Chan Hon Wing t/a Swatow Wong Lee Co v. Oriental Gloves Co Ltd

DCCJ008191/1968

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

Action No.8191 of 1968

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Coram: Judge Cons.

Date of Judgment: 16 December 1968

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JUDGMENT

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1. This action is brought by the plaintiff as drawee of a cheque alleged by him to have been given by the 2nd defendant in return for a personal loan, but by the defendants for the purpose of redeeming certain goods deposited by them as security to the 3rd party in respect of a debt for which the plaintiffs was also a guarantor. The defendants further allege that the plaintiff failed to make such a redemption and that therefore the consideration for the cheque has wholly failed. I did not grasp the reason why in these circumstances the cheque was not made out to the third party, but in any event, having heard such witnesses as were called, I have no hesitation in finding that the version put forward on behalf of the plaintiff is the correct one.

2. The question then follows who is liable upon the cheque. It is drawn in common form upon the Chiyu Banking Corporation Ltd. and bears at the top left hand corner a printed reference number and a rubber-stamped account number. Pausing here, I would like to comment, but with the greatest respect to some of my brethern that these numbers can have no bearing upon the question of who is liable upon the cheque. They are matters peculiar to the appropriate bank and its customer and are placed on the cheque, to my mind solely for the convenience of these parties. It is improper practice to attribute from them consequences to a third party. It might also be a dangerous practice, leading possibly to arguments that the cheque is therefore not an unqualified order or is one directed to something other than a person or a legal entity.

3. In the bottom right-hand corner the cheque bears a rubber stamp in the name of the 1st defendant company, underneath which is a dotted line upon which the 2nd defendant has signed his own name, and beneath which are rubber-stamped the words "Managing Director".

4. Upon this question, my attention was drawn to the following cases:

In addition I have referred myself to the cases of Cheng Chi v. Hing Fat Cheung Co.,Ltd. (1965) D.C.L.R. 165, Hong Kong Travel Bureau Ltd. v. George Wittsack (1968 D.C.L.R. 1) and Capital Printing Co. v. South America Plastics Factory (which is Victoria District Court Action No.3272 of 1968 and, as far as I know, still unreported).

5. Taken together with the other cases mentioned therein, these form a considerable mass of authority. But unfortunately no single principle emerges. The Courts appear to have adopted two separate approaches. On the one hand, following the case of Leadbitter v. Parrow (1816) 5 M. & s. 345 liability is placed squarely upon the individual whose actual name is subscribed to a bill, unless he can manage to extricate himself with the help of section 26(1) of the Bills of Exchange Ordinance.

6. Perhaps in passing it in worthwhile to note that the arguments put forward sometimes give the impression that this subsection creates some form of liability. This is not so. Liability on a dishonoured bill is imposed by section 55 of the Ordinance. The first part of section 26(1) provides an exception to that liability, while the second merely sets out a rule of evidence as to certain matters that by themselves will not be sufficient to bring an individual within the exception.

7. The second approach, exemplified in the case of Chapman v. Smethurst, takes a broad view, includes the words surrounding the actual signature and seeks to discover to whom the resultant, composite whole relates. Thus in that particular case, the stamped name of a limited company, to which was appended the writter name of a director, followed by the stamped words "Managing Director" imposed liability on the company alone and not on the individual. Whereas in Landes v. Marcus-Davids (1909) 25 T.L.R. 478, in almost identical circumstances - the stamped name of a limited company appears to have been at the top of the bill rather than just above the written signature - the individuals were held responsible. I cannot see that the physical position of the stamped name, so long as it is clear that it relates to the bill as a whole, is a material distinction.

8. Both approaches have their attractions and the arguments in favour of each are very evenly balanced. But I have finally decided to throw in my lot with those who favour the strict view, because this gives a life and purpose to section 26 which it would not otherwise have. With the greatest respect it seems to me that the broader view is somewhat obscured by a prejudice against joint liability. The exclusion of such liability was accepted without argument in Chapman v. Smethurst, and on the facts in the Hong Kong Travel Bureau case, where I confess I find the reason given a little difficult to follow. But I find nothing in principle to warrant a general exclusion of such liability or to rule that the signature which binds the individual should not also, together with other necessary ingredients, bind the company as well. This possibility was not all envisaged, at least by Lord Charwell, C.J., in the Leadbitter case and in the Capital Printing case, but also found to exist in the Cheng Chi case, where the company having already admitted liability, the Court held that the individual signatures were also bound.

9. In the result the 2nd defendant is liable because he signed the cheque and has not brought himself within the exceptions, the 1st defendant is liable because, it being conceded the 2nd defendant had the requisite authority, section 33 of the Company Ordinance makes it so.

10. These points are not without difficulty and the facts which give rise to them are common form in this Court. The defendants in this Action will be performing a real service to the community, and perhaps to themselves as well if they take the matter further. In the meantime there will be judgment for the plaintiffs against both defendants in the sum claimed and costs.