Wing Lee Secutities and Investmen Co v. Chan Chak Wah and Others

HCA005006/1980

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Coram: LIU, J. in Court.

Date of Judgment: 16th April 1981

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JUDGMENT

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1. This is, I agree, an extraordinary case - extraordinary not because of the circumstances leading to the claim of the plaintiff's against each of the defendants, but it is somewhat unusual in the manner in which it was contested by the 3rd defendant.

2. Nine cheques were given by the 1st defendant to the plaintiff company some time in August. At the request of the 1st defendant, several of them were withheld from presentment until some time in the morning of the 23rd August last year which was a Saturday. By the time the 1st defendant was summoned or himself, as usual, reported back to the office of the plaintiff company at about 9.30 a.m. on the 23rd August, all nine cheques of the 1st defendant had been dishonoured.

3. On his return to the office, the 1st defendant was spoken to by the Manager, Mr. Steven Chan on the dishonour of his nine cheques. Initially, Mr. Chee, sole proprietor of the plaintiff firm was present. After a time, he withdrew leaving the 1st defendant and Mr. Steven Chan in private conversation. Some time in the morning, precisely when it is not quite relevant, Mr. Steven Chan was anxious to ascertain the assets of the 1st defendant including his bank deposits and any available shares scrips.

4. The 1st defendant joined the plaintiff company as a runner on commission, but he had subsequently been authorized or acquiesced in his direct trading with the firm for himself or undisclosed principals. These direct tradings on his own account and in his own name were the 1st defendant's personal responsibility. These nine dishonoured cheques were drawn in such direct tradings for which the 1st defendant had personally assumed liability. There had been similar previous incidents but involving only $80,000 to $100,000. The dishonour of the nine cheques on this occasion was in an enormous amount of over $4 million.

5. Some time in the morning, the 1st defendant came up with $85,000 from one of his bank's accounts. There was a real possibility of the 1st defendant calling in another $180,000 in the other account of his. It transpired in the evidence that the 1st defendant had also trading credits with the plaintiff company. But all these available assets of the 1st defendant fell far short of the over $4 million of his dishonoured cheques.

6. I turn back to the scene in the office of the plaintiff firm: At a time during the discussion in the absence of proprietor, the 1st defendant produced a cheque signed by the 2nd defendant for $3 million. According to the 1st defendant, he had issued cheques on behalf of the 2nd defendant against this cheque of $3 million, which is Exhibit P1. The 1st defendant explained to the Manager, Mr. Steven Chan, that he was waiting for a call from the 2nd defendant before he would present this cheque of $3 million for payment and that as an alternative arrangement, it was open to the 2nd defendant to deposit funds into his account, in which case he would purchase a cashier order in favour of the plaintiff company.

7. With this $3 million cheque bearing the signature of the 2nd defendant, Mr. Steven Chan approached Mr. Chee in his office for advice. This $3 million cheque had earlier been endorsed by the 1st defendant in the presence of Mr. Steven Chan with the intention that same was to be held by the plaintiff firm pending the coming Tuesday on which day banks would re-open for business, Monday being a holiday. The sole proprietor of the plaintiff firm, Mr. Chee, was understandably reluctant to have, as security, this endorsed $3 million cheque until the following Tuesday. He suggested that the father of the 1st defendant be approached as a guarantor for due payment by the 1st defendant. According to Mr. Steven Chan and Mr. Chee, the father was nowhere to be found and the matter rested there. But according to the 1st defendant, Mr. Steven Chan succeeded in contacting his father who discreetly declined to assist. This evidential conflict is trivial and has little bearing on the real controversy between the parties to these proceedings except on the question of credibility. Then Mr. Steven Chan suggested that the younger brother of the 1st defendant whom he had met in a bowling alley and knew to be a director of an insurance company should be approached as a guarantor. Thereupon the 3rd defendant was sought to be contacted by the use of a pager number. The 3rd defendant returned the call and spoke to Mr. Steven Chan. A bare outline of some of the matters were related to the 3rd defendant by Mr. Steven Chan, and the 3rd defendant was requested to come up to the office of the plaintiff company to act as a guarantor. When the 3rd defendant inquired from Mr. Steven Chan as to the nature of the guarantee solicited, Mr. Steven Chan gave no reply but handed the receiver to the 1st defendant.

8. Evidence as to what was said by the 1st defendant over the telephone to the 3rd defendant was not altogether clear. I do not propose to place much reliance on it. The upshot of the telephone conversation was that the 3rd defendant agreed to attend at the office in about an hour or two.

9. According to Mr. Steven Chan, in order to show good faith the 1st defendant had earlier offered to surrender his Identity Card to the plaintiff company. Pending the arrival of the 3rd defendant, in the company of Mr. Steven Chan the 1st defendant returned home for his Identity Card. The 1st defendant originally denied having gone home on that occasion. When he was reminded of the surrender of his Identity Card, the 1st defendant quickly regained his memory. Again, this is a small matter of no great significance. Thereupon, the Identity Card was taken back to the office and handed over to the sole proprietor of the plaintiff firm by Mr. Steven Chan. According to Mr. Steven Chan, the intention was that the surrender was to serve as some sort of insurance against the 1st defendant not absconding, Whether or not the 1st defendant would still be able to travel outside the Colony is not as important as the intention with which he had decided to surrender his Identity Card on that occasion.

10. As promised, the 3rd defendant arrived, and the events subsequent to his arrival can be briefly summarized as follows: There were some variations in Mr. Chee's version as to the precise nature of his instructions to Mr. Steven Chan for obtaining indorsements on the $3 million cheque and the time sequence in relation to it. At one time, Mr. Chee testified that he instructed the Manager to invite the 1st and 2nd defendants to indorse on the cheque before the arrival of the 3rd defendant. At another time, he said that he gave those instructions before he parted company with the 3rd defendant, the 1st defendant and Mr. Steven Chan in the general office of the Plaintiff firm.

11. After the 3rd defendant was introduced to Mr. Chee in his office, the party of four left for the general office, and there Mr. Chee left the 1st defendant, the 3rd defendant and the Manager, Mr. Steven Chan in private conversation. Before Mr. Chee left the general office, he outlined the past history and the nature of the guarantee asked of the 3rd defendant. According to Mr. Chee and Mr. Steven Chan, the 3rd defendant raised no objection. According to the Manager, the 3rd defendant was unwilling to guarantee Mr. Lam, a total stranger to him. Thereupon Mr. Steven Chan explained to the 3rd defendant that the 1st defendant had had himself committed, and the 3rd defendant did not require much persuasion to consent to act as a guarantor for the payment of the cheque by the 1st defendant. Then, the Manager wrote: "Pay to Wing Lee Securities and Investment Co." under the signature which had earlier been put down on the back of the cheque by the 1st defendant and invited the 1st and the 3rd defendants to sign, which they did. According to the Manager, the cheque was immediately taken into the private office of Mr. Chee who examined the indorsements on the back of the cheque and had it locked up in the safe.

12. Much controversy was had on the writing of the words "Pay to Wing Lee Securities and Investment Co.". The 1st and the 3rd defendants maintained that such wording was put on without their consent or authority. These defendants also claimed that after the cheque had been taken from the general office into the private office of Mr. Chee, the same was taken out by Mr. Steven Chan who announced that he had, at the request of the sole proprietor Mr. Chee, added the disputed wording on the back of the cheque.

13. The 1st defendant experienced some difficulty in explaining why he signed a second time. According to the 1st defendant, the Manager "let go of" the cheque and pointed to its centre for their signatures. But according to the 3rd defendant, the Manager was specifying the space for signatures by blocking the upper part of the cheque.

14. The 1st defendant told the Court that when the Manager made reference to the disputed wording allegingly put on the back of the cheque without their consent or authority, he demanded to see it. It is difficult to understand the necessity for the $3 million cheque to be taken out to the general office again. If in fact, it had been taken out for seeking approval of the defendants, it would have been inexcusable for the defendants subsequently leaving the plaintiff's office with no avail, having allegedly raised an objection. The 1st defendant and the 3rd defendant claimed that they raised the most violent protest which drew Mr. Chee back into the general office and that Mr. Chee and the Manager both reassured them that the 3rd defendant's signature on the back of the cheque was merely for guaranteeing the continued presence of the 1st defendant in the Colony.

15. The Manager and Mr. Chee both denied that Mr. Chee ever returned to the general office after the cheque had been locked up and that the cheque ever left the private office again. According to Mr. Steven Chan, he was instructed by Mr. Chee to send away both defendants.

16. Without the wording, it would have been inconceivable for the 1st defendant to sign a second time. And if the 3rd defendant was telling the truth that the part on the back of the cheque for $3 million was deliberately blocked by the hand of Mr. Steven Chan at the time of their signatures, the tidy spacing for the wording would not be a matter easily explained.

17. It is also surprising that none of the 1st and 3rd defendants admitted knowing the legal consequence of indorsing a cheque. Both are well versed in English, and in fact these defendants were able to read and understand the endorsement. From time to time, both defendants corrected the court interpreter. They signed in English, and at least by the time when the cheque was allegedly shown to them again in the general office for the second time, they were left in no doubt what their legal responsibility was; hence the alleged objection. Yet they left without much ado on an alleged verbal assurance without amendments. The excuse from the 3rd defendant was that he was desirous of leaving the office of the plaintiff soonest possible. His wife was attending their baby and the car and had to deal with a not very compromising traffic policeman. However, that could hardly sound convincing for a matter involving liability up to $3 million. Both 1st defendant and the 3rd defendant departed without securing any rectification or deletion. No sensible businessman, in my view, would have accepted such alleged verbal assurance without a cancellation of the disputed wording in the circumstances.

18. I am not unmindful that Mr. Chee's claim. at one time, of his inability to read much of the indorsement in English was retracted in cross-examination. I have taken into consideration the demeanour of the witnesses and the discrepancies. I find that both the 1st and 3rd defendants needed little persuasion to sign on the back of the cheque and signed it under the wording in question. The 1st defendant himself explained that except for the huge amount, it was just one of the usual occurrences and that the drawer of the cheque was one of the good customers with no reason for him to panic. According to the 1st defendant, he conveyed this background to the 3rd defendant who duly signed. It is unbelievable that any of these defendants could have been unaware of the full effect of their signatures on the back of the cheque. The plaintiff company required further assurance because the amount was unusually large. The 1st defendant was prepared to give it and allegedly not in panic. There was no reason for the 3rd defendant to doubt the information supplied by his own brother and he cooperated fully. I have come to the conclusion that there has been a joint blatant attempt on the part of the 1st and 3rd defendants to mislead this Court. Insofar as the outline of the incident by Mr. Chee and Mr. Chan differs from that given by these defendants, I prefer and accept the evidence of Mr. Chee and his manager. I also accept the evidence of the Manager that he gave notice of dishonour to the 3rd defendant immediately after he had notice himself on Exhibit P2 - the bank slip indicating an insufficient balance to meet the $3 million cheque. I reject the allegation of the 3rd defendant that he was never given due or any notice of dishonour by Mr. Steven Chan. The 3rd defendant prevaricated in his evidence that he, for the first time, came to know of the dishonour when he was served the writ of summons. He had earlier told the Court that he was given such information by his brother, the 1st defendant.

19. From his demeanour in the witness box, the 3rd defendant appears to be a determined young man. He is conversant with business. If he had signed the back of the $3 million cheque without the disputed wording, in my view he would never have let the matter rest as it was. The 3rd defendant does not seem to be a person easily amenable to persuasion under pressure. And on the facts I find in this case, there was no undue pressure on the 1st defendant or the 3rd defendant. There was clearly no duress nor fraud.

20. It was stated by the 1st defendant in evidence that the 2nd defendant sought to deny having ever authorised the 1st defendant to fill in the amount on the cheque. Although the 1st defendant was allegedly disbelieved in his own criminal trial, that is a matter which I should not take and have not taken into consideration in the assessment of his credibility and evaluation of the evidence in this case.

21. I find that the 3rd defendant became a party to the cheque to ensure the due payment of it by the 1st defendant to the plaintiff. Thus, in these circumstances the 3rd defendant became an accommodation party as alleged and must therefore be liable for the amount thereon. Consequently, it remains for me to enter judgment against the 3rd defendant in favour of the plaintiff and dismiss the Counter Claim. I order Exhibits P1, P1A and P2 be released to the plaintiff's solicitor. I would give interest on the $3 million against the 3rd defendant at the rate as claimed. I award costs against the 3rd defendant.

Representation:

Mr. F. Eddis instructed by Messrs. Poon & Sum for Plaintiff.

Mr. Thomas Lai instructed by Messrs. Vincent Lo & Co. for 3rd Defendant.