The Bank of East Asia, Ltd v. The Personal Representative of Cheung Tai Ming, Deceased and Others

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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Coram: Deputy Judge Wilson in Court

Dates of Hearing: 12, 13 & 16 June 1997

Date of Handing down Judgment: 7 July 1997

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JUDGMENT

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1. The Bank of East Asia ("the Bank") brings this action against the seven defendants ("D1 - D7" respectively).

2. The Bank alleges that in May 1994 D1 and D2 charged a jointly owned flat at Princess Garden as security for repayment of general banking facilities granted to D1, D2, and D3.

3. D1 and D2 were husband and wife, and D3 Ltd a company in which they were interested. D1 has since died and his widow D2 now represents his estate.

4. The Bank further alleges that by a guarantee made in April 1994 D1, D4, D5, D6 and D7 guaranteed payment of all money due to the Bank under the Charge.

The Sole Issue

5. The only substantial issue of fact is whether D1 and D2 duly executed the Charge to the Bank.

6. D1 and D2 are represented by counsel, D2 being a defendant both in her personal capacity and her capacity as representative of her late husband D1.

7. D3 - D7 inclusive have all been served, but do not appear to contest the proceedings.

The Evidence

8. For the plaintiff a solicitor, Miss Elsie Chan, gave evidence she attended to the transaction on behalf of the Bank in 1994. She was then a trainee solicitor with a firm of solicitors in Shatin and has subsequently become a partner of that firm.

9. The instructions from the Bank to prepare the Charge and the guarantee came to her by fax. She already knew D1 and D4 as clients and as directors of D3 Ltd. An appointment was arranged for 4 p.m. on 19/5/94 for the parties to go to her Shatin office and sign the documents.

10. She says that D1, D2 and D4 attended her office as arranged where she interpreted and explained the Charge and they signed it in her presence. That is produced as Exh. P1.

11. As I say she already knew D1 and D4. She had not previously met D2 (D1's wife) however, and as a precaution she asked to see D2's identity card, photocopied it, and placed the copy on her file.

12. Thus, says the Bank, the Charge was duly and properly executed.

13. There was, recalls Miss Chan, only one small glitch, or nearly so, in this otherwise routine transaction - and this may just account for the situation which has now arisen. Miss Chan says she commenced the meeting having drafted the Bank's mortgage form and distributed copies of that to facilitate interpretation. Then she realized she should be using the Bank's Charge form, she told the parties this and removed the signing page from the mortgage to the Charge form.

14. D2 gave a sharply different account of both how and where the Charge came to be signed. She said she never went to any solicitors in Shatin and has never met Miss Chan.

15. On that day at about 10 am she and her husband D1 simply walked from their flat in Causeway Bay to the office of D3 Ltd in Leighton Road nearby. Her husband told her they were going to mortgage the flat to a maximum of $600,000.

16. At D3 Ltd's office they met D4 and the latter's secretary Priscilla. Priscilla produced a different set of documents (Exh. D1) for signature by D1 and D4 and herself. She had no explanation what it was all about other than her husband's casual mention of $600,000 maximum and she knew very little English. After signing she hurried to work at Lane Crawford in Admiralty District where she was then employed and never left Hong Kong Island let alone went near Shatin.

17. This Exh. D1 is a Bank mortgage form with a blank Property Schedule. What appear to be the signatures of, or copies of, the signatures of herself, D1 and D4 are at the signing page but are not witnessed. D2 says D4 supplied this to her after these proceedings were issued although he is not otherwise willing to give evidence.

Findings

18. The plaintiff draws attention to Section 23 of the Conveyancing and Property Ordinance, Cap. 219, which contains a presumption of due execution. I do not think that assists me where, as in the present case, the contesting party has displaced the presumption. The matter now falls for determination upon the credibility of the parties.

19. The plaintiff further points out that D2's solicitor, Mr Paul Tse, wrote two letters in pre-trial correspondence on her instructions in 1996 mentioning that the mortgage had been signed at the offices of the plaintiff's Solicitors. Here, it is argued, are two clear admissions contradicting D2's evidence.

20. Having heard Mr Tse give evidence I accept his explanation that his main focus in writing these letters was the substituted document issue, not the place of signing, and this was a slip arising from an assumption on his part. I am unable to attach the significance to this point for which the plaintiff understandably contends.

21. Miss Chan appeared to me to be a credible witness. I am conscious that she could have had a motive to cover a blunder or a "short cut" on her part. And I am conscious she does not attain more credibility merely because she is a solicitor.

22. But how did D2's copy identity card appear on Miss Chan's file if D2 never visited her office? The defence suggest this could have come from other sources - e.g. Priscilla, D4, or even her late husband - but this is conjecture.

23. The defence version of what was signed (Exh. D1) is explicable in that someone could have assembled it from the erroneous documents initially distributed by Miss Chan.

24. Both D4 and Priscilla could have thrown considerable light on the whole situation but neither was called. D2's account of why they were not available seemed to me to be weak, there was no suggestion either was dead, missing or out of Hong Kong. The plaintiff of course could not call D4, a defendant. D2 however had various avenues to ensure D4 was before the court but chose not to use these. Instead I have from her indirect evidence only of what D4 said and did.

25. Plaintiff's counsel points out that if D2 did hurry to work on the shop floor of Lane Crawford that day one would have thought she would have had an "alibi" (though I doubt that is the correct term in a civil case) for the Shatin office meeting with Miss Chan.

26. D2 has not seen fit to complain to any authorities, not even the Law Society let alone the police, about Miss Chan's alleged serious irregularities.

27. Miss Chan gave a convincing account of the signing and her explanation of the documents to the parties. Although it was a routine transaction and a long time ago, she recalled the odd triviality - e.g. that another director (D6) was due to attend but telephoned to say he was too busy; that in her office she had inquired whether D2 also worked for the company D3 and was given a negative answer. She understandably enough agreed she could not now recognize D2 after that one meeting. But she had some recollection of her general appearance which she gave.

28. D2 of course had a powerful motive, ie to evade liability under the Charge altogether. She appeared to me not a credible witness in the light of Miss Chan's evidence. Mr Paul Tse, her solicitor, was of course a completely credible witness, but he took her case no further other than to explain his letters.

29. I accept the evidence of Miss Chan that the Charge was duly and properly executed by all parties including D2.

Result

30. There will be an Order for judgment in favour of the plaintiff against all defendants with an order nisi for costs.

31. As to the actual form of the orders I accept and approve the two drafts submitted by counsel for the plaintiff with his written final submission. Liberty to apply on any matters arising.

Representation:

Mr Rupert Spicer instructed by M/S Haldanes for plaintiff.

Mr Paul Lam instructed by M/S Wilfred Lam & Co for D1 & D2.

No appearance for D3 - D7.