David Hsu v. Pioneer Elastic Fabric Ltd and Another

HCA005929/1982

BETWEEN

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Coram: Hon. Liu J. in Chambers

Date: 10th January, 1983.

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JUDGMENT

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1. This is a claim by the plaintiff against the 1st and the 2nd defendants on four dishonoured cheques for a total of $300,000. The plaintiff also claims against the defendants for interest and costs.

2. The 2nd defendant gave no notice of his intention to defend, and consequently judgment was entered against the 2nd defendant by the plaintiff together with interest thereon at 8% per annum on the judgment debt with fixed costs. The plaintiff proceeded against the 1st defendant limited company under order 19 before the learned Master who granted unconditional leave to the 1st defendant company to defend with usual directions. Against that decision of the learned Master, the plaintiff now appeals.

3. This appeal evolved not so much from the unconditional leave granted. It was submitted on behalf of the plaintiff that such leave ought not have been granted to the 1st defendant company against whom judgment should be entered for the sum claimed in this action.

4. On behalf of the 1st defendant company, Madam Lee Lai Chuen, a director deposed to the allegation that there was no business transacted between the 1st defendant company and the plaintiff and that each and every cheque in question in this action was given by the 1st defendant company through the 2nd defendant, then the managing director, in settlement of   his own gambling debts. the plaintiff replied and together with the Statutory Declaration of the 2nd defendant exhibited to his affirmation filed herein on the 22nd September 1982 deposed to the facts that at about the end of March, 1982, when the 1st defendant company was in need of fund for purchasing raw materials,$200,000 was borrowed from him, the plaintiff and that near the end of April, another $100,000 was obtained from him as a loan for payment of workmen's wages. There have been some discrepancies in dates, but that is neither here nor here.

5. In answer to the facts deposed to by the plaintiff in conjunction with the Statutory Declaration of the 2nd defendant, one Mr. Tsang Kang Po, presently the promotion manager of the 1st defendant company but formerly its purchasing manager stated on affirmation that at or above the end of Match in the presence of the plaintiff and a lady, $100,000 was given by the 2nd defendant to him for deposit into the account of the 1st defendant company. He had no knowledge of the other $100,000 said to have been lent by the plaintiff to the 2nd defendant for the 1st defendant company on that occasion. Mr. Tsang further corroborated the collection of $100,000 at the end of Apirl 1982 in the form of a cheque from the office of Mr. K. T. Chau. Mr. Tsang was not in the position to confirm or rebut the allegations of the plaintiff and in the Statutory Declaration of the 2nd defendant, but he maintained that the $100,000 he received at the end of March and another $100,000 near the end of April were only personal loans to the 2nd defendant, which were each to be and indeed used in settlement of the 2nd defendant's then personal indebtedness to the 1st defendant company. He further stated that his impression and hence understanding was that none of  these sums was a loan to the 1st defendant company otherwise he would have given instructions to the staff of the limited company to make the appropriate entries and would not have been prepared to sign his name on the back of the cheque collected from K.T. Chau's office near the end of April 1982.

6. Therefore, at the end of the day we have the allegation of the 1st defendant company through its director that the cheques in question were given in settlement of the gambling debts of the 2nd defendant, hence there was no consideration moving from the plaintiff for the issuance of any of them.

7. It would not be out of place here to complete the whole history. According to the plaintiff and the Statutory Declaration of the 2nd defendant, at the end of March when the $200,000 was obtained for the benefit of the 1st defendant company in three cheques, two dated the 2nd May 1982 for the sums respectively of $100,000 and $50,000 and another one dated the 5th May 1982 for another $50,000, they were issued by the 2nd defendant on behalf of the 1st defendant company, and further near the end of April when another $100,000 loan was secured for the benefit of the 1st defendant company, a further cheque dated the 28th May 1982 was issued by the 2nd defendant likewise on behalf of the 1st defendant company in blank in the sense that the payee was left unspecified. Subsequently, according to the plaintiff on or above the 1st of May 1982 when the three previous cheques were about to fall due, the plaintiff accepted three substitute cheques for the same amount also in blank without the payee designated, postdated to the 2nd June for the cheques in the sums of $100,000 and $50,000 and the 5th June for the cheque of the remaining $50,000. The plaintiff subsequently completed these cheques by filling in his own name as payee and presented them for payment on maturity. It is upon these four cheques which have been dishonoured that the plaintiff now claims against both defendants.

8. The allegation from the 1st defendant company through its director is that all the cheques were given by the 2nd defendant in payment of his gambling debts, hence there was no consideration moving from the plaintiff. As far as Mr. Tsang is concerned, his version deviated somewhat from the basic averment advanced on behalf of the 1st defendant company, and he asserted that none of the four cheques was a loan to the 1st defendant company but in settlement of 2nd defendant's personal indebtedness to the 1st defendant company from funds elsewhere made available. Madam Lee disclosed no source of her information,  if any, to found her belief. She did not condescend to particulars. Moreover, her allegations of gambling debts and absence of consideration virtually fell to the ground in the light of the plaintiff's description of cash transfer at the end of March except for the other $100,000 and payment in April as witnessed by Mr. Tsang. The issuance of the three cheques in consecutive serial numbers does go some way in linking the remaining $100,000 to the same transaction on the same occasion. It is notable that Mr. Tsang's bare assertion that the funds actually received for the benefit of the limited company were the 2nd defendant's part payment of his personal indebtedness to the company and not loans obtained for its benefit was wholly based on surmise. The transactions between the plaintiff and the limited company through its then managing director must necessarily depend on the conversation direct between the 2nd defendant and the plaintiff and the agreement reached between the two and not what Mr. Tsang claimed to have understood or how the ledgers of the 1st defendant company were in fact kept, their entries made, and last of all definitely not on what the 2nd defendant allegedly told Mr. Tsang. It is evident that Mr. Tsang's impression is no less irrelevant.

9. At the end of March 1982, as the 2nd defendant stated, he borrowed for the benefit of the 1st defendant company which was in need of finance for purchasing raw materials. Of that $200,000, how the 2nd defendant in fact dealt with and disposed of the other $100,000 is again not altogether material to the plaintiff's claim. What really  matters was that the 2nd defendant obtained these loans on behalf of the 1st defendant limited company and these loanswere so given by the plaintiff.

10. In the result, the 1st defendant company has not even begun to raise any bona fide defence. It was sought to be argued that circumstances were indicative of fraud which must be thoroughly investigated. Upon being pressed if counsel had specifically been instructed to make an allegation of fraud, Mr. Mayne categorically replied in the negative.

11. Apart from the insinuation of Mr. Tsang based wholly on his surmise, the allegation advanced on behalf of the 1st defendant company through its director, wife of the 2nd defendant was confined to the allegation that the 1st defendant's cheques issued and given by the 2nd defendant were in settlement of the 2nd defendant's personal gambling debts. If there were circumstances which would call for an investigation, they must, in my view, relate to and be connected with an allegation made by or on behalf of the 1st defendant company. No allegation has been properly set up. The general facts which are common to both for the purpose of the present proceedings are inconsistent with and contradictory to the bare assertions made. There are, therefore, no circumstances related to or connected with any allegation fit for investigation. Suspicion is not enough.

12. Consideration has been shown by the affirmation of the plaintiff exhibiting the Statutory Declaration on the 2nd defendant. It cannot be said that any matter was within the peculiar knowledge or control of the plaintiff. After all the 2nd defendant was at the material time, the managing director having the control of the 1st defendant company, and no allegation of fraud has been made. The authority of the 2nd defendant to sign and issue these cheques in question has never been put in issue.

13. For these reasons, I am driven to the conclusion that the 1st defendant company has not begun even to raise a bona fide defence and that whatever suspicion raise by the affirmation of the director of the 1st defendant company has been dispelled by the plaintiff's affirmation and the Statutory Declaration of the 2nd defendant, to a large extent of which it has been corroborated by the former purchasing manager of the 1st defendant company. I cannot, therefore, support the order of the learned Master granting unconditional leave to defend the 1st defendant and would allow the appeal.

Representation:

Mr. Wesley Wong instructed by Messrs. David K.W. Tsang & Co. for the Plaintiff/Appellant.

Mr. R. Mayne instructed by Messrs. Bernard Wong & Co. for the 1st Defendant/Respondent.