XCHRX BAIN D'OR CO. LTD. v. WONG KONG MING

HCA 13285/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13285 OF 1999

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J U D G M E N T

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1. The Plaintiff claims against the Defendant for the sum of $240,724.50 being the amount of a cheque dated 25 January 1999 drawn by the Defendant in favour of the Plaintiff. The cheque was dishonoured on presentation and the reason for the dishonour was that the bank account upon which the cheque was drawn was closed.

2. The Defence was that the cheque was issued subject to the condition that the Plaintiff would not apply for any compulsion order against Chit Lee Marble & Minerals Company Limited (hereinafter called Chit Lee) in a hearing on 11 November 1998. Alternatively the consideration for the issuance of inter alia this cheque was that the Plaintiff would not apply for any compulsion order against Chit Lee. In the event that happened, in a hearing on 11 November 1998, the Plaintiff did proceed to apply for and obtained summary judgment against Chit Lee in HCA 12745 of 1997 in the sum of $855,482.34. In the circumstances, it is the Defendant's case that the condition for the issuance of the cheque had not been met or alternatively there was a total failure of the consideration for the cheque.

3. The evidence before me revealed that the Defendant was the majority share holder of Chit Lee which is a company having business dealing with the Plaintiff. Chit Lee owed the Plaintiff money for goods sold and delivered. On 26 November 1997 the Plaintiff issued HCA 12745 of 1997 against Chit Lee for the recovery of HK$1,973,223.50 being the balance of the price of goods sold and delivered. Chit Lee filed a Defence and Counterclaim in that action. Thereafter Chit Lee paid a total of $657,741.16 in partial settlement of the Plaintiff's claim. The Plaintiff applied for summary judgment for the balance on 26 February 1998. Before the application was heard, on 9 September 1998 the Plaintiff, Chit Lee and the Defendant entered into a Deed of Settlement. Following the execution of the Deed of Settlement, the action was stayed with liberty to restore and the hearing date of the summons for summary judgment was vacated.

4. The Deed of Settlement provided that the Plaintiff would accept the payment of $1,381,449.00 in full and final settlement of their claim in the action. The settlement sum was to be paid by Chit Lee and/or the Defendant in accordance with a schedule set out in the Deed. According to the schedule the whole sum was to be paid by 5 installments. The first one is to be paid on 9 September 1998 in the sum of $200,000.00. This amount was duly paid. The 2nd, 3rd, 4th and 5th installments for the amounts of $100,000.00, $300,000.00, $500,000.00 and $281,449.00 were due on 15 September, 1998, 15 October 1998, 30 November 1998 and 15 December 1998 respectively. The Deed contained the usual default clause. Under the terms of the Deed, the Defendant was to give 4 post dated cheques for the payment of the 2nd to 5th installments, and the Defendant had done so. The cheque for the payment of the 2nd installments was duly honoured but the one for the payment of the 3rd installment was dishonoured. After the dishonour of the cheque for $300,000.00 there was further negotiation between the Plaintiff and the Defendant. Eventually it was agreed that the Defendant and Chit Lee were to pay the Plaintiff the sum of $305,282.00 by 2 installments of $150,000.00 and $155,282.00 on 21 October 1998 and 27 October 1998 respectively. On 21 October 1998, the sum of $150,000.00 was paid but the sum of $155,282.00 was not paid on 27 October 1998 or at all. Because of this default, the Plaintiff was entitled to and did restore the summons for summary judgment and the summons was fixed for hearing on 11 November 1998.

5. Again before the summons was heard, the Plaintiff's case was that on 8 November 1998 there was a meeting between the Plaintiff and the Defendant over the question of the outstanding indebtedness of Chit Lee. According to the Plaintiff, the Defendant approached the plaintiff with another request to repay the balance due to the Plaintiff by Chit Lee and to discharge his obligation under the dishonoured cheque of $300,000.00 and the 2 other cheques issued by him in the sum of $500,000.00 and $281,449.00 by 5 installments. First there would be cash payment of $10,000.00 immediately. Then there would be payment by 4 post dated cheques on 13 November 1998, 30 November 1998, 20 December 1998 and 25 January 1999 in the sums of $140,000.00, $300,000.00, $240,724.50 and $240,724.50 respectively. The Defendant agreed to issue the post dated cheques. On the Plaintiff's case, in the meeting Mr So of the Plaintiff also told the Defendant that the Plaintiff would proceed with the application for summary Judgment against Chit Lee notwithstanding the payment of the sum of $10,000.00 and the issuance of the post dated cheques.

6. The Plaintiff was probably wrong on the date of the meeting. This is because in exhibit "SCY-6", it could be seen that the Plaintiff acknowledged receipt of the cheques on 6 November 1998. However I do not think the difference or the mistake on the date would give rise to any triable issue so as to enable the Defendant to get leave to defend.

7. Apart from the date, the Defendant's case however is also different in other material aspects. According to the Defendant, the parties met on 6 November and in the meeting the parties reached an oral agreement that the Defendant was willing to issue the 4 personal post dated cheques but the condition for that was that the Plaintiff must withdraw the application for any compulsion order against Chit Lee in the hearing on 11 November 1998.

8. It is common ground that in pursuance of the agreement reached in the meeting the Defendant did send 4 cheques to the Plaintiff who acknowledged receipt of the cheques on 6 November 1998. On top of that, on 10 November 1998 the Defendant also issue a fax letter which would appear to be addressed to the Plaintiff saying that in order to ensure that the Plaintiff would not on 6 November 1998 (sic) applied for compulsion orders in HCA 12745 of 1997, the Defendant issued the 4 cheques to the Plaintiff. Copies of the 4 cheques were also enclosed in the fax. There is no question that the Plaintiff was in receipt of a copy of the fax as the same was made an exhibit to one of the affidavits of the Plaintiff. The cheque, the subject matter of this action, was one of the 4 cheques issued.

9. The fax letter was in the following terms:

"In order to ensure that your esteemed company would not raise to obtain any compulsion order (if any) in HCA 12745 of 1998 on 6 November 1998 (sic), we therefore issued 4 cheques to your company (please see the annexed sheets) to be honoured in 4 installments.

For the sake of avoiding any query, our company will in the hearing raise matters in defence, and will wait for the judgment of 12 November 1998

Chit Lee"

10. It is common ground that the Plaintiff duly attended the hearing on 11 November 1998 and obtained summary judgment in the sum of $855,482.34. The first of the 4 cheques due on 13 November 1998 in the sum of $140,000.00 was honoured.

11. On a date which is not clear, the Defendant on behalf of Chit Lee also signed a letter confirming the payment of the total sum of $921,449.00 (being the sum total of the 4 cheques issued in pursuance of the agreement reached in the meeting on 6 November 1998) by 4 installments either in cash or by cashier order in the amount of the posted dated cheques and on the respective dates of the post dated cheques.

12. Thereafter on 12 November 1998 the Defendant on behalf of Chit Lee wrote a letter to the Plaintiff in which he stated that he was aware of the judgment against Chit Lee but said that because of financial difficulties Chit Lee would like to have time to repay the same. In the affirmation filed, the Plaintiff contended that because of the fact that on 12 November 1998 the Defendant must be aware that judgment had already been obtained against Chit Lee, he would not have agreed to honour the cheque dated 13 November 1998 in the sum of $140,000.00. The Plaintiff thus submitted that the consideration for the giving of the 4 cheques, of which the subject cheque was one, could not be for the Plaintiff's agreeing not to obtain any compulsory order against the Defendant in the hearing on 11 November 1998.

13. The Defendant on the other hand contended that the cheque should not have been presented at all.

14. I would not consider that the fact that the cheque for $140,000.00 was honoured would be any strong indication that the consideration for the issuance of the cheque could not be as alleged by the Defendant. On the Defendant's contention, in the event that had happened, namely, the Plaintiff having gone ahead to obtain summary judgment, the Plaintiff should not have presented the cheque, and there was no reason for the Defendant to expect that the Plaintiff should present the cheque. In these circumstances, no inference could be drawn from the fact that the Defendant did not take any step to stop payment of that cheque of $140,000.00.

15. The Plaintiff contended that on true construction of the letter dated 10 November 1998, the Defendant offered to issue the 4 cheques as installment payments in respect of the liability of Chit Lee. It was contended that because in the letter the Defendant had expressly said that "for the sake of avoiding any query, our company will in the hearing raise matters in defence and will wait for the judgment of 12 November 1998", it would show that the tender of the cheques could not be as a condition for the Plaintiff's not obtaining judgment in the hearing of 11 November 1998 against Chit Lee but was only a proposal for installment payment to support Chit Lee's opposition for summary judgment. I have no doubt that on the face of the letter, the purpose of the issuance of the 4 cheques was to prevent the Plaintiff from obtaining summary judgment against Chit Lee and in effect the issuance of the 4 cheques amounted to a proposal for installments payment. However since the Plaintiff had by its conduct plainly refused to accept the installment proposal by proceeding to obtaining full judgment with no term for payment by installment, it is at least arguable that any terms and condition for the issuance of the cheques had not been accepted by the Plaintiff.

16. The Plaintiff further argued that although the Plaintiff had proceeded to obtain judgment, nevertheless the Defendant had not withdrawn the proposal and the Plaintiff did furnish consideration by not enforcing the judgment debt by way of execution. Thus it is argued that the Plaintiff did in effect give consideration in the form of forbearance.

17. The difficulty in the Plaintiff's way is that the cheques were not issued for the purpose of obtaining forbearance to execute the judgment. At least, in the light of the terms of the letter of 10 November 1998, it is at least arguable that the cheques were issued for the purpose of obtaining forbearance from entering into judgment as oppose to forbearance from enforcing the judgment to be obtained. At any rate, Chit Lee did later on apply for payment by installments and the Plaintiff successfully opposed such application.

18. Although the history of this matter did indicate that the Defendant and/or Chit Lee had been guilty of breaking their promises to make payment repeatedly, I do not consider that this would entitle me to come to the view that the defence put forward by the Defendant could not be true or that the same was only shadowy.

19. In the circumstances, I am of the view that the Defendant has satisfied me that there are triable issues in this case. Accordingly I will set aside the judgment entered by the Master and grant the Defendant unconditional leave to defend. The cost of the Plaintiff's application before the Master should be cost in the cause, the Defendant will have his cost of this appeal.

20. The Defendant will have leave to file an amended defence and counterclaim within 14 days from the date hereof.