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Colonial Cases

Hodgson (HSBC) v Punkee, 1881

Hodgson (HSBC) v Punkee

Supreme Court, China and Japan

Mowat ACJ

Shanghai, 1 June 1881

Source: North China Herald, 3 June 1881




Shanghai, 1st June 1881

Before R. A. MOWAT, Esq., Acting Chief Justice.

J. G. HODGSON, Appellant, and PUNKEE, Respondent.

 Mr. DOWDALL appeared for the appellant.

 Mr. MYBURGH appeared for the respondent.

  Mr. DOWDALL, in opening the case for the appellant, stated that this was an appeal against a decision of H.M.'s Court at Foochow, ordering the present appellant to return to the present respondent certain documents called dividend and bonus warrants of the Union Insurance Society of Canton, for sums amounting together to $9,926.14, or in default of doing so, to pay that sum with interest to the respondent.

  The circumstances of the case were as follows:- In the early part of the year 1878, a Mr. Mackenzie Bradley, who was then at Foochow, had an account with the branch of the Hongkong and Shanghai Bank there and deposited with the Bank five shares of the Union Society and other shares accompanied by blank transfers as security under which he was allowed to overdraw the account.  On the 1st of May, Mr. Bradley's account was overdrawn to the extent of $7,000.  On the 28th August, Mr. Bradley owe to the respondent, Punkee, who was his compradore, over $20,000, and it appeared from a statement in bankruptcy afterwards filed by Mr. Bradley that at the day of the bankruptcy he owed to other unsecured creditors, $385,000.  On the 28th August, Mr. Bradley wrote the respondent a letter, purporting to give the respondent a lien over what appeared to be the greater part of Mr. Bradley's property, and agreeing to hand to the respondent any dividends or bonus contributions paid and returned upon Mr. Bradley's various insurance shares, and to hand him any surplus above what was due to the Bank, which might be realized by sale of the securities in the hands of the Bank.  On the 13th of January, 1879, it appeared that Mr. Bradley owed respondent $36,000, and then wrote to him another letter purporting to give him what appeared to be practically the whole of Mr. Bradley's property as security for the money so due.  At this period Mr. Hodgson, the appellant, became agent of the Bank at Foochow.

  There was a letter from Mr. Bradley to the agent of the Union Society requesting that future dividends and bonus  warrants should be handed to the respondent; a letter from Mr. Bradley to the respondent sending a Yangxxxe Insurance Association divided warrant for $1,169.52 to be placed to his credit,  and saying that it was to be "considered as dividend due on 5 shares in the Union Insurance Society" held by the appellant as security; and a letter from the appellant to Mr. Bradley pointing out that dividends and bonuses on the shares in the hands of the Bank belonged to the Bank.  It further appeared that before the 8th of May, 1879, the Union Society shares had been sold by the Bank and transferred to the purchasers under the blank transfers. On this date the agent of the Union Society handed to Mr. Bradley the documents called warrants which were the subject of the suit.

  These documents, Mr. Dowdall explained, were simply forms of receipt issued by the Society for signature by shareholders acknowledging the receipt from the Society of the sums mentioned in them; they bore the words "Payable at the Hongkong and Shanghai Bank," but were not orders or promises to ay of any form.  On receipt of these documents Mr. Bradley signed then, wrote on the back "Pay Punkee, signed this endorsement, and handed the documents to the respondent.  The respondent presented them for payment, but the appellant considering they belonged to the Bank, refused to pay and retained the documents, giving the Shroff who presented them a letter to Mr. Bradley saying that the amount of them had been placed to the credit of his account.

 Mr. Bradley was adjudicated bankrupt on the 6th of June, 1879.  About this time the Bank realised some lead and other securities which produced sufficient money not only to satisfy its own claims but to leave in hand a sum equal to the dividends and bonuses in dispute and a small balance besides.  The trustee under Mr. Bradley's bankruptcy and also the respondent then applied for the amount of the dividends and bonuses; and the Bank, under an order of the Court at Foochow, paid the amount into Court, and the Court shortly afterwards paid it over to the trustee under an order which placed a restriction on his dealing with it for some time in case any legal proceedings should be institute with regard to it.  The poresent respondent some months afterwards commenced the present suit against, not the trustee of the bank, but against Mr. Hodgson, the appellant, personally.  The case was heard and an order made as he (Mr. Dowdall) had already stated.  Both the Assessors who sat with the learned judge of the Court below dissented from the judgment, one of them stating his grounds to be that the defendant (in the Court below) was not sufficiently covered for the advances.

  Mr. Dowdall further stated that the case had been before the Court before, and the Chief Justice had remitted it to Foochow to have some amendments made in the record, and his Lordship had suggested that the trustee should be asked to join in putting the facts into the form of a special appeal under which the question who was entitled to the $9,926.14 could be finally decided.

  The Trustee in the Bankruptcy, Mr. Dowdall continued, had agreed to join in a special case, but the respondent persistently refused to do so, and consequently the appeal came before the Court in its present form.

  Mr. Dowdall then submitted as his first point that the Bank were mortgagees of the shares and as such were entitled to the dividends and bonuses.

  Mr. MYBURGH said that he could not deny that the Bank was entitled to the dividends.  Nor could he contend that as between Punkee and the Bank, that Punkee could compel the Bank to pay the warrants.

  Mr. Dowdall, in support of his contention, referred to some passages in the appellant's evidence and to the cases of ex parte Duce, Weekly Notes for 1880, p. 5, and ex parte Masterman, in Chitty's Equity Index, p. 300.  Mr. Dowdall contended under this head that dividends and bonuses were in reality part of the property of the Company, not distinguishable from the general property, and so would pass under an assignment of the shares; and also that, even considered as separate from the general property of the Society, they would pass to the mortgagee in the same way as rents and profits of mortgaged land, and in support of this contention he cited Pope v. Biggs, 9 B. and C., p. 245, Garry v. Sharratt, 10 B. and C., 717, Fisher's Law of Mortgages, Webster v. The British Empire Mutual Life Assurance Company, 15 Ch. D. 169, and the French Code, Civil Art. 2,081.

  The next point was that there had not been any assignment of the dividends or warrants which would override the Bank's rights.  In support of this, Mr. Dowdall pointed out that this appellant had not, before the suit was brought, any notice of the two letters under which Mr. Bradley professed to give the dividends to the respondent, and that even if these letters were good as assignments that their operation would be subject to the rights of the Bank.  Mr. Dowdall cited the Judicature Act, 1873, Dec. 25 (6), Storey's Equity Jurisprudence, paragraphs 1,040, 1,047, and 1,057a, and White and Tudor's Leading Cases, 5th Ed. Pp. 76 and 767.

  Mr. DOWDALL proceeded to contend that the documents called warrants were not negotiable, and that therefore the respondent could acquire no property in them by their endorsement; in support he read several passages from Byles on Bills, and Grace's Law of Bankers, and referred to the cases of Rex. v. Box, 6 Taunt. 325, and Partridge v. Bank of England, 15 L.J. (NS) Q.R. 395.

  The next point was that the receipts themselves, considered as pieces of paper, did not belong to the respondent, and therefore could not be recovered by him in this suit.  Mr. Dowdall contended that these pieces of paper belonged to the Insurance Society and that they were issued to Mr. Bradley, who, in consequence of his having assigned the shares to the Bank, held these documents, when sent to him, in trust for the Bank; and that when they got into the hands of the Bank, the Bank properly retained them.  He referred to Smith's Mercantile Law, and Newton v. Beck, 27 L.J. (NS) Ex. 272.

  His LORDSHIP called attention to the case of Smith v. Mundy, 29 L.J. (NS) Q.B. 172, on this point.

  Mr. Dowdall's last point was that even if the respondent were entitled to the documents, that he had not sustained damages to the extent of $9.926.14, or any such amount, through the petitioner taking possession of them.  He pointed out that these particular documents were not necessary to the receipt of the money by any person entitled to it, and the possession of documents was separable from the right to receive the property they might represent.  He referred to Barton v. Gainer, 27 L.J. (NS) Ex. 390.

  Mr. MYBURGH was about to address the Court when the case was adjourned till 2 o'clock on the 3rd instant.


Source: North China Herald, 17 June 181



Shanghai, 8th June 1881

Before R. A. MOWAT, Esq., Acting Chief Justice.

J.G. HODGSON, Appellant, and PUNKEE, Respondent.

  Mr. DOWDALL appeared for the appellant.

  Mr. MYBURGH appeared for the respondent.

  The hearing of the case, an appeal from Foochow, was continued this afternoon.

  Mr. MYBURGH said that before he proceeded to speak at length I support of the judgment of the lower Court, he wished to say that according to the newspaper reports, it seemed that an admission he had made last week, went further than he meant.  He wished to explain that he merely intended to admit that the Bank was entitled to the dividends in question on the 15th May, when Mr. Bradley's letter was written, the Bank accepted the Yangtsze Insurance Company's dividends and placed them to Mr. Bradleys' credit. He held that the Union Insurance Society's dividends were then discharged.

  Mr. Dowdall said it was admitted that the Bank was at one time entitled to the dividends in the Union Society's shares and that his learned friend then argued that the Yangtsze dividend warrant was given to the Bank in substitution, and he (Mr. Dowdall) contended that there had been  no substitution which would discharge the Bank's claim to the Union Society's warrants because the Yangtsze warrants were not actual cash paid to the Bank in satisfaction of the value of the dividend warrants the Bank was entitled to, because the appellant stated in his evidence as a fact that Mr. Bradley had no right to substitute the one warrant for the other, and there was no evidence to rebut this statement of fact; and because Mr. Bradley, having given a security for overdraft on current account was bound in the ordinary course of business to pay into his account such sums as came into his possession just as he drew for such sums as he wanted to pay - and so the Yangtsze dividend warrant ought to have gone to his account t without discharging any part of the special authority.

Mr. Myburgh considered that the Bank was only an equitable mortgagee of the shares, with whom they were merely deposited.  There was no agreement in writing in existence to show the intention of the parties, and he thought that the bank transfer which had changed hands was inoperative because the transferee had no power to fill in the blank.  He referred to Taylor v. Great Indian and Pacific Railway Company, 28 L.J. Ch., pp. 285 and 708.  As an equitable mortgagee the learned Counsel held that the Bank in the absence of any agreement, was not entitled to any profit that might arise from the dividend warrants they held.  A legal mortgagee was certainly entitled to receive rents of property of which he held possession, but an equitable mortgagee had no such right and could not claim rents before an order had been made.  Fisher on Mortgages, p. 867, and Robson's Bankruptcy, p. 253, were cited in support of this contention.  The learned Counsel proceeded to argue that the proper course for the appellant to have taken would have been to apply to the Court for an order to compel the sale of the shares.  The only right course by which the Bank could have obtained relief was to have sold the shares and then applied to Mr. Bradley to liquidate his debit balance.  Mr. Myburgh also argued that even if the Bank, by agreement with Mr. Bradley, was entitled to the dividends on the Union Insurance shares, yet they had readily released them by their subsequent acceptance of the Yangtsxxxe Insurance shares.  He referred to Mr. Hodgson's letter, in which he accepted the dividends and put them to Mr. Bradley's credit, and by this means reduced his liability to the Bank; and he held that where a man paid money or its equivalent into a Bank for a specific purpose, the Bank had no power to apply it to any other.  With regard to the point that there never had been any assignment of the dividends or warrants which could override the Bank's right, Mr. Dowdall had said that there had been no assignment which could override the Bank's right.  He admitted this as regarded dividends, but not as to bonuses, because the Bank was never entitled to them, and even if the Bank were entitled to the bonuses, they would, after the found that they did not require that amount for security, be trustees to Punkee with respect to that amount because they had clear notice by endorsement of the warrant that Bradley had made over the sum mentioned in their hands to the respondent. On the point to the effect that the warrant was not negotiable, and therefore respondent could acquire no property by their endorsement, he argued that if these warrants had been made payable to any other Bank, Pun Kee would have got the money without fail, because the Bank would only have wished to see that Bradley's signature was in order.

  He should also argue that the letters from Mr. Bradley to Pun Kee assigning the dividends and bonuses to the latter outright, and were not merely a charge, as they were considered to be by his learned friend; and further, assuming that the Bank had the right to retain these warrants he considered that it only held them really in trust for Pun Kee.  With regard to the arguments that the warrants themselves were not negotiable, Mr. Bradley's endorsement of them gave Pun Kee so much property in them that he could have brought a suit against the Bank for the recovery of their value on that endorsement.  Again, the Bank had not proved a better title to the warrants than the respondent, and therefore the documents could not have been recovered by it from him, he having lawful possession of them.  Pun Kee certainly held sufficient property in them to enable him to maintain an action against the Bank for their recovery.  Evans v. Kymer, 1 Barnwell and Alderson, p. 535.  With regard to the value of the documents, they undoubtedly would have fetch the amounts written on their faces; if they had not been signed, those amounts could have been got from the Company, and those were undoubtedly the correct values.

Mr., Dowdall in reply said that really the substantial point of the suit was as to the value in the hands of Pun Kee of the documents in dispute.  The highest possible value they could have in his hands was that of the paper they were written on.  Now these warrants were on the face of them stated to be payable by the Bank at Foochow to Pun Kee.  It had not been even asserted that the respondent could get any money for the documents.  The Union Insurance Society, after having been notified of the transfer of the shares to the Bank, would not have paid the dividends to Mr. Bradley, much less to Pun Kee, and if Pun Kee had a right to the dividends and bonuses the possession of these receipt forms was not necessary to the enforcement of such right.

  He proceeded to comment upon the cases and authorities which had been cited in support of the respondent's case and concluded his address by an argument to the effect that as the dividends admittedly formed part of the property included in the Bank's security, it must be assumed, in the absence of any indication to the contrary, that the bonuses did so too.

  His Lordship reserved judgment.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School