Gobind Mohan and Another v. Brian Shane Mcelney and Others

HCA004611B/1978

No. 4611 of 1978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: The Hon. Mr. Justice Hunter.

Date of Hearing: 5 October 1984

Date of Delivery: 5 October 1984

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RULING

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1. The application upon which I now have to rule is one made by the 4th defendants, the bank, to be dismissed from this action. The basis of the application is simply this that there is manifestly nothing now left in the claim against it.

2. The matter arises in this way. The Statement of Claim gathered together the claims against the bank under four paragraphs. The first of those paragraphs was paragraph 38.   This, and a number of earlier paragraphs, formulated a claim against the bank in negligence, upon the basis that a banker who is simply asked to lend money, owes a duty to the customer or proposed customer positively to advise him upon the commercial soundness or good sense of the enterprise upon which that customer is about to embark with the assistance of money borrowed from the bank. In my judgment no such duty is in fact owed as a matter of law, a point which I thought was settled by a decision in England some four or five years ago. Mr. Eddis has accepted that position. He has expressly abandoned any cause of action in negligence, and if I may say so rightly abandoned. So I need say no more about paragraph 38.

3. The next paragraph is 39.  Now the initial pleader of this Statement of Claim regrettably used a lot of extravagant language, apparently upon the basis that when you have used extravagant language sufficiently often, it achieves some substance or life of its own. There is much extravagant language in this paragraph but no substance. Particulars were asked which revealed this lack of substance. It really is “a thing of sound and fury signifying nothing". There is simply nothing left in paragraph 39 following my refusal to allow what I regarded as a new cause of action to be added by way of amendment.

4. The third paragraph is 41. That was tarred with much the same brush as 39, until by a late amendment the word negligently was removed. So it was simply left as a plea of fact.

5. So the only paragraph left in this Statement of Claim which asserts a cause of action against the bank is paragraph 37. It is in these terms:

"Further or alternatively the 4th defendant in breach of its duty as bankers to the 1st plaintiff, and/or in respect of both plaintiffs in breach of trust and/or in breach of fiduciary duty and/or negligently wrongfully insisted that MPIL should purchase and that the plaintiffs should procure MPIL to purchase the said Herald Luxim Building well knowing that the said total consideration, including the guarantee, would be far in excess of the value of the said building and well knowing that as mortgagee to Herald Luxim, the 4th defendant had a potential conflict of interest, in that the proceeds of the said purchase would be used to discharge the said mortgage granted to it, the 4th defendant, over the said building by Herald Luxim."

6. The background to that plea is set out in the earlier paragraphs of the Statement of Claim. This pleads that on a particular day, Saturday-the 17th February, as a result I was told of a morning meeting, a luncheon meeting and an afternoon meeting, an agreement was reached between the 1st plaintiff on behalf of MPIL and Mr. Bloch on behalf of Herald Luxim for the purchase and sale of the Herald Luxim Building, in respect of which the bank were mortgagees. It is I think significant to notice that the operative words are "wrongfully insisted". There is no suggestion of coercion financial or otherwise; no suggestion of duress; no suggestion that in any way the bank sought to override the plaintiffs will. Therefore it is a peculiar allegation when you read it first. If the plaintiffs were free to say, yea or nay to the offer that was made to them, one might be forgiven for thinking "what is there in this plea?"

7. That was apparently confirmed on the first day of this hearing. When opening his case against the bank, Mr. Eddis put the matter against it in a very narrow compass, and on a completely new basis. Mr. Eddis had great problems with this pleading, which he was no way responsible for drawing, and no one could have done more than he to try and make something out of it. He plainly regarding this as a rather bizarre plea on the basis that I have just put namely that no one could be forced to do something like this against their will. Specifically as I understood him, he abandoned the words "wrongfully insisted that MPIL should purchase". In the course of his argument I put those words in pencil brackets with a line through them. The same impression was created on the minds of counsel. That was confirmed both later that afternoon on day 1, and on day 2, when a draft amendment was put before me which took out this particular allegation and substituted the new allegation which had been outlined by Mr. Eddis in the course of his opening. That application was in fact not pursued, and yesterday Mr. Eddis invited me to allow him to reinstate paragraph 37 upon the basis that his abandonment of the material allegation in it was mistaken.

8. My approach to this question is this: If counsel on their feet abandon an allegation ill advisedly and then seek to withdraw it, I should be very ready to allow that to happen, if it appeared to me that the original abandonment was in fact mistaken, and that there was potential substance in the allegation. But in my judgment in this case there is no substance in this present allegation, and Mr. Eddis' original reaction to it was wholly correct. There are two reasons for that.

9. The first is that on the facts pleaded (if you look at them as a whole) it is perfectly apparent that the main burden of the plaintiff's complaints against the bank in this contest is that the plaintiffs as mortgagees were saying they were not prepared to release their security unless the building sold for a particular price.  They were, (if you want to use the word "insisting") insisting that the property realised $X if they were to consent as mortgagees to this particular sale. This is something they were perfectly entitled to do. The pleader has got a very muddled view about this, and somehow confused in his mind the difference between insisting upon the property realising $X and insisting upon the purchase of the property. When he came towards the end of the pleading he resorted to the extravagant and somewhat meaningless language which one finds in paragraph 37.

10. This seems to me to emerge with complete clarity when you see how this claim is put together. One has to go back to the paragraphs which plead the meetings on the 17th February which resulted in the written agreement that afternoon. In paragraph 17 for a start one finds this:

"Further the 1st defendant arranged a meeting with the 1st plaintiff and the said George Bloch as director of Herald Luxim (I emphasise those words because there were some suggestion that the gentleman was acting for the bank) to discuss the purchase price of the building.  The plaintiffs cannot be more particular than to say that a certain meeting took place in about February 1973 and was attended by the 1st plaintiff, George Bloch and the 1st defendant. At the said meeting the 1st plaintiff was orally informed by the 1st defendant and/or George Bloch that the building was mortgaged to the 4th defendant and had notwithstanding that its value was, as valued as aforesaid $8m, the 4th defendant would not permit the building to be sold for a price less permit than $10 .5m such being the sum payable to the 4th defendant by Herald Luxim and secured by the mortgage."

That is a plain clear statement that the bank was not going to release its security and consent to the sale unless it was achieved a certain sum. It is flatly inconsistent with any insistence or anybody buying on any terms.

11. 19 is to the same effect. The intervening paragraph says that the plaintiffs thereupon offered $8m in cash.  19 pleads: "the 1st defendant and/or George Bloch however repeated that the 4th defendant would not permit the building to be sold at such a price, and if the 1st plaintiff wished to buy it he would have to make an offer to purchase on the following terms" which are then set out, and are said to be commercially disadvantageous to this plaintiff. Paragraph 19 therefore precisely and specifically repeats the same allegation as you will find in 17.

12. One then comes on to paragraph 20 which originally read like this:

"Thereupon the 1st and 4th defendant induced the 1st plaintiff to enter into such a purchase agreement."

Particulars were given of that. In the original allegation (which had since been abandoned) against the bank, the particulars were to this effect (and this is on page 161 of the bundle). Under particulars of inducement it was said that the person concerned was Mr. Purves, who was the senior representative of the bank involved in this negotiation. The answer was in these terms: "The plaintiffs cannot be more particular than to say the import of such inducement was to the effect (and I emphasise this) that if MPIL wanted to purchase the property the method of purchase as hereinbefore set out was the only way in which MPIL would obtain such property", this is a precise repetition of what was in paragraphs 17 and 19.

13. Some particulars were also given to the 1st and 2nd defendants, but which were specifically enlarged to cover the position of the 4th defendant. Those against the 1st defendant simply say that he was encouraging or urging this upon the basis that it seemed to him to make financial sense. As against the 4th defendant what has said is this: "The 1st defendant acted on behalf of the 4th defendant and/or the said George Bloch and the 1st defendant informed the 1st plaintiff that the 4th defendant would not be prepared to discharge the mortgage upon Herald Luxim Building unless the agreement as hereinbefore set cut was completed."  It is exactly the same thing again. Then it goes on "Further the same George Bloch stated that one Neville Mills of the 4th defendant had stated that the 4th defendant wanted to ensure a minimum price for the sale of the said building and wanted to take the two and a half million shares in MPIL." That again is totally consistent with everything that had gone before.

14. Then one comes on to paragraph 37 itself which I have already read. Particulars were delivered under that. First, there were particulars of the insistence (at page 179) "of the allegation that the 4th defendant wrongfully insisted that MPIL should purchase the Herald Luxim Building (1) giving particulars of all matters relied upon in support of such allegation." The answer is that "the plaintiffs in paragraphs (what are now) 15 to 23 of the Statement of Claim set out the best particulars that the plaintiff can give."  In other words as particulars of insistence they went back to the precise paragraphs I have just been reading and particularly 17 and 19.

15. Then we have the only matter which can be relied upon by the plaintiffs. The next request was this: "State whether the 4th defendant so insisted orally or in writing" and then the common form request on that. The answer was: "Orally. These matters have been set out in paragraphs 18 to 29 of the Statement of Claim." That is going back and certainly paragraphs 17 and 19 are picked up again. Then: "the plaintiffs contend that the said George Bloch at the same time, and at the same place orally asserted that one Neville Mills, servant to the 4th defendant had insisted that MPIL should purchase the Herald Luxim Building."  So this is the one account which is out of step with every other one. Where as we were told originally that Bloch had said Mr. Mills wanted a particular price, it now become insistence on a purchase. It seems to me that it is perfectly plain, taking this pleading as a whole that this is simply a misuse of language, and that from start to finish all the bank was saying was: If you want us to release this property you have got to put up X dollars. This simply does not start to constitute any sort of breach of duty at all. So that is the first ground for saying that this abandonment was right.

16. The second ground is that in my judgment a banker who is asked to lend money owes no duty whatever not to make extravagant, misguided, rapacious, unfair or unreasonable demands upon his customer. That is what has to be asserted as a duty, for this insistence to be wrongful or in breach of duty. In my judgment this duty simply does not exist at all. There are occasions when a banker assumes additional obligations. He may assume obligations to advise on investments. He may assume obligations if a relationship of confidentiality is created between him and his customer, or in other special circumstances like that. But to say that a banker owes some general duty not to make unreasonable demands on his customer or a potential customer is to my mind nonsense. And you only have to assert the duty to see how impossible it would be to formulate. Who is to decide whether the demands were one side of the line or the other, the demand of a reasonable banker or the demand of some rapacious person?

17. So I believe that looking at this pleading and looking at the underlying law one is driven to the conclusion that the pleader was not accurate and was simply trying to dress up a demand by the bank, which it was entitled to make, as "wrongful insistence". Secondly, even if he was right about that and there was some evidence of that, it simply displayed no breach of duty at a11.

18. Therefore I cannot see that there is now any substance in paragraph 37, and the court is in this position. A Statement of Claim was lodged against the bank in this case which contained a number of extravagant allegations which upon investigation, have either been shown to be ill founded or have been abandoned. I can see no conceivable reason for keeping the bank in this suit any longer. Indeed the kindest thing that I can do is to dismiss it from the suit. I have an uncomfortable feeling that this is an action, in view of what I have now seen, which should never had been launched against it at all in the first place. A court in that frame of mind should say so at the earliest possible moment. That is my conclusion. I do not believe that there is anything left in the claim against the bank and therefore I dismiss it from the suit.

Representation:

Mr. Francis Eddis instructed by M/s Haldane Midgley & Co. for Plaintiffs.

Mr. Peter Scott, Q.C., Mr. D.A.L. Wright, Mr. Andrew Li instructed by M/s Lo & Lo for 1st and 2nd Defendants.

Mr. Alexander Irvine, Q.C., Mr. Anthony Dicks instructed by M/s Baker & McKenzie for 4th Defendant.