Read the full judgment text of HCMP 002519/2001 on BabelCite. This High Court CFI judgment was delivered on 28 February 2002 before Ma J.
Civil practice – summary judgment under originating summons procedure – RHC Order 88 – guarantee of banking facilities – legal charge over three properties – defence of non est factum – defence of undue influence – defence of misrepresentation – third party bank – whether bank put on inquiry – whether representor acted as agent of bank. Banking – guarantee and legal charge – facility letter to corporate borrower – joint and several guarantee by borrower's principal shareholder and his parents – default in repayment – demand for payment – summary judgment. Contract – guarantee – personal liability of adult guarantor – non est factum unavailable where guarantor knew document was a guarantee but failed to read its terms – Commercial sense test. Undue influence – three-stage Etridge (No.2) test – whether bank put on inquiry – relationship of parent and child insufficient to raise constructive notice – bank not put on inquiry by son's status as majority shareholder of borrower. Misrepresentation – absence of agency – statement by third party not attributable to bank in absence of allegation that third party acted as bank's agent. Costs – solicitor and own client basis – contractual basis under guarantee – inclusion of legal expenses in guaranteed indebtedness. The plaintiff bank extended banking facilities to the 6th defendant and took a legal charge over three properties and a guarantee from the 2nd, 4th, and 5th defendants dated 28 September 1999. Following default, a letter of demand was sent to the 5th defendant on 13 March 2001. The 5th defendant raised three defences: non est factum (he thought he signed for the 6th defendant, not personally), undue influence (allegedly exerted by his father, the 4th defendant), and misrepresentation (his father told him he would never be personally liable). Held: all three defences fail. The non est factum defence is unavailable because the 5th defendant, a man of full age and capacity, knew he was signing a guarantee and was negligent in not reading its terms; the suggestion he signed for the debtor itself makes no commercial sense. The undue influence defence fails under the three-stage test in Royal Bank of Scotland v. Etridge (No.2) because nothing in the evidence could put the plaintiff on actual or constructive inquiry; the bare fact that the 5th defendant was the 4th defendant's son and the majority shareholder of the 6th defendant was insufficient to raise any presumption of undue influence. The misrepresentation defence fails because there is no allegation that the 4th defendant was acting as the plaintiff's agent. On the originating summons procedure, where the plaintiff seeks summary determination, the burden lies on the plaintiff to show entitlement, but once prima facie established the defendant must then show he has a defence (per International Bank of Asia Limited v. Kewpaisal Warranuch). Summary judgment entered for the plaintiff against the 5th defendant in the sum of HK$11,783,350.80 and US$294,097.38, with interest at the contractual rates from 31 July 2001 and at the judgment rate thereafter. Costs ordered on a solicitor and own client basis pursuant to the contractual obligation in the Guarantee, including all reserved costs.
Legal issues: Defence of non est factum to a personal guarantee · Defence of undue influence against a bank under a guarantee · Defence of misrepresentation to a third party bank
Outcome: Summary judgment for the plaintiff against the 5th defendant. All three defences (non est factum, undue influence, and misrepresentation) rejected.
Cited by 17 cases