SHUE KWOK KEUNG v. FU SI HING ENGINEERING & BUILDING COMPANY LIMITED AND ANOTHER

IN THE HIGH COURT OF JUSTICE

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JUDGMENT

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1. This is a plaintiffs appeal against an order of Master Boa made on 16th July 1984 by which the Master gave unconditional leave to the defendant to defend in an action which is brought upon a dishonoured cheque for HK$100,000.

2. The defence put forward to the learned Master and repeated on affirmation exhibiting a draft defence before me is that that although the cheque was made payable to the plaintiff in his personal capacity, it, in fact, represented an advance payment for work which the plaintiff's company or the company which he controls was to undertake by way of sub-contract for the defendant. That work was never started, says the defendant, so there was a total failure of consideration for the cheque and that is a defence on which leave should be given unconditionally as was the Master did.

3. Furthermore, it is said that there had been a payment of $50,000 by the defendant to the plaintiff for work which has not been carried out by a cheque which was honoured upon presentation and that, in the circumstances, there is a counterclaim for that amount.

4. The plaintiff's case is that although there was a contractual relationship between the company controlled by the plaintiff and the 1st defendant, the cheque for $100,000 had nothing to do with it. It represents the repayment of a loan which had been made some three months earlier at the end of 1983, and was a personal matter between the plaintiff and the 2nd defendant. Had matters appeared in that way, I would, I think, be inclined to leave undisturbed the order made by the learned Master. But what I had not appreciated, and I am sure it is entirely my fault, is that the cheque payable by the plaintiff to the defendant as exhibited is only a photocopy made before presentation, and that the original cheque has been paid. If it had been the case that the cheque had not been encashed, it would have lent colour to the defendants' case which is that it was something given merely by way of security from the sub-contractor in anticipation of the work which was to be carried out in an unusual but not wholly improbable arrangement. But it appears now that it is agreed between the parties that the cheque was cashed. I do not know the circumstances of it being cashed or into whose account the proceeds went; but it does seem to me that to take a cheque from the sub-contractor for $100,000, at the same time that $50,000 was advanced to provide working capital is a remarkable arrangement and one which, I am bound to say, I have not come across. It seems to me very odd that someone who is about to undertake work for which they expect payment should themselves made a substantial payment in advance. And, of course, if it were for security, then it more than covers the amount of the cheque which was paid, as is acknowledged, by the defendant to the plaintiff. Altogether the defence suggested has such an air of improbability about it but I am bound to regard it with a great deal of circumspection and suspicion. I think, to adopt the words which have been used in the cases, I am entitled to view it as a shadowy defence and I do. That being the position, although I am inclined to allow leave to defend in this action. I propose to do it upon stringent terms which will involve the defendants bringing the whole of the amount claimed into court; that is HK$100,000.

5. So, to that extent, the appeal is allowed. There will be leave to defend but it will be conditional upon the defendants bringing HK$100,000 into court within 7 days. So that there is no misunderstanding about it, that sum is to be placed in an interest bearing account. Costs of the appeal in the cause and that will leave the previous order for costs undisturbed.