PO YUEN ( TO'S) MACHINE FTY. LTD. v. CHAN SIU KING

DCCJ 13902/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 13902 OF 2001

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REASONS FOR DECISION

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1. The Plaintiff takes out this summons for judgment under Order 14 of the Rules of District Court. The subject matter is a post-dated cheque for HK$ 536,241.60 issued by the Defendant to the Plaintiff, and it was dishonoured upon presentation on its due date by reason of being countermanded.

2. The Plaintiff is a manufacturer of plastic-injection moulding machines and the Defendant is a director of a company called Golden Tech ( Asia) Limited ("GT"). In June 2001, GT issued 4 posted-dated cheques to the Plaintiff amounting to HK$ 1,072,483.20 for payment of goods sold and delivered to GT by the Plaintiff. GT was, however, unable to make payment on these cheques as its bank accounts were temporarily frozen because of a petition for its winding-up was filed on 10th July 2001. In order to keep the business of GT going, the Defendant issued two cheques, each for HK$ 536,241.60 to the Plaintiff to cover the amount owed by GT to the Plaintiff. The Plaintiff was able to receive payment on the first cheque but not the second one which is the subject matter of the present application.

3. There is no issue of consideration in respect of the two cheques issued by the Defendant. The Defendant only argued that in fact there were two conditions attached to the issuing of the two cheques, they are:

(a)- Upon clearance of the first cheque, the two post-dated cheques of GT issued to the Plaintiff must be returned to GT. When the second cheque is clear, the remaining two post-dated cheques of GT must be returned to GT;

(b)- The first and second cheques must be returned to the Defendant once the bank accounts of GT becomes operative.

4. On 2nd August 2001, an accountant firm was appointed as joint receivers and managers of GT who was then able to operate the accounts of GT. The Defendant therefore make a request to the Plaintiff for them to return the second cheque, for the receivers offered to pay the Plaintiff the said sum by a bank draft but the offer was not accepted by the Plaintiff.

5. The Plaintiff denied that there was ever such an agreement for these two conditions between the Plaintiff and the Defendant when these two cheques were delivered to them. Whilst the Plaintiff did not dispute that there was this bank draft from the receivers, however, they said that the offer was accompanying with conditions, and in effect, the receivers were attempting to renegotiate the terms of the debt owed by GT to the Plaintiff. Therefore they were entitled to reject it.

6. In Mass International Ltd. V. Hillis Industries Ltd & Anor ( CACV No. 192/1995), the court held that in an Order 14 application, triable issues must be shown and the court must be satisfied that there was a real or bona fide defence. The test for an Order 14 application was not whether the assertions were to be believed, but whether those assertions were believable in the light of the evidence placed before the court. On the other hand, the court must not embark on a mini trial on affidavits.

7. The Defendant is only a director of GT, under normal circumstances she should not be made liable to the debts of her company. Basically, what the Defendant was saying was that whenever the bank accounts of GT became operative, GT should pay off the debt it owed to the Plaintiff and the Defendant should be relieved of her obligation under the cheque forthwith. Whether or not there were conditions attached to the issuing of the cheque in question, in my view, has a bearing on the liability of the Defendant. If the Defendant could establish this fact, clearly that would afford her a defence. This fact, however, was disputed by the Plaintiff. In my judgment, the Defendant has shown to the court that there are triable issues and I am satisfied that there is a real or bona fide defence in the case.

8. Therefore, the Plaintiff's application is dismissed and I grant unconditional leave to the Defendant to defense her case. The Plaintiff has liberty to file Reply to the Defence within 14 days from the date of handing down this decision. Upon completion of pleadings, parties are to comply with the automatic directions under Order 23A r. 5 of the Rules of the District Court.

9. Costs of this application be to the Defendant with certificate of counsel, to be taxed if not agreed. I shall make it an order nisi, it shall become absolute upon the expiration of 14 days after the date of handing down this decision.