Kwok Hong Ping v. Chan Man Shoue
Read the full judgment text of HCA 3858/2002 on BabelCite. This High Court CFI judgment was delivered on 28 October 2004.
1. The plaintiff is a trader in cigarettes. On 4 July 2002 he agreed to buy 1,880 master cases of 10,000 cigarettes “555 State Express, U.K. made, Filter Kings” at a price of HK$5,273,200.00. The cigarettes were to be shipped from Dubai to Manila.
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HCA3858/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO.3858 OF 2002 --------------------- BETWEEN
--------------------- Before : Hon Tang J in Court Dates of Hearing : 11-14 October 2004 Date of Judgment : 28 October 2004 -------------------------- J U D G M E N T ------------------------- 1.The plaintiff is a trader in cigarettes. On 4 July 2002 he agreed to buy 1,880 master cases of 10,000 cigarettes “555 State Express, U.K. made, Filter Kings” at a price of HK$5,273,200.00. The cigarettes were to be shipped from Dubai to Manila. 2.The plaintiff paid a downpayment of HK$500,000.00 on 8 July 2002, the balance was paid by him on 29 July 2002 in the sum of HK$4,773,200.00. 3.No cigarette was ever delivered. The plaintiff was the victim of fraud. 4.The dispute between the plaintiff and the defendant is whether the defendant is personally liable. According to the plaintiff the agreement was made with the defendant. Alternatively, the defendant agreed to be personally liable in any event. 5.The defendant’s case is that he was a broker and was not personally liable. According to the defendant, the seller of the cigarette was one Johnny Chang Chan Hou (“Chang”), and that the plaintiff agreed to buy from Chang. The defendant said he had expressly told the plaintiff that he would not be personally liable, and that he was paid a commission by both Chang and the plaintiff. 6.On the other hand, the plaintiff’s case is that he had dealt with the defendant for over two years with over twenty transactions and that the defendant was always the counterparty. Sometimes the plaintiff would buy from the defendant, other times the defendant would buy from the plaintiff. The plaintiff has produced some documents regarding a transaction in September 2001 whereby the defendant bought HK$1,137,500.00 worth of, it seems, State Express 555 cigarettes from the plaintiff. 7.Returning to July 2002, the plaintiff said after he spoke to the defendant about this consignment of cigarettes he asked the defendant to fax him the defendant’s account number for payment purposes. What he got was the document at B3. He was told by his secretary that the payment was required to be made into the account of Chang. The plaintiff said he then called the defendant and spoke to him. He said he told the defendant that he was only dealing with the defendant, he did not know anyone else. The Chinese expression that he used was “我只係對你”. He said the defendant said “OK” and said he had been doing business with Chang for over a year. The plaintiff said that in their business one had to pay before the cigarettes were delivered. Thus, one had to operate on trust. 8.The defendant’s case is that there was no such conversation. Instead, according to him, every time he did business with the plaintiff (apart from the few occasions when he was buying from the plaintiff) he would mention that his responsibility was simply to introduce the parties and he would not be personally liable. He said the plaintiff had never dissented. 9.Thus, this case turns essentially on credibility. 10.The plaintiff is a relatively young man. He was born in 1972 and came to Hong Kong in 1986. He started his business of trading in cigarettes (I should mention he also traded in, for example, liquor) a few years ago. It was a small business and he had only one employee, namely, his secretary. However the transactions could be quite large sometimes running into tens of millions. The profit margin however was small. The plaintiff was a trader. In this particular transaction, he onsold the consignment of the cigarettes to one Coastline Services Phil. Inc. of Manila on or about 19 July 2002 at HK$5,602,400.00. Payments by Coastline were received by the plaintiff in full by 24 July 2002. So it would appear that the plaintiff paid a deposit of $500,000.00, onsold the cigarettes, received payment for the cigarettes and then made the balance of payment to Chang on 29 July 2002 — making a profit of HK$329,200.00. The plaintiff said the profit was uncommonly large. Normally the profit would have been about $50,000.00. The profit was large because BAT, the makers of the cigarettes, had suddenly reduced number of the authorized dealers and there was a shortage of State Express cigarettes at the time. 11.The defendant was introduced to the plaintiff by Choi Sau Lun a friend of the plaintiff’s father. The defendant, the plaintiff and Choi were all clansmen. The plaintiff said the defendant had a good reputation but the plaintiff had never traded with or heard of Chang before. He had no reason to trust Chang, he had reasons to trust the defendant. Generally speaking, the defendant impressed me as a witness. I also find his evidence to be more probable. 12.On the other hand, I find the defendant’s evidence quite improbable. Not least because after the fraud was discovered and a report was made to the police on 13 August 2002, the defendant said in his statement to the police dated 4 September, (B53) :
13.Now, if, as claimed by the defendant, every time he did business with the plaintiff (unless when he was dealing on his own account) he told the plaintiff that he would not be personally liable, I do not see why he should have said to the police “所以我依家仲欠郭康平錢” nor why the “不成文規定” should be applicable. On 9 September he made a further statement to correct and supplement the statement of 4 September, he said this (B54) :
14.If he had actually told the plaintiff expressly that he was not responsible personally, I find it difficult to see why the defendant should not have said so in his police statements. 15.In any event, if he had said to the plaintiff that he would not be responsible, I find it difficult to see why he should still consider himself to be under an moral obligation to pay the plaintiff. Moreover in his oral evidence he made it quite clear that he felt that he was under no legal or moral obligation to pay, the only obligation he felt he was under was to help chase Chang for payment. 16.There are other reasons which made me doubt the defendant’s reliability. 17.After the fraud was discovered, the defendant repaid the plaintiff a total of HK$2,228,200.00 as follows :
18.The defendant has counterclaimed the return of these payments on the basis that they were paid under duress harassment and/or criminal intimidation. 19.This is what the defendant said in his witness statement :
20.The plaintiff employed a debt collector on 14 August. He said he did so because he was earlier told by the defendant that the defendant could only afford to pay him $200,000.00 to $300,000.00 and that the balance would be paid by monthly payments of $3,000.00 which was not acceptable to him. The plaintiff said he took care to appoint a reputable debt collector one which he said was patronised by reputable companies, such as Hutchison and American Express. Moreover, a company which has a history of 150 years and has been established in Hong Kong for 21 years. The company he chose was Receivable Management Services (HK) Ltd (“RMS”) which is part of the Dun and Bradstreet Group. The commission payable by him was 10%. 21.The defendant had made several reports to the police arising out of the activities of the debt collectors. The first complaint was made on 18 August 2002 and the record of his complaint is at bundle B p.37 to 40. This is a complaint about an incident which allegedly took place at 14:30 hours on 16 August 2002 and under para. 5 there were several boxes which were required to be ticked by the complainant if applicable as follows :
The only box ticked by the defendant was box No. 4 namely, “telephone nuisance”. In the written information which appears at B40 and which was signed by the defendant, this appeared :
22.When one compares the defendant’s complaint to the police against his complaint in his witness statement, it appeared that the more serious allegations (see e.g. paras. 14 and 15 of his witness statement) had not been reported to the police. The defendant was asked about this in his evidence and he said that he told the police officer(s) about those other complaints. He claimed that the police officer(s) either refused or failed to record them : saying that they were mere words and no action had been taken by the debt collectors! 23.The second complaint which the defendant made to the police (at Bundle B at p.59 to 62) was made on 12 November 2002 and about an incident which allegedly took place at 10:30 hours on 5 October 2002. In this complaint two boxes were ticked by the defendant namely, No. 3 “Dunning letter” and No. 4 “Telephone nuisance”. In the statement signed to be correct by the defendant this passage appeared :
It is to be noted that his complaint was that the telephone nuisance “令我非常討厭”. 24.The last complaint was made on 24 March 2003 (Bundle B at p.66 to 69). The only box which was ticked was No. 3 namely, “Dunning letter”. 25.At p.69 in the statement signed by him, this passage appeared :
26.Again in relation to the second and third complaints, he said that he told the police about all the other matters which had happened and which he had recorded in his witness statement, but that the policemen refused or failed to record them again saying that they were mere words and no action had been taken. 27.I must say I find the defendant’s explanation to be totally unconvincing. I do not believe the defendant’s evidence on harassment duress or criminal intimidation. I believe the defendant would not have failed to complain to the police if the allegations in his witness statement were true. If he had told the police I do not believe they would have failed and refused to record them. It is quite clear in his 2nd complaint that he was complaining about the conduct of the debt collectors which he regarded as a nuisance or annoying (討厭). That is a far cry from harassment duress or criminal intimidations. From my impression of the defendant, I do not believe he would have been accepted the policemen’s failure to record those serious allegations. I believe that the other allegations were all made up by the defendant in order to assist his counterclaim. And perhaps also in order to explain why, if he had not agreed to be personally liable, he should have paid the plaintiff anything at all, since the defendant said he did not regard himself to be legally or even morally liable. 28.I turn to consider the meeting at Holiday Inn on 28 August. At this meeting a cheque for $1.5 million was given to the plaintiff and the defendant promised that $500,000.00 would be paid on the next day. According to the defendant the $2 million was paid because of the criminal intimidation and against the plaintiff’s agreement to stop the harassment as well as in full and final settlement. 29.In this he was supported by his witness Mr Chu Hon Pong. Mr Chu was also a trader in, amongst other things, cigarettes. He was at university with the defendant and a friend. I do not believe that the payment was in full and final settlement. According to the plaintiff, the defendant wanted him to sign a document to the effect that the defendant would try to recover from Chang the balance and pay the plaintiff thereafter. But the plaintiff refused to do so. 30.I should mention two witnesses called by the plaintiff, they are Mr Choi Sau Lun and Mr Chan Yiu. I have already said that Choi was a clansman and, it seems, a person respected by both the plaintiff and the defendant. Chan Yiu was someone who was experienced in the trading of cigarettes. 31.According to Choi and Chan, the defendant had tried to enlist their help. The defendant tried to persuade them to persuade the plaintiff to accept a lower payment. However both insisted that the defendant should speak to the plaintiff direct. For what it is worth, their evidence was that the defendant was responsible to make good the plaintiff’s loss and that the defendant had never asserted otherwise. Mr Chan, in cross-examination seemed to have agreed with the suggestion that the defendant had complained of duress to him. The evidence is not clear. But even if so, of course, that does not necessarily mean that the defendant was speaking the truth. In this I prefer to act on the defendant’s complaints to the police. I also prefer the plaintiff’s evidence that he never threatened the defendant. 32.Choi and Chan were both present at 28 August meeting at the Holiday Inn. Their evidence was that the meeting went well. They also confirmed the plaintiff’s evidence that the plaintiff refused to sign the paper the defendant prepared. Eventually, Choi and Chan signed on a photocopy of the cheque for $1.5 million as witness of the giving of the cheque. 33.I should mention that at this meeting the defendant first offered $1.5 million but that was refused by the plaintiff. The plaintiff insisted that an initial payment of $2 million should be made because he needed at least $2 million. At this meeting, Mr Chu agreed to lend half a million dollars to the defendant the next day and the plaintiff agreed that he would accept payment the following day. On the next day, the half million dollars was paid. I have to say I am not happy with the evidence of Mr Chu. He said the plaintiff agreed that the payment of $2 million was in full settlement. The expression Mr Chu used was “一了百了”. He said the plaintiff did not dissent. I do not believe that at all. That is inconsistent with the plaintiff’s refusal to sign the document prepared by the defendant. Mr Chu said that he was aware that a document was to be signed by the plaintiff, but he was not aware that the document had not been signed because it seemed that although the meeting at Holiday Inn was a short one, lasting no more than 15 minutes or so, he was absent part of the time because he went to the toilet! Thus, he did not know that the plaintiff had not signed the defendant’s document until a few days later. I do not believe Mr Chu. 34.Mr Chu also gave evidence about supposed harassment by debt collectors. I believe he was pronged to exaggeration. At first he said a collector called and said that if the defendant did not pay, he should beware because they might come up personally to collect. I have no doubt that there were telephone calls from the debt collectors. They might not have been very polite. But I do not believe they were intimidating. I do not believe the defendant would not have failed to report to the police, if the debt collectors were indeed intimidating. 35.The defendant also called Mr Yeung Pang Hoi, who was not cross-examined on behalf of the plaintiff. It is what he said in his witness statement :
36.I can understand why he was not cross-examined. His evidence does not show any unlawful conduct. 37.I turn to consider the document at B3 in greater detail. This is a document in the heading of a company called China Link Int’l Trading Co. which apparently was a company which at one time was operated by Chang. I set down below the contents of this document.
38.As noted, it will be seen that document began with this statement : “BUYER C/O CHAN MAN SHOUE”. The plaintiff has only had secondary education in the Mainland. He said he thought that meant that the defendant Chan Man Shoue was the buyer. He did not know that C/O probably meant “care of”. He said that he chopped and signed this document because he was asked by the defendant to do so, after he had the conversation with the defendant at which the defendant agreed the plaintiff was dealing with him. The defendant’s case is that B3 was the contract between the plaintiff and Chang. Whether there was a contract between the plaintiff and Chang does not depend entirely on the subjective intent of the plaintiff. Certainly, looking at the document from Chang’s point of view, if he was not a fraudster and he wanted to enforce his contract, because, say, the prices for cigarette had plummeted, it may be that Chang had a respectable case against the plaintiff that the plaintiff was the other contracting party. However I do not need to resolve this question. What is important is not the possible relationship between Chang and the plaintiff, but what was actually agreed and understood between the plaintiff and the defendant. In this respect because I believe the plaintiff’s version to be more probable, I hold that between the plaintiff and the defendant, there was a contract under which the defendant was liable to the plaintiff as if the defendant was the contracting party. It does not really matter what is the nature of this contract. The consideration for such contract included the payment by the plaintiff to Chang. In this respect, I do not agree with Mr Tony Ng’s argument that the plaintiff’s evidence is inconsistent with the pleading or his witness statement. His case, in essence, is that the defendant agreed to be responsible as a contracting party to him. It is not important whether the defendant contracted as seller to sell, or as agent to be responsible for the sale. 39.It is to be noted that the deposit required under B3 was $546,000.00. However the downpayment which was made was $500,000.00. This was not explored at the trial and I do not know why that was so. 40.I turn to consider another matter. On or about 1 August, before the fraud was discovered, and after the plaintiff had onsold the cigarette and received payment from the sub-purchaser, the plaintiff paid a sum of $142,420.00 into the defendant’s bank account. This is what the plaintiff said in his statement :
41.The plaintiff was cross-examined on this by Mr Tony Ng. I have to say I find this aspect of the plaintiff’s evidence not to be entirely satisfactory. According to the defendant he was entitled to be paid a commission by the plaintiff but that the exact amount had not been agreed and it was left to the discretion of the plaintiff. He said however he was not afraid he would not be paid because that would be known in the trade and would affect the plaintiff’s reputation. The plaintiff said that it was not a commission but an increase in the price because the defendant told him that he had not made much profit in the transaction. On the other hand, he was making much more than was normal. He also said that was paid as an inducement to the defendant to put more business his way. This, I find probable and believe the plaintiff. He was rightly challenged by Mr Ng for the fact that he said in his statement that the figure of $142,420.00 was arrived at by the defendant and him. It is obvious from the plaintiff’s evidence that it was the plaintiff who decided on the figure, and that he only informed the defendant of the payment when the money was paid into the defendant’s account. However, this evidence does not make me doubt the plaintiff on the question of the defendant’s liability, namely that before the plaintiff made payment and indeed before the document at B3 was signed by the plaintiff it was agreed orally between the plaintiff and the defendant that the plaintiff could look to the defendant as the counterparty. In other words that the defendant would be responsible for the transaction. This is consistent with what the defendant described in his police statement as “我哋不成文規定”. Nor does the fact that the defendant was apparently paid $86,000.00 by Chang, as a commission or otherwise, sufficient to make me doubt that the plaintiff did say to the defendant “我只係對你” and that the defendant agreed. On this essential issue, I have no doubt that the plaintiff’s version is to be preferred to the defendant’s version. Again, I regret to say for all the reasons that I have given, I do not regard the defendant as a reliable witness. Mr Ng said $142,420.00 was too little money for the defendant to assume such responsibility. But the defendant’s profit was $142,400.00 plus $86,000.00, namely, $228,400.00. That is actually more than the plaintiff’s net profit. The defendant had been trading with Chang and presumably found him trustworthy. It seems that trading on cigarettes, as the parties did, depended on trust, and provided one did not trust the wrong person, a profitable and low risk business. Also viewed against the background of what the defendant described as “不成文規定” I believe the defendant agreed to be personally liable. 42.It follows that I will give judgment in favour of the plaintiff against the defendant in the sum of HK$3,187,200.00 with interest on that amount from 29 July 2002 at 2% over the best lending rate of HSBC from time to time until judgment, thereafter at the judgment rate. I also make an order nisi for costs in favour of the plaintiff to be taxed if not agreed. The order is to be made absolute within 14 days unless in the meantime the defendant made representation to the contrary.
Mr William M.F. Wong, instructed by Messrs Vincent T.K. Cheung, Yap & Co., for the Plaintiff Mr Tony T.F. Ng, instructed by Messrs Tsang & Wong, for the Defendant |
Further hearings and rulings under HCA 3858/2002