WONG KING LUN v. HONG KIAO GO AND ANOTHER

DCCJ 67/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 67 OF 2005

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Judgment

1.  This is an O.14 application by the plaintiff.

2.  The plaintiff and D1 were business associates for some 6 years. The plaintiff and his wife own a company Gala Empire Limited (hereafter called “Gala for short). D2 is a company beneficially owned and controlled by D1 and her husband.

The plaintiff’s Case

3.  The plaintiff brought the present action against the defendants for money had and received. It is the plaintiff’s pleaded case that he had deposited a sum of money (US$65,000) with D1 in June 2001 to secure D1’s assistance in the issuance of letters of credits. The plaintiff made 2 further loans (of HK$100,000 each) to D1 in January and February of 2004. The plaintiff brought the present action when the defendants refused to repay the 3 sums of money.

4.  The chronology of events shows:-

(i)	In June 2001 the plaintiff paid D1 a deposit of US$65,000 in order that D1 would assist the plaintiff in the issuance of letters of credits. It was the parties’ understanding that the deposit would be returned when the plaintiff no longer required D1’s assistance in the issuance of the letters of credits.
(ii)	Since June 2001 the parties, including D1 and the plaintiff, were in touch to discuss about a possible Sino-Indonesian deal in the crude oil industry.
(iii)	On 15/10/01 an agreement was signed between D2 and the Indonesian company “PT Telaga” in which “PT Telaga” agreed to engage D2 to facilitate the arrangement of the Sino-Indonesian deal with a promised commission of 4% to D2 in respect of D2’s work.
(iv)	On 11/1/02 a letter of intent was signed between the plaintiff and the Chinese Company “Sinopec” in which Sinopec agreed to engage Gala in facilitating the arrangement of the Sino-Indonesian deal.
(v)	Sometime in 2002 a cheque for HK$507,000 was issued by D2 in purported repayment of the US$65,000 deposit, which according to the plaintiff was repayment made by D1 to the plaintiff with the use of D2’s cheque. The cheque was dishonoured on its date of maturity on 2 July 2002.
(vi)	The plaintiff has demanded repayment of the US$65,000 deposit from D1 by e-mail throughout the period from August 2002 to August 2003.
(vii)	On 25/9/02 the Sino-Indonesian deal between PT Telaga and Sinopec was signed through the assistance of D2 and Gala.
(viii)	On 25/11/03 Gala and Sinopec signed an agreement which enabled Gala to receive a commission payment of roughly US$150,000 from Sinopec in respect of the Sino-Indonesian agreement.
(ix)	On 15/12/03 Gala received payment of roughly US$150,000 from Sinopec as Gala’s commission in the Sino-Indonesian deal.
(x)	On 6/1/04 the P made a further loan of HK$100,000 to D1. D1 wrote to the plaintiff in her e-mail of 4/2/04, “ Transfer HKD 100,000…. I will pay back in the short time after sold out the good.”
(xi)	On 5/2/04 the plaintiff made another loan of HK$100,000 to D1. D1 wrote to the plaintiff in her e-mail of 5/2/04, “ Re: Loan. Thank you very very must (much) for your kindness. I am very very…. Because nobody to know the virus will come. So I must fund again for pay Indonesia Supply…”

5.  It was the plaintiff’s case that:-

(i)	D1 has a personal liability to repay all 3 sums of US$65,000 (deducting a partial repayment of HK$50,000 made in September 2002), HK$100,000 and HK$100,000 as she has personally borrowed the 3 sums of money from the plaintiff.
(ii)	D2 should be held personally liable in respect of the dishonoured cheque for the sum of HK$507,000 (the equivalent of US$65,000), which was issued in purported repayment of the US$65,000 deposit. The cheque was dishonoured on its date of maturity on 2 July 2002.
(iii)	The plaintiff accepts that D1’s and D2’s liability to the repayment of the US$65,000 -HK$50,000 deposit can only subsist in the alternative.

The Defence’s Case

6.  According to D1, through the collective effort of herself and that of the plaintiff, the Sino-Indonesian agreement was concluded in September 2002 which entitled the plaintiff to the payment of US$150,000 handling charge. It has been agreed between herself and the plaintiff that D1 would be entitled to ½ of the handling fees received by the plaintiff as well as the reimbursement from the plaintiff of D1’s expenses in concluding the Sino-Indonesian agreement.

7.  D1 contends the US$65,000 deposit held by her was held pursuant to an agreement reached with the plaintiff that the retention of the US$65,000 was for satisfaction of D1’s entitlement to the commission in the Sino-Indonesian deal.

8.  The subsequent payments of HK$200,000 were also payments made by the plaintiff to her, in satisfaction of the commission owing to D1 by the plaintiff in a Sino-Indonesian deal as well as in satisfaction of the out of pocket expenses of D1 in facilitating the Sino-Indonesian deal.

9.  Though there was also an agreement between D1 and the plaintiff that the plaintiff would be entitled to ½ of the commission D1 received in the Sino-Indonesian deal, D2 never received any commission payment from PT Telaga in respect of the Sino-Indonesian deal. Hence D1 had no commission money to account to the plaintiff.

The Plaintiff’s Submissions

10.  The plaintiff agreed there was agreement between D2 and Gala that Gala and D2 would have mutual sharing of their commissions in 1:1 ratio in this Sino-Indonesian agreement. So far D2 has not accounted to Gala the commission D2 received from the Indonesian company.

11.  The plaintiff further contends this monetary dispute about the 3 loans between himself and D1 bears no relationship to the Sino-Indonesian deal. In the plaintiff’s submission the 3 sums of money were paid to D1 as a personal loan.

12.  The plaintiff denies there was any agreement for the reimbursement of D1’s expenses by the plaintiff in the conclusion of the Sino-Indonesian deal. Plaintiff invites this court to consider the agreement signed between D2 and PT Telaga in which PT Telaga agreed to reimburse D2 its out of pocket expenses incurred for the work undertaken by D2.

Summary Judgment Rules

13.  On the affirmations in support of the application, if the plaintiff has established on balance, a valid basis for his claim for the return of the 3 sums of money, the burden shifts to the defendant to satisfy this court that there are triable issues between the parties.

14.  Has the defendant, by way of pleading and affirmation, established that she and D2 have a good defence, i.e. there is a real or bona fide defence, to the claim on merits? When there is no defence or no fairly arguable point, judgment ought to be entered in favour of the plaintiff. 

15.  Without embarking on a mini-trial on affidavit, the court must decide whether the defendant’s assertions are capable of belief, in light of the evidence placed before court. Unless it is obvious that the defence put forward by the defendant is frivolous and practically moonshine, O.14 ought not to be applied (Man Earn [1996] 1 HKC 225 at 228).

16.  It is trite law that mere assertion in the affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that she has a fair or reasonable probability of showing a real or bona fide defence, i.e that her evidence is reasonably capable of belief (Bhagwandas [1990] 1 HKLR 586 at 588-589).

17.  If the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real of bona fide defence and judgment will be given to the plaintiff (Ng Shou Chun [1994] 1 HKC 155 at 158).

18.  If the defendant’s case, apparently raises some issues which may probably provide her with a defence, is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that her defence is a sham, the plaintiff would be entitled to his judgment (Manciple v Chan On Man [1995] 3 HKC 459 at 466).  The two tests are : (i) Is what the defendant says credible?” and (ii) “Is there a fair or reasonable probability of the defendant having a real or bona fide defence?

19.  When there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the Court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good or bad faith, but should grant unconditional leave to defend.

Court’s Decision

20.  For clarity sake, it is more convenient to divide the discussion relative to the 3 transactions: the US$65,000 deposit, the HK$100,000 loan on 4/2/04 and the HK$100,000 loan on 5/4/04.

(A) The US$65,000 deposit

21.  The intricate factual issues in dispute between the parties which could not be resolved on affidavits were:-

(a)	The purpose for which the US$65,000 deposit was retained by D1. According to the plaintiff, it was a personal loan made to D1. According to D1, it was a retention of the fund for the ultimate payment of D1’s share of the commissions in the Sino-Indonesian deal.
(b)	From the factual matrix the negotiation stage about the Sino-Indonesian deal started in June 2001. Can one say it is inherently incredible for D1 to contend that the plaintiff and D1/D2 had reached agreement for the US$65,000 deposit to be kept towards payment of the commission due from Gala to D2?
(c)	It is the submission of counsel on behalf of the plaintiff that this court should consider the defendant’s contention of retention of the US$65,000 to be moonshine as it would be contrary to the contents of e-mails sent by the plaintiff to D1 since the plaintiff has been chasing D1 all along from August 2002 to August 2003 for the repayment of the said deposit. Despite these 10 mails, D1 gave no reply to deny her obligation to repay the US$65,000 deposit.
(d)	It is also the plaintiff’s contention that D1’s suggestion of an agreement between the plaintiff and D1 to enable D1 to retain US$65,000 for payment of the Sino-Indonesian commission is a sham because the Sino-Indonesian deal was concluded only in September 2002; the agreement between the plaintiff and the Chinese company, from which the plaintiff would have a contractual right to a handling fees was not signed until 26 November 2003, thus D1 and the plaintiff could not possibly have anticipated the payment of commission more than a year before the commission agreement was signed between the plaintiff and Chinese company.
(e)	According to the “History of Events” prepared by the plaintiff, it can be seen that the parties were engaging in liaising on the Sino-Indonesian deal since June 2001. Without documents in support of the payment of US$65,000 to show the deposit was indeed a personal loan from the plaintiff to D1 (such as evidence of payment of the said sum into the account of D1 as opposed to that of D2), one cannot conclude with confidence that the US$65,000 must be a personal loan though D1 had chosen not to respond to the plaintiff’s demand for repayment of the US$65,000 nor to seek to dispute on paper the plaintiff’s entitlement to an immediate repayment of the said deposit.
(f)	An unusual feature remains in this set of facts was there was no loan interest regarding this sum of US$65,000 retained by D1.
(g)	The plaintiff did not seek to dispute the fact that D2 was entitled to the payment of roughly about US$75,000 commission from the plaintiff in respect of Sino-Indonesian deal. In the plaintiff’s own letter addressed to D1 on 2 January 2004 (about a year before the commencement of the present proceeding), the plaintiff made deduction of D2’s commission entitlement in trying to work out a statement of account in respect of the sums outstanding between the plaintiff and D1.
(h)	The plaintiff suggested D1 confuses the liabilities of D2 and those of her own. It was clear from the letter of 2 January 2004 the plaintiff himself merged the identity of D1 and D2 in the calculation of accounts between himself, D1, D2 and Gala.
(i)	There was no evidence on D2’s actual receipt of its commission from PT Telaga, apart from the plaintiff’s contention in his affidavit and a letter from him to D1 demanding D1 for payment of a sum of US$50,000.
(j)	D2 contended the HK$507,000 cheque was issued with the verbal condition that the plaintiff was not to present the cheque for payment.
(k)	Should the plaintiff seek to enforce the dishonoured cheque for the US$65,000 deposit, there would certainly be a question outstanding whether D2 would be entitled to counterclaim against the plaintiff in respect of the US$75,000 commission sharing in the Sino-Indonesian deal.
(l)	The contention by D1 that she would be entitled to be reimbursed her traveling expenses in respect of the Sino-Indonesia deal concluded in September 2002 is a mere assertion on her affidavit as the purported verbal agreement was not supported by any contemporaneous documents nor illustrated by the subsequent conduct between the parties.
(m)	The agreement between D2 and the Indonesian company provided for the reimbursement of the traveling expenses incurred by D2 by the Indonesian company. What was contained in the answers to the further and better particulars did not appear to go beyond the expenses that had been envisaged and covered by the agreement signed between D2 and the Indonesian company. D1 is D2’s director. D2 could only have acted through its directors. It’s difficult to envisage the situation of costs incurred by D1, not covered by the re-imbursement provision in the agreement between D1 and the Indonesian company. The documents put in by D1 in support of the purported expenses did not take the matter further or shows expenses had been incurred which were not covered by the agreement between D2 and the Indonesian company.

22.  There is a triable issue on the purpose for which the deposit of US$65,000 was paid. The contended reimbursement for D1’s traveling expenses was a bare assertion on affidavit. The defendants ought to be given unconditional leave to defend the plaintiff’s claim for the return of the US$65,000 deposit.

(B) The two HK$100,000 loans

23.  In respect of the two HK$100,000 loans, though it was D1’s contention they were payment towards D1’s entitlement from the plaintiff in respect D2’s commission entitlement from the plaintiff in the Sino-Indonesian deal.  However this contention is clearly contrary to the contents of the D1’s own mails, which stated the sum was a loan and that she would repay as soon as the goods were sold.

24.  I accept the suggestion of the 2 sums being paid in satisfaction of D2’s commission entitlement is an afterthought. Such purported defence is no more than practical moonshine. Summary judgment ought to be given for the return of these 2 sums.

Court’s Order

25.  The defendants are granted leave to defend the plaintiff’s claim in relation to the return of the US$65,000 deposit. Summary judgment is granted for the repayment of the two loans of HK$100,000 with interest, at prime rate from date of the writ until judgment and thereafter at judgment rate until payment.

26.  Half of the costs of this application, excluding the costs for the preparation and consideration of page 77 onward and the relevant annexed exhibits in the plaintiff’s bundles in the present application (materials dealing with the mareva injunction application), be to the plaintiff.

27.  Half of the costs of this application be costs in the cause of this action.

28.  Costs are to be taxed if not agreed, with certificate for counsel.