BANK OF CHINA (HONG KONG) LTD. v. OPEN WIN (CHINA) LTD. AND OTHERS

HCA 417/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. HCA 417 OF 2001

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J U D G M E N T

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1. This is an appeal against a decision of the Master entering judgment under order 14 against the 1st and 2nd Defendants. Although the 1st Defendant appeals, the company makes no argument today and abandons its appeal.

2. Judgment for the Plaintiff against the 1st Defendant will therefore stand.

3. There was only one basis upon which any argument can be made on behalf of the 2nd Defendant. A claim that the 2nd Defendant was under undue influence has not been pleaded and was not sued before me today. A claim of non est factum was pleaded and is pursued today, but there is simply no basis upon which a claim for non est factum could succeed. The best that the 2nd Defendant can say is that he has made a mistake as to the effect of the documents that he signed. It was plain from Gallie v Lee [1971] AC 1004 that:

"A plea of non est factum is not available to anyone who has signed a document without taking the trouble to find out at least the general effect of the document. Neither can it be available to a person whose mistake is really a mistake as to the legal effect of a document."

4. The only basis upon which the 2nd Defendant can make an argument is a claim of misrepresentation. It is not disputed that in May 1999, with the indebtedness of the company to the bank standing at some $5.2 million, the 2nd Defendant, as a director of the 1st Defendant, negotiated a variation of the terms of the loan. The bank were undoubtedly at the time pressing for payment. The facility letter was signed on 3 May 1999, which in paragraph 4, in Chinese, describes the 2nd Defendant as "a guarantor". He had earlier, in 1997, signed a similar facility letter, but there is no evidence before me that a guarantee document was signed that time.

5. The banking documents, including the guarantee, were taken by bank officers to the 3rd Defendant for signature. The 2nd Defendant was not present at the time, and the documents were left with the 3rd Defendant to obtain the 2nd Defendant's signature.

6. It is said by the 2nd Defendant that at some time in September 1999, he telephoned the bank and spoke to a Mr Wong, and was told that the documents were normal banking documents he was required to sign as a director, and that if the company was unable to pay its debts, the bank would take legal action to claim against the 1st Defendant and wind up the 1st Defendant; and that, as one of the shareholders, he would be liable for any unpaid capital in the 1st Defendant.

7. I am not able to dismiss out of hand the possibility that this phone call may have been made, although I have the gravest doubt that any bank officer would explain a guarantee to a customer in that way. However, I am not able, in the circumstances, to say, in the immortal words of Godfrey J, that the 2nd Defendant's contention is "moonshine". He says the phone call was made. I suppose he has the right to go into the witness-box and say that the phone call was made and that he was given that explanation, and the court must determine whether or not he will be believed. But the circumstances are such that he must be placed on terms if he is to have leave to defend.

8. There will be an order that, upon the 2nd Defendant paying into court, within 28 days of today, the sum of $5,531,816.66, the judgment entered under order 14 will be set aside and he will have leave to defend. If he does not pay that sum within that time, the judgment will stand and may be enforced.

9. The question of costs is reserved.