BANK OF CHINA (HONG KONG) LTD. v. WONG YUK PING CAROLINE AND ANOTHER

HCMP2017/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.2017 OF 1995

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J U D G M E N T

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INTRODUCTION

1. This is yet another case where a wife, who had signed a legal charge over her property to secure and a personal guarantee to guarantee the banking facilities advanced by a bank to a company which she alleged to have been owned by her husband beneficially, seeks to set aside the deeds on the ground that the bank had constructive notice of the undue influence and misrepresentation practised on her by her husband in procuring her execution of the same.

2. Here, the wife is the 1st defendant, Ms Caroline Wong Yuk Ling ("Ms Wong"). The husband is Mr Edmund Wong ("Mr Wong"). They were married in 1983 but have been separated since September 1994. The property is Flat 5, 10/F, Siu Yan House (Block G), Siu Hong Court, Tuen Mun ("the Property"). Acquired by Ms Wong in 1983, it was at the material times the couple's matrimonial home. The company is the 2nd defendant, Legwell Limited ("Legwell"), which was incorporated on 12 November 1991 with Ms Wong and a Mr Leung Tai Kwok ("Mr Leung"), a business partner of Mr Wong's, as shareholders and first directors. The bank is Xin Hua Bank Limited ("the Bank"), which was merged with the plaintiff in 2001. It agreed to extend overdraft facility to the extent of HK$700,000 to Legwell in March 1994 ("the Facility"). The bank officer at the centre of the dispute is a Mr Law Kwok Keung ("Mr Law"), who at all material times served the bank accounts of Mr Wong's group of companies and Legwell. The legal charge dated 11 April 1994 and the personal guarantee dated 28 March 1994 ("the Legal Charge" and "the Guarantee" respectively) were all signed by Ms Wong on 11 April 1994 at the office of Mr Lee Chi Cheung ("Mr Lee"), a clerk of Messrs Edmund WH Chow & Co., the solicitors acting for the Bank in the transaction. Mr Lee is married to Mr Wong's younger sister. He is a law clerk with more than 30 years of experience.

3. Pursuant to the relevant terms of the Legal Charge, Ms Wong as mortgagor and Legwell as borrower are jointly and severally liable to repay on demand all outstanding sums due to the Bank, including the overdraft. In the event of default, the Bank is entitled to take possession of the Property. Under the Guarantee, Ms Wong as guarantor irrevocably and unconditionally guarantees to the Bank payment on demand all monies owed by Legwell up to limit of the principal sum of HK$700,000 with interest. On 21 December 1994, the principal sum of the overdraft was upon the request of Ms Wong reduced to HK$660,000.

4. Legwell subsequently defaulted. As at July 1995, the outstanding principal with interest exceeded HK$800,000.

PROCEEDINGS

5. On 26 July 1995, the Bank commenced the present proceedings by way of originating summons under Order 88, Rules of the High Court. Ms Wong subsequently obtained legal aid. By an order dated 15 August 1996, the master ordered the action to proceed as if begun by writ. In her defence and counterclaim, Ms Wong alleged that Mr Wong had exerted undue influence over her and had misrepresented the true nature of the deeds; that Mr Lee had not explained the contents, nature and consequences of the documents to her before execution; and that the Bank had constructive notice of Mr Wong's wrongdoings and hence her equity. She counterclaimed that both the Legal Charge and the Guarantee should be set aside. Apart from liability, Ms Wong disputed the plaintiff's entitlement to interest.

6. The action however did not progress as expeditiously as one might reasonably expect. It was after more than six years since its commencement that the action finally came up for trial before me on 9 November 2001. But even then some interlocutory matters relating to pleadings and discovery were still outstanding. Partly because of this and partly because of the gross under-estimate of time, the trial went part-heard and resumed on 11 March 2002. It was set down for four days. But eventually, it took 91/2 days to finish.

7. Legwell did not appear before me. In fact, it had already been struck off from the register of companies in December 1998. The trial is thus purely on the plaintiff's claim against Ms Wong for vacant possession of the Property and money judgment and her counterclaim to set aside the Legal Charge and the Guarantee.

8. To substantiate its claim, the plaintiff called Mr Law, Mr Lee and Mr Wong Yan Ian, a senior officer of the plaintiff's credit control department ("Mr YI Wong"). Mr Law gave evidence mainly on his dealings with Mr Wong, Ms Wong and the Dosum group, how the application for the Facility was made by Mr Wong and Ms Wong's subsequent conduct relating to the Facility. Mr Lee mainly described the circumstances on how Ms Wong executed the Legal Charge and the Guarantee. Mr YI Wong gave the calculation of the sums due including interest. Ms Wong alone gave evidence on her defence and counterclaim. She did not call any witness. As will be seen in a moment, this case essentially turns on the credibility of the witnesses.

9. In the following section, I will summarize the evidence adduced by the parties. For clarity, I will put the evidence under various headings.

EVIDENCE

(1) Ms Wong's personal background and her relationship with Mr Wong

10. Ms Wong received education up to Form 5. She is now 44. Working as a shipping clerk, she earns HK$13,000 monthly. She has been separated from Mr Wong since about October 1994. She now lives with her son in the Property.

11. According to Ms Wong, her husband was a university graduate. He was hardworking. But he had a big ego and was very stubborn. Once he made a decision or formed a particular view, it was difficult to change his mind. He also had a hot temper. He once lost temper over a trivial incident and made a big fuss out of it while having a meal to celebrate the birthday of his father in mid-1993. In July 1994, he beat Ms Wong up when she pressed him for repayment so that she could redeem the Property. By that time, Ms Wong had already come to know about the existence of the Legal Charge. (I will come back to this particular aspect later.) Subsequently, in the presence of Ms Wong's sister, Mr Wong told Ms Wong that if in the future she ever said something wrong, he would beat her up again. On 17 July 1994, Ms Wong told him to move out of the Property by 20 September 1994, which he did. Since then, she has not been able to contact Mr Wong.

12. At the material times, Mr Lee and the Wongs met about once every Saturday at family gatherings. He agreed that Mr Wong was a person with a big ego.

(2) Setting up of Dosum group of companies

13. In 1988, Mr Wong started an import and export business with his business partner, Mr Kwok Wai Chor ("Mr Kwok"). Since February 1988, they had set up a string of companies as their business grew :

Date of incorporation	Name of company
23/2/88	Dosum Ltd ("Dosum")
27/1/89	Palecko Development Ltd ("Palecko")
1/10/91	Focan International Ltd ("Focan")
17/9/92	Sunwick Enterprises Ltd ("Sunwick")
2/3/93	Sanrich International Ltd ("Sanrich")
16/11/93	Dosum International Ltd
	("Dosum International")

14. Other than Sunwick, both Mr Wong and Mr Kwok were the shareholders and directors of these companies. For Sunwick, they were shareholders only. As noted above, Legwell was incorporated on 12 November 1991. After allotments in April 1992, Ms Wong became the majority shareholder holding 7,000 of the 10,000 issued shares. Mr Leung held the remaining 3,000 shares. They were Legwell's first directors as well. Mr Leung's directorship was taken up by Madam Tse Yuk Lan, Mr Wong's mother on 21 February 1994. Ms Wong was also the company secretary. Her position as director and secretary was taken over by Mr Wong Kuen Fat, Mr Wong's father on 1 October 1994.

(3) Banking with the Bank

15. Dosum first opened its bank accounts with the Bank in May 1988. Over the years, to support the group's business, banking facilities were obtained from the Bank on the strength of various charges over deposits and properties owned by the companies in the group :

Date	Instrument	Company concerned
29/5/90	Deed of charge on deposits	Dosum
1/6/90	Deed of charge on deposits	Dosum
16/6/92	Legal charge on 8/F, Arion Commercial Centre	Dosum
21/4/93	Legal charge on 5/F, Kam Fung Commercial Building ("Kam Fung Property")	Dosum
12/7/93	Legal charge on Gold Shine Tower	Focan
5/8/93	Legal charge on Rhine Garden, Shem Tseng	Sunwick

On 13 September 1993, Ms Wong executed a legal charge on the Property as security for the overdraft facility extended to Dosum by the Bank ("the 1993 legal charge"). The 1993 legal charge was prepared by Messrs Edmund WH Chow & Co. According to the signing page, it was Mr Lee who interpreted the charge to Ms Wong. He also signed as a witness. The 1993 legal charge was discharged on 24 January 1994 subsequently.

16. It is not seriously in dispute that Mr Law had over the years cultivated quite a good business relationship with Mr Wong and Mr Kwok. He said in evidence that he had frequent business contacts with Ms Wong as well.

(4) Ms Wong's general involvement with the Dosum group

17. It is Ms Wong's own evidence that her involvement with Mr Wong's group of companies started in 1988. She was then working as an account clerk for another unrelated company, earning a monthly salary of $8,000. When Dosum was established, she joined it as an accountant clerk with a much lesser monthly salary of $2,000. She became one of signatories of Dosum's bank account. Her salary was increased gradually over the years with the growth of the business, reaching $11,000 in 1994. Although employed by Dosum in name, Ms Wong was actually at all material times responsible for handling and keeping the accounts of the entire group. Initially, she worked on her own. As the business grew, more employees were employed. In about 1991 a junior clerk and about two years later an account clerk joined the group. Both of them worked under Ms Wong's supervision. On 17 July 1992, the directors of Legwell resolved that Legwell was to open a bank account with the Bank with Mr Wong, Mr Kwok, Mr Leung and Ms Wong as authorised signatories. On 6 March 1993, Legwell entered into a customer's agreement for bills account with the Bank with Mr Leung and Ms Wong as signatories.

18. It is Ms Wong's evidence that she held the shares in Legwell only as a nominee for Mr Wong. There is, however, no written instrument to that effect. Ms Wong also alleged that her husband was in absolute control of the Dosum group of companies, including Legwell. He ran the business together with Mr Kwok. Her husband made all the decisions. Legwell engaged in a plastic material business. It exported goods for Dosum. It also produced products for Dosum for sale. Mr Leung was a partner of Mr Wong, responsible for managing Legwell's factory in the Mainland. When Legwell was set up, Mr Wong asked her to be a director as his nominee because he did not want the supplier of plastic materials to know that Legwell was related to him, lest they would know that his companies were obtaining a lot of plastic materials from them, which might affect the price. She did not share the profits of the companies. She was only an employee responsible for the accounts of the group.

19. Mr Law, however, had the impression that Ms Wong was the "boss" of Legwell. He said Ms Wong was quite sophisticated. When Mr Wong was not in Hong Kong, she would be responsible for the administration and management of Legwell. She was not a minor staff as alleged. She understood English. She worked independently on the bills and bill accounts. She also knew clearly the cash situation in the bank accounts of the group. Occasionally, he met the Wongs for meals. In particular, he recalled that he was invited to attend a dinner by Ms Wong with Legwell's staff. The dinner was hosted by Ms Wong as the boss.

20. Ms Wong disagreed. She recalled that the only occasion when she had meal with Mr Law was in mid-1993 when Mr Wong invited Mr Law to attend a lunch gathering where Mr Wong introduced Legwell's staff to Mr Law and discussed with him business plans. It is however her evidence that Mr Law, prior to the gathering, had come to Legwell's office quite regularly to chat with Mr Wong and Mr Kwok.

21. Ms Wong also said that Mr Law had once accepted a visit to the Mainland factory and a trip to Macau by Mr Wong. This is no doubt an attempt to destroy Mr Law's credibility by portraying him as a corrupt bank officer. But none of these allegations were raised previously, either in pleadings, witness statements or cross-examination of Mr Law.

(5) Mr Kwok's departure and its impact

22. The business of the group was prosperous until early January 1994 when Mr Kwok and Mr Wong decided to part company. On 5 February 1994, Mr Kwok formally withdrew from the business venture. He resigned as director or director and secretary (as the case may be) of Dosum, Sunwick, Dousm International and was replaced in the case of Dosum and Sunwick by Dosum International and in the case of Dosum International by Ms Wong.

23. Mr Kwok's departure affected the group's business performance and the Bank's assessment of its future. Properties were sold to reduce the group's financial exposure. Consequently, the charges particularised in paragraph 15 above were all discharged by 2 March 1994 except the one on Kam Fung Property, which was discharged on 18 April 1994.

24. It is Ms Wong's evidence, though only raised for the first time in her second supplementary witness statement dated 3 January 2002, that in early 1994 when Mr Kwok was about to leave, Mr Wong asked her to prepare the accounts for the year 1993 so that they could be shown to Mr Kwok. For the ensuing months, she spent all her time on the accounts. She was fully occupied by this special task at all material times. As will be seen below, this allegation that she was so occupied was a repeated theme of Ms Wong's evidence on a number of important aspects.

(6) Discharge of the 1993 legal charge

25. As noted above, Ms Wong mortgaged the Property under the 1993 legal charge to secure facility granted to Dosum by the Bank. Ms Wong did not have any complaint against it. Like the Legal Charge, it was an all monies mortgage. Ms Wong said in her oral testimony that she understood the purpose of the 1993 legal charge although Mr Wong told her that the it was limited to HK$600,000. But when a copy of the 1993 legal charge was shown to her, she appeared to have accepted that it was not so limited. She realized that there was a real risk of losing the Property if the 1993 legal charge was not discharged. In early January 1994 when the business association between Mr Kwok and her husband was to break up, she became concerned. She begged Mr Leung to persuade Mr Kwok to repay HK$690,000 so that the 1993 legal charge would be discharged. Eventually, she managed to obtain only HK$420,000 from Mr Kwok. She raise a further sum of HK$150,000 from her family members. The total of HK$570,000 was then used to discharge the 1993 legal charge. She was however unable to demonstrate by way of documents how that was done. She said she was not concerned about the details because she was busy with the special task about the accounts. It essence, she said it would be fine as long as the Property was redeemed.

26. After the 1993 legal charge was discharged, Ms Wong contacted Mr Lee for the title deeds of the Property in February 1994. He told her and she believed that redeeming a deed took three to six months. She therefore did not chase after Mr Lee for the title deeds in April or May 1994.

(7) Mr Wong's application for the Facility and Cheque 781875

27. In January 1994, Mr Wong met with Mr Law in the absence of Ms Wong and applied for the Facility. Mr Law suggested using the Property as security for the Facility. The Property was then the only valuable property as between the couple. Mr Wong later confirmed to Mr Law that the Property was available.

28. On 25 February 1994, the Bank, in anticipation of the granting of the Facility in March, extended $200,000 overdraft facility to enable the payment of a cheque no.781875 drawn by Legwell in favour of Focan to be effected ("Cheque 781875"). This cheque was signed by Ms Wong for and on behalf of Legwell.

29. Mr Law's evidence on Cheque 781875 is thus. On 21 or 22 February 1994, Ms Wong called him and asked for a temporary overdraft of HK$200,000. Mr Law told Ms Wong that the Bank was still processing the application for the Facility. They agreed that when the Facility was approved, it could cover the temporary overdraft of HK$200,000. After the telephone conversation, Mr Law then applied for Ms Wong's behalf for the temporary loan of HK$200,000. On 25 February, Cheque 781875 was brought to him through the business account division as there was insufficient fund to honour the cheque. Having received it, Mr Law called Ms Wong and told her the position. He also told her that after the approval of the overdraft, she had to go to the solicitors to process the relating documents. Ms Wong agreed. Mr Law then sought approval of Cheque 781875. At its back, Mr Law wrote down in Chinese :

"過額175,862.02
有房押O/D 70萬申請中，
契在周偉雄律師行處。
轉數往Focan還單用。"

Mr Law then put down his signature. Two approving officers later affixed their signatures on the back of the cheque as well. The approval date was stated to be 26 February 1994.

30. Ms Wong gave a different version. She first described how cheques were issues and signed for Legwell. She would draw up cheques together with payment vouchers for Mr Wong's approval. He then decided who should sign on a particular cheque. If the cheque was of little significance, he would sign it. If it was for paying plastic materials, he would ask Mr Leung to sign it. If it was for petty cash, he would ask Ms Wong to sign it. Before 1993, Ms Wong was seldom asked to sign cheques. She went on to say that she knew all along that Legwell did not have any overdraft facility. She would always try to ensure there would be funds in the account to meet cheques drawn on the account. However, since early 1994, she was occupied by the special task about the accounts, she did not have time to look at the monthly statements sent by the Bank. They were read by the junior accounts clerk. She signed Cheque 781875 as instructed by Mr Wong. Because she was too busy to read the bank statements, she did not know if there were sufficient funds in Legwell's account to meet the cheque. Probably Mr Wong knew that there was money in the account. Under cross-examination, she said Mr Wong knew that she was busy but he did not sign the cheque. He just asked her to sign and she did it accordingly. Ms Wong further explained that the cheque was for an internal transfer to Focan. Internal transfer of money was then common among the group. Instruction to issue Cheque 781875 and approval of the same all came from Mr Wong. She denied she had contacted Mr Law in February 1994 as alleged.

(8) Mr Wong asking to use the Property as security

31. Ms Wong went on to say that in March 1994, Mr Wong asked her to mortgage the Property to raise money. By that time, the 1993 legal charge had been discharged. She refused as she had had tremendous difficulty in redeeming it under the 1993 legal charge. She did not want to mortgage it again. Mr Wong was very angry and lost his temper. Ms Wong was scared.

(9) Execution of the deeds

32. Mr Lee described the circumstances relating to the execution of the Legal Charge and the Guarantee as follows. About a week before 21 March 1994, Ms Wong called him and asked if he had received the Bank's instructions regarding Legwell. On 21 March 1994, he received an instruction letter from the Bank of the same date ("the Instruction Letter") to prepare legal documents regarding the Legal Charge and the Guarantee. Enclosed with the Instruction Letter were (1) an undated pro forma guarantee of the Bank containing particulars of the borrower (Legwell), guarantor (Ms Wong) and the guaranteed sum (HK$700,000), (2) a pro forma undertaking of the Bank for repayment of overdraft, (3) a certified copy of resolutions with the name of Ms Wong and her identity card number and Legwell's chop appearing at the page for specimen signatures, and (4) an undertaking for repayment of overdraft containing Legwell's name and address and the figure of the overdraft, that is, HK$700,000. Mr Lee then proceeded to prepare the Legal Charge and a minutes of meeting of Legwell's board of directors. Produced as evidence is a true copy of the minutes certified by a solicitor, Mr David Hung, on 9 April 1994. It is Mr Lee's evidence that after he had prepared the minutes, he gave it to Ms Wong. Days before 9 April 1994, Ms Wong returned to Mr Lee the minutes duly signed by Madam Tse and her. In other words, when Mr Hung certified the copy, the minutes had already been signed by Madam Tse and Ms Wong. In the course of her evidence, Ms Wong suggested at one stage that she signed the minutes together with other documents on 11 April 1994. But when the date of certification was pointed out to her, she said she could not recall the circumstances under which she signed the minutes.

33. After he had prepared all the documents, Mr Lee asked Ms Wong to attend his office on 11 April 1994 to sign them. She came after noon but because of the long lapse of time, he could not remember exactly when. Following his usual practice, Mr Lee explained the contents of the documents to Ms Wong before she signed them. He did not go through all the pages but only interpreted and explained the main points including that the Property was mortgaged to the Bank as security for the overdraft extended by the Bank to Legwell, that the limit of the overdraft was fixed at HK$700,000, that she was personally liable to repay all the outstanding sum and that she personally guaranteed Legwell's liability. The explanation took about 30 minutes. Ms Wong understood the explanation and then signed on the documents. She also signed on a covering letter to be issued by Messrs Edmund Chow & Co. to the Bank dated 11 April 1994. The letter enclosing all the documents was sent to the Bank on 15 April 1994. The Guarantee was subsequently dated by the Bank as 28 March 1994.

34. Ms Wong's version was, as expected, markedly different. On 11 April 1994, at about 11 a.m., Mr Wong called her and asked her to go to the Mainland factory immediately as custom officers were seizing goods there. She said she did not know the way. Mr Wong told her that his father would go with her. She immediately called his father and asked him to meet her at the platform of Sheung Shui KCR at 2:30 p.m. However, she did not leave the office right away. She stayed to finish her daily duties. At about 12:30 p.m., Mr Wong called again. He asked her to go to Mr Lee's office to sign documents relating to the sale of an office premises owned by Dosum. He told her that she must arrive at Mr Lee's office before 1 p.m. as Mr Lee had to attend lunch by then. Ms Wong immediately left office at about 12:35 p.m. and arrived at Mr Lee's office about 15 minutes later. After receiving her, Mr Lee took out a file and turned to the signing page of each of the documents and asked her to sign. Mr Lee asked her if she had brought along the company chop. Ms Wong said she did not as Mr Wong did not tell her so. Mr Lee said he would deal with it with Mr Wong. Mr Lee did not explain the documents to her at all. However, Ms Wong was not sure up to the time when she was giving evidence if Mr Lee was part of Mr Wong's scheme in procuring her signature on the documents. She did say that she did not have any suspicion because one was her husband, the other was her brother-in-law.

35. Ms Wong signed the documents, which took about two to three minutes. Afterwards, she left. While having lunch nearby, she called her father-in-law at his home, intending to tell him that she could not make it at 2:30 p.m. as she had to go back to her home at Tuen Mun (that is, the Property) to get the re-entry permit before proceeding to Sheung Shui. He was not there. The call was answered by his wife. Ms Wong asked her to tell Mr Wong that she would be late for about an hour. He should wait for her at the railway station. Ms Wong arrived at the railway station sometime after 3:30 p.m. The two of them then went through customs at about 5 p.m. Ms Wong explained that it took such a long time because there were a lot of people passing through customs. According to immigration record, she passed through the immigration checkpoint at Lowu at 5:09 p.m that day.

(10) Cheque 781877 and other cheques

36. On 19 April 1994, Ms Wong signed a cheque no.781877 drawn by Legwell in favour of Dosum ("Cheque 781877") in the sum of HK$500,000. The cheque was honoured by using the Facility. Ms Wong said in her evidence that shortly before 19 April 1994, Mr Law called her and asked her to prepare a cheque of HK$500,000 drawn by Legwell in favour of Dosum. He told her not to date the cheque and she should personally bring the cheque to him. She sought instruction from Mr Wong who told her to proceed accordingly. She did not bother to check Legwell's account to see if there was money as it was her husband's account and he had already told her to go ahead with the cheque. Other than Cheque 781877, Ms Wong had signed on a total of 10 cheques in the months of April and May 1994, including Cheque 781885 for HK$120,000 payable to Focan/bearer and Cheque 781888 for HK$160,000 payable to Focan.

37. A couple of points arose out the cross-examination on this part of Ms Wong's evidence. First, she explained that she was not aware of the Facility, the existence of which could be clearly discerned from the monthly statements, because she was occupied by the special assignment on the accounts. She however accepted that the overdraft facility previously granted to Dosum was no longer available, that by the end of 1993, Legwell did not have any overdraft facility, that by March 1994, Legwell was the only trading vehicle for Mr Wong; that in order to do business, Legwell would have to use overdraft facility; that the Bank would not grant overdraft facility unless with security; and that at that time, the only valuable asset of the couple was the Property. Second, when she was asked to sign Cheque 781877, Mr Wong told her that a sum of RMB$1.5 million derived from a concluded business transaction would be collected in April 1994. She was therefore not concerned about issuing the cheque at all. This point was however only raised in the second day of her cross-examination.

(11) Discovery of the Facility and events thereafter

38. It is Ms Wong's evidence that in late May 1994 she discovered the existence of the Facility by reading a letter from the Bank to Legwell mentioning the Facility. She immediately asked Mr Wong about it. He told her that he had mortgaged the Property. She was very angry and asked when the documents were signed. He said it was on 11 April 1994. After heated arguments, Mr Wong promised that when a sum of HK$690,000 from Plaecko came by the end of August 1994, he would pay the overdraft. She accepted the promise and left.

39. Under cross-examination, Ms Wong said she continued to ignore the bank statements of Legwell for the months of June and July despite the discovery of the Facility. She spent most of her time in the Mainland factory. She and the account clerk were checking when the money from Palecko would arrive. Despite Mr Wong's promise, she kept on pressing Mr Wong for money in June and July, which eventually leading to the assult on her by Mr Wong in July 1994. Despite all these, she simply did not look at Legwell's account statements. Her real concern was when the money from Palecko would come in. She said she had no alternative if Mr Wong continued to make use of the Facility. She, however, had not explained why she did not contact Mr Law or the Bank to reveal what had actually happened. In about early September 1994, she did call Mr Law and asked him if he knew that she had not made use of the Facility. Mr Law said he knew and he would personally ask Mr Wong for repayment. Hearing that, Ms Wong set her mind at ease. When asked why did she not tell Mr Law that Mr Wong had cheated her, she said she was not good at speech and she was stupid enough not to mention it.

40. In September 1994, Ms Wong already knew that the money from Palecko was not used to cover the overdraft. But she said it seemed that she did not press Mr Wong further. She did not check the accounts of Legwell either because she was in a very bad mood and spent most of her time in the Mainland between September and December 1994. There is, however, no document, like re-entry permit or immigration record showing that that was the case.

41. On or about 20 December 1994, Ms Wong went to Guangzhou and stayed in a relative's place. On that morning, while tidying her purse she found a phone banking card, which reminded her of the Legwell's account. She therefore telephoned Hong Kong to check how much money was left with the account and discovered that only HK$510,000 of the overdraft was used. She immediately called Mr Law to see if there was any means to reduce the limit of the overdraft. Mr Law asked her to send in the request in writing. He also told her briefly what to write on the letter. Later on, Ms Wong faxed to him a letter of the same date requesting for a reduction of the limit to HK$510,000 ("the First Letter"). The First Letter read :

"新華銀行
9字樓
羅國強先生收

有關本人的擔保「力威有限公司」港幣柒拾萬元正，以我本人之物業FLAT 5, 10/Fl., SIU YAN HOUSE, SIU HONG COURT, TUEN MUN, N.T. 一事，

現減回只有伍拾壹萬元正，請即通知「力威有限公司」即日還拾玖萬元正給貴銀行。

特此正明

	黃玉萍
	Wong Yuk Ping 94.12.20"

Afterwards, she confirmed with Mr Law on the phone that he had received it. On the following day, that is, 21 December 1994, Ms Wong, out of curiosity, checked the Legwell account again via the phone banking facility. She was shocked to find out that the amount had used up to HK$660,000. She immediately called Mr Law who explained that Mr Wong went to withdraw HK$150,000 in the afternoon the previous day. Her request to reduce the limit to HK$510,000 could not be entertained. Mr Law then asked her if she would like to reduce it to HK$660,000. Ms Wong agreed. Mr Law told her to send in another letter, which she did by fax at about noon ("the Second Letter"). The Second Letter read :

"新華銀行 工商部 羅國強先生啟

FAX 854 2565

有關本人之物業FLAT 5, 10/Fl., SIU YAN HOUSE, SIU HONG COURT, TUEN MUN, N.T.
擔保「力威有限公司」一事，請即日減回為港幣陸拾陸萬元正。

Wong Yuk Ping
94.12.21"

42. According to Mr Law, between June to December 1994, whenever the limit of the Facility was exceeded, Mr Law called Ms Wong and she deposited money into the account to deal with the problem. On 20 December 1994, Ms Wong called him, requesting for a reduction of the overdraft limit. It was the first request by Ms Wong to reduce the overdraft limit. Before close of business that day, Mr Law received the First Letter. On 21 December 1994, he called Ms Wong and told her that her request could not be entertained and that a reduction to HK$660,000 was possible. He later on received the Second Letter. Ms Wong had never raised the allegation that she had been cheated by Mr Wong all along until the present proceedings arose.

43. It is the plaintiff's case that (1) by drawing the cheques after the grant of the Facility and execution of the Legal Charge and the Guarantee, and (2) by virtue of the First and Second Letters, Ms Wong had by conduct affirmed the deeds, even if there were any misrepresentation or undue influence as alleged.

THE LAW

44. Before proceeding to examine if the defence relied on by Ms Wong is made out, I will first set out the law in this difficult area.

45. Hong Kong is not the only place that saw a proliferation of cases of this type in recent times. The English courts had been called upon from time to time to decide similar cases, which had led to a difference of judicial opinion. In 1993, the House of Lords for the first time had to consider and determine the issues arising from this type of cases in Barclays Bank Plc. v. O'Brien [1994] 1 AC 180. Since then, many cases had been brought to courts to test the working of the O'Brien principle not only in the wife and husband scenario but also in other types of relationship. The O'Brien principle is by and large followed and applied here in Hong Kong. The principle is no doubt authoritative. But it had given rise to some concerns in England as the law developed. Revisiting the issues in Royal Bank of Scotland plc. v. Estridge (No 2) [2001] 3 WLR 1021, the House of Lords explained, clarified and restated the jurisprudential basis of the law. In Hong Kong, the latest reported decision after Estridge is Bank of China (Hong Kong) Ltd v. Wong King Sing [2002] 1 HKC 83 where the current position of the law was admirably summarized by Mr Recorder Geoffrey Ma, SC (as he then was).

46. Before setting out the propositions that I derived from the authorities, I should make two observations. First, it should be borne in mind that the law is designed to give effect to the pertinent policy considerations and the interests involved in this difficult area : see O'Brien at p.188C-H, Estridge, at para.34-37. In essence, the policy considerations are these. Matrimonial homes in modern times represent a substantial part of private wealth. Indeed, for most home-owning couples, their homes are the most valuable asset. They should be free to make use of this asset as a means of raising money for their joint or individual business enterprise. In order not to frustrate this freedom and hence sterilizing the economic wealth tied up in matrimonial homes, a lending bank must be able to have confidence that the guarantee or the legal charge signed by one of the spouses will be as binding on him or her as is the other documents which he or she signed. Otherwise, banks will not be willing to lend money on the security of a matrimonial home. At the same time, the high degree of trust and confidence and emotional interdependence that normally characterize a marriage provides scope of abuse, which unfortunately in reality is not uncommon. Victims of such abuse should reasonably be able to look to the law for protection. Thus the law should strike a balance between these competing interests and provide a structured scheme for the determination of cases raising the issue of enforceability as between the lending bank and the victim in such a position.

47. Second, the principles developed by the courts since O'Brien to achieve these objectives should not be applied mechanically. For instance, after O'Brien, the words "trust and confidence" used by Lord Browne-Wilkinson in his formulation of the principle had been given much prominence in many of the subsequent cases and led to controversy and difficulty. But as observed by Lord Nicholls in Estridge, at para.10-11 :

"The principle is not confined to cases of abuse of trust and relationship. It also includes, for instance, cases where a vulnerable person has been exploited. Indeed, there is no single touchstone for determining whether the principle is applicable. Several expressions have been used in an endeavour to encapsulate the essence: trust and confidence, reliance, dependence or vulnerability on the one hand and ascendancy, domination or control on the other. None of these descriptions is perfect. None is all embracing. Each has its proper place."

48. The primary question is whether in a particular relationship with its own characteristics between two persons, one has acquired over another a measure of influence or ascendancy of which the ascendant person then takes unfair advantage : Estrdige, at para.8. When approaching this fundamental question, I respectfully agree with the observation of Mr Recorder Ma in BOC at p.92E-G that one has to apply a large degree of common sense when assessing the relevant evidence. He said :

"While this is convenient and provides a logical basis for the application of at times not uncomplicated principles, it is to be borne in mind that the defence of undue influence is ultimately a simple concept. It has all to do with informed consent. Once a court forms the view that consent was freely given with full knowledge of the consequences of entering into the relevant transaction, that is the end of the matter, however improvident the transaction may objectively appear. The rationale for the defence of undue influence is to prevent the victimisation of the complainant. It is there to protect people from being forced, tricked or misled in any way by others into entering a disadvantageous transaction..."

49. Whether a transaction was brought about by undue influence is after all a question of fact to be determined by a proper and objective examination and assessment of all the circumstances of the case.

In the following section, I will set out the legal principles that I am able to derive from the authorities. In paragraphs 50 to 57, I deal with the complainant's equity to set aside the transaction against the wrongdoer who had exerted undue influence. I next discuss the complainant's rights to set aside the transaction as against the leading bank in paragraphs 58 to 63.

UNDUE INFLUENCE

50. A person who has been induced to enter into a transaction by the undue influence of another is entitled to set that transaction aside as against him. Equity traditionally identified broadly two forms of undue influence : actual and presumed : see Allcard v. Skinner [1887] 36 Ch D 145 (CA), Bank of Credit and Commerce International SA v. Aboody [1990] 1 QB 923 (CA) at 953 and O'Brien at pp.189B-190C.

(1) Actual undue influence

51. Actual undue influence is an equitable wrong committed by the dominant party against the other which makes it unconscionable for the dominant party to enforce his legal rights against the other. It is typically some express conduct overbearing the other party's will. It should be noted that actual undue influence does not depend upon some pre-existing relationship between the two parties although it is most commonly associated with and derives from such a relationship. He who alleges actual undue influence must prove it : Estridge, para.103.

(2) Presumed influence

52. Presumed undue influence arises out a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage. The law has long recognized the need to prevent abuse of influence in these "relationship" cases despite the absence of evidence of overt acts of persuasive conduct : Estrdige, at para.10. The burden rests with the complainant in the first place to raise a presumption in his favour that the transaction was brought about by undue influence. This is a rebuttable evidential presumption. Once this presumption is raised, the burden then shifts to the party seeking to uphold the transaction to prove that the complainant entered into the transaction with an independent free will and free of any undue influence. If he fails to discharge the burden, the transaction will be set aside without the complainant having to prove any actual undue influence : BOC, at p.94.

53. The complainant will be able to raise the presumption of undue influence by one of the following routes.

First, he proves the existence of one of the special types of relationship in which the law has always presumed, irrebuttably, the existence of a relationship of influence, that is, a relationship in which it will be presumed that the complainant reposed trust and confidence in the other party : Estridge, at para.18 as explained in BOC, at p.95D-E. Examples of relationships within this special class include parent and child, guardian and ward, trustee and beneficiary, solicitor and client and medical adviser and patient. It is, however, well-established that a husband and wife relationship is not within this category. While the court is not blind to the opportunities of obtaining and unfairly using influence over a wife which a husband often possesses, there is nothing unusual or strange in a wife, from motives of affection or for other reasons, conferring substantial benefits on her husband : Yerkey v. Jones [1939] 63 CLR 649 at p.675.

54. Alternatively, if the relationship does not fall within any of the special classes, the complainant proves two prerequisites :

(1) that he placed trust and confidence in the other party; and

(2) that the transaction is not readily explicable by the relationship of the parties : Estrdige, at para.14 and 21. This is a necessary limitation upon the width of the first prerequisite so that ordinary, unexceptional transaction of everyday occurrence will not be caught : Estrdige, at para.24.

55. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot be readily accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case : Estridge, at para.13. In this connection, the concept of manifest disadvantage is purely evidential : Estridge, at para.104. When the transaction is called for an explanation, the greater the disadvantage to the complainant, the more cogent must be the explanation before the presumption will be regarded as rebutted : Estridge, at para.24.

56. In the ordinary course, a wife's guarantee on her husband's debt is not to be regarded as a transaction which failing proof to the contrary is explicable only on the basis that it has been procured by the exercise of undue influence by the husband. Lord Nicholls observed in Estridge, at para.30 :

"Wives frequently enter into such transactions. There are good and sufficient reasons why they are willing to do so, despite the risks involved for them and their families. They may be enthusiastic. They may not. They may be less optimistic than their husbands about the prospects of the husband's businesses. They may be anxious, perhaps exceedingly so. But this is a far cry from saying that such transactions are a class to be regarded as prima facie evidence of the existence of the exercise of undue influence."

The court will nevertheless note, as a matter of fact, the opportunities for abuse that flow from a wife's confidence in her husband and for a husband to take unfair advantage of his influence over his wife or her confidence in him. The court will take this into account with all the other evidence in the case : Estrdige, at para.19.

THE COMPLAINANT AND THE LENDING BANK

57. As between the complainant and the lending bank, the essential question is under what circumstances the bank will be affected by the undue influence exerted on the complainant. Here, the complainant seeks to set aside the transaction, not against the wrongdoer who had exerted undue influence, but against the bank. The first hurdle that the complainant has to overcome is that he must prove undue influence or misrepresentation, as the case may be. If he fails, it is pointless to go any further to consider the extent of how the bank is affected : Estridge, at para.101 as explained in BOC at pp.100G-101C. As will be seen below, this point is of particular importance in the present case.

58. It is, however, not enough merely to show that the relevant transaction has been affected by the undue influence or misrepresentation before the bank is affected. There has to be some additional factor before the lender's conscience is affected and he is to be restrained from enforcing his legal rights : Estridge, at para.101. The additional factor is either agency or notice. Lord Browne-Wilkinson explained in O'Brien at p.191 :

"...if the wrongdoing husband is acting as agent for the creditor bank in obtaining the surety from the wife, the creditor will be fixed with the wrongdoing of its own agent and the surety contract can be set aside as against the creditor. Apart from this, if the creditor bank has notice, actual or constructive, of the undue influence exercised by the husband (and consequentially of the wife's equity to set aside the transaction) the creditor will take subject to that equity and the wife can set aside the transaction against the creditor...Similarly, in cases such as the present where the wife has been induced to enter into the transaction by the husband's misrepresentation, her equity to set aside the transaction will be enforceable against the creditor if either the husband was acting as the creditor's agent or the creditor had actual or constructive notice."

59. Agency is a question of fact. As between spouses, such occurrences are rare. The mere fact that a debtor is required by his bank to obtain security for facilities afforded to him whether by way of guarantee or otherwise and he then approaches the surety, does not mean that the debtor is acting as agent of the bank; in such circumstances he may well just be acting for himself : O'Brien, at p.193G-194B.

60. As to notice, the key to the problem is to identify the circumstances in which the creditor will be taken to have had notice of the complainant's equity to set aside the transaction. In O'Brien, Lord Browne-Wilkinson said at 195G to 196F :

" The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it. Therefore where a wife has agreed to stand surety for her husband's debts as a result of undue influence or misrepresentation, the creditor will take subject to the wife's equity to set aside the transaction if the circumstances are such as to put the creditor on inquiry as to the circumstances in which she agreed to stand surety ...

Therefore in my judgment a creditor is put on inquiry when a wife offers to stand surety for her husband's debts by the combination of two factors : (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction.

It follows that unless the creditor who is put on inquiry takes reasonable steps to satisfy himself that the wife's agreement to stand surety has been properly obtained, the creditor will have constructive notice of the wife's rights."

61. This concept of constructive notice was subsequently clarified by the House of Lords in Estridge in several aspects. First, it is accepted that this concept departed from the traditional notion of notice in equity : para.38 to 41 and 108. Second, the novelties in the formulation of Lord Browne-Wilkinson sought to develop the law in order that wives might be given a reasonable measure of protection, without adding unreasonably to the expense involved in entering into surety and guarantee transactions affected by undue influence or misrepresentation : para.42. Third, the steps a bank is required to take do not consist of making inquiries as such. They are there to reduce, or even eliminate the risk of the wife entering into the transaction under any misapprehension or as a result of undue influence by her husband. The steps are not concerned to discover whether the wife has been wronged by her husband in this way. The steps are concerned to minimise the risk that such a wrong may be committed : para.41. "Putting on inquiry" is strictly a misnomer. But it is convenient to use the terminology which has now become accepted or this context : para.44. Finally, the two requirements set out by Lord Browne-Wilkinson concerning financial disadvantage and substantial risk are properly to be regarded as being the underlying rationale why a bank is put on inquiry when a wife stands as surety for the husband's debts, not as being the requisite matters that a complainant must prove : para.46.

62. In a husband and wife scenario, depending on the particular circumstances, a bank may or may not be put on inquiry :

(1) Whenever a wife stands as surety for her husband's debts, the bank is put on inquiry : Estridge, at para.48, 84 and 108, BOC at p.101H. Lord Nicholls said :

"It is sufficient that the bank knows of the husband-wife relationship. That bare fact is enough. The bank must then taken reasonable steps to bring home to the wife the risk involved." (Emphasis supplied)

In BOC, Mr Recorder Ma, after referring to the test in Estridge, went on to say that inherent in this formulation are two requirements which have to be shown : (a) knowledge by the bank of the relationship between the creditor and the surety; and (b) that the nature of the transaction is such as to the apparently disadvantageous to the surety (such as where the surety guarantees the indebtedness of the debtor, no part having been played by the surety in the negotiations : at pp.101I to 102B. Requirement (a) is obvious. However, it is doubtful if requirement (b) is necessary. It would appear that when that part of his judgment was properly understood, the learned recorder did not intend requirement (b) to be a prerequisite in a husband and wife situation, having just pointed out that it was to be regarded as part of the underlying rationale why a bank was put on inquiry, not as being the requisite a wife must show. For my part, I would accept that knowledge of the existence of husband-wife relationship alone would be sufficient to put the bank on inquiry. The apparent disadvantageous nature of the transaction would have most probably been canvassed and determined earlier when the court examines if the transaction is not explicable by the relationship of the parties : see para.56 above.

(2) Where the wife becomes surety for the debts of a company whose share are held by her and her husband, the bank is put on inquiry even when the wife is a director or secretary of the company. The shareholding interests and the identity of the directors are not a reliable guide to the identity of the person who actually have the conduct of the company's business : Estridge, at para.49.

(3) Where, however, money is being advanced, or has been advanced, to husband and wife jointly, the bank is not put on inquiry unless the bank is aware that the loan is being made for the husband's purposes, as distinct from their joint purposes : CIBC Mortgages plc v. Pitt [1994] 1 AC 200.

STEPS NEED TO BE TAKEN BY THE BANK

63. Once it is established that the bank has been put on inquiry, the burden is on the bank to show that reasonable steps have been taken to satisfy himself that the surety's agreement has been properly obtained : O'Brien at p.196E-F. In surety transaction, the bank is required to the following :

(a) To insist that the surety attend a private meeting in the absence of the debtor with a representative of the creditor;

(b) At such meeting for that representative of the creditor to tell the surety of the extent of his liability as surety under the contract of suretyship;

(c) To warn the surety of the risk he is running in entering into the transaction;

(d) To urge the surety to take legal advice and in exceptional cases, to insist on it.

See O'Brien at p.196F-197B, Estridge, at para.50.

AFFIRMATION

64. A transaction liable to be set aside because of undue influence is voidable at the instance of the complainant. However, a complainant may have affirmed the transaction by conduct : see generally Chitty on Contracts, (28th edn), para.7-063 at p.445.

65. With the above legal principles in mind, I now turn to consider if the defence relied on by Ms Wong is made out.

UNDUE INFLUENCE OR MISREPRESENTATION?

66. As noted above, in order to succeed, Ms Wong must first prove the undue influence or misrepresentation as alleged.

67. The plea of undue influence does not stand on evidence. Despite her evidence on Mr Wong's personality and behaviour, when in March 1994 he asked her to mortgage the Property, she flatly refused. More importantly, Ms Wong confirmed in her oral testimony that she did sign the Legal Charge and the Guarantee willingly and voluntarily. Her real complaint is that she had been misled by her husband into signing them. He told her that the documents were in connection with the sale and purchase of the Kam Fung Property owned by Dosum. Thus it is not a case of undue influence as such. Instead, like O'Brien, it is a case of misrepresentation. Ms Wong must prove the misrepresentation : see paragraph 58 above. But in my view, she has failed miserably in this regard. I will explain why below.

68. Her story of how Mr Wong had tricked her into signing the Legal Charge and the Guarantee was flawed with inherent difficulties. First, she could not satisfactorily explain how the minutes of 28 March 1994 came about. According to the minutes, the board (consisting of Ms Wong and Madam Tse) resolved (1) that Legwell do jointly with Ms Wong apply to the Bank for general banking facilities and for that purpose to execute a legal charge with Ms Wong over the Property; and (2) that Ms Wong be appointed to execute the legal charge for the company. The minutes came into existence before 9 April 1994, that is, before any alleged misrepresentation by Mr Wong. Madam Tse also signed on the minutes. There is however no suggestion that she either took part in or was a victim of Mr Wong's trick. Nor is there any challenge on the authenticity or accuracy of the minutes. Second, it is the effect of Ms Wong's story that Mr Wong wanted to rush her into signing the documents. But I do not see the reason why Mr Wong would first ask her to go to the Mainland factory at about 11:00 a.m. urgently and then at 12:30 p.m. ask her to go to Mr Lee's office. What if Ms Wong had left the office right after receiving the instruction to go to the Mainland? There was no guarantee that Ms Wong would still be available when Mr Wong called again later. Why would Mr Wong run this risk when he could have simply asked her to go to Mr Lee's office shortly before 1:00 p.m.? Third, why did Ms Wong not leave the office right after receiving the first instruction? The visit was urgent and her evidence seemed to have suggested that she was submissive to her husband and she was then the only person who could go. Fourth, Mr Wong's trick could only succeed if Mr Lee was part of it. The documents according to Mr Wong's alleged misrepresentation was in connection with the sale of the Kam Fung Property owned by Dosum. So Dosum's company chop would be required. In actual fact, Legwell's chop was required and affixed onto the documents. An innocent request by Mr Lee for Dosum's company chop as opposed to Legwell's chop would destroy the whole plan. Ms Wong said she did not bring along Dosum's chop because Mr Wong did not ask her so. This I find it difficult to accept. With her experience, she must have known that she needed the company chop of Dosum when she was to execute documents for Dosum. She did not need any particular reminder or instruction by Mr Wong. In my view, it is only a convenient excuse to overcome the difficulty in this part of her evidence. Mr Lee had been cross-examined about the point that Legwell's chop did not really fit into Ms Wong's signatures on the documents. It appeared that Ms Wong had signed first before the chop was applied. Mr Lee said he could not remember whether the chop was affixed before Ms Wong signed or vice versa. Given the long lapse of time, I accept Mr Lee's explanation.

69. Ms Wong's evidence on how she signed the Cheques 781875 and 781877, that she was not aware of the Facility until late May 1994, and how she behaved after knowing that she had signed the Legal Charge and the Guarantee on 11 April 1994 is difficult to accept. The monthly bank statements revealed clearly that Legwell was granted and did make use of the Facility. Ms Wong being responsible for account matters would certainly come across the statements. She therefore had to make up the excuse that she was then fully occupied with the special assignment of preparing the accounts. She used the same excuse to justify her apparent ignorance of the position of Legwell's account at the material times, although she had been asked to issue and sign cheques of quite substantial amounts. In my view, it was only a recent fabrication. On Cheque 781877, she used a further excuse about the sum of RMB1.5 million. I am of the view that she made it up when she went along. It is the effect of her evidence that she discovered the Facility by coincidence. She had not read bank statements for quite a long time. But on a certain day in late May 1994 she opened one of the letters and found out the existence of the Facility. What a coincidence indeed. Mr Wong promised her to repay the overdraft by money coming from Palecko. Despite its importance, it was only raised in her second supplementary statement filed in January 2002. I am of the view that it is also a recent fabrication. She did not bother to read the bank statements to find out to what extent the overdraft facility had been used. This defies common sense. She did not complain to the Bank or take step to contain the damage by, say, reducing the amount of overdraft, as she did in December 1994. She did not offer any credible explanation for her lack of action. Despite Mr Wong's failure to fulfill the "Palecko promise" by repaying the overdraft subsequently in September 1994, Ms Wong did not make any complaint to the Bank, when it was possibly the most important thing to do in the circumstances. Her explanation why she failed to do that is simply hard to believe. I also find it incredible that she would have asked Mr Law to reduce the overdraft limit by the First and Second Letters in December 1994 without making any complaint if her allegation about misrepresentation were true. The letters in effect acknowledged the Legal Charge and the Guarantee and her liability thereunder.

70. Ms Wong is in my view a poor and untruthful witness. I have no hesitation in rejecting her evidence. On the other hand, I am satisfied that all the witnesses for the plaintiff are truthful and honest. I accept and prefer their evidence whenever it is in conflict with that of Ms Wong.

FINDINGS

71. Having carefully considered all the evidence, I make the following findings :

(1) Ms Wong did not, as alleged, held her share in Legwell as a nominee for Mr Wong. There is no document in support and I do not accept Ms Wong's allegation. However, Mr Wong did have a say in the business and operation of Legwell. This is an inference I draw from the undisputed fact that Mr Wong did apply for the Facility for Legwell and such application was accepted by the Bank. But that does not mean that Ms Wong held the shares for Mr Wong beneficially. Ms Wong was more than a mere accountant clerk. She was a director and signatory for the company's accounts. She was aware of the cash position of the Dosum group of companies, including Legwell. I find that she did take part in the management of Legwell together with her husband.

(2) Ms Wong knew that Mr Wong had applied for the Facility. It is apparent from Mr Law's evidence, which I accept, about the circumstances relating to the issue of Cheque 187875 : see paragraph 29 above. The Facility was necessary to keep the business of Legwell and possibly the Dosum group as a whole going. Ms Wong also knew that the Facility was to be secured by the Property. This explains why she did not retrieve the title deeds from Messrs Edmund WH Chow & Co after the 1993 legal charge had been discharged. The same firm of solicitors was to prepare the intended legal charge.

(3) Although it was Mr Law who suggested using the Property as security, Mr Wong did not act as agent of the Bank in obtaining it : see the legal proposition in paragraph 60 above.

(4) Ms Wong together with Madam Tse resolved at the board meeting on 28 March 1994 that Legwell should apply to the Bank for the overdraft facility and for that purpose to execute the legal charge over the Property. She thus had full knowledge about the transaction.

(5) Ms Wong willingly and knowingly signed all the documents at the office of Mr Lee on 11 April 1994, including the Legal Charge and the Guarantee. Before execution, Mr Lee had fully explained to her and she fully understood the essential terms of the documents, their nature and legal consequences. There is no reason why Mr Lee, a clerk with more than 30 years experience, did not do so. Ms Wong was a relative but I am not persuaded that Mr Lee would therefore fail to discharge his duty to explain as alleged.

(6) There was no undue influence or misrepresentation as alleged. Ms Wong willingly and knowingly used the Property as security for the Facility and agreed to personally guarantee Legwells' indebtedness thereunder.

(7) In December 1994, Ms Wong applied for a reduction of the overdraft limit with full knowledge of the Facility, the Legal Charge and the Guarantee. She did not make any complaint at all because, as she knew, the Legal Charge and the Guarantee were all valid and legally binding on her.

72. The above findings of facts are sufficient to dispose of this action. Ms Wong having failed to prove misrepresentation, her defence failed at the first hurdle. For the sake of completeness and in fairness to Mr Law, I also hold that Ms Wong's allegation that Mr Law was a corrupt bank officer was unfounded.

INTEREST

73. Clause 3.13 of the Legal Charge gave the plaintiff absolute discretion to determine the rate of interest charged on outstanding indebtedness. I accept Mr YI Wong's evidence of the plaintiff's usual practice on interest rate. I am satisfied that the plaintiff is entitled under the Legal Charge to charge prime + 3% and prime + 8% for outstanding sums within and without the overdraft limit. Mr Au-yeung, Counsel for Ms Wong, contended that the plaintiff had not exercised its discretion to charge such interest rate. With respect, this argument is without substance and I reject it accordingly.

CONCLUSION

74. For the above reasons, I will enter judgment for the plaintiff against Ms Wong for (1) delivery up of vacant possession of the Property, and (2) the sum of HK$693,901.32 with interest at the rate of prime + 3% for the sum of HK$660,000 and prime + 8% for the sum of HK$33,901.32 from 30 June 1995 until judgment and thereafter at the judgment rate for both sums until payment. I will also dismiss Ms Wong's counterclaim.

COSTS

75. Ms Wong is legally aided. By virtue of section 16 of the Legal Aid Ordinance, Cap.91, neither Ms Wong nor the Director of Legal Aid is liable for the plaintiff's costs of its claim : see subsection (1)(b)(ii). However, the plaintiff as the defendant in Ms Wong's counterclaim is entitled to its costs thereunder : see subsection (1)(b)(ia). In the circumstances, I will make an order nisi that there shall be no order as to costs on the inter partes costs save that the costs of the counterclaim be to the plaintiff, to be taxed if not agreed. Ms Wong's own costs shall be taxed in accordance with the legal aid regulations. The order nisi shall be made absolute within 14 days after handing down of this judgment.