XCHRX LI WAI MAN v. YIP KAM FAI

HCA 5089/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5089 OF 1999

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J U D G M E N T

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Godfrey, J.A. :

1. This is an application by a plaintiff for summary judgment upon a dishonoured cheque for HK$38.04m. The burden on the defendant in these circumstances is a heavy one, not easily discharged.

2. In the present case, the defendant has advanced the defence of "total failure of consideration", often advanced by those in the last extremity to avoid judgment in what is really a plain and obvious case.

3. The question here, as it often is, is whether what the defendant says is credible. If it is incapable of belief or practically moonshine, it will be disregarded and judgment will be given for the plaintiff. If, however, it is credible, whatever opinion the judge may form as to the likely outcome, if the defence has a realistic prospect of success, it will not be right to do so.

4. The defendant here has deposed as to the circumstances in which the cheque was given in order to support his assertion that there has been a total failure of consideration. The defendant has deposed as follows:

"In or about mid May 1998, I approached various persons including the Plaintiff intending to borrow money. I approached the Plaintiff because he was the person in charge of Well Shine. I intended to borrow $28,000,000.00 from Well Shine and to repay the loan and interest in one year's time. The Plaintiff stated that due to the amount involved was rather substantial, he could not figure out which company (companies) would be the lender and that the lender could be Well Shine or the parent company of Well Shine, namely "China Well Shine Financial Company". China Well Shine Financial Company was and is a company incorporated in China under the laws of the PRC. The Plaintiff was and is also a person in charge of China Well Shine Financial Company. I also started negotiating with some potential buyers to buy my shares. In or about early August 1998, the Plaintiff told me that the handling charge (commission) for the intended loan would be $3,600,000.00 while the interest would be $6,440,000.00 and he could persuade Well Shine and/or China Well Shine Financial Company to lend me $28,000,000.00. The Plaintiff asked me to draw an undated cheque with the name of payee blank in the sum of $38,040,000.00 which represented the sum of principal plus one year's interest plus the handling charge. The Plaintiff told me that he would hold the same as security and would only present the same for payment one year after the intended loan was credited to my bank account. The Plaintiff told me that he would procure the said sum of $28,000,000.00 to be remitted into my Standard Chartered Bank account from funds of Well Shine or China Well Shine Financial Company and he would procure the same as soon as possible. I therefore drew the cheque as instructed based on his assurance and handed the same to the Plaintiff leaving the name of the payee as well as the date blank. I was acquainted with the Plaintiff for about more than six years and we are also business partners and I trusted the Plaintiff.

However, the Plaintiff failed to procure Well Shine or China Well Shine Financial Company to advance me the said sum of $28,000,000.00 to me or at all."

5. I have reached the conclusion that what is said here by the defendant is credible. I do not express any opinion as to whether it will be, or ought to be, believed by the judge at the trial. That will be a matter for him.

6. I appreciate, of course, that the effect of my conclusion is to keep the plaintiff out of what the plaintiff considers to be an undoubted right to his money. However, this is not a straightforward case of an action on a dishonoured cheque. It is common ground in this case that the date of the cheque was left blank. Furthermore, if the defendant is to be believed (I see no present reason to form a view about that matter) the name of the payee was left blank as well, although the plaintiff says that the name of the payee was not left blank and that the plaintiff's name was inserted on the cheque.

7. I express no conclusion as to what the truth of the matter may be but I am not satisfied that this is a plain and obvious case. On the contrary, I am satisfied that the defendant has shown a realistic prospect of success in his defence. As counsel for the plaintiff properly pointed out, in fact it is clear that the delivery of the cheque was unconditional, but that is not the point. The point raised is that there has been here a total failure of consideration. Unusual though it is to find such a story to be credible, this seems to me to be one of those cases where it is.

8. For these reasons, I propose to give the defendant unconditional leave to defend. I will hear counsel on what directions I might be able to make in order to lead to the speedy resolution of this substantial dispute.