WAI CHI KWONG v. LAI KIN WING t/a CISION CO

DCCJ 1540/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1540 OF 2010

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JUDGMENT

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UNDISPUTED BACKGROUND

1.  The plaintiff and the defendant have known each other for about 30 years since the time when they were attending secondary school together. 

2.  Yiu Kai Chi (“Yiu”) has known the defendant since around 1986 if not earlier.

3.  In around February 1998, Yiu was in need of money urgently.  He asked the defendant for assistance but the defendant’s cash flow at the time did not allow him to lend any money to Yiu.  The defendant therefore turned to the plaintiff for help.

4.  The plaintiff eventually agreed to grant a loan in a sum of $250,000 (“the Loan”). There is a dispute as to whether it was the defendant or Yiu who was the borrower of this loan but as I will explain later in this judgment the actual identity of the borrower does not affect the outcome of the case.  What is important is the undisputed fact that the sum of $250,000 was transferred by the plaintiff to the defendant’s account for the use of Yiu in February 1998.

5.  At that time, it was agreed that the Loan would be repaid within 1 year.

6.  After the Loan was made, the defendant gave the plaintiff an undated cheque in the amount of $250,000 (“the Cheque”) which was drawn by the defendant’s company (Cision Company).

7.  Thereafter, the defendant and Yiu had deposited various sums of monies into accounts designated by the plaintiff as follows:

Repayment Date	Amount
27th March 1998	$17,500
5th May 1998	$17,500
3rd February 2000	$18,000
7th March 2000	$12,000
15th April 2000	$3,500
15th May 2000	$4,000
15th June 2000	$7,500
15th July 2000	$7,500
15th August 2000	$7,500
15th September 2000	$7,500
16th October 2000	$7,500
15th November 2000	$7,500
16th December 2000	$7,500
16th January 2001	$7,500
16th February 2001	$7,500
15th March 2001	$7,500
13th April 2001	$7,500
21st May 2001	$7,500
29th June 2001	$7,500
27th September 2001	$7,500
22nd June 2007	$36,000
18th February 2008	$21,000
19th November 2008	$10,000
31st December 2008	$5,000
1st April 2009	$10,000
	$259,500

8.  The first two payments in 1998 were made by Yiu via the defendant’s account whereas all the other subsequent payments were made by Yiu directly.

9.  On around 15^th March 2010, the plaintiff filled in a date on the Cheque and presented it for payment as the plaintiff alleged that the entire Loan was still outstanding.  It was returned dishonoured as the subject bank account had been closed by then.

10. The plaintiff therefore initiated this action and claims for the payment of $250,000.

THE ISSUES

11. Despite the denial in his Reply (before it was subsequently amended and re-amended) of the defendant’s case (as pleaded in the Defence) that there was repayment in the total sum of $259,500 (see paragraph 7 above), the plaintiff admitted in his oral evidence that he had indeed received such payments.  However, it is his case (as pleaded in his Re-Amended Reply) that those were only payments of interest which had been agreed to be payable at the rate of 14% per annum and that given the long lapse of time, the payments made in all these years were not adequate in covering the interest accrued.  Having said that, he made it clear that he did not want to complicate the matters and he was only minded to sue the defendant for the repayment of the principal of $250,000.  He said, as a matter of fact, the Cheque was given to him for this purpose – to provide a straight forward way for the recovery of the Loan in that he might present it for payment upon the defendant’s confirmation that he had the money to repay.

12. On the other hand, the defendant alleged that the plaintiff had never mentioned about charging interest on the Loan.  He stated that the Cheque was only given to the plaintiff as evidence of the Loan and he had never given the plaintiff any authority to put down a date thereon and present the same for payment.  In any event, he said that the reasonable time for such presentation had passed.

13. In my view, the issues of the present case boil down to the followings:

(1)  Was there any agreement between the parties regarding payment of interest on the Loan?

(2)  Was the plaintiff entitled to present the Cheque for payment?

DISCUSSION

Interest on the Loan

14. As aforesaid, the defendant had pleaded in his Defence that the Loan had been repaid in its entirety.  The respective dates and amounts of the payments in all these years had been set out therein. 

15. In his Reply (dated 19^th July 2010), the plaintiff simply denied such payments.  No positive case was pleaded in this regard.

16. The plaintiff then proceeded to file his 1^st witness statement on 21^st December 2010.

17. In paragraph 16 thereof, the plaintiff stated that:

「對於在《抗辯書》中被告人聲稱是姚先生已於1998年至2001年以及2007年至2009年期間通過他分25次共還款25萬9千5佰元予本人，本人已想不起那些款項分別是甚麼;特別是他聲稱於1998年至2001年期間已付的款項，由於時間相隔太久，本人實在找不到任何記錄核實本人有否收過有關的款項。本人的簡單回應是：

第一，本人否認姚先生曾向本人借款25萬元以及還款25萬9千5佰元；

第二，若姚先生曾向本人借款25萬元，本人不認為有任何理由他會還款25萬9千5佰元予本人；

第三，若姚先生需要還款予本人，他可以直接交付予本人，根本無須通過被告人交付；

第四，從被告人提供文件中所見，當中兩張號碼分別是588481及588522的支票存根，所寫的受款人是Lee Yui Kui，即本人太太，而非本人，這更令本人相信有關款項根本不可能是被告人所聲稱姚先生予本人的還款；

第五，在這些年來，本人和被告人在業務上和私人方面不時有金錢往來，數額亦不少，然而大家由此至終都清楚明白，被告人付款予本人絕對不屬於他所聲稱的代姚先生還款予本人。」

18. On 22^nd March 2011, the plaintiff filed his 2^nd witness statement.  There are only 3 substantive paragraphs in this statement, one of which asserted that it was reasonable for him to present the Cheque for payment in 2010, and it was stated in the other two paragraphs that since the plaintiff did not know Yiu well at the material time, he would not have agreed to lend Yiu any monies without charging interest.

19. With the leave of the court, the plaintiff re-amended his Reply on 4^th April 2011.  For the first time, he pleaded that the defendant had agreed to pay him interest on the Loan at the rate of 14% per annum and that such interest was to be paid in advance.  It was also alleged that as a result, two payments of interest in the total sum of $35,000 were made on 27^th March 1998 and 5^th May 1998.

20. In his 3^rd witness statement which was filed on 18^th May 2011, the plaintiff gave a very detailed account as to how the agreement on payment of interest was arrived at.  He stated, among other things, that initially he proposed to charge interest at 15% per annum, but it was eventually agreed to fix the annual rate at 14%.  He also stated that when he was told by the defendant in early 2000 that the Loan could not be repaid yet, he agreed to wait for the repayment of the principal further on the condition that the interest at 14% per annum would be payable continually.

21. I reject the plaintiff’s evidence that there was an agreement on payment of interest at the rate of 14% per annum for the following reasons:

(a)  Given the defendant’s pleaded case in the Defence that $259,500 had been repaid to the plaintiff, it must be apparent to the plaintiff that it was essential for him to explain (in his Reply and in his 1^st witness statement) why he was entitled to present the Cheque for payment despite those repayments.  If there were any agreement on interest, the plaintiff would have mentioned about it (even if by then he was unable to verify the alleged repayments item by item). However, the plaintiff did not say a single word in respect of the alleged agreement on interest in those documents. 

(b)  Worse still, in his 1^st witness statement, the plaintiff even said that he had forgotten what those payments were for (「本人已想不起那些款項分別是甚麼」) and that there was no reason for Mr. Yiu to repay $259,500 if the Loan was only for $250,000 (「若姚先生曾向本人借款25萬元，本人不認為有任何理由他會還款25萬9千5佰元予本人」). This contradicts the plaintiff’s subsequent evidence that those payments must be interest payments.  I am aware of his case that the Loan was made to the defendant but not Yiu.  However, as the plaintiff admitted in his witness statement, he knew back in 1998 that the Loan was borrowed for the purpose of Yiu, so the plaintiff must know what subject matter the defendant was referring to in the Defence when the defendant pleaded that “Mr. Yiu repaid the Loan to the plaintiff”.  Indeed, there was only one loan made by the plaintiff in the sum of $250,000.  Hence, if there were any agreement on interest, the plaintiff would not say that there was no reason for Yiu to repay a sum of $259,500 (see paragraph 17 above).

(c)  Even when the plaintiff alleged in his 2^nd witness statement that he would not have agreed to lend money to Yiu without charging him interest, he still did not mention anything about the alleged agreement on interest.  In my view, it would be natural for him (for the reason set out in the preceding sub-paragraph) to explain further about the agreement on interest in his 2^nd witness statement if there were indeed such an agreement.

(d)  Given their long-term friendship, it is inherently improbable that the plaintiff would have charged the defendant interest on the Loan.  In fact, when the plaintiff mentioned in his 1^st witness statement that he had borrowed money from the defendant and Yiu and lent them money in the past, he did not say that interest had ever been charged.  The plaintiff seemed to be suggesting that he had charged interest on this occasion because the defendant was also charging Yiu interest.  However, that is denied by the defendant and Yiu.  The plaintiff could not provide any satisfactory evidence in proving this assertion of fact.

(e)  The plaintiff’s evidence that there was an agreement to pay interest in advance is inherently improbable.  Given the undisputed evidence that it was agreed that the Loan would be repaid within 1 year, I do not accept that the defendant would have agreed to pay interest for the whole year in advance.  This assertion is also improbable in the light of the relationship between the plaintiff and the defendant as discussed in the preceding sub-paragraph.

(f)   The plaintiff’s evidence that he had charged the defendant interest at 14% per annum in advance is also contradicted by himself when he stated in paragraph 8 of his 3^rd witness statement that:

「本人沒有記錄下被告人在甚麼時候、支付了多少利息給本人。被告人做會計工作，本人相信他計算付給本人的利息必定是「有少無多」。事實上，本人從來沒有計較被告人有否付足利息予本人…」

I do not believe that the plaintiff would have adopted such a care-free attitude as far as interest payment is concerned if he was anxious enough to collect interest in advance in 1998.

(g)  The plaintiff stated that in early 2000, upon the defendant’s failure to repay the Loan after around two years, the parties agreed that interest at the rate of 14% per annum would continue to be accrued and payable, however, they did not specifically agree as to when such interest should be payable.  This, again, is inherently improbable.  If the continual accrual and payment of interest was a condition upon which the plaintiff agreed to wait further for repayment of the principal, I do not believe that the plaintiff would have been so relaxed in allowing the defendant to pay interest whenever the defendant wanted.    

(h)  The allegedly strict attitude adopted by the plaintiff (in charging interest and requiring advance payment of such interest) also does not sit well with the undisputed facts that the repayments were eventually made over a long span of 12 years and that he failed to take action in all these years, in particular, when there was not a single repayment made in the period between October 2001 and May 2007.

22. In my view, the plaintiff, by alleging that there was an agreement to pay interest, was only trying to explain away the defendant’s case that the Loan had already been repaid entirely.  It is more likely than not that the interest rate of 14% per annum was only an after-thought and that this was worked out by reference to the 2 payments made in 1998 in the total sum of $35,000.

23. In general, I also find that the plaintiff is an unreliable witness because there are some other parts of his evidence which do not make sense. 

24. The plaintiff stated that in around October 1998, the defendant told him that:

(a)  Madam Lau (Yiu’s wife) (“Lau”) had borrowed a sum of $300,000 from him (the defendant) but she was unable to repay; 

(b)  As a result, Lau agreed to sell her property in Tsing Yi (“the Property”) so as to raise enough money for the repayment of $300,000; and

(c)  The defendant would have money to repay the plaintiff (and the Cheque could be presented for payment) after the Property was sold.

25. The plaintiff was asked to be a witness of a memorandum signed by Lau and the defendant in which Lau stated that she agreed to sell the Property to the defendant at $1.3 million and the debt of $300,000 would be treated as deposit of the purchase price.  The plaintiff was also asked to be a witness of the provisional sale and purchase agreement of the subject conveyancing transaction.

26. The plaintiff’s assertion that the defendant said he could have money to repay the plaintiff after the conveyancing transaction was completed does not make sense at all because not only the defendant would not have any inflow of money by virtue of the transaction, he was actually required to pay the balance of $1 million to Lau if the transaction went ahead. I do not accept that the defendant had made such a representation to the plaintiff at the material time.

27. The plaintiff also said the defendant had alleged that in the event Lau refused to sell the Property, the defendant would sell it on her behalf and for that purpose, the provisional sale and purchase agreement was executed.  Again, this does not make any sense at all.  If the defendant wanted to force Lau in selling the Property for the purpose of raising money, the defendant would have asked Lau to execute a power of attorney in his favour so that he might sell the Property to an outsider instead of purchasing the Property himself. Hence, I do not believe that the defendant had said so as alleged.

28. Pausing here, I note that Mr. Li argued on the plaintiff’s behalf that this conveyancing transaction was in fact a sham.  It was said that the provisional sale and purchase agreement was entered into purely for the purpose of securingthe defendant’s loan to Lau and they had no intention to complete the transaction from day one.  It was further submitted that that is the reason why when the defendant sued Lau for recovery of the deposit of $300,000 and liquidated damages in the same amount (hence a total of $600,000), Lau did not appear in the proceedings at all and as a result the defendant was able to obtain a charging order (“the Charging Order”) against the Property.  With respect, this argument is rejected.  If the defendant was minded to achieve the alleged purpose, and if he had procured the cooperation on the part of Lau as alleged, he could easily have done so by suing Lau in court for the recovery of the debt and obtaining a charging order thereafter.  A “home-made” simple Statement of Claim would do because the plaintiff would have got default judgment against Lau anyway.  He did not have to engage solicitors in drafting a relatively complicated Statement of Claim for that purpose on the basis of the provisional sale and purchase agreement (which he did).  Further, the defendant did not have to incur stamp duty of $9,750 in respect of the provisional sale and purchase agreement.  The alternative of suing for recovery of the debt directly could also avoid any injustice to Lau because the “sham” agreement would entitle the defendant to obtain a judgment for a sum which was double the debt by reason of the liquidated damages clause.  I do not believe that Lau would have agreed to “cooperate” with the defendant in securing a judgment of $600,000 against herself when the outstanding loan was only in the sum of $300,000.

29. When I questioned Mr. Li on the above, he submitted that if the “sham” provisional sale and purchase agreement was entered into, the defendant would be able to register such an agreement within a very short period of time and his interest could be thereby secured without the need to wait for the judgment (on the debt) and the charging order.  I do not accept this argument because according to the land search record of the Property, the provisional agreement was not registered at the Land Registry until 2 months after the date of execution.  Thus, Mr. Li’s theory is not supported by the facts.

30. There are other times when the plaintiff had given contradictory evidence.  For example:

(a)  In his 1^st witness statement, the plaintiff stated that he only knew that Lau is Yiu’s wife recently when his solicitors did a search.  However, in his 3^rd witness statement, he stated that when the defendant asked him to sign on the memorandum as a witness in October 1998, he knew that Lau was Yiu’s wife.

(b)  In his 1^st witness statement, the plaintiff said that he was introduced to Yiu by the defendant many years ago and that when he and Yiu became more acquainted with each other, they had extended loans to each other, though of relatively small amount such as $10,000 or $20,000.  He said in court that those loans were made in cash.  This contradicts what he told the court that he had only met Yiu once.

(c)  In the plaintiff’s 1^st witness statement, he stated that the defendant had asked him for the Loan in 1998 because the defendant had cash flow problem in his business.  However, in his 3^rd witness statement, he stated that the defendant asked for the Loan because the defendant wanted to lend money to Yiu.

31. Mr. Li had made various attacks on the credibility of Yiu and the defendant.  I do not propose to deal with each and every point which he has made.  Suffice for me to say that:

(a)  Those attacks relate mainly to peripheral matters and do not have any direct relationship with the most crucial point in issue, that is, whether the parties had agreed that an interest of 14% per annum was chargeable on the Loan.

(b)  Mr. Li had spent much time to argue that the borrower of the Loan was in fact the defendant but not Yiu.   By reason of my finding that the parties had not made any agreement for the payment of interest, whether it was the defendant or Yiu who borrowed from the plaintiff is neither here nor there because in any event, the principal of the Loan had been repaid entirely and the plaintiff was not entitled to present the Cheque for payment in 2010.  Further, if Mr. Li is right in submitting that the defendant was the borrower, that only reinforces my view that there was no agreement on payment of interest because the Loan was not granted to a “stranger” (as the plaintiff put it).

(c)  Even if I accept Mr Li’s argument that the defendant and Yiu were not reliable or credible witnesses, that does not mean that I have to accept the plaintiff’s case that there was an agreement on payment of interest.  The plaintiff, who asserted that such an agreement existed, bears the burden of proof.  As I have explained above, I do not accept his evidence on this matter.

Presentation of the Cheque for payment

32. As aforesaid, it is my finding that the plaintiff was not entitled to present the Cheque for payment in 2010 because by then the entirety of the Loan had been repaid.

33. If I were wrong on that, then the next matter that I have to decide on is whether the Cheque was only given to the plaintiff as a piece of evidence of the Loan (as alleged by the defendant).

34. I rule against the defendant in this regard.  In my view, if the parties were minded to have something put down in writing as evidence of the Loan, they could have written an IOU.  I accept that the Cheque was given to the plaintiff so that when the defendant was ready to repay, the plaintiff could simply present the Cheque for payment.

35. According to the plaintiff, when the Cheque was given to him in around February 1998, the agreement was that the Loan had to be repaid within 1 year.  The defendant said at that time that when the defendant confirmed that there were sufficient funds in his (the defendant’s) account, the plaintiff might present the Cheque for payment.

36. If that is so, then the plaintiff did not have authority to present the Cheque for payment in 2010 because the defendant did not tell the plaintiff that there were sufficient funds in the defendant’s account. 

37. Furthermore, it is unquestionable that it was too late for the plaintiff to present the Cheque after 12 years.  By whatever standard, reasonable time has long expired.

38. Hence, the conclusion is that the plaintiff was not entitled to put down a date on the Cheque and present it for payment in March 2010 because he had failed to do so within reasonable time and strictly in accordance with the authority given by the defendant (see section 20(2) of the Bills of Exchange Ordinance (Cap.19, Laws of Hong Kong)).

39. The plaintiff suggested that the defendant had made further promises as to when he could present the Cheque for payment.  In relation to the alleged promise made in October 1998, please refer to paragraphs 24 to 26 herein.

40. In respect of the alleged promise of the defendant in early 2000 that the plaintiff could present the Cheque for payment after the Property was sold pursuant to the Charging Order, it is my finding that the defendant had not made such a promise.  If the defendant had made such a promise, the plaintiff would have pressed the defendant to proceed with the sale of the Property pursuant to such an order since then.  I do not believe that the plaintiff would have waited for another 10 years before he took legal action against the defendant.  The plaintiff would not have chased up the defendant for repayment only by a few phone calls since 2000.

CONCLUSION

41. For the above reasons, the plaintiff’s claim is dismissed.

42. I make a cost order nisi that the plaintiff do pay the defendant’s costs (including all reserved costs) to be taxed if not agreed, with certificate for counsel. This cost order shall become absolute absent any application to vary within 14 days.