DCCJ 1654/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1654 OF 2007

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 BETWEEN

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Coram: Deputy District Judge E. Yip in Court

Dates of hearing: 14, 15 and 18 February 2008

Date of Handing Down of Judgment: 3 March 2008

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Judgment

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Introduction

1. The Plaintiffs sue the Defendant for repayment of loans.  The Defendant says those were gifts.  In any event, their action is time-barred.  He counterclaims against the 1^st Plaintiff a sum equal to a half-share in a flat.  The 1^st Plaintiff says that the Defendant had no interest in the flat. 

Matters not in dispute

2. In 1954, the 1st Plaintiff came to Hong Kong from Mainland China.  He was first apprenticed in the sewing-machine industry.  He then repaired and traded in sewing-machines.  In 2003, he was near full retirement. 

3. The 2^nd Plaintiff married the 1st Plaintiff in 1968.  She first worked as a sewing worker and baby-sitter.  As they began to have more children, she became a full time homemaker. 

4.  They have 4 children as follows:

5. In 1969, they bought a flat in Bute Street, Mongkok.  They occupied one room and rented out other rooms.

6. In 1987, the Defendant completed the certificate examination with unsatisfactory results.  He was to repeat F.5. 

7. In 1988, they sold the flat in Bute Street to buy a flat in Sun Kwai Hing Garden.  They began to reside there.  His second sitting for the certificate examination did not yield satisfactory results.     

8. In 1989, the Defendant was employed as an apprentice in an electronics factory. 

9. In 1990, the Defendant was employed as an apprenticed technician in the town gas company.  In the evening he attended the high diploma course in Hong Kong Polytechnic.  He obtained good academic results. 

10. In early 1993, he asked them to provide money for his studying for a bachelor's degree in mechanical engineering in U.K.  It would take two years.  They agreed to help him.  They provided him with the money.   

11. In 1995, he further asked them to provide the money for a master's degree in U.K.  They agreed on the same terms. 

12. As he had a tight budget, he only returned to Hong Kong once, to attend the marriage of his elder sister, Man Yu, in March 1997. 

13. In early 1998, upon obtaining a master's degree, he returned to Hong Kong to live with them and the younger brother. 

14. In April 1998, he got a job.  He began to pay them $8,000 per month to them as a thankful gesture. 

15. In late 2000, he was planning to get married.  He was looking for a matrimonial flat.  He discussed with the Plaintiffs.  They eventually agreed to purchase a flat, namely Flat B, 20^th Floor, Block 7, Greenfield Garden, Tsing Yi (“the Greenfield Flat”) in the joint name of the 2^nd Plaintiff and him.  They would pay for everything, including purchase price, transaction costs, and renovation.  He would pay them $7,500 per month as occupation fee.  The purchase was completed on 16 January 2001. 

16. From January 2001 to May 2001, the Defendant paid them $10,000 per month. 

17. In June 2001, the Defendant paid them $11,000 per month.

18. From July 2001 to December 2004, the Defendant paid them $14,000 per month.

19. In November 2003, the Defendant’s daughter was born.  An Indonesian maid was employed to look after her.  The daughter and the maid resided in the Plaintiffs’ flat in Sun Kwai Hing Garden.  The Defendant and his wife had supper there.  The Plaintiffs were to pay for the daughter’s expenses and the maid’s salaries.  Later, the maid was dismissed.  The 2^nd Plaintiff took charge of the baby until her (the 2^nd Plaintiff’s) arm was injured.  The Defendant’s mother-in-law then temporarily looked after the daughter in Greenfield Garden. 

20. In June 2004, the Plaintiffs had discharged the mortgage by full payment.  Despite that, the Defendant paid them $14,000 per month afterwards.

21. From January 2005 to June 2005, the Defendant still paid them $14,000 per month. 

22. In June 2005, the new maid was approved by the authority and soon to arrive in Hong Kong to work.  The Defendant told the Plaintiffs that the baby and the new maid would stay in the Greenfield Flat.  The Defendant and his wife would no longer come to have supper with the Plaintiffs.  He would reduce the monthly payment from $14,000 to $7,500.  The Plaintiffs were not happy with the reduction.        

23. On 7 October 2005, the Defendant conveyed the Greenfield Flat back to the 1^st Plaintiff’s name.

24. The aforesaid facts are common ground. 

The Plaintiffs' case

25. The 1st and the 2nd Plaintiffs give evidence.  They adopt their witness statements [A38-39; A29-36] as part of their evidence-in-chief.  They also give oral evidence. 

26. In the present trial, the factual disputes between the Plaintiffs and the Defendant are as follows:

(1) What was the nature of the sums provided to the Defendant

27. Before they provided him with the money for his studying in U.K., they had said clearly that the Defendant would have to return the loans when requested by them.  They would adopt a fixed exchange rate of ₤1:HK$13.50.  In order to demonstrate that sums provided to their children are repayable, the 2^nd Plaintiff also mentions in Court the case of their younger daughter, Man Pui, and the younger son, Man Fai.  The Plaintiffs had made a first loan of $394,000 for Man Pui’s studying in Australia in 1989.  Man Pui repaid in full by instalments between 1995 and 2002.  They made a second loan of $270,000 to her.  She began to repay in 2004.  So far, she still owes them $70,000.  The Plaintiffs had made a loan to Man Fai to learn to drive.  He had repaid in full.        

(2) What was said in the family meeting in August 2005

28. In August 2005, there was a quarrel in the family meeting.  The Defendant said he would reduce the monthly payment from $14,000 to $7,500.  The 1^st Plaintiff asked the Defendant to repay his loans.  The Defendant replied that the 1^st Plaintiff could give a figure and he would repay.  The meeting ended in disagreement, which lasted until the present trial.  Afterwards, the Plaintiffs and the Defendant only talked to each other through social workers or lawyers.   

(3) What was the nature of the payment from 30 December 2005 onwards

29. On 30 December 2005, the Defendant began to repay the Plaintiffs’ loans.  He first paid $1,000.  He continued to repay irregular sums on a monthly basis.  Up to the last day of trial (i.e., 18 February 2008), the Defendant still owes them $939,168.12.

(4) What was the Defendant’s interest in the Greenfield Flat

30. They had never said that the Defendant was to be a joint owner.  The Defendant's name was used only because he had a regular income with proof whereas the father did not have. 

The Defendant's case

31. The Defendant adopts his witness statement [A41-53] as part of his evidence-in-chief.  He also gives oral evidence. 

(1) What was the nature of the sums provided to the Defendant

32. The Plaintiffs never said that he had to repay the money for his studying in U.K.  He has no record kept of the sums provided by them.  Before he left, he had transferred his savings, NZ$10,000 and HK$20,000, into his father's bank account by way of gift.  He has kept no record of these.  Nor has he any impression of what sums the 1^st Plaintiff had provided to him.  After he returned to Hong Kong and got a job, he continued to provide the Plaintiffs with money as a thankful gesture.      

33. As a matter of law, the alleged loan agreement would be void for uncertainty or there was no intention to create any legal relationship. 

34. He has kept no record but he disputes the dates and amounts of the sums provided by the Plaintiffs. 

(2) What was said in the family meeting in August 2005

35. In July 2005, the family meeting was held.  The Plaintiffs complained about his reduction of the monthly payment from $14,000 to $7,500.  They would only accept such an amount if the Defendant conveyed the Greenfield Flat back to his father's name.  The 1^st Plaintiff asked to see his tax return.  He refused to show the 1^st Plaintiff.  The meeting ended in heated disagreement.  Neither the Plaintiffs nor he ever talked of any loans or repayment. 

36. In early January 2006, he received a demand letter dated 30 December 2005 from the Plaintiffs' solicitors for repayment of loans.  This is the first instance where the Plaintiffs have ever said that those were loans.   

(3) What was the nature of the payment from 30 December 2005 onwards

37. Up to the last date of trial, he had been paying the Plaintiffs irregular sums on a monthly basis.  None has been intended or expressed as repayment of loans. 

38. As a matter of law, if the sums provided by the Plaintiffs were loans, the Plaintiffs’ cause of action had been statute-barred. 

(4) What was the Defendant’s interest in the Greenfield Flat

39. They had said that he would be a joint owner. 

The issues to be resolved

40. I have to resolve the issues hereinbelow.

The education in U.K.

The Greenfield Flat

41. I have to resolve whether the Defendant was a joint owner of the Flat. 

42. To clarify this issue, I have asked defence counsel whether, in the event of the defence failing to prove an agreement to be a joint owner, I shall consider the issue of a resulting trust.  This is because the Defendant has alleged to have made some contribution towards its purchase.  At the present juncture, the defence pleadings have not canvassed this.  Defence counsel confirms that the Defendant will not be relying on a resulting trust, so I do not have to consider it.     

Closing submissions

43. I have considered the Plaintiffs' and the defence full written submissions.  I shall refer to the parties’ submissions in due course.  The defence submissions do not seem to be entirely systematic at times as different matters are put under the same heading.  I shall try my best to formulate the Defendant’s case systematically.   

This Court's findings

On the Defendant's evidence

44. Defence counsel submits [para. 41(b) of Submissions] that the Assignment dated 7 October 2005 recited the Defendant as “the beneficial owner” [A197 Clause 1].   

45. I have noted two points relevant to, but not raised in, this submission.  Firstly, the Assignment [A197 Clause 1] had stated that “receipt [of $660,000] is acknowledged”.  Secondly, the even-dated confirmation letter signed by him to the conveyancing solicitors had stated that “[the Defendant and the 1^st Plaintiff] have already settled [the payment of $660,000] direct [themselves] and that you are not in any way involved therein”.

46. I now put everything into context.  The Plaintiffs were not particularly well-off.  There were four siblings, equally favoured by the Plaintiffs.  Man Pui had to repay to the Plaintiffs the loan for her studying.  Man Fai had to repay driving-lesson fees.  The Defendant had a decent and reasonably well-paid job.  The flat was worth $1,320,000.  Even if we assume the Defendant had been paying the mortgage instalments until redemption in June 2004, he says he had paid, say, about $280,000.  The Plaintiffs had paid all other monies, inclusive of legal fees and decoration.  The relationship between the Plaintiffs and the Defendant had gone from bad to worse since July or August 2005.  He said he no longer respected the Plaintiffs.  They had to make contacts through social workers.   When asked in Court as to why he would sign to transfer the flat back to his father's name, he explains that he still trusted that they would pay him back the value of the ½ share. 

47. Amid deteriorating relationship, the Plaintiffs had no reason to enter into an agreement “in the beginning of October 2005” (as pleaded by the Defendant: A15 para. 21) to favour him over other children in upgrading his.  I do not find his evidence of such an agreement credible. 

48. I do not find the Defendant a credible witness. 

On the 1^st and the 2^nd Plaintiffs’ evidence

49. Defence counsel purports to point out various inconsistencies and inherent improbabilities between and in their evidence.  

50. He queries [para. 19(a) of Submissions] whether it was the 2^nd Plaintiff’s or the Defendant’s idea to look for another flat after the Defendant got married.  I find no significance in this.   

51. He queries [para. 19(b) of Submissions] why the 2^nd Plaintiff said that she did not know what sort of inexpensive flat the Defendant was looking for on the one hand whilst she also said that the Defendant was happy to take up the Greenfield Flat at $7,500 based on the market rate for a newly renovated flat of similar attributes on the other hand.  I find no significance in this.   

52. He queries [paras. 16(e) and 19(c) of Submissions] why the Plaintiffs did not treat the surplus out of the $14,000 per month or other generous sums provided by the Defendant as repayment of the alleged loan.  I note that it is the Defendant’s own evidence that the sums had nothing to do with any alleged loan agreement.  Defence counsel cannot submit against his client’s own evidence. 

53. He queries [para. 19(d) of Submissions] why the trend of the Defendant’s payments was quite regular.  It does not look like payments for purchases requested by the Defendant.  I find nothing to contradict the 2^nd Plaintiff’s evidence that those were for the purchases of seafood, mushroom, and conpoy.

54. He queries [para. 19(e) of Submissions] why the 1^st Plaintiff had not asked the Defendant to convey the Greenfield Flat back to his (the 1^st Plaintiff’s) name as soon as practicable after June 2004.  However, I agree with the 2^nd Plaintiff’s evidence that there was no hurry to do so. 

55. He queries [para. 19(f) of Submissions] why the Plaintiffs had not prepared any instruments to evidence the Defendant’s trusteeship to the Greenfield Flat.  I do not find it a fair comment.  The Plaintiffs are not legally trained.  Reciprocally speaking, the Defendant could have done so to protect his beneficial interest, if any. 

56. He queries [para. 19(h) of Submissions] why the Plaintiffs said they had never seen any of the Defendant’s academic results before he went to U.K.  To be accurate, I think they had seen some, but not all.  I find no significance in this.   

57. He queries [para. 19(j) of Submissions] queries why the 2^nd Plaintiff had misstated that the 1^st Plaintiff had no bank account in his sole name.  I find no significance in this.   

58. He submits [para. 15(m)-(o) of Submissions] that the alleged exchange rate is hard to believe.  I see nothing wrong with the parties pre-fixing a rate for the sake of simplicity and convenience. 

59. He submits [para. 15(l) of Submissions] that there was no reason the Plaintiffs did not claim the first ₤5,000 allegedly provided to the Defendant if it was a loan.  I note from the 1^st Plaintiff’s evidence that there is no record of it, not even in the handwritten record [B8].  A litigant is at liberty not to lodge a claim based on flimsy evidence. 

60. I find the 1^st and the 2^nd Plaintiffs credible and reliable witnesses.  On all facts in issue, I accept their evidence and reject the Defendant’s evidence. 

On the education in U.K.

(1) How much money had the Plaintiffs provided to the Defendant

61. The 1^st Plaintiff had prepared a list of the monies, consisting of remittances and cash sums, to the Defendant [A222].  This list was in turn prepared from his (the 1^st Plaintiff’s) handwritten record [B8].  He had lost the bank records for the 5 remittances dated before 23 April 1996 as well as for the 5 cash sums in ₤.  He accepts in Court, however, that those 5 cash sums in ₤, in total ₤900, were to be deducted from his present claim because they were red packet money.  His present claim for his remittance is therefore $905,168.12 (i.e., ₤67,049.49 x $13.5).  Besides, he had also provided $34,000 (i.e., $22,000 + $12,000) to the Defendant upon the Defendant’s return to Hong Kong. 

62. The Defendant says he has no impression of the dates and the sums.  I am satisfied that all those aforesaid were true and accurate sums the Plaintiffs had provided to the Defendant.  The total is $939,168.12.

(2) Whether the money provided by the Plaintiffs to the Defendant was by way of loan or gift

63. According to the Plaintiffs’ evidence, the sums were provided to the Defendant by way of loan, not gift. 

(3) If it was by way of loan, whether it was void for vagueness or uncertainty

64. Defence counsel submits [paras. 12 and 17 of Submissions] that the loan would be void for uncertainty because:

65. I do not find any of these to be obstacles.  The Plaintiffs would provide such loan(s) as when requested by the Defendant to study full-time.  The Plaintiffs would tell the Defendant when and how much to repay.  The defence has not raised any arguments about half-time study, the form of request for repayment, or the Defendant’s inability to repay.  I do not find the loan(s) uncertain. 

(4) Whether there was any intention to create legal relationship

66. Defence counsel submits [paras. 13-16 of Submissions] that the parties had no intention to create legal relationship. 

67. He submits [para. 15(b)-(c), 17(b) of Submissions] that there was a fatherly moral obligation to provide the Defendant with the education in U.K. by way of gift, the more so because the Defendant’s academic results had improved a lot before he left for U.K.  I think, reciprocally speaking of a moral obligation, a son may be expected to regard the aged father’s life savings as merely loans, not gifts. 

68. He submits [para. 15(f)-(i) of Submissions] that at the time of the alleged loan agreement in January 1993, it was not envisaged by anyone that the Defendant would participate in a master’s degree, or that the likely expenses would substantially exceed $300,000.  I do not think that it matters.  The Plaintiffs could only provide such loans within their means.  They never regarded $300,000 as the maximum.  The same goes for the loan ($34,000) provided upon the Defendant’s return to Hong Kong. 

(5) Whether it would cover the sums related to the master’s degree and the loan upon the Defendant’s return to Hong Kong

69. Defence counsel submits [para. 18 of Submissions] that the Plaintiffs can only rely on one agreement of loan, which was made in 1993.  Therefore, it cannot include the subsequent sums related to the master’s degree and the loan upon the Defendant’s return to Hong Kong.  I do not agree.  According to the Plaintiffs’ evidence, the purpose of the loan was to enable the Defendant to study full-time and thereafter to get a job.  The Plaintiffs and the Defendant had both agreed to continue on the same terms after he obtained the bachelor’s degree.       

(6) Whether the action was statute-barred

70. Defence counsel refers to Chitty on Contracts, 29^th ed. Vol. 1 at para. 28-036 and submits that the action was statute-barred:

[W]here no time for repayment was specified in a contract of loan, or where the loan was expressed simply to be repayable ‘on demand’, the lender’s cause of action in general accrued when the loan was made and time began to run from that moment.  As a result, once the loan was outstanding for more than six years (which not infrequently happens in the case of loans between friends or members of a family) the lender’s right to recover money lent became barred notwithstanding that no demand for repayment had been made.

71. On that basis, the Plaintiff’s cause of action ought to have expired on 1 April 2004 (i.e., 6 years after the last sum provided on 31 March 1998).  Defence counsel submits that there was no act on the part of the Defendant to reactivate this cause of action.  The Plaintiffs’ counsel submits that in this connection the repayment of $1,000 made by the Defendant on 30 December 2005 was the first token of repayment. 

72. There is an argument between counsel as to whether it was after the Defendant had received the Plaintiffs’ solicitors’ letter dated 30 December 2005 [A214] that the Defendant first began to repay.  I do not think it matters much either way.     

73. I accept that in the family meeting held in July or August 2005, the Plaintiffs had asked the Defendant to repay their loans.  The Defendant had replied that he would.  I note that the Defendant had moved out from the Greenfield Flat by the end of December 2005.  The last link between the parties was the Greenfield Flat.  I see no reason for the Defendant, who began to begrudge the Plaintiffs so much, to give any money to them as a thankful gesture.  I think the more probable inference is that those sums from 30 December 2005 onwards were nothing but repayments of the loans.  In the premises, the Plaintiffs’ cause of action was reactivated from 30 December 2005.   

(7) If not statute-barred, how much the Plaintiffs can now recover from the Defendant

74. I accept the 1^st Plaintiff’s evidence as to what sums ($939,168.12) had been provided to the Defendant by way of loans.  I do not accept the Defendant’s evidence that he had given the 1^st Plaintiff NZ$10,000 and HK$20,000 before he left for U.K.

75. Since 30 December 2005, the Defendant had paid to the Plaintiffs the sum of $52,500 [para. 25 of Plaintiff’s Submissions].  I am of the view that those were for repayment of the loans.  Thus, the Defendant still owes the Plaintiffs $886,668.12 (i.e., $939,168.12 - $52,500).

On the Greenfield Flat

76. I accept the Plaintiffs’ evidence.  The Defendant was a mere trustee with no beneficial interest. 

Conclusion

77. I allow the Plaintiffs’ claim in the sum of $886,668.12.  This shall carry interest at judgment rate from today until payment.  I dismiss the Defendant’s counterclaim.  I make an order nisi for the Plaintiffs to have the costs of the action (including the costs for the counterclaim), with certificate for counsel.  This order shall become absolute 14 days from today.

Representation:

Mr. Kenneth Lam instructed by Messrs. Chung & Kwan for the 1^st and the 2^nd Plaintiffs.

Mr. Tony Li instructed by Messrs. Andy Fung & Associates for the Defendant.