BEST DAY INTERNATIONAL LTD v. SUPER GLORY CORPORATION LTD

DCCJ2892/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2892 OF 2007

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D E C I S I O N

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1.  This is an application for summary judgment in the sum of $919,501.15 in respect of a claim for dishonoured cheque.

2.  The Defendant at all material times engaged in the business of exporting garment products to overseas markets.  The Defendant had business dealings with a company in the Mainland known as Shenzhen City Fulide Industrial Company Limited (“Fulide”) whereby Fulide would supply garment products to the Defendant from time to time.  The Plaintiff and Fulide are associate companies owned by the majority shareholder, Mr Shen Zhi Sheng.

3.  According to the Plaintiff’s case, the Defendant on or about 28 February 2007 issued a cheque in the amount of $919,501.15 in favour of the Plaintiff (“the Cheque”) in order to settle the ledger account between Fulide and the Defendant, and the Cheque is now the subject matter of this claim.

4.  To oppose the Plaintiff’s claim, the Defendant put forward 4 grounds of defence:

(i)	since the debt under the ledger account was owed by the Defendant to Fulide, there was no consideration to support the issuance of the Cheque;
(ii)	there was a clear undertaking given by one Ms Sun of Fulide or the Plaintiff that the Cheque would not be presented for payment unless and until the Defendant verified and confirmed all the items and the accuracy of the ledger, and so the Cheque was delivered conditionally.  As the condition was not fulfilled in the present case, the delivery of the cheque was not complete;
(iii)	the Cheque was procured by duress made by Ms Sun of the Plaintiff or Fulide; and
(iv)	the Cheque was procured by misrepresentation as there were falsity and inaccuracy in the ledger account presented by the Plaintiff.

5.  For the purpose of this application, I only focus on the defence of duress which, in my judgment, would be sufficient to dispose of this application.

6.  According to the Defendant, there had been a long trading business relationship between the Defendant and Chevignon, a worldwide well-known brand for casual and trendy fashion.  In order to help Chevignon to develop the market in the United States, Chevignon would need to have the samples supplied by the Defendant on an urgent basis.  The Defendant placed an order with Fulide on or about 24 January 2007, with the order to be supplied on or before 5 February 2007.  However, Fulide delayed in the supply of the order.  On or about 28 February 2007, a Ms Sun of Fulide or the Plaintiff demanded the Defendant to settle the outstanding account owed under the ledger before Fulide would supply 90 items of garments to the Defendant pursuant to the order placed by Chevignon.  As this order was so important to the Defendant, the Defendant had no choice but to issue the Cheque to the Plaintiff.

7.  According to Ms Chan Suk Chun of the Defendant, she had made known to Ms Sun of Fulide or the Plaintiff the importance of the Chevignon order.  In the e-mail sent to Fulide on 7 March 2007, it mentioned that the Cheque was issued under the duress exerted by Fulide or the Plaintiff. 

8.  It is common ground that economic duress is a defence available to a claim for dishonoured cheque.  However, Mr Tse, counsel for the Plaintiff, makes the following points.  Firstly, there was nothing in the e-mail correspondence to show that the Plaintiff was aware of the urgency of the Chevignon order.  Secondly, there is evidence to show that the parties had revised the amounts due under the ledger, and so the Cheque could not have been issued under any duress.  Thirdly, there was no mention in the e-mail communication between Fulide and the Defendant on 28 February 2007 about any duress exerted by Fulide or the Plaintiff.  Fourthly, Fulide subsequently delivered another order known as the Mavi Order to the Defendant in early April 2007.  By that time, the Cheque had been dishonoured.  Should there be any duress, the Plaintiff could have insisted the Defendant to honour the Cheque before making delivery of the Mavi Order.  Fifthly, the duress was allegedly made by Fulide and so the defence is not available to a claim by the Plaintiff.

9.  Despite such submissions, I find that there is a triable issue in respect of such defence.  The most important reason is that there was a protest made by the Defendant about the duress on 7 March 2007, shortly after the issuance of the Cheque.  Indeed, the e-mail correspondence showed that the Defendant was prepared to issue a cheque of nearly a million dollars just to obtain delivery of 90 pieces of garments.  This showed that the delivery of these items was very important to the Defendant, and Fulide or the Plaintiff should have been aware of such fact.  The Defendant disputes that it had the opportunity to verify the accuracy of the ledger account before issuance of the Cheque.  As the Defendant has demonstrated by way of affidavit evidence, there were indeed a number of mistakes in the ledger account.  It was true that the Plaintiff or Fulide did not exert the same pressure before the delivery of the Mavi Order.  However, that does not mean that no such pressure had been exerted in respect of the issuance of the Cheque.  Finally, the duress was allegedly made by Ms Sun who was a representative of both Fulide and the Plaintiff.  If such a threat was indeed made, it was made with the clear knowledge on the part of the Plaintiff.  Hence, it would be a defence available to the Defendant in a claim for dishonoured cheque by the Plaintiff.

10.  I agree that the court should be cautious in dealing with a claim for dishonoured cheque.  It has been repeatedly emphasised by the court that a cheque is to be treated as cash and the defences available to this sort of claim are rather limited.  Further, allegation of duress can be made by way of bare allegation and the court should scrutinise such kind of defence in a careful manner.  However, the Defendant’s allegation is supported by written protest made shortly after the issuance of the Cheque, and the dispute between the parties about the account of the ledger also adds weight to the Defendant’s case.  Whether the Plaintiff or Fulide had indeed made the duress would be a matter to be decided at the trial.  In such circumstances, I find that the Defendant has discharged the burden of establishing an arguable defence and the Plaintiff’s application for summary judgment cannot therefore succeed.