CHOI LIN-CHI v. KOBAYASHI (HK) LTD

bjbj CACV000137/1980 Cheque - deposited by 2nd Defendant with Plaintiffs, brokers on Gold Exchange, in respect of opening of a second account - first account substantially in debit - Order XIV - 2nd Defendant alleging losses on first account due to breach of instructions given by him - held that (1) there was consideration for the cheques and (2) no cross-claim could be allowed to defeat Plaintiffs' right to summary judgment, there being no allegation of invalidity or of fraud. IN THE COURT OF APPEAL 1980 No. 137 (Civil) BETWEEN CHOI Lin-chi Appellant (2nd Defendant) KOBAYASHI (H.K.) LIMITED Respondent (Plaintiff) ----------------- Coram: Huggins, Leonard and Cons, JJ.A. Date of Judgment: 24th October 1980. ----------------- JUDGMENT ----------------- Huggins, J.A.: In this case the Plaintiffs, a limited company who are brokers on the Gold Exchange, sued upon three cheques against two Defendants. We are concerned only with the third of the cheques, drawn by the 2nd Defendant. The Plaintiffs sought summary judgment under Order 14. The matter came before the Registrar, who gave leave to enter final judgment. The 2nd Defendant appealed to a judge in chambers. The learned judge decided that there should be conditional leave to defend, the condition being that the whole amount of the cheque, namely $400,000 be paid into court. Both parties appeal to this court. The 2nd Defendant appeals and asks us to order unconditional leave to defend. The Plaintiffs seek to restore the order of the learned Registrar. The whole matter arises out of dealings in gold. The Plaintiffs opened an account for the 2nd Defendant, who bought and sold units of gold. There came a time when, according to the Plaintiffs, the 2nd Defendant was making heavy losses and they required what is described as a margin but which in fact was a deposit against the losses being made, and there is a dispute as to the reason which actually led to the giving of the cheque, but this much is clear, that the Plaintiffs allowed the 2nd Defendant to open a new account if he would pay $400,000, and the cheque was in respect of that consideration. The Plaintiffs did open the account and the cheque was given. The dispute mainly relates to whether or not the Plaintiffs were in breach of instructions given by the 2nd Defendant in relation to the original account and whether they are to blame for anyway a large part of the losses which were incurred by the 2nd Defendant on that account. The second account having been opened, the Plaintiffs, for a reason which is by no means clear to me, allowed the 2nd Defendant outside business hours to buy some gold at a price which was different from that which was ruling at the time business closed on that day and which was favourable to the 2nd Defendant, but that was the only transaction which took place. The gold was sold next morning at a profit of some $46,000 and the 2nd Defendant then closed the second account. The 2nd Defendant contends that, having given this cheque as a deposit in respect of the second account and the second account having been closed - and closed before the cheque was presented -, the consideration for that cheque has failed. With respect, I do not think that can be sustained. The consideration was clearly - although it was expressed by the 2nd Defendant as the continuing of the account - the opening of the account and the continuing of the dealings between the parties. Therefore, as soon as the account was opened and business commenced on that second account I think the consideration was supplied. As an alternative, it is argued on behalf of the 2nd Defendant that he has a claim against the Plaintiffs for the return of the deposit. The law, as I understand it, has long been that a cross-claim will not be allowed against a bill of exchange except in very limited circumstances. We were referred to Nova (Jersey) Knit Ltd. v. Kammgarn Spinnerei G.M.B.H. [1977] 1 Lloyd's Rep. 463 and the citation at p.469 from the speech of Lord Wilberforce: " And it is for this reason that English law does not allow cross-claims, or defences, except such limited defences as those based on fraud, invalidity, or failure of consideration, to be made". I have already said, I do not think here there was any failure of consideration, and there is certainly no allegation of invalidity or of fraud. That being so, I think that the learned Registrar was right and that there was no defence to this action and leave to enter judgment ought to be given. That would not prevent the 2nd Defendant from bringing a claim against the Plaintiffs in respect of the alleged failure to obey his instructions. Whatever might be the result of those proceedings clearly there are matters of grave suspicion on both sides as to what has happened in the dealings between them. In particular I refer to the transaction on the second account whereby, after hours, the Plaintiffs apparently allowed the 2nd Defendant to buy gold - from whom, it is not stated - and to buy it at a price other than that ruling on the market, but these are not matters which I think are relevant to the present proceedings and, as I say, I would restore the order of the Registrar. The order then should be that the appeal is dismissed and the cross-appeal is allowed. Leonard, J.A.: I, likewise, would restore the order of the Registrar for the reasons the President has given. Cons, J.A.: I would make the same order. 24th October 1980. Representation: PAGE PAGE PAGE - &`#$ BD|& CACV001137/1980 CHOI LIN-CHI v. KOBAYASHI (H.K.) LIMITED Normal Microsoft Word 9.0 Judiciary Hong Kong SAR Judiciary Hong Kong SAR CACV001137/1980 CHOI LIN-CHI v. KOBAYASHI (H.K.) LIMITED Title Microsoft Word Document MSWordDoc Word.Document.8 CACV001137/1980 CHOI LIN-CHI v. KOBAYASHI (H.K.) LIMITED Normal Microsoft Word 9.0 Judiciary Hong Kong SAR Judiciary Hong Kong SAR CACV001137/1980 CHOI LIN-CHI v. KOBAYASHI (H.K.) LIMITED Title