TAI SHING LEE VICTOR t/a LUCKY REMINBI EXCHANGE FOREIGN CURRENCY CO v. WU KA YU JENNIE

HCA 982/2018

[2021] HKCFI 3269

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 982 OF 2018

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J U D G M E N T

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Introduction

1.  This is the trial of the Action. 

2.  The Plaintiff was a foreign currency exchange operator trading under the name of Lucky Reminbi Exchange Foreign Currency Co (幸運人民幣找換匯款) (“Lucky”). Ms O Sau Kuen, Fanny (“Ms O”) is the wife of the Plaintiff and at the material time was a staff of Lucky.

3.  The Defendant was also a foreign currency exchange operator.  The Plaintiff claims she was acting on her own account when dealing with Lucky.  The Defendant claims that she used to be the licensee of 圓通兌換找換店 (“圓通”)[1] and dealt with fellow currency exchange operators, including the Plaintiff, in the name of 圓通when providing money exchange/remittance services to customers.  After April 2017, she became the staff of another currency exchange and remittance operator viz Joint Profit Inc Limited 駿利行有限公司 (“Joint Profit”) and dealt with fellow currency operators, including the Plaintiff, as the agent/staff of Joint Profit.

4.  This Action arose out of 2 foreign exchange and remittance transactions between Lucky and the Defendant which took place in July 2017. 

The parties’ case and the issues

5.  The Plaintiff’s case is as follows.

6.  By an oral agreement reached on 25 July 2017 between Ms O on behalf of the Plaintiff, acting for an unidentified principal, and the Defendant acting on her own account as licensee of 圓通, the Plaintiff agreed to engage the currency exchange and remittance service of the Defendant (“1st Agreement”).  The terms of the 1st Agreement were:

(1)  The Plaintiff would procure the deposit of RMB2,776,000 to a bank account in the name of 深圳市金來豐順貿易有限公司 with the Agricultural Bank of China Limited in the PRC (“PRC ABC Account”) and

(2)  The Defendant would procure the deposit of US$400,000 to a bank account in the name of Action Thrive Limited (“Action Thrive”) with HSBC in Hong Kong (“Action Thrive HSBC Account”).

7.  On 25 July 2017, the Plaintiff performed his part of the 1st Agreement by procuring the deposit of RMB2,776,000 into the PRC ABC Account.  On the same day, the Defendant purported to have performed her part of the 1st Agreement by sending via WhatsApp to the Plaintiff 2 bank deposit slips showing (i) a deposit of US$150,000 into the Action Thrive HSBC Account and (ii) a deposit of US$250,000 into the Action Thrive HSBC Account.

8.  By another oral agreement reached on 26 July 2017 between Ms O on behalf of the Plaintiff, acting for an unidentified principal, and the Defendant acting on her own account as licensee of 圓通, the Plaintiff agreed to engage the currency exchange and remittance service of the Defendant (“2nd Agreement”).  The terms of the 2nd Agreement were:

(1)  The Plaintiff would procure the deposit of RMB2,845,400 into the PRC ABC Account;

(2)  The Defendant would procure the deposit of

(a)  US$200,000 into the Action Thrive HSBC Account; and

(b)  US$200,000 into an account in the name of You Hong Rong held with the Bank of China in Hong Kong (“You BOC Account”).

9.  On 26 July 2017, the Plaintiff performed his part of the 2nd Agreement by procuring the deposit of RMB2,845,400 into the PRC ABC Account.  On the same day, the Defendant purported to have performed her part of the 2nd Agreement by sending via WhatsApp to the Plaintiff 2 bank deposit slips showing

(1)  a deposit of US$200,000 into the Action Thrive HSBC Account and

(2)  a deposit of US$200,000 into the You BOC Account.

10.  On 28 July 2017, Ms O informed the Defendant that the Plaintiff’s client had not received the US$200,000 supposedly deposited into the You BOC Account.  That issue was resolved for the time being and is not the subject of this Action. 

11.  On 31 July 2017, the Plaintiff was informed that the sum of US$600,000 had not been deposited into the Action Thrive HSBC Account.  After some investigation, Ms O found out that the bank deposit slips sent to her were “forged” documents prepared by a fraudster.  It is not in dispute that the fraudster was a Madam Wong 黃鷺蓬 (“Wong”) who had been known to the Defendant for years.  What apparently happened was that Wong deposited a cheque into the relevant bank account to create the impression that money had been deposited into it, but the cheque was subsequently dishonoured.  There is no suggestion by the Plaintiff that the Defendant was party to the fraud.

12.  As a result of the Defendant’s breaches of the 1st and 2nd Agreements, the Plaintiff was not able to fulfil his contractual obligation towards Action Thrive and is now being sued by Action Thrive for the amount of US$600,000 plus interest in HCA 2464 of 2017 (“HCA2464”).  The Plaintiff also claims he has suffered loss of profit in relation to the 1st Agreement in the sum of HK$20,000.

13.  In the Amended Defence, the Defendant denies being a contracting party to the 1st or 2nd Agreement.  She claims that, as made known to the Plaintiff and Ms O, the 2 agreements were entered into by her as agent for and on behalf of Joint Profit.  She has also pleaded a trade practice which, as shall be seen, has become irrelevant.

14.  The principal issues which fall for determination are:

(1)  Whether the Plaintiff entered into the 2 subject agreements with the Defendant or with Joint Profit (“Issue 1”)?

(2)  If the Court finds that the 2 subject agreements were entered into by the Plaintiff and the Defendant, what were their terms and whether the Defendant was in breach of them (“Issue 2”)?[2]

(3)  Whether the Plaintiff is entitled to recover from the Defendant the US$600,000 and the loss of profit of HK$20,000? (“Issue 3”)?

15.  At trial, the Plaintiff called 2 witnesses:

(1)  Ms O.

(2)  The Plaintiff himself.

16.  The Defendant called herself as the only Defence witness. 

17.  Ms O is the Plaintiff’s main witness as she is the one who dealt with the Defendant in relation to the 2 subject transactions.  Since Issue 1 and Issue 3 involve, to a greater or lesser extent, questions of fact, the credibility of the witnesses is a crucial factor in their resolution.  In this regard, this court has carefully considered the manner in which the witnesses testified including their demeanour and assessed it against the contemporaneous 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. 

Deliberation

Issue 1

18.  Apart from a pleading point raised by Mr Yip in his closing submissions which this court shall dispose of shortly, this issue essentially involves a contest of credibility between Ms O and the Defendant - the Plaintiff’s testimony being largely to agree with what Ms O had said in her witness statement with very little to add.

19.  Mr Yip’s pleading point is that the 6 “facts” pleaded in paragraphs 5 and 12 of the Amended Defence in support of the plea that the 1st and 2nd Agreements were entered into by the Defendant “expressly as agent for and on behalf of Joint Profit Inc Limited; as the Plaintiff at all material times well knew”, taken to their highest, were merely evidence of the Defendant’s representations towards the Plaintiff and Ms O that she was acting as agent/ staff on behalf of Joint Profit. 

20.  In this court’s view, the point is misconceived. The Defendant has clearly pleaded in paragraph 5 (and repeated in paragraph 12) that she expressly acted as agent for and on behalf of Joint Profit in entering into the 2 oral agreements.  That is a sufficient plea of agency in itself and no additional facts need be pleaded in further support of it.  It is up to the Plaintiff to seek further and better particulars of the agency if they would like to seek further details of it eg how, when, and by whom of Joint Profit the Defendant was appointed an agent.  But they have not done so.

21.  The 6 “facts” in question were pleaded not so much in support of the agency as such, but rather as particulars of the Plaintiff’s knowledge of it.  This is evident on the face of paragraph 5 itself and should also be quite obvious from what is pleaded, including inter alia:

(1)  In May 2017, the Defendant faxed to the Plaintiff a copy of Joint Profit’s Licence for Operating Money Service issued by the Customs and Excise Department (“JP Licence”) and the identity card of  Hwang Yan-kian, Christine (“Hwang”), the purpose of which was to inform the Plaintiff that from then on, the Defendant would be dealing with the Plaintiff not on her own account, but as an agent/staff of Joint Profit and that Hwang was it ultimate owner^[3].

(2)  In the course of her business dealings with Ms O, the Defendant had represented to Ms O that she was a staff of Joint Profit and operated for and on its behalf. 

22.  To conclude, this court has little doubt that the agency defence has been sufficiently pleaded.  This court will now move on to the crux of Issue 1. 

23.  In the witness box, both Ms O and the Defendant appeared confident and straightforward.  They stood by their recollection of their versions of facts and were unshaken, at least on this issue, in cross-examination.  In assessing their credibility, this court finds the following remark of Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Limited & Anor [2013] EWHC 3560 (Comm) at [22] particularly pertinent to the present case:

“… the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” (emphasis added)

24.  On Issue 1, Ms O’s testimony is that in entering into the 1st and 2nd Agreements, the Defendant had never informed her or the Plaintiff that she was acting as an agent of Joint Profit. 

25.  During cross-examination, Ms O testified inter alia that:

(1)  She only heard of Joint Profit when she received from the Defendant by fax a copy of Joint Profit’s business registration certificate (“BR”) and the JP Licence on 31 July 2021, but not earlier.

(2)  The reason why the Defendant faxed the 2 documents to her was because Ah Bo, whose full name is 張础桓 (“Ah Bo”), informed Ms O that the 3 US dollar deposits totaling US$600,000 had not been deposited into the Action Thrive HSBC Account.  When Ms O told the Defendant about it, the Defendant asked her to report the matter to the police and faxed those 2 documents to her in order to show the subject transactions were conducted with Joint Profit via her as its agent.

(3)  It was Ah Bo, rather than Action Thrive, who was the Plaintiff’s counterparty/client with respect to the 2 subject transactions involving Action Thrive.[4]

(4)  Ms O also received, on 31 July 2017, a copy of the online statement of the Action Thrive HSBC Account from Ah Bo in order to show that the 3 US dollar deposits of US$600,000 were made by cheques which were dishonoured on 27 July 2017.  Incidentally, the statement also showed a deposit of US$43,380 by Joint Profit into that account on 24 July 2021.

(5)  After reporting the matter to the police, she had requested the Defendant to pay back the US$600,000, including by text messages, but she could not produce a single text message or other written evidence of it.[5]

(6)  She had made a statement to the police but she had not given the statement to the Plaintiff’s lawyer.[6]

26.  The Defendant, on the other hand, said in her witness statement that, prior to the establishment of Joint Profit, she was the licensee of 圓通 and dealt with the Plaintiff in that capacity.  After the establishment of Joint Profit on 28 April 2017[7], she did tell the Plaintiff that (i) she would be a staff of Joint Profit, (ii) the licensee of Joint Profit was Hwang[8], and (iii) she would be dealing with the Plaintiff as agent on behalf of Joint Profit.  Further, the Defendant said that sometime in May 2017, she had faxed to the Plaintiff copies of the JP Licence and Hwang’s identity card in order to inform the Plaintiff of the establishment of Joint Profit and that she would from then on deal with the Plaintiff on behalf of Joint Profit.

27.  During cross-examination, the Defendant testified inter alia that:

(1)  After 圓通’s Licence had expired in November 2016, she stopped doing any money exchange/remittance business in its name.

(2)  She had not kept any record evidencing she had faxed copies of the JP Licence and Hwang’s identity card to the Plaintiff in May 2017 since she did not expect any lawsuit at the time such that she would require proof of her relationship with Joint Profit. 

(3)  She had also faxed copies of the BR and JP Licence to the Plaintiff on 31 July 2017 at his request.

(4)  The available WhatsApp Group chat records evidencing the exchanges between the Plaintiff, Ms O and the Defendant were entitled “圓通—汇款”; she did not change the Group chat title to Joint Profit or 駿利行because the chat Group had existed for years and none of the 3 had thought of changing its title even though 圓通 was no longer in business.

28.  Given that the recollection of Ms O and the Defendant cannot both be right, in resolving Issue 1, such contemporaneous documents as there are before this court, albeit neither comprehensive nor conclusive, are important.  So is the undisputed or indisputable facts of the case by reference to which one must do its best to assess the inherent probabilities or otherwise of the parties’ case.

29.  Mr Yip, in his closing submissions, first and foremost points out that the WhatsApp Group chat record among the Plaintiff, Ms O and the Defendant was entitled “圓通一匯款” and that Hwang was not added to the Group.  He submits that if Joint Profit was the party contracting with the Plaintiff, the boss of Joint Profit should also be a member of the Group chat so as to be kept informed of what happened.

30.  This submission ignores the undisputed fact that (i) the Plaintiff, Ms O and the Defendant had known each other for about 5 years before the subject transactions; (ii) the chat Group had existed and been used in their businesses for years and (iii) the 3 parties had been doing business fairly informally.  As an example, despite the amount of the 2 subject transactions which ran to millions of dollars, the 2 agreements in question were all entered into orally without being evidenced in writing as to who was contracting with whom or the terms of the agreements. 

31.  Further, it is not in dispute that the 3 parties were not merely business associates but were also personal friends with mutual trust in each other.  Another example of their informal dealing with each other is the fact that Ms O admitted in cross-examination that sometime in 2017, the Defendant had given her HK$1.5 million when she told the Defendant she needed money for her cash flow needs.  Ms O accepted the money had to be repaid to the Defendant.  On the evidence, no written acknowledgment of receipt or IOU was ever provided by Ms O. 

32.  As to why Hwang was not added to the chat Group and why there was no evidence that the Defendant had communicated with Hwang on the 2 subject transactions, whether before or after they were entered into, that is a matter entirely between the Defendant and Hwang.  Regrettably, the matter was not explored by Mr Yip in cross-examination.  If Hwang had trusted the Defendant sufficiently, there was no reason why she must be kept in the loop all the time with respect to each and every transaction entered into with the Plaintiff or with any other foreign currency exchange operator. 

33.  Mr Yip also queried the conduct of Hwang in that when the 2 subject transactions went wrong, she did not try to contact the Plaintiff with a view to dealing with the aftermath.  He submits that if Joint Profit were really the contracting party, there should at least be some discussion between Hwang and the Plaintiff about it.  He further submits that given the importance of the matter and that Hwang was the director and sole shareholder of Joint Profit, it is rather unusual that she did not attend the police station to assist with the investigation.  Given Mr Yip had not in any meaningful way explored the conduct of Hwang during his cross-examination of the Defendant, it is unfair for him to invite this court to draw the inference from the above that Joint Profit was not the contracting party in the 2 subject transactions.  For all one knows, there could be perfectly sensible reasons why Hwang had left it to the Defendant to deal with the aftermath - after all, it was the Defendant who had all along been dealing with Ms O and the fraudster Wong.  The important thing to note is that when the Defendant gave a statement to the police on 31 July 2017, the first thing she told the police was that she was reporting the matter as representative of Joint Profit. 

34.  On Day 2 and Day 3 of the trial, Ms O and the Plaintiff had produced exhibits P2 to P5, being copies and originals of Lucky’s proforma Application for Remittance dated 25 and 26 July 2017 with the words Wu Ka Yu, Miss Wu and/or 圓通handwritten on them.  However, their probative value on whether the Defendant was the contracting party of the 2 transactions is limited.  Rather, they reflect adversely on Ms O’s credibility, as explained below. 

(1)  First, the Plaintiff’s pleaded case has always been that the 2 subject transactions were agreed orally, and not even evidenced in writing.

(2)  Second, contrary to what Mr Yip told this court that they were for the Plaintiff’s internal record only, Ms O initially testified that copies had been sent to Defendant.  Upon learning what Mr Yip had said to this court, Ms O immediately retracted and said they were never sent to the Defendant and obviously were not signed or acknowledged by the Defendant.

(3)  Third, there is no explanation as to why, if P2 and P3 had indeed been given to the Plaintiff’s solicitors as Ms O claims, they had not been disclosed earlier.  P4 and P5, on the other hand, were said by Ms O to have been kept in the Plaintiff’s company all along.  But equally, there is no explanation as to why they were not given to the Plaintiff’s solicitors for the purpose of discovery and inspection.

(4)  For these reasons, this court is not minded to attach weight to these proforma internal documents of the Plaintiff as evidence that the Defendant was the contracting party to the 2 subject agreements. 

35.  Mr Cheung, on the other hand, relies heavily on the following contemporaneous evidence as supportive of the Defendant’s case that she was only acting for Joint Profit at the material time:

(1)  The online bank statement of Action Thrive dated between 24 and 27July 2017 showing a deposit of US$43,800 by Joint Profit into the Action Thrive HSBC account on 24 July 2017.  The bank statement was on 31 July 2017 shown to Ms O by Ah Bo who was admittedly the Plaintiff’s client. 

(2)  WhatsApp message dated 25 July 2017 between Ms O and the Defendant suggesting that Ms O was aware of the 24 July 2017 deposit by Joint Profit into the Action Thrive HSBC account.

(3)  The licence of 圓通 was valid only from 11 November 2014 to 10 November 2016.  There is no evidence that the licence had been renewed after its expiry.

(4)  The JP Licence dated 17 April 2017 and the company search record of Joint Profit confirming Joint Profit’s existence as a money service operator even before the 2 subject transactions in July 2017.

(5)  The Employer’s Return of Remuneration and Pensions from 1 April 2017 to 31 March 2018 showing the Defendant’s capacity as a director of Joint Profit from 1 June 2017 to 31 March 2018.

(6)  The Employer’s Returns of Remuneration and Pensions from 1 April 2018 to 31 March 2021 showing the Defendant’s continuous employment with Joint Profit and Joint Profit’s continuous existence and business operations.  The 4 Employer’s Returns were all apparently signed by Hwang and that the Defendant’s salary and bonus had been on a rising trend. 

36.  It seems to this court that (1) and (2) are important to undermine Ms O’s credibility that she was not aware of Joint Profit’s existence prior to 31 July 2017.  If Joint Profit had deposited money into the Action Thrive HSBC account, this could only have been done through the Defendant, Ms O and Ah Bo.

37.  (3) and (4) are important since operating a money exchange and remittance business without obtaining a valid licence is a criminal offence[9]. Why should the Defendant risk committing a criminal offence and jeopardising her relationship with the Plaintiff and Ms O by conducting the business without a licence when she could legally work for Joint Profit once the latter obtained its licence in April 2017?  And once the Defendant had begun legally working for Joint Profit’s business, what motivation did she have for not telling the Plaintiff and Ms O about it?

38.  A valid point raised by Mr Cheung in his closing submissions is that it is accepted by the Plaintiff and Ms O that the Defendant is a person of substantial means.  The profit to be made out of the 1st transaction was a mere RMB80,000.  It is rather improbable that the Defendant would risk committing a criminal offence for such a small sum of money. After all, the Defendant had given HK$1.5 million to Ms O when the latter had cash flow problems.

39.  (5) is clear evidence that the Defendant was working for Joint Profit at the time of the 2 subject transactions.  (6) shows the relationship between the Defendant and Hwang had continued after the fraud in relation to the 2 subject transactions was discovered.  If the Defendant was really contracting with the Plaintiff on her own account but purported to shift the liability to Joint Profit, it is inconceivable that the employer/ employee relationship between Hwang and the Defendant could have lasted until at least 2021. 

40.  It is undisputed that, prior to the issue of these proceedings in May 2018, there was no documentary evidence, whether WhatsApp message or letter before action, from the Plaintiff or his solicitors demanding the Defendant to bear responsibility for the US$600,000.  This omission is highly telling since the Plaintiff and Ms O were adamant that the Defendant was the contracting party and that the Plaintiff has incurred liability towards his principal in the sum of US$600,000.  This is not a small amount of money compared to the meagre profit which the Plaintiff claims to have lost.

41.  Another telling omission is that Ms O herself said she went to the police with the Defendant to report the fraud and that she had also made a statement to the police.  However, that statement was not adduced in evidence.  In fact, Ms O said in cross-examination that she had not given it to the Plaintiff’s solicitors.  There was no explanation from Ms O as to why that was so.  It is therefore reasonable to infer that the statement does not contain anything which corroborates her testimony. 

42.  To conclude, based on the analysis of the evidence set out above, this court accepts the Defendant’s testimony as credible and is of the view that, on balance of probabilities, the Plaintiff had entered into the 2 subject agreements with Joint Profit rather than the Defendant. 

43.  In the premises, Issue 1 is decided in the Defendant’s favour.  That spells the end of the Plaintiff’s claim in this action. 

Issue 2 and Issue 3

44.  In view of this court’s ruling on Issue 1, these 2 issues become wholly academic.  For completeness, this court will set out its findings in relation to them. 

45.  As far as the terms of the 1st and 2nd Agreements are concerned, Mr Cheung has confirmed in closing that he no longer disputes the terms are those pleaded in the Statement of Claim.  It follows that the failure to procure the deposit of US$600,000 into the Action Thrive HSBC Account constituted a breach of the 1st and 2nd Agreements.

46.  Regarding the claim for US$600,000, Ms O’s own testimony is that, in relation to the 2 subject transactions, the Plaintiff had contracted with Ah Bo rather than Action Thrive, as evidenced by 2 proforma Applications for Remittance dated 25 and 26 July 2017 which described Ah Bo as the remitter.  If so, the Plaintiff would not be liable to Action Thrive for the US$600,000 as claimed in HCA2464.  Indeed, this is the Plaintiff’s defence in HCA2464 pleaded at paragraph 4 of his Amended Defence. 

47.  Lastly, regarding the claim for HK$20,000 loss of profit in relation to the 1st Agreement, Ms O’s testimony is that the Plaintiff’s loss is RMB32,000, on the basis that the Plaintiff’s customer viz Ah Bo had engaged him to exchange RMB2,776,000 into US$400,000 at the exchange rate of US$1 to RMB6.94 and the Plaintiff then entered into a back to back contract with the Defendant at the exchange rate of US$1 to RMB6.86.  The calculation is set out in exhibit P2.  There is no effective challenge to that calculation by Mr Cheung.  This court therefore holds that the Plaintiff’s loss of profit is RMB32,000.  It is obviously strange, to say the least, for the Plaintiff to claim only HK$20,000 in this action.  However, the reason for that has not been explored in cross-examination.  In the circumstances, this court is prepared to accept that if the Plaintiff is content to claim a smaller sum as his loss of profit, it is up to him.

Disposition and costs order nisi

48.  The Plaintiff’s claim against the Defendant is hereby dismissed. 

49.  There shall be an Order nisi that costs of the Action be to the Defendant, to be taxed if not agreed, and paid by the Plaintiff forthwith, certificate for counsel.