 of submission] to the plaintiff’s evidence that all the monthly statements of the outstanding loan [such as p. 89] were only signed by the defendant and herself.  The defence submits that that clearly showed that the defendant’s wife, not the defendant, was the borrower.  Whilst this is part of the evidence for my consideration, it is not conclusive. 

42. The defence submits [in para 19(c) of submission] on the plaintiff’s failure to waive interest when helping friends such as the defendant’s side.  I find it strange that this submission strange because the defendant’s wife had never objected to such interest rate at all.  From the plaintiff’s point of view, there ought to be no reason to waive any interest where the money was not for personal use of a friend but for a business.  No doubt the defendant’s wife had thought the interest rate reasonable.  Otherwise the loans would have come other sources like the bank or finance company.  I see no relevance of this submission to the present case.   

43. Except for the minor aspect of his evidence to which I have referred hereinabove, I find the plaintiff’s and her husband’s evidence wholly credible and reliable on all facts in issue.  

Whether the defendant had entered into the loan agreements as a joint borrower

44. The overall principal was HK$1,000,000.  Based on my findings hereinabove, it was provided at various junctures as follows:

Date	Amount	Mode	Named payee and collected by
26/4/2000	250,000	Cheque	Defendant’s wife
9/6/2000	250,000	Cheque	Defendant
12/6/2001	100,000	Bank transfer	Defendant and wife’s joint a/c
12/6/2001	100,000	Cheque	Defendant
12/6/2001	300,000	Cheque	Defendant

45. I have to determine at what juncture did the defendant enter into the loan agreement for the first and the second amounts of HK$250,000 each.  It is the plaintiff and her husband’s evidence, which I find credible and reliable, that in April 2000, over the phone the defendant and his wife asked the plaintiff for a loan of HK$500,000 to run their new limited company; they offered to pay a 15% p.a. interest; the defendant and his wife promised to repay in 3 months’ time upon being notified to repay; the plaintiff discussed with her husband and accepted the offer; the plaintiff made it clear that the loan was to them personally and not to their limited company; the loan would be in 2 lots as they had to make the money ready; pursuant to the loan agreement, they advanced the 2 respective amounts of HK$250,000 to the defendant and his wife.  I find that the total amount of HK$500,000 herein was agreed by the defendant and his wife in April 2000 to be a loan provided to the defendant and his wife for which they would be jointly liable. 

46. I have to determine at what juncture did the defendant enter into the loan agreement for the third, the fourth, and the fifth amounts of HK$100,000, HK$100,000, and HK$300,000 respectively.  It is the plaintiff and her husband’s evidence, which I find credible and reliable, that in May 2001, the defendant and his wife asked for another loan of HK$500,000; the plaintiff discussed with her husband; both parties agreed to a 1% p.m. interest (i.e., HK$10,000 p.m.).  I find that the total amount of HK$500,000 herein was agreed by the defendant and his wife in May 2001 to be a loan provided to the defendant and his wife for which they would be jointly liable. 

Alternatively whether the defendant had subsequently agreed to repay the outstanding sum under the loans

47. It follows from my findings hereinabove that the defendant had agreed to repay the outstanding sum under the loans at all material times. 

Alternatively whether the defendant should be liable for money had and received 

48. It follows from my findings hereinabove that the defendant should be liable under this head but everything now goes under his liability to repay the outstanding sum under the loans as a joint borrower. 

Conclusion

49. I give judgment to the plaintiff.  I do not propose to award interest between the date of the writ and judgment.  I order costs to the plaintiff with a certificate for counsel.  This costs order nisi shall become absolute 14 days from today. 

Dated 4 October 2006