XCHRX LAMMAR OFFSET PRINTING LTD. v. LAM CHING WAH AND ANOTHER

HCA14065/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.14065 OF 1997

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J U D G M E N T

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1. This is an appeal against a decision of Master Cannon who on 11th February 1999 dismissed the Defendant's application to set aside the judgment which had been entered against him in default of giving notice of an intention to defend on 19th March 1998.

2. The Defendant was represented before Master Cannon but appeared in person on appeal. The skeleton argument submitted by Defence counsel before the learned Master was helpfully annexed to Plaintiff's counsel's written submission on appeal. In addition the Defendant made further oral submissions.

3. The first point which the Plaintiff prays in aid is the delay by the Defendant and the patience of the Plaintiff. The case stems from invoices for work done by the Plaintiff in 1995. In May 1997 the Plaintiff agreed to accept post-dated cheques for the outstanding amounts. The cheques started to "bounce" in August 1997, a writ was served in December 1997. No action was taken by the Defendant and judgment was entered on 19th March 1998. A further period of over seven months then passed before the Defendant applied to set aside the judgment.

The Facts

4. The Defendant and his wife were the only two shareholders and directors of Asia Graphic Arts Company Ltd ("AGA"). In 1995 the Plaintiff submitted five invoices for work done in a total sum of $475,374.50. The invoices were still unpaid in 1997 and so the Plaintiff instructed its solicitors to issue a demand letter to AGA. The upshot was that the Plaintiff agreed to accept ten post-dated cheques from the Defendant personally in forbearance to sue the Company. The first cheque was honoured, the next four cheques were dishonoured but the Defendant paid cash instead, but all cheques thereafter were dishonoured and no payment has been made. The Plaintiff's forbearance to sue the Company continued whilst the money was being paid but about one month after the August 1997 cheque was dishonoured and no cash paid either, the Plaintiff commenced proceedings against the Company. The Plaintiff has a judgment in those proceedings which has not been executed. The Proceedings on the dishonoured cheques against the Defendant personally were taken out on 23rd December 1997.

5. There is no dispute that the judgment entered on the cheques is a regular judgment and that the burden is on the Defendant to show he has a meritorious defence. Before the learned Master, two defences were advanced which were reiterated and expanded upon on appeal. I shall deal with them in turn.

1. Total lack of consideration :

6. The Defence argument is that by entering judgment against AGA on the unpaid invoices, the Plaintiff effectively discharged itself from its promise to forbear to sue. It is said that the Defendant received no benefit from issuing the cheques and so there is no consideration.

7. I do not accept this submission. By s.27(1)(a) of the Bills of Exchange Ordinance :

"valuable consideration for a bill may be constituted by any consideration sufficient to support a simple contract."

8. A promise and forbearance to enforce an existing claim against a third party or an actual forbearance of the promisor is sufficient to constitute consideration. Here, there was actual forbearance because the Plaintiff agreed not to sue the Defendant's own Company because the cheques had been issued, so long as they were being honoured. I find the argument that there was a total lack of consideration untenable.

2. Undue influence

9. The Defendant repeated his claim, originally made in his affirmation of 12th November 1998 that he had been treated unfairly by the Plaintiff's solicitor. It was submitted that the Defendant only provided the post-dated cheques because he was induced to do so. It was not in dispute that the Defendant was not legally represented at the time and that he attended the offices of the Plaintiff's solicitor in May 1998. It is not in dispute that he was informed that the Plaintiff would agree to not suing the Company if the Defendant paid his outstanding debt by way of personal post-dated cheques.

10. It is plain that none of this could be construed as undue influence. Any attempt to sustain it as a defence would be hopeless.

11. In all the circumstances and for the reason given, this appeal must be dismissed with costs.