UNION BANK OF HONG KONG LIMITED v. YEUNG PO CHUEN AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS NO. 2355 OF 1983

__________

____________

_____________

JUDGMENT

___________

1. This is an appeal from the decision of Master Hansen made on the 6th of June 1984, the Defendants not appearing, whereby he ordered that the Plaintiff recover against the Defendants $1,848,109.97 secured by a mortgage dated 22nd June 1981 and interest on $1,630,166.93 at the rate of 23.25% per annum from the 15th day of May 1984 to the date of the order and thereafter at judgment rate.

2. That the 1st and 2nd Defendants do within 28 days after service of the order on them deliver to the Plaintiff vacant possession of the property comprised in the said mortgage.

3. The 2nd Defendant, Yeung Moon, (D2) is the mother-in-law of Yeung Po Chuen, the 1st Defendant (D1) and Young Wong Yuk Lan, Alice ("Alice Young"), one ofthe partners of the 3rd Defendant Vincy Trading Co. (D3) is her daughter.

4. It is clear from the evidence that in June 1981, D1 and D2 purchased a flat known as A1, ninth floor, Chermain Heights, Eastbourne Road, Kowloon, together with a car park ("the premises"). The cost was $725,000 of which $125,000 was found in cash and the balance raised by a mortgage for $600,000 to the Plaintiff Bank. The mortgage was, however, stated to be to secure general banking facilities of $600,000 made to D3, a partnership between D1 and his wife (and D2's daughter) Alice Yeung. It is not in dispute that D3 is now totally insolvent and both D1 and Alice Yeung have been adjudicated as bankrupt. As at the 16th of May 1984 the amount owing by D3 was $1,630,166.93 plus interest of $272,535.73. There will be further interest now accrued. It is, however, not in dispute now that D2's liability is limited to the sum of $600,000 plus interest thereon.

5. An order was made by Master Hansen on the 6th of June 1984 giving judgment against the Defendants for $1,848,109.97 plus interest from the 14th May, and that D1 and D2 give up possession of the flat within 28 days. The order was in default of any appearance of the Defendants.

6. Nothing further was done in this matter until April 1987 when notice of intention to proceed was filed and a writ of possession applied for and possession was to be then given on the 19th June. This was stayed pending an application being made to set aside the order of Master Hansen on the ground that D2 is illiterate and uneducated. She did not realise what the Deed of Mortgage was when she signed it and, as a customer of the Plaintiff Bank, it owed her a fiduciary duty to explain the document to her before she did so. Reliance was placed on Lloyds Bank Ltd. v. Bundy⁽¹⁾ and it was submitted on behalf of D2 that if she did not know what she was signing the doctrine of non est factum applies and, so far as she is concerned, the document is void.

7. Leave to appeal against the order of Master Hansen was granted by Deputy Judge Cruden on the 8th of July.

8. The Deed of Mortgage is in fact not only a security for the loan made to finance the purchase of the flat but is to secure all advances made by the Plaintiff to D3 subject to a limit of $600,000, plus interest. It is not challenged that D2 had no financial interest in D3 and I am satisfied that there is an arguable case that she was not aware that the Deed of Mortgage was not simply a document securing the advance of $600,000 to purchase the flat. I granted leave to cross-examine her on her affidavits and she certainly seemed to be unaware at the time of the exact contents of the documents she was signing. I am, however, also satisfied that she was fully aware of the fact that the Plaintiff was lending D1 and herself $600,000 and the document she signed was to be security for that amount which was to be paid off by monthly installments of principal and interest. I am also satisfied that she paid some of those installments to D1 who in turn paid same to the Plaintiff, albeit in most oases very much in arrear. She may well have paid him sums for which he has failed to account.

9. D2 sought to rely on some credit entries made by the Plaintiff in D3's account on 21st October 1985. These reflected payments made by Leung Chiu Ping who had guaranteed D3's debt to the Plaintiff up to a limit of $1,000,000. A fixed deposit is her name for 1,400,000 matured on that day and of that $254,468 was credited to D3's account. That was an error which was subsequently corrected and I am satisfied that D2 cannot seek to have credit for that amount.

10. I am satisfied that there is evidence that D2 did not realise the full nature of the document she was signing though she did realise it was a Deed of Mortgage to secure the sum of $600,000 on the flat she and D1 were purchasing. To that extent there is a case fit for trial on a plea of non est factum such as may entitle her to have the Deed rectified to reflect what she thought it was. The question of whether rectification is available of a written contract where there is unilateral mistake is by no means clear, Riverlate Properties v. Paul⁽²⁾, but I am satisfied that there is an issue which should go to trial.

11. I am therefore satisfied that D2 has no defence in respect of the amount outstanding on the account in respect of the advance of $600,000 to purchase the flat which, as at 8th June 1985 was $485,192.14 plus interest on that amount and interest on the overdue interest to today. The rate of interest to be that currently charged by the Plaintiff on mortgage loans from time to time. Counsel informed me that this amount would be calculated and agreed.

12. The order of Master Hansen is therefore set aside. There will be judgment for the Plaintiff for $485,192.14 plus interest to be agreed.

13. There will be an order for vacant possession of the premises to be given to the Plaintiff in default of payment of the judgment debt on or before 20th December 1987, the premises to be then sold by public auction. Any amount in excess of the judgment debt plus the costs of sale to be paid into Court.

14. There will be leave to D2 to defend the Plaintiff's claim for any further relief.

15. There will be general liberty to apply.

16. There will be no order as to the costs of this appeal.

(1)    [1975] 1 Q.B. 326

(2)    [1975] Ch. 133