Leung Kin v. Kam Wah Film Co (A Firm) and Others
Read the full judgment text of DCCJ 4030/1968 on BabelCite. This District Court judgment was delivered on 28 October 1968.
1. By the endorsement upon the writ, the plaintiff claims a sum of money, payable by the defendants to the plaintiff, as money lent, evidenced by a note in writing made and signed by the defendants. There was also claimed the same amount as an account stated, but this was abandoned during argument by the plaintiff's solicitor.
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DCCJ004030/1968 IN THE DISTRICT COURT OF HONG KONG HOLDEN AT KOWLOON CIVIL JURISDICTION Action No. 4030 of 1968 -----------------
----------------- Coram: Judge Collier. Date of Judgment: 28 October 1968 ----------------- JUDGMENT ----------------- 1. By the endorsement upon the writ, the plaintiff claims a sum of money, payable by the defendants to the plaintiff, as money lent, evidenced by a note in writing made and signed by the defendants. There was also claimed the same amount as an account stated, but this was abandoned during argument by the plaintiff's solicitor. 2. When the action was called on for trial, the defendants' solicitor immediately applied for an order to strike out the action upon the ground that the note in writing, pleaded in the writ, amounted to a promissory note within the meaning of section 3 of the Stamp Ordinance and that, being unstamped, it was caught by section 24 of that Ordinance and that no action could arise from it: it was not merely a note evidencing a lending transaction, but was given as security for the loan. The point was not pleaded by way of defence or taken earlier as the defendants' solicitor had had no opportunity of seeing the "note" until that morning just before the Court sat. 3. The definition "promissory note" reads as follows:
4. Section 24(1) reads as follows:
5. In reply the plaintiff's solicitor said he was entitled, nonetheless, to sue upon the fact of money lent, evidenced by the note in writing. He also said that the note was not given for any pre-existing debt, but was given as collateral security. He said the plaintiff sued upon the consideration and cited as an "authority", in support of that proposition, Chalmers on Bills of Exchange at pages 343 and 378, but did not cite any of the cases therein referred to. 6. Digressing for a moment, there is an unfortunate and unhelpful practice in these Courts, employed more by solicitors than Counsel, though some of these latter are by no means blameless, of citing text-books and sourcebooks as "authorities". There is, of course, no objection to adopting the views of text-book writers as the argument of Counsel or solicitors but the citing of those views as authoritative is wholly wrong. It is by no means unusual that the cases cited in support of views of text-book writers do not support those views, as indeed is the case where the views of the learned editors of Chalmers on Bills of Exchange are concerned. Illustrative of the danger of relying on text books is the following instance which I witnessed in the Court of Appeal: Megarry Q.C. (as he then was) was arguing a case under the Rent Acts and was challenged by the Court that his book on the subject regarded by many as authoritative said something entirely different from his argument before the Court. The reply from learned Counsel was that, from his work in preparing the case before the Court he had concluded that his exposition of the same point in his book was wrong and that it would be changed. 7. The passage in Chalmers at page 343 referred to by the plaintiff's solicitor is of no relevance to this matter as it does not deal with the question of unstamped notes and is of no interest in this case. 8. At page 373 of Chalmers there appears this bald statement:
and cites in support, Brown v. Watts (1808) 1 Taunton 353, and invites the reader to compare Sutton v. Toomer (1827) 108 E.R. 778; Plimley v. Westley (1835) 2 Bingham's New Cases 249 and Gomperty v. Bartlett (1853) 2 E. & B. 849. These cases, neither separately, nor collectively go far enough to support that proposition and I am satisfied that the broad proposition as stated in Chalmers is inaccurate. 9. Brown v. Watts was a case of an unstamped note being given as security for an antecedent debt, in respect of which an admission had been made before the unstamped note was given. It was held that the plaintiff was entitled to sue on the antecedent debt, evidenced by the admission, that is, upon the status quo before the note was given. This is a different set of facts from the unqualified statement in Chalmers, supra. 10. In Sutton v. Toomer a promissory note was given by a bank as security for money deposited by the plaintiff at the bank. That note was properly stamped. Later, an alteration was made to the note, which required a fresh stamp which was not affixed. It was held that the holder was entitled to sue for money lent, using the paper as evidence. For reasons which I shall set out hereafter, the use of the paper as evidence of the debt is no longer possible and has not been since the Stamp Act 1891, which enacted what is now appears as section 24 of the Stamp Ordinance. Sutton v. Toomer was another case of an existing or antecedent debt, in respect of which an unstamped note was given. 11. Plimley v. Westley is of little relevance. The plaintiffs took, as indorsees, a promissory note without the words "or order" upon it, in payment for goods sold and delivered to the defendant. The note was dishonoured as being not negotiable for want of the words "or order" and the plaintiff sued for the debt in respect of goods sold and delivered, which the Court held they were entitled to do. The only mention of the note being unstamped is at the end of the judgment of Tindal C.J. Having held that the note was not negotiable and therefore no payment had been made in respect of the goods sold and delivered, he observed that, had a fresh stamp been affixed, that might have operated as the making of a new note, and not the endorsing to a third party of an existing note. This remark was clearly obiter and the reasoning upon which it is based difficult to follow. In my respectful view, the note was not negotiable and that was an end of the matter; what might have been done by the parties, but which they had not done, is of no assistance: nor was this a case of a note which should have been stamped but had not been so stamped. 12. In Gomperty v. Bartlett, the plaintiff bought what he thought to be a foreign bill of exchange. The bill was unstamped, which would have been in order had it indeed been a foreign bill. The bill had, in fact, been drawn in England and, because of the lack of a stamp, the Commissioners in Bankruptcy refused to allow proof, the makers of the bill having become bankrupt. It was held by the Court, Campbell, L.C.J., Coleridge & Whightman J.J., that this was a contract for the sale of a foreign bill, which was not, under the terms of the contract, delivered to the plaintiff and he was entitled to damages to the extent of the sum he had paid for the bill. As Campbell L.C.J. put it: "The case is precisely as if a bar was sold as gold, but was in fact brass, the vendor being innocent." 13. I find it singularly surprising that Chalmers, citing as he does those cases which were decided before the passing of the Stamp Act 1891, does not make any comment upon the effect of section 38(1) of that Act (s.24(1) of the Stamp Ordinance) upon those cases. Neither does Chalmers refer to the case of Foster v. Driscoll (1929) 1 K.B. 470, in connection with those cases and his statement, reproduced supra, though that case is referred to in other places dealing with subjects of no interest to this case. Byles on Bills of Exchange cites only Foster v. Driscoll in connection with section 38(1) of the Stamp Act. 14. Although the detailed facts of Foster v. Driscoll are somewhat complicated, the bare bones of those facts were that a partnership was formed for the purpose of buying a ship and a consignment of whisky and for conveying the whisky into the United States of America by means of smuggling, prohibition being then in force in that country. In pursuance of the agreement one of the parties, one Lindsay became the indorsee of a bill, unstamped, for £5,500. It was held that the bill was void and could not be sued upon. Scrutton L.J. put the matter in these words, at p.487. "The first bill for £5,500 was clearly an inland bill and was therefore null and void and to give it was a breach of the agreement which was to give a valid bill"; and at page 499: "On the view I take of this case, as explained above"[i.e. that the whole agreement between the parties was not void for illegality] "the results should be as follows: In the first action, Lindsay's claim on the bill, and his appeal against the judgment declaring it void, fail. But he succeeds against Foster on his counterclaim for damages for Foster's not giving a valid bill under the contract and he should have judgment against Foster for £5,500 .......". The other judges, Lawrence L.J. and Sankey L.J. disagreed with Scrutton L.J. upon the question of illegality, holding that the whole agreement was illegal, but Sankey L.J. at page 524 said "...... I think Lindsay would be entitled to damages and the amount would be the amount of the bill in question - namely £5,500, for which, apart from the point of illegality, I think he should have judgment." 15. In my judgment, Foster v. Driscoll is authority for the proposition that here is a contract to deliver a bill or promissory note in return for money lent and an invalid bill or note is delivered then, although no action may be brought upon the bill or note, being void because of the provisions of the enactments concerning stamps, an action will lie for breach of contract in not delivering a valid bill and judgment had for damages to the amount of the security lost. 16. That case does not, by itself, negative the proposition before me, namely that the holder of the invalid note may also have an action for the money lent without relying on the contract to deliver a valid bill. 17. The cases prior to the Stamp Act 1891 indicate that the delivery of an unstamped bill in respect of an antecedent debt will not invalidate a previously lawful contract to lend money and the creditor may sue upon the consideration in that contract. To that extent, the passage from Chalmers, cited supra, is correct. Foster v. Driscoll is in agreement with the decision in Gomperty v. Bartlett, that an action will lie for breach of contract where a term of that contract was to deliver a valid bill as security for money so advanced as part of a wider agreement or where money is paid as the purchase price of a bill thought to be valid by the parties to the contract of sale of the bill. 18. There is no decided case upon the facts of the case now before me. In the present case there was no antecedent debt, arrangement or contract. The plaintiffs lent money to the defendants upon their executing a promissory note. That note is void and cannot be sued upon. In my view there was no consideration moving from the defendants other than the promise contained in the void note or that promise upon which the void note was given. 19. Section 38(1) of the Stamp Act and section 24(1) of the Stamp Ordinance were passed clearly to inflict a swingeing penalty upon those who issue or accept or indorse unstamped promissory notes, in order to enforce the law with regard to stamping such notes. It would be a total avoidance of the provisions of those enactments were a person, who lent money upon the strength of an unstamped note, allowed to sue upon the mere lending, alleging the note was of no effect or importance, being put merely to inconvenience in proving the loan, if it were denied. I do not think that this was the meaning or intendment of those enactments. It is only right and proper that a person who has subsisting rights and who takes an unstamped bill as security for those rights or who is provided with an invalid bill where he is entitled to a valid one should be allowed to sue on those rights. 20. There remains one further matter. At the outset of this argument, the plaintiff's solicitor maintained that he could, in spite of section 24(1) of the Stamp Ordinance, use the invalid note as evidence of the debt, though he later withdrew that contention and stated that were he successful upon the point dealt with supra he would seek to amend his writ by delating the words "as evidenced by a writing dated ......". The Privy Council in Ram Rattan v. Parma Nand (1945) 73 Indian Appeals 28, dealt with the old cases which indicated that an unstamped note could be used as evidence of the transaction of which it was involved. The Indian Stamp Act 1899 provided that "No instrument chargeable with duty shall be admitted in evidence for any purpose ......" which is a milder prohibition than that provided by section 24(1) of the Stamp Ordinance. In the opinion of the Privy Council there appears this passage (page 32):-
21. In my judgment, those words must apply with at least equal force to the words "or to make the same available for any purpose whatever" in section 24(1) of the Stamp Ordinance. 22. In view of the foregoing, I find that this action is misconceived and I order it to be struck out.
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