XCHRX K F WONG & CO. (A FIRM) v. HONG MING TAK

HCA 2250/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2250 OF 2000

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J U D G M E N T

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1. I have before me this morning an appeal against the decision of a Master which was made on 16 June of this year giving the Defendant unconditional leave to defend the action.

2. The Plaintiff is a firm of solicitors. The Defendant is an individual who, by way of business, is a director and major shareholder in a construction company called Tak Yuen Construction Company Ltd. Tak Yuen Construction Company instituted proceedings against another company which I understand is called Wui Fu Development Company Ltd. The Plaintiff solicitors represented Tak Yuen Construction in this litigation.

3. By September 1999, the Plaintiff had incurred substantial fees and disbursements. In addition, in anticipation of the trial, additional funds were required to secure counsel's fees. Correspondence took place between Plaintiff and Tak Yuen Construction concerning this matter. In particular, I have before me a letter dated 17 September 1999 from Plaintiff to Tak Yuen Construction Company which refers to telephone conversations between the Plaintiff and the Defendant who, at all material times, as I have said, was a director of the company. Inter alia, the letter says:

"We have further checked with Teresa Cheng who has confirmed her brief fee including 5 refreshers (subject to revision after sight of the trial bundles) to be HK$270,000.00. Accordingly, as discussed, to enable us to continue to act for you in the above proceedings, you will have to let us have by noon tomorrow:-

(i) your further cheque dated 20th September 1999 for the sum of HK$50,000.00 as deposit for counsel's brief fee;

(ii) another personal cheque post-dated to 1st December 1999 by your Mr T Hong by way of a further deposit for our costs and disbursements in the sum of HK$380,693.00 comprising:-

- HK160,693.00 being the total amount of the monthly instalments provided in our letter to you dated 2nd March 1998 less the total amount already paid;

- HK220,000.00 being the estimated counsel's fees for the trial."

The letter continued:

"Save as expressly provided in the foregoing, the terms set out in our letter to you dated 2nd March 1998 shall continue to apply and in particular any balance of our fees not yet settled and all outstanding disbursements after application of any monies held on account shall be payable within 14 days of delivery of judgment by the court or settlement agreement reached between the parties."

It is common cause that Mr Hong, the Defendant, duly delivered his personal cheque for $380,693.00 which was post-dated to 1st December 1999. However, although the litigation proceeded, that cheque was not presented for payment on due date by the solicitors. There is no evidence as to why the cheque was not presented for payment. Counsel suggest - and I put it no higher - that the cheque was being held as some form of security to cover either the specific costs stated in the letter of 17 September 1999 or perhaps costs more generally. Without hearing evidence on this issue, the court can come to no finding and that is one of the material difficulties which I believe the Plaintiff faces. The correspondence is littered with references to various telephone conversations. Nor do the letters speak in unambiguous terms as to exactly what, if any, was the agreement reached between the parties as the litigation proceeded and further costs were incurred.

4. At the end of December 1999, there having been further requests for funds, Tak Yuen Construction sent a cheque in the sum of $200,000.00. The covering letter dated 29 December 1999 was written on company letterhead and was signed by Defendant as the authorised signatory. The letter read:

"As we discussed over the telephone, I enclose herewith a cheque in amount of HK$200,000.00 for settlement of partial legal costs of the captioned matter."

5. What exactly was discussed is not known. It is not clear whether the cheque was a company cheque or from Defendant personally. On balance, it appears to have been a company cheque.

6. Towards the end of January 2000, Plaintiff wrote to Tak Yuen Construction asking for more funds:

"We refer to the telephone conversations between your Mr M T Hong and our Mr Ip regarding settlement of our outstanding debit notes.

We write to inform you that unless we have your cheque in the sum of HK$200,000.00 by close of business next Friday, 28th January 2000 and your undertaking to settle the balance by 28th February 2000, we should have no alternative but to present your Mr Hong's personal cheque to the bank for payment."

7. In reply, by letter dated 27 January 2000, Tak Yuen Construction wrote the following:

"The personal cheque of our Mr Hong in the sum of HK$380,693.00 was given on or about 17th September 1999 for securing your costs and disbursements requested by your Mr Francis Ip at that date of HK$380,693.00.

We now enclose herewith our Company's cheque No. 548714 of HK$180,693.00 (which together with the cheque given by our company to you on 29th December 1999) total the sum of HK$380,693.00 being the amount of the costs and disbursements requested by you on or about 17th September 1999. By such payment by our Company's cheques, the said personal cheque of Mr Hong given for the purpose of securing your costs and disbursements as requested by your Mr Francis Ip on or about 17th September 1999 should be fully redeemed and the purpose for which they were given has lapsed.

Kindly return the said personal cheque of Mr Hong to us for cancellation."

The letter continued:

"Regarding the balance of your costs and disbursements, we are studying your interim bills of costs to consider if we can agree the same and we shall contact you regarding the amount thereof soonest possible with a view to agreeing an amount acceptable to both of us. Only if this cannot be agreed will you be required to tax your bills in the usual manner."

8. Although - again - it is not clear what happened or whether there were any further telephone conversations, it appears that the Plaintiff accepted the cheque for $180,693.00 and cashed it. It appears that the sum was credited generally to fees and disbursements incurred on the account of Tak Yuen Construction. But the cheque, of course, had been tendered subject to certain terms and conditions; namely, that it would be accepted together with an earlier payment in substitution for the Defendant's personal cheque being held as some form of security. The letter specifically asked for the return of the Defendant's cheque. But it was not returned. Without evidence to set the position, it appears that Plaintiff simply ignored the terms under which that last cheque was tendered.

9. At that time, after payment, Plaintiff was still due a sum of $274,494.00. This was approximately $100,000.00 less than the amount appearing on Defendant's 'security' cheque. Despite this, however, Plaintiff presented Defendant's cheque for payment. Earlier, Defendant had instructed his bank to stop payment of the cheque and it was not met.

10. Plaintiff has instituted action on the dishonoured cheque and it is in respect of this cheque that it now - on appeal - seeks summary judgment.

11. I am satisfied, however, that I am not able to grant any order for summary judgment. There are simply too many issues that can only be resolved at trial.

12. First, it remains uncertain what were the terms under which the Defendant's 'security' cheque was paid in the first instance. It also remains uncertain the degree to which, if at all, those terms were amended. Was the cheque to cover only those sums specifically detailed in Plaintiff's letter of 17 September 1999 or was it ever agreed that it would act as a form of security for Plaintiff's fees and disbursements generally? If the former, had those specific sums been liquidated by subsequent payments? In my judgment, these issues can only be resolved at trial.

13. Second, there is the difficulty presented by the terms under which Tak Yuen Construction presented its cheque for $180,693.00. It is not disputed that Plaintiff cashed that cheque. Did it do so in acceptance of those conditions?

14. Mr Wong, who appears for the Plaintiff, has argued that, even if he has difficulties, it is clear that the sum of $200,000.00 is still due and owing and that I should at least give summary judgment in respect of that sum. In particular, he has quoted to me from the latest edition of Halsbury, p. 165, para. 382 in respect of bills of exchanges, cheques and the like:

"Where the consideration for which a party signs the bill or note consists of a definite sum of money or of something the value of which is definitely ascertained in money, and it was either originally absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation to such party is entitled to receive from him is pro tanto reduced."

15. The difficulty is that, unless it can be resolved what exactly were the terms agreed by the Defendant pursuant to the letter of 17 September 1999, and unless it can be resolved what exactly, if anything, was outstanding by the end of January 2000, it is not possible to resolve the matter in part as Mr Wong wishes.

16. In the circumstances, I am satisfied that the learned Master was correct to give unconditional leave to defend this action. I appreciate, of course, that the hearing before me is de novo and I have dealt with it on that basis. The appeal is dismissed.

17. Before turning to the matter of costs, I am constrained to say something briefly about the need for litigation of this kind. I understand that Tak Yuen Construction has called for taxation of the costs. I am told a date for taxation is being obtained. That will settle the issue as to liability. Despite this, however, we find ourselves in a position where Plaintiff has instituted High Court action, effectively for payment of the balance of its charges. It has pressed for summary judgment and failed twice. Both parties are facing mounting litigation costs. Surely, with some modicum of sense, the parties could have come to some satisfactory compromise - the placing of funds in trust, for example - which would have avoided this.

18. As to costs, Mr Wong does not feel able to contest the normal order being made. The appeal is therefore dismissed with costs to the Defendant.