COIN YIELD CO LTD v. CHAN HO KONG

DCCJ 2563/ 2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2563 OF 2005

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RULING ON PLAINTIFF’S APPLICATION
FOR SUMMARY JUDGMENT

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Introduction

1.  The plaintiff sues on the value of a cheque drawn by the defendant.  The defendant says that when it was drawn, the plaintiff had promised not to present it for payment. 

The Law

2. The defendant has to satisfy the Court that there is a triable issue or question or for some reason there ought to be a trial (HKCP 2004, 14/4/3).

3.  The cheque as a bill of exchange is an unconditional order for payment on the due date.  Extrinsic evidence is not admissible to contradict the terms of the contract constituted by the bill of exchange, which is for unconditional payment (HKCP, 14/4/19). 

The defendant’s case

4. In July 2004, the defendant came to know Mr. Chan Chung Yin (“CCY”) through the introduction of a friend.  CCY was a director of the plaintiff.  The plaintiff was the owner or principal tenant of a shop premises (“the Premises”).   

5. In August 2004, CCY offered to let the Premises to the defendant on certain terms, including a monthly rent of $140,000 for a 3-year term and a grace period of several months, after the defendant’s business had commenced, for the defendant to pay up a 3 months’ rental deposit.    After a family discussion, the defendant told CCY that her 2 daughters would set up, and be the directors of, a company, Billion State International Investment Ltd. (“the Company”) for running a restaurant business on the Premises.  CCY asked the defendant to be a guarantor of the tenancy agreement.    

6. About a week before 20 September 2004, the defendant, her 2 daughters and his wife (“Emily Cheung”) attended the plaintiff’s solicitors, Howell & Co., to execute a tenancy agreement dated 20 September 2004 and a guarantee (BC 11-13) for the Premises.  As the Company’s bank account was not yet opened, CCY asked the defendant to draw a personal cheque as the 3 months’ rental deposit.   CCY promised to exchange it for a company cheque in future.  Neither CCY or the defendant made any mention of precisely when the Company cheque was due to be provided to the plaintiff.  In reliance on CCY’s promise, defendant drew a personal cheque post-dated to 18 March 2005 for $420,000 (“the Personal Cheque”) to CCY. 

7. From October 2004 onwards, the Company paid the monthly rent by the Company’s cheques. 

8. Since 15 February 2005, the Company had repeatedly defaulted in paying rent.   

9. At the end of February, Emily Cheung went to the plaintiff’s office with a cheque, no. 769809, dated 30 June 2005 for $420,000 drawn by the Company (“the Company Cheque”).  She asked CCY to take the Company Cheque and return the Personal Cheque to her.  CCY insisted on keeping both cheques.  He said he would return the Personal Cheque to the defendant upon clearance of the Company Cheque in early July 2005.  She trusted CCY and left. 

10. On 7 April 2005, the plaintiff presented the Personal Cheque for payment.  It was dishonoured as the account had been closed. 

11. By a letter dated 15 June 2005, the plaintiff’s solicitors returned the Company Cheque, together some other post-dated cheques drawn by the Company in purported payment of rent, to the Company.         

The plaintiff’s case

12. I shall only set out matters in dispute. 

13. First matter: CCY in his affirmation (AB 58) denies having ever made any oral promise in September 2004 or at all to exchange the Personal Cheque for a company cheque in future.  

14. Second matter: Emily Cheung came to his office in February or March 2005 to ask the plaintiff not to present the Personal Cheque for payment due to a lack of fund.  She offered the Company Cheque in exchange for the Personal Cheque.  CCY refused to exchange.  She left the Company Cheque with CCY.  The plaintiff never agreed to release the defendant’s liability on the Personal Cheque. 

Whether such matters constitute “ triable issues”

First Matter: Any promise in September 2004 to return the Personal Cheque in future

15. Mr. Chan for the defence submits that in September 2004 the tenancy had been affected by a demolition and reinstatement order dated 20 August 2002 of the Buildings Authority.  I query what effect this would have on the tenancy.  Mr. Chan submits that the plaintiff would give more generous terms to the defendant in the tenancy and that explains why the plaintiff would not want a rental deposit forthwith.  I do not find this point relevant because it is common ground that both parties had agreed to postpone the payment of rental deposit. 

16. The plaintiff and the defendant thought fit to pay a solicitor to create a custom-made tenancy agreement and a guarantee to define their legal rights and obligations.  The defendant’s solicitor submits that the Personal Cheque was in the nature of an I.O.U., which coincidentally took the form of the Personal Cheque, pending a real cashable Company Cheque in the indefinite future. 

17. I query why the plaintiff would need such a primitive document whilst it had the full set of legally drafted documentation.  Mr. Chan submits that the plaintiff wanted it as an extra protection because the plaintiff had anticipated that the guarantee would be set aside by the Court as it was not interpreted to the defendant by the lawyer, who held 1 out of 10,000 shares in the plaintiff.  I query how the guarantee would be set aside.  Mr. Chan informs me that the defendant has and had no complaint about the contents of the guarantee but his instructions are that, being an old man with little education, the defendant trusted the lawyer and was too ignorant to ask the lawyer to interpret it to him.  Mr. Chan submits that on 20 September 2004 the plaintiff already knew the guarantee would be set aside by the Court.  I fail to see any reason for the plaintiff to request the defendant to sign a guarantee which the plaintiff had known in advance that the Court would in future nullify it.                    

18. I query why the Personal Cheque was not blank but bore the date of “18 March 2004”.  No date would be required or desirable as it was supposed to be replaced by another cheque in the indefinite future.  Mr. Chan tells me from the bar table, although not stated in the defence’s affirmations, his instructions that the date was filled in by the plaintiff not the defendant.  It is the defence’s case that the plaintiff was throughout trying to deceive the defendant to benefit itself.  I then query why CCY had not written “20 September 2004” (instead of “18 March 2005”) so that the deceitful CCY could have cashed in on the same date forthwith.  Mr. Chan suggests a case of estoppel but subsequently abandons it for lack of any legal basis.  As the matter stands, Mr. Chan is unable to respond. 

19. I find the allegation that the plaintiff had made such a promise on 20 September 2004 or at all wholly incredible.   

Second Matter: Any promise in Feb/Mar 2005 to return the Personal Cheque upon clearance of the Company Cheque

20. The defendant alleges that on the date in Feb/Mar 2005, the plaintiff agreed not to cash a cheque (the Personal Cheque dated 18 March 2005) nearly due and to wait until a later cheque (the Company Cheque dated 30 June 2005) became due.  I query what business or common sense was there for the plaintiff to agree to do so.  Mr. Chan is unable to respond.  

21. I find the allegation that the plaintiff had made such a promise in Feb/Mar 2005 or at all wholly incredible.   

Conclusion

22. In the present case, the Personal Cheque was an unconditional order for payment on the due date.  The defendant has failed to show that there is a triable issue or question or for some reason there ought to be a trial.  I give judgment to the plaintiff in the sum of $420,000 and interest at judgment rate from the date of the Writ of Summons until payment.  There is no apparent reason why costs should not follow the event.  I make an order nisi, to be made absolute in 14 days, for costs to the plaintiff with certificate for counsel. 

Dated this 25 November 2005