COMSEC TRAVEL LTD. v. FOK HING TOURS CO. LTD.

CACV 276/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 276 OF 2002

(ON APPEAL FROM DCCJ 20895 OF 2001)

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J U D G M E N T

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Hon Sakhrani J (giving the judgment of the Court):

1. This is an appeal from the order of Judge Wong in the District Court made on 21 May 2002 whereby he ordered that the plaintiff's application for summary judgment against the defendant be dismissed with costs. On 18 June 2002 the judge granted leave to appeal from his order made on 21 May 2002.

2. The plaintiff's claim is for HK$252,000 as money had and received by the defendant to the use of the plaintiff. Alternatively, it is claimed that the said sum was paid to the defendant under a mistake of fact.

3. The plaintiff relies on affirmations made by Miss Jackie Li ("Jackie"), the manageress of the plaintiff, and Mr. Anthony Yeung Yiu Bong ("Yeung") in support of the application for summary judgment. Madam Lo Yuen Chun ("Lo") has made an affirmation on behalf of the defendant.

4. The background facts are that both the plaintiff and the defendant are travel agents. Jackie previously worked for the defendant. She commenced working in travel agencies in about April 1997. In or about January 2001 she went to work for the defendant as a business development officer. She left the defendant's employ to work for the plaintiff in or about September 2001. Whilst she was employed by the defendant she received a salary and commission on gross profits on airline tickets that she successfully sold. The commission would be calculated on full payment made by the clients for the tickets.

5. The plaintiff's case is that in or about December 2000 Jackie came across and contacted Yeung through the internet. Yeung was a stockbroker and Jackie required and obtained investment advice from him through the internet. In or about July or August 2001 she learnt that Yeung was going to open a new travel agency. Yeung asked her if she would be interested in joining the company. They then met and Yeung interviewed Jackie in August 2001. He eventually agreed to hire her as a manageress for the new travel agency namely, the plaintiff.

6. Having agreed to work for the plaintiff, Jackie informed Lo of her decision to leave the defendant's employ. Lo caused the accounts department to produce a breakdown of all receivables on the business generated by Jackie and informed her that the receivables amounted to about HK$900,000 and that she was responsible for the full payment of those receivables. Jackie says that at that time she believed that she did owe the defendant around HK$900,000 but she now disputes liability for the same. She goes on to say that in order to repay the defendant the debt owing by her, Lo suggested to her that after she had joined the plaintiff she should secretly channel the plaintiff's monies to the defendant to repay the amounts owing by her to the defendant.

7. According to Jackie, Lo suggested that a business relationship between the plaintiff and the defendant should be established. The suggestion made was that since the plaintiff was not a member of the International Air Transport Association ("IATA") and could not issue airline tickets, the plaintiff could purchase airline tickets from the defendant which was a member of IATA and a genuine business relationship could be established between the plaintiff and the defendant. This would make it easier for Jackie to steal monies from the plaintiff and pay them over to the defendant. Yeung agreed to the business relationship whereby the plaintiff would purchase airline tickets issued by the defendant on the plaintiff's behalf.

8. There can be no doubt that on Jackie's evidence she and Lo entered into a conspiracy to defraud the plaintiff whereby Jackie would transfer monies belonging to the plaintiff to the defendant so as to pay off her own outstanding indebtedness to the defendant without the knowledge or consent of the plaintiff.

9. Jackie also says that initially there were a number of genuine transactions where the defendant issued airline tickets on behalf of the plaintiff and these were paid for in full by the plaintiff. After conducting several genuine transactions on behalf of the plaintiff with the defendant, Jackie started to steal monies from the plaintiff and channelled the same to the defendant. She created a fictitious transaction for the purchase of three first class return airline tickets from Hong Kong to Paris for the total sum of HK$252,000. She also issued an exchange order to the defendant for the purchase of the said tickets but the exchange order never left the plaintiff's offices. Jackie also requested the plaintiff to issue a cheque in the said sum of HK$252,000 payable to the defendant as payment for the said tickets. The cheque was given to Lo and it was honoured upon presentation for payment. The defendant has received the said sum. This is the amount claimed by the plaintiff in this action.

10. The defendant denies that Lo ever entered into a conspiracy to defraud the plaintiff as alleged by the plaintiff. There is also a counterclaim for HK$480,000 being the amount of a dishonoured cheque drawn by the plaintiff in favour of the defendant and for HK$43,698 being the price of airline tickets sold to and/or hotel bookings made on behalf of the plaintiff for which the defendant has not been paid.

11. According to Lo, who verified the truth of the matters pleaded in the defence and counterclaim, Jackie had told her when she was working for the defendant that Yeung was her boyfriend who gave her the business that she brought into the defendant. Lo says that she met Yeung with Jackie in about September 2001 and Yeung also confirmed that he had sent Jackie all her customers and that he wanted to set up a travel agency incorporating Jackie's Chinese name into the Chinese name of the plaintiff. Yeung asked Lo to release Jackie from her employment with the defendant so that she could help him in his new business. Lo agreed.

12. Lo says that before Jackie left the employ of the defendant she caused a check to be made of the outstanding balance in Jackie's account and found that a sum of about HK$915,095 remained to be settled in her account. She asked Jackie for payment and Jackie indicated that about HK$217,262 should be deducted from that sum.

13. Lo also says that on or about 20 September 2001 the defendant received HK$100,000 cash from Jackie which was deposited into the defendant's bank account and which was given to her by Yeung.

14. On or about 24 September 2001 Lo also received from Jackie two cheques drawn by the plaintiff and made payable to the defendant, one for HK$14,400 and the other for HK$252,000 for further partial repayment of her outstanding balance to the defendant. These cheques were honoured upon presentation for payment.

15. On or about 5 October 2001 Jackie gave Lo another cheque post-dated to 6 October 2001 and drawn by the plaintiff in favour of the defendant in the sum of HK$480,000 in further payment of the outstanding balance Jackie owed to the defendant. This cheque was dishonoured upon presentation for payment and there is a counterclaim for payment of the amount of the dishonoured cheque.

16. Jackie denies that Yeung was her boyfriend and this is confirmed by Yeung. Surprisingly, however, although Jackie has in her affirmation admitted to a conspiracy to defraud the plaintiff she remains the manageress of the plaintiff.

17. Undoubtedly there are substantial matters in dispute between the parties.

18. The first matter to consider is whether the plaintiff is precluded from applying for summary judgment under O.14 because of 0.14; r.1(2) (b) R.D.C., which is the same as O.14; r.1(2)(b) R.H.C. This provides that O.14; r.1 does not apply to an action which includes a claim by the plaintiff based on an allegation of fraud.

19. In Tan Eng Guan v. Southland Co. Ltd [1996] 2 HKLR 117 it was held that the exclusion in O.14; r.1(2) (b) should be construed narrowly in accordance with the English authorities. It should be confined to actions based on fraud as strictly defined in Derry v. Peek (1889) 14 App.Cas.337 @ 374 namely, a false representation made (i) knowingly, (ii) without belief in its truth or (iii) recklessly, careless whether it be true or false.

20. The plaintiff's claim is not for damages for fraud as strictly defined in Derry v. Peek. In our judgment O.14; r.1(2)(b) does not preclude the plaintiff from applying for summary judgment under O.14.

21. Mr. Coleman, for the plaintiff, submitted that the defence is predicated upon the existence of a true debt owed by Jackie to the defendant. It was submitted that there was no evidence or explanation as to the basis of the debt.

22. The defendant alleges that there was a debt owing by Jackie in the amount of the receivables in her account with the defendant and that the cheque for HK$252,000 was paid in partial repayment of the debt. Jackie herself accepted at the time that there was a debt owing by her to the defendant. She also says that she paid HK$100,000 out of her own savings in partial repayment of the debt. She now denies that there was a debt due to the defendant. This is one of the areas of dispute between the parties and is not one that can be resolved at the interlocutory stage.

23. It was further submitted by Mr. Coleman that none of the factual matters in dispute were relevant and capable of amounting to a defence to the action. We are unable to accept this submission. It is important to bear in mind that the plaintiff alleges that the payment of HK$252,000 to the defendant was made pursuant to a conspiracy between its manageress Jackie and Lo of the defendant. The plaintiff's case is predicated upon the fact that there was a conspiracy to defraud as alleged. This is denied. The factual matters in dispute are relevant to the question of whether or not there was such a conspiracy to defraud the plaintiff.

24. It must be remembered that an O.14 application for summary judgment should only be made in the plainest possible case. The following passage appears at 14/1/1 in Hong Kong Civil Procedure 2002:

“ Notwithstanding the narrow definition of fraud, however, save in the clearest possible case, it is inappropriate for the court to decide in summary proceedings whether a defendant has been fraudulent or dishonest: see Skink Ltd (in liquidation) v. Comtowell Ltd [1994] 2 HKC 286, CA, Wavefront Trading Ltd v. Po Sang Bank Ltd [1999] 2 HKC 130. "

25. We agree entirely with what is stated in the above passage. Where, as here, the plaintiff alleges that the defendant entered into a conspiracy to defraud the plaintiff it cannot be right for a court to conclude that the defendant was guilty of it in summary proceedings save in the clearest possible case and where the evidence is overwhelming. This is not such a case. There are substantial disputes of fact between the parties. In our judgment it is inappropriate to grant summary judgment to the plaintiff. It cannot be said that the defendant's allegations are incapable of belief. Whether or not they will be believed is a matter for the trial judge.

26. As the defendant's allegations were set out in its defence and counterclaim which was served before the application was taken out the judge correctly dismissed the plaintiff's application with costs. We are, however, surprised that the judge did not give any reasons for his decision. He ought to have done so. The parties were entitled to know the reasons why the judge dismissed the application for summary judgment.

27. We dismiss the appeal. We make an order nisi that the plaintiff do pay the defendant its costs of the appeal.