OVERSEAS TRUST BANK LTD. v. MORAL TACT CO. LTD. AND OTHERS

CACV 3683/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 3683 OF 2001

(ON APPEAL FROM HCMP 1254/2000)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal. The history of this case is somewhat convoluted. There was an originating summons which was issued in March 2000. Eventually, that came to be heard, but when it was heard, the Master gave judgment against the four defendants. The 1st defendant is a company and the 2nd and 3rd defendants are its directors and shareholders. The 4th defendant is the wife of the 2nd defendant; she has in fact nothing to do with the 1st defendant, although she is a director and shareholder of a company called Union Zipper Manufactory Limited, which she runs with her husband and is concerned with zippers.

2. The 1st defendant, however, seems to have been engaged in purchasing office premises in Tsim Sha Tsui and for that purpose, it borrowed a great deal of money from the plaintiff. It is in respect of repayment of that amount that this action was commenced.

3. The 4th defendant has appeared in person up to now. This appears to be the first time when she has been represented. There has been a history of her missing court dates. One of the court dates that was missed, was apparently in October 2000 when there was a second hearing of the originating summons and on that occasion, the Master before whom the summons came gave judgment against all the defendants, and in particular, as far as the 4th defendant is concerned, gave judgment for $14,405,057.74 plus interest.

4. The 4th defendant applied to set that judgment aside and that application was eventually heard in June 2001. The application was unsuccessful. So, the 4th defendant appealed to the judge in chambers and the matter was scheduled to come on before Deputy Judge Poon on 23 October. The matter was listed for hearing at 10 o'clock on that day. Again, however, it appears that the 4th defendant got the time wrong. She had thought that the hearing was to take place at 2.30 in the afternoon and it was only when she was getting her papers together that she discovered that the hearing was scheduled for 10 o'clock.

5. She then set about coming to court. She spoke to the judge's clerk, presumably on her way to the court, at about 10.51 and arrived at court at 11.05 where, again, she spoke to the judge's clerk, it seems by telephone, but was told that the case had been heard and that she should make an application in writing. The case was in fact heard between 10.15 and 10.25 that morning. The merits of the case were not gone into. There was some discussion about an application by the 3rd defendant to have the matter adjourned, because he was ill in Australia. There was very little discussion about the 4th defendant. The appeal of the 4th defendant was dismissed.

6. At 4.31 on that day, a fax was received in court from the 4th defendant requesting re-hearing and offering to pay the costs. In fact, the application was by all the defendants, but only the 4th defendant is relevant for this application.

7. On 24 October, which was the next day, the Deputy Judge wrote on the fax which had come in, "Please advise the defendants that the appeal is dismissed. I am now functus ex officio, the application for a re-hearing cannot be entertained." As a result, the judge's clerk wrote a letter of the same date which was apparently faxed to the 4th defendant which said: 1. the appeal is dismissed; 2. the court is now functus ex officio; and 3. the application for a re-hearing cannot be entertained.

8. On 1 November, the clerk wrote again to the 4th defendant with a letter which suggested that that superseded the letter of 24 October and it said, "Having dismissed the appeal, the court is now functus ex officio, the application for a re-hearing cannot be entertained."

9. The Deputy Judge however, was wrong, because he was not functus officio; he could have ordered a re-hearing or that the matter be heard again. If matters are dealt with in the absence of a party and a proper explanation is put forward, the court has always power to re-hear a matter or to re-open it until the order has been sealed. The draft order was not submitted to the court until 7 November and the order itself was not filed until 10.20 on 9 November.

10. The 4th defendant filed a Notice of Appeal on 22 November and thereafter the court, it seems, asked for a transcript of what had happened at the hearing on 23 October. On 10 December, there was a letter from the judge's clerk enclosing a copy of the Ruling, which, it seems, should more accurately have been called, Reasons for the Ruling.

11. What is quite clear, therefore, is that the Deputy Judge below did not exercise his discretion as to whether the matter should be re-opened. The facts seem to be fairly clear: the 4th defendant made a simple mistake and offered to correct that by paying the costs which had been wasted as a result of it, and it seems to me that there was no reason why the matter should not have been re-opened.

12. Turning then to the crux of the matter, the 4th defendant's case is very simple. When she was first presented with this case, and she was told that she was being held liable under this guarantee which she had signed in respect of the 1st defendant's debt, her immediate reaction was that she never knew that she had signed this guarantee. She knew that she signed a number of documents in relation to Union Zipper Manufactory Limited, but she said in paragraph 5 of her first affirmation, "I am now unable to ascertain when and where I signed this guarantee, because all along I thought that the documents I signed were merely signed for Union Zipper Manufactory Limited." Then she went on, "In fact, the 1st defendant and I did not have any relationship. I was neither the shareholder nor the director of it. (Company search record enclosed). The defendant has never told or explained to me the details." By the defendant, she was presumably meaning both the 1st defendant and, in reality, her husband who was the 2nd defendant.

13. She then queried as to whether she had even signed the guarantee in front of Mr Chan Charm-kwong, who was an officer of that plaintiff bank, who has signed the document as witnessing her signature. She has given evidence that she doubts whether she ever did that because she never signed any documents in front of him. All the bank documents for Union Zipper were sent to her or sent to her husband; they signed them and then they returned them to the bank.

14. On this aspect, there is a conflict of evidence between her and Mr Chan, but it also seems clear that what the 4th defendant has said all along is that she has signed this document not knowing what it is. In a recent affirmation which she has filed partly to explain her non-appearance at the hearing in the court below, the 4th defendant has amplified and made clear that now it transpires that her husband has admitted that he obtained her signature on this guarantee without telling her what it was and leading her to believe that it was yet another document for Union Zipper which she was happy to sign.

15. In those circumstances, it seems to me quite clear that at least on paper, the 4th defendant has a very arguable case. I have therefore no hesitation in saying that, in my view, the judgment which was entered by the Master should be set aside and the matter should go to a proper trial, where first of all the 4th defendant's evidence as to how she came to sign this document and as to what she believed she was signing, and how she was led into believing that, should be tested. That can only be done by oral evidence with cross-examination. Secondly, any discrepancies between her evidence and that of Mr Chan can also be tested.

16. It seems to me inevitable therefore, that there must be a proper trial of this matter and that this originating summons must now be treated accordingly. It is probably suitable, therefore, that there are pleadings in the matter and that there is all appropriate discovery and the matter can proceed as quickly as possible. In my view, therefore, the judgment below must be set aside and the judgment of the Master must be set aside and directions should be given by this court for the further conduct of this originating summons.

Hon Le Pichon JA:

17. I agree.

(Discussion as to order)

18. So, the statement of claim, shall be served and filed 28 days from today that would be on or before 28 November. 14 days for defence and that would take us up to 12 December. Reply, 28 December, just to give an extra day after the public holiday. Discovery, that would be 11 January; inspection seven days thereafter, 18 January. Matter to be restored before the judge in chambers for any further directions, 24 January or so soon thereafter as possible.

19. The order as to costs that we are going to make is that the first hearing, which is in fact down as the second hearing of the summons, thus anything up to 13 October 2000 should be costs in the cause because the order which the Master should have made is that this matter should go for trial.

20. Thereafter, on the application to set aside the judgment before the Master on 8 June 2001, the Master should have set the judgment aside and therefore the 4th defendant is entitled to the costs. On the occasions when the 4th defendant did not appear, she of course is not entitled to any costs, but neither should the plaintiff get the costs. So, there should be no order as to costs on the subsequent occasions when the 4th defendant has not appeared. Then this appeal has been allowed and therefore the 4th defendant should have the costs in the ordinary way.