Fong Huen v. Anthony Wong

HCA000167/1974

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO.167 OF 1974

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Coram: Cons, J.

Date of Judgment: 27 September 1974

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JUDGMENT

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1. This is an action brought upon a promissory note. The defendant admits having signed and given the note but alleges lack of consideration. To support this he gave evidence of the circumstances in which he says it came to be made. There is no need to go into the details of his story. It is sufficient to say that having heard both sides I have no hesitation in preferring the evidence of the plaintiff and his daughter to that of the defendant. However, that evidence presents difficulties. The difficulties were apparently not foreseen in the preparation of the plaintiff's case and I should add as a word of caution that the conclusions I have come to have been reached with the benefit of virtually no argument. It is necessary to recount the facts as I find them.

2. The defendant is a travel agent. In the latter part of 1970 he desired to take over the limited company then owned by his cousin but did not have the necessary capital. He suggested to his wife that she approach her father, the plaintiff, for a loan of $25,000. She correctly foresaw that this would not be granted. But there was another answer. She was the owner of a flat, at least it was registered in her name. Her father had given it to her and her sister some years before, although it was understood that the gift would not become absolute until such time as the father had completed the education of her younger brothers. That time is still a few years away. The idea was that money could be obtained by mortgaging that flat. To do so it would still be necessary to approach the father for he retained the title deeds in his safe custody. The wife realised that he would not be in favour of this scheme without some security and the defendant suggested that he sign a promissory note. It was on this basis that the wife approached the father and it was on this basis that the father agreed and released the title deeds to her. The understanding as to the promissory note was later confirmed personally by the defendant to the father. In due course the mortgage was executed and an overdraft taken in favour of the defendant's limited company. The defendant did not immediately sign the promissory note, making excuses such as lack of time, but he did so eventually. Since then neither the marriage nor the business has prospered. The defendant and his wife were divorced last June and the overdraft facilities are still being used to almost their full extent of $48,000.

3. The consideration pleaded in the Reply filed by the plaintiff is that the plaintiff "would permit the defendant's wife to mortgage her property", or in other words, would release the title deeds. This would certainly be sufficient consideration if he were in a position properly to refuse. But to my mind he was not. The flat in question was apparently a new one purchased upon an instalment plan whilst it was being constructed. The initial contract had been made in the name of the plaintiff, his daughter and one of his sons. All the payments had been made by the plaintiff. At the time of the completion the son had left for education abroad and the assignment from the developer was taken in the name of the daughter only. Since she put up no money herself, despite the contrary impression given by the wording of the documents then drafted, she would normally have held the property upon a resulting trust in favour of the plaintiff. In that case he would have been fully entitled to control its disposition. But as she was his daughter equity presumes that the beneficial interest was also intended to pass. This presumption can, of course, be rebutted and perhaps would have been rebutted in this instance, at least for the time being, by virtue of the educational strings attached, although I do not think this is necessarily so. The strings may well have been attached only to the rent and profits; the details were not pursued at the trial. But there was more than this. On the same day that the assignment was executed the daughter, at the request and with the consent of her father, executed a deed of trust in favour of herself and her then infant younger sister. No resulting trust can be implied in face of such express conduct. The father effectively deprived himself of his former interest in the property and would have been obliged, if called upon, to deliver the title deeds to his daughter. By promising to do so in return for the defendant's promise of a security he was only promising to perform an existing duty. Can this then amount to sufficient consideration to make the defendant's promise enforceable?

4. It is usual in these circumstances to distinguish between a promise to perform a public duty imposed by law and a private duty imposed by contract. The former is generally not accepted as sufficient consideration, although there is some authority to the contrary: Ward v. Byham⁽¹⁾. On the other hand the latter is. The cases have been usefully set out and the theory analysed in an article by Professor Davis⁽²⁾. The authority is rather old, but I know of nothing more recent, except a passing criticism of one case by Salmon, L.J., in Jones v. Padavatton⁽³⁾. That was however, I think, directed at a different aspect of the case.

5. The answer to the question depends upon which type of duty was imposed in the present instance. It is not immediately obvious, but I have come to the conclusion that it is analogous to a contractual one. It arises from deliberate transactions between private individuals and could be enforced only by those directly concerned. At the same time it is of no public concern.

6. It was suggested that the effect of such a conclusion would be to make the defendant liable twice over for the same debt because the plaintiff might not use the money to clear the overdraft; the defendant would then still remain liable to the bank and this would be inequitable. I do not think this is a substantial risk. It is clear that the whole object of the wife's family is to recover the property which must be now worth far more than the amount for which it was mortgaged. Furthermore there is no reason why the bank should call in the overdraft, let alone proceed directly against the defendant's company, so long as it retains the benefit of the mortgage.

7. Judgment is entered for the plaintiff in the sum of $48,000 and costs.

Representation:

Therese Trieu (P.H. Sin & Co.) for plaintiff

K.H. Woo (C.P. Lai & Co.) for defendant

(1) [1956] 1 W.L.R. 496

(2) (1937) 6 Camb. L.J. 203

(3) [1969] 2 All E.R. 616 @ 621