ATLAS PLASTIC PRODUCTS (HK) CO LTD v. ATLAS DEVELOPMENT LTD

DCCJ 99/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 99 OF 2013

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

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

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

JUDGMENT

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

1. The plaintiff’s claim is based upon a dishonoured cheque for the sum of HK$300,000 (“the Cheque”). In defence to the plaintiff’s claim, the defendant asserts that the Cheque was delivered conditionally and there was a total failure of consideration on the plaintiff’s part.

2. On the first day of trial, the defendant sought to file a 3^rd Supplemental List of Documents disclosing the company searches of Shenzhen Atlas Plastic Products Company Limited “(Shenzhen Atlas”) and深圳雅利士塑膠製品有限公司 (“Shenzhen Ya Li Shi”), and an email sent by Rony Lee to the defendant dated 9 August 2012.  The plaintiff did not object to the disclosure of such documents but objected to the defendant’s reliance on these documents at trial.

3. After I considered submissions of Counsel, I granted leave to the defendant to file the 3^rd Supplemental List of Documents and to insert the same into the trial bundle, with reasons reserved.  I shall set out those reasons in this judgment.

THE ISSUES

4. This case is mainly one of factual dispute in which my finding of facts based on the credibility of the witnesses is determinative of the issues as set out below: 

(1)  Whether the Cheque was delivered conditionally?

(a)  Whether there was an agreement between the parties prior to the delivery of the Cheque?

(b)   Whether the delivery of the Cheque was conditional on the following:

(i)   The fulfilment of the conditions set out in the Letter of Confirmation; and/or

(ii)  The signing of the Letter of Confirmation by both parties? 

(2)  Whether there is total failure of consideration on the plaintiff’s part?

5. I shall assess the evidence of the witnesses as pertaining to the issues set out above.  

6. The test  to be considered when assessing the credibility of witnesses is set out in at paragraph 12 of Star Glory Investment Ltd v. Kai Tuo (HK) Technology Co Ltd and others, unrep, HCA 3523/2002 which reads:

“There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-
(a)	whether that part of his testimony is inherently plausible or implausible;
(b)	whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).
Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility.  Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony.  For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest”.

BACKGROUND OF THE CASE

7. A summary of the parties’ respective case is set out below.  Further details of this case will be discussed where relevant to the issues.

8. Both the plaintiff and defendant are companies incorporated in Hong Kong.  The plaintiff has two wholly owned subsidiaries in China, namely, Shenzhen Atlas and Shenzhen Ya Li Shi.

9. The defendant has a wholly owned subsidiary in China, namely, 伊美達塑膠製品 (深圳) 有限公司 Shenzhen EMT Plastic Products Company Limited (“Shenzhen EMT”).

10. Shenzhen Atlas’ factory was originally located in Nam Wan Street (“Nam Wan”).  In or about 2011 the plaintiff intended to move Shenzhen Atlas’ factory from Nam Wan to Ping Shan.  There is a dispute as to when Shenzhen Atlas moved out of the Nam Wan factory.  The plaintiff claims the move was as early as September 2011 whereas the defendant believes the move was after that date.  

11. Having learnt of Shenzhen Atlas’ intended move, the defendant expressed interest in having Shenzhen EMT take over the Nam Wan factory lease commencing from October 2012.  The parties entered into negotiations regarding the lease and the purchase of Shenzhen Atlas’ equipment. In or about May 2012, the parties agreed to the purchase price of $300,000 and the Cheque (dated 15 May 2012) was sent by the defendant to the plaintiff.  However the precise terms of the agreement (if any) and the conditions attached (if any) are in dispute.

12. Mr Yeung Shing Bo (“Mr Yeung”) for the plaintiff claims that before Shenzhen Atlas moved out of the factory in Nam Wan on or about 30 September 2011, he promised Mr Ng Wan Chau he would sell Shenzhen Atlas’ equipment to Shenzhen EMT.  The purchase price would be decided between Mr Yeung and Mr Ng Tat Bor (“Mr Ng”).  Ms Yeung Nga Yee (“Ms Yeung”) for the plaintiff confirms in her witness statement the plaintiff provided to the defendant handover lists of all equipment to be left behind in the Nam Wan factory. In early May 2012, Mr Yeung and Mr Ng agreed the purchase price for the equipment would be in the sum of $300,000.  There were no further conditions attached.  

13. Sometime after the receipt of the Cheque, the plaintiff received a document from the defendant entitled “設施/設備/裝修轉讓收款確認書” (“Letter of Confirmation”). The Letter of Confirmation contained two conditions. The first condition is the equipment/ facilities/ renovations as left behind by Shenzhen Atlas in the Nam Wan factory would belong to Shenzhen EMT. The second condition is for Shenzhen Atlas to return the cap mould machine to Shenzhen EMT. 

14. Mr Yeung was surprised to have received the Letter of Confirmation and believed that Mr Ng was adding conditions to their previous agreement. Mr Yeung does not accept the Letter of Confirmation formed part of their agreement.  

15. Mr Ng for the defendant denies the parties reached any binding agreement.  The defendant claims the Letter of Confirmation was sent together with the Cheque. The delivery of the Cheque was conditional on the plaintiff’s agreement to the conditions set out in the Letter of Confirmation.  Due to the plaintiff’s failure to sign the Letter of Confirmation and failure to fulfil their obligations therein, there was no binding agreement between the parties and the plaintiff was not entitled to present the Cheque.  Ms Chan Sze Man (“Ms Chan”) for the defendant confirms the same.

16. It is not disputed Shenzhen Atlas left their equipment in the factory at Nam Wan after they moved out of the premises.  However the parties are in dispute over whether the ownership of the equipment was effectively “transferred” to the defendant. The defendant claims there was no “transfer of ownership” as the plaintiff failed to sign the Letter of Confirmation.  Hence the plaintiff surrendered the equipment to the landlord and the landlord has assumed ownership of the equipment.  Shenzhen EMT could only use the said equipment in their capacity as a tenant of the premises. This is denied by the plaintiff.

17. The plaintiff asserts their obligation under the agreement between the parties was to sell the equipment left behind by Shenzhen Atlas. Hence by leaving the equipment in the Nam Wan factory, the plaintiff fulfilled their obligation to sell the said equipment and the equipment was in fact sold to defendant. The plaintiff denies they surrendered the equipment to the landlord.

18. On 21 September 2012, the defendant gave instructions to the bank to countermand the Cheque.  Consequently, when the plaintiff presented the Cheque for payment on or about 25 September 2012, the Cheque was dishonoured.

LATE DISCLOSURE

19. My reasons for granting leave to the defendant to file the 3^rd Supplemental List of Documents are set out below.

20. In short, the defendant explained the late disclosure is as a result of matters being considered in the course of preparing for trial. 

21. These courts have time and time again expressed strong disapproval for late disclosure made by parties at the eve of or on the day of the trial.  I expressed the same disapproval to the defendant’s application.

22. It is clear that whatever issues were raised in the witness statements which required further discovery, those issues should have been considered much earlier and consequential discovery should have been made soon after the witness statements were exchanged.  There is no good reason as to why these documents were left to be disclosed on the eve of trial.

23. However, the lack of a good reason for the late disclosure is not the only factor to be considered when considering such applications.  The court is also required to consider the relevancy of the documents and balance the interests of all parties.  As stated by Her Honour Judge Ng in Headwin Engineering Ltd v. United Soundfair Engineering Co Ltd [2008] 1 HKC 369, the discretion is to be exercised in a fair manner having regard to all the circumstances.

24. Though Counsel for the plaintiff, Mr Chan, does not take issue with the relevancy of the documents, he remarked the documents related to peripheral matters. I disagreed with Mr Chan as it is evident the email refers to the Letter of Confirmation as an “agreement”.  I was of the view the email related to the issues to be decided by this court.

25. Mr Chan submitted there would be prejudice suffered by the plaintiff if the court allowed the defendant to rely on the said documents at trial.  However he was unable to pinpoint exactly what prejudice his client would suffer.  He commented the plaintiff was prejudiced in having had very little time to consider the documents and to give instructions.  However when I asked whether the plaintiff required an adjournment of the trial in the event I granted the defendant’s application, Mr Chan confirmed that the plaintiff would not.  Furthermore, Mr Chan indicated the plaintiff will not seek to adduce any further evidence in the event the defendant was successful in their application.

26. I specifically asked Mr Chan whether the plaintiff suffered any prejudice that could not be remedied. Mr Chan submitted there was none.

27. In view of the lack of or minimal prejudice suffered by the plaintiff and the relevance of the documents to the issues to be tried, I granted leave to the defendant to file their 3^rd Supplemental List of Documents and to have the documents inserted into the trial bundle.

DISCUSSION

28. A cheque, being an unconditional order in writing requiring the bank to pay on demand, is a bill of exchange in accordance with the definition set out in section 3(1) of the Bills of Exchange Ordinance (Cap 19). 

29. Once a cheque is in the possession of the payee, unconditional delivery is presumed until the contrary is proved: see section 21(3) BEO.

30. Pursuant to section 30 of the BEO, consideration is presumed until the contrary is proved: see also Li Yu v Hui Yan Sui William, (unrep), HCA 993/2009, paragraph 40.

31. Hence the burden is on the defendant to prove, on a balance of probabilities, there was conditional delivery of the Cheque and/or there was a total failure of consideration on the plaintiff’s part.  See paragraph 2-154 Chalmers and Guest on Bills of Exchange and Cheques (17^th ed) and paragraph 40 of Li Yu.

32. The parole evidence rule stipulates that any oral (or written) evidence cannot be admitted to vary, qualify, add or subtract from the terms of the written contract: see paragraph 12-096 Chitty on Contracts, Volume 1, (23^rd Ed).  Hence the Letter of Confirmation is inadmissible for the purpose of qualifying the defendant’s payment obligations under the Cheque unless it falls into the exceptions of the parole evidence rule.

33. Counsel both agree that in so far as the Letter of Confirmation is being used to prove conditional delivery and total failure of consideration of the Cheque, the Letter of Confirmation is admissible.  If the court finds that either or both of the defences are made out, the Letter of Confirmation will be admissible as an exception to the parole evidence rule.

34. Conversely, should the court find the defence of conditional delivery and total failure of consideration not made out, the Letter of Confirmation should be excluded for being inadmissible under the parole evidence rule.

Whether the Cheque was delivered conditionally?

35. The defence of conditional delivery is a limited defence and is only made out if the defendant can show there was no intention of “transferring the property in the instrument…or that the delivery was subject to the fulfilment of a condition suspending the operation of the instrument”: see Suen Ho Sun v Kamenar International Ltd [1989] 1 HKC 135 at 138.

36. In order to determine whether the Cheque was delivered conditionally, the first and foremost factual dispute to resolve is whether the parties reached an agreement prior to the delivery of the Cheque and the terms of that agreement.

Whether the Letter of Confirmation had to be signed before there would be a binding agreement.

37. The defendant denies the parties had reached any agreement during the material time. Their pleaded case is that the plaintiff failed to accept the conditions set out in the Letter of Confirmation and are therefore not entitled to “receive, retain/cash” the Cheque (see paragraph 8 of the Amended Defence). On re-examination Mr Ng stated the Letter of Confirmation had to be signed before there was an agreement between the parties. This is also confirmed by Ms Chan in her witness statement.

38. Firstly, it is not pleaded in the Amended Defence the Cheque was delivered on the condition that the Letter of Confirmation had to be signed.  There is no specific form of acceptance of the Letter of Confirmation or of the conditions therein pleaded in the Amended Defence. Hence Mr Ng’s assertion the Letter of Confirmation must be signed before there would be an agreement between the parties is not within the defendant’s pleaded case. 

39. Secondly, there is nothing on the face of the Letter of Confirmation indicating it was an offer which required acceptance by the plaintiff by way of signature.  The Letter of Confirmation only asks the plaintiff to sign to acknowledge receipt of the funds.

40. Thirdly, there is no evidence in show the defendant, or any other person on behalf of the defendant, explicitly made it known to the plaintiff the Letter of Confirmation must be signed before there would be a binding agreement.  This is conceded by Defence Counsel.

41. In commenting on the operation of section 21(2)(b) Bills of Exchange Act 1882, which is equivalent to the section 21(2)(b) Bills of Exchange Ordinance (Cap 19), the author of Byles on Bills of Exchange and Cheque stated, “In order for s 21(2)(b) to be operative it seems clear that any condition of special purpose must be communicated by the transferor to the transferee, since the commercial efficacy of the transaction depends upon the pro tem transferee knowing that he may not present or negotiate the instrument.”  See paragraph 9-005, Byles on Bills of Exchange and Cheque (29^th ed). 

42. It is common sense and only logical that any condition of a contract must be communicated and made known to the other party before it could take effect.  Otherwise the parties would be unclear as to their obligations.

43. In absence of any evidence to show the defendant communicated the purported condition the plaintiff must sign the Letter of Confirmation before there would be a binding agreement, I fail to see how the defendant could substantiate the assertion the Letter of Confirmation was an offer requiring acceptance by signature. Hence I do not accept the defendant’s allegation there could be no binding agreement between the parties until the Letter of Confirmation is signed.

Whether there was an agreement prior to the delivery of the Cheque.

44. In respect of the defendant’s assertion there was no binding agreement prior to the delivery of the Cheque and the Letter of Confirmation, I find the assertions made by Mr Ng in this regard to be inherently improbable.

45. In respect of the equipment to be sold to the defendant, Mr Ng’s evidence taken as a whole is that he negotiated with the plaintiff on the purchase of Shenzhen Atlas’ equipment and eventually agreed to pay a sum of $300,000 in absence of any agreement with the plaintiff on precisely what items would constitute the “equipment/ facilities/ renovations” to be purchased. Mr Ng admitted that despite being the author of the Letter of Confirmation, he did not define the meaning of the “equipment/ facilities/ renovations” as referred to in the said letter. He explained this was not discussed between the parties. He also denied he or his staff received handover lists from the plaintiff or Shenzhen Atlas in respect of what equipment/ facilities/renovations were to be left behind.  Other than the purchase price for Shenzhen Atlas’ equipment to be left behind, the parties did not agree on anything else.

46. I find Mr Ng’s evidence in this regard to be incredible and unbelievable. It is improbable that any sensible businessman would agree to pay $300,000 for goods unknown to them. It is unbelievable the parties could negotiate the price of the equipment in a vacuum. In being able to agree on the purchase price, the parties must have agreed on what equipment would be sold to the defendant. Hence it must follow the defendant knew or, at the very least, had an idea as to what equipment was included in purchase price.

47. In respect of the undisputed fact Shenzhen Atlas did leave behind equipment in the Nam Wan factory, Mr Ng’s evidence read in its entirety is as follows: in absence of any binding agreement between the parties and despite the deterioration of the relationship between the plaintiff and defendant since about mid-2012, Shenzhen Atlas left behind the equipment mentioned in the Letter of Confirmation, that is, all the equipment to be sold for the price of $300,000: see paragraph 6(3) of the Amended Defence. Shenzhen Atlas did so knowing full well Shenzhen EMT would move into the premises and have the benefit of using the said equipment.

48. Moreover, Shenzhen Atlas left behind the equipment despite the deteriorating relationship between the parties. It is not disputed that Shenzhen EMT took over the Nam Wan factory lease on 1 October 2012. It is clear by September 2012 the parties were no longer on good terms as the plaintiff had been chasing the defendant for outstanding payments and the defendant insisted on the conditions of the Letter of Confirmation being fulfilled before honouring the Cheque.  If there was no binding agreement between the parties as claimed by Mr Ng and the parties’ relationship had deteriorated before Shenzhen EMT took over the lease, Shenzhen Atlas could have removed the equipment from the Nam Wan factory before October 2012. There was no good reason for Shenzhen Atlas to leave the equipment in the Nam Wan factory in all the circumstances. Hence I find it unbelievable and inherently improbable that Shenzhen Atlas would leave their equipment in the Nam Wan factory in absence of any binding agreement between the parties.

49. I also find it inherently improbable for the defendant to send the plaintiff the Cheque in the factual matrix as put forward by Mr Ng. In effect, Mr Ng’s evidence is that the Cheque was sent to the plaintiff in absence of any agreement the parties and without knowing precisely what equipment/facilities/renovations the defendant would purchase. It does not make good business sense to send another party a cheque for a substantial sum when the terms of the agreement had yet to be agreed unless it was to facilitate negotiations or to entice the other party to enter into an agreement. However there is no evidence the Cheque was sent for these purposes. According to Mr Ng, the conditions of the Letter of Confirmation had been discussed between the parties when negotiating the purchase price and had been “acknowledged” by Mr Yeung. The conditions were draft in accordance with the discussions held between the parties. In the end, the parties were able to agree on the purchase price of the equipment. In those circumstances, the Cheque would serve no purpose of inducing the bargain between the parties or to facilitate negotiations.

50. The defendant’s version of events does not explain the reason for or necessity in sending the Cheque to the plaintiff. In fact, there is no explanation offered by Mr Ng as to why it was necessary to send the Cheque to the plaintiff in all the circumstances. Although Defence Counsel submitted the defendant sent the Cheque to the plaintiff as a gesture of sincerity on the defendant’s part, the submission is made without evidential basis. None of the witness statements filed by the defendant explain the Cheque was offered for such a purpose.  Moreover, it is not pleaded by the defendant the Cheque was offered to show sincerity or the like. It is telling to note that when Mr Ng was asked during cross-examination whether the Cheque was issued to show sincerity, he did not understand what was meant by “offering the Cheque as a gesture of sincerity”. Hence I do not accept Counsel’s submission that the Cheque was offered as a gesture of sincerity.

51. Having considered the evidence of Mr Ng and Ms Chan, I find the defendant’s version of events to be thwarted by its inherent improbabilities. 

52. In contrast, the plaintiff’s version of events is more believable and probable. 

53. I note Mr Suen submitted the plaintiff’s version of events is inherently improbable and the plaintiff’s witnesses, in particular Mr Yeung, were incredible. However for reasons given later on in this judgment, I do not accept those submissions.

54. The plaintiff’s pleaded case is simply the parties entered into a sale and purchase of Shenzhen Atlas’ equipment situated in the Nam Wan factory. According to the evidence of Mr Yeung and Ms Yeung, handover lists were sent to the defendant to show them what equipment was to be left behind in the Nam Wan factory and the purchase price was in relation to those items set out in the handover lists. The defendant issued the Cheque in honour of their promise to purchase the equipment. 

55. I am of the view the plaintiff’s version of events provides a more inherently probable explanation as to why the defendant sent the Cheque to the plaintiff, why there is no exhaustive definition of equipment or facilities in the Letter of Confirmation, and why Shenzhen Atlas left behind the equipment in the Nam Wan factory for the defendant’s use.

56. I do not propose to deal with all submissions made by Defence Counsel in his closing submissions but shall deal with salient submissions on the credibility and inherent probability of the plaintiff’s case as set out below.

Factual dispute relating to the date when the Letter of Confirmation was delivered

57. Mr Suen submitted Mr Yeung deliberately lied about when the plaintiff received the Cheque and the Letter of Confirmation.  It was further submitted that Mr Yeung’s evidence is incredible as his oral evidence contradicted his witness statement regarding whether he instructed Rony Lee to send the email dated 19 May 2012 to the defendant. 

58. Ms Chan produced the courier receipt and explained the documents referred to in the courier slip are the Cheque and Letter of Confirmation. The courier receipt shows that the delivery order was made on 16 May 2012. Ms Chan claims that the Cheque and Letter of Confirmation would be delivered to the plaintiff either on the same day or the next day. Mr Suen submitted that by logical conclusion the documents must have been received together.

59. Having considered Mr Yeung’s evidence, I do not find Mr Yeung to be deliberately lying about the receipt of the Cheque and Letter of Confirmation.  I note Mr Yeung conceded that he was rarely involved in the daily management activities of the plaintiff.  He relied on his staff to report to him about important matters.  Mr Yeung concedes that he did not personally receive the Letter of Confirmation and was told by his staff, Rony Lee, the Letter of Confirmation was received sometime later after the Cheque. This is consistent with the fact that Mr Yeung was unable to tell with precision how much later the Letter of Confirmation was received after the Cheque and is further reflected in the inconsistency in his witness statement and the Amended Reply. 

60. It is evident from the emails written by Rony Lee, there is ambiguity as to when the documents were received by the plaintiff. In the email dated 19 May 2012, Rony Lee said she received the documents “the day before” (“日前”).  However in the email dated 20 June 2012 she also refers to the documents received “the day before”.  Similarly, she uses the same phrase of “the day before” in the email dated 9 August 2012.  Either Rony Lee made a mistake in all or some of the emails relating to receipt of the documents or she is unclear on the date when the documents were received. Hence it is not surprising Mr Yeung, in reliance on what Rony Lee told him, is unable to answer with precision when the plaintiff received the Letter of Confirmation.

61. I find that understanding his evidence in its entirety he was only telling the court what he understood to be the facts. Mr Yeung explained that in his mind, the two documents were sent separately because he knew of them on separate dates.  However he had no first hand information as to when the Letter of Confirmation was received and had relied on his staff to report the matter to him.  In those circumstances, although Mr Yeung’s evidence on these matters is inconsistent and ambiguous, I do not find Mr Yeung to be deliberately untruthful.

62. In respect of the inconsistency in Mr Yeung’s witness statement and the oral evidence regarding whether he instructed Rony Lee to write the email dated 19 May 2012, I did not find this matter to cause the plaintiff’s version of events to be unbelievable or to be inherently improbable.  Mr Yeung explained in his evidence that by reason of his old age and because the events happened some time ago, he could not remember all the details.  I accept that Mr Yeung may not be able to remember all the details surrounding events that happened almost 3 years ago but accept he is able to remember the important facts. 

63. Moreover in determining whether the plaintiff’s version of events should be accepted, I had considered Mr Yeung and Ms Yeung’s version of events and the inherent probability of their version of events with the undisputed facts and undisputed documents before me.  For reasons given above, I found the version of events put forward by the plaintiff to be the more probable and believable version.

The plaintiff’s attempt to locate the cap mould machine

64. It is undisputed the plaintiff did attempt to locate the cap mould machine on the request of the defendant. Mr Suen submitted this shows the plaintiff knew and acknowledged the Cheque was delivered subject to the conditions set out in the Letter of Confirmation. He submitted Mr Yeung’s allegation that there was an agreement without conditions must be false.

65. I do not find the plaintiff’s attempt to locate the cap mould machine to signify their acknowledgment of the condition so as to render the Cheque conditional on the return of the cap mould machine.  It is not disputed there is no agreement on the Letter of Confirmation, let alone the condition relating to the return of the cap mould machine.  Mr Yeung is adamant the second condition set out in the Letter of Confirmation was not accepted. This is supported by the email sent by Rony Lee dated 19 May 2012.  The case put by the defendant is that there was no binding agreement between the parties by reason of the plaintiff’s failure to accept the conditions set out in the said letter: see paragraphs 7(1) and 8 of the Amended Defence. Hence it cannot be said that the plaintiff’s attempt to locate the cap mould machine is somehow an implicit acceptance of the second condition of the Letter of Confirmation as this is contrary to the defendant’s case.

66. Since it is not disputed there was no agreement on the Letter of Condition and the condition relating to the cap mould machine, any attempts to locate the said machine by the plaintiff must be for reasons other than the Letter of Confirmation.  Therefore, I am unable to accept Defence Counsel’s submission that the plaintiff’s attempt to locate the cap mould machine is indicative of their acceptance of the second condition in the Letter of Confirmation. 

The time lapse of 4 months before the Cheque was presented for payment

67. Mr Suen submitted the fact that the plaintiff waited for many months before they presented the Cheque for payment supports the defendant’s version of events that there was no agreement prior to the signing of the Letter of Confirmation.  Counsel submitted that if there truly was a binding agreement without conditions as alleged by the plaintiff, there would be no need for the plaintiff to have waited so long before presenting the Cheque for payment.

68. I have considered the explanation made by Mr Yeung.  He explained because the sums were not relating to “貨款” (sums received for goods in normal business transactions), the staff did not know how to enter the sum of $300,000 into the company accounts. Since Mr Yeung was frequently out of Hong Kong, the staff did not immediately cash the Cheque. Moreover, the defendant requested the plaintiff to wait a few days before presenting the Cheque for payment. In such circumstances there was a delay in presenting the Cheque for payment.

69. I did not find the explanation offered by Mr Yeung to be inherently improbable or incapable of belief.  The sum of $300,000 relates to sale of business assets and not the normal business transactions of the company. Different accounting rules and procedure would apply to the entry of this sum into the company accounts. I do not find it inherently improbable that the staff of the company would wish to consult Mr Yeung before depositing the Cheque.

70. As stated above, both parties agree that there was no agreement as per the terms set out in the Letter of Confirmation.  Under such circumstances, I did not accept the submission that the delay in presentment of the Cheque was an acknowledgment of the Letter of Confirmation or for the purposes of honouring the conditions in the said letter.  

71. I do not find that any adverse inferences can be drawn by the mere delay in presentment of the Cheque.

The use of the word “協議” (agreement) in the email sent by Rony Lee dated 9 August 2012

72. Mr Suen submitted that the email dated 9 August 2012 shows the plaintiff intended to conclude an agreement based on the Letter of Confirmation and not on the terms as alleged by the plaintiff.

73. As stated above, it is undisputed there is no agreement on the Letter of Confirmation between the parties.

74. Moreover for reasons given above, I have doubts as to the accuracy of the emails sent by Rony Lee as demonstrated by her use of the phase “the day before”.

75. In respect of the use of the word “agreement”, it could be seen that the three emails produced are contradictory as to whether in fact the plaintiff regarded the Letter of Confirmation as an agreement. In the first email dated 19 May 2012, Rony Lee clearly indicated the plaintiff did not accept the second condition contained in the Letter of Confirmation. There was no use of the word “agreement” in that email. In the second email dated 20 June 2012, it was clearly stated the parties had yet to come to an agreement on the Letter of Confirmation. Again, there was no use of the word “agreement” in this email. The use of the word “agreement” only appears in the third email dated 9 August 2012 and was used to refer to the Letter of Confirmation. It is not clear why after denying there was an agreement in the last 2 emails, Rony Lee would suddenly send a third email naming the Letter of Confirmation as an agreement. Hence it is unsatisfactory to draw the conclusion from this one reference of “agreement” to mean the plaintiff somehow intended to be bound by the Letter of Confirmation.

Adverse inferences

76. Mr Suen asked this court to draw adverse inferences against the plaintiff by reason of failing to call various witnesses and to produce documents. 

77. I have considered Mr Suen’s submissions on adverse inference and whether it would be appropriate to draw an adverse inference against the plaintiff based on the email dated 9 August 2012. However the emails are inconsistent as to whether there was an agreement on the Letter of Confirmation. As previously stated, the plaintiff by the email dated 19 May 2012 specifically rejected the second condition of the Letter of Confirmation. Moreover the defendant’s pleaded case is that the parties failed to reach an agreement on the Letter of Confirmation. I fail to see how this email can be determinative of whether the plaintiff intended to be bound by the conditions set out in the Letter of Confirmation.

78. In such circumstances, I am of the view that any conclusion based on an adverse inference drawn from the email is unsatisfactory. Therefore, I decline to draw any adverse inferences based on the email dated 9 August 2012.

79. Hence having considered all the submissions and the evidence of the plaintiff, I do not accept Defence Counsel’s submission relating to the credibility and inherent probability of the plaintiff’s version of events. I find the plaintiff’s version of events more believable and more credible. I therefore accept the plaintiff’s assertion that the parties had reached an agreement before the Cheque was delivered.

The terms of the agreement as relevant to the delivery of the Cheque. 

80. By reason of accepting the plaintiff’s version of events as being more credible, I find the parties had formed a sale and purchase agreement in or around May 2012, that is, when they agreed the purchase price of $300,000.  The equipment to be sold is as listed in the handover lists provided by the plaintiff.

81. In so far as the Cheque is concerned, I accepted the plaintiff’s assertion that the Cheque was sent to the plaintiff in honour of the defendant’s promise and obligation to pay for the equipment. There were no other conditions agreed between the parties so as to render the delivery of the Cheque to be conditional.

Whether there is total failure of consideration on the plaintiff’s part?

82. By reason of my findings set out hereinabove, I do not find the conditions as set out in the Letter of Confirmation to form part of the agreement between the parties. Hence there is no obligation on the plaintiff  to perform the conditions set out in the Letter of Confirmation, save and except the first condition in so far as the parties had agreed the plaintiff would sell the equipment left behind by Shenzhen Atlas in the Nam Wan factory. In absence of any obligation on the plaintiff’s part, there would be no failure of consideration by reason of the plaintiff’s failure to sign the Letter of Confirmation or failure to fulfil the second condition.

83. Based on my finding of facts in respect of the agreement between the parties, the submission of past consideration raised by Mr Suen is no longer applicable or relevant. 

84. The agreement was that the plaintiff agreed to sell to the defendant various equipment left behind in the Nam Wan factory by Shenzhen Atlas.  The consideration provided by the plaintiff is the promise to procure Shenzhen Atlas to leave behind equipment in the Nam Wan factory and to sell the same to the defendant.  There is no question of past consideration.

85. Mr Suen further submitted consideration has not moved from the plaintiff but from Shenzhen Atlas.  I do not accept this submission.

86. Paragraph 3-037 of Chitty on Contracts, Vol. 1 (31^st Ed)  states, “The requirement that consideration must move from the promisee is most generally satisfied where some detriment is suffered by him . . . But the requirement may equally well be satisfied where the promisee confers a benefit on the promisor without suffering any detriment. . . But the rule in question is not in fact based on this invented consideration. It is based on benefit to the promisors.”

87. Hence it is adequate consideration once the plaintiff confers a benefit on the defendant; the benefit being the use of the equipment.  

Summary

88. I find the defendant unable to prove the defence of conditional delivery and total failure of consideration.

89. Hence the Letter of Confirmation is inadmissible under the parole evidence rule to vary the terms of the Cheque.

90. In all the circumstances, I find the defendant is liable to pay the sum of $300,000 to the plaintiff being the sum of the dishonoured cheque.

91. The sum shall bear interest at judgment rate from the date of the issuance of the Writ of Summons until full payment of the said sum. 

92. I make a costs order nisi that the defendant pay the plaintiff’s costs of this action to be taxed if not agreed, with certificate for Counsel.  Unless any party applies to vary the costs order within 14 days hereof, the costs order shall become an order absolute.