Luk Chi-keung v. Sin Hua-trust, Savings Commercial Bank Ltd
Read the full judgment text of DCCJ 281/1978 on BabelCite. This District Court judgment was delivered on 16 October 1978.
1. This is an action in which the plaintiff claimed $4,000, being the proceeds of a cheque drawn by the plaintiff upon the defendant bank.
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DCCJ000281/1978 IN THE DISTRICT COURT OF HONG KONG HOLDEN AT TSUEN WAN CIVIL JURISDICTION ACTION NO. 281 OF 1978 -----------------
----------------- Coram: Judge Bewley, District Judge in Court Date of Judgment: 16 October 1978 ----------------- JUDGMENT ----------------- 1. This is an action in which the plaintiff claimed $4,000, being the proceeds of a cheque drawn by the plaintiff upon the defendant bank. 2. It is a bizarre case, in that the plaintiff deliberately miswrote his signature on the cheque in the hope and belief that it would not be honoured on presentation. He did so in anticipation of a total failure of the consideration given for the cheque. To his chagrin, the bank failed to notice that the signature on the cheque did not correspond with the plaintiff's specimen signature and duly honoured the cheque. 3. The defendants admitted that the cheque should not have been honoured, but submitted that, if the plaintiff had wished to stop the cheque, he was obliged in law to bring the matter to the attention of the bank in the proper manner. The defence further maintained that the consideration for the cheque had not failed and that the plaintiff, having suffered no damage, could not succeed. 4. The plaintiff is a sweet merchant and on 1st February, 1978, he agreed to purchase a consignment of chocolate from a Mr. CHAN Foon-yee. According to the plaintiff, when he examined the outsides of the boxes containing the chocolate, he was suspicious that it was defective. He was unable to take delivery of the chocolate, or even to open the boxes for inspection, until he had paid for the consignment. Having to fulfill orders from his customers, he gave Mr. CHAN a cheque and took delivery of the chocolate, but, to protect himself, he wrote his signature inversely thus, "Chi-keung LUK", instead of "LUK Chi-keung," and postdated the cheque to 4th February. It was a bearer cheque and he left the name of the payee blank. When he handed over the cheque his intention was that it should be dishonoured. 5. To make sure, he went to his bank the following day, 2nd February, and spoke to Mr. TSANG Yui-woon (DW1), a counter clerk. In chief the plaintiff said he addressed him thus, "Good morning, Mr. TSANG. I have a cheque which was postdated to 4th February in the amount of $4,000. The signature is incorrect. I would like to draw your attention to this." 6. Mr. TSANG consulted another official, a Mr. LEUNG, who told the plaintiff that he would have to see the cheque before taking any action. He also scolded the plaintiff for signing the cheque carelessly. The plaintiff pointed out that he had signed the cheque incorrectly because he did not wish it to be cashed. He then left the bank. 7. Next day the plaintiff returned and asked Mr. TSANG if his cheque had been stopped. Mr. TSANG said he did not know and the plaintiff left the bank. The plaintiff paid another visit to the bank on 11th February - after the Chinese New Year holiday - and ...(illegible) asked Mr. TSANG if the cheque had been stopped. He received the same reply and left with out further enquiring. The same thing happened on 17th February. Finally, on 25th February, when he once more enquired about the cheque, Mr. TSANG took a bundle of documents from a drawer and told the plaintiff that his cheque had been cashed on 6th February. His account was in funds at the time and had in fact been debited $4,000 on 4th February. 8. The chocolate proved to have been defective, as the plaintiff suspected, and consequently the cheques that he received from his customers were all dishonoured. 9. Mr. TSANG gave evidence for the defence. He recalled the plaintiff's visit to the bank on 2nd February. He admitted they were exceptionally busy on account of the approaching Chinese New Year. The plaintiff said he had a problem with a cheque and was "reluctant to pay it", because he had "written something wrong". Mr. TSANG asked him for the serial number, date and amount, but the plaintiff would not tell him. Assuming he wished to countermand the cheque, he asked the plaintiff to follow the usual procedure by completing a form. The plaintiff said he didn't wish to do this and Mr. TSANG therefore consulted his superior, Mr. LEUNG. On his return, he again told the plaintiff that he must complete a form, but, because of the press of people, he did not actually hand it to him. Later, when he was in a position to give the plaintiff the form, the latter was nowhere in sight. 10. Mr. TSANG did not see the plaintiff again until 22nd February. The plaintiff asked about a cheque and gave him the serial number, date and amount. Mr. TSANG made enquiries and discovered that this cheque had been cleared. 11. The final witness was Mr. CHAN Foon-yee, the chocolate merchant. He had been doing business with the plaintiff for 3 months before this incident, but always on a cash basis: if the plaintiff had no ready cash, he would give him a cheque. In early February he sold the plaintiff some chocolate and received on delivery a postdated cheque in which the payee's name had been left blank. In due course Mr. CHAN cashed this cheque, which is the cheque in question, with a friend. 12. Mr. CHAN denied that there was anything wrong with the chocolate and said he had received no complaints, either at the time of delivery or later. He denied that the plaintiff had phoned him on 4th February and complained about mould on the boxes. 13. I did not accept the plaintiff's reason for miswriting his signature on the cheque. If he had suspected something was wrong with the chocolate, he would have examined it at the time of delivery or, at any event, soon afterwards. Any resulting breach of contract with his customers, due to the poor quality of the chocolate, could he laid at the door of Mr. CHAN. The plaintiff's evidence that he was determined to pass on what he suspected to be defective goods did not ring true. Indeed he contradicted himself as to his knowledge of the defect. In chief he said he "knew", before he signed the cheque, that there was something wrong with the chocolate. He then admitted that his knowledge was based on the external appearance of the boxes. In cross-examination he first said he had never examined the chocolate itself, even after he had received complaints from the buyers on 5th February. In his next answer, however, he said he did go to inspect the goods after the buyers' cheques had been stopped. 14. The plaintiff was then asked if he had claimed against Mr. CHAN. He said he had done so on the telephone, but had not written to him (or presumably taken out a writ). In re-examination he produced a bank chit (P6), which was dated 4th April, 1978, and states that a cheque for $1,525, drawn on Kwang Tung Provincial Bank, was referred to drawer. Without the evidence of one or more of the buyers of the chocolate, this document takes the matter no further. 15. Finally, Mr. CHAN impressed me as a witness of truth and the plaintiff did not. If there had been anything wrong with this chocolate, I was satisfied that the plaintiff would have been in a position to lead evidence to that effect. 16. If follows also that the plaintiff's stated motive in signing the cheque in such a way was untrue. It was not necessary to speculate on his real reason for so doing, but this finding affected his credibility as to what took place in the bank. 17. Although I found Mr. TSANG to be a truthful witness and I did not accept there was any likelihood that retribution for what occurred might come his way, and that, therefore, he might be tempted to give false evidence, I bore in mind that there was little reason for Mr. TSANG to remember the details of the conversation of 2nd February. The plaintiff, whom he knew only vaguely, apparently wanted to stop a cheque, but could not be bothered to fill up the relevant form. This I would have expected Mr. TSANG to remember. But, in the conditions prevailing in the bank that day, it is unlikely that anything else would have been remembered. I suspected that Mr. TSANG was doing his best, but that, not remembering whether something was said, he tended to state that it was not said. 18. The chances are that the plaintiff did mention the date and the amount. There was not much point in the plaintiff going to the bank, unless he was prepared to do this. He undoubtedly wanted to ensure that the cheque would not be paid, but did not want to put his name to a form that would represent documentary proof that he had stopped the cheque. He preferred to draw the bank's attention to the faulty signature, but to do this he would, at least, have had to give the date and the amount. He did not have his cheque book with him and was unlikely to have been carrying the serial number in his head. He first stated in his evidence that he did mention the serial number to Mr. Tsang, but he later retracted this and admitted that he had given only the date and the amount of the cheque. 19. I found that the plaintiff was lying when he said he was not asked to complete a form. I accepted Mr. Tsang's evidence that this was normal practice and had no doubt that this would have been an automatic reaction to the plaintiff's request. 20. The plaintiff also lied concerning his visits to the bank on 5th, 11th and 17th February. If he thought he had stopped the cheque, there was no reason for him to keep going back to the bank. Alternatively, if he was in any doubt about the matter, he would not have been satisfied so easily by Mr. Tsang's repeated answer that he was not sure of the position. He would have announced his intention of waiting while Mr. Tsang ascertained the truth. 21. The fact remained that, although the plaintiff refused to complete the relevant form, he nevertheless indicated verbally to Mr. Tsang that he wished to stop a cheque and he gave the date and amount, but not the serial number. It was, of course, surprising that the cheque was paid, since the signature differed from the plaintiff's specimen signature. But it was nevertheless the plaintiff's own signature, and was a mandate to the bank to pay the sum stated. The question was whether this mandate was effectively countermanded. 22. A banker's primary function and duty, as his customer's agent, is to honour his customer's cheques, provided the state of the account warrants his doing so and there is no legal reason or excuse to the contrary. Apart from this contractual obligation, or as a consequence thereof, the paying banker must remember that his customer's credit may be seriously injured by the return of one of his cheques dishonoured. Paget's Law of Banking, 8th Edit. p.312. As Lord Dunedin said in the leading case on the subject, Westminster Bank Ltd. v. Hilton(1):
23. S.75(a) of the Bills of Exchange Ordinance provides that the duty and authority of a banker to pay a cheque drawn on him by his customer are determined by countermand of payment. To constitute an effective countermand it must come to the conscious knowledge of the banker. Curtice v. London City and Midland Bank Ltd.(2). If it be by the negligence or default of the bank that such countermand fails to be effective, the bank will be liable to the customer for any loss incurred thereby. Reade v. Royal Bank of Ireland Ltd.(3). 24. According to Paget (supra):
Mr. J. Milner Holden in his Law and Practice of Banking, Vol. 1 at p.228 goes further and declares that the customer's written confirmation should be obtained. 25. In the instant case the plaintiff was identified as a customer and the question, therefore, arose as to whether the cheque itself had been sufficiently identified and, if so, whether verbal instructions to countermand it were sufficient to make the bank liable. 26. In Ireland & Others v. Livingston(4), the House of Lords held that, where a letter of order which constitutes a contract from a merchant to his commission agent is so worded as to be capable of two interpretations, if the agent fairly and honestly assumes it to bear one of those interpretations, and acts on that assumption, the merchant cannot be released from his contract on the ground that he intended it to bear the other. As the error arose from his own indistinctness of expression, he must bear the loss. 27. This principle was applied in Hilton (supra). In that case the plaintiff instructed the bank by telegram to stop cheque No. 117283 drawn for £8-1-6 in favour of P. He did not add that it was a post-dated cheque: no date was mentioned. Next day the plaintiff telephoned the bank and the cashier confirmed that the telegram had been received and that the cheque would be stopped when presented. In fact, the plaintiff had wrongly stated the serial number in the telegram. When cheque No. 117285, for the same sum and in favour of the same payee, was presented a few days later, it was paid. It was unanimously held by the House of Lords that, as both the cashier and the manager knew that there was a stop on the cheque, and had, following the ordinary practice, looked at the ledger, which showed that no cheque in favour of P. had come in, their view was correct that the cheque presented, being subsequent to the date of the stop instructions, might be a duplicate cheque and that they were bound to cash it. 28. Lord Dunedin said in the course of his speech:
But he went on to say:
29. I bore in mind that Hilton's case was decided in 1926, and that banking practice has, with the advent of the computer and modern methods, become very much more sophisticated. In my judgment it is not reasonable to expect a bank clerk to accept incomplete and peculiarly phrased oral instructions to countermand a cheque, particularly in a crowded and busy bank at Chinese New Year. He took the proper action in telling the plaintiff that he had to follow the normal procedure, and, when he saw that the latter had not bothered to wait for the form, he was perfectly justified in ignoring his visit. 30. For these reasons I found that plaintiff had failed effectively to countermand the cheque and that the defendant was accordingly not liable on the claim for the amount of the cheque.
Certified True Copy
Representation: (1) (1926) 136 L.T. 315 at 316 (2) 1908 1 ...(illegible) 293 (3) 1922 2 I.R. 22 (4) 1872 27 L.T.Rep. 79 |