CHINA SOURCES ENGINEERING CO., LTD. v. K & E (H.K.) GROUP (a firm) AND OTHERS

DCCJ 16770/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 16770 OF 2001

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J U D G M E N T

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1. In this action, the plaintiff claims against the 1st defendant firm a sum of $340,000 together with interest thereon at the rate of 3% per month from 18 January 1999. It is not in dispute on the pleadings that the 2nd defendant was one of the partners of the 1st defendant at all times material to this action.

2. The plaintiff's claim is set out in its Re-Amended Statement of Claim dated 28 July 2000. The plaintiff says that by a written agreement in Chinese signed on 24 December 1998 by the plaintiff as lender and the 2nd defendant for and on behalf of the 1st defendant as borrower, the plaintiff agreed to lend and the 1st defendant agreed to borrow a sum of $340,000 from the plaintiff upon the terms and conditions therein contained.

3. The loan agreement stipulated, inter alia, that:

(a) the 1st defendant would repay the loan in the sum of $340,000 to the plaintiff within 25 days after the said loan was lent to the 1st defendant;

(b) interest on the unpaid amount of the said loan at the rate of 3% per month would be levied if the whole amount of the said loan was not repaid within 25 days as aforesaid; and

(c) the 1st defendant would draw a post-dated cheque for the sum of $340,000 in favour of the plaintiff in repayment of the said loan.

4. Pursuant to the loan agreement, the plaintiff advanced the sum of $340,000 to the 1st defendant on or about 24 December 1998. In return, the 2nd defendant delivered to the plaintiff a cheque for the sum of $340,000 drawn on the 1st defendant's account maintained at the Nanyang Commercial Bank Limited (Wan Chai Branch) post-dated to 19 January 1999. The cheque was presented for payment on or about 15 March 1999 but was dishonoured and returned with an unpaid item memo from the bank stating "Refer to Drawer".

5. Neither the 1st defendant nor the 2nd defendant appeared in court today. I exercised my discretion under Order 35, rule 1 of the Rules of the District Court and proceeded with the trial. The 1st and 2nd defendants' then solicitor was present at the hearing at which today's trial date was fixed.

6. The plaintiff called one witness, Mr Sze Kwok Wah, in support of its case. Mr Sze adopted his Witness Statement and his Supplemental Witness Statement dated respectively 14 August 2001 and 20 June 2002 as his evidence. He further produced the original cheque and the unpaid item memo in evidence.

7. In the light of the unchallenged evidence of Mr Sze, I am satisfied that the plaintiff has proved its case on the loan agreement and on the cheque on a balance of probabilities.

8. Furthermore, I would dismiss the 2nd defendant's counterclaim against the plaintiff. The 2nd defendant being absent, there is no evidence before the court to support the same.

9. I see no reason why interest should not be awarded on a contractual basis, that is, at the rate of 3% per month from 19 January 1999 (the date when the plaintiff's cause of action on the loan agreement accrued).

10. Ms. Lan, acting for the plaintiff today, asks for an order that the costs of the action and of the counterclaim be taxed on the common fund basis or the indemnity basis. After careful consideration, I am not prepared to depart from the usual order that costs should be taxed on a party and party basis. This is a case where the defendants had been given conditional leave to defend upon the plaintiff's application for summary judgment under Order 14. Further, this is a case where the plaintiff has not seen fit to apply to strike out the 2nd defendant's counterclaim on the ground that it is obviously unsustainable.

11. Accordingly, the order I make is as follows:

(1) there be judgment against the 1st and 2nd defendants in favour of the plaintiff for the sum of $340,000, together with interest thereon at the rate of 3% per month from 19 January 1999 to the date hereof;

(2) the counterclaim by the 2nd defendant against the plaintiff be dismissed;

(3) costs of the action be paid by the 1st and 2nd defendants to the plaintiff, costs of the counterclaim be paid by the 2nd defendant to the plaintiff; and

(4) the above costs to be taxed if not agreed on a party and party basis with a certificate for counsel for today's hearing.