HO PO KI v. LAI KING HEI

DCCJ 1914/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1914 OF 2014

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

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

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

REASON FOR JUDGMENT

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

The legal principle

1.  This is an application for summary judgment concerning a dishonoured cheque (“the Cheque”) for the sum of HK$203,250.00.  At the conclusion of the hearing, I granted judgment in favour of the plaintiff together with costs.  I stated that reasons would be given later, which I now do.  I accept the submissions of the plaintiff’s counsel and will repeat them in this judgment.

2.  The principles regarding summary judgment for a claim on a dishonoured cheque are trite and well-established.  A bill of exchange is to be treated as cash and honoured unless there is good reason to the contrary.  Where an application for summary judgment in respect of a claim on a dishonoured bill of exchange, the general rule is that leave to defend will not be given unless there are exceptional circumstances.

3.  The bill is itself a contract separate from the contract of sale.  Its purpose is, inter alia, to avoid postponement of the purchaser’s liability to the vendor, grounded upon some allegations of failure by the vendor under the underlying contract.

4.  Unlike a case of simple contract, consideration is presumed for a cheque until the contrary is shown. The burden is on the defendant to rebut such presumption of consideration.  It should be remembered that in an action based on a dishonoured cheque, the plaintiff is suing on the cheque and not on the underlying contract.  There is no need for the plaintiff to particularise the circumstances as to how consideration was given.

5.  Under an Order 14 application the defendant must condescend upon particulars.  Mere assertion in the affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence.  The defendant must state clearly what facts are relied on.  There should be no doubt that according to the law, the burden should be on the defendant to satisfy the court that the defendant has a credible defence.  

Background

6.  In February 2014, the defendant’s wife, Cheung Man Ching (“Cheung”) learned that Music Genius Art Centre (“the Centre”) was for sale.

7.  On 7 February 2014, Cheung gave the plaintiff HK$30,000 in cash as deposit for the sale.  Another deposit of HK$20,000 was subsequently paid by Cheung.

8.  The plaintiff and the defendant signed a formal agreement (“the Agreement”) on 17 March 2014, the contents of the Agreement are, inter alia, as follows:-

“正式合約 (連三附件)

甲方: 何寶琪，

乙方: 黎敬羲

於2014年3月17日，乙方交付兩張支票給甲方，其中一張為港幣二十萬三千二百五十元的支票， …… 作為甲方轉售優才音樂藝術中心有限公司予乙方的款項……”

9.  The Cheque was to pay for part of the price of $253,250, which in turn was for, amongst other things, (i) the plaintiff to sell the Company to the defendant, (ii) the plaintiff to allow the defendant to obtain the lease of the Premises with the agreement of the landlord/lessor, and (iii) for the transfer the assets set out in Appendix 1 of the Agreement (together with Appendix 2 and the information set out in Appendix 3).

10.  Mr Lau, counsel for the plaintiff, submitted that the plaintiff’s claim was not based on the underlying agreement.  It was based solely on the dishonoured Cheque.  The plaintiff was not suing for the price or for specific performance of the Agreement.

Defendant’s submissions

11.  Mr Wong, counsel for the defendant, resist the application by raising the following reasons:-

A. Conditional Delivery of Payment

Mr Wong submitted that “the defendant stated in the WhatsApp that the plaintiff did not deposit the Cheque until after the negotiation in the meeting on 22 March 2014 had failed, because the plaintiff knew that the Cheque was “without value” (吉的支票).  Furthermore, it stated that the defendant did not have to pay as the plaintiff did not enter into the tenancy with the landlord.  This is a contemporaneous correspondence showing that the Cheque was subject to that condition.  It was also supported by the fact that the plaintiff did not deposit the Cheque upon receiving the same. ”

Mr Wong submitted that “the Cheque was issued by the defendant to the plaintiff to show his sincerity, in other words, it is a form of guarantee of payment and there is condition subject to the negotiation and fulfillment of the terms of the sale”

B. egotiation

Mr Wong submitted that the Agreement was not binding as some of the important terms of the sale including the purchase price in the amount of HK$303,250 and the completion date and respective obligations of the parties were not included in the Agreement.

C. Partial Failure of Consideration

Mr Wong also submitted that it was a case that partial failure of consideration was applicable.

Discussions

12.  I do not accept Mr Wong’s submissions for the reasons that:-

A. It is clear that the Agreement is a binding agreement.  Although it did not state clearly about the payment of the initial deposit of HK$50,000, all the essential terms were there.  It was titled as the formal agreement and there were also 3 Appendixes for the particulars of the sale.  The contention that no binding agreement had been reached is not arguable.

B. In paragraph 19.3 of the Affirmation of Cheung Man Ching, the wife of the defendant, she affirmed that the Cheque was given as the remaining fee for buying the business and some of the items.  It was never mentioned that the Cheque was given as a guarantee or to show sincerity. 

C. The allegation that the plaintiff knew that the Cheque was without value is the self serving statement of the defendant’s wife.  It was mentioned after the plaintiff deposited the Cheque with the bank.  The defendant could not infer that because the plaintiff delayed in depositing the Cheque for several days, she should have known that the Cheque was worthless.  Such allegation is inconsistent with the act of tendering and depositing the Cheque.  Would the plaintiff accept the Cheque if it has no value? Such evidence, if any, would be inadmissible.  By reading the contemporaneous messages of WhatsApp, it could be seen that the Cheque was dishonoured because of the cash flow problem of the defendant (我入左錢入去比你，我就無錢比恆基，一樣做唔到頂手).

D. Mr Wong’s submission that the Cheque was tendered subject to the condition of fulfillment of the terms of the sale is unacceptable as it would render the Cheque worthless in the plaintiff’s hands.

E. As to the completion date, it was agreed in the Agreement that the plaintiff would deliver the venue to the defendant on 17 March 2014.  The defendant did take possession and agreed to pay all the expense from that date onwards.  On 22 March 2014, both parties signed an agreement confirming that the defendant had taken over the business.  He had paid the rents, management fee, rates and air condition fee to the plaintiff on that date.

F. Partial failure of consideration is only applicable when that partial failure is an ascertained and liquidated amount.  No part of the Cheque can be clearly ascertained as being the price of the pianos or the missing items.  Such defence is not applicable in this case.

Conclusion

13.  In conclusion, I find the allegations of the defendant not believable and the contentions not arguable.  Judgment for the plaintiff in the sum of HK$203,250 is granted together with interest at the rate of 2.5% per annum from 22 March 2014 to the judgment date and thereafter at judgment rate until payment.

14.  Costs should follow event, the defendant do pay costs of this action and this application (including any reserved costs) to the plaintiff, with certificate for counsel, to be taxed if not agreed.