Lin Su Chun, Barbara v. Christiaan Georgio and Another

HCA017229/1999

HCA 17229/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 17229 OF 1999

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Coram: Deputy High Court Judge Woolley in Court

Dates of Hearing: 27-29 May 2002

Date of Handing Down Judgment: 7 June 2002

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J U D G M E N T

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1.In these proceedings the plaintiff makes a number of claims arising out of payments made by her to the defendants, and the cost of articles purchased by her for the 1st defendant, who is effectively the beneficial owner of the 2nd defendant. None of the payments nor the purchases are disputed by the defendants, and the only issue in respect of them is the basis on which the payments and purchases were made. The plaintiff maintains that they were an investment by her in a business being set up by the 1st defendant, which became the 2nd defendant, and the 1st defendant claims that they were all gifts made as a result of the affection that the plaintiff felt for him during the relationship that existed between them from some time in 1996 to 1999.

2.The 1st defendant is a ladies' hairdresser and is now 33 years old. He came to Hong Kong in about 1993 and worked for a Mr Roger Craig in his hair salon, firstly in the Kowloon Shangri-La Hotel, and later in the Island Shangri-La Hotel (the hotel). The plaintiff was a customer of the salon and would have her hair cut there regularly on her business trips from Taiwan, where she worked in a partnership in the fashion garment industry. After a time the 1st defendant became the one to regularly cut the plaintiff's hair, they got on well, and began meeting outside the salon. A close relationship rapidly developed which continued, with some breaks, until their final parting in 1999. The first such break was, according to the plaintiff, early in their relationship, when she was concerned at the disparity in their ages, she being nearly 11 years older. This is to some extent borne out by the schedule of her visits to the hotel, when there was a break in her visits between July and September 1996, which may have been a result of the 1st defendant having his annual holiday, but a further gap in time between September and December that year is otherwise unexplained. However, the relationship certainly began at some time that year and continued until their final break up.

3.During the course of this relationship the subject of the 1st defendant having his own hairdressing salon was discussed. However, the parties disagree as to who raised it. The 1st defendant said that the plaintiff suggested it, and he said that he was too young and could not afford it, while the plaintiff's evidence was that he wanted to run his own business and it was she who told him he was still young and there would be opportunities for him. I find the plaintiff's evidence as to this more convincing as the matter came to a head not long afterwards in early 1997, when Roger Craig indicated his intention of leaving Hong Kong, and the chance arose for the 1st defendant to take over the salon, a prospect he says he found very attractive, and which he immediately discussed with the plaintiff. This does not indicate to me any reluctance on his part to take on the responsibility of such a business.

4.There is no dispute that the 1st defendant told the plaintiff that the cost of setting up and equipping the salon would be $1.5 to $2 million and she immediately started remitting this to his bank account on 24 June 1997 with a remittance of $800,000.00. There followed further remittances that year, of $500,000.00 on 14 July, $300,000.00 on 7 October and $400,000.00 on 17 October, making a total of $2 million. The haste was apparently to be able to show the hotel that he had sufficient funds to set up the salon should he be granted the lease. In October 1997 he began negotiations with the hotel which were successful later that year, and he formed the 2nd defendant through which to operate the new salon. He also opened a bank account in the 2nd defendant's name, although in April 1998 he was still using his own account to pay cheques for the business. The 1st defendant spent about $1,700,000.00 on payments for advance rent and deposits, decorations, fitting out and architect's fees, and equipment, and the salon opened for business on 1 March 1998.

5.The plaintiff at that time was in receipt of income from her business by way of share of profits in two payments a year, so to raise the funds for these remittances she sold some shares she held, and raised loans from her family and friends to cover about $700,000.00 of it. These loans were paid off within a matter of months. The plaintiff understood that the renovation work on the salon only commenced in March 1998, and says that she was asked in late March by the 1st defendant for more money as the work had exceeded the budget. It is clear from the documents produced by the defendants that work did go on well after March 1998, but had commenced before that. A further payment of $55,000.00 had been made by her in February 1998, and later that year four more were made: $193,000.00 on 21 September, $100,000.00 on 18 November, $50,000.00 on 27 November and $150,000.00 on 3 December. The plaintiff says that all these were at the request of the 1st defendant to cover expenses, and it is again clear from the documents that there were still outstanding invoices at least into May and June. There were two further payments of money in December 1998 and March 1999, the first of $4,293.89, and the second of $100,000.00. The second was the only sum not remitted directly to the bank account of either the 1st defendant, or, after September 1997, the 2nd defendant, but given to the 1st defendant in cash.

6.In addition to these payments, the plaintiff also bought for the 1st defendant a number of items which she lists as two antique backgammon sets, valued at $10,000.00 and $20,000.00 respectively, two knitted Gucci garments, for which she paid $6,600.00, diamond earrings as a present for his mother, worth $25,000.00, and gifts for his brother and sister of a crystal tiger and a Taekwando costume, at $3,000.00, making a total of $64,600.00. Her evidence is that all these were bought at his request and the cost would be treated as further funds injected by her into the salon.

7.The 1st defendant admits that he did not spend all the money remitted by the plaintiff on the salon. He says that he bought things for himself, at one time sending money to his brother in Australia with instructions to buy a BMW car for him. He justifies this on the basis that the money was an unconditional gift and she encouraged him to spend it as he pleased. Indeed, in November 1997 he sent some money back to the plaintiff in Taiwan to invest for him in shares, which she did, still holding the proceeds for which she is willing to account to him. Whether this came from his own funds or the money sent by the plaintiff is not clear, and the 1st defendant himself probably does not know, as it was all intermingled in his bank account.

8.Matters between the parties became difficult in about March 1999. The plaintiff says that she asked to see the accounts of the business, asked how it should be managed, and as it was a joint venture between them she should have a share. She claims that the 1st defendant denied this and said that the funds would be repaid. Following this the plaintiff went to see her solicitor in Taiwan who drafted a joint venture agreement which the plaintiff brought to Hong Kong late in April, but the 1st defendant refused to sign it. The 1st defendant denies this account and says that the plaintiff did not ask to see the accounts, but did produce a document, which he says was not the draft produced in court, which he refused to sign. He said initially that this was in April, but withdrew that and claimed that it was only in September when they finally broke up, shortly before the letter before action and the writ in these proceedings.

9.Of these versions of the events of 1999 I have to say that I prefer that of the plaintiff. It seems to me more likely that, although she was keen to see their relationship continue, she sought reassurance that she would be acknowledged as the one who had supplied the means to establish the salon, and tried to obtain the signature of the 1st defendant on a document to confirm this. It may well have been an attempt on her part also to cement the relationship between them, on a business as well as a personal footing.

10.Whatever the truth of the numerous incidents about which I have heard evidence from both, it is clear that, as far as the plaintiff was concerned, this was a deep and close relationship which she wished to continue indefinitely. She admitted that she loved the 1st defendant, and as a result trusted him absolutely. I regret that, from the totality of the evidence I have heard, I am not satisfied that that level of affection was returned by the 1st defendant, who all but admits that he took advantage of her generosity. This he clearly did. While the money supplied by the plaintiff was clearly intended to pay for the setting up of the salon, he freely used it also for his own purchases, including the car, to the extent that it seems there was insufficient to pay contractors and suppliers as and when their bills fell due for payment, and he asked for more and more money to cover them. The depth of the plaintiff's feelings for the 1st defendant is clear from the evidence of his brother, for whom she found employment in Taiwan at the 1st defendant's request, and provided accommodation for. During this period he says that she talked constantly of his brother and seemed obsessed with him.

11.The plaintiff claimed in evidence that she was not a wealthy woman. As I remarked at the time, these things are relative. She clearly had a successful business, from which she lived comfortably and had money to invest in stocks and shares. She thought nothing of flying regularly to Hong Kong, at times just to have her hair cut, and always stayed at the hotel, which she admitted was expensive, at her own expense, not apparently even claiming the cost against her business. She had no trouble borrowing large sums of money to make the payments over this period, nor to repay them. This is not a picture of someone of merely modest means. I have no doubt either that she used these means to further her relationship with the 1st defendant. He claims that she frequently gave him expensive gifts of designer clothes and similar items. On this I am satisfied he is telling the truth, that her feelings for him were so strong that she used her affluence to ensure the relationship continued. I also believe that he freely accepted such largesse, knowing of her feelings.

12.It is in the light of this situation that I must consider on what basis both the money and the items purchased by the plaintiff, the cost of which she claims, were given to the defendants. I will deal with the "gifts" first. From my findings above as to the nature of the relationship, and the plaintiff's financial standing, I am satisfied that it is more likely than not that all the items bought by her and given to either the 1st defendant or his family were intended as generous gifts. It may well be that the 1st defendant indicated that he wanted one or more antique backgammon sets, and was prepared to contribute to them as they were expensive. Indeed, he tried to do so by giving her a cheque for $10,000.00, which she never cashed. Her reason for not doing so was that she had no Hong Kong dollar account, but I consider it more likely that she wished this to be a present and refused payment. I do not find it unusual that she bought presents for his family, never having met them, except for his brother, as it is likely that she saw this also as a means of cementing their relationship.

13.In any event, the idea that certain purchases were to be considered as an investment in the business I find unlikely to the point of being bizarre, particularly as no records were kept by her in the form of receipts, so that the sums claimed are little more than estimates. From this it is clear to me that no consideration was given by her at the time that these were anything other than outright gifts, and her claim for the return of their value must fail.

14.Different considerations, however, apply to the remittances of money. I have to say immediately that, however deep the plaintiff's feelings for the 1st defendant, evidenced by the generous gifts made to him, I am not satisfied that the money paid over to him was regarded by her in the same light. It is one thing to give generous gifts, but quite another to pay over a sum of $2,000,000.00 within a period of 4 months, some of which had to be borrowed, without expecting it to be at least accounted for in some way. The 1st defendant wished to have his own salon, an opportunity arose for this to happen at the time that a woman with the means to assist him to realise his ambition was infatuated with him. She readily agreed to make the funds available and did so. I have to bear in mind that this was at a time when she clearly hoped and expected that the relationship would continue indefinitely. It is therefore likely that she saw their future together not only on a personal basis, but also as partners in business. It is significant that this is not the first time it would have occurred. Her own business in Taiwan was a partnership with a former boyfriend, which fortunately had continued on an amicable basis despite the ending of their relationship. I do not find it unusual that nothing was recorded in writing of her intentions, nor that the 1st defendant may have misinterpreted them. The nature of their relationship was such that she would consider it unnecessary, and, having heard the 1st defendant give evidence of that period, I am not satisfied that he gave the matter serious thought at all, provided his ambition of running his own salon was realised.

15.It is clearly established law that, payment of money being proved or admitted, in the absence of circumstances giving rise to a presumption of advancement, there is prima facie an obligation to repay it. If it is claimed to be a gift then the onus is on the recipient to prove that. It is on that basis that, on the request of counsel for the plaintiff, and not opposed by the 1st defendant, I required the 1st defendant to open the case and call evidence first. In my view the 1st defendant has failed to discharge that onus to show that these payments, with the exception of the last two with which I will deal shortly, were intended as gifts. The plaintiff clearly thought that, although the business would be run by him, it would be a partnership in which, as a result of her financial input, she would have at least the larger share. The relationship between them, and in particular her feelings for him, was the reason she willingly supported his venture without the need for any documentary proof, but it was not such as to establish that anything she gave to him was intended as an outright gift.

16.The last two payments fall into a different category. That on 29 December 1998 of $4,293.89 is clearly different from those previously remitted, not only in it being a very small sum by comparison, but also very far from a round figure. There must therefore be another reason this payment was made. The plaintiff says that it was the product of converting NT$18,000.00 which the defendant's brother had given to her to pay for his accommodation while in Taiwan, which she did not want and which she thereupon converted to HK dollars and remitted to the 1st defendant, she says as a further investment in the business. I find this unlikely. If, as she says, she did not want the payment, she might well have refused it. As part of an investment it is a very strange sum, by comparison to those that preceded it. I find the 1st defendant's explanation more likely in the circumstances, that he had made a purchase on his credit card which she wished to reimburse. And, indeed, there is an item on his bill for a similar, although not identical, sum. I consider it more likely that this was a further gift.

17.As to the last payment of $100,000.00, this again falls into a different category, firstly because it was in cash, and secondly because it was given to the 1st defendant on 1 March 1999, his birthday. Although as a gift it falls outside the admittedly high levels of generosity exhibited by the plaintiff hitherto, I find that it is too much of a coincidence that it was given on his birthday, in cash, in an envelope, which the 1st defendant says was a red packet. I consider that this too was intended as a gift, albeit a very generous one, possibly explained by the first signs of a fragmentation of their relationship and an attempt by the plaintiff to rescue it.

18.In short I find that the total sum of $2,503,400.00, given to the defendants by the plaintiff, was not intended as an outright gift, but as an investment in the business that was to be established by the defendants.

19.To what remedy is the plaintiff then entitled? Mr Carolan for the plaintiff submits that, the basis of payment having been repudiated by the defendants, the plaintiff is entitled to repayment of the sums received by the defendants. Either the defendants received them to invest for the plaintiff in the business, and there is therefore a resulting trust in her favour, or it was payment under a contract, the consideration for which has totally failed. We appear to have here a combination of the two. Had the business continued and prospered, which I understand it has not, having closed earlier this year, the plaintiff would be entitled to a declaration as to her interest in it to the extent of her investment, and to an order for accounts of the profits. However, Mr Carolan relies principally on the latter scenario, that there was a contractual relationship here, the money being paid for a consideration, an interest in the business, which, being denied by the defendants, has totally failed. In effect he says the defendants have repudiated the contract, and by her solicitors' letter of 7 October 1999, and the subsequent issue of the writ, the plaintiff has accepted that repudiation. That must be right. There was clearly an agreement, albeit unwritten, between these parties, that the money paid by the plaintiff would be used by the defendants to set up a business in which the plaintiff would have a large share. They are equally clearly in breach of that agreement. The plaintiff must accordingly be entitled to restitution of the sums paid for the purpose of that investment, which as I have found above amount to $2,503,400.00.

20.There will therefore be judgment against the 1st defendant for that sum, and against the 2nd defendant for the sum of $1,193,910.41 being part of the above sum either received directly by the 2nd defendant, or transferred to the 2nd defendant by the 1st defendant, with interest at 1% over HSBC prime rate from 3 December 1998, the date of the last payment, to the date hereof. There will also be an order nisi that the defendants pay the costs of the plaintiff to be taxed. There will be a further order that the sum in Court in respect of security for costs be paid out forthwith to the plaintiff's solicitors with any accrued interest.

Representation:

Mr Paul Carolan, instructed by Messrs Baker & McKenzie, for the Plaintiff

The 1st Defendant, also representing the 2nd Defendant, in person