XCHRX THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD. v. WONG KONG MING AND OTHERS

HCMP6865/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 6865 OF 1999

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J U D G M E N T

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1. This is an appeal from the order of the Master made in January 2000 granting judgment against the 1st defendant in respect of a mortgage deed, commonly called "the 1st mortgage", given by the 1st defendant in respect of his property in relation to borrowing by the 3rd defendant from the bank.

2. The 1st defendant has a controlling interest in the 3rd defendant company. The 3rd defendant company required finance from the plaintiff bank. In March 1996, the 1st mortgage was entered into by the 1st defendant as the mortgagor, by the 3rd defendant as the borrower and by the bank as the lender. The 1st mortgage is an all-monies mortgage and has two features. The first feature is that it gives the security of the property to secure the loan. The second feature of the 1st mortgage is that it contains a covenant by both the mortgagor, i.e. the 1st defendant, as well as the 3rd defendant, i.e. the borrower, under Clause 2 to repay on demand all the monies that are outstanding to the plaintiff by the 3rd defendant. The order that was given by the Master and the subject of the today's appeal was to the effect that both the 1st defendant and the 3rd defendant pay to the plaintiff bank the amount outstanding which is standing at some $21 million.

3. At the hearing of this appeal, a number of points were raised by counsel for the 1st defendant. I would briefly deal with those relevant points. The first point that was raised is that there had been a misrepresentation by the bank to the 1st defendant. This is expressed at page 36 of the Bundle where it stated that "there was a misrepresentation in early 1996 before the letter of 10 January 1996". However, it is to be noted that it does not say in clear terms under paragraph 4 of the 1st defendant's 2nd affirmation that the bank staff had represented to the 1st defendant that the security demanded by the bank from the 1st defendant was limited to only a mortgage of the property and would not require a guarantee, namely the covenant for payment of money.

4. Having regard to the fact that the subsequent letter dated 10 January 1996 was in the clearest terms (under page 41) indicating that the security required would be a mortgage "... with an unlimited joint and several covenant to pay on the part of the Mortgagor and Borrower.". It seems to me that there is really no scope for the allegation of misrepresentation. It is also to be noted that the 1st mortgage itself was in clear terms.

5. The 2nd defence raised is non est factum based on more or less the same material. I think Le Pichon J in her judgment in HCCW114/2000 had expressed it very clearly how the non est factum point really could not run. Because in order for any prospect of success with such a point, the 1st defendant would have to show that there had not been negligence in having arrived at the wrong misapprehension, namely the alleged misapprehension in thinking that the document the 3rd defendant signed was only a conventional mortgage limited to a property and not a document which encompass not only the charging of a property but also a guarantee to pay money unlimited in scope. The facts here show that the 1st defendant, when he executed the document in March, had plenty of time to take legal advice - there was of course already the letter of January 1996. So, in my view, there is simply no prospect for the 1st defendant being able to succeed on a defence of non est factum.

6. The third matter that was raised is that the deed, as we can see in the Bundle, did not contain a signature by the bank. But as was pointed out by Mr Tollan on behalf of the plaintiff, it is not necessary for the bank to sign on such a deed. I was reminded that it is a very common form, both for guarantees as well as for all-monies mortgage such as this, for the bank not to sign. In any event, I accept that the deed is valid notwithstanding that there had been no signature by the bank, and if it is valid, then the relevant provision, namely Clause 2, can be called upon by the bank to enforce its present claim. So there is again nothing in that point.

7. The last point is what is alleged to be an agreement, set out at page 37, paragraph 11 of the Bundle, that the bank had agreed to drop all proceedings in return for certain promises from the defendants. I have received further affidavit material from the plaintiff which shows that the contemporaneous arrangement was really at best a temporary "cease fire" by the parties pending the defendants paying up on a regular basis the additional further money, and the evidence shows the defendants could not keep up the payment promise, therefore the bank resumed the war. I think there is nothing in this point of the bank having given up its right to sue by the November 1999 agreement.

8. It follows, therefore, that I have come to the conclusion that the appeal of the 1st defendant fails. By agreement of the parties, it was conceded that if the appeal fails then the restored hearing of the balance of the claim by the bank for possession in relation to the first and second properties must also succeed. Accordingly, therefore, I also make an order in favour of the bank against the 1st defendant for possession of the first and second properties pursuant to the 1st mortgage. The 1st defendant must pay to the plaintiff the costs of the appeal as well as the costs of the hearing for possession.