ZHANG FUZHU v. COSMIC DITIGAL TECHNOLOGY CO., LTD

DCCJ3468/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3468 OF 2008

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

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

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

D E C I S I O N

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

1.  The plaintiff applied for summary judgment against the defendant, its former employer, under four dishonoured cheques for unpaid salaries.  The defendant opposed the application alleging that the employment contract of 1 September 2007 was a sham and the position of sales, administrative and purchasing general manger did not exist prior to the employment contract of 1 September 2007, and that since the defendant company’s business had declined since September 2007, the employment contract with the plaintiff is questionable.

2.  The liquidators of the defendant further claimed that their suspicions were raised when the plaintiff failed to answer the queries as to the duties the plaintiff performed between September 2007 and July 2008.  Because the plaintiff had informed the liquidators by letter in November 2008 that he had moved back to live in Dongguan, that, to the liquidators, was a further reason for their suspicions.

3.  Furthermore, the liquidators considered the sale of the assets of the defendant was undervalued.  Other queries of the liquidators were that the first three of the four cheques for the salary payments had very close serial numbers to each other, the date of each of them was one month apart.  They further suspected that the four cheques contained forged signatures, not authorised by the company. 

4.  Mr Tang, counsel for the defendant, further claimed that if the cheques were issued after 21 July 2008, they would not be binding on the defendant because that was the date when the liquidators came onto the scene.  They also raised queries as to why the four cheques were presented on 29 July 2008 after the plaintiff’s letter to the liquidators demanding payments of the four months’ salary.  The letter was dated 25 July 2008. 

5.  In reply, the plaintiff claimed he sent the letter to the liquidators on 30 July 2008, one day after he presented the four cheques to the bank and these were dishonoured.  The plaintiff further denied that his employment contract was not genuine.  He produced bank account statements that he was paid a salary of $100,000 between October 2007 to February 2008. 

Findings

6.  The plaintiff is claiming under four dishonoured cheques for four months’ salaries.  Under an Order 14 application the defendant must “condescend upon particulars”.  The defendant must state clearly what facts are relied on.  The practice notes in the white book, Hong Kong Civil Procedure 2009 at 14/4/4 stated clearly, the defendant must show a triable issue in order to succeed in obtaining leave to defend.  Unless the defendant can show that it is not indebted to the plaintiff, the plaintiff would be entitled to recover the debt owed based on the four dishonoured cheques.

7.  Just as Stone J held in Yuen Chak Construction Co. Ltd v Tak Son Contractors Limited reported in [1997] 3 HKC 294.  At page 298, he said, at E:

‘I confess to a certain lack of interest in Mr Houghton’s persuasive invitation to become involved at this stage, (or, perhaps, at all) in the minutiae of a dispute between contractor and sub-contractor about the performance of a construction contract.  This is demonstrably not what cheque cases are about, and it is to avoid precisely this sort of investigation that the law on cheques and bills of exchange has developed in the way that it has.  The well-known words of Lord Denning in Fielding & Platt Limited v Selim Najjar [1969] 2 ALL ER 150 at 152B-C, to the effect that a bill of exchange or promissory note is to be treated as cash, and is to be honoured unless there is some good reason to the contrary, in my view, remain as appropriate today as when they were uttered.  See also, for example, the words of Lord Bridge in Montecchi v Shimco (UK) Limited [1980] 1 Lloyd’s L R 50 at 51:

“...it is elementary that as between the two immediate parties to a bill of exchange which is treated in international commerce as the equivalent of cash, the fact that the defendant may have a counterclaim for unliquidated damages arising out of the same transaction forms no sort of defence to an action on a bill of exchange.”’

8.  I have been shown numerous documents including bank statements, balance sheets by the liquidators of the defendant, and they have been gone into thoroughly at today’s hearing.  However, they failed to satisfy me that the plaintiff was not employed as the general manager of the defendant in charge of sales, purchasing and administration.

9.  The plaintiff was employed before between 2006 and 2007 as one of the two main officials of the defendant.  In or about July 2007 his brother, the other manager, left the employ of the defendant.  As a result, in September, an employment contract was entered into between the defendant and him, employing him as the manager for sales, purchasing and administrative duties, as a general manager.

10.  Although the liquidators have doubts as to whether this employment contract was a genuine document, there was nothing the liquidators can produce in support other than suspicions that the document was not a genuine document and that the employment was not a real employment.  The liquidators also questioned if the plaintiff was doing good and competent job as the general manager looking after the defendant’s business.  At the same time, the liquidators queried if according to the plaintiff’s letter to them that the company was not doing much business, or doing much trading since August 2007, why should the company employ him as a general manager at $100,000 a month and what was he doing. 

11.  The liquidators may, if they found sufficient proof, take an action out against the plaintiff for misfeasance, or for not doing his job well, for not picking up the company’s business and making it work, or make more profits than before.   But the issue here is whether or not he was employed as the general manager at $100,000 a month and under the employment contract of 1 September 2007.   If he was so employed, there is no basis to the defendant’s claim that the four months’ payment of salary was not supported by consideration.  If he was not, then the defendant should produce sufficient evidence to show that he was not so employed and there would be no action against the plaintiff as a general manager for misfeasance because if he was not so employed, it was not his duty.   It is only be on the basis that he was employed that the liquidators can claim he was not doing his work well and there may be an action in tort against him.

12.  To establish a good defence against the dishonoured cheque claim, the defendant must show the four cheques were issued fraudulently to the plaintiff who had no right to the money.  After hearing both counsel, Mr Tang in particular, and after reading all the documents and affidavits produced, I do not find the defendant has succeeded in showing that there is a triable issue.

13.   I have seen the liquidators had acted out of suspicion, but there was insufficient evidence to sustain a defence here against the dishonoured cheque claim.  The bank accounts of Bank of China clearly showed there were company activities between September 2007 to at least March 2008 because bank statements up to March 2008 were exhibited.  They further showed that the plaintiff was paid and did receive salaries of $100,000 between October 2007 and February 2008.

14.  It is further not surprising that three of the four cheques under claim are close in sequence when the defendant’s liquidators confessed to have received a letter from the plaintiff that there were little company activities after August 2007.  I note of course that there are evidence showing the defendant had a number of bank accounts and the Bank of China was only one of them.  And the bank statements showed that there were other cheques issued at the same time, during the same period, both from the BOC account and from the DBS account.

15.  To conclude, I am not satisfied the defendant showed a triable defence on the four dishonoured cheques.  The defendant may have a case against the plaintiff in tort but it is not an issue here today.  I would therefore grant summary judgment against the defendant with costs to be taxed if not agreed with certificate for counsel.  Interest on HK$400,000 at 2% per annum from date of presentation of cheques on 29.7.2008 to date of judgment and thereafter at judgment rate until payment.