JU YAN DI EMPERORY GENESISY v. YAU WAI HAN

DCCJ 2996/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2996 OF 2012

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JUDGMENT

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1.  This action was commenced in 2012. In it the plaintiff claims repayment of loans allegedly made on nine occasions between November 2011 to February 2012 to the defendant totaling HK$132,713. Alternatively, he sues on three dishonoured cheques totaling HK$130,000 drawn in alleged repayment of the said loans.

2.  The defendant counterclaims against the plaintiff in respect of payments made by her to him

(a) in relation to a beauty parlour business, in the sum of HK$100,222;

(b) as loans, in the sum of HK$42,280;

(c) under the pretext of investing in Chinese herbs businesses, in the sum of HK$250,300;

(d) under the pretext of investment in public stocks, in the sum of HK$559,000; and

(e) her loss relating to the plaintiff’s occupation and use of Flat B, 1/F, Wang Kei Building, Nos 35-41 Yan Hing Street, Tai Po (“Flat B”), in the sum of HK$104,100.

In the Amended Counterclaim, items (a), (c) and (d) were framed as trust funds, alternatively as loans; item (e) was pleaded as arising out of a sub-tenancy with implied terms.

3.  Both parties have been legally represented at some point, they now act in person.

Background

4.  The plaintiff pleaded no background in his Statement of Claim.  Despite an Unless Order dated 29 June 2016, the plaintiff did not file his or any witness statement.  He was absent at trial.  In fact, since acting in person from August 2015, the plaintiff has been absent in all the case management conferences and summons hearings.

5.  From the evidence of the defendant, which I accept, I find as fact the following background.

6.  In about October 2010, the plaintiff and the defendant got acquainted through activities of the parent teacher association of Caritus Ma On Shan Secondary School (“PTA”) as the plaintiff was then the chairman and the defendant was a committee member.  The plaintiff claimed himself to be an accountant and businessman.

7.  The defendant was educated up to Form 4 by evening school.  She was then 58 years old.  She was a divorcee raising her two sons alone.  Her second son was a child with special need.  She operated a stall in Smithfield Market in Kennedy Town held in the name of her younger brother.  She owned a flat in Ap Lei Chau in which she had lived for over 20 years (“Ap Lei Chau flat”).

8.  Since their acquaintance, the plaintiff has made effort to befriend the defendant by frequently telephoning her and visiting her at the stall.  Often times, he represented and hinted that he was a resourceful, knowledgeable and successful person, and that he knew a lot of “powerful friends in Mainland”.  He frequently persuaded her to sell her Ap lei Chau flat, which was disagreed to by her younger brother.  The plaintiff often painted scenarios and made claims to the defendant to make her feel unsafe, isolated and insecure, such as her first son might one day lose control and burn the house (the relationship between the defendant and her first son being far from harmonious); that the plaintiff’s “friends” had followed her younger brother and discovered that he had secretly committed illegal acts and offended many people, including some “Mainland powerful persons” and there would be repercussions.  The defendant was also scared into following his “advice” by changing her mobile phone number and withholding the new number from all her friends and relatives as the plaintiff claimed that her phone was tapped.

9.  On the other hand, the plaintiff all along showed to have concern for her well-being.  He often hinted and reassured her that he could and would protect her.

10.  In July to September 2011, upon the plaintiff’s persuasion, the defendant, among others,

(a) signed the provisional agreement to sell her Ap Lei Chau flat and on 26 July received an initial deposit in the sum of HK$80,000;

(b) moved to live in Tai Po, upon the plaintiff’s claim that he was “powerful” there in that even the triads there knew and respected him;

(c) in August opened a bank account with the Tai Po branch of Citic China Bank International numbered 742-2-12481400 (“Citic Account”) and later on 8 September 2011 deposited the balance of the proceeds of sale of her Ap Lei Chau flat in the sum of HK$2,325,130 into it; and

(d) in August published a notice in the newspaper to announce the severance of her relationship with her younger brother.

11.  The various events and payments set out below in respect of the items in the Amended Counterclaim also took place.

12.  In mid July 2012, the defendant began to question and chase after the plaintiff regarding all the money matters.  Arguments ensued between the parties.  On 17 July 2012, the defendant reported to the police complaining against the plaintiff for criminal intimidation, theft and deception^[1].

13.  On 28 August 2012, the plaintiff commenced the present action.

14.  I accept the defendant’s evidence and find that the plaintiff manipulated her by the means described above; by which she was made to feel isolated, scared and insecure, and by which the plaintiff gained the defendant’s trust to do what he asked.

The defendant is a credible and reliable witness

15.  She gave evidence at trial.  When answering the queries raised by the court in relation to events, documents and the many entries in the bank statements and passbooks, the defendant was attentive, straight forward and spontaneous.  Her version of events is consistent with contemporaneous documents, so far as the same are available.  Her story is also corroborated by the evidence of DW1, Mr Chow Chiu Woo (“Mr Chow”).  Also, since 16 August 2013 (when the defendant was acting in person), she prosecuted this case with conviction and persistence leading to the successful appeal on 8 January 2015 against the summary judgment entered against her herein on 5 December 2012.  I find her a truthful, honest and credible witness.

16.  That notwithstanding, I remind myself that as there are many withdrawals and payments involved (some of them do not feature in this judgment), in assessing the amount due under the Amended Counterclaim I need also to be satisfied that her recollection of various transactions and amounts are reliable.

17.  I am so satisfied because: -

(a) On one instance when asked about a withdrawal made on 12 September 2011 from the Citic Account in the sum of HK$116,800, she initially had difficulty in remembering.  However, she did not claim this as one of the many withdrawals given to the plaintiff.  Instead with a bit of time she recalled that the sum was withdrawn to pay the second deposit for her purchase of Flat B, 2/F, Wang Kei Building, which was in fact the case.

(b) She voluntarily and readily told the court that many of the withdrawals (as large as HK$13,000) were for her own personal use and not paid to the plaintiff.

(c) She also voluntarily and readily told the court about a sum in the amount of about HK$3,000, the credit of which need to be given to the plaintiff.

Evidence of Mr Chow

18.  He is called by the defendant.  He was the Vice Principal of Caritus Ma On Shan Secondary School from September 2010 to February 2011.

19.  His evidence is that during his two months’ sick leave in January and February 2011 as a result of a slip and fall accident, the plaintiff visited him on several occasions and borrowed from him a total of HK$72,000, employing similar means of manipulation: -

(a) The plaintiff hinted that he knew the accounts of the PTA was false through telephone tapping by Mainlanders.

(b) He warned Mr Chow that one “錦田傻豹” was stalking near his house as it was suspected that Mr Chow hid copies of the accounts in his house.

(c) The plaintiff also said that Mr Chow and his daughter need to be very careful when going out.

(d) The plaintiff then said in gist that his accounts were frozen through the fault of his business partner, and that because of him voicing out about the false accounting in the PTA accounts, his wife was planted with dangerous drugs and was arrested and he needed HK$220,000 for bail money.

20.  Of note is that the plaintiff also tried to persuade Mr Chow to move for safety reasons, to open a bank account and let the plaintiff keep the cheque book to facilitate repayment of the loan and to rent a flat for him.  Mr Chow was not persuaded.

21.  Mr Chow further said that after much chasing the plaintiff called him in about mid August 2011 telling him that he had repaid Mr Chow HK$5,280 by cheque.  The cheque^[2], as later discovered, was in fact the cheque (No 548256) drawn on the defendant’s Nanyang bank account.

22.  Sometime in October 2011, Mr Chow received another call from the plaintiff telling him that another HK$30,000 odd was deposited into Mr Chow’s account.  Mr Chow checked and found a total of HK$32,539 was deposited.

23.  Having seen and heard Mr Chow, I have no hesitation in finding him to be a credible, truthful and reliable witness.  I accept his evidence.

HK$100,222 PAID TO THE PLAINTIFF IN RELATION TO THE BEAUTY PARLOUR BUSINESS

Evidence

24.  The defendant’s evidence in respect of this claim, which I accept, is as follows.

25.  In July 2011, the plaintiff asked her to invest into the beauty parlour business operated by her wife.  Previously, the plaintiff has introduced to the defendant as his wife one 金素妍 (“Ms Kam”).

26.  So far as the defendant can recall in asking her to invest into the beauty parlour business, the words used by the plaintiff was “同佢合作” (cooperate with him), “賺到兩份分” (share the profit equally), “好好生意，我會教你” (business is good, I will teach you), and “投資” (invest).

27.  Reposing her trust in him, the defendant agreed.  For that purpose, she paid the plaintiff the following four sums totaling HK$100,222: -

(a) HK$20,000 in late July 2011 by cash at hand;

(b) HK$13,200 withdrawn from her Nanyang Commercial Bank Savings Account numbered 04300518086 (“NY Savings Account”) on 1 August 2011;

(c) HK$57,000 withdrawn from NY Savings Account on 10 August 2011; and

(d) HK$10,022 withdrawn from NY Savings Account on 12 August 2011.

28.  At the time of the said four payments, she has not been given, nor has she enquired for, any information or details concerning the beauty parlour business; nor has she visited the beauty parlour.

29.  After having moved to Tai Po in early September 2011, the defendant started to work in the beauty parlour, which she then learned was called Song Beauty and Health Centre and was situated at M/F, No 25 Fu Shin Street, Tai Po.  She also learned that business was not good.  She was given the keys to the premises.

30.  Since October 2011 up to July 2012, the plaintiff asked for and the defendant did pay HK$3,500 each month as her half share of the rent for the beauty parlour premises.  The defendant also paid for half of all the operating expenses of the beauty parlour.

31.  Up to May 2012, the defendant received half of the income from the beauty parlour after having paid Ms Kam a certain portion of the receipt.  Since May 2012, the plaintiff withheld all the receipts on the pretext that he would account to her in one go on a later date.

32.  In July 2012 and without the defendant’s consent or knowledge, the plaintiff removed some of the machines and furniture from the beauty parlour.

33.  In relation to the two documents in Chinese entitled “項目入股証明書” respectively dated 8 August 2011^[3]and 28 March 2012^[4] produced by the plaintiff in his summary judgment application, the defendant was very clear that she has not agreed to those terms nor in fact seen these documents hitherto.  I believe her and so find.  I place no weight at all on these two documents.

Not trust or loan

34.  As mentioned, the defendant’s claim in respect of this item is based on a trust having been created or alternatively loans being given.

35.  The basic nature of a trust is that: -

“where a person has property or rights which he holds, or is bound to exercise for or on behalf of another or other, or for the accomplishment of some particular purpose or particular purposes”[5].

It can be created expressly or by operation of law.

36.  On the evidence, the communication between the parties clearly cannot be understood as creating a trust.  The circumstances also do not bring into operation any resulting or constructive trust by operation of law.

37.  Rather, the contemporaneous communication in the wordings set out above indicated that the defendant was to acquire some beneficial interest in the beauty palour business, albeit the terms of the transaction were most vague. The wordings used also did not indicate a loan.

38.  The fact that the defendant did consistently share in the receipts of the business, as well as the outlay, including rent and operating expenses, and the fact that the defendant was to an extent involved in the running of that business all pointed to the nature of the transaction being one in which she acquired some beneficial interest in the business.  Such nature of the transaction was inconsistent with a trust of those four sums.  It was also inconsistent with the four sums being loans to the plaintiff for running the business.

39.  For these reasons, I find no trust was created or loans given, and that the four sums paid by the defendant to the plaintiff were paid to acquire some beneficial interest in the beauty parlour business (albeit it seems to be a bad bargain).  Therefore, I have to dismiss the defendant’s claim regarding this item.

LOAN TO THE PLAINTIFF IN THE TOTAL SUM OF HK$42,280 PROVED

40.  The defendant’s evidence is, which I accept: -

(a) On 3 August 2011, the plaintiff told the defendant that he was in urgent need to settle some payments with a vendor but he did not have a bank account. On the plaintiff’s request, the defendant wrote out a cheque (No 548256) in the sum of HK$5,280 but leaving the name of the payee unfilled.  She handed the cheque to the plaintiff who promised to repay her the sum.

(b) On 9 September 2011, several days after the defendant has deposited the balance of the proceeds of sale of her Ap Lei Chau flat into the Citic Account, the plaintiff asked the defendant to lend him HK$37,000 to repay Mr Chow who the plaintiff said has lent him money to pay for the bail of Ms Kam earlier on.  On that day, the defendant withdrew HK$37,000 from Citic Account and handed the cash to the plaintiff.

(c) It is later discovered that the cheque[6] was in fact paid into a Hang Seng Bank account held in the name of Mr Chow.

(d) The plaintiff has not repaid her these two sums.

41.  I find the defendant’s claim for these two sums totaling HK$42,280 proved.

HK$250,300 PAID TO THE PLAINTIFF UNDER THE PRETEXT OF INVESTING IN CHINESE HERBS BUSINESSES

42.  I accept the defendant’s evidence regarding this claim, as follows.

43.  The plaintiff claimed that his grandfather was a“御醫”(a doctor in the imperial court) and that he himself was knowledgeable about Chinese medicine and Chinese herbs business.  He claimed he was in the process of setting up businesses relating to them.

44.  In early to mid September 2011, on one occasion the plaintiff gave the defendant a document entitled “紫禁城控股有限公司”^[7] which listed out the names in Chinese of one company, one clinic, two centres and a laboratory and their field of activities and business to explain to the defendant the business “projects” he was setting up and asked the defendant to “invest”.

45.  Again and unfortunately, the defendant fell for it and withdrew from her Citic Account and paid to the plaintiff the following five sums totaling HK$250,300: -

(a) HK$50,000 on 10 September 2011;

(b) HK$68,000 on 12 September 2011;

(c) HK$27,000 on 19 September 2011;

(d) HK$9,800 on 22 September 2011; and

(e) HK$95,500 on 3 October 2011.

46.  Unsurprisingly, these so called businesses never materialized.  There is no information or evidence whatsoever suggesting that any steps had in fact been taken by the plaintiff to set up these so-called businesses.

47.  In the circumstances, I hold that there is a total failure of consideration for the payment of these five sums, which are money had and received by the plaintiff to the defendant’s use.  These sums totaling HK$250,300 must be returned to the defendant.

HK$559,000 PAID TO THE PLAINTIFF UNDER THE PRETEXT OF INVESTMENT IN PUBLIC STOCKS

48.  I also accept the defendant’s evidence, as follows.

49.  Some time in September 2011, the plaintiff gave the defendant various “股票攻略”^[8] and described to her various strategies used by Mainlanders in the buying and selling of public stock.  He claimed that he knew a friend in Mainland who specialized in this. He said he himself gave money to this friend for him to invest in stocks.  He then persuaded the defendant to give him money to do the same.

50.  For that purpose, the defendant initially withdrew from her Citic Account and paid to the plaintiff two sums of HK$50,000 each respectively on 15 and 16 September 2011.

51.  Then, several days later, the plaintiff gave the defendant about HK$3,000 claiming that the sum was earned from her investment in stocks, and that it was easy to profit from stock investment.  The plaintiff lured her to invest more, saying that with a larger investment, the return alone would be sufficient for her to live on.  The defendant then withdrew from her Citic Account four more sums totaling HK$459,000 and gave them to the plaintiff to invest in stocks, as follows: -

(a) HK$110,000 on 22 September 2011;

(b) HK$100,000 on 23 September 2011;

(c) HK$112,000 on 26 September 2011; and

(d) HK$137,000 on 4 October 2011.

52.  To keep the defendant interested, the plaintiff on occasions gave the code numbers of various stocks to the defendant and claimed that they were in her “portfolio” and asked her to follow the ups and downs of their prices.

53.  Since the said payment of about HK$3,000, the plaintiff has not given any sum as “money earned from these investments”.  In fact, the plaintiff refused to reveal to the defendant the name and details of “his friend” or to give any details regarding or documents relating to her “investments in stock”, or to give an account of them.

54.  In the circumstances, I am satisfied on balance of probabilities that the plaintiff never really used any of the defendant’s money to purchase stocks in her name as he claimed.  I hold there is a total failure of consideration for the payment of these six sums, which are money had and received by the plaintiff to the defendant’s use.  Again, these sums, after giving credit to the HK$3,000 received by the defendant, in the total amount of HK$556,000 must be returned to the defendant.

LOSS RELATING TO THE PLAINTIFF’S OCCUPATION AND USE OF FLAT B

55.  The defendant’s evidence is as follows, which I accept.

56.  After the defendant signed the provisional agreement to sell her Ap Lei Chau flat, she was persuaded by the plaintiff to move to live in Tai Po.  The plaintiff then took her to view various flats for rent.  The plaintiff also suggested that he could help renovate.  Eventually, the defendant signed a tenancy agreement on 12 August 2011^[9] to rent Flat B.  As usual, she paid a month’s rent in advance in the sum of HK$6,500 and two months’ rent as deposit.  Vacant possession would be given on 22 August 2011.

57.  At the time the tenancy agreement was signed, the plaintiff expressly asked that his name and telephone number, instead of the defendant’s, be written therein as the contact person for the tenant.

58.  The next day on 13 August 2011, the plaintiff asked the defendant for a sum of HK$22,600 as the cost for renovating Flat B.  Then trusting the plaintiff, the defendant withdrew that sum from her NY Savings Account and gave it to him.

59.  Two days later on 15 August 2011, the plaintiff wrote out a list of furniture costing in total HK$18,895^[10] and asked the defendant for HK$18,000.  The defendant then withdrew that sum also from NY Savings Account and gave it to the plaintiff.

60.  Shortly after, the plaintiff claimed that Flat B was in fact haunted and advised the defendant, for her safety, not to live there.  He then said he knew a female Chinese military personnel who could take up Flat B.  Then, he took the defendant around to look for another flat.  Shortly after, the plaintiff claimed that the female Chinese military personnel could not take up Flat B as there was some internal arrangement whereby she would live elsewhere.  He then said he could do the defendant a favour by living in Flat B, a haunted house, and paying the monthly rent to the landlord.

61.  The defendant herself never took possession of Flat B, which was by the plaintiff.  She did not know whether actually there was renovation done to Flat B or whether the furniture was in fact bought.  The plaintiff did not give an account or any receipt to her regarding any spending on renovation or purchase of furniture.

62.  The defendant then rented another flat in Plover Cove Garden Arcade. For that flat, the plaintiff did not offer to help renovate.

63.  It was later in November 2011 that she first visited Flat B twice as there was some serious water leakage and the plaintiff required her attendance to negotiate with the landlord.  On those occasions, she observed and remembered distinctly that Flat B looked old and the furniture used.

64.  In March 2012, the defendant was summonsed before the Lands Tribunal as the plaintiff has not paid rent since December 2011.  Eventually the Tribunal gave possession to the landlord and the defendant need to pay four months’ rent, two of which were set off from the deposit.  The plaintiff moved out taking with him all the furniture without returning them to the defendant.

Defendant’s loss

65.  I find on the above evidence that the defendant has given an oral license to, rather than entering into a sub-tenancy with implied terms (as pleaded) with, the plaintiff to occupy Flat B on the term that he would pay the monthly rent of HK$6,500.  The defendant has paid in advance on the plaintiff’s behalf and for his benefit the rent for September 2011; and later in 2012 paid on his behalf and benefit the rent for the months of January to April 2012. She therefore is entitled to recover from the plaintiff the rent for these five months totaling HK$32,500; and I so hold.

66.  In respect of the renovation cost of HK$22,600 and cost of furniture of HK$18,000 totaling HK$40,600, I accept the defendant’s evidence that on the two occasions she visited Flat B, she observed that the flat looked old and the furniture used.  I therefore find, on balance of probabilities, that the plaintiff in fact has not renovated Flat B, nor purchased the new furniture for the defendant.  There is thus a total failure of consideration for the payment of these two sums. They are therefore money had and received by the plaintiff to the defendant’s use.

67.  Moreover, even if some or all of the furniture were in fact purchased new, on the evidence the defendant never expressly agreed to provide the new furniture (or any furniture) to the plaintiff, who in any case, all along has had their exclusive use and then later took them away.  He had been unjustly enriched.

68.  I therefore hold that the plaintiff is liable to return the sum of HK$40,600 to the defendant.

69.  During the course of trial and after sorting out the matter, the defendant fairly agreed that the claim in the Amended Counterclaim for “Deposit being forfeited” ^[11] is subsumed under the claim for the five months’ rent and the “Cost for decoration” ^[12] of HK$18,000 is a double count.  I therefore make no award regarding them.

DISMISSAL OF THE PLAINTIFF’S CLAIM

70.  The plaintiff filed no witness statement to substantiate his claim for the nine loans or speak to the facts and circumstances regarding the issuance of the three alleged dishonoured cheques.

71.  In any event, I accept the defendant’s evidence and find, in respect of the three alleged dishonoured cheques: -

(a) Upon the plaintiff’s recommendation, the defendant intended to take her second son to Mainland China for schooling.  Shortly before she was due to depart on 14 January 2012, the plaintiff’s requested the defendant to write out five cheques purportedly to rent premises and to provide funds for the Chinese herbs businesses and to pay expenses for the beauty parlour business.

(b) The defendant signed and wrote out five cheques (Nos 000016, 000018, 000019, 000020 and 000021 in the respective amounts of HK$110,000, HK$24,000, HK$10,000, HK$10,000 and HK$5,000). Cheques numbered 000016, 000019 and 000020 are the three alleged dishonoured cheques in the plaintiff’s claim.

(c) Upon the plaintiff’s direction, the date and the name of the payee on these five cheques were not filled out.

(d) The defendant expressly stated that her prior consent was required before the plaintiff could fill out these cheques and use them, to which the plaintiff agreed.

(e) The three alleged dishonoured cheques were later filled out and used by the plaintiff without the consent of the defendant; nor was any consideration given for them.

72.  By reasons of the above, the plaintiff’s claim herein is dismissed.

DISPOSITION AND COSTS

73.  The plaintiff’s claim is dismissed.

74.  Judgment be entered in favour of the defendant against the plaintiff for the total sum of HK$921,680 plus interest, at the Best Lending Rate plus 1% per annum on the whole sum, to be calculated from 15 September 2011 until judgment; and thereafter at judgment rate until full payment.

75.  On nisi basis, the plaintiff shall pay the defendant the costs of the whole action, including any costs reserved, to be taxed if not agreed.  Such costs order nisi shall become absolute unless an application to vary is made by summons within 14 days from the handing down of this judgment.  The defendant’s own costs, during the period she was legally aided, shall be taxed according to the Legal Aid Regulations.

76.  The defendant may arrange with the court for the interpretation of this judgment to her when it is handed down.