上海海泰克貿易發展有限公司 v. CHINA SCI-TECH HOLDINGS LTD. AND OTHERS

CACV 243/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 243 OF 2002

(ON APPEAL FROM HCA 1769/1999 AND 1771/1999 (CONSOLIDATED))

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J U D G M E N T

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Hon Mayo VP:

1. This is the substantive application of the 1st defendant for a stay of the judgment entered against all the defendants in actions HCA 1769 and 1771 of 1999 pending an appeal.

2. On 11 June 2002 Mayo VP and Cheung JA granted an interim stay of execution pending the hearing of this application.

3. This litigation has had a somewhat chequered history.

4. The plaintiffs applied for summary judgment under Order 14. The application was heard by Godfrey JA who was sitting as an additional Judge of the Court of First Instance. He granted leave to defend conditional upon the payment into court of $26,139,446.33. He made a further order in these terms:

"the Plaintiffs are to be at liberty to apply for payment out of the court of the sum paid into the court in pursuance of paragraph 1 [sic] of this Order in the event of their succeeding in entering judgment against any one of the Defendants in this Consolidated Action, but none of the Defendants is to be at liberty to apply for such payment out except in the event of the dismissal of all the Plaintiffs' claims against all the Defendants in this Consolidated Actions or further order by the court."

5. Payment was made into court and the case proceeded to trial before Deputy High Court Judge Poon.

6. The factual background to this litigation has most succinctly been summarised by Yuen JA who, as a single Justice of Appeal, entertained the initial application for a stay of execution. She did so in these terms:

"3. I shall deal very briefly with the background of the case as found by the trial Judge. On 17 June 1998 there was an agreement between a company referred to by the Judge as SH Bonnie and the 1st Plaintiff which is a company incorporated on the Mainland.

4. The 1st Plaintiff was to procure the issuance of letters of credit with funds to be provided by SH Bonnie. It was agreed that a company by the name of New Excellence Holdings would draw a cheque for 20% of the amount 3 days before the Letters of Credit were to be opened and would provide the balance of 80% by 15 October 1998.

5. The cheque to be drawn by New Excellence Holdings was to be paid to the 2nd Plaintiff which was the 1st Plaintiff's window company in Hong Kong.

6. On the same day as this agreement was entered into between SH Bonnie and the 1st Plaintiff, the 1st Plaintiff entered into two agreements, 1st for the purchase of goods by the 1st Plaintiff from a company known as Hong Kong Bonnie, and then for the on-sale of those goods by the 1st Plaintiff to a company called Binet. Hong Kong Bonnie and Binet were found by the trial Judge to have been sellers and buyers nominated by SH Bonnie.

7. In late June 1998, there was an arrangement whereby in place of New Excellence Holdings, the 1st Defendant's cheque would be given to the 2nd Plaintiff. Pursuant to that arrangement, on 10 July 1998, after some initial difficulties, the 1st Defendant's cheque in the sum of about $23.6 million was given to the 2nd Plaintiff, and on the same day the 1st Defendant signed an "undertaking" (which was not by deed) in favour of the 2nd Plaintiff. On the same day, it appeared the 2nd and 3rd Defendants also signed guarantees in favour of the Plaintiffs.

8. The due date of the cheque was 15 October 1998, but it was not presented until 28 December 1998 and it was dishonoured the next day. On 30 January 1999, a Writ was issued. Apparently there was first an action issued against the 1st Defendant only, and subsequently there was a second action against the 2nd and 3rd Defendants."

7. At the trial the main issue which was canvassed was the common defence of illegality. This foundered on the failure of the defence's expert on Chinese law to make good the opinions he had expressed. This issue is not going to be canvassed in the appeal.

8. It now appears that the most substantial ground of appeal which will be advanced will be whether the 1st defendant was able to rely on the lack of consideration as a defence.

9. This was an issue which was joined on the pleadings.

10. The plaintiff's answer to this complaint was to rely upon an implied warranty and promise.

11. The point which is made by Mr Warren Chan SC is that any such warranty or promise must have been given at the request of the 1st defendant.

12. It is apparent from a perusal of the judgment that this issue was not ventilated at the trial.

13. The question which then has to be considered is whether Mr Chan is right in his submission that this was simply a point of law.

14. I do not think that this is right. I am of the view that this is a mixed question of law and fact.

15. The question whether the 1st defendant ever expressly or impliedly made such a request is a question of fact.

16. Having regard to the way in which the case proceeded it was not incumbent upon the plaintiffs to adduce evidence on this point.

17. Over and above this it needs to be borne in mind that as the claim was being based upon a cheque the burden of proof shifted to the 1st defendant on account of the presumption under section 30 of the Bills of Exchange Ordinance Cap. 19 that a party to a bill is prima facie deemed to have given value.

18. At this late stage I am doubtful whether the Court of Appeal would be prepared to entertain submissions on such a ground of appeal in the absence of findings of fact made by the trial judge. This being so the prospects of success on any appeal are minimal.

19. In this connection the Court of Appeal would naturally be extremely reluctant to embark upon what would amount to the 1st defendant being allowed to argue an entirely new case before it. The relevant principles were considered in the judgment of Bokhary PJ in Flywin Company Limited v Strong & Associates Limited FACV 15/2001.

20. Two hurdles have to be surmounted if an order is to be made that there should be a stay of execution pending an appeal. The first is that it has to be established that if an order is not made there is a considerable risk that if the appeal is successful it would be rendered nugatory as the means available to satisfy it would have been dissipated.

21. It is by no means clear on the evidence which is available that this would necessarily be the case.

22. The second hurdle is that it has to be demonstrated that there is a reasonable prospect of success on this appeal.

23. The interim application was heard at very short notice and the time available for the hearing was limited. It was not possible to consider the application in any great depth.

24. I am now satisfied for the reasons which have been briefly referred to in this judgment that there is no reasonable prospect of success on this appeal and that the interim order should not have been made.

25. There is a further matter. Earlier reference was made to the order made by Godfrey JA on the Order 14 application. The restriction he imposed on the plaintiffs on seeking for payment out of the moneys in court no longer has any application. Judgment was entered against all defendants. The 3rd defendant has not appealed against the judgment and the 2nd defendant is not seeking any stay of the execution.

26. Be that as it may for the reasons which have been given I am of the view that this application should be dismissed and the interim order should be set aside.

Cheung JA:

27. I also agree that the application should be dismissed and I agree with the reasons given by the Vice President.

28. The passage in Bullen & Leake & Jacob's Precedents of Pleadings (14th Edn., paragraph 6-10) which provides that :

"Likewise, it is not strictly necessary to allege consideration, which is presumed unless the contrary is shown under section 30(1) of the Act. Again, it is suggested that it is preferable to state the consideration given where it is practicable to do so, and essential so to do if it is known that this is disputed."

will not assist the 1st defendant.

29. The requirement stated by this passage is not supported by authority. I think starting with the presumption of value under s. 30 of the Bills of Exchange Ordinance, what the author suggested merely amounts to a good practice for the parties to identify the issues of their case. In any event the plaintiffs had indeed fulfilled their obligation on the pleadings. They had specifically pleaded that the nature of the consideration for the cheque issued by the 1st defendant was, among other things, the implied warranty by the 2nd plaintiff to the 1st defendant as to its authority to accept the cheque in diminution or discharge of the obligation of S.H. Bonnie to provide security under the agreement. Such an implied warranty is clearly recongised as good consideration, see : Pollway Ltd. v. Abdullah [1974] 1 WLR 493, Spencer v. Crowther [1986] 1 NZLR 755, Pendergrast v. Chapman [1998] 2 NZLR 177, Wong Fook Heng v. Amixco Asia Pte Ltd [1992] 2 SLR 342.

30. If the 1st defendant wished to challenge this because the plaintiff had not specified that the promise was made at the request of the promisor as discussed in Butterworths Common Law Series The Law of Contract at pp 177-179, then it clearly had to plead this, or at the latest, raise this at the trial so that the issues can be resolved.

31. Even if s. 30(1) is concerned only with the shifting of evidential burden, in my view, if the 1st defendant chose to call no evidence at the trial, then clearly the plaintiffs had proved their case on the consideration point. The concern then, as it is now, was no longer a matter of pleadings but a matter of substance based on the operation of s. 30 and the evidence of the case.

Hartmann J:

32. I also agree that this application should be dismissed. I have nothing to add.

Mayo VP:

33. The application is accordingly dismissed and the interim order is set aside. The plaintiffs are to have the costs of the application.