XCHRX UNION BANK OF HONG KONG LTD. v. CHAPOL LTD. AND OTHERS

HCMP 2048/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2048 OF 1997

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J U D G M E N T

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1. These are consolidated mortgage actions brought by the Plaintiff as the lender against the 1st Defendant as the mortgagor, the 2nd Defendant as the borrower and the 3rd Defendants as the guarantors.

2. In both actions, Master Cannon on 15 October 1998 granted default judgments against the Defendants for the outstanding loans and the delivering of vacant possession of the mortgaged properties.

3. As one of the guarantors, the 2nd named 3rd Defendants (Mr Yan)'s liability is an amount not exceeding HK$40 million in each of the two actions.

4. Mr Yan only applied to set aside the default judgments on 27 July 2000 although copies of the judgments were served as early as 8 December 1998.

5. On 25 November 2000, Master Yuen set aside the default judgments conditional upon Mr Yan paying into court the sum of $8,050,000 in respect of each of the two actions.

6. Both Mr Yan and the Plaintiff now appeal against the order of Master Yuen. Mr Yan wants unconditional leave to defend. The Plaintiff wants the restoration of the default judgments. The cross appeals by the Plaintiff are substantially out of time.

7. Mr Yan raised the following matters in his first 3 affirmations:

8. Subsequent to the granting of the default judgments by Master Cannon on 15 October 1998, Mr Yan raised further matters in his 4th and 5th affirmations.

9. Mr Yan reiterated that Mr Gordon Chan did not explain to him the content of the guarantee before its execution and was in fact not present at that time. It was further suggested by Mr Yan that he was misled by Mr Gordon Chan as he signed the guarantee on the express condition that Mr Yan Kwok Kin Julian would also acted as a guarantor because he was in control of most of the offshore assets of the 2nd Defendant. But Yan Kwok Kin Julian did not sign the guarantee. Gordon Chan also told Mr Yan that his liability under the guarantee was only secondary and would only arise after the assets of the 1st and 2nd Defendants were realised and the proceeds were not adequate to repay the loans.

10. In the affirmation of service by Mr Chung Ngan Sun dated 15 October 1998, it was deposed that the notice of hearing was properly served in Mr Yan by post at his last-known address.

11. Mr Yan was of course present when his previous solicitors Messrs C Y Lam & Co. applied to cease acting for him. He had earlier asked for an adjournment of the matter. Mr Yan suggested that he had moved to another address in late 1998 without informing the court or the Plaintiff. If a party to a proceeding moves house without informing the other side or the Court, he cannot have any legitimate complaint if services of court documents are effected on his previous address.

12. In any event, services had been effected on the other Defendants and Mr Yan should be made aware of them. After all, the other Defendants are companies under his control and his sisters.

13. On the evidence, the default judgments are regular judgments. But the Court can still set aside a regular judgment and the primary consideration is whether the Defendant has an arguable defence to the Plaintiff's claim.

14. On the matters raised by Mr Yan, his defence is basically two folded, namely non est factum and misrepresentation.

15. The suggestion that there was a conflict of interest on the part of Mr Gordon Chan is in my view not relevant.

16. I agree with counsel for the Plaintiff that if Mr Yan is of the view that Mr Chan had failed to properly discharge his professional conduct, he can of course report the matter to the Law Society or take such other steps as may be necessary. It is not a matter which affects the parties' right and obligation under the guarantees in question.

17. The burden of proof in relation to a defence of non est factum is indeed a heavy one which lays on the person pleading it (see Union Bank of Hong Kong Ltd v. Ng Yiu Hung and another [1975] HKLR 26).

18. In Saunders v. Anglia Building Society [1971] AC 1004, it was held that the plea of non est factum could not be argued unless it could be shown that the signatory thought that he was signing a document substantially different in nature or in kind and that the person raising the plea had acted reasonably and with due care.

19. Mr Yan is clearly a well educated man. He is a director of what was a substantial company. He does not suggest that he was unaware of the nature of the guarantee when he signed it. If he signed the guarantee without knowing the contents of such document, he could not be said to have acted reasonable and with due care. The defence of non est factum is not available to him.

20. Mr Yan also relied on misrepresentation purportedly made by Mr Gordon Chan on behalf of the Plaintiff. Mr Chan of course completely denied the allegations against him by Mr Yan.

21. It is not for me at this stage to resolve dispute as to facts.

22. It is also fair to say, if Mr Yan's assertion is established, the misrepresentation could vitiate the validity of the guarantee in question.

23. But it is trite law that the mere assertion in an affirmation of a given situation which is to be the basis of a defence does not itself provide leave to defend. A defendant has to satisfy the court that there is a fair and reasonable probability of a real or bona fide defence.

24. The alleged misrepresentation was not raised by Mr Yan until his 5th affirmation. The allegations were vague and lacking in particulars. They were also unsupported by any other evidence than the mere assertion by Mr Yan. The chance of such assertion being accepted is indeed very remote.

25. I have considered the fact of the case and everything that has been urged upon me. The order made by Master Yuen may well be favourable to Mr Yan. Nevertheless I am persuaded that there is valid basis for Master Yuen to make the order as she did. There is no valid basis to challenge such order.

26. In the circumstances, both the appeal and the cross appeal are dismissed.

27. In the light of the background of the case, and the decision of the Court, I make no order as to costs on the appeal and the cross appeal.

28. The order on costs is an order nisi to be made absolute 14 days after the handing down of the judgment.