SEAFUL INTERNATIONAL LTD v. WONG HUNG PING t/a WING HUNG KNITWEAR GARMENT FACTORY

DCCJ350/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 350 OF 2004

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J U D G M E N T

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1. This is an application for summary judgment in the sum of $294,350, being the amount due under 5 alleged dishonoured cheques drawn by the Defendant in favour of the Plaintiff ("the Cheques").

2. In an earlier action by the Plaintiff against the Defendant, DCCJ No. 3450/2003 (the "Earlier Action"), the Plaintiff claimed against the Defendant for the sum of $583,728.94, being the outstanding price for the goods sold and delivered by the Plaintiff to the Defendant. In the Earlier Action, the Defendant admitted that he was indebted to the Plaintiff for the outstanding price of the goods except for the claim for interest, but he claimed that there was an agreement between the parties that the outstanding price would be paid by 10 instalments ("the Agreement"). The Defendant drew 10 post-dated cheques to the Plaintiff accordingly, and the Cheques in this action were among the said 10 post-dated cheques drawn by the Defendant.

3. In its reply filed in the Earlier Action, the Plaintiff denied the existence of the Agreement. According to the Plaintiff, the Defendant did make a request for payment by instalments and the Defendant issued 10 post-dated cheques as security for the debt. However, as the parties finally failed to agree on the terms of the repayment schedule, there was no payment by instalment agreement concluded between the parties.

4. In his defence of the present action, the Defendant claims that the consideration for the 5 Cheques has totally failed, and as a result the claim cannot succeed. In determining whether it is a valid defence, we have to examine two possible scenarios: one on the basis that there was an Agreement as alleged by the Defendant in the Earlier Action, and one on the basis that there was no such Agreement.

5. In respect of the first scenario, the consideration for the Cheques obviously has not failed. The Cheques were issued for the purpose of the Agreement, and there is good consideration to support the same. In fact, this is the only possible scenario that is relevant for the purpose of the present application. In an application for summary judgment, it is the duty on the part of the Defendant to establish a positive case for his defence. In this regard, Mr Fung for the Defendant confirms that the defence put forward by the Defendant in the Earlier Action was true, and there was a payment by instalment Agreement made between the parties and the Defendant issued the Cheques pursuant to that Agreement. In such case, the consideration for the Cheques has not failed, and this would have been sufficient to dispose of the present application.

6. Although it is not absolutely necessary for me to deal with the second scenario, I would also like to say a few words on this issue. Even if there was no Agreement as alleged by the Plaintiff, the Defendant's defence cannot succeed on the following reasons. Firstly, the Plaintiff claims that the Cheques have been issued as security for the debt pending the discussion on the repayment schedule. Even if the parties did not finally reach an agreement on the repayment schedule, it does not disturb the fact that the Cheques had been issued as security for the debt - a matter which has not been expressly challenged by the Defendant. This consideration clearly has not failed.

7. Secondly, section 27 of the Bills of Exchange Ordinance provides separately that an antecedent debt or liability is deemed valuable consideration for a cheque. As there was an existing debt between the parties and the same was deemed valuable consideration for the Cheques, the Defendant cannot possibly argue that such consideration has failed in the present case.

8. Thirdly, the Defendant maintains that he issued the Cheques simply for the purpose of the Agreement. As the Plaintiff claims that there was no such agreement concluded between the parties, the consideration for the Cheques has failed. In my judgment, this is a narrow interpretation of the purpose of the issuance of the Cheques. Taking into account that there was an existing debt between the parties, I am of the view that the Cheques were also issued for the purpose of the partial payment of the debt. To take an example, assume A owes B $10,000. They discuss a possible payment by instalment schedule, and A gave $2,000 cash to B pursuant to such discussion. In the event that the parties fail to conclude the payment by instalment agreement, is A then entitled to demand back the sum of $2,000? In my judgment, the answer is simply no. The tendering of the cash in the sum of $2,000 was for the purpose of the discussion of the payment by instalment agreement, and, and I emphasise the word "and", also for the purpose of the partial settlement of the debt. It has been repeatedly stated in an action for dishonoured cheque, the cheque is to be treated as cash. Taking into account that the debt owed by the Defendant to the Plaintiff, the court is entitled to conclude that the Defendant issued the Cheques with the dual purposes for the possible payment by instalment agreement and for the partial settlement of the debt. This may be the rationale why there is a separate provision for antecedent debt as valuable consideration in section 27 of the Bills of Exchange Ordinance.

9. In his submission, Mr Fung for the Defendant repeatedly complains that the conduct of the Plaintiff in respect of the 2 actions is unfair to his client. In the Earlier Action, the Plaintiff denied the existence of the Agreement, but in the present case, the Plaintiff claims against the Defendant on the Cheques. In my judgment, there is no unfairness to the Defendant for summary judgment to be entered against him. It has all along been the Defendant's case that there was an Agreement made between the parties and the Cheques were issued for such purpose. In such case, the Defendant has to honour his obligation under the Agreement by paying the amounts under the Cheques. If the Defendant complains that he has suffered any prejudice by reason of the Earlier Action, the Defendant is always entitled to make such complaint in the Earlier Action.

10. Based on the aforesaid, I am of the view that there is no arguable defence in respect of the present claim for the Cheques, and I therefore grant summary judgment in favour of the Plaintiff.