Maytex Trading Co (A Firm) v. Texfarm Garments Factory Ltd and Another
Read the full judgment text of HCA 555/1976 on BabelCite. This High Court CFI judgment.
1. This judgment was delivered in open court at the conclusion of the trial. It is reduced to writing at the request of the 2nd defendant who wishes to appeal.
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HCA000555/1976 IN THE SUPREME COURT OF HONG KONG HIGH COURT ACTION NO. 555 OF 1976 -----------------
----------------- Coram: Cons, J. Date of Judgment: 29th October 1976 ----------------- JUDGMENT ----------------- 1. This judgment was delivered in open court at the conclusion of the trial. It is reduced to writing at the request of the 2nd defendant who wishes to appeal. 2. This is an action upon eight dishonoured cheques which together amount to almost half a million dollars. They are all drawn in favour of the plaintiff and signed by one KWOK Wing. Surrounding the signature of KWOK Wing on each cheque is the impression of a rubber chop with the words "Texfarm Garments Fty. Ltd." above the signature and below it a dotted line and the word "Director". On one cheque there is an extra signature of Mr. KWOK Wing without the rubber chop in order to validate a spelling error in the name of the payee. But I do not think it is necessary to rely on this. In the bottom left hand corner of the cheques are printed the words "Texfarm Garment Fty. Ltd." and an account number. Otherwise the cheques are all drawn in the usual form. They were given in payment of goods supplied to the company by the plaintiff. Six of them were exchanged for earlier cheques which had not been met but that does not alter the general position. The plaintiff has sued both the company and Mr. KWOK Wing. He has obtained judgment against the company and satisfied it to a certain extent by execution. I am concerned now only with Mr. KWOK Wing. 3. A certain amount of evidence was called on both sides. I do not think it affects the issue in any way. Mr. KWOK Wing's liability depends upon what appears on the cheques themselves. But in case I am not correct in this view I would record that where there is any discrepancy between the evidence of Mr. NG for the plaintiff and Mr. KWOK Wing I prefer the evidence of the former. 4. This is by no means the first time that the personal liability of a signatory to a cheque such as this has been called in question in the courts. It turns upon section 26(1) of the Bills of Exchange Ordinance, Cap. 19:-
There are many reported decisions. Mr. Mayne for Mr. KWOK Wing has very patiently and very pleasantly forced me to renew my acquaintance with most of them. But with every respect to him the matter is academic so far as the principle is concerned. It was settled last year in Blooming Textiles Ltd. v. Sun Sang Garment Factory Ltd. (1). In that case I indicated what I thought to be the two lines of authority, labelling them "the strict approach" and "the broader view". The decision was given in favour of the strict approach. 5. That decision was taken to what was then the Full Court sub. nom. CHEUNG Yiu-wing v. Blooming Textile Limited (2). That court dealt with the appeal directly upon the particular facts. But it is at least implicit in the single judgment given that the broader view is dead and buried. Counsel is not willing to accept this. Perhaps we see the distinction between the two approaches differently. To my mind it is not a distinction between looking at the cheque as a whole and looking at the immediate and restricted area surrounding the signature. It is a distinction between seeing whose cheque it generally appears to be and seeing whether there are express words to exclude the personal liability of the man who has signed it. 6. Be that as it may, although the Full Court may have buried the broader view its ghost has not yet been laid. Perhaps it will not be until every possible variant of signature and company chop and officer has been brought up for adjudication. Because every case must ultimately depend upon its own individual facts. In the present instance counsel contends that these are in any event within the strict approach. He seeks to distinguish the facts from the Blooming Textiles' Case. In two ways. In the first he is successful. He points out that the cheques in that case did not contain the word "Director" below the signature. The present cheques do. That is a valid distinction. In the second counsel is not successful. He says that in the earlier case the name of the company had already been printed upon the cheque in the same way as the general body of the cheque itself, whereas in the present case it was impressed by a rubber chop at or about the same time as the written signature. I cannot myself think it makes any difference when or how the company name is put there. This is confirmed to some extent by the comments at the top of p.392 of the Full Court decision. Such a distinction would be impracticable with modern processes. For example, I would find it impossible on just looking at the present cheques to say how or when the name of the company came to be impressed in the bottom left hand corner. The make liability upon a negotiable instrument dependent upon such uncertainties would be quite contrary to the general principle underlying their use. 7. Counsel relies on two cases in the English courts which he says are on all fours with the present. They are Chapman v. Smethurst (3) and Britannia Electric Lampworks Ltd. v. D. Mandler & Co. Ltd. (4). The latter may be quickly dealt with. The point there was obiter. Apart from that the court relied solely upon the authority of the Chapman Case. And the authority of that case is seriously, if not completely, undermined by two things. First, it was decided essentially upon the basis that there could not be joint liability, that liability had to be either in the company or in the personal signatory but not in both. Secondly, no mention at all was made of section 26(1) of the Bills of Exchange Act of 1882 although that provision had already been in force then for several years. 8. There are in the present instance no words which indicate that the signature was placed there "for or on behalf of a principal or in a representative character". Such words as there are are descriptive. To my mind Mr. KWOK Wing has not brought himself within section 26(1). 9. Counsel advanced other arguments. He referred to subsection 2 of the same section:-
and suggested that "validity" should be construed with the reference to how the cheque would be treated by the bank on which it is drawn. In the present case the bank would not have honoured the cheques with the bare signature of Mr. KWOK Wing. It would have required also the chop of the company. This is a dangerous argument. The next step would be to construe according to who was most able to meet any judgment given. However, I am not prepared to construe the subsection in that way. There appears to me no reason for it. The relationship between the bank and its customer is of no concern to a third party into whose hands a cheque of that customer may properly have come. I prefer not to express any opinion upon the actual meaning of the subsection as a whole. The opening clause is difficult in that on a quick reading it appears to suggest that liability must be alternative. But on further consideration one realises that the word "or" is not necessarily disjunctive. The whole subsection may be no more than a general exhortation to the courts not to rule a negotiable instrument invalid unless conclusively forced to do so. That would be in line with the general policy of the law to treat a negotiable instrument as actual cash so far as its nature will permit. 10. Then it is said that Mr. KWOK Wing is not liable because it was the company and not he who was the "drawer" of the cheques; that his signature was an integral part of the company's signature, rather a signature in its own right. With respect to counsel this is merely another way of putting his principal argument. Any person who puts his name to a cheque is, ipso facto, a drawer of the cheque unless he brings himself within section 26(1). Mr. KWOK has failed to do that and must therefore be one of the drawers. 11. This case illustrates once again the essential need for certainty in these matters, particularly in our community which relies so heavily upon commerce and trade for its livelihood. Negotiable instruments are what they are called - instruments which may be negotiated from one hand to another. All that a person should need to consider when he is offered one is whether or not it is complete and regular on its face and the creditworthiness of the person or persons who have signed. Who those persons are should be immediately apparent from what is inscribed on the document itself. It should not depend upon what view is subsequently taken by a particular judge or particular court or appeal. Representation: Ronny Wong and Ronny Tong (Fairbairn, Kwok & Wong) for the plaintiff. Ronald E. Mayne (P.H. Sin & Co.) for 2nd defendant. (1) [1975] H.K.L.R. 388 (2) [1975] H.K.L.R. 388 (3) [1909] 1 K.B. 927 (4) [1939] 2 K.B. 129 |