BANK OF CHINA (HONG KONG) LTD v. YICK CHIAO DEVELOPMENT CO LTD AND OTHERS

HCA 604/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 604 OF 2004

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D E C I S I O N

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Application

1. This is an application for summary judgment by the Plaintiff against the 5th Defendant under a guarantee.

Background

2. The Plaintiff was and is a banking corporation in Hong Kong.  At all material times, the 1st Defendant was the customer of the Plaintiff.  By a Deed of Guarantee dated 25 September 1998 (the “Guarantee”), the 2nd to 5th Defendants jointly, severally and continuously guaranteed and undertook the due payment by the 1st Defendant to the Plaintiff to the extent of HK$84,100,000.00.

3. On 15 March 2004, the Plaintiff commenced the present proceedings against all the Defendants for the sum of HK$5,164,754.01, interest and costs.

“	Particulars
	Nature of Facilities Principal as at 26/02/2004 Accrued interest as at 26/02/2004 Total amount as at 26/02/2004 Further interest will be charged at the following rate from 26/02/2004 Term Loans $4,692,060.34 $471,193.67 $5,163,254.01 At the rate of 11% per annum (subject to fluctuation) Expenses $1,500.00 --- $1,500.00 ---       Total: $5,164,745.01	”

(paragraph 18 of the Statement of Claim)

4. The 1st to 4th Defendants did not take any step to defend for the proceedings.  Default judgments were entered against them in April and May 2004.

5. In the meantime, the 5th Defendant filed her acknowledgment of service on 1 April 2004 indicating that she would be contesting the proceedings.  She also filed her Defence and Counterclaim on 30 April 2004.  Mr. Lawrence Hui, Counsel for the 5th Defendant, summarized her defence as:

“	a)	She had no knowledge about the Guarantee,
	b)	She did not know a person called Mr. William Kwok [the solicitor attending witnessing the signature of the Guarantee],
	c)	She did not sign the Guarantee,
	d)	In the alternative, even if she had signed such document, she was under a mistake, she had no intention to be bound and she received on consideration in return.”
	(paragraph 2 of Mr. Hui’s skeleton)

Further, it is submitted that there are 2 core issues for the Court to resolve, i.e.

“	(1)	Whether the Guarantee was in fact signed by the Defendant?
	(2)	Even if she had signed it, was she automatically liable?”
	(paragraphs 3 and 4 of Mr. Hui’s skeleton)

6. The parties appeared before me on 29 August 2005 for the substantive argument of the matter.  Having heard from Mr. Chan Chi Hung, S.C. for the Plaintiff and Mr. Hui, I reserved my decision to be handed down.

Ruling

7. Upon consideration of the evidence authorities and submissions from the parties, I have decided that summary judgment is to be granted for the Plaintiff against the 5th Defendant.  My reasons appear below.

Reasons

8. The applicable law relating to summary judgment is clear now.  There should not be any dispute.  The underlying policy of this summary procedure is to prevent the defendant from delaying the plaintiff to obtain judgment in a case where the defendant clearly has no defence.  Two questions are to be asked.  (1) Factually, is what the defendant says believable in light of undisputed or indisputable circumstances?  In this respect, the Court is entitled to have regard to the commercial reality as well as to the contemporaneous documents.  However, mini-trial on affidavit evidence shall not be embarked.  Bare assertion is insufficient and the defendant must condescend upon particulars.  (2) Legally, if what the defendant says is believable, does it amount to an arguable defence in law.  After all, the burden lies on the defendant to show triable issue or some other reason to be a trial.

9. Bearing in mind the above principles, I agree with Mr. Chan that the defence raised by the 5th Defendant is unbelievable in facts and/or unsubstantiable in law.

Did the 5th Defendant sign the Guarantee?

10. Much was said by Mr. Hui that contradictory evidence had been filed by the parties as to whether the 5th Defendant did or did not sign the Guarantee.  He submitted that this Court could not resolve such question on affidavits and the 5th Defendant should be allowed to cross-examine the witnesses of the Plaintiff.  However, with respect, the 5th Defendant fails me because:

(a)	Bare assertion is insufficient, not to mention “non-admission” or “bare denial”. In her Defence, the 5th Defendant simply said that she had no knowledge about the Guarantee and put the Plaintiff to straight proof. In her affirmation in opposition, she could only manage to say:
	“	6.	……I do not remember signing and seeing any of those documents ……
		7.	I indeed do not remember signing the said Guarantee and the relevant documents, ……
		8.	……
		10.	For the avoidance of doubt, I do challenge the genuineness of the signatures which the Plaintiff alleges to be mine.”
(b)	Mr. Hui appeared to complain that the Plaintiff had failed to come up with expert evidence to prove that the 5th Defendant did sign the Guarantee. However, quite to the contrary, in my view, the burden should lie on the 5th Defendant herself.
(c)	All the contemporaneous documents point to the fact that the 5th Defendant did sign the Guarantee. The Plaintiff granted substantial credit facilities to the 1st Defendant who was a limited company. All the directors, i.e. 2nd to 5th Defendants, signed the joint several and continuing guarantee. The 2nd to 5th Defendants’ attended a firm of solicitors executing the necessary documents, including initialing/signing altogether on each and every copy of the guarantee which bore Chinese words like “擔保書” “擔保人” “擔保金額”. Identity cards of the signatories were asked to check their identities and copies were kept on file for references. The Defendants were attended by a clerk. The documents were then executed in front of the solicitor. Payment was defaulted. The Plaintiff demanded for repayment and thereafter sued all the Defendants. Judgment has been entered except the 5th Defendant. Now, in the words of Mr. Hui, the “strongest” defence was that: it appears that the 5th Defendant did not sign the Guarantee, and so the Plaintiff was put to strict proof. With respect, such defence is frivolous and practically moonshine.
(d)	I further agree with Mr. Chan that it is unbelievable that the 5th Defendant did not sign the Guarantee.
	“	…… it is not suggested that anyone would impersonate her to sign the Guarantee in the presence of WK, [the solicitor, Mr. William Kwok] back in 1998, long before there was any problem (the facility in question was only granted in 2002). Nor could that be possible, as WK did check her ID card, as my solicitor would always do in attesting execution of a Deed.”
	(paragraph 7 of Mr. Chan’s skeleton)
(e)	The 2nd Defendant has attempted to assist the 5th Defendant. In light of my above observations, I am not persuaded in any way by his evidence or at all.

Non-est factum/Undue influence?

11. The 5th Defendant relied on 2 further alternative defences:

“	4.	(a)	Further or in the alternative, if (which is denied) the 5th Defendant signed the said Deed, the 5th Defendant denies that she signed the said Deed purporting to be a guarantee as alleged in the Statement of Claim or otherwise.  The 5th Defendant did not speak and write English and that she did not know or understand the contents of the document i.e. the Deed.  She were under a mistake as to the nature of the document.  The 5th Defendant avers that she only signed document which were brought to her for signing by the 1st Defendant’s staff who alleged the document were the company’s document of the 1st Defendant which required the 5th Defendant’s signature.
		(b)	In the premises, the 5th Defendant has never intended to sign the said Deed as a guarantee and she is not liable thereon.
	5.	Further or in the alternative, if (whish is denied) the 5th Defendant signed the said Deed, the 5th Defendant avers that the transaction embodied in the said Deed was manifestly disadvantageous to the 5th Defendant in that she received no, or no valuable, consideration therefore in return for a potential liability to the Plaintiff.”
	(Defence of the 5th Defendant)

Mr. Chan called them non-est factum and possibly, undue influence. I agree.

12. Given my above ruling that the 5th Defendant did sign the Guarantee before the solicitor, I doubt very much if her alternative defences can stand.  Nonetheless, in any event, the defence of non-est factum must fail, as suggested by Mr. Chan, as a matter of law.  Saunders v Anglia Building Society [1971] AC at page 1016 is the authority for it.

“The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document.  Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any inquiry as to their purpose or effect.  But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact is character or effect was quite different.  He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief.  The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case.

Further, the plea cannot be available to a person whose mistake was really a mistake as to the legal effect of the document, whether that was his own mistake or that of his adviser.  That has always been the law and in this branch of the law at least I see no reason for any change.

We find in many of the authorities statements that a man’s deed is not his deed if his mind does not go with his pen.  But that is far too wide.  It would cover cases where the man had signing something different from that which in fact he signed.  I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted.  It is for the person who seeks the remedy to show that he should have it.”

13. Finally, as to undue influence, I have heard nothing from Mr. Hui.  Probably, it is the right course not to pursue it.  As pointed out by Mr. Chan, no proper case of undue influence has been pleaded nor deposed to (see also O.18 r.12(1)(a) RHC) and after all, the 5th Defendant was at the material times, a shareholder, director and secretary of the 1st Defendant.  The transaction was not on the face of it manifestly disadvantageous to her, and indeed, one may go to the contrary to suggest otherwise.

Costs

14. I see no reason why costs should not follow the event.  Both Counsel agreed a Certificate of Counsel should be granted.  Thus, there will be an order nisi that the Plaintiff shall have costs of the action as well as the application, together with Certificate of Counsel for the hearing before me, to be taxed, if not agreed.  Such order nisi will become absolute within 14 days from today.