Security Facific Credit (Hong Kong) Limited v. Wong Kwong Shing and Another

CACV000154/1983

BETWEEN

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Coram:    Leonard, V.-P., Cons and Fuad, JJ.A.

Date of Judgment: 25th January, 1984

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JUDGMENT

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Fuad, J.A. :

1. This is an appeal from a judgment of Mantell J. dated the 12th October 1983 by which he entered judgment against the Appellant in a claim based on contract and ordered that damages should be assessed by a Master.

2. Security Pacific Credit (Hong Kong) Ltd. is a finance company "Security Pacific"). On the 23rd July 1981 they entered into a hire-purchase agreement with Mr. Wong Kwong Shing in respect of a taxi. The taxi had been the property of the Appellant, Tai Wo Motor Cars Storage Battery Company ("Tai Wo"). Under familiar arrangements Tai Wo had sold the taxi to Security Pacific who in turn had let it out on hire-purchase terms to Mr. Wong.

3. On the 20th September 1981 the hire-purchase agreement was varied by the substitution of another motor vehicle. Otherwise the terms and conditions of the agreement were unaltered. No issue now arises on this.

4. Mr. Wong Kwong Shing failed to keep up with the instalments he had undertaken to pay; as from the 23rd October, 1981. The second taxi was repossessed under the agreement. Security Pacific sued Mr. Wong as the 1st Defendant for damages in relation to his breach of contract, and joined Tai Wo as the 2nd Defendant relying on what was called a "Master Agreement". Judgment was entered against Mr. Wong Kwong Shing in default, which remained unsatisfied at the time of the trial. This case turns on the question whether or not Tai Wo was bound by the Master Agreement.

5. The Master Agreement provided that Security Pacific would consider, and in its discretion accept, proposals from Tai Wo to buy new or second-hand motor vehicles, and let them to hirers named in hire-purchase agreements submitted by Tai Wo. The Agreement spelt out the basis upon which such proposals would be accepted and Tai Wo undertook certain obligations in this connection.   The effect of other clauses was that Tai Wo agreed to indemnify Security Pacific for any losses they might sustain as a result of the breach of hire-purchase agreements that were covered by the Master Agreement.  It is upon this indemnity that Security Pacific based its claim against Tai Wo.

6. Mr. Ng Fung, who owns Tai Wo, told the court that he had been in the business of buying and selling taxis (and obtaining permits for them) for the past 10 years. In July 1975 the then manager of Security Finance, a Mr. Wong Ki Ming, came to his office, as the Judge put it, "seeking fresh avenues for business". Although Mr. Ng could not clearly remember what documents he signed on their presentation to him by Mr. Wong on that occasion, he recognised his signatures on the documents shown to him in court, and the evidence as a whole shows that he in fact signed three documents - the Master Agreement, and what were called a Memorandum of Deposit and a Letter of Set-off. These were all signed on the 31st July 1975. I would interpolate here that what is perfectly clear is that Mr. Ng realised that he was entering into contractual arrangements with Security Pacific, and wished to do so. Mr. Ng had had dealings with other finance companies in the past but he did not tell the court the nature of his contractual arrangements with them.

7. The Master Agreement was in English. Mantell J. accepted Mr. Ng's evidence that he could neither read nor write English; that all he was told about it when he asked was that it was a document necessary to open an account with Security Pacific; and that his understanding about all the documents he had signed was that they were legal documents necessary to bring into effect an agreement so that he and Security Pacific could carry on business together. I mention here that the evidence showed that this relationship prospered and the volume of business done extended to several millions of dollars.

8. It was common ground, as the Judge found, that on the 31st July 1975 the Master Agreement had not been sighed on behalf of Security Pacific and, by mistake, Mr. Ng had placed his signature at the foot of the document where their signature should have appeared. This was discovered a couple of months or so after the hire-purchase agreement with Mr. Wong Kwong Shing was entered into, that is to say, in about September 1981. When the present General Manager of Security Pacific, Mr. Raymond Leung, realised what had happened, after first telephoning Mr. Ng, he called round to see him, with the original of the final page of the Master Agreement and a photocopy of it. Mr. Leung explained the whole matter to Mr. Ng who was given the original final page to keep. He signed on the photocopy in the right place, and this page was later signed on behalf of Security Pacific. The Judge commented that Mr. Leung had acted quite properly in the matter.

9. Two issues were before the Judge. The first was the legal effect of the evidence relating to the signature on the Master Agreement, and the second was a plea of non eat factum raised by Tai Wo.

10. About the first issue, the Judge took the view that as at the 31st July 1975 when only Mr. Ng's signature appeared on the Master Agreement, it could not be said that that Security Pacific and Tai Wo had each signified their willingness to be bound by the agreement. It might be, said the Judge, that Security Pacific's then manager had said something on that date which indicated their intention to be bound, but there was no evidence of that and the burden was on Security Pacific, as Plaintiff, to prove the existence of a concluded agreement. Whatever might have been the position then, the Judge held, Security Pacific had certainly signified their intention to be bound by the terms of the Master Agreement when they first started to conduct business under that agreement at the end of December 1976. Security Pacific had then given effect to clause 1 of the agreement by which they had agreed to consider and accept proposals from Tai Wo to buy cars from them and let them to hirers named in hire-purchase agreements submitted by Tai Wo.  And so, Mantell J. reached the conclusion (leaving aside the plea of non est factum) that from the beginning of 1977 the Master Agreement bound both the parties.

11. On this issue Tai Wo, by their Notice of Appeal, complain, inter alia, that the Judge was wrong in fact and in law in holding that at any material time Security Pacific had indicated its intention to Tai Wo to be bound by the Master Agreement, because -

12. It is also said that the agreement was intended by the parties to be a bilateral contract duly signed by both parties and so it was a condition precedent to its enforceability that it should be signed by both parties. This had not happened at any material time.

13. With due respect to these arguments I find no merit in them. I do not gain any assistance from Brogden v. Metropolitan Railway Co., (1887) 2 App. Cas. 666 which was cited to us by Mr. Payne, where the circumstances were very different. When the Master Agreement was taken to Mr. Ng on the 31st July 1975 and he was invited to enter into a business relationship with Security Pacific it seems to me that in the absence of evidence to the contrary they were proferring the document as their offer, which Mr. Ng accepted by his signature. Let us suppose that Mr. Ng had read and understood the document and then agreed by his signature to be bound by it; if he had later discovered that Security pacific had not signed the same document, could he have been heard to say that there was no binding agreement? I do not think so. I know of no authority that holds that where an agreement contains the names of two contracting parties, the subject matter of the contract and the promise, it is not binding on the party signing it, simply because it is not signed by the other party. What matters is the mutual intention of the parties, and Mr. Ng's evidence falls far short of establishing that there was no mutuality and that his signature was conditional on the signing of the document also by Security Pacific. I would hold in favour of the appellant on this issue, although I have used a different route from that taken by the Judge. I would add that in my view what appears at the foot of each of the Assignments, of which the document at p.107 of the appeal bundle is an example, under the heading ("Dealer's Indemnity and Undertaking''), tells heavily in Security Pacific's favour. It seems to me that by the document read as a whole, both parties were clearly recognising the existence and binding effect of the Master Agreement of the 31st July, 1975.

14. On the issue of non est factum, the Judge reviewed the facts and the authorities to which he had been referred. He cited passages from the speeches of Lords Reid and Hodson in Saunders v. Anglia Building Society [1971] A.C. 1004, and from the judgment of Donovan L.J. in Muskhan Finance v. Howard [1963] 1 Q.B. 904. He concluded by saying -

"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, I have come to the conclusion that the defence of non est factum has not been established... "

15. On that issue it is said that in rejecting the plea the Judge failed to take into account the following -

16. Moreover, complaint is made that-

17. It must be taken as firmly settled that a heavy burden lies upon a person who seeks to put forward the plea of non est factum. It is to be noted that in the majority of the cases, where the plea has been upheld; the signatory's mistake was induced by fraud, although I think the cases indicate that fraud is not necessary foundation for a successful plea. In reviewing and re-stating the law in Saunders several of their Lordship's stressed the need to restrict the scope of the plea within narrow limits.

18. With respect, I agree with Mantell J. that following passage from the speech of Lord Reid in Saunders [1971] A.C at p.1016 is particularly in point on the facts of this case -

"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.

19. In Saunders their Lordships used a number of different epithets to categorise the degree of difference that must be established by someone seeking to rely on the plea between the signed document giving rise to his contractual obligations and that which he intended to sign, but as Lord Reid pointed out (at p.1017) "what amounts to a radical difference will depend on all the circumstances". All Mr. Ng said about this was that he thought the three documents that he signed, including the Master Agreement, were needed for opening an account with Security Pacific. It might be said that this proved to be the case. He did not tell the court to what particular type of document his intention was directed so as to establish the radical difference between what he signed and what he thought he was signing which was the necessary basis for his plea.  I would comment here that what was said in para. 3(c) of Further Re-amended Defence of Tai Wo was no foundation for a plea of non est factum.

20. Although in many of the cases an innocent third party was involved, and one of the objects of restricting the application of the plea of non est factum is to protect their interests, I do not consider that Mr. N g can buttress his plea on that account. Nor do I find any substance in the submissions that are based on the proposition, said to affect both issues, that something turned on the fact that Mr. Ng was not given a copy of the challenged agreement after he had signed it. In my judgment Mantell J. was fully justified in finding that the plea of non est factum had not been satisfactorily established by Mr. Ng on whom the burden on that issue lay.

21. I would dismiss the appeal.

Leonard, V.-P. :

22. I agree that the appeal should be dismissed for the reasons given by Fuad J.A.

Cons, J.A. :

23. I, too, agree that the appeal should be dismissed and for the reasons given by my lord, Mr. Justice Fuad. I would only add with regard to the point dealing with the binding nature of the agreement that although like him, I prefer to base my decision upon the fact that the evidence in my view leads inescapably to only one conclusion, - that there was an offer by the plaintiff to deal on the terms contained in the document he was putting forward and the offer was accepted by the defendant and evidenced by his signature - nevertheless, when one takes into account what happened after that, and particularly the 2nd defendant's signature on the documents which appear at page 107 and onwards in our bundles, I think the learned Judge below was justified in drawing the inferences that he did.

Representation: