DENE HUNT v. GORDON WILLIAM FISHER

IN THE COURT OF APPEAL

1995, No. 38

(Civil)

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J U D G M E N T

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Liu JA:

1. This is an O. 14 appeal. The defendant is a practising barrister. In 1990, approximately US$500,000 in Australian currency was remitted to a trust company in the United Kingdom called P.F.L. (Holdings) Limited. The remittance was pre-arranged by one Mrs Barbara Harris, an alias of the plaintiff, for investment on behalf of a blind trust known as the "Snow Trust" by P.F.L.'s controlling French company called Union Fidelite Corporation S.A. The United Kingdom trust company which was controlled by the French company, therefore became the trustee of the Snow Trust. In 1990, the principal directors of the French company were the defendant, Mr Andrew Paul and Mr Colin Diamond. The defendant was then the Managing Director. The Snow Trust was a blind trust in the sense that it was set up deliberately with no current beneficiaries. The plaintiff had been introduced to the defendant by one Mr William Hodgekiss, a Sidney barrister, before she, in one of her aliases, caused the remitted fund to be invested by the controlling French company on behalf of the blind trust under the auspices of the defendant. The defendant then professed to provide financial services. In 1992, the blind trust's investment through the controlling French company was lost. The defendant is said to have also sustained heavy personal loss in the same line of investment. In September 1992, the plaintiff visited the defendant in Monaco with the view to seeking repayment of her investment. The defendant allegedly told the plaintiff that he had lost all her investment but that he would make good the loss, standing "in the shoes of the Snow Trust". A deed was thereupon drafted and signed by the defendant for the plaintiff to take back to Australia for legal advice. In November 1992, Mr Hodgekiss was sent by the plaintiff to Monaco to try to recover her money from the defendant. It is claimed that the defendant admitted to Mr Hodgekiss that he had lost all the plaintiff's money in American Mutual Funds and that on legal advice he would at least be liable to her in negligence. The defendant entertained Mr Hodgekiss on 11 November 1992, and on the next day he produced a draft deed to Mr Hodgekiss over lunch. Mr Hodgekiss had previously consulted the plaintiff's Monaco lawyer, Mr Lindsay Leggatt-Smith who advised adding the words "and subject to the performance" to clause 2 of the draft deed so as to ensure that the plaintiff would not have to release the "Snow Trust" unless the defendant had discharged all his obligations under the deed. In the same evening on 12 November 1992 at a dinner held at the defendant's home at Beausoleil, the defendant produced the deed with the suggested amendment, on which the plaintiff sues. Yam, J granted summary judgment, and from that order of the judge the defendant now appeals.

2. It is the defendant's allegation that a great many conditions precedent were orally laid down at the time when the amended deed was handed over to Mr Hodgekiss. Mr Bleach, leading counsel for the plaintiff was critical of these alleged conditions precedent. They were, in the main, inconsistent with the provisions of the deed which was, on its face, signed, sealed and delivered by the defendant. These alleged conditions precedent are also sought to be impugned on various other grounds, including the one that no material terms would have likely been left out of the deed by a person of the defendant's legal experience and training. However, leading counsel for the defendant, Mr Griffiths reminds us of the concept of delivery "in escrow". When a deed is delivered in escrow, the conditions upon the fulfilment of which the deed is to be released, thus bringing it into operation could well be incongruous with its terms. The plaintiff leans heavily on the evidence which bears upon the defendant's clear intention to personally recoup the plaintiff's loss. But our attention is drawn by counsel for the defendant to the reality that the defendant had good cause for choosing to pay on behalf of the Snow Trust so as to take full advantage of the right of subrogation after having satisfied the plaintiff's claim. The plaintiff also seeks to make much of the many communications, including dispatches of facsimiles to the defendant who flatly denies the receipt of any telling messages. At the time the defendant had just separated from his wife and operated from a friend's office in Hong Kong. However, it has not been suggested that the defendant made any effort to keep himself reasonably informed. The defendant further complains that bare assertions aside, there was no evidence of due or timely execution of the deed and moreover that the plaintiff was dilatory in issuing her writ, some 10 months after the defendant's alleged default on 31 December 1992 in making his initial payment under the deed.

3. Counsel for the plaintiff submits that the defendant's case is incredible. See Murjani & Others v. Bank of India [1990] (1) HKLR 586. This court is invited to conclude that the defendant's crucial assertions are totally unbelievable and that a fair or reasonable probability of a real or bona fide defence capable of belief has not been demonstrated.

4. For the defendant it is sought to be explained that the conditions precedent insisted upon at the time when the deed was passed over to Mr Hodgekiss allegedly in escrow were sensible safeguards. The defendant attacks, through his counsel, various facets in the plaintiff's case, such as her many aliases, the possibly tainted source of her approximately US$510,000, the absence of direct evidence of due or timely execution of the deed by the plaintiff, her dubious country of residence, and other features within the peculiar knowledge of the plaintiff. These, so counsel for the defendant suggests, cry out for interrogatories on and cross-examination of the plaintiff, and would provide additional or other reasons for a trial. See Miles v. Bull [1969] 1 QB 258. The defendant further argues that the nature of the plaintiff's claim lies in damages in lieu of specific performance which would only be decreed on the overall circumstances, including delay, subject to the court's residual discretion. I do not propose to set out in full the contentions of the parties advanced to us in this appeal.

5. I have formed my own views on these arguments of counsel, but on an Order 14 appeal, it would be as well undesirable as unnecessary to address these issues. I need focus only on the following aspect which I regard as sufficient for disposing of this appeal. The material part of clause 1 of the deed which bears the date 16 September 1992 reads as follows:

"In consideration of the acknowledgment by Hunt contained at clause 2 hereof, FISHER, on behalf of the trustee of the trust estate of 31 July, 1990 known as the Snow Trust, covenants to pay to HUNT the sum of five hundred and ten thousand United States Dollars (USD510,000) as follows."

Reference to the above covenant in clause 1 is also made in clauses 2, 3 & 4. In these clauses 2, 3, & 4, the mention made of "covenant" and its performance is clearly referable to what is covenanted in clause 1. In clause 2 of the deed, the words are : "the covenant of FISHER contained in clause 1 hereof." Identical wording is found in clauses 3 & 4 of the deed: "his covenants given and expressed at clause 1 hereof." These descriptions given for "covenant" do not seem to have the effect of taking it out of the meaning ascribed to that word by clause 1. Prima facie, on the proper construction of the part of clause 1 I have set out, the covenant to pay would seem to be one made on behalf of the trustee of the Snow Trust rather than one to pay on a personal basis by Fisher, the defendant. Therefore, it would appear to be arguable that in substance the deed, though made in the name of the defendant, was not the defendant's deed. It was in fact so pleaded in paragraph 5 of the draft defence. Issue was accordingly joined: "In further answer to paragraph 3 the defendant says that the Deed is not the deed of the defendant."

6. Mr Faulkner, counsel for the defendant so submitted to Yam, J in his resistance to the plaintiff's application for summary judgment:

"Unquestionably any covenant which may be contained in Clause 1 is a covenant by the Snow Trust. The words are quite clear. 'FISHER, on behalf of the trustee of the ....... Snow Trust, covenants to pay ......'. The trustee of the trust was (the United Kingdom trust company). This is quite consistence with the relief of the Trust and the Trustees referred to in Clause 2. Accordingly, if it is the plaintiff's case that the deed is so unambiguous that nothing extraneous can or should be looked at, the plaintiff's claim must fail. However, if it (is) the plaintiff's case that surrounding circumstances can be looked at then all the circumstances must be taken into account and there are clear and serious dispute of fact as to those circumstances which cannot be tried on affidavit."

7. Mr Bleach, leading counsel for the plaintiff submits before us that the covenant created by clause 1 of the deed is unobscure. It is clearly, so counsel maintains, a personal covenant. At one time counsel could be understood to have conceded that "perhaps normally" the covenant was one given on behalf of the Snow Trust rather than one given personally by the defendant but counsel then argued that in the following clauses of the deed such as clause 3 the covenant was unequivocably clarified as "his (the defendant's) covenant". Mr Bleach seeks also to rely on the facts that no agency is pleaded in the draft defence and that the defendant has not resiled from the stance that he had personally undertaken to pay the plaintiff. In particular, leading counsel for the plaintiff has led us through paragraph 17 of the defendant's fifth affidavit sworn on 4 October 1994. Paragraph 17 reads as follows:

"17 at the time I wrote, by facsimile, to caplan that is to say, on 16 September, 1992, I also informed the plaintiff that I was willing to assume the risk of recovering the Snow Trust's investment in the American Mutual Funds and, to that end, I was prepared to "stand in the shoes" of the Snow Trust. In exchange, the plaintiff was to release any interest which she might have in the Snow Trust in consideration of my agreement to pay her the value of the investment by the Snow Trust in the American Mutual Funds. However, I informed the plaintiff that I, myself, had also just lost a considerable amount of money through the fraud of persons in Australia; who were, in turn, associated with the persons in the United States who had recommended the investment in the American Mutual Funds. That was why the Australian police were in my French office as deposed at paragraph 9 of the affidavit of Hodgekiss; they were obtaining evidence from me for the criminal prosecution of the Australian fraudsters."

8. The references to the covenant created by clause 1 of the deed in its clauses 2, 3 & 4 do not seem to take the matter further. The stance hitherto adopted by the defendant could hardly affect any attempted interpretation of the deed. The usual canon of construction is to give weight to the natural meaning and in the case of an ambiguity, the factual matrix i.e. "evidence of the factual background known to the parties at or before the date of the contract, including evidence of the 'genesis' and objectively the 'aim' of the transaction" may be called in aid. (Emphasis supplied). It would not be permissible to admit evidence of a party's objective or intention "even if it is known to the other party". See Prenn v. Simmonds [1971] 1 WLR 1381 at p. 1385 letter H & letters C - D, per Lord Wilberforce.

9. Evidence of the defendant's intention is inadmissible for construction. Paragraph 5 of the draft defence seems to have implicitly raised the issue of agency. The effect of the covenant as given in clause 1 of the deed is not likely to be abrogated by clauses 2, 3 & 4.

10. Mr Bleach, leading counsel for the plaintiff is firm that the relevant words in clause 1 of the deed are unambiguous and that they created a personal covenant in the defendant. I am not persuaded at this stage that these words must necessarily connote a personal obligation on the part of the defendant to pay. Mr Bleach submits, in the alternative, that if these words were obscure, the court might pray in aid the defendant's unequivocal stance. It would appear that such evidence of objective or intention is inadmissible for the purpose of construing the words in question. In any case, counsel refers us to no factual matrix.

11. Mr Griffiths, leading counsel for the defendant takes a diametrically opposite view on interpretation. Counsel submits that the words in question clearly did not create a personal covenant but a covenant on behalf of the trustee of the Snow Trust. In his submission, with no less confidence Mr Griffiths does not seek to rely on factual matrix. In the outcome, this court has not had referred to it any factual matrix.

12. I do not share the confidence of Mr Griffiths nor that of Mr Bleach. It would appear that despite what is claimed to be the plain meaning of these words, they are arguably ambiguous. That factual matrix would be necessary for construing these words if they are ambiguous does not seem to be in dispute. This issue of capacity was not determined by the judge. In the circumstances, I also find it quite impossible to deal with this issue on appeal. This matter must go to trial. I would therefore give unconditional leave to the defendant to defend.

13. In the arguments run for over a day and a half, the true construction of these words in clause 1 of the deed came into focus only during the last hour. It is unsurprising, therefore, that this issue was left unresolved by the judge whose otherwise closely reasoned analysis of the facts and the law would now have to set at naught. For these reasons, I would make an order nisi that costs of the appeal and below be costs in the cause, particularly when the issue of agency or capacity has not even been made a ground of appeal although the point is allowed to be fully ventilated before us.

Bokhary JA:

14. I, too, would allow this appeal, set aside the judge's Order, give the defendant unconditional leave to defend and make an order nisi that the costs here and below be in the cause.

15. Having regard to what appears to have led to this deed to begin with, I can quite readily understand the plaintiff's suggestion that it would be a somewhat strange result if the defendant ended up as no more than a mere agent thereunder. Be that as it may, I consider it at least reasonably arguable nevertheless that the wording of the deed brings about that very result.

16. On that basis (even if on no other) the defendant is, in my judgment, entitled to unconditional leave to defend. There is therefore no need to deal with the other defences raised. And I say nothing either to encourage or to inhibit those lines of defence being run at the trial.

17. Finally, I would like to express my thanks to counsel on both sides for the very considerable assistance which I have derived from their able arguments.

Nazareth V-P:

18. On 19th January 1995 Yam J allowed the plaintiff's appeal, set aside Master Beeson's order granting the defendant unconditional leave to defend upon the plaintiff's application for Order 14 summary judgment, and entered judgment for the plaintiff in the sum of US$510,000. The defendant now appeals to this Court against Yam J's order and seeks unconditional leave to defend.

19. Having regard to the conclusion I have reached, I do not find it necessary to set out the facts in any more than the following general and abbreviated way. The defendant is a barrister of the Supreme Court of New South Wales and was in practice in Hong Kong between 1986 and 1989. He had in Australia known one Mr William Hodgekiss, another barrister of the New South Wales Supreme Court. The plaintiff, Ms Dene Hunt, was a family friend of Mr Hodgekiss in Australia. In 1988 or early 1989, she asked Mr Hodgekiss for advice to reorganise her finances. He introduced her to the defendant in 1989. By that time the defendant had ceased to practise as a barrister and was the managing director of a French company, Union Fidelite Corporation SA ("UFC") which had originally been an UK company called PFL (Holdings) Ltd ("PFL").

20. In late 1989, the plaintiff came to Hong Kong, met the defendant and according to him, entrusted US$500,000 to UFC through him; the plaintiff says she entrusted the money to the defendant personally as financial adviser of a trust fund called the "Snow Trust". According to the defendant, the settlor of Snow Trust was PFL, and it was a "blind" trust in that there were than no entitled beneficiaries, the only beneficiary being a "default beneficiary". PFL as trustee had powers to invest the trust moneys as it saw fit, and these were invested in American mutual funds. According to the defendant, in the third quarter of 1992, the entire investment, including some of his own money, was lost due to fraud. The plaintiff then authorised Mr Hodgekiss to act on her behalf to secure the return of the funds entrusted by her to the defendant.

21. On or about 16th September 1992, the defendant met the plaintiff at his office in the south of France and informed her that he was willing to assume the risk of recovering the Snow Trust's investment in American mutual funds and to that end, he was prepared to "stand in the shoes" of the Snow Trust. He said that the plaintiff was in exchange to release to him any interest which she might have in the Snow Trust in consideration of his agreement to pay her the value of the investment by the Snow Trust in American mutual funds. He added that he was prepared to give her a deed and provided her with a copy. She sought legal advice from one Mr Lindsay Leggatt-Smith ("Lindsay"), a lawyer practising in Monaco. He advised her that the words "and subject to the performance" should be inserted in clause 2 of the deed.

22. Some two months later, about 12th November 1992, Mr Hodgekiss went to see Fisher in France. Mr Hodgekiss says the defendant gave him a deed in which the amendment advised by Lindsay had already been incorporated and which had been signed and sealed by the defendant. The deed was in the following form:

"DEED OF COVENANT AND ACKNOWLEDGMENT

THE DEED is made the 16th day of September, 1992

BETWEEN:

GORDON WILLIAM FISHER of 43 Boulevard de la Turbie, 06240 Beausoleil France ('Fisher'), of the one part;

AND

DENE HUNT of PO Box 14, Double Bay, Sydney, New South Wales, Australia ('HUNT'), of the other part.

NOW THIS DEED WITNESSES:

1. In consideration of the acknowledgment by HUNT contained at Clause 2 hereof, FISHER, on behalf of the trustee of the trust estate of 31 July, 1990 known as the Snow Trust, covenants to pay to HUNT the sum of five hundred and ten thousand United States Dollars (USD510,000) as follows:

(A) The sum of four hundred and thirty-five thousand United States Dollars (USD435,000) no later than 31 March, 1993 Pending payment thereof, and in order to guarantee and support the covenant aforesaid of FISHER in respect of the said payment, FISHER shall cause and procure forthwith the registration of a mortgage, in favour of Hunt and in the sum of four hundred and thirty-five thousand United States Dollars (USD435,000), being a mortgage overt that property being real estate with improvements erected thereupon, and being that property registered with the Nice Mortgage Registry on 13 June, 1988, at volume 88 P No.2197 and being that property located in Beausoleil, France, at 43 Boulevard de la Turbie, Quartier du Carnier/des Mules, formerly registered under Section D No.1P and subsequently re-registered in the New Property Register of the said Commune of Beausoleil under Section AD No.230; PROVIDED THAT if the aforesaid described property is sold before 31 March, 1993, the aforesaid payment of four hundred and thirty-five thousand United States Dollars (USD435,000) shall be made simultaneously with the settlement of such sale as consistent with the rights and interests of HUNT as a mortgage of the aforesaid described property.

(B) The sum of seventy-five thousand United States dollars (USD75,000) no later than 31 December, 1992.

2. In consideration, and subject to the performance, of the covenant of FISHER contained in Clause 1 hereof, HUNT hereby acknowledges:

(a) that she has no rights or interests whatsoever in the trust estate known as the Snow Trust and that she shall not hereafter make or assert any rights or interests whatsoever therein; and

(b) that she has no claims or actions whatsoever against the trustee of the said Snow Trust, nor against any person or persons associated therewith, and that she shall not hereafter make or assert any claims or actions whatsoever against the trustee of the said Snow Trust, nor against any person or persons associated therewith.

3. In support of his covenant given and expressed at Clause 1 hereof, FISHER declares that the property described at and in Clause 1(A) hereof has a bona fide market value of six million francs (FF6,000,000) and that there are extant against the said property mortgages to an aggregate value of approximately four million francs (FF4,000,000); being mortgages in favour of Barclays Bank SA, Susan Lenehan and Alpha Technical Services SA.

4. In further support of his covenant given and expressed at Clause 1 hereof, FISHER hereby declares and further covenants that he shall not do any act, matter or thing which shall or may reduce the value of the outstanding equity in the property described at and in Clause 1(A) hereof prior to the registration of the mortgage referred to at Clause 1(A) hereof.

5. FISHER acknowledges that prior to his execution of this Dead he was free and at liberty to seek and obtain legal advice with respect to the Deed and its consequences, but choose not to so seek and obtain such legal advice. HUNT acknowledges that prior to her execution of this Deed she was free and at liberty to seek and obtain legal advice with respect to the Deed and its consequences, and did so seek and obtain such legal advice.

6. This Deed shall have no force or effect whatsoever unless and until executed by both parties hereto.

7 This Deed and the obligations and rights hereunto shall be governed by and construed in accordance with the laws of England, and the parties hereto submit to the jurisdiction of the Courts of England with respect to this Deed and all matters arising thereout.

SIGNED SEALED AND

DELIVERED by GORDON WILLIAM

FISHER in the presence of :

 

SIGNED SEALED AND

DELIVERED by DENE

HUNT in the presence of :"

The plaintiff says she signed the deed in Australia.

23. The defendant's case is that he never delivered the deed in the sense that it was to immediately and unconditionally come into force, but that he handed it over on condition that Mr Hodgekiss was to ascertain from the plaintiff whether its terms were acceptable to her, that he was to ensure that she obtained independent legal advice with respect to the deed, that she was to confirm within a short period that the deed was acceptable, that Mr Hodgekiss was to obtain a counterpart copy of the deed signed by the plaintiff and so forth; in short, that he handed the deed to Mr Hodgekiss in escrow pending compliance with those conditions. Mr Hodgekiss denies that any such instructions were given to him. It was accordingly this issue of whether the deed was handed to Mr Hodgekiss in escrow that was the main issue before Yam J. But it was by no means the only issue.

24. That main escrow issue and other issues were canvassed before us. However, it is not necessary, in my view, to adumbrate those issues or indeed other factual aspects of the matter for the following reasons. In the course of the submissions the court's attention and that of counsel came to focus upon the following words of clause 1:

"In consideration of the acknowledgment by HUNT contained at Clause 2 hereof, FISHER, on behalf of the trustee of the trust estate ... known as the Snow Trust, covenants to pay to HUNT the sum of ...USD510,000 ..."

25. Mr Bleach QC, for the defendant, contended that these words, supported by several references to the defendants' covenant in the Deed, meant quite clearly that Fisher was covenanting to himself pay to Hunt the sum of US$510,000 on behalf of the trustee, a fortiori having regard to the facts, the intention of the parties, and indeed the defendant's pleadings and affidavits. For the plaintiff, Mr Griffiths QC contended that the plain meaning of the words in question was that Fisher was covenanting as the trustee's agent, and that it was not permissible to construe the meaning of those words by reference to the intention of the parties or to negotiations (Prenn v Simmonds(HL(E)) [1971]1 WLR 1381).

26. I am satisfied that Mr Griffiths's submissions disclose a clearly arguable defence. Having reached that conclusion, it would not be appropriate to say any more than that although the point was raised before Yam J, it does not appear to have been pursued, for the judge did not proceed to rule upon it. Likewise, I do not find it necessary nor deem it appropriate to address the other points raised before this Court; this will leave the parties free to pursue those points if they so wish.

27. I should also add that the construction of clause 1 was not raised by the defendant in its grounds of appeal; but no point was taken upon that before us. I feel bound to add that had any objection been taken on that ground, I would have been disposed to grant leave to appropriately amend the grounds of appeal had application therefore been made.

28. For the reasons I have given, I would allow the appeal, set aside the order of Yam J, grant unconditional leave to defend and concur in the order nisi proposed by Liu JA.