Hu Lan v. David Golden

HCA 2320/2019

[2023] HKCFI 873

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2320 OF 2019

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BETWEEN

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J U D G M E N T

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UNDISPUTED/INDISPUTABLE BACKGROUND

1.In this action, the plaintiff sues the defendant for the total sum of USD8,680,000 (“the Sum”). 

2.The defendant’s father is Mr Gao Jiaren (“Father”), who has had a number of marriages.  His first wife, with whom he separated in 1986, is the defendant’s biological mother.  Since then, he had had other failed marriages, and he subsequently married the plaintiff in 1997.  In other words, the plaintiff is the defendant’s step-mother.

3.While Father has a number of other children (including adopted children), the defendant is his only son.

4.In 2011, the defendant and Madam Wang Chaojie (“Wang”)  got married.

5.On around 3 October 2016, the plaintiff and the defendant accompanied Father to travel from Shanghai to Cleveland, Ohio for the purpose of seeking medical treatment of Father’s heart conditions.

6.After the treatment (which was successfully done), the parties went to New York together with Father and stayed there together with the defendant’s family.

7.During their stay in New York, it was decided that a house would be purchased under the name of the defendant.

8.A house was then identified as suitable in Brookville, New York (“the Property”), and it was agreed to purchase the same at USD8.3 million.

9.On 19 December 2016, USD830,000 was paid from the joint bank account held by the plaintiff and Father to an escrow account held by the attorney of the vendor of the Property for the purpose of the payment of the first instalment of the purchase price of the Property.

10.A Contract of Sale for the Property was entered into by the defendant with the vendor of the Property on 20 December 2016 (“the SP Agreement”), pursuant to which the Property was sold to the defendant at the consideration of USD8.3 million.

11.In the period between 20 December 2016 and 6 March 2017, the plaintiff has transferred a total of USD7,850,000 from a bank account with Standard Chartered Bank (opened under her sole name)  to the defendant’s bank account, for the purpose of the purchase of the Property.  The particulars are as follows:

20 December 2016		USD200,000
10 January 2017		USD6,000,000
6 March 2017		USD1,650,000

12.On 14 November 2019, the plaintiff, through her solicitors, issued a written demand to the defendant for the repayment of the Sum.

13.The defendant had not made any repayment of the Sum to the plaintiff.

THE PLAINTIFF’S CASE

14.The Sum was a loan which the plaintiff lent the defendant for him to purchase the Property.  The loan was granted by the plaintiff to the defendant upon the latter’s request for financial assistance.

15.On around 19 December 2016, the plaintiff and the defendant entered into a loan agreement (“the Written Loan Agreement”), by which they agreed that:

(1)  The plaintiff shall lend the amount of USD8,650,000 to the defendant for paying the purchase price of a residential house in New York and the expenses of the purchase (“the Loan”);

(2)  The Loan is repayable within 30 days of the plaintiff providing the defendant with a written notice of demand; and

(3)  If the defendant defaults in the performance of any obligation under the Written Loan Agreement, the plaintiff may declare the principal amount owing and the interest due under the Written Loan Agreement at that time to be immediately due and payable.

16.In around late December 2016 or early January 2017, the defendant indicated to the plaintiff that an additional amount of USD30,000 was needed for several miscellaneous expenses (“the Additional Loan”).  The plaintiff agreed to lend the defendant the Additional Loan, and it was further agreed that the Additional Loan would be repayable upon demand.

17.Starting from around October 2019, the plaintiff had repeatedly demanded the defendant for repayment of the Loan and the Additional Loan.  However, the defendant refused to repay.  The plaintiff therefore engaged solicitors to issue the demand letter dated 14 November 2019.

18.Father and the plaintiff had never intended to give the defendant the Property as a wedding gift as alleged.

THE DEFENDANT’S CASE

19.It is the defendant’s case that the Sum was not a loan but a wedding gift given by Father.

20.After Father had received a successful heart treatment in Ohio, he went to New York together with the plaintiff and the defendant. One day, while they were in a car ride (the plaintiff, the defendant, Father and Wang were present), Father told the defendant that since he had not given the defendant any wedding gift when the defendant got married, Father intended to purchase a house as a gift for the defendant (“the Promise”).

21.Because of the Promise, in around November 2016, Father, the plaintiff, the defendant and Wang did a house search in Long Island, New York together, with the assistance and in the presence of an estate agent, Joni Zhang (“Joni”). 

22.With the assistance of Joni, the Property was identified as a suitable house to be bought.  As a result, Father agreed to pay for the purchase price and the miscellaneous expenses of the Property.

23.At all material times, Father parked his funds in the plaintiff’s bank accounts in Hong Kong.  Upon the instructions of Father and in fulfilment of the Promise, the plaintiff caused the Sum to be paid from her accounts to an escrow account held by the vendor’s attorney and the defendant’s bank account.

24.In around October 2019, the relationship between the plaintiff and Father on one hand, and the defendant on the other hand, turned sour.

25.Father’s health has been declining rapidly in recent years and he is now suffering from, inter alia, dementia.

26.The defendant has no recollection that he has ever signed the Written Loan Agreement.  He does not admit that the signature thereon belongs to him.  He alleged that, in the dealings between the plaintiff and the defendant, there were occasions when the plaintiff requested the defendant to sign documents, without explaining the nature or contents of the documents to him, and he had also been asked to sign on some blank A4 papers by the plaintiff.  He had agreed to sign such documents simply because of his trust and confidence in the plaintiff.  However, since he has no idea as to how the Written Loan Agreement came about, he does not have a positive case as such as far as the execution thereof is concerned.  In essence, he simply puts the plaintiff to prove that the Written Loan Agreement was signed by him in the circumstances as described by her.

27.The defendant does not read English, and would not be able to read and understand the content of the Written Loan Agreement without assistance.

THE MAIN ISSUE

28.The main issue is therefore whether the Sum was given to the defendant as a gift or a loan.

NEW EVIDENCE

29.On 31 January 2023 (one week before the commencement of the trial), the defendant filed a summons (“the Summons”)  and sought leave to adduce two documents at the trial as follows:

(1)  Copy of the written judgment (summary judgment)  delivered by Mr Justice Lack [Ag.] of the Eastern Caribbean Supreme Court (“the BVI Summary Judgment”)  in Claim No. BVIHC (COM)  167 of 2019 dated 22 July 2021 (“the BVI Proceedings”); and

(2)  Copy of the 2^nd Affidavit of George Anthony Ribeiro in the BVI Proceedings (“Ribeiro 2^nd”).

30.The Summons was fixed to be heard on the first day of the trial.

31.During his submissions, Mr Chen for the defendant confirmed that the purpose of referring to the BVI Summary Judgment was only to give the background of the case (in that the discovery of the BVI Summary Judgment had led to the further discovery of Ribeiro 2^nd), and that the defendant was mainly interested in adducing Ribeiro 2^nd only. Upon taking further instructions, he withdrew the application to adduce the BVI Summary Judgment as new evidence.

32.While Mr Chen accepted that this was indeed a late application, he submitted that Ribeiro 2^nd should be admitted because it is plainly relevant to the main issue which this Court has to resolve, given Mr Ribeiro, the plaintiff’s solicitor herein, had given the following evidence:

“[…] I am advised by the [plaintiff] and verily believe that the signature on this bespoke document is different because the [plaintiff] executed that document in long form on [the defendant]’s behalf […]

The [plaintiff] who managed the business of the Villa with [Father], being proficient in English as well as the owner of Sundale, was the family member who took care of corporate documentation of Sundale and its subsidiaries.  As [the defendant] might not be available to sign a corporate document, there were occasions where [the plaintiff] would sign on his behalf through a long form writing out the name ‘David Holden’ after she had informed him that she would do so.  Then, when [the defendant] was available, the [plaintiff] would have [the defendant] sign or re-execute the same document and he generally did so in his usual signature which was in a short form […]’ ”

33.It was submitted by Mr Chen that:

“The fact that P had the habit of signing documents using the name of David Golden when D was not available is certainly a relevant matter for this Court to know and consider in assessing whether the Loan Agreement was indeed signed by D. With leave of the Court, this matter will be further explored in cross-examination.”[1]

34.Having considered parties’ submissions, this Court had dismissed the Summons for the following reasons:

(1)  I did not agree with Mr Chen’s argument that “habit of signing documents using the name of David Golden when D was not available” is a relevant matter which the Court should take into account when the Court considers whether the defendant had signed the Written Loan Agreement. The situation covered by Mr Ribeiro’s affirmation is totally different in that the habit described is about the plaintiff signing documents upon the consent given by the defendant.  Further, in the scenario referred to by Mr Ribeiro, the plaintiff used to sign the long form of the defendant’s name “David Golden” on documents, whereas in the present case, the signature on the Written Loan Agreement is not in such a long form at all;

(2)  The defendant’s solicitor, Mr Lau Chun Ming, explained that the BVI Summary Judgment and hence Ribeiro 2^nd were discovered only when he visited the website of the Eastern Caribbean Supreme Court on 27 January 2023 in preparation for the trial and for the purpose of making sure that there was no development in the BVI Proceedings subsequent to the filing of the defendant’s witness statement on 20 April 2021.  This explanation was rejected.  I did not understand why Mr Lau did not visit the website of the Eastern Caribbean Supreme Court earlier, in particular, before he personally signed the Listing Questionnaire filed on 9 June 2022 in which he confirmed that (i)  discovery had been completed; and (ii)  all steps that ought to be taken to prepare the defendant’s case for trial had been duly taken. Taking into account the BVI Summary Judgment was dated 22 July 2021, the defendant’s legal team would have discovered the said Judgment together with Ribeiro 2^nd if they had done the search at that time.  In other words, even if the defendant did not know the relevance of the said Judgment (which I did not accept – see further below), his legal team in this action could have advised him on this much earlier; 

(3)  Mr Chen had laid emphasis on the point that Mr Ribeiro made his affidavit with authorisation of the plaintiff in the BVI Proceedings.  In other words, Ribeiro 2^nd was not a document coming from the defendant as such.  He therefore argued that the plaintiff’s interest would not be prejudiced even if Ribeiro 2^nd was admitted as evidence herein, and if required, the defendant would have no objection for the plaintiff to expand her evidence-in-chief and explain Ribeiro 2^nd. I did not agree that the plaintiff would not be prejudiced.  In my view, the fact that the plaintiff had to deal with a document newly admitted as evidence at the beginning of the trial would itself be a prejudice which the Court must take into account; 

(4)  In Mr Lau’s Affirmation filed in support of the late discovery application, it was alleged in paragraph 13 that:

“Mr David Golden himself is not trained in the legal practice and was not previously aware of the relevance and significance of these documents to these Hong Kong proceedings herein. Nevertheless, upon our request and explanation, Mr Golden immediately procured these documents to be provided to us”

Order 41 rule 5 of the Rules of the High Court (Cap.4A, Laws of Hong Kong)  (“RHC”)  stipulates that an affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.  While there is no doubt that the content of the said paragraph 13 of Mr Lau’s Affirmation was hearsay evidence, he did not explain the source of information.  He did not say whether it was the defendant or anybody else who had told him about the lack of legal qualification and lack of prior knowledge of relevance on the part of the defendant.  When this was pointed out to Mr Chen, he argued that since Mr Lau had made it clear in the said affirmation that he was authorised by the defendant to make the affirmation, and that the last sentence of the said paragraph 13 showed that Mr Lau must have discussed this application with the defendant, it could be inferred that Mr Lau must have obtained such information from the defendant, and therefore the requirement under Order 41 rule 5(2)  of the RHC was satisfied.  With greatest respect to Mr Chen, this argument was very bold and was made to be rejected.  If he was right, then the purpose of the said Order 41 rule 5(2)  would be totally defeated.  That cannot be right.  In such circumstances, the Court should not give any weight to the assertions which Mr Lau made in paragraph 13 of his affirmation.

35.Having considered all relevant matters, I held the view that the Court should not exercise its discretion in allowing the defendant to adduce Ribeiro 2^nd at last minute.  The defendant’s application for adducing new evidence had therefore been dismissed with costs.

CREDIBILITY OF WITNESSES

General principles

36.When I consider the credibility of various witnesses who had given evidence in court, I shall take the following matters into account[2]:

(1)  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2)  Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3)  The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;

(4)  The court should consider a witness’ motive for deliberately not giving truthful testimony.  For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(5)  It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected.  A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(6)  On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility; 

(7)  While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.

The plaintiff’s credibility

37.Generally speaking, I am of the view that the plaintiff is not a credible witness.  She would not hesitate to give answers which cannot be the truth if she took the view that such answers would be favourable to her case.  An obvious example is that when she was cross-examined on why she did not ask Father to give evidence in Court in support of her case, she boldly suggested that Father’s evidence is irrelevant in the present action.  Given the crux of the matter herein is whether Father had promised the defendant that the Property should be given to the defendant as a wedding gift, the plaintiff’s answer was most surprising.  In my view, she must know that her answer could not be right, and she said so only for the purpose of avoiding being criticised of not calling Father to give evidence.

38.The plaintiff has also given contradictory answers on a number of important matters.  For example, when she was cross-examined on her evidence that she had created a reference number for the Written Loan Agreement which she said was subsequently also inserted into the SP Agreement, she initially stated that the reference number was needed by the bank in Hong Kong which helped her transfer her funds to the US. However, she changed her evidence shortly thereafter and admitted that the bank actually did not need the reference number.  I am of the view that she was making up her evidence along the way.

39.In fact, if there were any truth in her alleged creation of the reference number, this would be an important factual matter which would support her case.  Yet, this was not mentioned in her pleadings or witness statement at all.  This is another example which shows that the plaintiff was fabricating her evidence while she was giving oral evidence at the trial.

40.There are other aspects of her evidence which show that she was not telling the truth, and I will discuss those aspects further below.

Credibility of the defence witnesses

41.Generally speaking, I accept that the evidence given by the defence witnesses are credible and should be accepted.

42.As far as the defendant is concerned, even though there were occasions when his evidence was not perfect (for example, he initially stated that Wang was born in 1972, but admitted afterwards that Wang was in fact born in 1975, and “1972” was only stated in her passport by mistake), I accept that he is a truthful witness.  This is because he has impressed this Court that he would make admissions to matters that may be against his own defence.  For example, he did not hesitate to admit that the signature on the Written Loan Agreement looks like his. 

43.Wang also appeared to me to be a straight-forward witness.  I hold this view despite the fact that she is the defendant’s wife and therefore she had the motive to give false evidence in support of the defendant’s case.  This conclusion is not affected by the fact that she has probably misrepresented her age in her witness statement, presumably for the purpose of sticking to the information as stated in her passport.

44.The evidence of Joni and Yang were not severely challenged by the plaintiff’s counsel.  They also appeared to me to be straight-forward witnesses.  Although the plaintiff argued that they were not really independent in that they had known the defendant and/or Wang for quite a while, there is no suggestion that they would have any personal gain as such if the defendant defends the plaintiff’s claim successfully.  In the circumstances, I do not accept that they would be willing to assist the defendant to the extent of giving false evidence in Court.

DISCUSSION

Challenge of authenticity of the Written Loan Agreement

45.The plaintiff relied heavily on the Written Loan Agreement which she alleged that the defendant did sign in her presence on 19 December 2016.  On the face of the Written Loan Agreement, it was indeed signed, sealed, and delivered by the defendant.  It was further submitted by Ms Lam for the plaintiff that the signature therein appears to be the same as the ones on various other documents placed before the Court which the defendant had admittedly signed.

46.In this regard, the defendant stated that he had no recollection signing the said document at all and he put the plaintiff to strict proof.

47.In these circumstances, the correct approach for this Court is to look at the inherent probabilities and weigh the respective cases for the parties, so as to decide on the issue, bearing in mind that the plaintiff has the burden of proof: Club Deluxe Ltd v Club Metropolitan Ltd & Others [1995] 2 HKLR 69, at 80 & 82.

48.Before I consider the inherent probabilities of the matter, it is noted that the plaintiff argued that the defendant should be deemed to have admitted the authenticity of the Written Loan Agreement pursuant to Order 27 rule 4(1)  of the RHC, as the defendant has failed to give any notice stating that he does not admit the authenticity of the plaintiff’s documents as stipulated under Order 27 rule 4(2)  of the RHC.

49.Order 27 rule 4(1)  of the RHC provides that:

“Subject to paragraph (2)  and without prejudice to the right of a party to object to the admission in evidence of any document, a party on whom a list of documents is served in pursuance of any provision of Order 24 shall, unless the Court otherwise orders, be deemed to admit—

(a)  that any document described in the list as an original document is such a document and was printed, written, signed or executed as it purports respectively to have been, and

(b)  that any document described therein as a copy is a true copy.

This paragraph does not apply to a document the authenticity of which the party has denied in his pleading.” (emphasis added)

50.In Yuen Minghwa Francois, the Administrator of the Estate of Yuen Kiu Kwan, deceased v. Lo Mei Kin Stella (CACV 225/2011, unreported, 1 August 2012), the Court of Appeal held at [24]:

“It is clear from the terms of RHC O 27, r 4 that the authenticity of a document may be challenged either by a denial of its authenticity in the pleadings or by service of a notice, pursuant to O 27, r 4(2), that the party does not admit the authenticity of that document and requires it to be proved at the trial. [...]” (emphasis added)

51.In the present case, the defendant pleaded clearly in his Defence[3] that he did not admit that the signature on the Written Loan Agreement belonged to him.

52.The plaintiff’s argument is therefore misconceived.

Inherent probability and analysis of the facts

53.I now turn to consider the main issue of the present case: whether the money transferred by the plaintiff to the defendant was (i)  as alleged by the plaintiff, a loan; or (ii)  as alleged by the defendant, a gift.

54.I am of the view that it is more likely than not that the money represented a gift rather than a loan, for the following reasons.

55.Firstly, it should be borne in mind that it is undisputed that the defendant was only receiving a nominal salary in the sum of around RMB30,000 per month, which amount was substantially less than the monthly expenses of his family.  As a result, a large proportion of the defendant’s monthly expenses had to be paid by the “company”[4]. That being the case, it is inherently improbable that the defendant would have asked Father and/or the plaintiff for a loan (and for them to grant such a loan if requested), when they knew well that the defendant did not have the ability to repay.

56.Secondly, the aforesaid financial position of the defendant made it even more bizarre for the plaintiff to say that there was an express agreement that the defendant would have to repay the Loan upon demand.  That is simply incredible.

57.When it was pointed out to the plaintiff by the defendant’s counsel that given her knowledge of the defendant’s financial situation, he simply did not have the ability to repay the Loan within 30 days as stipulated in the Written Loan Agreement, the plaintiff, after a long pause, stated that she had not thought about it so much at the material time.  I do not believe that she and Father would not have thought about it at all if they were really minded to treat the Sum (which is a huge sum of money)  as a loan as alleged.  This just does not make sense.  In my view, the fact that the plaintiff had not, at the material time, thought about the defendant’s repayment ability supports the defendant’s case that she and Father agreed that the Sum was a gift which the defendant would not be required to repay at all.

58.Thirdly, it is undisputed that Father and the plaintiff did accompany the defendant and Wang in the house-hunting exercise.  If the Sum only represented a loan rather than a gift, there was no need for Father and the plaintiff to be so involved. All they needed to do would be to transfer the amount of money which they had agreed to lend the defendant.

59.Fourthly, not only did the plaintiff participate in the house-hunting exercise, she had also been involved in the contract stage of the purchase.  According to her evidence, she had instructed the estate agent to send the draft SP Agreement to her for her reference.  In my view, this is inconsistent with her case that the Sum was a loan, because in such a case she should not be bothered with the details of the term of the SP Agreement.  While the plaintiff gave evidence at the trial, she explained that she wanted the draft SP Agreement to be sent to her because she needed to make sure that the defendant would use the Sum to purchase the Property.  I do not accept the plaintiff’s evidence in this regard, as there is no evidence which shows that Father or the plaintiff was suspicious of the defendant’s behaviour at the material time.

60.Fifthly, it can be seen that the Written Loan Agreement (which was purportedly signed on 19 December 2016)  made reference to the contract number of the SP Agreement “HRtoDG”.  However, this contract number was only found on the executed SP Agreement which was signed on 20 December 2016, and it is evident (and agreed by the plaintiff)  that she only received the executed version of the SP Agreement after 21 December 2016.  Hence, it is impossible for the Written Loan Agreement to have been signed on 19 December 2016 as alleged. 

61.When the above was pointed out to the plaintiff at the trial, she explained that the above contract number “HRtoDG” was actually created by her and it was she who requested to have it inserted into the SP Agreement. 

62.I do not accept this evidence of the plaintiff, and I am of the view that she just made this up while she was giving evidence, for the following reasons:

(1)  If it was the plaintiff who created the said contract number, then she needed to inform the US estate agent about this, and it is more likely than not that this had to be done by way of email correspondence.  However, the plaintiff had failed to produce any such email in support;

(2)  If it was she who created this contract number and requested to have this included in the SP Agreement so as to “connect” the SP Agreement with the Written Loan Agreement, this must be an important matter which would strongly support her case (the plaintiff accepted this in Court also).  However, she had never mentioned this in any court document including her witness statement; 

(3)  When she gave evidence, she initially said the bank needed to know that the loan was connected with the purchase of the Property, and for this purpose, the bank needed to know the contract number. However, she changed her evidence shortly afterwards and accepted that the bank did not need such a number. 

63.Hence, in my view, the Written Loan Agreement could not have been signed by the defendant before 20 December 2016 as alleged by the plaintiff.

64.Sixthly, it is undisputed that there was a list of expenses (“the List”)  which was prepared by the plaintiff and the defendant together before the completion of the conveyancing transaction of the Property on 20 December 2016.  The List reads:

“1房款	8,300,000.00
2定金		830,000.00
3	餘款	7,470,000.00
1 Franklin Land Services (包括1%豪宅稅和費用保險)		115,195.13
2家具費		100,000.00
3 AIG Insurance Annual Premium (房屋保險)		17,500.00
4 Nassau county tax (地稅)		18,087.35
5 School Tax (學區稅)		89,283.95
1 National Grid (煤氣)		5,670.75
2 PSEGLI (電費)		24,995.97
3 East Coast Waste (垃圾處理費)		622.41
4 KJ Pools (游泳池)		5,163.00
5 JEM Security (安保系統)		685.43
6 Century Tennis (網球場)		2,797.09
7 Jericho Water (水費)		2,568.90
8 Jolly Green Landscaping (園林費)		3,345.66
合計:		385,915.64
總計:		8,685,915.64”

65.The plaintiff told the Court that the purpose of compiling the List was to find out how much in total had to be lent to the defendant.

66.In my view, the plaintiff’s evidence in this area further exposes the falsity of her case:

(1)  The total figure of 8,685,915.64 simply does not match the amount of $8,650,000 as stated in the Written Loan Agreement.  When the plaintiff was asked about this discrepancy, she could not give any satisfactory answer apart from alleging that there might well be adjustment afterwards.  This evidence is not accepted;

(2)  It is undisputed that the List includes certain annual maintenance fees and tax which were expected to be payable in 2017 (the first year after the Property was purchased).  However, there is no explanation at all as to why the defendant had to borrow for such annual expenses to be incurred for the first year after purchase, given it is undisputed that the defendant’s expenses would be paid by the “company”[5] anyway;

(3)  Furthermore, as the plaintiff’s counsel pointed out, the List did not include “attorney fees” at all.  I just wonder why this was so if the plaintiff was telling the Court the truth.

67.Hence, the plaintiff’s evidence that the List was prepared for the purpose of ascertaining the amount of the loan to be made available to the defendant is rejected. 

68.Seventhly, the plaintiff said in her evidence that she (rather than Father)  acted as a lender because her capacity as the defendant’s step-mother could make the defendant take the loan more seriously in the sense that she would not hesitate to sue him for the repayment of the Loan in the event of default. 

69.This evidence is incredible and is rejected:

(1)  It should be borne in mind that the plaintiff’s allegation is not that the defendant had to repay the Loan by instalments.  Hence, in the circumstances of the present case (as alleged by the plaintiff), it is meaningless to make the defendant “take the loan more seriously”.

(2)  At the material time, parties were still in harmonious relationship.  It is therefore incredible for the plaintiff to allege that Father and she were already thinking about suing the defendant in future.  Indeed, this is contrary to her own evidence that, at the time when the loan was allegedly granted, she had not even thought about whether the defendant had the financial ability to repay her.

70.Eighthly, it was alleged by the plaintiff that, in around late December 2016 or January 2017, the defendant indicated that he needed an additional amount of USD30,000 to settle certain miscellaneous expenses and, as a result, they agreed orally that the Additional Loan should be granted to the defendant.  This is incredible because, as agreed by the plaintiff, the defendant’s monthly family expenses had been settled by the “company”.  In my view, if the defendant had incurred further “miscellaneous expenses” as alleged, he could have asked the “company” to settle such expenses for him (there is no allegation that he had to repay the “company” in such a case).  He did not have to ask the plaintiff for the Additional Loan (which he had to repay)  at all.

71.Ninthly, the defendant’s case is supported by the evidence of Joni, who told this Court that she had heard Father saying during the house-hunting exercise that the property to be purchased would be his gift to the defendant.  As aforesaid, while Joni has been a personal friend of Wang for sometime, I believe that she was telling the truth.  The same analysis applies to Yang who had also given evidence that he had heard Father saying similar things upon Father’s return to Shanghai from USA after his successful heart surgery.

72.Tenthly, given the plaintiff’s acceptance that the defendant’s English standard was not high at all, it is highly suspicious as to why she would have prepared the Written Loan Agreement in English, especially when we bear in mind her evidence that it was the intention of Father and herself that they wanted the defendant to “take the loan seriously”.  In this regard, she explained that she had to prepare the Written Loan Agreement in English because Standard Chartered Bank (“SCB”)  in Hong Kong might ask to have a look at it.  However, there is no doubt that SCB staff could read Chinese.  The plaintiff’s explanation simply cannot hold water.

73.Lastly (but certainly not least), there is nothing strange for Father to gift the Property to the defendant, as he is his only son.  The defendant must also have been a person Father trusted, as it is undisputed that the defendant was appointed the legal representative and Chairman of Shanghai Jiacheng Zhaoye Real Estate Company which owned and developed the Sunville project (which consisted of 268 luxurious villas in Shanghai), which was the most valuable assets of Father. On the other hand, the plaintiff could not provide any acceptable reason to explain why it was not probable for Father to gift the Property to the defendant.

74.In coming to the above conclusion, I have not lost sight of the various arguments raised by Ms Lam on behalf of the plaintiff.  However, with respect, I do not think they are enough to tip the balance when I weigh the respective cases of the parties.  For the sake of completeness, I will deal with some of those submissions as follows.

75.Ms Lam submitted that the defendant’s evidence that Father had already raised the topic of buying him a property back in 2012/2013 is incredible because, inter alia, this evidence was never mentioned in his witness statement.  Furthermore, it was argued that while the defendant said Wang was present on one of the occasions when Father mentioned purchasing a property as a gift in 2012/2013, such evidence was not corroborated by Wang, who said that discussions about the purchase of a property as a wedding gift took place for the first time during the New York trip in 2016. 

(1)  In the circumstances of the present case, I am of the view that the conversation between Father and the defendant back in 2012/2013 is not crucial at all.  Put it in another way, even assuming that this Court rejects the defendant’s evidence in this regard, this would not affect the overall finding of the Court, namely, that the Sum was transferred as a gift rather than a loan;

(2)  I do not think it is fair for the plaintiff’s counsel to argue that the defendant’s evidence in this regard was not corroborated by Wang’s evidence.  What happened at the trial was that when the plaintiff’s counsel asked Wang about whether there were any conversations between the defendant and Father about buying a property in New York as wedding gift before 2016, it seemed to me that Wang could not entirely understand the question and therefore she kept talking about the conversation in the car ride in 2016.  It had taken a few questions before the plaintiff’s counsel realized the confusion on the part of Wang.  However, surprisingly, having clarified with Wang that she was still talking about 2016 all along, the plaintiff’s counsel did not go further and ask her about conversations in 2012/2013.  In such circumstances, it cannot be said that the defendant’s evidence regarding the 2012/2013 conversation was not corroborated.

76.The plaintiff further submitted that in the circumstances where Father’s health declined in around 2012 due to his heart conditions which resulted in a heart surgery in 2013, it is improbable that Father would engage in discussions with the defendant on the purchase of properties in the USA. 

77.As I said, even if this argument is accepted, I do not think it would assist the plaintiff’s case.

78.In any event, I would have thought if Father’s health was declining at the time, it would support rather than contradict the defendant’s case, because it is more probable than not that Father would like to complete what he had wanted to do before it was too late.

79.It was then submitted that since the total purchase price of the Property inclusive of all fees and taxes in fact exceeded USD8.68 million, if the Property was indeed a gift from Father, the more probable scenario would have been for Father to pay for everything and not just USD8.68 million exactly because the defendant admittedly had a very low monthly income.  In the light of the defendant’s evidence that his monthly expenses were paid by the “company” (which was corroborated by the plaintiff’s own evidence), I do not think this argument assists the plaintiff.

80.This Court’s attention was also drawn to the plaintiff’s instructions letter issued to SCB dated 21 February 2017 in which it was stated that the purpose of the transfer of USD1.65 million was for a loan for the purchase of the Property.  This is indeed a contemporaneous letter, which was issued when the family’s relationship had not turned sour yet, and it seems to support the plaintiff’s case.  However, this does not alter the fact that this is a self-serving document.

81.Ms Lam further argued that the defendant’s evidence that Father purchased the Property as a wedding gift to him and Wang since he felt remorseful is completely incredible and improbable.  For the sake of convenience, I quote her argument as follows:

“95. Both D and Wang’s respective witness statements explained that the Father felt remorseful for disliking Wang and for not supporting their wedding. However, the Father’s attitude towards Wang changed after he realized that Wang gave him many grandchildren. P submits that such an explanation is contradictory to D and Wang’s own evidence and against common sense: -

(1)  In D and Wang’s live evidence, they both confirmed that they have 4 children who are born in 2005, 2008, 2010 and 2011. According to D and Wang’s marriage certificate, they married on 10/19/2011, which means that at most, only their youngest child was born after they were married. This is contradicted by both their witness statements, which confirmed that 2 of their children were born after their marriage, seemingly to support D’s case on the Father’s change of attitude towards Wang;

(2)  If the fact that D and Wang’s children were the reason for Father’s change of attitude, he would not have disliked Wang and discouraged D from marrying her because D and Wang would have already had 3 children (at least 2 sons)  before they married;

(3)  In fact, during cross-examination, D confirmed that he neither informed nor invited Father to the wedding, which contradicts D and Wang’s portrayal of the situation in their witness statements, where they gave evidence that the Father treated their marriage coldly (非常冷淡地處理我與朝杰/我與達偉的婚事)  . When in fact, D never even invited, let alone informed, Father to the wedding.

96. On the contrary, according to P’s evidence, Father all along dislikes Wang because of her previous occupation in the nightclub, though such contention is denied by both D and Wang[6]. P submits that such evidence at least counters D’s case on the reasons why the Property would not have been a wedding gift.

[…]

101.  Irrespective of the Father’s reasons for disliking Wang, P submits that D’s explanation that Father purchased the Property as a wedding gift to him and Wang out of remorsefulness is completely incredible and improbable in light of the evidence.”

82.As Father did not give evidence at the trial, there is no direct evidence from him as to why he did not like Wang in the first place.  But I do not think that matters at all.  For our purpose, I am of the view that the most important factual matter in this respect is that Father had really not given the defendant any wedding gift when he got married.  This is undisputed. 

Adverse inference

83.In Ip Man Shan Henry v. Ching Hing Construction Co Ltd (No 2) [2003] 1 HKC 256, Deputy High Court Judge Lam (as Lam PJ then was)  had the following to say at [155]:

“Mr Yu relied on Cross & Tapper on Evidence, 9^th Edn, p.36-38 and invited this court to draw adverse inference against Arnold. In my judgment, the relevant principles applicable to civil proceedings can be summarized as follows,

(a)  if a prima facie case is made out, and if there are evidence available to the party against whom the case is established which could displace the prima facie case, and he omits to call such evidence, an inference could be drawn;

(b)  however, the inference could be rebutted by a plausible explanation by the party who elected not to call the evidence;

(c)  if an inference is to be drawn, it would be an inference that such available evidence, even if adduced, would not displace the prima facie case;

(d)  it is also open to a tribunal of fact, upon the drawing of such an inference, to take it into account in respect of a matter with respect to which the person not called as a witness could have spoken,

i.  in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party;

ii.  in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given.”

84.In Tullett & Tokyo International Securities Ltd v APC Securities Co. Ltd. [2001] 2 HKLRD 356, Le Pichon JA followed the principle explained by Fuad JA in Hongkong and Shanghai Banking Corporation v Chan Yiu-wah and Another [1988] 1 HKLR 457 at 467 C – H:

“In relation to the fourth point above, Mr Huggins SC prayed in aid the maxim omnia praesumuntur contra spoliatorem ("the maxim")  sometimes referred to as the principle in Armory v Delamirie (1722)  1 Str 505. Excerpts expounding that principle from Wigmore on Evidence (Chadbourn Revision) (1979)  Vol. 2, at paras. 285 and 291 were quoted in the judgment of Fuad JA in Hongkong and Shanghai Banking Corporation v Chan Yiu-wah and Another [1988] 1 HKLR 457 at 467 C – H :

‘285. Failure to produce evidence, as indicating unfavorable tenor of evidence: (1)  In general. ... The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so; and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavorable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.

The non-production of evidence that would naturally have been produced by an honest and therefore fearless claimant permits the inference that its tenor is unfavorable to the party's cause. Ever since the case of the Chimney Sweeper's Jewel [Armory v. Delamirie] this has been a recognised principle.

[…]”[7] (emphasis added)

85.In my view, there is no doubt that the defendant has made out a prima facie case that Father had promised to buy him the Property as a gift to him.

86.Apparently, the plaintiff could have called Father (if he is mentally fit as alleged by the plaintiff herself)  to give evidence in Court so as to establish a case which could displace the defendant’s prima facie case. However, the plaintiff did not call Father at all.

87.The plaintiff explained that she has decided not to call Father as a witness because she considered his evidence irrelevant, given Father was not a party to the Written Loan Agreement, and the Sum came from her own bank account.  As aforesaid, I find these explanations totally unreasonable.  The plaintiff’s explanation that the Sum came from her own account is also not entirely correct, because the first trunk of USD830,000 actually came from a bank account under the joint names of Father and the plaintiff.

88.In these circumstances, I take the view that this is an appropriate case where the Court should draw an adverse inference against the plaintiff. 

89.I should also mention that I do not accept the argument of the plaintiff’s counsel that the same objection may be raised against the defendant in that he could also have called Father to give evidence at the trial.  With greatest respect, this is a very desperate argument. Assuming for the present purpose that the plaintiff is truthful when she said in her evidence that Father is mentally fit to give evidence, it is unrealistic to expect that Father would be willing to give evidence for the defendant, given the undisputed fact that Father has in the last few years commenced various court proceedings against the defendant in different jurisdictions.  Indeed, according to the unchallenged evidence of the defendant, he has not seen Father for 3 years.  The relationship between Father and the defendant had apparently turned sour.

Conclusion

90.To conclude, it is my finding that the plaintiff has failed to prove on the balance of probabilities that:

(1)  the Sum represented a loan to the defendant as alleged;

(2)  the Written Loan Agreement was signed by the defendant in the circumstances as described by the plaintiff;

(3)  the Written Loan Agreement encapsulated the parties’ intention at the material time[8].

ORDER

91.By reasons of the aforesaid, the plaintiff’s claim is hereby dismissed.

COSTS

92.I make a costs order nisi that the plaintiff shall bear the defendant’s costs of the action (including all costs reserved), to be taxed if not agreed.

93.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper)  within 14 days hereof.

Ms Flora Lam, instructed by Ribeiro Hui, for the plaintiff

Mr Vincent Chen, instructed by Stevenson Wong & Co, for the defendant