Judgment

H.H. Lee CJ (Borneo)

(delivering the judgment of the Court)

1. The only question in this appeal is the right of respondents to sue appellants in their own name in respect of four bills of exchange.

2. Briefly, the respondents were the drawers and payees of and the appellants the acceptors of the said four bills which were subsequently negotiated. When the bills were presented for payment they were dishonoured and were duly protested for non-payment. As a result, they began their journey backwards to respondents, the original drawers cum payees, who became the holders of the bills. They sued appellants as acceptors of the bills. In their defence appellants alleged that respondents were not entitled to the claims under the bills. Respondents obtained summary judgment under O 14 r 2 of the Rules of the High Court, 1980. The learned judge confirmed his decision after hearing further argument in open court. Appellants appealed.

3. Respondents discounted the first bill No 2984G dated 18 March 1980 for S$19,859.97 with Barclays Bank International Ltd which sent the bill with the endorsement “For collection only without recourse. Pay to the order of Kwong Lee Bank Bhd.”

4. The second bill No 2934J dated 7 March 1980 for M$15,247.93 was also discounted with the said Barclays Bank which in turn discounted it by endorsing “Pay to the order of Kwong Lee Bank.”

5. The third bill No 2868A dated 26 February 1980 for £2,387.97 was discounted with Hong Kong and Shanghai Banking Corp, which in turn discounted it by endorsing “Pay to the order of Kwong Lee Bank Bhd.”

6. The fourth bill No 005G dated 15 April 1980 for S$46,158.97 was discounted with the Standard Chartered Bank which endorsed it with the words “Pay to the order of any bank or trust company. For collection only.”

7. Eventually, Kwong Lee Bank Bhd became the holders of the four bills. As stated they were dishonoured on presentation on due dates and protested pursuant to the right of recourse under s 47(2) of the Bills of Exchange Act 1949 – Act 204 (Revised – 1978).

8. Appellants’ contention is that only Kwong Lee Bank Bhd can sue as they are the holders as well as payees and endorsees. Appellants say respondents are not holders. In order to make respondents holders Kwong Lee Bank Bhd, so appellants argue, must re-open the endorsement, that is to say, re-endorse the bills to respondents. As there has been no such endorsement on any of the bills it is appellants’ submission that respondents have no right to sue. They were right to say that endorsement is a matter of vital importance since bills are negotiable instruments and the rights of various parties to bills depend on the validity and regularity or otherwise of the endorsement. For this reason they fear that they would not discharge their liability if they pay the wrong party.

9. Respondents’ contention is that endorsement is irrelevant in this case as the bills were protested for non-payment and were sent down the line until they reached respondents, the original drawers and payees. Section 2 of the Act defines “holder” to mean the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof. Respondents fall within the meaning of “holder” and therefore have the right to sue under their own name under s 38 of the said Act.

10. All the points raised here were also before the learned judge. He was of the view that under s 29(3) respondents were holders of the bills and could sue in their name by virtue of s 38. Section 29(3) reads: –

    A holder (whether for value or not) who derives his title to a bill through a holder in due course, and who is not himself a party to any fraud or illegality affecting it, has all the rights of that holder in due course as regards the acceptor and all parties to the bill prior to that holder.

11. Section 38(a) makes it clear respondents as holders have the rights and powers to sue in their own name. The obligation of appellants is stated in no uncertain terms under s 54(a). By accepting the bills appellants promise or engage that they will pay the bills according to the tenor of their acceptance. Appellants have failed to honour their promise.

12. On the question of endorsement this point was answered by the case of Jade International v Robert Nicholas Ltd [1978] 3 All ER 104; [1978] 3 WLR 39. At page 108 this passage is relevant:–

    They in their turn discounted the bill to the Deutsche Bundesbank, and the Deutsche Bundesbank in turn apparently discounted the bill to the Midland Bank Ltd. That bank then presented the bill for acceptance. It was duly accepted. It was presented for payment after the 120 days had elapsed and as I have already said it was dishonoured at that stage. The Midland Bank Ltd, it having been discounted to them, assuming it was so discounted as it seems to have been, were holders in due course, and when it arrived to them there was no further transfer. If one looks at the reverse side of the bill one sees that the Midland Bank simply opened the endorsement; then it was passed back down the line inoculated, so to speak, with the title of the Midland Bank. The intermediate bankers had given value for the bill and that made them holders in due course, which gave them under the sections to which I have already drawn attention rights against the acceptors. So the bill goes back through the Deutsche Bundesbank to the Sparkasse: Sparkasse debited the plaintiffs’ current account, and counsel for the plaintiffs submits, thereby they give value for the bill, although plainly on the terms of s 29(3), which I have already read, it does not matter whether they gave value or not, it does not affect their situation as holders.

13. No particular emphasis was placed on the opening endorsement. If such was necessary then the two immediate banks would also have to open endorsements. They did not as it was not necessary. In other words, neither endorsement nor opening is necessary when bills make their way back to the original drawer. The bills were out for collection only. No endorsement is necessary as all the bills were endorsed for collection “for and on behalf of British Markitex Ltd.” We cannot see how appellants should fear that their liability would not be discharged in the present case. For if they pay they can expect to get the bills and become the holders then the bills will be discharged. Further, s 61 of the Act provides clearly that:–

    When the acceptor of a bill is or becomes the holder of it at or after its maturity, in his own right, the bill is discharged.

14. It is not in dispute that respondents fall within the meaning of transferees and their right to have the endorsement of the transferor is preserved under s 31(4). Appellants say for the provision of s 31(4) to apply, the transferee must come within the definition of a holder under s 2 of the Act. Since the bills have gone back to respondents and are in their possession they become holders. An original payee is not holder in due course. The delivery of a cheque to the original payee is not a negotiation. See RE Jones Ltd v Waring & Gillow [1926] AC 670, 680. The learned judge was quite right to say as holders they have the right to sue in their own name. The term “holder” includes

    1. the original payee of a bill, and

    2. a banker who is a mere agent for collection:

    Sutters v Briggs [1922] 1 AC 1 a decision on the term “holder” in the Gaming Act, 1855, s 2 (repealed), but the definition of the term was argued and adjudged with reference to the Bills of Exchange Act, 1882.

15. The learned judge relied on Jade International which he considered to be an authority for the proposition that a drawer of a bill of exchange who after negotiating it and who later becomes a holder following the dishonour of the bill by non-payment is entitled to sue defendant as acceptor of the said bill. Further, the English Bills of Exchange Act, 1882 is substantially identical to our Bills of Exchange Act, 1949 – Act 204 (Revised – 1978). We have no reason to interfere with the decision of the learned judge that respondents have the capacity to sue appellants. Accordingly, we would dismiss the appeal with costs. Deposit to respondents on account of taxed costs.

Cases

Jade International v Robert Nicholas Ltd [1978] 3 All ER 104; [1978] 3 WLR 39; RE Jones Ltd v Waring & Gillow [1926] AC 670; Sutters v Briggs [1922] 1 AC 1

Legislations

Bills of Exchange Act 1949 (Act 204): s. 29, s. 38, s. 54, s.61

Representations

SC Chong for the appellants.

PO Chew for the respondents.