CREDIT ONE FINANCE LTD v. LEUNG YING LOK AND ANOTHER

HCA 3146/2016

[2020] HKCFI 2919

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3146 OF 2016

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JUDGMENT

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Introduction

1.  This is the trial of the Action. 

2.  The Plaintiff is and at all material times was licensed as a money lender under the Money Lenders Ordinance, Cap 163 (“MLO”).

3.  The 2nd Defendant is and at all material times since 22 September 1988 has been the sole registered owner of the property known as Flat E, 1/F and Portion of the Flat Roof, Tai Shing Building, Nos 129/133 Caine Road, Hong Kong (“Caine Road Property”).  In 2016, the Defendants, their daughter, the 2nd Defendant’s mother-in-law Madam Leung Lai Yong Hing (“Madam Leung”) and 2 domestic helpers were residing in the Caine Road Property. 

4.  The Plaintiff’s case is that on 29 June 2016 the Defendants borrowed from it HK$4.5 million (“Loan”) pursuant to a loan agreement dated 29 June 2016 (“Loan Agreement”).  The Loan Agreement provided for inter alia (i) a term of 12 months, (ii) payment of 12 monthly interest instalments of HK$90,000 on the 29th day of each month and (iii) repayment of the Loan on 29 June 2017.  While the Loan was stated to be HK$4.5 million, in fact only HK$4,490,300[1] (“Revised Principal”) had been advanced by the Plaintiff to the Defendants.  The advance was made by a cheque issued by the Plaintiff’s solicitors Messrs Cheung & Choy (“Cheung & Choy”) payable to the 2nd Defendant and marked “account payee only” (“Cheque”).  The Cheque had admittedly been deposited into the 2nd Defendant’s bank account on 29 June 2016 and the bulk of it was transferred out to the 1st Defendant very shortly afterwards.

5.  The Loan was secured by a 2nd Legal Charge dated 29 June 2016 executed by the 2nd Defendant over the Caine Road Property (“2nd Legal Charge”).  The Defendants had paid the first two monthly interest instalments due on 29 July and 29 August 2016 but they had failed to make any further interest payments or repay the Loan. On 1 December 2016, the Plaintiff instituted the present proceedings.

6.  The Plaintiff’s claim is for the recovery of the outstanding principal of the Loan together with 2 unpaid interest instalments due on 29 September and 29 October 2016 respectively as well as contractual interest at the rate of 24% p.a..  The Plaintiff also claims for an Order for the delivery of vacant possession of the Caine Road Property. 

7.  The 2nd Defendant has filed an Amended Defence and Counterclaim and was legally represented at the trial.  Her Defence is that she had not borrowed any money from the Plaintiff, she was unaware of and had not signed the Loan Agreement, the 2nd Legal Charge or other related documents on 29 June 2016 and is not bound by them.  Her Counterclaim is for declaratory relief to reflect her Defence ie the Loan Agreement and the 2nd Legal Charge are null and void and unenforceable against her and for an order that the registration of the 2nd Legal Charge be vacated from the Land Registry.

8.  The 1st Defendant had not entered an appearance to defend this Action and did not appear at the trial.  The Plaintiff seeks judgment against him in absentia. 

Background

9.  The 1st and 2nd Defendants were husband and wife until their divorce in October 2017. 

10.  According to the 2nd Defendant, the 1st Defendant used to work in the Customs and Excise Department until his retirement in 2006. 

11.  Prior to her marriage in 1980, the 2nd Defendant ran a frozen meat business until 1992 when she retired from it in order to take care of her family.  In around 2013, she took up employment as a telephonist in a clinic and later a night-shift security guard until now. 

12.  In September 1988, the 2nd Defendant charged the Caine Road Property to the Bank of America National Trust and Savings Association at the time of its purchase.  That was discharged in March 1996. 

13.  In January 2008, she again charged the Caine Road Property to Citic Ka Wah Bank Limited (“Citic”) (“Citic Legal Charge”) and executed a Rental Assignment in favour of Citic. 

14.  In June 2010, the 2nd Defendant obtained a release of the Citic Legal Charge and the Rental Assignment and executed an all moneys Legal Charge (“Fubon Legal Charge”) in favour of Fubon Bank (Hong Kong) Limited (“Fubon”).  The Fubon Legal Charge was still subsisting at the time of the trial.

15.  By any standard, the 2nd Defendant is a seasoned property investor and her property dealings in and after 2016 could not be explained by her meagre salary of HK$14,000 as a security guard.  Below is a table of the properties presently or formerly owned by (i) the 2nd Defendant alone, (ii) the 2nd Defendant and Madam Leung jointly, (iii) the 1st and 2nd Defendants jointly and (iv) the 1st Defendant alone. The 2nd Defendant claims that between 2008 and 2011, she used her own savings to purchase inter alia 2 properties for rental income which were registered in the sole name of the 1st Defendant.

No.	Address	Registered Owner(s)	Year of Purchase / Sale	Purchase/ Sale Price
1	Caine Road Property	The 2nd Defendant	1988	$1.165 million
2	Block A, 1st Floor, Yau Fook Building, No. 171 Cha Kwo Ling Road, Kwun Tong, Kowloon, Hong Kong	The 2nd Defendant & Madam Leung	1993	$0.835 million
3	Flat A2, 15th Floor, King’s Towers, No. 480 King’s Road, North Point, Hong Kong	The 1st Defendant	2000	$2.208 million
			2014	$7.5 million
4	4th Floor, No. 23 Wong Chuk Street, Sham Shui Po, Kowloon, Hong Kong	The 1st Defendant	2008	$0.83 million
			2017	$4 million
5	Flat A, 8th Floor, Hong Lok Building, No. 77 Marble Road, North Point, Hong Kong	The 1st Defendant	2008	$2 million
			2017	$8.579 million
6	6th Floor, No. 6 Sing Woo Road, Happy Valley, Hong Kong	The 1st & 2nd Defendants	2008	$2.98 million
7	G/F Including the Yard & Cockloft, Shun King House, No. 4 Un Chau Street, Sham Shui Po, Kowloon, Hong Kong	Sky Bright Trading Limited[2]	2011	$22.3 million
			2016	$29.5 million
8	Flat A, 12th Floor, Capitol Mansion, Nos. 195, 195A, 197, 199, 201 & 201A, Shau Kei Wan Road, Hong Kong	The 2nd Defendant	2016	$3 million
9	4th Floor, No. 372 Shau Kei Wan Road, Hong Kong	The 2nd Defendant	2017	$3.45 million

The issue and the witnesses

16.  Both Mr Chain and Miss Ho agree that the present case turns on a single factual issue of identification—did the 2nd Defendant sign the Loan Agreement and the 2nd Legal Charge etc or were they signed by an impostor?

17.  It is undisputed that the 2nd Defendant’s genuine Hong Kong ID Card was presented to the staff of the Plaintiff and Cheung & Choy for verification prior to the execution of the Loan Agreement and the 2nd Legal Charge, with photocopies made contemporaneously. 

18.  The 2nd Defendant’s evidence is that on 27 June 2016, the 1st Defendant borrowed her ID Card for “some taxation processes to handle”.  As the 1st Defendant has always been responsible for handling tax returns and taxation matters, she gave him her ID Card.  The ID Card was next found by her on the dining table at the Caine Road Property in the afternoon of 29 June 2016 at around 3pm.  The inevitable conclusion from the 2nd Defendant’s evidence is that the 1st Defendant had colluded with an impostor who looked like her (“Impostor”) and gone to the offices of the Plaintiff and Cheung & Choy to sign the Loan Agreement, the 2nd Legal Charge and other related documents.  Indeed, the 2nd Defendant said so explicitly in her 1st witness statement at paragraph 18:

“18. To conclude, I have never borrowed any money from Credit One Finance Limited and did not visit the offices of Credit One Finance Limited or Messrs. Cheung & Choy, Solicitors on the day of the incident (29th June 2016). I have never signed any documents related to the borrowing of money in these proceedings. I believe that in the abovementioned incident, Leung Ying Lok took my Identity Card and conspired with other(s) to forge my signature to borrow money.”

19.  At trial, the Plaintiff called 3 factual witnesses:

(1)  Ms So Wing Man Tracy (“Ms So”), former loan officer of the Plaintiff.

(2)  Ms Tsang Chung Man (“Ms Tsang”), paralegal of Cheung & Choy.

(3)  Mr Lam Tze Chiu Andrew (“Lam”), manager of the Plaintiff.

20.  The 2nd Defendant herself testified on the facts. She also called Mr Kwok Kai Bun (“Kwok”) as her handwriting expert.

21.  This court has carefully considered the testimony of all witnesses and assessed it against the documentary evidence and the known and undisputed circumstances of this case.  This court has in particular considered the inherent probabilities or otherwise of the witnesses’ testimony and assessed their credibility accordingly in order to resolve the material factual disputes between the parties. 

22.  As a preliminary observation, this court finds Ms So and Ms Tsang truthful witnesses.  They are independent witnesses with no connection with the Plaintiff.  Ms So left the Plaintiff’s employment in January 2017 and is now employed as a loan officer by a different company.  Ms Tsang is still employed by Cheung & Choy but does not have any direct relationship with the Plaintiff.

23.  Both Ms So and Ms Tsang were forthcoming whilst in the witness box.  They gave their testimony calmly and their response to questions was mostly direct.  When questioned on some details which they did not remember, they would simply say so instead of indulging in some fanciful speculation.  Ms So was prepared to concede in cross-examination that she had to rely on the underlying documents to help her recall the events on 29 June 2016.  As for Ms Tsang, she was prepared to concede in cross-examination that part of her testimony was based not on her independent recollection of what happened on 29 June 2016, but rather on her usual practice whilst working in Cheung & Choy’s conveyancing department. Their credibility has withstood the vigour of cross‑examination. 

24.  In her Closing Submissions, Miss Ho challenges the testimony of Ms So and Ms Tsang as tainted with doubts on the reliability of their recollection of the events in question.  She also submits that their evidence is only reliable and credible if they are able to show they can recall the “unique details of the matters they handled and processed” on that day, failing which their recollection is but a “recitation of common sensical work practice.”

25.  As always, this court has borne in mind the need to be cautious before coming to any conclusion on the credibility of a witness. This court has also borne in mind the helpful guidance in Lord Bingham’s book The Business of Judging reproduced in Fung Sau Mui Janne v Fung Wing Tong unrep, HCMP 798 of 2016, 3 October 2018, DHCJ Wong SC at [13].  But this court does not agree that a witness’ testimony is reliable and credible only if he can recall the unique details of the matters testified upon.  Nor can this court agree that a witness who relies in part on contemporaneous documents and in part on his usual work practice to refresh his memory would necessarily lack credibility.  The court must look at all the factual circumstances of each case and come to a view on whether a witness’ testimony is credible and should be believed.

26.  Lam’s witness statement, consisting of 7 short paragraphs, is confined to one incident on 15 September 2016 at the Plaintiff’s office when the 2nd Defendant demanded for documents relating to the Loan.  This court does not consider his testimony to have any significant impact on the resolution of the factual issues in this Action.

27.  As for the 2nd Defendant, for reasons to be elaborated at the next section “Deliberation”, this court does not find her a truthful or reliable witness.  At this stage, suffice it for this court to note that her testimony is disingenuous, self-contradictory and inherently improbable and her credibility is seriously dented by undisputed and indisputable evidence.

Deliberation

The veracity of the Plaintiff’s case

28.  To start with, it should be highlighted that the signing of the Loan Agreement, the 2nd Legal Charge and other related documents was preceded by verification of the 2nd Defendant’s identity by Ms So and Ms Tsang on 2 occasions in the morning and afternoon of 29 June 2016 (“1st Verification” and “3rd Verification” respectively) to ensure that the woman who accompanied the 1st Defendant to the offices of the Plaintiff and Cheung and Choy was indeed the 2nd Defendant herself. 

29.  On the evidence of Ms So, in between the 1st and 3rd Verifications, at around lunchtime that day, there was another instance of verification of the 2nd Defendant’s identity by a bank teller (“2nd Verification”) after the Defendants had left the Plaintiff’s office and gone to Fubon’s Tsim Sha Tsui branch.  The 2nd Verification was witnessed by Ms So and detailed in her testimony.  The purpose of the visit was to confirm the outstanding balance due to Fubon which was secured by the Fubon Legal Charge. 

30.  Ms So’s testimony is that in the morning of 29 June 2016, she performed the 1st Verification at the Plaintiff’s office prior to the signing of the Loan Agreement and related documents.  Ms So was the loan officer assigned to explain the Loan documents to the Defendants and to witness their signatures on them specifically the Loan Agreement.  As a loan officer, a large part of her professional experience and responsibility involved customer due diligence, attending to the signing of loan documents and verification of borrowers’ identities. 

31.  The Defendants were the clients of a Mr Lau Kam Wah (“Lau”), manager of the Plaintiff who has since passed away.  Since it was the Plaintiff’s internal policy that each loan agreement must be handled by an independent loan officer, Ms So was asked by Lau to handle the Defendants’ loan application.  Lau obviously knew the Defendants.  They were his clients and it was Lau who on the day in question took them to the conference room and told Ms So that the Defendants had arrived. 

32.  Ms So gave some details as to what was involved in the 1st Verification while in the conference room—she sat across a small table from the Defendants, she asked for their original ID Cards to confirm their identities, she said she could clearly see their face and positively matched their face against the photographs in their ID Cards as well as the ID Card photocopies in the file, she witnessed the Defendants signing inter alia the Loan Agreement and she compared the 2nd Defendant’s signature on the Loan Agreement against that which appeared on the Fubon Legal Charge.  The entire meeting took about 1 hour. 

33.  Around lunchtime, the Defendants, Lau, Ms So and an independent agent went to Fubon’s Tsim Sha Tsui branch for the purpose of verifying the outstanding balance due to Fubon which had been declared by them in the Plaintiff’s office to be HK$3.23 million odd.  Lau and Ms So accompanied the 2nd Defendant to wait in line for counter services.  Ms So witnessed the 2nd Defendant producing her ID Card to the bank teller when she asked the teller to check the outstanding balance due.  After performing the 2nd Verification, the teller accessed the 2nd Defendant’s bank account, wrote down the outstanding balance on a piece of paper and handed it to the 2nd Defendant.  The 2nd Defendant then showed the piece of paper to Ms So for cross-checking.

34.  The 3^rd Verification was performed by Ms Tsang in the afternoon of 29 June 2016 prior to the signing of the 2nd Legal Charge at the office of Cheung & Choy in Central.  She was the paralegal assigned to explain the 2nd Legal Charge and related documents to the Defendants and to witness their signing of the documents in question. 

35.  Ms Tsang also gave some details as to what was involved in the 3rd Verification after meeting the Defendants in the conference room.  She sat directly opposite the Defendants at a conference table with a clear and unobstructed view of their face.  She requested to see their ID Cards and made photocopies of them.  She spent about a minute to verify the details on their ID Cards and looked up at the Defendants to see if their looks matched with the photographs on the ID Cards.  It was only after having satisfied herself of their identities that Ms Tsang proceeded to explain the 2nd Legal Charge and related documents to the Defendants.  She witnessed the signing of those documents by the Defendants as well as a copy of the Cheque by the 2nd Defendant.  Lastly, Ms Tsang compared the 2nd Defendant’s signature with her signature on a copy of the Fubon Legal Charge and was satisfied that they were sufficiently similar. 

36.  Both Ms So and Ms Tsang were adamant that they had verified the 2nd Defendant’s identity and it was the 2nd Defendant who signed the various loan and mortgage documents in front of them on 29 June 2016.  In the course of their employment with the Plaintiff and Cheung and Choy, they frequently had to verify the identities of people before witnessing their signatures on documents.  There is no basis upon which one can conclude they would have omitted to take this essential step on this very occasion.  Any suggestion that they have conducted the verification exercise hastily or carelessly is mere speculation.

37.  It is important to point out that the evidence of Ms So and Ms Tsang has a cross-corroborating effect since they were testifying on a connected sequence of events in the morning and afternoon of 29 June 2016.  While not impossible, it seems to this court rather improbable that (i) both would have been fooled into believing that the Imposter was the 2nd Defendant, (ii) both were equally sloppy when it comes to verifying the identity of the woman in front of them or (iii) they both lied on oath about the verification process they said they had undertaken on 29 June 2016 when in fact they could not remember whether or not they had. 

38.  The testimony of Ms So and Ms Tsang is corroborated by what happened at Fubon’s branch which was witnessed by Ms So. Mr Chain very properly accepts the evidence in relation to the 2nd Verification carries less weight since the bank teller who did the verification is not a witness in this trial.  However, what Ms So witnessed and testified ie the teller allowed the 2nd Defendant’s account to be accessed after checking the ID Card of the person in front of her, still has some probative value on the issue of identification.

39.  Lastly, although Lau did not testify at the trial, the fact that the Defendants were his clients and that it was he who told Ms So that they had arrived at the Plaintiff’s office on the day in question is also supportive of the Plaintiff’s case on identification.  It stands to reason that Lau would, more likely than not, have met the Defendants before and had obtained photocopies of their ID Cards which were placed in the file together with other supporting documents.  According to Ms So, it was Lau who passed that file to her for review.  While this piece of evidence carries less weight than the direct testimony of Ms So and Ms Tsang, since the circumstances under which the Defendants came to be his clients are unknown to this court[3], it seems to this court rather improbable that Lau would have mistaken the Imposter as his client and introduced her to Ms So as the 2nd Defendant.

The difficulties with the 2nd Defendant’s case

40.  On the other hand, the 2nd Defendant’s case is fraught with difficulties and her credibility is in grave doubt.

41.  First, the purported reason for the 2nd Defendant to give her ID Card to the 1st Defendant and not asking for its return.

42.  As stated earlier, the 2nd Defendant’s explanation in her witness statement is that the 1st Defendant borrowed her ID Card for “some taxation processes to handle”.  As the 1st Defendant has always been responsible for handling tax returns and taxation matters, she agreed to give him her ID Card.  There is no further explanation in her statement as to what taxation matters she was referring to.  Nor can one find in her statement that she had actually asked the 1st Defendant why her ID Card, instead of a photograph or a photocopy of it, was required to deal with those matters.  When questioned on this during cross-examination, she simply replied that she did not ask. 

43.  Whilst in the witness box, the 2nd Defendant supplemented her explanation to the effect that over the years, whenever the 1st Defendant asked for her ID Card, she would always give it to him and every time, it was about taxation matters, as though it would give more credence to her original explanation.

44.  Anyone who has paid tax (salary, profit or property tax) would know that the Inland Revenue Department does not require the production of an ID Card for the purpose of filing tax returns or dealing with other tax related matters.  As someone who had once run a business and as a seasoned property investor, the 2nd Defendant should be well aware of this.  The 2nd Defendant should also be well aware that an ID Card is an important identification document, not to be lightly handed over except perhaps to someone undeniably trustworthy.  This brings out the next point: was there trust and confidence between the 1st and 2nd Defendants at the time?

45.  In her witness statement, the 2nd Defendant claimed that not only did the 1st Defendant not contribute to their household expenses, he would frequently ask the 2nd Defendant for money allegedly for investment or start up business.  Further, most of the 1st Defendant’s credit card debts were repaid by her.  The 1st Defendant was so heavily indebted that he had to use the properties registered in his sole name (but paid for by the 2nd Defendant according to her) to borrow from finance companies on numerous occasions to repay his debts.  There came a point of time that the 1st Defendant asked her to help borrow money from finance companies which she “determinedly turned him down.”  In the 2nd Defendant’s police statement made on 24 February 2017, she said the 1st Defendant had not shown love and affection towards her and the family and the 1st Defendant had a record of debts. 

46.  In Miss Ho’s Closing Submissions at paragraphs 34 to 36, the relationship between the Defendants is described as “one that sadly, lacks affection or meaningful exchanges … Of the limited communications they had, D2 frankly admits that she and D1 would communicate over the purchase of properties and D1’s request to D2 to pay off his credit card bills”.  Miss Ho’s submission is that the 2nd Defendant “evidently led an emotionally and financially independent lifestyle from D1”.  If that is the case, it begs the question why the 2nd Defendant had to rely on the 1st Defendant for taxation matters and why the 2nd Defendant entrusted her ID Card to the 1st Defendant without question. 

47.  Second, the 2nd Defendant’s purported explanation for the use of her personal HSBC account by the 1st Defendant and his business partner (“Poon”).

48.  According to the 2nd Defendant’s witness statement, it all started in the evening of 27 June 2016.  The 1st Defendant mentioned to her at home that he had run a graveyard business with Poon in Mainland China, it was so very profitable that they had earned several million dollars and, because Poon trusted him, Poon proposed to deposit the monies earned into her personal bank account.  She said she did not respond at the time.  The next day, the Defendants went to a McDonald’s where Poon explained to her about their graveyard business. 

49.  Then, on 29 June 2016, the 2nd Defendant said she went home after finishing her shift in the morning.  The 1st Defendant called home since around 1 pm urging her to go the headquarters of HSBC, claiming that the bank would close soon and that she must go.  At around 3 pm, the 2nd Defendant was about to go out and found her ID Card on the dining table.  When she arrived at HSBC, the 1st Defendant and Poon were already there.

50.  The 1st Defendant communicated with a counter staff but she did not pay attention.  Then, the staff gave her a withdrawal slip and asked her to sign it.  She roughly knew the amount was around HK$4 million. She said she knew her bank account did not have such a large sum of money but she did not think much about it and just signed obligingly.  Afterwards, she found out the Cheque was deposited into her account and HK$4.39 million was transferred out to another bank account No.  404-242125-833.  Subsequently, the police told her the money was transferred to the 1st Defendant’s account. 

51.  The absurdity of this entire explanation is self-evident and leaves many questions unanswered. 

52.  To name just a few: (i) Why should the profits made by Poon and the 1st Defendant from their graveyard business be paid into the 2nd Defendant’s bank account instead of their own and why should she agree to it?  (ii) Why did the 2nd Defendant not check the balance in her bank account first if she did not think it had HK$4 million in it and why did she sign the “withdrawal slip” anyway?  (iii) how would the bank staff have prepared the withdrawal slip if the instructions did not come from the 2nd Defendant?  (iv) if the “withdrawal slip” contained instructions to transfer HK$4.39 million out to another account, which it did, why did she not enquire with the bank staff at the time who the account holder was?  (v) when she subsequently updated her bank passbook, she must have found out that over HK$4 million had been deposited into her account and almost immediately transferred out, why did she not make any enquiries either with the bank or the 1st Defendant?  (vi) why did she obligingly do what the 1st Defendant told her to do when she had no trust in him?

53.  Whilst in the witness box, the 2nd Defendant tried to modify her explanation in these ways. 

54.  First, albeit the 2nd Defendant confirmed she had no trust in the 1st Defendant in June 2016, she said she had not thought about whether the 1st Defendant was unreliable in respect of money matters.  Second, when she met the 1st Defendant at HSBC on 29 June 2016, he had told her the few millions earned from the graveyard business had already been deposited into her bank account.  Third, when questioned why she did not ask the 1st Defendant and Poon to use their own accounts, her answer was that there was no need to since the 1st Defendant had already told her everything about the graveyard business.  Fourth, wisely or otherwise, the 2nd Defendant also expanded on the sequence of events between 27 and 29 June 2016 by adding that at first the 1st Defendant told her that monies earned from the graveyard business could only be paid into a Union Pay account.  Without further explanation why that was so, she agreed.  Then sometime thereafter but before 29 June 2016, the 1st Defendant told her that the Union Pay account could not be used and, without asking why not, she agreed to let the 1st Defendant use her HSBC account.

55.  As Mr Chain puts it in his Closing Submissions which this court fully agrees, the 2nd Defendant’s story, whether its original version or modified version, is simply nonsensical.  No reasonable person in the same circumstances would have behaved so indifferently and shown so little concern over the use of a personal bank account by others and the movement of millions of dollars in and out of it. 

56.  Third, the purported reason for making a police report on 14 September 2016 and the steps taken (or not taken) by the 2nd Defendant thereafter.

57.  According to the 2nd Defendant, she made a report to the police on 14 September 2016, after having received from an anonymous sender a late payment reminder on 25 August 2016.  The reminder suggested she called a Mr Lui to clarify the matter.  Upon calling the telephone number on the reminder, she was told by a Mr Lui that it was a mistake.  She did not ask and was not told the name of the purported lender which issued the reminder. 

58.  Apparently, the 2nd Defendant was content with the answer that it was a mistake.  While at that time, she had two mortgage loans outstanding ie the one secured by the Fubon Legal Charge and another in respect of another property, she did not see fit to make any enquiries with either of the lenders.  Having made no further inquiries, all of a sudden, the 2nd Defendant decided to make a report to the police.  The reason she gave for going to the police was that someone had demanded repayment from her but she did not owe anyone any money so something was wrong and she had to investigate.

59.  At first, the 2nd Defendant stated that the report to the police was not directed against anyone.  When compelled to agree that normally people went to the police to report a crime, she changed her evidence by saying a crime had been perpetrated by the 1st Defendant and she had told the police about it on 14 September 2016.  This is obviously disingenuous because if the 2nd Defendant had reported a crime to the police, she would have to give a statement to the police, either on the day or shortly afterwards, which she had not.  But more importantly, what was the crime she thought the 1st Defendant had perpetrated on her when, as at 14 September 2016, all she had received was a late payment reminder sent to her by mistake.

60.  Also inexplicably, the 2nd Defendant and her son went to conduct a search at the Lands Registry the next day on 15 September 2016.  Having discovered the 2nd Legal Charge, she went to the Plaintiff’s office to lodge a complaint and demanded for copies of the documents relating to the Loan.  She also told Lam she had not borrowed any money from the Plaintiff. 

61.  Common sense would dictate that at this juncture, the 2nd Defendant must have realised a crime had been perpetrated on her by the 1st Defendant and his collaborator(s).  One would have expected the 2nd Defendant to confront the 1st Defendant who was still living in the Caine Road Property.  Yet, the 2nd Defendant was reticent about what, if any, she did to confront the 1st Defendant in her 2 witness statements.  As Mr Chain points out in his Closing Submissions, the 2nd Defendant admitted that the 1st Defendant continued to live with her in the Caine Road Property until their divorce in October 2017.  Upon their divorce she arranged for the locks to be changed, formally kicking the 1st Defendant out.  Effectively, the 2nd Defendant continued to live together with the 1st Defendant for over a year after she had discovered the fraud. 

62.  Further, one would have expected the 2nd Defendant to report the “crime” to the Police immediately thereafter.  Yet, all she did was to make 3 statements to the Police in February, March and August 2017, well after the Writ in this Action had been issued.

63.  Fourth, the lack of corroborative evidence, documentary or otherwise, to support the 2nd Defendant’s case. 

64.  The 2nd Defendant’s case is that on 28 June 2016 she worked night shift ie from 7pm to 7am the next day.  At about 7am on 29 June 2016, she took a bus from Wanchai to the Caine Road Property, slept until around 2pm and then went out to HSBC at around 3pm by minibus. 

65.  To start with, one would have thought it could not be too difficult for the 2nd Defendant to find someone eg her supervisor or co-worker to confirm that she worked night shift on 28 June 2016.  Even if none were prepared to testify on her behalf, she should still be able to obtain some records from her employer as proof.  None has been produced.

66.  The only contemporaneous document that the 2nd Defendant is able to adduce in support of her case is a 1-page Octopus Card Record setting out her travelling itinerary on 29 June 2016.  The Record shows she used it once in the morning at 07:28 with a description of “NWB”, presumably New World Bus and then used it again in the afternoon at 15:33 with a description of “General Elite Ltd”.  Assuming in favour of the 2nd Defendant that General Elite Ltd was a minibus company and it was the 2nd Defendant who used the Octopus Card to travel in the early morning and in the afternoon, the Octopus Card Record is still of minimal probative value.  The simple reasons are that (i) the Record did not reveal her itinerary after getting on the bus or the minibus and (ii) the 2nd Defendant could have travelled anywhere without using her Octopus Card.

67.  From the 2nd Defendant’s point of view, it would potentially be much more helpful if she could adduce corroborative evidence from Madam Leung and/or the 2 domestic helpers who were admittedly at home when the 2nd Defendant claims she was resting after work.  Even if, as suggested by Miss Ho, it is unrealistic to expect Madam Leung[4] to testify, there is no reason why one or both domestic helpers cannot testify or at least make a statement in support.  As it turns out, the 2nd Defendant has not called either domestic helper or obtained a statement from them.

68.  It is well established that if a party against whom a prima facie case is established omits to call an available witness, then unless there is some plausible explanation for the omission, adverse inferences can be drawn against him.

69.  In Prest v Petrodel Resources Ltd & Ors [2013] 2 AC 415 at [44], Lord Sumption JSC explained the principle on the drawing of adverse inference by reference to 2 well-known authorities:

“44 In Herrington v British Railways Board [1972] AC 877, 930-931, Lord Diplock, dealing with the liability of a railway undertaking for injury suffered by trespassers on the line, said:

‘The appellants, who are a public corporation, elected to call no witnesses, thus depriving the court of any positive evidence as to whether the condition of the fence and the adjacent terrain had been noticed by any particular servant of theirs or as to what he or any other of their servants either thought or did about it. This is a legitimate tactical move under our adversarial system of litigation. But a defendant who adopts it cannot complain if the court draws from the facts which have been disclosed all reasonable inferences as to what are the facts which the defendant has chosen to withhold. … As the appellants elected to call none of the persons who patrolled the line there is nothing to rebut the inference that they did not lack the common sense to realise the danger. A court is accordingly entitled to infer from the inaction of the appellants that one or more of their employees decided to allow the risk to continue of some child crossing the boundary and being injured or killed by the live rail rather than to incur the trivial trouble and expense of repairing the gap in the fence.’

… For my part I would adopt, with a modification which I shall come to[5], the more balanced view expressed by Lord Lowry with the support of the rest of the committee in R v Inland Revenue Comrs, Ex p TC Coombs & Co [1991] 2 AC 283, 300:

‘In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified.’” (emphasis added)

70.  As Mr Chain submits, the 2nd Defendant claims to have discovered the fraud in mid-September 2016 and she was legally represented shortly after the present proceedings were commenced.  There is no justification for the 2nd Defendant’s failure to obtain and adduce corroborative evidence or at least to give an explanation of her attempts to do so and the reasons for her failure. 

71.  In the premises, this court is of the view that an adverse inference could and should be drawn against the 2nd Defendant for her failure to adduce evidence from the multiple sources aforesaid. 

72.  Fifth, in her first witness statement and in Miss Ho’s Closing Submissions, the 2nd Defendant is portrayed as an unsophisticated businesswoman-turned-housewife-turned-security guard earning a meagre HK$14,000 a month in 2016.  The 2nd Defendant also explains why she would not have entered into the Loan Agreement and the Second Legal Charge—she could not afford to pay interest at 24% p.a. and would have no place to stay if the Caine Road Property were sold under the Second Legal Charge.  This may make some sense if one considers her witness statement alone but not if one digs deeper.

73.  As stated in the section “Background”, the 2nd Defendant is a seasoned property investor since at least 1988.  Of the 9 properties set out in the table, the 2nd Defendant currently owns or has interest in 5 of them ie items 1, 8 & 9 under her sole name, while items 2 & 6 under the joint names with Madam Leung or the 1st Defendant.

74.  As for item 1 ie Caine Road Property, the 2nd Defendant claims in her first statement dated 7 November 2017 that it was worth about HK$11 million.  On the evidence, the balance due to Fubon was HK$3.23 million odd in June 2016 while the Loan is HK$4.5 million.  As for items 8 & 9, they were purchased by the 2nd Defendant without the assistance of mortgage.

75.  It is therefore clear that the 2nd Defendant’s first witness statement is misleading as far as her means are concerned.  Contrary to what she has stated there, the 2nd Defendant does have the means to pay interest under the Loan Agreement.  Even if the Caine Road Property is sold, she does have other properties to stay or the means to find alternative accommodation. 

76.  Last but not least, as a matter of inherent probabilities, it seems to this court too much of a coincidence that the 1st Defendant, a retired Customs and Excise employee rather than a known con artist, could have managed to find someone of similar age as the 2nd Defendant, who looked sufficiently like her and who was willing to participate in this scam to defraud the Plaintiff.  While that is not impossible, it seems highly improbable to this court. 

The handwriting expert evidence

77.  Given this court’s acceptance of the testimony of Ms So and Ms Tsang and its rejection of the 2nd Defendant’s testimony as untruthful and unreliable, her handwriting expert evidence can be dealt with relatively briefly.  This is because, as Chan PJ put it in Nina Kung v Wang Din Shin (2005) 8 HKCFAR 387 at [15], the courts generally prefer the direct evidence of witnesses who actually saw and heard what happened to the opinion evidence of an expert.  This is especially so in the case of handwriting evidence because of the nature of such evidence.  In the same case, Ribeiro PJ also opined at [393] that handwriting evidence is necessarily of a lower order of cogency than direct evidence of execution.

78.  In the case of Kwok, the first question to ask is whether he is qualified as a handwriting expert.  In this regard, the test is whether the proposed expert is skilled in comparing handwritings—he need not be a professional expert or whose skill has been acquired in the way of his profession or business: The Queen v Silverlock [1894] 2 QB 766, 771 (Lord Russell CJ).

79.  In his report, Kwok has set out his expertise in paragraphs 1.3 to 1.5 together with a “full profile” in Appendix A.  It is fair to say that Kwok’s description of his own expertise is full of generality but short of details and particulars.  Moreover, the description of his court, arbitration or tribunal appearances in Appendix A did not on its face appear to relate to comparison of handwritings at all.  In his Closing Submissions, Mr Chain has neatly summarised Kwok’s “expertise” or “skill” as follows. 

80.  By Kwok’s own assertion or admission,

(1)  he is a CPA and a Chartered Accountant by qualification and a forensic accountant by training;

(2)  he does not have academic or professional training/ certification in handwriting analysis;

(3)  he does not belong to any professional body of handwriting analysis;

(4)  while he is a member of US Association of Certified Fraud Examiners, he admits a person can become a member of this association without any expertise in handwriting analysis;

(5)  he has experience in providing expert assistance to plaintiffs/defendants in relation to the inspection and analysis of specimen genuine signatures by way of comparison with questionable documents, but no particulars or details were given and no such reports were produced—he also did not go so far as to say he had deployed such assistance to his clients in court;

(6)  he has testified in courts and tribunals as an expert in respect of “accounting, commercial, and financial matters”, with no further elaboration.

81.  What is more, the methodology used by Kwok in his report is far from reassuring to this court that he can be accepted as a handwriting expert.

82.  The first thing to note is that, remarkably, by his own admission in court, Kwok’s methodology was something he had created himself rather than based on any accepted professional literature or guidelines (and none have been attached to his report).  As pointed out by Mr Chain who has derived considerable assistance from the authorities in which handwriting evidence had been adduced, most notably Nina Kung v Wang Din Shin supra, some of the more dubious features in Kwok’s methodology include:

(1)  he did not appear to have a sufficient number of specimen authentic signatures ie 6 only (Batch A documents) to identify the individual characteristics which represent the writing habits of the 2nd Defendant with which to compare the similarities and differences with the specimen disputed signatures ie 27 in total (Batch B documents);

(2)  he only had the copy documents bearing authentic signatures for comparison with the original documents bearing disputed signatures - without the original documents bearing authentic signatures, Kwok would not have been able to properly assess the nature of the paper used which could affect the writing speed and which in turn would have an effect on the style of writing;

(3)  he did not appear to consider it important to record and consider the writing instruments used for the disputed signatures in the Batch B document[6]—this is so notwithstanding the opinions expressed in accepted literature that the type of writing instrument used would have an important effect on the handwriting which extends beyond that of mere difference in appearance: Nina Kung v Wang Din Shin supra at [65];

(4)  the ultimate conclusion at section 6 of his report is based on the 3 “distinguishing features” which he identified in section 5 of his report; when it was put to him that his selection of the 3 distinguishing features was entirely arbitrary and not in line with accepted method of handwriting analysis, Kwok’s answer was that it was his own idea and based on his own experience and judgment.

83.  In these circumstances, and with respect, this court is not persuaded Kwok has demonstrated that he is sufficiently skilled in comparing handwritings to qualify as an expert and in any event, this court is not satisfied any weight should be given to his opinion as expressed in his report. 

Quantum of the Plaintiff’s claim

84.  First, while the Loan is HK$4.5 million, the Plaintiff is content to claim the Revised Principal ie HK$4,490,300 from the Defendant.  Further, the Plaintiff seeks the 2 unpaid interest instalments in the sum of HK$90,000 each.

85.  Second, with respect to interest, the Plaintiff relies on clause 4 of the Loan Agreement which provides that all outstanding amounts, whether due before or after judgment, shall be calculated and charged at the contractual rate of 24% p.a..

86.  Third, in respect of pre-judgment interest, the Plaintiff claims simple interest at the contractual rate of 24% p.a. in respect of (i) the unpaid 3^rd Interest Instalment from its due date on 29 September 2016; (ii) the 4^th unpaid Interest Instalment due on 29 October 2016 and (iii) the unpaid Revised Principal HK$4,490,300 from its due date of 7 November 2016 ie the date of the letter whereby the Plaintiff terminated the Loan Agreement and demanded payment of all outstanding sums including the Principal.

87.  In relation to (ii) and (iii), Mr Chain submits that the charging of simple interest on an interest instalment which has already fallen due but unpaid is permissible by virtue of the proviso to section 22(1) MLO: Honip Credit Ltd v Leung Tak Sing Paul unrep, HCMP 835 of 2018, 11 October 2019, Mr Recorder Eugene Fung SC at [18].  This court agrees and adopts the reasoning of the learned Recorder.

88.  Fourth, in respect of post-judgment interest, the Plaintiff equally seeks simple interest at the contractual rate of 24% p.a., instead of the usual and much lower judgment rate, on the Revised Principal, the 3^rd Interest Instalment and the 4^th Interest Instalment. In this regard, Mr Chain relies inter alia on Freeway Finance Company Ltd v Tam Chuen On Raymond unrep, HCA 61 of 2010, 2 July 2010, DHCJ L Chan (as he then was) at [16]-[19] and importantly the Court of Appeal decision in Honip Credit Ltd v Asia China Tea Export Co Ltd unrep, HCMP 399 of 2016, 2 June 2016 at [21].  Since this court is bound by the Court of Appeal decision, it will accede to the Plaintiff’s claim for post-judgment interest at the contractual rate of 24% p.a. until payment. 

Disposition and costs order nisi

89.  To conclude, this court finds in favour of the Plaintiff and enters judgment against both Defendants in the sums of HK$4,490,300 and HK$180,000, together with pre-judgment and post-judgment interest at the rate of 24% p.a. as follows:

(1)  on the sum of HK$90,000 from 29 September 2016 until payment;

(2)  on the sum of HK$90,000 from 29 October 2016 until payment; and

(3)  on the sum of HK$4,490,300 from 7 November 2016 until payment.

90.  There shall be an Order nisi that costs of the Action be to the Plaintiff to be taxed if not agreed on an indemnity basis and paid by the Defendants forthwith, with certificate for leading counsel.

91.  The 2nd Defendant’s Counterclaim is hereby dismissed with an Order nisi that costs be to the Plaintiff to be taxed if not agreed on an indemnity basis and paid by the 2nd Defendant forthwith, with certificate for leading counsel.

92.  There shall also be an Order nisi against the 2nd Defendant for the delivery of vacant possession of the Caine Road Property to the Plaintiff within 12 weeks.  This Order shall become absolute provided that (i) the Plaintiff shall serve this Order nisi on Fubon Bank as soon as practicable; and (ii) 21 days after service of this Order nisi on Fubon Bank, there is no application by the bank to vary or discharge it.

93.  Liberty to apply.

94.  Lastly, this court thanks counsel on both sides for their helpful assistance.