Cheng Ping Lung v. Yiu Kwai Bor

DCCJ 3696/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3696 OF 2014

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JUDGMENT

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INTRODUCTION

1.The plaintiff claims against the defendant for “Repayment of the Sum in the amount of HK$300,000 advanced to the Defendant by the Plaintiff on 9 March 2012[1].”

2.The basis of the plaintiff’s claim is an oral agreement (“the Agreement”) pleaded in the Statement of Claim.  The defendant denies the existence of the Agreement.

THE FACTS

3.I would first set out the facts which are agreed or undisputed.

4.The plaintiff and the defendant were business partners since 2004.  They had 2 companies, Manlitat Air Cargo Limited (“MA”) and Manlitat Haulage Services Limited (“MH”).  Each company was owned by the plaintiff and the defendant in equal shares.  Each company had 2 directors, namely, the plaintiff and the defendant.  Over the years, the plaintiff and the defendant had an understanding that they should contribute equal amounts to each company, and they should be entitled to have equal withdrawals from each company.

5.The accounts of MA were managed by Madam Eva Chow (“Eva Chow”).  Eva Chow was working for the defendant and reported to the defendant.

6.The accounts of MH were managed by Madam Ceci Lai (“Ceci Lai”).  Ceci Lai was working for the plaintiff and reported to the plaintiff.

7.The table below shows the plaintiff’s contributions and the defendant’s contributions to MA and MH from January 2012 to January 2014:-

Date	MA		MH
	Plaintiff (HK$)	Defendant (HK$)	Plaintiff (HK$)	Defendant (HK$)
30 January 2012	2,000,000
31 January 2012		2,000,000
7 February 2012	1,000,000	1,000,000
5 March 2012				600,000
16 March 2012			1,000,000
19 March 2012				700,000
22 March 2012		300,000[2]
16 January 2014			300,000
Balance	3,000,000	3,300,000	1,300,000	1,300,000

8.On or about 9 March 2012, the plaintiff gave a personal cheque of HK$300,000 (“the Cheque”) to the defendant.  The defendant subsequently deposited the Cheque into his personal account.  The core issue in these proceedings is the true nature of this payment.

9.The relationship between the plaintiff and the defendant deteriorated since early 2014.  In November 2015, both MA and MH were wound up by the High Court upon the petitions by the plaintiff.

THE PARTIES’ RESPECTIVE CASES

10.The plaintiff’ case as pleased in the Statement of Claim is as follows:-

“4. At all material times, the Plaintiff and the Defendant have agreed that [MA] is and was to be funded by shareholder's loans contributed by each of them separately, but in equal proportions (ie in reflection of their equal shareholding).

5. [MA] holds a bank account with the Hang Seng Bank, account no. 786-05379001 ("the Account") for its operations.

6. All the bank statements and accounting records of [MA] are kept by a Ms Eva Chow ("Ms Chow"), who is and was at all material times an accountant of Defendant but was assigned by the Defendant to look after [MA] 's accounting works.

7. In March 2012, [MA] was temporarily short of operational funds and required funding from the shareholders. The Plaintiff decided to advance a sum of HK$300,000 ("the Sum") to [MA].

8. On or about 9 March 2012, the Plaintiff and the Defendant orally agreed that:-

a. the Plaintiff would first transfer the Sum to the Defendant;

b. the Defendant would then deposit the Sum into the Account for and on behalf of the Plaintiff; and

c. the Sum is an advance/loan made by the Plaintiff to [MA] ("Agreement").

9. On even date and in pursuance to the Agreement, the Plaintiff issued a personal cheque in the sum of HK$300,000 (ie. the Sum) payable to the Defendant. The Plaintiff understood the Defendant had thereafter deposited the same amount into the Account purportedly in accordance with the Agreement.

Breach of the Agreement

10.  However, the Plaintiff subsequently discovered the deposit entry of HK$300,000 into the Account in March 2012 was actually recorded by Ms Chow as an advance/loan from the Defendant in the ledger account of "the director current account — Yiu Kwai Bor" instead of the Plaintiff.

11.  Despite repeated requests and enquiries, the Defendant has failed and/or refused to recognize that the said deposit of HK$300,000 in March 2012 into the Account by the Defendant had originated from the Plaintiff or that it was in fact the Plaintiff's advance/loan to [MA] and should be recorded in the ledger account of "the director current account- Cheng Ping Lung".

12.  In light of the aforesaid position adopted by the Defendant, the Plaintiff avers the Defendant had breached the Agreement in having failed to deposit the Sum into the Account for and on behalf of the Plaintiff, if at all.

13.  By reason of the aforesaid, the Defendant is accountable as constructive trustee for the Sum he received.  The Plaintiff is entitled-to recover them in equity.

14.  Further or alternatively, the Defendant has been unjustly enriched and is indebted to the Plaintiff for the Sum as money had and received in restitution.

15.  Despite repeated requests and demands, the Defendant has failed and/or refused to return the Sum or any part thereof.”

11.The defence put forward in the Defence is as follows:-

“7. On or about 3 March 2012, Ms Chow received a verbal notice from the Plaintiff that Manlitat Haulage was in urgent need of HK$600,000 for its operation and each of the Plaintiff and the Defendant should make an immediate advance of HK$300,000 to the said bank account of Manlitat Haulage.

8. However, as the Plaintiff told Ms Chow that he did not at the material time have any bank account in the Hang Seng Bank and as Manlitat Haulage was in urgent need of the said sum of HK$600,000, and upon the request of the Plaintiff, the Defendant then on 5 March 2012 transferred a sum of HK$600,000 from his own bank account numbered 372-002113-888 to the said bank account of Manlitat Haulage and on the same day, the Defendant verbally informed the Plaintiff on telephone of the said transfer. The Plaintiff agreed to repay his share of HK$300,000 to the Defendant in due course.

9. On or about 9 March 2012, the Defendant received from the Plaintiff a cheque for the said sum of HK$300,000 for repayment to the Defendant of his share of the advance to Manlitat Haulage.

10. For reasons unbeknown to the Defendant, he has recently discovered that the deposit entry of HK$600,000 made on 5 March 2012 is still recorded by Ceci as wholly made by the Defendant in the ledger account of “Amount due to directors – Yiu Kwai Bor” of Manlitat Haulage and no adjustment has been made in the ledger account of “Amount due to directors – Cheng Ping Lung” since 9 March 2012.”

12.One can immediately see that the parties’ difference falls within a narrow compass.  The plaintiff is saying that the Cheque was handed over to the defendant pursuant to the Agreement, under which the defendant had agreed to deposit the amount as stated on the Cheque (ie HK$300,000) into MA on behalf of the plaintiff.  According to the plaintiff, the defendant had failed to perform the Agreement.  The defendant’s case is that the Cheque representing a repayment from the plaintiff to him, as he had deposited HK$600,000 into MH on behalf of the parties, in respect of which the plaintiff should repay half to the defendant, and the plaintiff did so by the Cheque.  However, Ceci Lai mistakenly recorded that HK$600,000 on MH’s accounts as an amount all due from MH to the defendant.

THE EVIDENCE

13.The plaintiff is the only witness giving evidence in support of his case.  The defendant himself and Eva Chow are the witnesses giving evidence in support of the defendant’s case.

14.Having heard the evidence, I reject the plaintiff’ evidence and accept the defendant’s evidence and Eva Chow’s evidence.  Wherever there is a conflict between the plaintiff’s evidence on the one hand and the defendant’s evidence and Eva Chow’s evidence on the other hand, I prefer the latter.

15.I find that the plaintiff’s evidence is inconsistent with his own pleaded case and is inherently improbable.  Further, the plaintiff is a witness who would choose to say anything to justify his case, paying no heed to the truthfulness of the matter said or the allegation made by him. 

16.The plaintiff said the following in his witness statement:-

“9. On or about 8 March 2012, I was informed by Ms Chow that [MA] was short of funds and was requested to inject a further HK$300,000 as working capital. At the time, both Mr Yiu and I had contributed equal proportion as our respective shareholder’s loan to [MA] both stood at HK$3,000,000 apiece.

10. After discussions with Mr Yiu, we agreed that I would made the injection of HK$300,000 to [MA] through Mr Yiu because he needed short term liquidity and that in turn, Mr Yiu will duly deposit the same into the Account on my behalf when he is subsequently liquid (“the Agreement”).

11. By reason above, I had on 9 March 2012 wrote a cheque no. 001773 in the amount of HK$300,000 payable to Mr Yiu and delivered the same to Mr Yiu as capital contribution to [MA] but also as a loan to Mr Yiu. I understand Mr Yiu duly deposited and/or cashed the Cheque shortly thereafter.

12. Meanwhile, since such transfer would mean I will have contributed HK$300,000 more than Mr Yiu in [MA], Mr Yiu and I therefore also came to a mutual consensus for Mr Yiu to contribute HK$300,000 more in MH so that our overall contribution to [MA] and MH would still be even.

13.    As a result of the aforesaid, I had on 16 March 2012 deposited HK$1,000,000 into the bank account of MH.  In turn, Mr Yiu had on 5 March 2012 deposited HK$600,000 and on 19 March 2012 deposited HK$700,000 (in aggregate HK$1,300,000) into the bank account of MH.  My shortfall of HK$300,000 is thus made up by my extra contribution in [MA] by my payment of the Cheque to Mr Yiu.  Everything was supposed to balance out according to our agreement.”

17.In his own witness statement, the plaintiff alleged that the defendant was having short term liquidity problem on or about 8 March 2012.  Therefore, the Cheque was given to the defendant “as a capital contribution to [MA] but also as a loan to [the defendant]”.  However, that the Cheque was given to the defendant as a loan to the defendant has never been pleaded in the Statement of Claim.  This is not a small matter.  If the plaintiff’s evidence in his witness statement is true, the true agreement between the plaintiff and the defendant would be this:- the defendant is allowed to keep the HK$300,000 for his personal use for a certain period of time to solve his short term liquidity problem, and thereafter, the defendant would have to deposit HK$300,000 into MA.  This is clearly not the Agreement pleaded in the Statement of Claim.

18.As to the agreement alleged by the plaintiff in his evidence, the plaintiff has not said pursuant to this agreement, the defendant could keep the HK$300,000 for his personal use for how long.  At the time of that agreement, the plaintiff knew that MA was short of funds.  If the agreement as alleged by the plaintiff in his evidence is true, naturally the plaintiff would only allow the defendant to keep the HK$300,000 for his personal use up to a certain time limit and would require the defendant to inject the HK$300,000 into MA after that time.  This time limit would be an essential term of the agreement.  The plaintiff would not fail to mention this time limit if the agreement alleged in his evidence is true.  

19.As to whether the defendant had a short term liquidity problem on or about 8 March 2012, there is no evidence in support of the allegation apart from the plaintiff’s bare allegation.  It is an agreed fact that the defendant injected HK$600,000 into MH on 5 March 2012.  This is evidence against the plaintiff’s allegation that the defendant had a short term liquidity problem on or about 8 March 2012.  Mr Tony Chow, counsel for the plaintiff, submitted that the evidence could be interpreted in this way:- as a result of paying HK$600,000 into MH on 5 March 2012, the defendant experienced a short term liquidity problem on or about 8 March 2012.  If that is the case, the most naturally move of the defendant would be immediately demanding the plaintiff to repay HK$300,000 to him, for the plaintiff should be responsible for half of HK$600,000 paid into MH on 5 March 2012.

20.As to whether MA was short of funds on or about 8 March 2012, Mr Chow drew my attention to the bank statements of the MA’s account (“the HS Account”) in the Hang Seng Bank.  These statements show that as at 7 March 2012, the balance in the HS Account was HK$31,159.64.  On 9 March 2012, there are 3 sums received from a Taiwan Express (HK) Co Ltd (“Taiwan Express”) and deposited into the HS Account.  The total of these 3 deposits is about HK$1,846,000.  On 12 March 2012, there are payments from the HS Account to 4 companies, namely Band One Cargo Services Ltd (“Band One”), Champion Cargo Servicing (“CC”), JIT Transportation Co (“JIT”) and Manlitat Logistics Limited (“ML”).  The total of these payments is about HK$816,000.  Mr Chow submitted that on or about 8 March 2012, one did not know that Taiwan Express would pay substantial sums to MA on 9 March 2012.  Facing the need of paying Band One, CC, JIT and ML over HK$800,000 on 12 March 2012, MA was indeed short of funds on or about 8 March 2012.

21.With respect to Mr Chow, his submission is not supported by the evidence.  Both the defendant and Eva Chow said in evidence that Band One, CC and JIT were companies controlled by the plaintiff, and ML was a company controlled by the defendant.  The defendant said in evidence that as these companies were associated with MA, these companies would only get payments from MA if MA was having funds.  They would not compel MA to pay if MA had no money in hands.  All these are not challenged by Mr Chow in cross-examination, and I accept that these are true.  That being the case, MA in fact would have no need to pay the 4 companies if MA did not have sufficient funds on 12 March 2012.

22.Apart from the HS Account, MA had another account in the Bank of Communications (“the BC Account”).  As at 7 March 2012, the balance in the BC Account was HK$454,881.59.

23.Having considered the statements of the HS Account and the statements of the BC Account, in my judgment, MA was not short of funds on or about 8 March 2012.

24.Mr Chan Chung, counsel for the defendant, during cross-examination of the plaintiff, drew the plaintiff’s attention to the following entries in Eva Chow’s notenook:-

“(a) 3 Mar 2012 (星期六)

亞龍通知MH注資$30萬

(b) 15 Mar 2012 (星期四)

MA將要付126萬

9條架及保險費

另:鄭生話通知姚生

入MA$30萬

入MH$70萬”

25.Mr Chan suggested to the plaintiff that according to these entries in Eva Chow’s notebook, the plaintiff told Eva Chow on 3 March 2012 that the defendant should inject HK$300,000 into MH.  As a result of this notification, the defendant put HK$600,000 into MH, among which half was the defendant’s share, and the other half was paid by the defendant on behalf of the plaintiff.  Further, on 15 March 2012, the plaintiff told Eva Chow that the defendant should inject HK$300,000 into MA, and inject HK$700,000 into MH.  As a result of this notice, the defendant put HK$700,000 into MH on 19 March 2012 and HK$300,000 into MA on 22 March 2012.  Mr Chan suggested to the plaintiff that these entries in Eva Chow’s notebook supported the defendant’s case and contradicted the plaintiff’s case.

26.In response to these questions, the plaintiff repeatedly and firmly stated that the entries in Eva Chow’s notebook were all fabricated.  Mr Chan then showed the original of the whole notebook to the plaintiff for his examination.  After seeing the original notebook, the plaintiff still firmly stated that the entries were fabricated.

27.The entries in Eva Chow’s notebook were disclosed by the defendant in these proceedings a long time ago and were mentioned in Eva Chow’s witness statement dated 18 April 2016 and supplemental witness statement dated 27 July 2016.  The plaintiff has never requested for inspecting the original before the commencement of the trial.  I asked Mr Chow whether he has any challenge to the authenticity of the entries in the notebook, and Mr Chow has confirmed to this court that he has no challenge to the authenticity.

28.In my judgment, the allegation that the entries in Eva Chow’s notebook were fabricated was invented by the plaintiff while he was in the witness box and being asked questions on those entries during cross-examination. Fabricating evidence is an extremely serious allegation.  I regret that the plaintiff made up this extremely serious and unfounded allegation while giving evidence.

29.Although Mr Chow did not have any challenge to the authenticity of the entries in Eva Chow’s notebook, he challenged the accuracy of those entries. For the reasons set out in the paragraphs 44 to 46 below, I find that in that notebook, the events recorded under a certain date might not occur exactly on that date, but might occur at a time around that date.  Subject to this caveat, I find that the entries in Eva Chow’s notebook are accurate.

30.The parties began to argue the HK$300,000 paid by the plaintiff to the defendant in March 2012 in the email exchanges in January 2014.  Ceci Lai raised the issue for the first time in her email to Eva Chow and the defendant (with a copy to the plaintiff) dated 7 January 2014 (“the 7 Jan Email”):-

“據龍哥說他應該在MA多入三十萬元正，請跟進！＂

31.On 14 January 2014 at about 1:46 pm, Eva Chow replied to Ceci Lai by email (with copies to the plaintiff and the defendant) (“the 14 Jan 1346 Email”) and said:-

“(B) 等待妳回覆如何處理的事件：

B.1 跟據妳提供給我的文件好清楚寫明其中一位股東鄭先生在MH少入數港幣$30萬元，此事有2個做法：(一)鄭先生將少入的$30萬元款項補回MH以平衡返個數，（二）MH退回$30萬元支票給姚先生。

B.2 跟據妳說鄭先生應該在MA多放$30萬元的就法我亦已經再三查證過，證實是姚先生又多入左$30萬元正在MA賬戶內，請妳跟據第（2）項的做法給我回覆。＂

32.At about 2:41 pm, Ceci Lai replied and said:-

“B) 請先詳列鄭生及姚生的往來帳給鄭生查看，再作回覆！”

33.At about 3:03 pm, Eva Chow replied:-

“因為鄭生說他在MA多入三十萬，最好你給鄭生一個明細的往來帳，了解清楚吧！”

34.At about 3:40 pm, Ceci Lai replied (“the 14 Jan 1540 Email”):-

“1. 鄭生同意先入回三十萬給MH(入妥後會安排E-mail你)[3]

2.  另鄭生記憶他在2013年2012年3月給過姚生三十萬；此費用應該是平衡MH少付的三十萬，而姚生是否已入回此三十萬，請查查!”

35.On 15 January 2014, Eva Chow replied to the 2 points stated in the 1540 Email.

(a)   Reply to the 1^st point: 等待妳的入數紙

(b)   Reply to the 2^nd point: 有待查證

36.Thereafter, the plaintiff personally took up the matter and expressed some strong views in the emails.

37.A point to be noted from these emails is that as to the HK$300,000 in question, everything in the plaintiff’s case is from the plaintiff’s memory without support of any document.  This is evidenced by the 7 Jan Email, in which Ceci Lai said “據龍哥說”. See also the 14 Jan 1540 Email, in which Ceci Lai mentioned “鄭生記憶”.

38.The 2^nd paragraph in the 14 Jan 1540 Email, ie “此費用應該是平衡MH少付的三十萬，而姚生是否已入回此三十萬，請查查”, bears importance.  Mr. Chow agreed that Ceci Lai was talking about the HK$300,000 in question in this paragraph.  I asked Mr Chow what was the true meaning of this paragraph.  Mr Chow submitted that here Ceci Lai was saying the HK$300,000 in question should be deposited into MA by the defendant on behalf of the plaintiff, as the plaintiff had paid HK$300,000 less than the defendant in MH.  By doing this, the contributions by the plaintiff and the contributions by the defendant would be equal in MA and MH as a whole.

39.Reading the 14 Jan 1540 Email in a way favourable to the plaintiff as suggested by Mr Chow, the payment of the HK$300,000 in question from the plaintiff to the defendant in March 2012 would not be because “[MA] was temporarily short of operational funds and required funding from the shareholders” as pleaded in paragraph 7 of the Statement of Claim, and would not be because MA was short of funds and the defendant needed short term liquidity as alleged by the plaintiff in his evidence.  The real reason is that the defendant has paid HK$300,000 more than the plaintiff in MH.  Even if reading the 14 Jan 1540 Email in the way as suggested by Mr Chow, that email is a piece of evidence contradicting the plaintiff’s case, either pleaded in the Statement of Claim or alleged by the plaintiff in his evidence.

40.Viewing the plaintiff’s evidence as a whole, I do not regard the plaintiff as a reliable witness.  I am of the view that the case as told by the plaintiff in his evidence is contradicted by undisputed facts and contemporaneous documents and is inherently improbable.

41.Both the defendant and Eva Chow have given clear and straight-forward evidence.  Their evidence is in line with the defendant’s pleaded case and the documents. 

42.An important piece of evidence is the entries in Eva Chow’s notebook. Eva Chow said in her evidence that she used the notebook as an aid memoire. When there was something requiring her attention, she would record the same in the notebook to remind herself to follow up the matter.  According to Eva Chow, the true meaning of the entries in her notebook as set out in paragraph 24 above is as follows:-

(a)  3 Mar 2012 (星期六)

亞龍通知MH注資$30萬

“亞龍” is the plaintiff. The entry here means that on 3 March 2012, the plaintiff told Eva Chow that the defendant should inject HK$300,000 into MH. The line striking through the entry means that this matter has been done.

(b)  15 Mar 2012 (星期四)

MA將要付126萬

9條架及保險費

另:鄭生話通知姚生

入MA$30萬

入MH$70萬

The entry here means that one of the matters occurred on 15 March 2012 is the plaintiff through Eva Chow notifying the defendant to inject HK$300,000 into MA and HK$700,000 into MH.

43.I accept that the true meaning of these entries is the meaning as explained by Eva Chow.

44.Mr Chow has cross-examined Eva Chow intensively on the entries in Eva Chow’s notebook.  Mr Chow drew Eva Chow’s attention to the copies of her notebook in Trial Bundle B, pp 403-405.  Mr Chow pointed out to Eva Chow that on p 403 of Trial Bundle B, the date “11 Mar 2012 (星期一)” could not be right, for 11 March 2012 was a Sunday.  Eva Chow accepted that the date was incorrect.  As Sunday was her regular holiday, the events recorded under that date should occur on Monday.  Mr Chow also pointed out to Eva Chow that on the same page, the date “17 Mar 2012 (星期三)” was not right, for 17 March 2012 was a Saturday.  Eva Chow accepted this.  Mr Chow also asked Eva Chow that the events recorded on pp 403 to 404 of Trial Bundle B were not in chronological order.  Eva Chow accepted this.

45.Mr Chow also criticized that the records in Eva Chow’s notebook were very brief and did not contain the details now set out in Eva Chow’s witness statements.  With respect to Mr Chow, I do not regard this as a valid criticism.  The notebook was used by Eva Chow as an aid memoire. Understandably, Eva Chow would have no need to record every detail in that notebook.  As long as the notes therein could serve as reminders reminding Eva Chow the events in respect of which she has to pay attention to, that would be sufficient.

46.After hearing the evidence and examining the original of Eva Chow’s notebook, I find that the dates stated in the notebook might not be entirely accurate.  Due to this reason, the events recorded under a certain date might not occur exactly on that date.  However, I find that the events recorded did occur, and the events occurred at a time around the date under which the events were recorded.  In particular, I find that the matter stated in paragraph 42(a) above occurred at a time around 3 March 2012, and the matter stated in paragraph 42(b) above occurred at a time around 15 March 2012.  In my judgment, the entries in Eva Chow’s notebook provide strong support to the defendant’s case.

47.Eva Chow said in mid-January 2014, after Ceci Lai making the allegation that in MA the plaintiff’s contribution was HK$300,000 more than the defendant’s contribution, Eva Chow noticed that from the financial documents of MA, in fact the defendant had contributed HK$300,000 more than the plaintiff in MA. Eva Chow also noticed that from the financial documents of MH provided by Ceci Lai, the defendant also contributed HK$300,000 more than the plaintiff in MH.  Eva Chow reported these findings to the defendant.  The defendant’s instruction to Eva Chow was to ask the plaintiff to make up the differences. Eva Chow then wrote the 14 Jan 1346 Email to Ceci Lai.  Eva Chow said that 1 or 2 weeks thereafter, she went through the financial documents of MA and the financial documents of MH together with the defendant.  On that occasion she and the defendant discovered the real problem was that Ceci Lai had mistakenly recorded the injection of HK$600,000 by the defendant into MH on 5 March 2012 as a sum all due from MH to the defendant.  In fact, the plaintiff had repaid half of that sum to the defendant by the Cheque.

48.The defendant’s evidence corroborated with Eva Chow’s evidence, save that in respect of the time when Eva Chow and the defendant together going through the financial documents of MA and the financial documents of MH, the defendant said the time was several months before he made his witness statement dated 18 April 2016.  It is understandable that different people may have different memories of some minor details of a past event.  I do not think this minor discrepancy would affect the defendant’s evidence and Eva Chow’s evidence in any way.

49.The defendant said when Eva Chow told him in mid-January 2014 that he had put HK$300,000 more than the plaintiff in MH and he had also put HK$300,000 more than the plaintiff in MA, his immediate reaction was to tell Eva to ask the plaintiff to make up the differences.  It was only at a later time when he and Eva went through the financial documents of MA and the financial documents of MH, he realized the real problem was that Ceci Lai made a mistake in respect of HK$600,000 injected into MH on 5 March 2012. 

50.I accept both the defendant and Eva Chow are honest and reliable witnesses.  I accept their evidence.

NO AGREEMENT AS ALLEGED

51.As a result of the analysis above, I reject the plaintiff’s case and accept the defendant’s case.

52.I find that the Agreement as pleaded by the plaintiff in the Statement of Claim is untrue.

53.As the basis the plaintiff’s claim is the Agreement, since I have found that the Agreement is untrue, the plaintiff’s claim must fail on facts.

THE ALTERNATIVE SCENARIO

54.For the sake of completeness, even if the Agreement as alleged by the plaintiff is true, the plaintiff’s claim must still fail on law.

55.The 2 causes of action pleaded in the Statement of Claim are (a) breach of contract; and (b) unjust enrichment.  In my judgment, even if the Agreement is true, the plaintiff still cannot succeed in either cause of action.

Breach of Contract

56.There are 2 problems in the “breach of contract” claim:-

(a)  The Agreement as pleaded in the Statement of Claim is not an agreement supported by consideration and hence is not an enforceable contract.

(b)    It is not known on what basis the plaintiff may claim for the repayment of the HK$300,000 in the “breach of contract” claim.

57.In respect of consideration, Mr Chow in paragraph 8 of his written final submissions submitted “[i]t is P’s case that the consideration afforded by him as the promisor is to write D a cheque personally in the sum of $300,000 to solve his liquidity issue (ie paragraph 8(a) of the SOC).”  However, it is clear that “to solve his liquidity issue” does not appear in paragraph 8(a) of the Statement of Claim or at anywhere in the Statement of Claim.  “To solve his liquidity issue” is an allegation made by the plaintiff in his witness statement but that allegation has never been pleaded.

58.It is trite that it is the pleadings, not the evidence, defining the issues in a trial.  In Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663, Ma CJ said:-

“21. …… It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced……”

59.It is equally trite that the consideration in support of a contract not under seal is a material fact which must be pleaded.  In Huen Wai Kei v Choy Kwong Wa Christopher (No.2) [2014] 4 HKLRD 782, Kwan JA said:-

“60. Order 18 rule 7(1) of the Rules of the High Court stipulates that every pleading must contain a statement in a summary form of the material facts on which the party pleading relies for his claim or defence. Hong Kong Civil Procedure 2014, vol 1, §18/12/7 reads as follows: “(6) Consideration – If this is for any agreement not under seal, it is a material fact and must be pleaded, except in the case of negotiable instruments, where it is presumed.” No authority was cited in the commentary for this proposition, but Mr Chain was able to refer us to Clarke v Gray (1805) 6 East 564, which was mentioned in an old edition of Bullen & Leake & Jacob’s Precedents of Pleadings (13th ed, 1990) p 269, and the relevant passage is as follows: “The consideration necessary to the validity of a simple contract must in general be shown upon the statement of claim (Myddleton v Kenyon Ltd (1782) 2 Ves Jun 391 p 408; Clarke v Gray (1805) 6 East 564). But consideration need not be pleaded for agreements under seal, bills of exchange, promissory notes and cheques.”

61.    The Security & Set-Off Agreement, which was made orally, was not an agreement under seal.  In Clarke v Gray at 568, Lord Ellenborough CJ had this to say about an agreement not under seal:

“It is no more necessary to state every part of an agreement not under seal, each part making a distinct contract, than it is of an agreement under seal: it is sufficient in either case to state so much of each as constitutes that contract, the breach of which is complained of, prescribes the duty to be performed, and the time, manner, and other circumstances of its performance: with this difference only, that in the case of an agreement, not under seal, the consideration must be stated, and no part of the entire consideration for any promise contained in the agreement can be omitted.”

62.    …… We are inclined to think the passage quoted above on the pleading of consideration remains good law.  Consideration for the Security & Set-Off Agreement is a material fact and should have been pleaded by the plaintiffs.  This was not done in §8 of the consolidated statement of claim, which has been set out in full in the earlier part of this judgment.”

60.The Agreement pleaded in the Statement of Claim is an oral agreement, which would not be enforceable unless it is supported by consideration.

61.Mr Chow submitted that the consideration in support of the Agreement is the HK$300,000.  Mr Chow submitted that as a result of the Agreement, the plaintiff has parted with the HK$300,000.

62.I am unable to accept this submission.  Looking at the case as pleaded by the plaintiff in the Statement of Claim, the defendant has agreed to deposit the HK$300,000 into MA on behalf of the plaintiff.  This is the promise given by the defendant.  The Agreement would only be enforceable if the plaintiff has provided consideration in exchange for the promise made by the defendant.  The plaintiff parting with the HK$300,000 is simply because the plaintiff is requiring the defendant to deposit the money into MA on the plaintiff’s behalf.  It is not in exchange for the promise made by the defendant.

63.In my judgment, the plaintiff has failed to plead the consideration in support of the Agreement.  Even if the plaintiff is able to prove the Agreement, the Agreement would not be an enforceable contract.

64.The second problem in the “breach of contract” claim is that it is not known on what basis the plaintiff may claim for the repayment of the HK$300,000 in the “breach of contract” claim.

65.In a “breach of contract” case, the innocent breach may sue for specific performance or damages.  No doubt the plaintiff is not claiming for specific performance.  The plaintiff is not seeking an order to compel the defendant to rectify the MA’s accounts by changing the HK$300,000 in question recorded thereon from “a debt due to the defendant” to “a debt due to the plaintiff”. It is unclear whether the plaintiff is seeking damages for breach of contract. If yes, the plaintiff certainly cannot get back HK$300,000 by this claim, for there is no evidence quantifying the loss and damage suffered by the plaintiff as a result of the defendant’s breach of contract.

66.It is trite that the purpose of damages is to put the innocent party in the position as if the contract had been duly performed, subject to the question of remoteness.  See Richly Bright International Ltd. v De Monsa Investments Ltd. (2015) 18 HKCFAR 232, per Ribeiro and Fok PJJ at para.15.

67.Had the Agreement been duly performed, after the defendant putting HK$300,000 into MA on 22 March 2012, that sum would be recorded on MA’s accounts as a debt due from MA to the plaintiff.  In other words, the plaintiff would have a chose in action on 22 March 2012.  As a result of the defendant’s breach of the Agreement, the loss and damage suffered by the plaintiff is losing this chose in action.  Accordingly, the damages to be awarded to the plaintiff would be an amount equivalent to the value of this chose in action on 22 March 2012.

68.However, there is no evidence on the value of this chose in action. Undoubtedly, the value of this chose in action would not be equivalent to HK$300,000.  In order to realize this chose in action, one has to take steps to enforce this chose in action against MA, and it is not known whether MA would be able to repay the debt in full.  All these have to be taken into account, and the value of the chose in action on 22 March 2012 would obviously be less than HK$300,000.  As to the precise value of the chose in action, there is simply no evidence on the point.  That being the case, at most the plaintiff can only get nominal damages. See Born Chief (trading as Beijing Restaurant) v George Tsai and Another [1996] 2 HKLR 188.

Unjust enrichment

69.On the question of unjust enrichment, it is useful to refer to the following passages in Goff & Jones, The Law of Unjust Enrichment (9th Edition):-

Para. 4-01:

“A claim in unjust enrichment is:

“…not a claim for compensation for loss, but for recovery of a benefit unjustly gained [by a defendant] at the expense of the claimant.”

The question whether the defendant has been enriched is therefore “centre stage”. It is not enough for the claimant to show that he has suffered a loss, since:

“…a person cannot be unjustly enriched if he has not been enriched at all and the fact that a payment may have been made… is not by itself sufficient to justify a restitutionary remedy.”

The claimant must also show that the defendant has made a corresponding gain, and proving the defendant’s enrichment is therefore “not merely material to success, but the whole essence of the action.””

Para. 4-26:

“The burden of proving enrichment lies in the first instance on the claimant, who must show that the defendant received a recoverable benefit with an objective financial value.”

Para. 4-54:

“Where a claimant seeks a personal restitutionary remedy, the questions whether the defendant was enriched, and if so, to what extent, are tested at the date of receipt.”

70.Reading the case as pleaded by the plaintiff in the Statement of Claim, in particular paragraphs 10, 11 and 12 thereof, the plaintiff’s complaint is the defendant caused the HK$300,000 recorded in MA’s accounts as a debt due to the defendant, not a debt due to the plaintiff.  Accordingly, in the plaintiff’s pleaded case, the defendant’s enrichment is a debt of HK$300,000 owed by MA, which is a chose in action.

71.The defendant obtained this chose in action on 22 March 2012, for it was recorded in MA’s accounts that a debt of HK$300,000 due to the defendant appeared on this date.

72.In order to succeed on the “unjust enrichment” claim, the plaintiff must show that the defendant has been enriched by obtaining the said chose in action on 22 March 2012.

73.However, as said above, there is no evidence on the value of this chose in action on 22 March 2012.  The owner of this chose in action is merely an unsecured creditor of MA.  It is not known whether MA was solvent on 22 March 2012.  It is also not known whether MA had any other creditors having a priority over the owner of this chose in action.  With all these unknown, one cannot ascertain the value of this chose in action on 22 March 2012.  In fact, if MA was insolvent on 22 March 2012, the chose in action might only have a nominal value.

74.For these reasons, even if the Agreement as pleaded by the plaintiff in the Statement of Claim, the “unjust enrichment” claim would still fail for the plaintiff has not proved the “enrichment” element.

REFUSING LEAVE TO AMEND THE REPLY

75.Mr Chow made an application for leave to amend the Reply in the middle of the trial.  After hearing submissions from Mr Chow and Mr Chan, I dismissed the application with costs.  I now give my reasons.

76.On Day 1 of the trial, after Mr Chow finishing his opening, I asked Mr Chow whether there was a typo in paragraph 6(b) of the Reply.  The last sentence of that paragraph reads as “…… Therefore, the Plaintiff Defendant has advanced HK$300,000 more to Manlitat Haulage than the Defendant.”  I asked Mr Chow whether the word “Defendant” immediately after the word “Plaintiff” was a typo and should be deleted.  Mr Chow confirmed that was a typo and would seek leave to amend the Reply by deleting that word.  Mr Chan had no objection to this amendment.  I asked Mr Chow to prepare a draft Amended Reply to correct the typo and handed up the same on Day 2.  Mr Chow then called the plaintiff to give evidence.  After the evidence in chief, Mr Chan began to cross examine the plaintiff.

77.On Day 2, in the afternoon while Mr Chan was still cross-examining the plaintiff, Mr Chow informed this court that he would apply for leave to amend the Reply, but the proposed amendment was not only limited to correcting the typo.  The proposed amendment was to delete the entire paragraph 6(b), the second-half of paragraph 7(b), and entire paragraph 8(c) of the Reply.  Mr Chan opposed this application.  As the application for leave to amend the Reply, if granted, would have an impact on the trial, I decided to immediately hear submissions and determine this application. 

78.Mr Chow submitted that the Reply was prepared in December 2014.  As time passes, the plaintiff has a clearer recollection of the events and therefore would like to seek leave to amend the Reply.  Mr Chow told this court that the plaintiff had given instruction to make this application before the commencement of the trial.  Mr Chow conceded that this was a late application and the plaintiff had not offered any explanation for the delay.  However, Mr Chow submitted that this application would not cause any prejudice to the defendant, as Mr Chan would have the opportunity to cross-examine Mr Chan on these amendments. 

79.Mr Chan submitted that allowing the plaintiff to amend his Reply at this late stage would not be fair to the defendant, and the application ought to be refused.

80.Having considered the submissions, I decided to exercise my discretion against the plaintiff.

81.In a civil trial, the parties should put all cards on the table before the trial.  Every party is entitled to know the other side’s pleadings, documents and witness statements before the trial, and to have proper time to prepare cross-examination and submissions to meet the other side’s case as disclosed.  There should be no ambush.  Regrettably, the plaintiff had not adhered to this.  He decided to seek leave to substantially amended the Reply before the trial, but did not make the application at any time before the commencement of trial.  The application was only made while Mr Chan was cross-examining the plaintiff and had almost came to the end of the cross-examination.  No explanation was offered explaining the delay in making the application.  The inexplicable delay alone would be sufficient for me to decline the application.

82.A further reason for refusing the application is, in my judgment, there would be real and substantial prejudice to the defendant if the application is granted.  Mr Chow submitted that there would be no prejudice to the defendant as Mr Chan would have the opportunity to further cross-examine the plaintiff as a result of the amendments.  I disagree.  Mr Chan prepared his cross-examination on the basis of the original pleadings.  When the application was made, Mr Chan had already asked many questions in the cross-examination and had almost came to the end of the cross-examination.  If I allow these substantial amendments to the Reply at this point of time, there is a real risk that this would cause irreparable damage to Mr Chan’s cross-examination.  Further, if I allow these proposed amendments, it cannot be said that there would be no prejudice to the defendant as Mr Chan would have an opportunity to cross-examine the plaintiff on these amendments.  Not only should Mr Chan be given an opportunity to further cross-examine the plaintiff, but Mr Chan should be given proper time to prepare the further cross-examination.  While the plaintiff chose to make this application in the afternoon on Day 2 during a 3-day trial, I do not think Mr Chan would have proper time to prepare further cross-examination if I allow the amendments, unless I adjourn the trial.  I would not adjourn the trial as there is simply no explanation from the plaintiff as to the lateness of his application for leave to amend the Reply.

CONCLUSION

83.I come to the conclusion that the plaintiff’s case as pleaded in the Statement of Claim cannot succeed, either on facts or on law.  I dismiss the plaintiff’s claim.

84.Mr Chow and Mr Chan have agreed that costs should follow the event, with a certificate for counsel.  I therefore order that costs of these proceedings (including all costs reserved, if any) be paid by the plaintiff to the defendant.  For the trial, there be a certificate for counsel.

85.Lastly, it remains for me to thank the parties for the assistance rendered to this court.

Mr Tony Chow, instructed by Raymond Yu & Co, for the plaintiff

Mr Chan Chung, instructed by Ng & Partners, for the defendant