LI KWOK YIU v. WONG SIK FAI

DCCJ 11327/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 11327 OF 2001

---------------

--------------

______________

JUDGMENT

______________

1 The Plaintiff claims against the Defendant for a dishonoured cheque at the sum of $80,000.

Background

2. The Plaintiff was the sole proprietor of Yiu Sing Engineering Company (Yiu Sing) carrying out business of plumbing and drainage work.

3. In early 1995, Luen Yick Water and Drainage Works Limited (Luen Yick) of which the Defendant was the director and shareholder, was the sub-contractor of a construction project at Lot No.6157 San Po Kwong. Luen Yick sub-sub contracted the plumbing and drainage work of the project to Yiu Shing at the contractual sum of $2,900,000. The contractual sum was subsequently varied to $3,100,514.10 for extra work and purchase of material.

4. By September 1998, there was an outstanding sum of $662,514.

5. By a written agreement dated 11th September 1998, Luen Yick agreed to settle the outstanding sum by way of 5 installments commencing November 1998.

6. By May 1999, the sum of $662,514 remained outstanding.

7. A meeting took place between the Plaintiff and the Defendant. The Plaintiff agreed to accept the reduced sum of $500,000 as full and final settlement of the outstanding balance.

8. The sum of $500,000 was to be paid by way of five post-dated cheques. Two out of the five cheques were issued by Luen Yick at the sum of $150,000 and $100,000 post dated 12th May 1999 and 22nd May 1999 (cheques Nos. 1 and 2), the rest were issued by the Defendant at the sum of $90,000, $80,000 and $80,000 dated respectively 30th June 1999, 31st July 1999 and 31st August 1999 (Cheques Nos. 3, 4 and 5).

9. Cheques No. 1 and 2 were presented on the due date and honoured.

10. Before the due date of cheque No. 3, the Defendant telephoned the Plaintiff requesting him not to present cheque No. 3. The Defendant requested to replace cheque No. 3 with a Luen Yick cheque. The Defendant requested the Plaintiff to name a company other than the Plaintiff or Yiu Shing as drawee. The Plaintiff although not knowing why the Defendant made such request, he was prepared to go along with the request and named Dickming Engineering Company Limited (Dickming) as the drawee. On about 11th October 1999, a cheque dated 16th October 1999 issued by Luen Yick to Dickming was sent to the Plaintiff. This cheque was honoured.

11. Again, prior to 31st July 1999, the Defendant requested the Plaintiff not to present cheque No.4 and would replace the cheque in the same mode as cheque No.3. The Plaintiff agreed not to present it. Cheque No.4 was subsequently replaced on about 15th January 2000 with a Luen Yick cheque to Dickming dated 28th March 2000. This cheque was honoured.

The cheque in issue

12. For cheque No. 5, it is the Plaintiff's case that prior to 31st August 1999, the Defendant requested the Plaintiff not to present the cheque. The Plaintiff states that he did chase for payment, but the Defendant stated that they had no money and requested the Plaintiff not to present the cheque and he would arrange Luen Yick to make payment. The Plaintiff continued to make requests for payment approximately every 2 weeks. When the Plaintiff realised that the payment was not forthcoming, after discussion with his wife, on 10th March 2000, he present cheque No.5 for payment. By then it was already over 6 months from its due date. Not surprisingly, it was dishonoured for reason of "out of time".

13. The Plaintiff states that he called the Defendant after he was notified of the dishonour of cheque No.5. He was unable to remember the exact date but able to say that it was around 13th March 2000. When the Defendant was informed by the Plaintiff of the presentation of the cheque, he was displeased and blamed the Plaintiff for not having notified him before the presentation of the cheque. He further queried whether the Plaintiff intended to take out legal proceedings against him. The Plaintiff stated that he only wished to collect the outstanding sum. The Plaintiff's case is that the Defendant then in the same telephone conversation, proposed to settle the $80,000 by way of 2 equal monthly installments and told the Plaintiff to contact a Ms. Cheng of Luen Yick for replacement cheques.

14. The Plaintiff's case is that he did subsequently phone Ms. Cheng but never received any replacement cheques. The Plaintiff then called the Defendant in April 2000. The Defendant informed the Plaintiff that Luen Yick had no money and would inform the Plaintiff when cheques are ready.

15. From May onwards to December 2000, the Plaintiff repeatedly requested for payment but the Defendant informed the Plaintiff that Luen Yick had no money and refused payment. By January 2001, the Plaintiff handed the matter to his lawyers and commenced proceedings.

The Defence

a) The Defendant states that the Defendant's cheques were issued as security only. The Plaintiff agreed not to present them and there was no consideration.

16. The Defendant states that the cheques issued by the Defendant were delivered to the Plaintiff as security only. It was agreed that these cheques should not be presented unless and until (1) the main contractor paid Luen Yick its balance of construction sum and (2) with the Defendant's prior consent.

17. I refer to the settlement agreement dated 12th May 1999. These alleged agreement was not incorporated into the written settlement agreement. Further, from my reading of the settlement agreement it was in a form of full and final settlement inclusive of any retention money, it was not subject to condition of Luen Yick getting payment from the main contractor. I therefore do not accept the Defendant's case that there was an agreement that the Plaintiff held cheques issued by the Defendant as security only.

18. Putting the Defence case at its highest, even if the cheques were used as a security, the function of the cheque as a security must have been to provide the Plaintiff with remedy in the event Luen Yick does not pay up. I find that there was consideration in issuing the cheque. It was as a result of the issuing of the 5 cheques that there was a settlement agreement.

b) The Plaintiff failed to present the cheque within a reasonable time and there was no waiver by the Defendant

19. Mr. Lui for the Plaintiff rightly concedes that cheque was not presented within a reasonable time under S.45 Bills of Exchange Ordinance Cap.19. The Plaintiff however relies on waiver of the Defendant.

20. Under Section 46 (2) (e) of the Bills of Exchange Ordinance, Cap 19:

"Presentation for payment is dispensed with by waiver of presentment, expressed or implied."

21. Ms. Ng for the Defence submits that when presenting the cheque the Plaintiff knew that it would be dishonoured. His knowledge that the cheque would be dishonoured is inconsistent with the plea of waiver, as he should not have need to worry that it would be dishonoured if he knew that the time for presentation had been waived. Further, if at the time required for the presentment of the cheque was waived, the Plaintiff ought to have informed the bank that the time for presenting the cheque was waived. On this point, I find that the Plaintiff when presenting the cheque although knew that it was likely to be dishonoured; he still had some hope that it would be honoured. This is shown by the fact that after presentation, but before receiving notification of dishonour, the Plaintiff and his wife felt very happy for a while. His belief that the cheque would be dishonoured is not inconsistent with the case of waiver. I find that the Plaintiff when presenting the cheque to the bank was trying his luck and hoping there was sufficient funds in Defendant's account and that the cheque would go through without the need to resort to legal proceedings. Since the Defendant was deliberately delaying payment at the time, there was no point in informing the bank as to the parties private arrangements which would in turn lead the bank to seek instructions from the Defendant. This would only lead to the Defendant stopping payment.

22. The Defendant's case is that there were further repair works after the owners had moved into the building. The Plaintiff refused to carry out repair works. Luen Yick therefore contacted another contractor to carry out repair works. Extra expenses were incurred and $80,000 was deducted from the outstanding balance to the Plaintiff. The Defendant further states that the Plaintiff did not object to the deduction. The Plaintiff denied that there had ever been any request to do repair work. Since I find that the settlement agreement was not made conditional upon the Plaintiff doing any repair work, there was no reason for the Plaintiff to have undertaken any repair work. There has been no supporting document in support of the alleged repair work done by other contractors on behalf of the Plaintiff. No invoice or receipts in respect of this alleged remedial work was produced in support. I reject the Defendant's case that there was a need for remedial work for the Plaintiff.

23. I find that the Defendant did subsequent to the issuing of the cheques make requests to the Plaintiff not to present the cheques issued by the Defendant. I further find that there had been continue promises by the Defendant to arrange payment by Luen Yick in place of cheque No.5. This had led the Plaintiff to defer presentation and this constitutes waiver on the part of the Defendant. I find there was continue excuses made on the part of the Defendant for delaying payment from late August 1999 up till March 2000. Since I reject the Defendant's case that the Plaintiff agreed to hold the cheques issued by the Defendant as security only, but for the request from the Defendant, the Plaintiff is likely to have presented the cheque No.5 on the due date 31st August 1999.

c) Failure to give notice of dishonour

24. Under Section 48 of the Bills of Exchange Ordinance Cap. 19

"Notice of dishonour must be given to the drawer and to whom such notice is not given is discharged."

25. The Defendant's case is that the Plaintiff did not demand Luen Yick to make payment for the sum of $80,000 and there was no notice of dishonour from the Plaintiff as to Cheque No.5. The only notice received was the letter from the Plaintiff's solicitor dated 31st January 2001.

26. I find the Defence case that the Plaintiff did not demand payment for cheque No.5 incredible. I accept the Plaintiff's evidence that he had continued to chase for payment. Whilst the Plaintiff may have had some difficulty in recollecting some specific dates of events under the able examination of Ms. Ng, and at times had difficulties expressing himself, I find him to be a credible witness. I accept that he had informed the Defendant over phone shortly after he was notified of the dishonoring of cheque No.5. This did upset the Defendant. I find that there had been an effective notice of dishonour.

27. Accordingly, I give Judgment for the Plaintiff against the Defendant in the sum of $80,000 on the cheque as claimed with interest from 10th March 2000 at 8.125% p.a. and thereafter at judgment rate.

28. I further make a cost order nisi that the Defendant pays the Plaintiff's costs of this action.