Ted Ohya v. Abdo a Osman

DCCJ4042/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4042 OF 2005

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BETWEEN

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Before: Her Honour District Judge Marlene Ng in Chambers (Open to Public)

Date of Hearing: 10^th May, 2006

Date of Handing Down Judgment: 17^th May, 2006

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D E C I S I O N

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Introduction

1.On 5^th January 2006 I handed down judgment in favour of the Plaintiff against the Defendant for the sum of HK$500,000.00 together with interest thereon at the rate of 8.245% pa from the date of the writ of summons to the date of judgment and thereafter at judgment rate until payment. I also granted an order nisi that the Defendant do pay to the Plaintiff costs of the action and of the application for summary judgment (including all costs reserved, if any, to be taxed if not agreed (the “Judgment”). The costs order nisi became absolute in February 2006.

2.By an inter partes summons dated 3^rd February 2006, the Defendant applies for the following orders :

(a) the Defendant do have leave to appeal to the Court of Appeal from the Judgment;

(b) the execution of and all further proceedings on the Judgment be stayed pending the determination of the appeal therefrom by the Defendant; and

(c) costs of the application be costs in the cause of the appeal.

3.The Plaintiff opposes the Defendant's summons. By an inter partes summons dated 23^rd February 2006, the Plaintiff applies for the following orders :

(a) the Defendant do pay the judgment sum into court and give security for the Plaintiff's costs of the appeal to the satisfaction of the court within 7 days from the date of the order to be made should the court grant leave to the Defendant to appeal;

(b) until such payment is made into court and the security be given, the Defendant's appeal be stayed; and

(c) costs of and occasioned by the application to the Plaintiff; and

(d) liberty to apply.

Leave to appeal

(a) Legal principles

4.Section 63 of the District Court Ordinance cap.336 provides that a party may only appeal from the District Court to the Court of Appeal with leave. If a judge below refuses leave, the intended appellant may still apply for leave to appeal to the Court of Appeal.

5.The principles on application for leave to appeal are set out in Ma Bik Yung v Ko Chuen HCMP 4303/1999 citing Smith v Cosworth Casting Processes Limited [1997] WLR 1538 in which Lord Woolf provided the following guidance :

“(1) The Court will only refuse leave if satisfied that the applicant has no realistic prospect of succeeding on the appeal. This 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 of the use of the word 'realistic' makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.

(2) The court can grant the application even if it is not so satisfied. There can be many reasons for granting leave even if the court is not satisfied that the appeal has any prospect of success. For example, the issue may be one in which the court considers should be in the public interest be examined by this court, or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying.”

(b) Draft grounds of appeal

6.For convenience I will adopt the abbreviations used in the Judgment.

7.The Defendant's draft grounds of appeal in relation to the finding that the Note signed by the Defendant is an unconditional promise of the Defendant to pay are as follows :

(a) the judge did not take any or any sufficient account of the fact that the Note was allegedly made on 10^th October 2002 which was apparently after the transfer of the Sum to the Defendant's personal account. The Note was therefore supported by past consideration and accordingly it should have been unenforceable for total failure of consideration (“Past Consideration Ground”);

(b) the judge did not take any or any sufficient account of the fact that as late as 9^th April 2005 when the parties signed the Agreement prepared by the Plaintiff via Ho, the Plaintiff thereunder agreed to transfer part of his shareholdings in APPM to the Defendant without making reference to the Note nor making it a condition to repay the same by the Defendant before the intended transfer of shares, thereby demonstrating the Plaintiff's waiver by conduct as to the repayment of the Sum by the Defendant (“Waiver Ground”).

8.The Defendant's draft grounds in relation to the finding that the Defendant's complaint constitutes a viable cross-claim against the Plaintiff are as follows :

(a) the judge did not take any or any sufficient account of the fact that the Note was given in circumstances closely associated with the formation of APPM and involved the parties thereto as promoters of APPM, so that the underlying relationship between the Plaintiff and the Defendant in relation to the setting up and business operation of APPM is of material importance both regarding the validity of the Note and the counterclaim of the Defendant (“Underlying Relationship Ground”);

(b) the judge did not take any or any sufficient account of the fact that the alleged theft of the APPM property and the Defendant's property by the Plaintiff had seriously prejudiced the Defendant's ability to substantiate the case and the question of fraud on the part of the Plaintiff should justify the necessity for a trial of the entire dispute (“Theft Ground”).

Past Consideration Ground

9.This draft ground can be dealt with briefly. Section 95(1) of the Ordinance provides that “[subject] to the provisions in this Part and except as by this section provided, the provisions of this Ordinance relating to bills of exchange apply, with the necessary modifications, to promissory notes”. Section 27(1)(b) of the Ordinance provides that “[valuable] consideration for a bill may be constituted by – …… (b) an antecedent debt or liability. Such debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time”. I refer to Chalmers and Guest on Bills of Exchange and Cheques 16^th ed para.4-002 at p.228-229 as follows :

“The general law of consideration therefore applies to bills, cheques and notes. However, the principles applied differ to some extent from those applicable in the case of ordinary contracts.

First, in contract law, past consideration is no consideration, and a promise will be unenforceable for want of consideration if the only consideration for it is an antecedent debt owed by the promisor to the promise. But valuation consideration for a bill may be constituted by an antecedent debt or liability.

……

Thirdly, the burden of proving that consideration has been given normally lies upon the claimant who seeks to enforce the contract. But, in the case of bills, consideration is presumed until the contrary is proved [see section 30 of the Ordinance].” (my emphasis)

10.In my view, there is no merit in this draft ground of appeal.

Waiver Ground

11.This draft ground can also be dealt with briefly. I again refer to section 95(1) of the Ordinance that applies the provisions of the Ordinance relating to bills of exchange with the necessary modifications to promissory notes. Section 95(2) of the Ordinance provides inter alia that in applying those provisions the maker of a note shall be deemed to correspond with the acceptor of a bill.

12.Section 62(1) of the Ordinance provides inter alia :

“When the holder of a bill at or after its maturity absolutely and unconditionally renounces his rights against the acceptor the bill is discharged. The renunciation must be in writing, unless the bill is delivered up to the acceptor.”

13.Chalmers and Guest (supra at para.8-062 at p.539) provides inter alia that “[where] the requirements of this sub-section are satisfied, the bill is discharged. For this to occur, first, the renunciation must be made by the holder, as defined in section 2 of the Act. Secondly, the renunciation must be at or after maturity …… Thirdly the renunciation must be of the holder's rights …… in case of a note, against the maker of the note. …… Fourthly, the renunciation must be absolute and unconditional. A promise not to enforce a bill if certain event takes place would appear not to satisfy this requirement, even if the event occurs ……” (my emphasis).

14.Chalmers and Guest (supra) went on to say at para.8-063 at p.539 inter alia that “the renunciation must be in writing, unless the bill is delivered up to the acceptor …… The writing need not, it seems, be signed by the holder, but: “What must be in writing is an absolute and unconditional renunciation of rights. It is not necessary to put these words in; but that must be the effect of the document. Then the document is not to be a note or memorandum of the renunciation or of an intention to do it, but it must be itself the record of the renunciation.”” (my emphasis)

15.The aforesaid passage cited in Chalmers and Guest (supra) is extracted from In re George (1890) 44 Ch d 627. The learned editors also cited the case of Rimalt v Cartwright (1925) 132 LT 40, 42 where Scrutton LJ said as follows :

“This is an action on a bill of exchange, and the law affecting bills of exchange differs in many ways from the law affecting other contracts. In those cases evidence may be given of collateral agreements which will put an end to the liability of the parties in the original agreement, but if the original agreement is a bill of exchange, it can only be renounced by the holder if the renunciation is in writing, or the bill is cancelled by delivery up to the person liable as acceptor.”

16.Here the draft ground recognises that the Agreement made no reference to the Note or to the obligation of repayment of the Sum under the Note. In short, the Agreement is silent on the Note. The Defendant also submits at the hearing that the absence of any reference to the Note or the Sum means the Plaintiff has waived repayment of the Sum from the Defendant and has agreed to look to APPM for such repayment. This argument plainly falls foul of the requirement in section 62 that the renunciation by the holder, ie the Plaintiff, must be an absolute and unconditional renunciation of his rights in writing against the maker of the Note, ie the Defendant. Waiver by conduct is insufficient.

17.In my view, there is no merit in this draft ground of appeal.

Underlying Relationship and Theft Grounds

18.It is useful to deal with these 2 draft grounds together. I refer to paragraphs 78 to 85 of the Judgment and will not repeat them again in this ruling. As regards the suggestion that I have not paid any or sufficient regard to the underlying circumstances in relation to the issuance of the Note, the underlying relationship of the parties and the assertions of theft and fraud, I refer to paragraphs 12 to 58 of the Judgment which recite the relevant affidavit evidence and the Written and Oral Submissions that I have considered. I also refer to paragraphs 81 to 83 of the Judgment, which set out the particular considerations in my assessment of the impact of the alleged counterclaim and the defence of set-off. Despite the Defendant's assertion that I have not taken into account the above matters, I have in paragraph 83 of the Judgment in fact proceeded on the assumption that the Defendant were able “to establish a cross-claim against the Plaintiff based on any or all of the matters raised in his affidavits and/or his Oral Submissions”.

19.My conclusion that such free-standing cross-claim in respect of any or all of the Plaintiff's misdeeds as to the underlying relationship and/or the thefts/fraud subsequent to the issuance of the Note is based on settled law referred to in paragraph 84 of the judgment. There is no suggestion that the legal principles in Fielding and Platt, Ltd v Najjar [1969] 2 All ER 150 and Chalmers and Guest (supra) at para.4-010 at pp.233-236 are inapplicable or incorrect.

20.As regards the theft of APPM property, any claim in relation to the same should be maintained by APPM and not by the Defendant who has no locus to counterclaim against the Plaintiff for the loss of such property.

21.Again, I do not see any reasonable prospects of success in respect of these draft grounds.

Defendant's further submissions at the hearing

22.The Defendant reiterates at the hearing that although he signed the Note, the Sum was given to him to cover part of the Expenses and not for his own personal purpose. He says that at that time the Plaintiff has not retired from the bank where he was working, so the Plaintiff did not want to operate through his own bank account. The Expenses were incurred through the Defendant's bank account. This argument has in fact been canvassed in paragraphs 68-71 of the Judgment. The Defendant has not been able to say that the legal authorities cited therein are inapplicable or incorrect. As a matter of law, parol evidence cannot be introduced to contradict the express terms of the Note.

23.The Defendant submits that the Plaintiff has been fraudulent in having stolen APPM's and the Defendant's properties after the issuance of the Note and is currently subject to criminal investigation. The Defendant claims that had he been able to access the documentary and computer records that the Plaintiff dishonestly spirited away for destruction to cover his tracks, he would have been able to prove that the Sum was for part payment of the Expenses and not for his own purpose. This argument, which I have referred to in paragraph 72 of the Judgment, is akin to the Theft Ground. However, given the restriction in adducing parol evidence that contradicts the express terms of the Note, even assuming that the documentary or computer record is available and supports what the Defendant says, they do not support any arguable defence.

24.The Defendant also claims that the Plaintiff lied to get him to provide the Note. This is a mere assertion made at the hearing and does not sit well with his own case which is set out in paragraph 19 of the Judgment.

25.The Defendant goes on to say that the Plaintiff's solicitor in representing the Plaintiff made false statements to the court and he did not wish to hear such falsities uttered in his presence. Such submission does not support any draft ground of appeal put forward.

Conclusion

26.In the circumstances, I am not satisfied that leave should be granted to appeal against the Judgment. Since I decline to grant leave, there is no reason for me to grant stay of execution of the Judgment. Likewise, I need not deal with the Plaintiff's application for payment of the judgment sum into court and for security for costs. Both parties' summonses are therefore dismissed.

27.In respect of the Defendant's summons, there is no reason why costs should not follow event. I therefore grant a costs order nisi that costs of the application be paid by the Defendant to the Plaintiff to be taxed if not agreed.

28.In respect of the Plaintiff's summons, although I have dismissed such summons, the dismissal was caused by the Defendant's application for leave to appeal and by his eventual failure in the application. I consider it reasonable for the Plaintiff to take the precaution of issuing the Plaintiff's summons to cater for the possibility that I may grant leave to appeal. In the circumstances, I also grant a costs order nisi that the costs of the Plaintiff's summons be paid by the Defendant to the Plaintiff to be taxed if not agreed.

Defendant's other applications

29.At the hearing before me, the Defendant made 2 initial applications. First, he challenged the Plaintiff's solicitors capacity to represent the Plaintiff on the basis of an alleged conflict of interest in their concurrent representation of APPM in making a call for payment on shares allotted to the Defendant. Secondly, he applied for an adjournment of the hearing of the above summonses. For reasons given in separate rulings, I have dismissed the Defendant's applications but reserved the issue of costs.

30.There is no reason why costs should not follow event. I grant a costs order nisi that the Defendant do pay to the Plaintiff costs of these two applications to be taxed if not agreed.

Ms Susan Liang of Messrs Susan Liang & Co for the Plaintiff.

The Defendant acting in person and present.