BANK OF CREDIT AND COMMERCE HONG KONG LTD (IN LIQUIDATION) v. DAYAL N. HARJANI t/a N. VENSIMAL CO (HK)

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal from a decision of Master Woolley who on 16th August 1995 made an order under Order 14, r. 3 of the Rules of Supreme Court that judgment be entered against the Defendant for the sum of USD273,079.55 with interest at the rate of 4.25% per annum from 27th January 1994.

2. The brief history of the matter is that the Defendant, according to the Plaintiff, discounted a Bill of Exchange for USD141,557.07 drawn on a drawee in Nigeria called Pekos Co. Ltd. The Plaintiff forwarded the bill to a bank in Nigeria for collection. At that time the Plaintiff was named Hong Kong Metropolitan Bank Ltd. and the bank to which it sent the bill for collection was called Bank of Credit & Commerce International (Nigeria) Ltd. It has been submitted on the part of the defence that, in fact, both banks are part of the same group so that any money received by the bank in Nigeria was received by the Bank in Hong Kong since they were in effect one on the same person.

3. I do not accept that submission. They were separate legal entities and one bank was remitting a draft to another for collection. The drawee paid to the bank in Nigeria a sum of Nigerian currency equivalent to the sum due on the bill but the Nigerian government which was suffering a financial crisis at the time, put an embargo on remittances of foreign currency as a result of which the correspondent bank was unable to remit the necessary US dollars to the Plaintiff.

4. In those circumstances, both the Plaintiff and the Defendant apparently proceeded in the belief on both sides that the Plaintiff had a right of recourse against the Defendant on the basis that the bill was unpaid since no money had reached the bank in Hong Kong. There was a series of transactions and various arrangements were made between the parties in order to deal with the situation but eventually, the Plaintiff made demand of the Defendant for repayment of principal and interest due on a term loan which had been set up in substitution for the debt which they apparently both believed to exist in relation to the Bill of Exchange.

5. There has been argument over the course of a day and a half during which many issues have been canvassed, including the effect upon the relations between the parties of certain Promissory Notes issued by the Central Bank of Nigeria in substitution as it were for the Bill of Exchange. There were a number of other matters. It is not necessary for me to go into them in detail, save to say that I would not have been disposed to allow the appeal on any argument put forward by the Defendant except one and that one argument is this : the Defendant has said in one of his affidavits that he has been told and believes it to be so that upon receiving the Nigerian currency in Nigeria, the correspondent bank released the bill to the drawee.

6. The Plaintiff has not overlooked that assertion for it is referred to in one of the affidavits filed on its behalf but the assertion that the bill was surrendered to the drawee has neither been admitted nor denied.

7. If the Defendant is right and the bill was delivered to the drawee, that would be an indication that the drawee was being discharged, so far as its obligation upon the bill was concerned.

8. It is common ground now, according to what Mr. Liu for the Plaintiff has said in Court, that the correspondent bank was acting as agent for the Plaintiff bank since the Plaintiff had bought the bill which was discounted to it by the Defendant.

9. This is not a case where the Plaintiff advanced money against the bill which it was collecting on behalf of the Defendant. The Plaintiff was collecting the bill on its own behalf. If the bank in Nigeria treated the debt from the drawee as discharged and surrendered the bill to the drawee in return for the Nigerian currency, then it was acting as agent for the Plaintiff and the Plaintiff falls to be treated as having acted through its Nigerian agent.

10. The question then arises as to what is the legal effect of the delivery of the bill to the drawee, if that is indeed what happened. I am not in a position to decide on the material before me whether it happened or not but if it did happen, it seems to me that it may be arguable that the Plaintiff thenceforth was not in a position to make any claim against the Defendant on the bill. This is a case where the fact alleged by the Defendant needs to be investigated and if it is established as a fact, there needs to be legal argument as to its effect upon the relationship between the Plaintiff and Defendant. If the result was that the Plaintiff was not entitled to sue the Defendant on the bill, then the question arises whether both parties were not acting under a mistake of law when they purported to create a term loan to represent what they imagined to be a debt due by the Defendant to the Plaintiff.

11. It seems to me that there is an issue to be tried between the parties and that in the circumstances the appeal should be allowed and leave should be given to the Defendant to defend.

12. Mr. Liu, on behalf of the Plaintiff, submits that if the Court thinks that the defence is a shadowy one, the Defendant should be given leave only on condition that it pays into Court a sufficient sum which Mr. Liu has calculated by giving credit for certain sums which have been applied in diminution of the debt since the date when the sum for which judgment was given was calculated, namely the 27th January 1994. The sum he has calculated is USD244,763.43.

13. The Defendant says that he is not in a position to pay anything like that sum and I have no reason to disbelieve him. If I were to give leave with such a condition, it would be tantamount to depriving him of a trial. Notwithstanding the fact that he has for years proceeded on the basis that he did owe the money to the Plaintiff, it is at least arguable that both parties may have been mistaken about that.

14. In the circumstances, I feel that the proper course is to give unconditional leave to defend. The appeal will therefore be allowed and there will be an order that the Defendant be given unconditional leave to defend.