周月珍 v. 伍栽治

HCA 983/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 983 OF 2011

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J U D G M E N T

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Introduction

1. In this action, the plaintiff Chau Yuet-chun claims against the defendant Ng Choi-chi for repayment of loans totalling HK$2,171,431.  The said loans allegedly comprised two sums of money. First, a sum of HK$1,250,000 which the plaintiff says she had borrowed from a finance company during the period from 2009 to 2010 which was subsequently advanced to the defendant for his own use due to his financial difficulties (“the Finance Company Loans”).  As at 19 May 2011, that said sum of HK$1,250,000 including interest charged by the finance company amounted to HK$1,734,332. Secondly, according to the plaintiff’s case, she has lent further sums of money to the defendant since 2009 adding up to HK$437,099 (“the Cash Loans”).

2. The plaintiff’s claim is denied by the defendant.  Although the defendant accepts that he and the plaintiff were lovers and in an intimate relationship from 2009 to 2011, the defendant asserts that the sum of HK$1,250,000 was obtained by the plaintiff from the finance company for the purpose of using the same as the start-up capital of the plaintiff’s own nightclub business – called 金港美華 (“Golden Harbour”).

Factual background

3. In March 2009, the plaintiff first met the defendant when she started working as a hostess (公關) at a nightclub owned and operated by the defendant called 新華登卡拉OK夜總會 (“SWD Nightclub”).  The plaintiff and the defendant fell in love with each other and soon developed an intimate relationship.  That lasted for two years until early 2011.

4. During the period between April 2009 and late 2010, the plaintiff obtained various loans from a finance company called Cash Link Finance Company Limited (“the Finance Company”).  Four separate sums totalling HK$1,250,000 were borrowed by the plaintiff under four separate loan agreements executed by the plaintiff and the Finance Company.  The defendant acted as guarantor in each of the four loan agreements.  As security for the said loans, the plaintiff mortgaged her flat situated at 3^rd Floor, No 16 Wan Hing Street, Hung Hom, Kowloon (“the Flat”) in favour of the Finance Company.  Details of the loans are as follows: -

Dates of signing (according to the plaintiff's case)	Loan agreement	Amount of loan
April 2009	H090427-1-120G	HK$500,000
July 2010	H100628-1-12G	HK$550,000
July 2010	H100915-2-12G	HK$100,000
November 2010	H101008-2-12G	HK$100,000
	Total amount	HK$1,250,000

5. It is not in dispute that according to the underlying documents in respect of the third loan set out above, the defendant was the guarantor for the loan of HK$100,000 obtained from the Finance Company.  The plaintiff and the defendant further wrote to the Finance Company on 15 September 2010 to request the latter to issue the cheque for HK$100,000 made available under the loan to the defendant directly.  The Finance Company duly issued a cheque for the sum of HK$100,000 made payable to the defendant.

6. There is no suggestion by the defendant that the instructions and practice in relation to the other three loans from the Finance Company were any different.  Copy of the relevant cheques issued by the Finance Company made payable to the defendant have been exhibited to the 1^st Affirmation of the plaintiff filed on 13 May 2014.

7. The plaintiff says that the defendant (her boyfriend at the time) was experiencing financial difficulty and involved in various lawsuits, and thus required the plaintiff to lend him the said sum of HK$1,250,000 borrowed from the Finance Company.  She further mortgaged the Flat to the Finance Company as security to obtain the loans.  On the other hand, the defendant’s pleaded case is that he never borrowed money from the plaintiff.  Rather, the defendant claims that it was the plaintiff who wanted to set up a new nightclub but did not have sufficient capital for the new business.  She therefore mortgaged the Flat to the Finance Company for cash to be invested in the new nightclub, ie Golden Harbour.

8. In respect of the Finance Company Loans totalling HK$1,250,000, the plaintiff says that the defendant had signed an IOU [page 107 of the Trial Bundle] in favour of her to show that the sum of HK$1,250,000 is repayable together with interest.  The defendant’s pleaded defence accepts that in or around the end of 2010, the defendant signed a document at the plaintiff’s flat but the defendant claims that the document signed by him was not an IOU.

9. Apart from the loan of HK$1,250,000 obtained by the plaintiff from the Finance Company for the benefit of the defendant, it is the plaintiff’s case that she had from her savings lent further sums of money to the defendant since 2009, totalling HK$437,099.  In support of her claim in this regard, the plaintiff relies on three further IOUs [pages 108-110 of the Trial Bundle] allegedly signed by the defendant.  The defendant disputes this in his Defence.

10. In or around July 2010, the defendant’s SWD Nightclub closed down.

11. Golden Harbour commenced business on 28 September 2010.  However, the business of Golden Harbour only lasted for four months and ceased operation towards the end of January 2011.  The relevant documents of Golden Harbour shows that the business registration and liquor licence of Golden Harbour were issued and held in the name of the plaintiff and one Yu Zhimin.  The plaintiff says she only worked as a cashier in Golden Harbour and never invested her money in the business.  According to the plaintiff, she applied for the liquor licence and business registration of Golden Harbour pursuant to the instructions of the defendant, who was her boyfriend at the time.  It was the defendant who actually owned and operated Golden Harbour.  The defendant, on the other hand, asserts that he had no shareholding in Golden Harbour and had only assisted the plaintiff in the running and management of Golden Harbour

12. As at 19May 2011, the total amountowed to the Finance Company (including interest) added up to HK$1,734,332.  Together with the further sum of HK$437,099 which the plaintiff says she lent to the defendant, the plaintiff claimed against the defendant the total sum of HK$2,171,431 in her Statement of Claim.

13. An important point to note is that the defendant suffered a serious second stroke in around April 2013 (the first one occurred in 2006).  According to a Reference Letter dated 3 December 2013 issued by the Queen Elizabeth Hospital, the defendant was suffering from a “disabling” stroke.  Apart from that, the defendant was suffering moderate stage Vascular dementia.  In the letter, the defendant was described as “mainly homebound and chairbound” and was “dependent in most of his activities of daily living”.  In view of his medical condition, the defendant was not called to give evidence at trial.

Relevant legal principles

14. Mr Adrian Leung, counsel for the plaintiff, referred to the well-known case of Seldon v Davidson [1968] 1 WLR 1083 to establish that where a defendant admits receiving money from the plaintiff, or if payment of money to a defendant is proved, in the absence of circumstances giving rise to a presumption of advancement, it is for the defendant to prove that the money was a gift or a loan which was not repayable at the date of the issue of the writ.  Mr Leung went on to submit that, in respect of the Finance Company Loans, although it is the defendant’s pleaded case that the sum of HK$1,250,000 was start-up capital and injected back into the business of Golden Harbour, as the defendant did not give evidence at trial, there is no evidence in support of this assertion.  Accordingly, so say the plaintiff, the defendant has failed to discharge the onus of proving the facts to show that the sum of HK$1,250,000 was not repayable to the plaintiff.

15. Mr Leung referred, in particular, to the recent Court of Appeal’s decision in FBC Construction Co Ltd v Ben Lee, CACV 160/2011 (Judgment dated 25/04/14).  At paragraph 80, Yuen JA had this to say: -

“80. Further, in Seldon the only defence was that the money was a gift. There was no suggestion that anything was given in exchange. The narrow concept (that the presumption applies only where there is no allegation by the defendant of an exchange of cash or something of that nature) was adopted by this court in Mak Ka Hing v Pang Ming Chung [2011] 1 HKLRD 357 (para 23) and El Vince Ltd v Wu Wen Sheng [2005] 1 HKC 111 (para 10).”

16. Mr Leung, apparently taking the above dictum literally, went on to submit that, in the present case, as there is no allegation by the defendant that the sum of HK$1,250,000 was paid to him “in settlement of an existing debt, or that it was given in return for cash, or anything of that sort”, the Seldon v Davidson “presumption of fact” against the defendant is applicable in the present circumstances.

17. I do not agree.  In this regard, it is important to note that the italicized words in the preceding paragraph came from the judgment of Willmer LJ in the Seldon case itself.  At page 1088 D-G, Willmer LJ stated as follows: -

“ There is very scanty authority on this subject. The researches of counsel took us back to the year 1801, and we were referred to Cary and Others, Executors of Greatorex v Gerrish. That is a case which no doubt bears a certain similarity to the present case, but it is, I think, distinguishable on grounds which appear from the judgment of Lord Kenyon. When this question was discussed before him, he said:

‘No evidence is offered of the circumstances under which the draft was given; it might be in payment of a debt due by the testator: or the defendant might have given cash for it at the time.’

No such considerations arise in the present case; indeed they are clearly ruled out, because we have from the defendant in this case a clear admission of the payment of money, and no suggestion that it was paid in settlement of an existing debt, or that it was given in return for cash, or anything of that sort. In the absence of any such circumstances, money paid by the plaintiff in circumstances such as these is prima facie repayable on demand. If the defendant seeks to evade repayment of the money which was paid to him, it seems to me that the judge was right in placing the onus upon him to prove the facts which he alleges show that the money was not repayable.” (emphasis in bold supplied)

18. It seems clear to me that the highlighted words were said by Willmer LJ in the context of distinguishing the facts in Seldon from the Cary case.  They should not be read restrictively as suggested by Mr Leung.  In my view, the Seldon v Davidson “presumption of fact” applies only where there is no allegation by the defendant of any commercial basis or consideration backing the payment; in other words, where the only defence is that the money was a gift.

19. Support for my view can be found in China Metal Recycling (Holdings) Ltd (In Provisional Liquidation) v Chun Chi Wai and Others, HCA 1412/2013 (Judgment of Mr Recorder Pow, SC dated 15/08/13).  At paragraph 30, the learned Recorder stated as follows: -

“ Mr Lam then submitted that I could draw adverse inference from the fact that the 11^th and 12^th defendants did not assert and provide evidence in their affirmations to establish the commercial basis for the remittances. This submission was made on the basis that relying on Seldon v Davidson, the burden was squarely on the 11^th and 12^th defendants. I accepted the submissions of Mr Mok and Mr Leong that in the circumstances of this case, the burden of proof never shifted onto their respective clients. First of all, the Seldon v Davidson principle would only apply in the absence of any “suggestion” that there was consideration backing the payments. In fact, in the judgement of Willmer LJ in Seldon v Davidson, his Lordship referred to “absence of circumstances” as justifying a prima facie recoverability of an admitted payment …”

(emphasis in bold supplied)

20. It follows that, in my view, the burden of proof in this case never shifted onto the defendant.

21. Moreover, even if I am wrong on the question of burden of proof, the matter does not end there.  As Tang PJ puts it in Lui Fai Yeung v Chui Kin Man (2012) 15 HKCFAR 80, at paragraph 16: “I believe the proper inference to draw depends on the circumstances of the particular case and not on who has the burden of proof”.

Analysis of the plaintiff’s evidence

22. I have had the benefit of observing the demeanour of the plaintiff when she gave evidence in the witness box.  My general impression of the plaintiff is that she is a disingenuous witness constantly trying to hoodwink the court into believing that she was an innocent and impressionable woman, habitually following the instructions and complying with the requests of the defendant, because of the infatuation she had for the defendant, to the extent that she would mortgage her own home to the Finance Company to help the defendant and lend to the defendant the bulk of her savings.

23. A glaring example is the plaintiff’s evidence that when she started to work as a dance hostess at the SWD Nightclub in March 2009, it was just to “try-out”, to “have fun” and “play”.  It is hard to accept this as the plaintiff’s true intentions.  Bearing in mind it was the plaintiff’s evidence that, prior to 2009, she had been working as a masseur in “saunas” for around nine years, I find the plaintiff’s evidence to be wholly incredible.

24. Another example is the plaintiff’s claim that one of the reasons for her being so trusting of the defendant was that she had been suffering from mental problems (more precisely, schizophrenia) for around 10 odd years and receiving treatment and medications from the Kowloon Hospital.  Again, I find the assertion incredible, in that, if it were true, why was it not mentioned in her Witness Statement?

25. Further, I find the plaintiff’s case to be inherently implausible in many material respects.

(1) It is the plaintiff’s evidence that soon after she became intimate with the defendant, the defendant asked her to stop working at the SWD Nightclub and promised to give her HK$10,000 odd per month as living expenses.  However, the defendant did not honour his promise to her. Therefore, the plaintiff left the SWD Nightclub and went back to her previous job as a masseur.  In the circumstances, it is incredible that she would thereafter go so far as to use the Flat, her own home, as collateral to obtain finance for the defendant.  How could the plaintiff possibly trust the defendant?

(2) Moreover, it is not disputed that after obtaining the first loan from the Finance Company in April 2009, the defendant did not make any repayment either to the plaintiff or the Finance Company. Again, it is wholly incredible that the plaintiff would still trust the defendant and subsequently obtain further loans totalling HK$750,000 from the Finance Company.

(3) The plaintiff said the Flat was her “life blood (命根)”.  It is incredible that she would risk losing it to help the defendant, after only knowing the defendant for one to two months.

(4) The plaintiff also failed to explain why she did not ask the defendant to obtain finance using his own properties as collateral.  According to the plaintiff, the defendant had previously told her that he owned various properties, including a hotel and a 5-room apartment in Kowloon.

(5) The above comments also apply to the Cash Loans totalling HK$437,099 allegedly made from her savings. According to the plaintiff, at the material time, she only had around HK$500,000 to HK$600,000 in her bank accounts.

(6) When asked how she gave the defendant the money he had asked for, the plaintiff said she would go to the bank to withdraw cash and hand it to the defendant.  Yet, the plaintiff did not produce any passbook or bank statement to evidence such withdrawals.

26. Furthermore, I do not feel able to place any weight on the IOUs relied on by the plaintiff in support of her claims. The plaintiff, in my view, has failed to give a credible account of the circumstances under which the IOUs came into existence.

(1) As regards the IOU in respect of the Finance Company Loans, in paragraph 4 of her Witness Statement (which was adopted as part of her examination-in-chief), the plaintiff clearly stated that the same was written and given to the plaintiff upon the obtaining of the first loan from the Finance Company on 27 April 2009.  Indeed, this IOU bears the 27 April 2009 date on its face.  However, when it was pointed out to the plaintiff that this IOU stated that the defendant had received the sum of HK$1,580,000 from the Finance Company, and this could not have been the position as at 27 April 2009 (because only a loan of HK$500,000 had been obtained by that date), the plaintiff changed her story to say that this IOU was drafted by her shortly after she had been informed in around June 2010 by a former colleague at the SWD Nightclub called “Mi Mi” that the defendant had also borrowed some HK$200,000 from “Mi Mi” and the same remained outstanding.  No satisfactory explanation has been given by the plaintiff to explain this drastic change of front.

(2) The other three IOUs in respect of the Cash Loans are equally problematic.  It is the plaintiff’s evidence that the four IOUs were prepared and drafted by her at different times but were arranged to be signed by the defendant together on one occasion.  Yet, the plaintiff was unable to give even approximate dates when the IOUs were drafted or the approximate date when they were signed.  Further, as admitted by the plaintiff, the three alleged signatures of the defendant on the IOUs in respect of the Cash Loans [pages 108 to 110 of the Trial Bundle] appear to be different.  If nothing else, this certainly militates against the plaintiff’s evidence that they were signed on the same occasion.

27. Further still, the plaintiff’s case is, in a very material way, contradicted by her previous statements given to the police in connection with her application for a liquor license for Golden Harbour.  In particular, in her statement to the police dated 18 August 2010 [pages 93 to 95 of the Trial Bundle], the plaintiff stated the following: -

“(3)答：…其實我總共問‘達通財務有限公司’借咗港幣八十萬嚟搞‘金港美華’，而我朋友余智敏女士則攞咗港幣五十萬出嚟，即係我哋合共攞咗港幣一百二十萬出嚟。我嗰時喺‘達通財務’借錢嗰合共八十萬喺開支票比錢我嘅，而張支票收款人喺寫伍栽治個名，所以嗰八十萬我喺無接過手，直接由伍栽治管理嗰八十萬。其實‘金港美華’所有事務，包括裝修、交租、按金等所有都由伍栽治負責，即喺我出錢比佢全權負責…”

“(5)問：你話‘金港美華’嘅所有事務比哂伍栽治搞，咁佢搞‘金港美華’合共用咗幾錢？

(5)答：唔知,伍栽治佢無比單據我，我信佢咋，所以我都唔知用咗幾錢亦唔知夠唔夠錢，總之我哋比一百二十萬佢就幫我哋搞掂啦。”

28. The statements made by the plaintiff as quoted in the preceding paragraph are certainly against her interest, and consistent with the defendant’s case.  I hold that I can accord to them considerable weight.  I reject the assertion by the plaintiff at trial that Golden Harbour in fact belonged to the defendant, and that she lied to the police as instructed by the defendant.

Conclusion

29. For the reasons stated above, I am not satisfied that the plaintiff has proved her case against the defendant, either for the Finance Company Loans or the Cash Loans.

30. As regards the Finance Company Loans, even if I am wrong to hold in paragraph 20 above that the burden of proof never shifted onto the defendant, on the entirety of the evidence before the court, the proper inference to be drawn is that Golden Harbour belonged to the plaintiff (or, in any event, did not belong to the defendant) and the loans were obtained from the Finance Company by the plaintiff in order to establish the same.  In this regard, I rely, in particular, on the plaintiff’s own admissions as set out in paragraph 27 above.

Disposition

31. In the premises, the plaintiff’s claim against the defendant in this action is dismissed.

32. I see no reason why costs should not follow the event.  Accordingly, the defendant shall have the costs of this action against the plaintiff, including all costs reserved (if any).  Such costs shall be taxed, if not agreed.  The plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.

33. The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

34. Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.