CONTO FABRIC LTD. v. CHAN LOK PAN

DCCJ 18437/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 18437 OF 2000

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J U D G M E N T

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1. This is a claim by the Plaintiff against the Defendant in respect of the sum of $166,138.45 allegedly owed by the Defendant to the Plaintiff. The Defendant admitted that he owed the Conto Fabric Company the sum of $160,000.00. However, he claimed that such sum had been repaid.

2. The evidence of the Plaintiff came from Lam Kong Wan (hereinafter referred to as "Lam"). She was a consultant of the Plaintiff Company who had been authorized to take this action on behalf of the Plaintiff Company. The Plaintiff was not able to give first hand evidence in relation to the facts of this case. The Plaintiff was only able to provide documentary evidence related to the loan owed by the Defendant or by hearsay evidence.

3. The onus is on the Plaintiff to establish the loan being due to the Plaintiff. Upon proof of this fact, the onus is on the Defendant to establish that the loan had been repaid. The 1st issue is whether the Plaintiff has discharged their onus of proof. The 2nd issue is whether the Defendant has discharged the onus of proof.

4. The documentary evidence related to the loan of the debt due from the Defendant to the Plaintiff is an acknowledgement of debt marked Exh P5 purported to be signed by the Defendant. This document sets out the total sum of $166,138.45 owed to the Plaintiff by the Defendant and particulars of how the total sum outstanding is made up. It sets off a repayment of $10,000 by the Defendant out of the Defendant's salary for the month of February 1997. The Defendant denied that the signature affixed thereon next to what appeared to be a date "31/3" was his signature. Lam stated that this document was given to her by Mr. Tsui Tsang Hau (hereinafter referred to as "Mr. Tsui") the director of the Plaintiff who has since died. Lam stated that to her knowledge all the debts of Conto Fabric Company had been taken over by the Plaintiff on the date of incorporation. This debt had been taken over by the Plaintiff from Conto Fabric Company. Exhs. P2, P3 and P4 show that at least $80,000 of the loan were made by Conto Fabric Company to the Defendant. Before incorporation, Canto Fabric Company was a sole proprietorship. The sole proprietor was Mr. Tsui as is shown at pages 91 - 94 of the Bundle of Documents (BD). Mr. Pan Sai Tai the former partner resigned from the partnership on 1.3.95.

5. The Defendant admitted that he was employed by Conto Fabric Company from about June 1995 until March 1997. Conto Fabric Company became a limited company. He stated that he was not informed whether he was then employed by Conto Fabric Company Limited. However, the fact that he was employed by the Plaintiff in the tax year ending 31st March 1997 is clearly evidenced by the Inland Revenue Department Employer's Return of Remuneration and Pensions for the Year Ended 31st March 1997 shown at page 68 of the Bundle of Documents. The Defendant admitted that he owed the debt of $160,000.00 to Conto Fabric Company. However he stated in evidence that this debt was repaid firstly by a sum of $10,000.00, which was a deduction from his salary paid by the Plaintiff in or about February 1997. He stated that in about March 1997, Mr. Wong Yee Tung, a Director of the Plaintiff (hereinafter referred to as "Mr. Wong"), chased him for repayment of the sum of $150,000.00. He wrote the cheque the photocopy of which was at page 63 of the Bundle. It had the name of Conto Fabric Company in Chinese crossed out and substituted with the Defendant's own name. The certified true copy of the cheque was produced into evidence and marked Exh D1. He stated that he intended to give it to Mr. Wong. He met Mr. Wong at a restaurant. At the restaurant, Mr. Wong stated that he wanted cash. The Defendant went back to Sin Hua Bank to get cash and gave it to Mr. Wong. Mr. Wong then signed a receipt with the Company Chop of Conto Fabric Company affixed to acknowledge receipt of the sum of $150,000. This was submitted by the Defendant marked Exh D3.

6. The Defendant produced a copy of a bank transaction slip from his bank Sin Hua Bank Ltd. for a transaction dated 3 August 1999 when he made a withdrawal with his cheque No. 648316 from his account 031-352-0-013964-1 and deposited the sum of $150,000.00 into his account No. 012-898-1-011915-7. He also submitted a certified copy of his bank statement with Sin Hua Bank Ltd in respect of his Account No. 031-351-0-013964-1 for the period from 1999/07/26 to 1999/08/12 marked Exh. D4. In this statement it can be seen that a deposit of $150,000.00 was made into his account on the 1999/08/02 and a withdrawal made by cheque No. 648316 on 1999/08/02 of the sum of $150,000.00.

7. Lam stated in evidence that in August 1999, the Director of the Plaintiff, Mr. Wong asked her to chase the Defendant for payment. She did so for 2 or 3 times. The Defendant informed her that he had paid the outstanding sum in 1998. The Defendant informed her that he gave a cheque to Mr. Wong. Then he took back the cheque and obtained cash and he gave the cash to Mr. Wong. The Defendant then faxed to her a monthly statement from Sin Hua Bank. That is marked Exh. P6. The monthly statement has entries starting from 1998/07/26 up to 1998/08/12. It has the deposit of $150,000.00 on 1998/08/02 and withdrawal on 1998/08/03 by cheque No. 648316. Other entries on that statement were the same as that in Exh D4 except that the year related to the transactions is 1998 instead of 1999 as in Exh D4. Further this copy bank statement did not have the address of the Defendant nor the account number of the Defendant's bank account.

8. At the same time the Defendant faxed the receipt marked Exh. D3 purported to have been signed by Mr. Wong with the company chop of Conto Fabric Company. Lam stated that the signature on the receipt purported to be signed by Mr. Wong marked Exh. D3 is not the signature of Mr. Wong. Lam had seen Mr. Wong's signature before. She produced the Appointment of first director, of the Plaintiff, obtained from the Company Registry marked Exh P1. She pointed out that the signature of Mr. Wong therein is entirely different from that purported to be his signature in the receipt marked Exh. D3. She also pointed out that the company chop of Conto Fabric Company is not the company chop of the company. She stated that the company chop of Conto Fabric Company is that as shown in the Employer's Return of the Inland Revenue Department at page 66 of the BD.

9. Lam stated that Mr. Wong informed her that he had not received the money. Mr. Wong had gone to Canada and therefore could not give evidence on behalf of the Plaintiff. Lam checked with the accountant of the Plaintiff and confirmed that the Plaintiff had not received it.

10. The Defendant stated that he had not seen the bank statement from Sin Hua Bank purported to have been faxed by him marked Exh. P6. He denied that he had worked for the company Chung Bao that was printed by the fax machine at the top of the statement.

11. At page 63 of the Bundle of Documents was a photocopy of the front and back of the cheque dated 2 August 1999 in the sum of $150,000 first issued to Conto Fabric Company then with that payee deleted and substituted with the name of the Defendant (hereinafter referred to as the "photocopy cheque"). This had been previously discovered by the Defendant and included in the Bundle of Documents at page 63 thereof. However the back of this photocopy cheque contained a signature of the Defendant, which is entirely different from the signature of the Defendant at the back of the cheque in the bank certified copy, marked Exh. D1. The back of Exh. D1 had a large chop of the Bank with the words "DEMAND DEPOSIT". This chop is missing in the photocopy cheque. Further the number under the Defendant's signature at the back of the cheque in Exh D1 was "01289810119157". The number under the signature "DEREK" in the photocopy cheque is 01289870119157. When cross-examined in relation to the signature at the back of the photocopy cheque, the Defendant stated that this was his signature. When asked "Why is your signature at the back of the photocopy cheque different from your signature at the back of the cheque marked Exh D1", the Defendant stated that he did not know. He confirmed that both Exh D1 and the photocopy cheque were given by him to his Solicitors for production to the Court. When asked "Which one is not the true copy of the cheque, he stated "the one certified by the bank".

12. He was cross-examined on why he needed to cross out the signature of Conto Fabric Company to write his own name as payee rather than substitute the name of Conto Fabric Company with "Cash". If he did so he would not have to go to the bank to pay in his cheque or to get cash. He stated that on that day he had on him cash in the sum of $110,000 to $120,000. He had previously borrowed this sum from his friend. He had also earlier borrowed $150,000.00 from his wife which sum he had deposited into his bank account. He did not want to use the sum borrowed from his wife. He therefore banked this cheque to deposit $150,000.00 into his savings account from which he drew cash in the sum of $30,000.00 to $40,000.00. This added to the sum he had on him made up to $150,000.00.

13. When cross-examined as to why in his Defence at page 23 of BD and paragraph 8 of his witness statement at page 47 of BD he stated that he drew a cheque of $150,000.00 in favour of Conto Fabric Company. However Wong requested him to pay cash in lieu of the cheque. Then he corrected the name of the payee to himself and obtained cash from Sin Hua Bank Limited in Shamshuipo Branch and afterwards, he gave the cash of $150,000.00 to Mr. Wong and did not mention he had cash on him. He could not give an explanation except to repeat that he had cash in hand, he did not need to cash the whole cheque so he paid the cheque into his saving account and drew some cash to make up $150,000.

14. When cross-examined on why the chop of Conto Fabric Company at page 67 of the BD is different from the chop of the company in the copy Employer's Return at page 66 of the BD, the Defendant stated that he did not know if the company chop had changed.

15. When asked why he paid the money purported owing to Conto Fabric Company to Mr. Wong who was not a partner of the firm as shown in the Business Registration Particulars at page 91 - 94 of the BD, he stated that Mr. Wong had been responsible in managing the partnership. He stated that Mr. Tsui had told him that Mr. Wong was his partner when he started to work for the firm.

Credibility of Witnesses

16 Lam herself stated that she was a consultant of the Plaintiff duly authorized to take this action. Having heard her evidence I have found her evidence to be credible. Much of her evidence is hearsay evidence although she adduced documentary evidence in support.

17. The evidence of the Defendant is highly doubtful. He admitted that the photocopy cheque at page 63 of the BD came from him. Yet the back of the cheque appeared to have been tampered with when compared with the certified true copy of the same cheque marked Ex D1, which came from the bank. The signature at the back of the photocopy cheque is entirely different from that at the back of the cheque marked Exh D1. Further the bank chop with the words "Demand Deposit" shown at the back of the cheque in Exh D1 is missing in the photocopy cheque. The number under the signature at the back of the photocopy cheque, which should have been the number of the Defendant's savings account, is wrongly written. Yet the Defendant had the audacity to state that the certified copy of the cheque was not that authentic copy.

18. The bank statement which Lam stated had been faxed to her by the Defendant, marked Exh P6 appeared to have entries which are identical to that adduced from the bank marked Exh D4, except that the year 1999 in the entries in Exh D4 had been altered to the year 1998 in the photocopy statement marked Exh P6. In Exh P6, the account number and the address of the Defendant are missing as well. It seems clearly that Exh P6 had been tampered with. Although the Defendant denied that he faxed Exh P6 to Lam, yet it would be impossible for Lam to have access to information of the Defendant's bank statement. There would be no reason for Lam to tamper with the photocopy bank statement sent to her by the Defendant. However, there would be reason for the Defendant not to disclose his address and account number and to alter the year when he paid Mr. Wong. The Defendant denied he faxed this from the company called Chung Bao. Yet, the receipt at page 67 of the BD which the Defendant stated had been signed by the Mr. Wong and had been kept in his custody and was faxed to Lam had at the top the faint imprint from the fax machine of the words "CHUNG BAO". This shows that the receipt at page 67 and the bank statement at page 121 must have been faxed from Chung Bao. As only the Defendant has access to these documents and he stated he faxed the receipt at page 67 of the BD they must have been faxed from "Chung Bao".

19. The Defendant's credibility is not only at issue but it seems from the discrepancy of the photocopy cheque produced by the Defendant, with the certified true copy of the cheque marked Exh D1, the Defendant had tampered with the photocopy cheque. He changed his signature at the back of the photocopy cheque. This is serious as it shows he tampered with evidence by altering the document. I therefore am of the view that the Defendant is not an honest witness and his evidence is not to be trusted. I totally disbelieve his evidence.

The 1st Issue

20. Is there sufficient evidence adduced by the Plaintiff that the Defendant owed the Plaintiff the sum of $156,138.45. The Defendant does not dispute that he had owed the sum of $150,000.00 to Conto Fabric Company but not to the Plaintiff. The Defendant stated that he had repaid this sum to Mr. Wong.

21. The only evidence related to the fact that the debt of $156,138.45 was due to the Plaintiff was the acknowledgement of debt marked Exh P5. This stated that Chan Lok Pan owed Conto Fabric Limited the 6 items of sums stated therein making up the total of $176,138.45. After deducting the sum of $10,000.00 from the Defendant's salary in February 1997, the sum owing was $166,138.45. A further sum of $10,000.00 was stated to have been deducted from the Defendant's salary in March 1997 leaving the balance due of $156,138.45. There is a purported signature of the Defendant next to the date 31/3. The Defendant denied his signature thereon was his signature.

22. The signature on Exh P5, which the Defendant denied to have been his, looks entirely similar to the Defendant's signature on the cheque at Exh D1, the cheque that he admitted to have been issued by him. Further, the Defendant admitted in evidence that a sum of $10,000.00 was deducted from his salary from the Plaintiff in repayment of this debt. This helps support the evidence of Lam that this debt owed to Conto Fabric Company had been taken over by the Plaintiff.

23. Lam's evidence related to the fact that the loan owed by the Defendant to Conto Fabric Company had been taken over by the Plaintiff, was hearsay evidence. There is no evidence of the assignment of debt by Conto Fabric Company to the Plaintiff nor any notice to the Defendant from Conto Fabric Company that this debt had been assigned to the Plaintiff. The acknowledgement of the debt from the Defendant that he owes this debt to the Plaintiff is not sufficient. The fact that the debt has been assigned to the Plaintiff has to be acknowledged by the firm, Conto Fabric Company. Mr. Tsui was the sole proprietor of the firm. There is no evidence of assignment of the debt nor notice of such to the Defendant so as to authorize the Plaintiff to take this action. Without such, there is nothing to stop the estate of Mr. Tsui, who has since died to pursue the Defendant for payment of this debt. For payment of this debt to the Plaintiff would not release the Defendant from liability of the debt owed to Conto Fabric Company. In my view evidence of the acknowledgement of debt marked Exh P5 referred to above and the admission of repayment by the Defendant of $10,000.00 by a deduction out of his salary from the Plaintiff is not evidence of the assignment of the debt by Conto Fabric Company to the Plaintiff.

24. I find there is no evidence of the assignment of the debt by Conto Fabric Company to the Plaintiff and no evidence of notice of such to the Defendant. I find against the Plaintiff in relation to the 1st issue.

The 2nd Issue

25. Having found against the Plaintiff in the 1st Issue there is no necessity for me to go on to find on the 2nd Issue. However for the sake of completeness, I will do so.

26. On the evidence before me I would find the evidence of the Defendant that he repaid Mr. Wong $150,000.00 by payment of cash of $150,000.00 to be unbelievable for the following reasons:-

1. I had found the Defendant to be a wholly unreliable and dishonest witness.

2. As stated by the Plaintiff's Counsel, there was no reason why he did not amend the payee of the cheque to "cash" then and there, thus saving a visit to the bank whilst Mr. Wong was kept waiting at the restaurant. He could have immediately handed the cash cheque to Mr. Wong if the whole purpose was to repay the money to Mr. Wong in cash. The Defendant stated a story about having on his person the sum of $110,000.00 - $120,000.00. This sum had been borrowed from his friend and he wanted to use this sum rather than the sum in his bank account, which had been borrowed from his wife. Therefore, he deposited this cheque into his bank savings account and thereafter on the same day withdrew the sum of $30,000.00 to $40,000.00 This version of facts is different from that stated in his witness statement and his Defence. This version of facts came out of cross-examination when he was asked why he did not when crossing out the name of Conto Fabric Company on the cheque substitute the payee to "Cash".

3. The receipt allegedly signed by Mr. Wong marked Exh. D3 showed a signature of Mr. Wong, which was different from his usual signature familiar to Lam. It is clear from the Appointment of first directors form marked Exh P1 that the signature of Mr. Wong thereon is entirely different to that in the receipt marked Exh D3. Further the purported chop of Conto Fabric Company on the receipt at Exh D3 was not the same as that in the Inland Revenue Department Return of Employer form at page 66 of the BD. In view of the Defendant's ability to tamper with signatures and alter forms, the value of this document Exh D3, in the light of the discrepancy from the usual signature of Mr. Wong and the discrepancy in the company chop of Conto Fabric Company, is greatly in doubt. Therefore the evidential value in this receipt, Exh D3 is in doubt. Further, this receipt is undated. Also, Mr. Wong was not a partner of Conto Fabric Company and there was no reason why he should be the recipient of this sum.

27. As I have found against the Plaintiff in relation to the 1st issue that there is no evidence to show the right of the Plaintiff to claim this sum from the Defendant, I dismiss the claim against the Defendant. I grant an order nisi for costs of the action in favour of the Defendant to be paid by the Plaintiff to be taxed if not agreed. The Defendant's own costs to be taxed in accordance with Legal Aid Regulations.