XCHRX HO HON MING v. IP KIN FAN, SAMUEL

HCA11890/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.11890 OF 1997

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J U D G M E N T

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1. This is an appeal against the Order of Master Poon dated 1st April 1998 when the learned Master ordered that the Defendant should pay to the Plaintiff the sum of HK$750,000 and HK$81,600, together with interest on HK$750,000 at the rate of HK$240 per day from 7th November 1997 until payment and with costs to be paid by the Defendant to the Plaintiff, to be taxed if not agreed.

2. In pursuing the appeal, Mr Edward Chan of M/s Chan, Wong & Lam relies upon the case of Thong Ko Sine v. Anthony George Wilkinson [1998] CA 30 to make the point that the Statement of Claim is defective in that it does not contain a statement of the facts relied upon to dispense with Notice of Dishonour. The Statement of Claim, in this case, in relation to this point, states :

"Notice of dishonour has been duly dispensed with under section 50(2)(c)(v)(sic) of the Bills of Exchange Ordinance (Cap.19) by the drawee or acceptor being, as between itself and the drawer, under no obligation to accept or pay the bill."

3. There are no other facts pleaded which were relied upon to support the claim that Notice of Dishonour was duly dispensed with under the section quoted.

4. In the preceding paragraph of the Statement of Claim, all that was pleaded was that the said cheque was dishonoured upon due presentment for payment at the bank, upon which the cheque was drawn. In the affidavit by the solicitor for the Plaintiff in support of the application for summary judgment, the affidavit was in the usual form, that the debt was incurred and was still owing, and that the deponent verily believed that there was no defence to the action, and thereby requesting judgment to be entered for the Plaintiff against the Defendant as in the Statement of Claim.

5. There was no mention whatsoever in that affidavit of Notice of Dishonour having been given to the Defendant or of any facts which would have dispensed with the Notice of Dishonour in accordance with the Bills of Exchange Ordinance.

6. The Defendant filed an affidavit to oppose the application for summary judgment, in which he alleged that the cheque in question for HK$750,000 was given to the Plaintiff and a person called Leung as payment of commission to those two persons. He alleged in his affidavit that the Plaintiff was paid his commission of HK$250,000 by means of a cheque which was exhibited to the affidavit, and the person called Leung was paid his HK$500,000 by means of another cheque for HK$400,000 which was exhibited to his affidavit. The Defendant also alleged that the remainder of HK$100,000 due to Leung was fully paid at a later stage by setting off the legal fees of Leung due to him, the Defendant. The Defendant also said in his affidavit :

"It was intended that by paying the above payments to the parties, my obligation in respect of commission was fully discharged. The Plaintiff and Leung agreed to return the said cheque to me but they never did. I did not seriously pursue the matter because I thought that since I had paid them, they would not present the said cheque for payment."

7. The Plaintiff filed an affirmation to reply to the Defendant's affidavit, and it is only in that affirmation that for the first time mention is made of the cheque in question being presented to the bank on 26th November 1996 but was returned dishonoured. The Plaintiff exhibited a copy of the said cheque together with the unpaid item memo, which was the slip from the bank giving the reason for the dishonour, and on the slip there appeared a cross against item No.1 "Refer to Drawer". This affidavit by the Plaintiff was only affirmed on 16th February 1998 whereas the Statement of Claim together with the writ was dated 7th November 1997.

8. In Thong Ko Sine v. Anthony George Wilkinson (Supra), Rhind J. said :

"It is well established law that when a payee sues on a dishonoured cheque, the statement of claim must contain either an allegation that due notice of dishonour was given to the defendant, stating the date when, the manner in which, and the person by whom such notice was given, or else it must contain a statement of the facts relied on dispensing with such notice under section 50(2) of the Bills of Exchange Ordinance ("the Ordinance"), Cap.19."

9. Rhind J. then quoted s.50(2)(c)(iv) :

"Notice of dishonor is dispensed with - as regards the drawer in the following cases, namely :

(iv) where the drawee or acceptor is, as between himself and the drawer, under no obligation to accept or pay the bill."

10. In Thong's case, the reason for the dishonour of the cheques was, as in this case, "Refer to drawer". Rhind J. continued :

"As everyone knows, "Refer to drawer" is a euphemism meaning that there are insufficient funds in the drawer's account, and that the cheque is being rejected for that reason...."

Further on in the judgment, Rhind J. said :

"... What section 50(2)(c)(iv) means in plain English is that if the bank on which the cheque is drawn has not been put in funds and no arrangements have been made for a sufficient overdraft, then the bank is not obliged to pay on the cheque, and it is not necessary for any payee wanting to sue on the cheque to give notice of dishonour...."

Rhind J. continued :

"... The authorities already cited show, quite clearly, in my view, that for a pleading about notice of dishonour to be effective, it must give particulars, and if those particulars are not given in the statement of claim, then they should at least be given in the affidavit in support of the plaintiff's statement of claim...."

11. In the case mentioned above, the other basis on which the Plaintiff sought judgment was that Notice of Dishonour was unnecessary because there were facts on which he could rely to show that Notice of Dishonour was unnecessary. Rhind J. in relation to that, said :

"... Unfortunately, while those facts appear clearly enough in various affidavits that have been filed, those facts are not embodied in the statement of claim. The statement of claim baldly states that the cheques, when presented for payment, were returned dishonoured. The pleading does not go into any detail as to why they were dishonoured...."

12. The Court of Appeal then held that the pleading was defective because it lacked the necessary detail to amount to a cause of action.

13. In the instant case, in my judgment, the Statement of Claim is defective because it only pleads s.50(2) of the Bills of Exchange Ordinance and it only avers that the drawee or acceptor, as between itself and the drawer, was under no obligation to accept or pay the bill. There is no mention whatsoever in the Statement of Claim of the reason for the dishonour of the cheque and why, by virtue of that reason, the drawee or acceptor was under no obligation to accept or pay the bill. Even though this reason for the dishonour of the cheque was subsequently exhibited to the Plaintiff's affirmation in reply to the Defendant's affirmation to oppose summary judgment, I find that that is insufficient to rectify the defect in the Statement of Claim.

14. In the circumstances, I allow the appeal and order that the Order of the learned Master be set aside. I give unconditional leave to defend to the Defendant. The costs of the Plaintiff's application up to and including the costs of the hearing before Master Poon be costs in the cause and the costs of this appeal be to the Defendant, to be taxed if not agreed.

15. I should mention that another reason for allowing the appeal is that in my judgment, the Defendant, by his affidavit to oppose summary judgment, has raised what are clearly triable issues in that he has alleged that payment of the amount of the cheque in question has been made to the Plaintiff and to the other person concerned by means of two cheques and the setting off of some legal fees. These are clearly triable matters and should be left for the trial judge to determine. The same can be said about the matters raised by the Plaintiff in his affidavit in an attempt to rebut the Defendant's affidavit.