Re Lo Fong Sang
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HCB 2118/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 2118 OF 2013 ____________ RE: LO FONG SANG, Debtor EX PARTE: FU CHUN KEUNG, Creditor (Petitioner) ____________ Before: Hon Chung J in Court Dates of Hearing: 14 to 16 October 2014 Date of Judgment: 25 November 2014 _______________ J U D G M E N T _______________ INTRODUCTION 1.This petition was commenced in March 2013, based on a debt of $500,000 (advanced in mid-May 2008) said to be the outstanding portion of an unsecured loan of $600,000. There is also no dispute that a total of $100,000 has been paid (from November 2009 to January 2011) (see also para 5(3) below). 2.The principal disagreement in this petition lies in whether:
3.The outcome of this petition therefore very much depends on the determination of the above factual dispute, which in turn largely depends on the assessment of the credibility of the parties’ witnesses. SUMMARY OF THE PARTIES’ CASE 4.The petitioner’s case is as below. By mid-May 2008, he and the debtor have been close friends for a long time. The debtor had asked him for a $100,000 loan in early 2008. Further, before that loan was repaid, the debtor asked him for another loan of $500,000 in mid-May 2008. 5.An undated written document was prepared by the petitioner’s staff, a Ms Choi (“Choi”), and the same was signed by the petitioner, the debtor and Choi (as witness) (“the loan document”). The loan document recorded:
It is, however, noted that the loan document does not mention any interest payable for the said loan. Further, the periodical payment refers to in sub-para (3) above is accepted by the parties to be unrelated to the $500,000 loan, the subject matter of this petition (para 5, debtor’s written closing submissions) (see also para 1 above). 6.Further to the loan document, the debtor has deposited with the petitioner two cheques:
7.Other cheques were also deposited by the debtor with the petitioner:
(total $269,400 (2,400 + (12 x 6,000) + (30 x 6,500)). The petitioner says the above (save for the $2,400 cheque) were post-dated cheques for paying the agreed monthly interest at 1.2% (or 14.4% per year). The interest payable was increased to $6,500 per month in about April 2009 (see also sub-para (2) above). 8.On the other hand, while the debtor does not dispute the above loan or the deposit of the above cheques, the debtor’s case is in gist that:
WITNESSES’ CREDIBILITY/RELIABILITY 9.The following witnesses testified at trial:
10.In short, over the critical factual dispute of whether interest was payable for the debt owed by the debtor to the petitioner, I believe the testimony of the petitioner’s witnesses and disbelieve that of the debtor’s witnesses. (a) The petitioner’s witnesses 11.The petitioner is understandably the most important witness in support of the petition; he was one of the two principal parties to the loan agreement. 12.Of the criticisms levied against him, the debtor emphasizes the following:
13.In relation to para 12(a) above, the petitioner explains that the loan document was drafted by his staff, one Ms Choi. He also explains that he did not bother with the precise language and was satisfied with the security provided (by way of post-dated cheques). 14.In this connection, it is noted that, for a period of more than 3 years (from May 2008 to November 2011), the petitioner has been given the post-dated cheques referred to in para 6(a) and (b), and 7(1) and (2) above. 15.The $500,000 cheques were not presented for payment. The petitioner explains that they were given as security for the loan principal. While not disputing that they were:
the defence suggested in its cross-examination of the petitioner those cheques were mutually agreed to be not for presentment at all; in other words, they were agreed to be of “no worth”. To this, the petitioner’s response is in effect that, as long as the loan was repaid as agreed, they would not be presented. As will be explained below, I reject the part (among other parts) of the defence witnesses’ testimony which claims that those cheques were not intended to be of practical use. I find the petitioner’s above response to accord with common experience and is inherently plausible. 16.In relation to para 12(b) above, the defence criticism focuses on the petitioner’s repeated testimony to the effect that the interest for the loan was payable at “每月十二厘”. The defence interprets this phrase as meaning “12% per month”. This is however not supported by the meanings given to it by the dictionaries (to which the court interpreter who attended the trial has helpfully drawn our attention):
The word “厘” can bear two different meanings depending on whether it is used in connection with yearly interest or monthly interest. Hence:
The same meaning also appears in the last of the above 3 dictionaries. 17.In this connection, it is noted that the petitioner’s affirmation deposed:
18.Based on the above, it is obvious the true meaning of the petitioner’s testimony is that the monthly interest was agreed at 1.2%, rendering the annual interest to be 14.4%. “14.4%” was the yearly interest mentioned in the petitioner’s 2nd affirmation (para 27 thereof) (by way of correction of his earlier affirmation (see para 17 above)). 19.Although there is no clear evidence about this, it is obvious from the contents of the two affirmations (when read together) that whoever on the part of the petitioner’s solicitors was responsible for drafting the English affirmations fell into the same erroneous understanding of the word “厘” (as did the debtor). And this resulted in an interest rate (set out in the two affirmations) the monthly and annual rates of which can never be reconciled arithmetically (para 9(a), petitioner’s affirmation vis-à-vis para 27, petitioner’s supplemental affirmation). 20.With the above in mind, I conclude that there is no substance in the above criticism either, and find that the testimony of the petitioner is truthful. 21.Sze, who testified for the petitioner, said in short that the debtor:
(para 4 and 5 thereof). The other witness for the petitioner, Ms Fu, testified similarly about this. 22.The defence does not contend Sze and Ms Fu to be untruthful witnesses. But they are said to be unhelpful, vague and imprecise because they accept they cannot remember the time when they heard the debtor’s above utterances (nor do they know of the particulars of the loan agreement). I disagree. I consider them to be reliable witnesses because they fairly and frankly admit their inability to recall the precise details. They are however adamant about their recollections of the debtor’s said grumbles. 23.The testimony of Sze and Ms Fu is further evidence which is supportive of (or at least consistent with) the petitioner’s testimony that interest was payable under the loan agreement. 24.Criticisms have also been made based on the two solicitors’ letters in February 2013 and July 2013 respectively (the former was written before the commencement of this petition and the latter was written afterwards). It is true interest has not been mentioned therein. But the demand made therein is consistent with the petitioner’s case which has always been the whole of $500,000 remains outstanding (and not $172,100 as the debtor contends). It is also noted the interest element of the loan agreement was raised in the petitioner’s affirmation filed shortly later in early August 2013. (b) The debtor’s witnesses 25.Naturally the debtor, being the individual privy to the loan agreement, is the most important defence witness. For the reasons set out below, I do not accept his testimony concerning the loan agreement to be truthful and therefore reject it. 26.As stated above, the undisputed fact is that post-dated cheques have been deposited with the petitioner for the purpose of the loan (see para 6(a) and (b), and 7(1) and (2) above). 27.As regards the $500,000 cheques, the debtor has given a convenience reason for handing them to the petitioner. He asserts that those cheques were merely “symbolic” and were not meant to give any security other than in name. In other words, they were not supposed to be presented irrespective of whether there was any repayment default. 28.Such an explanation does not accord with common daily experience and is inherently implausible. It also renders the “renewal” of one cheque with another in mid-2009 completely superfluous. 29.In the context of the second of the $500,000 cheques (drawn in mid-2009), his explanation is even less convincing because, by mid-2009, on the debtor’s case, a substantial part of the loan principal has already been repaid. There would have been no sensible reason for another such cheque to be drawn; and the debtor fails to give any such reason. 30.I reject the debtor’s above assertion as incredible. 31.The debtor also faces difficulties explaining the cheque for $2,400. The petitioner testified that this amount is easily explained by the contractual interest rate: at 1.2% per month, $2,400 represented 12 days’ interest (at $200 per day ($500,000 x 1.2%) / 30) (see para 13(b), petitioner’s affirmation). 32.On the other hand, the debtor asserts that “$2,400” represented some kind of “good gesture” sum, according to some kind of Chiuchow custom. Such “custom” is not widely known, and can find no independent support (save for the testimony of SL Lo). The cheque amount does not bear a sum which is widely known locally to have a meaning of good luck (such as “3”, “8” or “18”). 33.The above assertion has not been put forth in the debtor’s affirmation either. There the explanation was that $2,400 was the part repayment for May 2008 (para 13 thereof). I therefore conclude that the assertion is contrived and should not be accepted. 34.SL Lo’s testimony generally supports the debtor’s testimony summarized above. For the reasons given above, SL Lo’s testimony suffers from the same problems and is rejected. 35.The testimony of Ms Yuen, the debtor’s wife, should not be accepted either. I agree with the petitioner that Ms Yuen fails to account for the source of the cash allegedly given by her to the petitioner; nor has the cash payment been supported by documentary evidence. FINDINGS OF FACT 36.By virtue of the above paragraphs, and having considered the totality of the admissible evidence placed before me, the following findings of fact are made:
CONCLUSION 37.By reason of the above matters, and that there is otherwise no other justification for adjourning or dismissing this petition, I will make the usual bankruptcy order against the debtor, with costs against him. OTHER MATTERS 38.The parties’ written submissions also mentioned various other points. These have not been expressly set out or dealt with above. This is so only because of the need to balance between the length of the judgment and its comprehension. It does not mean those other points are thought to be irrelevant (or have been overlooked). To avoid doubt, those other points have also been considered.
Mr Anthony Lo, instructed by Philip K Y Lee & Co, for the creditor (petitioner) Mr Aidan L F Tam, instructed by Louis K Y Pau & Co, for the debtor Official Receiver did not appear |