K & C CREATION LTD v. W & R DESIGN CONSULTATIONS CO LTD

DCCJ 1280/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1280 OF 2005

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J U D G M E N T

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1. This is the Plaintiff’s application for summary judgment against the Defendant.

2. It is the Plaintiff’s case that the Defendant drew a cheque dated 28^th February 2005 in the sum of $600,792.41 in favour of the Plaintiff (“the Cheque”).  Upon presentment on 1^st March 2005, the Cheque was dishonoured for the reason of “refer to drawer”.  By this action, the Plaintiff claims against the Defendant the amount of the Cheque.

3. The Defendant admits that it drew the Cheque and that the Cheque was dishonoured.  It, however, maintains that the Plaintiff’s action herein is pre-mature and that the Plaintiff is in any event not entitled to payment.

4. It is the Defendant’s case that Mr. Wakamatsu of the Defendant orally informed Mr. Kono of the Plaintiff in or about February 2005 that the Defendant would not be able to honour the Cheque on its due date due to cashflow problems.  Eventually, a settlement agreement (“the Alleged Settlement Agreement”) was reached between the parties on the following terms:

(a)  The Plaintiff agreed not to take any legal action against the Defendant in the event that the Cheque was dishonoured.

(b) The Defendant agreed to pay to the Plaintiff a sum of $600,792.41 (“the Settlement Sum”) on or before the end of August 2005.

(c)  Mr. Wakamatsu agreed to provide a charge over his shares in Smile & Mahalo Hong Kong Co Ltd, which was operating a Japanese restaurant in Hong Kong, for the due and punctual payment of the Settlement Sum on or before the end of August 2005.

(d) In default of payment aforesaid, Mr. Wakamatsu would cause all his shares in Smile & Mahalo Hong Kong Co Ltd to be transferred to the Plaintiff in full and final settlement of the Settlement Sum.

(e)  The parties also agreed that the charge over the shares of Smile & Mahalo Hong Kong Co Ltd would be discharged and released immediately upon the Defendant’s receipt of the full payment of the Settlement Sum.

5. The Plaintiff denies the Alleged Settlement Agreement and asserts that it has never agreed not to take action against the Defendant on the dishonoured cheque.

6. In an application for summary judgment, it is for the Defendant to satisfy the court that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial (see Rules of the District Court, Order 14, rule 3).  It is trite law that mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence.  If the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff (see Hong Kong Civil Procedure 2004, para.14/4/9).  Furthermore, cheques being a form of bills of exchange are treated as cash.  Where there is an action between the immediate parties to a bill of exchange, judgment should be granted unless there are exceptional circumstances (see Hong Kong Civil Procedure 2004, para.14/4/19).

7. Having carefully considered the defence raised by the Defendant, I find it incredible.

8. To start with, it is the Defendant’s case that under the Alleged Settlement Agreement, the Defendant has agreed to pay the Settlement Sum (which is equivalent to the amount on the Cheque) on or before the end of August 2005 (as opposed to upon presentment of the Cheque).  If this is true, the parties have in effect agreed to replace the Defendant’s payment obligation under the Cheque (i.e. on present of the Cheque) by the payment obligation under the Alleged Settlement Agreement (i.e. on or before the end of August 2005).  If so, I find it incredible that there should be a term in the Alleged Settlement Agreement that the Plaintiff should nevertheless present the Cheque but agreed not to take legal action in the event that the Cheque is dishonoured.  Why would parties agree that the Plaintiff should still go ahead to present the Cheque when it they had already agreed to defer payment to the end of August 2005?

9. Secondly, one would expect some form of documentary evidence for an elaborate agreement such as the Alleged Settlement Agreement, which involves the charging of Mr. Wakamatsu’s shares in Smile & Mahalo Hong Kong Co Ltd to the Plaintiff.  The only document exhibited by Mr. Wakamatsu in his affirmation purporting to evidence the Alleged Settlement Agreement is an agreement entitled “Share Mortgage”.  Mr. Wakamatsu calls it a “draft” agreement.  It is undated and has apparently not been executed.  It is an essential element of the Alleged Settlement Agreement that Mr. Wakamatsu has already agreed to charge over his shares in Smile and Mahalo Hong Kong Co Ltd to the Plaintiff as security.  If that is the case, I find it unbelievable that there is no documentary evidencein furtherance of the Alleged Settlement Agreement.

10. Thirdly, Mr. Wakamatsu alleges in his affirmation filed in opposition to the Plaintiff’s present application that there has been part-payments in the total sum of $50,000 in pursuance of the Alleged Settlement Agreement.  In reply, the Plaintiff says that it has in fact received a total sum of $60,000 from the Defendant since the date of writ but the money was not received in pursuance of the Alleged Settlement Agreement.  In my view, the payment by the Defendant to the Plaintiff since the date of writ is a neutral fact.  It neither supports the existence of the Alleged Settlement Agreement nor contradicts it.

11. In my judgment, the only defence put forward by the Defendant, namely, the Alleged Settlement Agreement, remains an assertion on affirmation unsupported by evidence and is also incredible.  The Defendant has not satisfied me that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial.

12. For the above reasons, the Plaintiff should be entitled to judgment against the Defendant.  The Plaintiff is agreeable to give credit to the sum of $60,000 received from the Defendant since the date of writ and asks for judgment on the remaining sum of $540,792.41 only.  The Plaintiff further asks for interest pursuant to sections 49 and 50 of the District Court Ordinance.

13. I therefore adjudge that the Defendant do pay the Plaintiff the sum of $540,792.41 with interest thereon at judgment rate from the date of writ until payment.

14. There be a costs order nisi that the costs of this action, including the costs of this application and all reserved costs, be to the Plaintiff to be taxed if not agreed.  Unless an application has been made to vary such order, such order shall become absolute 14 days after this written decision is handed down.