Summary judgment dismissed because limited defences on bills of exchange require fraud, invalidity, or failure of consideration.

[*544] 1984 March 27

(ELIADES, D.J.)

IN THE DISTRICT COURT OF LARNACA

Miltiades Alexiou,

Plaintiff,

v.

XENOVA (Dedics) Ltd.,

Defendant.

(Action No.2313/83).

Civil Procedure - Claim not exceeding £1,000.- Order 65 of the Civil Procedure Rules applicable - Application for summary judgment - Rules 8 and 15 of said Order - Parties not entitled to apply for determination of side issues before trial - The application for summary judgment has, therefore, to be dismissed.

Civil Procedure - Summary Judgment, application for - The Civil Procedure Rules, Order 18 - What applicant must prove in order to succeed - Leave to defend - Fair probability of success by defendant sufficient for granting such leave.

Bills of Exchange - Actions on - Defences limited to those based on fraud, invalidity or failure of consideration.

T. Koumis, for Applicant-Plaintiff.

A Argyrides, for Respondent-Defendant.

RULING

The following ruling was delivered by:

ELIADES, D J.: On the 16.12.83 the applicant–plaintiff filed the present action for the recovery of an amount of £70.- due by virtue of a cheque issued on the 6.12.83, and subsequently dishonoured. The action was fixed for hearing on the

30.1.84 but following an appearance by the respondents-defendants on the 31.1

84 (as a result of which the [*545] action was adjourned on the 24.2.84), the applicant - plaintiff motioned the Court for summary judgment relying on the provisions of 0.18, rules 1 to 6.

(A) INTERLOCUTORY APPLICATIONS UNDER 0.65:

As the claim involves the payment of an amount of £70.- with 9% interest as from the 6.12.83, the procedure is regulated by 0.65 which has been held to govern all claims not exceeding £1,000.- as from 1.1.83 (See the Official Gazette dated the 3.9.82, No.1800).

By virtue of 0.65,r.8 it is provided that no application for interlocutory orders shall be made before the hearing of the action, except applications for injunctions or variation of the times prescribed by the

rules of 0.65.

No doubt the purpose of the rule is the bypassing of the determination of minor issues which would arise before the hearing of the action (as for example applications for further and better particulars, security for costs etc.) in an effort to effect a speedier adjudication on all matters in issue at the date of the trial.

Provision has been made however by virtue of r.15 for some relaxation of strict compliance to r.8 by conferring a discretion to the Court to vary the procedure with a view to save time and expense in a way that no injustice would be caused to the parties concerned. [*546]

Mr. Koumis has cited in support of his application the decision in Hermes Insurance Co.Ltd. v. Theodorides (1983) 1 C.L.R. p.333, where jurisdiction was assumed by the District Court of Limassol on an application for summary judgment on a claim based on a cheque for £986.245 mils. With all respect to learned counsel for application the action in that case was filed in 1982 and the relevant application was considered before the coming into effect of the amendment of 0.65 so as to include claims up to and not exceeding £1,000.-.

From a careful consideration of the wording of 0.65 I do not entertain any doubts that this rule does not allow the parties to apply for the determination of side issues before the date of trial and an application for summary judgment cannot qualify as an exception under the provisions of r.15. Accordingly this application is doomed to failure.

(B) SCOPE AND EFFECT OF 0.18:

However if the matter goes higher and I stand dismissed on this aspect I consider it pertinent to examine the application on its merits.

The application for summary judgment was opposed on the ground of total failure of consideration. It is alleged that the cheque was issued in favour of the applicant-plaintiff for his undertaking to repair and/or restore [*547] into operational condition a B.M.C. 22 b.h.p. engine belonging to the respondents-defendants. Payment was stopped when it was discovered that the engine was not restored into operational order.

0.18, r.1, which corresponds to the English 0.14, r.1 reads as follows:

“I(a). Where the defendant appears to a writ of summons specially indorsed under Order 2,rule 6, the plaintiff may on affidavit made by himself, or by any other person who can swear positively to facts, veryifying the cause of action, and the amount claimed (if any), and stating that in his belief there is no defence to the action, apply for judgment for the amount so indorsed, together with interest (if any), or for the recovery of the land (with or without rent), or for the delivering up of a specific chattel, as the case may be, and costs. And judgment for the plaintiff may be given thereupon, unless the defendant shall satisfy the Court that he has a good defence to the action on the merits, or disclose such facts as may be deemed sufficient to entitle him to defend.”

It follows from the wording of 0.18, r.1 that before [*548] judgment is issued the applicant-plaintiff must prove that:

“(i) The writ is specially indorsed,

(ii) The defendant has entered an appearance, and

(iii) The plaintiff or some other person who can positively swear to the facts, has sworn an affidavit verifying the cause of action and the amount claimed, stating at the same time that in his belief there is no defence to the action.”

This summary procedure was designed in order to eliminate the delay which a plaintiff could suffer in vindication of his rights through the raising of sham defences. (See Lord Halsbury, LC in Jacobs v. Booth’s Distillery Co. (1901) 85 L.T . 262).

However in exercising its discretion to enter judgment for the plaintiff, the Courts must try to maintain a fine balance between the necessity of the need to prevent a defendant from resorting to delaying tactics in order to postpone the quick administration of justice and the requirement of allowing a defendant to forward his version before judgment is pronounced.

By a series of decisions it has been emphasized that the jurisdiction of the Courts under 0.18

is one to be exercised with the utmost care so as not to preclude a party from raising any defence he may really have which is [*549] not a mere sham.

(see Anglo-Italian Band v. Wells, 38 L.T. 197.C A., Ford v. Harvey and Others,9 T.L.R. 328.).

The reason for such strict approach has been stated by Buckley J. in the following terms:

“Trial as a rule, must precede judgment. 0.14 provides an extraordinary procedure in certain cases; it is a procedure in which, instead of trial first and then judgment, there is judgment at once and never a trial. Such a procedure must be strictly confined to the specific cases for which it is provided as set forth in the order.” (See Simon and Co. v. Palmer’s Stores (1912) 1 K.B. 259.).

Concerning the burden cast upon the defendant to disclose grounds of a character that would allow him leave to defend Lord Blackburn had this to say:

“He (the defendant) may fall far short of satisfying a judge that there is a defence upon the merits; still he may do so (defend the action) if he discloses such facts as may be deemed sufficient to entitle him to defend. And that raises another question altogether. There may very well be facts brought before the judge which satisfy him that it is reasonable, sometimes without any [*550] terms and sometimes with terms, that the defendant should be able to raise this question, and fight it if he pleases, although the judge is by no means satisfied that it does amount to a defence upon the merits.” (See Walllingford v. Mutual Society (1874-1880) All E.R. Rep. 1386 at page 1394.).

The defendant is under no obligation to convince the Court of a definite prospect of success for a “fair probability” is sufficient (see Ward v. Plumbley(1890 ) 6 T.L.R. 198) but the setting up of a defence which is impossible in law will result in judgment being signed in favour of the plaintiff. (See Knapp-Fisher v. Crips

(1936) 3 All E.R. p.560).

Claims for the recovery of money based on negotiable instruments are of a distinctive character in view of their nature and the implications which arise there-from. Payments by cheques have been judicially considered as deferred instalments of cash. (See Warwick v. Nairn (1855)10 Exch. 762.). Accordingly a defendant who is sued upon a bill of exchange will not be allowed to defend unless he raises a defence which goes to the execution and validity of the document forming the subject-matter of the proceedings. This has been recently approved by the House of Lords in Nova Knit Ltd., v. Kammgarn Spinnerei GmbH (1977) 2 All E.R. 463, where Lord Wilberforce specified [*551] that the only defences which may be raised in on action on a bill of exchange are those based on fraud, invalidity or failure of consideration..

The decision in Nova Knit v. Kammgarn ( Supra) received judicial approval in Cyprus and Loris J. had this to say in this respect in Hermes Insurance v. Theodorides (1983) 1 C.L.R. 333 at p.341:-

“The principle approved in the case of Nova Knit v. Kammgarn in connection with the limited defences upen to actions on bills of exchange ( ‘the cheque is a bill of exchange drawn on a banker payable on demand’ vide s.73 of Cap.262) is not a new principle but one of long standing; it was on several occasions pronounced in earlier English authorities and it finds expression in section 30 of our Bills of Exchange Law Cap. 262 as well; perhaps the ‘novelty’ about it is that the principle was authoritatively settled by the House of Lords as late as 1977.”

The affidavit filed in support of the opposition purports to afford the reasons why the payment of the cheque was stopped. In my mind sufficient particulars are adduced indicating to a failure of consideration which would entitle the defendant to unconditional leave to defend.

Accordingly the application is dismissed. The action is fixed for hearing on the 4.5.84. The statement [*552] of defence to be filed within 10 days from today. Any reply within 5 days thereafter. Considering the award of costs it is well settled that it is within the discretion of the Court and such discretion must be exercised judicially. Costs normally follow the event. The final outcome of the case in the most important consideration which will be taken into account by the Court in deciding to award costs, (see Evangelou v. Ambizas ,(1982) 1 C.L.R. 41), but it is to be noted however that it is not the sole consideration. The conduct of the parties is also an important factor which cannot be disregarded by the Court in exercising its discretion.

Considering the reasons behind the outcome of the present application there will be no order as to costs.

Application dismissed.

No order as to costs.