Keung Kam Chuen Trading As "Dah Lee & Co." (A Firm) v. The Miyazaki Bank Ltd.

Case No.CACV 40/1980

Court

Court of Appeal

Date31 Oct 1980

Judge—

Case Document

100%Judiciary

CACV000040/1980

Bill of Exchange - order to pay "180 days documents against acceptance (Due date: [date inserted]) sight of this First Bill of Exchange" - whether order to pay "at a fixed or determinable future time" - wording undesirable but intention clear - s.3 of Bills of Exchange Ordinance complied with.

Illegality - bills accepted by Defendant for price of goods purchased from Japan - vendor desiring to sell to purchaser in the Philippines - intermediate sale to Defendant for purpose of defrauding Philippines Customs by production of documents relating to intermediate re-sale to true purchaser at deflated price - actions by banks as holders of the bills - banks unaware of conspiracy - Order XIV - no arguable defence.

IN THE COURT OF APPEAL	1980 No. 40
	(Civil)

BETWEEN
	Keung Kam Chuen trading as "Dah Lee & Co." (a firm)	Appellant (Defendant)
	AND
	The Miyazaki Bank Ltd.	Respondent (Plaintiff)

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BETWEEN
	Keung Kam Chuen trading as "Dah Lee & Co." (a firm)	Appellant (Defendant)

	AND
	The Saitama Bank Ltd.	Respondent (Plaintiff)

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Coram: Huggins, Leonard and Cons, JJ.A.

Date of Judgment: 31 October 1980

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JUDGMENT

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Huggins, J.A. :

1. We have before us two appeals which involve basically the same facts. Actions were brought by two banks against the same Defendant on three bills of exchange. The Plaintiffs sought summary judgment under Order 14. The Registrar gave leave to defend and, on appeal to the judge in chambers, the judge reversed that decision and entered judgment for the Plaintiffs.

2. The bills were part of a transaction which basically was the purchase and sale of steel wire. The seller was Kelly Industrial Co. Ltd., a company in Japan, and the purchaser was Universal Screws & Nuts Manufacturing Co., which was a company in the Philippines. There apparently was no written contract between those parties. The case for the Defendant is that the purchaser, and the vendor for that matter, desired to avoid customs duty in the Philippines. In order to do that the Defendant was brought in as an intermediary - he being a businessman having a firm in Hong Kong - in return for a one per cent commission. The Defendant agreed to be the nominal purchaser from Kelly and to effect a nominal re-sale to Universal. The goods were to be shipped direct from Japan to the Philippines, but there would be documents showing a sale to the Defendant at one price - the real price - and further documents showing a re-sale by the Defendant to Universal at a lower price, the aim being that those second documents were to be shown to the Customs in the Philippines and the customs duty would therefore be paid on the lower price. Purchase confirmations were produced, prepared by Kelly and alleged to have been signed by the Defendant, but the Defendant says that these documents were forged. He has produced sales contracts which he agreed that he signed, but which were not signed by Kelly. There were no invoices or other documents produced, except the bills of exchange which are the subject matter of the actions. In the first appeal the bills of exchange were accepted by the Defendant and were payable to the vendor's bank. In the second one the position was the same, the banks of course being different. It is admitted that the signatures of acceptance are those of the Defendant. It is, however, to be noted that the Defendant himself deposes to having signed the two bills of exchange in the first appeal as acceptor, although he signed both of them with a name other than his own and the second one with the addition of his true name. He has not explained why that was nor do we know whether the name which he signed on both of them was that of a fictitious person or not. The goods were shipped, but they were impounded by the Philippine Customs. Universal, the purchasers, provided bills of exchange to the Defendant, but these have been dishonoured. The Defendant, therefore, declined to pay on the bils which were drawn by Kelly and accepted by him.

3. In the result, two points have been taken on the appeal. I will deal first with the contention that the bills sued upon were not bills of exchange at all. The basis of this contention is that, as it is submitted, the documents were not orders to pay "at a fixed or determinable future time" within the meaning of s.3 of the Bills of Exchange Ordinance. All three bills were drawn on printed forms, the printed words start "At _____ sight of this FIRST Bill of Exchange Pay". In the blank, in the first bill, have been inserted the figures and words "180 days D/A from B/L date. (Due date: January 27, 1976)". In the second bill in the blank appears "180 days D/A after B/L date (March 2, 1976)" and, in the other appeal, the third bill of lading has the insertion "Due on Dec. 10, 1976". It is accepted that if there is any conflict between the printed words and the added words then the added words must take precedence, but what is submitted on behalf of the Defendant is that, at least, these orders are ambiguous.

4. Now I say at once that this is an undesirable form of wording. "D/A" clearly means "documents against acceptance", and that is not in dispute. Those words actually appear on the documents at the top. The question which was raised, and which has already been discussed in a case in England, was What was the effect of the letters "D/A" in the text of the bill? It is desirable that such insertions should not be made: it seems to me that they are merely a direction indicating that the person to whom the bill is addressed is not required, or expected, to accept unless the documents are tendered to him. In Korea Exchange Bank v Debenhams (Central Buying) Ltd. this matter was discussed at first instance at 1979 1 Lloyd's Rep. 100, and in the Court of Appeal in the same volume at p.548. Donaldson, J. held that the document appeared to be intended to be a bill of exchange. It was very similar to that in our case, except that the printed word "sight" had been obliterated whereas in our case it has been left in. He thought that the court should not be astute to detect ambiguity in such a document. He held that the word "sight" meant "acceptance" and, therefore, there was no difficulty in making sense of the bill. The Court of Appeal took a slightly different view. They held that the wording was not sufficiently clear and they reversed the judgment of Donaldson, J.

5. In the present case I think it is clear what was intended by the order. Payment was to be made, in the first case, 180 days from the bill of lading date, the acceptor being entitled to documents on acceptance. I have little doubt that the date was so stated in the bill in order to comply with the terms of the purchase confirmations, whether they were forged or not. To leave no possible doubt the actual date had been calculated and had been inserted. It is not suggested that there was any inconsistency between the actual date inserted and the statement "180 days from B/L". Therefore, in my view, the first bill is clearly a bill of exchange. The second one is so similar that there is no need to deal with it differently. The third bill indicates a date and there is nothing which suggests that there is any other date which could have been intended. That also seems to me to be a clear bill of exchange. It has not been argued before us, and it was not argued in the Korea Exchange Bank Case, that the insertion of "D/A" was anything more than a direction as to the right of the acceptor to insist on documents before acceptance or that the order was, as a result, conditional. In my view, these bills were within the meaning of s.3 of the Ordinance.

6. The second point is that, even if the bills were valid bills of exchange, they could not be enforced against the Defendant as they were affected by illegality. It is said that the whole transaction vis-a-vis the Defendant was illegal and that it was an attempt to defraud the Philippine Customs.

7. It has been conceded that it has to be shown that the banks were privy to the illegal consideration alleged if there is to be any defence on the bills. The evidence suggested to raise an arguable issue as to illegality is in three parts:

(i)	Reference is made to a telex which was sent to Kelly's office in Manila from their Tokyo office. Part of it indicates that the bank's employee in the first appeal had indicated that he would be forced to resign or would be dismissed by the bank if payment on the bills was not made. It is suggested that this indicated knowledge on the part of that employee of the illegality and that the bank was fixed with the knowledge of its employee. In my view, that is not enough to show that the bank was in any way aware of illegality. It could well be that the employee was afraid that the mere fact that the acceptor of the bill was not able to pay was sufficient to put his job in jeopardy.
(ii)	There is in the letter in which this telex is set out a parenthesis which reads "for shipments of Kelly/Tokyo to Universal Screws & Nuts Mfg. Co. through Dah Lee & Co., Hongkong" and the suggestion is that this indicates that the bank knew that there was going to be a re-sale by the Defendant. I will accept that is some indication of knowledge of that fact, but it does not, in my view, raise anything sinister and there is no reason to believe that the bank knew that there was this conspiracy to defraud the revenue. Secondly, reference is made to a letter from Kelly to the Defendant in which it is said that Kelly's bank - that is the Plaintiff - would like to confirm certain points, one of which was the ability of the purchaser, Universal, to meet its liability. It is suggested that that again indicates that the bank was aware of the conspiracy. In my view, it does not. The bank was reasonable concerned to know whether the acceptor of the bills which they held was likely to be able to meet his obligation and, on the information which they had, clearly his ability to pay might depend upon the ability of Universal to meet its obligation on the re-sale.
(iii)	It is argued that the banks have not, so far as we are aware, sued Kelly, the drawer of the bills. That again is not altogether surprising. Kelly was, after all, their customer and it may well be that the banks knew that to bring any proceedings against Kelly would be ineffective; but whatever the reason they were under no obligation to bring an action first against Kelly and I do not think that one can draw any sinister conclusion from their failure to do so.

8. For these reasons I do not think that there is enough evidence here to raise an arguable issue as to either bank's knowledge of illegality. In the second case it is not even suggested that there was any real evidence to show that the bank knew of the full arrangement. That being so, we need not deal with the other arguments - first, that if there was no illegality at all (although I confess that I find that a difficult argument to accept) and, secondly, that if there was such illegality it was too remote from these to affect them.

9. For the reasons I have given I think these appeals should be dismissed with costs.

Leonard, J.A. :

10. I agree and have nothing to add.

Cons, J.A. :

11. I, too, agree that both appeals should be dismissed.

31st October 1980.