XCHRX COSMOS WIN ENTERPRISES LTD. v. KWOK CHEUNG HING

HCA5874/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5874 OF 2000

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REASONS FOR RULING

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1. This is an appeal from the order of Master Jones made on 16 October 2000 whereby the master struck out paragraphs 15 to 27 inclusive of the plaintiff's Statement of Claim and further ordered that the plaintiff's application for summary judgment under Order 14 be dismissed. Now the plaintiff appeals against that Order on both scores.

2. After hearing submissions by both parties, I made an Order that only paragraphs 16, 17 and 18, as well as the first phrase of paragraph 19 and also paragraphs 26 and 27 of the Statement of Claim be struck out. In so far as the application for summary judgment is concerned, I gave unconditional leave to the defendant to defend this case. I now give my reasons for so ordering.

Background

3. The pleaded case of the plaintiff is as follows. The defendant is a director of Ausyear Limited. The plaintiff's claim against the defendant is for HK$3,931,500 as being monies had and received by the defendant to the use of the plaintiff. It is pleaded that in 1998, the defendant had directed the plaintiff to sell goods to a company in China by the name of ZHG Animal Husbandry Company ("ZHG"). The defendant orally guaranteed the payment of the price for the goods of US$510,000 from ZHG. After the goods were delivered to ZHG, the plaintiff looked to the defendant for payment of the price. The defendant then suggested to the plaintiff that Ausyear Limited would pay to the plaintiff the price of the goods but those monies should be immediately transferred back to the defendant by way of loan from the plaintiff to the defendant.

4. It is not disputed between the parties that between 21 to 30 July 1999, the defendant made 12 cash deposits into the plaintiff's account with the Belgian Bank, altogether totalling HK$3,377,000, and that during the same period of time, HK$3,356,000 was transferred out from the same bank account of the plaintiff back to the defendant by way of 13 cheques which had earlier on been given by the plaintiff to the defendant in blank.

5. It is also not in dispute between the parties that between 2 to 17 August 1999, the defendant had paid into the plaintiff's account with the Standard Chartered Bank a total of HK$725,500 by way of five separate cash deposits and that during that same period of time, the plaintiff had also re-deposited back to the defendant's bank account the exact sum of HK$725,500, also by way of five cash deposits.

6. The plaintiff's case is that these deposits, firstly, by the defendant into the plaintiff's account and then back to the defendant's account were the payments made by the defendant for the price of goods sold by the plaintiff to ZHG, and then those monies were loaned by the plaintiff back to the defendant by way of loan and which loans are now still outstanding, being the subject matter of the plaintiff's claim against the defendant for money had and received.

7. On the other hand, the defence case takes a very different complexion. The defendant alleges that this curious transaction of putting funds into the plaintiff's account for it shortly to be transferred back to the defendant's account were all done at the suggestion of the plaintiff, the reason for which the defendant is not fully aware, but that the defendant acceded to it only by way of assisting the plaintiff at the plaintiff's request. The defendant says that these were revolving loans at the request of the plaintiff.

The striking out application

8. The application for striking out is brought under Order 18, rule 19. It was also pleaded by the plaintiff in his Statement of Claim that the plaintiff was pressurized by the defendant into agreeing to the defendant's proposal of immediately paying back to the defendant the monies paid by the defendant to the plaintiff, being the price of the goods sold to ZHG. As such the plaintiff relies upon economic duress. The threat pleaded by the plaintiff for agreeing to that proposal was that the defendant had threatened that if the plaintiff did not agree with such proposal, the defendant would not deal with the payment for the price of the goods and would stop all the business relationship with the plaintiff. Under such circumstances, it was pleaded that the plaintiff accepted such proposal with great reluctance. The particulars of economic duress relied upon is the threat by the defendant already mentioned, the failure of ZHG to pay the plaintiff for the goods sold, the plaintiff required the defendant's cooperation to recover the price for the goods sold to ZHG, that it was better for the plaintiff to maintain business relationship with the defendant, that by accepting the proposal, the defendant was made personally liable to repay those monies to the plaintiff, that the plaintiff could sue the defendant for such loan to him and that the plaintiff had no other alternative but to accept such proposal.

9. This plea of economic duress by the plaintiff is clearly bad in law, in that, nowhere was it pleaded that the threat made by the defendant was an illegitimate one or was one which is legally wrong. That is a prerequisite of economic duress. Moreover, when the entirety of the Statement of Claim is read, it is clear that the plaintiff's case on economic duress is no more than a commercial decision made by the plaintiff because it was thought to be more advantageous to the plaintiff commercially to accept the proposal suggested by the defendant.

10. Since no application by the plaintiff was forthcoming for any amendments to the Statement of Claim to put the plea of economic duress on a proper footing, I acceded to the defendant's application that the plea of economic duress should be struck out from the pleadings. However, I took the view that the master had gone much farther than was necessary to strike out the plea of economic duress. As a result, I had only restricted the striking out to those parts of the Statement of Claim pleading economic duress, leaving intact other parts which pleads the various deposits into the accounts of both the plaintiff's and the defendant's since those facts pleaded are also capable of supporting the plaintiff's claim for repayment of the loan. It should be noted that by striking out the plea of economic duress, the plaintiff is still able to pursue its claim against the defendant for repayment of the loan.

11. Paragraphs 26 and 27 were struck out as being wholly irrelevant to the plaintiff's claim.

Application for summary judgment

12. The application by the plaintiff for summary judgment in this case is, in my view, wholly misconceived. Those facts as stated above cry out for investigation as to what was the real purpose behind those transactions. That part of the plaintiff's claim which is disputed by the defendant is, on the plaintiff's own case, wholly oral in nature. The so-called tripartite agreement between the plaintiff, the defendant and ZHG for the sale of the goods is, according to the plaintiff, an oral agreement, so, too, the guarantee given by the defendant for the payment of the price of the goods. The exact terms of those oral agreements need to be properly established if such was the case, if only because those terms have not been pleaded or particularised. Indeed, very little documentary evidence has been produced by the plaintiff in respect of its application for summary judgment. What has been produced by the plaintiff, namely, receipts and vouchers which, on the face of them, showed that the monies paid by the defendant into the plaintiff's bank accounts were payments for the price of goods sold to ZHG were documents prepared by the plaintiff itself. Nothing on these documents showed that they were signed or acknowledged by either the defendant or ZHG. Indeed, the defendant's evidence was that he had never seen these receipts allegedly given to him by the plaintiff before the present action was commenced.

13. Despite what has been said above, the plaintiff saw fit to issue Order 14 summons for summary judgment in this matter. In so doing, the plaintiff's submission was that what the defendant has alleged by way of defence is so wholly incredible that it should not be believed relying on the case of Bhagwandas Kewaleram Murjani & Others v. Bank of India [1990] 1 HKLR 586. However, those advising the plaintiff would do better to look at the comments given by Godfrey JA in the case of Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155, at 158 where he commented on the case of Murjani and its use in future for applications of striking out or summary judgment.

14. I need only say once more that summary judgment applications are for "plain and obvious cases" only, and that this is by no means such a case. There are factual matters that need be proved at the trial and cannot be done so on affidavit evidence. There are also factual matters in this case that need to be investigated and cross-examined upon before a trial judge can make his findings. Nor am I persuaded on the present material before me that the defence put up by the defendant is either shadowy or for the purpose of delay such that I should consider giving conditional leave to defend.

15. For all these reasons, therefore, I gave unconditional leave to the defendant to defend.