The Administrator in Hong Kong of the Catholic Mission of Macao v. The Hong Kong and Shanghai Banking Corporation and Others
Read the full judgment text of HCA 276/1976 on BabelCite. This High Court CFI judgment.
1. The material facts of this case may be shortly set out. The plaintiff was the registered shareholder of a considerable number of shares in the defendant bank. In May 1973 the certificates relating to those shares were presented to the bank together with completed share transfer forms. The presentation was not made on behalf of the plaintiff or with his knowledge. It was made on behalf of a person who had no title to the shares whatsoever. The signatures on the share transfer forms purporting
|
HCA000276/1976 IN THE SUPREME COURT OF HONG KONG HIGH COURT ACTION NO. 276 OF 1976 -----------------
----------------- Coram: Cons, J. Date of Judgment: 11th March, 1977. ----------------- JUDGMENT ----------------- 1. The material facts of this case may be shortly set out. The plaintiff was the registered shareholder of a considerable number of shares in the defendant bank. In May 1973 the certificates relating to those shares were presented to the bank together with completed share transfer forms. The presentation was not made on behalf of the plaintiff or with his knowledge. It was made on behalf of a person who had no title to the shares whatsoever. The signatures on the share transfer forms purporting to be those of the Bishop of Macau - the appropriate signature of the plaintiff: Cap. 1006 - were forged. The bank attended to the presentation and in due course removed the plaintiff's name from the register, replaced it with the other name given and issued new share certificates accordingly. 2. The truth came to light a few months later and eventually the plaintiff brought this action to require the bank to reinstate it to the register and make good the lost dividends, bonus shares, etc. The only defence raised by the bank was to deny that the signatures were in fact forged. This defence was easily disposed of by the plaintiff and an order was made in favour of the plaintiff in December last year. Since then the plaintiff has taken no further part. 3. The third party proceedings are between the bank and the firm of stock-brokers who actually presented the share certificates and the forged transfer forms. The first third party was the sole proprietor of the firm at that time. The other third parties are the partners who took over the firm some time later but failed to issue a notice in accordance with the Fraudulent Transfers of Businesses Ordinance, Cap. 49. Fourth parties have also been added but I am not concerned with those at the moment. The Bank's Case 4. The bank's case is that in presenting the shares for transfer the brokers both expressly and impliedly warranted that the transfer forms and the signatures thereon were genuine. The express warranty depends upon the words of the covering letter sent by the brokers. That was in printed form with spaces left for the details of the particular transaction. The printed words were as follows:
5. It is said for the brokers that the words "duly completed" mean no more than "completed properly so far as we know" or "completely filled in". I am not sure that I would agree with either interpretation. I would think the words more likely mean "validly completed" otherwise there is no need for them. But the point was not argued at length and I do not express any considered opinion upon it. There is no need. The case of Sheffield Corporation v. Barclay(1) is good authority that in circumstances such as these the warranty is implied by law, that the person making the request is bound to indemnify the bank against any loss it suffers by reason of complying there with. The Defences 6. The brokers put forward three lines of defence. (a) The indemnity is a question of fact. 7. It is argued that although the law may allow an indemnity to be implied, whether it should be so implied in any particular case is a question of fact to be decided each time according to the particular circumstances. The argument is founded on certain passages in Dugdale and others v. Lovering(2). At p.200 Brett, J., refers to the facts in the case as being
And at p.201 Grove, J., says
8. With every respect to counsel the case of Dugdale does not touch in any way upon the present circumstances. It was not concerned with the registration of shares. It was concerned with the physical delivery of chattels to which there were rival claimants. There had been a suggestion that the indemnity could be implied by law but the court did not find it necessary to decide. It found that the indemnity was to be clearly implied from the particular facts. The remarks of the judges were made in that context. They cannot detract from the law later laid down in the Sheffield case. (b) The brokers did not request the transfer. 9. The letter requesting the transfer was headed in large type with the name and address of the brokers. It was signed by somebody on their behalf and chopped with their rubber stamp. It is nevertheless suggested that they should not be held responsible for it because they had not acted for the transferee in the purchase of the shares and were not paid for submitting the request on his behalf. At the time the transferee was not one of their customers. He was nothing more than an acquaintance of one of their messenger boys. Subsequently he became a regular customer. But I cannot see that these things matter. It was the brokers who in fact approached the bank. As a result of that approach the bank acted. And as a result of so acting the bank lost a great deal of money. It seems to me quite irrelevant and unnecessary to look into what decided the brokers to set that train of events in motion or to inquire whether they were paid or not for their part. (c) The bank did not prove that it relied upon the implied warranty. 10. My difficulty in considering this argument is that nothing was put forward to show why the bank should have proved this matter. It is not a question of misrepresentation. That would apply if the bank were seeking to set aside a contract. Here it is not. It is seeking to enforce a contract, an implied promise by the brokers that they would indemnify the bank if subsequently it suffered loss. I do not see that the bank is required to prove that at the time it consciously took that promise into account. 11. In case I should be wrong in this view I should record that it was obvious that the staff of the bank's registry placed no store upon the personality of those who submitted requests for transfers, whether those requests were made, as in the present instance, by letter or in person over the counter. In the latter instance no form of identification was ever required. Whether the conduct of the staff of the registry would have been approved by those in authority in the bank I do not know. No evidence was called. I should also add, although the point was not know. No evidence was called. I should also add, although the point was not expressly argued, that such conduct by the staff would not in my opinion amount to a waiver of the bank's rights. 12. It might also be convenient here to comment upon certain evidence given by Mr. Stanley Yeung, the first third party, to the effect that whenever a broker dealt in a sale and purchase transaction of shares the broker put his chop upon the transfer form. In the present instance the transfer forms had no such chop, which, it is said, must have indicated to the bank that the brokers submitting the forms had not dealt with the transaction and were therefore in no position to warrant that the applications were genuine. And then further presumably, by consenting to act with that knowledge, the bank had waived its rights against the brokers. Again I do not think that waiver would necessarily be established by those circumstances. But in any event the argument must fail unless what was in effect a trade custom was made out. Mr. Yeung was not an impressive witness. He did not appear to be very experienced in the broking world. I am not prepared to accept trade customs on his evidence alone. 13. If the brokers' defences fail - as they do - they seek to pass some of their liability back to the bank. Two suggestions need be considered: (i) Contributory negligence. 14. It is suggested that with reasonable diligence the bank could have discovered that the signatures on the transfer forms were forgeries and thus by their own negligence contributed to their own loss. The bank argues immediately that the suggestion is technically bad in that the doctrine of contributory negligence is limited to an action in tort whereas their action against the brokers lies in contract. But a question that needs to be dealt with first is whether the bank is under any duty of care to the brokers, for if there be no duty there can be no actionable negligence. And that prior question has already been answered by Lord Davey in the Sheffield case where at p.403 he says:
It is true that earlier in his judgment Lord Davey had referred to the need for the bank to act "without any default on (the bank's) own pat". But I do not read these words as imposing upon the bank duties which they would not otherwise have. (ii) Contribution by a joint tortfeasor. 15. It is suggested that if the plaintiff had so chosen it could have sued both the bank and the brokers as joint tortfeasors; then the brokers would have been entitled to recover contribution from the bank under section 19(1)(c) of the Law Amendment and Reform (Consolidation) Ordinance, Cap.23. That reads as follows:
16. With respect one has only to read the paragraph through to the very end to see that this suggestion must inevitably fail. The bank is entitled to an indemnity against the brokers. Whether the bank is a tortfeasor as such or not - and it is not necessary to decide this point - contribution cannot be recovered. 17. If I am wrong in my conclusions on these two suggestions I would have held the bank and the brokers equally to blame. The bank should have noticed that the signatures were forgeries. The discrepancies with the genuine were immediately obvious to the naked eye. The bank had a genuine signature with which they could have made comparisons. It was kept for that very purpose. But I do not think that in the particular instances it can have been so used. It was also suggested that other matters should have raised the suspicions of the bank, for example, the size of the transaction, the fact that the plaintiff usually purchased rather than sold shares, that the address of the apparent purchaser was what might be thought a poor area of Hong Kong and that the signatures of the seller and purchaser were both witnessed by the same person. I do not agree with these suggestions. They are not matters to which to my mind necessarily suggest deceit. Then a great deal of time was also taken up with the examination of the internal procedures of the registry of the bank. Eventually it was shown that, perhaps due to pressure of work, the staff of the registry did not carry out those procedures as thoroughly as they might. But that is a matter for the bank alone. The only aspect possibly relevant to this case is the failure to check the signatures. 18. The brokers were likewise to blame in that no effort whatsoever was made to check upon the identity or bona fides of the person on whose behalf they consented to act. 19. There remains only one further point to consider. It is raised by the third, fourth and fifth third parties. They argue that the plaintiff was to some extent the author of his misfortune. Before one set of transfers were registered, and perhaps both, the bank wrote to the plaintiff advising the plaintiff that a request for transfers had been lodged and indicated that unless they heard from the plaintiff by return of post they would assume that the transfers were in order. The plaintiff ignored the letter. It is easy to sympathize with the third parties. One would have expected an immediate reply. If so there would probably have been no fraud. The plaintiff in a sense could therefore have prevented the fraud. But that does not make the plaintiff responsible for it. The final step in the fraud was initiated by the brokers. They can only shift their responsibility to the person who persuaded them to take that initiative. 20. For these reasons judgment is entered for the defendant bank against the third parties in such sum as may be necessary for the bank to meet its obligations in this action to the plaintiff. Representation: Ronny Tong (Woo, Kwan, Lee & Lo) for the plaintiff. Anthony Dicks (Johnson, Stokes & Master) for the defendant. Charles Ching, Q.C., and D. Chang (Yung, Yu, Yuen & Co.) for the first and second third parties. Third third party in person. Fourth third party in person. Fifth third party in person. First fourth party not present. Second fourth party not present. (1) [1905] A.C. 392 (2) [1875] 10 L.R.C.P. 196 |