JU YAN DI EMPERORY GENESISY v. YAU WAI HAN

DCCJ 2996/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2996 OF 2012

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J U D G M E N T

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Introduction

1.  This is an application by the plaintiff, based on Order 14 rule 1 of the Rules of District Court, for summary judgment against the defendant.

Background

2.  The plaintiff claims against the defendant for the sum of $130,000 being outstanding balance of loans of $132,713 advanced by the plaintiff to the defendant on divers days between 17 November 2011 to 17 February 2012.  The loans, except for a sum of $24,760 which was paid in cash to the defendant, was said to have been made by way of cash or cheque deposit into the bank account of the defendant. The plaintiff claims that on 17 February 2012, the defendant had made repayment of $2,713 in cash and had drawn 3 cheques purported to settle the said balance in the sum of $130,000, one in the sum of $110,000 and the remaining two of $10,000 each. The cheques were dishonoured on presentation on 6 August 2012.

3.  According to the Defence and affirmation filed in opposition to this application, the defence raised is that :

(a) in July 2011, the defendant had invested $100,000 into a beauty parlour business set up by the plaintiff, each of them is entitled to half of the net sale proceeds;

(b) in August 2012, the defendant had given the plaintiff another $700,000 as investment in a business trading in Chinese herbal medicine;

(c) the defendant will give money to the plaintiff from time to time upon request by the plaintiff;

(d) the money paid into the bank account of the defendant by the plaintiff were proceeds of these joint venture business;

(e) the plaintiff had requested the defendant to sign on her personal cheques and stated the amount paid, leaving other particulars blank just in case money was needed for the joint venture business and the plaintiff will call the defendant when he needed to use the cheques to pay for purchase of Chinese herbal medicine ;

(f) the plaintiff had practiced a fraud by using such cheques of the defendant without her knowing or consent, including the 3 cheques involved in this case as well as another cheque for settlement of personal loan of the plaintiff owed to a Mr. Chow.

The Issue

4.  In essence, the issue for determination in this case is whether the plaintiff is entitled to summary judgment for the sum claimed as a loan or alternatively on the dishonoured cheques, or whether the defendant has an arguable defence on the basis that the money paid were proceeds of investment and the plaintiff had used the cheques of the defendant without her knowledge or consent. 

Legal Principles for Order 14

5.  In an application for summary judgment, it is for the defendant to satisfy the court that there is an issue or question in dispute which ought to be tried or that there ought for some reason to be a trial of the claim or part (O.14 r.3 of RDC).  The test is : “is what the defendant says credible?” (Ng Shou Chun v Hung  Chun San [1994] 1 HKC 155).

6.  However it is trite law that assertion must not be taken in isolation.  They must be credible or believable in the light of the evidence placed before the court (Mass International Limited v Hillis Industries Limited [1996] 1 HKC 434.  A defendant responding to an application for summary judgment must condescend to particulars.  The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend.  The defendant must satisfy the court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence.  In deciding whether there is a fair or reasonable probability of the defendant having a real or bona fide defence, the court does not isolate each factual issue and consider whether it is possible that the defendant’s story on that issue is credible.  Rather, the court must look at the whole situation.  In assessing the credibility of the defendant’s factual case, while the court will not embark on a mini-trial of affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate.  If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so.  If the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence (see National Westminster Bank plc v Daniel [1993] 1 WLR 1453, per Gildewell J at 1457; Manciple Ltd v Chan On Man [1995] 3 HKC 459 (CA), per Motimer JA at 466E-G; Re Safe Rich Industries Ltd, CACV 81/1994, unreported, per Bokhary JA at page 5; Microsoft Corporation v Electro-Wide Ltd [1997] FSR 580, per Laddie J at 593 and DMT Finance Ltd v Ming Kee Investments Ltd, HCCL 11/1998, unreported, per Stone J at page 4).

Loan or payment of profits

7.  Upon considering the evidence in this case, I found the defendant’s case in this regard unbelievable and self-contradicting.

8.  There is no dispute that the plaintiff and the defendant were involved in the beauty parlour business with half share of the net profits.  This is evidenced by a partnership agreement produced by the plaintiff in answer to the defendant’s affirmation (page 80-81 of Bundle).  According to the terms of the partnership agreement, the defendant had in fact invested $120,000 in support of the plaintiff’s case instead of $100,000 alleged by the defendant.

9.  The allegation by the defendant about the business in the trading of Chinese medicine is unsupported by any evidence except for the mere assertion of the defendant. The document produced by the defendant allegedly prepared by the plaintiff (page 94 of Bundle) is just a document with some writing on it.  There is nothing from the document itself to relate to the plaintiff.  And given the fact that there was a written agreement for the investment of $100,000 in the beauty parlour business, it would be beyond belief that for an investment of $700,000, there was nothing in writing.  It is the defendant’s case that she withdrew money from the bank and paid cash to the defendant.  Even though the defendant had produced her bank statements, it is only a selective disclosure in the sense that the bank statements for some of the relevant period are missing. And the bank statement of August 2011 does not show that the defendant had the ability to pay a sum of $700,000 to the plaintiff as investment.  It is beyond belief that the defendant parted with such a substantial amount of money without keeping any record of her own or anything in writing acknowledged by the plaintiff.

10.  As for the allegation that the money paid into the defendant’s account were proceeds of investment, again, there is nothing in support.  The defendant had failed to provide any particulars as to the actual sum of payment made. 

11.  From the witness statement of the defendant to the police dated 21 October 2012 (page 128-139 of Bundle), the defendant initially denied knowledge about the payment of $25,000 on 4 occasions and another $1,953 which were all money paid by the plaintiff, and then explained that the payment of $25,000 on all occasions were payment of her salary but upon payment into the account, she would withdraw the same amount and handed it back to the plaintiff whilst she only kept a small amount as repayment of loan by the plaintiff.  This is apparently inconsistent with the defendant’s case in her Defence and her affirmation. 

12.  And the defendant had also provided 3 different versions as to the total sum of money she had paid to the plaintiff, from $700,000 in her Defence and Counter-Claim, to over $1 million in her affirmation and eventually to over $2.6 million in her statement to the police.  I found the defendant’s evidence are inconsistent and contradictory.

13.  The defendant also alleged that the plaintiff had used one of her cheques to settle a personal debt owed to a Mr. Chow by the plaintiff and had produced a statement prepared by Mr. Chow to confirm the same.  The plaintiff denied and claimed that the cheque was paid by the defendant to Mr. Chow to settle a personal debt of the defendant.  I cannot see how such a fact assist the defendant in establishing that the money paid to her are not loans as alleged by the plaintiff.

14.  Mr. Hui for the defendant relied heavily on the fact that the defendant had reported the matter to police as early as on 9 August 2011 and submitted that it is unlikely for the defendant to make a false report which attracts serious consequences.  And it is Mr. Hui’s contention that such a move by the defendant tends to show that the defendant’s case is genuine.  Whilst this court will not speculate on the intention of the defendant in reporting the matter to police, this fact does not answer all the incredibility of the defendant’s case as mentioned above and does not convince this court otherwise that the defendant’s case should be believed.

15.  I found the defendant’s case is incredible and failed to establish a triable issue that the money paid into her bank accounts are not loans but instead profits from her investment.

Dishonoured cheque

16.  It is submitted by the plaintiff that a cheque is an unconditional order in writing requiring the banker to pay on demand money in a certain sum (Sections 3 and 73 of the Bills of Exchange Ordinance, Cap 19 (“the Ordinance”).  The drawer of the cheque engages that on due presentation, the cheque will be paid according to its tenor.  Extrinsic evidence is generally inadmissible to prove that the terms of the contract are different from those expressed in writing in the cheque (S Y Chan Ltd v Choy Wai Bor [20010 3 HKLRD 145].

17.  Mr. Hui for the defendant had no quarrel with the legal principle above. 

18.  The attack by the defendant is that the plaintiff had forged the date and name of payee on the 3 cheques and the defence is one of fraud.  I found there is no arguable case of fraud.  It is the defendant’s case that she voluntarily issued the cheques and left them in a drawer to which the plaintiff kept the key and the cheques were for the plaintiff’s use with the name of payee and date on the cheque left blank.  By so doing, the plaintiff must have accepted that the plaintiff can insert the name of payee and the date on the cheques when he required to use them.  The underlying premise for the fraud argument falls away.

19.  It is also the defence case that the plaintiff failed to obtain the consent or knowledge of the defendant before he used the cheques.  It is the defendant’s evidence that the plaintiff told her that he would phone her when he needed to use the cheques to buy Chinese herbal medicine (paragraph 5 on page 28 of Bundle).  I found this to be implausible.  Apart from a bare assertion of “for convenience purposes”, there is no credible explanation for cheques to be signed with amount stated beforehand for the plaintiff’s use.  The defendant is working in the beauty parlour everyday and it would be beyond belief that just for convenience purpose, she needed to sign all the cheques and kept inside the beauty parlour.  The cheques were all signed by the defendant and kept by the plaintiff. If the defendant intended for her consent or knowledge to be obtained in the first place, why would she allow the cheques to be kept in a drawer with keys to it kept by the plaintiff; and why can’t she not issue the cheque whenever the plaintiff required it. 

20.  There is no evidence of any conditional delivery and this is also not the pleaded case of the defendant.  Even if there is, I found the evidence that the plaintiff had to obtain the consent and knowledge of the defendant before use of the cheques inadmissible.  This is in effect seeking to vary the unconditional payment nature of cheques and such evidence is not admissible by the authority of SY Chan Ltd (supra) which held that oral evidence is inadmissible to contradict a contract expressed in writing on cheque, which is an unconditional order in writing requiring a bank to pay a sum certain to a specified person or to bearer.  It offended the parol evidence rule. 

21.  The defendant had also adduced a statement from a Mr. Chow about a loan to the plaintiff with part of it settled with a cheque of the defendant.  I cannot see how Mr. Chow can tell if the cheque was used by the plaintiff with or without the knowledge of the defendant since that is something between the plaintiff and the defendant.

22.  A bill of exchange is to be treated as cash and honoured unless there is some good reason to the contrary. Only in exceptional circumstances will a court deprive a claimant of judgment on a claim based on a cheque (Fielding and Platt, Ltd v Najjar [1969] 2 All ER 150, 152 and Sun Wah Aluminium Windows & Curtain Wall Company Limited v Panyu Fantasy Film City Limited operated as Sammyland HCA3119/2002, Sakhrani J (unreported, 17^th October 2003)).  I found the defendant failed to establish a credible and arguable defence in this regard.

Conclusion

23.  For the reasons aforesaid, I find that the defendant has failed to show a good defence or that there are triable issues whether on the Defence or the affirmation evidence.  In the circumstances, I grant judgment in favour of the plaintiff against the defendant for the sum of $130,000.  I also ordered interests from the date of writ at judgment rate until full payment.  I also grant a costs order nisi that the defendant do pay the plaintiff’s costs of this application and of the action, including all the costs reserved, to be taxed if not agreed without certificate for counsel.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.