YIP OI MEI v. WOO HIP HONG (a firm)

1983, No. 15486

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff brings this action against the defendant firm as drawer of two cheques for $50,000 each, making a total claim of $100,000.

2. It is admitted by the defendant that these two cheques bear the composite signature of the defendant and are signed by Yip Yuk-cheong (deceased) and Yip Yuk-kan, two of the three partners of the defendant firm and that they are dated the 1st of July 1983 and are each for $50,000.

3. It is, however, denied that the defendant firm is liable on these two cheques for the following reasons :-

4. The defendant therefore counterclaims for the return of the two cheques.

5. In a defence to the counterclaim, the plaintiff denies the defendant's allegations in the counterclaim and maintains that the defendant is not entitled to the return of the two cheques.

6. Later, the plaintiff's solicitors sought further and better particulars of the second of the allegations contained in para. (b) above.

7. To this letter, the defendant's solicitors replied in the following terms:-

8. The plaintiff then filed a Reply Joining Issue with the defendant on its defence and alleging that the 2 cheques were supported by sufficient consideration from the plaintiff and that they were given to the plaintiff as security for the plaintiff's advances to the deceased partner and particularizing the various advances made. There was also pleaded an estoppel, but the plaintiff does not now pursue that contention before me.

9. There was no suggestion in the pleadings that the Plaintiff had acted improperly at all in completing the cheques before presenting them. The case was fought on the basis that if the cheques had been given by the deceased to the Plaintiff, they did not bind the defendant firm because the deceased had not been specially authorized by his co-partners to issue them as security for his personal indebtedness and on the basis that there was no consideration for these cheques.

10. The Plaintiff gave evidence to the effect that she and the deceased partner in the Defendant firm became friends in early 1980. She had knowledge that he was a partner of the Defendant firm. She confirmed that she had advanced to him sums totalling $100,000 as a loan. She identified 5 cheques appearing on pages 1-5 of the agreed bundle totalling $94,780.00, saying that all of them had been paid to the deceased and her account debited. She also testified that the balance of $5,220 was paid by her to the deceased in cash.

11. In return, the deceased partner gave her the 2 cheques appearing on pages 8 & 6 of the agreed bundle (the subject matter of this action) as security for the loan. She testified that these cheques were completed in all but the date and that she was to cash them when she needed the money.

12. She told the Court how the deceased had been involved in a traffic accident on the 1st of July 1983 which she heard about two days later and that the deceased had died on the 5th of July 1983, which she heard about roughly two days later on the 7th of July. She testified that she back-dated these cheques to the 1st of July and presented them on the 7th of July. She was notified of the dishonour of these cheques on the 11th of July 1983 and she testified that she still has not been paid on these cheques.

13. Although there was no such contention in the pleadings, Mr. Wesley Wong in his cross-examination of the Plaintiff appeared to suggest that she had filled in the particulars on the cheque herself including the amount. This she denied and there was no evidence to contradict her testimony in this respect. She was also cross-examined with a view to showing that the $100.000 was not money advanced as a loan, but rather an investment in a restaurant owned by the deceased partner. In this connection, she was referred to a letter on page 14 of the agreed bundle which purports to have been written by a friend and sent to the Defendant's solicitors on the 14th of July 1983 on her behalf referring to the $100,000 as being an investment in Mr. Yip's restaurant. However, she denied in the witness box that the money was an investment and maintained her evidence that it was a loan. The friend who wrote that letter on her behalf has not been called to give evidence and there has been no investigation as to how the letter came to be phrased in the way it was. In any event even the Defendant's further and bettor particulars refer to money as a loan and to the cheques as security for the loan.

14. I do not therefore think that I should concern myself with any suggestion that there was anything improper about the way these cheques came to be completed and presented for payment. I accept the evidence of the plaintiff that she was given these cheques by the deceased partner. Not only has she testified to this effect but her evidence as to the dates when she received these cheques from the deceased tallies with the documentary evidence in relation to the bank account upon which the cheques were drawn. I accept that the cheques were issued to the plaintiff by the deceased partner as security for advances totalling $100,000 made by her to him in his personal capacity.

15. That being so, it seems to me that the only real issue in this case is whether the deceased partner had the authority of his co-partners to issue the cheques in question.

16. Section 9 of the Partnership Ordinance Cap. 38 provides:-

"Where one partner pledges the credit of the firm for a purpose apparently not connected with the firm's ordinary course of business, the firm is not bound, unless he is in fact specially authorized by the other partners; ...."

17. Both the surviving partners, Mr. Yip Yuk-kan and Mr. Yip Yuk-kwan who are the brothers of the deceased have testified that they did not authorize the issue of these cheques. Mr. Yip Yuk-kan (D.W.1) explained how a cheque hook of the Defendant firm had been given to the deceased before he passed away and that the cheques bore the signature of Mr. Yip Yuk-kan himself and also the Defendant's chop. He said the reason for this is that it was troublesome for the deceased in settling the accounts to have to obtain another signature. However, he testified that the use of this cheque book was for the purpose of settling the account on behalf of the company, by which he meant the Defendant firm. He denied that either he, himself, or his brother had agreed that the deceased should be able to use these cheques for other purposes. He testified that the 2 cheques were intended for the settling of accounts with the petrol company who were the suppliers of the defendant firm and that the Plaintiff was not a customer of his firm and that she did not have dealings with his firm. However later Mr. Yip Yuk-kan admitted that the deceased's partner received monthly income from the Defendant but that there was no fixed amount. He could spend as much as he wanted. He could always draw money from the bank for his own use. He nevertheless maintained that neither he nor his brother had given authority to the deceased to pay such cheques which had been signed, for purposes other than that of the firm. Had he known that such cheques would have been used for purposes other than the firm's business, he would not have agreed to it.

18. He admitted under cross-examination that the Defendant firm was a family business and that there was no agreement as to when profits would be distributed or the amount which would be distributed. If one of the partners required money, he could draw it out of the firm's current account but he had to have the consent of the other partners before he could do so. He admitted that there were occasions in the past when cheques had been issued in the name of the firm for the personal purposes of the deceased. On these occasions, it would be written down in the accounts against the name of the person and the amount which had been taken out. He was taken through the books of account of the Defendant firm and it became clear that there were many examples of cheques drawn on the account of the Defendant which had been made out in respect of matters which had nothing to do with the business of the Defendant firm, but rather the personal business of the deceased. He admitted that so far as the books of account of the firm are concerned, it was the practice of the firm to spell out the purpose under the word "description" if it related to the business of the firm, whereas if it did not relate to the business of the firm, it would merely be recorded who had drawn out the money. He admitted that the deceased did not have to account back to the firm in respect of those payments of a personal nature. He admitted that the account of the firm was just like a joint pool from which each of the partners could draw provided entries in the records were made. He also testified that the deceased would have to report back to him as to whom the amount had been paid to because their younger sister and he were responsible for keeping the cash book.

19. Mr. Yip Yuk-kwan (D.W.2) the younger of the two surviving partners also gave-evidence for the Defence. He testified that when a partner draws out money for his own personal use, usually that partner has to tell him the purpose of the payment. Under cross-examination however, he admitted that the deceased's partner had general authority to issue cheques when it was necessary. He was not able to say whether there was a cash book in respect of the defendant firm's account with the Hang Seng Bank after the 8th of November 1982. When asked if he could give an explanation in respect of this, he replied to the effect that the deceased partner was keeping the cash book himself. He also went on to say that this was because at that time the deceased's partner took it as if it were his own. He was then asked this question :

20. He also explained in cross-examination how the figure in the balance sheet as being "due from partners" was calculated. It was arrived at by a negative deduction, that is that the total of the cheque payments for trade purposes would be taken from the total of the banking withdrawals and the difference would be treated as the amount due from the partners.

21. Miss Mok argues that judgment should be entered for the plaintiff on the basis that the second defence witness admitted that the deceased partner had general authority to issue cheques whenever it was necessary for his personal purposes, and that after the 8th of November 1982 the two other partners have allowed the deceased partner to treat the Hang Seng Bank account as his own and thirdly that the method of calculating the amounts due from the partners implicitly recognized the authority of the validity of partners drawing out of the accounts for their own purposes.

22. Mr. Wong on the other hand relies on the evidence to the effect that these surviving partners did not give consent or authority for the issue of the 2 cheques in question. Neither were they prepared to ratify the issue of these cheques.

23. In view of the evidence to the effect that the deceased partner had general authority to draw on the Hang Seng Bank account and to treat the account as if it were his own and that he had been given a cheque book signed by a co-partner and bearing the chop of the Defendant firm to enable him to issue cheques without having to go to his fellow partners, I have reached the conclusion that he had been specially authorised within the meaning of section 9 of the Partnership Ordinance to issue the cheques in the book including the 2 cheques, the subject matter of these proceedings. The surviving partners having given him this general authority, could not complain later when he used the cheques for a purpose of which they disapproved.

24. So far as consideration is concerned, there was obviously consideration moving from the plaintiff in the form of the advances made to the deceased partner amounting to $100,000.

25. There will therefore be judgment for the Plaintiff in the sum of $100,000 with costs and the counterclaim will be dismissed with costs.