HCA 2860/2018
[2024] HKCFI 979
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 2860 OF 2018
____________
BETWEEN |
| | FUNG SHING CHUNG(馮承宗) | Plaintiff |
| | and | |
| | CHOI KING HUNG (蔡景紅) | Defendant |
____________
| Date of Hearing: | 8-11, 15 January 2024 |
| Date of Hearing of VCF Summons: | 8 January 2024 |
| Date of Hearing of Amendment Summons: | 15 January 2024 |
| Date of Hearing of Summons to Adduce New Evidence: | 22 February 2024 |
| Date of Judgment, Reasons for Decision | 8 April 2024 |
| on Various Summonses and Ruling on Costs: | |
________________________________________________
JUDGMENT, REASONS FOR DECISION
AND RULING ON COSTS
________________________________________________
A. INTRODUCTION
1. The Plaintiff and the Defendant used to be close friends for 30 years before this action commenced.
2. The Plaintiff’s case is that on or about 12 September 2013, he lent RMB 8 million to the Defendant, at an interest rate of 5% per annum repayable on demand (“the Loan”). The Loan was allegedly required by the Defendant to repay his business associate, one Mr Gatot. Allegedly on the instruction of the Defendant, the Loan was transferred by the Plaintiff’s brother, Feng Ke Wai (“Feng”) to the cousin of Mr Gatot, Zhang Zi-lian (“Zhang”). The Defendant only made part repayment. This action is the Plaintiff’s claim for the balance of the Loan and interest.
3. The Plaintiff relies on the following documents by which the Defendant was said to have acknowledged the Loan in writing:
(1) 3 Memoranda dated 13 April 2016, 4 May 2017 and 4 July 2017 each signed by the Defendant (“the 3 Memoranda”); and
(2) A 4th Memorandum signed by the parties dated 3 August 2018 by which the Defendant acknowledged that the outstanding amount of the Loan calculated up to 31 August 2018 was US$1,014,983.32 (“the 4th Memorandum”).
4. Ms Jessie Chan (“Ms Chan”) was said to have prepared the 4 Memoranda, photocopied them after the Defendant had signed and gave a copy of each of the 4 Memoranda to the Defendant.
5. The Plaintiff asserts that the Defendant had made 3 partial repayments of the Loan from 2017 to 2018 (“the 3 Payments”), which were all reflected in one or more of the Memoranda.
6. The Defendant disputes the existence of the Loan.
(1) He admits having signed the 4th Memorandum but claimed to be intoxicated at that time and was acting under the undue influence of the Plaintiff.
(2) As for the 3 Memoranda, he alleged that he had only seen those documents for the very first time upon their disclosure on 26 August 2020 in the present action. Some 2 ½ years later, in the 4th version of his defence filed on 27 March 2023, he claimed, for the first time, that the 3 Memoranda were forged.
7. The Defendant also denies that there were partial repayments. He says that the 3 Payments were to settle prior debts between the parties.
8. The Defendant claims to have made loans to the Plaintiff, at the latter’s request, totalling HK$6,805,817 (“the HK$6.8m Loan”), by 6 Cheques (“the 6 Cheques”). He counterclaims for repayment.
9. The Plaintiff denies ever seeking any loans from the Defendant. The Plaintiff asserts that 5 of the 6 Cheques represented payment of proceeds of sale of shares which he traded through the Defendant’s securities account; the remaining cheque duplicated one of the 3 Payments.
B. ISSUES
10. The issues turn on 4 areas: existence of the Loan, forgery, intoxication and counterclaim of the HK$6.8 million Loan.
11. Mr Charles Chan and Mr Kwan, counsel for the Defendant, have confirmed in their opening submission that the Defendant does not rely on the defence of undue influence.
C. INTERLOCUTORY APPLICATIONS
12. There were 2 interlocutory applications that arose at the commencement of the trial, 1 after close of evidence and 1 after trial.
(1) A summons was taken out by the Defendant on 22 December 2023 for leave to take the evidence of Mr Gatot using video conferencing facility (“VCF Summons”). After hearing arguments on the first day of trial, I dismissed the VCF Summons.
(2) An oral application was made by the Plaintiff for an order to set aside the subpoena issued by the Defendant to summon Feng (“Subpoena Application”), but no order was made.
(3) A summons taken out by the Defendant made on the day of closing submission, to amend his pleading to introduce a defence in illegality (“Amendment Summons”). I dismissed it after hearing short arguments.
(4) A summons filed by the Defendant on 25 January 2024 for leave to file his 9th affirmation (“D-9th”) (“New Evidence Summons”). I heard the application on 22 February 2024 and dismissed the summons.
13. Here are my reasons for decisions on those applications.
C1. VCF Summons
14. Mr Gatot was to be a defence witness. He had provided a witness statement. There was no question of relevance of his evidence. He was allegedly seriously ill and was not fit to travel from Indonesia to Hong Kong to give evidence. The Defendant took out the VCF Summons, supported by his 7th affirmation (“D-7th”) and a purported affirmation of Mr Gatot which exhibited his medical certificate in support.
15. Firstly, as Mr Kok (counsel for the Plaintiff) submitted, Mr Gatot’s affirmation was inadmissible. The jurat clause did not state where the affirmation was affirmed, in breach of Order 41, rule 1(8). There was a chop apparently placed by a notary. However, there was neither a certificate of notarization nor an apostille in breach of the Law Society circular 13-832(PA) dated 4 November 2013.
16. Mr Charles Chan suggested that time be given to remedy the affirmation as quickly as possible and that Mr Gatot be arranged to give evidence, say, on day 5 of the trial.
17. I rejected the application. Given the lateness in the application and that the Defendant was seeking indulgence of the Court, it was incumbent on him to get the affirmation in order. Neither the Court nor the Plaintiff should be made to wait and see if the Defendant could remedy the situation. Further, in this Court’s assessment, it was unlikely that the evidence needed to go into the 5th day[1]. Meanwhile, the attention of the Plaintiff’s lawyers should not be diverted from preparation for trial to making arrangements for VCF, which could all be wasted if Mr Gatot could not put his affirmation in order in good time.
18. Secondly, there was unexplained delay on the part of the Defendant. The symptoms of Mr Gatot were known in early 2023. It became worse in June and finally became serious starting from October 2023. D-7th affirmed on 18 December 2023 stated that the serious deterioration of Mr Gatot’s health came to his knowledge on 15 December 2023 (§4). He did not say how he acquired knowledge. As Mr Kok pointed out, the present application could have been taken well before or at the pre-trial review in October 2023.
19. Thirdly, neither the 1st nor 2nd medical certificate of Mr Gatot, dated 16 and 28 December 2023 respectively, say anything about his medical history, except that he has arrhythmia (sic) that required the use of a pace maker.
20. The delay meant that the Plaintiff had no opportunity to verify Mr Gatot’s condition.
21. Fourthly, the Defendant had attempted to orchestrate a witness’ evidence in the past, as could be seen from the Decision of Anthony Chan J in the present case: [2023] HKCFI 100, §25. This made it all the more important for the Defendant’s witness to come to Court to testify under the solemnity of the court atmosphere.
22. Mr Charles Chan asked the Court not to be too harsh to a witness who was ill. This was a witness crucial to the Defendant’s case. The technical defaults could be cured. There would be no prejudice to the Plaintiff.
23. With respect, this Court had no intention to be harsh to a witness. It was the Defendant who should have kept his house in order by making the appropriate application at the appropriate time. Not giving the Plaintiff the chance to verify the medical condition of Mr Gatot was prejudicial to the Plaintiff.
24. For the reasons given in Section C1, I dismissed the VCF Summons. Mr Gatot’s witness statement was excluded from the evidence.
C2. Subpoena Application
25. This was an application by the Plaintiff to set aside the subpoena which the Defendant has applied for in relation to Feng.
26. According to what Mr Charles Chan and Mr Kwan told this Court, the subpoena was put into the letter box of Feng’s last known address on 28 December 2023. This was not a valid mode of service as the witness had to be served personally: Order 38, rule 17. No affidavit of service had been filed. No reason had been given as to why personal service could not be effected. Even if the Court had wished to exercise any discretion with regard to the subpoena under Order 38, rule 17, there was no basis to do so. Even if the Defendant were to serve Feng personally on the first day of trial, there would be less than 4 clear days before the evidence would close.
27. Feng had not turned up at the trial at all. No order needed to be made. If this Court had to, I would no doubt have ruled in favour of the Plaintiff’s application.
C3. Amendment Summons
28. The application was to amend the defence and counterclaim in order to allege illegality of the Plaintiff in contravening foreign exchange laws of the PRC when the Plaintiff allegedly transferred money for the Loan to the Defendant.
29. Firstly, this was an ambush on the Plaintiff of the worst kind.
30. When the case was adjourned on 11 January 2024 after close of evidence, this Court clearly directed that closing submissions should be provided by 9:15 am on 15 January 2024. Mr Kok duly complied with the direction. Mr Charles Chan delivered to the Court the closing submission out of time – at 10:05 am. Not only that but he also delivered a full bundle of documents, with a 16-page submission seeking leave to amend, an affirmation of the Defendant in support of the amendment, a PRC opinion exhibited to the affirmation and a draft 5th version of the defence and counterclaim.
31. The Plaintiff and the Court had only 4 ½ hours to consider the closing submissions and the Amendment Summons. The Defendant’s conduct was abusive and wholly disruptive to the Plaintiff’s proper preparation for the oral hearing for closing submission in the afternoon.
32. To his credit, Mr Kok competently dealt with both the late application for amendment and the closing submission of the Defendant in a most succinct and focussed manner.
33. On the ground of ambush alone, the Amendment Summons should be dismissed.
34. Secondly, the whole procedure flew in the face of court practice. The Amendment Summons was fixed to be heard by a Master on Monday (22 January 2024) when the trial would have been completed with closing submission. A case would not usually go back to a Master after pre-trial review. There was simply no reason why the Summons should not be heard by the judge who was seized of the trial.
35. Worse still, it was the Plaintiff’s instead of the Defendant’s solicitor who informed the Court of the hearing date before the Master. Even on such a matter as fixing of hearing, the Defendant’s side had not been forthcoming.
36. What was more ridiculous was that the Amendment Summons was not even in the bundle of documents relating to this Summons.
37. Thirdly, there was simply no prospect of success on the draft 5th (violet) version of the defence and counterclaim (“DRRRADCC”).
38. The whole bases for the Defendant’s application was that on day 2 of the trial, the Plaintiff allegedly “admitted” under cross-examination, for the first time, that “for the purposes of the alleged Loan, the money was transmitted from the PRC to Hong Kong, circumventing PRC foreign exchange control rules” (“Plaintiff’s Admission”).
39. According to the oral evidence quoted by Mr Charles Chan, the Defendant told the Plaintiff that he needed over US$1 million. However, the Plaintiff did not have enough US dollars but only RMB. He therefore asked Feng to assist. Subsequently, the amount was transferred from Feng to Zhang. When asked by the Defendant’s counsel why there were so many third parties involved, the Plaintiff said that there was a need for the transfer to go through Zhang because he could not transfer RMB to the Defendant/Mr Gatot directly due to foreign exchange control. Zhang claimed to have the means to and was responsible for transmitting US dollars to the Defendant after receiving the RMB from Feng. The Plaintiff was based in Mainland China and the Defendant in Hong Kong.
40. According to Mr Charles Chan, this meant that the transaction must have involved a cross-border transfer that violated PRC’s foreign exchange control. The Plaintiff’s Admission brought about a “fundamental transformation” in the nature of the Alleged Loan. It was the first time that the Defendant heard about (i) the allegation that Zhang transferred the RMB 8 million equivalent of US dollars to the Defendant; and (ii) steps taken pursuant to the alleged Loan “to circumvent PRC foreign exchange controls”. Mr Charles Chan accepted that the illegality was not in the Loan agreement itself but in the performance of it. He submits that even if this Court finds against the Defendant on the existence of the Loan, the contract could be unenforceable for illegality.
41. Without disrespect, that submission was misleading. None of these quotes could amount to admission of contravention of foreign exchange control. What the Plaintiff said was that he could not remit money due to foreign exchange control. He left it to Zhang who said that she had the means to remit the money. The unchallenged evidence was that the Plaintiff did not even know her. How Zhang dealt with the money was a matter between her and the Defendant. Without more, there was nothing illegal about Zhang having the means to conduct currency exchange.
42. The preceding paragraph is completely consistent with Mr Charles Chan’s acknowledgement that the evidence of the trail of money stopped at Zhang. If there had been contravention of foreign exchange control, there was nothing to show that the Plaintiff had knowledge of or taken part in it.
43. Fourthly, there were ways to transmit the money legally even on the Defendant’s purported expert evidence:
(1) As pleaded in §12F of the DRRRADC, for each person every year, the total annual amount adopted for personal settlement and domestic personal purchase of foreign exchange shall be US$50,000. Within that amount, it shall be handled by a bank. If beyond US$50,000, it shall be handled under Articles 10-12 of the present Detailed Rules; while those under the capital account shall be handled under the related provisions of the “Administration of the Personal Foreign Exchange under the Capital Account” in the present Detailed Rules.
(2) As pleaded in §12H of the DRRRADC, the PRC imposes restrictions on foreign exchanges and all such transactions must be conducted in authorized institutions, and that no private or disguised trades are allowed; and per Art 4 of the Regulations, the fact that the receipt of foreign currency occurs outside the PRC does not mean the whole transaction would not be governed by the relevant laws in the PRC.
44. As per §12F of the DRRRADC, transmission of foreign currency could have been done lawfully. The Defendant had not even purported to plead in what way the Plaintiff or Zhang had contravened the foreign exchange control. His case on illegality simply could not get off the ground.
45. Fifthly, the Defendant laid blame on his late discovery of the Plaintiff’s evidence. However, the fact was that the Plaintiff had, in the first version of his statement claim and his very first witness statement, disclosed that the money trail stopped at Zhang. His stance never changed even up to trial. The Defendant did not serve interrogatories, seek specific discovery or seek expert opinion on foreign exchange control. It was an abuse of process for the Defendant to seek to introduce such a substantial defence after the evidence was closed when he could have done so much, much earlier.
46. Sixthly, whether the Loan was transmitted illegally was irrelevant as the Defendant’s case is that the Loan had never existed and he had never received the money. He cannot put forth an inconsistent case: Yiu Ka Fung Vincent v Info-Vantage Ltd, CACV 96/2014, §63.
47. Mr Charles Chan however, relies on the case of Sun Tian Gang v Changchun High and New Technology Industries Development Parent Co [2018] 5 HKLRD 485, §§17-32. DHCJ Le Pichon held that a distinction must be made between a party advancing inconsistent allegation of fact or advancing a fallback position in law. DHCJ Le Pichon allowed an amendment, holding that the Plaintiff was simply pleading a fallback position in law to cater for the possibility that the Court did not accept his primary case on forgery.
48. Even if the Defendant was advancing a fallback position, for the reasons given in §§37-44 above, that position must fail.
49. The Court does have power to allow amendments to pleadings even after close of evidence but before judgment to determine the real issues: Order 20, rule 8, RHC. However, the Court would not accede to the present application that was completely devoid of merits, an outrageous ambush on the Plaintiff after evidence has closed.
C4. New Evidence Summons
50. The new evidence, D-9th, purported to challenge a WeChat message dated 11 August 2017 (“11/8/2017 Message”) which the Defendant sent to the Plaintiff enclosing an image of the 3rd Memorandum (“the Image”), and stating that he had repaid the Plaintiff 600,000 interest in May. That was a hotly contested WeChat message at the trial. D-9th stated that the Defendant had no recollection of sending out the 11/8/2017 Message. He claimed that the Plaintiff had only provided copies of WeChat messages for trial. The Plaintiff never produced his mobile phone or confirmed the accuracy of the WeChat messages. After seeing the WeChat messages in colour during the trial, the Defendant suspected the genuineness of those WeChat messages. The Defendant enlisted the assistance of the Public Security Bureau (“PSB”) in Mainland China on 11 January 2024. He first learnt from the PSB that it was possible to restore the data in a mobile phone. He instructed an Inspection Centre in Mainland China to examine his own mobile phone (which he had stopped using for 3-4 years) to see if the 11/8/2017 Message and other deleted messages could be restored.
51. On 23 January 2024, the Defendant received a report from the Inspection Centre confirming that the 11/8/2017 Message did not exist. The Defendant was also told by the Inspection Centre to distinguish between full image and forwarded image. The latter could have been edited. The Defendant claimed that many WeChat messages that the Plaintiff submitted to the Court did not contain full conversations but the contents had been selectively produced.
52. This was an attempt to adduce expert evidence after trial. After a short hearing, this Court:
(a) dismissed the New Evidence Summons;
(b) directed that, without leave of the Court, the Defendant shall be barred from filing further summonses before judgment is handed down; if he were to file any summons in contravention of this direction, it would not be necessary for the Plaintiff to respond to it and the summons shall stand dismissed, unless otherwise directed by the Court.
(c) ordered the Defendant to pay the Plaintiff costs on indemnity basis in the sum of HK$10,000. Here are my reasons.
53. Firstly, the Defendant blamed his late application on the fact that he could only see the relevant WeChat message in colour during the trial. With respect, the Defendant had since commencement of this action been represented by the same firm of solicitors until he filed a notice to act in person on 20 February 2024, after trial. The parties had gone through discovery and inspection. The 11/8/2017 Message containing the Image was disclosed to the Defendant in August 2020 and was referred to in §19 of P-WS filed on 26 August 2020. His failure to seek colour copies of the WeChat messages, or to raise objection to the authenticity of the 11/8/2017 Message were not grounds to re-open the evidence.
54. Secondly, he boldly denied ever sending the Image. By the trial neither the Plaintiff nor the Defendant still possessed the mobile phone containing the relevant WeChat messages. However, D-9th exposed the Defendant’s lie in that he was plainly in possession of his mobile phone which he sent to the Inspection Centre.
55. Thirdly, the ability to restore even deleted electronic data was not a new technology. D-9th was an attempt to adduce expert evidence through the back door. The Defendant never sought leave (not even in the New Evidence Summons) to adduce expert evidence on this aspect.
56. Fourthly, the Defendant had already cross-examined the Plaintiff on the genuineness of the Image. He could not be given another chance to challenge the genuineness again through the backdoor.
57. The New Evidence Summons, when viewed with the Amendment Summons, plainly exhibited abusive litigation conduct of the Defendant to delay the trial and the giving of a judgment as much as possible. Accordingly, I gave the direction in §52(b) above.
58. As the VCF Summons and the Amendment Summons were extremely late and contained their own seeds of destruction, it is only fair that the Defendant should be made to bear costs on indemnity basis. I make an order nisi accordingly.
59. I now turn to analyze the case as tried.
D. EXISTENCE OF THE LOAN
60. The Loan was allegedly advanced in 2013. There was no contemporaneous written loan agreement. Mr Charles Chan submits that it was strange. I do not agree, having regard to the fact that the parties had become friends from around 1993 and each had placed great trust and confidence in the other. The evidence also established that huge sums changed hands between them over the years. Even on the Defendant’s pleaded case, at one time, there were over HK$10 million owed to him by the Plaintiff without documentary proof (§17 of the Amended Defence).
61. The Plaintiff testified that the Defendant told him by WeChat message, one hour after deposit with Zhang, that Zhang had received the money so the Plaintiff deposited another tranche of money with Zhang. This was fresh evidence from the Plaintiff in the witness box and the WeChat message was not produced. I place no weight on this part of the Plaintiff’s evidence. At one point the Plaintiff also testified that he used Feng’s name to transfer the RMB but later said he could not remember. The Plaintiff had no written acknowledgement of using Feng’s money. However, that was a matter between the 2 brothers.
62. The trail of the Loan monies stopped at Zhang. There was no documentary evidence of the money having left Zhang or receipt by the Defendant/Mr Gatot of the Loan monies. There had been no written demand for repayment prior to 2016.
63. The Plaintiff has given evidence as to how he had acted at the request of the Defendant to transfer to an account designated by the Defendant, and that his brother had RMB whilst Zhang had the means to convert the same into US dollars. The Plaintiff had performed his part of the bargain.
64. The Plaintiff did not call Feng as a witness to prove the provision of the Loan money. The Plaintiff was engaged in hostile litigation with Feng in 2013. It was strange that he had used Feng’s money to lend to the Defendant.
65. Ms Chan apparently kept some record in September 2013 per the Plaintiff’s instructions over a telephone call one day in 2013. However, no such record was produced as evidence. It was remarkable that Ms Chan could remember with such particularity a single telephone call more than 10 years ago. I will not rely on her evidence in this aspect.
66. The Plaintiff’s evidence was that he told Ms Chan about the Loan face to face (not via telephone call). The discrepancy cast doubt on how the Plaintiff or Ms Chan could remember the details of the Loan.
67. Notwithstanding the unsatisfactory evidence of the Plaintiff and Ms Chan, the Plaintiff has the 4 Memoranda that can individually show that the Defendant had acknowledged the existence of the Loan or the outstanding balance. The Defendant has to discredit each of these Memoranda in order to defeat the claim. He also has to explain why someone with 30 years’ friendship had to frame up this convoluted channel of making a loan, using forged documents and involving unconnected persons.
68. Apart from the Memoranda, there was a series of WeChat messages wherein the Defendant kept saying “repay”/“repayment” (還). In a WeChat Message dated 11/8/2017, the Plaintiff stated that he had already waited a few years for repayment and that it was best if all the debts could be cleared by the same year. The Defendant expressed no surprise at such remarks of the Plaintiff.
69. In challenging the credibility of the Plaintiff’s case, the Defendant refers to a lot of extraneous matters eg that the Plaintiff has not declared the Loan in his Form E in the matrimonial proceedings with his ex-wife. Quite apart from the fact that the Plaintiff has given explanations (which it is not necessary for this Court to adjudicate on), the fact remains that documents in the matrimonial proceedings are not before this Court. The Defendant should not make speculative assertions without proof.
70. In respect of the Defendant, he has made various bare assertions, as will be demonstrated under various issues below.
71. He refers to his bank account in 2013 to show that he had a credit balance of over HK$20 million, which made it unlikely for him to borrow money from the Plaintiff at 5% per annum.
72. However, even on the face of his bank statement dated 5 September 2013, the Defendant only had cash deposits of HK$548,536.32. There were “investments” (all being securities) worth around HK$25 million. Three months later, his bank statements showed his net position to have reduced by 62% to HK$9,505,901.20, with cash of HK$505,842.97 and the rest being securities. It was thus not clear that the Defendant’s liquidity was as good as he wanted the Court to believe. Be that as it may, his positive bank balance was one of the considerations of this Court in deciding on whether he had sought the Loan.
73. Mr Gatot did not give evidence. His evidence, at best, showed that the Defendant never needed the Loan to repay Mr Gatot. As with §72, this is a matter to be weighed. However, a lender need not be concerned with the true purpose or destination of a loan.
74. In sum, although the Plaintiff’s evidence was not perfect, all circumstances weighed together did support, on balance of probabilities, a credible case on the existence of the Loan.
E. FORGERY OF THE 3 MEMORANDA
E1. Legal principles on forgery
75. The legal principle on forgery have been summarized in Shengzhen Honeycomb System Co Ltd v HCT Technologies (Hong Kong) Co Ltd[2020] HKCFI 3175 §6, Mimmie Chan J:
“claim that a contract, or any document, is a forgery is a serious allegation to make, and the standard of proof required must be commensurate with the seriousness of the allegation. Evidence to a very high standard of cogency is necessary before a court could be justified in finding that a document has been forged. Inferences of fraud and serious misconduct are not to be reached by conjecture, nor on a mere balance of probability, but have to be plainly established as a matter of inference from proved facts. The court is not entitled to merely choose between guesses on the ground that one seems more likely than another (Ming Shiu Chung v Ming Shiu Shum (2006) 9 HKCFAR 334). As further explained in Re H & Others (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 at 856 (and cited in Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387 at 560), when assessing the probabilities, the court must have in mind as a factor that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on a balance of probability.”
76. The courts generally prefer the direct evidence of witnesses who actually saw and heard what happened to the opinion evidence of an expert. This is especially in the case of handwriting which evidence is necessarily of a lower order of cogency than direct evidence of execution: Fung Shing Chung v Chow King Hung[2023] HKCFI 2332, §§25-26, Recorder William Wong SC.
E2. Analyses of the factual evidence concerning forgery
77. Forgery is a belated plea raised 2 ½ years after the 3 Memoranda were first disclosed in August 2020 and 4 years after the Defendant first filed his defence. Mr Charles Chan points out that this was after the Defendant had sought inspection of the 3 original Memoranda on 19 September 2022 and Ms Hui had provided her first report in January 2023. Meanwhile, the pandemic had halted proceedings.
78. This plea is inconsistent with the Defendant’s prior case in his supplemental witness statement that he had no recollection of signing the 3 Memoranda. He also asserts that even if he had signed, it was because the Plaintiff told him it was about their business cooperation.
79. In all his witness statements, the Defendant has not asserted that any of the 3 Memoranda was forged. This Court has previously commented that he had not even filed a supplemental witness statement pursuant to the amendment that introduced the forgery plea: [2023] HKCFI 2730, §18, 24 October 2023, Au-Yeung J.
80. The Defendant confirmed in the witness box, upon the Court’s questioning, that he would continue to pursue the plea of forgery. This Court queried who could have been the forger. It could not have been Ms Chan because she was the Plaintiff’s employee and had no interest in the money. The greatest “suspect” could only be the Plaintiff.
81. However, I cannot see why the Plaintiff had any motive to commit forgery or procure someone to do so. On the Defendant’s own evidence (§25 of D-WS), the parties had settled all the debts between them by 2018, after the 3 Payments. The Defendant was so generous as to have sold his own shares and “lent” the Plaintiff a total of HK$6.8 million up to January 2018. He was a friend in need of the Plaintiff, not even questioning why the Plaintiff needed to borrow. The Defendant had never, before making the counterclaim, asked the Plaintiff for repayment of the HK$6.8 million Loan. In the 2nd version of his counterclaim, the Defendant thought that he had lent the Plaintiff as much as HK$10 million. Even by the time of the 4th Memorandum, the Defendant was contemplating business investment with the Plaintiff, in which the Defendant alone would be giving out US$500,000.
82. As a matter of logic, there was no reason why the Plaintiff would need to commit forgery. He could have simply asked the Defendant to give him money. The Defendant could not provide any explanation to the Court’s queries.
83. Further, it was difficult to see why any forger needed to forge 3 different signatures, thereby exposing himself to greater risk of criminal conviction.
84. The 3rd Memorandum even recorded a reduction in the Loan by US$ 65,114.55 (ie US$1,510,384.40 – US$1,445,269.85). Why would a forger have wanted to reap less if he had got away under the 1st and 2nd Memoranda already?
85. Next, the Defendant’s case on forgery is contradicted by his own evidence. The 11/8/2017 Message forwarded the Image of his signed 3rd Memorandum to the Plaintiff. Faced with the incontrovertible evidence, the Defendant responded as follows:
(1) He boldly denied ever sending the 11/8/2017 Message. I only need to repeat Section C4 above on the New Evidence Summons.
(2) He pointed out that the Image showed 7% interest instead of 5% and hence might not be the same document as the 3rd Memorandum. I reject his evidence. The resolution of the Image was very low. That it appeared to show 7% interest could not be conclusive. On the other hand, the Image bore the same title, rows, column format and the images of the signatures (including the unique “U” mark) as in the 3rd Memorandum. The date was missing probably because it was at the very bottom of the Image and the Defendant did not capture it. On balance of probabilities, I find that the Image was that of the 3rd Memorandum. The 11/8/2017 Message starkly contradicted the Defendant’s assertion that he had only first seen, the 3rd Memorandum during the discovery process. Mr Charles Chan submits that the Image might be related to some other document but he has no evidentiary basis that there was a Loan between the parties at 7%. The finding in this sub-paragraph alone is enough to dismiss the defence in forgery.
86. The Defendant is utterly unbelievable and I reject his evidence.
87. On the Plaintiff’s side, Ms Chan prepared the Memoranda, witnessed the signing of some Memoranda and photocopied the signed documents. She kept the originals whilst the Defendant was given copies of each Memorandum to keep.
88. Ms Chan’s evidence was not entirely consistent.
(1) Her first witness statement did not mention her witnessing the signing of any Memorandum.
(2) In §12(i) of her 3rd supplemental witness statement (“Chan's 3rd SWS”) (filed after the forgery plea was added), she stated that she witnessed the Plaintiff signing on the 1st Memorandum. However, the fact was that the Plaintiff did not sign on that Memorandum.
(3) In §12(iii)(b) of Chan's 3rd SWS, Ms Chan stated that she witnessed the signing of either the 2nd or 3rd Memorandum by the parties. However, in the witness box, she testified that she witnessed the signing of the 2nd but not the 3rd Memorandum. She had not explained why her memory suddenly became clear.
89. Mr Charles Chan criticizes the fallibility of Ms Chan’s memory and the extent to which it had been massaged for the purpose of this trial.
90. Whilst the lapse of time did create difficulty in memory of Ms Chan, I am not satisfied that she was entirely unreliable. Even if I were to reject her evidence on witnessing, there were lots of circumstances to support the existence of the 3 Memoranda.
91. The undeniable fact was that all the Memoranda were typed out with interests properly computed. Each of the 3 Memoranda could not have been an occurrence at the spur of the moment. Given the assistance she had rendered to the parties in the past, it was not surprising that Ms Chan had assisted in the clerical work of typing and photocopying.
92. In respect of the 2nd Memorandum (Exhibit P2), Ms Chan was able to tell what was done before the sentence in red was written, before she was shown the original. She ably explained the use of different colours of pen by different persons. Her testimony was natural and convincing.
93. The Plaintiff’s evidence supported Ms Chan’s. In particular, he has explained that the back of Exhibit P2 were scribbles concerning the proceeds of sale of his shares, whereas the Defendant has never explained those scribbles. Whether they concerned sale of shares was irrelevant. What was relevant was that Exhibit P2 showed that the parties had had discussion over figures in the process leading up to the execution of Exhibit P2.
94. I find that the 3 Memoranda came into existence and were signed as Ms Chan described. I have no hesitation in rejecting the forgery defence.
E3. Expert evidence on forgery
95. Having regard to my findings above, the expert evidence has little impact on my conclusion. I only deal with it for the sake of completeness. I thank counsel for their succinct summaries of the expert evidence.
96. The Plaintiff’s expert is Ms Maria Lam (“Ms Lam”) and the Defendant’s Ms Emily Hui (“Ms Hui”). In their reports, the signatures on the 3 Memoranda are referred to as Questioned Signatures (Q1, Q2 and Q3 respectively). The 13 signature samples provided by the Defendant are referred to as Known Signatures. In gist, their opinions are that:
(1) Ms Lam: Q1 and Q2 were probably written by the Defendant and unlikely to be forged; whether Q3 was written by the Defendant was inconclusive because there was inconclusive or insufficient basis to suggest that Q3 was a forged signature.
(2) Ms Hui: The Defendant was most probably not the writer of Q1-Q3.
97. Just as a party must in cross-examination challenge evidence of fact given in chief by a lay witness which is not accepted, so the opinion of an expert must be challenged if they are to be disputed. See Hodgkinson, Expert Evidence: Law & Practice (5th ed), §8-016.
98. Ms Lam’s reports were admitted as evidence without cross-examination. I have read them and would like to highlight one thing. According to Koppenhaver, 20-25 signatures should be provided for comparison purpose but the Defendant only supplied 13 Known Signatures. Ms Lam took it upon herself to ask the Defendant for more samples (i) of the Known Signatures, which the Defendant did and became K15-17; and (ii) of other signature samples similar to Q1-Q3 for comparison purpose, but the Defendant refused. Ms Lam considered that the Defendant’s refusal to cooperate “caused significant limitations to the comparison exercise”, such that there was no credible basis for Ms Hui to arrive at her purported conclusions based on the limited and inadequate samples assessed by her.
99. I accept that when obtaining samples, Ms Lam had followed the guidelines in the textbooks: Robertson, Koppenhaver and Hayes. However, I accept Ms Hui’s comments that, requested writings were not ideal comparison standards because:
(a). they were taken after a question had arisen about a document;
(b). they were taken specifically for the purpose of comparison, the writer may be nervous or tempted to disguise them;
(c). they were not likely to be contemporary with the questioned writings; and
(d). changes could have occurred in the person’s writing as a result of time lapse etc.
100. Q1-Q3 were forged on the Defendant’s case. The Court is unable to place weight on his refusal to forge the forgers’ signatures for Ms Lam to examine. The situation would be different from a handwriting expert asking e.g. a suspect to give further samples of his signature on a passport because the suspect has held out the passport as his own and signed an entry card using that signature.
101. I therefore disregared Ms Lam’s opinion with regard to §100 above. Subject to this, and §110 below, I am satisfied as to the methodology of Ms Lam and accept her expert evidence.
102. In contrast, I have serious doubts on the methodology of Ms Hui in her handwriting analyses and her evidence under cross-examination was nothing short of “shocking”. The reasons are as follows.
103. Firstly, in comparing Q1-Q3 (which were plainly different visually) with 13 Known Signatures, she came to the opinion that Q1 to Q3 were “comparatively simple and clear” whereas the Known Signatures were “tangled or intertwined in a difficult to be deciphered cluster in the midzone”.
104. She concluded that each of Q1 to Q3 did not correspond with each of the 13 Known Signatures. In coming to this conclusion she was “comparing onions to oranges” which the authoritative guidelines warned against:
“Exemplars should be in the same writing style or allograph as the questioned material. The examiner must compare printing to printing, cursive to cursive, numbers to numbers or signatures to signatures. The content should also be the same if at all possible, or at least similar. Onions cannot be compared to oranges with significant results other than they’re both round.” See Hayes, Reed (2006), Forensic Handwriting Examination – a Definitive Guide.
105. Secondly, a number of signatures of the Defendant in the trial bundles, which were also “comparatively simple and clear” and similar in appearance to the 3 Questioned Signatures, were not provided to Ms Hui for comparison. Such signatures included the Defendant’s signature in his witness statements, his statement of truth on the defence and counterclaim, his undisputed signature on the 4th Memorandum (which was used by Ms Lam and marked as “K11” in her expert report). Those signatures, in my view, were visually very similar to Q1-Q3, but Ms Hui had failed, wrongly in my view, to give consideration to them.
106. Thirdly, Mr Kok pointed out in cross-examination that the originals of the 1st and 3rd Memorandum were examined on 14 November 2022, whilst the originals of the 13 Known Signatures were only examined more than a month later on 19 December 2022. Ms Hui confirmed that she had not compared those 2 sets of original documents side by side. She had used her mobile phone to take photos of the back page of the original documents. She had also used her hand to touch the original documents to feel the pressure patterns. She accepted that different A4 papers may have different thicknesses and their textures might change over time, but she did not take these into account during her analyses. This mode of comparing originals (to an extent by memory) was unreliable. I just wondered how telephone images could show the pressure of signing.
107. Fourthly, Ms Hui has probably taken everybody by surprise when she mentioned, for the first time ever, in the witness box, that the Questioned Signatures and the Known Signatures were all in Chinese. As one could expect, Ms Hui could not identify any of the 3 Chinese characters of the Defendant’s name in any of those Signatures. This completely contradicted her own observation in her Report that the Questioned Signatures and Known Signatures were all illegible. She explained that it was her retaining lawyer who told her that the Questioned Signatures were the Defendant’s Chinese signatures. She, as an expert, took it on from there.
108. This Court has pointed out that the signatures K3 and K4 had a dot in the right hand corner and asked which of the 3 Chinese characters the dot represented. Ms Hui could not but insisted that the Known Signatures were in Chinese, solely on the basis that those were her instructions from the Defendant’s solicitor.
109. Such evidence of Ms Hui showed that she was not independent and acted without rational bases when saying that the Questioned Signatures and Known Signatures were in Chinese.
110. Sixthly, Ms Hui used a “Zonal Analyses”, ie segregating a signature into the upper, middle and lower zone. Ms Lam suggested that this method was only applicable to English signatures only. I am not certain that this must be correct. Much depends on the layout of a signature itself. By way of example, the words 蔡 and 景 can be divided into 3 zones. I would not rest my decision on this view of Ms Lam.
111. Even if the Zonal Analyses was applicable, it was difficult to see how Ms Hui could have identified the 3 zones, given the difficulty in discerning the contents and structure of the Known Signatures.
112. Fifthly, Mr Kok challenged Ms Hui for her failure to consider the “writing position, stress level, illness, weakness or injury to the hand use for writing” at the time of the signatures, for the purpose of properly comparing the pressure patterns on the documents. See Ms Lam’s Report at §4.4(g), citing Hayes, p35. Ms Hui had no answer to this except to repeat that she saw that the Defendant was in good health at the time she saw him.
113. Without disrespect, I do not place weight on this part of Mr Kok’s submission because there was no evidence to suggest what the signing position was and whether the signer had illness or weakness at the time he signed.
114. Seventhly, Ms Hui spent time on criticizing the Plaintiff’s expert rather than focusing on the issues and giving objective opinions. She refused to engage with Ms Lam when the time came for preparing the joint report. She did not respond to the core analyses in Ms Lam’s Expert Report, including §4.4. In the witness box, Ms Hui was very defensive and often missed the question e.g. when asked about Edna Robertson’s approach (C195).
115. The analyses in Section E3 shows that Ms Hui lacked independence and proper bases for her conclusions. Her methodology was defective and unreliable. I reject her findings. I prefer the approach of Ms Lam and accept her findings.
F. INTOXICATION
F1. Legal principles on intoxication
116. The law “prima facie, presumes that every adult has a capacity to contract and that where exemption from liability to fulfil an obligation is claimed by reason of want of capacity, this fact must be strictly established on the part of the person who claims the exemption”: Fine Talent Finance Ltd v Leung Pak Wai[2022] HKCFI 1482, §38, B Chu J.
117. For the validity of a contract to be upheld (despite any allegation of want of capacity), it is sufficient that the party in question had the capacity to “understand the general nature of what he is doing”: Fine Talent Finance Ltd, §38.
118. “A person cannot escape from liability on a contract merely because, when he made it, his commercial judgment was impaired by drink”. The party seeking to avoid the contract must show that he was then so drunk that he could not understand the nature of the transaction but also deprive him of the awareness that he does not understand it and the other party knew this: Schwartz v. Barclays Bank Plc (1995) The Times, 2 August 1995, p.3, Millett LJ (as he then was); Burrows, on Principles of the English Law of Obligations, §1.280.
F2. Analyses of the evidence on intoxication
119. The Defendant asserts that the parties were drinking in the morning from a previous night of drinking at the nightclub. He was drunk at the time he signed the 4th Memorandum. He admits that he had written the words “十月份先給五十萬元”, but claims that he thought it was in relation to an investment with the Plaintiff in Mongolia.
120. The Plaintiff’s denies any drinking. As confirmed by Ms Chan, the Defendant was in a sober state when he signed the 4th Memorandum in the morning of 3 August 2018.
121. The Defendant’s evidence cannot be believed.
122. Firstly, despite his own description of being “唔清醒”、“半清半醒”、“未必咁清醒”when he signed the 4th Memorandum, he was able to recall the alleged events happening in the daytime of 3 August 2018 in some detail – that there was an alleged discussion with the Plaintiff on investment in Mogolia, that what he signed related to that investment and that the 500,000 related to the investment.
123. Secondly, the sentence “十月份先給五十萬元” is legible. It could hardly be suggested that it came from the hand of someone intoxicated.
124. Thirdly, in none of the replies to the Plaintiff’s demand for repayment by WhatsApp messages had the Defendant ever denied liability to repay or asserted that he was intoxicated.
125. Fourthly, without questions asked, the Defendant knew (as shown in the WeChat messages dated 22-23 October 2018) that the 500,000 was in US currency and that it was he who should repay. He never asserted in the WeChat that the 500,000 was related to anything other than a loan.
126. Fifthly, despite the Defendant’s insistence that the sentence used the word “給”， the Defendant all along used the word “還” in his replies by WhatsApp messages to the Plaintiff’s demands for repayment. As this Court pointed out to the Defendant during his cross-examination, “還” was not a difficult Chinese word. Even a primary school student would have known that it was due to a debt being owed that someone needed to repay.
127. In fact, the Defendant positively confirmed that he would make repayment to the Plaintiff when funds were available: “有錢就還，不是一直在還”; “我不是不想還，只是樓一路未能賣出… 希望你能夠見諒”. See the Defendant’s WeChat messages dated 22 to 23 October 2018.
128. The above indicated that the Defendant was not “唔清醒”、“半清半醒”、“未必咁清醒” as he wanted the Court to believe. It was irrelevant that he did not read or inquire about the contents of the 4th Memorandum before signing. As an adult and a person of full understanding, a person is bound by the documents that he signed: Bison Birdsville Global Ltd v Yang Mingzhi[2023] HKCFI 3130, §41(2), Au-Yeung J.
129. The defence of intoxication is wholly discredited by the Defendant’s own evidence. Given the clear evidence of the Plaintiff and Ms Chan, the veracity of the 4th Memorandum is established.
F3. Part payments
130. The genuineness of the Loan is reinforced by the 3 Payments, each stated in the 4th Memorandum.
(1) 4 May 2017 cash payment of US$50,000;
(2) 10 May 2017 cheque for HK$600,000 (ie US$77,220) by the 6th Cheque;
(3) 8 Feb 2018 cheque for US$500,000.
131. The Defendant admits that he had made those Payments but asserts that they were to set off the debts between the parties for purchase of wood, brandy and shopping. Those assertions are not believable.
132. In respect of the 1st and 3rd Payments,
(1) As observed by A Chan J in his Decision [2023] HKCFI 100 dated 6 January 2023, at §7, there were no pleaded purposes. Even though the defence was last amended on 27 March 2023 after A Chan J’s Decision, no amendment was ever introduced to tackle A Chan J’s observation till now.
(2) In D-WS (§§21, 22 and 24), the Defendant simply stated that the 1st and 3rd Payments were based on the so-called “Advances” (賒數) between the parties，without evidential basis.
(3) The 1st Payment was recorded in the 2nd and 3rd Memoranda, signed by the Defendant.
(4) The 3rd Payment was foreshadowed by the Defendant’s WeChat message to the Plaintiff on 1 February 2018, ie that the US$500,000 would be made as a part repayment to the Plaintiff, and the balance would be repaid as soon as possible (先還你五十萬美元 ……我會最快清還餘額給你).
133. In respect of the 2nd Payment, the defence has undergone some changes.
(1) The initial defence was that the Plaintiff requested the Defendant to settle a credit card bill of HK$600,000 being spending by the Plaintiff during his trip in France. This plea has been withdrawn and the latest plea in the re-amended defence is that the alleged spending in France was only €4,711.50. Even on the latest figure, it was shown during cross-examination that the documentary evidence referred to by the Defendant did not show spending of €4,711.70 but a sum of €2,800 spent by credit card, under the name of the Plaintiff and not the Defendant.
(2) Next, the Plaintiff had allegedly, in November 2013 to July 2014, assisted the Defendant in the purchase of Indonesian wood in the sum of US$82,590. This sum was set off against the following sums paid by the Defendant:
(a) The Defendant’s alleged payment of HK$600,000 (or US$77,220) by cheque in or about May to June 2016, allegedly to assist the Plaintiff in the purchase of brandy; and
(b) The Defendant’s alleged payment of €4,711.50 (equivalent to about US$5,000) by credit card in or around February 2017, allegedly to assist the Plaintiff in his shopping in France.
(3) Assuming the set-off in sub-paragraph (2) to be true, why then would the Defendant have to pay another sum of HK$600,000 to the Plaintiff by cheque on 10 May 2017, well after the debts in sub-paragraph (2) have been set off ? The alleged set-off was but a cloud of dust to obfuscate the issue.
134. As Mr Kok submits, the defence case on the 2nd Payment was an attempt by the Defendant to piece together a fabricated case. I agree. This defence must fail.
135. Having regard to the analyses in this Section, I reject the Defendant’s evidence on the 3 Payments and accept the Plaintiff’s. Their being recorded in the 2nd to 4th Memoranda reinforced the existence of the Loan.
G. COUNTERCLAIM OF THE HK$6.8m LOAN
136. The counterclaim is based on Six Cheques. The Plaintiff denies the loan. He says that the first 5 Cheques were for proceeds of sale of shares he traded through the Defendant’s account in Henik Secuities LTD (“Henik”); and the 6th Cheque was one of the 3 Payments. His case is tabulated as follows:
| Cheque of the Defendant | Date | HK$ | Plaintiff’s Response and Supporting Documents |
1st Cheque
(no.390760)
| 06.03.2017 | $2,500,000.00 | Sale proceeds: P’s~800,000五礦資源(#1208) shares at ~HK$3.00 |
Ms Chan’s excel table dated 17/5/2018
|
| 2nd Cheque (no.390776) | 09.08.2017 | $373,651.00 | Sale proceeds: P’s 100,000五礦資源(#1208) shares at HK$3.75 (on 04.08.2017)
|
On 1/8/2017 P messaged D “今日沽3.75/10w 剩餘40w[2], right?”
On 07.08.2017 D made specific reference to “373651” is his reply on 7/8/2017;
P’s handwritten note “1/8 3.75/10萬375,000” (P#59)
|
| 3rd Cheque (no.390774) | 09.08.2017 | $1,716,802.00 | Sale proceeds:
(1) P’s 100,000五礦資源(#1208) shares at HK$3.43
(2) P’s 400,000五礦資源(#1208) shares at HK$3.45,
on 31.07.2017
|
P’s message to D “今日沽3.43/10w, 3.45/40w, 是否正確? 另外你处[3]仍有50w未沽” on 31/7/2017; and D’s specific reference to “1716802” in his WeChat message to P on 7/8/2017.
Image of Henik Statement dated 31.07.2017 and 3rd Cheque in D’s WeChat message;
P’s handwritten note
|
| 4th Cheque (no.390775) | 10.08.2017 | $396,568.00 | Sale proceeds:
P’s 100,000五礦資源(#1208) shares at HK$3.98 (on 04.08.2017)
|
P’s message to D stating “8月四日沽3.98/10w.right余30w” on 6/8/2017; and D’s reference to “明天還有396000左右收到” in his WeChat message to P on 7/8/2017.
Henik Statement dated 04.08.2017 and 4th Cheque;
P’s handwritten note “4/8 3.98/10萬 398,000”
|
| 5th Cheque (no.390781) | 10.01.2018 | $1,218,796.00 | Sale proceeds:
(1) P’s 200,000五礦資源(#1208) shares at HK$4.03
(2) P’s 100,000五礦資源 (#1208) shares at HK$4.18
|
D’s messages to P “我明天給票 jose [Jessie] $1,218,796 你看對嗎?” and “200,000 $4.03, 100,000 $4.18” on 1/8/2018
P and D also engaged in discussions (between 8/1/2018 and 10/1/2018) as to whether the calculations for the amount to be paid to P was correct, and in particular D sent an image of his handwritten calculations relating to the share sales to P. D’s handwritten calculations showed the sum of HK$1,219,589, which D acknowledged was incorrect by HK$800 (“你對我減多800 ”).
Image of Henik Statements dated 02.01.2018 and 08.08.2017
|
| 6th Cheque (no.390766) | 10.05.2017 | $600,000.00 | D’s 2nd Repayment of Loan
3rd Memorandum, duplicated one of the 3 Payments |
| | Total | $6,805,817.00 | |
137. Firstly, the Defendant’s assertion is that the RMB 6.8m was a “disbursement” to the Plaintiff with an “undertaking to repay”. However, there are no particulars as to what the disbursements were, why the Plaintiff needed to repay and what the terms of the undertaking were.
138. Indisputably, prior to this action, the Defendant had never suggested that the Plaintiff owed him this amount. Instead, the contemporaneous WeChat messages in the trial bundles (eg those dated 1 February, 17 May, 22 October to 6 November 2018) showed clearly that it was the Defendant who was indebted to the Plaintiff and the Defendant had to repay (還).
139. Secondly, the Defendant asserted during cross-examination that the basis for repayment stemmed solely from the fact that the Six Cheques were issued to the Plaintiff.
140. This is wrong as a matter of law. In Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364, at §§99-109, it was held that the making of a bare payment to another might be explicable by reference to a wide variety of possibilities. The onus of proving that the payment of money amounted to a loan was on the claimant and was not satisfied by proof merely of the payment to the defendant of the amount claimed. The Defendant has utterly failed in discharging this onus.
141. Thirdly, the Defendant’s own case in §25 of D-WS is that following the 3 Payments, there had been complete set off / payment between the parties under the alleged Advances. In answer to the Court’s further query, the Defendant confirmed that the Advances were the same as what the Defendant is seeking to rely on in respect of the Six Cheques. How the RMB6.8 million debt had arisen was never clear from the Defendant’s evidence.
142. Fourthly, the 6th Cheque for HK$600,000 was in fact the 2nd Payment to the Plaintiff for the Loan. It was unclear how the Defendant could have asserted both a defence and a claim to one single Cheque.
143. Fifthly, in contrast, the Plaintiff’s explanation for each Cheque was supported by contemporaneous documents. See the Table in §136. They showed that the Defendant held the Plaintiff’s shares in Five Mines Resources (五礦資源) in the Henik Account. From time to time, between March 2017 and January 2018, the Defendant would sell some of the Plaintiff’s shares and inform the Plaintiff of the sale proceeds in round figures. Ms Chan recorded the sale proceeds in her excel records.
144. If it had just been boasting about the profits that he had made, the Defendant need not have told the Plaintiff what expenses had been deducted, the balance of shares in hand, or shown the Plaintiff the Defendant’s Henik statements. Plainly, the Defendant was accounting for the sale proceeds that rightfully belonged to the Plaintiff. There was no mention of any debt owed by the Plaintiff to Defendant at all during the accounting exercise.
145. Sixthly, the Defendant claimed that he had “lent” the shares to the Plaintiff, to be repaid in shares. However, this was a recent fabrication whilst he was in the witness box, totally unsupported by evidence.
146. For the reasons given in this Section, the counterclaim is utterly devoid of merits and should be dismissed.
H. CONCLUSION
147. Based on the above analyses, and despite the Defendant’s assertions that he did not need the Loan in view of the money sitting in his bank account at the material time or that he need not repay Mr Gatot, I accept the Plaintiff’s case that the Loan was made. The defences are totally devoid of merits. The Plaintiff is entitled to judgment. The agreed quantum is in the total amount of US$1,028,053.
148. The HK$6.8m Loan did not exist. Five of the Six cheques represented proceeds of sale of shares to the Plaintiff and one was for part payment of the Loan. The counterclaim is dismissed.
149. On interests, there should be pre-judgment interest upon the sum of US$1,028,053 at the rate of 5% per annum (the agreed rate under the Loan Agreement) from the date of the writ (5 December 2018) up to the date of judgment and thereafter at judgment rate until the date of payment. Mr Kok has referred to 2 cases on interests: Sahara Investment Group Private Ltd v Liu Zhijia[2018] HKCFI 16, §15, A Chan J; and Mayar (HK) Limited v Narotam Sayal, HCCL 4/2007, 18 August 2009, at §94(ii), Stone J. without disrespect, they have not laid down any principle on interest and I shall not rely on them.
I. COSTS
150. Costs should follow the event and be to the Plaintiff.
151. The litigation conduct of the Defendant was thoroughly reprehensible. He has put forth a deliberately false case against a friend who lent him money.
152. He had used all sorts of tactics to delay the case coming to trial. At the interlocutory stage:
(1) A Chan J found that the Defendant had made use of late applications to file a witness statement as a delaying tactic: Decision dated 6 January 2023.
(2) In dismissing the Defendant’s application to adduce late witness statements at the pre-trial review, this Court found the Defendant’s conduct to be egregious and had even misled the Court: Decision dated 24 October 2023, §§15 and 18.
153. He had shown no regard for telling the truth in the witness box. He had come up with new stories. His own Wechat messages at the material period starkly contradicted his defence.
154. Just before closing submission, the Defendant sought to amend his defence to plead a case of illegality without bases, on the advice of 2 counsel in the circumstances that imposed great pressure on the opponent.
155. Such litigation conduct was egregious in the extreme and the Defendant ought to be penalized with costs on indemnity basis.
156. I therefore order as follows:
(1) There be judgment to the Plaintiff in the sum of US$1,028,053 (or its Hong Kong dollar equivalent at the time of payment);
(2) On a nisi basis, interests on the sum in paragraph (1) at the rate of 5% per annum from the date of the writ (5 December 2018) up to the date of judgment and thereafter at judgment rate until the date of payment;
(3) On a nisi basis, costs of the action and the costs of the VCF Summons and Amendment Summons be borne by the Defendant on indemnity basis.
157. I thank Mr Kok for his able assistance.
| | (Queeny Au-Yeung)
Judge of the Court of First Instance
High Court |
Mr Martin Kok, instructed by Lennon & Lawyers, for the Plaintiff
Mr Charles KC Chan and Mr Kwan Ping Kan, instructed by M.C.A. Lai Solicitors LLP, for the Defendant
[1] It turned out that the evidence was closed in the morning of the 4th day.
[2] “w” refers to “萬”, according to the Plaintiff’s oral evidence.
[3] According to P, “你處” refers to the Henik Account held by D.