Rosita Chui Shum Ching Sum v. Philip T. Tan

HCA012426/1983

BETWEEN

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Coram: Hon. Power, J.

Dates of Hearing: 2 and 7 March 1984

Date of Delivery of Judgment: 7 March 1984

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JUDGMENT

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1. This matter came before me on the afternoon of Friday, the 2nd of March. I heard argument from both counsel and at the conclusion of that argument I delivered an oral decision. I did so upon the basis that there was no direct authority that would assist me in coming to a conclusion on this matter. Since delivering that judgment I have referred myself to certain authorities which appear to me to be very much in point. Byles on Bills of Exchange in the 24th Edition at p.128 states:-

"If a bill or note is taken on account of a debt and nothing is said at the time, the legal effect of the transaction is that the original debt still remains, but the remedy for it is suspended till maturity of the instrument in the hands of the creditor. This effect of giving the bill has also been described as a conditional payment. It is an exception, but not a solitary one, to the general rule of law that a right of action once suspended by act of the parties is gone for ever. The action for the original debt is equally suspended if the bill or note is given by a stranger or if it is outstanding in the hands of a transferee after dishonour, at the date of the commencement of the action, though it is in possession of the creditor at the date of trial."

2. For the purposes of this application the material words are: "The action for the original debt is equally suspended if the bill or note is given by a stranger or if it is outstanding in the hands of a transferee after dishonour at the date of commencement of the action though it is in possession of the creditor at the date of the trial." This statement seems to me to indicate clearly that, if the bill is dishonoured, the right of action on the original debt is no longer suspended but that it cannot be pursued by the creditor unless he is in possession of the bill at the date of commencement of his action on that debt. It is not enough if the bill is in the possession of the creditor at the date of the trial. The statement refers to several cases. The first of which is Davis v. Reilly ⁽¹⁾ where Mr. Justice Wright said:-

"I was at first inclined to think that on equitable grounds it would be sufficient if the plaintiff could shew that the bill was in his hands at the date of the trial. But on reflection I am satisfied that that is not so. It seems to be clearly settled at common law that an action will not lie for the price of goods, for which a bill of exchange has been given, while the bill is outstanding in the hands of a third party. At the date of the commencement of this action he was not entitled to sue, and we have no power to amend so as to give him a new cause of action which he had not got when the action was begun."

3. That authority was followed in In re A Debtor.⁽²⁾ The law was expounded in some detail by Lord Justice Fletcher Moulton when he said at p.350:-

"But Mr. Hogg says the true effect of this principle is only to create a suspension of the rights of the creditor during the currency of the bill, and that when the bill became overdue this suspension came to an end. That contention, in my opinion, is unsustainable. A parallel case where a bill is taken in payment of a debt, say for instance in payment for goods sold, exactly illustrates what is the effect of taking a bill. It is perfectly true that it is only a conditional payment. It is a payment if the bill is paid, and if it is in your hands when it becomes due and is dishonoured the debt revives. But if you have availed yourself of the character of the bill as a negotiable instrument, and have passed it out of your possession so that the right to proceed on that bill is vested in some one else and not in you at the date of the dishonour, the suspension of the debt continues just as much as if the bill was not overdue. A moment's consideration will show that the Courts would not be administering justice if they did not hold this to be the case, because otherwise you could sue for the price of the goods, while another man, through possession by your act of the negotiable instrument which had been given for the price, could make the debtor pay the amount over again. Therefore I am satisfied that it is a fundamental principle applying to all cases where bills are taken either in satisfaction of a debt or in suspension of the exercise of any legal rights, that the satisfaction or the suspension lasts only so long as the bill is not overdue, unless you have parted with it so that another person is dominus of the bill, and then it lasts until you have got it back into your possession. When you have got it back you can wipe it out, and the debtor can no longer say, 'There is an outstanding bill which suspends your right'. The answer is, 'You cannot rely on a bill which you have failed to pay, and which bill is in my possession.'"

4. It seems to me perfectly clear that a creditor, once he obtains the bill back into his possession, is entitled to sue on the original debt. The case I have just cited was followed in Nathan v. Green.⁽³⁾ I only refer to this because it emphasizes the need for the creditor to have reduced the bill into his possession. The Chief Justice, Mr. Justice Irvine said at 125:-

"Then it appears in the plaintiff's statement that a few days before the trial he obtained possession of this note from the bank. No explanation is given of the circumstances in which he obtained possession of the note from the bank, and it is consistent with the possession that the bank may have allowed him to have it on the understanding that the property in the note should not cease to be the property of the bank. In other words, they lent it to plaintiff, and in my opinion the plaintiff has not established as a fact that it was handed to him under circumstances which made him the holder of the note. Even if that were not so, I agree with the argument put forward by defendants' counsel that that handing over was too late, and that the plaintiff himself has established that his cause of action became complete after the writ was issued."

5. On the basis of these authorities, I am satisfied that, even though a bill passed out of the possession of a creditor to a third party, once he has reduced it back into his possession, the bill not having been met, he is entitled to commence an action upon the original debt to recover the amount thereof. In the present case the Plaintiff did not plead that she had the cheques in her possession at the time when she commenced the action nor did she advert to that matter in her affidavit. As I have already indicated the Defendant has not raised any real defence to the claim by the Plaintiff that he owes her money. In all the circumstances the proper course seems to me to be to adjourn the matter again to give the Plaintiff the opportunity to amend the Statement of Claim, if the facts justify such an amendment, and to make a further affidavit. I will hear Mr. Chain, who appears for the Defendant, before I make any order in this regard.

6. Mr. Chain having raised no objection, I adjourn accordingly.

(1) (1898) 1 Q.B.D. p.1

(2) (1908) 1 K.B. 344

(3) (1921) Victorian Law Reports 121

Representation:

Mr. D. Fung (Fairbairn & Kwok) for Plaintiff.

Mr. B. Chain (Lo & Lo) for Defendant.