Wong Ka Lee v. El Fight Sports (HK) Ltd t/a Everlast Fight & Fitness

DCCJ 1317/2017

[2020] HKDC 1227

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1317 OF 2017

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BETWEEN

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JUDGMENT

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1.The plaintiff commenced the present action against the defendant to rescind various personal fitness training contracts on the ground of misrepresentation and unconscionable sales method. The defendant has apparently ceased operation, and was absent from court hearings including this trial.

Background

2.The defendant was and is a limited company, which operated a fitness centre under the name of “Everlast Fight & Fitness” at Shop 2, 1/F, 458-468 Hennessy Road, Causeway Bay, Hong Kong (“the Centre”).

3.On 23 October 2014, the plaintiff passed by the Centre and was invited by a salesperson, who held herself out as the defendant’s employee or agent, to join a trial personal fitness training session.  After a trial boxing session, and under the promotion by Fu Man Ki (“Fu”), personal trainer under the employ of the defendant, the plaintiff entered into a written agreement for the defendant’s provision of 10 personal training (“PT”) sessions of an hour each at the total cost of HK$8,600 (“the 1^st Agreement”).  She duly paid the agreed cost by way of credit card.

4.After the completion of the 10 PT sessions under the 1^st Agreement, on 2 November 2014, the plaintiff entered into another written agreement for the defendant’s provision of 250 PT sessions of an hour each (at HK$680) at the total cost of HK$170,000 (“the 2^nd Agreement”).  She duly paid the agreed cost by way of credit card in 2 instalments.  This agreement would expire on 1 November 2016.

5.On or about 20 or 25 March 2015, Fu orally represented to the plaintiff at the Centre that her PT sessions had been used up, and she would be unable to continue her training if she did not enter into further agreement for additional sessions.  So induced by such representation, the plaintiff entered into another written agreement for the defendant’s provision of 362 PT sessions of an hour each (also at HK$680) at the total cost of HK$246,160 (“the 3^rd Agreement”).  This agreement was supposed to expire on 19 March 2016.  She duly paid the agreed cost in cash.

6.On or about 31 March 2015, Fu again represented to the plaintiff at the Centre that her PT sessions had been used up, and persuaded her to enter into a further agreement for additional PT sessions.  So induced, she did as requested, and entered into a written agreement, this time for 100 PT sessions of an hour each (also at HK$680) at the total cost of HK$68,000 (“the 4^th Agreement”).  This agreement was supposed to expire on 30 March 2016.  She also paid the agreed cost in cash.

7.On or about 10 April 2015, Fu again represented to the plaintiff at the Centre that her PT sessions had been used up, and that she could not continue her training unless she entered into yet another agreement for additional sessions.  So induced, she entered into a written agreement for the defendant’s provision of 182 PT sessions of an hour each at the total cost of HK$356,720.  This time the cost per session was substantially increased toHK$1,960.  She too paid the agreed cost in cash.  This agreement was supposed to expire on 9 April 2016.

8.In March 2017, the plaintiff, through solicitors, commenced the present action.  She contends that the representations by Fu which led to the 3^rd Agreement, the 4^th Agreement and the 5^th Agreement were false as well as made fraudulently or recklessly without caring about their truth or falsity. The plaintiff also contends that the 2^nd Agreement, the 3^rd Agreement, the 4^th Agreement and the 5^th Agreement were entered into under undue influence by Fu for and on behalf of the defendant, who took advantage of her state of mind as expressed to him to gain her trust and confidence.  They were entered into under undue influence. 

9.For the above reasons, the plaintiff claims for rescission of these agreements and recovery of the money paid for them. Alternatively, she claims damages pursuant to section 3 of the Misrepresentation Ordinance, Cap 284 (“MO”).

10.The defendant filed its notice to act in person in September 2018.  However, it gradually became absent from court hearings. Pursuant to the direction of this court at the pre-trial review, the plaintiff has conducted in mid-October 2020 an up to date search in respect of the defendant, which was confirmed to be existing as a matter of registration.

11.The plaintiff was legally aided until her legal aid certificate was discharged on 24 December 2019.

12.The defendant was absent from this trial. Seeing no reason why the plaintiff should be prevented from doing so, I allow the plaintiff to proceed in the defendant’s absence.

How the plaintiff came to commit herself to the above agreements

13.Essentially, the plaintiff complains about the unconscionable promotion and sales tactics exercised by the defendant, mainly through Fu, on her.  She adopted her witness statements, which contained evidence in respect of the following material details.

14.At the material time, the plaintiff was 35 years old.  She grew up and graduated from university in Canada before returning to Hong Kong in 2006.  She then worked for an investment bank.  Notwithstanding her age, educational and occupational background, the plaintiff still fell for the alleged unconscionable tactics of Fu at the material time mainly because of her prevailing psychiatric condition.

15.The plaintiff recounted the beginning of her psychiatric problem in about 2013, involving delusional thoughts and unstable mood.  During the period between September and November 2014, the plaintiff has consulted Dr Anita Chu’s Medical Practice, and the diagnosis then was depression and anxiety with delusion.  Timing wise, she was so affected at the time when she was first approached by the defendant’s employee on 23 October 2014 and when she committed to the 2^nd Agreement.

16.The plaintiff’s case is that during the conversation with Fu at the Centre on 23 October 2014, she disclosed her (delusional) thoughts of being followed by strangers in the streets, who intended her harm. She was under great mental stress.  Fu’s response was that she should in the circumstances take PT session to prepare herself for self-protection.  Hence the 10 PT sessions contracted under the 1^st Agreement.  There is no dispute that those 10 PT sessions were completed by early November 2014. Effectively, the plaintiff attended the session almost daily if every visit entailed one session.

17.On about 2 November 2014, Fu represented to the plaintiff that she would be unable to train to protect or defend herself, on the basis of her previous description of her (delusional) thoughts, if she did not enter into further fitness training agreement.  So induced, the plaintiff committed to the 2^nd Agreement.  The payment for the cost then by credit card was sufficiently evidenced.  Given the 250 PT sessions subscribed under this agreement, it would have taken the plaintiff up about July 2015 if she attended training session daily.  As mentioned, she had up to 1 November 2016 to use the sessions.

18.The plaintiff’s psychiatric condition did not improve, while she still attended the Centre for training.  On one occasion during her attendance at the Centre in January 2015, she was seen taking off her clothes and walking around the Centre topless due to delusion that she were a male.  Fu and the other employees of the defendant are said to have witnessed the situation and advised her to put her clothes back on.  On other occasions during the first quarter of 2015, the plaintiff was seen breaking down into emotional disturbance in the presence of the personal trainers.

19.On about 18 April 2015, Fu even requested that other personal trainers accompanied the plaintiff to consult Dr Tung Fu Yin, specialist in psychiatry.  Dr Fu’s record of the same date set out the information about the plaintiff’s history and condition.  The diagnosis was psychosis with suicidal idea.  Dr Tung immediately referred the plaintiff for admission to the Psychiatric Observation Unit of the Pamela Youde Nethersole Eastern Hospital (“the Hospital”) on 18 April 2015.  She was kept under observation until 21 May 2015.  She was subsequently admitted on 18 June until 28 July 2015.  The diagnosis was schizophrenia.  She had to be followed up by the Psychiatric Department of the Hospital.

20.The records of Dr Tung and the Hospital revealed that the plaintiff lived alone and often changed jobs, and became unemployed since 2010 and started to live on her savings.  The record of the information from the personal trainers accompanying her to Dr Tung confirmed the plaintiff’s version of how she behaved at the Centre on the various occasions mentioned above.

21.The plaintiff gradually came to realise her commitment to the PT sessions at the defendant time and time again because of perceived persecutory imagination since 2014.  After discharge from the Hospital, the plaintiff sent to the defendant a letter dated 31 July 2015 complaining about the sales tactics.  With the help of relatives, she also approached a District Councilor, who also wrote to the defendant, essentially explaining the psychiatric condition of the plaintiff and the impairment of her judgment by her condition and antidepressant medication.  A medical certificate of Dr Chu (mentioned above) was enclosed with the letter to the defendant.

22.Rather obviously, a disturbing feature of the sales tactics of Fu, on behalf of the defendant, was the very fact that he repeatedly represented that the plaintiff had run out of PT sessions and urged her to subscribe for more within just a couple of months.  According to the plaintiff, by the time of Fu’s such representation which led to the 3^rd Agreement, the plaintiff had used up 51 sessions out of the 250 sessions subscribed under the 2^nd Agreement.  By the time of Fu’s such representation which led to the 4^th Agreement, the plaintiff had used up 77 sessions subscribed under the 2^nd Agreement, and had yet to start using the sessions subscribed under the 3^rd Agreement.  By the time of Fu’s representation which led to the 5^th Agreement, the plaintiff had used up 101 sessions subscribed under the 2^nd Agreement, and none of those subscribed under the 3^rd Agreement and the 4^th Agreement had been used.  One should recall that the plaintiff had up to 1 November 2016 to use the sessions subscribed under the 2^nd Agreement.

23.The plaintiff gave the above evidence in respect of the actual usage of the PT sessions.  The numbers slightly differ from those pleaded.  They also differ from what the defendant alleges.  That said, the defendant is said to have failed to provide accurate and consistent records of the usage of the PT sessions by the plaintiff, which it should have kept properly.  Further, it is pointed out that during the periods of her hospitalization, any attendance of the plaintiff purportedly recorded by the defendant could not possibly be true.

24.The defendant absented itself from the trial. It must follow that the witness statement of Fu originally proposed to testify must be expunged and disregarded.  There is nothing to contradict the version of the plaintiff. The pleaded contention of the defendant that the plaintiff had the liberty to check the usage of the PT sessions at the material time, which was not substantiated at trial, must be rejected, when the circumstances prevailing then are also considered.

25.Considering the evidence, I find that the situation would have been inexplicable, had it not been for the misrepresentation by Fu as to the plaintiff’s usage of the PT sessions.  Such misrepresentation vitiated the 3^rd Agreement, the 4^th Agreement and the 5^th Agreement.

26.I also find that Fu was aware of the plaintiff’s repeated expression of her state of mind and thought.  That would have put a reasonable person upon learning about that to be on guard as to whether the plaintiff could be of insufficiently sound mind and free will to enter into contractual relationship.  Fu either ignored or, as I tend to believe, took advantage of that, and induced the plaintiff to commit to subscribing PT sessions under the 2^nd Agreement, and blatantly so that led to the 3^rd Agreement, the 4^th Agreement and the 5^th Agreement within the following couple of months.  The proven repeated misrepresentations by Fu to the plaintiff only reinforce my belief that Fu was taking advantage of the plaintiff in her then state.  The plaintiff was unable to exercise her own free will because of the impact of her psychiatric condition and medication, when she was induced into committing to the 2^nd Agreement, the 3^rd Agreement, the 4^th Agreement and the 5^th Agreement.  These agreements are therefore also vitiated for this reason.

27.The stance of the defendant, as also pleaded, is that it was an express term of the agreements that all the fees paid shall under no circumstances be refundable, and that the plaintiff acknowledged that she fully understood and accepted that by executing the same.  Such provision would not avail the defendant, when it is established that the agreements are vitiated for the grounds contended by the plaintiff, and are liable to be set aside altogether.

28.Further, section 4 of the MO provides that:

“If a contract contains a term which would exclude or restrict-

(a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or

(b) any remedy available to another party to the contract by reason of such a misrepresentation,

that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 3(1) of the Control of Exemption Clauses Ordinance (Cap 71); and it is for the person claiming that the term satisfies that requirement to show that it does.”

29.The defendant did not come forward to discharge the burden under section 4 above.  Suffice for me to say that by reference to sections 3 and 8 of Cap 71 (which the plaintiff has pleaded), there is no way that the defendant could satisfy the requirement of reasonableness, in view of the above adverse findings against the defendant.

Disposition and order

30.The 2^nd Agreement was partly performed, and 101 PT sessions have admittedly been consumed by the plaintiff.  I am not impressed that the agreement is a severable one by reference to each PT sessions subscribed under it.  In the circumstances, I do not consider it suitable to declare that the agreement is rescinded.  However, I see valid basis for ordering that the defendant pay the plaintiff damages in the sum of HK$101,320, which represents the cost of the 149 unused PT sessions (at HK$680 each) under this agreement.

31.As to the 3^rd Agreement, the 4^th Agreement and the 5the Agreement, I declare that they are duly rescinded; and the plaintiff is entitled to the repayment of the total sum of HK$(246,160 + 68,000 + 356,720) = HK$670,880, which represent the total cost paid by the plaintiff to the defendant under these 3 agreements.

32.The defendant shall pay to the plaintiff interest on the above total sum (HK$772,200), which shall run at the judgment rate from the date of writ until full payment.

33.Costs follow the event.  The defendant shall pay the plaintiff’s costs of this action, including any costs reserved, to be taxed, if not agreed.  The plaintiff own costs up to the discharge of legal aid shall be taxed in accordance with legal aid regulations.

The plaintiff appeared in person

The defendant was not represented and did not appear