Hang Lung Bank Limited v. Fu Hok Ven and Another

HCA001771/1985

1985 No. A1771

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Jones J. in Chambers

Date of Hearing: 4th July 1986

Date of delivery of judgment: 11th July, 1986

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JUDGMENT

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1. This is an appeal by the defendants from a decision of Master O'Donnell made on the 23rd June 1986 when he ordered summary judgment under 0.14 for the sum of $70,000 interest and costs. There is also a cross appeal by the plaintiff against the Plaster's decision granting unconditional leave to defend another claim against the 1st defendant for the sum of $100,000.

2. The claims are under two continuing guarantees in respect of banking facilities granted by the plaintiff to the Very Nice Watch case Manufactory, Limited (hereafter referred to as "the company") of which company the defendants who are husband and wife are the directors. The first guarantee was entered into on the 6th July 1982 between the plaintiff and the 1st defendant for $100,000 and the second guarantee on the 30th March 1984 between the plaintiff and both defendants for the sum of $70,000. Both guarantees are in the same terms except for the difference in amount.

3. The claims arise as a result of ten cheques drawn on the Hang Seng Bank Limited by the company and were endorsed by the Dragon Industrial Company (Dragon) which were purchased by the plaintiff at a discount. These cheques were dishonoured on presentation, the last cheque being presented in July 1983.

4. Proceedings were instituted against the company in October 1983 for recovery of the monies due and judgment in default was entered on the 16th November 1983 for the sum of $197,594 which related to nine of the dishonoured cheques, the amount under the other cheque having been paid. No payment has been made by the company under the judgment, but the company's current account with the plaintiff has been earmarked for this sum.

5. The writ in the present proceedings was issued on the 22nd March 1985 and a defence was filed on the 29th April 1985. An application for summary judgment was issued by the plaintiff on the 31st July 1985 whilst the defendants issued a summons to strike out part of the statement of claim on the 15th August 1985. Both summonses came before Master Suttill on the 2nd September 1985 when he dismissed the application for summary judgment but granted the plaintiff leave to amend the statement of claim as certain parts were defective. The amended statement of claim was filed on the 16th September 1985 and an amended defence was filed on the 6th November 1985. The second application for summary judgment was issued by the plaintiff on the 25th April 1986 and was heard, as I have said, by Master O'Donnell on the 23rd June 1986.

6. Mr. Ramanathan who appeared on behalf of the defendants raised four issues in support of his argument that there are triable issues upon which unconditional leave to defend should be given. First the guarantees do not cover the alleged liability of the company to the plaintiff. Secondly misrepresentations were made by the Wong Chi branch Manager of the plaintiff's Causeway Bay branch which induced the defendants to sign the second guarantee. Thirdly that if misrepresentations were made, the plaintiff is estopped from reviving any liability that arises under the first guarantee. Fourthly that the judgment sum has been wholly or partially satisfied by other means.

Construction of Guarantees

7. The two guarantees provide for the making of advances by the plaintiff for discounting bills for or otherwise giving credit or granting banking facilities or granting time to or on account of the company. Mr. Ramanathan's principal argument under the guarantees relates to the construction to be placed upon clause 1. clause 1 reads :

"1.         The Guarantor will pay you on demand and hereby guarantees the repayment to you on demand of all sums of money which now are or shall hereafter become due to you from the Principal either alone or in conjunction with any other corporation or corporation person or persons and whether as Principal or Surety and whether upon account current or other banking account or accounts or otherwise or in respect of bills, drafts, notes, or other negotiable instruments made drawn, accepted, advised, endorsed or paid by you or on your account for the Principal either alone or in conjunction as aforesaid or which you may from time to time become liable to pay in respect of any bills, drafts, notes, letters of credit, circular notes or any other dealing or transaction on account of or for the benefit or accommodation of the Principal either alone or in conjunction as aforesaid together with all interest costs, commission and other banking charges and expenses which you may in the course of your business as bankers charge against the Principal and all costs, charges and expenses which you may incur in enforcing or obtaining payment of the sums of money due to you from the Principal either alone or in conjunction as aforesaid or attempting so to do. "

8. Mr. Ramanathan placed emphasis upon the words which are underlined in black and argued that the words "all sums of money" should not be construed in isolation, but in the context of the words that follow which qualify the extent of the liability guaranteed by the defendants. He argued that it is only in respect of liabilities arising from the direct relationship between the company and the plaintiff that the defendants should be held to be liable. Accordingly, it does not cover the situation where the plaintiff has accommodated a third party by discounting cheques on behalf of that third party. This accommodation will therefore be totally extraneous to the language covered by the guarantees. However, Mr. Neoh who appeared for the plaintiff submitted that the words "or otherwise" which are underlined in yellow included all liabilities incurred by the company in respect of the banking facilities granted. Mr. Neoh also submitted that the defendants would in any event remain liable by virtue of the provisions set out in clauses 11, 12, 13 and 15 of the guarantees. These clauses read as follows:-

"11.         This Guarantee shall be in addition to and shall not affect or be affected by any other security or rights now or hereafter held or exercisable by you on account of or in respect of any of the monies or obligations herein guaranteed by the Guarantor and this Guarantee may be enforced by you without you first having recourse to any such security or rights and without you first having to take steps or proceedings against the Principal or any other party. The Guarantor shall not be discharged or released from this Guarantee by any alteration in any obligation undertaken by the Principal either alone or in conjunction as aforesaid and in particular but without in any way limiting or prejudicing the generality of the aforesaid, you may without the consent or knowledge of the Guarantor grant to the Principal or to any other person any time or indulgence or renew any bills, promissory notes or other negotiable or non-negotiable instruments or securities, give up, deal with, exchange, vary, realise, release or abstain from perfecting or enforcing any guarantees, liens, bills, notes, mortgages, securities or other rights which you may now or hereafter have from or against the Principal or any other person or persons corporation or corporations whether hereunder or otherwise and may renew, determine, vary or increase any credit or facilities to or the terms or conditions in respect of any transaction with the Principal as to the application of any advance made or to be made to the Principal or compound with, discharge, release or vary the liability of the Principal or any other person or persons corporation or corporations or concur in accepting or varying any compromise, arrangement or settlement or omit to claim or enforce payment of any dividend or composition when and in such manner as you may think expedient and no such act or omission on your part shall in any way discharge, lessen, affect or impair the liability of the Guarantor under this Guarantee or the validity of this Guarantee.

12.        The Guarantor shall not in respect of any payment due to be made under this Guarantee be released from his obligations hereunder in any circumstances (notwithstanding anything which but for this provision would release him or would affect his liability in respect of such payment) other than the receipt by you of the entire amount of such monies (it being hereby expressly agreed that the latter expression shall not include any payment in liquidation or bankruptcy of less than one hundred percent) from the Principal or from the Guarantor.

13.        You shall be at liberty but not bound to resort for your own benefit to any other means of payment at any time and in any order you think fit without thereby diminishing the liability of the Guarantor and you may put this guarantee in force either for the payment of the ultimate balance after resorting to other means of payment or for the balance due at any time notwithstanding that other means of payment have not been resorted to and in the latter case without entitling the Guarantor to any benefit from such other means of payment so long as any monies remain due from the Principal to you.

15.        Any accounts settled or stated by or between you and the Principal or on his behalf may be adduced by you and shall be accepted by the Guarantor as conclusive evidence of the amount thereby appearing to be due from the Principal to you and any payment to you by or on behalf of the Principal on account of his liability whether for advances or interest or charges and any acknowledgement by acquiescence in account or otherwise by or on behalf of the Principal of such liability shall operate as an acknowledgement of the liability of the Guarantor according to the terms thereof. "

9. In my judgment upon a construction of the words contained in clause 1 of the guarantees, I am quite satisfied that liability attaches to the defendants for the debts incurred to the plaintiff as a result of the discounted cheques for the words are plain and obvious. I do not therefore accept the limited interpretation that was placed upon this clause by Mr. Ramanathan. I further agree with the submission made by Mr. Neoh that the other clauses to which I have referred would cover the liability of the defendants in any event.

Misrepresentation

10. The 1st defendant alleged that Mr. Wong who was the manager in charge of the company's accounts and the 1st defendant's personal account at the Causeway Bay branch of the plaintiff, informed him that he was being transferred to the Eastern branch and that if the 1st defendant and his wife entered into another guarantee, the plaintiff could provide better services to the company and the 1st defendant and suggested that the accounts of the company and the 1st defendant at the causeway Bay branch be closed and transferred to the Eastern branch. In consideration of this agreement, Mr. Wong said the first guarantee would be automatically cancelled upon closure of the company's and the 1st defendant's accounts at the causeway Bay branch. The 1st defendant says that the company's account was closed at the end of 1983 or early 1984 whilst his personal account was closed about the 6th January 1984. It was therefore submitted on behalf of the 1st defendant that the first guarantee was cancelled in about January 1984. The second guarantee was entered into at the end of March 1984 and was required to be signed by both defendants in order to secure advances to the company at the new branch. On the assurance made by Mr. Wong that the first guarantee had been cancelled, the second guarantee was entered into by the defendants. By so doing, it was argued that the plaintiff is now estopped from relying upon the first guarantee. Mr. Ramanathan asserted that if the first guarantee had not been cancelled, the defendants were induced by Mr. Wong's misrepresentation to sign the second guarantee and that this misrepresentation vitiates the second guarantee. The allegations made by the 1st defendant have been denied by Mr. Wong. In fact, Mr. Wong also states that the first account of the company with the causeway Bay branch has not been closed. Although there is a conflict of fact between the evidence of Mr. Wong and the 1st defendant, I find that the evidence on this aspect is inherently improbable. However, on the assumption that it is credible, there is, nevertheless, no consideration moving from the plaintiff to the defendants for the plaintiff merely transferred the account from one branch to another.

11. Further it is also significant that a claim was made by the plaintiff against the defendants and the company under the second guarantee for the sum of $43,290.06 with interest in February 1985 in respect of which proceedings were later instituted in the Tsuen Wan District Court. Subsequently, payment was made by the defendants of this sum following which the proceedings in the Tsuen Wan District court were discontinued. After payment had been made, the defendants' solicitors wrote to the plaintiff's solicitors requesting the return of the two original guarantees for cancellation which request was refused unless all outstanding payments due were discharged. The defendants did not pursue their request. No reference was made by the defendants to any allegation of misrepresentation by the plaintiff and it is clear by their conduct that they had acted inconsistently with any intention that they might have had to rescind the agreements. Accordingly I agree with the argument put forward by Mr. Neoh that the defendants by their conduct had affirmed the guarantees. The allegations have been made as an afterthought.

12. In the circumstances I am unable to accept that the defendants have shown a reasonable ground of defence on the basis of misrepresentation. The issue of estoppel does not therefore arise.

Debt paid wholly or partially

13. It was alleged by the defendants that the debt due to the plaintiff has been wholly or partially discharged as a result of a cheque for $32,000 drawn on about the 14th May 1985 which was remitted by Dragon. Dragon requested the plaintiff to appropriate the proceeds towards the judgment sum of $197,594, obtained against the company. However, the plaintiff rejected this request and it is clear that the payment made by Dragon was for a monthly instalment in respect of a separate action where the judgment debt was for $1,536,796.90. The evidence advanced by the defendants in respect of this submission did not support the allegations that were made by the defendants.

Conclusion

14. As a result, I am satisfied that no grounds have been raised in respect of either claim for unconditional leave to defend to be granted. The appeal by the defendants from the decision of the Master will therefore be dismissed whilst the cross appeal of the plaintiff is allowed. There will be judgment for the plaintiff against the 1st defendant in the sum of $170,000 and against the 2nd defendant in the sum of $70,000.

Representation:

Mr. Anthony Neoh (Lo & Lo) for Plaintiff

Mr. Kumar Ramanathan (Fred Kan & Co) for Defendants