CHUNG FAI HOLDINGS LTD. v. TATTUNE DEVELOPMENT LTD.

CACV 124/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 124 OF 1999

(ON APPEAL FROM HCA 13669/97)

----------------------

----------------------

J U D G M E N T

----------------------

Godfrey, J.A. (giving the judgment of the court) :

1. This is an appeal from an order of Keith, J. made on 16 April 1999, giving the defendant unconditional leave to defend the plaintiff's action. The plaintiff's claim was a claim based upon a dishonoured cheque for $15 m dated 23 October 1997, drawn on the defendant's bank account in favour of the plaintiff and dishonoured on presentation.

2. The plaintiff applied for summary judgment under Order 14. The master gave the defendant leave to defend the action but that leave was conditional on the defendant paying $15 m into court.

3. The defendant appealed to the judge, seeking unconditional leave to defend the action, and the judge gave the defendant unconditional leave to defend the action.

4. The judge said this as to the explanation as to the cheque which was proffered to him by the defendant :-

"On the crucial issue of fact which divides the parties, namely the purpose for which the cheque was delivered to Mr. Wong, a court would normally be extremely sceptical of an assertion that the delivery of a cheque served no purpose other than to show that the drawer of the cheque was sincere in his intention to perform his contractual obligations. But in this particular case, I cannot say that the Defendant's version of events is not believable."

5. For our part, we agree with the judge that the court would be extremely sceptical of such an assertion. Indeed, in this case, the only explanation offered by the defendant was that the cheque was given "as a sort of earnest money". That must mean it was intended to have some value in the hands of the recipient; not simply a piece of paper with no value at all. Otherwise, it seems to us to be hardly "earnest", let alone "money".

6. With great respect, it seems to us that the judge went wrong in treating this evidence as sufficient to justify his giving the defendant unconditional leave to defend. At best the order ought to be the order made by the master, that is to say, an order giving the defendant conditional leave to defend, on payment of the $15 m into court. That is all for which the appellant asks today.

7. We will allow this appeal, set aside the order of the judge and restore the order of the master. If the condition is not satisfied within 7 days from today, the appellant will have leave to enter judgment for the $15 m with interest and for its costs of this appeal and all its costs below.