Barclays Bank International Ltd v. Chau Tin Yuen and Others

HCA001533/1983

1983, No.1533

IN THE HIGH COURT OF JUSTICE

BETWEEN

Coram: Hon. Power, J.

Date: 26th July, 1983.

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JUDGMENT

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1. In this matter the plaintiff, Barclays Bank International Limited, sued the three defendants Mr. Chau Tin Yuen, Mr. Robert Chow and Mr. John C.P. Li for an amount due to the plaintiff by the defendants jointly and severally under a guarantee in writing made on the 20th May 1982.  The writ was issued on the 4th February 1983 and on the 15th March 1983, the plaintiff made application under Order 14 for final judgment.

2. This application was supported by an affidavit of Mr. F.Y.C. Kan dated 31st March to which was annexed the guarantee signed by the 1st, 2nd and 3rd defendants. The original amount claimed was $23,330,863.79.  However, because certain securities were able to be realised that amount was eventually reduced to $10,268,357.46. On the 14th April Mr. Robert Chow, the 2nd defendant filed an affidavit in opposition to the Order 14 application. In this he said that he had been a director of Axona International Credit and Commerce Ltd., a company whose debt was guaranteed, and that he was authorised by the other two defendants to make the affirmation on their behalf. He denied any indebtedness and referred to a letter of the 18th May 1982 from the plaintiff to Axona. This letter was addressed to Bancom International Ltd., the name under which Axona formerly traded. In it the plaintiff agreed to Grant banking facilities to Axona on the basis of securities consisting of :-

3. The deponent went on to say that the guarantee was given upon the basis of the letter of the 18th May 1983, and all three of us knew and expected that Barclays would at all times obtain and maintain the lien on the $3 million deposit and enough Hong Kong shares of marketable value of $28 million". That the guarantee was given upon the basis of the letter is not a matter of dispute.

4. The expectation of the 3 defendants that Barclays would ensure that all of the securities mentioned in the letter would be given to them must, of course, be seen against the background of the guarantee which allowed Barclays, in Clause 10, to grant any indulgence to the principal, if it saw fit to do so, and to modify any securities. The deponent stated that Mr. Norman Chan, the Financial Controller of Axona informed him that Barclays did not obtain from Axona shares with a market value of $28 million and did not ensure that at all times snares were pledged to the marketable value of $28 million.

5. In paragraph 7 of the affidavit there first appears the suggestion that the reason that Barclays did not do so was because they had made a mistake as to the calculation of the value of the shares pledged. It is to be noted that the witness here says, "What apparently happened was that Barclays had been 3 mistaken about the calculation of the Hong Kong shares pledged by Axona". It appears to me that the deponent is not here swearing to a fact but rather to a conclusion which he came to based upon facts which he sets out later in the affirmation. The crux of the defence is set out in paragraph 8 of the affidavit where the deponent says that on the 16th November 1982, he asked Mr. Francis Kan of Barclays whether Barclays had enough pledged shares and lien deposit to cover Axona outstanding liability to Barclays. I was told by Mr. Kan that Barclays had more than adequate securities to cover. Axona's outstanding liability and that in fact there was a confident margin". The deponent says that having been given this assurance, he did not then take steps, which would have been open to him, by virtue of the position of himself and the other two defendants in Axona, to ask Axona to pledge further shares or to cause Axona to repay the whole of its outstanding indebtedness to Barclays. Whether Axona would have acceded to such a request or whether the deponent could have caused Axona to repay its indebtedness, I do not know, however, I must act upon the basis of the facts sworn to in the affidavit where the deponent states, "The guarantors could have caused Axona to repay the whole of Axona's outstanding indebtedness to Barclays". In paragraph 8 the deponent says that he "subsequently learned that Barclays had made a mistake" as to the amount of securities. He does not say how he came to learn that a "mistake" had been made, indeed when one bears in mind the words in paragraph 7, it would appear that he did not come to learn there had been a mistake as a matter of fact, but concluded that there must have been a mistake upon. the basis of other facts which came to his knowledge. These facts appear to be set out in paragraph 9 which states that sometime shortly after the 16th November 1982, "because a customer of Axona wished to redeem some Hong Kong Land Warrant and Axona did not. have these particular Hong Kong Land Warrant, Axona approached Barclays and offered to swap 60,000 Jardines shares for the equivalent market value of the Hong Kong Land warrant. It was then that Barclays discovered. its mistake and demanded shares of some $4 million worth instead of the $700,000 worth offered by Axona. The swap suggestion was of course dropped by Axona and the mistake became known to Barclays. It was the mistake of Barclays' clerk who dealt with calculation of securities which has led to the present claim being made by Barclays against the guarantors, for without his mistake, the sale of all the Hong Kong shares pledged by Axona to Barclays plus Axona's deposit of $3 million will result in Axona becoming on any basis a creditor of Barclays rather than the alleged debtor."   It is to be noted that nowhere has the deponent suggested that Barclays ever admitted, either verbally or in writing, having made any mistake. His suggestion appears to be that, as Barclays demanded for 14 million worth of Jardines shares when only $700,000 worth of shares was the proper amount to cover the swap, this must indicate that they had discovered that they had, up to that time, been mistaken as to the amount of securities they were holding.

6. The affidavit goes on to state that the mistake was wade by the Barclays' clerk who dealt with the calculation of securities and, in paragraph 7 of a later affidavit of Mr. Chow, filed on the 1st July 1983, he says that the clerk who made this mistake was asked to leave the securities department after the discovery of the mistake.

7. The Registrar gave summary judgment to the plaintiff and the defendants now appeal to this court against that decision. Mr. Waung who appeared for the defendants submitted that the statement by Mr. Kan on or about the 16th November 1982 was made in circumstances where the bank owed a duty of care to the defendants and that, as such statement was false and was made without proper care having been taken to ensure that it was true and as the defendants have suffered loss because they acted upon it, the plaintiff is liable to them for that loss.

8. Mr. Waung did not cite any authority in support of this proposition. It seems that he Was suggesting that the situation fell within the principles enunciated in Hedley Byrne & Co. Ltd v. Heller and Partners Ltd ⁽¹⁾. He was it seems suggesting that the bank and the defendants had a professional relationship which gave rise to a duty of care because the bank knew or ought reasonably to have known that the defendants were likely to act or refrain from acting upon the basis of what was said to them.

9. Mr. Waung also suggested that the bank would be, having made the representation they did and the defendants having acted upon it to their detriment, estopped from denying the truth of the statement made.

10. Mr. Tong, who appeared for the plaintiff, submitted that the relationship between the parties was governed wholly by the guarantee and the defendants were clearly liable under that guarantee. He submitted that, even if there was a misrepresentation, it in no way affected the liability under the guarantee. As to the estoppel, he submitted that the defendants had not shown that they did any act to their detriment or failed to do any act which might have assisted them to avoid the liability which they now face.

11. Let me say immediately that I find the factual basis upon which the defence rests shadowy. I say this because of the slight nature of the evidence placed by them before the Court as to "the mistake". The defendants answer this by saying that they could not, at this stage, be reasonably expected to put more before the Court than they have as to the mistake, as all of the facts, as to how the mistake came to be made, are within the knowledge of the plaintiff. They submit once they have discovery, the nature and extent of the mistake will be revealed.

12. I could not say, given that the defendants are able to establish the existence of the alleged mistake, that they do not have an arguable defence. However, the evidence before me as to the existence of a mistake is so slight that I consider this is a proper case to grant conditional leave. The defendants are given leave to defend conditional upon their making payment into court of the full amount claimed within 28 days.

(1)    (1964) A. C. 465.

Representation:

Mr. R. Tong (Robert W.H. Wang & Co.) for Plaintiff/Respondent.

Mr. W. Wuang (King & Co.) for D1 & D2. )-Appellants

Mr. W. Wuang (Woo, Kwan, Lee & Co.) for D3.)-Appellants