KUAN KAM YUNG v.TSE JACQUELINE KAR YUE

DCCJ 3702/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3702 OF 2011

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JUDGMENT

Introduction

1. The Plaintiff (“Mr Kuan”) and the Defendant (“Ms Tse”) were lovers and had maintained a long distance relationship since 1999 when both were pursuing their study or career overseas.  They started cohabitation by late 2005 as by then both had returned to Hong Kong.  They separated in July 2008. Now Mr Kuan says that Ms Tse is indebted to him for two sums of money made up of a loan owed to him and a shortfall in splitting of sales proceeds of their property investment; the two sums amount to a total of $426,211.09.

The Loan

2. It is Mr Kuan case that Ms Tse borrowed a loan of $400,000 from him after they had separated. Since there was a joint investment from which Ms Tse should be getting her own half share, the debt should be in the sum of $225,931.41 after taking that into account.

3. Ms Tse says that there was never such a loan borrowed from Mr Kuan. The $400,000 received was just the return of her money kept by Mr Kuan for their wedding and future family use. She called it the Love Fund (“the Love Fund”).

4. She denies having any knowledge about any investment account as alleged by Mr Kuan although she had some vague ideas of Mr Kuan making investment with the Love Fund. She says if there was a investment account, it was managed solely by Mr Kuan.  She says that the $400,000 was given to her for clean-break.

Sale Proceeds of Property

5. Mr Kuan says that the parties had made joint investment in a landed property situated at City One, Shatin (“the Property”) in 2008.  The Property was sold in 2010 but he was not given the whole of his half share in the sale proceeds (“the Proceeds”).

6. Ms Tse says that Mr Kuan had got more than his half share. To avoid any bickering with him over dollars and cents, Ms Tse paid him $350,000. In fact, there was an overpayment of $71,012.5.  She now wants to get such sum back by making a counterclaim against Mr Kuan.

Issues

7. No Joint List of Issues was filed at the case management stage subsequent to exchange of witness statements.  The solicitor acting for Mr Kuan had however prepared one of his own and had it submitted to the Master together with his Listing Questionnaire on 4 October 2012. In respect of the Proceeds, the issues for trial listed therein included the following :

(a)  Whether on proper assessment Defendant has owed Plaintiff money and how much;

(b)  If not, whether the Plaintiff can be held liable for a breach of a common intention and if so whether on proper assessment Plaintiff has owed Defendant money and how much. 

8. These issues were subsequently adopted by the solicitors acting for Ms Tse when parties appeared before Master Ho on 16 October 2012 for hearing of the Defendant’s application for leave to file supplemental witness statement.

9. In his opening on the first day of trial, Mr Lam for the Defendant submitted that one of the trial issues should include “whether the parties had agreed to a full and final settlement on 3rd March 2011 upon payment of HK$350,000 to Mr Kuan by Ms Tse’s mother on Ms Tse’s behalf.  This was opposed by Mr Chai saying that “full and final settlement” had never been pleaded. After discussion, the parties agreed that the issues in the claim to be tried would be:

(1)The purpose of  $400,000 paid to Ms Tse; was it a loan plus the equal split of their joint investment or return of love fund for clean-break;

(2)What is the amount each party was entitled to upon the sale of the Property;

(3)At the time Mr Kuan accepted $350,000, was there any common intention to have a full and final settlement;

10. Credibility is the most deciding factor in this case because most of the assertions or allegations were not supported by contemporaneous records. I shall deal with parties’ evidence when issues are to be resolved.

The Purpose of the $400,000

11. In his pleadings and witness statement, Mr Kuan said that during their cohabitation, there was an account set up in his sole name with the Hang Seng Bank for investment on stocks and shares (“the Investment Account”). Source of fund was from both of them on equal contribution. He said that since 2006, Ms Tse had from time to time deposited money into his Hang Sang Bank savings account and he would top up the deposits with like amount and transfer the total of their equal contributions to the Investment Account.  It had been agreed between the parties that each would hold 50% interest in the Investment Account. He would periodically report to Ms Tse on the performance of their portfolio. He also said that most of the time, it was Ms Tse who made decisions on the investments. He produced some emails in support of his case [KKY-1].

12. After separation, he said, Ms Tse called him on the 23rd July 2009 and said to him that she had heavy credit card debt amounting to $400,000, she wanted Mr Kuan to pay out to her her share in the Investment Account and wanted to have a loan from him. She promised she would pay him back when her cash flow problem was resolved. Mr Kuan produced an email dated 24 July in which he said Ms Tse had reiterated her promise to pay him back [KYK-10].  In the email Ms Tse said “when you can, give me your bank account that I should make payment to in future.”

13. He had then on 30 July and 4 August 2009 deposited two sums of $200,000 respectively into Ms Tse’s bank account with DBS. In his witness statement he said that the $400,000 had included a sum of $174,026.59 which should be Ms Tse’s share of half the assets in the Investment Account. He explained that the balance in the Investment Account at the time was $348,053.18 according to a bank statement of the Investment Account dated 27th June 2009 [KKY-11]. For this reason, he said the loan to be repaid by Ms Tse amounted to $225,973 ($400,000-$174,026.59). He said that Ms Tse had sent him email in September 2009 apologizing for not having paid him back soonest and said she would pay him back by 2-3 installments starting end 2009 [KKY-14].

14. Ms Tse said that she was not aware of the set up of the Investment Account. She said however that since 2005 she had put money into the bank accounts of Mr Kuan, including his savings account in Hang Seng Bank and DBS to save money for their wedding as well as for future family use (“the Love Fund”). She said she had no idea about the Investment Account at all. She might have a vague idea of Mr Kuan investing the Love Fund in stock market but she had never taken any part in the investment. Out of trust, she did not make any records of such transfer nor had she asked about the performance of the fund. She denied that Mr Kuan had ever reported to her the situation of the Love Fund except after they had separated.

15. She said that the $400,000 was paid to her by Mr Kuan as a clean-break of their relationship. She said that this was roughly worked out and agreed by them. She said she had never asked for any loan from Mr Kuan after separation. She produced bank statement covering that period of time to prove that she had sufficient cash, over $1,000,000, in her bank account and there was no credit card loan. As to the email in which she said she would pay money to Mr Kuan, she said she was only talking about other money as there were still some other transactions between them that included the prospective sale of the Property.

Discussion

16. Having heard parties, I do not think the evidence of Ms Tse is convincing. Her saying is not supported by documents. She said there were other money matters between them when she sent an email apologizing for not having paid him back yet and said she would pay him back by 2-3 installments starting by late 2009 [KKY-14].  But she could not name anything specific transaction except the Proceeds. Further, I am of the view that by the time of July 2009,  the Property was still in the name of Ms Tse pending sale, it would possibly be pre-mature to say that the $400,000 was for clean-break of the relationship. I also find her saying on her non-involvement with their joint investment inherently improbable. I believe it just being natural that they had discussed about their portfolio from time to time given the background of both. I find Ms Tse’s assertion on having no involvement in the investment only to deny allegations put forth by Mr Kuan which might jeopardize her career. 

17. Having said that Mr Kuan would still have to prove his case on balance of probability. From his pleadings, the amount of the Loan is dependent upon the value of the investment, the first question to ask is what the value of the investment was at the material time. Other relevant questions to ask would be whether Mr Kuan had made his contribution to the Investment Account as alleged and whether Ms Tse’s contribution had been wholly reflected in the bank statement delivered in June 2009. 

18. Evidence produced by Mr Kuan in these regards was lacking. He had not produced any record showing the input of Ms Tse, not to mention any records on his own input. There was no evidence proving the equal contribution alleged by him. There was no evidence to prove that Ms Tse’s contribution had been wholly reflected in the Investment Account as shown in the bank statement dated 24 June 2009. Mr Kuan’s evidence on picking this statement as a final statement to split the assets in the Investment Account was unconvincing. He was asked why he did not produce the end July 2009 bank statement, or to take that as a cut off time because Ms Tse according to him raised the Loan in July 2009. His answer was that there were stocks sold in July 2009 and therefore the July 2009 statement would not be most accurate. I could not agree with this. Even if stocks were sold in July 2009, the proceeds in the form of cash should still be kept in the Investment Account unless there were withdrawals. I am of the view that since the Investment Account is in the name of Mr Kuan, it would only be fair if at least statements of the Investment Account were shown to Ms Kuan for verification and for the final account when $400,000 was transferred to Ms Tse saying that this had included the split of asset in the Investment Account.  I am of the view that they are all the more important for the purpose of trial.

19. Further I am of the view that bank statement dated 24 June 2009 was irrelevant to state the value of assets in the Investment Account for the purpose of settling a final account which was first raised in July 2009 and the transactions took place on 30 July and 4 August 2009. 

20. Moreover, although Mr Kuan had produced some emails purporting to prove that he had reported the performance of their portfolio to Ms Tse. I agree with Mr Lam’s comment that this only happened after their separation. More importantly, the reports contained in the emails were not material from the bank, they show an on-line portfolio created by Mr Kuan with software supplied by an investment institute. After downloading the software, users would have to key in data of their stocks and the software will update and calculate for the reference of the users. Without being disrespectful to Mr Kuan, the emails in the circumstances were just secondary evidence showing at most only part of the investment without taking into account the cash.  I also find it strange that although there had been email exchange between them after separation up to the time the Property was sold, the Loan was never mentioned in any of them by Mr Kuan.

21. For reasons set out in the above, I do not think Mr Kuan has proved on balance of probability that there was a loan in the sum of $225,973.41 due and owing to him by Ms Tse.

The Purpose of the $350,000

22. The first question to ask is what was the entitlement of parties on the premise that there be equal share of reasonable and necessary expenses. It is not disputed that the Proceeds amounted to $764,106.91. Mr Chai has helpfully set out in his final submission the expenses that the parties no longer disputed after trial had commenced. The total of such expenses is $694,185.57. He has further submitted that Mr Kuan had contributed a total amount of $465,277 ($300,000 as initial payment +$165,277 as mortgage payment) until the sale of the Property. I notice that there is a difference of about $ 2,000 in the parties’ case on the contribution made by Mr Kuan.

23. Basically the dispute is on how much Ms Tse had contributed. Mr Kuan said that she had only contributed $228,908,57 whilst Ms Tse said she had contributed a total amount of $447,727. For clarity, apart from those expenses which become undisputed at trial as stated above, Ms Tse said that on top of the initial payments, she had paid certain expenses including $75,000 for the remodeling and leakage repair, $5,000 for debris removal fees and $17,492 as deposit utilities meter. At the trial, she agreed that there was double accounting of the debris removal fees with the remodeling and leakage repair, so she would not insist to be repaid this $5,000; further she agreed that she could get a refund for  utilities meter deposit and therefore would not insist on the claim under this head.  She also agreed that she had not paid $300,000 as initial start-up fund as Mr Kuan did. What she had done was just making payment for the balance of the initial payment and other expenses from time to time as and when necessary. So the disputed items on Ms Tse’s contribution include the following :

(i)  Whether Ms Tse had paid any mortgage installment;

(ii)  Whether Ms Tse had left behind a sum of $50,000 to pay for mortgage before she left;

(iii)  Whether Ms Tse had paid $75,000 for the remodeling and leaking repair;  and

(iv)  Whether payment under (iii), if paid, was necessary and reasonable.

24. Having heard evidence of Ms Tse, I accept on balance that she had roughly paid mortgage upto the time she moved out as the parties had agreed that there would be equal contribution. I accept that for this purpose, there were two deposits made by Ms Tse to the DBS mortgage account held in the sole name of Mr Kuan for a total amount of $8,000 in June 2008. Mr Kuan said that those deposits were for mortgage payments but were paid by himself to the DBS mortgage account. So the purpose of the payments were not disputed and the remaining dispute was just on who had made these deposits. Having heard evidence and viewed the documents, on balance I accept that the two deposits were made by Ms Tse and not by Mr Kuan.  My such finding is made on the basis that the pay-in slips were in possession of Ms Tse and there were hand-writings of Ms Tse on one of them giving instructions to the bank which account the money should go to.  Other than this $8,000, there was simply no evidence showing payment made by Ms Tse for same purpose. In the circumstances, I accept that she had made contribution of $8,000 as shown by the pay-in slips.

25. As to whether she had left $50,000 behind before she moved out, I do not accept her such saying. Ms Tse only raised this assertion for the first time when she was cross-examined. Mr Chai submitted that such saying contradicted her earlier saying in her witness statement that since she had put in $300,000 as initial payment (now she admitted she had not done so), there was surplus of $114,000 which would go to subsequent mortgage payment. I accept the submission of Mr Chai and on balance I find there was no such incident that she had left behind $50,000 for mortgage payment.

26. Disputed expenses now left behind is the cost on the remodeling and leakage repair allegedly paid by Ms Tse.  Documents produced by Ms Tse included two documents at pages 290-291 and 292. Both were issued by a contractor called Siu Chor Chung Interior Decoration. In the two documents items of work and the cost were listed out. These two documents were later replaced by two other identical copies, at pages 294-295 and 296, only with the address of the renovated property amended.

27. There was a note at page 293 purportedly written by the same maker stating that when the first two documents were issued on 19 July 2008 and 29 January 2010 respectively he invariably committed a mistake on the address of the renovated property. He then found out and confirmed that the unit having works done should have been the Property. He therefore amended the address written down in the first two documents and produced their amended versions as now shown in the trial bundle. The maker of the note was not called to give evidence and be cross-examined. 

28. Mr Chai argued that no weight should be attached to the documents including the note because they are hearsay evidence. Mr Lam for the Defendant said that Hearsay Notice had been issued pursuant to the s.47A of Evidence Ordinance and unless the Plaintiff had issued Counter-Notice, the documents are admissible and the content shall be accepted as true.  I cannot agree. If no Counter Notice is issued, the documents would be admitted as part of the evidence, but it is for the court to decide how much weight is to be attached to them as they contain hearsay evidence under s46 of the Evidence Ordinance. 

29. I accept Mr Chai’s submission that I have to consider the whole of the circumstance when determining how much weight is to be attached. I agree with Mr Chai that it is least probable that same mistake would be committed twice when the two documents were issued on two separate occasions which were 18 months apart from each other. The note did not offer any explanation as to why the address was in the first place wrongly quoted and the same mistake was repeated 18 months later.  It was not disputed that the address wrongly quoted was the address of a property owned by Ms Tse’s mother. Mr Chai submitted that it was just too much of a coincidence. Further the maker did not make any declaration of truth. Further if such expenses had been incurred, I see no reason why Ms Tse would not have raised it with Mr Kuan for comments or to put him at least on notice. 

30. Having considered the whole of the circumstances, I refuse to attach any weight to the documents.

31. Even if weight is attached, the documents did not say that the amount had already been paid and by whom. Further, it is not clear whether they were quotations, invoices or receipts.

32. Since I have rejected the documents, I would not deal with the individual items therein and to make such rulings as to whether they were necessary and reasonable.

33. It is also the Plaintiff’s case that Ms Tse might have taken the Property as her residence for some time and therefore any such expenses on renovation was only to facilitate her stay in the Property. Yet, Ms Tse’s evidence on whether she had taken the Property as her residence was to say the least confusing. In court, she was adamant that she had never moved into the Property for however short a period of time, but in her witness statement she had said that she moved out of the Property in March 2009, that was about 9 months after their separation. She in court explained that by saying “Property” in the witness statement she meant the property in which they had lived together in Kowloon Tong. I do not accept this explanation. First she called that Kowloon Tong property “the flat where we lived together” in paragraph 11 of her witness statement and she had earlier on in paragraph 8 mentioned that the property they invested in as the “Property”. In all of the circumstances, I do not think  Ms Tse has proved that the expenses of $75,000 was reasonable and necessary expenses to be also borne by Mr Kuan.

34. To conclude, I will add $8,000 to what had been contributed by Ms Tse towards the mortgage loan and same amount would be deducted from the alleged contribution from Mr Kuan. Mr Kuan’s contribution is therefore $457,277 ( $465,277- $8,000). This $8,000 would be added to the alleged contribution of $228,908.57 made by Ms Tse (see paragraph 23 above), and Ms Tse’ contribution should in such circumstances amount to $236,908. Since the Proceeds of $764,106.91 with total expenses amounted to $694,185, there should have been a surplus of $69,921, and each of the parties should be getting $34,960.5 as profit.  Mr Kuan should therefore be entitled to be reimbursed by Ms Tse for the expenses he had paid together with his share of profit. He should therefore be getting a total of $492,237 ($457,277 +$34,960). Since he had already been paid a sum of $350,000, Ms Tse should pay him a further sum of $142,237.

Whether there was Common Intention for Full and Final Settlement

35. Ms Tse said that Mr Kuan had been overpaid his share as she did not want to bicker with him over dollars and cents. In response to the claim of Mr Kuan, she made a counterclaim against him for overpayment. I have already made a finding on the entitlement of the parties (see paragraph 33 above), I find that there was no overpayment made to Mr Kuan. The counterclaim must therefore be dismissed.

36. That remains a question as to whether Mr Kuan had received the $350,000 to his satisfaction and accord as his share of Proceeds. Mr Chai submitted that “full and final settlement” had never been pleaded in the Defence and any such contention would be contradictory with the Counterclaim.

37. Mr Kuan admitted that he had received a cheque of Ms Tse through her mother, Madam Ng, for an amount of $300,000 allegedly representing his half share of the Proceeds. He said he raised objection with Madam Ng saying that his half share of the Proceeds should have exceeded $300,000. He said then Madam Ng agreed to give him an extra $50, 000 saying that that would be out of her own pocket and asked that Mr Kuan would not tell the Defendant about it. He said he had all along made it clear that the payment was not for full and final settlement and at one stage he was considering whether he should accept the cheque and the extra $50,000. He said that he accepted the $350,000 because Ms Ng had said to him that it would be better if he was owed less even by one dollar (“欠少一蚊得一蚊”).

38. Ms Tse denied such saying. She said that she had asked her mother to settle the matter with Mr Kuan so that their relationship would come to a complete conclusion. She later learned that Mr Kuan had accepted $350,000 but was shocked to learn that she was sued for the Proceeds.

39. Madam Ng was called to give evidence. She did not tender any evidence in her witness statement except for adopting relevant passages in Ms Tse’s witness statement (paragraphs 18-21). In Court she said that she was entrusted the task by Ms Tse to clear up everything in the relationship by paying Mr Kuan a sum of $300,000. The cheque was issued by Ms Tse. However she was given a range for her to exercise her discretion. So at the end she raised it from $300,000 to $350,000. She said it took a long time to come to that figure.  She admitted that there was no unequivocal promise from Mr Kuan that the acceptance of $350,000 was for full and final settlement.  She said throughout the meeting, she stressed that after receiving the payment Mr Kuan should not find her daughter again. Madam Ng said that from the conversation and his eventual acceptance of an extra $50,000 from her, there was a common intention or understanding to have a full and final settlement. She said that he had indicated that he would not go after Ms Tse, but she could not remember what had actually been said by him. 

40. Putting aside the dispute on fact, Mr Chai for the Plaintiff argued that the Defendant should not be allowed to pursue the contention of “full and final settlement” because first it was never pleaded and secondly, contrary to her assertion that there was full and final settlement, she asked to recover the overpayment from Mr Kuan by the Counterclaim.

41. Mr Lam did not strongly dispute that full and final settlement was not pleaded, but submitted that a party can amend the pleadings at any stage. He further submitted that evidence before this court should be sufficient to find a conclusive agreement from parties to have full and final settlement not only for the split of the Proceeds but also for whatever money matters still outstanding between them at that time. 

Discussion

42. Although it is not incorrect to say that a party could ask to amend the pleadings at any stage, as far as the present case is concerned, there was no application for amendment put before me so far. I was not given the chance to have a glimpse of any draft amendment. At the time when the Defendant’s lawyer adopted the List of Issues to be Tried prepared by the Plaintiff’s lawyer, full and final settlement was not listed (see paragraphs 7-8 above).

43. Ms Tse was legally represented throughout the time since Acknowledgment of service of writ of summons. If after exchange of witness statements they agreed that the issues to be tried did not include full and final settlement, it was not an issue to be taken.

44. Assuming that Ms Tse could overcome the problem in her pleadings, Ms Tse’s contention was in my view sparing of evidence.  She was not present when Mr Kuan met Madam Ng. Madam Ng’s evidence was on the other hand not very clear in her witness statement and in court. The best she could tell this Court was that she had said to Mr Kuan not to find her daughter again and let both parties start a new life.

45. Last but not the least, Ms Tse’s case was premised on an overpayment made to Mr Kuan with a common intention that there would be full and final settlement. However the assertion of overpayment is inconsistent with my finding. I have found that $350,000 was an underpayment and not an overpayment. In the circumstances, Ms Tse’s case on having a common intention to have a full and final settlement cannot stand. 

46. To sum up, it is for Ms Tse to prove on balance that there was common intention to have full and final settlement. With the evidence before me I do not think Ms Tse has come up to prove her case in this regard; not for the split of the Proceeds nor for any other financial matter between them.

Conclusion

47. I find that Mr Kuan has failed to prove the amount of loan owed to him by Ms Tse. On the other hand, it is my finding  that he has proved on balance of probability that there was a shortfall in his share of the Proceeds. As it is also my finding that there was no common intention for full and final settlement by receiving $350,000 from Madam Ng, he should therefore receive a further payment of $142,237 ($465,277 - $8,000 + $34,960 - $350,000) from Ms Tse.  As I find Mr Kuan was underpaid for his share, the Counterclaim of Ms Tse must be dismissed.

Order

48. My Order:

(i)  The Defendant do pay the Plaintiff a sum of $142,237; and

(ii)  There be interest on $142,237 at judgment rate from date of writ until full payment.

Costs

49. Since the Plaintiff has failed one item and succeeded in another, he should not be getting all his costs from the Defendant. Yet although the Defendant has failed in her Counterclaim, the fact in dispute was just part and partial to the claim of the Proceeds sought by the Plaintiff. In such circumstances, I make an order that there be no order as to costs. This is an order nisi and such order shall become absolute unless there is application to vary the same within 14 days.