Wong Wai Lan v. Li Yim Fong

Read the full judgment text of DCCJ 3413/2016 on BabelCite. This District Court judgment was delivered on 12 December 2018.

1. This is the trial of four actions which are heard together.  The four plaintiffs are individuals.  I shall refer to them by their last names, Wong, Chim, Cheng and Liu.  They make separate claims against Madam Li Yim Fong, also known as Maria Li, for restitution, based on substantially the same facts.  The events giving rise to the claims took place in 2014 to 2015 when the five of them were colleagues at the Construction Industry Council.  The defendant worked there as an assistant clerk but

Cites 3 cases

Case No.DCCJ 3413/2016[2018] HKDC 1474[2019] 1 HKLRD 452
Court
District Court
Date12 Dec 2018
Judge
Case Document
100%Judiciary

DCCJ 3413/2016
DCCJ 3414/2016
DCCJ 3415/2016
DCCJ 3416/2016
(Heard together)

[2018] HKDC 1474

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3413 OF 2016

-------------------------

BETWEEN
  WONG WAI LAN Plaintiff
and
  LI YIM FONG Defendant

-------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3414 OF 2016

-------------------------

BETWEEN
  CHIM SHUK YEE Plaintiff
and
  LI YIM FONG Defendant

-------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3415 OF 2016

-------------------------

BETWEEN
  CHENG YUEN CHUN Plaintiff
and
  LI YIM FONG Defendant

-------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3416 OF 2016

-------------------------

BETWEEN
  LIU HANG KUEN 1st Plaintiff
  WONG SIN TING 2nd Plaintiff
  (discontinued)
and
  LI YIM FONG Defendant

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Before: Her Honour Judge Winnie Tsui in Court
Dates of Hearing: 21, 24 and 27 September 2018
Date of Judgment: 12 December 2018

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JUDGMENT

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Introduction

1.This is the trial of four actions which are heard together.  The four plaintiffs are individuals.  I shall refer to them by their last names, Wong, Chim, Cheng and Liu.  They make separate claims against Madam Li Yim Fong, also known as Maria Li, for restitution, based on substantially the same facts.  The events giving rise to the claims took place in 2014 to 2015 when the five of them were colleagues at the Construction Industry Council.  The defendant worked there as an assistant clerk but has left since about 2015.  She is now in her early 60’s.  Wong, Chim and Liu are all educated up to Form 5 and Cheng holds a Bachelor’s degree.

Factual background

2.At the conclusion of the evidence, it became clear that the parties are, on the whole, in agreement on the material events giving rise to the restitutionary claims, save for one issue.  As confirmed at closing by Mr Matthew CS Chong, appearing for the plaintiffs, and Ms Wendy Lau, together with Mr Richie Lai for the defendant, there is only one factual dispute between the parties.  As it will become clear, that dispute is not a material one.  The outcome of the actions therefore primarily turns on the legal analysis of the evidence.

3.On that basis, I set out below the material facts leading to the claims.  They are either agreed or not seriously disputed.  I find them as facts, unless I indicate otherwise.

4.In about February 2014, the defendant made the acquaintance of a Yip Wing Yee (“Yip”) through a mutual friend.  Yip told the defendant that she could purchase electronic products (such as mobile phones) from Fortress and cash coupons of retailing outlets (including ParknShop) at a discount from her sources.  The discounts were as high as 40 to 50% off the retail prices.  Yip said she could help the defendant and her friends to buy these products and that delivery would normally be within three months of payment.

5.In about March 2014, the defendant purchased some products at discounted prices from Yip and successfully collected them in about June 2014.  After the first purchase, the defendant purchased more products from Yip from time to time.  The goods were delivered by Yip with no complication.

6.The defendant also started to tell her friends that she had a friend working in Fortress through whom they could purchase electronic products and cash coupons at big discounts.  The purchase money should be paid in advance and the products would be delivered within three months of payment.  Many of her friends expressed interest.  Amongst them were the four plaintiffs. 

7.The purchase arrangement was as follows.  It was the same for the plaintiffs (and the other friends of the defendant).

8.The interested purchaser would inform the defendant of the products which she would like to buy and the defendant would inform Yip of the same. Yip would then inform the defendant of the prices, which information the defendant would pass back on to the purchaser.

9.Wong’s first purchase was a Samsung Galaxy Note 3 mobile phone in about August 2014.  She paid $2,000 for it and received the phone from the defendant in about December 2014.  In September and October 2014, she purchased a total of 17 mobile phones of the same model.  They were delivered to her between February to March 2015, accompanied by a receipt from Fortress showing the normal retail price. 

10.The defendant told Chim about the purchase arrangement in August 2014. Chim’s first purchases comprised two Samsung Galaxy Note 3 mobile phones at $2,000 each and eight Apple iPhone 6 plus (64GB) at $5,900 each.  These phones were delivered to her in about December 2014 and January 2015. 

11.Cheng started making purchases in about September 2014.  They included mobile phones, iPad and camera.  These products were delivered to Cheng, again, accompanied by a receipt from Fortress showing the normal retail prices.

12.Liu started making purchases in July 2014.  She would appear to be the “biggest” buyer amongst the four plaintiffs.  At the beginning, she had purchased 33 Samsung Galaxy Note 3 mobile phones at $2,000 each, which were delivered to her in December 2014.

13.The plaintiffs paid the purchase moneys as follows.

14.Yip had only provided to the defendant the details of her bank account held with DBS Bank and that was the account into which the purchase moneys were to be paid. 

15.Some of the purchasers, amongst whom were Chim and Liu, would deposit the purchase moneys directly into Yip’s DBS account.  Chim did so by using DBS’s ATM machines near her home whereas Liu had an account with DBS and therefore was able to transfer money to Yip’s DBS account by, eg, direct transfer.

16.Other purchasers, including Wong and Cheng, would deposit the purchase moneys into the defendant’s bank account maintained at HSBC or Hang Seng Bank. The defendant would then collect the moneys from a few purchasers and transfer the moneys in one lot within a few days to Liu, the defendant and Liu each having an account at HSBC.  Liu would then transfer the same amount of money to Yip’s DBS account.  The defendant said that this arrangement was for the convenience of those of her friends who did not hold a bank account at DBS. She offered to make available her HSBC and Hang Seng Bank accounts to collect purchase moneys from them and then, through Liu, those moneys were sent to Yip.

17.In addition, on occasions, the defendant would give cash, which comprised her own money and money from other purchasers, to Chim and asked Chim to help pay the money for her into Yip’s account by depositing the cash at the DBS ATM machine. 

18.In their purchases, the plaintiffs communicated with the defendant verbally and also through Whatsapp messages.  Copies of these messages have been disclosed in these actions. 

19.I should pause here to highlight two matters.  They are supported by the contemporaneous messages.  

20.First, the plaintiffs did not purchase the products and cash coupons solely for self-use.  They were in fact pooling purchase orders from their own sources, eg, their relatives and friends.  That much is clear from, first, the large quantities of the same products purchased by each plaintiff and, secondly, some of the WhatsApp messages exchanged at the time.

21.For instance, Wong sent the following message to the defendant in February 2015, showing that she was also making purchases for her niece and her niece’s friends:

“我姨甥女要果啲數聽日覆實妳可OK, 佢家問啲friend喎!”

22.Another example is the WhatsApp message sent by Cheng to the defendant (date unknown) in which Cheng said that her brother and father also wanted to buy the ParknShop cash coupons because they were such a good bargain.  (The cash coupons were sold at half price or at 40% off.)

“我哥哥和老豆都話好抵要買百佳券, 請幫我訂面值$22,000.00元 … ”

23.Further, it is common ground that on one occasion after receipt of some iPhones from Yip, Chim, Cheng, Liu and the defendant together went to Sin Tat Plaza, a shopping mall known for the sale of mobile phones and other digital products, to re-sell them and they each made a profit from the re-sale.

24.Secondly, at all times, the plaintiffs knew that the defendant was purchasing the products and cash coupons from a friend, although they now claim that they did not know then that that friend was Yip.  In their WhatsApp messages, there were references made to “the friend”. 

25.In the WhatsApp messages exchanged between Chim and the defendant in November 2014, Chim expressly confirmed to the defendant that she (Chim) would make payment of $20,000 to “your friend” (ie the defendant’s friend).

26.In another WhatsApp message, Cheng made a (positive) comment about the defendant’s friend:

“你朋友甘好個個月都有嘢比你買…..”

27.In cross-examination, when asked whether she knew that the purchase money was to be paid to Yip, Cheng replied that she did not know to whom the defendant would then transfer the money.  But Cheng agreed that the defendant was supposed to transfer the money onward.

28.Separately, when Liu paid the purchase moneys into the DBS account, she noticed that the account holder was Yip but the name was unknown to her as she paid into that account solely as directed by the defendant.

29.Problems started to surface in March 2015.  From that time onwards, Yip has failed to deliver the products purchased by the defendant and her friends. The plaintiffs now claim against the defendant for the purchase moneys paid in advance for the products which remain undelivered to date.  I set out in the appendix to this judgment the dates of the payment, the undelivered products and the amounts paid in respect of each plaintiff.  The total amounts claimed by the plaintiffs are $123,600, $56,400, $118,200 and $321,500 respectively.

30.The defendant, together with other purchasers who dealt directly with Yip, chased Yip for the products but to no avail.  Eventually, in June 2015, Yip issued cheques to these purchasers as refunds.  A cheque in the sum of $2,096,088 was issued to the defendant.  However, the cheque bounced upon presentation.  The defendant made a report to the police against Yip. 

31.Yip was prosecuted under DCCC 1010/2015 facing nine charges of evasion of liability by deception, contrary to section 18B(1)(b) of the Theft Ordinance, Cap 210.  One of the charges was in respect of the dishonoured cheque issued to the defendant, who gave evidence for the prosecution as “PW3”.

32.Yip was convicted.  According to the reasons for verdict:

(a)   Yip operated a scheme whereby she bought large quantities of electrical goods and cash coupons at retail price, which she then sold at heavily discounted prices to her friends and their contacts.  Purchase moneys were paid into Yip’s bank account.  Yip used the money to purchase goods for the earliest adopters of the scheme. 

(b)   Inevitably, the economics of the scheme meant that Yip ran out of money and was unable to purchase further goods that had been promised to the purchasers. Eventually, Yip supplied those persons with cheques as refunds for their purchases in June 2015.  There was no money in her bank accounts.  The cheques therefore bounced. 

(c)   The nine charges were based on nine cheques issued to nine victims.  In total, the nine cheques amounted to over $5 million. 

33.Yip was sentenced to 36 months’ imprisonment in October 2017.

34.The reason why Yip operated the scheme in the first place is not relevant to the present claims.  However, I set out Yip’s testimony here just for completeness.  She said that she was generally a lonely and unhappy person and found it difficult to make close friendships.  It all began when she won a prize from a lucky draw at her workplace in early 2014.  This allowed her to redeem two Samsung mobile phones from Fortress.  She sold them to a colleague, one of the nine victims, at a discount.  The colleague was suspicious that the phones were parallel goods, so Yip lied to her that it was from someone working in Fortress who could get the phones cheaply.  The colleague then wanted more discounted phones from Yip.  This improved the relationship between Yip and the colleague, who was Yip’s only friend.  Eventually Yip agreed to sell more electrical items to the colleague, fearing that not doing so would jeopardise their relationship.  From then onwards, more orders came in.  Yip also sold directly to the other victims, all at a loss to herself.  After April 2015, Yip was no longer able to make any further deliveries.  It was revealed that in total some $12 million had passed through Yip’s accounts and she spent some of the money on luxury items while the scheme was in operation. 

35.The defendant also instituted a civil claim against Yip under HCA 1172/2016 in respect of the dishonoured cheque issued by Yip.  The case is still ongoing. 

36.In closing submissions, the plaintiffs accepted that when the purchase moneys were paid, the common intention of all the parties was that the moneys would ultimately go to the defendant’s friend (ie Yip although the name was then not known to the plaintiffs) and, further, that all the moneys were in fact ultimately transferred to Yip, either directly (in the case of Chim and Liu) or through the defendant (in the case of Wong and Cheng).  What is in dispute is whether, notwithstanding that, the defendant was enriched at the expense of the plaintiffs as a matter of law.

The factual dispute

37.The defendant stressed that in these purchases, she was merely acting as a coordinator relaying messages between the purchasers and Yip.  She did so out of a simple desire to help her friends to buy cheap products.  That was all that she was doing.  She did not derive any personal benefit from the purchases.  She was herself also a victim in the end.  In her oral testimony, she confirmed that the sum of the dishonoured cheque covers the amounts now claimed by the plaintiffs.  She said that if she managed to get back the money from Yip, she would pass it back to them.

38.On the other hand, the plaintiffs allege that the defendant obtained benefits for herself in these purchases.

39.I should, however, point out at this juncture that Mr Chong said in his closing submissions that whether or not the factual dispute is resolved in the plaintiffs’ favour, the defendant is liable for restitution as a matter of law.  His submissions would not turn on the outcome of that dispute.  So, strictly speaking, it is not necessary for me to rule on it.  However, since some time was spent on it at the trial, I would proceed to make a finding.

40.Wong said that after the defendant failed to deliver the products, she and four other colleagues met with the defendant to follow up.  At that meeting, the defendant admitted that she earned $300 for each purchase of Samsung Galaxy Note 3 mobile phone.  Although she received $1,800 from the purchaser for each purchase, she in fact only passed on $1,500 to Yip.

41.The plaintiffs also rely on some contemporaneous documents in support.

42.In about February 2015, the defendant told Chim that there were some mistakes in the calculations.  The defendant asked her to check the number of orders made and for that purpose she sent to Chim copies of some WhatsApp messages between the defendant and a person named “Sara”, who was in fact Yip. The messages were exchanged in December 2014 and January 2015.  They read as follows (“Sara” and “liyfmaria” being references to Yip and the defendant respectively):

“2014年12月7日 8:36 : Sara (聰聰同事): 我fd昨晚收到公司email, 3月份拿禮券,每定滿2萬就會有額外送2000稻香禮券同2張海洋公園免費入場券, 因為佢公司本身禮券賣給高級客人, 所以有此優惠, 請人家拿時禮券時, 如果無比這免費以上免費禮券, 記得提我追反比你地, 我驚到時唔記得拿就唔好意思

2014年12月7日 8:37 : Sara (聰聰同事): 任何禮券加了總數夠2萬就有, 每2萬有一份”

“1月13日 12:26 - Sara (聰聰同事): 如果128g, iphone6, 4月拿, 5000有冇人買

1月13日 12:26 - Sara (聰聰同事): 仲有note3, 1500”

“1月28日 17:13 - liyfmaria: 想問下, 百佳券的數量, 會否有你之前提過滿20000有稻香現金券及海洋公園票及滿60000有note4送?

1月28日 17:14 - Sara (聰聰同事): 會, 她會比返你

1月28日 17:14 - Sara (聰聰同事): 我到時會計數”

43.Based on the above evidence, the plaintiffs say that the defendant received the following benefits:

(a)   For each purchase of cash coupons in the total sum of $20,000, she received Tao Heung gift vouchers worth $2,000 and two Ocean Park tickets.

(b)   For each purchase of cash coupons in the total sum of $60,000, she received one Samsung Galaxy Note 4 mobile phone.

(c)   For every purchase of one Samsung Galaxy Note 3 mobile phone, she earned $300.

44.The defendant denies that she ever received any benefit from the purchase arrangements.

(a)   She denies marking up the price of the Samsung Galaxy Note 3 mobile phone from $1,500 to $1,800 so as to earn the difference.  In cross-examination, she said that initially that model was sold at $2,500.  The price was later reduced by Yip to $2,000 and then further to $1,800.  The defendant said that she had been frank about the reduction with the purchasers all along and if she had wanted to make a profit, she could have simply not told the plaintiffs about the price reduction. 

(b)   As regards the Whatsapp message which referred to the price of $1,500 for the model, the defendant explained in her oral testimony that it was a one-off incident where a friend of Yip’s had ordered an extra phone.  In the end, the defendant herself bought that phone from Yip at $1,500.

(c)   Also, she never received any Tao Heung gift vouchers or Ocean Park tickets from Yip, notwithstanding what Yip said in her WhatsApp messages.  The defendant said in oral evidence that if she had received any of these coupons, she would have distributed them amongst the purchasers.

45.On this factual dispute, having considered the evidence as a whole, I prefer the defendant’s evidence and accept what she says as true.  I therefore find that she did not receive or derive any benefit in the purchases involving the plaintiffs, whether in the form of cash, gift vouchers or otherwise.  In my view, the following matters are material considerations in resolving this factual dispute.

46.First, the defendant’s testimony is strongly corroborated by the undisputed fact that the Samsung Galaxy Note 3 mobile phone was initially sold at the price of $2,000 to some of the plaintiffs: see paras 9, 10 and 12 above. That reinforces the defendant’s allegation that she had been forthcoming and frank about the price reduction of that product. 

47.Secondly, while the WhatsApp messages reveal that Yip had mentioned the Tao Heung gift vouchers and Ocean Park tickets to the defendant, they are not by themselves proof that such vouchers and tickets were in fact subsequently given to the defendant. 

48.Thirdly, it was suggested by the plaintiffs that it is against common sense that the defendant had not derived any personal benefits from the purchases.  The purchases which she had handled were worth as much as $2 million (and in fact more).  And at all times she was working as a clerk.  They ask rhetorically – would the defendant have done all these for nothing?  I agree that that is a background fact against which I should assess the defendant’s denial of personal benefit.

49.Fourthly, the defendant was cross-examined at some length.  Despite the repeated questioning on the issue of benefit, she remained firm and unshaken when testifying.  The crux of her evidence was that she wished simply to help her friends to buy products at a bargain and she would not and did not try to make profit out of her friends.  While she did sell some iPhones at Sin Tat Plaza, she made her profit from outsiders, not friends.  In any event, three of the plaintiffs were selling iPhones together with her on that occasion.  (I should add that the defendant was also cross-examined on the police statement which she made in the criminal proceedings and her evidence at the criminal trial and it was put to her that there were discrepancies between that and her evidence in these proceedings.  However, I do not find that there is any material discrepancy.)

50.On balance, I consider that the defendant’s case is on the whole coherent and inherently plausible and accept her evidence to be truthful.

Discussion

51.The plaintiffs’ claims against the defendant are for money had and received where consideration has totally failed.  The plaintiffs make no claim against the defendant based on contract.

52.To establish their claims, the following three matters need to be shown in each case: (a) the defendant was enriched; (b) the enrichment was at the plaintiff’s expense; and (c) the enrichment was unjust.  If established, it is then for the defendant to raise a defence and show why the plaintiff in each case should not be entitled to restitution of the moneys paid: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at para 66; Goff & Jones, The Law of Unjust Enrichment (9th ed) at para 1-09.

53.The facts giving rise to the four actions are basically the same, the only difference being the payment mechanism involved.  It will be recalled that Chim and Liu paid their purchase moneys directly into Yip’s bank account without going through the defendant at all whereas Wong and Cheng paid to the defendant first, who then arranged for the moneys to be paid to Yip (through Chim or Liu).  Save for this aspect of the case, the four claims are subject to the same legal analysis.

54.I shall deal with the claims of Chim and Liu first.

55.In my view, their claims must fail because on the facts, the defendant was not enriched.  The first element of the cause of action is not made out.

56.All the plaintiffs knew that the defendant was sourcing the products from “a friend”.  They were fully aware that the purchase moneys ultimately went to the friend.  Once paid, the products would be delivered within three months of payment.  Because there was a DBS ATM machine near where Chim lived and Liu had a DBS account, the two of them chose to pay their purchase moneys directly into Yip’s DBS account.  At no time did their purchase moneys go through the defendant’s hands.  In other words, the defendant had never received their moneys.  As such, there was no enrichment as a matter of law.  There was no change to the financial position of the defendant before and after Chim and Liu made the payments.

57.On the issue of enrichment, Mr Chong made a number of submissions.

58.He argued that the defendant was enriched “because the moneys were actually for the Defendant placing orders with Yip” and that “Chim and Liu paid the moneys to Yip for and on behalf of the Defendant, even though the moneys were relating to orders corresponding to those placed by Chim and Liu with the Defendant” (emphasis added). 

59.I do not think that the submission is borne out by the facts and should therefore be rejected.  There is nothing to suggest that when Chim and Liu paid their own purchase moneys (as opposed to the purchase moneys of the other buyers) into Yip’s bank account, they were doing so for and on behalf of the defendant.  The objective facts are: (a) they knew that the defendant’s friend was the source of the products, and (b) it was the defendant’s friend who was to be paid in order for those products to be delivered.  From whichever angle one looks at the matter, in respect of the sums they now claim, they were paying those sums to Yip for their own purchases on their own account, but not for the defendant. 

60.Mr Chong also made the following submission in closing:

“Here, the Defendant was clearly enriched (in the negative sense) by reducing or saving her loss arising from the fraudulent scheme run by Yip at the expenses of the Plaintiffs in the Transactions. As confirmed by the Defendant, the scheme was based on trust reposed by Defendant in Yip and then trust reposed by the Plaintiffs in the Defendant. It is the Defendant who brought the Plaintiffs into the purchase scam and thereby enabled Yip to occasion the loss to the Plaintiffs. The Defendant must sustain the loss of the moneys. …”

61.It is generally recognised that a defendant is enriched when his debt or other legal obligation is discharged and the measure of his enrichment is the value of the discharged liability.  This is because he is relieved of a legally necessary expense so that he is free to spend an equivalent sum on something else: Goff & Jones at para 4-34.  However, this general proposition does not apply to the facts here. 

62.Insofar as Mr Chong was suggesting that the defendant was enriched because her obligation to pay to Yip was reduced by the amounts of the sums transferred by Chim and Liu to Yip directly, the contention is invalid.  On the facts, the defendant did not owe any debt or obligation to pay money to Yip.  There was no commitment on the part of the defendant to buy anything from Yip in the first place.  What would normally happen was that the defendant would check the prices of the products with Yip and relay them to her friends.  If interested, the buyers would confirm the number of items with the defendant and make payment accordingly.  Throughout these arrangements, the defendant did not at any time owe any obligation to buy anything from Yip or pay her any money.  As there is no obligation, there can be no enrichment in the form of reduction of such obligation. 

63.As highlighted in Goff & Jones, the question whether a defendant has been enriched is “centre stage”.  It is not enough for a plaintiff to show that he has suffered a loss.  He must show, amongst other things, that the defendant has made a corresponding gain.  The mere fact of the plaintiff’s loss is not by itself sufficient to justify a restitutionary remedy.  Proof of the defendant’s enrichment is therefore “not merely material to success, but the whole essence of the action”: para 4-01.

64.In the case of Chim and Liu, such proof of “the corresponding gain” is absent.  Their restitutionary claims must fail.

65.It is therefore unnecessary and, logically speaking, not possible to proceed to rule on the other two elements of the cause of action. 

66.I now turn to the claims of Wong and Cheng.  Although the payment of their purchase moneys followed a different route, I am of the same view that the defendant was not enriched.  Hence their restitutionary claims also fail at the first hurdle. 

67.The plaintiffs’ position is that the defendant was enriched by receiving the purchase moneys from Wong and Cheng and that it is so, notwithstanding that those moneys were transferred to Yip immediately afterwards (usually within a few days). 

68.On this point, Mr Chong relied on the following passage from Goff & Jones, at 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.” (emphasis added)

69.In the case of Wong and Cheng, the date of receipt was, in respect of each purchase, the date on which Wong or Cheng paid the relevant purchase money to the defendant.  Applying the above passage literally, the court is to look at the position of the defendant on that date.  On that basis, it would seem to be the case that the defendant was enriched by the amount transferred to her on each payment date.

70.However, the facts of the case have to be looked at more closely and the intention of the parties, as objectively ascertained, must be taken into account when considering the issue of enrichment.  As revealed by the evidence and confirmed by Mr Chong in his closing submissions, the common intention of Wong, Cheng as well as the defendant herself was that while the purchase moneys were given to the defendant, she was to transfer them to “the friend” who was the source of the products.  That intention was in fact carried out within a few days of the payment.

71.In view of the particular circumstances of the case, I would hold that, as a matter of analysis, each time when the defendant received the purchase money, she was not enriched because she was receiving it on the common understanding that she was to transfer it to Yip straightaway, which she in fact did.  If she had held on to the money contrary to the common understanding, she would have been enriched from the moment when she should have forwarded it to Yip, namely within a few days.  But this is not what happened on the facts.  The defendant in fact forwarded the purchase money to Yip each time.  Therefore, in my view, there was no enrichment.

72.For that reason, the claims brought by Wong and Cheng must fail.

73.But if I am wrong on this and the issue of enrichment ought to be determined without regard to the common intention held by the parties at the time of receipt, I would consider that the defendant would have a valid defence of change of position vis-à-vis Wong and Cheng’s claims. 

74.The test is whether a defendant entered into a transaction that he would not have entered but for the enrichment: Goff & Jones at para 27-08.  Here, the defendant proceeded to transfer the purchase money on each occasion after she received it from Wong or Cheng.  The defendant would not have made the transfer to Yip if she had not first received the money from the buyer.  The test is therefore satisfied.

75.On the defence, Mr Chong made the following submission:

“This alleged change of position was clearly not caused by the enrichment simply because the Defendant is not required to use the same moneys to place orders with Yip. And the moneys were actually spent by the Defendant for placing orders with Yip in the normal course of business of the scheme of transactions. In other words, the enrichment is still with the Defendant although it has become the equivalent pecuniary advantage from discharging her obligation to pay Yip. The enrichment only changed its form but not substance. The defence of bona fide change of position is not made out.”

76.The submission is not entirely understood.  But insofar as Mr Chong was saying that there was no causal link between the payment by the plaintiffs to the defendant and the payment by the defendant to Yip, I reject that submission as contrary to the established facts. 

77.At the trial, Mr Chong made a number of other points, which I should also address.

78.First, he submitted that, on the facts, the plaintiffs placed purchase orders with the defendant and the defendant in turn placed corresponding orders with Yip.  It follows that:

“In terms of commercial reality, Yip was acting like a wholesaler, the Defendant a retailer and the Plaintiffs end buyers.”

79.Mr Chong further submitted:

“On evidence, D confirmed that, in the purchase arrangement, it is D who took the purchase risk because it is D who trusted Yip. In other words, Ps did not share with D the risk of placing purchasing orders with Yip.”

“It was D (not Ps) who placed the purchase orders with Yip out of trust. It was D (not Ps) who took up the risk of purchase from Yip. This is why Yip refunded all the moneys to D alone. So in terms of liability, Yip is liable to D (not Ps) and D is liable to Ps. This is the true distribution of risk and liability in the present proceedings on evidence.”

80.It is not entirely clear to me how the above characterisation fits into the overall analysis of the restitutionary claims.  In any event, there is no merit in these submissions.    

81.In these actions, the plaintiffs are not making any contractual claim against the defendant.  The wholesaler-retailer relationship, which generally arises out of contracts for sale of goods, simply has no relevance in the present discussion.  Further, there is no allegation made to the effect that the defendant expressly or impliedly made any promise or guaranteed to deliver the products to the plaintiffs.  It would seem to be the case that the parties had never expressly discussed what should happen if Yip failed to deliver the products.  In the circumstances, I fail to see how one can conclude that the defendant should bear the non-delivery risk. 

82.Secondly, Mr Chong relied on the following statement from Lickbarrow v Mason (1788) 2 TR 63, cited in Commonwealth Trust, Limited v Akotey [1926] AC 72 at 76.

“Wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it.”

83.Here, the argument is that it was the defendant who introduced Yip to the plaintiffs and “brought [them] into the purchase scam” operated by Yip. Therefore, it was the defendant who “enabled” Yip to occasion the loss to the plaintiffs.  The defendant should bear those losses.

84.I do not accept the argument.  The two cited authorities were not decisions on restitution.  It is doubtful that the statement relied on has any application to the present claims based on unjust enrichment.  As firmly established by modern authorities (eg, Shanghai Tongji in Hong Kong), the claims should be considered by an examination of whether the three elements of the cause of action are made out and, if so, whether any recognised defence applies.  I have already gone through that process above and concluded that the claims are not made out. 

85.But even if I were to apply the statement as a legal principle applicable to the present case, it would not advance the plaintiffs’ position. On the one hand, it is true that it was as a result of the defendant’s introduction that the plaintiffs made the purchases from Yip.  Hence it may (loosely) be said that the defendant had “occasioned” their losses.  On the other hand, it must be recognised that the plaintiffs are all educated adults and they made the decision to buy voluntarily, no doubt being attracted by the huge discounts on offer.  It can therefore equally be said that it was their own conscious choice to buy in such circumstances which “occasioned” their own losses. 

86.To sum up, the statement in Lickbarrow is not a general principle of law applicable in the context of restitution and even if it applies, it does not assist the plaintiffs’ case.

87.Thirdly, and lastly, Mr Chong repeatedly emphasised that it would be unjust if the defendant is not held liable.  He said:

“The Plaintiffs are entitled to recover the moneys paid for total failure consideration. It is not a defence for the Defendant to say that the moneys so paid have been duly applied by her. If the Defendant is not liable, against no one else could the Plaintiffs obtain any relief. This is where the unjust factor comes in.”

88.I reject this submission.  As highlighted in para 63 above, the mere fact that the plaintiffs have sustained losses is by itself not enough to justify a claim in restitution.  By its nature, a claim based on unjust enrichment is not a claim for compensation for loss but for recovery of a benefit unjustly gained at the expense of the claimant.  It is about whether the defendant is better off as a result of the claimant’s acts: Goff & Jones at paras 1-14 and 4-01.

89.I have held that the defendant was not better off as a result of the plaintiffs’ acts.  To hold her liable for the plaintiffs’ losses would require her to make compensation out of her own pocket.  She would be worse off.  There is no legal basis for doing so.  It is tantamount to imposing on her a promise to deliver the products which she had never made.  The plaintiffs are all consenting adults and made their own decisions to make the purchases.  They had enjoyed the fruits of the earlier purchases but have suffered losses from the later ones.  In my view, as between the plaintiffs and the defendant, there is nothing unjust that these losses should stay where they are.

Conclusion

90.I order that the four actions be dismissed.  I further make an order nisi that in respect of each action, the defendant do have costs of the action, to be taxed if not agreed, with certificate for one counsel.

 
 

  (Winnie Tsui)
  District Judge

Mr Matthew CS Chong, instructed by Wong, Fung & Co, for the plaintiff in each of the four actions

Ms Lau Chui Ling, Wendy and (on 21 and 24 September 2018 only) Mr Richie Lai, instructed by So, Ho & Co, for the defendant in each of the four actions




Appendix

Products paid for by Wong but not delivered

Date of payment

Products

Amount ($)

 

24 January 2015

1 Apple iPhone 5s

1,000

28 January 2015

ParknShop cash coupons

20,000

2 February 2015

4 Samsung Galaxy Note 3 and ParknShop cash coupons

12,200

10 February 2015

11 Samsung Galaxy Note 3

19,800

12 February 2015

5 Samsung Galaxy Note 3

9,000

16 February 2015

4 Samsung Galaxy Note 3 and Fortress cash coupons

25,200

17 February 2015

2 Apple iPhone 6 Plus

10,000

18 February 2015

3 Apple iPhone 6 Plus

15,000

9 March 2015

3 Samsung Galaxy Note 3

5,400

10 March 2015

Fortress cash coupons

6,000

 

Total   

$123,600

Products paid for by Chim but not delivered

Date of payment

Products

Amount ($)

 

3 September 2014

4 Apple iPhone 6 Plus

20,000

11 November 2014

ParknShop cash coupons

19,400

16 November 2014

ParknShop cash coupons

1,000

11 December 2014

Watsons cash coupons

10,000

12 January 2015

Fortress cash coupons

6,000

 

Total   

$56,400

Products paid for by Cheng but not delivered

Date of payment

Products

Amount ($)

 

17 September 2014

1 Apple iPhone 6 Plus

5,900

22 September 2014

1 Apple iPhone 6 Plus

5,900

27 September 2014

1 Apple iPhone 6 Plus

5,900

12 November 2014

ParknShop cash coupons

13,200

13 November 2014

Watsons gift voucher

5,000

12 December 2014

1 Apple iPhone 6 Plus 128GB

2 Apple iPhone 6 Plus 64GB

1 Apple iPhone 6 64GB

1 Apple iPad air 2 wifi 128GB

2 Samsung Galaxy Note 3

H&M cash coupons

Fortress cash coupons

42,000

2 January 2015

ParknShop cash coupons

H&M cash coupons

13,500

27 January 2015

6 Apple iPhone 5s

ParknShop cash coupons

11,000

2 February 2015

14 Apple iPhone 5s

14,000

10 March 2015

1 Samsung Galaxy Note 3

1,800

 

Total   

$118,200

Products paid for by Liu but not delivered

Date of payment

Products

Amount ($)

 

6 September 2014

4 Apple iPhone 6 Plus

20,000

6 September 2014

2 Apple iPhone 6 Plus 64GB

11,800

20 September 2014

1 Apple iPhone 6 Plus

5,500

12 November 2014

ParknShop cash coupons

14,400

4 December 2014

Fortress and Marathon Sports cash coupons

12,000

22 December 2014

25 Samsung Galaxy Note 3

45,000

22 December 2014

1 Samsung Galaxy Edge

5,000

22 December 2014

11 Apple iPhone 6 Plus 128GB

63,800

22 December 2014

7 Apple iPhone 6 Plus 64GB

35,000

24 January 2015

28 Apple iPhone 5s

28,000

28 January 2015

ParknShop cash coupons

2,000

3 February 2015

68 Apple iPhone 5s

68,000

23 February 2015

ParknShop cash coupons

11,000

 

Total   

$321,500