KONG KWONG LAM DAVE v. IBA CREDIT LTD

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JUDGMENT

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Godfrey, J.A. :

Introduction

1. This is an appeal by the plaintiff from an order of Leong, J. made on 25 September 1995. The order made by the judge was an order made on an application by the plaintiff for summary judgment. The Registrar gave judgment in favour of the plaintiff. The judge, reversing the Registrar, granted the defendant unconditional leave to defend the action. The plaintiff now appeals to this court.

The facts

2. The plaintiff claims to be entitled to the benefit of certain bearer certificates of deposit issued by the defendant (which is a bank). The certificates were originally purchased by one Jack Chan. There were five of them, each of $200,000, four of which are being sued upon by the plaintiff, who claims to have acquired them for value from Mr. Chan. The certificates are negotiable and transferable. The maturity date of each of these certificates was 26 November 1990. The plaintiff has presented the certificates for payment, but the defendant has refused to honour the certificates.

The defendant's case

3. The defendant entertains some suspicion as to the source of the funds with which Mr. Chan purchased these certificates. Mr. Chan was employed by a firm of solicitors called Clifford Yeung & Co. The defendant suspects that the money used by Mr. Chan to purchase the certificates was abstracted from the funds of Clifford Yeung & Co. and it fears that Clifford Yeung & Co., or the official receiver in bankruptcy of Mr. Clifford Yeung, the principal of the firm, may have a claim against it for the money. (It believes too that it may be open to a claim from the banks whose money it was that was being held by Clifford Yeung & Co. when it was abstracted by Mr. Chan.)

Has the defendant a defence to the plaintiff's claim?

4. All the matters of suspicion to which I have referred have been ventilated before us. However, the certificates of deposit being, as I have indicated, negotiable and transferable, and payable to bearer, must be honoured by the defendant in the absence of any demonstrable claim by some third party to a better title than that of the bearer, in the present case the plaintiff; and, in the state of the proceedings before us, there is no person claiming to have a better title than the title of the plaintiff as the bearer of the certificates. It is not, as I think, for this court now to embark on an inquiry into what might have been the position if the defendant had sought to invite Clifford Yeung & Co., or the official receiver in bankruptcy of Clifford Yeung, or the banks whose money was held by Clifford Yeung, to advance a claim to the certificates or forever hold their peace. That was not done, and the position today is that the plaintiff has presented the certificates of deposit and has been refused payment. On the facts to which I have referred this court cannot countenance such a refusal. I am of the opinion that these certificates have to be honoured in the absence of a clear and demonstrable claim by some third party to a superior title to the money which they represent. There is no evidence of any such claim. There is suspicion; but, as I think is demonstrated by, e.g., London Joint Stock Bank Ltd v. Macmillan and Arthur [1918] AC 777, a banker is not entitled to refuse his customer's demand for payment on grounds of mere suspicion. Still less, as it seems to me, is a bank entitled to refuse the bearer's demand made by the holder here of these negotiable and transferable certificates of deposit on mere suspicion as to the source of the funds with which they were purchased. The defendant has not demonstrated any defence to the action.

Conclusion

5. For these reasons, I would reverse the decision of the judge and restore the order of the Registrar giving summary judgment in favour of the plaintiff. The certificates of deposit have matured and the plaintiff does not seek to assert any claim to interest on the certificates of deposit between the date of maturity and the date of refusal of payment, although he does ask for interest thereafter. On this footing, I would allow this appeal.

Ching, J.A.:

6. I agree with the judgment and the reasons given by Godfrey, J.A.

Litton, V.P.:

7. I too agree and have nothing to add.