CHINA METCHANTS CONTAINER LINES LTD v. NG KWOK KIT t/a LAPWIN INDUSTRIAL CO

[Where the owner of goods objects to a warehouseman's charges but pays the charges by cheque in order to obtain the release of the goods, he cannot countermand the cheque and then raise his objection in the warehouseman's action on the cheque. The owner's complaint against the warehouseman arises out of the underlying contract. It will not be allowed to support a stay of execution in the warehouseman's action on the cheque]

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is the plaintiff's appeal from an order of Master Yam made on 29th August 1991. The plaintiff complains of the failure of the Master to give judgment in favour of the plaintiff on its summons in the action for summary judgment pursuant to the provisions of Order 14 of the Rules of Supreme Court. The plaintiff's claim is based on a dishonoured cheque for HK$121,894.92.

2. The brief history of the matter is this. The plaintiff is a warehouseman. It held 3 containers for the defendant in its warehouse. Storage charges were accruing and the defendant wanted the goods released to him. In order to obtain the release of the goods, he had to pay the plaintiff what the plaintiff claimed as its charges. The sum was larger than the defendant thought was fair and proper, but he had no alternative but to pay it in order to obtain the release of the goods. It may be that the plaintiff's charges were in fact justified. It may be that they were excessive. Anyway, it is common ground that a substantial part of the plaintiff's charges, other than about $40,000.00 which is in dispute, was properly due and owing by the defendant to the plaintiff.

3. The defendant obtained the release of the goods by giving the plaintiff a cheque for the whole amount claimed by the plaintiff. The plaintiff accordingly released the goods (and so released its lien over them for storage charges) and the goods were received by the defendant. The defendant then countermanded the cheque.

4. It is important to appreciate that this action is an action upon that dishonoured cheque. It is not an action based on the underlying contract between the plaintiff and the defendant.

5. A cheque is treated in the ordinary course of commerce and in the practice of the courts as if it were cash. In an action on a cheque, save in exceptional circumstances or upon strong grounds, the defendant will not be allowed to advance a set-off or counterclaim for damages for breach of the underlying contract and the plaintiff will be held entitled to judgment for the full amount of his claim. He will not be subjected to a stay of execution. It has repeatedly been said in the courts that a bill of exchange or promissory note is to be treated as cash. It is to be honoured unless there is some reason to the contrary; see for example, Fielding and Platt Ltd. v. Selim Najjar [1969] 1 WLR 357, per Lord Denning, M.R. at page 361.   Not surprisingly, therefore, despite the dispute about the underlying contract, the plaintiff instituted these proceedings and applied for summary judgment, supporting its application under Order 14 by the usual formal affidavit.

6. The matter came before Master Woolley. It was ajourned to a date to be fixed and came on before Master Yam on 29th August 1991. At the hearing before Master Yam the defendant sought to raise the dispute it had with the plaintiff, not, it is to be observed, upon the cheque, about which there is no dispute whatever, but upon the underlying contract, asserting that it has been overcharged. It put in evidence. The plaintiff, in response to that evidence, tried to place before the Master (in my view understandably but misguidedly) a number of documents to justify its own case that the charges were reasonable. The Master, unhappy about that and taking the view that, if such documents were to be used at all, they had to be put in evidence, gave the plaintiff leave to file an affidavit within 14 days in reply to the defendant's evidence.

7. The plaintiff has appealed from that decision, objecting to its having been given leave in this way when really what it wanted was a summary judgment then and there. In effect, says the plaintiff, the Master wrongly refused its application for an immediate summary judgment.

8. There seem to me to be serious procedural difficulties here. But happily, and very sensibly, counsel for the plaintiff and for the defendant have (at my suggestion) invited me to treat the Order 14 application as before me and to deal with it on its merits on the evidence originally filed before the Master. This I now proceed to do.

9. The only answer that can be made by the defendant to the plaintiff's claim under 0.14, r.1 is an answer based on the provisions of 0.14, r.3. Under 0.14, r.3, the Court may, in its discretion, refuse to grant the plaintiff summary judgment, if it is satisfied that there is an issue or question in dispute which ought to be tried, or that there ought, for some other reason, to be a trial of the claim, and may stay execution for that purpose.

10. Mr Woo, for the defendant, has very ably argued before me that this is a case to which that should apply. The court, he says, should in its discretion take into account the dispute between the parties, assuming (as I do for the moment) that it is a perfectly genuine dispute. I should refuse to give judgment, at any rate, for the whole amount of the sum claimed by the plaintiff.

11. In my respectful opinion, this confuses the action on the dishonoured cheque with a different action that might have been but is not before the Court, namely, an action on the underlying contract. If the dispute was a dispute about the cheque, it would be a different matter; but it is not. It is a dispute as to the terms of the underlying contract. As to the cheque itself, there is no dispute.

12. The practice of the court in an action on a dishonoured cheque is clear and well-settled. This case seems to me in no way to provide any sort of exception to it. I have no alternative but to give judgment for the plaintiff. under Order 14.

13. If  the defendant feels aggrieved, he has only himself to blame for issuing the cheque. I appreciate. fully that this was done, so the defendant says, because he had to do it in order to get the goods released to him. But he must pursue that matter in another action. I cannot stay the execution of the plaintiff's judgment in this action; and there is no point, therefore, in giving the defendant leave to counterclaim in this action for the disputed amount. If I had thought it right to stay execution as to the disputed amount, which I do not, I would have thought it right to allow that claim of the defendant to be advanced in this action. But as it is there is no point in it.

14. For the reasons I have given, the plaintiff succeeds in his application and will have judgment under Order 14 for the whole amount of the cheque with interest as claimed.

15. I am not going to disturb the order of the Master which gave the costs below to the defendant. The Master obviously gave the plaintiff leave to file evidence in reply because the plaintiff seemed to be wishing to use some material which was not in evidence, and the Master thought he should give it an opportunity to do so. It seems to me perfectly reasonable that he should have ordered the costs of that exercise to be the defendant's costs. So I would not disturb the order of the Master.

16. I find it a bit more difficult to decide what to do about the costs of this appeal, which has succeeded only because I have dealt with the Order 14 application itself. On the whole, having regard to the fact that the appeal seems to me to be incompetent (because, in form, it is the plaintiff's appeal against an order giving leave to the plaintiff itself to file an affidavit in reply) I think I should make the order which the defendant has asked me to make, that is to say, no order as to the costs of this present appeal. In my view, that is the only just course.