XCHRX OVERSEAS TRUST BANK LTD. v. CHIU MAY AND OTHERS

HCMP2971/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.2971 OF 2000

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J U D G M E N T

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1. This is an appeal by the plaintiff against the refusal by the master to enter judgment in favour of the plaintiff bank against the 4th defendant in respect of a guarantee given by the 4th defendant in 1999 in favour of the bank in relation to banking facilities given by the bank or to be given by the bank to the brother of the 4th defendant, i.e. the 2nd defendant, and the wife of the brother, the sister-in-law of the 4th defendant, namely, the 1st defendant. I shall call them collectively the brother and sister-in-law.

2. What had happened is this. Way back in 1996, the brother and sister-in-law wished to buy new premises. They were living in existing premises. Because of the necessity to obtain a bridging loan, the brother and sister-in-law approached the 3rd and 4th defendants to help in the obtaining of the appropriate loans from the plaintiff bank. The 3rd defendant being the brother of the sister-in-law, i.e. the 1st defendant, and the 4th defendant being, as I indicated earlier, the brother of the 2nd defendant. In these circumstances, according to the 4th defendant, in order to help the brother with the obtaining of the bridging loan, the first guarantee was given. This is the guarantee given by the 3rd and 4th defendants in 1996. The document can be seen at pages 91 to 94.

3. The old premises was sold in November 1996. So far as the 4th defendant is concerned, he understood his liability in relation to the first guarantee therefore, should have ceased. The 4th defendant informed the court that the circumstances surrounding the signing of the second guarantee in 1999 was by the brother approaching him in the absence of the bank and informing him that the second guarantee was required merely for record purposes of the bank because there had been a mistake made by the bank earlier with the first guarantee. There was no mention about any additional facilities of $800,000 given by the bank to the brother and sister-in-law in 1997. He, i.e. the 4th defendant, trusted his brother and it was in those circumstances the second guarantee was signed.

4. What happened in 1997 was that the brother and sister-in-law wished to raise additional facilities of $800,000 and approached the bank. It was in these circumstances that the 3rd defendant was required to sign and did sign a second guarantee, which can be seen at pages 76 to 79 of the bundle, with the guaranteed amount being put at the maximum of $800,000. It is not in dispute that in 1997 when the $800,000 additional facility was required, the 4th defendant was never required to sign that $800,000 additional guarantee. The reason as submitted by the 4th defendant today is simple. He was not asked to sign the $800,000 guarantee in 1997 because he would have refused, having already signed the bridging loan guarantee and having already seen the bridging loan facilities terminated because of the sale of the old property in November 1996.

5. It seems to me that on the hearing of this appeal, the question for me is whether an arguable case has been made out by the 4th defendant to impugn the second guarantee that the plaintiff is suing on. In the course of his argument, I summarized to the 4th defendant that his case seemed to turn on merely two defences : one is undue influence and the other is misrepresentation. In my view, the facts disclosed an arguable case of both undue influence and misrepresentation. Mr Leung, counsel for the plaintiff, in opposition and on instructions put to me very strongly and very courteously the case of the bank, namely, the plaintiff has an overwhelming case against the 4th defendant. He relied on the authority of Barclays Bank Plc v. O'Brien [1994] 1 AC 180 and the most recent authority of Deputy Judge To's decision in Re Lai Kwok Man ex parte The Hongkong and Shanghai Banking Corporation Limited, unreported, HCB No.2318 of 1999. I think in the context of Hong Kong, with close family ties, notwithstanding the decision of Deputy Judge To in Re Lai Kwok Man (which, of course, I notice, was a decision based on a trial and where the defendant was acting in person), that there is certainly scope for a case to be put properly before the court at the trial of undue influence and misrepresentation.

6. I think the basic facts cannot be disputed that the 4th defendant has nothing to gain by this guarantee as he has no personal interests in this guarantee or in this facility, that he is a younger brother to the 2nd defendant and it seems to me that the basic fundamental essentials are already there for the bank to be put on notice. In relation to the second guarantee, the bank is put on notice in more than just merely those two basic essentials of O'Brien. There is also the fundamental fact that in 1999, there was no reason for the bank suddenly to ask for the second guarantee to be executed. There was no additional facility to be granted. So, the surrounding circumstances of the bank suddenly wanting the second guarantee to be signed has to be discovered or properly flushed out at the trial. Secondly, it cannot be disputed that the bank did not personally have the 4th defendant come in to sign the guarantee. Instead, it would seem that it was left to the 2nd defendant, i.e. the brother, to persuade the 4th defendant to sign. Why should that be the case? One does not know and that is again a matter to be discovered at the trial. It seems to me that this case plainly calls out for a final determination at a full trial and not to be summarily decided by way of a summary judgment at an interlocutory stage. As I see it, the master was quite right in reaching the decision she did.

7. The appeal, therefore, of the plaintiff fails with costs against the plaintiff. The case must go to trial.