Albert Chang v. Tong Kau t/a Consolidated Salvage and Engineering Co

HCA000709/1969

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

Action No. 709 of 1969

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Coram: Huggins, J.

Date of Judgment: 7th April, 1970.

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JUDGMENT

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Huggins, J.: The plaintiff sues upon a promissory note dated 1st September 1966 for the sum of $125,000. The defendant denies that he executed the note and alleges that it is a forgery. The note was not stamped before execution but no point has been reserved as to that.

1. It is common ground that the parties first became acquainted in connection with the salvage of cargo from the "Dora", which sank in the Western Approaches to Hong Kong in a typhoon. A part of the cargo, consisting of some 1000 logs, was insured with Gilman & Co. Ltd. The insurers apparently paid a total loss and were minded to employ a contractor to raise the logs in order to recoup themselves. A member of their staff was friendly with one Mr. Carroll, a Director of Asia Enterprises Ltd., of which the plaintiff is the managing director. Although the evidence is not as clear as it might have been I am satisfied that Mr. Carroll came to some agreement with Gilman & Co. Ltd. and that he in turn left it to the plaintiff to find a competent salvor. The plaintiff consulted one Leung Chi, who knew of the defendant by repute. Leung Chi and the plaintiff called upon the defendant and enquired whether he would undertake the job. Leung Chi has not been called as a witness and the two parties gave very different accounts of the details of what followed. It does, however, seem to be agreed that the defendant was to receive a lump sum of $132,000 or thereabouts for his services.

2. The plaintiff's story is this. He enquired how much the defendant could make from the transaction. The defendant was attracted by the job because he said the operation would not be technically difficult and because, he hinted, a not too honest salvor would be able to make a lot of money. The defendant said he was in financial difficulties and was not willing to risk one centavos so he asked the plaintiff to advance the necessary finance, which he originally estimated at about $45,000. The plaintiff agreed, but as the operation proceeded he found the defendant continually asking for more money, and, in a period from about October 1964 to February 1965, the plaintiff paid in cash a total of $125,000 and for each advance he received an I.O.U. He advanced the money although he knew the defendant was being paid by Mr. Carroll as the operation proceeded, despite the fact that under the contract the $132,000 was to be paid only on completion of the operation. At this point the plaintiff asked how things were going and the defendant then told him of a plan to loot the ship of cargo not belonging to Gilman & Co. Ltd., the defendant promising to the plaintiff a substantial share of the proceeds. To the plaintiff's remonstrance that this was against the law the defendant replied: "I have been in this job for a long time. I know what I am doing". Later the defendant showed him a godown containing stolen cargo which he (the plaintiff) valued at approximately a quarter of a million dollars. The plaintiff kept pressing for repayment of the money advanced and, getting no satisfaction, eventually threatened legal proceedings. To this the defendant is said to have given a reply which should suffice to humble any judge: "You go to hell; or you go to court". Despite the cleavage between the parties the defendant was apparently (at least in the first instance) only refusing to pay until such time as the allegedly stolen cargo had been sold and in 1966 they even came to an agreement whereby the I.O.U.s were surrendered by the plaintiff in exchange for the promissory note which is the subject matter of this action. The note was drafted by the plaintiff in pencil. The next day the defendant produced his company's letter-head and a rubber chop and the plaintiff then typed the note in duplicate. The defendant read it very carefully and signed it very carefully. The plaintiff at first admitted that he expected to receive from the defendant 40% of his nett profit. Again he was not very clear, but I understood him to be saying that this arrangement was to apply both to the salvage of the logs belonging to Gilman & Co. Ltd. and to the salvage of what he was pleased to describe as "the illegal cargo". Later he agreed that it was nonsense to suggest that he was to get 40% of the salvage reward for the logs.

3. The defendant says he was told at the original meeting at his home that there were about 1,200 logs, each weighing about 3 tons. He knew something about the ship and was able to quote a price of $180,000 for the job, or $40 a ton. The plaintiff said that was a little on the high side and the usual haggling ensued, during which the plaintiff said Mr. Carroll wanted $10,000 - this sum, apparently, to come out of the defendant's contract price. Eventually the defendant came down to $150,000 but his secretary was not there and the defendant said he could not give the estimate in writing. The plaintiff insisted that Gilman & Co, Ltd. required an estimate from Mr. Carroll the next day and offered to type for him. His offer was accepted and a written estimate was prepared, signed and chopped. That document has not been produced. Two days later the plaintiff returned with Leung Chi and pressed for a further reduction to $132,000, a figure which the defendant finally accepted. Next day the defendant went with his secretary to the plaintiff's office, where he met Mr. Carroll. After some discussion about the formality of a permit from the Marine Department the plaintiff left the room and returned with his co-director and general manager, YUE Ka-pui. The plaintiff told the defendant that if he had any queries relating to the salvage he should contact Mr. Yue as he himself was going to the Philippines. The defendant received payments totalling $106,000 but was then told that Mr. Carroll wanted $12,000 instead of $10,000 and that Yue Ka-pui wanted $6,600. He refused to pay. In the course of the salvage of the logs some of the other cargo floated out of the ship and had to be collected up and some other cargo had to be lifted to give access to the logs. For this work Yue Ka-pui paid $23,000, either as expenses or, more probably, as salvage reward. The defendant did not receive any loan from the plaintiff. He did receive a letter dated the 30th January, 1967 from the plaintiff which referred to a promissory note alleged to have been made by the defendant's company in respect of the proceeds of sale of the other cargo and which stated that Yue Ka-pui had told the plaintiff that the entire proceeds had been handed to the defendant. The defendant was indignant upon receiving this letter and accused the plaintiff of extortion. To this charge the plaintiff replied: "After this venture Yue Ka-pui got all the money so I have to come to you".

4. The substance of the opposing allegations is, therefore, on the one hand that the plaintiff lent money to the defendant and that the defendant executed the promissory note as security for repayment; and on the other hand that the plaintiff is trying to extort money from the defendant by means of a forged document. Unfortunately the only expert evidence relating to the suspect document is of no practical assistance because there are insufficient data for fruitful comparison. Although Inspector Chow was able to say that the chop impression on the note was not made by the rubber chop produced to him, that rubber chop has not been identified to my satisfaction. In any event I am by no means convinced that the only rubber chop produced in evidence, if it was the chop shown to the Inspector, is the only chop which has been in use in the defendant's firm since 1965, as was suggested by the defendant.

5. It is unfortunate that neither the plaintiff nor the defendant was entirely convincing as a witness. I must mention a number of difficulties which make belief in their stories difficult. If the plaintiff is right when he says that the consideration for the note was loans totalling $125,000 it is passing strange that he should write to the defendant on the 30th January, 1967 a letter (document No. 19 in the agreed bundle) referring to a "Promissory Note" and alleging that Yue Ka-pui had paid to the defendant $125,000 as payment for goods, which were obviously the "illegal cargo." Not only that, but the plaintiff in the letter clearly indicates that he expects some benefit from those goods although his evidence was that he was anxious to dissociate himself from what he conceived to be an improper transaction. There is some evidence suggesting the illegal cargo was sold for $62,976 but the plaintiff said he saw cargo in a godown which he estimated to be worth a quarter of a million dollars and it is possible that he thought his share ought to be half of that. While this is, of course, pure conjecture it is consistent with the threat in the last paragraph of the letter to sue upon the promissory note unless the matter were immediately cleared up, "the matter" being the amount said to have been handed to the defendant in respect of 1,473 bundles of rattan and 58 tons of sea-shells. It would also be consistent with the statement that Mr. Carroll had been pressing for payment of the promissory note and with the statement in a letter of 6th February, 1967 (No. 20 in the agreed bundle) that "Yue Ka-pui intends to pocket it and leave the responsibility entirely to you", i.e. that Yue Ka-pui was pocketing half the quarter of a million dollars and leaving the defendant to give the plaintiff something out of his share. I do not believe the plaintiff when he says the words "We shall rely upon the promissory note" were to be understood to mean that Gilman & Co. Ltd. and the cargo owners would bring an action. I reject as fanciful the plaintiff's suggestion that all references to a "Promissory Note" in this letter are a mistranslation (as to which there is no expert evidence) and that the document indicated was an inventory of the "illegal cargo" which showed it to be worth $125,000 - a document, incidentally, which has neither been disclosed nor produced.

6. The plaintiff said that he received through the post a photostat copy of the promissory note (although not showing the date) and two statements of account. (These were Ex. G and documents No. 19B and No. 19D in the agreed bundle). He endorsed upon one of the accounts a note that it was submitted by Yue Ka-pui. His explanation for sending the accounts to the defendant was that he did not understand them and knew nothing about them. The covering letter gave no indication that this was the reason. At first he could give no explanation for sending the copy of the note but later he said it was because there was no date on it.

7. The strange thing about the defendant's evidence was his account of what happened when he received the copy promissory note from the plaintiff. He went to see the plaintiff and asked to see the original note. The plaintiff said it was locked in a safe deposit box in a bank but promised to send it to him by post. Whether the note was forged or not it is inconceivable that the promisee would agree to let it go out of his hands into those of the promisor through the mail. Moreover, the defendant says that on or about the 21st February, 1967 he had sent his foki to the office of Messrs. Remedios & Yanne, Solicitors, to see the note, instead of going himself, but that the foki did not succeed in obtaining a sight of it. He did nothing more on that occasion, nothing when the promise to send the note by post was not honoured and even when the letter before action was received he again sent only his foki to consult solicitors and to inspect the suspect document. Shortly afterwards, however, he did make a report to the Police as a result of which Inspector Chow obtained possession of the note from the plaintiff and carried out his examination. As against all this it must be remembered that the defendant at least as early as the 15th February, 1967 flatly denied having made any promissory note and yet the plaintiff saw fit to do nothing to establish its validity for over two years.

8. While I agree with counsel for the plaintiff that one is slow to find that an apparently complete document is a forgery, since if the conclusion is wrong an innocent plaintiff may be deprived of the only substantial evidence of an honest debt, yet the burden of proof is on the plaintiff to establish execution of the document. He can, of course, do little more than swear that the signature is that of the defendant, and I bear that very much in mind. Nevertheless it is impossible to believe so much of the plaintiff's evidence in this case that I am unable to say he has swung the scales in his favour. I would have expected some independent evidence of loans totalling $125,000 but there is none. Allegations of payment of such large sums in cash must inevitably be suspect without such evidence. The defendant was a complete stranger to the plaintiff and yet he claims to have made these loans with nothing more than some vague expectation of benefit, whether in respect of the salvage of the logs or the salvage of the illegal cargo or both. He knew the total gross reward to the defendant from the salvage of the logs would be $132,000 (less whatever was paid as solatium to others) while his protestation of his wish to be dissociated from the salvage of the other cargo makes it at least doubtful whether he would advance money for that venture. I cannot believe that he would have committed the salvage operation to a man who, so he says, was unwilling to put up one cent towards the expenses. I do not overlook the fact that the defendant's cash balance as disclosed by his bank statements was ebbing fast during 1964 but he had work on hand and there is no reason to think that he was on the verge of bankruptcy: his balance sheets for this period show a reasonable profit.

9. It is unnecessary for me to decide who forged the note. I think at least one of the parties knows a great deal more about the whole matter than has come out in the evidence. Yue Ka-pui appears as a somewhat shadowy figure. I was told that one of the persons who, besides the parties, might reasonably have been expected to give evidence at the trial was not available, but no attempt was made to explain the absence of the others. I am therefore left to do the best I can with only the evidence of the parties and the documents to guide me. In the result I am not satisfied that the plaintiff has discharged the burden of proof which is upon him and the action is dismissed.

7th April, 1970.

Representation: