OVERSEAS TRUST BANK LTD. v. TANG CHE CHING AND OTHERS

M. P. No. 837 of 1986

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. 167 Castle Peak Road is owned by seven parties. They are the seven defendants in these proceedings. All seven defendants are members of the same Tang family. They own the property in suit as tenants-in-common.

2. The plaintiff bank has become mortgagee of 167 Castle Peak Road. The mortgage loan has not been repaid and by an Originating Summons the plaintiff bank instituted proceedings against all seven defendants for payment of the mortgage loan and, in default of payment, possession of 167 Castle Peak Road, the subject-matter of the mortgage. Costs is also claimed by the plaintiff bank.

3. The 1st and the 6th defendants are represented by Mr Lim. The 7th defendant acts in person but I am told that he has filed no defence and is not in attendance to-day.

4. The history and had background of these proceedings, so far as it is relevant, may be briefly stated: The 1st to 5th defendants all signed Powers of Attorney in identical or almost identical terms in favour of the 7th defendant. On the force of these Powers of Attorney, a mortgage to the bank dated the 8th October 1979 was executed by the 7th defendant as such attorney for the 1st to 5th defendants and in his personal capacity. The 6th defendant is the sister of the 7th and the other defendants. She joined in the said mortgage as a signatory. The mortgage was for a term loan of $500,000. By a Further Charge, another term loan of $300,000 was granted to the 7th defendant who executed it as attorney and in his own capacity. The 6th defendant also signed the Further Charge. Thus, another term loan was advanced to the 7th defendant under this Further Charge. A second Further Charge was similarly signed but this time for securing banking facilities to the extent of $1.2M. Finally another Further Charge was signed in the same manner for raising backing facilities to the ceiling of $2.4M.

5. The first two term loans have apparently been repaid. Banking facilities obtained under these four documents have not been satisfied. Together with interests accrued on these banking facilities, a substantial amount is outstanding and remains unpaid The plaintiff bank sues all seven defendants for the payment of money outstanding in these banking facilities granted to the defendant under these four documents. In default possession is claimed by the bank.

6. In essence, the defence of the 1st to 5th defendants is run on the basis of pure construction. As far as the 6th defendant is concerned, her defence is one of incomplete interpretation at the respective time of execution of each of these four documents.

7. The Powers of Attorney in question contain 23 clauses and two winding-up paragraphs at the end. The portions relied upon by the bank are clauses 13, 14, 16, 21 and the last two paragraphs. In proper construction of the relevant clauses in the Powers of Attorney, so counsel for the 1st to 5th defendants reminded me, regard must be paid to the whole of the document, in particular to clauses relating to the management of the donors properties and affairs.

8. From the recital of each of the Powers of Attorney, it can readily be seen that the documents were executed to cater for, inter alia, the absence of the respective donors from jurisdiction. At one time, reliance was sought to be placed on another part of the recital in each of these Powers of Attorney, but that line of argument is no longer pursued.

9. In the dissenting judgment of Russell J. in Reckett v. Barnett, Pembroke & Slater Ltd. [1928] 2 KB 244 at p.268, the basic need for a power of attorney was adumbrated. Russell J. had this to say :

"The primary object of a power of attorney is to enable the attorney to act in the management of this principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or the others of his principal's property"

10. This observation on the fundamental concept was described by Lord Hailsham, L.C. in their Lordships' House as "quite accurate" in the same case of Reckett v. Barnes, Pembroke & Slater Ltd. [1929] A. C. 176 at p. 183. The dissenting judgment of Russell J. was upheld by the House of Lords. It is therefore for this Court to determine whether on proper construction of the relevant clauses relied upon by the bank, there was clear power to borrow and to mortgage conferred on the 7th defendant as attorney under the respective powers of Attorney executed.

11. Clause 13 of the powers of Attorney reads as follows :-

"To borrow money upon such terms as my attorney shall think fit upon the security of my properties of any part thereof."

Clause 14 reads :

"From time to time, if and when my attorney shall think fit to sell (either by private treaty or by public auction) exchange surrender give up mortgage charge pledge redeem demise lease or dispose of my said properties or part or part thereof upon such terms as my attorney shall think fit."

12. The last paragraph in each of the Powers of Attorney reads :

"And I hereby expressly declare that the particular powers enumerated above shall be given the widest interpretation and shall not be construed as setting limit to the general authority conferred on my attorney and that the power of attorney hereby conferred on my attorney and that the power of attorney hereby created shall not be revoked by debt, ..........."

13. It was submitted by Mr Lim, counsel for the 1st to the 5th defendants, that these powers of Attorney were prima facie executed for the benefit of the donors. Any power to borrow money or to mortgage for the benefit of the attorney himself must be specifically provided for.

14. What must not be lost sight of is the real issue whether clauses 13 & 14 conferred on the attorney clear powers to borrow and to mortgage for whatever purposes. The question cannot be one of whether a general power clearly granted was explicitly made exercisable for any particular person's benefit. Any specific direction for its exercise would inevitable restrict the general power. The powers in question were expressly stated not to "be construed as setting limit to the general authority conferred". References to "benefit of the attorney" in Clauses 13 & 14, if made ,would set a limit to the general authority so given and cause disharmony with the clear intention of each donee as stressed in the last

15. The rest of the provisions in each of the Powers of Attorney did not take the general principle further, that is to say, the primary purpose of a Power of Attorney is to enable the attorney to act in the management of his principal's affairs, so stated Russell J.

16. Clauses 13 and 14 are unobscure provisions conferring clear powers to borrow and mortgage on the 7th defendant as attorney. The clear power conferred by these respective clauses was reinforced by the last paragraph in the operative part in each of these documents. None of the clauses in question is susceptable of the limited meaning sought to be put upon it by Mr Lim, Counsel for the 1st to the 5th defendants. They are plain clauses, in unambiguous language conferring wide general power to borrow and mortgage on the 7th defendant as attorney.

17. As far as the 6th defendant is concerned, her case is embodied in paragraphs 4 to 9 of her defence. Paragraph 4 refers to a brief Chinese interpretation at the time when the mortgage document was explained to her . The first Further Charge is also brought under a similar complaint, that is to say, an inadequate explanation. In paragraph 6, the 7th defendant for execution by the 6th defendant and allegedly the 7th defendant's explanation was confined to acursory statement that the document was in connection with the previous mortgage and Further Charge. As for the last Further Charge, the 6th defendant alleges that it was similarly brought home by the 7th defendant for her execution. Again a similar general explanation and no more was allegedly offered by the 7th defendant. It is, in particular, alleged that the provisions or covenants for personal liability of the mortgagors to repay was never interpreted or explained to the 6th defendant.

18. At the hearing of these proceedings, the 6th defendant raised for the First time the allegation that she was categorically told that it was the 7th defendant who borrowed the bank money and it was the 7th defendant who alone was to repay such a loan. It was claimed during this trial by the 6th defendant for the first time that she was led to believe that she would incur no personal liability to repay the bank loans under the Mortgage and the Further Charges.

19. I cannot accept the belated attack made by the 6th defendant at these documents. It was hotly contested where some of these documents were executed and how some of them were attested. It is the case of the 6th defendant that the last two Further charges were not executed in the offices of solicitors but were brought home to her by the 7th defendant for execution. The 6th defendant was adamant that on at least two occasions, a document was brought home to her for her execution and that they were not, in fact, executed either before a solicitor or in an office of a solicitor.

20. Various persons involved with the execution of all these document were called by the plaintiff bank. From their recollection, with the aid of the documents in question, they all testified to the facts as represented by the entries on the documents. It is difficult naturally for these witnesses to have any clear personal recollection of the actual events. In the light of the assertions of the 6th defendant and after the long lapse of time, it would not be easy for this Court to determine, even on a balance of probabilities, where the truth lies.

21. However, as far as the case of the 6th defendant is concerned, it is quite unnecessary for this Court to make any factual findings on the scenario against which these documents were in fact executed. Apart from her belated accusation which I have rejected the 6th defendant's case is that she was aware of the documents she executed being a mortgage and documents, relating to the mortgage. She fully understood that a bank loan was to be obtained. She was left in no doubt that her property was to be put up as security. She herself is a registered nurse. I do not accent that she did not understand enough English to appreciate the significance of the contents of the documents she executed. She recalled that on one occasion she had not too much difficulty in appreciating the demand made in a bank letter with the aid of a dictionary. Her case is one of non est factum which she has to establish according to the guidelines given in Saunders v. Anglia, Building Society [1971] A.C. 1004, generally known as Gallie v. Lee.

22. The plea of non est factum cannot be put on its feet unless it can be shown that the signatory thought that he was signing a document substantially different in nature or in kind and that the person raising the plea had acted reasonably with due care.

23. The 6th defendant disclosed that she was aware there were other pages of the document which signed, not interpreted or explained to her. As I said, on at least one occasion, she resorted to the facility of a dictionary. Even if she had executed a document substantially different in nature or in kind Madam Tang the 6th defendant would not have succeeded in discharging the onus of due care required of her by Gallie v. Lee. Mr Lim was relatively silent on the Madam Tang's lack of care in his final address.

24. In essence, she claimed not to have been made fully aware of all the legal consequences and effect of the documents which she executed. Ignorance of full legal effects of a signed document would provide no defence of non est factum; so held Howatson v. Webb, [1908] 1 Ch. 1.

25. The defences of the 1st to the 6th defendants can fairly be said to be doomed to failure from the very inception. On the limited approach accorded to these defences by Counsel, with all the eloquence counsel had displayed in these proceedings, none of the defendants has managed to succeed in demonstrating any real defence to the claims of the plaintiff.

26. It is quite unnecessary for me to deal with peripheral disputes. The matters between the plaintiff bank and the defendants can be justly disposed of for the reasons I have given. It is therefore evident that the plaintiff bank should succeed in its claim for payment and in default for possession of the premises in suit against all the defendants including the defendant not in attendance, the 7th defendant. I would now entertain Counsel's submissions on the question of costs.

(Submissions of costs made)

27. The plaintiff should, in all the circumstances, enjoy a more stringent order for costs against the defendants. The defences paraded before this Court seemed to be, for Counsel of the the 1st to the 6th defendants, an uphill battle from beginning to end. From start to finish, difficulties had been experienced even in aligning these defences on a legalistic basis. The situation of the defendants is sympathetic. But there is no conceivable reason why the plaintiff bank should be allowed to be dragged through all these tedious proceedings. Costs to the plaintiff should be paid on a common fund basis as suggested by Mr Bleach. I order that judgment in terms of paragraphs 1 & 2 of the Origination summons in the amount, for paragraph 1, of $4,834,668 with interests on $2,400,000 thereof at 2% over prime from the 1st June 1984 up to today. The plaintiff to undertake not to avail itself of paragraph 2 of the Origination Summons before the 31st March 1989. Lastly, costs to the plaintiff on a common fund basis.