HUNG CHING WAN v. CHEUNG KWOK CHIU

HCA 3811/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3811 OF 2002

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J U D G M E N T

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1. In this action the Plaintiff sues to recover a sum of $1.6 million from the Defendant.

2. Mr Lee Chi Ming is the son of the Plaintiff. He used to work as an accounts executive with HSBC Broking Securities (Asia) Limited, which was at the material times known as Wadley Securities Limited. Mr Lee has a former schoolmate, the Defendant. The Defendant used to be a client of Wadley, whose account was handled by Mr Lee.

3. By March 1998, according to the evidence of Mr Lee, the Defendant's account in Wadley had become dormant for a period of time. Further, according to the evidence of the Plaintiff as well as Mr Lee, by that time, it was felt that it was no longer convenient for the Plaintiff who had also been a client of Wadley and whose account had been operated by her son as the accounts executive, to carry on investment in securities in the own name of the Plaintiff. According to the evidence, it was thus discussed and eventually agreed amongst the Plaintiff, Mr Lee and the Defendant that the Plaintiff would make use of the dormant security account of the Defendant for future trading in securities. The arrangement was that the Plaintiff would carry out all her trading activities in securities through the account maintained in name of the Defendant and the Defendant would refrain from operating the account. Furthermore, withdrawal of monies from the account, which would normally be done by transfer of monies from Wadley to the Defendant's account, would be achieved by the Defendant returning the monies so transferred into his account by Wadley to either the Plaintiff or her son.

4. According to the evidence, it was thus that the Plaintiff by three cheques paid into the account in question a total sum of over $2 million. The monies thus transferred into the account were used for the trading of shares. The transactions were handled by Mr Lee in his position as an accounts executive. The Defendant did, as agreed, refrain from making use of the account for his own purposes.

5. Prior to the withdrawal of the subject sum of $1.6 million on 16 August 1999, according to the evidence, there had been two previous withdrawals of money from the account. As was agreed, after the monies were paid by Wadley into the banking account of the Defendant, he in turn as per the instructions of the Plaintiff paid over the monies to Mr Lee.

6. According to the evidence, on 16 August 1999, Mr Lee arranged for the withdrawal of a sum of $1.6 million from the account. Wadley made out a cheque for that sum in favour of the Defendant. Instead of Wadley depositing the cheque into the Defendant's account, according to Mr Lee's evidence and a receipt signed by the Defendant in favour of Wadley, the cheque was collected by the Defendant from Wadley's office in person, which was subsequently cleared. According to Mr Lee's evidence, contrary to his expectation and requests, the Defendant thereafter failed or refused to repay the sum of $1.6 million or any part thereof to his mother or him. Mr Lee said that he then lost contact with the Defendant for a period of time. Apparently the Defendant was having some trouble in the Mainland and he required money for solving his problem. Given the situation, according to Mr Lee, he started selling off the shares that were still deposited in the account in question, which as described above was maintained with Wadley in the name of the Defendant. The sales generated proceeds, which were withdrawn by Mr Lee from that account on the strength of withdrawal instructions to Wadley that carried the signatures of the Defendant.

7. Mr Lee explained in the box that prior to the Defendant's sudden disappearance in late August 1999, the Defendant had signed blank pieces of paper in favour of Mr Lee so as to enable Mr Lee to effect withdrawals of money from the account when the Defendant was outside Hong Kong. After the disappearance of the Defendant, Mr Lee made use of the blank pieces of paper and converted them into withdrawal instructions to Wadley for the withdrawal of monies from the account. It was thus that several sums of money representing the proceeds of sale of the remaining stocks that had been kept in the account were withdrawn in favour of friends nominated by the Plaintiff and Mr Lee for the receipt of the withdrawn monies. According to the evidence, these nominees in turn returned the monies to the Plaintiff or her son.

8. According to the evidence, the Defendant re-surfaced sometime in late 1999 and at one stage promised Mr Lee that he would make repayment of the sum of $1.6 million by December 1999. The two had discussions regarding the repayment of the money and it was agreed that the sum would be treated as a sort of a loan by the Plaintiff to the Defendant. However, despite promises and despite repeated requests for repayment, the Defendant never made any repayment of money.

9. At one stage, the Defendant had promised to sign a loan agreement in favour of the Plaintiff. Indeed a draft loan agreement had been prepared by solicitors on the instructions of Mr Lee. But the Defendant never signed the document.

10. At trial, the Plaintiff relied on the transcript of a conversation that took place during lunch between Mr Lee and the Defendant as well as that of a telephone conversation, in which the Defendant made admissions regarding the indebtedness of $1.6 million.

11. I should add that the loan agreement provided for the repayment of the sum of $1.6 million by monthly instalments of $5,000 each. But as I said, the Defendant never signed the loan agreement and he never made any repayment whether by instalments or otherwise.

12. The present action was commenced in October 2002. The Defendant, in response to the claim, filed a homemade defence, which, apart from a bare allegation that the monies paid to him or paid into his account represented his share of profit in trading in securities in 1997 paid by Mr Lee to him, contained only bare denials of the Plaintiff's case.

13. At one stage thereafter, the Defendant was represented legally. On behalf of their client the Defendant's solicitors at the time made discovery of documents, provided particulars of the defence and made requests for particulars of the Plaintiff's pleadings; but the Defendant subsequently became unrepresented again and despite court orders the Defendant never filed or served any witness statement. Nor did he appear at the trial. In those circumstances, this Court was satisfied that the trial should proceed in his absence.

14. During the course of trial, I have heard evidence from both the Plaintiff and her son Mr Lee. I have also been supplied with, by way of proof, documentary evidence in support of the Plaintiff's claim.

15. Having considered the evidence including both the oral evidence and the documentary evidence, having considered the inherent probabilities and improbabilities of the matter as well as the objective circumstances, and in the absence of any evidence or real opposition from the Defendant at trial, I accept the evidence of the Plaintiff and Mr Lee, as well as the Plaintiff's case.

16. In those circumstances, I find that the sum of $1.6 million withdrawn from the account in question and collected by the Defendant as aforesaid was money belonging beneficially to the Plaintiff; the Defendant had no right to the money. He never repaid it to the Plaintiff (or her son). In other words, the Defendant has no defence to the Plaintiff's claim for the repayment of the money.

17. I therefore order that judgment be entered for the Plaintiff against the Defendant for the sum of $1.6 million, together with interest thereon at the prime rate from 16 August 1999 to the date of judgment and thereafter at the judgment rate until full payment. I also award the costs of this action to the Plaintiff.