Zhong Gang Ao Investment & Trading Co Ltd v. Lee Chiu Yee t/a Wah Tat Industrial Co
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HCA 422/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 422 OF 2010 ____________
_______________ J U D G M E N T _______________ INTRODUCTION 1.The plaintiff commenced this action in March 2010 suing the defendant for the repayment of 4 loans:
(total $1.78 million). The plaintiff accepts that the defendant has made cash repayment of $20,750; thus leaving an outstanding sum of $1,759,250 (“the amount claimed”). 2.The amount claimed is denied by the defendant. He also alleges the plaintiff has wrongfully kept his cheques and counterclaims for their return. BACKGROUND 3.The summary of the background set out below is largely undisputed. 4.Mr Wong, a shareholder and director of the plaintiff (“Mr Wong”), and the defendant used to be good friends, having known each other since the 1970s. 5.The defendant was in the electroplating business. Since about 1986, he has from time to time borrowed money for business use from the plaintiff, a licensed money lender. There are memoranda in the trial bundles showing 4 such loans. These were one-year loans with annual interest chargeable at either 54% or 48% (as the case may be). 6.The plaintiff has made the payments set out in para 1(a) to (d) above to the defendant (para 1, defendant’s closing submissions). ISSUES 7.After various amendments to his pleadings, by 14 September 2012 (the defendant’s application for leave to amend his pleadings), two lines of defence are put forth by the defendant (besides a general denial of the amount claimed):
8.Apart from the amendments to the defence pleadings, at the 14 September hearing, deletions have sensibly also been made to remove immaterial averments. As will be set out in more details in para 26 to 27 and 39 to 42 below, unfortunately that economical approach has not always been maintained throughout the trial. 9.In relation to the counterclaim, the issue is whether the plaintiff has wrongfully retained the defendant’s blank cheques. WITNESSES’ CREDIBILITY 10.Before turning to the assessment of witnesses’ credibility, a few words have to be spent on the defendant’s argument related to this aspect. 11.It is argued that, if the plaintiff is unable to adduce truthful and reliable evidence:
The reason put forth in support of the above argument is:
12.It is unclear if the defendant’s above argument is directed at the general state of the plaintiff’s accounts (see, for example, para 9(a) to (e) and 10, defendant’s closing submissions). Insofar as he may be doing so, however, the defence pleadings do not support the above argument (nor the reason given in support of such argument). 13.First, despite the general denial that the amount claimed was in the nature of loans (para 13(a) and 13(d)(i), latest version of defence), it is accepted the plaintiff has made the payments set out in para 1(a) to (d) above (para 6 above). I pause here also to observe that para 13(a) and 13(d)(i) do not appear to comply with RHC Ord 18 r 13(5)(a) and (b) in failing to state (i) any reason for the denial, or (ii) if there is a different version of events (and if so, what it is). 14.Secondly, the defendant has not put forth an allegation that he was entitled to the amount claimed (such as it was paid by way of gift, or it was the plaintiff’s repayment of money owed to him and the like). Instead, a defence of repayment in full has been pleaded. The relevant averment appears in the latest version of the defence (leave to amend has been granted at the 14 September hearing). It reads:
Under “Particulars”, 9 cheques are set out (see para 7(2) above). The total amount of these cheques comes to about $1.876 million. 15.In view of para 13 to 14 above, the burden of proving that the amount claimed has been repaid should in fact fall on the defendant (see also Ord 18 r 13(6)). Indeed, as will be set out in more details in para 26 to 27 below, by virtue of the latest version of the defence pleadings, this should not be a case involving a total re-examination of the “running account” between the parties; thus, the general state of the parties’ accounts is irrelevant. 16.When assessing witnesses’ credibility, I have adopted the test set out in my earlier decision in Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA3523/2002 (13 August 2005), para 12. 17.The main factual disputes between the parties are whether:
As regards sub-para (a) and (b) above, the plaintiff’s witnesses testified to the effect that such was the case (and deny sub-para (c) above). The defence witness testified otherwise. (a) The plaintiff’s witnesses 18.Two witnesses testified for the plaintiff: Mr Wong and Ms Wong. Ms Wong has been the plaintiff’s staff responsible for its accounting (or bookkeeping) work. 19.Three principal matters have been relied upon by the defence as showing their testimony is untruthful or unreliable. 20.The first is the lack of documentary record regarding the payment of $20,750 by the defendant (see para 1 above) (and a similar criticism concerning the loans underlying the amount claimed). The plaintiff’s explanation is essentially as follows. It is true the loans utilized the plaintiff’s fund; likewise the said payment would ultimately be refunded to the plaintiff. However, the fact remains the loans (which were intended to be temporary arrangements) were advanced because of the personal friendship between Mr Wong and the defendant; similar consideration applies to the said payment. It was for that reason those items have not been properly recorded in the plaintiff’s books. 21.I accept the above explanation to be truthful. Apart from having taken into account the overall credibility of the plaintiff’s witnesses, in accepting this part of their testimony I also note that the above payment was in the defendant’s favour (it reduced his indebtedness). It is thus not a matter which they have a monetary motive to be dishonest about. 22.Secondly, it is also said that the earlier claims of the plaintiff were inconsistent with the amount claimed in that:
I also accept the plaintiff’s explanation concerning this. Mr Wong explained that the initial legal advice was to limit the claim to the dishonoured cheques. This action was later expanded to cover the amount claimed upon counsel’s later advice that the claim should cover all outstanding sums. 23.The third matter relates to three of the cheques which the plaintiff relies on: three dishonoured cheques of $119,750 each (payable in January, February and March 2009 respectively); the plaintiff asserts these were drawn by the defendant in purported partial repayment of the amount claimed. The defendant, on the other hand, relies on a fax message sent on 9 December 2008 which (he contends) shows that those dishonoured cheques were used to settle a letter of credit which the plaintiff earlier drew in favour of its supplier. 24.In this connection, the defendant emphasizes the part of the fax message which reads:
25.The plaintiff’s witnesses explain that the fax message was only one of several options discussed at the time, and that the option was in fact rejected by the creditor bank because the cheques were posted-dated for too long. I accept the testimony. Several features of the fax message are to be noted:
26.The defendant also relies on evidence of previous payments of substantial sums as casting doubts on the credibility of the plaintiff witnesses’ testimony to the effect the defendant was in great financial difficulties and unable to repay his debts; references were made to the defendant’s payments of:
27.In view of the latest version of the defence, I do not think the defendant should be permitted to rely on such matters (see para 7 to 8 and 12 to 15 above). To permit him to do so would risk unfair prejudice to the plaintiff. This is because the plaintiff could well have adduced evidence to show that the defendant’s total indebtedness (especially that owed to the plaintiff) was much more than the above amounts of payment. 28.In any event, when the plaintiff’s witnesses were cross-examined about this aspect, they testified to the effect that the debt owed by the defendant exceeded the above amounts of repayment. Insofar as it may be necessary to do so, I also accept this part of their testimony. (b) The defence witness 29.The only witness testifying for the defence was the defendant. I do not accept his testimony because I find it to be untruthful and unreliable. 30.First, the various earlier amendments to the defence pleadings show that some of his factual lines of defence changed over time. As stated above, the latest (and the only) purely factual defence is the full repayment of the amount claimed by way of the 9 cheques particularized (this was only raised since 14 September hearing). 31.Besides the above general observation, the defendant has been shown to be evasive when he was cross-examined. From time to time, he either refused to answer simple factual matters, or claimed that he could not remember them. Such instances include:
32.Further, as the plaintiff points out, the total amount of the 9 cheques (relied upon as repayment of the amount claimed) is $1.876 million odd. This is about $117,000 more than the amount claimed. The defendant has not explained why the two amounts should differ. 33.Finally, the defendant’s assertion that the amount claimed involves loans which charged very high interest rates is totally unsupported by documents; also, he cannot explain why the amount claimed is exactly the same as the amount advanced to him earlier if interest were payable (in addition to the principals). FINDINGS OF FACT 34.Having considered the admissible evidence adduced at trial, the following findings of fact are made:
MONEY LENDERS ORDINANCE (CAP 163) 35.By reason of the findings of fact above (para 34(1) and (4) above), the amount claimed does not involve any loan which falls within Cap 163. 36.Insofar as it may be said that Cap 163 does apply, and also by reason of the findings of fact (para 34(1) and (3) to (7) above), I consider this an appropriate case for the discretion conferred by Cap 163 (especially s 18 thereof) to be exercised in the plaintiff’s favour: In re Strong Offer Investment Ltd (2007) 10 HKCFAR 529. Further, by reason of the finding of fact made at para 34(4) above, any non-compliance with s 18, Cap 163 was not deliberate. CONCLUSION 37.Judgment is entered against the defendant in the plaintiff’s favour. 38.The counterclaim is dismissed. OTHER MATTERS 39.After the trial commenced, the defendant sought to rely on further documents purportedly in answer to the following part of the re-re-re-amended reply:
The above was one of the consequential amendments in answer to the latest version of the defence (concerning the alleged full repayment by 9 cheques). 40.I refused to permit the new documents to be used, and gave extemporary reasons for doing so, indicating that more detailed reasons will be given later. They are as follows. 41.The earlier defence alleged (at one stage) in effect that the “running account” was in the defendant’s favour. Thus, it was averred:
Those averments were, however, deleted since the 14 September hearing (and the lines of defence referred to in para 7(1) and (2) above were raised). 42.If the defendant had indicated he would rely on the new documents at the 14 September hearing (when the latest version of defence was raised), that would have afforded the plaintiff just short of one month’s time before trial to collate its documents in response. But to do so only at the time of trial instead would risk causing irreparable prejudice to the plaintiff. The defendant has not explained why he did not do so at the 14 September hearing (or even earlier). COSTS ORDER NISI 43.There is no apparent reason to depart from the usual rule that costs should follow the event. There will accordingly be a costs order nisi pursuant to Ord 42 r 5B(6) that the costs of this action (and any reserved costs) be paid by the defendant to the plaintiff to be taxed if not agreed. 44.The plaintiff seeks indemnity costs against the defendant. This may be a borderline case, but I find that the defendant’s conduct is not quite sufficient to justify costs to be taxed on such basis.
Mr Lawrence Cheung, instructed by Yu Hung & Co, for the plaintiff Mr Jeremy Cheung, instructed by George Chan & Co, for the defendant | ||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCA 422/2010