Algemene Bank Nederland NV v Happy Valley Restaurant Pte Ltd

• Jurisdiction: Singapore
• Judge: Lord Asquith of Bishopstone
• Judgment Date: 10 April 1991
• Neutral Citation: [1991] SGHC 48
• Date: 10 April 1991
• Subject Matter: Civil Procedure,Banking,Pleadings,Cheques,Application to amend defence,Amendment,Whether proposed amendments were of a material nature and would unfairly prejudice the plaintiffs,Whether cheques crossed 'Account Payee Only' and 'Not Negotiable' transferable,Account payee crossing,ss 8(1), (2), (4), 30 & 81 Bills of Exchange Act (Cap 23),Presumption of consideration from person suing on bills and notes until contrary was shown
• Docket Number: Suits Nos 1033 of 1983 and 5224 of 1984
• Published date: 19 September 2003
• Defendant Counsel: Tang Liang Hong and Siaw Kheng Boon (Tang & Co)
• Court: High Court (Singapore)
• Plaintiff Counsel: Steven Chong (Drew & Napier)

The plaintiffs are a Dutch bank carrying on business in Singapore. On 16 July 1982 a company, Maris Enterprises (Pte) Ltd (hereinafter called Maris), applied to the plaintiffs for the issue of a letter of credit in favour of Stemark Industries Ltd of Hong Kong (hereinafter called Stemark) for a sum of HK$600,000 (equivalent to S$213,900) for the purchase of 300 katies of sharksfin and 100 katies of abalones. The quantity of the sharksfin was subsequently amended to be only 100 katies. Pursuant thereto, a letter of credit was duly issued by the plaintiffs in favour of Stemark.

The goods in question were conveyed by Cathay Pacific Airways from Hong Kong to Singapore on or about 21 August 1982. The air waybill listed the plaintiffs as the consignees. It also stated that Maris should be notified when the goods arrived. Normally the plaintiffs would allow Maris to take the goods against a trust receipt. In this instance the plaintiffs refused because Maris had an overdue trust receipt in respect of an earlier transaction (involving diamonds) amounting to S$295,000. In view of this the plaintiffs instructed KC Dat, a reputable firm of removers, to take delivery of the goods and to store them in an air-conditioned premises. Various proposals were made by Maris to take delivery of the goods but those proposals were not acceptable to the plaintiffs. One David Yong was the person who was managing the affairs of Maris and talking to the plaintiffs` officers.

Then on or about 2 December 1982 David Yong, acting for Maris, had a discussion with officers of the plaintiffs with a view to obtaining the release of the goods. This led to a certain arrangement which was set out in a letter of 2 December 1982 (AB54) from Maris. This arrangement involved the payment of $100,000 for the outstanding trust receipt of Maris and a scheme of payment for $213,900 in respect of the sharksfin and abalones (hereinafter called the goods). In the letter of 2 December 1982 a first cheque for $50,000 was enclosed. The cheque was honoured. On 22 December 1982, Maris wrote again to the plaintiffs informing them that the ultimate buyer of the goods, ie Happy Valley Restaurant (Pte) Ltd, the defendants (hereinafter referred to as Happy Valley), were not agreeable to the terms earlier agreed. Instead the following was proposed: on delivery of the goods to the defendants the following cheques would be issued:

(i) a cheque for $50,000, post-dated to 15 days after delivery and made payable to Maris;

(ii) three cheques of equal amounts totalling $213,900, the first of which was to be post-dated 30 days after delivery and the subsequent cheques to be post-dated at 30-day intervals and the cheques were to be made payable to the plaintiffs.

Both the letters of 2 December 1982 and 22 December 1982 were copied by Maris to Happy Valley.

Accordingly, on 11 January 1983 four cheques were issued by Happy Valley for the sums of $50,000, $71,300, $71,300 and $71,300 and post-dated 31 January 1983, 28 February 1983, 31 March 1983 and 30 April 1983 respectively. However, the last three cheques, instead of being made payable to the plaintiffs, as agreed, were made payable to Maris. These cheques were, on the same day, indorsed and forwarded by Maris to the plaintiffs with a request that the plaintiffs deliver the title documents relating to the goods directly to Happy Valley. Notwithstanding that there was a slight deviation from the original agreement, as the three later cheques should have been made payable to the plaintiffs, the latter decided to accept them on their being indorsed over by Maris. As instructed by the plaintiffs, the goods were delivered by KC Dat to Happy Valley on or about 13 January 1983. Subsequently, all the four cheques were dishonoured on the due dates when they were presented for payment. The present two actions have been instituted by the plaintiffs to recover the four sums under the four cheques. The two actions have been consolidated by an order of court dated 11 February 1985.

The claim of the plaintiffs is as an indorsee of the four cheques. At all relevant times, the principal shareholder of Happy Valley, Maris and Stemark was one Nicholas Chu, except that in December 1982/January 1983, Nicholas Chu`s shares in Happy Valley were bought over by his half brother, Aloysius Chu.

In their defence, Happy Valley state that as the cheques were crossed `account payee only` and `not negotiable`, they deny that the plaintiffs, as indorsees, are entitled to payment on the said cheques on the ground that there was a total failure of consideration. Happy Valley say that what they had agreed to purchase from Maris were 100 katies of superior sharksfins and 100 katies of superior abalones. In forwarding the four cheques in question to Maris on 11 January 1983, Happy Valley had, in their letter of that date, expressly stated that `we reserve the right to reject any part of the shipment should they not be of the quality as sample shown and quantity as specified`. Happy Valley claim that when the goods were delivered they were found not to be of the quality which Happy Valley had contracted to buy. Happy Valley have also pleaded that the quantity tendered was less than that agreed to (this plea has been withdrawn). By a letter dated 15 January 1983 Happy Valley informed Maris that they had rejected the goods and would stop payment on the four cheques. They further aver in their defence that in spite of the notice of rejection given on 15 January 1983, Maris fraudulently indorsed the four cheques over to the plaintiff on 31 January 1983, 28 February 1983, 31 March 1983, 30 April 1983 respectively. Happy Valley say that in view of the breach of a fundamental term of the contract of sale and purchase, Maris was not entitled to any payment whatsoever and therefore by virtue of s 81 of the Bills of Exchange Act, Maris was not capable of giving a better title to the said cheques than that which Maris itself had.

Application to amend defence

It would be appropriate for me at this juncture to refer to an application made by Happy Valley to amend their defence in order to introduce the following three additional defences:

(i) that Maris was, at all material times, prohibited from and was not capable of transferring the cheques to the plaintiffs;

(ii) that the sharksfin and abalones delivered were infested with worms;

(iii) that the rejection conveyed in the letter of Happy Valley of 15 January 1983 was accepted orally by Maris, through its manager, David Yong, sometime in January 1983.

Now this application to amend the defence was only made after the plaintiffs had closed their case and the defendants had begun to call their first witness and while the parties were waiting for dates to be allocated for the resumed hearing the actions. As these proposed amendments were of a material nature and as they would unfairly prejudice the plaintiffs, particularly in relation to the second and the third amendments, and as the plaintiffs had already closed their case, I did not think it was proper and just that I should allow the application. It seemed to me clear that the evidence the plaintiffs would adduce would depend on what allegations they had to meet. An award of costs alone would not undo the harm which the amendments would cause. And of course these were points which the defendants could and should have raised very much earlier. I may add that even when the defence counsel opened his case, he did not say that the cheques were not transferable, only that they were not negotiable and that the plaintiffs had accepted them at their own peril.

Effect of crossing on cheques

On the evidence it is clear that the plaintiffs are holders for value of the four cheques. Through David Yong and through the letters of 2 December and 22 December 1989 from Maris to the plaintiffs and which were copied to Happy Valley, Happy Valley knew very well that of the four cheques issued, the first for $50,000 was to settle a part of the outstanding trust receipt of Maris and the remaining three cheques were to pay for the goods in question amounting to $213,900. On the basis of the pleadings before me, it is clear that it is not open to the defendants to argue that the four cheques were not transferable. The defence filed impliedly admit that the cheques could be transferred but only that in view of a total failure of consideration, the plaintiffs, as indorsees, could have no better title to the four cheques than Maris itself.

Though I have disallowed the amendment proposed by the defendants to add the additional defence on non-transferability of the cheques, counsel for both parties have made submissions on this very point. Therefore, I propose to deal with it.

The relevant provisions of the Bills of Exchange Act (Cap 23) (the Act) are ss 8(1), (2) and (4) and s 81, which read as follows:

s 8(1)

When a bill contains words prohibiting transfer, or indicating an intention that it should not be transferable, it is valid as between the parties thereto, but is not negotiable.

s 8(2)

A negotiable bill may be payable either to order or to bearer.

s 8(4)

A bill is payable to order which is expressed to be so payable, or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it should not be transferable.

s 81

Where a person takes a crossed cheque which bears on it the words `not negotiable`, he shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had.

The effect of ss 8(1) and (4) of the Act is that for a cheque to be non-transferable it must contain words on the cheque itself `prohibiting transfer or indicating an intention that it should not be transferable`. Other than the fact that the four cheques were crossed with the words `non...