Tong Kai on t/a Hang Sing Knitting Factory v. Tse Ping Ngai t/a Kar Lok Garment Factory

HCA001330/1977

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Coram: Mr. Commissioner Swaine, Q.C.

Date of Judgment: 11 October 1979

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JUDGMENT

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1. This case turns mainly on credibility. The plaintiff sues on five dishonoured cheques totalling $42,278. The defendant says no consideration was given for these cheques. The burden is on the defendant to show that. He says the cheques were lent to the plaintiff as security for a loan which the plaintiff was to obtain from a third party. In his Reply the plaintiff says the cheques were in payment of the balance of the price of cloth supplied by him to the defendant in January 1976. Delivery of such cloth amounting to 7,357 pounds is not in dispute. It is also not in dispute that the purchase price of such cloth was $106,311.26. The plaintiff says that out of such price he has been paid the sum of $64,033.26 leaving the amount of the cheques outstanding. The defendant says that he had paid in all $90,000 for such cloth and that 830 pounds of such cloth was returned to the plaintiff at a cost of between $12,000 to $13,000. The balance which remains on the defendant's figures of some $3,000 or $4,000, he says was agreed between himself and the plaintiff to be deducted as compensation.

2. There is also a dispute between the parties as to how the respective amounts said by them to have been paid were made up. The plaintiff says that the sum of $64,033.26 was made up as follows:

3. At the end of December 1975 he received a deposit of $30,000 from the defendant. The plaintiff subsequently amended this figure to $20,000 paid out of the cheque Exhibit D2 in the sum of $25,031 of which $5,031 he said was for another transaction, and the balance $10,000 out of the $30,000 deposit he said was separately paid.

4. I do not hold this change in evidence against the plaintiff. It was not until cross-examination that the defendant's case on the early payments was made evident to the plaintiff. There is nothing about such payments in the defence and no rejoinder has been filed. The plaintiff goes on to say that in February 1976 he received payment of a further $10,000. This amount is not in dispute. Then the plaintiff says in April 1976 he received payment of a further sum of $24,033.26. The defendant says there was no such payment.

5. As for the defendant's version of how the payments were made, he says, first, he had paid to the plaintiff on the signing of the Chinese document Exhibit D1 a cheque for $20,000 being cheque No. 141812. The plaintiff says this cheque was dishonoured on presentation. The plaintiff further says that the document Exhibit D1 was only a draft and that when cheque 141812 was dishonoured, he and the defendant scrapped the draft agreement and replaced it with a new oral agreement for delivery of 7,000 odd pounds of cloth in place of the 13,500 pounds stipulated in Exhibit D1. The defendant says that a further sum of $20,000 was paid out of the Exhibit D2 cheque totalling $25,031 and this amount is now conceded by the plaintiff to be correct. The defendant then further states that he paid a sum of $20,000 by the cheque Exhibit D3 to the plaintiff, but the plaintiff says this was in respect of another transaction between them. The defendant then relies on the $10,000 payment to which I have already referred and which is not in dispute between the parties. Finally, the defendant relies on a cheque for $20,000, Exhibit D5, dated 31st December, 1976, but the plaintiff says that this was in respect of another transaction.

6. Where the evidence of the plaintiff and defendant conflict, I unhesitatingly choose the evidence of the plaintiff as being the more reliable. There were two discrepancies in his evidence. I have referred to his change of evidence concerning the make-up of the $30,000 deposit and I have dealt with it. He had also said that the transaction in issue was the only credit transaction between himself and the defendant but admitted later that that was not so. I do not consider him an untruthful witness, and I consider that he was genuinely trying to remember events of some three years ago. On all key issues his evidence was clear and unshaken. The defendant in the witness box was an unimpressive witness and I do not believe him on the key issues. Further, there is the inherent improbability in his story as to how the five cheques were given. I do not consider that his evidence in any way dispels the inherent improbability of his defence.

7. I would say that much of the disputed points in this case relating to the payments could have been resolved by the production of bank statements and other documentary evidence, such as invoices, by either of the parties, but the documentary evidence in this case was very scant. The plaintiff says that his records were destroyed in a fire at his factory on the 25th of December 1978, but the documents which he produced in court were preserved as they were with his solicitors for the purpose of this action. The defendant explains that his bank, despite requests, has simply been unco-operative; and he further explains that he retired from business in 1978. Both plaintiff and defendant could have subpoenaed their respective banks but they have failed to do so. However, I find the defendant's omission to be far more serious in the context of this case as the plaintiff had disclosed his state of accounts in the Reply whereas the defendant did not disclose his state of accounts until the trial.

8. I shall now come to the five cheques in issue in this case. The plaintiff says that all five cheques were drawn by the defendant in June 1976 in payment of the unpaid balance of the purchase price of the cloth in question and that the defendant had requested that he be allowed to pay by instalments because he himself had not been paid by his own customer. The defendant, on the other hand, says that the five cheques were drawn by him at the end of July or the beginning of August of 1976 and were lent to the plaintiff. The defendant's case is that at the end of July or the beginning of August, the plaintiff approached him to lend him the five cheques to enable the plaintiff to use them as security for a loan from a third party, such third party not being known to the defendant. At this time, according to the defendant, the plaintiff had already been in breach of contract by delay in delivery and such delay, according to the defendant, had brought about his own ruin because the defendant's chief customer had as a result broken off relations with him. I disbelieve the defendant on this story.

9. One portion of his evidence which I find totally unbelievable is where he said that the plaintiff had asked only for an approximate amount and the plaintiff had asked the defendant to write down $40,000 odd. The defendant said this in chief. In cross-examination, the defendant explained the odd cheque for $12,278 Exhibit P1(e) saying that he had run out of cheques and there was just the one cheque left in the book; his foki had earlier written the Chinese characters for $12,278 on this cheque to pay another account. This was, as is plain to see, the last cheque in the series of five given to the plaintiff, and on the defendant's story, his foki had filled out this odd sum on this last cheque in the book which defendant then dated and signed and gave to the plaintiff!

10. I do not think it is particularly significant that the five cheques in question were all drawn on the defendant's personal account whereas the rest of the cheques put in evidence were on his firm's account. The defendant is sole proprietor of his firm. I do not have to speculate as to why, in regard to the payment of this overdue amount, he drew on his personal account; perhaps for the very reason that account was long overdue.

11. I find the plaintiff's version of how the defendant drew these five cheques in his favour to be far more credible and in accord with the inherent probability of the case.

12. The defendant produced a document in Chinese dated the 17th of September, 1976, Exhibit D6, in support of his case. The first part of that document related to another cheque altogether for the sum of $25,000 which the defendant had endorsed as an accommodation to the plaintiff. This part of the document is not in dispute between the parties. The plaintiff signed the document but he protests that the words at the end of the document referring to the borrowing of four of the five cheques in question were added later without his knowledge and consent. He says that this part of the document is false. He says that he first knew of this when he saw a copy of the document at his solicitors' office after he had issued his writ and the defendant had replied. It is, of course, part of the record that an Order 14 summons was issued by the plaintiff, and the defendant, in his affidavit showing cause, exhibited a copy of that document. The plaintiff says in evidence that he had complained to the Commercial Crimes Office about this document, but that after investigation they had decided not to prosecute. It would appear from the copy of the report of the Government Chemist which has gone into evidence by consent Exhibit P4 that the reason not to prosecute may have been that the Government Chemist was unable to come to any clear conclusion as to the falsity or otherwise of that portion of the document.

13. For the defendant, it must be said that if this disputed portion was indeed false, then he had acted very clumsily in falsifying this part of the document. I am not, however, prepared to accept the defendant's version as to how the document came to be made and I do not accept that the document, Exhibit D6, is genuine insofar as the disputed portion is concerned.

14. In the result, the defendant has failed to satisfy me that the five cheques were given in the circumstances alleged by him.

15. I accordingly find for the plaintiff and there will be judgment for the plaintiff as claimed in the sum of $42,278. In the writ interest has been claimed from the 1st of January, 1977 and I so award interest on the cheque No.466,193 in the sum of $8,000 which was presented and dishonoured on the 31st August, 1976. The rest of the cheques were presented and dishonoured on the 28th of February, 1977, so interest on those cheques will run from the 1st of March, 1977. Interest on all amounts will run at the usual rate as claimed of 8% per annum until judgment. Thereafter interest will, of course, run on the aggregate sum as prescribed by Section 49 of Chapter 4 until payment. The plaintiff will, of course, have his costs.

Representation:

A. Ismail (W.S. Lo & Co.) for plaintiff.

J. Chan (Yung, Yu, Yuen & Co.) for defendant.