RAINIER INTERNATIONAL BANK v. L AINE & CO. LTD. AND OTHERS

Action 1984, No. 5715

IN THE HIGH COURT OF JUSTICE

HONG KONG

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JUDGMENT

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1. This is an action by the Plaintiff Bank on a guarantee said to be signed by the 2nd and 3rd Defendants who although they have put in a defence in this case, are not represented and do not appear. There is every reason to think that they are out of the jurisdiction. It is said by the Plaintiffs that these 2 Defendants signed a guarantee on the 13th of August 1981 guaranteeing advances to the principal L Aine & Co. Ltd. of which they were directors. The principal having at some time before August 1984 defaulted, in August 1984 the Bank instructed their solicitors to make demands under the guarantee and those demands have not been being met according to the Plaintiff.

2. There are 3 main issues raised in the defence. The first issue is whether the two Defendants signed the guarantee. The second is whether the demand in writing was made under the guarantee. And thirdly, there is an issue as to the amount of the liability under the guarantee. Additionally, the Defendants allege in their defence that Mr. Cheung who gave evidence before me and who until in August 1981 was the senior vice-presendent and general manager of the Plaintiff, misrepresented to the Defendants that the signing of the guarantee document by them as directors of the principal was merely a procedural formality for the giving of loans to a limited company and also that as directors they had to sign the guarantee document.

3. First, I am quite satisfied on Mr. Cheung's evidence that the 2nd and 3rd Defendants did sign the guarantee which is produced in the case. This is P4. Although the burden does not lie upon the Plaintiff on this matter, I am satisfied that Mr. Cheung explained to the 2nd and 3rd Defendants very carefully the import and the effect of the document which they were signing. He told me that he spent some time explaining the nature of this document particularly to the 3rd Defendant because it was his view that courts had been particularly lenient with ladies who had signed guarantee documents of this nature. I am quite satisfied that there was no misrepresentation of any kind by him. I am quite satisfied that both the 2nd and the 3rd Defendants understood exactly what they were signing and the importance of the document. I am also satisfied that the document was not signed in blank. It had already been completed.

4. It is also of interest to note that I accept Mr. Cheung's evidence that he was concerned to have this guarantee, not as any formality as it is being alleged in the defence, but because the Bank was extending facilities to a principal in relation to a sum which was more than the paid-up capital of the company. Therefore it was an obvious case where the Bank would require further security. The two Defendants, represented themselves to him as being sufficiently wealthy to sign this guarantee and indeed his independant knowledge of them was to the same effect.

5. So I am quite satisfied that this was a document properly signed and that the 2nd and 3rd Defendants were liable under the guarantee prima facie.

6. Now, were demands made in accordance with the guarantee? I have had evidence produced by Mr. Lee, the partner of the solicitors for the Plaintiff. He produced carbon copies of letters which were sent respectively to the 2nd and 3rd Defendants on the 2nd of August 1984. I am quite satisfied on his evidence and the evidence of the next witness Connie Lau that those letters were despatched to the address of those 2 Defendants in Canada. In pursuance of clause 20 of the agreement it is deemed that demands were received by them 8 days later, that is 8 days after the date of despatch on the 2nd of August of 1984. So I am quite satisfied that a demand was properly made in accordance with the guarantee; the Defendants are certainly liable under the guarantee and that the only question that remains is what is their liability.

7. Mr. Cheung in pursuance of clause 11 of the guarantee, has produced a certificate signed by himself as an officer of the Bank which shows the liability. That I accept and the result is that the total liability of principal and interest is the sum of $430,085.47. The Plaintiff is entitled therefore to judgment against each of the Defendants in that sum because the guarantee is a joint and several.

8. Judgment for the Plaintiff against 2nd and 3rd Defendants in the sum of $430,085.47 with costs.