BARCLAYS BANK PLC v. WONG SIU WING AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. I have before me a claim by Barclays bank PLC against a number of defendants. It all arises out of the same matter namely the setting up of a company called Peak Throne Company Limited which was established in about July 1983 and the directors of that company were the third and fourth defendants. The first defendant is the father of the third defendant. The second defendant is the husband of the fourth defendant. Insofar as these proceedings are concerned the matter has been settled against the first defendant, the second defendant has been adjudged to be a bankrupt and the matter continues as against the two directors of the company.

2. There was a company bank account established at Barclays Bank in Tai Po and the Bank Manager, a Mr. Thomas Chan, was the manager at all material times. The company started this bank account in July 1983 and was soon substantially in overdraft and there happened a matter with which I am concerned it happened in August of 1983. Prior to the 30th of August of 1983, as I said, this company was in overdraft, the second defendant tells me that the bank manager, Mr. Chan, had granted facilities of some $400,000 in overdraft and on the 30th of August, the second, third and fourth defendants went to the bank at Tai Po and in the office signed a guarantee which is at pages 61 - 64 in the bundle of documents before me. The material portions read as follows:

"In consideration of you giving time credit and/or Banking facilities and accommodation to Peak Throne Co. Ltd. of 25th floor, Block 1, Flat A, Tai Ping Ind. Centre, Ting Kok Road, Tai Po ........... "

 

and as a proviso at the end of that paragraph -

"Provided always that the total amount recoverable hereon shall not exceed the sum of"

and that has been left in blank. There is no doubt at, all and it is not disputed that the second, third and fourth defendants signed that, nor is there any dispute that at the present moment the total indebtedness of the company is $1,344,443.68. By virtue of the matter having been settled as against the first defendant for $200,000 plus interest, the total claim insofar as this guarantee is concerned is now $1,144,000 etc.

3. The plaintiff bank says the defendants (I am concerned only with the third and fourth) signed the guarantee, the amount owing is "X" and therefore they are liable to pay this sum of money. The defendants raised initially a number of potential defences to this claim. Originally they said the-guarantee was null and void because the plaintiff had not told them to seek legal advice and had not assisted them in any way at all insofar as telling them about their legal liability.

4. That defence has now been dropped by the defendants. The only issue before me which I have to rule upon is the defence of the defendants when they say that at the time the guarantee was entered into Mr. Chan, the bank manager, warranted and/or represented that the total liability of the three should not exceed $100,000 - in other words that there was a limit of liability of $100,000. It was also not a joint and several liability, it was a total liability for the three of them. Insofar as the evidence is concerned, I have heard evidence for the plaintiffs from CHAN Chi-keung who made an affirmation in this matter; he is the new manager - what is called the manager of business development in the plaintiffs - his affirmation contained the evidence he gave before me and I do not take up time in reciting all the facts. He, of course, has no personal knowledge of what transpired in August 1983, but he says that the records showed the indebtedness and indicated that the original of the guarantee was signed on 30th August. He said that insofar as the blank portion is concerned, if it is left blank then the liability is unlimited. He said that it is not an unusual matter for that to be left blank.

5. One of the matters that has taken up some time is a letter at page 59 of the bundle, which is a letter from the bank dated the 30th of August and sent to Mr. Peter Lee - Peter Lee is the second defendant, he gave evidence and denied having ever received this letter. It was an unusual letter in that the bank manager sets out that the banking facilities were $2,000,000 and that as security three mortgages were required, a debenture and a joint and several guarantee of $2,000,000. Now the unusual feature is that at the end of that letter, a paragraph is inserted for the person to whom it is sent to sign it, presumably to be signed by someone other than Mr. Peter Lee. The letter has not been signed and there is no doubt that the only mortgage taken up was of Flat A in Lai Chi Kok Road-no other mortgages were completed and also that a sum of money said to be the commitment fee of $2,500 does not appear to have been debited to the company account. As I said, it is an unusual letter and it is difficult for me to say whether or not the defendants or any of them did have notice of this. My present view is that I am satisfied that on the evidence they did not; it has not been signed by any of them. It may be that it was just retained in the bank file, but in my judgment it does not really make any difference to the conclusions I have come to in this case. I accept from Mr. Tang who has put forward a number of very interesting and clear submissions that strange things were going on between the bank manager and these defendants and it does appear odd that a large amount of overdraft came into being so quickly without apparently any security being obtained. Nevertheless, it is for me to rule upon this guarantee and to say whether or not on the evidence I have heard that there was some warranty made by the bank manager limiting the liability. First, as a matter of ordinary common sense, it would be unusual for a bank manager so to do, unless clearly something was indicated on the document, or there was some other contemporaneous document whereby the bank manager was limiting the liability and also of course binding his own bank insofar as it could only recover the sum of $100,000. This company was, as I have said, in overdraft very quickly; it appears to have been doomed from the start. It was always in overdraft and the indebtedness grew and grew.   In view of that and the fact that the two directors and principal shareholders were two ladies who do not appear to have had any money at all, and that the second defendant was not even a director, it would, in my view, on the probabilities have been most unusual for the bank to have limited its guarantee to merely $100,000 to a company which was overdrawn very substantially even in those early days. I have seen nothing, no documentation being produced, which in anyway indicates that the indebtedness was limited to $100,000. Nevertheless, I have listened carefully to the evidence which has been given by the defendants.

6. The third defendant, WONG YUK FUN, gave evidence and she said that she has not really had much to do with the company; she had a baby in early 1984. Although she was a signatory on the bank account, she said she did not have a great deal to do with the company, but apparently it was her and the second defendant who were running the company; I found her evidence unsatisfactory. I think really she knew more about what was going on than she has told me. She said that she went to the bank and that the bank manager said to her that "your liability is limited on a guarantee to $100,000". I do not accept that-that occurred. I do not consider that she is giving me, in any shape or form, accurate evidence. I found her really an unreliable witness. A letter was sent to her prior to action being commenced, the bank were pressing for their money, and a letter was sent on the 10th of September 1984 to all of the defendants saying that Barclays had been pressing for the money, that they will not wait any more and they wish them to pay 1.2, as it then was, million dollars. None of the defendants, although the second said he handed the letter to his solicitor, appears to have raised in any shape or form the point that the liability according to them was limited to $100,000. In my judgment, if indeed that had been the true position and the bank manager had bound his bank only for that sum of money, I would have expected something to be said by at least one of the defendants when they received this letter.

7. The fourth defendant also gave evidence before me. she also had made an affirmation and referred to that - she was the other director and the other shareholder.  She does not appear to know what was really going on in the company. I found her also unimpressive.

8. The second defendant gave evidence. He appears to have been the person running the company, or he said he ran one department of it, and he said he managed the company; he was able to obtain $400,000 without security; that may be so; he may have been able to persuade this unusual bank manager to do that. I should indicate that the original bank manager, Thomas Chan, has left the employ of Barclays Bank, and cannot be found. Where he has gone I do not know. I am asked to say that that was some indication that he was an unusual bank manager. I think that may be right and may be he was, but I have no doubt at all that the guarantee which was entered into was a standard guarantee and, as I have said, it was not disputed by the defendants that they entered into the guarantee. I am asked to hold that as the bank manager may have been unusual he did limit the bank's liability to recover only $100,000. The second defendant, again, I found an unimpressive witness. I do not think he was telling me the truth about a number of matters and in my judgment there is no truth at all in the assertion that the guarantee was limited in some way to $100,000. I find that the guarantee was freely entered into by these defendants. They knew or should have known that they were entering into a guarantee to guarantee their company which they had set up which, as I said, initially was in substantial overdraft and continued to be a very shaky business enterprise from the word "go"; clearly they knew that they were guaranteeing the facilities that were being provided by the bank for running this company, otherwise the business would have folded immediately unless Barclays Bank had given these facilities. It is easy to criticise the bank; they should have obviously taken steps to recover the monies earlier; the matter appears to have been dealt with in a sloppy manner by their ex-bank manager. I think really that the present people appearing for Barclays do not dispute that there was something not up to their usual high standard being carried out in that Tai Po Branch, but nevertheless in my judgment this guarantee which was signed by these defendants did not in any shape or form limit their liability. I therefore give judgment for the plaintiff.

9. It has been agreed between the parties, in view as I have said of the settlement against the first defendant, that the total indebtedness now is $1,089,117.65. I give judgment for that amount.