CHEUNG KWOK HUNG v. LEE SHUN FOON

DCCJ 1933/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 1933 OF 2011

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JUDGMENT

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Introduction

1.  This is a claim by the plaintiff (“Cheung”) to recover from the defendant (“Lee”) a debt in the sum of HK$300,000 (“the Loan”). Lee accepts that Cheung extended a loan to her in the said amount. The loan was indeed evidenced by a written acknowledgment of debt dated 19 April 2010 (“the IOU”).

2.  All the monies under the Loan in cash were converted into rolling chips (泥碼) and evaporated on a baccarat table in a casino in Macau called Starworld Casino (星際娛樂場) within two hours on 19 April 2010. Lee says it was Cheung who gambled away all the monies under the Loan and hence she is not liable to repay Cheung any part of the Loan.

3.  Lee says that the IOU was extracted from her by the use of threats. She counterclaims for (a) a declaration that the IOU be set aside and (2) damages for conversion. At the outset of the trial, Mr David Chen, counsel for Lee, expressed his agreement with me that the IOU is merely a piece of evidence of the Loan and it is per se not an agreement. It is hence not amenable to being set aside.

Issues to be resolved

4.  The key factual issues in this action are (a) under what circumstances the Loan was extended to Lee and (b) what happened to the rolled chips purchased by the monies under the Loan at the baccarat table in Starworld Casino when Cheung and Lee gambled together in the small hours of 19 April 2010.

5.  Only Cheung and Lee testified and the only documentary evidence included in the trial bundle is the IOU.

Undisputed background facts

6.  I shall first set out the very few uncontroversial facts. Cheung was also known as Kit Chai (傑仔). Cheung was a clerk by occupation with a monthly basic salary of HK$5,000. His employer was a financial and investment company called 置富財務公司. Lee was a cleaning worker with a monthly salary of HK$6,000 to HK$7,000. Despite her meagre income, Lee was a habitual gambler and she visited casinos in Macau on a regular basis. Cheung often met Lee in casinos in Macau.

7.  Before the Loan was made on 19 April 2010, Cheung previously advanced a loan to Lee a sum of HK$20,000 and another sum of HK$30,000 in cash in one evening in late September 2009 in Macau (collectively “the 1^st Loan”). Lee repaid Cheung the 1^st Loan in the same evening. That was the first time that Cheung and Lee had had any interaction. The 1^st Loan was arranged by their mutual friend known as Sister Ling (玲姐) whose true name is Wong Yuk Mui. According to Cheung, Sister Ling is his godmother, having known each other for seven to eight years. Lee only knew Sister Ling by her true name and did not know that she was also known as Sister Ling.

8.  Not long after the 1^st Loan, Cheung granted another loan in the sum of HK$200,000 to Lee in cash in Macau in October 2009 (“the 2^nd Loan”). Lee repaid Cheung the 2^nd Loan within 2 days later. 

9.  In the small hours of 19 April 2010, Cheung did extend the Loan to Lee in Macau. Cheung and Lee gambled on the same baccarat table at Starworld Casino. This concludes the narrative of undisputed background facts.

Cheung’s case and evidence

10.  Cheung’s evidence of the Loan can be summarized as follows. At about 8:00 pm on 18 April 2010, Cheung received a phone call from Lee and she told him that she was in need of money to pay off some debts urgently. They agreed to meet at a noodle shop called Internal Noodle Restaurant (國際麪家) to discuss further.

11.  About an hour later, they met at the noodle shop. Lee was with Sister Ling. Lee urged Cheung to grant a loan to her. Cheung was reluctant to grant another loan to Lee but he eventually decided to give face to Sister Ling. Cheung agreed to grant the Loan to Lee and the Loan was interest free. The Loan was extended on the basis that it was Sister Ling asked for it and so Cheung did not charge any interest on the Loan.

12.  Cheung then went home to get the money for Lee. He only found ten odd thousand dollars at home. Therefore, Cheung went to a shop called 澳門金娛樂團 (“the Shop”). Cheung had a non-interest bearing savings account with the Shop. He did not have any bank accounts in Macau. He only deposited his money with the Shop. The advantage of the Shop over local banks was that the Shop was open twenty-four hours a day and Cheung needed this convenience for his gambling habit. He eventually withdrew from his account with the Shop HK$300,000 in cash in that evening so as to make the Loan to Lee. I pause to note that at that time Cheung said he had about HK$650,000 in his alleged account. Prior to his then current employment as a clerk, he had been unemployed for years and he had lived on gambling in Macau.

13.  He then returned to the noodle shop. He asked Lee to give him her identity card so that he could obtain a photocopy and write an IOU thereon. For the 2^nd Loan, Cheung did the same. Lee agreed and Cheung obtained a photocopy at a supermarket nearby. Cheung returned to the noodle shop and he produced the IOU and Lee signed on it after he gave Lee the cash in the sum of HK$300,000. Lee did not check the exact of the cash handed over to her despite the fact that Cheung asked her to do so. Lee said that it was unnecessary because they were so close.

14.  Cheung and Lee left the noodle shop. Cheung went to a casino called 回力賭場 (“Jai Alai Casino”) by himself. He did not know where Lee had gone. However, he bumped into Lee at the casino. After a while, they left for Starworld Casino together. There, they played separately and at one time they were on the same baccarat table. They never betted together and they just had a chat at Starworld Casino. 

15.  After that night, Cheung was unable to reach Lee again. Sister Ling went missing too. Cheung denied having gambled away any monies of Lee at Starworld Casino. He denied using any threats to coerce Lee into signing the IOU.

Lee’s case and evidence

16.  Lee agreed that Cheung lent to her the 1^st and 2^nd Loans. For the 1^st Loan, she explained that she was gambling at Jai Alai Casino. She lost all her money and she came to know Sister Ling then. Sister Ling introduced Cheung to him so that both of them could borrow some money from Cheung.

17.  First, Cheung lent each of Sister Ling and Lee a sum of HK$20,000. The agreed terms of the 1^st Loan included that for every HK$1,000 Lee betted, Lee would give Cheung HK$200 as commission. With the monies loaned to her, Lee got chips in the same amount and she lost all the chips before long. She became penniless.

18.  Then Lee asked Cheung for another loan. Cheung granted another loan of HK$30,000 to her on the same terms including the amount of the commissions payable to him. When she gambled with the 2^nd Loan, she received a call from her family members in Hong Kong. Knowing that she was gambling again in Macau, they came over to Macau and went straight to Jai Alai Casino, which was the usual place Lee went. They found Lee there and they stopped Lee from gambling further. At that time Lee had some money left. Her family members brought some cash in addition to the remaining amount of Lee to pay off the 1^st Loan. There was no IOU signed to evidence the 1^st Loan.     

19.  In regard to the 2^nd Loan, Lee could not explain why she does not admit its existence in her Amended Defence. She confirmed that an IOU was signed when Cheung granted her the 2^nd Loan in about October 2009. She received from Cheung the full amount of the 2^nd Loan in cash and had them converted into cash chips. Cheung charged the commission in the same manner as in the 1^st Loan. The 2^nd Loan was all gambled away at another casino called Lido.  

20.  Under cross-examination, Lee disclosed more for the first time about the 2^nd Loan. After she had lost all her monies at Lido, Cheung sent his agent to accompany Lee to Hong Kong. At the ferry termination in Hong Kong, two young men sent by Cheung waited for Lee’s arrival and followed Lee home. They refused to leave her home. They demanded Lee to pay a sum of HK$380,000 so as to pay off the 2^nd Loan. Cheung also phoned her home and asked her husband to pay him HK$380,000. Lee reported the matter to the police. The two young men were subsequently brought to the police station for investigation.

21.  Finally Lee agreed to repay Cheung by a sum of about HK$220,000. Lee said the extra HK$20,000 was given to Cheung as tea money of her own volition at the suggestion of her family members. The IOU in respect of the 2^nd Loan was returned to her for her disposal after her repayment.

22.  As regards the Loan, Lee said the total sum of HK$300,000 was not actually advanced to her in one go on 19 April 2010. Her version was that in early April 2010, she again went to Casino Oceanus, Macau to gamble and there she bumped into Cheung. She told Cheung that she was losing money and Cheung took out HK$30,000 in cash from his pocket straight away and offered to lend Lee the said amount. Lee agreed. The parties did not sign any IOU to evidence this loan of HK$30,000. Lee needed not pay any commission and interest on this loan. Lee gambled away the entire sum of HK$30,000 and then she returned to Hong Kong without any hassle.

23.  She went to Macau again and on 18 April 2010 she met a person called Ah Wei at Casino Oceanus. She knew Ah Wei through Cheung. She did not have any money to buy a ferry ticket to Hong Kong and so she asked him to lend her a few hundred dollars. Ah Wei agreed to lend her more money to gamble instead after making a phone call.

24.  Cheung arrived shortly afterwards. Lee asked Cheung to lend her a few tens of thousand dollars. Cheung told her that he did not have the cash with him and asked her to wait for him to make arrangements.

25.  All three of them then went to a restaurant nearby. There, Cheung told Lee that he was not going to lend her any amount less than a hundred thousand dollars. To make up a round figure with the previous loan of HK$30,000 in early April, Cheung offered to lend Lee a sum of HK$200,000.

26.  They first went to a casino called 金娛樂. Cheung was not happy with 金娛樂 because there was no rolling chips. They then went to Starworld Casino.

27.  At Starworld Casino, Lee saw Cheung take out cash in the amount of HK$170,000 and have them exchanged into rolling chips (“the 1^st batch of chips”) at a counter. All three of them settled at a baccarat table. Lee sat on the right side of Cheung and Ah Wei sat on his left. The 1^st batch of chips were placed between Lee and Cheung on the table.

28.  Lee placed HK$10,000 each for her first and second bet and she lost. In such bets, Cheung took away HK$2,000 of the first batch of chips as his commission as per previous arrangements. Lee did not object to this.      

29.  Lee had no chance to place her third bet. Cheung complained that she gambled too slowly and took charge of all the subsequent bets. When Lee tried to place bets with the remainders of the 1^st batch of chips, Cheung simply warded her off. Lee said she protested but in vain. She could only sit quietly along side with Cheung until he lost all of the 1^st batch of chips. It took about 90 minutes to lose all of them.

30.  Lee then asked Cheung to lend her more money as she only made two bets of HK$10,000 each. Cheung agreed and went to a counter and come back with rolling chips in the amount of HK$100,000 (“the 2^nd batch of chips”). Cheung counted the 2^nd batch of chips in front of Lee. All three of them continued to sit on the same baccarat table and the 2^nd batch of chips were placed again between Cheung and Lee.

31.  Cheung, however, placed bets as if he were the owner of the 2^nd batch of chips despite the protests of Lee. Until there were only chips of HK$22,000 worth left, Cheung told Lee that he would allow her to play a little bit. Lee then placed HK$10,000 for her first bet and HK$12,000 for her second bet. She lost on both occasions. There was no chips left.

32.  All three of them then left the table and went to a VIP area. Cheung asked Lee for her identity card and left her for five to ten minutes. He came back with a photocopy of her identity card with some handwritten notes written thereon. Lee said she could not read the words as her eyesight was poor. She could just read the figure of HK$300,000. Lee demanded her to sign on the note.

33.  Lee refused to sign on it as she disagreed with the figure. She believed that the actual amount she had borrowed from Cheung was HK$72,000 (HK$30,000 + 20,000 + 22,000).

34.  Cheung however threatened her by saying the following: “如果你唔簽, 睇你有冇命返屋企.” (English translation: if you do not sign it, let’s see if you would be alive to go back to Hong Kong). Frightened, Lee signed on the note, which turned out to be the IOU.

35.  Afterwards, Ah Wei sent her to the ferry terminal and bought her a ferry ticket. She returned to Hong Kong on her own.

36.  On the foregoing evidence, Lee’s pleaded case is that Cheung has unlawfully converted her rolling chips at Starworld Casino of HK$228,000 worth to his own use and the IOU was signed by her under duress. Lee hence claims damages for conversion and a declaration that the IOU be set aside. As mentioned, Mr Chen accepts that the declaration is not necessary though I would also deal with the allegation of duress.

Discussion

37.  It is essentially a case of Cheung’s words against Lee’s. Each of them presented a diametrically different version of events without collaborative evidence. I paid particular attention to their oral testimony. Regrettably, neither of them appeared to be a reliable witness to me.

38.  I bear in mind that the burden is on Cheung to prove the Loan and Lee has the burden to prove the alleged conversion and duress. In my consideration as to whether the respective burdens are discharged, it is unnecessary for me to resolve all the factual differences of the two accounts. 

39.  Cheung tried to make this court believe that all the loans were made to Lee out of his own monies. There is no documentary evidence of his financial condition. He could not produce any records about his alleged account with the Shop. He said the Shop was closed down in November 2011. He thus lost all the documents. I do not believe him.

40.  He was hesitant about the details of the nature of his employer’s business. He even had difficulties in telling the court the exact Chinese name of his employer too. I do not think he could have sufficient amounts to make substantial loans to others, in particular, a known habitual gambler in Lee, with his alleged employment with his small basic salary. It is noteworthy that before the alleged employment he had been unemployed for a while. I believe that he was able to extend the Loans to Lee only with an external financial source.

41.  I can only go this far. There is no allegation that Cheung was a money lender. Nor is there any allegation of illegality of any of the Loans.

42.  I focus on the Loan. I believe the account about the 2^nd Loan given by Lee though it was not mentioned in her pleadings and her witness statement. I accepted that Lee did call the police and the two young men sent by Cheung were brought to the police station. The extra HK$20,000 was given to Cheung so that Cheung could let her off in relation to the 2^nd Loan.

43.  I however do not accept that Lee’s allegation that in early April 2011, Cheung offered to lend her HK$30,000 cash. In the wake of the unhappy situation under which the 2^nd Loan was settled, I do not believe that Cheung would be so generous and kind to offer an interest-free loan to Lee without an IOU and let her return to Hong Kong after she had lost all the monies. I find that Lee made up the account about the loan of HK$30,000.

44.  On balance, I find that all the monies under the Loan were extended to Lee on 19 April 2010. However, I do not accept that Cheung parted with his HK$300,000 at the noodle shop and left Lee alone. I cannot believe that Cheung would be happy with a repayment in the sum of HK$300,000 alone to settle the Loan. Cheung would get nothing out of the Loan then. There was no reason why Cheung would agree to extend this interest-free loan of such a sizable sum to Lee after Lee had previously made report to the police about his agents. Cheung clearly intended that Lee would gamble with the Loan with him so that he could earn commissions in the same manner as in the case of the 1^st and 2^nd Loans.

45.  I then believe that they did first go to 金娛樂 Casino together and that Cheung got his cash there. This is the reason why it was recorded in the IOU that the Loan was made at 澳門金娛賭團. I do not accept Cheung’s incomprehensible explanation that he had to stipulate his source of monies, namely, 澳門金娛樂團  on the IOU so as to show Lee that he was not so financially sound. He needed not do so and his source of monies had nothing to do with his financial status.   

46.  I accept that the Loan was as a matter of fact given to Lee. Lee actually saw the cash which were converted into HK$300,000 worth of rolling chips. All of them were gambled away at Starworld Casino. I accept that the Loan was converted into the 1^st batch of chips and 2^nd batch of chips. Lee was and is no doubt indebted to Cheung in the said amount of the Loan.

47.  I do not believe Lee’s account of Cheung conversion of the 1^st and 2^nd batches of chips. All of the chips were placed between Lee and Cheung from the very outset. Lee never complained about this. Cheung and Lee clearly intended to use the chips to gamble together. Furthermore, Lee explained to the court that to her knowledge it was usual in casinos that money-lenders would play together with their borrowers and sometimes the money-lenders would bet by the use of the monies loaned.

48.  If the use of the 1^st batch of chips by Cheung was against the freewill of Lee, there was no reason why Lee stayed at the table throughout the ninety minutes. She even asked for a further loan of HK$100,000 and allowed the 2^nd batch of chips to be placed between Cheung and her. She accepted that she wanted to have a come-back win with the 2^nd batch of chips. She did not protest within the thirty minutes when the 2^nd batch of chips vanished in the baccarat table.

49.  I find that Cheung betted with some of the 1^st and 2^nd batches of chips with the consent of Lee. I find that there was no conversion as alleged.

50.  In regard to the IOU, I believe that Lee was asked to sign the IOU in the VIP area at Starworld Casino and not the noodle shop after she had lost all the monies under the Loan. I do not believe that Cheung had ever threatened her to sign the IOU. The slight difference between her oral testimony and her pleading relating to the alleged intimidation aside, there is no reason why Lee has never reported this matter to the police when it was a clear case of criminal intimidation. Lee explained that she did not know Macanese law and so she did not complain to the police in Macau.

51.  I cannot accept her explanation. There is no reason why she has done nothing to protect her legal position in Hong Kong until her counterclaim knowing that the IOU must be detrimental to her interest. She made a report to the police about the 2^nd Loan and there is no reason why she has not done so about the IOU.

52.  Strictly speaking, I do not have to resolve the parties’ dispute about Cheung’s addition of a sentence in the IOU, which reads “因急需現金周轉向張國雄身份証號碼 K602xxx(x)” (“the Sentence”). However, in the interest of justice and for the sake of completeness, I also make a finding in relation to the addition of the Sentence.     

53.  Lee first complained about the Sentence in her original defence (§9). Her contention was that the Sentence was only added between the 1^st and 2^nd lines of the IOU after she had signed the same. Lee’s allegation is grave indeed and if it is true it means Cheung has tempered evidence with a view to misleading the court.

54.  Cheung’s reply to this serious allegation is, curiously enough, just a bare denial and Lee is to put to strict proof of the same: §6 of the Reply.

55.  Actually, it can be easily seen from the line spaces that the Sentence was only added after the 1^st and 2^nd lines had been written. It was clearly an addition. Cheung in the witness box accepted this for the first time. However, in his evidence in chief, his explanation was that inside the noodle shop, after writing the contents of the IOU, he found it necessary to add the Sentence and so he did so before Lee signed the IOU.

56.  I then directed Cheung’s solicitors to produce the original of the IOU for inspection as previously ordered by a master. The original arrived on the second day of the trial. Cheung was recalled to give further evidence about the original.

57.  Upon inspection of the original, it is clear to me that the Sentence was clearly written by the use of a different pen. Cheung explained that in the noodle shop he first asked a waiter to lend him a pen to write the IOU. He then returned the pen to the waiter. But after a few minutes, before Lee signed the IOU, he found it necessary to add the Sentence and so he asked another waiter to lend him a pen. The Sentence was thus written with a different pen.

58.  Given my finding that the IOU was actually signed in the VIP area at Starworld Casino, I cannot believe Cheung’s explanation about the addition of the Sentence in the noodle shop. Moreover, it was not necessary for Lee to make this serious allegation and there was no reason why Cheung was so coy about the truth in his pleadings. It is also inexplicable why the IOU was not signed after a few minutes it was created and suddenly it occurred to Cheung that the Sentence had to be added.

59.  In my judgment, Cheung subsequently added the Sentence for the purpose of these proceedings. He might want to make it clear that the Loan is a personal loan between Lee and him. The subsequent addition of the Sentence to the IOU is not only just to paint the lily but also tantamount to concocting false evidence. This must attract the sanction by this court as reflected in the costs order nisi I am going to make.

Conclusion

60.  I find that Cheung has proved his claim and I reject Lee’s claim of conversion and duress. I enter judgment against Lee in the sum of HK$300,000. I dismiss Lee’s counterclaim.

61.  Costs should follow the event. However, given my finding about the addition of the Sentence, I would disallow a part of Cheung’s costs to mark this court’s serious disapproval of his conduct in these proceedings. I make an order nisi that Lee should pay 80% costs of Cheung, to be taxed if not agreed, with certificate for counsel. Unless any of the parties applies by way of summons to vary the same, this order will be made absolute 14 days after the date of this judgment.

61.  Lastly, I thank Ms Wong and Mr Chen for their assistance.