United Chinese Bank Ltd v. Cheung Sum Kee Construction Co (A Firm) and Another

HCA002361/1966

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.2361 OF 1966

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Coram: Briggs, J.

Date of Judgment: 16 January 1969

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JUDGMENT

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1. In this case the plaintiff claims $207,525.69 being the outstanding balance of the overdraft of the first defendant with the plaintiff bank. The plaintiff also claims a like sum from the second defendant as guarantor of the first defendant. The plaintiff claims interest at 1.2% per month as from 11th October 1966 from each of the two defendants.

2. I gave judgment in default against the first defendant. The second defendant denied liability.

3. A manager of the plaintiff bank produced copies of the current account of the first defendant with his bank. It showed that he was overdrawn to the extent of $63,756.21 as at 30th November 1964.

4. This witness said that in January 1965 the first defendant requested further overdraft facilities. The bank at first demurred but eventually agreed and a mortgage was executed in their favour on certain land in the New Territories, which was owned by the second defendant she being a trustee for two other persons. Originally the bank had provided facilities for overdraft up to $100,000 to the first defendant. As a result of the security afforded by the mortgage this was increased by $220,000 to $320,000 in all. In 1966 the bank foreclosed and the land the subject matter of the mortgage was sold realising $85,000.

5. On 11th October 1966 the outstanding balance owing to the bank by the first defendant was $292,525.69. As the land fetched $85,000 the plaintiff claimed the difference $207,525.69. For some unexplained reasons, the sum of $85,000 is not credited to the account of the first defendant in the books of the bank. This, however, does not matter since in fact that sum has been taken into effect in calculating the amount claimed.

6. The sole point in issue is one of the construction of the mortgage.

7. The indenture was made on 11th January 1965 between the second defendant, [the mortgagor,] the first defendant, [referred to therein as "the requesting parties"] and the plaintiffs, the mortgagees. It recites that the first defendant requested general banking facilities up to $220,000 and that the plaintiffs agreed to this. The deed further states as part of the recital that the premises which are the subject matter of the mortgage are "intended to be assigned as security for the due payment of all monies payable or which may at any time hereafter or from time to time become payable by the first defendant to the plaintiff" under any of the covenants of the mortgage. Later it is stated that the first and second defendants will on demand pay to the plaintiff "all sums of money which at the date of each demand may be outstanding and according to the books of the mortgagees [plaintiff] payable by the requesting parties [first defendant] to the mortgagees [plaintiff] in respect of any account whatsoever between the requesting parties [first defendant] and will on the 10th day of each calendar month hereafter pay interest on all sums advanced by or owing to the mortgagees [plaintiff] during that calendar month at the rate of "1.2% per month. Again later in the mortgage the first and second defendants covenant to "make good and to pay and to discharge .......... any liability whatsoever of the requesting parties [first defendant] to the mortgagees [plaintiff] which liability may be incurred or arise in any manner howsoever whether the actual condition under which such liability may be incurred or arise or have not been specifically mentioned and provided for by the forgoing covenants contained in these presents and whether such liability shall be a liability incurred or arising under circumstances or conditions incidential to any form of contractual relationship between the requesting parties [first defendant] and the mortgagees [plaintiff] which comes properly and strictly within the meaning of the term 'Banking Facilities'".

8. It was argued for the second defendant that though she had guaranteed the first defendant's overdraft up to $220,000 she had nothing to do with any monies owed by the first defendant to the plaintiff at the time of the signing of the mortgage. It was also suggested that the wording of the indenture was in any event ambiguous and that regard might therefore be paid to correspondence between the second defendant the District Office, Tsuen Wan and the solicitors for the plaintiff to the effect that the overdraft of $220,000 was to be used for a specific purpose.

9. No evidence was given of this by the second defendant. And I was of the opinion that the correspondence was not capable of altering the clear meaning of the words of the indenture itself. This, as I have shown above, refers most clearly to "General Banking Facilities". I do not find any ambiguity in the words of the indenture. Indeed if this overdraft was to be for a specific purpose one would have expected a separate account to be opened at the bank and for the specific purpose to be recited in the indenture.

10. Nor can I accept the interpretation of the indenture suggested by counsel for the second defendant. He suggested that the mortgage only referred to liabilities incurred under the mortgage itself. But the actual indebtedness of the first defendant at the time of the signing of the mortgage is clearly covered, in my view, by the words which I have quoted above. It is not suggested that no one was unaware of the existing indebtedness of the first defendant and the indenture was prepared in the usual way, both parties being separately and professionally advised. In my view the mortgage covered all sums owing by the first defendant up to the total of $220,000 whenever incurred.

11. In evidence the manager of the plaintiff's bank said that owing to an accident there was a gap in the account of the first defendant. The pages referring to the months of December 1964 and January 1965 are missing. However sheets were produced from September 1964 until November 1964 inclusive and from February 1965 until December 1966 inclusive. The witness said that the accounts were true accounts and I do not think that the fact of there being a gap in them for two months need detain us. On the balance of probabilities, there being no evidence other than the accounts themselves I accept the accounts as being true and genuine.

12. In the circumstances there must be judgment for the plaintiff against the second defendant. The solicitors for the parties calculated the correct figure taking into consideration the interest claimed.

13. There will be judgment for the plaintiff against the first defendant for $207,525.69 with interest there on at the rate of i.e. $67,055.00 with costs.

14. There will be judgment for the plaintiff against the second defendant for $259,021.06 with costs. Each judgment debt to bear simple interest as from 8th January 1969 at the rate of 1.2% per calendar month until date of payment.

Representation:

Mr. Robert Wei (J. S. & M.) for the Plaintiffs.

Mr. John Swaine (Shea & Co.) for the 2nd Defendant.