XCHRX CHEUNG KAM SUET t/a QUODA TRADING CO. v. HUNG YIN PING AMY t/a HUNGTEX TRADING CO.

HCA21463/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.21463 OF 1998

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J U D G M E N T

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1. This is the Plaintiff's application for summary judgment under Order 14. The Plaintiff's claim herein is based on two dishonoured cheques drawn by the Defendant in the Plaintiff's favour in the total sum of $516,161.88.

2. The Defendant admits that she drew the cheques and avers in the Defence and the affirmation filed in this application that the cheques represented damages to be paid to a Wealthwell Co. Ltd. ("Wealthwell").

3. The defence advanced by the Defendant in her Defence and the affirmation is that the transaction underlying the cheques was an illegal one under the laws of Mainland China. The Defendant avers that the underlying underline transaction relating to the cheques was a sale of textile quota by the Defendant to Wealthwell for the export of textile goods from the Mainland to the United States.

4. Having examined the documents and considered the parties' submissions, I find that the Defendant has not established any triable defence to the Plaintiff's claim because :-

(a) The Defendant has failed to established the alleged illegality - Article 20 of the Foreign Trade Law of the PRC refers to the distribution of "quota" ("配額"). There is no provision in that Article prohibiting the transfer of quota, the prohibition of sale or distribution in the statutory provisions relied upon by the Defendant were related to "licences for import and export" ("進出口許可証"). There is no evidence that under the Mainland law, the word "quota" ("配額") is equivalent to "licences for import and export" ("進出口許可証").

(b) The Defendant has not alleged or proved that the Plaintiff was aware of the alleged illegality. It is up to the Defendant to establish that Mainland law is applicable in Hong Kong, if not, Mainland law can be regarded as foreign law. In order for the Defendant to successfully defend this action, the Defendant must prove that the Plaintiff was also aware of the illegality : see Chitty on Contracts (1994) 27th Edition, para 16-029.

(c) In any event, no expert evidence is adduced to prove the foreign law. See Cheshire & North's Private International Law, 12th Edition, pp 107-8.

(d) There is no evidence to show how the PRC law applies (if it applies) to the facts of this case.

5. The Defendant also raises a defence that the sum was a penalty. The burden is on the Defendant to establish that the claim relates to a penalty. There is, however, no evidence to such effect.

6. Further defence was raised by the Defendant during the hearing including the following :-

(1) The Defendant has no dealings with the Plaintiff and the Plaintiff was unknown to her.

(2) A suggestion that the cheques were drawn under duress.

(3) There was an oral condition attached to the cheques, namely, there was insufficient fund in the account to meet the cheques.

(4) There was a partial payment of $40,000.

(5) There was a settlement agreement reached between the Plaintiff for payment of a lesser sum by instalments.

As regards these further lines of defence, they were never advanced in either the defence or the affirmation in opposition. I note that the Defendant has all long been legally represented until today's hearing. Secondly, I consider that these lines of defence are bad in law because :-

(1) According to the Defendant's affirmation, Wealthwell, the creditor, instructed the Defendant to pay the sum to the Plaintiff in discharge of the Defendant's indebtedness to Wealthwell. This provides the necessary consideration to support the cheques.

(2) The allegation of duress is unsupported by sworn evidence and it was only raised at a very late stage.

(3) The alleged oral condition is inadmissible evidence to contradict the written contract represented by the cheques.

(4) The allegations that there was a settlement agreement and partial payment were also unsupported by sworn evidence and were only raised at the hearing.

7. I therefore reject these lines of defence. For the above reasons, I find that there is no triable defence and there is no other reason why the matter ought to go to trial. There will, therefore, be final judgment in the sum claimed with interest thereon.