Security Pacific Credit (Hong Kong) Ltd v. Wong Kwong Shing and Another

HCA005868A/1982

Action No. 5868 of 1982

Contract - Non Est Factum.

A motor dealer signed an agreement with a finance company which was intended to govern future hire purchase transactions involving the parties with customers of the dealer as hirers. By one of its terns the dealer agreed to hold the company free from loss should a hirer default. In an action by the company to enforce the indemnity clause the dealer claimed that being in English he had not been able to read the agreement and had not known that it contained the term relied upon.

Held:

It is for the party raising a plea of non est factum to make it good by clear and positive evidence and as in this case there had been no misapprehension as to the general nature of the agreement the plea failed.

Saunders v. Anglia Building Society [1971] Appeal Cases followed.

Action No. 5868 of 1982

IN THE HIGH COURT OF JUSTICE

BETWEEN

_______

Coram: Hon. Mantell J.

Date: 12th October, 1983.

__________

JUDGMENT

__________

1. The plaintiff is a finance company. The 2nd defendant is a firm carried on by a Mr. Ng which deals in the sale of taxis and taxi licences. The 1st defendant, against whom the plaintiff has obtained judgment by default at some date earlier to this hearing, entered into a Hire Purchase Agreement with the plaintiff for the hire purchase of a taxi and the taxi licence. The total hire purchase cost was considerable, being just short of HK$500,000. Originally, the taxi and taxi licence had been the property of the 2nd defendant and the Hire Purchase Agreement came about through the familiar tripartite arrangement involving the finance company, the dealer and the hirer. In.the course of that arrangement, the 2nd defendant had sold the taxi and licence to the plaintiff who, in turn, had let it on hire purchase terms to the 1st defendant. That agreement was entered into on 23rd July 1981. In due course, the hirer defaulted under the terms of his agreement with the plaintiff. The plaintiff, in due course,repossessed the vehicle and subsequently, as I have already mentioned, obtained judgment against the hirer which up to now remains unsatisfied.

2. In the present action against the 2nd defendant, the plaintiff claims under the terms of what is alleged to be a Master or Recourse Agreement with the 2nd defendant. It is that Master Agreement with which this action is chiefly concerned.

3. In July 1975, on the evidence of Mr. Ng which I accept, he had been carrying on his business as a dealer in taxis and taxi licences for something like five or six years. He had had previous arrangements and continued to have arrangements so far as I know with other finance houses. He never told me and there is no evidence as to the terms under which he did business with those other finance houses. The plaintiff's case is that the agreement was entered into on 31st July 1975. The plaintiff does not dispute Mr. Ng's evidence that the approach which gave rise to the making of this agreement was made for the plaintiff by a Mr. Wong, no doubt, seeking fresh avenues for business. On 31st July 1975, Mr. Wong presented Mr. Ng with a number of documents, one of them being, as I find on the evidence, the Master Agreement. The other documents to which Mr. Ng appended his signature are contained in the Agreed Bundle. They all had to do with the projected arrangement between the plaintiff and Mr. Ng's firm, but the Master Agreement sets out comprehensively the contractual basis proposed between' the parties. It is to be found at page 23 of the Agreed Bundle.

4. Clause 1 reads:

"The company will consider and if it thinks fit accept proposal forms (approved by the Company) submitted from time to time by the Dealer to purchase motor vehicles now or used and let the same to hirers named in hire purchase agreements submitted by the Dealer".

5. Clauses 2 to o inclusive further particularise the basis upon which such proposals would be accepted and imposed upon the 2nd defendant as dealer certain obligations. The material clauses to this action are clauses 7 to 10, by which, in effect, the dealer agrees to hold free from loss the plaintiff in so far as such loss might arise from the plaintiff entering into the Hire Purchase Agreement contemplated by they so called, Master Agreement.

6. After the Hire Purchase Agreement with the 1st defendant had been entered into on 23rd July 1981, there was a variation in that another vehicle was substituted for that originally referred to in the agreement and that was a matter raised by the 2nd defendant in his defence. As a point of defence, however, it was abandoned early in the hearing by Pin. Van Buuren who appears on behalf of the 2nd defendant. What remains for decision, however, is the effect of that Master Agreement and the question for me is whether or not the 2nd defendant is bound to indemnify the plaintiff as a result of the 1st defendant's admitted default.

7. The Master Agreement was signed by the 2nd defendant, as I find on the evidence, on 31st July 1975: It was not at that time signed for or on behalf of the plaintiff. Mr. Ng's signature was placed on the document at a point which had been designated the place for the plaintiff's signature. The whole of the Master Agreement was in English. Mr. Ng can neither speak nor read English. All he was told about this document when, as I find, he asked what it was about,was that it was a document necessary to open an account with the plaintiff. That he understood that it, together with the other documents he signed, were the legal documents necessary to bring into effect an agreement between himself and the plaintiff in order for them to be able to carry on business together, I also find. Some time after the relevant Hire Purchase Agreement had been entered into in July 1981, the plaintiff discovered that the Master Agreement had never been signed on their behalf. Quite properly, they did not attempt to add their signature at that stage but followings telephone conversation, the present General Manager of the plaintiff, Mr. Leung took the final sheet on which Mr. Ng's signature appears to Mr. Ng, having first ensured that a photo-copy of the sheet had been made. He produced another sheet which he invited Mr. Ng to sign in the correct position which Mr. Ng did and that sheet was signed also on behalf of the plaintiff.

8. The plaintiff and the 2nd defendant did not start to do business together immediately following the making of the Master Agreement in July 1981. Business did not begin between them until some day, as I find, towards the end of 1976. But thereafter, the volume of business was considerable. Mr. Ng says,and I accept, that it amounted to several million dollars worth of business.

9. The first matter I have to decide before the plaintiff can succeed is whether or not, to all outward appearances, there was a binding agreement between the parties in the terms of the Master Agreement. Returning to first principles, it seems to me that as at 31st July 1975 at the moment when only Mr. Ng's signature appeared on the document, it could not be said that both parties had signified their willingness to be bound by the terms of that agreement. Mr. Ng had, to all outward appearances but the plaintiff had not. It maybe, of course, that something had been said by Mr. Wong at the time which did signify the willingness of the plaintiff to be bound but there has been no evidence as to that, and the burden at this stage to show the existence of a concluded agreement between the parties must rest upon the plaintiff. But whether or not the plaintiff at any material time signified its intention to be bound by the terms of the agreement by appending its signature, it certainly did so, when it first entered into business arrangements with the 2nd defendant under the terms of the agreement and gave effect to clause 1 of the agreement, the terms of which I have reproduced earlier in this judgment. And if there had been no earlier business as I find that there had, it would have signified its willingness to be bound at the very latest on 23rd July 1981 when it entered into the Hire Purchase Agreement with the 1st defendant.

10. I have been assured from the Bar that there is no statutory provision in Hong Kong which might vitiate the effect of this Master Agreement on the ground of lack of form. In other words, the failure by the plaintiff to sign the document at any particular time does not of itself vitiate the legal effect of the document provided always there did come a time, as I have found, when both parties indicated their willingness to be bound by its terms.

11. So, I find on the evidence before me that there was to all outward appearances from the beginning of 1977 between the plaintiff and the 2nd defendant a binding agreement in the terms of the Master Agreement. I have used the expression "to all outward appearances" because it is a defence raised by the 2nd defendant in this action and the only outstanding defence which I have to consider that in signing the agreement as he did on 31st July 1975, Mr. Ng's mind did not go with his act. In other words, the defence is one of non est factum.

12. Mr. Van Buuren questioned whether or not such a defence being raised, the burden of proof resides with the party raising it. On authority, as I find, the burden does rest on the party alleging non est factum and, as I find also on authority, it is a defence which may be established in unusual cases but only by clear and positive evidence.I do not accept that the standard of proof required is that appropriate to criminal cases as was, at one time, suggested in argument by Mr. Ho. Has the 2nd defendant succeeded in establishing a defence of non est factum? I accept his uncontradicted evidence with regard to the meeting on about 31st July 1975, that he does not know English, and that he did ask Mr. Wong who presented him with the document to explain it to him. I also accept his evidence that Mr. Wong did not, in any way, attempt to go through the terms of the Master Agreement but simply said that it was a necessary document if Mr. Ng wished to open an account with the plaintiff, and by opening an account, I have understood, as I find Mr. Ng also understood, Mr. Wong to be meaning the entering into an agreement with the plaintiff. Mr. Ng's recollection of that meeting, not surprisingly, is at this distance of time somewhat hazy. He cannot, for example, remember how many pages there were in the document he signed or very little else about it, but I do find that the document he actually signed was the Master Agreement which has been put before me. Is that sufficient?

13. There is no evidence before me as to the nature of the various agreements Mr. Ng had entered into previously with other finance houses and I have indicated that I decline to take judicial notice of the standard form of such a Master or Recourse Agreement. I have been referred to authorities where on the facts non est factum has been established, one being a decision in Hong Kong as recently as July this year in the case of Wong Kwok Wing v. Wong Sau Hing,⁽¹⁾ and another, the only report of which Mr. Van Burren has been able to place before me being in Current Law for 1976 at paragraph 340. This last is an Australian case where it was held to be a material factor that the plaintiff in that case who was raising the issue of non est factum rather than the defendant was unable to read and understand the document which he signed. Both of those cases are, in my judgment, readily distinguishable on their facts from the present one and I am left in a position where I have to apply, as I find, the now well established principles with regard to non est factum as laid down by the House of Lords in Saunders v. Anglia Building Society, ⁽²⁾ or as it sometimes referred to as the decision in Gallie v. Lee  I remind myself of the words in the speech of Lord Reid appearing at page 1016:

"The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any inquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case."

and the words of Lord Hodson at page 1019:

"The plea of non est factum requires clear and positive evidence before it can be established."

"The plea of non est factum is a plea which must necessarily be kept within narrow limits."

and continuing from the speech of Lord Hodson:

"To take an example, the man who in the course of his business signs a pile of documents without checking them takes the responsibility for them by appending his signature. It would be surprising if he was allowed to repudiate one of those documents on the ground of non est factum."

14. Applying that approach and bearing in. mind that in this case, there were two parties contracting on equal terms, that Mr. Ng was a man who had been carrying on business in a similar field for a number of years, that there was no pressure upon him to sign without taking steps to have the document translated and to have, if necessary, advice upon it, Shave come to the conclusion that the defence of non est factum has not been established and, consequently, the plaintiff must succeed in its claim against the 2nd defendant. Counsel have agreed that the question of liability should be determined first leaving aside the issue as to damages which as yet has not been resolved and I indicated that I was prepared to follow that course, making it known that following my decision on liability I would entertain an application as to whether or not I should refer the matter of damages to a Master for assessment or whether I should deal with them myself.

15. By consent, damages to be assessed by a Master.

16. Costs of the action to the plaintiff.

(1)    Civil Appeal No. 23 of 1983

(2)    [1971] Appeal Cases

(3)    [1963] 1 Q3 904 at p.912

Representation:

B.K. Ho (Fairbairn & Kwok) for Plaintiff.

B. Van Buuren (John Ip & Co.) for 2nd Defendant.