AST RESEARCH (FAR EAST) LTD. v. WOND WAI WO, RICHARD t/a TREND ENTERPRSES CO.

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J U D G M E N T

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Sir Derek Cons, V.P.:

1. This is an appeal from the order of Godfrey, J., dismissing an appeal from Master Yam who entered summary judgment for the plaintiff below in the sum of US$272,130 or its equivalent in Hong Kong currency being the balance of the price of goods sold and delivered.

2. By a purchase order dated 22nd June 1991 the defendant agreed to purchase from the plaintiffs goods to the value of just under US$600,000. Payment was expressed to be "by bank draft or L/C". Approximately half was settled without problem. The balance, the subject matter of the present proceedings, was paid in the first instance by two instruments drawn at the expense of the defendant upon the Bank of Credit and Commerce Hong Kong Ltd and dated respectively 27th and 28th June 1991. In form the instruments are similar to normal bank cheques with the bank's name and logo prominent in the top left hand corner, signed "for Kowloon City Branch" and made payable to the order of "AST Research (Far East) Ltd", who are the plaintiffs. But just beneath that entry, in small print, are the words "Payable at American Express Bank Ltd" together with an address in New York and the logo of that bank alongside. When presented to the American Express Bank in New York on 8th and 9th July the instruments were returned dishonoured and marked "A/C frozen". We understand that event to have followed action initiated by the authorities here in Hong Kong. Hence the claim in the action below.

3. The nature of the instruments was fully canvassed below and to some extent before this court. The learned judge had no doubt. He said:

" The instruments in question can, on examination, clearly be seen to be not bank drafts at all, but ordinary cheques. ... The only thing they have in common with bank drafts is that the unfortunate defendant has had to pay the Bank of Credit and Commerce for them,".

4. We need not concern ourselves with that question now, for in bringing the appeal Mr. Chong, for the defendant, has felt himself forced by authority to concede that even if the instruments were properly to be construed as bank drafts they could still amount to no more than conditional payment, that is payment only if in due course they were honoured.

5. He attempts to circumvent the difficulty in which the concession places the defendant by referring to the plaintiff's clear endorsement of each instrument and to other less clear markings thereon which could be interpreted as indicating that on 1st and 2nd July respectively the plaintiff negotiated the instruments to the Bank of America Ltd against cash (it was the Bank of America which presented them to the American Express Bank on 8th and 9th July).Mr. Chong then relies on the words of Staughton, J., in Libyan Bank v. Bankers Trust [1988] 1 Lloyd's L.R. 259 at 274:

"     A banker's draft is, in effect, a promissory note, by which the banker promises to pay to or to the order of the named beneficiary. When the beneficiary receives the draft he can negotiate it, or hand it to another bank for collection. If he negotiates the draft the beneficiary's part in the transaction ends. He has received all that he bargained for, and so far as he is concerned no action in New York is required."

to suggest that in the present instance the plaintiffs have, by negotiating the instruments, likewise obtained all that they bargained for and are precluded from further action against the defendant.

6. In our view the short answer to that proposition is that in the present context the plaintiffs have not obtained what they bargained for. They bargained for drafts that would be honoured. The drafts they have received have been dishonoured. That is the end of the matter. The context of Libyan Bank v. Bankers Trust was quite different.

7. However in deference to the zeal with which it has been advanced we should also mention that the argument depends largely upon speculation as to what really took place after the instruments were received. As to that no one has filed an affidavit, possibly because Mr. Chong, coming late into the proceedings below, raised the point for the first time only when actually before the learned judge. He asks this court to assume, in effect, that whatever was the nature of the transaction between the plaintiffs and the Bank of America at the beginning of July, the consideration was absolute and the Bank of America has in no circumstance a right to recover from the plaintiffs (but see Secs. 5(a) and 55(2) of the Bills of Exchange Ordinance, Cap. 19, for their liability as endorsers). In the light of the indisputable fact that the plaintiffs are now in possession of the two instruments themselves, that seems to us to be a most unlikely scenario and were we disposed to grant leave to defend it would certainly be given only on the condition of bringing the whole amount in dispute into court. However in Order 14 proceedings the onus is upon the defendant. We appreciate that in the present instance it would be difficult, if not impossible, for the defendant to adduce facts which would support the situation suggested without the interlocutory assistance of the court. The defendant has at no stage sought that assistance, nor even applied for an adjournment in order to do so. We would therefore not grant leave of any kind but would dismiss the appeal.

8. We should also add that Mr. Chong has put forward an alternative defence which rests upon Sec. 74 of the Bills of Exchange Ordinance, Cap. 19, together with what he suggests to be the notorious facts surrounding the Bank of Credit and Commerce during the first week in July 1991. We regret that we have made no attempt to deal with this defence, but we have to confess that despite Mr. Chong's patient explanations we have been unable at any stage to discern any useful connection between those factors, taken either individually or together, and the position, relative to each other, of the parties to this litigation.

9. In handing down this judgment dismissing the appeal we make an order nisi that the plaintiffs shall have their costs thereof.