CHAN YIU WAH AND ANOTHER v. THE HONGKONG AND SHANGHAI BANKING CORPORATION

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 455 OF 1984

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JUDGMENT

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1. Before I turn to my judgment proper in this matter, I would like to say this: This is one of the most interesting and fascinating cases, that it has been my privilege to be involved with over some thirty years, both from a factual point of view and from a legal point of view, and I am quite sure that no one who has had any part in the matter (this case) will ever forget it. I would like to record my gratitude to counsel for their endeavours on behalf of their individual clients, for if there are errors in this judgment, they are mine and mine alone.

2. I turn first to the background. I am going to deal with the background in a little more detail than I would normally.

3. The two plaintiffs are husband and wife. They came to Hong Kong from Mainland China many years ago; Mr. CHAN in about 1957 and Madam LAW in 1958. They were each penniless or nearly so. Mr. CHAN worked in a textile factory and Madam LAW worked as an amah. She saved and it is clear from all the evidence that she was the one of these two who was the more financially intelligent.

4. After two years she bought a wooden hut and raised some pigs. Apparently that was unfit for habitation and she was moved out by squatters control. The result was that she and her husband were allotted a shop in a resettlement estate. So began a varied and successful business career.

5. Madam LAW is clearly intelligent but she is almost illiterate. She proved to be much more careful and skilful in business than her husband. It is clear to me that from time to time he made generous but ill-advised loans to his friends which were never recovered. The result was that Madam LAW took control of the family assets, that is now the real property and the bank accounts and in the past the trading companies.

6. Unknown to her husband, Madam LAW gambled on the stock exchange and invested in gold. She did this successfully.

7. During the seventies, the two of them were running a shop in Argyle Street. In addition, between about 1974 and 1978 Mr. CHAN ran a restaurant at No. 11 Argyle Street.

8. It was during the late seventies that Mr. CHAN became interested in collecting. On a small scale he began to collect antiques, paintings, coins and eventually he began to collect some notes.

9. After about 1978 when the restaurant business had been sold, he took up collecting more seriously. He had more time and perhaps more money was available.

10. In particular, so far as this case is concerned, in about 1980 he began to collect banknotes; included were not only examples of various types of currency but banknotes which on their faces contained errors.

11. It is not possible to define limits to the errors which may take place in printing a banknote but on the evidence that has been given during this case, it seems that the more common ones relate to errors of the numbers, the absence of signatures or dates or the placing of those matters in the wrong position or the absence of part of the pattern on the notes. Other errors relate to double printing, that is printing patterns in the wrong place, and errors may relate to the colour. One note was produced on which certain colours were missing altogether.

12. A young person used to patronize the plaintiffs' provision store here in Hong Kong. His name is LAW Wai-yee. He got to know both Mr. CHAN and Madam LAW and he came to know that Mr. CHAN was interested in collecting.

13. By May of 1982 LAW - Wai yee had gone to the States. Apparently he was a student there. But after he had gone to the United States, he first had contact in about May 1982 when it is said he telephoned Mr. CHAN out of the blue. He had some startling news. He said he had a one-thousand Hong-Kong-dollar note issued by The Hongkong and Shanghai Bank which had been printed in the wrong colour. Instead of being predominantly yellow or gold, it was brown and the brown colour was the same and exactly the same as a normal five-hundred-dollar note of that time. In addition, he had certain other items for sale--mirrors, paintings, and apparently a decree of one of the Chinese emperors.

14. He asked Mr. CHAN if he was interested in buying these items, but according to Mr. CHAN, he said that he hadn't seen them and he would not negotiate with LAW Wai-yee unless he brought them to Hong Kong for inspection. It appears, according to Mr. CHAN, that LAW Wai-yee was suggesting a very large price for these items; something between five hundred thousand and six hundred thousand dollars.

15. According to Mr. CHAN and Madam LAW, they had a discussion, in particular, about the note because she was in control of the finances. After the telephone call, Mr. CHAN asked her if she would make ready for any purchase, that is, make money available. He asked for a large sum but Madam LAW said that they certainly could not afford the sort of money he was talking about and said she would agree to four hundred thousand dollars and not even five cents more.

16. Consequently, according to her evidence, in order to avoid touching what she described as the family assets, for this purpose she obtained a mortgage through The Bank of East Asia for the four hundred thousand dollars. In support of her account of the matter, she produces a document relating to that mortgage loan and this shows that certainly such a loan was obtainad on the 28th of May, 1982.

17. In June of 1982 LAW Wai-yee came to Hong Kong with the articles he had for sale. He went to the plaintiffs' home and there was some bargaining. According to the plaintiffs, the result was that Mr. CHAN agreed to buy the note and two antique mirrors. The other items were too expensive and in any event Madam LAW was reluctant to agree to any purchase.

18. In the end, according to the plaintiffs, Madam LAW was persuaded by her husband that the banknote was very valuable and she saw no reason why she should not accommodate him in respect of this purchase. She said something to the effect that the money had been earned by the labour of the two of them.

19. The price agreed was three hundred and fifty thousand dollars for the note and fifty thousand dollars for the two mirrors; four hundred thousand dollars in all. Exactly the sum borrowed by way of mortgage.

20. According to the plaintiffs, because they were not buying the imperial decree, Mr. CHAN assisted LAW Wai-yee in the sale of that and perhaps other items, by writing to a museum in Taipei on his behalf.

21. According to Madam LAW, by the time LAW Wai-yee came in June, she had used the money she had obtained on the mortgage for other purposes. She cannot any longer remember the exact detail of how the money was spent but she had used it. She had invested it in various ways that she was wont to do if she had money available.

22. As she didn't have the money by the time the price was agreed, she got over this difficulty by telling LAW Wai-yee that he could have a hundred thousand dollars immediately and she promised to pay off the remainder by the end of the month. She did this partly by using some US dollars which she had in her safe at home. Previously these dollars had been earmarked to go towards the children's education.

23. So far as the note was concerned, before the purchase Mr. CHAN verified it in the only way he knew. That was by placing it under his testing light. As it showed to be genuine, there were no other steps that he could take.

24. I am satisfied that he did examine the note with considerable care. I don't think he gave any evidence that he compared that note with a five-hundred-dollar note, but Madam LAW said that at this time they did compare the note with a five-hundred-dollar note and they matched exactly.

25. After the purchase of this note, Madam LAW was instructed to put on the note the Chinese character for "SIM", her name, so that it could be identified and she says that she did. She was instructed by Mr. CHAN to take the note to The Bank of East Asia and place it there in her safe-deposit box.

26. In fact, on the day when. Madam LAW set off with the intention of placing that note into the deposit box, she went to invest money, on the stock exchange and became absorbed in its activities. She says the result was that she forgot to go to The Bank of East Asia in time and so the note was taken home and instead she put it in her safe and there it remained.

27. So far as LAW Wai-yee and the transaction are concerned, there are a number of surprising matters. First, there was no documentation of any kind. No receipt was demanded; no receipt was given. The reasons for this given by the plaintiffs are frankly unconvincing.

28. Even more surprising is that once LAW Wai - yee had been paid and he had left for Taiwan, he has been, so far as the evidence goes, neither seen nor heard of since.

29. Mr. CHAN says he recorded his name and address in a diary which was later lost when they moved and other efforts to contact LAW Wai-yee have failed. The result is that he has not been available to give evidence in the case.

30. But I should add that this part of the case is only, on the face of it, part of the account because as I will relate later, there is no doubt whatsoever that the plaintiffs had in their possession the note which is involved in this action.

31. The note remained in the safe at the plaintiffs' home until the 17th of September, 1983. In the meantime, it had not been touched. Mr. CHAN was always under the impression that it was in the safe-deposit box at The Bank of East Asia. Madam LAW never enlightened him to the contrary.

32. As a matter of fact, I believe that Mr. CHAN thought that that note had been always in the deposit box until Madam LAW gave evidence in this case. It is a significant little pointer to Madam LAW's attempts, as I believe them, to be accurate and truthful in her evidence.

33. The reason why the note was eventually removed on the 17th of September, 1983 was because the plaintiffs came into contact with Mr. CHAN Chun-yip. CHAN Chun-yip was also born in Mainland China in the same village as one of the plaintiffs. They lived at different ends of the village and although they knew each other, they were not particularly friendly.

34. CHAN Chun-yip went to live in Thailand in about 1946. He had a transportation business in Thailand but he has since retired. He has family here in Hong Kong, his daughter and his wife.

35. CHAN Chun-yip's daughter was aware that CHAN Yiu-wan, the first plaintiff, was here in Hong Kong and, without going into details, eventually a meeting was arranged between these two former acquaintances. It seems that the meeting took place in about May or June. The meeting took place at a local hotel, and by this time although the plaintiffs had fairly considerable assets, they were short of money.

36. In the course of a general conversation between CHAN Yiu-wah and CHAN Chun-yip the note involved in this case was mentioned. CHAN Chun-yip was asked if he happened to know anyone who might be interested in buying it and in a semi-joking way some enormously extravagant figures were mentioned as to the price that the plaintiff CHAN Yiu-wah would accept.

37. CHAN Chun-yip said he did know a wealthy collector in Thailand and he would approach him and he, according to his evidence, approached CHAN Shun-hoi. He expressed interest and there was a series of negotiations, mostly on the telephone.

38. CHAN Shun-hoi gave CHAN Chun-yip a document of authority (which is in the case) and armed with that document he came to Hong Kong at the end of July 1983 in order to see whether a deal could be reached.

39. For reasons which will appear later, it is not necessary for me to go into detail about the deal but all the parties say that eventually a deal was reached and reached in the sum of ten million dollars.

40. The basis was that, first, the principal CHAN Shun-hoi required that the note should be verified by the bank and that the deal should be documented or witnessed in a solicitor's office. Although nothing was said, the principal obviously required the agent to examine the note for himself not only for colour but also for the number which had been provided by CHAN Yiu-wah sometime before.

41. When Madam LAW heard that the proposed purchases of this note required the note to be verified, according to her evidence, she said, well, her husband should verify whether the other party had the money. And so it is said that at about the time the deal was struck, two documents were shown to CHAN Yiu - wah, the plaintiff: first, CHAN Chun-yip's written authority from his principal; and secondly, a photostat of a time deposit receipt with The Bangkok Bank in respect of a US-dollar deposit in CHAN Chun-yip's name, although it was differently described or. the document, between July and September of 1982, not 1983.

42. This was said by CHAN Chun-yip to demonstrate that the money for the downpayment was available. Of course, the document demonstrates no such thing but he explained that the money was rolled over with interest and redeposited and was still available.

43. Further, he says that there was other money deposited in his daughter's and his wife's name and that all this money belonged to CHAN Shun-hoi. Attempts were made to prove that the two million was available but it is right to say that really those attempts foundered.

44. It is also right to say that CHAN Chun-yip was really saying that his credit was so good at The Bangkok Bank that he could have not only terminated any time deposit he had but that he could have got credit to the extent of two million. Again, that is what was said and for reasons which I will go into in due course, it perhaps matters little, that is, the detail of that matters little.

45. The only other matters of importance at this stage before turning to the 17th of September were this; that the arrangement spoken of by the witnesses was that if everything went smoothly with regard to the verification of the note, the documentation of the deal at a solicitor's office and the payment of the deposit, then CHAN Shun-hoi would come from Thailand to Hong Kong to pay the balance of eight million and complete the deal.

46. That brings me in this account to the 17th of September of 1983. The arrangement. was made by CHAN Yiu-wah who thought that the note was in Madam LAW's deposit box at The Bank of East Asia. So he made an arrangement with CHAN Chun-yip to meet his wife outside the bank in Nathan Road. The object of the exercise was that Madam LAW should take the note from her deposit box and present it to the bank for verification.

47. The plaintiffs, of course, had considerable confidence that the note would be verified because Mr. CHAN had a light of his own. and he had seen that it showed up as a genuine note.

48. Madam LAW's account is that, she set off from home to the bank and having got so far, she could not remember whether the note was in the deposit box or not and she remembered later that it was in her safe at home. So she describes running back home, arriving there and making an excuse on her arrival to conceal from him the fact that she had never obeyed his instructions to put the note in the deposit box. She recovered the note from the safe and went back to the bank.

49. The evidence is that she met CHAN Chun yip and they went into the bank. Once inside he sat down and it is to be noted that he is a fairly elderly man. Madam LAW produced the note to him from her purse or her handbag and handed it to him for inspection.

50. According to both of them, he did two things. He first checked the number of the note against a number which he had written on a piece of paper. He was checking to see whether it was the correct note for he had been given the number sometime before. Then he took from his pocket a five-hundred-dollar note and he compared the colour. According to both CHAD Chun - yip and Madam LAW, the colour matched.

51. I am going to digress slightly at this point, although I will return in the course of this judgment to CHAH Chun - yip. He was considerably pressed in cross-examination and in examination-in-chief about the nature of the note which he thought he was buying and about his comparison.

52. Having seen him in the witness-box for a considerable length of time, I am satisfied that he was a fairly elderly man and I am satisfied that there were times when he was under cross-examination when he became tired and confused.

53. He is now mistaken about the exact nature of the note which he had in his hand. If he ever set out to buy the note at all and I believe that he did, I think he knew its true nature at that time, although not its exact colour except by description until the moment he was in the bank.

54. In the course of examination and cross-examination when it appeared that he thought the note was a five-hundred-dollar note with the figures of one thousand upon it, I am satisfied that in giving that evidence he is not giving false evidence. If he were giving false evidence, one would not find a witness coming to court and making such an elementary error in the account he was supposed to give.

55. It goes a little further than that. In the course of being pressed about what he noticed in relation to the note, he said that he didn't think that, when he was looking at the note, the design of the lion on the thousand dollar note and the lion on the five-hundred-dollar note were different. In his rough check, he said he thought they were the same.

56. Of course, having seen the two notes that he was shown in court and having compared them, he noticed they were different. But he did not, as he could easily have done, trim his evidence on this point and he continued to tell the court that in the rough check that he made at the time, he thought the lions were exactly the same. That indicates to me that, at least, he is trying to give accurately his recollection, although it is a recollection that is on that matter mistaken.

57. After CHAN Chun-yip had satisfied himself about the note, Madam LAW presented it for verification. CHAN Chun-yip did not accompany her to the counter.  He speaks little or no Cantonese, he is Hakka-speaking. When Madam LAW got it to the counter, she was told that as far as they could see, the note was genuine but it ought to be verified by the issuing bank, The Hongkong Bank.

58. That leads me then to the events in the bank, in The Hongkong Bank, the mini branch in Nathan Road where the note was then taken by Madam LAW. As far as CHAN Chun-yip is concerned, his account of the events which followed him leaving The Bank of East Asia is very strange. But leaving those aside, Madam LAW went to The Hongkong Bank branch. She went with the note to the counter.

59. Because it is of such importance, I will deal in detail with what happened in the bank there, but it is not in issue that having been to the counter, she left without the note and the bank had the note thereafter.

60. As far as CHAN Chun-yip is concerned, he says that he followed some way behind. He did not follow Madam LAW into the bank. He was finishing his cigarette off outside. He gave a number of varying accounts as to what he heard and what he saw, but the result was, according to him, that he saw there was some kind of altercation going on in the bank, he became worried because he heard words such as "identity card" and "police station" spoken by some people who came out of the bank, as a result of which he became afraid that the note was being said to be counterfeit or possibly counterfeit--I digress for a moment because that is exactly what I believe was being said--and having become frightened and not wanting to be involved if there was any trouble, he left.

61. The events thereafter were that strenuous efforts were made by the plaintiffs to recover the note. They went to the police on the 17th of September but as they had a receipt, they were told that they should wait until the seven days were up and see whether the bank returned the note.

62. On the 21st of September, Madam LAW was telephoned by the bank. She went to the branch and she was offered not the thousand-dollar note but she was offered another one which she refused.

63. Both husband and wife then went to the police. She made a statement there. The police went to the bank. They tried to get the note back and they failed.

64. That brings me to the beginning of these proceedings, save for a brief account as to what happened so far as the bank was concerned.

65. Having got the note at the mini branch, it was sent to the Main Treasury for inspection. According to the witness Mr. LEUNG, it was inspected at the Main Treasury, not only by him but by others. According to him, it was found to be genuine, then it was passed into the system for destruction and if the system was followed, then the note was destroyed, and so it was that the bank was then not in a position to either return the note to the plaintiffs or demonstrate what the note was really like.

66. The plaintiffs' concern in this matter from the outset--I mean by that the very first letter that was written--was for the return of the note itself. Within seven days of trying to get the note back through the police and having failed, the plaintiffs' then solicitor wrote to the defendants.

67. In the course of that letter, they said first that their client was in possession of the note. They set out that on the 17th of September she presented the note to the branch for the purpose of verification as to whether it was a genuine note and not for the purpose of having it deposited at the bank. They then said that Madam LAW had tried to have the note back upon realizing that the note needed to be returned to the main office for verification and refused to accept a receipt in respect of it and then set out the report to the police.

"We are of the opinion that your bank has no right to detain the note which was never presented to your bank as deposit and we are instructed to inform you that unless the said dollar note is returned to our client or us on her behalf together with your legal authorities in support of the detention within ten days, we have instructions to issue proceedings. "

68. On the 5th of October the bank replied. The bank said that they had then had an opportunity of making a thorough investigation into the incident raised in the letter. The second paragraph says this:

"Apparently, when your client presented the banknote in question to our branch, our staff were concerned that the banknote may have been counterfeit and, with your client's consent, referred the note to our Main Treasury division for analysis. A receipt for the banknote was handed to and accepted by your client. "

69. It continues:

"I understand that some thirty minutes later your client returned to the branch and informed the Manager that she would like the banknote back. Aware of your client's concern that the banknote may be forfeited in the event that it was found to be counter-feit, our Manager offered your client a replacement note on the condition that the banknote was found to be genuine by the Main Treasury but that offer was rejected. "

70. The letter goes on to say that the banknote was genuine but it was discoloured, that it was not of any numismatic value and that it had been destroyed and that also discolouration of banknotes can be effected very easily in a number of ways but for obvious reasons strongly discouraged by the bank. And then this:

"We regret that your client may have misunderstood our Branch Manager's intentions in this matter and agree that the consequent acrimony was unfortunate. "

71. The bank they. offers again another banknote if Madam LAW would like to call for it.

72. I have set out that background of this matter at unusual length because it is a somewhat unusual case.

73. Let me now get down to the matters which are not in dispute.

74. Of course, it is not in dispute that Madam LAW, the second plaintiff, was in possession of a thousand-dollar note on the 17th of September which was not of the correct colour. That colour was brown rather than yellow or gold but the shade of the brown is in issue.

75. It is not in issue that she took it to the mini-bank branch in Nathan Road to ask whether the note was a genuine one-thousand-dollar note.

76. It is not in dispute that when she was told that it would go to the Main Treasury, she asked for it back. That is what one of the tellers said about the incident and she was refused it.

77. There are then issues about the precise dealings in the bank with which I will deal broadly. The bank says that the note was handed over for verification and replacement as money. The plaintiff says it was handed over for verification and return as a chattel.

78. There is no dispute that the Main Treasury of the bank received the note on about the 17th and that by about the 20th it had been checked and found to be genuine.

79. There is no dispute that the system is, if it were followed, that notes, once bundled into the correct number of notes, would be destroyed and that if the system had been followed, it is probable that the note was destroyed on the 21st or the 22nd of September.

80. There is, of course, therefore no dispute that the note has never been returned to the plaintiffs.

81. The normal procedure in relation to a genuine note which was found to be damaged or of the wrong colour, which a client expressed a desire to retain, is also not the subject of dispute. It was described by Mr. William SHEK who said this in relation to such notes:

"In the Main Treasury, if they were told, they would verify the note and then return it to the branCh. If the note was odd, the Treasury would also try to find out if the presenter wanted the note, even if that had not been set out on the accompanying memorandum (that is the one from the branch).

 

If a note was of the wrong colour, the first action would be to discover whether the note was genuine and then the second would be to refer the matter to him and the Manager for authority for a decision whether to release. Our answer would probably be no; but if the note was discoloured, we would talk to the customer to see if we could persuade him not to have it back because we have a duty not to circulate notes which are discoloured or mutilated and because we don't think discoloured or mutilated notes have any value. But if the presenter of the note insisted upon having the mutilated or discoloured note back, the note would be given back to him. "

82. There is no dispute that a banknote can be a chattel in certain circumstances and that, therefore, the note can be bailed to the bank and that the bank, subject to certain arguments with which I will deal, the bank must therefore return the very note. Therefore, there is no dispute and it is not suggested by the bank that a note is always money. This is a matter to which I will return.

83. Then there is no dispute that three days or so after sending the note to the Main Treasury for verification, the branch rang and spoke to Mr. LEUNG to see whether they could have the note back.

84. Mr. LEUNG did this--he looked at the record (which is page 28 of the bundle) and saw that the branch had been credited and that the matter had passed out of his hands. Although he conceded and if he didn't concede, it is clear--that by the time the very note may not have been destroyed, when asked about whether he made any effort to find the note, he said, "Even if it might have been possible to get the note back, we wouldn't do that. " In other words, the note had passed into the system and he was not going to take any action to retrieve it.

85. That is what I described in the course of argument that if anyone asked for the note back at that time, it having gone into the system, the answer was "Bad luck!"

86. It is a matter of some importance generally in the case and, in particular, in relation to the account of what happened at the bank that it is accepted that both the plaintiffs are suffering from serious psychiatric illness.

87. In relation to the first plaintiff, there is no dispute that his depressive illness was brought about, was caused by the retention of the banknote by the bank. There are issues as to the cause of the second plaintiff's anxiety state but the general picture is that as a result of the loss of the note, the lives of this family have been-one hopes only temporarily-have been devastated.

88. That leads me to a general finding of fact in the case of some importance.

89. I am satisfied that this note was of great importance to the first plaintiff. He thought that the note was of great value and he thought it was extremely rare, the only one of its kind in the world. And I am satisfied that because of those matters, he had high hopes for it. By that, I mean he thought that he was going to make very considerable profit if he ever wanted to sell it, and he thought it was an extremely rare and valuable note for anyone to have in their collection. Those hopes were dashed (at any rate in his eyes) when the bank did not return the note.

90. A further matter which I am not called upon to make any finding in relation to liability is the question whether I accept the circumstances in which the plaintiffs acquired the note. But for reasons which will appear, I have found it necessary to make a finding about that matter, and in doing so, I have already mentioned some very unusual and surprising features of the plaintiffs' account of the acquisition of the note-no documentation; an inability to trace the vendor; a possible coincidence in relation to the price and the money available on mortgage.

91. But I am satisfied on the whole of the evidence that this note was purchased and that it was purchased for a very considerable sum. I have no reason to doubt that it was purchased for three hundred and fifty thousand dollars because of the support that this is given by the mortgage that was obtained, although the money was used in a different way, and that it was obtained from LAW Wai-yee.

92. On this matter, I remain impressed by Madam LAW's evidence and I take into account criticisms that may be made of it and can be made properly. She was cross-examined at very very great length and it sometimes happens that a cross-examination of great length destroys a witness absolutely. It sometimes happens that in the course of cross-examination it becomes clear to the court that there are matters upon which the court can rely and that was so in this case.

93. I was impressed by her reluctance about the deal, her reasons she gave of accommodating her husband in this matter about the mortgage, although she really thought that he was paying far too much for any item of this kind, her account of investing the money on other things unknown to her husband until she gave evidence and her having been persuaded by her husband against her judgment that the deal was a good one and her difficulty in raising the money to pay and where the money came from.

94. So far as the suggestion and the account which she gave in her statement to the police that she had received the note in the course of business, that was an admitted lie on her behalf. It was a way of explaining possession of the note and it related to something that she had said in the bank itself.

95. But as to a suggestion (which I thought at one stage was being made) that this was the true account of her acquisition of the note, then I am quite satisfied it is not true and I am satisfied that I can rely upon what was said in spite of the obviously unusual nature of the account. I am quite satisfied that the note was purchased, as I say, for three hundred and fifty thousand dollars.

96. Let me turn now to the nub of this case. It is what happened when the note was handed over to the bank on the 17th of September of 1983.

97. The account given by the tellers at this branch and that given by the second plaintiff differ. The bank's case on this is that she handed the note over as money, asking that it be verified as genuine and leaving the bank free to return to her the face value of the note if it was found to be genuine, another one thousand dollars.

98. I have already said that it is conceded by the bank that a note can be an object, a chattel and that a bailment of that chattel therefore is possible and it is on this matter, therefore, that I concentrate.

99. If the note was handed over for verification as a chattel so that the bank became a bailee, prima facie the bank were under a duty to verify the note and return it. If, on the other hand, the note was simply handed over as money for verification, checking that it was a valid note, it would then be open to the bank to return one thousand dollars.

100. In approaching this question, it is right that I should bear in mind certain background matters. First, of course, usually notes are treated as money. Therefore, if a person takes a note into the bank and is intending to give it to the bank, asking the bank to verify it and return it--bailing it to the bank in other words--that must be made clear to those on the other side of the counter. I accept Mr. Bunting's submissions in that respect.

101. Secondly, the bank staff must be at least alert to the possibility that they may be taking a note as bailee and not simply as money. In other words, if it is explained to them that somebody wants the note back, they must not simply override that request.

102. Thirdly, I must bear in mind in my approach that the second plaintiff had no account with the bank and, therefore, she was not under any circumstances depositing this note with them to be put into an account.

103. Fourthly, I bear in mind the purpose for which the note was being handed over by the second plaintiff. There really can be little doubt that whatever she said, the purpose of her handing the note over was for verification and return. But of course it is what was said that is important.

104. And finally, I bear in mind the background, unknown to those in the bank, of course, about the acquisition of the note and the importance of that note, at least, to the plaintiff.

105. Let me turn now to the evidence that was given first by Christine LAW and her evidence was supported by the other teller Annie MAK. She said that she recalled that at sometime after 10 a. m. Mrs. CHAN came in and she joined a queue.

"When she got to the head of the queue, she was holding a piece of paper. She was holding it in her hand. She said it was a thousand-dollar note and she "asked me to see if it was genuine. My response was, 'If we suspect it to be false, we will send it to the Main Treasury for examination; and if it turns out to be false, we will forfeit it. If it is genuine, we will return one thousand dollars to you (meaning one thousand dollars, not the note). ”

106. She went on to say:

"We have circulars as to how to deal with people who bring in suspect notes and it was the standard practice to tell customers that the note would be sent to the Main Treasury, also to say if it was counterfeit, it would be forfeited.

 

Mrs. CHAN said the thousand dollars was given to her by a customer who was making a purchase and that if the note was found to be genuine, she would telephone her husband at the shop to give the customer the change. "

107. Christine LAW said that she then repeated what she had said before about the procedure because she said:

"Having seen the note, I thought it would certainly be sent to the Main Treasury.

 

She was very impatient. She said, 'You just shine it with the light. ' She said she had taken it to The Bank of East Asia and the manager had said it was genuine and because the note was issued by The Hong Kong Bank, it should be taken to us for a replacement. Then she threw the thousand-dollar note into the tray (or scoop). "

108. She said she looked at the note. She put the note under a light and it reacted properly but the colour did not look like that of a five-hundred-dollar note, it was lighter.

109. She then said that she told Mrs. CHAN to wait for a while and she called the manager and the matter was explained to him. After he had looked at it under the light, he told Mrs. CHAN that he had to send it to the Main

Treasury. He said he was not sure whether the note was genuine.

110. Mrs. CHAN's reaction was this, according to Christine LAW:

"If you don't know either (meaning if he didn't know whether it was genuine as well as the teller), then give it back to me. "

111. Mr. LEE, the manager said:

"We have told you several times our procedures. We cannot give it back to you. "

112. Christine LAW then described how the manager told Mrs. CHAN to hand over her ID card and she said:

"I demanded her address and telephone number. Mrs. CHAN was unhappy but she did these matters.

 

I told her that the bank would phone her within seven days. Before that I asked her for her account number, if she had an account with the bank, but she said she had not. Then I told her I would ring her up after seven days and a receipt had by then been handed over. "

113. The receipt that she had been given is in standard form and in English and she did not understand English. It sets out certain personal details and the details of the note and says "received from her one Hongkong Bank note" and so forth "suspected of being counterfeit" and ends by saying that:

"The issue of this receipt does not imply any obligation on the part of the Bank to make any payment in respect of the said note whether of its face value or otherwise. "

114. Both the tellers said that when she left, she was upset. Christine LAW described how she later came back alone. It was because the telephone number on her receipt was wrong. It appears that she had given the wrong number to the bank when asked for her details.

115. Christine LAW went on to say that:

"Mrs. CHAN saw the manager again. It was at her request because she raised objections. She said she wanted the banknote back. "

116. The manager, according to Christine LAW, said that the procedure had to be taken and had to be followed and said:

"You wait to be informed. We suspect the note to be false and, therefore, the note has to be sent to the Main Treasury for examination. "

117. Mrs. CHAIN appeared to be somewhat upset. When she left, she took the corrected receipt. She went on to say that she did not remember anyone saying anything about calling the police or anyone wanting or starting to make a telephone call. That is broadly the account of the tellers in this matter.

118. Madam LAW's account was this-after describing going to the first bank, she says:

"I went into the bank and there were many people lining up. I went to one counter and presented the note to a young lady. I said, 'Miss, I have brought this note for verification. ' I showed her the note by holding it up to her and I told her I had brought the note for verification only. The lady reached her hand out, trying to take the note. I held it back and said, 'You make it clear to me. This note is worth much money. ' Then she took it and she said, 'If it is a genuine banknote, it will be returned to you. If it is a fake one, it will be forfeited. ' It was after she had taken the note that she said those last words.

The young lady held up the note and looked at it. Then I heard a click and then I heard something being said like, 'How can she say it is worth much money?' She then went to where the manager was and she asked for my identification card. She said, 'Let me have your ID card. ' She was rather rude. I asked her why she wanted my identification card saying, 'What do you want my identification card for?' Before that she had asked me where I got the banknote. I was a little shocked upon being asked where I got the note and for my identification card. I was displeased and I said, 'Why should you ask me this? I am a businesswoman. " She asked me, 'What business are you in?' and I said, 'Fashion business. ' She said then, 'Do not ask so many questions! When I ask for your identification card, you give it to me. '"

119. There was then, she described, an argument and the manager eventually said that she must produce her identification card and insisted and then said:

 

I provoked the manager by not producing my identification card and when the young man was about to dial, I became frightened. I had told them that I hadn't got my identity card earlier. "

120. Then she described being given the receipt which was in English and she asked him to explain the contents. She said:

"I was told that verification would take seven days and at the end of seven days, if the banknote was proved to be genuine, it would be returned to me. If it was fake, it would be forfeited. "

121. She was cross-examined about that account and I bear in mind what she said in cross-examination. But having considered the evidence that was given on both sides in this matter, I prefer Madam LAW's account. Of course, having regard to the length of time and the importance being placed upon this incident and the happening since this occasion, it would be difficult perhaps for anyone to give a wholly accurate account.

122. But I am certain, first, that the teller Christine LAW did not launch into what can be described as her circular formula at once as she said in her evidence. It would be much more likely, I think, that she said, when she was presented with the note, something of the order of "Hand it over to me. If it is genuine, I will return it to you; and. if not, it will be forfeited" as Madam LAW says.

123. Also I am quite certain, having regard to the background, that Mrs. CHAN never said at any time that she had been told to bring that note in for replacement. That would have been wholly ridiculous in the circumstances for her to say that and I reject that evidence.

124. I am satisfied that she made it clear that she thought the note was valuable. I do not think she repeatedly said anything about this because her husband had told her not to say anything about the deal that had been made, but I am quite certain she said something about what she thought about the value of the note.

125. It is quite clear on the evidence that she was asking for the note back and that it should not be sent to the Main Treasury. I am satisfied that the teller told her originally that the note would be returned to her if it was verified and it was only when she and the manager had both examined it that they decided that it was necessary for it to go to the Treasury.

126. The receipt shows the basis upon which they were holding it because they suspected it of being counterfeit and this was undoubtedly their decision to hold it and the effect is that they were holding it then in accordance with bank procedure against Madam LAW's will.

127. As I have said there is really no room for a finding other than the plaintiff asked for the note back if it couldn't' be verified there and then and the manager refused that relying upon bank procedure.

128. It is clear from William SHEK's evidence that so far as error notes are concerned, the procedure which he told the court about was not known to the teller nor indeed is it probably necessary that it should be known to the teller, because she said she would not give an error note back to a customer if she saw it but she would tell the customer to go to the manager.

129. On the evidence I have heard, I seriously doubt whether the manager himself knew the system as described by William SHEK. Certain it is that when his customer Mrs. CHAN asked for the note back and he said "No, it will have to go to the Treasury", it was then up to him to clarify any matters in relation to the note and whether he was to return it to her, for of course it may be that she having told the teller that the note was in her eyes valuable, that that was not passed on to the manager. But anything told to the teller is told to the bank.

130. In making this finding, I have not overlooked the second plaintiff's evidence that the teller reached out. for the note and that this could not be so because of the barrier on top of the bank counter. She is wrong about this. I do not take the view that because her memory is wrong about that, that she is telling lies. I think she was trying to tell the truth about what happened. She undoubtedly was very considerably upset in the bank when she was there, and it may be that simply the teller was indicating for her to pass over the note because there were people waiting in the bank.

131. Secondly, I have not overlooked the fact that at some stage the second plaintiff indicated or implied that she got the note in the course of business. If her evidence is examined, it is clear that she was uneasy about error notes and about her husband's possession of them. She was not sure at one stage, it seems, whether anyone ought to have such notes in their possession.

132. It was when she was being challenged and it was suggested that it might be a forgery that she implied, perhaps not directly, that she got the note in the course of business; and she repeated that lie--because even if she implied it, it was one--in her statement later to the police.

133. Further, I don't overlook the fact that she might have said something about her husband waiting for the result of the verification. If she said something like that, it was done in her anxiety and her distress to try and get the note back and try to persuade the bank to rely upon the light.

134. Those matters do not disturb in any way my finding that she had indicated to the bank that she wanted the note verified and passed back to her and she wanted that done then and she indicated that she thought the note was valuable and that the only reason the bank kept the note was because they were following bank procedures as they saw it. It was not handed over by way of money.

135. She got the telephone number wrong when she gave it to the bank because she was so distressed with their reaction.

136. I think that there was some suggestion at some stage that the police might be informed if she did not give over her identification card, and the reason was that the bank, as they say in their receipt, suspected this note of being counterfeit.

137. It is right to say that I am satisfied, however, that there was no phone on the wall and if anyone reached for one to make a phone call there, it was not on a phone on the wall. That may be indeed an error on the part of Mrs. CHAN.

138. Everything that happened thereafter is consistent, I believe, with this finding: She was extremely upset and she certainly was not upset in her position about not getting one thousand dollars in return for the note or having to wait for seven days for one thousand dollars.

139. I am satisfied that she and her husband visited the police that day in order to see whether anything could be done. The events on the 21st of September and a further report to the police and the     efforts to get the note back are consistent.

140. The illness that was caused to the first plaintiff is consistent and their immediate recourse to their solicitors and the letter which was thereafter written and the bank's reply are consistent.

141. The result is that I find that that note was bailed to the bank by way of mandate for verification and return.

142. At the Main Treasury also, the bank was following its procedure. I am satisfied that the note was found to be genuine. It was of the wrong colour. No tests of any kind were carried out on that note to discover whether that was printed in the wrong colour or was discoloured, and indeed there was no record of any kind as to the exact nature of the colour of that note.

143. A credit was made by Mr. LEUNG's assistant on page 28, a credit to the bank branch, and in the course of the system the note was passed over to go for destruction. As I have said, if the procedure was followed exactly, it is likely that the note would be destroyed in the normal course either on the 21st or the 22nd of September.

144. Mr. LEUNG had a phone call three days after the receipt of the note. It could have been on the 20th of September but, of course, he cannot remember. If that were so, that was before the note was destroyed. The phone call was asking for the note.

145. As I have said, the effect of his reply was "Bad luck! We are following our procedures here. " He made no effort of any kind to discover whether the note had or had not been destroyed.

146. If he had been able to recover it or if the manager of the branch had followed the procedure as set out by William SHEK or if the bank had been a little more careful, perhaps even a little more considerate towards the plaintiff, none of this would have happened and none of us would be (I suspect) here today.

147. It follows from my finding that the bank was bailee of the note and there was a mandate to verify the note and if it was genuine, to return it, that the plaintiffs were of course entitled to its return; and as now I accept that, on balance of probability, it was destroyed, they are entitled to damages for its conversion.

148. That is subject to one matter, because the bank says that even if all this is so, even if they were a mandatory of the note, then there are exceptional cases where the mandatory does not have to return the chattel. The case of British Crane Hire v. Ipswich Plant Hire^(l) at page 313 D to G has been cited to me. It is said that this case is exceptional and that, therefore, for the reasons which have been given in relation to the bank's duty in relation to maintaining the currency and so forth that they were entitled to keep it.

149. I can deal with this point briefly. In the face of William SHEK's evidence, the argument that the bank were entitled to retain the note as against the plaintiffs is untenable. So the plaintiff is entitled to recover the market value of the note at the time of the conversion, that is, September 1983.

150. Of course, in assessing the market value of the note, it is necessary to decide first what sort of note the bank destroyed. The issue is simple to state. The bank contends that all that was destroyed was a note, a used note which had been deliberately discoloured by the use of chemicals, that therefore it was not a genuine error note and was worth either just one thousand dollars or very little more.

151. The plaintiffs' contention is that the note was a misprinted note, a note misprinted in the wrong colour, that it was a genuine error note and that therefore it was worth a very great deal of money.

152. If the note had been available, if it had been available and produced by the bank and not been destroyed, then this issue could have been resolved with the greatest possible ease. A discoloured note can be tested by the application, a further application of a chemical, hydrogen peroxide, and it can be shown for certain whether the note had been discoloured or printed in the wrong colour.

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153. The note in question was never tested even by the bank when they were considering whether or not to destroy it. It was assumed by the bank that it had been discoloured by some means and there is no evidence before me to show that at that time they knew how such a note could be discoloured. There is no evidence before me as to what tests, in fact, were carried out on this particular note. I will return to that.

154. Now what do the two sides say? First, the plaintiff says that the note was purchased as a genuine note; that it was truly the colour of a five-hundred-dollar note; that they had no reason to examine it other than to examine it under a light to determine whether it was a genuine note; that it was not known to the plaintiff that such a note could be discoloured and, therefore, there was no reason to carry out any tests for colour; and that the bank has by its unlawful act deprived the plaintiff of his necessary evidence to show the true nature of the note. Therefore, it is said on his behalf, first, that the bank should not be allowed to call evidence to show that the note was other than a genuine error note or, (perhaps the same thing), that there is an irrebuttable presumption that the note was a genuine error note and finally, a further alternative, that at the very least there is a very strong presumption that the note was a genuine error note, so that a very high burden indeed is thrown upon the defendant to discharge the presumption.

155. The plaintiff relies upon the maxim "omnia praesumuntur contra spoliatorem”. More cogently, perhaps, the plaintiff relies upon the principle in Armory v. Delamirie⁽²⁾, a case in which the report, as was usual in those days, was very brief; a case in which it was found that the Master was answerable for his apprentice's neglect in being unable to or refusing to produce a jewel which had been bailed.

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156. There was no suggestion in that case that the Master personally was deliberately refusing to produce the jewel, but there can be little doubt that the apprentice had either deliberately made off with it or had certainly unlawfully refused to return it.

157. The principle was that in those circumstances the court should presume the jewel to be of the best quality that would fit into the setting.

158. A further case has been cited to me, Gray v. Haig⁽³⁾, in which The Master of the Rolls, then Sir John Romilly, said in relation to the deliberate destruction of accounts by one of the parties in order to take advantage:

"I am compelled to act upon the principle laid down in the well-known case, of Armory v. Delamirie⁽²⁾ and presume, as against the person who destroyed the evidence, everything most unfavourable to him, which is consistent with the rest of the facts, which are either admitted or proved. "

159. So far as the defendants are concerned, the defendants say that reliance on this principle is not appropriate because the plaintiff has to prove that the note was an error note and on a balance of probability from the evidence that the defendants have called, it could not have been such, for on the proved facts the defendants say it was a deliberately discoloured note.

160. What are the principles that I must apply? First of all, I am satisfied that evidence about the note, even if indirect evidence, is admissible to show what kind of note it was and, therefore, the evidence which I admitted de been esse from the expert Mr. Thomas from Bradbury & Wilkinson I find is admissible.

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161. But there is no doubt that the note was destroyed and was destroyed by the defendants' wrongful act. It was not a simple misunderstanding nor was it simple carelessness and regarded objectively--I say "objectively" because one is conscious that in a large organization a number of people may play minor parts, simply doing their duty as they see it, but it may add up in the end to an objectionable situation--and so I say regarded objectively, it was not only an unlawful act but the sending of the note for destruction was presumptuous, for it was presumed that the note was discoloured without any test and it was presumed that there were rights to do this when none existed.

162. Secondly, it was inconsiderate. It was inconsiderate of the plaintiffs' obvious wishes in favour of the system that was laid down as they saw it.

163. And finally, I am bound to say that objectively it was arrogant, for it was an assumption of a right to destroy when none existed. It was a refusal to return the note and it was a refusal even to attempt to find the note if it had not then been destroyed. Mr. LEUNG said, "Even if it might have been possible to get the note back, we wouldn't do that. "

164. However, I add and I say at this moment that in spite of that, there is no question here of the defendants' deliberately destroying evidence in order to gain an advantage as in the case of Gray v. Haig⁽³⁾ and this is certainly not a case where the plaintiff is being deprived by the defendant of evidence, where the defendant is trying to seek its own profit as was the situation in Armory v. Delamirie⁽²⁾.

165. Of course, it makes little difference to the plaintiff whether the defendant deliberately destroys evidence to gain an advantage or whether the destruction is otherwise unlawful because the plaintiff is in serious danger of being put into a serious disadvantage in relation to the evidence that the plaintiff can call.

166. However, the fact that these matters are not deliberate on the defendants' part to gain an advantage or to gain a profit does make a difference to the way in which the "contra spoliatorem" principle is applied.

167. If deliberate, the presumption which is made against the defendant is in practice irrebuttable, almost to the extent of being an estoppel. It depends on the circumstances.

168. Here, as I have said, the evidence is not inadmissible but the defendants' unlawful destruction of the chattel means that the presumption of the chattel being of the best quality will only be rebutted by the defendants calling cogent, compelling and direct evidence as to its nature, of course always compared with the evidence which is available to the plaintiff.

169. Let me try now to apply the proper principles to the evidence that has been given in this case, and let me deal first with the direct evidence in relation to the note which always is of prime importance.

170. The direct evidence given by the defendants about the note has been limited to the tellers and to Mr. LEUNG. So far as Mr. LEUNG is concerned, his evidence about examining the note was superficial in the extreme. Indeed he gave no evidence as to the manner in which he examined the note in order to determine that it was a genuine note. On this matter he is not to be blamed in any way, for he was not to know at the time that he might be called upon to give any evidence, but the result is that his evidence is unimpressive. I doubt whether he has any real memory of the note itself. He had no concern to remember it in detail and, therefore, his evidence as direct evidence of the note and its exact colour is unhelpful to me.

171. So far as the tellers were concerned, it was not their duty to make' any examination of the colour of the note. Once they had decided it was of a different colour to that which it ought to have been, their task was to refer the matter to the manager and then of course for further examination to the Main Treasury.

172. I have found that their evidence is not acceptable on other grounds and their direct evidence of the nature of the note I find is not helpful and is likely to be unreliable.

173. The direct evidence given by the first plaintiff and on his behalf is considerably more cogent. One might expect it in a way because having decided that he paid a great deal of money for the note, it is likely that he would give it a little more attention within the limits of his knowledge at the time.

174. He was at the time collecting or beginning to collect error notes, but he was uninformed, inexpert and in any event only a beginner. He examined the note and he was satisfied from his examination that it was the same colour as a five-hundred-dollar note. If it had been a different colour, he certainly would have remembered and I find that on this matter his evidence is reliable and I accept it.

175. But, of course, it doesn't stand alone. He was pressed at very great length about the colour of the note and again that served, so far as I was concerned, to make me think, far from the fact that I could not rely on him, that I am able to rely on him.

176. He examined the note closely for smoothness among other things because he had heard that a US note could be tampered with by rubbing the colour.

177. So far as Madam LAW was concerned, I found her evidence upon this impressive. Not because she was always accurate, because I found she is not always accurate. She was a rather timid and anxious witness trying, I think, to give an accurate account and she was giving an account of things that her husband did not know of until she was in the witness-box.

178. It is a fact that colours are difficult to remember unless a direct comparison is made. She said and I accept that a comparison was made between this note and a five-hundred-dollar note and she said the colours were exactly the same.

179. Further, she described a comparison of the colour when CHAN Chun-yip was in The Bank of East Asia. I am satisfied that CHAN Chun-yip was there and I am satisfied that he made a comparison. Madam LAW described his action as being "smart" because he produced a five-hundred-dollar note from his pocket for the very purpose and it was compared there and found to be the same as she saw it.

180. CHAN Chun-yip gave the same evidence. He was mistaken about the nature of the note that he was examining, but as I have already said, he did not--as he must know now that he was mistaken, his impression of the notes, being a thousand-dollar note and a five-hundred-dollar note, so far as the lions are concerned being exactly the same-- he did not try to trim his evidence. He tried to give his recollection and his recollection is at fault on that matter.

181. So far as the comparison of the colour is concerned, I think it supports significantly the comparison that had been made by Madam LAW.

182. Therefore, so far as the direct evidence is concerned, the evidence given by the plaintiff is far to be preferred from that given by the defendants, and the direct evidence would lead to the conclusion that this note was exactly the same as a five-hundred-dollar note and would lead to it being highly likely that the note was printed in this colour and that it was a genuine error note.

183. As far as I recall, it was not said by any witness that notes of exactly the same colour as a five-hundred-dollar note were produced by the discolouration process and certainly none of the notes that have been displayed here, which have been discoloured, are exactly the same colour.

184. I find the note concerned in the case was a circulated note and, therefore, it is very unlikely that anyone had discoloured it in order to deceive an unsuspecting collector.

185. That's the direct evidence. The bank has called indirect evidence. The purpose of this evidence was to invite me to infer that the note was one which had been discoloured.

186. The evidence in this regard is twofold. First, a few other notes were produced which were said to be discoloured because they were not the same as a proper thousand-dollar note and they were not the same as a proper five-hundred-dollar note. These notes had been collected, it was said, by the bank since the case began but the precise circumstances in which they were obtained remain unknown.

187. It is to be noted that although in the agreed bundle there are documents which relate to discoloured notes, there are no documents which relate to discoloured notes, internal documents, in the bank before the incidents which gave rise to this case.

188. There is no evidence that any note had been sent to the printers or that the printers had been consulted about the discolouration of notes before this case arose and whereas, therefore, there has been -- witnesses have spoken from time to time about notes being of the wrong colour, the nature of such notes as have been described is doubtful.

189. Secondly, evidence has been given of the printing process and the system of checking end inspection at Bradbury & Wilkinson. That evidence has been given by Mr. Thomas and there is no challenge in the sense that there is no challenge that Mr. Thomas was describing a system which was not carried out. His evidence on this matter is a matter of record. and I am not going to, therefore, set it all out or rehearse it.

190. He said that thousand-dollar notes are printed eighteen on a sheet. First of all, they are printed by an offset process, the first offset process being on one side and the second offset process on the other. But those earlier matters are unimportant, so far as this case is concerned. It is the intaglio, the direct printing process, which is important.

191. First of all, he said the system is that one side of the note is printed, still being eighteen in a sheet. That goes into a drum, all the sheets go into a drum and then the ink has to dry. It is better that they have something like seven days to dry.

192. Then the next intaglio process is carried out, printing the other side of the note with the colour. And finally, there is a third intaglio process.

193. There is elaborate checking and after that, printing with the numbers, date and signature and after that guillotining, later packing in numerical order, sealing and despatching.

194. The ink which is used on one side of the note is slightly different from that used on the other in the proper process. It has something to do with the pressure under which the note is placed to do the first intaglio printing.

195. There is careful checking of the ink itself which has to be withdrawn from stores against signatures and then put into the machines. The machines are washed out every night.

196. Now I can summarize this evidence quite briefly, for it is clear that if this system is followed, that is if the notes are printed according to the system laid down and if the machinery operates properly and if the checking is done properly, it is highly unlikely that a thousand-dollar-note could be printed both sides in the wrong colour. Indeed if all those things are done and the checks are made carefully, it would be near impossible for there to be an error note.

197. But, of course, the evidence is that error notes are easily available and that there are some thirty dealers apparently here in Hong Kong. Having heard about the system and having seen a note which has been produced by Mr. CHAN, it is difficult to even understand how such a note could be printed.

198. But leaving that aside, the fact is that machines do go wrong, that systems are not followed as they should be, check are not made as carefully as they should be, and those who are carrying out the systems do not always even try to follow them on occasions.

199. Now all those are general matters and it is no criticism in relation to Mr. Thomas. But the evidence of system and checks are not always a reliable guide as to the result which is achieved. I may say that I have some thirty years' experience at the bar of considering industrial systems in relation to things that have happened that should never have happened. One knows regrettably that because there is a system, it does not mean that unusual things cannot result.

200. So this evidence which is indirect must be put and firmly put into its proper perspective and the question is: Is that evidence enough to displace the direct evidence which appears on its own to be cogent and compelling, if not, I may say, conclusive?

201. Well now, when I consider the whole of that matter and I compare the direct evidence with the indirect evidence and then apply properly the principles in Armory v. Delamirie⁽²⁾, then I find that the heavy burden which is placed upon the defendants in these circumstances is not discharged and indeed I find also that the direct evidence which I have accepted is of itself compelling that this was a genuine error note. I so find.

202. That brings me now to the market value of a genuine error note, a one-thousand-dollar note printed in the wrong colour. The plaintiffs' case and the defendants' case are astonishingly apart.

203. The plaintiff's case is simply that there is no market for such a note. It is so rare and that on that basis the plaintiff had an agreement for the sale of this note, that it would have been sold for ten million, that there was no prospect of obtaining a replacement in the market and therefore, the proper measure of damages is the loss under that contract, and France v. Gaudet⁽⁴⁾ is cited to me.

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204. Failing that, the plaintiff says that the market value of such a note on their evidence and the evidence of their experts is between one million dollars and five million dollars.

205. On the other hand, the defendants' case is these prices are totally absurd and that at-the most the value of such a genuinely printed error note is, as Mr. CHAN says, three thousand dollars or, I suppose, just possibly on one view of Mr. MAO's evidence, five thousand. But, of course, he said at one stage that he did not know anything about the value of error notes.

206. Let me turn first to the contract for ten million dollars. Having heard CHAN Chun-yip the agent and CHAN Shun-hoi the purchaser and bearing in mind the document of agency which supports their relationship as principal and agent in respect of this purchase and the so-called "certificate" which was brought into being after the loss of the note to indicate that CHAN Shun-hoi still wanted to buy, I do not think that this is a fabricated account. It is extremely bizarre but I am quite sure that it is not a fabricated account.

207. However, the chances of the sale actually being effected at ten million dollars, once CHAN Shun-hoi had come to his senses about the matter, are I believe quite remote.

208. I believe that the situation was this, in so far as I have to make a decision about it, that CHAN Shun-hoi was a man with a great deal more money than sense. I think he had a very great deal of the former and very little of the latter.

209. He, because he perhaps came by his money somewhat easily from his nightclub in Bangkok, became interested in collecting and he trusted CHAN Chun-yip absolutely, but CHAN Shun-hoi knew nothing about collecting error notes. In the course of cross-examination by Mr. Bunting, he showed that he knew little about anything that he had collected in his house, assuming he had collected something in the first place.

210. But I am satisfied that because he trusted CHAN Chun-yip absolutely, he came to be of the view that there was a note here which was of enormous value and that was enthusiasm that had been communicated by the plaintiff through CHAN Chun-yip to CHAN Shun-hoi, and I think they were all individually and collectively deceived about the real value of this note. None of them knew very much about error notes. Certainly none of them knew anything about the printing process and, therefore, how rare such a note was likely to be.

211. But if one thinks through what was likely to have happened, CHAN Shun-hoi wanted a certificate in relation to the note showing that it was genuine. That could not have been obtained from the bank on the day that CHAN Chun-yip was there. If a certificate had been sought, a lot of tests would have been necessary. They would have gone to solicitors. Once solicitors were brought in, I believe that CHAN Shun-hoi would have come to his senses and the chances of this deal going through in the end were remote. However, I do accept that so far as the plaintiff was concerned, he really believed that it would go through.

212. So what is the market value of this note on the evidence? And I think I shall turn to that, if I may, after the adjournment.

1:00 p.m. Court adjourns

2.30 p.m. Court resumes.

Appearances as before.

COURT: Now I turn to what is the market value of this note for this reason, that although I am satisfied., as I have said, that the plaintiff could not have gone out and purchased on the market a note like this, it does not mean to say that there is not a market in error notes, and it does not mean to say that no market value can be put on such a note.

213. In Building and Civil Engineering Holiday Scheme Management v. The Post Office⁽⁵⁾, at 264 Lord Denning, the caster of the Rolls, said this (although in another context),

 

"The 'market value' here means the price at which the goods may be expected to be bought and sold as between a willing seller and a willing buyer, and ever though one or both may be hypothetical rather than real."

 

In considering the market value of the note on the evidence that I have heard, I have to turn, first of all, to the expert evidence. There were two experts who gave evidence on behalf of the defendants and two experts on behalf of the plaintiffs.

214. I turn to the defendants' expert evidence first. Mr. Mao was an excellent witness. He is undoubtedly a man of great expertise in relation to currency, paper currency by that I mean, and he has a collection of notes but only very few of which are error notes. And it became clear in the course of his evidence, especially under cross-examination, that he really was unable to make any proper estimate, any proper expert estimate of the value on the market of such a note as is involved in this case.

215. Mr. CHAN also gave evidence. He is very knowledgeable about notes and he collects error notes., and in the course of giving his evidence he was asked to give his opinion as to the value of the note in this case. The astonishing thing is that when he was so asked, it was the first time that he had been asked to make that estimate.

__________

216. The statement, as an expert, which is in front of the court was a superficial one and without regard to some of the real issues in the case. That is not his fault. There were two ways in which he could be an expert in this matter. He could have real knowledge of the market. It is clear that he did not have any real or deep knowledge of the market. Or secondly, I suppose, he could have had a detailed knowledge of the printing process from which it would have been possible for him to give some -- have some judgement of the rarity of this note.

217. It became clear that he had no knowledge of the printing process at all, so was not able to judge the rarity of this note.

218. Now in the light of those matters and particularly the fact that he had not been given the opportunity of considering the question relating to the value of this note before he was giving evidence in the witness box, I find that his evidence on the value is unreliable and I reject it. Getting the evidence on this particular point from him was rather like trying to squeeze blood out of a stone.

219. So so far as the defendants are concerned, I find the expert evidence which was called of no assistance.

220. So far as the plaintiff's side was concerned, two witnesses gave evidence first of all, Mr. LAW from Macau. He has had a number of years of experience in trading in error notes. I am bound to say that I was not greatly impressed by him as a witness. I found it difficult to accept his evidence in relation to the value of this note. I think it was really out of his field, although I do accept his evidence that rarity is a test for the value. His estimate was that one million dollars would be, as it were, the starting price.

221. One important part of his evidence I do accept. I accept that error notes are sold for sums which were quite unknown in amount to the defendants` experts. He told the court, Mr. LAU. told the court that he gave $15,000 for a U.S. note and he produced a document to support that purchase. I accept that he did buy a note, an error note which he described, for that amount.

222. His evidence as to his sale of that note was much less cogent, but perhaps in the end it matters not.

223. Mr. LEUNG Tai-leung then gave evidence. He is a hawker and he has been dealing for three years in error notes. In the more valuable ones, he has been dealing as a go-between because he said he hadn't the capital to purchase them.

224. A certain amount of effort was spent by the Bank in taking photographs of him selling on the street. And no doubt the object of all that was to persuade me that because he was a hawker, he had no knowledge of the market. Well I could only say about that that it was, of course, useful to know that. Mr. LEUNG Tai-leung never tried to hide that fact and I, sitting here, view witnesses as I see them in the witness box with, of course, a knowledge of their background.

225. It would have been perhaps more useful for the Bank to spend time getting their own expert evidence in order rather than going taking photographs of Mr. LEUNG Tai-leung at his street stall. But again perhaps that is an aside.

226. A good deal of scorn was poured upon Mr. LEUNG Tai-leung but for myself, I found him to be a good deal more streetwise and have a good deal more knowledge of the real market than the other experts who were called.

227. He produced two pairs of notes which he had for sale as a go-between and he told the court about the asking price. He said one pair the asking price was $450,000 and another pair $400,000 and, of course, he emphasized rightly that those were only the asking prices: He had had an offer, he said, for the second pair of $260,000 but that hadn't been accepted by his client and he hadn't given an opinion as to whether that should be accepted.

228. What he did do, however, in the course of his evidence was he gave his opinion about the value of those notes with his reasons. Now, of course, that evidence is only marginally relevant to any assessment of the value of the note concerned in the case for when Mr. LEUNG Tai-leung came to this note, it was clear that he was out of his depth as well.  He gave an estimate of about five million as his opinion of its value. In the course of rather casual conversation with his solicitor -- with not his solicitor, the solicitor for the plaintiffs earlier -- he had given one million and that became part of his written evidence and I find this part of his evidence unreliable in the sense that I think he was doing his best but he was out of his depth.

229. The importance of his evidence is that it indicates that error notes are being bought and sold for a great deal more than the defendants' experts knew about. So far as those two pairs of notes are concerned, on any view, having considered the prices process and the rarity of the note which that indicates, this note must be worth more.

230. Of course, if the evidence ended there, I would be facing a tremendous problem because as I have indicated, I really have rejected all four experts as being reliable upon the market value of this note. Fortunately, the evidence does not stop there because I have in front of me in the case evidence of a real sale, which I accept. That is evidence of the sale to the plaintiff himself. And that evidence is consistent with the rest of the - with part of the experts' evidence which I do accept and with the other evidence in the case. It is consistent with the apparent rarity of this note gained from a knowledge of the process of printing which it appears none of the experts who came to value the note, had. And it is consistent with the prices being paid for other notes that I heard of from the experts themselves.

231. The sale to the plaintiff was in June of 1982. He paid $350,000 for the note. I have to place a value on -- a market value on that note in September of 1983. It is correct, therefore, in my judgement, that there should be some but only a modest increase in that value between 1982 and -- June 1982 and September 1983. I assess on all the evidence the market value of this note at $375,000.

232. That is not an end of the case. Each of the plaintiffs also claims damages for personal injuries. Now I am going to pause there because although I am going althought I am going to consider very briefly the questious relating to personal injuries, I am quite certain that these damages in a claim for conversion of a chattel of this kind are too remote and that the plaintiffs cannot recover them.

233. Of course, on the test of foreseeability in tort, in certain torts, indeed marry torts, damages can be recovered for personal injuries. Often where there is a personal element in the effect of the tort or indeed in the contract, then damages can be recovered for inconvenience and distress. Put in a case such as this where the tort is the conversion of a chattel, a banknote, it is not foreseeable that the plaintiffs will suffer personal injuries, and on that basis these damages claimed are too remote as I say, and they are not recoverable.

234. However, if I should be wrong about that, it is right that I should consider the evidence. I do so very briefly. The first plaintiff, as I have said already, suffers from depressive illness. It is quite clear it is a direct cause of the Bank's retention of the note.

235. So far as he is concerned; I accept Dr. Singer's reports and Dr. Singer's evidence to the effect that he has been suffering from those matters, those problems which are set out in the reports and that with treatment, he will now hopefully recover in about six months.

236. So far as the second plaintiff is concerned, her condition is very severe. The causes of that condition are in dispute. As I think I said in the course of argument, I was in fact greatly impressed by Dr. Green and the manner in which he gave his evidence, and the way in which he was prepared to concede one matter. It was a matter which related to Dr. Singer's treatment of the first plaintiff and his views as to how quickly he would recover.

237. I was, I may say, equally impressed with Dr. Singer. And having formed that high view of both those experts and when I have to consider which of them is right in relation to the causes of the second plaintiff's illness, (which is a very severe anxiety state), in the end I am driven to accept Dr. Singer's view on behalf of the plaintiff.

238. I believe, first of all, that Dr. Singer was in a much better position to make a judgement.  He had been treating the second plaintiff and has been treating her frequently right up to the present moment. Whereas Dr. Green, who made his diagnosis on the one occasion that he saw her, he didn't appreciate for some reason at the time when he was seeing her that he was going to make a report upon her, and undoubtedly the questions that she was asked in the course of that examination related very greatly to her husband's problems. Now, of course, that was relevant (and very much so) to Dr. Green's examination but it may have, I think, distracted from an in-depth consideration of the causes of her condition.

239. There is also the danger which I know of from many years experience of dealing with this kind of problem, that when a plaintiff is interviewed by a doctor for the -- appearing for the defendants, that there is a tendency to, to use a colloquial term "to put it on a bit" for the defendants' doctor.

240. Now having regard to those matters, as I say, I am satisfied that Dr. Singer's views as to her condition are correct, and the causes of it. It follows that as a direct consequence of the retention of the note, this has caused serious illness to both plaintiffs, and I so find.

241. If I had to assess the damages, I would assess the general damages in relation to the first plaintiff at $40,000 and in relation to the second plaintiff $50,000 and in addition, of course, there would be the special damages in relation to the treatment, which are in evidence, and that I am not going to rehearse.

242. Now it follows from that that the plaintiff is entitled to judgement in the sum of $375,000 with interest from 17th September, 1983. I think actually from - not from 17th September, but from 22nd September which is the last day upon which the note could have been destroyed.

MR. BUNTING :    I think my learned friend is right about rate of interest.

MR. MUMFORD :    I am much obliged my Lord. And, of course, I must ask for costs.

COURT :    Yes. You can't say anything about that, Mr. Buntine, can you?

MR. BUNTING :    My Lord, I can, yes.

COURT :    Oh, yes, right.

MR. BUNTING :    I would like to.

COURT :    Yes, of course.

COURT :    Of course.

MR. BUNTING :    ... in relation to costs. I have already formulated one or two things.

COURT :    Yes.

MR. BUNTING :    I should like to check through the judgement in relation to that.

COURT :    Certainly. Well perhaps you will let me know when you are ready.

3.00 p.m. Court adjourns:

3.10 p.m. Court resumes.

Appearances as before.

DISCUSSION BETWEEN COURT AIM COUNSEL RE COSTS.

243. The basis is that the pleadings - the pleaded case is that the plaintiffs' claim in detinue alternatively in conversion and in the claim under conversion, plaintiffs alleged that they had suffered loss and damage and then give particulars of special damage which relate to the ten million whereas there ought to have been a claim for ten million alternatively the market value and so that ought to be specified, not only there but also in the prayer.

244. How this was raised by Mr. Bunting at an early stage in this Action. My view is simply this. That looking at this pleading from the point of view of the defendant and being realistic about it, it cannot have been in anyone's mind that if a market value charged in the course of the evidence that the plaintiffs weren't entitled to recover the market value of the note even though it fell below ten million. In those circumstances, as the plaintiffs have had to bring this Action in order to get redress, it is open also to the defendants to pay into court to protect themselves absolutely from costs that are awarded.

245. They certainly considered paying in. When considering paying in the question of the market value of this note must have been considered by the defendant. If it wasn't I would be very surprised indeed, and in those circum-stances I am quite satisfied that justice requires that the plaintiffs should have the costs and also the costs related to the issue of the value of the note. And that includes the costs relating to the contract which is an alternative claim.

246. Now so far as the other matters are concerned, the defendants ask that I should make a special order in relation to the wasted time. Time was wasted in this case through no one's fault, and again the plaintiffs have to bring these proceedings in order to get redress and the costs in relation to that, in my opinion, should follow the event whatever may have happened in other cases. That is one of the risks of litigation.

247. So far as the claim for personal injuries is concerned, then that claim, I have said, was bad in law. In those circumstances. ; it would be wrong that the defendants should pay the costs relating to that issue. So so far as the medical issue is concerned, the fair and proper order in my judgement is that there should be no order for costs in relation to the medical issue and such time as was spent upon that. And I am afraid that will be a matter, if parties can't agree, for the taxing master to resolve.

248. Now subject to those matters, there will be an order for costs against the defendants. I am greatly obliged.

(1)    [1975] QB 303

(2)    (1722) 1 Strange Law Reports 505

(3)    (1855) 13 Beavan 65

(4)    (1871) LR 6 QB 199

(5) 1966 (1) Q,B., 247