Eurostar (Fast East) Ltd v. Albert Tsang Jewelry Design Ltd

DCCJ 2774 of 2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2774 OF 2005

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BETWEEN

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Coram: Deputy District Judge K.W. Wong in Chambers (open to public)

Dates of Hearing: 20^th January 2006

Date of Handing Down Reasons for Decision:  26^th January 2006

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REASONS FOR DECISION

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1.This is an application for leave to appeal against my decision handed down on 24^th November 2005 (“ my said decision”) entering summary judgment for the Plaintiff against the Defendant for a sum of $950,000.00, being the sum total under 19 dishonoured cheques, together with interest and costs.

2.The principles applicable to an application for leave to appeal are not in dispute. It is common ground that the realistic prospect test stated by Lord Woolf in Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538 and cited with approval by Leong CJHK in Ma Bik Yung v Ko Chuen, unreported, HCMP4303 of 1999, 8^th September 1999 is the proper test. In Smith v Cosworth Lord Woolf, MR stated the test as follows:

“(1)      The Court will only refuse leave if satisfied that applicant has no realistic prospect of succeeding on the appeal. The test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case. Why however this court has decided to adopt the former phrase is because the use of the word “realistic” makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.”

3.The other grounds of appeal, e.g. public interest or unsettled law grounds referred to in Smith v Cosworth are not relied on by the Defendant.

4.In the summary judgment application, the Defendant basically raised two grounds of defence, namely, conditional delivery and inadequate consideration. Mr. Chung, Counsel for the Defendant, has indicated that he was not challenging the part of my said decision relating to inadequate consideration which I have rejected as unbelievable a story of the Defendant that the sales of the diamonds in the transactions concerned were sales by invoices. The Defendant now challenges my said written decision relating to its first ground of Defence.

5.The only ground of appeal is that this Court erred in law in ruling that the evidence of Cecilia Yau and Albert Tsang on what was said at the time of issue of the said cheques inadmissible. It is submitted by counsel for the Defendant that the Defendant is relying on section 21(2)(b) of the Bills of Exchange Ordinance, Cap 19 (“BOEO”) as one of its grounds of defence. The Court has therefore to decide whether the Defendant’s case falls within the ambit of the special defence set out in this particular provision, and the Court has failed to make any ruling in my said written decision as to whether section 21(1)(b) is applicable. Mr. Chung submitted that the legal principles stated in my said decision, including paragraph 380 in Chalmers And Guest and cited therein are correct. However the Court has been wrong in their application.

6.For the purpose of this decision, it is useful to set out sections 21(2)(b) and (3) of the BOEO:

21(2)(b)

“As between immediate parties, and as regards a remote party other than a holder in due course, the delivery –

(a) …

(b) may be shown to have been conditional or for a special purpose only, and not for the purpose of transferring the property in the bill;

but if the bill is in the hands of a holder in due course, a valid delivery of the bill by all parties prior to him, so as to make them liable to him, is conclusively presumed.

21(3)

Where a bill is no longer in the possession of a party who has signed it as drawer, acceptor, or indorser, a valid and unconditional delivery by him is presumed until the contrary is proved.”

7.The attack can be summarized on three respects. Firstly, the Court, when coming to its conclusion that the cheques were “delivered operatively”, has stated no analysis.  Secondly, the approach of the Court is wrong. It is submitted that the Court should have analyzed what those cheques would have become of if the conditions now sought to be introduced had been read into them, just as what Hunter JA had done in Suen Ho Sun v Kamenar international Ltd [1989] 1 HKC 135 (CA) and cited by Recorder Kwok SC in paragraph 13 of SY Chan v Choy Wai Bor [2001] 3 HKLRD 145 at 150. Thirdly, the Court should have expressly dealt with the defence of section 21(2)(b) of BOEO.

8.What Cecilia Yau and Albert Tsang said in their respect affidavit, in a nutshell, is that the sales of diamonds are a sale of diamonds by invoices. Although the diamonds concerned had been in the possession of the Defendant, invoices of some diamonds had not been delivered. So when Cecilia Yau handed the cheques to Mr. Salim, they were handed on the express condition that their presentment was conditional on the delivery of the original invoices to the Defendant. This part of the evidence is oral. Counsel Mr. Chung submitted that therefore the Defendant at least had an arguable conditional delivery defence falling within section 21(2)(b) of the BOEO. According to the applicable principle as stated in Chalmers (paragraph 17 of my said decision which are not disputed by the parties), oral evidence can be introduced to establish defective or conditional delivery. It is only when oral evidence is introduced in defeasance of an operative bill that such oral evidence is excluded.

9.It is unnecessary for me to repeat paragraph 19 and 20 of my said decision. Suffice to say that I have started with a written contemporaneous acknowledgment, a document which is not in dispute and in fact relied on by the Defendant, and come to the conclusion that according to the said document, the cheques were issued expressly for settlement of outstanding amounts totalling some 2.3 million as stated in this document. It is obvious that according to this document, the cheques were to become operative when delivered to Mr. Salim otherwise it would be inconsistent with the plain meaning of the document.

10.The conclusion of the cheques being delivered “operatively” in paragraph 21 has therefore been explained in the preceding two paragraphs of my said decision. As I have stated in the last sentence of paragraph 20 of my said decision, there is no other evidence that the cheques were delivered in escrow, section 21(3) of BOEO has not been rebutted. I do not consider that the first ground of the Defendant substantiated.

11.Furthermore, the Defendant has indicated that it does not seek to challenge the part of the decision concerning partial consideration, in which the Court had expressly rejected the Defendant’s story of sale by invoices as unbelievable. Since the alleged conditional delivery allegation and the story of sales by invoices are part and parcel of each other, I wonder how the Defendant can show any realistic prospect that the alleged oral evidence of conditional delivery can be accepted when the story of sale by invoices having been rejected as unbelievable remains uncontested.

12.Concerning the second point raised, obviously there is no hard and fast rule that the absurd consequences of reading the conditions into the cheques needs be stated. Once the Court has come to the conclusion that the cheques have been delivered operatively, any oral evidence seeking to vary or contradict the unconditional nature of the bill will be excluded. Whether or not the Court will proceed to analyze what has become of the cheques is neither here nor there. The second ground raised is totally without merit.

13.For the third ground, once the Court has come to the view that as a matter of fact the bill is to become operative when delivered, which is a finding inconsistent with a conditional defence, it goes without saying the conditional defence under section 21(2)(b) must fail. In fact all other defences inconsistent with such finding must also fail. I do not think the absence of any express reference to section 21(2)(b) will render the decision unsafe.

14.By reasons of the above, I do not consider that the Defendant will have any realistic prospect of success. I dismiss the Defendant’s application for leave to appeal accordingly with costs to the Plaintiff, with certificate for counsel, to be taxed if not agreed.

Mr. Collin Wong, instructed by M/s Tsang, Chan & Woo for the Plaintiff.

Mr. Gary Chung, instructed by M/s Leung, Chan & Pang for the Defendant.