GOLDEN EDGE GROUP LTD v. TAI TAK HIP t/a LEADSTAR INDUSTRIAL CO

DCCJ3339/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3339 OF 2012

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JUDGMENT

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1.  This is an application for summary judgment concerning a dishonoured cheque for the sum of HK$193,080.

2.  The plaintiff is a manufacturer and supplier of extension sockets, adaptors, convertors and related products, whereas the defendant carries on business as a trading exporter and importer.

3.  The plaintiff and the defendant appear to have had various business dealings with each other since 2007.  Disputes have arisen out of such dealings, and these disputes form the subject matter of this action.  In short, the plaintiff claims against the defendant for non-payment of goods sold and delivered, whilst the defendant contends that the goods were defective and that the plaintiff was also in breach of certain exclusive distributorship agreements entered into between the plaintiff and the defendant.

4.  However, for the purposes of the present application, I am concerned only with one aspect of the plaintiff’s claim, that is, for a dishonoured a cheque drawn by the defendant dated 15 September 2012 in the amount of HK$193,080.

5.  It is the plaintiff’s case, as set out in paragraph 11 of the Statement of Claim, that the cheque was part payment of invoice E212033 issued by the plaintiff on 31 May 2012 for a shipment of electrical plugs and sockets sold to the defendant and delivered to the United Arab Emirates (UAE).

6.  In §28 of the Amended Defence and Counterclaim, the defendant admits that the cheque was drawn and delivered by the defendant to the plaintiff and does not deny that the cheque was for part payment of the amount due under invoice E212033.  However, the defendant contends that there has been a total failure of consideration by the plaintiff under the contract.  It is not alleged that the goods forming the subject of invoice E212033 were never delivered, but rather that such goods were, along with other goods delivered under previous contracts, defective in a number of respects, and the defendant’s customers in the UAE have threatened to claim against it for breach of contract.

7.  There is indeed some evidence to suggest that there may have been quality issues in respect of some of the goods shipped by the plaintiff to the defendant, which have resulted in certain “letters of guarantee” issued by the plaintiff assuring the defendant that it would take responsibility for and resolve any quality problems.

8.   The principles concerning dishonoured cheques are well established and not in dispute. A bill of exchange is to be treated as cash and honoured unless there is some good reason to the contrary.  Only in exceptional circumstances will a court deprive a claimant of judgment on a claim based on a cheque. In Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH [1977] 2 All ER 463Viscount Dilhorne stated the position at p 470 as follows:

“Bearing in mind the intrinsic nature of a bill of exchange, ‘an unconditional order’, which the appellants were entitled to regard as a deferred instalment of cash, and the fact that cross-claims, unless based on fraud, invalidity or failure of consideration are not allowed, it appears to me that seldom, if ever, can it be right while denying the right to bring a cross-claim, to allow a cross-claim to operate as a bar to execution and to prevent the holder of a bill of exchange receiving the deferred instalment of cash which the parties agreed he should get.”

See also the principles summarised in paragraph 14/4/15 of Hong Kong Civil Procedure 2013

9.  At the beginning of his submissions, Mr Chow, counsel for the defendant, confirmed that he relies solely on the defence of failure of consideration to this aspect of the plaintiff’s claim.  The contractual principle of failure of consideration is now fairly well settled.  The failure must be total as consideration is “whole and indivisible”.  Thus any performance of the actual thing promised, as determined by the contract, is fatal to a plea of failure of consideration.

 See eg Stocznia Gdanska SA v Latvian S S Co [1998] 1 WLR 574, 588.

10.  Given that the goods were delivered and accepted, even if there were any defects to the goods, there cannot be said to be any failure of consideration. The defendant is, of course, free to pursue its counterclaim for unliquidated damages arising from any breaches of contract by the plaintiff.  However, these are not matters which can constitute a defence to a claim under a dishonoured cheque.

11.  For the reasons above, the plaintiff is entitled to summary judgment for the amount of the cheque, and I enter judgment accordingly against the defendant for the sum of HK$193,080.

12.  Mr Lau, counsel for the plaintiff, has referred me to Section 57 of the Bills of Exchange Ordinance (Cap 19), and asks for interest to be calculated from the date of presentment of the cheque on 18 September 2013.  This is fairly accepted by Mr Chow.  I therefore award interest at the commercial rate from 18 September 2012 until today, and interest thereafter at judgment rate.

13.  Mr Chow asks for a stay of execution of this judgment pending the determination of the defendant’s counterclaim.  As mentioned above, a stay will seldom, if ever, be granted in circumstances such as the present, and I can see no reason to depart from the usual rule. I therefore refuse a stay.

14.  Costs should follow the event.  Mr Lau asks for a certificate for counsel for both the call-over hearing before Registrar Lui on 13 September 2013 and this hearing.  This is not resisted by Mr Chow.  In my view, however, the attendance of counsel at the call-over hearing was unnecessary, particularly in the light of the relatively modest amount in question.  I therefore order that the plaintiff have the costs of this application, including the costs of the hearings on 13 September 2013 and this morning, with a certificate for counsel only for this morning’s hearing.