The Wing on Bank Ltd v. Tech-craft Industries Ltd

HCA000190/1975

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.190 OF 1975

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Coram: Li, J. (In Court as Chambers).

Date of Judgment: 9th July, 1975

Mr. H. Litton, Q.C., and R. Wong (T.S. Tong) for plaintiff

Mr. Dicks (J.S.M.) for defendant.

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JUDGMENT

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1. This is an appeal against the decision of Registrar Cameron, dated the 6th of June this year, dismissing the plaintiff's summons for final judgment with costs to the defendant in any event. The action arose out of a Bill of Exchange (hereinafter referred to as the Bill). By a specially endorsed Writ of Summons dated the 21st of January 1975 the plaintiff alleged that it was the holder of a Bill of Exchange No. K/IN-6850 dated the 26th of September 1973 for HK$950,000 drawn by one Ronald Lui on the defendant, payable at 95 days after sight. It further alleged that the Bill was accepted by the defendant on or about the 24th of September 1973, and that the Bill was partially retired to the extent of $750,000, leaving a balance, due and owing on the said Bill, of $200,000. The defendant failed to pay the said balance of $200,000, despite repeated demands for payment. By its defence, filed on the 3rd of March 1975, the defendant denied that it had accepted the Bill and alleged that it was the plaintiff who accepted the Bill. Alternatively, the defendant denied that the Bill was lawfully or validly accepted, and in further alternative, the defendant alleged that, to the knowledge of the plaintiff, the defendant had accepted the Bill for accommodation of the said Ronald Lui without consideration, the Bill was endorsed to the plaintiff without consideration and that the plaintiff received and obtained the Bill without lawful consideration. The defendant denied that the Bill had been partially retired, or that any demand had been made, and that the defendant had wrongfully failed to effect payment.

2. The Bill is exhibited in an affidavit of one Tse Fat-yuen, dated the 17th of March 1975, the assistant manager of the plaintiff, marked 'TFY-2'. It is drawn by one Ronald Lui on the defendant as drawee, to pay the Kwong On Bank the sum of $950,000 at 95 days after sight. On the back of the Bill is the signature of the drawee, without any date. Also on the back of the Bill is the endorsement by Kwong On Bank Limited in these terms:

"PAY/DELIVER TO THE ORDER OF THE WING ON BANK LTD. KWONG ON BANK, LTD."

And then on the face of the said Bill is a stamp by the plaintiff in these terms:

3. Mr. Litton, for the plaintiff, contends that there is no defence to this action, as there is no triable issue. The defendant is the only drawee on the face of the Bill and the defendant's signature appears on the back of the Bill. There is no dispute on these two points. He submits that once a signature of a drawee appears on the Bill, the drawee has accepted the Bill and is liable to pay according to the tenor of the Bill. Mr. Dicks, for the defendant, contends on the other hand that it is too late now to apply for summary judgment, because the plaintiff has given consent to file the defence out of time. Further, there is no explanation for this delay.

4. The second objection to this appeal is that the defendant never validly or lawfully accepted the Bill. The date of the acceptance of the Bill is uncertain. The third point is that there is no pleading that the plaintiff is a holder for value, and in any event the defence disputes the plaintiff to be a holder of value. There is also the objection that the plaintiff's own statement of claim raised the point that it is a partially retired Bill. Thus there is no certainty of the sum claimed. This in fact is an action for a partly paid bill. The plaintiff is suing only for a sum lesser than the amount on the face of the Bill. He further contends that the plaintiff had accepted the Bill by stamping with an alteration on the face of the Bill, and as such, the Bill is no longer negotiable. Alternatively, it is contended that the Bill, on the face of it, makes reference to a Letter of Credit. Knowledge of the terms of credit was impugned to the plaintiff who is bound by the terms. Once the terms of the Letter of Credit are not complied with, the Bill ceases to be negotiable.

5. And finally there is the question of consideration. It is contended that the plaintiff has given no consideration for the Bill, and the defendant has received no consideration for accepting the Bill. I shall deal with all these points one by one.

6. It is true that if any of these points should succeed, there would appear, prima facie, to be a triable issue, and as such the plaintiff would not be entitled to summary judgment.

7. It is first contended that the plaintiff gave consent to the defence being filed out of time. As such, the plaintiff impliedly admits that there is a reasonable defence in any event. I am unable to find any authority in support of that proposition. In my opinion, a consent to file the defence out of time merely means a concession as to time. The defence has not been delivered yet, and it is not for the plaintiff to admit or deny whether there is any reasonable defence.

8. It is said that the plaintiff is barred from taking out an Order 14 Summons after the delivery of the offence without any explanation. The case of McLardy v. Slateum⁽¹⁾ has been cited in support of the proposition. Baron Pollock is reported to have said, at page 506, that:

There was no special circumstances set out in that case, except perhaps if one looks at the paragraph just preceding the aforesaid dictum the learned Baron said:

"The view taken by other judges, and by the masters, is that the intention of Order XIV., r.1, was that the plaintiff should apply within a reasonable time after the appearance of the defendant, but that it very often happens that a defence, which has been delivered, itself discloses facts which make an application under Order XIV. right and proper."

He is saying that this is the proper construction of the rule. In other words, an application for a summary judgment after the delivery of the defence is not fatal. The essential element still depends whether, after the delivery of the defence, the defence discloses no defence at all. Thus, this point is not a triable issue.

9. It is alternatively contended that there is a triable issue simply because the defendant denies having accepted the Bill. However, in this instance, there is no dispute that the defendant is the only drawee of the Bill, and the defendant's signature appears on the back of the Bill. Section 17 of the Bill of Exchange Ordinance provides that:

My attention has been drawn to the case of Young and Glover⁽²⁾, which is authority for the proposition that an endorsement of a Bill is valid whether it is in front or on the back of the Bill. By comparison, therefore, an acceptance is equally valid even though the signature appears on the back of the Bill. But the essential point is that there is nothing in Section 17 requiring an acceptance to appear on the face of the Bill. In Halsbury Laws, Volume 4, at paragraph 362, it is said that:

It refers to the case of Young and Glover⁽²⁾ again, in support of that proposition. For these reasons, I hold that it is quite clear that the defendant is an acceptor of this Bill.

10. In this connection, it is convenient to examine the defence contention whether the plaintiff accepted the Bill by stamping on the face of it "ACCEPTED", or having altered the Bill to such an extent to make it cease to be negotiable.

11. First of all, I must observe that the plaintiff is not the drawee of the Bill. As such, he has not the capacity to accept the Bill. Whatever is written on the face of the Bill by stamping may be regarded as an endorsement. Paragraph 1901 of the volume of Benjamin on Sales (1974) reads as this:

"Under Section 56, where a person signs a bill otherwise than as drawer or as acceptor, he incurs the liabilities of an indorser to a holder in due course. This principle does not apply where a person signs the bill as a guarantor, as he assumes in such case liability towards all the parties to the bill and not only towards subsequent parties. Problems arise when a person other than the drawee purports to accept the bill in his own name. As the bill is drawn on a specific drawee, a signature on the bill by any other person who wishes to accept it is not an acceptance and will probably be construed as an indorsement."

The contention that the plaintiff, in this respect, is in fact an acceptor of the Bill is no longer valid.

12. It is observed that section 12 of the Bill of Exchange Ordinance, provides that:

if the bill subsequently comes into the hands of a holder in due course, the bill shall not be avoided thereby, but shall operate and be payable as if the date so inserted had been the true date."

Thus the date that has been stamped by the plaintiff is no more than the date that was inserted as the date of acceptance, and has in no way altered the Bill.

13. It is further contended that the date of the Bill is uncertain. Indeed, paragraph 3 of the statement of claim alleges that the date of the Bill is on the 26th of September 1973. Paragraph 4 of the statement of claim alleges that the acceptance of the Bill occurred on or about the 24th of September 1973. Mr. TSE Fat-yuen, by his affidavit dated the 17th of March 1975, confirmed that the contents of the statement of claim were true, thereby reaffirming that the date of acceptance was on or about 24th of September 1973. However, by paragraph 3 of his affidavit dated the 27th of May, Mr. Tse put the date of acceptance as on the 26th of September 1973. It is argued, on that basis, that the date of acceptance of the Bill is uncertain. However, I find that although in the statement of claim it is alleged that the acceptance occurred on or about the 24th of September, the final affidavit has put it down as on the 26th of September 1973. Once the bill is exhibited one will find the date of acceptance was on the 26th of September 1973. There is no uncertainty anyway, as to the date of the acceptance and the date when the bill fall due. In any event, the 8th of January 1974 had well passed 95 days since the 26th of September or the 24th of September. I cannot help feeling that the citation of Section 39 of the Bills of Exchange Ordinance referring to presentment of the Bill is a red herring, since the Bill had been accepted by signification by virtue of the defendant's signature.

14. Then there is the point that by alleging partial retirement of the Bill the plaintiff only sues upon a debt and not upon the Bill. However, the statement of claim makes it quite clear that the sum is certain, and the plaintiff is suing indeed on the Bill, but is only claiming a smaller sum on the Bill.

15. The classical work of Byles on this subject, at page 117, reads:

"It was long an unsettled question whether payment in part or in full by the drawer to the holder would discharge the acceptor pro tanto, or whether the holder might, nevertheless, recover the whole amount from the acceptor, and hold the equivalent of the amount received from the drawer as money received of the acceptor to the drawer's use. Section 59(2) expressly provides for the case of payment in full by a drawer or indorser, but does not deal with the case of part payment. In the event, however, of a bill remaining in the hands of a holder after a payment in part or in full by the drawer or an indorser, there can now be little doubt but that the holder can sue the acceptor for the entire amount, holding in trust for the party who has so paid the amount of his payment, and any defence or set-off open to the acceptor against the party who has so paid is available against the holder. The party paying may, it seems, leave the bill in the hands of the holder that he may take action thereon."

Under the circumstances, there is nothing to prevent the plaintiff from suing for a smaller sum under the Bill, provided the whole circumstances make it quite clear that he is in fact suing on the Bill. It is of interest to observe that by denying the partial retirement of the Bill, the defendant has never asserted whether he had paid in full, or paid the Bill in any way as an acceptor, or whether anybody paid on the Bill at all. For this reason I will hold that there is no triable issue, because the sum has already been ascertained. There is no uncertainty to be tried as to the sum claimed.

16. It is alleged that the statement of claim never pleads that the plaintiff is a holder for value. Therefore the plaintiff has not given any consideration for the Bill. In any event, the defendant alleges that the plaintiff gave no consideration for the Bill at all. In answer to this the plaintiff has Mr. Tse's affidavit dated the 5th of June 1975 to the effect that the Kwong On Bank had been paid by the plaintiff. Section 30 of the Bills of Exchange Ordinance provides that:

In this case, there is nothing in the defence to allege any fraud, duress, force, fear, or illegality. Thus the bare assertion that there has been no consideration, without any supporting allegation to substantiate this assertion, is just not sufficient to displace the provisions of Section 30 of the Bills of Exchange Ordinance. As such, the defendant cannot really dispute the plaintiff to be a holder for value, or indeed, as I can see it, even as a holder in due course. The trust receipt exhibited in Tse's affidavit dated the 27th of May 1975 is yet another document which shows that the plaintiff was justified in paying the Kwong On Bank. I need only to refer, on this point, the note to Order 14, at paragraph 14/3-4/15, at page 139 of the Rules of the Supreme Court in England, which reads that:

"In an action on a bill of exhhange, the mere assertion by the defendant of fraud or illegality affecting the bill is not in itself enough to entitle him to leave to defend, but equally if the defendant sets out facts supporting a case of fraud or illegality affecting the bill, the mere assertion by the plaintiff that he took the bill in good faith and for value will not in itself deprive the defendant of his entitlement to leave to defend, but if the plaintiff's claim to be a bona fide holder for value is uncontested or he can establish such claim by unchallenged or unchallengeable contemporary documents, the plaintiff is entitled to judgment, since he will thereby have discharged the onus put upon him by s.30(2) of the Bills of Exchange Act 1882"

That is, in my opinion, the position here.

17. It is also said the defendant received no consideration and that the Bill was accepted by them solely for the accommodation of one Ronald Lui, and this is to the knowledge of the plaintiff. There has been no suggestion of any fraud, fear, or duress. One has only to refer to the provisions of Section 28 of the Bills of Exchange Ordinance, which provides that:

In other words, even if the plaintiff had known that the defendant accepted the Bill as an accommodation party, and never received any consideration, yet the plaintiff had already given value. The plaintiff's knowledge as to this is completely immaterial.

18. Argument is made that the Bill refers to the Letter of Credit and as such will make the Bill not negotiable. The plaintiff is impugned with knowledge as to the terms of credit, and the plaintiff will therefore be bound by such terms. The case of Chartered Bank of India, Australia and China v. Macfadyen and Co.⁽³⁾, has been cited in support of this contention. However, I find that the case can give me very little guidance, because the whole facts of the case are different. The Chartered Bank case⁽³⁾ was an action against the defendant who declined to accept the bill. In the present case the Bill had already been accepted. Further, in Gutteridge and McGrath on "The Law of Bankers' Commercial Credits" at page 81, citing the Privy Council case of Sassoon v. International Banking Corporation⁽⁴⁾, in support of the proposition that the holders -

"take the bill free from conditions deriving from the credit, that the fact that the bill bears a reference to the credit in no way puts them on enquiry as to whether the terms of the credit have been fulfilled - in fact, they may be sure, if the bill is drawn on the issuing bank, that it would not have been accepted unless the documents had been in order."

concludes that:

"the mere fact of negotiation by one bank of the draft and documents drawn and tendered by virtue of a credit issued by another bank does not, by itself, bind the former to comply at its peril with the terms of the credit as a condition of the retention of its rights on the draft."

and goes on to say that:

"If this is the correct view, the question whether every transferee of a bill which bears on its face a reference to the credit by virtue of which it is drawn is vested with notice of the conditions of the credit, takes subject to them and thus takes subject to any defence which the drawee can set up against the seller, is answered in the negative."

In view of this, the allegation that the plaintiff is bound by the terms of credit is no longer a triable issue.

19. There are one of two technical objections which refer to the fact that TSE, although he filed affidavits in support of the application, had in fact no personal knowledge, and that the defence can be amended in any way. Dealing with the first of these objections, although TSE may not know personally the transaction about the Letter of Credit yet he is an Assistant Manager of the plaintiff and has alleged that he has personal knowledge as to the Bill. In any event, when the facts are pleaded in the pleadings and the Bill exhibited they speak for themselves. The exhibits have not been challenged.

20. As to the argument that the defence can be amended, I have at this stage no amended defence exhibited to me. All I can judge is on the merit of the defence that is now before me. In any action on a bill of exchange and summary judgment is applied for if it is alleged that there is a reasonable defence, the defence should be exhibited in an affidavit filed in opposition. Here a defence is filed. The defence, in my opinion, has offered no reasonable defence - no triable issue. No amended defence has been filed in opposition. As such, I cannot at this stage guess in anticipation, that there might be a reasonable defence after amendment.

21. Having read and considered the affidavits of the parties and the addresses by learned Counsel for both parties, I have come to the conclusion that there is no valid defence to this action, because there is no further triable issue. The Registrar's decision must be reversed and the appeal allowed. Would the parties like to address me on costs?

(Court and Counsel confer on costs)

COURT: I don't see that there is any justification for a stay in this case. If there is any error in my judgment it will be reversed and the defendant can always recover the sum from the plaintiff, which is, to my knowledge, a Bank of substance, I only record that, for reasons given, the appeal is allowed, judgment to the plaintiff in in the sum claimed, plus Interest at the rate of 8% per annum from the date of the Writ and costs of the action to the plaintiff. There will be certificate for two counsel.

Representation:

Mr. H. Litton, Q.C., and R. Wong (T.S. Tong) for plaintiff

Mr. Dicks (J.S.M.) for defendant.

(1) 1890, 24 Q.B. 504.

(2) (1857) 3 Jur. N.S. 637.

(3) (1895) 1 Commercial Case page 1.

(4) (1927) Appeal Cases 711.