SIU SHUN IP v. LAU SHING FAI

DCCJ14502/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 14502 OF 2000

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JUDGMENT

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Plaintiff's claim

1. The Plaintiff claims against the Defendant for a loan together with interests and extra expenses involved in the sum of $317,134.61 or in the alternative for a cheque drawn by the Defendant in favour of the Plaintiff for the same amount which was dishonoured upon presentation for payment.

The Defence

2. The Defendant admits having drawn the cheque which had been dishonoured but denies having obtained a loan from the Plaintiff. He says that the loan was obtained from Hugo Mark Ltd (hereinafter called "Hugo") hence it was not a personal loan, therefore the cheque had been given for no consideration.

Facts which are not in issue

3. Hugo is a limited company in which Yeung Wai Hung held 60% and the Defendant held 40% of the issued share as nominee of the Plaintiff. Hence Plaintiff was a 100% beneficial owner of all the issued shares in Hugo.

4. On 29/3/95 Plaintiff sent a cheque in the sum of $400,000 as a personal loan to Hugo as security for credit facilities of Hugo in Standard Chartered Bank. On 10/4/95 the $400,000 was converted into Deutsche Mark term deposit at Plaintiff's instruction.

5. On 10/4/95 Defendant by phone to New Zealand asked for a personal loan of $260,000. The Plaintiff agreed that the Defendant could uplift the Deutsche Mark deposit and use the fund for the $260,000 personal loan and that the Defendant would be liable for the exchange loss for the conversion and for any penalty for uplifting the term deposit.

6. By a document dated 10/2/96 the Defendant acknowledged he had obtained a loan in the sum of $260,000 from the Plaintiff and that he agreed to pay the extra expenses in the sum of $12,284.61 and interest at 9% p.a. Defendant further agreed to pay the aforesaid sums before 31/12/96.

7. By another document dated 12/9/96 the Plaintiff and Defendant agreed to extend the date of repayment to 2/3/97. They agreed that the aggregate of the principal and interest together with the extra expenses up to 2/3/97 to be $317,134.61 (the amount of the Plaintiff's claim). The Defendant issued a cheque no. 004275 drawn on Hong Kong and Shanghai Bank in favour of the Plaintiff maturing on 2/3/97.

8. The said cheque was dishonoured upon presentation for payment.

The issue

9. The only issue is whether it was a personal loan or loan from Hugo. If it were a loan from Hugo then it was not a personal loan and the cheque had therefore been given for no consideration.

Finding

10. The Defendant argued that the money was taken from Hugo with the Plaintiff's consent and it was meant to be a loan from the Hugo. Because the money came from Hugo therefore it was a loan he obtained from the company and not a loan from the Plaintiff.

11. It is not disputed that the money Defendant obtained was from the $400,000 the Plaintiff paid to Hugo as a personal loan to the company and the Plaintiff agreed to use that sum to pay to the Defendant when he asked the Plaintiff for the loan.

12. Although the Defendant in his evidence said that he had asked for a loan from the company, his evidence is not supported by any other evidence. In fact in cross-examination when asked if the Plaintiff had asked him to acknowledge he had borrowed 260,000 from the Plaintiff, his answer was "it was over the phone, he did not ask me to send it". He was evasive. When the court asked whether there was such a suggestion his answer again was evasive, he said "he asked me to draw from the company, convert the deposit to current and wait for him to return".

13. The acknowledgment dated 12/9/96 and the subsequent agreement for extension of time for repayment stated in no uncertain term that it was a personal loan from the Plaintiff.

14. Although the Defendant obtained the money after uplifting the term deposit from Hugo it was the Plaintiff's money. It was a personal loan from the Plaintiff to the company. The Plaintiff is the 100% beneficial owner of Hugo therefore he has a right to recall the loan at his discretion.

15. The Defendant was in urgent need of the loan at that time as he was hard pressed by his creditors to repay his debit immediately. That was clearly stated in his report to the Plaintiff. To remit the money to New Zealand and then for the Plaintiff to issue him with a cheque, wait for the cheque to come through the post and then pay into his own account would take a few days. The Defendant just could not wait. What the Plaintiff had done was just to facilitate the Defendant. It lies ill in the mouth of the Defendant now to say that it was the company's loan. He has abused the hospitality bestowed on him by the Plaintiff.

16. I find as a fact that the money came from the Plaintiff as a personal loan. The cheque was for repayment of that personal loan. Hence there was consideration for the cheque.

17. Hence there be judgment for the Plaintiff in the sum of $317,134.61 with interests at 9% p.a. from 2/3/97 until judgment and thereafter at judgment rate until payment. Under nisi.: Costs to Plaintiff. Certificate for counsel.