YIP YAU CHEUNG v. MIDLAND INSURANCE CO. LTD.

DCCJ 4666/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPEICAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4666 OF 2002

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JUDGMENT

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1. This is the plaintiff's application for summary judgment against the defendant. The plaintiff's claim arose out of seven cheques totaling $70,000 all of which were dishonoured upon presentation. The defendant has raised the defence of total failure of consideration in respect of all seven cheques. For the purpose of this hearing the plaintiff has filed two affirmations dated 12th September 2002 and 21st October 2002 respectively whilst the defendant relies on the affirmation of its director Chong Chuen Fong dated 1st October 2002.

2. On 15th November 1996 the defendant sold the premises at Unit C, 12th Floor, Mong Kok Commercial Centre, 16 Argyle Street, Kowloon to the plaintiff and a Mr. Chu Wai Mau ("Chu"). It is common ground that the defendant, having sold the premises to the plaintiff and Chu, leased the premises back from them. There is a dispute as to whether the lease commenced on 15th November 1996 or 16th November 1996 but it matters not for the purpose of this application. The lease was for a term of about two years at a monthly rental of $10,000. A deposit equivalent to two months rental was payable under the lease. From the terms of the lease it is clear that the arrangement between the parties was less than formal, this is possibly due to the fact that Chu was a director of the defendant at the time of the sale and purchase of the premises.

3. The defendant says the plaintiff and Chu used the premises for their own business from September 1997 to January 1998 inclusive. As a result an agreement was reached in or about early 1998 whereby the plaintiff and Chu exempted the defendant from paying rent for the months from September 1997 to January 1998 inclusive. According to the defendant the parties also agreed to use the deposit to set off the rental for July 1997 and August 1997. The defendant's case is that the all the subject cheques were issued in or about 1997 as future rental payments upon the request of Chu who, at that time, was the director and shareholder of the defendant. According to the defendant's company search as exhibited to the affirmation of Chung Chuen Fong, Chu ceased or resigned as a director of the defendant on 10th April 1997 (p56 of bundle). However he was named as one of the directors in the defendant's annual return dated 3rd August 1998 (p49-53 of bundle). It follows from the defendant's evidence that the seven alleged post-dated cheques must have been issued prior to 10th April 1997 when Chu was still a director.

4. The plaintiff denies the cheques in question were post-dated cheques and says the cheques were issued on the respective dates appearing in the cheques as rental for the corresponding month. On each occasion when the respective cheque was issued, the defendant asked the plaintiff to wait for confirmation from the former before presenting the cheque for payment. The defendant's request for defer presentation was accepted by plaintiff. However despite having received the go-ahead from the defendant, the cheques were dishonoured when they were eventually presented in December 1997 and March 1998 respectively. The plaintiff explains his sound financial position in 1997 and 1998 was the reason why he took no action on the dishonoured cheques.

5. The plaintiff denies he and Chu had occupied the premises from September 1997 to January 1998 and that the defendant was exempted from paying rent for that period. The plaintiff also denies the existence of any agreement to use the deposit to set off the rental for July and August 1997 since the defendant did not pay the deposit until 14th February 1997. According to the plaintiff the deposit was used to set off the overdue rental for December 1996 and January 1997.

6. The defendant's evidence that the seven cheques were post-dated cheques issued for future rental payments flies in the face of the evidence before me. I agree with the analysis and submissions of Mr. Kwan (for the plaintiff) that if what the defendant says is true then one would expect these cheques to bear consecutive numbers. Instead, the numbers of these cheques ranged from 215335 (the first cheque dated 20th July 1997) to 215414 (the last cheque dated 20th January 1998). Of these seven alleged post-dated cheques, four (July 1997, August 1997, November 1997 and January 1998) were dated the 20th, two (September 1997 and October 1997) were dated the 23rd and one (December 1997) was dated the 25th. If these cheques were post-dated cheques as the defendant claims they were it defies common sense as to why they should bear different dates.

7. Mr. Ho (for the defendant) insinuated impropriety on the part of Chu who, together with Chung Chuen Fong, was a signatory of these cheques. However there is simply no evidence along this line from the defendant. In his affirmation Chung Chuen Fong is not saying the cheques were issued without the defendant's authority or that he had no knowledge of their issuance, instead he claims the cheques were post-dated cheques for rentals which had been waived subsequently. The suggestion of Mr. Ho is therefore without any basis.

8. The defendant relies on a payment voucher exhibited to the affirmation of Chung Chuen Fong (p37 of the bundle) as evidence that the deposit was paid on 10th December 1996. According to the payment voucher the plaintiff was paid $30,000 by way of a cheque (no. 215190) on 10th December 1996 being rental for November 1996 and the deposit. However the defendant's evidence is refuted by a deposit slip exhibited to the 2nd affirmation of the plaintiff (p84 of the bundle). The deposit slip shows $30,000 was paid into the plaintiff's account on 14th February 1997. According to the plaintiff this sum of $30,000 represented the rental for November 1997 and the requisite deposit. The deposit slip included in the hearing bundle is not the clearest copy and only the last two number of the cheque "90" could be read. However I have examined the copy of deposit slip kept by Mr. Kwan (for the plaintiff) and also the deposit slip exhibited to the 2nd affirmation of the plaintiff filed in court, from these copies it is possible to make out that the number of the cheque deposited was "215190", the same cheque number stated in the defendant's payment voucher. In light of this the defendant's evidence as to when the deposit was paid and the purpose for which it was utilized simply cannot stand.

9. For the reasons given above, I find the defence of total failure of consideration not credible and a mere sham. In the circumstances there will be judgment for the plaintiff in the sum of $70,000. The judgment sum shall attract interest at the rate of 1% over Hong Kong dollar prime rate from the date of Writ (26th July 2002) until judgment date (13th November 2002) and thereafter at the prevailing judgment rate until payment. The plaintiff is to have the costs of this action including the costs of this application.