Thai Oversea Investment & Finance Co Ltd v. A. Winner Co (A Firm) and Another

HCA000063/1979

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 63 OF 1979

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Coram: Penlington J.

Date of Judgment: 13th July 1981

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JUDGMENT

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1. This was a claim brought by the plaintiff against the 1st defendant in respect of 2 advances each of $50,000 made on the 14th and 24th October 1978 and in respect of the 2nd defendant on the basis of a guarantee dated the 21st August 1978 executed by the 2nd defendant in respect of the 1st defendant's account. It was not in dispute that the two advances were made by the plaintiff to the 1st defendant that 2 post-dated cheques each for $50,000 were given to the plaintiff by the 1st defendant and that when these post-dated cheques were presented on the 24th November and the 14th December 1978 both were dishonoured. The 1st defendant did not enter an appearance and took no part in the proceedings. It would seem that the 1st defendant has now gone out for business and the action was entirely directed to the liability of the 2nd defendant in respect of the guarantee.

2. It was agreed between the parties that the plaintiff is a registered money lender, that the 2nd defendant signed the guarantee which is at page 4 of the agreed bundle of documents and that the 1st defendant did, on the security of that guarantee obtain 2 loans of $50,000 each on the 22nd August 1978. These were repaid on time but that subsequently the 1st defendant obtained 2 further loans from the plaintiff which have not been repaid, each of those loans also being for $50,000.

3. There was only one witness called by the plaintiff, Mr. Eric Chan, a loan officer of the plaintiff company. He said he had been with the company since 1978 and that the company as a matter of routine sent out to real estate brokers a list of their current interest rates and invited the brokers to introduce purchasers of property to the plaintiff company for the purpose of obtaining loans on mortgage. He said that the 2nd defendant was a real estate broker and she was on their mailing list. In May 1978 the 2nd defendant introduced to the firm a partner in the 1st defendant company, a Mrs. Nancy Wong. He said that in May 1978 there was a meeting in the Mandarin Hotel coffee shop between himself and Mrs. Wong and the 2nd defendant. Mrs. Wong's business was discussed and this discussion was carried on to the Furama Hotel. Mr. Chan said that Mrs. Wong wanted a loan of $500,000. He told her it could not be done on the basis of an unsecured loan.

4. After that conversation in May he said that the plaintiff obtained a banker's report on the 1st defendant company and they then received a letter dated 28th July from the 1st defendant asking for a loan. He said that the company decided that they would make an advance to the 1st defendant and a Mr. Tse, Mrs. Wong's husband had told them that the 2nd defendant would act as a guarantor. He said that they considered the 2nd defendant was credit worthy as they knew she owned real estate. He said that the document was then prepared and he rang the 2nd defendant to make an appointment to see her.

5. He said that this meeting took place on the 22nd August at the 2nd defendant's desk in the Real Estate Property Brokers' Association premises in the Wing On Centre. He said that he did not see a young lady present and a Miss Lau Yuk-yu who later gave evidence for the 2nd defendant was brought into Court and he said that he did not recognise her as being present on that occasion. He said that he filled in all except the address of the guarantor in the guarantee form but he did not ask the 2nd defendant if she could read English. He briefly explained to her what the document was and she signed it.

6. In cross-examination Mr. Chan agreed that he had said he would telephone the 2nd defendant when any further advances were made but he said that the arrangement was that he would do so immediately after the loan was made, not before. He gave evidence that if he had telephoned her after a loan was made she could then have cancelled the guarantee and the cheque would have been stopped. I found this evidence somewhat strange but it seemed to be contemplating a hypothatical situation which in fact did not occur. He said that in fact he did not ring the 2nd defendant when the first two loans were made of $50,000 each but she phoned him on the 22nd August and said that somebody would be coming to collect the money. He said that he did try to contact the 2nd defendant concerning the 3rd and 4th loans, which are the subject of this action, but was told that she was in Taiwan and her staff did not know when she would be back. He said that he telephoned her just for her information not so that she might be able to stop the payment of the cheques. He then went on to say that he really did not know what the purpose of telephoning her in this way was but that was what she had asked him to do. He denied that he told the defendant that this was a single-credit guarantee and he did not tell her that he would telephone her before any loan was made. He said that eventually he did contact the defendant in October and told her about the second two loans and she then said that it would be the last time she would guarantee the 1st defendant's loans. He said, however, that she was not angry. He said also that in respect of the 1st defendant he regarded each discounted cheque as a separate matter requiring a fresh undertaking to repay which in fact was to be done. However so far as the guarantee was concerned he regarded that as a continuing guarantee and no further document was required in respect of any subsequent loans made after the 21st August.

7. Evidence was given by the 2nd defendant who said that in 1978 she was a member of the Hong Kong Property Exchange. Her experience for that position seemed to be virtually non-existent and before taking up that position she was a midwife and had no experience of business. However she did a short business course in March 1978 before taking up her desk in the Exchange.

8. She said that Nancy Wong was an old friend of hers and that a member of her firm had bought a flat through her using the plaintiff company for finance. She said that Mrs. Wong told her that she was in financial trouble and a meeting was arranged in May 1978 in the coffee lounge of the Mandarin Hotel. At the meeting Mrs. Wong asked for a loan of $400,000 - $500,000. She said that during this conversation between Mr. Chan and Mrs. Wong she was not there all the time as she was away making phone calls concerning business. He said that she intended to help Mrs. Wong to introduce her to a possible source of finance but not to act as a guarantor. She said that on the 21st August she received the phone call from Mr. Chan who said that the plaintiff company had approved a loan of $100,000 to the 1st defendant and said that she had to sign a document. When she asked him for details he said he would explain that when he came to see her. He came to her office where she was seated at the desk together with her husband and the member of her staff, Miss Lau. Mr. Chan then produced the guarantee which was at that stage blank. She said that this was the first time that she had any idea that she was to act as a guarantor and that although, Mr. Tse, Mrs. Wong's husband, had telephoned her about the matter he had not told her that she was required to be a guarantor.

9. She said that the form was in English and she did not understand it as her English standard was only of form 1 or primary 6. She said that when she was studying the form her husband had left and she asked a Mr. Chan about the document because she did not understand it. She said that he explained briefly said that it was guarantee for a loan and as she did not understand the contents and asked she to take it away and asked somebody else. She took it to a Mr. Cheung who also a property broker and occupied a nearby desk. She said that Mr. Cheung told her that it was guarantee and said that she should be careful because if her friend did not pay the finance company then she would have to repay the loan herself. She said she asked him if the guarantee was for numerous occasions or just one occasion and he said that it was not stated that the guarantee would be for ever but advised her that she should make it clear to the finance company that the guarantee was for one single transaction only. She then returned to Mr. Chan and Miss Lau and asked Mr. Chan if in fact the guarantee was for one single transaction or not and he said it was for only one single transaction. She then called Mrs. Wong in the presence of Mr. Chan and Miss Lau. Mrs. Wong asked her to help her in view of their friendship. Again she was assured by Mrs. Wong that the guarantee was for only this loan. After that she again said to Mr. Chan is this guarantee for just one occasion, just for the loan being made today, and once again he said yes. She then agreed to act as a guarantor and Mr. Chan filled in the guarantee form. In her evidence she said that she wrote a some of the guarantee form and in particular the name "A. Winner Company" in lines 9, 14 and 18. She also said that her husband wrote the address at the bottom and that he had come back when the document had been filled in and signed. Later on she agreed that in fact the document had been filled in by Mr. Chan apart from the address at the bottom. Her evidence regarding this was unsatisfactory. She said that her husband had come back and saw Mr. Chan. He asked Mr. Chan what happened and he looked at the guarantee. She said he scolded her for having signed that but she told him that it was now done and she could not go back on it. First she said that she asked Mr. Chan to advise her immediately after any further loans had been made but later in her evidence she said that in fact the arrangement was that he should inform her before any loan was made. She said that she was not advised of any further loans and she went to Taiwan in October and had not been advised prior to her departure of any further advances. She said that when she returned there was not message in her office from Mr. Chan.

10. She said that she first came to know about the two additional loans in late October or November. She telephoned Mr. Chan and he told her that two more loans had been made to the first defendant. She said that she told him that he was not to advance any more loans as she was only the introducer. She said she also phoned Mrs. Wong who told her that the first loans had been repaid but she did not mention the second two. She said that Miss Lau was present when Mr. Chan came to the Property Exchange on the 21st August and may have overheard some of the conversation but she could not be sure. She said that Miss Lau was only approached to give evidence on the day before this trial started. She was referred to a letter from her solicitors dated 12th February 1979 and said that the independent witnesses referred to there did not include Miss Lau. She said that at the time she had in mind Mr. Cheung, who had seen the guarantee.

11. Evidence was given for the 2nd defendant by Mr. Cheung and also by Miss Lau. Mr. Cheung said that he was a broker in the Real Estate Exchange on the 21st August 1978 and he remembers the 2nd defendant bringing the guarantee to him and asking him about it. He said that it was not filled in and he told her that it was a guarantee for a loan and that she should be careful to see that the amount was included so that she was not liable for more and that she had agreed to and also that she should make it quite clear that she was only liable for one loan. He said the main concern was not the amount of a hundred thousand dollars but that it was only for that particular loan and that any subsequent loans should have nothing to do with the 2nd defendant. He said he had come in a solicitors firm and knew about the loan matters. He said that he advised her to make it quite clear to the finance company that she was only to be liable for the one advance being made.

12. Evidence was also given by Miss Lau who said that she was present when the guarantee was signed and heard what was said. She said that the 2nd defendant told Mr. Chan she would be a guarantor but only for that particular loan. She said that the 2nd defendant's husband was there but only for a short while. She saw the 2nd defendant take the document away and discussed the matter with Mr. Cheung and that when she returned she asked Mr. Chan to insert the repayment date in the loan. She said that she was no longer employed by the 2nd defendant.

13. I did not believe much of the evidence given by the 2nd defendant. It was very much part of her case that she did not understand English and had only a Form 1 education in that language. She did however later admit that she had gone as far as Form 5. On several occasions she interrupted the interpreter when he made what she considered it to be a wrong interpretation and on other occasions she answered questions without waiting for the interpretation. I am quite satisfied her standard of English is considerably better than what she makes out. Her evidence relating to who had filled in the blanks in the guarantee form, although not particularly relevant, was again unsatisfactory and I am quite satisfied that when she looked at the form in the witness box she must have realised that she did not fill in any of those blanks as she initially said she did. I find it quite amazing that if Miss Lau, an employee, was present when the conversation with Mr. Chan took place and the guarantee was executed that Miss Lau should only be contracted on the day before the trial. I certainly do not believe her when she says that Miss Lau was not one of the independent witnesses referred to in the letter from the 2nd defendant's solicitors to the plaintiff's solicitors of the 12th February 1979. It also seems to me extraordinary that if in fact the 2nd defendant's evidence is correct and she was given a firm undertaking that she would not be liable for any further loans, when she received a letter from the plaintiff's solicitors demanding payment of the second two loans that instead of immediately informing them of her position she simply wrote a letter dated 12th December 1978 merely saying that she was going to Peking the following day and would they please not take any further action until her return to Hong Kong. In fact a further letter dated 27th December 1978 was sent to her demanding payment of this sum but it does not seem to have been any reply until the letter of 12th February from her solicitors.

14. I also have considerable doubts concerning the evidence given by Miss Lau. Again I find it extraordinary that she should only be approached as she says she was on the day before the trial when obviously she was in a position to give most valuable evidence for the 2nd defendant. I did not find Miss Lau a credible witness.

15. Mr. Chan the witness of the plaintiff did give some evidence which I find somewhat strange regarding the reasons for advising the 2nd defendant after further loans had been made. By and large however I find him to be a witness of truth and I accept his evidence as to what happened before and at the time the guarantee was signed. I am satisfied that he made no representations to the 2nd defendant that it was to be only a one-loan guarantee. It seems to be no dispute that, whether it was to be after or before any further advances were made, he was to advise the 2nd defendant of such further advances. This seems to me to be quite contrary to her allegation that there was no question of her being concerned in any further advances.

16. I was referred to case of Heffield v. Meadows 1869 C.C.P. 595 which says that when considering whether or not a guarantee is continuous the surrounding circumstances should be looked at. I am satisfied that what that that case and subsequent authorities decide is that if there is any doubt as to what the guarantee is one should look at the surrounding circumstances. In this case the guarantee is a simple document which in my view quite clearly guarantees the 1st defendant's continuing account.

17. In this case I do not think there is any need to look at the surrounding circumstances to interpret the guarantee which seems to me to be quite un-ambiguous. In any event however I am satisfied that no representations of the sort alleged by the 2nd defendant were made. The guarantee remained in force until it was revoked by the 2nd defendant whereupon her liability would be limited to the balance then outstanding, subject to the limit of $100,000. No such revocation was made before the second two loans of $50,000 each, the subject of this action.

18. There will be judgment for the plaintiff for the sum of $100,000, plus interest as claimed in paragraph 10 (ii), (iii) and (iv) of the Statement of Claim.

19. The plaintiff is entitled to its costs.

Representation:

Mr. Jimmy Kwong instructed by (Hwang & Co.) for the plaintiff

Mr. F.Leung instructed by (K.W. Ling & Co.) for the defendant