BANK OF CHINA (HONG KONG) LTD v. KAM KWAI WAH

HCA583/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.583 OF 2003

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J U D G M E N T

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1. This is the trial of an action brought by the plaintiff bank against the defendant, Mr Kam Kwai Wah, in relation to a guarantee signed by the defendant in respect of a loan made by the bank to a Mr Cheng and on the security of a mortgage executed by Mr Cheng and on the security of the guarantee signed by Mr Kam.

2. The action has been resisted strenuously and, at the trial before me, four witnesses gave evidence for the plaintiff and two witnesses gave evidence for the defendant. 

3. The defence is a simple one.  The defendant, at the time when he signed the document, was informed by a bank official in the form of a Mr Yip Kwan Fai that the document he was signing, that is, namely, the guarantee, was just for pure formality and posed no liability on the defendant. 

4. The story of the whole transaction started with an application by Mr Cheng dated 14 February 1997 (at documents bundle, page 1a) for a loan.  There was a Credit Approval Form (page 2a) of that loan, which is also on that same day, 14 February 1997, bearing the writing of a Mr Allan Kam Chi Fai, a bank officer.  That approval recites that a guarantee of the defendant is required, and it also referred to the matter to be handled by the solicitors firm, Messrs Day & Chan, and the person who would be attending to that matter in the solicitors firm would be Herman Chan.

5. This was then followed by an important document on 18 February 1997 — a Letter of Instruction from the bank to the solicitors firm (at pages 17 and 18).  On page 18, it said :

“Please arrange the enclosed guarantee to be signed with your solicitor’s witness and kindly return to us together with your execution letter.”

The Instruction Letter also referred to a completion date of 15 May 1997.  This important Instruction Letter went out at the same time as the Facility Letter (at page 14) to the borrower to say that the loan had been approved together with the interest rate, details of the interest rate and number of monthly instalments. 

6. The documents bundle showed that there was a Deed of Guarantee (at pages 19 to 24) and the signature was on page 24.  The Guarantee showed that the date of execution as being 14 May 1997 with the signature of the defendant, and it showed that it was signed in the presence of Herman Chan, the clerk of the solicitors firm.  On the same occasion as the signing of the Guarantee, there was also the signing of the Mortgage Deed, at pages 38 to 75, by the borrower owner, Mr Cheng.  It can be seen at page 75 that Mr Cheng signed and his signature was also witnessed by the same Herman Chan.

7. What then followed was the vital letter dated 14 August from the solicitors firm, Messrs Day & Chan (at pages 25 and 26), where the solicitors wrote to the bank referring to the Instruction Letter of 18 February 1997 saying that the solicitors firm had carried out the instructions and enclosed the Mortgage signed as well as the Guarantee signed.  The last sentence at page 26 referred to the enclosure of the Deed of Guarantee duly signed.  That is the state of affairs so far as the documents disclosed. 

8. At the trial before me, the contemporaneous documents were further supplemented by the various witnesses called by the plaintiff.  The most important witness is of course Mr Herman Chan who gave evidence by video link from Australia and who confirmed that he witnessed the signing of the vital guarantee document on 14 May and that the defendant signed the Guarantee and that the defendant signed the guarantee in front of him.  The evidence of the plaintiff was further supported by four other witnesses :

(1)    Mr Yip Kwan Fai - who denied the defendant’s allegation of the misrepresentation and described his involvement with the loan.

(2)    Mr Siu - who gave evidence of the chasing by the bank for the loan and the problems encountered by the bank with the defendant’s resisting his liability under the Guarantee.

(3)    Mr Kam - who described his involvement with the loan and the Guarantee.

(4)    Ms Fanny Wong of the solicitors firm.  There is of course the agreed evidence of Ms Wong to the effect that she confirmed her involvement as disclosed by the documents and the further fact that when the letter of 14 May 1997 went out, it enclosed the executed Guarantee.

9. The defence is a very strange one, strange in the sense that the alleged misrepresentation defence depends on four vital aspects :

(a)    Date - some time in March 1997.  Not some time in February or some time in May, but some time in March 1997.

(b)    Place - at the bank offices.

(c)    Person - Mr Yip made a misrepresentation to the defendant.

(d)    Event - The alleged misrepresentation was that the Guarantee document to be signed was purely a document for formality or for reference. 

10. That misrepresentation allegation, of course, was supported by the oral evidence of Mr Kam, the defendant and, to a limited extent, by the evidence of Mr Cheng, the borrower.

11. Mr Cheng had gone bankrupt.  He could not keep up the mortgage payment and went into default.  That is the reason why the bank had to resort to the personal guarantee of the defendant.  The evidence of Mr Cheng is not satisfactory and goes against commonsense.

12. Mr Kam himself also gave evidence.  He tried to paint to the court a picture of a simple man who did not understand the documents.  I find him a poor witness.  I cannot accept his evidence.

13. Having regard to the overall circumstances and the undisputed genuineness of the documents put before the court, I have no doubt so far as the oral evidence is concerned, that the plaintiff’s witnesses are to be wholly trusted and that the evidence of the defendant’s witnesses are to be rejected. 

14. Let us examine a little bit at the central allegation.  The central allegation was that in March 1997, after the February events and documentation, and contrary to the bank’s practice of ensuring that the security documents were properly executed in the solicitors’ office, somehow Yip took upon himself to have Mr Kam come in to the bank to execute this Guarantee.  It just simply does not make sense because the contemporaneous documents clearly showed that the documents were not executed in front of Mr Yip, but at the office of the solicitors in May 1997, the day before the completion.  Why would all of a sudden the guarantor be called in to the bank office to execute that important document in front of a bank officer, contrary to the practice of the bank, the regulation of the bank and the express instructions of the bank by the letter of 18 February 1997.  So, whether you look at it upon the weight of contemporaneous documentation, whether you look at it from inherent probabilities, whether you look at it from the commercial considerations, the story of the defendant just does not add up as it makes no sense. 

15. Mr Hui, for the defendant, has done everything he could in the circumstances, but it is an impossible task for any counsel to run this kind of defence.  Mr Hui suggests that the court might regard the possibility of the defendant’s story being true.  I can find nothing which even begins to give me a reason to doubt that the plaintiff’s story is improbable.  It seems to me that everything points powerfully, convincingly, inevitably towards the documents speaking the voice of truth.

16. What is however of interest is to note the March date.  The only relevance of the March date is that March seemed to have been the time when there was completion of the defendant’s own purchase and loan (the Mortgage was executed on around 14 March 1997).  I suspect that what the defendant had done was to transpose that date of his own loan to this case (the date of the alleged misrepresentation).  That transposition of events however also had to contend with the problems of place (at the solicitors offices not at bank offices) and person (in front of a Solicitor’s clerk Susanna Ko not Mr Yip).

17. Be that as it may, it seems to me that the case is so clearcut.  I can find no reason whatever to doubt that judgment should be given in favour of the plaintiff.  I understand that the figures had been agreed and that I should give judgment to the plaintiff in the sum of HK$741,117.13.  The plaintiff is also to have its costs of the action.