Edward Wong Finance Co Ltd v. Infinity Industrial Co Ltd and Another

HCA003469/1977

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Coram: Cons, J.

Date of Judgment: 27th November, 1978.

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JUDGMENT

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1. Edward Wong Finance Co., Ltd., the plaintiff in this action, is the holder for value of three cheques to the total amount of $85,996. The finance company holds these cheques because it discounted them for a company known as Willtex Garments (H.K.) Ltd., which is the payee named in each cheque. The drawer of each cheque is Infinity Industrial Co., Ltd., the 1st defendant in this action and the only defendant with which I am concerned.

2. Across the top left-hand corner of each cheque there is a chop consisting of two parallel lines, with between them the words "A/C PAYEE ONLY". I have no idea by whom this chop was imposed but I will assume that it was done by Infinity when the cheque was drawn. Next to that chop is another chop with the words "For account of EDWARD WONG FINANCE CO., LTD.". I assume this was imposed by the finance company after the cheques were discounted and before they were presented for collection and payment. Each cheque is also specially crossed in favour of the European Asian Bank.

3. In the bottom right-hand corner of each cheque is a small red chop which has been scored out and on the back is a signed chop of the finance company also scored out. It is pleaded in the defence that these are material alterations but the point has not been pursued in argument and I am satisfied that they are not.

4. The cheques were presented and dishonoured. The only issue is whether Infinity can escape liability by reason of the words "A/C PAYEE ONLY". It is submitted that these words render the cheques not negotiable in the fullest sense of those words, or as it is sometimes put, not transferable.

5. In general the provisions of the Bills of Exchange Ordinance, Cap. 19, apply to a cheque: s.73. Section 8(1) of that Ordinance provides:

"Where a bill contains words prohibiting transfer, or indicating an intention that it should not be transferable, it is valid as between the parties thereto, but is not negotiable."

The generally accepted view is that the words "A/C PAYEE ONLY" are not sufficient to invoke this subsection. The authorities start soon after the parent act was passed in England. In National Bank v. Silke⁽¹⁾ a cheque was drawn payable to the order of J.F. Moriarty, Esq., and crossed with the words "Account of J.F. Moriarty, Esq., National Bank, Dublin". Moriarty paid the cheque into his account with that bank and drew upon the funds thus credited. Subsequently the cheque was dishonoured and the bank was unable to recover from Moriarty. They sued the drawer. The drawer objected that no one other than Moriarty himself had any right to sue upon that particular cheque. The judges of the English Court of Appeal did not agree. They held that the words of the crossing did not clearly and without ambiguity prohibit transfer or indicate an intention that the cheque should not be transferable. They took the view that the words amounted to nothing more than a direction to the collecting bank to credit the monies once received to the account of Moriarty. Fourteen years later a similar view was expressed by Bigham,J.: Akrokerri (Atlantic) Mines, Ltd. v. Economic Bank⁽²⁾. Then his words were specifically recommended by Atkin, L.J., in 1927: Importers Co. v. Westminster Bank, Ltd.⁽³⁾. Much more recently and in this jurisdiction Huggins, J., as he then was, said this:

"I agree that to mark a cheque 'Payee Account Only' does not destroy its negotiability ....": Asiatic European Corp. Ltd. v. Overseas Trust Bank Ltd.⁽⁴⁾

6. Counsel for Infinity seeks to distinguish these authorities. He suggests that the comments are obiter in that the cases are basically concerned with limiting bankers' liabilities. With respect that is not completely so. The very first mentioned was one brought by a bank itself against the drawer and suing as a holder for value. As I see it that case is on all fours with the present. There are differences, of course. But they do not distinguish. The most obvious is that there the cheque was marked with the name of a particular account. But the account was that of the payee and it matters not that the drawer there wrote the name in full whereas the present drawer used a form of shorthand. Indeed the learned editors of Byles on Bills of Exchange do exactly the same when referring to the facts of this case at p. 74 of the 23rd edition. Then the present drawer has added the word "ONLY". The same learned editors, speaking this time through the 8th edition of Paget's Law of Banking at p. 259, leave open the exact effect of this addition. But with every respect to them it seems to me that so long as the whole phrase is treated merely as a direction to the collecting bank the additional word can have no effect at all. In other circumstances it may. For example, a document marked "Present to Mr. Smith Only" may indicate that it should not be handed to his secretary. But once a named account is mentioned the ultimate restriction is already reached. Accounts do not have secretaries. The word "ONLY" becomes emphatic rather than restrictive. Another difference is that Moriarty's cheque was an order cheque whereas the present cheques are to a named payee without mention of either order or bearer. But again this does not help the defendant. The position is covered by s. 8(4) which makes such a cheque payable to order unless it also contains words prohibiting transfer or indicating an intention that it should not be transferable.

7. It was suggested that I strike out on my own against the general current of the authorities and adopt a broad commonsense approach. However, I am not sure that my commonsense conclusion would necessarily have agreed with that of defence counsel. A man of commonsense would not unthinkingly accept common fallacy. He would consider the words themselves and immediately realize the difficulties inherent from the coupling of the payee's name with the word "account". He might also consider that if the drawer had intended the payee to be the only possible beneficiary of the cheque the drawer would have said so by the simple method of putting the word "only" immediately after the payee's name. A man of commonsense might well assume that by not taking this obvious course the drawer had something else in mind. However, in my view, authority does not allow me to speculate on this fascinating question. In my view the plaintiff company is entitled to judgment on the three cheques and judgment is accordingly entered in its favour with costs.

Representation:

Mr. C. Mumford (Fairbairn, Kwok & Wang) for the plaintiff.

Mr. Philip Lee (Ng and Yung) for the 1st defendant.

(1) [1891] 1 Q.B. 435

(2) [1904] 2 K.B. 465

(3) [1927] 2 K.B. 297 at 307

(4) [1967] H.K.L.R. 1 at 15