XCHRX TAM CHE MING v. YEUNG KANG LAM

HCA 8925/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8925 OF 2000

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J U D G M E N T

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1. This is an appeal against the decision of Master Mary Yuen given on 22 December 2000 whereby she gave conditional leave to the defendant to defend the action on condition that the defendant pays into court the sum of $2 million within 14 days from that date.

2. The plaintiff's claim against the defendant is a claim on a dishonoured cheque drawn by the defendant in the plaintiff's favour in the sum of $2.5 million. The plaintiff also claims against the defendant under the terms of a written loan agreement described as a loan deed. The plaintiff's case is that the plaintiff and the defendant entered into a loan agreement dated 18 April 2000 whereby the plaintiff agreed to lend the defendant $2.5 million. Under the loan agreement produced in evidence it was agreed between the plaintiff and the defendant that the plaintiff would lend the defendant $2.5 million upon execution of the deed. The defendant agreed to repay the loan together with agreed interest of $15,625 on or before 2 May 2000. It was further provided that if the defendant failed to repay the loan and the agreed interest on or before 2 May 2000 in full, the plaintiff would be entitled to, by giving written notice to the defendant, demand repayment of the loan and the agreed interest together with default interest at 25% per annum in the total sum from 3 May until payment. Thereafter on 19 April 2000 the plaintiff gave the defendant a cheque for $2.5 million. The defendant gave the plaintiff two cheques, one for $2.5 million and the other for $15,625 for the agreed interest. Both cheques were post-dated to 2 May 2000. On 17 August 2000 the two cheques were presented for payment. The cheque for $15,625 was honoured but the one for $2.5 million was dishonoured.

3. The defendant relies on an oral agreement between the parties. According to him, he was an agent for an iron mine company in the Mainland. On or about 18 April 2000 the plaintiff instructed him to buy on his behalf black mine iron sand ("the goods"). The main terms were that the price was to be $2.5 million if delivery could be effected on or before 25 April 2000. The price would be reduced by $15,625 if delivery was after 25 April 2000 but before 2 May 2000. The price would be further reduced by a rate equivalent to 25% per annum on the sum of $2.5 million if the delivery of the goods purchased was after 2 May 2000 but on or before 31 July 2000. The defendant says that it was for this reason that $2.5 million was given by the plaintiff to him on 19 April 2000 and that it was never meant or intended to be a loan. The defendant also says that on or about 2 May 2000 he told the plaintiff that the mine company was unable to deliver the goods. In order to accommodate his partners, the plaintiff asked the defendant to give him two cheques, one for $2.5 million and the other for $15,625. The cheque for $15,625 was for the reduction of the price for the goods that had been agreed and the cheque for $2.5 million was for his guarantee that the goods would be delivered on or before 31 July 2000. Thus it is said that the cheque sued on was not meant to be presented for payment but was only for the defendant's guarantee for the delivery of the goods on or before 31 July 2000. This is also pleaded in para 1(3) c. and para. 2 of the defence and counterclaim. The defendant also says that he was required to sign the loan agreement then which he did. In para. 11 of his first affirmation he states :

"I yielded to TCM's requests in order to make life easier for him trusting he would not present the 2nd Cheque for payment until and unless the Goods were not delivered to him on or before 31 July 2000 and he would not enforce the loan agreement. On or about 2 May 2000 I gave the 1st Cheque and 2nd Cheque to TCM and signed a loan agreement. The Loan Deed referred to Paragraph 2 of Affirmation was not entered by me with TCM on 18 April 2000 nor I deposited with TCM on 18 April 2000 cheques for respective sums of HK$15,625.00 and HK$2,500,000.00 both post-dated on 2 May 2000. I only signed the Loan Deed on or about 2 May 2000."

He further states that on or about 12 May 2000 and 14 July 2000 he bought and paid for the goods from the mine company and produces receipts for the purchase of the goods to the total value of $2.5 million. He also states that he resold part of the goods on behalf of the plaintiff and received $500,000 which he had already paid to the plaintiff.

4. It is readily apparent that the defendant seeks to contradict the terms of the written loan agreement and the terms of the dishonoured cheque by parol evidence. He seeks to contradict by parol evidence the nature of his obligation under the written loan agreement as well as under the written contract which was created on the giving of the unconditional order for payment expressed by the very cheque itself. It is plain that oral evidence is not admissible to contradict the terms of the written loan agreement or the cheque itself (Great Sincere Trading Co Ltd v Swee Hong & Co [1968] HKLR 660).

5. In my judgment the defendant cannot rely on the oral agreement to contradict the terms of the written loan agreement or the cheque. In my judgment section 21(2)(b) of the Bills of the Exchange Ordinance (Cap. 19) is not available to the defendant as a defence.

6. Mr Chung, for the defendant, also submitted that there was a defence of total failure of consideration and fraud. I am unable to see how it can be said that there has been a total failure of consideration or that there has been fraud on the part of the plaintiff. I would observe that none of these matters have ever been raised in the defence and counterclaim that has been filed. No triable issue has been shown on these matters.

7. Mr Chung also submitted that there was a defence that the plaintiff was an unlicensed money lender. But again, this has neither been pleaded in the defence and counterclaim filed nor has it been raised in the affidavit evidence. No triable issue has been shown as to this either.

8. In my judgment, the plaintiff is entitled to judgment. The appeal is allowed. The order of the master is set aside.