Re The Grand Hotel Ltd

HCCW000003/1966

IN THE SUPREME COURT OF HONG KONG

COMPANIES WINDING-UP

ACTION NO. 3 OF 1966

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Coram: Briggs J. in Chambers

Date of Judgment: 23rd April, 1970.

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JUDGMENT

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1. There are two summonses before me. The first is dated 3rd December, 1969 and is brought under rule 95 of the Companies (Winding-Up) Rules by Chen Ching Tak. The second is dated 29th January, 1970 and is brought by the Official Receiver as liquidator of Grand Hotel Limited under rule 96 of the same rules. In the winding up of that company Chen Ching Tak sought to prove that the sum of $163,460 was owing to him by the company. The liquidator accepted proof of the debt to the amount of $20,532 but rejected proof of the rest of the debt namely $142,928. These two summonses seek to reverse both of these decisions of the liquidator. Chen Ching Tak seeks to reverse the decision of the liquidator in rejecting his proof of debt of $142,928. The liquidator wishes to reverse his own decision to allow proof of debt of $20,532 in favour of Chen Ching Tak.

2. It will be convenient to deal with the two summonses together.

3. At the material time Chen Ching Tak was the sole proprietor of Cheng Tai Construction Company. And in 1963 or 1964 he was engaged to erect certain buildings for the Sun Brothers' Investment Company Ltd.

4. By a written memorandum of 23rd September, 1964 made between him and Sun Ting Yat, the managing director of the Sun Brothers' Investment Company it was agreed that that company owed Chen Ching Tak $200,000 which represented the retention money under the building contract. It was further agreed that this should be paid off by 12 monthly instalments. Twelve post dated cheques for $17,866 each were given to Chen Ching Tak. These cheques were all drawn by Sun Ting Yat as managing director of the Grand Hotel Company not as managing director of the Sun Brothers' Investment Company. Some of the cheques were honoured and there was a further arrangement in respect of other cheques but cheques to the amount of $163,460 have been dishonoured. And this is the amount that Chen Ching Tak claimed from the Grand Hotel Company in the liquidation proceedings.

5. At the time Chen Ching Tak received the cheques he was told that the Grand Hotel Limited was the tenant of the building he had erected on behalf of the Sun Brothers' Investment Company. He was also told that the cheques represented the amount of rent payable by the Hotel to the Investment Company. Sun Ting Yat was managing director both of the Investment Company and of the Hotel. Indeed the directors of both companies were the same. It is believed that they have vanished from Hong Kong. Both companies are in liquidation.

6. The cheques were presented for payment in April and May 1965. The winding up of the two companies commenced in March 1966. So there is no suggestion here that these cheques were passed to Chen Ching Tak to defeat the claims of other creditors of the companies or for some other shady purpose.

7. The Official Receiver does not dispute these facts but points out that the Grand Hotel Company Limited was not a party to the agreement made between Chen Ching Tak and the Investment Company. The Official Receiver further relied upon rule 94 of the Companies (Winding-Up) Rules, which states that the liquidator must examine every proof of debt lodged and only accept those, the proof of which is satisfactory.

8. Mr. Mills-Owens who appeared for Chen Ching Tak relies on two points. First he says there was good consideration. Secondly he relies on section 30 of the Bills of Exchange Ordinance.

9. As to the first point, when Chen Ching Tak accepted the post dated cheques he deprived himself of the right to insist upon the immediate payment of the retention money, which was already due to him. The acceptance of the cheques implied a forbearance to sue the Sun Brothers' Investment Company until they had been presented and it is well settled that a forbearance to sue is good consideration. Therefore Chen Ching Tak had given good consideration for the cheques. This would appear to be the case.

10. There is no mention of the forbearance to sue in the agreement itself but Chen Ching Tai has sworn to this in an affirmation which has not been contradicted.

11. The second point is much stronger. It is unnecessary to set out the terms of section 30 of the Bills of Exchange Ordinance. But its effect in the present case is to make the Grand Hotel Limited a party to the cheques as drawn. And the payee, Chen Ching Tak is presumed to have given consideration for them. This section only raises a presumption, which can be rebutted. In the present case the onus passed to the Official Receiver to rebut the presumption but no evidence of rebuttal has been forthcoming. It is not suggested that there was fraud nor that Sun Ting Yat had no authority to sign the cheques. There simply is no evidence available.

12. The Official Receiver argued that in winding up proceedings the onus did not pass to the liquidator: winding up proceedings are, it was suggested, out of the realm of ordinary commercial law. The simple question was, was the relationship between the Hotel and Chen Ching Tak that of creditor and debtor? And the mere production of the Hotel's cheques by Chen Ching Tak was not enough to prove this: the liquidator could "go behind" the cheque and look at the true relationship of the parties.

13. This is an attractive argument. But if it means that a liquidator can ignore the provisions of section 30 of the Bills of Exchange Ordinance it is untenable. There is no authority for such a proposition. There is no reason why a liquidator should not "go behind" a cheque but it is for the liquidator to produce evidence of the true relationship between the parties so as to rebut the presumption contained in the section. It is not for the holder of the cheque to produce additional proof that the relationship of creditor and debtor exists between him and the company in liquidation. It is for the Official Receiver to rebut the presumption contained in section 30.

14. As I have said there was no evidence before me to rebut the presumption. In the circumstances Chen Ching Tak succeeds in the first summons. The decision of the liquidator rejecting proof of debt dated 29th September, 1969 is reversed. Further, and for the same reason, the second summons is dismissed. Chen Ching Tak is entitled to his costs on both summonses. Costs to be paid out of the estate. Certificate for Counsel.

Representation:

Mills-Owens (Woo & Woo) for Applicant.

Miss Smith for Official Receiver.