LAU CHAM YUEN ALBERT v. CHANG YAN HAO JEFF

HCA 430/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 430 OF 2006

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D E C I S I O N

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Application

1.  This is an application by the Plaintiff against the Defendant for summary judgment upon a dishonoured cheque in the sum of HK$5,295,500.00.

Background

2. On 29 January 2004, under HCA 2460/2003, Master Charles Wong, upon an order 14 application, granted judgment to Subic Bay Travel & Amusement Ltd (“Subic Bay”) against the Defendant herein for a sum of $3,500,000 together with interest and costs.  The Plaintiff herein was and is a director of Subic Bay.

3. The Defendant failed to pay Subic Bay and it then issued bankruptcy proceedings HCB 10976/2004 to enforce the judgment debt.  Parties negotiated and the Defendant handed 2 blank cheques to the Plaintiff to provide for security.  On 13 April 2005, the petition was withdrawn and subsequently, the Defendant further paid a total sum of RMB700,000.00 to the Plaintiff in about April/May 2005.

4. On 14 November 2005, the Plaintiff inserted the date, payee (in his own name) and amount of $5,295,000 in one of the said blank cheques.  It was then presented for payment but was bounced for “Drawer’s chop/sign differs” and “Refer to drawer”.

5. The Plaintiff commenced the present proceedings on 27 February 2006 and further issued the present order 14 summons on 27 March 2006.  The substantive argument of the matter came before me on 18 July 2006.  Mr. B. Tso of Messrs. Tso Au Yim & Yeung acted for the Plaintiff and Mr. K.C. Li of Messrs. Raymond Chan, Kenneth Yuen & Co. represented the Defendant.  Upon consideration of all the evidence authorities and submissions from the parties, I have come to the conclusion that unconditional leave is to be given to the Defendant to defend the proceedings.  My reasons appear as follows. 

6. For the purpose of this application for summary judgment, Mr. Li raised 3 defences, namely (a) lack of consideration, (b) the cheque was delivered with conditions and (c) there were some other reason for a trial in the present proceedings.

Consideration?

7. At the hearing, the parties spent quite some time in arguing if the Plaintiff had given consideration for the cheque.  Mr. Tso said that the withdrawal of HCB 10976/2004 by Subic Bay against the Defendant provided for the consideration while Mr. Li argued that it was insufficient as it was only given by a third party.

8. The parties then turned on the argument on the interpretation of section 27(1) Bills of Exchange Ordinance (Cap. 19).

“(1) Valuable consideration for a bill may be constituted by-

(a) any consideration sufficient to support a simple contract;

(b) an antecedent debt or liability.  Such a debtor or liability is deemded available consideration whether the bill is payable and on demand or a future time.”

It suffices for me to say that the law appears to be unsettled yet.  There are two lines of authorities in relation to “antecedent debt or liability”.

(a) In Kao, Lee & Yip v Euro Tresure Ltd [1985] 1 HKC 46 (Court of Appeal – Roberts CJ, McMullin VP and Silke JA), it was held per curiam that:

“Per curiam

Although unnecessary to decide, the court preferred that view that, in relation to s 27(1) of the Bills of Exchange Ordinance, it was insufficient if consideration had been given to a third party, and that value need not be given by the holder of the cheque, so long as value had been given for it.  Therefore the defendants did not have an arguable case.  Diamond v Graham [1968] 1 WLR 1061 followed.  Oliver v Davis [1949] 2 KB 727 and Hasan v Willson [1977] 1 Lloyd’s Rep 431 considered.”

(b) However, in a later Court of Appeal case, Fortune Focus International Ltd v The (Holdings) Co Ltd [1998] 1 HKLR 304 (Nazareth V-P, Lin & Leong JJA), it was viewed that:

“Held, allowing the appeal, that:

(1) ……

(2) ……

(3) Section 27(1)(b) did not apply to the case of an antecedent debt or liability of a third party in the absence of, at least, a relationship sufficient to connect the receipt of the cheque with the antecedent debt or liability (Oliver v Davis [1949] 2 KB 727; Hasan v Willson [1977] 1 Lloyd’s Rep 431 followed).  (See p.306H-I.)”

(c) The legal dispute cannot be resolved in an application for summary judgment.

Conditional delivery?

9. The Defendant further relied on section 21(2) of the Bills of Exchange Ordinance.

“ 3.1 The second line of defence adopted by the Defendant is that the delivery of the cheque was conditional and not for the purpose of transferring the property in the cheque and that the conditions were not fulfilled.  The Defendant is relying on Section 21(2) of Bills of Exchange Ordinance.

  3.2 The conditions alleged by the Defendant were (a) the Plaintiff must produce a written assignment of the outstanding judgment debt in another Action signed by Philip Li on behalf of Subic Bay in his favour and (b) the Plaintiff must produce the written break-down and calculation of the amounts when he filled in the amount of the cheque ……”

(skeleton submission of Mr. Li)

10. In this respect, the Mr. Tso persuaded me to ignore it because:

“11. There was no condition attached to the Cheque when it was delivered to the Plaintiff…...

12. The Defendant’s case is also contraditionory, it is unbelievable and inconsistent with the facts of the matter, that the Defendant on the one hand is asserting that he must be provided with a written assignment of the Judgment Debt in the Plaintiff’s favour signed by Mr. Philip Li on behalf of Subic Bay in order and on the other hand the Defendant just simply paid RMB700,000 to the Plaintiff’s account without requesting any written assignment or document signed by Mr. Philip Li on behalf of Subic Bay authorizing receipt thereof.”

(skeleton submission of Mr. Tso)

11. In this respect, upon consideration of the evidence before me, in my view, I cannot agree with the Plaintiff that the “conditions” are wholly unbelievable in the circumstances. As a matter of common sense, a debtor will never want to pay twice or to pay more than he is liable for.  These disputed facts or triable issues are to be left to be decided at trial.

Some other reason for a trial?

12. Mr. Li further relied on paragraph 14/4/10 in Hong Kong Civil Procedure 2006 (“HKCP 2006”) at page 173 to suggest that summary judgment should not be entered for the Plaintiff.  The long and short of his argument is that, notwithstanding the complaint by the Defendant, both the Plaintiff and Subic Bay have elected to keep silent on their position.  Hence, if judgment would be entered herein, the Defendant were to be faced with two judgments when he should only be liable for one.  Further, it is still not made known to the Plaintiff or to the Court as to how the sum of HK$5,295,000.00 was arrived at.  Taxation in HCA 2460/2003 has never been done and the Plaintiff does not even attempt to supply the particulars of the calculation or at all.

13.  To these arguments, I believe that neither the Defendant nor Mr. Tso has rendered any satisfactory explanation to the Court by way of affidavit evidence or submission.

Costs and further directions

14.  There appears to be no reason why costs should not follow the event.  I therefore make an order nisi that costs of the application, together with costs reserved on 8 May 2006, be costs in the cause (Paragraph 14/7/13, HCKP 2006 at page 191).

15.  I further direct that:

(a) The Defendant shall within 14 days from today file and serve his Defence and Counterclaim, if any.

(b) The Plaintiff shall file and serve his Reply and Defence to Counterclaim, if applicable, 14 days thereafter.

(c) Time shall run during court vacation.