XCHRX Ocean Cassette Accessories Manufactory Ltd. v. Maxii High-Technique Engineering Co. Ltd.

DCCJ16446/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 16446 OF 2001

__________________

J U D G M E N T

__________________

1. This afternoon, I have an Order 14 application by the Plaintiff against the Defendant in respect of two dishonoured cheques in the respective sums of $237,000 and $221,912 issued by the Defendant in favour of the Plaintiff. The cheques were presented for payment by the Plaintiff and, as I say, they were dishonoured and so in this action the Plaintiff sues for the sums represented by the two cheques.

2. In the defence filed by the Defendant as well as in an affirmation made by a Mr Au, a director of the Defendant, the Defendant put forward the case that it had no business or contractual relationship whatsoever with the Plaintiff. According to the defence and Mr Au's affirmation, the circumstances of the Defendant's writing the two cheques in favour of the Plaintiff were like this.

3. There was a sort of joint venture company formed on the one hand by Mr Au or his company, the Defendant, of which he was a 50 per cent shareholder, and by a Madam Ho, on the other, who was at all material times a director and shareholder of the Plaintiff. Under this joint venture company known as Ikeda, Ho and Au were both directors and Ho also owned 50 per cent of the shareholding of the company, whereas according to the company's registration record Mr Au was a 50 per cent shareholder.

4. According to the defence and Mr Au's affirmation, Ikeda was indebted to a number of creditors and it is not in dispute that Ikeda owed the Plaintiff money and before me I have invoices evidencing the indebtedness in question. According to the defence and Mr Au, the two cheques were written or issued by the defendant "to settle part of the debts of Ikeda", as per paragraph 4 of the defence. The cheques were handed to Madam Ho for custody. Ho, in the capacity of a director of Ikeda, the joint venture company, promised Au, who gave her the cheques, that she would not send out these two cheques unless and until Au informed her to do so. According to Mr Au, at that time he did not know that Ho had an interest in the Plaintiff company. According to the defence and Mr Au's affirmation, without the authorisation of either Mr Au or the Defendant, the cheques reached the hands of the Plaintiff which then presented the cheques for payment leading to the present complaint of dishonoured cheques.

5. In opposition to today's application, the Defendant argued that there was no business or whatever relationship between the two parties and therefore the Defendant was not liable to make payment in respect of the indebtedness of Ikeda towards the Plaintiff. The Defendant also argued that because of the oral agreement between Madam Ho and Mr Au in relation to the custody of the cheques in question, there was no authorised delivery of the two cheques by the Defendant in favour of the Plaintiff, and it was also suggested that Madam Au had acted in breach of her fiduciary duty owed to Ikeda, the joint venture company, by concealing her involvement in the Plaintiff company.

6. I shall deal with these arguments in the following order: Taking the last point first, even taking the Defendant's case to the highest and even assuming that Madam Ho concealed her involvement in the Plaintiff from the joint venture company, Ikeda, there is no dispute that the joint venture company did owe the Plaintiff the money represented by the two cheques in question, and as I say, as evidenced by the documents before me, and any breach of fiduciary duty would be a matter between Madam Ho and Ikeda, something which has nothing whatsoever to do with the present claim of the Plaintiff against the Defendant based on the dishonoured cheques. I see nothing in this argument of the Defendant.

7. Turning to the first argument, i.e. that there was no contractual relationship between the Plaintiff, I take the Defendant to mean that the Defendant was not obliged to make repayment on behalf of Ikeda in favour of the Plaintiff in respect of Ikeda's indebtedness towards the Plaintiff. That must have been correct, at least up to the time when the Defendant agreed to write out the cheques in question. But once the Defendant agreed to write out the cheques in question, given the involvement of Mr Au in both Ikeda and the Defendant, the irresistible inference to be drawn from the facts must be that the Defendant agreed at the request of Mr Au and/or Ikeda to write out the two cheques in question to satisfy the indebtedness of Ikeda towards the Plaintiff. In other words, in those circumstances, I find that there was consideration for the two cheques, it being the discharge of the indebtedness of Ikeda towards the Plaintiff or the release of the indebtedness on the part of the Plaintiff, in return for the two cheques by the Defendant which were issued by the Defendant at the request of Mr Au and Ikeda. So I see nothing in this argument either.

8. Dealing with the non-delivery of the cheques argument, I must mention that before me there are Minutes of the joint venture company, Ikeda, of board meetings held between June and July. In these Minutes, there were repeated references to the fact that the company owed the Plaintiff money, i.e. the indebtedness represented by the two cheques in the present case, and Mr Au had agreed to be responsible for discharging this indebtedness on behalf of the company and this he had promised to do by the issuance of two cheques. And, in fact, according to the Minutes, all of which were signed by Mr Au himself, regarding the first cheque, i.e. the cheque for the sum of $237,000, it had already been directly given to the Plaintiff and as regards the other cheque, i.e. the cheque for $221,912, the cheque had already been given by Mr Au to Ikeda.

9. Taking the first cheque first, these Minutes clearly contradicted the story of Mr Au that these cheques were only physically handed over to Madam Ho on the condition that they should not be presented for payment until further instructions from Mr Au or the Defendant. The Minutes, in my judgment, clearly showed that this first cheque was given by the Defendant to the Plaintiff to satisfy the indebtedness represented by the amount of the cheque in question. Nor can one argue that the Minutes only referred to Mr Au himself issuing cheques in favour of the Plaintiff because the Minutes clearly referred to the fact that two cheques had already been physically received by the Plaintiff and Ikeda respectively and from the evidence available, the reference to these two cheques must have been a reference to the two subject cheques in question, i.e. the cheques issued by the Defendant, no doubt at the request of Mr Au in favour of the Plaintiff to discharge the indebtedness of Ikeda. So Mr Au's story really flies in the face of the Minutes in question, at least in relation to the first cheque and he is totally contradicted by the contemporaneous documents.

10. So although this is an Order 14 application and all a defendant needs to do is to show an arguable case, given the factual situation as analysed by me above, in my judgment the story put forward by the Defendant is totally unbelievable and is contradicted by the available contemporaneous documents, particularly when the Minutes were all signed by Mr Au himself.

11. Although the Minutes referred only to the second cheque having been received by Ikeda instead of the Plaintiff itself, in my judgment, given the nature of the Defendant's story and Mr Au's story, the two cheques must stand or fall together or put another way, the story relating to giving the cheques respectively to Madam Ho for safe custody only pending further instructions which were never forthcoming, must stand or fall together in relation to the two cheques, and one cannot split up the story and say that it was partially true in relation to the subsequent cheque but not so true in relation to the first cheque.

12. So in my judgment, following my rejection of the story in relation to the first cheque as contradicted totally by the Minutes, it is quite impossible for me to accept the story of the Defendant or Mr Au in relation to the second cheque as arguable at all. In my judgment, the whole story is quite unbelievable and is contradicted by the documents.

13. Judging from the available materials, in my judgment it is quite clear to me that the two cheques were issued at the request of Mr Au by the Defendant to discharge the indebtedness of Ikeda towards the Plaintiff. There were some postponements of the date for presenting the cheques for payment, as evidenced by the Minutes, but in my judgment this did not amount to the imposition of any condition precedent relating to the delivery of the cheques. In my judgment, the cheques had been delivered and all that Mr Au and the Defendant did was to ask for indulgence from Madam Ho and the Plaintiff to delay the presentation of the cheques. The cheques had been delivered and they were fully functional cheques. That there had been some delay or indulgence granted on the part of the Plaintiff did not affect their legal position.

14. So for all these reasons and as it has been said on many occasions and certainly in almost all occasions when people apply for summary judgment in relation to dishonoured cheques, cheques, except in very exceptional circumstances, should be treated as cash, and whatever disputes there may be or may have been between the parties underlying the cheque transactions should be litigated elsewhere, I give summary judgment to the Plaintiff in respect of the two sums in question, i.e. $237,000 and $221,912.

15. And on top I also order that the Defendant pay the Plaintiff interest from the respective dates of presentation of the two cheques, i.e. from 20 June 2001 and 10 September 2001 respectively, to the date of judgment at the rate of 6 per cent per annum and thereafter at the judgment rate until full payment.

16. I also order that the Defendant pay the Plaintiff the costs of this action to be taxed if not agreed.