Lee Wing Chiu v. Lee Wing Fai

CACV000032/1984

IN THE SUPREME COURT OF HONG KONG

COURT OF APPEAL

(On appeal from High Court Action No. 15027 of 1983)

BETWEEN

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Coram: Sir Denys Roberts, C.J., Yang and Barker JJ.A.

Date of Judgment:  24 April 1984

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JUDGMENT

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Yang J.A.:

1. On 27th January 1984 Master Hansen made an order under Order 14 giving the Defendant unconditional leave to defend. On hearing the Plaintiff's appeal against the order on 15th February 1984, Mayo J. ordered that the Defendant be given leave to defend on condition that the sum of $300,000 be paid into Court within 14 days.

2. The dispute between the parties arose out of an agreement dated 9th November 1983 whereby the Plaintiff sold to the Defendant 400 shares in a private limited company called the Jets Communication Services Co. Ltd. ("the Company") for $2,000,000. By Clause 3 of the agreement the purchase price for the shares was to be paid by the Defendant by eight monthly instalments, for which purpose the Defendant was to give the Plaintiff eight post-dated cheques. Appearing in handwriting and as an addition to Clause 3(a) of the agreement, it was stipulated that upon default in payment of any of the instalmenta for over seven days from the respective dates, the whole sum would immediately become due and payable.

3. By his Statement of Claim the Plaintiff alleged that the eight post-dated cheques were delivered to the Plaintiff by the Defendant but the first cheque of $300,000 dated 24th November 1983 was presented by the Plaintiff for payment on due date and dishonoured. The Plaintiff therefore claims on the dishonoured cheque for $300,000 and further, or in the alternative, the whole of the $2,000,000 being purchase price for the shares.

4. By two affidavits dated 26th January 1984 and 14th February 1984 respectively, the Defendant claimed that the Plaintiff had made certain misrepresentations as to the financial condition of the Company at the time of the purchase of its shares.

5. Mayo J. found that Master Hansen was correct in principle in finding that there was a triable issue between the parties. The judge went on to say -

"         I am satisfied that the payment of the cheque was inextricably part of the subject matter of the agreement between the parties. I did not therefore consider it to be appropriate to enter judgment in respect of the cheque. I do though consider after reading all of the affidavits and hearing the submissions of counsel that the defendant's defence particularly regarding the cheque is a shadowy defence and I felt it to be necessary to impose a condition that the defendant must pay into Court the sum of $300,000 within 14 days before being allowed to pursue his defence."

6. Five grounds of appeal were argued before us, namely,

7. Before we heard argument on the grounds of appeal, we had to dispose of two preliminary matters.

8. First, the Defendant sought to introduce new evidence in the form of an affirmation sworn by his accountant, purporting to show the inaccuracies in the Company's accounts. The Defendant's affirmation of 14th February 1984 stated that he had been advised by the accountants of the Company it would take "at least another two weeks before the documents related to the Company's accounts could be sorted out". However, when the matter came before Mayo J., the Defendant did not ask for an adjournment to enable the Company's accountant to examine the relevant documents. Nearly two months later, we were told that the accountant has still not completed his work.

9. It is also interesting to note that on the eve of the hearing before Master Hansen, the Defendant for the first time swore an affirmation alleging misrepresentation in the Company's accounts. On the eve of the hearing before Mayo J., the Defendant swore an affirmation asserting that he had arranged for the books and records of the Company to a firm of accountants who were "now" checking all payments and accounts. Yesterday evening, the accountant's affirmation, sought to be put in evidence, was served on the Plaintiff's counsel.

10. A pattern therefore seems to have emerged showing what might well be seen as tactical moves on the part of the Defendant. We are not satisfied that the new evidence which the Defendant seeks to adduce could not have been obtained with due diligence. His application was therefore dismissed.

11. The second matter was the Plaintiff's application to serve a Respondent's notice out of time. For present purposes it is not necessary to go into the question in detail. Suffice it to say that, unlike section 31(2) of the Judicature Act 1925 which made provisions to the contrary, by our law, the order made by the judge below is clearly an interlocutory order (of. The Supreme Court Practice 1982, 14/3-4/26, second paragraph thereof, at page 178). So, the Plaintiff is clearly out of time, and furthermore, the Respondent's notice was wrongly served on the Registry of the Supreme Court and not, as should have been done, on the appellant (vide Order 59, rule 6(3)). For this reason the Plaintiff's application was dismissed.

12. Without in any way intending to be discourteous to counsel for the Defendant, who has ably presented his case before us, we do not think it necessary to repeat all his arguments in support of his grounds of appeal.

13. Grounds 1 and 4 may be taken together. There is nothing in the judgment to indicate that the judge singled out the claim on the dishonoured cheque as something distinct from the sale and purchase agreement as a whole. Indeed he found that the cheque was inextricably part and parcel of the agreement. He quite rightly viewed the matter of the first cheque within the context of the agreement. Ground 2 was raised by counsel in the court below and the judge took it into account in his judgment. Grounds 3 and 5 must be considered in the light of the absence of any explanation whatsoever as to why the first cheque for $300,000 was not met. This cheque was due on 24th November 1983. On 26th November 1983 the Plaintiff demanded payment and warned the Defendant of the default clause in the agreement. The first allegation of misrepresentation of accounts was not made until 26th January 1984. In those circumstances one might be forgiven for viewing anything that the Defendant said with a considerable degree of suspicion. We think it perfectly natural that Mayo J. should form the view that the Defendant's case is a "shadowy defence".

14. The appeal is accordingly dismissed with costs.

Representation:

Mr. Benjamin Chain (Ip, Ku & Stoppa) for Appellant/Defendant.

Mr. David Yam (N.K. Tsang &. Co.) for Respondent/Plaintiff.