LAM KWOK HUNG v. WONG CHI FAI

HCA7151/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.7151 OF 1992

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J U D G M E N T

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1. This is an action to recover the proceeds of a cheque dated 1 October 1992 in the sum of $715,000 drawn by the defendant and payable to the plaintiff. The cheque was post-dated and was presented for payment on 1 October 1992. It was returned to the plaintiff marked "Payment countermanded by the drawer". The notice of dishonour was deemed to have been given statutorily and by a letter dated 1 October 1992 the plaintiff's solicitors demanded payment of the sum of $715,000.

2. The defendant who acted in person, responded in two ways. Firstly, by his defence filed on 27 February 1997, he pleaded that the defendant was not liable to pay the said sum since the consideration for the cheque had totally failed. In his affirmation prior to trial and of the trial itself he claimed that there was no consideration for the cheque at all.

3. The history of the matter was that in 1988 a company called "Onweltex Industrial Company Limited" was incorporated and on 8 March 1988 was given a business registration certificate. The Company had three equal shareholders, the plaintiff, the defendant and one Lee Wah Chiu. In or about April 1992, the plaintiff became concerned about the accounts of Onweltex and commissioned an investigation report into the financial affairs of the Company by Peggy Cheung, a chartered accountant. That was quickly completed. On 8 May 1992, the plaintiff's solicitors issued a letter to the defendant demanding clarification of various discrepancies that had become apparent in the analysis of the company's books. On 28 May 1992, a meeting was held between the plaintiff, the defendant and Lee together with their respective lawyers and the plaintiff says that certain admissions were made by both Lee and the defendant as being admissions to having drawn money from Onweltex which they were not entitled to draw. This is denied by the defendant. It had however become evident at that point that confidence had been lost between these three men and that at a meeting on the 17 June 1992, the plaintiff, the defendant and Lee together with their legal advisors decided that the Company should be liquidated, the assets sold and the monies thereby obtained distributed between the three shareholders.

4. It is at this point that the dispute arises between the parties. It was the evidence for the plaintiff that a figure was arrived at which the defendant was obliged to pay to the Company to make good monies that he had taken from the Company. He undertook in addition to pay to the plaintiff the sum of $715,000 by way of a cheque. There was prepared a draft Deed of Settlement which was produced in evidence and which was signed by the solicitors' acting on behalf of the defendant as being amended and approved by them on his behalf. That Deed was between Onweltex Industrial Company Limited, Party A who is the plaintiff, Party B who is the defendant and Party C who is Lee Wah Chiu. In part, that Deed of Settlement read :

" Party B and Party C agreed that they shall repay to the Company the said indebtedness in the respective sum of HK$2,488,000.00 and HK$2,050,000.00 on or before 1st September 1992. It is further hereby agreed by Party B and Party C that Party A shall be paid by Party B and Party C in the respective sum of HK$715,000.00 and HK$585,000.00 ('the said ex-gratia payment') representing the ex-gratia payments to Party A due to his loss of the Management of the Company and the mistaken accounts as aforesaid. It is hereby declared by Party B and Party C that the repayments of the said sums to the Company and the said ex-gratia payment to Party A shall be without prejudice to the rights of the parties herein for further claim, (if any), against each other in respect of transactions other than the Settled Transactions."

5. That Deed of Settlement was never signed by the defendant, but I am entitled to look to it to see what was prepared and approved on his instructions and on his behalf by his solicitors at the time these events took place. The version given by the defendant is wholly at odds with that given by the plaintiff and is unsupported by any evidence or documentation other than the evidence of the defendant. It was his testimony that at the time when agreement was reached that the Company should go into liquidation, he offered to pay the sum of $715,000 to the plaintiff by way of a post-dated cheque as a gesture of good faith against the eventual distribution of the assets of Onweltex and with no intention on the part of either party that the cheque be presented for payment. He said that as the Company had been wound up prior to the due date of the cheque and the assets distributed, the need for the comfort given by the cheque had passed and he therefore instructed his bank to refuse payment upon its presentation. The dispute between the parties is one of fact.

6. I am satisfied that a cheque was drawn by the defendant to the plaintiff in the sum of $715,000. That was agreed by the parties. I am satisfied because it is agreed by the parties that the cheque was not met upon presentation. I had the benefit of hearing both the plaintiff and the defendant give evidence and in cross-examination. The plaintiff was a truthful forthright witness and I have no difficulty in accepting his version events as being true. The defendant on the other hand was reluctant to answer questions and persisted in not addressing his answer to the questions asked. On a considerable number of occasions when asked concerning the withdrawal of money from the Company where and when and how the withdrawal was made, he declined to answer on the basis that to do so may involve him in admission of the commission of a criminal offence.

7. Whilst I do not take that into account, I did take into account his overall manner and his reluctance to be forthcoming when assessing the credit to be placed upon the evidence that he gave. I am satisfied that there was no credit whatsoever to be placed upon it. I am satisfied that when the cheque was handed by the defendant to the plaintiff, it was in consideration of the matter set out in the Deed of Settlement albeit that Deed was unsigned. There was compensation payable by the defendant to the plaintiff for the actions of the defendant in respect of the Company Onweltex.

8. I am satisfied that there was good consideration for the cheque and that at no time did that consideration fail. The payment of that sum of money was in no measure related to the winding-up of the Company and was a personal matter between the plaintiff and the defendant unconnected with the liquidation of the Company.

9. I accept that the consideration for the cheque continued up to the time when it was presented by the plaintiff for payment and there was not at any time up to the time when payment should have been made any failure of that consideration. There will be judgment for the plaintiff against the defendant in the sum of $715,000 and the said sum shall have interest payable thereon from 1 October 1992 until judgment at the rate of 8.5% per annum. There will be costs for the plaintiff. I am asked to make an order for indemnity costs but decline to do so.