The Canton Trust & Commercial Bank Ltd v. Fui Men-tak Formerly t/a Wei Tak Tailors and Mandarin Products Co and Others
Read the full judgment text of HCA 609/1971 on BabelCite. This High Court CFI judgment was delivered on 11 November 1974.
1. When the plaintiff bank was forced to put an end to its normal business in February 1965 the first defendant was operating two current accounts, one in the bank's Mongkok branch, the other at Shamshuipo. Each was, with the consent of the bank, heavily overdrawn. Interest charges have since accumulated to an extent almost equal to the original balance. Prior to the collapse the third and fourth defendants had each signed a letter of guarantee to cover the overdrafts respectively, and the inter
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HCA000609/1971 IN THE SUPREME COURT OF HONG KONG (ORIGINAL JURISDICTION) ACTION NO.609 OF 1971 -----------------
----------------- Coram: Cons, J. Date of Judgment: 11 November 1974 ----------------- JUDGMENT ----------------- 1. When the plaintiff bank was forced to put an end to its normal business in February 1965 the first defendant was operating two current accounts, one in the bank's Mongkok branch, the other at Shamshuipo. Each was, with the consent of the bank, heavily overdrawn. Interest charges have since accumulated to an extent almost equal to the original balance. Prior to the collapse the third and fourth defendants had each signed a letter of guarantee to cover the overdrafts respectively, and the interest thereon. Whether the bank can enforce those guarantees against the third and fourth defendants are the matters with which I have to deal. The other aspects of this action have been dealt with elsewhere. 2. The third defendant puts forward three defences on his pleadings. Whatever their legal validity they can only be successful if supported by evidence. In the event no evidence was produced and I therefore need not consider these defences further. Instead I turn to the plea which was effectively raised, namely that the claim against the third defendant is barred by the Limitation Ordinance. 3. The most recent general authority upon the application of periods of limitation to guarantees of this kind is Parr's Banking Co. v. Yates(1). That case was decided upon the principle that periods run separately with regard to each individual advance or charge which together make up the total overdraft balance. That case has been criticised in Paget's Law of Banking, 8th Edition at p.627, but the learned authors even then accept that their own view is not without difficulties. So far as I am aware the case is still good law. In the present instance the writ was issued on 22nd March, 1971, which means that no sum advanced before March, 1965 is recoverable. This in effect limits the plaintiff to the recovery only of interest, for no other sum could have been advanced since the bank ceased business on 8th February 1965. I think that event is sufficiently notorious for me to take judicial notice thereof. 4. There are at least two ways in which a bank may easily circumvent the principle of Parr's case. It may, either, as was done in the case of Wright v. New Zealand Farmers Co-operative Association of Canterbury, Ltd.(2), require the guarantee to be expressed in relation to the balance at any time owing by the original debtor. Or it may make the guarantee subject to demand, in which case of course the period of limitation will run only from the date that demand is actually made. If that had been the situation in the present instance the plaintiff bank would have been saved for a letter of demand was apparently sent to the third defendant in 1966. 5. It has been suggested, again in Paget at p.628 that express words or not, a demand is always necessary before a cause of action can arise upon a contract of guarantee, because it is a collateral contract. Reference is made to the case of Bradford Old Bank, Ltd. v. Sutcliffe(3). It must be conceded that there are dicta in that case which tend to support that suggestion, particularly in the judgment of Bankes L.J. But it must be noted that that case was concerned with a guarantee which was expressly made payable "on demand" and that both the other Lords Justices approached the matter from a different angle. To them the importance of the collateral nature of the contract was only to show that the words "on demand" could not automatically be neglected, as they would have been in the case of a simple debt. They then proceeded to look at the rest of the guarantee to decide what the parties had really meant to say. This approach was also adopted by Atkin L.J., when dealing with the converse situation of a customer seeking repayment of a current account in credit, in Joachimson v. Swiss Bank Corporation(4) where he says
6. It is the approach therefore that I feel I should adopt in the present instance. It appears that it is the invariable practice of bankers to specify that the liability of the surety shall be to pay on demand: Paget, p.628. That is readily understandable. Although it may give the illusion of favouring the guarantor that requirement is in reality a protection for the bank. Yet it was not included in the present guarantee. The plaintiff bank must have been aware of normal banking practice. The form signed by the third defendant was apparently prepared and drafted by the bank. I am therefore forced to the conclusion that for some reason which does not appear to me the bank deliberately left that requirement out and made the guarantor liable without the need for prior demand. The plaintiff is therefore entitled to judgment against the third defendant, but only in respect of the interest which has accrued in the six years immediately prior to the issue of the writ, which on the evidence of Mr. Jones is $9,418.41. 7. I must also enter judgment against the fourth defendant in the sum claimed against him. It is unsatisfactory but in the circumstances unavoidable. And at the moment those circumstances appear to be entirely the fault of the fourth defendant himself. At the first hearing of this matter he appeared in person. At that hearing the action was adjourned sine die with liberty to restore to enable the third defendant to set out properly the question of limitation. When the action was eventually restored the registered letter containing the notice which was sent to the fourth defendant was returned by the postal authority marked "Moved. Address unknown." There may of course be some good reason why the fourth defendant has failed to notify the Court of his new address, but I am not yet aware of it. He was therefore deprived of the opportunity to pursue the only line of defence so far raised by him, namely that his is not the signature that appears on the guarantee contained in the files of the bank. The plaintiff had already met that line of defence by calling the evidence of an expert on handwriting and on such evidence as I have actually heard there is a strong balance of probability in the bank's favour that the signature is indeed that of the fourth defendant. 8. The plaintiff is to have his cost against both defendants. Representation: Michael Asome (D'Almada & Co.) for the plaintiff. Miss Tam (Chan & Ho) for the third defendant. (1) [1898] 2 Q.B. 460 (2) [1939] A.C. 439 (3) [1918] 2 Q.B. 833 (4) [1921] 3 K.B. 110 at 129 |
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