CHENG MAY YIN v. HO KAM MAN AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

BETWEEN

____________

JUDGMENT

____________

1. The 1st and 2nd Defendant are husband and wife. They carry on business under the style of "Retail Manufacturing Company", and their business is to import and export clothing largely as between Hong Kong and the Middle East. In September, October and November 1984, they had dealings with a firm calling itself Grace Enterprises Company who make; amongst the other things, underwear. In about September 1984 Grace Enterprises Company, or so it appears from the affirmation of Mr. Ho Kam Man entered into a partnership with Sun Sun Industrial Development Company of which company Madam Cheng May Yin is or was the proprietor. In the course of dealing between the Defendants and the partnership a number of orders were fulfilled for underwear of one sort or another by various deliveries made in September, October and November. But by November there was outstanding from the Defendants to the partnership a considerable sum of money equal to something of the order of HK$135,000. In November Madam Cheng on behalf of the partnership sought payment of the outstanding amount and also asked for interest on the debt in consequence of which the Defendants gave Madam Cheng a promissory note for $172,500 payable by instalments. One instalment was paid of $37,500, but the balance remains unpaid. The action out of which this appeal arises was a claim on the promissory note for the balance of the amount said to be due. It has resulted in summary judgment being given by the Master on the 3rd June this year. It is against that decision the Defendants now appeal.

2. Let me say straight away that there is no question of the Defendants' bona fides. They have fortified their appeal with the concession that leave to defend should be conditional upon their bringing into court the whole of the judgment sum and Mr. Tang has also said that, if necessary, they will bring in a sum sufficient to secure the Plaintiff's costs. But notwithstanding that concession I have to consider whether or not there is any reasonably arguable defence put forward which entitles the Defendants to have leave to defend whether conditional or otherwise and so to deprive the Plaintiff of her judgment.

3. I have been troubled for a while, but in the end I have decided that there is no reasonably arguable defence available and that the decision of the Master should stand. What Mr. Tang is saying in effect is that the Defendant having given a promissory note to Madam Cheng, it appears that there is dissension between the original partners and the Defendants are now being sued by Grace Enterprises for the same sum which is the subject matter of the present action and the Defendants do not really know to which party they ought to make payment. And further, if they had thought of it in time, what they would have done would have been to take out an interpleader summons thereby securing themselves against all parties, not only as to the amount of any judgment, but also as to any costs. It would have become a battle between the two partners or former partners. But, of course, the fact that that course was available to the Defendants is not in itself any defence to the present claim which rests upon the promissory note. In order for there to be a defence it would be necessary for Mr. Tang to show it is reasonably arguable that there was or had been a total failure of consideration or that the promissory note was vitiated in some other way, for example, by fraud. Well, on the evidence before me, I am not able to say that either of those two defences or any other can be put forward. The promissory note was given on the basis that the debt would be paid by instalments. So even if Madam Cheng had no claim to payment in her own right, there was nevertheless consideration for the note moving from her. It is not asserted there was any fraud here and Mr. Tang has to fall back on a rather general suggestion that the transaction which produced the promissory note was in some way vitiated, but it is difficult to see how the validity of the note itself could be affected in that way. Here on any view was a payment to one of two partners in what was, no doubt, a valid discharge of the debt. That is what the Defendants have done or will be doing subject to judgment in this case. That ought to provide an answer in any claim brought by anyone of the former partners. If it does not, there are other means open to the Defendants by which they may protect themselves. For example they may join the Plaintiff in this action in the alternative proceedings.

4. In my judgment therefore, the Master's decision cannot be impugned. The appeal is dismissed with costs.