JU YAN DI EMPERORY GENESISY v. YAU WAI HAN

CACV 259/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 259 OF 2013

(ON APPEAL FROM DCCJ NO. 2996 OF 2012)

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REASONS FOR JUDGMENT

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Hon Cheung JA :

1. The plaintiff obtained summary judgment from Deputy Judge Angela Kot for the sum of $130,000 against the defendant. Pursuant to leave granted by this Court, the defendant appealed. We allowed the appeal and granted the defendant unconditional leave to defend.

The plaintiff’s claim

2. The plaintiff’s claim as appeared in the statement of claim is a simple one.  He lent the defendant $132,713 on nine occasions between 17 November 2011 and 17 February 2012.

	Particulars of the Loans
	Date of Loan	Amount (HK$)
1)	17th November 2011	$25,000.00
2)	15th December 2011	$1,953.00
3)	16th December 2011	$25,000.00
4)	10th January 2012	$2,500.00
5)	11th January 2012	$1,500.00
6)	13th January 2012	$2,000.00
7)	13th January 2012	$24,760.00
8)	17th January 2012	$25,000.00
9)	17th February 2012	$25,000.00
		$132,713.00

3. There was part payment of $2,713 by the defendant leaving a balance of $130,000.  The defendant drew three cheques to settle the debt.  The cheques were dishonoured upon presentation.

4. In support of his application the plaintiff filed an affirmation verifying the claim.  He exhibited eight pay-in slips of deposits made by him into the defendant’s account in respect of eight of the loans.  One loan of $24,760 which was based on RMB 20,000 was lent by the plaintiff to the defendant in cash.

5. The plaintiff further said that the three cheques were given to him by the defendant several days after 17 February 2012.  On that occasion the defendant repaid him $2,713 and gave him the three cheques which he presented on 6 August 2012.

The defence

6. The defendant filed a defence and counterclaim in which she denied that she had borrowed $130,000 from the plaintiff.  She claimed that the plaintiff had committed an offence of fraud without specifying the details. She claimed that the $130,000 was her money.  This is what she pleaded about the three cheques :

‘ 4. The Defendant denies paragraph 3 of the Statement of Claim. The Defendant denies that the three cheques were drawn by the Defendant in settlement of the alleged loan of HK$130,000. The Defendant says that the Plaintiff committed an offence of fraud.

PARTICULARS OF FRAUD

(a)   In or about August 2011 the Defendant gave some HK$700,000 odd to the Plaintiff for investments.  The Defendant gave her account details to the Plaintiff so that he would deposit the returns from investments to the Defendant.  During the interim period, the Defendant also gave money to the Plaintiff upon his request.  All the sums pleaded by the Plaintiff in paragraph 2 of the Statement of Claim in fact belong to the Defendant.

(b)  In or about January 2012 the Plaintiff requested the Defendant to sign the cheques and with the amounts filled in whilst the payee and date were left blank.  The said cheques were kept inside a drawer at the joint-investment beauty parlour carried on by the Plaintiff and the Defendant, namely, Song Beauty and Health Centre at M/F, No. 25 Fu Shin Street, Tai Po, New Territories.  The Plaintiff kept the keys of the drawer.  The Plaintiff told the Defendant that he would phone the Defendant when he needed to use the cheques to purchase Chinese herbal medicine for the use of the joint-investment beauty parlour.

(c)   Unbeknown to the Defendant, the Plaintiff deposited the cheques in question in about August 2012 without the Defendant’s prior knowledge and consent.  The Plaintiff forged the cheques by filling in the dates and the name of the payee being the Plaintiff himself.  The cheques were not supported by any consideration.’

7. In opposing the application for summary judgment, the defendant filed two affirmations.  In the first affirmation she confirmed her defence.  She further claimed that the plaintiff had used another cheque belonging to her to repay $5,280 to a third party, Mr Chow, which was part of a loan of $50,000 the plaintiff owed to Mr Chow.  She claimed the plaintiff had used her cheques without consent. In her second affirmation, the defendant claimed that the plaintiff had persuaded her to invest $100,000 in a beauty parlour business.  Apart from the $700,000 she referred to in paragraph 4 of the defence, she had also given the plaintiff money at his request from time to time.  In total she had given him $1,117,882.  She also stated that the plaintiff had cheated her in respect of accommodations that the plaintiff had arranged for her to rent which eventually found her being evicted by the landlord.  She could not locate the plaintiff who had disappeared since July 2012.  She claimed that she had reported the theft of her six cheques, three being the cheques now sued upon by the plaintiff to the Police and she exhibited a statement she made to the Police.  The relevant part of the statement for the purpose of this appeal is paragraph 21 in which she said that she had discovered that there were five deposits to her bank account by persons whom she did not know.  The five deposits were by cheques :

Particulars
	Date of deposit	Payer	Amount
1)	16 November 2011	Fohrer Group Limited (‘Fohrer’)	$25,000
2)	14 December 2011	Ho Kit Ching Daisy	$1,953
3)	December 2011	Fohrer	$25,000
4)	16 January 2012	Fuhrerech Group Limited	$25,000
5)	16 February 2012	Fohrer	$25,000

8. These five payments match Items 1, 2, 3, 8 and 9 of the nine loans set out in paragraph 2 above.

The plaintiff’s response

9. The plaintiff filed a further affirmation in response to these two affirmations.  The plaintiff admitted that he and the defendant had entered into the business of beauty parlour in which the defendant invested $120,000 and not $100,000.  He went into details of the premises rented by the defendant.  He denied that he had borrowed from Mr Chow.  On the contrary, he claimed that he lent money to Mr Chow.  He denied that the defendant had lent him $700,000 or $1,117,882.  Apart from the beauty parlour business, he had never entered into any other business with the defendant. 

10. Contrary to the case pleaded in the statement of claim as verified by his first affirmation, the plaintiff gave a different version as to the circumstances in which he received the three cheques :

‘ 16. In fact, the 3 cheques as referred to in my previous Affirmation and marked exhibits “JYD-9”, “JYD-10” and “JYD-11” were personally delivered by the Defendant to me at her home on 17^th February 2012 shortly before I lent a sum of HK$25,000 to her. After our calculation, it was agreed by the Defendant that she was indebted to me a total sum of HK$130,000 after she had repaid a sum of HK$2,713 to me. Since the amount of loan was substantial, I requested the Defendant to give me some security by way of cheque so that I could deposit the same into the bank for payment upon demand was made by me to the Defendant. She promised and accordingly signed the said 3 cheques after verification of the actual indebtedness due by her to me. The amounts or figures stated in the said 3 cheques were written by the Defendant. The payee and the date of the said 3 cheques were left blank. After the Defendant gave the said 3 cheques, I accompanied her to go to Citic and deposited the final amount of HK$25,000 by way of cheque into her bank account on 17^th February 2012. As at 17^th February 2012, the Defendant was and is indebted to me a total sum of HK$130,000.’

11. The plaintiff denied that he had suggested to the defendant to sign any blank cheque.  He did not have the key to the drawer at the beauty centre.  Further, as the defendant was all along working and residing at the beauty centre, it was easy for her to sign cheques when she was asked to do so.  There was no reason why she had to put the blank cheques into the drawer of the beauty centre.  In any event, if money was required to buy Chinese herbal medicine for the use of the joint-investment as alleged, there was no valid reason why the joint venture corporation would not use its cheques instead of using personal cheques.

12. In respect of the defendant’s statement to the Police the plaintiff simply said that he ‘refuted all the unfounded complaints made by the defendant’ against him.

The Judge’s decision

13. In essence, the Judge granted summary judgment because she held that the defendant did not have a credible defence, particularly in respect of the cheques which by law are to be treated as cash and honoured unless there is some good reason to the contrary.

My view

14. It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence.  However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case.  This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim.  This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence.  This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim.  This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness.  In many summary judgment applications, the plaintiff will have no difficulties in demonstrating that there is no credible defence but this case is not one of them.  In my view, the defendant has shown that she has a credible defence to the plaintiff’s claim for which summary judgment is not suitable.

15. For a start, the plaintiff must demonstrate that he had indeed lent $130,000 to the defendant when this matter is expressly put in issue by the defendant.  While initially he had exhibited the pay-in slips to the defendant’s bank account of the nine loans, it now transpires that the money of five of the loans came from some other source and not the plaintiff.  What is more surprising is that when faced with this evidence, the plaintiff’s response is simply to put in a general statement stating that he refuted the allegations made against him without giving any particulars.  In my view this is not enough.  The plaintiff should explain why cheques belonging to third parties had been used and deposited into the defendant’s account, particularly when the defendant had stated that she had often, at the plaintiff’s instruction, effected transfer of funds between her two bank accounts, for purpose she was not aware of.  The bank statements disclosed by the defendant revealed that there were indeed withdrawals following deposits made into her account.  If the parties’ relationship was simply confined to the investment by the defendant of $120,000 in the plaintiff’s business, why would he lend money of an even greater amount to her?  The plaintiff has been reticent in responding to the defendant’s allegations.  The overall impression is that there is more to the parties’ transactions than meets the eye.

16. In the absence of a proper explanation by the plaintiff, a serious doubt is cast on the plaintiff’s case and hence a triable issue is raised whether he had indeed lent money to the defendant.  This point was not considered by the Judge.  This leads to a further doubt on whether the three cheques were properly supported by consideration.  This is more so when the plaintiff himself had given two different versions of the circumstances in which he received the three cheques from the defendant.

17. It is true that the defendant’s affirmations contained matters that may not appear to be relevant but the essence of her defence can be discerned from the morass of materials disclosed by her, namely, that she had not received the loans and the three cheques were not supported by consideration.

Conclusion

18. Accordingly we allowed the appeal and granted the defendant unconditional leave to defend.

New evidence

19. The defendant sought to adduce new evidence in the form of a further statement she made to the Police after the judgment had been given against her.  The Police made inquiry with her about the theft of a cheque of $1,953 drawn by Ms Ho and deposited to her account which was one of the five cheques by third parties that the defendant said had been deposited to her account.  We refused the application because the defendant has failed to show that the requirements on adducing fresh evidence have been satisfied.  The relevance of the statement is minimal, the defendant’s response to the inquiry was that she chose to remain silent.  The fact that there was an allegation of theft of the cheque does not carry the matter further.  Further, the matter concerning the cheque had already been dealt with by the defendant when she disclosed the existence of this cheque in her second affirmation. 

Hon Kwan JA :

20. I agree with the judgment of Cheung JA.

Hon Chu JA :

21. I agree with the judgment of Cheung JA.