FUNG LAI HAN v. CHAN LAI ON

DCCJ 4582/2020

[2023] HKDC 1676

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4582 OF 2020

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BETWEEN

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JUDGMENT

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A. BACKGROUND

1.  The plaintiff was a professional beautician. She is married with 3 children.

2.  The defendant, a businesswoman, was a VIP customer of the beauty salon where the plaintiff worked as a beauty consultant. She is also married with 3 children.

3.  They gradually became close friends.

4.  It is not disputed that, from 2016 to 2017, the plaintiff advanced various sums totalling $3,279,100 to the defendant:

Date	Amount (in HKD)
2016.01.07	$200,000 (“the 1st Sum)
2016.10.06	$300,000 (“the 2nd Sum)
2016.12.16	$200,000 (“the 3rd Sum)
2017.02.11	$20,000 (paid pursuant to the 5th Oral Agreement as defined in Section G2 below)
2017.02.13	$1,500,000 (“the 4th Sum)
2017.02.25	$8,800 (paid pursuant to the 5th Oral Agreement)
2017.03.09	$8,800 (ditto)
2017.03.25	$5,100 (ditto)
2017.04.10	$4,900 (ditto)
2017.04.26	$8,800 (ditto)
2017.05.08	$8,800 (ditto)
2017.05.23	$5,100 (ditto)
2017.06.10	$8,800 (ditto)
2017.12.09	$1,000,000 (“the 6th Sum)
	Total: $3,279,100

5.  It is also not disputed that from 2016 to 2020, the defendant made repayments totalling $1,972,600 to the plaintiff.

Date	Amount (in HKD)
2016.12.08	$2,100
2017.01.11	$3,700
2017.02.11	$3,700
2017.02.27	$100,000
2017.05.17	$200,000
2017.05.17	$100,000
2017.05.17	$100,000
2017.06.26	$69,900
2017.07.25	$61,100
2017.08.29	$61,200
2017.09.27	$61,200
2017.11.02	$61,100
2017.12.21	$20,000
2018.01.26	$102,200[1]
2018.06.29	$100,000
2018.07.03	$600,000
2018.07.03	$72,200
2018.09.03	$30,000
2018.09.04	$30,000
2018.09.07	$2,200
2018.09.24	$50,000
2018.09.24	$12,200
2020.01.04	$130,000
	Total: $1,972,800

6.  The circumstances under which such sums were transferred are hotly disputed between the parties.

B. ISSUES IN DISPUTE

7.  The central issues before this Court can be summarised as follows.

(1) Issue 1: Whether the 1^st Sum was transferred to the defendant (i) pursuant to an oral loan agreement made on 7 January 2016 on an interest-free repayable on-demand basis, or (ii) for the purpose of the plaintiff’s investment in stock.

(2) Issue 2: Whether the 6^th Sum was transferred to the defendant (i) pursuant to an oral loan agreement made on 9 December 2017 carrying a fixed interest of HK$50,000 repayable in August 2019 (ie after 20 months) or (ii) for the purpose of the plaintiff’s investment in physical gold.

(3) Issue 3: What is the total outstanding amount payable by the defendant to the plaintiff?

C. THE RELEVANT LEGAL PRINCIPLES

8.  The resolution of the above issues mainly depends on my view on the credibility of the plaintiff and the defendant, the only 2 witnesses who gave evidence in the present case.

9.  In making my findings of fact in this case, I adopt the following general principles as to fact-finding and assessment of credibility set out in Hui Cheung Fai v Daiwa Development Ltd (unreported, HCA 1734/2009, 8 April 2014) at §§77-80, as recited in Zief Incorporated v Tekchandani Ajai Mohan (T/A D’Ziner Collections (Hong Kong) & Ors [2021] 3 HKC 69:

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) …

78. In deciding whether to accept a witness’s account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5^th May 2011) §39 (Chu J).

79. In determining a witness’s credibility, I have also attached importance to the consistency of the witness’s evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ).

81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:

‘Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.’

82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination…”

10.  In the present case, records of the WhatsApp messages (including some of the attachments and transcripts of the voice messages) were placed before the Court. Such contemporaneous evidence formed the backbone of my determination of the parties’ credibility.

11.  Regarding Issues 1 and 2, the plaintiff bears the burden of showing that the oral loan agreements were made as alleged.

12.  Parties agree that I can take into account the subsequent conduct of the parties in deciding whether there was an oral contract and what the terms of the contract were. See Carmichael & Another v National Power Plc [1999] 1 WLR 20142 at 2050H-2051B and Chitty on Contract (34^th ed), [15-060].

13.  In their opening submissions, parties raised an issue concerning how the repayments should be properly appropriated. See Chitty on Contracts (34^th ed), [24-060] and SAS Institute Inc v World Programming Ltd [2019] EWHC 2496 (Comm), §§64-68. However, as demonstrated below, ultimately, there is no dispute as to the appropriate appropriation in the present case.

D. CREDIBILITY FO THE PALIN AND THE DEFENDANT

14.  The plaintiff is a hardworking and, in many respects, impressive individual. Even with her limited education, she accumulated a certain level of wealth and takes care of her children.

15.  She undoubtedly placed considerable trust in the defendant and had (what she considered) a genuine friendship with her.

16.  However, regrettably, I consider the plaintiff an unreliable witness.

17.  As will be made plain below, her answers were often evasive, and she changed her account of events from time to time under cross-examination.

18.  Most importantly, her evidence was frequently at odds with the contemporaneous evidence, and her attempts to explain away the inconsistencies, incredulous.

19.  In contrast, I consider the defendant a generally reliable witness. She gave her answers in a forthright manner, and was willing to admit matters which could be said to be against her interest.

20.  Mr Samuelson Choi, the plaintiff’s counsel, sought to attack the defendant’s character by alleging or implying that the defendant’s deeds were, put mildly, shady or of questionable moral character. These submissions are not without force, and I give full weight to the plaintiff’s allegations.

21.  However, ultimately, as will be demonstrated below, these submissions fail to undermine the defendant’s credibility in respect of the key aspects of the parties’ case, particularly in view of the contemporaneous documents.

22.  It is to be noted that, in respect of the 1^st and 2^nd Issues, the plaintiff advanced no alternative case other than the alleged oral loans. Thus, I am not grappling with issues such as whether the defendant has breached any duties as the plaintiff’s agent, save to indicate that, as stated above, I have given full weight to the implications of the defendant’s questionable behaviours when considering the defendant’s credibility.

23.  Thus, insofar as there is a conflict between the plaintiff’s and the defendant’s evidence, I tend to prefer the latter.

24.  That said, as demonstrated below, this does not mean that I accept the defendant’s evidence wholesale.

25.  For the avoidance of doubt, in coming to my conclusion below, I have considered the totality of the evidence and counsel’s submissions when determining the issues. I separately set out my analysis concerning each of the transactions below for ease of understanding only.

E. ISSUE 1: WHETHER THE 1^ST SUM WAS TRANSFERRED TO THE DEFENDANT (i) PURSUANT TO AN ORAL LOAN AGREEEMNT MADE ON 7 JANUARY 2016 ON AN INTEREST-FREE REPAYABLE ON-DEMAND BASIS, OR (ii) FOR THE PURPOSE OF THE PLAINTIFF’S INVESTMENT IN STOCK

E1. The plaintiff’s case

26.  The plaintiff’s case is that on 7 January 2016, the defendant borrowed $200,000 from the plaintiff. It was an interest-free loan repayable on demand.

27.  On 5 or 6 January 2016, the defendant called and informed the plaintiff that she needed funds to invest in the stock market. Thus, she would like to borrow money from the plaintiff.

28.  Because the defendant was a good friend and was a VIP customer, the plaintiff was willing to do so. Accordingly, she entered into the said oral loan agreement.

29.  She had never invested via the defendant. She had her own investment account and would invest on her own without the defendant’s assistance.

E2. The defendant’s case

30.  The defendant’s case is that in early 2016, she mentioned to the plaintiff that she was investing in a stock pursuant to the information given by her friend. This piqued the plaintiff’s interest. The defendant ultimately agreed to allocate a certain percentage of the stock she had already bought as the plaintiff’s shares, roughly equating to around $200,000. However, since her friend reminded her to keep the information secret, she did not tell the plaintiff about the share number she purchased at the time.

31.  However, the price of the stock kept falling. Having sought the plaintiff’s view, the plaintiff decided not to cut loss by selling the shares. Instead, like the defendant, she decided to switch to another stock.

32.  As of the end of 2011 (when the defendant filed her witness statement), the shares were worth just one-tenth of the purchase price.

E3. Analysis

33.  As foreshadowed above, it is apt to start the analysis by looking at the contemporaneous WhatsApp messages between the plaintiff and the defendant.

34.  In relation to the 1^st Sum, the most apposite WhatsApp messages are as follows.

(1) On 7 January 2016, after the 1^st Sum was transferred to the defendant, the plaintiff took a photo of the transfer slip and then sent it to the defendant. That was followed by the plaintiff’s message: “萬分感激 陳皮公主辛苦妳嗱 [with crying and thank you emojis]” (English translation: Most grateful, Chan Pei Princess (nickname of the defendant), really appreciate it). The defendant then replied with an OK emoji (“the 7 January 2016 messages”);

(2) On 9 December 2017, the plaintiff sent a photo summarising the transactions in question. In that photo, she referred to the 1^st Sum as “New 股票花20萬” (English translation: New Stock Flower 200,000) (“the 9 December 2017 message”);

(3) A picture of a handwritten note the defendant sent to the plaintiff via WhatsApp on 3 July 2018 (“the Handwritten Note”)

(4) At a later stage, there were references to the plaintiff lending around $2-3 millions (“later messages”)

E3.1. The 7 January 2016 messages

35.  As to the 7 July 2016 messages, Mr Bache Sit, the defendant’s counsel, submits that these messages clearly show that at the material time, the plaintiff was asking the defendant for a favour, instead of the other way round. The messages do not sit comfortably with the plaintiff’s contention that she was advancing an interest-free loan to the defendant. If the 1^st Sum were indeed an interest-free loan, the plaintiff would have nothing to gain.

36.  Under cross-examination, the plaintiff explained that it was her habit as a member of the service industry to speak with the utmost deference and courtesy.

37.  While it is understandable that the plaintiff would be courteous as a matter of habit, this is not a proper explanation of the plaintiff’s response, for the plaintiff was plainly expressing her gratitude to the defendant, not mere deference. While I accept Mr Choi’s submissions that at the time, the interest rate was low, and hence the detriment the plaintiff suffered (by way of a loss of interest) was negligible, it still makes little sense for her to express her gratitude in such an effusive manner.

E3.2. The 9 December 2017 message

38.  In any event, the 9 December 2017 message makes it plain that the 1^st Sum was an investment.

39.  When cross-examined on this message, the plaintiff claimed that she labelled the sum as stocks (“股票花”) on the deposit slip, as this was the defendant’s purported purpose of the loan. I agree with Mr Sit that this was not a reasonable explanation.

40.  First, the plaintiff could not provide any, let alone any logical, reason explaining why she had to add the word “new” to the beginning of the description.

41.  During closing submissions, Mr Choi reiterated the plaintiff’s explanation that “New” meant a new item. But upon further questioning, he admitted that it is not clear why the plaintiff had to remark that this particular item was “New” specifically – this makes little sense when compared with the other listed items.

42.  But the word “New” is entirely consistent with the defendant’s case, namely, that by that time (around mid-2017), the defendant had sold the stock of a listed company that she initially held for the plaintiff and used the sale proceeds to invest in another listed company’s stock for her. That explains why the plaintiff described the stock investment as “New”. She knew that there was a stock switching.

43.  Secondly, in the version of WhatsApp the plaintiff disclosed in this action, on the same photo message, the words “股票花” were removed, leaving a blank between the words “New” and “20萬”.

44.  The plaintiff gave no reasonable explanation as to why the words “股票花” were blotted. It certainly could not be due to any malfunctioning of her phone as alleged. Apparently, she knew that the description undermined her case and decided to edit the evidence.

45.  Thirdly, I was also invited to consider the defendant’s financial condition at the time when the 1^st sum was transferred. As the Member Account Treatment Balance sheet reveals, the defendant at the material time had purchased a substantial amount of beauty treatment credits.

46.  Further, as the composite statement of the defendant’s HSBC account shows, before the defendant received the 1^st sum on 7 January 2016, the defendant had already in December 2015 purchased the bulk of the stock that she planned to invest (7.128 M shares of the listed company’s stock numbered 00705). The value of those stocks as of 5 January 2016 was $862,488.

47.  Viewed objectively, the defendant did not have a liquidity crunch during that period, and she simply did not need to borrow from the plaintiff. The contention that the 1^st Sum was a loan is inherently improbable.

48.  Mr Choi submitted that, since the defendant admitted that he had borrowed money from others to invest in gold (see below), the defendant had a “habit or tendency of….borrow[ing] money from others to make investments,…despite not having sufficient funds herself to do so”.

49.  But the above sheds little light as to the defendant’s need or habit to borrow money at the material time when the 1^st Sum was advanced.

E3.3. The Handwritten Note

50.  The Handwritten Note the defendant sent out on 3 July 2018 deserves closer attention because of its potential importance to both the 1^st and the 2^nd Issues.

51.  In gist, it set out what appears to be a breakdown of the defendant’s repayments in June and July 2018 totalling $772,200 as follows: (a) 6 instalments under the 4^th Sum: $450,000, (b) the 1^st Sum: $200,000, (c) part of the 6^th Sum: $100,000 and (d) 6 months interest under the 2^nd and the 3^rd Sums: $22,200.

52.  According to the plaintiff, that shows the defendant accepted her liability to repay the 1^st and the 6^th Sums.

53.  On the other hand, under cross-examination, the defendant suggested that it merely recorded the plaintiff’s proposal which was under the defendant’s consideration at the time.

54.  The defendant’s version of events was that at that time, the plaintiff begged the defendant to treat the 1^st and the 6^th Sums, the unsuccessful investments, as loans that were advanced to her. The defendant did consider this as she felt that she had let her friend down, but could not readily accede to that request as she had also suffered significant loss in the gold transactions. After the Handwritten Note was sent out, the parties realised that $450,000 was insufficient to fully settle the sum due under the 4^th Sum as there were 7, instead of 6, outstanding instalments. Thus, they discussed the appropriation proposal again and further revised it. The proposal set out in the Handwritten Note was not adopted.

55.  I prefer the defendant’s evidence on this issue.

56.  First, having considered the totality of the (contradictory) WhatsApp messages, I am of the firm view that while the plaintiff could not give any sensible explanation to account for her messages (see above), while the defendant’s explanation was coherent and reasonable. It is also worthy of note that the WhatsApp messages show that earlier on the same day, the plaintiff did make a proposal and asked the defendant whether the “above proposal” was alright.

57.  Secondly, the explicit identification of “股票” (stock) and “金” (gold) and their grouping in the Handwritten Note is significant, as the purposes for the other (undisputed) loans were not specified. I agree with Mr Sit’s observation that there were no words like “car park” marked beside the 4^th Sum and no words to the effect of “small house” marked beside the 2^nd and the 3^rd Sums. These tend to support the defendant’s case that the “stock” and “gold” were different from the other loans – they were identified and grouped differently because they were investments.

58.  In coming to this conclusion, I have not lost sight of the fact that the defendant had deliberately deleted the Handwritten Note from the WhatsApp messages she produced. The defendant’s explanation that the deletion was done because the arrangement was not implemented is not accepted.

59.  However, this does not mean that the defendant was necessarily lying in all respects of the matters concerning the Handwritten Note. There was a motive for the defendant to delete this message as it, on the face of it, could support the plaintiff’s case (as shown above), and could potentially undermine the plaintiff’s case in other ways (see Section F3.3 below). Having regard to the contemporaneous documents and the defendant’s explanation as to the provenance of the Handwritten Note, I come to the conclusion that it did not support the plaintiff’s contention that the 1^st Sum (and the 6^th Sum) was a loan.

E3.4. Later messages

60.  Since about 2018, there have been a few messages from the plaintiff which suggested that she had lent the defendant $2-3 million. See, eg the WhatsApp messages on 6 July 2018.

61.  I attach little weight to them, as it appears to me that they are self-serving and completely contrary to the contemporaneous documents. By then, the plaintiff began to lose faith in the defendant, and categorising all the Sums as “loans” generally was an afterthought.

E3.5. The defendant’s improprieties

62.  Mr Choi cross-examined the defendant in detail about her (alleged) allocation of the shares or the subsequent alleged change of stock. It was suggested, in effect, that the defendant might not have bought any shares for the plaintiff, but merely retrospectively attributed the shares to her.

63.  I believe it is possible (I put it no higher than that) that the defendant might not be acting in the plaintiff’s best interest in this regard, e.g. by allocating more expensive shares to her retrospectively.

64.  However, the plaintiff never advanced any case alternative to the alleged interest-free loan. E.g, that the defendant had breached her duties (fiduciary or otherwise) as the plaintiff’s agent or had committed fraud.

65.  Insofar as it is suggested that I ought to draw an inference, by reason of the above, that there was a loan agreement in respect of the 1^st Sum, this is a quantum leap from the evidence before the Court.

66.  I have not lost sight of the fact that the defendant bought those shares because of information she received from her friends. Mr Choi suggested that there was a hint of impropriety in relying on what could be said to be insider information.

67.  There was insufficient information before me to judge whether the allegation was well founded. But more importantly, even if I agree with Mr Choi, it appears to me that the plaintiff knew about this too – that was one of the reasons why she was interested in asking the defendant to invest for her. Hence, the defendant’s (potential) impropriety in this respect does not mean that her version of the event is inherently improbable, let alone supports the existence of a loan agreement.

68.  Indeed, the perceived sensitivity of the information concerning the stocks explains why there was little discussion between the plaintiff and the defendant or records in writing concerning the status updates of such stocks. The plaintiff alleged that she did not know and did not ask what stock the defendant was purchasing, at the time of lending and thereafter, and neither did the defendant tell her. Whether this was the case is immaterial: I do not doubt that the plaintiff trusted the defendant and did ask her to help her invest in a stock which the latter had already invested in by reason of the information given by her friend.

69.  Having considered all the relevant evidence and submissions, I am of the firm view that the plaintiff did ask the defendant to help her invest the 1^st Sum in a stock and that there was no loan agreement whatsoever in respect of the 1^st Sum. I accept the defendant’s evidence that she did inform the plaintiff whether she would continue to hold the stock and subsequently the need to switch to another stock. This explains the description “New股票花”, as stated above.

70.  Thus, the Plaintiff failed on the 1^st Issue.

F. ISSUE 2: WHETHER THE 6^TH SUM WAS TRANSFERRED TO THE DEFENDANT (i) PURSUANT TO AN ORAL LOAN AGREEMENT MADE ON 9 DECEMBER 2017 CARRYING A FIXED INTEREST OF HK$50,000 REPAYABLE IN AUGUST 2019 (ie AFTER 20 MONTHS) OR (ii) FOR THE PURPOSE OF THE PLAINTIFF’S INVESTMENT IN PHYSICAL GOLD

F1. The plaintiff’s case

71.  The plaintiff’s (pleaded) case is that the defendant borrowed a sum of $1,000,000 from the plaintiff on 9 December 2017, repayable in 20 months with a fixed interest of $50,000.

72.  On 7 or 8 December 2017, the defendant asked the plaintiff to lend her $1,000,000 on the phone to invest in gold. Since the defendant had repaid from time to time in the previous months, the plaintiff was not wary of her and thought that the defendant could bring her interest and entered into the said loan agreement.

73.  The plaintiff never participated in the gold investment or trading as the defendant alleged.

F2. The defendant’s case

74.  The defendant’s case is that she and her husband were first introduced to gold investment by Wong Wang Kei (“Mr Wong”). The defendant, her husband, Mr Wong and another friend therefore started investing in gold.

75.  One night, while the defendant was attending a banquet, the plaintiff called her and asked her what she was doing lately. The defendant told her about the gold investment. The plaintiff was apparently interested, and asked about the investment details.

76.  Eventually, the plaintiff asked if she could participate in the investment. The defendant warned her that such investments were “in the scale of millions” and she had to think carefully before investing.

77.  Later that night, the plaintiff called and said she would like to make a $1 million investment in gold. The defendant agreed and accepted the $1 million transfer on 9 December 2017.

78.  Eventually, the defendant and (inter alios) Mr Wong paid a $6 million deposit for buying the relevant gold bars. However, that investment wholly failed; to date, they have gotten nothing back in return.

F3. Analysis

F3.1 The WhatsApp messages

79.  Mr Sit submitted that the plaintiff’s case (in both her pleadings and witness statements) contradicts the following WhatsApp conversations.

80.  On 9 December 2017, before the 6^th Sum was transferred to the defendant, the plaintiff enquired in the WhatsApp if the 2^nd and the 3^rd Sums could be put into the scheme of “14天速成大滴滴” (English translation: 14 days crash big drops) (“想問吓呢個舊plan可否轉新plan 14天速成大滴滴”.)

81.  I agree with Mr Sit that the plaintiff’s case is wholly inconsistent with the contemporaneous evidence in the following three respects:

(1) First, while the plaintiff alleged that the 6^th Sum is a 20-month term loan, at the material time in the WhatsApp, she actually described it as “14天速成大滴滴”. The plaintiff used the term “滴滴” (drops) to denote return or benefit (see further below). Obviously, she expected that whatever arrangement the 6^th Sum was subject to would yield a return in 14 days, but not in 20 months’ time.

(2) Secondly, the plaintiff’s question, on the plaintiff’s case, did not make sense. According to the plaintiff, the 2^nd, the 3^rd and the 6^th Sums were all personal loans she advanced to the defendant. Thus, the plaintiff was in effect asking whether the defendant would mind borrowing less from her (reduced from $1,000,000 to $500,000). I agree with Mr Sit that the message would make more sense if the plan of “14天速成大滴滴” was an investment - the plaintiff was probably enquiring if she could be repaid the 2^nd and the 3^rd Sums and use the repayment to participate in the new investment plan. In any event, it is plain that the WhatsApp messages are inconsistent with the existence of a loan agreement in respect of the 6^th Sum;

(3) Thirdly, Mr Sit submitted that, on the plaintiff’s case, the 20-month term loan carries a fixed interest of $50,000 and thus a monthly interest rate of 0.25%. That is much lower than the monthly interest rates under the 2^nd Sum (0.7%) and the 3^rd Sum (0.8%). The plaintiff however, described the 6^th Sum as carrying “大滴滴” (English translation: big drops) and the 2^nd and the 3^rd Sums as carrying “小滴滴” (English translation: little drops), implying that the return to be derived from the former is larger than that of the latter. I agree with Mr Sit’s submissions, although I note that here, the plaintiff was (in theory) talking about getting interest payments within 14 days – but this created further problems;

82.  When confronted with the WhatsApp messages showing that the 6^th Sum was referred to by herself as “14天速成大滴滴”, the plaintiff immediately came up with an unpleaded version of events mentioned for the first time during cross-examination, namely, that the 6^th Sum was initially proposed as a 14-day loan carrying a fixed interest of $30,000 and it only became a 20-month term loan carrying fixed interest of $50,000 about 7 or 8 months later, ie in late 2018.

83.  I agree with Mr Sit that this stands in complete contrast to her pleaded case that the 6^th Sum was all along a 20-month term loan.

84.  The plaintiff offered no reasonable explanation for the sudden volte-face. Her answer, during cross-examination, that she misremembered because the defendant (often) called at night while she was taking care of the children simply could not explain the change of evidence, which was clearly an afterthought. It is particularly unreasonable in view of the fact that in respect of the 4^th Sum, she had in fact pleaded a supplemental agreement. She could have easily pleaded another supplemental agreement in respect of the 6^th Sum.

85.  During re-examination, the plaintiff gave yet another account of the events, namely, that the 6^th Sum was initially indeed a 20-month term loan carrying fixed interest of $50,000. Soon after she transferred the 6^th Sum to the defendant, however, the defendant proposed to her that the whole sum would be repaid in 14 days instead and the defendant would still pay her the same amount of fixed interest, ie $50,000. That proposal however was not honoured by the defendant.

86.  This version of events was also mentioned only for the first time in Court. It is apparently an attempt to correct the earlier (highly improbable and contradictory) version.

87.  But even this (third) version is still inconsistent with the WhatsApp messages. As stated above, it still made no sense for the plaintiff to ask this question.

88.  Mr Choi submitted that “滴滴” (drops) denote “interest” as opposed to “return”, and therefore the plaintiff was in fact talking about interest from the loan. But, as stated above, this interpretation does not make sense in the context of the WhatsApp messages.

89.  The WhatsApp messages also show that the plaintiff did actively ask the defendants for money-earning opportunities.

90.  For instance, on 4 November 2019, she asked the defendant in a voice message, “仲諗住揾你食飯㖭，睇下有無啲野搞下？本小利大嗰啲。” (English translation: Was planning to have dinner with you, see if there is anything that (we) can do? Those with little cost and big return.)

91.  In a WhatsApp message sent on 25 January 2018, she stated that “妳set 1億，我都訂1千萬！所以我要定期坳撈住妳” (English translation: You set $100 million [target], I would also set $10 million. I will regularly seek opportunities from/earn from/work with you)

92.  When cross-examined about this message, the plaintiff said that these were her pet phrase (口頭蟬) or that she was just joking.

93.  Relying on the Handwritten Note, Mr Choi made similar submissions to the effect that this supports the plaintiff’s case that the $1,000,000 was advanced as a loan. I likewise reject these submissions for the reasons stated in Section E3.3 above.

94.  Mr Choi’s submission above that since the defendant admitted that he had borrowed money from others to invest in gold, the defendant had a “habit or tendency of borrow[ing] money from others to make investments” also applies to the 6^th Sum. It is plain that the defendant had borrowed money from the plaintiff before. However, in view of the contemporaneous evidence, I cannot draw the inference that the advancement of the 6^th Sum was also likewise a loan.

F3.2 Inherent probabilities

95.  Mr Sit submitted that the plaintiff’s case has also undergone a significant morphing in that at the pre-action stage after she had engaged her lawyers, she did not include the sums under the 5^th Oral Agreement and the 6^th Sum into the list of loans that she allegedly advanced to the defendant in the pre-action letters dated 11 June 2020 and 30 July 2020. It is to be noted that the 5^th Sum was indisputably concerned with an investment as opposed to a loan.

96.  I tend to agree with Mr Sit’s submissions. The plaintiff explanation that she has yet to complete calculating the respective outstanding sums under the 5^th Oral Agreement and the 6^th Sum and so she omitted them for the moment was incredible. Not only that, arguably, she had never completed the calculation exercise (until the closing submissions stage), but also that there was no reason why she could not simply state in the letters that she was still calculating those outstanding sums.

97.  During cross-examination, the defendant was asked, and thus gave evidence on, the following matters:

(1) She ignored obvious problems in the agreement regarding the $4,500,000 investment, such as a reference to “1000%”. During cross-examination, she claimed that she did not understand the English word “amount”;

(2) She did not ask Mr Wong for a photo record of the agreement signed for the $1,500,000 investment and the $3,000,000 investment later on;

(3) She arranged for the $3,300,000 to be paid from GWK Group Ltd to her Thai restaurant, Thai Relax Limited, so that she could avoid the bank asking her for the reason of having such a large sum of money transferred into her personal account. For the same reason she did not make the repayments in one go.

(4) She did not call the police or take any legal action against GWK Group Ltd after the company appeared to be unable to repay the investment sums to the defendant, as she consulted “relevant people” and was advised not to do so since there was no proof of her involvement.

98.  In his closing submissions, Mr Choi appears to be suggesting that the above shows that “the Plaintiff’s evidence, when compared to the Defendant’s, is more believable…”. It is plain that the plaintiff knew or at least was told about the gold investment – this was regularly referred to in the WhatsApp messages, including the Handwritten Note (which the plaintiff relied on) and a message on 14 January 2018, which referred to the $6 million investment.

99.  Insofar as it is suggested that the defendant’s conduct was not totally above board, this may well be so. But this does not undermine the defendant’s case that the 6^th Sum was advanced for investment purposes, not a loan. Again, the defendant was not sued for breach of her duties as agent or for fraud.

100.  Indeed, I found the plaintiff’s version of events to be wholly unconvincing and inherently improbable.

101.  On her case, by the time she transferred the 6^th Sum to the defendant, the defendant had already wholly failed to return the 1^st Sum, and defaulted or delayed in returning the 2^nd Sum, the 3^rd Sums and the 4^th Sums and the relevant interest payments. Given that, on the plaintiff’s case, she had been reluctant to lend the defendant money from the get-go, her apparent willingness to lend increasingly larger sums to the defendant was inexplicable.

102.  On the other hand, the defendant’s version of events is coherent: other than the loan in respect of the 4^th Sum, the plaintiff stood to gain (or at least the plaintiff was under such an impression) at the time:

(1) The 1^st, 5^th and 6^th Sums were advanced as investments;

(2) The 2^nd and 3^rd Sums were (eventually) advanced as loans to third parties with a view to earning higher interests.

103.  Thus, on the defendant’s version of events, the plaintiff’s frequent expression of gratitude makes perfect sense. As to be elaborated below, the plaintiff considered the advancement of all the Sums (apart from the 4^th Sum) as investment or earning opportunities.

F3.3. An alternative case?

104.  In the course of the plaintiff’s closing submissions, Mr Choi advanced an alternative case.

105.  Insofar as I can understand it, the alternative case appears to be that even if I find against the plaintiff in respect of the 1^st and 2^nd Issues (which I do), I should treat the repayments in respect of the (1) 200,000 for the Shares and (2) 100,000 for the gold investments as stated in the Handwritten Note as gifts to the plaintiff. That is to say, they were not “repayments” for the defendant’s indebtedness to the plaintiff.

106.  There are multiple problems with these submissions.

107.  First, this alternative case is inconsistent with the pleadings, in which the plaintiff readily accepted that the $300,000 in question were repayments of the indebtedness to her.

108.  Secondly, the plaintiff has not pleaded this or, indeed any alternative case. It is not permissible for the plaintiff to advance this alternative unpleaded case at such a late stage.

109.  Thirdly, since I accepted the defendant’s explanation as to the provenance of the Handwritten Notes, namely, that it recorded the plaintiff’s proposal to which the defendant was pondering whether to agree, there is no evidence that the defendant intended to make any alleged gifts to the plaintiff.

110.  Thus, I reject this alternative case.

G. FINDINGS IN RESPECT OF THE 2^nd, 3^rd AND 5^th SUMS

111.  While the parties differ in their accounts in respect of the reasons for the advancement of these sums[2], counsel agreed that these matters only concern the general credibility of the parties.

112.  Thus, I would only deal with these matters briefly. Suffice to say, I have considered all the evidence and submissions by the parties, and have factored in these matters when considering the plaintiff and the defendant’s general credibility.

G1. The 2^nd and 3^rd Sums

113.  There is no dispute that the plaintiff initially advanced the 2^nd Sum (of $300,000) to the defendant as a personal loan to the latter.

114.  The dispute concerns whether, subsequently, the 2^nd Sum remained as a personal loan to the defendant carrying monthly interest, until the principal became repayable in April 2020 as alleged by the plaintiff, or it subsequently became a loan advanced by the plaintiff, through the defendant, to the defendant’s friend Mr Wong as the defendant alleged.

115.  It is plain from the contemporaneous WhatsApp messages that the plaintiff was fully aware that the actual borrower was a third party:

(1) In the WhatsApp messages, she expressed from time to time her wish that the borrower would repay her later so that she could continue receiving monthly interest;

(2) Most tellingly, in the voice messages in the same period, the plaintiff even wished the debtor to be heavily indebted so that she could continue to receive the interest payments (“希望佢負債累累啦”). Her explanation that “佢” (he or she) in the context meant “you” (the defendant) is utterly incredible and contrived;

(3) Subsequently, when the defendant indicated that the borrower had not yet repaid and so the 2^nd and 3^rd Sums could not be applied to gold investment, the plaintiff also readily understood what she meant and replied with an OK emoji.

116.  While I do not have to find whether the 2^nd and 3^rd Sums were specifically lent to Mr Wong, Mr Sit’s observation that the plaintiff had deliberately attempted to distance herself from Mr Wong was also justified. Under cross-examination, she repeatedly said that she had no idea at all that the defendant had any friend nicknamed “太子仔” (Prince), “阿基” (Ah Kei) or “盧基” (Lo Kei). But in the WhatsApp messages, she would, from time to time, bring up these nicknames on her own initiative. She must be aware of the existence of Mr Wong, but did not want to admit it.

117.  In contrast, the defendant was unshaken during cross-examination: she readily confirmed that she earned higher interests than the plaintiff when lending the same amount of money to Mr Wong, and that she knew that Mr Wong would on-lend the money as part of his moneylender business.

118.  All in all, I prefer the defendant’s account of events, and I find that the 2^nd and 3^rd Sums were advanced to a third party such that the plaintiff could obtain interest payments. It was not a fixed-term loan to the defendant, and the plaintiff knew about the arrangement.

119.  That said, since the defendant all along agreed that she would make repayments concerning the 2^nd and 3^rd Sums (whether as agent or just out of a moral obligation), the above analysis does not affect the resolution of Issue 3.

G2. The 5^th Oral Agreement

120.  It is not disputed that on or about February 2017, the plaintiff agreed with the defendant to participate in an investment plan under which she would ultimately be entitled to $225,000 in return (“the 5^th Oral Agreement”).[3]

121.  The plaintiff case appears to be that while there was an oral agreement with the defendant concerning an investment, she did not know that she participated in a chit-fund, and never quite knew how the chit-fund was supposed to work. On reflection, the 5^th Oral Agreement was probably proposed by the defendant in order to avoid making the various outstanding payments.

122.  The defendant case is that she invited the plaintiff to join in a chit-fund of which her husband was a member, and did explain the mechanism of the chit-fund.

123.  While Mr Choi expressly stated that he would not raise any issue on illegality, he nonetheless invited the Court to rule that the defendant’s testimony in this respect was inherently improbable, as it is inherently improbable that such a chit-fund, which involved breaches of the Chit-Fund Businesses (Prohibition) Ordinance (Cap 262), could exist: see Suen Chap Lam v Suen Kit Lin (unrep, HCA 2912/2016, 19 October 2020) [2020] HKCFI 2643 at [48].

124.  I am unable to accept Mr Choi’s submissions.

125.  The defendant’s case is supported by contemporaneous documents. Most importantly, she sent a record form of the chit-fund to the plaintiff via WhatsApp on 10 February 2017 when inviting the plaintiff to participate in the investment scheme. In the form, the essential terms of the scheme were set out, together with the various names of the other participants. It is abundantly clear that the plaintiff knew at least some of them, and could have easily bumped into them in social occasions. Thus, the plaintiff could have easily exposed this scheme. It is not apparent why the defendant would make up such an overly complicated and ineffective scheme, even if she wished to invent a (fake) investment scheme to avoid repayment.

126.  It is also evident from the WhatsApp records that the defendant explained the basic information concerning the scheme, and subsequently enquired whether the plaintiff understood how the scheme worked. In response, the plaintiff said that she did not need to understand the mechanism as long as the defendant understood how it worked. This shows that the defendant did not try to hide the mechanism of the chit-fund from the plaintiff in any way.

127.  Thus, I find that the plaintiff knowingly participated in the chit-fund per the terms set out in the said record form.

128.  The above assists me in coming to the conclusion that I consider, generally speaking, the defendant is the more credible and reliable witness.

H. ISSUE 3: WHAT IS THE TOTAL OUTSTANDING AMOUNT PAYABLE BY THE DEFENDANT TO THE PLAINTIFF?

129.  Since the plaintiff failed in Issues 1 and 2, the outstanding amount payable is the amount payable for the sums due in respect of the transactions concerning the 2^nd, 3^rd and 4^th Sums and the 5^th Oral Agreement minus the sums repaid by the defendant, having regard to the proper appropriation.

130.  The defendant’s pleaded case is that she would not be liable for more than $360,300.

131.  The defendant accepted that, in this case, it was up to the plaintiff to make the relevant appropriation. In his closing submissions, Mr Sit suggested that the appropriate calculation should be as follows:

(1) The repayments totalling $936,500 between 27 February 2017 and January 2018 should be appropriated towards repaying the 4^th Sum.

(2) The repayments totalling $772,200 between June and July 2018 should be appropriated towards repaying the 4^th Sum and 5^th Oral Agreement fully.

(3) The repayments totalling $124,400 in September 2018 should be appropriated in this way: $7,400 ($3,700 x 2 months) to repay the interest incurred in August 2018 and September 2018 and the remainder of $117,000 ($124,400 - $7,400) to repay the principal of the 2^nd Sum. After the repayments, the outstanding principal under the 2^nd Sum would be $183,000 ($300,000 - $117,000). The corresponding monthly interest after the repayment is $1,281 ($183,000 x 0.7%);

(4) The repayment of $130,000 on 4 January 2020 should be appropriated in this way: $46,096 (($1,600 + $1,281) x 16 months) to repay the interest accrued between October 2018 and January 2020 and the remainder of $83,904 ($130,000 - $46,096) to repay the outstanding principal of the 2^nd Sum. The outstanding principal under the 2^nd Sum after the repayments would be $99,096 ($183,000 - $83,904). The corresponding monthly interest after the repayment is $693.672 ($99,096 x 0.7%);

(5) The total interest payable under the 2^nd Sum for the period between November 2016 and April 2020 (41 months) is $68,777.016 ($2,100 x 22 months + $1,281 x 16 months + $693.672 x 3 months).

132.  Thus, the total sum that the plaintiff is entitled to get back from the defendant is:

Sums	Date	Principal	Interests/Return
2nd	2016.10.06	$300,000	$68,777
3rd	2016.12.16	$200,000	$67,200
4th	2017.02.13	$1,500,000	$50,000
5th	2017.02.11 – 2017.06.10	$79,100	$20,600
		Total:	$2,285,677

133.  In short, the defendant needed to repay the plaintiff $312,877 ($2,285,677 - $1,972,800).

134.  During closing submissions, Mr Choi agreed that the defendant's calculation is correct should the plaintiff fail in Issues 1 and 2.

I. CONCLUSION

135.  By reason of the aforesaid, I make the following order: the defendant do pay the plaintiff $312,877 within 42 days, with interest at judgment rate from the date of Judgment.

136.  The defendant succeeds in all the issues. Costs should follow the event. I make an order nisi that costs be to the defendant, to be taxed if not agreed, with certificate for counsel.

137.  I thank counsel for their assistance.