WONG YUEN FONG AND ANOTHER v. KWAN YUEN YEE JANDEAR and CHAN YING MING SIMON (Third Party)

HCA 5655/1998

Headnote

O. 14 judgment. Appeal from Master. 2nd Plaintiff's claim on a dishonoured cheque drawn by Defendant in favour of 2nd Plaintiff. Cheque given to 2nd Plaintiff in part payment of the overdue balance owing by the Defendant to the 1st Plaintiff. Held, agreeing to use the proceeds of the cheque to reduce the total indebtedness of the Defendant to the 1st Plaintiff is good consideration. No triable issue shown. Appeal dismissed.

HCA 5655/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5655 OF 1998

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J U D G M E N T

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1. This is an appeal from the decision of Master Muttrie given on 2nd June 1999 entering final judgment on behalf of the 2nd Plaintiff against the Defendant for the amount claimed in the Amended Statement of Claim with interest and costs.

2. The claim by the 2nd Plaintiff is in respect of a dishonoured cheque in the sum of $1,000,000 drawn by the Defendant and made payable to the 2nd Plaintiff which was dated 13th January 1998.

3. The Defendant is a customer of the 1st and 2nd Plaintiffs. The 1st Plaintiff is a stockbroker. The 2nd Plaintiff is a finance company. On 9th December 1997, the Defendant opened a securities trading account with the 1st Plaintiff. The 2nd Plaintiff agreed to provide finance and advances to the Defendant. The documents that have been produced in evidence show that the formal documentation for the opening of the accounts with both Plaintiffs were completed and signed by the Defendant on 9th December 1997.

4. According to the Amended Statement of Claim, there was, as at 2nd February 1998, owing by the Defendant in respect of the sale and purchase of securities under her account with the 1st Plaintiff a net balance in the sum of $3,924,973.90. It is pleaded that in purported part payment of the overdue balance as at 9th January 1998 owing by the Defendant to the 1st Plaintiff, the Defendant drew the cheque sued on which was made payable to the 2nd Plaintiff. The 2nd Plaintiff presented the cheque for payment on 13th January 1998 but it was dishonoured. As it was in part payment of the overdue balance, the amount of the cheque would have been used to reduce the Defendant's indebtedness to the 1st Plaintiff.

5. The Defendant says that she was an account officer and employee of Billion Finance Company which was owned by Simon Chan ("Chan") who was also the Chairman of Billion International Holdings Ltd. She says in her affirmation that Chan instructed her to open a trading account with a securities brokerage firm and she was assured by Chan that the account would be funded and managed by him and there should not be any personal liability on her part. It was after that she then met the 1st Plaintiff's general manager in the presence of Chan. She then opened the account with the 1st Plaintiff. She also asserts that:

"According to my understanding, Chan had expressly told the 1st Plaintiff that the said account shall be funded and operated by him and he would only use my name to facilitate the securities transaction for which the 1st Plaintiff fully understands and accepts."

This is what she says in para.5 of her affirmation. The source and grounds for the said understanding, as counsel for the Defendant has submitted, was based entirely on what Chan had told her. There is no evidence that what Chan had allegedly told the Defendant was ever done in the presence of the 1st Plaintiff's representative.

6. I do not see how it can be said that there is credible evidence that there was an agreement between the 1st Plaintiff, the Defendant and Chan that it was really Chan but not the Defendant who would be personally responsible for the account opened in the name of the Defendant with the 1st Plaintiff. That is a mere assertion on the part of the Defendant. I do not find it believable. It is in stark contrast to the contemporaneous formal documentation completed and signed by the Defendant on 9th December 1997 the validity of which have not been challenged.

7. There is evidence to show that the $5,000,000 deposit given by the Defendant to the 1st Plaintiff on the opening of the account was funded by Chan. But there is no credible evidence to show that this was known to either Plaintiff. That is a matter between Chan and the Defendant. I observe that the Defendant brought third party proceedings against Chan and has already obtained judgment against Chan for an indemnity against any judgment that may be entered against her by the 1st and 2nd Plaintiff.

8. It is well settled that in O.14 proceedings, the Defendant has a threshold onus to satisfy the court that there is an issue or question in dispute which ought to be tried. (Tandy/Rank Video & Anor v. Yee Hing Cassette Factory Ltd. [1991] 1 HKC 136.

9. It is trite law that cheques are to be treated as cash and should be honoured unless there are good reasons to the contrary. It was submitted by counsel for the Defendant that there was no consideration given for the cheque which was made payable to the 2nd Plaintiff. It was said that there was a triable issue as to this.

10. Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value (S. 30(1) Bills of Exchange Ordinance (Cap.19)). There is a presumption that valuable consideration has been given for a bill. The burden is on the Defendant to rebut that presumption.

11. It is clear that consideration must move from the promisee. Here, the promisee is the 2nd Plaintiff. Agreeing to use the proceeds of the cheque to reduce the total indebtedness of the Defendant to the 1st Plaintiff is, in my view, good consideration. The case of Fortune Focus International Ltd. v. The (Holdings) Co. Ltd. [1998] 1 HKC 578 is, in my view, distinguishable on the facts.

12. In my judgment, the Defendant has not put forward any credible evidence to rebut the presumption that valuable consideration has been given for the cheque sued on. On this, there is no triable issue.

13. It was also submitted on behalf of the Defendant that she was an accommodation party within the meaning of S. 28(1) of the Bills of Exchange Ordinance. That, however, does not provide her with a defence against the 2nd Plaintiff's claim. The Defendant has failed to raise a triable issue that there was no consideration for the cheque. The 2nd Plaintiff was a holder of the cheque for value. By S. 28(2) of the Bills of Exchange Ordinance, even assuming that the Defendant was an accommodation party, she is liable on the cheque to a holder for value and it is immaterial whether, when such holder took the cheque, he knew the Defendant to be an accommodation party or not. There is also no triable issue shown on this.

14. I have considered the submissions of counsel. I am satisfied that the 2nd Plaintiff is entitled to judgment as claimed. The appeal is dismissed.

15. I am of the view, however, that there should be a stay of execution of the judgment until after determination of the 1st Plaintiff's claim against the Defendant in this action. The cheque was in part payment of the outstanding balance owing to the 1st Plaintiff which is being disputed by the Defendant. That has not yet been determined. Counsel for the 2nd Plaintiff has informed me that the 2nd Plaintiff has no objection to a stay of execution. I grant a stay of execution of the judgment until after determination of the 1st Plaintiff's claim against the Defendant.

[After hearing submissions]

16. The costs order made by Master Muttrie is to stand. Costs of the appeal to be costs to the 2nd Plaintiff.