Cheung Ngai Sing t/a Kim Shing Piece Goods Co v. Yim Cheuk Nam
Read the full judgment text of HCA 6376/1980 on BabelCite. This High Court CFI judgment.
1. There are two actions. There were two determinations by the learned Registrar. There are two appeals, one in each. They can be and have been conveniently dealt with together before me to-day.
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HCA006376/1980 (Heard together by consent without any consolidation)
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----------------- Coram: Liu, J. in Chambers. Date of Judgment: 13th February, 1981 ----------------- JUDGMENT ----------------- 1. There are two actions. There were two determinations by the learned Registrar. There are two appeals, one in each. They can be and have been conveniently dealt with together before me to-day. 2. The 1st action is High Court Action 6376 of 1980. The 2nd action is High Court Action 4471 of 1980. They have been described as the 1st and 2nd actions not by virtue of their proper sequence but by reason of the order of counsel's submissions. 3. In the 1st action, the plaintiff sues the defendants on six dishonoured cheques in the sum of $359,026.46. Allowing a part redemption in the sum of $30,000, the plaintiff's claim against the defendants on these six cheques is a net total of $329,026.46. The 2nd action is a claim by an endorsee of a cheque in the sum of $69,974.28 drawn by the defendants in favour of the plaintiff in the 1st action as Third Party in the 2nd action. 4. Leave to sign judgment was granted in 0.14 proceedings by the learned Registrar in the 1st action against the defendants on the said six cheques. From this decision of the learned Registrar, the defendants now appeal. 5. In the 2nd action, having suffered judgment entered against them on the said cheque for $69,974.28, the defendants caused to be served on the plaintiff in the 1st action a Third Party Notice. A summons for summary judgment or directions was issued by the defendants in the Third Party proceedings in the 2nd action against the Third Party i.e. the plaintiff in the 1st action. The facts in both actions arose out of an identical transaction between the plaintiff and the defendants in the 1st action, i.e. the Third Party and the defendants in the 2nd action. In the 2nd action, the learned Registrar dismissed the defendants' Third Party summons. The defendants in the 2nd action likewise felt aggrieved, hence, the appeal in the 2nd action. 6. Before the hearing of the appeals to-day, the Third Party in the 2nd action i.e. the plaintiff in the 1st action filed a further affidavit. Mr. Lee, counsel for the plaintiff in the 1st action and the Third Party in the 2nd action (both respondents in these appeals) stated that when the 0.14 summons in the 1st action came before the learned Registrar, there was insufficient time for his client as plaintiff in the 1st action and Third Party in the 2nd action to join issue on fact and that he, as counsel reserved in no uncertain terms the right of his client in both actions to file a further affidavit should circumstances require. There has been no serious refutation of counsel's statement made to this court, which I accept. In anticipation of my approach to the question of costs at the end of my judgment, suffice it to say that in my view the seeming delay in filing the further affirmation of the Third Party in the 2nd action has been satisfactorily explained. 7. Mr. Tang, counsel for the defendants in both actions and the appellants in both appeals recognized the obstacle raised by the further affirmation of the Third Party in the 2nd action and readily conceded that the 2nd appeal stood or fell by the very submissions advanced in the 1st appeal. Mr. Tang stressed that whatever was the outcome in the appeal in the 2nd action, the question of costs would have to be separately decided in the light of the circumstances. 8. The basic principles are beyond doubt. Cheques have, for many years last past, been treated as payment of cash. In 0.14 proceedings on cheques, the discretion vested in the courts to grant a stay has not been completely removed. It is trite law that on an 0.14 application for summary judgment in respect to cheques, a stay of execution will only be granted in exceptional circumstances and that as between the immediate parties to a cheque, a partial failure of consideration in a liquidated amount may be relied upon as a pro tanto defence. Legal opinions on the latter do not seem to be undivided. "Partial failure of consideration" has been left ill-defined. I do not propose to delve into the subtleties of this limp of legal principle, not directly pertinent to the matters at issue. It can be amply illustrated by a citation of certain passages in Byles on Bills of Exchange, the 24th ed. at p.223 and footnote 23 thereto:
9. Note 23 reads as follows:
10. The plaintiff and the defendants in the 1st action entered into Contract No. 140 dated the 7th March, 1980 for a quantity of materials to be delivered. One day thereafter on the 8th March, 1980, another Contract No. 1783 was signed between the defendants and Messrs. The Win Dyeing Works Ltd. which may shortly be called "The Win". The defendants alleged that defects in deliveries under Contract No. 140 were so extensive that as for the six cheques in the 1st action it was a case of partial failure of consideration. But evidently damages said to have arisen therefrom do not, as they generally do not, fall into the category of liquidated damages. 11. It was further alleged by the defendants that under their own Contract No. 1783 with The Win, subject - matter of another High Court Action No. 6523 of 1980, a sum of $661,795.97 fell due but had remained unpaid. On account of inter alia such alleged defective deliveries, the cheque in the 2nd action was, so ran the arguments advanced on behalf of the defendants, similarly given by the defendants to the Third Party in the 2nd action. Likewise, it was contended that the amount on that cheque which had been adjudged as payable to the plaintiff endorsee in the 2nd action must also be the responsibility of the Third Party. 12. In addition, almost 30,000 yards of materials had admittedly been returned to and accepted by the plaintiff in value to the tune of $272,701.80. 13. All these matters alleged are, so urged Mr. Tang, matters that ought to be given the consideration they deserve. There were, so counsel submitted, exceptional circumstances to justify the exercise of discretion in granting a stay of execution, if not of the entire judgment debt in each action, at least to the extent of the value of the returned almost 30,000 yards worth $272,701.80. The exceptional circumstances so heavily relied upon by the defendants were outlined with remarkable clarity by Mr. Tang under three heads: (1) It was submitted that Contract No. 140 and Contract No. 1783 were back-to-back contracts. Under Contract No. 140, the defendants were to pay cash, but it was stipulated that post-dated cheques drawn by customers, if received, might be accepted as payment with presumably banking interests to be borne equally by the plaintiff and the defendants. In the defendants' contract with The Win, payment was to be made by post-dated cheques. Obviously, a time lapse in reimbursement was envisaged by the defendants in these transactions. The defendants took upon themselves to assume risk with open eyes and for a commission of a small marginal profit. They should have no justifiable complaint, but Mr. Tang elaborated that the back-to-back transaction was in the sense that all concerned appreciated that in reality the ultimate user of the materials to be delivered was not to be the defendants. There was also an allegation of defects by The Win. The Win had allegedly been uncooperative. The defendants are now without payment or the materials delivered or a large quantity of it. Although Mr. Tang was unable to account for the post-dated cheques supposedly to have been paid to the defendants, counsel urged that the defendants should not be put to hardship because of these loosely termed back-to-back transactions. I do not share counsel's sympathy for his clients. The defendants committed themselves to these contractual obligations at arm's length, and I can see no reason why they should not face the consequence which is not wholly unexpected. (2) Mr. Tang further submitted that a strong possibility of a counterclaim as fortified by the surveyor's report might appropriately be equated with the position of the case of strong evidence of repudiation. By itself, so submitted counsel, it would constitute an exceptional circumstance. It would not be out of place here to refer to the conclusion drawn by the surveyor that the materials delivered and retained were not entirely useless. It might be gainfully put to use in the manufacture of second-quality garments. Be that as it may, I am not prepared to accept that the defendants' counterclaim is indefensibly strong. In most, if not all cases on dishonoured cheques, substantial allegations are generally being resorted to. How else may a written mandate to pay cash be effectively impugned? This is no exception. Even assuming a strong case of an alleged counterclaim had been made out before the learned Registrar, it should not have been taken, without more, as an exceptional circumstance. It is, at least to that extent, different from strong evidence of repudiation. (3) Mr. Tang relied on alleged defects as well as the returned almost 30,000 yards as partial failure of consideration which should have induced the learned Registrar and should persuade this court to grant a stay wholly or in part. It must not be forgotten that the allegation of defects in this case has not, in my view, introduced liquidated damages to qualify as pro tanto defence. As for the almost 30,000 yards returned, the defendants have yet to suggest in black and white which of the six cheques was tied to these almost 30,000 yards taken back. Mr. Lee, counsel for the plaintiff in the 1st action and Third Party in the 2nd action referred to the nature of the plaintiff's claim pleaded as being an action for goods sold and delivered, which excludes, on the face of it, returned goods. In fact, at no time have the defendants sought to rely on any of the $272,701.80 returned goods in defence of the plaintiff's claim on these six cheques, none of which exceeded $100,000. 14. It is not a matter in issue that on an appeal from a Registrar, matters are to be decided de novo. However, in all the circumstances, I am unable to say that any part of the decisions of the learned Registrar was wrong in principle or his exercise of discretion. I would not have myself come and in the circumstances cannot come to a different conclusion from that reached by the learned Registrar. Consequently, it remains for me to order that both appeals against the Registrar's decisions be dismissed with costs. 15. I should add a rider. The learned Registrar in the 2nd action dismissed in toto the summons of the defendants against the 3rd party, which sought in the alternative Third Party directions. The subject-matter for determination relates to a cheque drawn by the defendants in favour of the Third Party and endorsed to the judgment creditor in the 2nd action. I take the view that payment to the Third Party on the cheque in the 2nd action should not be interfered with, and it stands to reason the no Third Party directions were called for. So it was decided by the learned Registrar by necessary implication. This matter was drawn to the attention of Mr. Tang during the course of his full and well-organized arguments, and counsel was content to rest on the submissions advanced in support of the appeal in the 1st action.
Representation: Mr. Sammy Lee instructed by Lo & Lo for Plaintiff/Respondent in Action No. 6376 of 1980. Mr. Sammy Lee instructed by Robert W.H. Wang for Third Party/Respondent in Action No. 4471 of 1980. Mr. Robert Tang instructed by Denton Hall & Burgin for Defendants/Applicant in both actions. |