PONG YUEN MAN TOMMY v. YEUNG KANG LAM

HCA8447/2000 and
HCA9307/2000
(Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.8447 OF 2000

--------------

-----------------------

D E C I S I O N

-----------------------

1. This is an appeal by the plaintiff in HCA8447/2000 ("the plaintiff") against the Order of the master made on 8 December 2000 dismissing the plaintiff's summons for summary judgment with costs. After hearing counsel, I allowed the appeal and gave oral reasons for so doing. I now reduce the reasons into writing.

Background

2. In HCA9307/2000, the plaintiff claims against the defendant therein ("the defendant") the sum of $11.1 million together with interest and costs. Two causes of action are pleaded in the Amended Statement of Claim. The first is in dishonoured cheque, and the other in breach of agreement.

3. The plaintiff's case is that pursuant to an oral agreement made in the end of February 2000, he had, between 29 February and 4 March 2000, lent $9 million to the defendant by depositing three sums, each of $3 million, into different bank accounts of the defendant. Under the oral agreement, the defendant was to repay the principal together with $600,000 interest within two months. The defendant defaulted in payment. So on about 15 August 2000, the parties further agreed orally that the repayment is to be made by three installments of $3 million each together with $2.1 million as interest for seven months. Pursuant to this agreement, the defendant issued and gave to the plaintiff four cheques, three of which were in the amount of $3 million and the fourth one was for $2.1 million. The cheques were all undated. When the plaintiff subsequently requested the defendant to insert the dates, the defendant declined and instead asked the plaintiff to insert the dates. The plaintiff inserted the dates and presented the cheques for payment, but they were all returned unpaid for the reason that they had been countermanded.

4. The Writ in HCA9037/2000 was issued on 3 October 2000 and the summons for summary judgment was issued on 16 November 2000.

5. The defendant's case is that the four cheques were not for repayment of any loan, but were issued pursuant to an oral agreement whereby the defendant was to purchase from the plaintiff 7,300 tons of steel of screw shape for construction purpose at the price of $1,507 per ton. Under the oral agreement, which was made in mid-June 2000, the delivery was to be effected by four shipments, all in July 2000. The four undated cheques were deposited with the plaintiff so that he may insert the dates and present them for payment three days after each delivery. The plaintiff made no delivery under the oral agreement so, Mr Duncan for the defendant submitted, there is both fraud and total failure of consideration.

6. As to the three sums totalling $9 million deposited into the defendant's accounts, the defendant's case is that they were for services rendered by the defendant to the plaintiff in connection with a scheme to "reactivate" or restructure a public company known as GKC Holdings Limited ("GKC"). The defendant says that there was an oral agreement between him and the plaintiff and the plaintiff's business associate, Mr Tam Che Ming, that he would be paid $20 million for introducing Union Contractors Limited ("UCL"), of which the plaintiff and Mr Tam were shareholders and directors, to GKC, if the scheme came to fruition, and $11 million if it did not. The scheme subsequently fell through so he was entitled to $11 million, and the balance of $2 million is still due and owing. This is the subject matter of the defendant's claim in High Court Action No.8447/2000 ("HCA8447/2000") commenced on 23 August 2000 wherein he claims against the plaintiff and Mr Tam the balance of $2 million. The defendant says that it is an abuse of process for the plaintiff to institute HCA9037/2000. He therefore took out a summons on 16 October 2000 under Order 18, rule 19 of the Rules of the High Court, seeking to strike out the plaintiff's claim. The summons was heard immediately before the summary judgment application. The master dismissed it but made no order as to costs.

7. On the summary judgment application, the master considered that there are triable issues and dismissed the summons with costs to the defendant. At the same hearing, the master also on her own motion ordered that HCA9307/2000 be consolidated with HCA8447/2000 with the Statement of Claim in HCA9307/2000 to stand as the counterclaim in the consolidated action. The defendant has since filed a defence to this counterclaim.

Dismissal of the summons

8. The starting point in considering this appeal is whether the summons for summary judgment ought to be dismissed. Although Mr Duncan submitted that it is within the power of a master to dismiss a summons for summary judgment as opposed to granting leave to defend, he has not advanced any substantive argument to say that this is a proper case for exercising the power. It is not suggested and there is no material to show that the application does not come within Order 14 or that the plaintiff knew, before issuing the summons, that the defendant is relying on an arguable defence. It is to be noted that the defence of an oral agreement to purchase steel neither features in any correspondence between the parties nor in HCA8447/2000. As a matter of fact, the main thrust of Mr Duncan's submission is that the defendant should have unconditional leave to defend. In my view, this is not a case that justifies a dismissal with costs. On this ground alone, the appeal should be allowed.

Leave to defend

9. It is trite that where a defendant contends that he should have leave to defend, the onus is on him to satisfy the court, by credible evidence, that there is a triable issue or that, for some other reasons, there ought to be a trial. It is also trite that in determining whether there is triable issue, the court should not be involved in a mini-trial of the action on affidavit evidence, but that the court needs only ask whether the defendant's assertions are credible : Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155, 158.

10. Mr Duncan did not dispute these propositions, but submitted that there are doubts on the plaintiff's case, so that the court needs not even look at the defendant's case. Reliance is placed on Billion Silver Development Ltd v. All Wide Investments Ltd [2000] 2 HKC 262 and, in particular, the judgment of Ribeiro J (as he then was) at p.268D where his Lordship stated that if genuine weaknesses are exposed in a plaintiff's case, this casts doubt on the plaintiff's right to invoke the summary judgment procedure in the first place. In such a case, the proper course is to give unconditional leave to defend so that all matters can be ventilated at the trial.

11. The doubts identified by Mr Duncan are the inconsistencies between the letter of demand written by the plaintiff's former solicitors and the pleaded case, the fact that the cheques were undated, the new plea in the Amended Statement of Claim about the plaintiff being told by the defendant to insert the dates and the reason for asking the defendant to insert the dates as pleaded. It is true that the letter of demand, which was dated 21 August 2000, did not mention that the defendant had given four undated cheques for repayment of the loan and that it only demanded the repayment of the principal sum of $9 million but not the $2.1 million interest. These are, however, in the nature of omissions and not inconsistencies. Despite the omissions, the letter did specifically refer to the loan agreement and demanded repayment. It is also true that the Statement of Claim, before it was amended, did not state that the defendant had told the plaintiff to insert the dates on the cheques. All these omissions are of marginal relevance in that there is no dispute that four cheques were given, that they were undated and that the defendant had authorized the plaintiff to insert the dates. It is only the circumstances in which all these arose that are in dispute. Likewise, it is immaterial whether the defendant had refused to date the cheques, since it is not the defendant's case that the plaintiff is not entitled to insert the dates on the cheque. As to the reason for the plaintiff to subsequently request the defendant to date the cheques, namely, that a lawyer friend had advised him that there might be problems or disputes arising from the cheques being undated, I do not agree that this is inherently improbable or suspicious. Although under the Bills of Exchange Ordinance, a cheque is not rendered invalid solely by reason of it not being dated, an undated cheque is not necessarily free from any problem or dispute. In my view, the matters raised by Mr Duncan do not expose any weakness in the plaintiff's case nor do they cast doubt on its genuineness.

12. I turn then to deal with the plaintiff's claim in dishonoured cheque and the defence raised. It is plain that the plaintiff cannot succeed on the third and fourth cheques since they were dishonoured on 5 October and 11 October 2000, after the Writ herein was issued. The same applies to the second cheque which was dishonoured on 4 October 2000. At the appeal hearing, I was under a misapprehension that the second cheque was dishonoured on 3 October 2000, but on referring to the exhibits again, it appears that the second cheque was also dishonoured after the issue of the Writ. The plaintiff had amended the Statement of Claim to add the claim of dishonoured cheque and to plead the dishonour of these three cheques. As an amendment dates back to the original issue of the Writ, the plaintiff cannot include the second to fourth cheques as part of the claim on dishonoured cheque since the cause of action only accrued to him after the issue of the Writ. This part of the claim is therefore bad.

13. That leaves only the first cheque. The defence of an oral agreement for purchase of steel is extremely brief and devoid of any evidential support, whether documentary or otherwise. It is set out in two short paragraphs of the defendant's affirmation and is no more that a bare assertion by the defendant. It is most unusual that two individuals would trade in such large quantities of steel said to be for construction purpose and which worth over $10 million. Neither the reason nor the background leading to it was alluded to in the defendant's affirmation. A natural inference must be that the defendant was purchasing the steel for the purpose of making a profit by resale. It is therefore difficult to understand why he never demanded compensation or claimed loss and damage when the plaintiff defaulted in making delivery. It is interesting to note that the defendant only counterclaimed for the return of the four cheques in the consolidated action. The manner in which the transaction was agreed to be carried out also calls for explanation. If indeed the parties were, as Mr Duncan put it, in a climax of trust and confidence when they concluded the oral agreement, there was no need for the defendant to deposit four cheques for each of the four shipments at the time of the agreement. Payment could have been effected by cheques on delivery. Alternatively, as the shipment was to be made in Guangzhou, the reasonable course to adopt would be to pay by letter of credit. It is strange that the defendant would adopt a mode of payment which exposes him to the trouble of having to countermand the cheques and to the liabilities arising from dishonoured cheques, as opposed to payment by letter of credit which will afford him full protection in the event of non-delivery. The defendant is afterall the chairman of a public company and must therefore be experienced in commercial dealings. It is difficult to understand why he would subject himself to such commercial risks. In addition, it is also strange that he did not set off the $2 million said to be owing to him against the purchase price. All these, in my view, point clearly to the defence being a shadowy and sham one. The defendant's assertions are plainly, inherently incredible and no triable issue can arise from it. There is therefore no defence to the claim in dishonoured cheque in so far as it relates to the first cheque for $3 million.

14. The alternative cause of action in breach of an agreement concerns the balance of the plaintiff's claim. The defence raised in this regard is that there was no loan and that the $9 million paid previously was for services rendered and pursuant to the oral agreement between the defendant on the one part and the plaintiff and Mr Tam on the other part. At the hearing before the master, the evidence on this part of the defence is extremely scanty, to say the least. The defendant exhibited the pleadings in HCA8447/2000 in his affirmation in support of the striking out application. Nothing was mentioned about this part of the defence in his second affirmation filed two days before the hearing in opposition to the summary judgment application. The defendant had not even confirmed the truth of the contents of his Statement of Claim in HCA8447/2000 in either of his two affirmations. As the evidence stood before the master, the defendant's defence to the alternative claim is no more than a mere denial. At the appeal hearing, the defendant submitted a bundle containing additional court documents in HCA8447/2000 and in the consolidated action. It is to be pointed out at the outset that they are not evidence. Nevertheless, Mr Cheng for the plaintiff did not oppose to the bundle being put in and had further relied on part of it. Among these additional court documents is the Further and Better Particulars of the Defence in HCA8447/2000 supplied by the plaintiff herein. A letter dated 12 January 2000 was annexed to the Further and Better Particulars. The letter was from one Kingsway Capital Investment Limited, which was engaged to advise the investors on the restructuring of GKL, to UCL in which Kingsway Capital Investment Limited set out the terms of its engagement. Mr Cheng relied on this letter and submitted that no reference was made to the defendant or any payment to be made to him. For my part, I find it odd that no or no documentary evidence has been adduced by the defendant to substantiate the defence that the $9 million was remuneration and not loans. Other than the bare denial and the assertions on pleadings, there is simply no material, let alone evidential material, before the court. There is no triable issue and no defence to the alternative claim.

15. For all these reasons, the plaintiff is entitled to summary judgment together with costs here and below.

Ancillary matters

16. Given that judgment is entered for the plaintiff on the claim in HCA9307/2000, I had raised with counsel the issue of a de-consolidation order and/or consequential directions. But as Mr Duncan indicated that the defendant would appeal against the judgment and that he wished to have time to consider the question of de-consolidation and consequential matters, the matter was not pursued for the time being. On the defendant's undertaking to file a notice of appeal within seven days, I granted the application for a stay of execution on the judgment pending the determination of the intended appeal.

Conclusion

17. The Orders I made are as follows :

(1) The appeal is allowed.

(2) The Order of the master dated 8 December 2000 dismissing the summons for summary judgment with costs to the defendant is set aside.

(3) Summary judgment be entered for the plaintiff in the sum of $11.1 million together with interest at judgment rate to run in respect of $3 million from 30 September 2000 to full payment thereof, and in respect of the balance of $8.1 million from the date of the Writ to full payment.

(4) There be a stay of execution on the said judgment on condition that the defendant files a Notice of Appeal within seven days.

(5) Costs of the application for summary judgment and of this appeal be to the plaintiff against the defendant, to be taxed if not agreed.