LAM YING LING v. KUBOTA YOSHIAKI

HCA 3844/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3844 of 2001

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J U D G M E N T

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The claim:

1.  In this action the Plaintiff, Ms Lam, sues the Defendant, Mr Kubota, in his capacity as the administrator of the estate of his late wife, Madam Tam Sui Ming.  Ms Lam alleges that on divers dates between May 1993 and 8 August 1994 she advanced to Madam Tam the total sum of $3,150,672.20.

2.  The writ was not issued until 28 August 2001, more than six years after the last date on which the advances were made.  In order to overcome the restrictions on the recovery of a debt, more than six years old, in the Limitation Ordinance, Ms Lam, by an Amended Statement of Defence, filed after the limitation issue was raised, alleges that on divers dates between 1995 and 2000, Mr Kubota made partial repayment of the loan on behalf of his deceased wife.  Seven payments in all, totalling $259,000, are alleged to have been made between July 1995 and 25 August 2000.

The defence:

3.  By his defence Mr Kubota does not admit the debt, and requires Ms Lam to prove the advances.  He acknowledges having made the seven payments, and says they were not in repayment of any advance made to his late wife, but were separate loans made by him to Ms Lam.  Consequently he pleads the Limitation Ordinance in his defence.

The circumstances of the debt:

4.  The evidence established that Ms Lam and Madam Tam had come to know each other when they worked as colleagues in a nightclub in about 1985.  Ms Lam worked in the nightclub for about a year, during which time she and Madam Tam became close friends.  Ms Lam then ceased work and for the next 10 years was supported financially by her boyfriend, a married man.  It was not in dispute that the relationship between Ms Lam and Madam Tam had been close, with Ms Lam treating Madam Tam as her godmother.

5.  The primary document relied upon by Ms Lam to support her claim was a handwritten document, apparently made on 8 August 1994.  The document is headed “Miss Tam Sui Ming”, and is signed by her in no less than nine places.  It purports to record first, that she had received cash and cheques and transfers prior to 8 August 1994, totalling $3.05 million.  The document then refers to “ purchase invoices” and a sum of $98,950.00.  Further sums, plainly expenses incurred on that day, 8 August 1994, are then recorded.  The total comes to $3,150,672.20.

6.  The case for Ms Lam was that between 1993 and 1994 she had made various advances to Madam Tam of sums in excess of $3 million, as recorded in the document.  The source of the funds was, in reality, Ms Lam’s boyfriend, but for a number of reasons, which I find to be realistic, Ms Lam told Madam Tam that, of the sums advanced, $600,000 came from her mother.

7.  It is not in dispute that Madam Tam carried on various businesses in Nam Cheong, in Guangdong.  These included a real estate business, an arts and crafts company, and a fruit drinks company.   The case for Mr Kubota was that the sums represented by the document upon which Ms Lam relied were in fact a record of an investment made by Ms Lam in Madam Tam’s three businesses in China.  It appears that subsequent to the death of Madam Tam the businesses have been taken over, probably without any proper authority, by a man in Nam Cheong, who appears to have been Madam Tam’s business partner there.  Ms Lam has been to Nam Cheong with Mr Kubota, when he went there to approach that man in an effort to resolve the business issues.  Mr Clough, for Mr Kubota, says that the terms of the document, the circumstances in which the money was paid to Madam Tam, and Ms Lam’s visit to China with Mr Kubota in relation to the businesses all demonstrate that the document is not an acknowledgement of debt, but a record of a business partnership arrangement.

8.  I have carefully considered the whole of the evidence and in particular the document itself.  It is a document that has been made by laymen and not by the lawyers.  It does not contain the expression “ loan”, or “borrow”, but all other respects it has the character of an acknowledgement of debt.  Having regard to the circumstances in which it was made, its terms, and the whole of the circumstances of the case, I find that it was more likely than not that Madam Tam intended it to record a debt between herself and Ms Lam.

9.  I accordingly hold that the exhibit P2, constitutes an acknowledgement of debt recording of that as at 8 August 1994, Madam Tam was indebted to Ms Lam in the sum of $3,150,672.20.

The alleged part payments:

10.  Madam Tam died on 22 March 1995.  There is no evidence that prior to that date Ms. Lam had taken any steps to recover the loan.  The first formal step taken by her was, on the evidence, not until solicitors’ letters before action shortly before the issue of the writ. 

11.  The writ was issued on 28 August 2001, and Mr Kubota, within only 6 days, on 3 September 2001, promptly filed a statement of defence, pleading the Limitation Ordinance.  On 11 February 2004, 2 years and 5 months later, Ms Lam filed an amended statement of claim in which she set out seven payments having been made to her by Mr Kubota, on particular days between 3 July 1997 and 25 August 2000, which she said were payments made in partial repayment of the debt between herself and Madam Tam.  The purpose of such a pleading was to demonstrate that the cause of action, having been statute barred by the passage of six years from 8 August 1994, was revived by the part payments pursuant to s 23(3) Limitation Ordinance.  Again acting promptly, 6 days later, on 17 February 2004, Mr Kubota filed an amended statement of defence, repeating the Limitation Ordinance defence, and asserting that the payments relied upon by Ms Lam were not partial repayments of the alleged debt, but new loans made by Mr Kubota to Ms Lam, to assist in meeting her living expenses and the educational expenses of her child.

12.  The seven payments totalled $59,000 and were made as follows: (i) 3 July 1997, $10,000, (ii) 23 July 1998, $10,000, (iii) 28 January 1999, $5,000, (iv) 26 August 1999, $15,000, (v) 14 January 2000, $10,000, (vi) 15 every 2000, $5,000, (vii) and 25 August 2000, $4000.

13.  On the first day of trial, and 11 months after the filing of that amended statement of defence, leave was sought to further amend the statement of claim by the addition of a further payment made in July 1995 in the sum of $200,000.  The fact of the payment was not disputed by Mr Kubota, and I gave leave to amend the statement of claim further.  Mr Kubota relied upon the defence already pleaded, that all the payments that had been made were payments by way of loan to Ms Lam to assist her in her living expenses and the education of her child.  Ms Lam acknowledged in her evidence that during the period from July 1995 to August 2000 she was not working, had no source of income, and was not being supported by any boyfriend.  She offered no explanation as to her source of funds during that period, and plainly would have needed assistance in living expenses and the education of her child.

14.  Madam Tam had died on 22 March 1995.  The evidence established that the payment of $200,000 had been made on 1 July 1995.  Ms Lam did not take any steps to prove her debt in the estate of Madam Tam.  She claimed that she did not do so out of ignorance.  Mr Kubota’s evidence however, which I accept, was that in discussions shortly following Madam Tam’s death, he suggested to Ms Lam that if she could prove any loan that had been made by her to Madam Tam she could “make a claim on the probate”.  No documents were produced until Ms Lam’s solicitors’ letter before action, and no proof of debt was lodged with Mr Kubota in his capacity as the executor.

15.  Ms Lam acknowledged that the payments by Mr Kubota had been made to her, but said that when she first issued the writ she had “forgotten” about them, and only remembered them when her solicitors raised with her the limitation defence.  She contended that the time that was raised with her, which must have been immediately following the filing of the statement of defence which first pleaded the Limitation Ordinance, in September 2001, she instructed her solicitors in respect of all of the payments.  Her evidence was that she had instructed her solicitors not only in respect of the series of small payments, but also in respect of the substantial payment of $200,000.

Ms Lam’s credibility:

16.  While it might be possible to accept that a person might forget about a series of small payments in sums ranging from $4000-$15000, it is difficult to accept that a person might forget $200,000.  If she had in fact instructed her solicitors as to all of the sums, including the $200,000, then the omission of that sum from the payments pleaded might be adequately explained by incompetent drafting on the part of the solicitors.

17.  It was of course open to Ms Lam to waive privilege and to call her solicitor to give evidence to establish when the instructions were given, and what instructions were given in relation to the sums concerned.  The matter was specifically canvassed during the course of the trial.  After taking instructions overnight from his client, I was informed by Mr Yee that Ms Lam elected not to waive privilege, and not to call any corroborative evidence that might establish when she gave the instructions, or what instructions she gave as to the payments.

18.  I have said that I found Ms Lam’s reasons for saying to Madam Tam that part of the advances she made to Madam Tam, were from her mother, to be reasonable.  However the loan was not made by her mother, but by Ms Lam.  At the same time as the writ was issued proceedings were commenced by Ms Lam’s solicitors in the District Court, in Ms Lam’s mother’s name is seeking to recover an advance of $600,000 allegedly made by Ms Lam’s mother to Madam Tam.  That was a false claim.  It is right that Ms Lam’s mother’s name was on an acknowledgement of debt for the sum, but the reality of the situation was that the advance had been made by Ms Lam.  The claim ought to have been brought in Ms Lam’s name, properly pleading out the circumstances in which the advance was made.  To pursue the action in the form it was, would have required Ms Lam’s mother to perjure herself should the matter proceed to trial, by giving evidence that she in fact had made the advance.  In the absence of any evidence from Ms Lam’s solicitors as to the advice they gave her on the form of the action should take, the inference is that they were not instructed as to the true lender.  In this regard the claim District Court may properly be characterised as a false claim, being pursued by Ms Lam.  This is a matter which inevitably reflects upon her credibility.

19.  At the same time as the writ was issued the claim by Ms Lam’s mother for $600,000, a further claim by Ms Lam for $400,000 were commenced in the district Court.  Ms Lam was subsequently obliged to concede that that sum of $400,000, evidenced by a Cashier’s Order Application Form showing a transfer from Ms Lam’s account to Madam Tam’s account, formed part of the sum claimed in the writ.  In these circumstances Mr Clough was entirely justified in saying that the total claims against Madam Tam’s estate were wrongly inflated by the sum of $659,000, (the $400,000, and the $259,000 by way of part repayments), and a further action against the estate was being prosecuted on an entirely false premise.

The character of the payments:

20.  Weighing all of these matters I do not find Ms Lam to be a credible witness.  I  find that it is more likely than not that the payments made by Mr Kubota to Ms Lam were not, as contended by her, partial repayments of the sum comprised in the acknowledgement of debt, but, as asserted by Mr Kubota, quite separate loans made by Mr Kubota personally, not in his capacity as the Executor of Madam Tam’s estate.

21.  It follows that there have been no partial reductions of the loan made by Ms Lam to Madam Tam following the expiry of the six year period on 8 August 2000, Ms Lam’s action against the estate of Madam Tam, having been commenced more than six years after the date of the acknowledgement of debt, is statute barred.

22.  For these reasons there will be judgment for the defendant, together with an order nisi that Ms Lam must pay the costs of the action to be taxed on a party and party basis if not agreed.