KAN MAN LOK PAUL v. CHENG YANG

HCA 215/2018

[2020] HKCFI 2506

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 215 OF 2018

________________________

________________________

________________________

J U D G M E N T

________________________

1.  This is the trial of the Plaintiff’s claim for the sum of HK$75 million based on a cheque no. 263179 drawn by the Defendant in favour of the Plaintiff dated 31 December 2017 which was dishonoured on 2 January 2018 upon presentation (the “Dishonoured Cheque”).

2.  The Defendant was absent during the trial. Hence, he could not and did not adopt the matters set out in his witness statement as his evidence.  The Plaintiff duly gave evidence and adopted the content of his witness statement as his evidence in chief.

3.  In the circumstances, it is up to the Plaintiff to prove his pleaded case. 

4.  Having examined the pleadings, the Plaintiff’s witness statement and the contemporaneous documents, I am of the view that the Plaintiff is entitled to judgment on the claims he set out in his Statement of Claim.

5.  First, this is a simple dishonoured cheque case.  It is established law that cheques are treated as the equivalent of cash.  They are to be honoured.  Only in exceptional circumstances will a court deprive a claimant of judgment on a claim based on a cheque.  (See Li Yu v Hui Yan Sui William, HCA993/2009, unrep., 12 October 2009 at §§21-23 per Marlene Ng J. and   sections 3 and 73 of the Bills of Exchange Ordinance, Cap.19 (the “Ordinance”))

6.  Section 55(1)(a) of the Ordinance provides:

“(1) The drawer of a bill, by drawing it –

(a) engages that, on due presentment, it shall be accepted and paid according to its tenor, and that if it is dishonoured he will compensate the holder or any indorser who is compelled to pay it, provided that the requisite proceedings on dishonour are duly taken;

(b) is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.”

7.  Notice of dishonour shall be dispensed with where the dishonoured cheque was returned by the drawee bank with the note “refer to drawer”. (See Section 50(2)(c)(iv) of the Ordinance and Thong Ko Sine v Anthony George Wilkinson & Anor, CACV 30/1988, unreported, 10 June 1988).

8.  In the present case, the cheque was duly presented for payment at the China Construction Bank (Asia) Corporation Limited on 2 January 2018.  The cheque was subsequently returned dishonoured and marked as “refer to drawer”.

9.  Shortly after, on 25 January 2018, the Plaintiff commenced the present action.

10.  Secondly, the Defendant’s case that the Dishonoured Cheque was merely used as a security for a loan.  As the loan has been repaid, the Dishonoured Cheque should be returned to the Defendant and should not have been presented for payment. 

11.  Specifically, the Defendant’s case is that:

(1)  At the material time, the Plaintiff and the Defendant were involved in a corporation transaction whereby the Plaintiff’s company, Lawnside International Limited, a British Virgin Islands company (“Lawnside”) agreed to sell to the Defendant’s company, Advanced City Investments Limited (“Advanced City”), its shares in a Hong Kong listed company, namely, Champion Technology Holdings Limited (“Champion”) (stock code: 92).

(2)  After the sale of the shares in Champion, it is alleged that the Plaintiff was concerned with the ability of Champion to repay an existing debt and offered a bridging loan of HK$167 million to Champion to enable it to stay afloat (the “Lawnside Loan”).

(3)  The Defendant further pleaded that as part of the Lawnside Loan, the Defendant and Champion were required to offer various security including two post-dated cheques drawn by the Defendant in the aggregate sum of HK$100 million.

(4)  It is also pleaded that a further security arrangement was reached in about 2017 requiring the Defendant to replace the previous post-dated cheques with new cheques increasing the aggregate security to the sum of HK$125 million (the “Further Security Arrangement”).

(5)  It is pursuant to this Further Security Arrangement that the Defendant asserts that the Dishonoured Cheque was drawn.

(6)  The Defendant further pleaded that the Lawnside Loan was repaid on 7 March 2017.  Hence the Plaintiff was no longer entitled to present the Dishonoured Cheque for payment.

12.  Mr Chow for the Plaintiff submitted that first, the contemporaneous documents do not specify any requirement of any post-dated cheques issued by the Defendant personally to the Plaintiff personally as a security for the Lawnside Loan.

13.  Secondly, in terms of security, the Lawnside Loan was secured by the list of properties in Hong Kong held by Champion as set out in the letter dated 27 October 2016.

14.  Thirdly and more importantly, in terms of timing, it is the Defendant’s own case that Champion had effectively secured a loan to repay the Lawnside Loan by early March 2017 and had repaid the loan by 17 March 2017.  In such circumstances, it makes very little sense for the Plaintiff to make a demand for a further security in the form of a post-dated cheque on 16 March 2017 post-dated for payment on 31 December 2018.  It is even more unfathomable as to why the Defendant would have agreed to provide the Dishonoured Cheque on 16 March 2017 as a security for a loan which was paid off on the next day, namely, 17 March 2017.  There are merits in Mr Chow’s submissions.

15.  Fourthly and fundamentally, this Court cannot see any documentary link between the Lawnside Loan and the Dishonoured Cheque. The Defendant chose not to come forward to testify in Court and give an explanation.  There is no evidence to support the pleaded defences.

16.  In the circumstances, I find that the Plaintiff has proved his claims against the Defendant. 

17.  As far as interest is concerned, the Plaintiff is entitled to have interest at HSBC’s prime rate plus 1% as from 2 January 2018 and thereafter at the judgment rate.

Disposition

18.  For all the reasons stated above, I make the following orders:

(1)  The Plaintiff is entitled to the sum of HK$75,000,000;

(2)  Interest at the rate of HSBC’s prime rate + 1% as from 2 January 2018 and thereafter at the judgment rate;

(3)  Costs to be paid by the Defendant to the Plaintiff, to be assessed on a party to party basis, if not agreed.

19.  Finally, it remains for me to thank Mr Chow for the Plaintiff for his helpful assistance to the Court.