Wesco China Ltd v. Liu Fu Tien
Read the full judgment text of DCCJ 2460/2005 on BabelCite. This District Court judgment.
1. The Plaintiff was a supplier of plastic raw materials (“ Materials ”). The Defendant was the “director”/investor/owner of a PRC factory known as 深圳市龍崗區坑梓偉田織帶製品廠that manufactured plastic belts (“ Factory ”). The Plaintiff claimed on a dishonoured cheque dated 15 th January 2005 and drawn by the Defendant for the sum of HK$130,000.00 (“ Cheque ”) and interest thereon.
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DCCJ2460/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2460 OF 2005 ------------------------ BETWEEN
------------------------ Coram: H H Judge Marlene Ng in Chambers (Open to the Public) Date of Hearing: 29th November, 2006 Date of Handing Down Judgment: 3rd January, 2007 ------------------------ J U D G M E N T ------------------------ I. Introduction 1.The Plaintiff was a supplier of plastic raw materials (“Materials”). The Defendant was the “director”/investor/owner of a PRC factory known as 深圳市龍崗區坑梓偉田織帶製品廠that manufactured plastic belts (“Factory”). The Plaintiff claimed on a dishonoured cheque dated 15th January 2005 and drawn by the Defendant for the sum of HK$130,000.00 (“Cheque”) and interest thereon. II. Defendant’s summons 2.At the hearing before me, I granted leave to the Defendant to withdraw his summons filed on 22nd May 2006 with costs to the Plaintiff, including all costs reserved and costs of 1 hour and 20 minutes of the hearing with certificate for counsel. III. Plaintiff’s summons 3.The Plaintiff applied by summons for summary judgment against the Defendant and filed the first and second affirmations of Xu Heng (or Henley, “Mr Xu”), the Plaintiff’s senior sales manager, and the affirmation of Lu Chieu Wei (“Mr Lu”), the Plaintiff’s sales general manager, in support. The Defendant filed his second affirmation and the affirmation of Tam Yik Man in opposition. With no objection from Ms Yiu, counsel for the Plaintiff, I granted leave for the Defendant to rely on his first affirmation as well. IV. Amendment summons 4.The Plaintiff amended the Statement of Claim shortly before the hearing. I made the following orders in favour of the Plaintiff at the hearing, namely, (a) leave to amend the Order 14 summons, (b) leave to file/serve the affirmation of Tsui Wan Fung and (c) abridgement of time for service of the aforesaid documents. I also awarded costs of and occasioned by such application to the Defendant in any event. V. Background 5.Since June 2000 the Plaintiff supplied the Materials to the Factory under various contracts/transactions. They later entered into three long term contracts (“Long Term Contracts”) dated 22nd January 2001, 19th March 2002 and 14th November 2003 (“1st, 2nd and 3rd Contracts”) respectively. Such Long Term Contracts were usually prepared by the Plaintiff’s Hong Kong office (“HK Office”) and presented to the Factory for signing. 6.Each of the 1st, 2nd and 3rd Contracts :
7.The Sales Contracts of the 1st, 2nd and 3rd Contracts provided inter alia as follows :
8.The Annexure of the 1st, 2nd and 3rd Contracts provided inter alia as follows :
9.The Defendant issued his personal cheques in favour of the Plaintiff for payment of the Deposits under the 1st, 2nd and 3rd Contracts. 10.After signing each of the 1st, 2nd and 3rd Contracts and receiving the relevant Deposit, the Plaintiff arranged for shipment of the Materials to Shenzhen and sent to the Factory notices of the price and shipment details (“Shipment Notices”) for the Factory to prepare for payment of the price and collection of the shipment. 11.In/about October 2004, Mr Xu started to negotiate with the Defendant and the Factory’s manager (“Manager”) on mutual business after the 3rd Contract and/or on the terms of the subject contract (“4th Contract”). 12.The 4th Contract was prepared by the HK Office in duplicate. On its face, the 4th Contract comprised a Sales Contract, the Conditions and an Annexure, and appeared to be a Long Term Contract dated 27th December 2004 on inter alia the following terms :
In paragraph 7 of his first affirmation the Defendant said “[all] the terms and conditions of the [3rd and 4th Contracts] are basically the same”. 13.On 29th December 2004, Mr Xu brought the 4th Contract to meet the Manager at the Factory (“Meeting”). The Manager signed the Sales Contract and the second page of the Annexure of the two original duplicates and affixed the Factory’s Chop thereon. The Manager retained one original duplicate that he signed (“Factory’s Duplicate”) and Mr Xu retained the other (“Plaintiff’s Duplicate”), which was eventually sent to the HK Office. 14.On the same day, the Factory’s Duplicate (three pages without the Conditions) was faxed via the Factory’s fax machine to the Plaintiff’s Zhong Shan representative office (“ZS Office”) (“Faxed Duplicate”), which was in turn faxed to the HK Office. The Plaintiff’s sales co-ordination department noticed the mistyped date (24th November 2004) on the second page of the Annexure of the Faxed Duplicate. The Plaintiff amended it to 27th December 2004 in manuscript to correspond with the date on the Sales Contract and on the first page of the Annexure (“Date Amendment”), which explained why the Date Amendment was not found on the Factory’s Duplicate retained by the Factory and why the Factory only became aware of the same subsequently. 15.On 30th December 2004, Mr Xu did not attend the Factory. But the Plaintiff instructed its driver, Yan Jia Ping (“Driver”), to collect from the Factory the balance of the Deposit for the 4th Contract and the price of the last shipment of the Materials under the 3rd Contract (“3rd Contract Price”), and issued an authorisation letter of the same date for such purpose (“Authorisation Letter”). On the same day, the Driver received from the Factory (a) the Cheque for the full amount of the Deposit and (b) a further cheque for HK$384,359.00 being the balance of the 3rd Contract Price less inter alia the Deposit under the 3rd Contract. Despite clause 2 of the Annexure of the 4th Contract (see paragraph 12(c) above), the Deposit under the 3rd Contract was not transferred to be part of the Deposit for the 4th Contract but was used to reduce the 3rd Contract Price. 16.On the same day (ie 30th December 2004), the Driver signed on the Factory’s 付款簽收簿 to acknowledge receipt of the Cheque as well as the cheque for the balance of the 3rd Contract Price. Particulars recorded in the Factory’s 付款簽收簿 in relation to the Cheque were as follows :
The Plaintiff also issued a written receipt on the same day for the Cheque as Deposit for the 4th Contract. 17.In December 2004, the open market price of the Materials fell (“Price Decrease”), so on the face of the 4th Contract the price payable for the December 2004 shipment of the Materials (“12/04 Shipment”) was higher than the average open market price. 18.The Plaintiff proceeded to arrange the 12/04 Shipment and issued Shipment Notices dated 5th January 2005 to the Manager with copy to the Defendant to inform the Factory of the price, the departure date and the estimated arrival date of the shipment (“5/1/05 Shipment Notices”). 19.On 7th January 2005, the Plaintiff (a) formally acknowledged receipt of the Cheque as payment of the Deposit under the 4th Contract, (b) referred inter alia to the 5/1/05 Shipment Notices, (c) informed the Factory that the 12/04 Shipment would arrive shortly and (d) urged the Factory to be ready to pay the price and collect the shipment. 20.On 14th January 2005, the Plaintiff notified the Factory in writing of the estimated departure date of the 12/04 Shipment from Hong Kong to Shenzhen and requested the Factory to be ready to pay the price and collect the shipment. On the same day, the Defendant countermanded payment of the Cheque, which was dishonoured when the Plaintiff presented it for payment on 15th January 2005. 21.Referring to the 5/1/05 Shipment Notices and its letter of 14th January 2005, the Plaintiff wrote to the Factory on 19th January 2005 (“Demand Letter”) to advise that the 12/04 Shipment had arrived in Hong Kong on 18th January 2005 pending shipment to Shenzhen. In the Demand Letter, the Plaintiff noted that the Defendant had countermanded the post-dated Cheque, which was a serious breach of the 4th Contract, and demanded payment of the Deposit by 21st January 2005, failing which it reserved the right inter alia to terminate the 4th Contract. 22.The Factory did not pay the Deposit under the 4th Contract. The Plaintiff wrote to the Factory on 26th January 2005 to (a) note that such failure was a serious breach of contract, (b) advise the termination of the 4th Contract and its intention to resell the 12/04 Shipment, and (c) reserve its right to claim against the Factory for any price difference, storage charges, container fees and economic loss (“Termination Letter”). 23.On 29th April 2005, the Plaintiff’s former solicitors by letter demanded the Defendant to redeem the Cheque within seven days. The Defendant did not do so. On/about 5th and 8th March 2005, the Plaintiff resold the 12/04 Shipment and on 8th February 2006, wrote to advise the Factory of the same and demanded payment of the damages it suffered (ie HK$50,519.12) within three days. VI. Order 14 principles 24.A plaintiff may invoke the procedure under Order 14 of the Rules of the District Court where there is no valid defence to his claim or otherwise a triable issue :
25.In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted it was not appropriate to embark on a mini-trial of the action on affidavit evidence. The court should ask itself the question whether what the defendant says is credible or believable. If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment. 26.However, Hong Kong Civil Procedure 2006 Vol.1 para.14/4/9 at pp.171-172 went on to say “[it] is trite law that the mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his evidence is reasonably capable of belief …… there are some cases in which the defendant’s own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham”: per Mortimer J.A. in Manciple Ltd. v. Chan On Man [1995] 2 H.K.C. 459 at 466. ……” VII. Law on dishonoured cheques 27.A bill of exchange is to be treated as cash and honoured unless there is some good reason to the contrary. Only in exceptional circumstances will a court deprive a claimant of judgment on a claim based on a cheque (Fielding and Platt, Ltd v Najjar [1969] 2 All ER 150, 152 and Sun Wah Aluminium Windows & Curtain Wall Company Limited v Panyu Fantasy Film City Limited operated as Sammyland HCA3119/2002, Sakhrani J (unreported, 17th October 2003)). 28.Further, Lord Russell of Killowen in Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH [1977] 2 All ER 463, 479-480 said : “…… The bill is itself a contract separate from the contract of sale. Its purpose is not merely to serve as a negotiate instrument; it is to avoid postponement of the purchaser’s liability to the vendor himself, a postponement grounded on some allegation of failure in some respect by the vendor under the underlying contract, unless it be total …… failure of consideration ……” (followed in Hong Kong in C A Pacific Forex Limited v Lei Kuan Ieong CACV126/98 (unreported, 14th January 1999)). 29.In S Y Chan Ltd v Choy Wai Bor [2001] 3 HKLRD 145, 149, Recorder Kwok SC said as follows :
VIII. Defence arguments 30.The wide-ranging arguments raised in the Defendant’s affirmations and in the submissions of Ms Lau, counsel for the Defendant, can be grouped as follows :
The Defendant’s affirmation evidence purported to raise a number of issues relating to the underlying contract, but the above legal principles show that they are irrelevant to the claim on the Cheque. I do not propose to deal with all such purported defence arguments. IX. Total failure of consideration 31.The Defendant claimed the Factory did not agree to or conclude the purported 4th Contract and never bought, received or collected any Materials thereunder from the Plaintiff, so there was total failure of consideration for the Cheque. (a) Defendant’s case 32.On 29th December 2004, Mr Xu and another salesman went to the Factory to discuss mutual business for 2005 with the Manager, who (as instructed by the Defendant) negotiated with Mr Xu “for transactions …… which were intended to start in January 2005”. The Manager spotted the error in the effective month for the Shipment Period in the 4th Contract (“Effective Month”) and requested to change “December 2004” to “January 2005” (“Month Amendment”). Mr Xu did not bring along the Plaintiff’s company chop (“Plaintiff’s Chop”), so he requested the Manager to sign the 4th Contract without the Month Amendment and promised to return to the Factory with the Plaintiff’s Chop on the following day (ie 30th December 2004) to make the Month Amendment and sign the 4th Contract. It was also agreed that a cheque for the Deposit would be issued/delivered to the Plaintiff upon/after the 4th Contract was duly amended, signed and concluded by the Parties on 30th December 2004. So the Manager signed/chopped the 4th Contract at Mr Xu’s request and retained the Factory’s Duplicate. 33.The Defendant claimed that all along the Effective Month was intended to be January 2005, and he would not have agreed to December 2004 as the Effective Month since the Factory could have purchased the Materials in the open market at a lower price due to the Price Decrease. 34.The Defendant denied that the Factory faxed the Faxed Duplicate to the Plaintiff’s office. Instead, Mr Xu at the Meeting requested that the Faxed Duplicate be faxed via the Factory’s fax machine to the Plaintiff’s office for reference. The Defendant further denied that he or the Factory ever received the Re-Faxed Duplicate (see below) or the Plaintiff’s Duplicate duly signed by the Plaintiff. The Defendant claimed he was shocked by the purported 4th Contract signed/ chopped by both Parties (ie the Re-Faxed Duplicate (see below)), which was “very doubtful and [he] will definitely challenge its authenticity if this dispute goes to trial”. He further claimed he only became aware of the Date Amendment when his solicitors obtained a copy of the Re-Faxed Duplicate (see below) from the Plaintiff’s solicitors in the course of these proceedings. 35.Since the Defendant had to go to Taiwan in the afternoon of 31st December 2004, he issued the Cheque post-dated to 15th January 2005 “as agreed in the said meeting between [Mr Xu] and the Manager and left the same on 30th December 2004 at the Accounts Department of the Factory for the ease of management.” The Plaintiff did not return to the Factory to amend/sign the 4th Contract, but sent the Driver with the purported Authorisation Letter to the Factory to collect the Cheque without notifying the Defendant or the Manager or anyone else in advance “and/or [their] permission”. The Defendant was surprised the Factory’s staff let the Driver took away the Cheque on production of the Authorisation Letter “without knowledge of the progress of the negotiation and/or the preconditions made between the parties”. When the Manager became aware of the above developments, he immediately notified the Defendant. 36.The Defendant could not contact Mr Xu by telephone until the morning of 31st December 2004 when he requested Mr Xu not to present the Cheque for payment because the 4th Contract had not been concluded. He said he would countermand payment of the the Cheque. The Defendant had to go to Taiwan that day, so he proposed (and Mr Xu agreed) to discuss the 4th Contract in detail with Mr Xu when he returned to the PRC. 37.Since the 4th Contract was not concluded at the material time, the Factory disregarded the 5/1/05 Shipment Notices for the 12/04 Shipment. 38.The Defendant denied he had the alleged telephone conversation with Mr Xu on 10th January 2005 (see below) and further denied he or the Manager requested postponement of the 12/04 Shipment. Instead, the Defendant requested the Plaintiff to return the Cheque (since the 4th Contract had not been concluded) otherwise he would countermand payment of the same. 39.The Defendant returned to the PRC on 23rd January 2005 and discovered the Plaintiff had presented the Cheque for payment notwithstanding he and Mr Xu “had an agreement to the otherwise over the phone on 31st December 2004”. The Defendant was disappointed and/or angry “and therefore, [the Defendant] did not negotiate further with the Plaintiff in relation to the [4th] Contract”. 40.Immediately after receipt of the Termination Letter dated 26th January 2005, the Defendant telephoned Mr Lu to explain again there was no 4th Contract between the Parties and it was groundless to allege breach of such contract. 41.The Defendant and/or the Manager on various occasions (in particular on every occasion of receipt by the Factory of notice or letter from the Plaintiff) repeatedly expressed to Mr Xu and Mr Lu that the 4th Contract had not been concluded. (b) Plaintiff’s case 42.On 29th December 2004, Mr Xu brought the 4th Contract to the Factory for the particular purpose of presenting it for execution by the Factory. By that time the Parties had agreed to the terms of the 4th Contract (including the Shipment Period from December 2004 to November 2005) and there were no further negotiations. 43.After the Manager signed/chopped the 4th Contract, the Factory retained the Factory’s Duplicate and faxed the same to the ZS Office on the same day. The ZS Office faxed the Faxed Duplicate to the HK Office for signing and affixing the Plaintiff’s Chop (which as a matter of practice was kept at the HK Office) thereon. Only the Plaintiff’s Deputy General Manager, General Manager or Director had the authority to sign the 4th Contract and affix the Plaintiff’s Chop. In the end, it was the Plaintiff’s Deputy General Manager who signed/chopped the 4th Contract. 44.After the Date Amendment, the Faxed Duplicate signed/ chopped by the Plaintiff was faxed back to the Factory on 31st December 2004 (“Re-Faxed Duplicate”). Mr Xu said all sales contracts (apart from the Long Term Contracts) entered into by the Parties had been concluded by fax. 45.On 30th December 2004, the Plaintiff duly authorised the Driver by the Authorisation Letter to collect inter alia the Cheque from the Factory. Mr Xu denied that he had the alleged telephone conversation with the Defendant on 31st December 2004 or that the Defendant or any representative of the Factory requested him not to present the Cheque for payment. 46.On 3rd January 2005, the Plaintiff’s sales co-ordination department informed Mr Xu the Cheque was post-dated. He telephoned the Manager to ask why the Cheque was post-dated, but the Manager said he had no idea. 47.On/about 10th January 2005, Mr Xu telephoned the Defendant to make the same enquiry. The Defendant did not give any explanation, but requested postponement of the 12/04 Shipment due to the Price Decrease. Mr Xu enquired with and was informed by the HK Office that the Plaintiff had already made delivery arrangements for the 12/04 Shipment, so in/about the afternoon of the same day he informed the Defendant the requested postponement was not possible. The Defendant said he might countermand payment of the Cheque. 48.On/about 11th January 2005, the Manager telephoned Mr Xu to reiterate the request to postpone the 12/04 Shipment from December 2004 to January 2005. Mr Xu explained it was not possible because delivery arrangements had already been made. The Manager told Mr Xu the Defendant might countermand payment of the Cheque. 49.The 12/04 Shipment arrived in Hong Kong on 18th January 2005. Shortly after issuance of the Demand Letter, Mr Xu telephoned the Manager to request payment of the Deposit under the 4th Contract. 50.Mr Lu recalled he telephoned the Defendant after the Cheque was dishonoured with a view to enquire why the Cheque was countermanded. During the telephone conversation, the Defendant requested to postpone the 12/04 Shipment from December 2004 to January 2005. Mr Lu did not accede to such request because (a) the 4th Contract was already concluded, (b) the Cheque was already issued and (c) the Plaintiff already made the delivery arrangements. (c) Analysis 51.For convenience I will set out my analysis under various headings, but I have considered the whole situation and the entirety of the affirmation evidence. I am not satisfied the Defendant’s bare oral assertion that there was no concluded 4th Contract is believable and/or credible or that there is a fair and reasonable possibility the Defendant had an arguable defence or raised a triable issue. The defence contentions do not sit well with the undisputed evidence or the contemporaneous documents and are inherently implausible. As explained above, a mere assertion in an affidavit of a given situation which is to be the basis of a defence does not ipso facto provide leave to defend. (1) Still negotiating? 52.There is no dispute (a) since October 2004 the Parties started to negotiate the terms for the new Long Term Contract and (b) it was only on 29th December 2004 that Mr Xu brought the two original duplicates of the 4th Contract to the Factory. I find it implausible that the Parties were still negotiating the terms of the 4th Contract by the time of the Meeting otherwise Mr Xu would not have brought the two original duplicates of the 4th Contract to the Factory. Rather, the above undisputed evidence supports the Plaintiff’s case that the Parties had reached agreement on the terms of the 4th Contract and Mr Xu brought the original duplicates to the Meeting for execution by the Factory. 53.Ms Lau queried why, if Mr Xu’s sole purpose in attending the Meeting was to have the 4th Contract signed, he did not bring the Plaintiff’s Chop. This conveniently brings me to the next point. (2) Alleged agreement at the Meeting 54.The Defendant claimed that Mr Xu did not bring along the Plaintiff’s Chop, so Mr Xu (a) asked the Manager to sign the 4th Contract without the Month Amendment and (b) promised to bring the Plaintiff’s Chop to the Factory the very following day to make the Month Amendment and sign the 4th Contract. 55.I note at the outset that apart from the Month Amendment the Defendant did not disagree with the other terms of the 4th Contract which were largely the same or similar to those of the 1st, 2nd and 3rd Contracts. Indeed, it is the Defendant’s case that both Parties would sign/chop the 4th Contract after making the Month Amendment on 30th December 2004 and the Factory would pay the Deposit thereafter. 56.Clause (10) of the Sales Contract of the 4th Contract (which the Factory/Defendant did not disagree (see above) and which was the same as clause (10) of the Sales Contract of the 2nd and 3rd Contracts) provided that the 4th Contract and any modifications/amendment thereto shall only be valid if chopped and signed by the Plaintiff’s Deputy General Manager, General Manager or Director. Mr Xu was not any of such authorised signatories and could not have validly signed the 4th Contract or affixed the Plaintiff’s Chop thereon. It is therefore implausible for Mr Xu to have made the alleged promise. Further, the 4th Contract gave the HK Office as the Plaintiff’s address, and the Plaintiff’s Chop and the Plaintiff’s authorised signatories were in Hong Kong. This is also borne out by the fact that eventually the Plaintiff’s Deputy General Manager signed the Faxed Duplicate and affixed the Plaintiff’s Chop thereon in Hong Kong. 57.I find it unbelievable Mr Xu would have suggested to the Manager to sign the 4th Contract “as is” (ie without the Month Amendment) when, according to the Defendant, Mr Xu allegedly promised to return on the very following day (ie 30th December 2004) with the Plaintiff’s Chop to amend/sign the 4th Contract. There is no justifiable urgency in not waiting until the following day since the Defendant claimed the Effective Month would be January 2005. 58.Further, there is no credible reason for the Manager to sign the 4th Contract “as is” when he claimed he was the one who spotted the “error” in the Effective Month. Even on the Defendant’s case, there would have been no practical difficulty for the Manager to mark up the Month Amendment on the original duplicates of the 4th Contract and initial/chop next to such amendment at the same time he signed the 4th Contract, and leave the Plaintiff to initial/chop the same on the following day. I find it strange and unbelievable that the Manager would meekly acquiesce in signing the 4th Contract “as is” when he allegedly knew the Effective Month was incorrect and such “error” could have been easily amended. 59.The Defendant’s contentions are also contradicted by the contemporaneous documents discussed below, including the receipts issued by the Plaintiff for the Cheque, the Factory’s 付款簽收簿 and the Plaintiff’s subsequent letters to the Factory (including the Demand and Termination Letters), which were consistent with a concluded 4th Contract. (3) Handling of the Cheque 60.The Defendant next claimed he left the Cheque with the Factory’s accounts department “for ease of management” pursuant to the agreement at the Meeting that the cheque for the Deposit for the 4th Contract would be issued upon/after the 4th Contract was duly amended, signed and concluded on 30th December 2004. I find such assertion implausible. 61.Apart from a bare assertion of “ease of management”, there is no credible explanation. Ms Lau submitted the Cheque was post-dated because the Month Amendment was pending. But there is no suggestion in the Defendant’s affirmations that the Factory’s accounts department was instructed not to deliver the Cheque to the Plaintiff pending the Month Amendment. Even if, according to the Defendant, it was anticipated the Parties would amend/sign the 4th Contract on 30th December 2004, it still does not explain why the Cheque was post-dated to 15th January 2005. Although the Defendant claimed it was agreed at the Meeting, yet his description of the Meeting did not give particulars of such agreement at all. Further, any concern about failure by the Plaintiff to amend/sign the 4th Contract could have been easily addressed by withholding delivery of the Cheque (which did not happen) without any need to post-date it to 15th January 2005. In my view, the issuance/delivery of the post-dated Cheque in the sum of HK$130,000.00 (ie the amount of the Deposit for the 4th Contract) supported the Plaintiff’s case that the 4th Contract had been concluded and reflected the Factory’s reluctance in accepting delivery of the 12/04 Shipment after the 4th Contract was concluded (see below). 62.Further, the contemporaneous documents and objective/ undisputed facts in relation to the delivery of the Cheque also illustrate the implausibility of the Defendant’s bare contentions. First, the Driver came to the Factory with the Authorisation Letter which openly and expressly set out the Plaintiff’s intention to collect the cheque for the Deposit for the 4th Contract. Secondly, although the Defendant claimed that the Plaintiff failed to notify or seek permission from him or the Manager in advance, there is no dispute the Factory handed over the Cheque to the Driver voluntarily. Thirdly, the Plaintiff on the same day gave a receipt for the Cheque that openly described it was for the Deposit for the 4th Contract. Fourthly (and this is very telling), the Driver signed the Factory’s付款簽收簿 which not only specified the Cheque was for the Deposit for the 4th Contract but also described the Shipment Period to be from “December 2004 to November 2005”. Such description by the Factory of the Shipment Period wholly contradicts the Defendant’s case. In my view, the above contemporaneous documents and undisputed facts echo the Plaintiff’s case (as evidenced by the Factory’s Duplicate) that the Factory signed the 4th Contract and affixed the Factory’s Chop thereon without any discussion or agreement as to the Month Amendment. (4) Faxing procedure 63.The Defendant made a bare assertion, which I find implausible, that at the Meeting Mr Xu requested to fax the Faxed Duplicate to his office for reference. There is no credible reason why Mr Xu would want to do so when, according to the Defendant, (a) the 4th Contract was not yet concluded on the terms stated therein, (b) Mr Xu was in possession of the Plaintiff’s Duplicate and (c) Mr Xu promised he would return on the very following day with the Plaintiff’s Chop to amend/sign the 4th Contract. In my view, faxing the Faxed Duplicate to the ZS Office is a clear indication the 4th Contract was concluded. 64.However, Ms Lau submitted it was pointless for the Factory to fax the Factory’s Duplicate to the Plaintiff’s office if the 4th Contract had been concluded since Mr Xu already had the Plaintiff’s Duplicate, which was eventually sent to the HK Office. The short answer (as explained by Mr Xu) can be found in clause (3) of the Sales Contract of the 4th Contract (which term the Factory/Defendant did not disagree (see paragraph 55 above) and which was the same as clause (3) of the Sales Contract of the 1st, 2nd and 3rd Contracts) which provided inter alia that a contract signed and returned by fax was valid and effective. So even if (as the Defendant alleged) historically the Plaintiff signed/chopped on the original duplicates of the 1st, 2nd and 3rd Contracts at its office and the Factory thereafter affixed the Straddle Chop thereon, the Parties plainly accepted it was permissible and effective to conclude a Long Term Contract (including the 4th Contract) by signature and return by fax. 65.It is therefore not strange for the Plaintiff to sign and affix the Plaintiff’s Chop on the Faxed Duplicate and then fax the Re-Faxed Duplicate to the Factory instead of signing on the Plaintiff’s Duplicate. Such faxing procedure was also consistent with the fact that the Plaintiff’s authorised signatories and the Plaintiff’s Chop were in Hong Kong. 66.Ms Lau suggested that the Plaintiff produced in evidence more than one version of the 4th Contract. But tracing how the Factory’s, Faxed and Re-faxed Duplicates came into existence amply demonstrates (a) the hollowness of the Defendant’s challenge as to the authenticity of the Re-Faxed Duplicate and (b) the fact that the 4th Contract was concluded. 67.It began with Mr Xu bringing the two original duplicates of the 4th Contract to the Factory for the Manager to sign and affix the Factory’s Chop thereon. After the Manager did so, the Factory retained the Factory’s Duplicate and Mr Xu took away the Plaintiff’s Duplicate. The Faxed Duplicate was faxed to the ZS Office, which in turn faxed it to the HK Office. The Plaintiff then made the Date Amendment on the Faxed Duplicate and its authorised signatory signed and affixed the Plaintiff’s Chop thereon. The Plaintiff faxed the signed/chopped Faxed Duplicate to the Factory and this became the Re-Faxed Duplicate. The above paper trail shows that all along there was only one version of the 4th Contract. 68.Further, the contemporaneous documents clearly show that (a) the Factory faxed the Faxed Duplicate to the Plaintiff’s office and (b) the Plaintiff faxed the Re-Faxed Duplicate to the Factory, thus concluding the 4th Contract. The starting point is the faxed copy of the Defendant’s name card which showed the Factory’s fax number of (0755) 84 122 728 and a fax header as follows : “FROM: WT PHONE NO.: 75584122728 MAY.10 2006 [illegible]”. “WT” appeared to be the abbreviation of the English translation of the name of the Factory (ie 偉田). The Re-Faxed Duplicate displayed a similar fax header inter alia as follows: “FROM:WT PHONE NO.: 75584122728 DEC.29 2004” and the time of “12.52PM”, “01.06PM” and “01.08PM” for the first page of the Annexure, the Sales Contract and the second page of the Annexure respectively. This showed that the original version of the Re-Faxed Duplicate (ie the Faxed Duplicate) was faxed from the Factory to the Plaintiff’s office. Then the Plaintiff’s facsimile communication result report (“Fax Report”) recorded that at 11:42pm of 31st December 2004 three pages were successfully faxed from the HK Office to fax number “00986755842122728” (ie the Factory’s fax number). The lower half page of the Fax Report was the Sales Contract of the 4th Contract duly signed and chopped by both Parties. 69.The documentary evidence leaves no doubt that the Re-Faxed Duplicate duly signed/chopped by the Plaintiff was successfully faxed to the Factory pursuant to clause (3) of the Sales Contract of the 4th Contract. The 4th Contract so concluded was therefore valid and effective. The Defendant did not give any (let alone credible or believable) explanation concerning the above documents, which contradict his bare assertion that the Factory did not receive the Re-Faxed Duplicate. I find such assertion (and his further assertion that he was unaware of the Date Amendment until the present proceedings) incredible and unbelievable. (5) Countermanding payment of the Cheque 70.It is not easy to understand why Ms Lau suggested that the strongest indication of there being no concluded 4th Contract was the fact that the Defendant countermanded payment of the Cheque. In light of the aforesaid analysis and the contemporaneous documents, the Defendant’s conduct is consistent with a refusal to pay the Deposit under the concluded 4th Contract. Even if I am wrong, it is at best a neutral factor since the Plaintiff also strongly relied on such conduct to illustrate the Defendant’s breach of the 4th Contract in refusing to pay the Deposit and to accept delivery of the 12/04 Shipment. (6) Post-contract communications 71.The Defendant made a bare assertion that after 30th December 2004 in the course of communications between Mr Xu/Mr Lu of the Plaintiff on the one part and he/Manager of the Factory on the other part he/Manager (a) proposed to further negotiate the terms of the 4th Contract, (b) explained there was no concluded 4th Contract and no breach thereof, and (c) requested the return of the Cheque. These assertions (which Mr Xu/Mr Lu denied) are inconsistent with the contemporaneous documents and I find them unbelievable. 72.The contents of the contemporaneous documents, eg the 5/1/05 Shipment Notices, the Plaintiff’s letters of 7th, 14th, 19th and 26th January 2005 (including the Demand and Termination Letters) to the Factory/Defendant, were all premised on a concluded 4th Contract and imminent delivery of the 12/04 Shipment pursuant thereto. There was no written response from the Factory/Defendant at all until after the commencement of the present proceedings in 2006. 73.The Defendant’s claim that he ignored the 5/1/05 Shipment Notices is implausible. If the Defendant claimed there was no concluded 4th Contract, I find it surprising (given that the Factory/Defendant must have been aware from its past experience of the 1st, 2nd and 3rd Contracts that the 5/1/05 Shipment Notices were a prelude to actual shipment of the Materials by the Plaintiff) the Factory just ignored such Shipment Notices without expressly warning the Plaintiff it would not accept the 12/04 Shipment. Further, when (according to the Defendant) the Plaintiff failed to heed the Defendant’s/Manager’s oral protests that there was no concluded 4th Contract and continued to notify the Plaintiff in writing of the imminent delivery of the 12/04 Shipment throughout January 2005, it is incredible that the Factory/Defendant did not respond and state their objections in writing at all. The Defendant at one stage in his affirmation evidence suggested he could not contact the Plaintiff or had to go to Taiwan, which was all the more reason for reducing his protests into writing. However, despite further demand letters dated 29th April 2005 and 8th January 2006, there was still no written reply from the Factory/Defendant until the present proceedings. 74.Indeed, the above analysis and objective facts, including the Factory’s 付款簽收簿, the Re-Faxed Duplicate and the Fax Report showing that the 4th Contract was concluded by fax, the Plaintiff’s various letters in January 2005 that warned of the imminent delivery of the 12/04 Shipment, the Price Decrease over the relevant period, all pointed to the credibility of Mr Xu’s claim that the Defendant/Manager requested to postpone the 12/04 Shipment and that the Plaintiff could not accede to such request since the shipping arrangements had already been made. The Defendant’s assertion that the Price Decrease was why the Factory would not have agreed to have December 2004 as the Effective Month does not sit well with the aforesaid contemporaneous documents and is incredible. 75.In any event, whether the Defendant requested for postponement of the 12/04 Shipment was irrelevant. After all, if there was a concluded 4th Contract, whether there was any breach of contract arising from failure to accept delivery of any monthly shipment of the Materials (see clause 3(b) of the Annexure of the 4th Contract) or any other issue arising from the underlying contract was irrelevant to the Plaintiff’s present claim on the Cheque. (7) Miscellaneous matters 76.Ms Lau submitted that because Mr Lu did not (a) in his affirmation specifically deny the Defendant’s claim that there was no concluded 4th Contract and (b) ask the Defendant about his act of countermanding payment of the Cheque when it was his intended purpose in making the telephone call, Mr Lu’s evidence was suspicious or unreliable. 77.I do not understand the complaint in (a) above. Unlike pleadings, Mr Lu’s affirmation is an affirmation of fact which described the contents of his telephone conversation with the Defendant, so it was unnecessary for him to expressly deny the Defendant’s allegation when factually it was not part of the telephone conversation. Further, it is unmistakably obvious from Mr Lu’s description that the telephone conversation was premised on a concluded 4th Contract. In respect of (b), I find Mr Lu’s version of his telephone conversation with the Defendant entirely plausible and consistent with the aforesaid analysis. In any event, a post-contract dispute does not advance the Defendant’s case of total failure of consideration for the Cheque. 78.Ms Lau next argued that clause (10) of the Sales Contract of the 4th Contract (ie the entire agreement clause) did not prevent the Defendant from adducing oral evidence as to the Month Amendment contemplated by the Parties. She pointed out that the Factory signed the 4th Contract on 29th December 2004, so the date of the 4th Contract (ie 27th December 2004) and the provision for payment of the Deposit by 28th December 2004 were incorrect, and they together with the subsequent Date Amendment showed that as at the Meeting the 4th Contract was not “entire”. 79.However, whether the 4th Contract was an entire agreement or not is irrelevant to the present claim on the Cheque. It relates to the underlying 4th Contract. More importantly, the above matters do not go so far as to become credible or arguable evidence that the Plaintiff waived payment of the Deposit, so it does not assist the Defendant. 80.In any event, Mr Xu explained that since the Long Term Contracts were prepared by the HK Office and presented to the Factory for signing, it was not unusual to find time gaps amongst the contract date, the date when the contract was actually signed, the date for payment of the Deposit expressed in the contract and the actual date of payment of the Deposit. This explanation was in fact borne out by the documentary evidence, ie the 3rd Contract. The contract date of the 3rd Contract (14th November 2003) pre-dated the contractual date for payment of the Deposit (17th November 2003), which in turn pre-dated the date when the contract was signed and the date when the Deposit was actually paid (both 18th December 2003). Likewise there were time gaps amongst the contract date of the 4th Contract (27th December 2004), the date when the Factory signed/chopped the 4th Contract (29th December 2004) and the date when the Plaintiff signed/chopped thereon (30th or 31st December 2004). 81.Plainly, in signing/chopping the 4th Contract after 28th December 2004 the Parties must have mutually waived the contract date of the 4th Contract and the contractual date for payment of the Deposit. There is also no doubt from the face of the 4th Contract that the date of 24th December 2004 in the Annexure was a typographical error. After all, the Sales Contract and the first page of the Annexure expressly stated the contract date to be 27th December 2004. These matters do not diminish the validity and effectiveness of the entire agreement clause in relation to the substantive contractual terms of the 4th Contract. 82.In the circumstances, the Defendant is unable to raise a credible or believable argument that the 4th Contract has not been concluded. There is no total failure of consideration for the Cheque. X. Fraud 83.There is no express assertion of fraud in the Defendant’s affirmation evidence. Although Ms Lau in her written submissions raised the issue of “whether is there …… fraud in obtaining the Cheque”, she did not condescend upon particulars of the alleged fraud. In the course of her oral submissions, it transpired the allegation was premised on the assertion that since the 4th Contract had not been concluded, the Plaintiff committed fraud in collecting the Cheque prior to making the Month Amendment and signing the 4th Contract. 84.It is trite that an assertion of fraud can only be made if there is sufficient evidence and it should be fully particularised (see my Reasons for Decision in Imada Luenwah World Ltd v Yip Ming Cheong and Wong Chi Nang both trading as Mei-King Machinery Engineering DCCJ5540&6521/2003 (unreported, 27th October 2006)). The above legal principle is particularly pertinent to an application for summary judgment where the defendant has to show cause, ie to show a defence upon merits. Consequently, the defendant’s affidavit must condescend upon particulars “…… and state clearly and concisely what the defence is, and what facts are relied on to support it …… If the defence relied on is fraud, the affidavit should state the particulars of the fraud (see O.18, r.8(1); Wallingford v. Mutual Society (1880) 5 App.Cas. 685). A mere vague general allegation of fraud is useless” (see Hong Kong Civil Procedure 2006 Vol.1 para.14/4/4 at p.169). 85.The above fraud argument that rests on Ms Lau’s oral submissions does not satisfy the above requirements. In any event, I have found the Defendant’s contention that the 4th Contract was not concluded unbelievable and incredible, so the underlying premise for the above fraud argument falls away. 86.But even on Ms Lau’s contentions, there is no arguable case of fraud. There is no dispute the Defendant voluntarily issued the Cheque and gave it to the Factory’s account department for handling and the Factory’s staff voluntarily handed the Cheque to the Driver. There was no evidence that the Driver or Mr Xu tricked the Factory into releasing the Cheque. On the contrary, the Plaintiff openly stated in the Authorisation Letter (which the Driver presented to the Factory) its intention to collect inter alia the cheque for the Deposit for the 4th Contract and gave a written receipt to the Factory on the same day stating that the Cheque was received as Deposit. More importantly, the Driver signed on the Factory’s付款簽收簿 to acknowledge receipt of inter alia the Cheque and the particulars therein specified the Cheque was the Deposit for “2004年12月 – 2005年11月合同”. On 7th January 2005, the Plaintiff gave a formal receipt of the Cheque to the Factory by opening stating it was for the Deposit for the 4th Contract. It is clear from the above that the Plaintiff obtained the Cheque with candour and openness and I find any suggestion of fraud unbelievable and incredible. 87.The events subsequent to the delivery of the Cheque discussed above also supported such conclusion. Further, the Defendant did not complain of fraud in his affirmations even though the Manager informed him that the Plaintiff had collected the Cheque almost immediately on the same or the following day. Subsequently, although the Defendant claimed he had asked the Plaintiff not to present the Cheque for payment and warned that he would countermand payment of the Cheque, he still did not complain of fraud. There is no merit in this defence argument. XI. Conditional delivery of the Cheque 88.The defence argument of conditional delivery of the Cheque does not appear distinctly in Ms Lau’s written submissions, but I gather from her oral submissions that it ran along the following lines, namely, that since the 4th Contract had not been concluded, the Cheque was delivered to the Plaintiff subject to the Month Amendment and the execution of the 4th Contract by the Parties (“Condition”), and would not take effect as a contract between the parties until the Condition was fulfilled. 89.Section 21(2)(b) of the Bills of Exchange Ordinance Cap.19 (“Ordinance”) provided inter alia that “[as] between immediate parties …… the delivery …… 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 ……” This is a limited defence (see Suen Ho Sun v Kamenar International Ltd [11989] 1 HKC 135). The Court of Appeal in Lin Hsien Tseng v So Sin Mui Bonnie [2002] 4 HKC 532, which followed Suen Ho Sun’s case, said the defendant had to establish that the parties “intended that the ‘cheque’ should be held in escrow by the payee such that the document did not have the qualities of a cheque at all as it had not been delivered. Certainly it is not enough to refer to the oral testimony of conditions which have allegedly been imposed before the cheque can be presented for payment. The question which has to be determined in this action is whether the cheque in question was delivered in escrow or whether an attempt was being made to orally attach conditions to the payment of the cheque.” 90.Therefore, the question to ask is whether the Cheque was delivered conditionally as a mere escrow and not for the purpose of passing the property in it. Since I have found the Defendant’s case incredible and unbelievable, the Condition cannot stand. In any event, the contents of the Authorisation Letter, the Plaintiff’s receipts of 30th December 2004 and 7th January 2005, the Demand and Termination Letters and, more importantly, the Factory’s 付款簽收簿 clearly demonstrate that the Cheque was delivered as payment of the Deposit for the 4th Contract. The defence contention that the Cheque was to be presented for payment upon fulfilment of the Condition is an oral qualification of the nature of the Cheque, which was an unconditional order for payment on or after 15th January 2005 (and not upon fulfilment of the Condition). The Condition introduced a contingency into the contract represented by the Cheque that contradicted the instrument. There is a clear line of authority to say it is not permissible (see Great Sincere Trading Co, Ltd v Swee Hong & Co [1968] HKLR 660, Suen Ho Sun’s case, Lin Hsien Tseng’s case, Po Yuen (To’s) Machine Fty Ltd v Chan Siu King [2003] 2 HKC 402 and various cases cited and discussed in S Y Chan Ltd’s case). 91.However, Ms Lau relied on Townearn Industrial Ltd v Golden Globe Holdings Ltd [2003] 1 HKC 186 cited in Sun Wah Aluminium Windows & Curtain Wall Company Limited’s case. In that case, the Court of Appeal held that where it was arguable the cheque was a form of guarantee of payment and the imposed condition had not been fulfilled, the defendant should be given unconditional leave to defend. This case turns on different facts. Further, unlike the present case, the relevant condition in Townearn Industrial Ltd’s case which was not satisfied (ie the cheque was not to be presented until after the final settlement of claims between the plaintiff and the defendant’s principal) was already expressly stated in the plaintiff’s letter to the defendant. I do not find this case of assistance. 92.In Sun Wah Aluminium Windows & Curtain Wall Company Limited’s case, the plaintiff and the 1st defendant entered into a written agreement that the plaintiff would perform construction and engineering works for a lump sum price payable by scheduled instalments. The 2nd defendant gave a written guarantee that the 1st defendant would pay the plaintiff in accordance with the schedule. Sakhrani J held that since there was no dispute the 2nd defendant delivered six post-dated cheques to the plaintiff “for security purpose” or “as security for the performance by the 2nd defendant of the guarantee”, it was arguable such cheques were delivered for payment only on condition that (a) the 1st defendant’s payment obligation had arisen, (b) the 1st defendant had failed to discharge the same, and (c) the 2nd defendant had failed to discharge the 1st defendant’s liability. I am unable to draw assistance from this case since its facts were far removed from the present proceedings where the Plaintiff insisted that the Cheque was for payment of the Deposit for the 4th Contract, which stance was supported by objective facts and contemporaneous documents. 93.Ms Lau placed even stronger reliance on the judgment of H H Judge Li in Lee Man Ching Mandy v Chiu Hing DCCJ16461/2000 (unreported, 22nd February 2001). In that case, the defendant argued there was an oral agreement for him to transport the plaintiff’s products to a designated destination in Mainland China. As security for faithful and satisfactory performance, the defendant drew two cheques in favour of the plaintiff. The products were seized by the authorities. Subsequently it was orally agreed that in consideration of the defendant paying HK$30,000.00 the plaintiff would not present the cheques for payment until matters were disposed of. The defendant paid such sum to the plaintiff and tried to recover the products, so it was argued the plaintiff should not have presented the cheques for payment. 94.H H Judge Li noted there were two distinct lines of authorities with “diametrically opposite treatment of the issue” represented by Great Sincere Trading Co Ltd’s case and Ken Kee Securities Co v Wong Yin Cheong (No 1) [1973-1976] HKC 55 respectively. The learned judge preferred the reasoning of Trainor J in Ken Kee Securities Co’s case and held that since the act of delivery of the bill of exchange was independent of the written terms, written or oral evidence relating to the quality or validity of such act was not evidence going to the terms of a written contract and as such could not possibly contravene the parol evidence rule. He further held inter alia that evidence could be adduced under section 21(2) of the Ordinance to show the delivery of the cheque was conditional. 95.On appeal ([2001] 4 HKC 280), the Court of Appeal held that what was in issue on the facts of Lee Man Ching Mandy’s case was whether there was an agreement as alleged by the defendant after the issue of the cheques, and the defendant’s payment of HK$30,000.00 supported his assertions which could not be said to be unbelievable. Consequently, H H Judge Li’s views became obiter (see S Y Chan Ltd’s case at p.156 and Mightfort Engineering (HK) Limited v Chester Construction Company Limited DCCJ1904/2005, H H Judge Lok (unreported, 15th November 2005) para.9). 96.I am doubtful whether H H Judge Li’s reasoning in the first instance decision in Lee Man Ching Mandy’s case remains persuasive. I note that the Court of Appeal in Lee Man Ching Mandy’s case referred to the reasoning in Great Sincere Trading Co Ltd’s case without disapproval. Further, Recorder Kwok SC in S Y Chan Ltd’s case (pp.152-153) questioned whether Ken Kee Securities Co’s case was still good law after the judgment of the Court of Appeal in Suen Ho Sun’s case :
In light of the Great Sincere Trading Co Ltd and S Y Chan Ltd line of cases, I am of the view that Ken Kee Securities Co’s case and H H Judge Li’s first instance judgment in Lee Man Ching Mandy’s case insofar as it followed Trainor J’s reasoning in Ken Kee Securities Co’s case are no longer good law. In coming to such conclusion I am emboldened by the similar view of H H Judge Lok in para.10 in Mightfort Engineering (HK) Limited’s case. 97.Further, the ratio of the Court of Appeal judgment in Lee Man Ching Mandy’s case concerning whether there was an agreement after the issuance of the two cheques is far removed from the present proceedings where the Defendant relied on an alleged Condition imposed before the Cheque was issued. I do not find Lee Man Ching Mandy’s case of assistance. XII. Defence arguments relating to the underlying contract 98.The Defendant raised a number of arguments premised on there being a concluded underlying 4th Contract. However, once the 4th Contract was concluded, there would not have been any total failure of consideration for the Cheque. Defence arguments concerning the underlying contract are therefore irrelevant to the Plaintiff’s claim on the separate contract represented by the Cheque. 99.First, the Defendant claimed that if the 4th Contract were concluded, previous usual practice indicated that the first monthly shipment of the Materials would arrive in/about two months (instead of a few weeks) after the commencement of the contract. However, as rightly pointed out by Ms Yiu, once the 4th Contract was concluded, such argument in relation to the underlying 4th Contract does not advance the argument of total failure of consideration. In any event, Mr Xu clarified the shipment information for the 1st to 4th Contracts as follows :
The first shipments for both the 1st and 4th Contracts arrived in Hong Kong in/about three weeks after the contract dates, so the first shipment under a Long Term Contract would not necessarily arrive in two months’ time. 100.Secondly, Ms Lau submitted that on the Plaintiff’s case whether it accepted repudiation of the 4th Contract as a result of the Factory’s/Defendant’s failure to pay the Deposit or the Factory’s failure to accept delivery of the 12/04 Shipment raised a triable issue. I find this totally irrelevant to the Plaintiff’s claim on the Cheque. 101.Thirdly, Ms Lau’s written submissions suggested “what is the loss suffered by the Plaintiff” was a triable issue. In light of the aforesaid legal principles on dishonoured cheques, I cannot see how breach of the underlying contract and damages that flowed from such breach will be pertinent to the claim on the Cheque. 102.Fourthly, Ms Lau in her written submissions argued that assuming the 4th Contract had been concluded the Cheque (although meant to be for the Deposit) should not have been presented for payment in which event the Plaintiff should have sued the Factory instead. But Ms Lau conceded during her oral submissions that if the 4th Contract had been concluded, it was improbable for the Parties to have contemplated that the Plaintiff would retain the Cheque as a piece of paper and not present it for payment. With the 4th Contract being a year-long Long Term Contract and the Cheque going stale after six months, such argument is devoid of merit. XIII. Cheque amounting to a “penalty”? 103.Ms Lau submitted that the Plaintiff never treated the 4th Contract as valid and binding “or else it would have purportedly forfeited the deposit of HK$130,000.00 instead of demanding compensation which they have not done”. Such complaint (which I reject) is difficult to comprehend since up to the hearing before me the Defendant never paid the Deposit to make it available for forfeiture. 104.Ms Lau in her oral submissions argued that (a) if the Defendant were liable for the Cheque, the Plaintiff would have relied on the Forfeiture Clause to forfeit the Deposit when paid by the Defendant and (b) the sum of HK$130,000.00 exceeded the Plaintiff’s actual damages of HK$50,519.12 (see paragraph 23 above), so the Forfeiture Clause was an unenforceable penalty provision. Ms Yiu justifiably complained that such argument not found in Ms Lau’s written submissions took her by surprise, but she was prepared to deal with the same at the hearing. 105.In my view, there is no merit in this argument. As Ms Yiu pointed out, this argument which relied on the interpretation of the Forfeiture Clause in the Annexure was necessarily premised on the assumption that the 4th Contract was concluded. But if the 4th Contract was concluded, there would have been consideration for the Cheque and the aforesaid argument relating to the underlying contract is irrelevant. There was no penalty provision on the face of the Cheque. 106.But even if the underlying 4th Contract were to be considered (which I disagree), the Plaintiff’s claim for the sum of HK$130,000.00 is plainly premised on the Defendant’s accrued contractual obligation to pay the Deposit. Chitty on Contracts 29th ed. Vol.1 para.24-051 at pp.1401 said as follows :
and cited Damon Compania Naviera SA v Hapag-Lloyd International SA [1985] 1 WLR 435 in support of the above proposition. 107.Damon Compania Naivera SA’s case was summarised in Sihombing and Wilkinson, Hong Kong Conveyancing Law and Practice Vol.1(A) (2006) para.[2102] at pp.VIII 609-610 as follows :
Ms Lau referred me to the dissenting judgment of Goff LJ, but I am not persuaded that his dissenting views diminish the applicability of the aforesaid general principles given the close parity of the facts of both cases. 108.Ms Lau referred me to Chitty on Contracts : Hong Kong Specific Contracts (2004) para.11-353 at p.895 as follows :
I am at a loss to understand the relevance of the above principles on assessment of damages to a claim on the Cheque or (even assuming the underlying contract is to be considered) to a claim based on an accrued obligation to pay the Deposit. 109.I also agree with Ms Yiu there is no arguable case that the Forfeiture Clause is a penalty provision. Chitty on Contracts 29th ed. Vol.1 para.26-109 at p.1489 provided as follows :
In the circumstances, the actual loss of HK$50,519.12 is irrelevant. The Defendant did not adduce any evidence to show that at the time of entering into the 4th Contract the quantum of the Deposit (ie HK$130,000.00) was not a genuine pre-estimate of loss. On the other hand, I note that the Shipment Period of the 4th Contract extended over almost a year and that the 5/1/05 Shipment Notices stated that the price for a single shipment of the Materials (ie the 12/04 Shipment) was HK$449,806.50. Plainly the total price of the Materials to be supplied over the whole term of the 4th Contract would be very substantial. Whilst it is true, as Ms Lau submitted, there was no evidence of the amount of the Plaintiff’s expected profit under the 4th Contract compared with the amount of the Deposit, it must be remembered that the burden is on the Defendant (and not the Plaintiff) to establish an arguable case that the Forfeiture Clause was a penalty provision. I am not satisfied he has done so. There is no merit in this argument. XIV. Conclusion 110.In the circumstances, the Defendant failed to establish any arguable case or triable issue. I therefore grant judgment in favour of the Plaintiff against the Defendant in the sum of HK$130,000.00 and interest thereon at the rate of 10.934% pa from the date of the writ of summons to the date of judgment and thereafter at judgment rate until payment. 111.There is no reason why costs should not follow event. I therefore grant a costs order nisi that the Defendant do pay the Plaintiff costs of this action and costs of the application for summary judgment (including all costs reserved, if any) to be taxed if not agreed with certificate for counsel.
Representation: Ms Elsie Yiu instructed by Messrs Spencer Lee & Co for the Plaintiff Ms Lorinda Lau instructed by Messrs Clarence Wong, Cheung & Liu for the Defendant |
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