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Colonial Cases

Pun Kee v. Hodgson, 1881

Pun Kee v. Hodgson

Supreme Court for China and Japan

Mowat ACJ, 23 August 1881

Source: North China Herald, 26 August 1881




Shanghai, 23rd August.

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

PUN KEE (Plaintiff and Respondent)


HODGSON (Defendants and Appellant.)

In this case His Lordship today, delivered the following


  This is an appeal from, the Provincial Court at Foochow.  What I consider to be the material facts of the case, as I gather them from the record, are these:

  On the 16th May, 1879, one Bradley, a holder of five shares in the Union Insurance Society of Canton, received from the Agent at Foochow of the Company two documents, the first of which was as follows:-

Payable at the Offices of the Hongkong and Shanghai Banking Corporation.

W. M. Bradley, Esq.

Received from the Union Insurance Society of Canton the sum of Dollars one hundred and sixty three and cents sixty-four, being third final bonus on 1.73 per cent on contributions of premiums during the year 1877, together with Third and Final Dividend for the same year of nine dollars and eighty-four cents per share, on five shares registered in ............... name.

Bonuses    $114.44

Dividend   $    9.26


Foochow, 15th May, 1779.

  The second document was similar in form, but the amounts named therein were in respect of a first bonus of $8,959.25 on contributions during 1878, and of a dividend of $803.25 on the five shares, - in all $9,762.50. On the same day Bradley, who was largely indebted to the plaintiff (his compradore), gave both documents to he latter, having previously signed hem at foot, and having further endorsed them thus:- "Pay to the order of Pun Kee, W. McKenzie Bradley."

  Pun Kee, having in turn signed them with his name, sent them by his shroff to the Hongkong and Shanghai Bank (of whose agency at Fochow the defendant was acting manage) for payment.  Bradley's account with the Bank had been overdrawn since May, 1878, at which time he deposited with it as security, amongst other things, his five shares in the Union Insurance Society.  No letter of hypothecation had been given - it not being usual, as was stated by the defendant, to require such against an overdraft on current account - but a printed form of transfer in blank, signed by Bradley, was attached to the shares, and given by Bradley to the Bank.  |The object of having the transfer signed was to enable the Bank to sell the shares at any time, should need arise for that step, without reference to Bradley.  On the 16th May, 1879, Bradley's overdraft amounted to over $16,000, and the Bank still held, with other security, the five Union Insurance shares.  The defendant, when the receipts were presented to him for payment, neither paid Pun Kee nor returned then to him, but passed the total amount represented by them ($9,926.14) to Bradley's credit, thereby reducing Bradley's debit balance to the Bank to $6,000 odd.

  The debit balance was, by the realization of the other security, converted later into a small credit balance, but before that took place Bradley had been, on the 6th June, adjudicated  Bankrupt,  There was no evidence of any application having been made by or on behalf of Pun Kee for the return of the scripts (failing their payment) until the 31st July, although the petition alleges that repeated applications had been made. The trustees of Bradley's estate had meanwhile demanded from the defendant payment of the amount represented by the receipts, and the defendant, not knowing to whom to ay it - for by some "rearrangement of accounts! Which is not explained, he at this time had the amount to Bradley's credit clear of any charge on the Bank - on the 31st July applied to the Court at Foochow for leave to pay the amount into Court.  

  Leave being granted on the 6th August, on that day paid the amount into Court, and in informing the plaintiff that he had done so, suggested his applying to the Registrar for payment of the amount of the credits.  The plaintiff made no application to the Court in the matter, but having on the 8th October again unsuccessfully applied o the defendant, on the 29th November filed his petition against hm.

  The case was hard before the Consul and two Assessors, and judgment was, on the 25th March, 1880, given in favour of the plaintiff for the return to him of the two receipts or, in default, for payment to him of he sum of $9,926.14, "the value thereof," with costs and interest at 10 per cent to date of payment.  Both the Assessors dissented from the judgment; on the ground that the action lay not against the defendant but against the Bank, the other on the ground that the defendant, not being sufficiently covered for his advances by the securities he held, was entitled to retain the receipts and to pass them to Bradley's credit pending the final adjustment of accounts.  The defendant appealed from the decision, and after a considerable delay arising from various causes, some negotiations took place between the parties with a view to the statement of a special case in which the trustee of the bankrupt should join. These ultimately resulted in nothing, and he appeal cam on for hearing in June.The point as to the Bank being the proper defendant was not taken, but the case was argued on behalf of the Bank.

  In my view the only question in the case that poses any difficulty is the question of what damages the plaintiff is entitled to recover.  The act of the defendant in retaining the documents without paying the amounts was plainly unjustifiable.  He was not of course in any way bound to pay the amounts to Pun Kee, any more than he was bound to pay them to Bradley himself.  The only person to whom he owed any duty in the matter was the Insurance Society, who had placed the money in his hands to pay to Bradley on  a certain condition, viz., the signature by Bradley of the receipts and their surrender by Bradley to the defendant for the Society,  But while Bradley could not have compelled the defendant to make the payment to him, because between him and the defendant there was no privity whatever, there was obviously nothing to prevent the defendant making the payment if he chose - especially as that was the object with which the money was placed in his hands - but if he does so, he must do it in the way that Bradley indicated if he does indicate any way, or not at all.  If Bradley had sent to the Bank the documents signed simply, and without any endorsement upon them, it is hardly necessary to say that the Bank would have been entitled to apply the amount to the diminution of his debit balance; but if instead of sending then without any specific direction, he had taken them to the Bank, and asked for the money over the counter in exchange for them, it is clear to me that the defendant must either have given him the money or refused to cash them ad returned them to him, just as he must have either cashed or returned a cheque drawn by a customer of the Bank in Bradley's favour which  Bradley presented for payment.  And as to the case of Bradley, so in the case of Pun Kee.  The defendant might have refused to cash the documents, in which event Pun Kee would have nothing to say, or he might safely have cashed then - for one signature of Bradley at the foot would be a sufficient discharge to the Insurance Society - but he cannot cash them and apply the money to the Bank's purposes.  They were not presented to him for that object, but, as he knew, for a totally different one; and in my opinion he is not at liberty to receive them with one hand apparently for one purpose and apply them with the other to another.  

  That the documents were not negotiable, does not make the lightest difference in this respect; the endorsement may be entirely disregarded and Pun Kee will then be simply the agent of Bradley to receive the money; but, further, without treating him as Bradley's agent at all, he had a right of property in the documents which was, I should day, good against all the world.  The Counsel for the defendant contended indeed that they belonged to the Insurance Company, but even if this were so, a defendant cannot set a jus tertii against a plaintiff in actual possession.  It is perfectly true that a banker has for any balance due him a lien on the securities of his customer that come into his hands, but, to have this effect, they must come into his hands in the ordinary way of business and without anything to show that hey were received under special circumstances which would take them out of the general rule.

  If, for example, there is an express contract between the parties inconsistent with the existence of a right of lien, or if circumstances exist which show that it was not intended to give a lien, then no lien can arise.  In Lucas v. Dorrien (7 Taunt. 278) a customer of the defendants, who were bankers, had applied to them to advance him money on the security of a lease, which they declined to do.  The customer, however, left it with them without making any declaration of the purpose for which it was so left, sand it remained in the defendants' possession from that time till the bankruptcy of the customer. He being indebted to the bankers, they sought to set up a lien upon the lease, but it was decided that there was no lien, the lease having been only casually left in the defendants' possession.  Burrough, J., says at p. 282:-

There is not a question as to the lease.  The case states that the bankrupt applied to borrow money upon it, which the defendants declined to lend; a court of equity, therefore, never would have deemed that as security for money.  It was left in the defendants' banking house by mistake, and the defendants' possession of it is explained.

This case shows that even as against Bradley, if he had himself taken the documents to the Bank to get money in exchange, the defendant could not have detained then without payment against Bradley's will; and in the case of the plaintiff, there is of  course still less justification for such action on the defendant's part, because the plaintiff was not a customer of the Bank at all.

  So far, then, the case is clear enough.  The defendant's obvious duty when the receipts were presented to him by the plaintiff for payment, was either to hand the money represented by them to the plaintiff, or to return them to the plaintiff stating that he declined to pay him the amount. Not having done so, but having appropriated them to another purpose, he is a wrongdoer, and judgment was therefore properly entered against him.  The only question that remains, as the defendant is not in a position to return the documents, is what damages ought the defendant to pay in respect of his conversion of he plaintiff's property.  The true measure of damages in such a case is the value of the documents.  But what is their value?  That is a question which has given me a great deal of difficulty, and after all the consideration that I have been able to give it in the intervals that the other work of the Court has left me since the case was heard, I confess I am not by any means certain that I am even now prepared with the proper answer to it.  Is the plaintiff to have only nominal damages for the conversion of his property? Or is he to get the amount that the Bank got for the documents?  The defendant contends that the value of the documents to he plaintiff is only the value of the paper on which they are written.  But can I say, positively and without any kind of doubt, that that is so?  With the documents returned to him, as they ought to have been, I do not know that the plaintiff night not, with the assistance of Bradley - and Bradley was disposed o help him, witness what he did in the matter of the Yangtsze  Insurance dividend warrant on the 15th Nay - have procured payment of the documents.  The Union Insurance Society was bound to pay Bradley the amount that it admittedly owed him, and it could not insist upon payment at any particular place; nor ought I to assume that it would attempt to withhold payment - and Bradley could then have paid the plaintiff.

  Throughout, moreover, it is to be borne in mind that if there is any difficulty in assessing the value of these documents, it arises solely from the defendant's own wrongful act, and he had, therefore, himself only to blame if the value is fixed too high.  And the amount that the defendant procured for then is not to be overlooked; it certainly does not follow that the plaintiff would have received the same amount, but I do  not know that I ought to make presumptions against the innocent person in favour of the wrongdoer, and it does unquestionably shock one's sense of fairness that a wrongdoer, having possession by his own wrongful act, should be allowed to say to the sufferer by his wrong, "I shall get full value for the documents, but I will give you only their value as pieces of paper."  Again, if the documents in the hands of Pun Kee were valueless, one would think that the defendant could safely have left them with him, and taken other steps to get his debt from Bradley.

  One other consideration. In his letter to Pun Kee of the 6th August, the defendant speaks of the documents and of the amounts named in them as equivalent things, for he writes that the Bank had waived its claim upon the documents, and adds that if the plaintiff will apply to the Registrar of the Bankruptcy Court he no doubt will receive an order from him for the amount of them,  Now this, I think, shows that the defendant would have paid the amounts when Pun Kee presented the receipts to him for payment on the 16th May, if he had not thought it his duty to protect the Bank.  But it was just his double position of is that led him into error.  He forgot that he was first the agent of the Insurance Society to make the payment to the creditor, and next a creditor of that creditor.  He ought to have kept his two capacities distinct, and the question must accordingly be looked at by so keeping them.  Pun Kee may therefore be well entitled to say, 'Had you kept your capacities distinct, as it was your duty to do, you would have paid me the money if you kept the documents; you did not do so, and by your wrongfully taking advantage of your second position I have lost by your improper action what you would on the other view have paid me.  Therefore that is the amount of my loss by your action, and hat is the damages I am entitled to at your hands.'

 On the whole I think that a jury might, on the ground that it was not certain that the plaintiff could not have procured full value for the documents if he had been allowed to remain in possession of them, not unfairly, as against the defendant, presume that they were worth to the plaintiff what the defendant got for them.  That the defendant afterwards, having found that he could dispense with them, paid them away to a third person, is of course no answer at all to the plaintiff; the defendant will be at liberty to follow them there if he can.

  In the result, I have come to the conclusion, though not without doubt, to dismiss the appeal with costs.

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