CHIYU BANKING CORPORATION LTD. v. LAM SZE LAI

HCA820/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.820 OF 2001

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REASONS FOR DECISION

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1. The plaintiff Bank ("the Bank") appealed against Master Au-yeung's refusal on 11 January 2002 to grant summary judgment in the Bank's favour against the 3rd Defendant ("Mr Chan"). I allowed the appeal on 4 April 2002. This is a note of my reasons for doing so.

2. By its Statement of Claim dated 20 February 2001 the Bank claimed a total of $5.6 million together with accrued interest and further interest against Mr Chan. Paragraph 5 of the Statement of Claim pleaded that Mr Chan (among others) executed a Continuing Guarantee dated 28 April 1997 ("the 1997 Guarantee") in consideration of the Bank granting facilities to the extent of $4.1 million to Tat Fung Textile Company Limited ("Tat Fung"). Paragraph 6 of the Statement of Claim referred to another Deed of Guarantee dated 30 July 1999 ("the 1999 Guarantee") whereby Mr Chan (among others) guaranteed an additional $1.5 million of facilities for Tat Fung. The Bank's action against Mr Chan arose out of the 1997 and 1999 Guarantees.

3. The Statement of Claim also claimed against the 1st and 2nd Defendants under the 1997, 1999 and other Guarantees. But those proceedings were not relevant to the application before me on 4 April 2002. Mr Leung acting on behalf of the Bank informed me that judgments have in fact already been obtained against the 1st and 2nd Defendants.

4. Mr Chan, who acts in person, did not show up in court for the hearing of the appeal on the morning of 4 April 2002. When I became aware that Mr Chan was not present, I asked my clerk to contact him by telephone. My clerk managed to do this at around 10:05 a.m. Mr Chan told my clerk that, as he had been told that he was likely to lose the appeal, he would not be turning up in court. From Mr Chan's response, there could have been no doubt that Mr Chan was aware of the hearing, but decided of his own volition not to come. I therefore proceeded to hear the appeal.

5. Mr Leung's helpful skeleton pointed out that Mr Chan did not dispute that he signed the 1997 and 1999 Guarantees. In his affirmation evidence Mr Chan simply said by way of defence that he signed the Guarantees on the instructions of his father (Mr Chan Cheung Kei) and his mother (the 2nd Defendant). Mr Chan affirmed that (as far as he was concerned) he was signing such documents as an authorised person of Tat Fung and no one ever explained to him their nature. In essence Mr Chan relied on a defence of non est factum.

6. In Nanyang Commercial Bank Limited v. Jialing International Holdings Limited, HCCW612/2000, 18 September 2000, Le Pichon J (as she then was) summarised the matters that a person needs to establish for a plea of non est factum :

"(a) that there was a radical (or fundamental) difference between what he signed and what he thought he was signing;

(b) that the mistake was as to the general character of the document, as opposed to its legal effect; and

(c) lack of negligence, i.e. that he took all reasonable precautions in the circumstances to find out what the document was."

Yeung J has stressed in Bank of East Asia v. Ne Wai Foo, HCMP186/2000, 27 July 2001, at paragraph 17 that :

"[t]he burden of proof in relation to a defence of non est factum is a very heavy one which lays on the person pleading it.".

In my judgment, Mr Chan's evidence did not come anywhere near to establishing an arguable case of non est factum. In particular, mere carelessness in appending one's signature without bothering to ascertain the nature of a document cannot be enough to establish the alleged defence.

7. I therefore concluded that Mr Chan did not have an arguable defence to the Bank's action against him.

8. I questioned Mr Leung on the calculation of the interest sought by the Bank against Mr Chan under the 1997 and 1999 Guarantees. After a brief adjournment for Mr Leung to obtain instructions, he told me that the Bank would restrict its claim to $5.6 million together with interest at a suitable rate from date of writ until judgment and thereafter at the judgment rate.

9. Accordingly I made the following Orders :

(1) I allowed the appeal against the Order of Master Au-yeung which I set aside.

(2) I gave leave to enter final judgment in the Bank's favour against Mr Chan in the sum of $5.6 million together with interest thereon at a commercial rate of 1% over Hong Kong prime from date of writ until date of judgment and thereafter at the judgment rate.

(3) I ordered that the costs of the Bank's action against Mr Chan (including the costs of the Order 14 application before Master Au-Yeung and the appeal before me) be to the Bank to be taxed if not agreed.