Burke v Sogex International Ltd

CourtCourt of Appeal
JudgeCollins, Harman and Machin, JJ.A.:
Judgment Date30 September 1992
Date30 September 1992
Collins, Harman and Machin, JJ.A.:

A.P. Begg for the appellant;

The respondent did not appear and was not represented.

Cases cited:

(1) Chestertons v. Leisure Enterprises (Jersey) Ltd., 1985-86 JLR 271, overruled.

(2) Foster v. Att. Gen., 1992 JLR 6.

(3) Intersub Ltd., In re, 1985-86 JLR 202.

(4) Nova (Jersey) Knit Ltd. v. Kammgarn Spinnerei GmbH, [1977] 1 W.L.R. 713; [1977] 2 All E.R. 463; [1977] 1 Lloyd's Rep. 463; (1977), 121 Sol. Jo. 170, applied.

(5) Wallingford v. Mutual Socy. (1880), 5 App. Cas. 685; 43 L.T. 258; 50 L.J.Q.B. 49; 29 W.R. 81, applied.

(6) Warwick v. Nairn (1855), 10 Exch. 762; 156 E.R. 648.

Additional cases cited by counsel:

Abdel Rahman v. Chase Bank (C.I.) Trust Co. Ltd. 1984 J.J. 127.

Att. Gen. v. Contractors Plant Serv. Ltd., 1967 J.J. 785.

Bow, McLachlin & Co. Ltd. v. The Camosun, [1909] A.C. 597.

D.B. Installations Ltd. v. Vaut Mieux Ltd., 1987-88 JLR N-5.

Davest Invs. Ltd. v. Bryant, 1982 J.J. 213.

Dawnays Ltd. v. F.G. Minter Ltd., [1971] W.L.R. 1205.

Malabry Invs. Ltd., In re, 1982 J.J. 117.

Romeril v. Comptroller of Income Tax, 1967 J.J. 817.

Ruban v. Att. Gen., 1987-88 JLR 204.

West v. Lazard Bros. & Co. (Jersey) Ltd., Royal Ct., July 8th, 1992, unreported.

Wimborne (Viscount) Ex p., 1983 J.J. 17.

Legislation construed:

Loi (1813) concernant le paiement de lettres de change, art. 1: The relevant terms of this article are set out at page 208, lines 34-42.

Texts cited:

Le Gros, Droit Coutumier de Jersey, at 317 (1943).

Matthews & Nicolle, The Jersey Law of Property, para. 5.3, at 47 (1991).

Banking—cheques—dishonour—court may allow answer or counterclaim to suit on dishonoured cheques only if exceptional circumstances amounting to fraud, invalidity or failure of consideration disclosed on objective view of proceedings

Bills of Exchange—law applicable—English law—Bills of Exchange Act 1882 and related English decisions followed unless significant difference in local conditions justifying different approach

The appellant, in an action on dishonoured cheques before the Royal Court, sought to have the respondent company's defence and counterclaim struck out or, alternatively, to be given directions as to whether a defence and counterclaim could be entered in such an action.

The appellant performed services for the respondent company which tendered cheques in settlement, some of which were subsequently dishonoured when the respondent countermanded them. The appellant's application to have the respondent declared en désastre was refused and he therefore brought the present proceedings seeking payment on the dishonoured cheques. Having made payment into court of the sum owed on the cheques, the respondent entered a defence and counterclaim for an unliquidated sum of damages alleging, inter alia, breach of contract and fraud on the part of the appellant. The appellant applied to the Royal Court (Le Cras, Commr.) to have the defence and counterclaim struck out or, alternatively, to be given directions to determine whether a defence and counterclaim could be raised in such an action but his summons was dismissed on the grounds, inter alia, that the allegations of improper conduct disclosed a reasonable cause of action or defence which justified the court's exercising its discretion to admit them. The decision is reported at 1987-1988 JLR 316.

On appeal, the appellant submitted, inter alia, that (a) the court had erred in holding that it had a discretion to permit the defence and counterclaim to be heard because the practice of striking out an answer and counterclaim in an action on dishonoured cheques could be departed from only if the defence disclosed exceptional circumstances such as fraud, invalidity or failure of consideration, none of which had been sufficiently particularized by the respondent; and (b) since it was not possible to have an unliquidated counterclaim in an answer to an action seeking a liquidated sum for damages, the respondent's counterclaim should be struck out accordingly.

Held, allowing the appeal:

(1) The court had erred in holding that it had a discretion to permit the defence and counterclaim to be heard. A cheque tendered in exchange for goods or services was an unconditional order in writing and should be treated as equivalent to cash. Consequently, in an action on dishonoured cheques, the court could not permit any defence to be raised unless, on an objective view of the pleadings, exceptional circumstances amounting to fraud, invalidity or failure of consideration had been disclosed. Since the respondent had failed to particularize any admissible defence, his answer would be struck out accordingly (page 208, line 1 - page 209, line 22; page 210, lines 20-35; page 211, line 24 - page 212, line 6; page 214, lines 4-13).

(2) Nor was it possible to have an unliquidated counterclaim in answer to an action on a bill of exchange which, by its nature, was for liquidated damages (page 206, lines 6-12).

(3) The Jersey law of bills of exchange in general, and cheques in particular, had developed in parallel with that of other financial jurisdictions, especially England. The Jersey courts should accordingly follow the provisions of the English Bills of Exchange Act 1882 and the decisions of the superior English courts on it unless there existed any significant difference in local conditions which justified a different approach (page 210, lines 36-40).

COLLINS, J.A.: This is the judgment of the court. By an action commenced by an Order of Justice in April 1987, Thomas Joseph Burke, the plaintiff in these proceedings and the appellant in this court, sued on three cheques drawn on its bankers by the defendant, who is the respondent to this appeal.

This followed an application to have the defendant company declared en désastre, which proceedings were stayed on the payment into court by the defendant of $150,000, which payment was effected on January 26th, 1987.

By the Order of Justice it is alleged that in May 1987 a Mr. Hamzah, a director and part owner of the defendant company, delivered to the plaintiff four post-dated cheques, each in the sum of $50,000 drawn on the defendant's bankers, Chase Bank AG of Frankfurt, and that the first cheque having been honoured, the second was presented for payment on August 15th, 1986 and dishonoured on the ground that there were insufficient funds in the account. Thereafter it is alleged that the third and fourth cheques were likewise dishonoured. Further allegations relate to the efforts of the plaintiff to obtain payment.

An answer was delivered by the defendant which accepted the issue and delivery of the cheques on its account but went on to allege that the three cheques which were dishonoured were countermanded for good reason.

We refer to the terms of the answer in greater detail later in this judgment.

By his reply, the plaintiff admitted writing the letter which was referred to in that answer and to which we will refer in detail later, and otherwise put all matters in issue.

Thereafter the plaintiff applied to the Royal Court by summons under r.6/13 of the Royal Court Rules, 1982, as amended, to strike out the defence and counterclaim; or in the alternative to give directions for a hearing on a preliminary point of law as to whether the defendant is entitled as a matter of law to raise a defence and counterclaim in an action brought on bills of exchange. The learned Commissioner dismissed the applications...

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