Chow Luen Fat v. Wong Yat Kong

DCCJ 6688/2020

[2026] HKDC 735

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6688 OF 2020

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JUDGMENT

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Introduction

1.This is a simple debt recovery action. The ultimate question is whether the debt was owed to the plaintiff in his personal capacity.

The plaintiff’s case

2.In or about July 2014, the plaintiff as the lender orally agreed to lend to the defendant as the borrower a loan of $1,500,000 which would be repaid in full by 31 December 2014.

3.On 15 July 2014, the plaintiff procured and arranged Tak Lee Machinery Company Limited (“Tak Lee”) to advance the loan amount to the defendant.

4.On 1 December 2014, the defendant repaid $1,000,000 to Tak Lee but refused and/or failed to repay the outstanding sum of $500,000 to the plaintiff.

The defendant’s case

5.The defendant denied that there was a loan agreement between the plaintiff in his personal capacity with the defendant in or about July 2014.

6.The defendant also denied that the $1,500,000 transferred to the defendant on 15 July 2014 was made pursuant to the alleged loan agreement or by Tak Lee on behalf of the plaintiff.

7.The defendant said that he has been a contractor in the demolition field for over 20 years. Since 28 March 2014, he has been trading as the sole proprietor of Kwan Lik Construction Company (“Kwan Lik”).

8.After the business registration of Kwan Lik, the defendant had caused Tak Lee to create an account in the name of “Kwan-Lik-Cons”. Tak Lee would issue statements of account from time to time to the defendant for settlement.

9.Tak Lee and the defendant were therefore constantly in a debtor/‌creditor relationship with no fixed period of repayment.

10.In early July 2014, the defendant needed a sum of $1,500,000 as working capital and approached Tak Lee for a loan. Tak Lee advanced a loan of $1,500,000 and transferred the same to the defendant on 15 July 2014.

11.The defendant transferred a sum of $1,000,000 to Tak Lee as part repayment of the loan of $1,500,000. It was agreed between Tak Lee and the defendant that the defendant could not repay the remaining $500,000 immediately and the same would be accounted for in the future business dealings between the defendant and Tak Lee.

Findings of fact

12.Obviously, this case turns on the credibility of the plaintiff and the defendant.

13.Deputy High Court Judge H Au-Yeung (as he then was) in Hu Lan v David Golden [2023] HKCFI 873 usefully summarised the principles on credibility of witnesses as follows:

(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; and

(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.

14.The plaintiff said that in or around July 2014, the defendant told him through meetings and telephone calls that he had some disputes with his ex-wife, he needed some short-term financial resources. He wanted to borrow $1,500,000 from the plaintiff to buy a landed property in Tuen Mun. He was applying for a mortgage and would repay the plaintiff after the approval of the mortgage.

15.As it was the first time the defendant asked him to do a personal favour and their relationship was quite good at the time, the plaintiff agreed to lend the defendant the money which would be repaid in full by 31 December 2014. Therefore, on 15 July 2014, the plaintiff procured and arranged Tak Lee to advance the said $1,500,000 on his behalf by cash transfer to the defendant’s personal bank account with Bank of China.

16.The money was transferred from Tak Lee’s account because as a director and shareholder of Tak Lee, from time to time the plaintiff poured in financial resources to Tak Lee to satisfy the operation needs and Tak Lee would make payments out on his personal behalf so that the director’s loans between Tak Lee and himself can be net off. In doing so, he signed a payment instruction letter dated 15 July 2014 requesting Tak Lee to do the transfer.

17.When the defendant repaid $1,000,000 on 1 December 2014 by transferring the same to Tak Lee’s account, the deposit slip was passed to Tak Lee’s accounting department for record reflecting the amount due from Tak Lee to the plaintiff had to be adjusted accordingly.

18.On the other hand, the defendant said in early July 2014, he approached Tak Lee through the plaintiff (as he was the “boss” or at least a person who was responsible for making important decisions on behalf of Tak Lee) for a loan of $1,500,000 expressing that part of which was to buy property but mainly for the purpose of maintaining working capital for his business. He stressed that the loan was taken from Tak Lee because of the long-term amicable business relationship. He believed that Tak Lee agreed to advance the money to him because his business was active and would continue to be a customer of them. He emphasised that he never requested the loan from the plaintiff personally since the loan was mainly for the purpose of maintaining working capital for his business.

19.The defendant said that was why it was Tak Lee who transferred the $1,500,000 to him and he made the partial repayment of $1,000,000 on 1 December 2014 by transferring it to Tak Lee’s bank account. After that, Tak Lee never told him that he had paid the money wrongly. It was his understanding that the remaining balance of $500,000 would be accounted for in the future course of business with Tak Lee.

20.In my view, the fact that the defendant asked the plaintiff for the loan which was acceded to by the plaintiff is the clearest evidence that the loan was from the plaintiff in his personal capacity.

21.The defendant said that he approached Tak Lee for the loan partly for buying a property but mainly for maintaining a working capital for his business. Tak Lee being a company in the business of selling and leasing of new and used heavy equipment for construction projects, the purpose of the defendant’s loan was outside the scope of business of Tak Lee. With that in mind, it does not make sense that the defendant, as a customer of Tak Lee, would see it fit to seek a loan from Tak Lee at a business level. There is simply no basis for the defendant to ask Tak Lee to help him either to buy a property or to provide working capital for his business. Rather, as a long-standing customer of Tak Lee, it is more likely that the defendant made use of his personal relationship with the plaintiff, asked the plaintiff for a loan which was largely about his personal affairs.

22.The defendant said that the $1,500,000 was transferred to him from Tak Lee’s account showed that it was Tak Lee who advanced the loan to him. Also, after he made the partial repayment of $1,000,000 by paying the same into Tak Lee’s account, Tak Lee did not tell him that he had paid the wrong party.

23.In my judgment, the question of the contracting parties to the loan agreement is to be determined when the agreement was reached, not by the acts of how the agreement was performed thereafter. Hence, the fact that the money came from a third party does not thereby alter the identity of the original contracting parties.

24.In the present case, as at the time when the loan agreement was reached between the plaintiff and the defendant, Tak Lee was indebted to the plaintiff as director $92,135,001.98. The plaintiff had the right to request Tak Lee to advance the sum of $1,500,000 to the defendant in reduction of the director’s loan. Such arrangement indeed did not make Tak Lee the lender of the loan to the defendant.

25.Likewise, when the defendant made the partial repayment of $1,000,000 to Tak Lee, such sum was credited to the plaintiff’s director’s current account in Tak Lee as evidenced by a transfer voucher dated 1 December 2014. As such, there is no need for Tak Lee to inform the defendant to repay the plaintiff directly instead.

26.The plaintiff further said that on 15 January 2016, the defendant came to his office for business matters. He showed the defendant a Loan Confirmation (“the Loan Confirmation”) which, among others, recorded the outstanding sum of $500,000 which the defendant was owing to the plaintiff personally. Both of them signed on 2 originals in front of his assistant Miss Liu Shuk Yee (“Miss Liu”) and each kept one for record.

27.The defendant denied that he had ever seen or signed the Loan Confirmation. He added that even if he had seen or signed the Loan Confirmation, his understanding would have been that it was a confirmation recording the outstanding sums due between Tak Lee and Kwan Lik.

28.When cross-examined, the defendant confirmed that the signature that appeared in the Loan Confirmation was one of his signatures, but he could not confirm the document itself.

29.It seems to me that the defendant was not adamant that he did not sign the Loan Confirmation. Given that the Loan Confirmation was signed in front of Miss Liu and was kept by the plaintiff for record, on balance of probabilities, I accept that it was a genuine record signed by the plaintiff and the defendant. As the Loan Confirmation was written in English and Chinese with a detailed breakdown, I find as a fact that by signing on it, the defendant acknowledged and confirmed that he owed to the plaintiff personally, inter alia, the $500,000 being the balance of loan advanced to him on 15 July 2014.

30.Mr Lewis Law, counsel for the defendant, has tried hard to persuade me otherwise. With respect, I am not in agreement with Mr Law’s submission.

Conclusion and Judgment

31.By reasons of my findings of fact aforesaid, I give judgment in favour of the plaintiff for the sum of $500,000 against the defendant.

Interest

32.Miss Pauline Leung, counsel for the plaintiff, asked for pre-judgment interest from the date of accrual, ie 1 January 2015. Mr Law, however, submitted that this Court should take into account the plaintiff’s delay in commencing the proceedings in 2020.

33.I tend to agree that the plaintiff has been late to commence action against the defendant for no explicable reason.

34.Accordingly, the defendant shall pay pre-judgment interest on the sum of $500,000 from the date of writ (ie 16 December 2020) to the date of judgment at 1% above the HSBC best lending rate and thereafter at judgment rate to the date of payment.

Costs

35.Costs to follow the event. I make a costs order nisi that the defendant shall pay the plaintiff the costs of this action with certificate for counsel on a party and party basis, to be taxed if not agreed.

36.In the absence of any application by summons for variation within 14 days from the date of this judgment, the costs order nisi shall become absolute.

Ms Pauline Leung, instructed by Loeb & Loeb LLP, for the Plaintiff

Mr Lewis Law, instructed by Fung, Wong, Ng & Lam LLP Solicitors, for the Defendant