HCA001657A/1973
IN THE SUPREME COURT OF HONG KONG
ORIGINAL JURISDICTION
ACTION NO. 1657 OF 1973
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| BETWEEN | | |
| | KEN KEE SECURITIES CO. (sue as a firm) | Plaintiffs |
| | and | |
| | WONG YING CHEONG | Defendant |
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Coram: Trainor J. in Chambers
Date of Judgment: 20th October, 1973
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JUDGMENT HANDED DOWN
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1. A writ of summons was issued by the plaintiffs for a sum of $46,001.50 being a balance due by the defendant, it was alleged, by reason of two dishonoured cheques for $20,000 and $36,001.50 and a credit of $10,000. The plaintiffs claimed the balance, interest at the rate of 8% and costs. The writ was served on the 14th June. 1973 and the defendant entered an appearance on the 22nd June. With the consent of the plaintiffs, given by their solicitors, the defendant delivered a late defence on the 21st July.
2. On the 4th of August the plaintiffs issued a summons for final judgment and in support of it filed an affirmation of a Mr. Liu who described himself as a merchant and a partner in the plaintiff firm (which it, would appear, is a firm of stockbrokers). In this affirmation it is deposed that the deponent had been informed by the plaintiffs' solicitors and believed that there is no defence to the action.
3. In an answering affirmation the defendant referred to the delivery of a defence on his behalf and maintained that consequently the plaintiffs could not be heard to say there was no defence.
4. In the defence it is alleged that about the middle of March 1973 on the defendant's instructions the plaintiffs purchased 5,000 shares at $11.10 each, the total cost of which amounted to $56,001.50 at which time the plaintiffs owed the defendant $10,000, being a balance due for work done for them. On the 23rd of that month defendant was asked to pay an instalment of $20,000 and to give an undated cheque as security for the balance. The defendant proposed that he gives a cheque for $10,000 and that the balance of $10,000 due to him be utilised to make up the difference. It was counter-proposed by the plaintiffs that the defendant give a cheque for $20,000 and the plaintiffs would give him a cheque for $10,000, the balance due for the work done. (It was submitted before me that this might be for accountancy purposes) The defendant gave his cheque but the plaintiffs did not give theirs and as a result of the plaintiffs' default the defendant's cheque was not met. On being notified of this the defendant gave another cheque for $10,000 which was duly presented and honoured and this, it is pleaded, together with the $10,000 balance due to him redeemed the first cheque and discharged his obligation to the plaintiffs so far as it was concerned.
5. At the time the defendant gave the first cheque he also gave an undated cheque in the amount of $34,001.50 as security for the balance due for the share purchase. He gave this on the understanding and assurance of the plaintiffs that it would not be presented until such time as agreed between the parties. In addition the plaintiffs held the share certificates which, the defendant alleged, was to be held as further security and returned contemporaneously with the presentation of the cheque.
6. The defendant further alleged that on the 20th March he instructed the plaintiffs to sell the shares for a price not below $7 per share but they failed to do so and the defendant counterclaimed for the difference between the price of $7 and the amount for which the shares, still unsold, may fetch. He also claimed damages and other relief.
7. Mr. Liu to whom I have earlier referred, again stating himself to be a merchant, filed a replying affirmation. In it he denied: that the defendant had ever been requested to do any work for the plaintiffs as alleged or at all: that any of the agreements alleged by the defendant had been entered into by the parties: that he or the plaintiffs had ever been instructed to sell the shares.
8. The motion for judgment came on before Mr. Registrar Silke on the 10th September, 1973 and he granted the application unconditionally and gave the defendant leave to proceed on the counterclaim.
9. Against the decision of the learned Registrar the defendant now appeals.
10. On the appeal Mr. Gunston appeared on behalf of the appellant and Mr. Tang for the respondents.
11. Mr. Gunston argued that so far as the first cheque is concerned nothing is due on it; it has been redeemed or discharged by the payment of $10,000 and by the agreed appropriation or nonpayment by the respondents of the $10,000 due to the appellant. He would submit that as the payment of the $10,000 was not in dispute even if the other $10,000 was, it was not for the learned Registrar to rule on what must be a matter of evidence and a fact to be decided by a judge in court. As to the second cheque, he maintained this should not have been presented. He said there is the affirmation of the appellant to the effect that there was an agreement between the parties that the cheque would be held as a security and would not be presented until an agreed date. This, he said, is confirmed by the fact that the cheque, as conceded by the plaintiffs, was undated. He said that although an affirmation had been filed on behalf of the respondents no explanation was offered as to why the cheque should have been undated whereas the other cheque given at the same time for $20,000 was. He further referred to the affirmation of Mr. Liu which, he said, established that there were many matters in dispute and therefore the learned Registrar should not have dealt with the matter under Order XIV but should have given unconditional leave to defend.
12. Mr. Gunston referred to the appellant's counterclaim and cited Order XIV(3)(2) of the Rules of the ...(illegible) Court which ...(illegible) for ...(illegible) judgment with a stay of execution pending the determination of a counterclaim raised by a defendant. He said that the appellant had a bona fide counterclaim and cited the White Book 14/3-4/12A:-
"Moreover, where the defendant sets up a bona fide counterclaim arising out of the same subject matter of the action, and connected with the grounds of defence, the order should not be for judgment on the claim subject to a stay of execution pending the trial of the counterclaim, but should be for unconditional leave to defend, even if the defendant admits the whole or part of the claim."
13. Mr. Gunston referred to the last sentence in further paragraph, 14/3-4/15, to the effect that in an action between the immediate parties to a Bill of Exchange the judgment will not be held up by virtue of a counterclaim unless there are exceptional circumstances; these he said existed in this case.
14. He again cited the White Book, paragraph 14/1/3 to support his contention that the learned Registrar should have dismissed the respondents' application as it was made after the delivery of the defence and the respondents were aware of an arguable defence.
15. Mr. Tang who appeared for the respondents argued that these are proceedings based on cheques which, he said, are Bills of Exchange within the definition of the Bills of Exchange Ordinance. The money is still owing and there is no answer to the claim. He maintained that the counterclaim made by the appellant was no answer to the application for judgment on Bills of Exchange. In support he cited Lamont & Co. Ltd. v. Hyland Ltd.(1). This was a case where the plaintiffs sued on a Bill of Exchange and the defendant counter-claimed for damages for breach of the contract by reason of which the bill was accepted. The master gave leave to enter judgment subject to a stay of execution pending the decision on the counterclaim. Both parties appealed to a judge and Lynskey J. dismissed the defendant's appeal and allowed that of the plaintiffs' against the stay of execution. The defendant appealed. The judgment of the court was read by Roxburgh J. Having referred to the judgment in Morgan & SonLtd. v. Martin Johnson & Co. Ltd.(2), where the court of appeal held that where matters relied on by a defendant were such as would, before the Judicature Acts have been regarded by a Court of Equity as grounds of relief by way of equitable set off, the proper order to make under Order XIV, is, as a general rule, that the defendant has unconditional leave to defend, Roxburgh J. went on to say:-
"The question raised in this appeal is whether this rule applies to a Bill of Exchange, where the matters relied on by the defendant afford no defence under the Bills of Exchange Act. In such cases, although not easy wholly to reconcile the authorities, a rule more favourable to the plaintiffs has in general prevailed, the court treating the execution of the Bill of Exchange either analagous to a payment of cash, or as amounting to an independent contract within the wider contract in pursuance of which it was executed and not dependant as regards its enforcement on due performance of the latter."
Roxburgh J. went on to refer to: Glennie v. Imrie(3); Warwick v. Nairn(4) ("The payment of a Bill of Exchange is to be taken as the payment of so much cash; the defendant ought to satisfy the Bill and proceed upon the remedy for breach of warranty" Pollock C.B.); Morgan v. Richardson(5); and finally Anglo-Italian Bank v. Davies(6) ("I must say, speaking for myself that I should hesitate long before I allowed a defendant in an action on a Bill of Exchange to set up a case of damages by reason of the breach of the plaintiffs of some contract. I do not say there cannot be a case where the two transactions may not be so connected, but at present I cannot even imagine the existence of such a special case. Jessel, M.R."). The appeal was dismissed.
16. Mr. Tang also cited Brown, Shipley & Co. Ltd. v. Alicia Hosiery, Ltd.(7).
17. Dealing with the second cheque he contended that it was not invalid by being undated (Sec.3(4) Bills of Exchange Ordinance) and was payable on demand, and presentation is demand, when no time for payment is expressed (Sec.10(1)(b) ibid.). Mr. Gunston replied.
18. So far as the cheques are concerned, if Mr. Gunston's contention is that because a cheque is given subject to a collateral condition between the parties it is not a bill of exchange there is a fallacy in his argument.
19. A cheque is a bill of exchange (Sec.73(1) Bills of Exchange Ordinance, Cap.19) and a bill of exchange is defined in Sec.1 of that Ordinance as "an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to, or to the order of, a specified person or to bearer." There is no doubt that the first cheque is a bill of exchange as defined; it fits clearly within the definition.
20. The second cheque is in the same position. It is true that it was undated but a bill of exchange is not invalid by being undated (Sec.3(4) ibid.) and is payable on demand when no time for payment, e.g. is undated, is expressed (Sec.10(1)(b)). Therefore both cheques are valid bills of exchange.
21. If the appellant's only answer to respondents' claim were that the cheques were not bills of exchange then he must fail. But an essential to a bill of exchange to make it complete is delivery, and although Sec.21 of the Bills of Exchange Ordinance was not specifically referred to I consider I must take it into contemplation. This section provides:-
| " | (1) | Every contract on a bill ..... is incomplete and revocable, until delivery of the instrument to give effect thereto: | |
| | (2) | As between the parties ..... the delivery - ..... | |
| | (b) | may be shown to have been conditional or for a special purpose only, and not for the purpose of transferring the property in the bill." | |
As against this there is t he further provision in the section.
| | (3) | Where a bill is no longer in the possession of a party who has signed it as a drawer ..... a valid and unconditional delivery is presumed until the contrary is proved." | |
22. But this is a rebuttable presumption. A bill of exchange may be handed over as an escrow and, unlike a deed, does not necessarily cease to be so by being handed over to the person entitled to the benefit of it e.g. the drawee of a cheque.
23. Whether these cheques were handed over as escrows is a matter of fact and a proper issue to be tried. The importance is this, that if the cheques were handed over in escrow then the cheques were not completed bills of exchange and could not be sued upon as such and the right of the appellant to defend and have his counterclaim dealt with at the same time would arise.
24. In the case of Morgan & Son Ltd. v. Martin Johnson & Co. Ltd.(2) to which I have already referred the court of appeal allowed an appeal against a decision of a judge in chambers which gave permission to the plaintiffs to sign judgment for their claim but imposed a stay of execution pending trial of a counterclaim and held that the defendant should have been allowed unconditionally to defend and leave should not have been given to the plaintiffs to sign judgment. In that case the defendant conceded that the amount claimed was due.
25. I am satisfied that there arises in this case the question of whether or not the delivery of the two cheques was conditional or not. If it was conditional then the cheques were incomplete bill of exchange and could not be sued upon as such and, as I said earlier, this was a proper matter to be tried. On this ground alone I would allow the appeal and grant unconditional leave to defend.
26. Having so decided I do not think it is necessary to dwell on the other point raised by Mr. Gunston with regard to the first cheque: that the appellant had discharged his liability of foot of it. Clearly, that too was a matter requiring adjudication by way of hearing.
27. Mr. Gunston made the point that the appellant had delivered a defence before the respondent's application for judgment and that the respondents ought not be allowed to be heard to say that the defendant has no defence. The more is this so, he argued, as the defence, being out of date, was delivered with the consent of the respondents.
28. I consider that point well taken. It is quite clear and well established that a plaintiff should move for judgment within a reasonable time after an appearance has been entered and before a defence has been delivered, and he should not, usually, be allowed to sign judgment under Order XIV if the defendant has delivered a defence. There may be circumstances when he will be permitted so to do as where the defendant, not having a bona fide defence, delivers one immediately after appearing for the purpose of procrastination. I think, without going further, that it might even be possible to sign judgment after the delivery of a defence in a case where clearly none existed e.g. where the plaintiff sued on a bill of exchange properly delivered, but such is not the position here. In this case the defence was delivered with anything but undue haste and there appears to be a bona fide defence.
29. A case dealing with an application to sign judgment after delivery of defence that I consider apt to the instant case is that of McLardy v. Slateum(8).
30. The case was an appeal from a decision of Field, J. who reversed a master who had given judgment for the plaintiff on a claim for principal and interest on an Order XIV application made after a defence had been delivered.
31. In giving the judgment of the Court Pollock, B. (Wills, J. with him), having said that as a result of being told by counsel that Field, J. had ruled in another, but unreported, case that an application under the Order could not be sustained if made after the delivery of a defence, said:-
| | "We have made ..... inquiries, and learn that the view of Field, J. still is that the intention of Order XIV was that the plaintiff must make his application before delivery of a statement of defence; but that in peculiar circumstances it may be made after, as where the defendant has delivered his defence before the expiration of the usual time, for the very purpose of defeating such an application. 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 often happens that a defence, which has been delivered, itself discloses facts which make an application under Order XIV right and proper. We think this is the proper rule. | |
| | Although the primary intention of the rule may be that an application should be made before a defence has been delivered in the ordinary course, yet we think that it is not in all cases compulsory ..... . | |
| | If the plaintiff makes his application after the ordinary time, the onus is on him to show that the delay is justifiable under the special circumstances of the case." | |
32. Very clearly the respondent was guilty of laches in not making his application under Order XIV sooner. Moreover it was quite wrong for him, or more likely his legal advisers, to have consented to the appellant delivering a late defence knowing that an Order XIV application was to be made. I consider the respondent's consent and delay as unpardonable.
33. I allow this appeal with costs to the appellant.
Representation:
Mr. Robert Tang (H.H. Lau & W.S. Lo) for plaintiffs
Mr. Gunston (Gunston & Chow) for defendant
(1) [1950] 1 K.B.585
(2) [1949] 1 K.B.107
(3) [1839] 3 Y. and C.436
(4) [1855] 10 Ex.762
(5) [1806] 7 East 482 n.
(6) [1878] 38 L.T.R.197
(7) [1966] 1 L.L.L.R.668
(8) [1890] 24 Q.B.D.504