First issue: authority to fill up the cheque
37I have referred already to s 18 of the Cheques Act. That section reads as follows:
18 Inchoate instruments
(1) Where the drawer of an instrument that is signed, but is otherwise wanting in a material particular necessary for the instrument to be, on its face, a complete cheque, delivers the instrument to another person in order that the instrument may be filled up as a complete cheque, any person in possession of the instrument shall be presumed, unless the contrary is proved, to have authority to fill up the instrument as a complete cheque in any way the person sees fit.
(2) Subject to subsection (4), an instrument to which subsection (1) applies is not enforceable against the drawer or a person who becomes an indorser of the instrument before the instrument is filled up as a complete cheque unless the instrument is filled up within a reasonable time and strictly in accordance with the authority given.
(3) Reasonable time, for the purposes of subsection (2), is a question of fact.
(4) An instrument of the kind referred to in subsection (1) that has been filled up as a complete cheque shall, as regards a holder in due course, be conclusively presumed:
(a) to have been delivered to another person in order that the instrument might be filled up as a complete cheque; and
(b) to have been filled up within a reasonable time and strictly in accordance with the authority given.
38At this point, it is convenient also to set out the definition of cheque in s 10 of the Cheques Act, and I shall set that out.
10 Cheque defined
(1) A cheque is an unconditional order in writing that:
(a) is addressed by a person to another person, being a financial institution; and
(b) is signed by the person giving it; and
(c) requires the financial institution to pay on demand a sum certain in money.
Note: In this Act, financial institution has a restricted meaning-see the definition in subsection 3(1).
(2) An instrument that does not comply with subsection (1), or that orders any act to be done in addition to the payment of money, is not a cheque.
39In the present case, there can be no doubt that the piece of paper signed by Mr Chen and given to Mr Demian was not a cheque. It did not have the name of the payee. It did not have any specification of a sum certain in money that the bank to which it was directed was required to pay to the payee.
40Mr Chen gave some evidence of the circumstances in which the form of cheque had been filled up. For reasons that were not explored, he did not touch on this in his affidavit evidence. Part of the story emerged in examination-in-chief (by leave). The other part emerged in cross-examination.
41In chief, Mr Chen identified the handwriting on the form of cheque (apart from his signature) as being that of Mr Canavan. He said, "I remember he drew up the cheque".
42Mr Chen denied that he had authorised Mr Canavan "to fill up the name Kerry Ann Saba".
43In cross-examination, Mr Chen agreed that he handed over the form of cheque bearing his signature. He said that in doing so it was his intention that the person he was handing it to had his authority to complete the blank parts of the cheque form. However, he said, that authority, "is to let the cheque addressed to Colliers, the selling agent, not to the vendor". Mr Chen said that he did not know the full name of Colliers nor how to spell it and that is why, "so left them to fill it".
44Further, Mr Chen said, he was happy to have the cheque filled up after he had signed it, "because I give, I trust Demian will do it, but he give the cheque to Colliers to do it, but it was not, I'm not paying attention on this".
45Mr Chen then said (T 28.11-.18):
Q. You were happy to sign the cheque and hand it over to the agents on the basis that they would fill it out as the deposit cheque payable to whom it was supposed to be paid to, correct?
A. WITNESS: Yes. I let them to fill it, but I didn't pay attention to who.
Q. You knew that it was you were handing over that cheque so that it could be used as the deposit, didn't you?
A. WITNESS: Yes
46I do not accept that part of Mr Chen's evidence in which he denied that he authorised Mr Canavan "to fill up the name Kerry Anne Saba". I do not think that Mr Chen was being consciously dishonest in saying this. Rather, I think, he was not really turning his mind at this point to all the circumstances in which the cheque had been produced, signed and filled up.
47To my mind, the truth is that, as Mr Chen acknowledged in the passage of transcript that I have set out (and in the material preceding it that I have summarised), he authorised (and trusted) those to whom he gave the cheque to fill it out in such a way as would be required to enable the deposit to be paid according to the contract.
48It is important to remember, on Mr Chen's evidence, that he had not been made aware of the terms of the correspondence passing between the solicitors on 20 March 2013 until after the property had been knocked down to him. It does not appear from his evidence that he was ever aware that the requirements as to the deposit had been changed in two ways; first, by reducing the deposit from 10 per cent to 5 per cent; and, secondly, by providing for its release forthwith to Mrs Saba.
49I have no doubt that Mr Chen understood, from his work as a real estate agent, that the usual practice was for the deposit to be paid to the vendor's agent pending completion. I have no doubt that, when Mr Chen handed the cheque form over, signed but incomplete, that is what he expected to happen. That I think is why he has now said that he asked them to write the name of Colliers on. But I think the truth is that he either came to understand that the cheque needed to be filled out in another way, or, regardless, acquiesced, because he was prepared to sign the cheque and hand it over "on the basis that they would fill it out as the deposit cheque payable to whom it was supposed to be paid".
50Thus, I think, when one looks at the evidence overall, the better inference is that Mr Chen authorised Mr Demian to ensure that the cheque was filled out in the way that the contract required, for whatever the amount of the deposit was supposed to be, and payable to whomsoever was entitled to receive it.
51In reaching that conclusion, I take into account that, as the case was argued, the issue of authority to fill up the cheque was a key issue. It must always have been perceived as such. Thus, it is something that one would expect to have been dealt with in Mr Chen's affidavit. It is obvious that his affidavit was very carefully prepared (and I mean this by way of praise, not criticism). The drafter clearly had in mind the relevant issues as they were perceived at the time. Great care was taken to ensure that Mr Chen gave evidence in admissible form on those issues. The fact that there were no references at all made to the authority (or lack of it) for Mr Demian or Mr Canavan to fill up the cheque, when that careful affidavit was drafted, leads to the inference that those matters were not present to the mind of Mr Chen when he prepared and swore his affidavit.
52I do accept that English is not Mr Chen's first language. I am prepared to accept that he may not be familiar with the detail of legal process in this country. But, making all proper allowances for those matters, I regard the omission of this material from his affidavit as a serious matter weighing against the acceptance of his bald and conclusory statement, in evidence in chief, to the contrary. And when other inferences are available from his evidence in cross-examination, which explored the situation with greater care, I am the more strongly inclined to accept the latter, and to reach the conclusion that I have just expressed.
53In summary, I think, Mr Chen handed the signed but otherwise blank form of cheque over with the intention that it be filled up as required for payment of the deposit. He told Mr Demian of that intention in the presence of Mr Canavan. No doubt Mr Chen thought it would be made out to the selling agent. But I do not think that he expressed the precise identity of the payee as a condition of, or limitation upon, the authority to fill it up.
54As I have said, I do not think that Mr Chen was then aware of the relevant changes to the deposit. That fortifies my conclusion that his attitude was the more general, and permissive one that I have indicated.
55I therefore conclude that, objectively, Mr Chen handed over the form of cheque to Mr Demian on the communicated basis that it was to be filled up as required for payment of the deposit: that is to say, as required by the form of contract. I find further that this express intention was communicated in the presence and to the knowledge of Mr Canavan.
56On that basis, I conclude on balance that the cheque was in fact so filled up and that, having been so filled up and dated, it was given to Mrs Saba.
57Accordingly, in my view, the authority issue should be dealt with adversely to Mr Chen and in favour of Mrs Saba.
Second issue: conditional delivery
58I start with ss 25 to 28 of the Cheques Act:
25 Delivery essential for drawing or indorsement
A contract arising out of the drawing or an indorsement of a cheque is incomplete and revocable until delivery of the cheque.
26 Requisites for effective delivery
The delivery of a cheque is not effective to complete a contract arising out of the drawing or an indorsement of the cheque unless the delivery is made by the drawer or indorser, as the case may be, in order to give effect to the drawing or indorsement, as the case may be.
27 Drawing or indorsement may be shown to be ineffective
Subject to section 28, the delivery of a cheque by the drawer or an indorser may be shown to have been conditional, or for a special purpose only, and not in order to issue the cheque or transfer it by negotiation, as the case may be.
28 Presumption of effective delivery
(1) The drawer of a cheque shall:
(a) as regards a holder in due course-be conclusively presumed to have made an effective delivery of the cheque so as to complete the drawer's contract on the cheque; and
(b) as regards a holder who is not a holder in due course-be presumed, unless the contrary is proved, to have made an effective delivery of the cheque so as to complete the drawer's contract on the cheque.
(2) An indorser of a cheque shall:
(a) as regards a holder in due course:
(i) where the holder in due course took the cheque from the indorser-be presumed, unless the contrary is proved, to have made an effective delivery of the cheque so as to complete the indorser's contract on the cheque; or
(ii) in any other case-be conclusively presumed to have made an effective delivery of the cheque so as to complete the indorser's contract on the cheque; and
(b) as regards a holder who is not a holder in due course-be presumed, unless the contrary is proved, to have made an effective delivery of the cheque so as to complete the indorser's contract on the cheque.
(3) Nothing in this section affects the operation of subsection 18(1) or (4) in relation to an instrument of the kind referred to in that first‑mentioned subsection.
59It is clear, and was common ground, that Mrs Saba as payee was not a holder in due course. (See ss 50 and 51 of the Cheques Act; it was not suggested that the s 51 presumption had any application on the facts of this case.)
60There is no doubt that there was one communicated and accepted condition of delivery. That was, that the cheque would not be presented for at least one business day after delivery. That condition was satisfied.
61That "presentation" condition had been negotiated and agreed to for the purpose of enabling Mr Chen to put the account in funds. That follows in particular from paras 58 to 61 of Mr Chen's affidavit. Those paragraphs also make clear what was in his mind the link between the this condition and the Whitfield conditions. I will not take up further time and space by setting out those paragraphs.
62The other asserted condition is that, according to Mr Chen, he handed over the form of cheque on condition that it would be presented only if the Whitfield conditions were met.
63I have said already that Mr Chen's affidavit links the presentation and Whitfield conditions. Whether it did so or not, the connection is in my view clear on an objective basis. It follows that proof of the first condition (and I repeat that it is common ground that the first condition was agreed between the parties to have been imposed) could facilitate proof that Mr Chen also sought to impose the second condition.
64On balance, I think, Mr Chen did communicate to Messrs Demian and Canavan the condition relating to what I have called the Whitfield conditions. That seems to me to follow from the relevant background events.
65Mr Chen was representing his principal in China, Mr Wang. Mr Wang apparently required the Whitfield conditions to be accepted; he would not proceed otherwise. Mr Chen knew that. (I should say that it is unnecessary to find whether Mr Wang in fact did hold that intention; it is sufficient to find, and my findings should be taken no further, that Mr Chen believed that this was Mr Wang's state of mind at all relevant times.)
66Up until after the time the property was knocked down, Mr Chen believed that the Whitfield conditions had been accepted. He thought that when he went to the auction. He thought that when he bid at the auction. He thought that when the property was knocked down to him. He was not disabused until he was taken into the room to sign the contract.
67When Mr Chen found out that the conditions had not been agreed, he stated repeatedly that he did not wish to proceed. Indeed, he said (and Mrs Saba appears to agree) that at one stage he got up and left the room. Mr Chen said that, thereby, he was seeking to indicate that he wanted no further part of the business. However, he was talked out of this by Mr Demian and Mr Canavan.
68Those circumstances seem to me to support the conclusion, which I reach, that at all times Mr Chen both wanted the Whitfield conditions to be agreed and insisted on this as a condition of his proceeding (and, through him, Mr Wang's proceeding) with the transaction.
69It is clear, on Mr Chen's evidence, that he communicated this position to Messrs Demian and Canavan. It is equally clear that Mr Canavan at least spoke to Mrs Saba about this.
70There was thus a very difficult situation. The auction had been concluded. The property had been knocked down to Mr Chen. Mr Chen may have been required, as part of some collateral contract arising from his attendance at the auction, to sign the contract. But as the decision in Boulas shows, in the absence of any memorandum in writing to satisfy s 54A of the Conveyancing Act, specific performance would not lie against Mr Chen on the principal contract: the contract for sale.
71In those circumstances, I think, the likelihood is that Mr Canavan did say that he would take the inchoate instrument and the contract on the basis that Mr Chen stipulated. It was very much in the interests of Mr Canavan and his employer Colliers that the sale should proceed. As I have said, there was to be a substantial commission payable. Colliers had done all the work and incurred all the expense. If the matter went off, it would be in substance unremunerated, and Mr Canavan would lose any bonus that might be payable to him.
72The question is, whether the condition was communicated to Mrs Saba, within the meaning of s 18 of the Cheques Act.
73I should start by recording that Mr Anderson of counsel for Mrs Saba submitted that it was necessary, for the purposes of s 18, that any condition should be agreed before it could be effective. He relied on the decision of the Full Court of the Federal Court of Australia in Spalla v St George Wholesale Finance Pty Ltd (1999) 95 FCR 359.
74In my view, the decision in Spalla is not authority for the proposition for which Mr Anderson contended.
75It may be accepted that the primary judge had found that Mr Spalla communicated a condition on presentation of the cheque to the person to whom he handed it, a Mr Cahill of the respondent, St George Wholesale Finance. The primary judge appears to have found, further, that Mr Cahill received the cheque on that basis. That is made clear by the Full Court (Heerey, Sundberg and Weinberg JJ) at [33].
76However, when their Honours returned to the question at [106] and following, they were talking not so much of an agreement to impose a condition on delivery as an agreement to vary the terms of the contract recorded in the cheque (or in some of the cases, bill) itself. Their Honours' discussion proceeded on the basis of what evidence was, and what was not, admissible. Nothing that their Honours said, in my view, is to the effect that any condition of delivery must be accepted before it becomes effective.
77At [111], their Honours said:
"The imposition of the condition upon the presentation of the cheque...had the effect...of suspending the operation of the cheque, and converting it into an escrow. It did not otherwise contradict the express terms of the written instrument. It was, therefore, both at common law, and pursuant to s 27 of the Cheques Act, a valid condition, and one in relation to which parol evidence could be given."
78No doubt, there will be circumstances where a condition of delivery has been stated and accepted - agreed - before the cheque is handed over. That would appear to have been the case in Spalla. But it does not follow in my view that this is the only case in which a condition may be imposed for the purposes of s 27.
79Where the drawer of a cheque hands it over on an express and communicated condition, that has not been the subject of prior consent, the payee to whom it is handed over has two choices. One is to accept the cheque, including the condition on delivery that accompanies it. The other is to return the cheque. If the payee takes the first course, the conditional delivery is complete. If the payee takes the second course, there is no delivery of any kind. But what the payee cannot do is take the cheque and thereafter, unilaterally and without communication or consent, ignore the condition and present the cheque.
80However, that is not the end of the story.
81When the form of cheque was handed over to Mr Demian and by him to Mr Canavan, it was inchoate. It did not specify the payee. It did not specify the amount to be paid. It was not a "cheque". A fortiori, it was not a cheque that could be delivered, so as to satisfy the essential condition of delivery for the purposes of s 25 of the Cheques Act.
82The only "delivery" of the piece of paper as a "cheque" occurred once it had been filled up by Mr Canavan. He then took it to Mrs Saba and gave it to her or (at her express or implied direction) to her legal representative. Her evidence, which I accept, is that Mr Canavan did not inform her of the second condition - the condition relating to the Whitfield conditions.
83Whatever may be sufficient to impose a condition on delivery for the purposes of s 27, in my view, an uncommunicated condition cannot be effective to make the delivery conditional. On any basis, if s 27 is to make sense in the scheme of Div 3 of Pt 2 of the Cheques Act, the condition must be communicated to the payee. If it is not communicated, it is not effective and the delivery is relevantly unconditional.
84Further, as I have said, Mr Demian and through him Mr Canavan had at least the implied or ostensible authority of Mr Chen to fill up the cheque and, having done so, to act as his "deliveryman" for the purpose of effecting delivery of the cheque to the person entitled to receive it. Having regard to what in my view was the relevant variation to the draft contract, that person was Mrs Saba. Mr Canavan effected that delivery.
85Mr Lewis, I think, accepted that Mr Canavan was not acting within the scope of his authority as the selling agent in dealing with the cheque in the way that he did. See the written outline of opening submissions at paras 4.4 to 4.6; and see also Mr Lewis' oral submissions recorded at T 51. Although that submission might be seen to stand in some contrast to the submission at 4.3, where Mr Lewis asserted that Mr Canavan "in his capacity as agent to [Mrs] Saba, subsequently 'filled up' the cheque to order", the submission in 4.3 cannot be correct. It was no part of any authority given by Mrs Saba to Colliers or Mr Canavan to fill up a form of cheque signed by the purchaser. When Mr Canavan did that he exercised, as I have said, the implied or ostensible authority given to him by Mr Chen to do so.
86No doubt, at the time of delivery of the cheque to Mrs Saba, Mr Canavan knew that Mr Chen had imposed the second condition on the delivery of the cheque (and, for that matter, on the delivery of the signed counterpart of the contract for sale). However, unless that condition were communicated to Mrs Saba, I do not think that it was effective for the purposes of s 27. I do not think that it was any part of the authority of Mr Canavan, as representative of the selling agent, to receive communications of that nature for Mrs Saba. No doubt, had the matter proceeded according to plan, he would have had her express authority to receive and bank the cheque for the deposit. But that express authority had been overtaken by events.
87It follows, in my view, accepting as I do Mrs Saba's evidence on the point, that there has only been one condition imposed on the delivery of the cheque. That condition was that the cheque not be presented for payment for at least one business day after delivery. That condition was accepted and honoured (unlike the cheque).
88In my view, the second condition, relating to Mr Whitfield's unaccepted requests to vary the contract, was not communicated to Mrs Saba and was not effective.