SZETO SHIU ON v. MOK SIU WAH JAKKIE and Another

1994, No.A3185

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This action is about two dishonoured cheques, one in the sum of $1 million and the other $100,000. The Plaintiff is related by marriage to the Defendants who traded under the name of Laser Collection Company. The Plaintiff's wife is the elder sister of the 1st Defendant and the 2nd Defendant is the husband of the 1st Defendant.

The cheques : reason for their issuance

2. It is the Plaintiff's case that the $1.1 million was owing to him by the Defendants. In August 1993, at the Defendants' request, he invested $798,020 in a venture concerning the purchase and resale of some Australian loudspeakers by the brand name of "Audio Definition", the Defendants guaranteeing a total return of $1.1 million within 80 days of the advance. The Defendants' deny that there was any agreement for the resale of the loudspeakers at a guaranteed profit for the Plaintiff, the August transaction being nothing more than an ordinary sale transaction. It is their case that the Plaintiff provided no consideration for the cheques which were issued at his request by the 1st Defendant in the circumstances described below.

(a) The Plaintiff's evidence

3. In late July 1993, at the Defendants' instigation, the Plaintiff and his wife had a meeting with the Defendants. Prior to this meeting, the Plaintiff said he was aware that the Defendants were in financial difficulties. The Defendants have since 1989 carried on an audio-visual business and the Plaintiff had heard from another brother-in-law, one Siu Kin Fat, the husband of his wife's sister, that the Defendants had tried to obtain a loan from him of $200,000.

4. At the meeting, the Defendants mentioned their cashflow difficulties and invited the Plaintiff to "invest" in some loudspeakers which the Defendants represented could be resold at a 100% profit. The Defendants told him that they had recently become the agents for this particular brand of loudspeakers and were anxious to expand their business. They said they did not have enough money so the Plaintiff was asked if he was interested in investing in the business. The Plaintiff queried the need for his investment if the speaker business was as good as the Defendants had made out. The Defendants told the Plaintiff that the $800,000 would be used to purchase speakers from them which they had in stock and which had already been paid for. They would then make arrangements for those same speakers to be resold to third parties. It was his understanding that the Defendants would use the $800,000 to pay debts owed to their bankers and that would buy them time to find buyers to purchase the speakers from the Plaintiff and to make a profit.

5. After a few days, having discussed the matter with his wife, the Plaintiff decided to approach his friend and employer Mr Wong Wing Wai for a loan as he did not have the funds himself. The Plaintiff and Mr Wong were colleagues in 1982. The Plaintiff is an accountant and after Mr Wong left to set up a business on his own, the Plaintiff assisted him on a part-time basis to do tax returns, etc. In 1989, he was asked by Mr Wong to work full time as a manager in one of Mr Wong's companies, Paco Fashion Limited. Mr Wong also had another company called Decor Limited. Decor was not a trading company. It held one investment which was a property that was rented out to tenants.

6. It is the Plaintiff's evidence that he told Mr Wong the purpose of the loan although he did not tell Mr Wong the rate of return expected from this "investment". Mr Wong was willing to lend the money and suggested putting the loan in the form of a letter of credit and using the letter of credit to buy the goods.

7. The Plaintiff telephoned the 1st Defendant to inform her of his decision to invest in the loudspeakers. He asked her for information relating to the loudspeakers which would enable him to make an application for a letter of credit. The Plaintiff received the details relating to the description, quantity and unit prices by fax from the 1st Defendant. Based on the information supplied, the Plaintiff prepared an application for a letter of credit which was submitted to the bank.

8. It is the Plaintiff's evidence that he told the Defendants to contact the bank. After obtaining the letter of credit, the Defendants apparently did not know how to deal with the necessary documentation to enable the letter of credit to be negotiated, so the Plaintiff assisted them and typed up not only the sales invoice but also the packing list and cargo receipt. The letter of credit was issued on 18 August 1993. The Plaintiff's evidence is that earlier in the day, based on the description of goods accompanying the application for the letter of credit, he prepared the cargo receipt which was presented to Mr Wong for his signature. It was only later that evening that he typed up the sales invoice and packing list which were two of the other documents that were required for the bank to make payment under the letter of credit.

9. The Plaintiff said that he was very familiar with the procedure for the opening of letters of credit as his company often purchased goods through letters of credit. He said that he made no formal inspection of the loudspeakers as such but that prior to making the application for the letter of credit, he did go to the Defendants' showroom in Sai Yeung Choi Street and saw some speakers there. He said he did not count them to make sure that they tallied with the list and that this visit occurred before the opening of the letter of credit but after he had agreed to invest. The Plaintiff could not remember when the application was submitted to the bank but that it was within one or two days of deciding to invest and notifying the 1st Defendant.

10. So far as his agreement with Mr Wong was concerned, the Plaintiff said that he undertook to pay all the fees, charges and interest associated with the letter of credit. Under the arrangement with the bank, the amount advanced under the letter of credit had to be repaid within 90 days. The fees for the issuance of the letter of credit and the trust receipt were debited directly from the Decor's account with the bank; so was the interest. At the expiration of the 90-day period, the principal was similarly debited.

11. On or about 27 November 1993, the Plaintiff sold his share of an investment in Solidale Industries Limited to his brother-in-law, Mr Siu and received $870,000. Out of this amount, he repaid $498,020 to Decor on 8 December 1993. The balance is still outstanding but the Plaintiff said that it was agreed with Mr Wong that the balance would be repaid when he was himself repaid by the Defendants. At the time, it was his intention to commence proceedings, if necessary, to obtain repayment and the balance of the funds was to enable him to finance litigation as well as to fulfil certain other needs that he had at the time.

12. It is the Plaintiff's evidence that several days before 28 November 1993, he approached the Defendants for the return of his investment. Two cheques were made out to him by the 1st Defendant. It was delivered to him in the shop premises of Laser Collection Company. At his request, the payee's name was left blank but everything else was completed by the 1st Defendant. The Plaintiff's explanation for this is that more often than not his name was mis-spelt and he felt it would be better if he completed the name himself. The first cheque for $1 million was dated 28 November and the second cheque was dated 28 December. These cheques were not presented for payment until February 1994 when they were dishonoured.

13. Three witnesses testified on the Plaintiff's behalf. They were his employer Mr Wong Wing Wai, a brother-in-law Mr Siu Kin Fat and the Plaintiff's wife.

(i) Mr Wong

14. Mr Wong first came to know the Plaintiff when they were both working for a company called Afasia Limited in 1982. The Plaintiff became Mr Wong's employee on a full-time basis in 1989. According to Mr Wong, in August 1993, the Plaintiff asked him for a loan which he needed for a business deal involving loudspeakers. The amount required was $800,000. Mr Wong's reaction was that as the amount was not insignificant, the Plaintiff ought to consider it seriously, but the Plaintiff told him that it was a business deal with a relative so it would be alright. It is Mr Wong's evidence that the Plaintiff did mention the profit he expected of the venture to him. Mr Wong could not now remember the exact figure except that the return was very handsome. Mr Wong told the Plaintiff that he did not have enough cash available but that he did have credit facilities left and asked the Plaintiff if he minded if a letter of credit was drawn instead. It was therefore agreed that the Plaintiff would repay the amount drawn under the letter of credit at the end of the 90-day credit period under the trust receipt. He would also be responsible for all fees, charges and interest payable in relation to the letter of credit. Mr Wong said that he derived absolutely no benefit from the transaction, and all that he did was to help the Plaintiff out.

15. Mr Wong was not in Hong Kong when the 90-day credit period expired. Several days thereafter, in any event by the end of the first week of December, the Plaintiff told Mr Wong that "he wasn't able to get all of it back yet" and repaid Mr Wong $498,020. This was deposited into Decor's account. Mr Wong was willing to defer the repayment of the outstanding amount but no mention was made of when that was going to occur. When questioned further about the time-frame for repayment of the balance of the advance, Mr Wong said that the Plaintiff initially told him that it would be as soon as possible. Then some two or three months later, the Plaintiff told him that there might be a delay as he was not "getting the rest back from the Defendants and that he might have to lodge a claim against them." Mr Wong said he did not ask for interest on this outstanding amount but he said that the Plaintiff must have felt embarrassed for not repaying the whole amount. The Plaintiff apparently brought up the subject of interest on his own initiative. Mr Wong told him to worry about it only after he had got his money back. The rate of interest was apparently not mentioned.

(ii) Mr Siu

16. Mr Siu is married to an elder sister of the 1st Defendant. It is his evidence that in July 1993 the Defendants approached him for a loan of $100,000 explaining that the Defendants were experiencing financial difficulties in their business. In the course of that meeting, the 1st Defendant mentioned that they had the sole agency for an Australian brand of loudspeakers and asked if Mr Siu was interested in joining her in that business. Mr Siu replied saying that he had no knowledge about loudspeakers and was not interested. He happened to mention that the Plaintiff might have an interest. At the end of the meeting, Mr Siu agreed to lend the 1st Defendant $100,000 which had to be repaid in 60 days.

17. The next morning, he received a telephone call from the 1st Defendant who wanted to borrow not $100,000, but $200,000. Mr Siu agreed and later gave her two cheques in exchange for two post-dated cheques from the 1st Defendant.

18. Much to Mr Siu's chagrin, both cheques were dishonoured. In July 1994, the 1st Defendant started paying back, little by little, in instalments of several thousand dollars. After several months, payment stopped and Mr Siu eventually obtained from her a number of cheques in smaller amounts. Altogether he was given six cheques by the 1st Defendant. They all bounced. The loan has not been entirely repaid and according to Mr Siu, the outstanding amount will be repaid once the Defendants have the money.

19. It is Mr Siu's evidence that he knew the Plaintiff long before the Plaintiff married the sister of Mr Siu's wife. He said that he and the Plaintiff were colleagues for a very short time at a company called Afasia, a knitting company. He was a supervisor of yarn. He said he left in 1974 or 1975. He said that after leaving Afasia he was with a trading company for three years before moving to Yee Tai. These companies, particularly Yee Tai, transacted a great deal of business with Afasia and Mr Siu continued to see the Plaintiff. It is to be noted that the time-frame given by Mr Siu differed significantly from that given by the Plaintiff.

20. Mr Siu also gave evidence regarding "investment" arrangements between him and the Plaintiff. Mr Siu has had a construction business for about six to seven years and in 1991, he invited the Plaintiff to "invest" $100,000. That investment (as was the case with subsequent investments) was neither in Mr Siu's company nor in any of his projects : rather, it was an arrangement whereby the Plaintiff was guaranteed a profit of 30%, the length of the investment being a year or less.

21. Mr Siu confirmed that towards the end of November 1993, the Plaintiff asked if Mr Siu would purchase his share under an agreement concerning a building project handled by a construction company operated by Mr Siu. The Plaintiff had invested $400,000 into the project. After investigating the market price, Mr Siu acquired the Plaintiff's interest for $870,000. This amount was paid into the Plaintiff's account on 27 November 1993.

(iii) Mok Siu Lam

22. She is the Plaintiff's wife but was not present at any of the meetings between the Plaintiff and the Defendants. Her evidence which was to the effect that the 1st Defendant had never mentioned the two cheques to her has no bearing on the issues in this case.

(b) The Defendants' evidence

23. The Defendants deny that there was any arrangement whereby they guaranteed the resale of the speakers on the Plaintiff's behalf within 80 days for $1.1 million.

24. Some time in July 1993, the 2nd Defendant received a visit from the Plaintiff who said that he had some business for the 2nd Defendant. He said that his boss was looking for hi-fi equipment and asked if the Defendants were able to help as they were in the trade. At the time, the 2nd Defendant thought it strange as he knew that the Plaintiff's company was in a garment business. However, the Plaintiff explained that if there was money to be made, they would engage in any kind of business.

25. What was required were loudspeakers and amplifiers : in general terms, the set-up to play karaoke. The 2nd Defendant told the Plaintiff that as they were the sole agents for speakers, there was no problem, but for amplifiers, the Plaintiff could get better prices from other traders. He gave the Plaintiff a catalogue and a price list to review. He also took the Plaintiff to the showroom to see what the speakers were like.

26. The Plaintiff returned several days later and said that his boss approved of the speakers and asked if the 2nd Defendant had a stock of them. The 2nd Defendant said that he recommended to the Plaintiff which speakers and how many of each should be purchased by reference to the catalogue and the budget which was $800,000. The 2nd Defendant agreed to be paid by means of a letter of credit rather than in cash or by cheque. As far as he was concerned, this was a regular commercial transaction and that there was substantial profit in it for the Defendants. The 2nd Defendant gave two examples of the unit cost and sale price of two types of speakers that were purchased. In general terms, the profit was 200 to 300%.

27. The 1st Defendant dealt with the letter of credit and the necessary documentation. The 1st Defendant's evidence is that she is familiar with documentation connected with the issuance of letters of credit, having been taught in about 1990 by a supervisor of the inward bills remittances Department of the bank they were using. She said that she typed up both the sales invoice and the packing list. These were typed using different typewriters at different times. She explained that she typed the sales invoice in her shop in the late afternoon of 18 August. She was then interrupted by customers and traders who wanted to go to the warehouse in Kwai Chung. She accompanied them to the warehouse and completed the job of typing the packing list there. It is to be noted that although the evidence of the Plaintiff and the 1st Defendant differed as regards the preparation of the invoice and packing list, nothing turns on it since the Plaintiff does not deny that the speakers were purchased from the Defendants.

28. It is the 1st Defendant's evidence that sometime prior to 18 August, the speakers described in the sales invoice and packing list ("the goods") were collected by the Plaintiff. A transport company went to the warehouse to collect them. The 1st Defendant recalled that it was a large lorry but did not see the name of the transport company. The 1st Defendant said that a former employee was present on that occasion. This person left her employ in 1995. His name is Kwok Chi Kit and a receipt was given at the time with the company chop affixed. That receipt was exchanged for the cargo receipt signed by Mr Wong on behalf of Decor. The 1st Defendant said that she kept a copy of the receipt but that in 1994, they suffered three floods in their shop and a lot of documentation was lost or damaged as a result. There is also the Defendants' evidence that they did not get all the documents back from their former solicitors.

29. As regards the issuance of the cheques in question, the 1st Defendant said that in November 1993, the Plaintiff went to her shop and asked if he could borrow two company cheques. He said he was in urgent need of showing it to a third party but that the cheques would not be presented to the bank for payment. When the 1st Defendant was informed of the amount the Plaintiff wanted, she told him that they did not have that amount of money in the account. The Plaintiff reiterated that the cheques would not be cashed, that they were simply to be shown to a third party and that he would return the cheques in two weeks. Given their relationship, the 1st Defendant wrote out the cheques as requested by the Plaintiff and asked who the payee should be. She was told to leave it blank.

30. The cheques were not returned after the two-week period. As they had not been presented, (and the 1st Defendant had checked with the Bank that this was the case) she did not bother to get them back from the Plaintiff. In February 1994, she received a bank statement relating to that account which showed that the cheques had been paid in. She contacted the Plaintiff several times who explained he was too busy to come to the shop to return the cheques. The next thing that happened was the current proceedings which were commenced in April 1994.

Credibility

31. Who is to be believed?

32. There are serious difficulties with the evidence adduced by and for or on behalf of the Plaintiff. At the heart of it lies the "investment" proposal allegedly made by the Defendants and accepted by the Plaintiff. Quite how it could help the Defendants expand their business is not apparent. It was not an invitation to invest in the Defendants' business. It was not even an invitation to acquire a particular shipment of loudspeakers from Australia for resale in Hong Kong. Rather, it was an invitation to purchase 28 pairs of an Australian brand of speakers which the Defendants had already paid for and had in stock from the Defendants and for their resale by the Defendants on the Plaintiff's behalf to third parties, at a guaranteed profit representing some 371/2% of the purchase price to be paid by the Plaintiff, in a period of 80 days. The transaction made no business sense from the Defendants' viewpoint.

33. The Plaintiff had never had previous business dealings with the Defendants. He is an accountant. He was apparently willing to acquire $800,000 worth of loudspeakers which would be resold on his behalf within 80 days at a guaranteed profit without as much as inquiring into the original acquisition cost of the speakers to ascertain whether he was buying at cost or at a premium, and if the latter, the level of premium, or to whom the speakers would be resold. If, as is the Defendants' evidence, the sale to the Plaintiff was already at a markup of 200 to 300%, who were the potential customers of the alleged resale? These are matters which any uninitiated investor, much less a professional accountant, would have asked. The Plaintiff did not.

34. There are other matters that are problematic. First, Mr Wong readily acknowledged that $800,000 was a significant sum. It was almost equivalent to two years of the Plaintiff's salary. At the time, the Plaintiff's earnings were under $20,000 a month. Mr Wong said he could not remember whether he had ever lent money to the Plaintiff before, a response which I find surprising. He said that he has in the past advanced monies to co-traders to help them out, without deriving any benefit from the transaction himself. Although the amount involved could be as large as $800,000, the period of the loan was never more than eight to ten days. There is also the fact that not only was Mr Wong deriving no benefit from this advance to the Plaintiff, he was in fact out of pocket : it is common ground that the bank deducted the charges from Decor's account on a monthly basis, but the Plaintiff did not have to make any kind of repayment to Mr Wong's company until the end of the 90-day period. Second, Decor was not a trading company. Rather, it held a single property for investment. This property was rented out at about $80,000 a month but the mortgage repayments were of the order of $80,000 to $90,000. Mr Wong could not readily explain how it was that the company which only came into existence at the end of 1992 or early 1993 could, in those circumstances, have the necessary funds to repay the bank for the $800,000 advanced under the letter of credit. The evidence as to the arrangements for repaying the bank were far from clear. Whilst Mr Wong may have had other accounts which were in credit, obviously transfers had to be made into Decor's account to cover the amount of repayment. Mr Wong was not in Hong Kong at the end of November 1993 when the repayment was due, and the Plaintiff did not speak to Mr Wong till several days thereafter.

35. Who made the arrangements to transfer funds? Upon whose instructions? These gaps in the evidence are troubling. This is so because the nature of the relationship between the Plaintiff and Mr Wong - friend and employer - could hardly go to explain the "generosity" of Mr Wong. I have grave reservations regarding the veracity of the evidence of both the Plaintiff and Mr Wong regarding the transaction.

36. There are also significant discrepancies between the evidence of the Plaintiff and that of Mr Wong. They relate, inter alia, to :

(a) whether Mr Wong was told of the rate of return the Plaintiff was expecting from this investment;

(b) the reason why Mr Wong suggested a letter of credit for the advance;

(c) the reason why the Plaintiff was unable to repay Mr Wong the entire amount advanced under the letter of credit;

(d) the agreement as to the repayment of the outstanding balance; and

(e) whether interest on the outstanding balance was mentioned at all.

Though relating to matters of detail, they have a bearing on the reliability of the evidence of the witnesses. It is to be noted that the Plaintiff never sought payment of the $1.1 million when the 80 days expired.

37. So far as the evidence of Mr Siu is concerned, I view it with a degree of circumspection as he was hostile to the Defendants, particularly the 1st Defendant and disapproved of their lifestyle and method of doing business. In fact, he tried hard to discredit the Defendants by painting a picture of their financial irresponsibility.

38. There are specific aspects of Mr Siu's evidence that give rise to doubt as to its reliability. The time-frame he gave of his previous jobs, in particularly, as to when he came to know the Plaintiff, cannot be reconciled with that given by the Plaintiff. But it is Mr Siu's explanation of his "investment" arrangements with the Plaintiff that I find difficult to accept. That kind of arrangement even on a small scale makes no business sense when even according to Mr Siu, not every single project of his was profitable although generally speaking they were. A 30% profit or return is high and it is difficult to see why anyone would want to "guarantee" such a return when the same amount could easily have been borrowed from a bank at a lower cost unless the purpose is to confer a benefit on the Plaintiff. Nor was his explanation of the form the "investment" took readily comprehensible. Mr Siu also contradicted himself regarding the Plaintiff's subsequent "investments" with him. Having initially said that the original investment together with the profit was rolled over into the second investment, he subsequently denied that there was any rolling over but that the Plaintiff was paid for every project. Mr Siu said it was his practice to reduce all agreements into writing and his arrangement with the Plaintiff was accordingly also reduced to writing. However, no agreement was adduced in evidence.

39. Mr Siu's evidence that the sum of $870,000 paid to acquire the Plaintiff's "investment" in one of Mr Siu's building projects reflected the market price appeared to be inconsistent with his explanation of his investment arrangements with the Plaintiff which was that the Plaintiff's entitlement was to a "guaranteed" profit. If so, market price could not have been relevant.

40. The Defendants' case is that the transaction that took place in August was nothing more than an ordinary commercial transaction for the sale and purchase of loudspeakers and denied that there was any arrangement for them to resell the speakers for the Plaintiff at a guaranteed return within 80 days.

41. To substantiate their claim, they endeavoured to show that the loudspeakers that were the subject of the sale formed part of the stock of speakers that they had purchased from Australia prior to August 1993 which the Plaintiff was at pains to challenge. The quantity and description of the speakers that were the subject of the sale are to be found in the cargo receipt. Prior to the August transaction, there appears to have been three shipments of Audio Definition speakers from Australia. Invoices were produced relating to 6 pairs of speakers for delivery in January 1993 and for 49 pairs of speakers in July 1993. When checked against the August transaction, there is a shortfall of three (and not five) pairs of speakers, namely one pair of each of the following models : Acolyte, Synergy and Quintet. There is a copy of a document from the Overseas Trust Bank containing information relating to the issuance of an irrevocable letter of credit issued in March 1993 for the shipment, inter alia, of 26 pairs of Audio Definition loudspeakers, c.i.f. Hong Kong as per a confirmation order dated 4 February 1993. This is prima facie evidence that a further 26 pairs of speakers were purchased prior to August. A detailed list of the 26 pairs of speakers is not available. The Defendants' explanation is because that their shop was flooded on three occasions in 1994 and business records had been destroyed or damaged as a result. In addition, solicitors who had previously acted for the Defendants did not return all of the documents to them. Notwithstanding the absence of information and specification regarding these 26 pairs of speakers, there is, prima facie, sufficient evidence for an inference to be made that the goods had been purchased by the Defendants from Australia prior to the August transaction.

42. Delivery of the goods at the warehouse to the Plaintiff was, of course, a critical aspect of the Defendants' case. A former employee by the name of Kwok Chi Kit, who allegedly witnessed the delivery, was not called as a witness. He left the Defendants' employ early in 1995, having fallen out with the 1st Defendant and the Defendants, who had not been in contact with Mr Kwok since then, did not wish to subpoena him. Nevertheless they indicated that they had no objection to the Plaintiff so doing, an invitation which the Plaintiff declined to take up. In the circumstances, and in particular, having regard to the fact that the Defendants are litigants in person, I am not prepared to draw any adverse inference from the fact that Mr Kwok was not subpoenaed, assuming he could be located.

43. The Plaintiff also sought to demonstrate that the Defendants found themselves in financial straits at about the time of the August transaction. It is the Plaintiff's case that the Defendants needed his "investment" in order to repay certain debts. He endeavoured to show this by relying on six writs which had allegedly been issued against one or both of the Defendants between January and November 1993, claiming a total of approximately $500,000. The focus of this evidence appeared to be the Defendants' financial position at the end of November 1993. It is not apparent why that date as opposed to August 1993 (the date of the August transaction) was thought relevant since the 1st Defendant readily acknowledged that she did not have those funds in November 1993.

44. Of the six writs relied on, clearly two had nothing whatsoever to do with the Defendants; by sheer coincidence the defendants in those two actions had the same name as the 2nd Defendant. At the time of the August transaction, only one writ had been issued against the Defendants for about $160,000. That was an action brought by Tom Lee Music Company on 10 August 1993. There appears to be very little mileage in this action from the point of view of the Plaintiff since the matter was resolved within a week of the issuance of the writ. It is not necessary for me to go into the explanation given by the Defendants as to the circumstances that gave rise to the action and its subsequent settlement. As to the other actions against the Defendants, it is also unnecessary for me to go into them although the Defendants were subjected to lengthy cross-examination about this. They are simply irrelevant to the issues that I am concerned with in the present action. The Defendants did, inter alia, have credit facilities of $3.8 million from the Overseas Trust Bank granted in January 1993, although their actual financial condition in August 1993 is not known because bank statements for that period were not available. In any event, there was no evidence to show that the Defendants were destitute in August 1993.

45. The Plaintiff also relied generally on the evidence of Mr Siu relating to the loan of $200,000 to show that the 1st Defendant was experiencing financial difficulties in July 1993. The 1st Defendant gave a different explanation regarding the loan of $200,000. Accepting for the moment Mr Siu's version that the loan (which was interest-free and for a period of 60 days) was for the trading needs of the Defendants because they were experiencing cashflow problems, it would hardly explain the "investment" arrangement with the Plaintiff since the latter can be viewed as nothing more or less than a loan arrangement but with one difference : the guaranteed return translates into an annual interest rate of some 200%. I am not here concerned with any question of illegality but simply whether the arrangement put forward by the Plaintiff is inherently probable.

46. Against this, the credibility or otherwise of the Defendants' explanation for the issuance of the two cheques has to be balanced. The Plaintiff submitted that the Defendants' explanation is incredible because, inter alia, the Defendants have not claimed for the return of the cheques, there was no evidence to show that the Plaintiff was indebted so as to need two cheques totalling $1.1 million and that there was a pattern of dishonouring cheques by the Defendants. The first and third matters raised have little bearing on the question whether the Defendants' version is "incredible". Evidence as to the Plaintiff's financial condition would lend support to the Defendants' explanation but the absence of such evidence is not necessarily fatal since the cheques were written out by the 1st Defendant based on nothing more than the Plaintiff's oral request. The Plaintiff also submitted that there was no proper explanation by the Defendants as to the circumstances in which the cheques were delivered.

47. At the end of the day, it comes to no more than which of the two competing versions is the more believable. Whilst the accounts of both the Plaintiff and the Defendants have their difficulties, after reviewing all the evidence, and having seen the parties give evidence, I prefer the evidence of the Defendants.

Order

48. I find that the August transaction was a genuine sale and purchase transaction and nothing more than that. It must follow that no consideration was given for the two cheques that are the subject of this action. Accordingly, the Plaintiff's claim is dismissed.

49. The Defendants are entitled to an order nisi for the costs of this action.