YAU PO KEUNG v. FONG SUNG YUN AND ANOTHER

CACV 227/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 227 OF 1999

(ON APPEAL FROM HCA 21983/1998)

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J U D G M E N T

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Rogers, J.A. :

1. This is an appeal from a judgment which was given on the 20th July of this year in Order 14 proceedings. The action concerns a claim in respect of two cheques of $250,000 each. The claim is thus a simple one.

2. The 1st named Defendant appears in person as he did below. He is sued together with his wife. His wife was given unconditional leave to defend. At one stage, the 1st named Defendant was represented and a defence and affidavits were prepared. The 1st named Defendant is now in the process of applying for legal aid. His defence in short is this that there were a series of payments by the Plaintiff in 1996. These payments were not made to the 1st named Defendant but they were made to a company of which the 1st named Defendant and a Mr. Lam were the sole shareholders, namely Centacom Trading (HK) Limited. The payments were made to that company to be transmitted to Mr. Lam, says the 1st named Defendant, for the purpose of purchasing shares from Mr. Lam in Centacom. The 1st named Defendant says that the payments were transmitted via the company to Mr. Lam, who by that stage was in Canada. They were not paid directly to Mr. Lam's bank account but to those of his close relatives because Mr. Lam did not have any bank accounts in Canada. The 1st named Defendant said the 2 cheques were issued because the Plaintiff put pressure on the 1st named Defendant in respect of the money that had been paid and the fact that no shares had in fact been transferred because Mr. Lam had not executed the transfers. Regrettably, in the interim now, the company has had to be put into liquidation because its business has failed.

3. There was a memorandum which is headed "CASH FLOW FROM J. YAU - S.Y. FONG VIA W/L BANK" listing out the payments in 1996 which had been paid by Mr. Yau. There is a chop at the bottom. We have been told today by the 1st named Defendant that this is a chop which was in fact the 1st named Defendant's chop but it had only ever been used in China for the purposes of securing electricity supplies and the chop had certainly not been affixed by the 1st named Defendant to the document. The 1st named Defendant tells us that he never saw this document until he saw it in the affidavit which was filed in April of this year.

4. In those circumstances, it seems to me that as a factual matter, the 1st named Defendant has a clear defence that there was no consideration for these cheques. The payments which had been made were payments which were to be channelled to Mr. Lam. They were duly channelled to him and in consideration of them Mr. Lam was to transfer the shares which he held in the Centacom Trading to the Plaintiff. Albeit, that never took place, the cheques were thus given without consideration.

5. The question on this appeal is whether the defence which has been raised is believable. In my view, it would be impossible to say that this defence, when properly understood, is not believable.

6. The 1st named Defendant's case was not analysed in the judgment below and hence the basis on which it was held that the Defendant had no defence is not clear.

7. In my view, the 1st named Defendant should be given a chance to appear in court and establish his case by evidence and show that he is not liable for this money.

8. I would simply mention that in the defence it is also pleaded that as a result of and following the payments which had been made, as the 1st named Defendant says, to be transferred to Mr. Lam, Mr. Yau actively participated and was involved in the daily operation of the management of the company and in particular, his factory in the mainland. That has been alleged by the 1st named Defendant appearing today.

9. In those circumstances, I would allow this appeal and set aside the judgment and give unconditional leave to the 1st named Defendant to defend this action.

Yeung, J. :

10. I agree with the decision of Rogers, J.A. For the reasons that he has given, I too would allow the appeal and grant the 1st named Defendant unconditional leave to defend the action.