Tang Chi Kin v. Tang Fong Chuen

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

APPEAL No. 10 of 1947

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(O.J. Action No. 1 of 1946)

Coram: Mr. Justice E.H. Williams and Mr. Justice T.J. Gould

Date of Judgment: 13 September 1947

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Judgment of Appeal Judge

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1. I have arrived at the same conclusion as has been expressed by the learned President.

2. Although great stress in argument has been placed upon what have been called the "bank" cases, I do not think it follows that the proposition in broad terms at the top of page 496 of Volume 13 of Hailsham which is based upon them can necessarily be applied without reservation in the case of all forged instruments. On the facts, the present case seems to me to fall more naturally among those in which estoppel by acquiescence has been relied upon. Admittedly the requisites of a valid estoppel by representation are similar in all the different forms of that plea but I am unable to see why, where a person is labouring under a mistake as to title to land, it should make any difference whether that mistake arises through a forgery or from some other cause. The respondent in this case is said to have stood by while the appellant relied upon a title to leasehold inconsistent with the respondent's own title and bad to the knowledge of the respondent, and it is necessary to determine whether or not his silence constituted a breach of a legal duty and was thereby to be deemed a representation.

3. The general rule in such cases is expressed by Spencer Bower on Estoppel by Representation at p.61 as follows:-

"Where a person having a title right or claim to property of any kind, perceives that another person is innocently, and in ignorance, conducting himself with reference to the property in a manner inconsistent with such title, right, or claim it is the duty of the former to undeceive the other party forthwith; if he omits to do so, and if all the other conditions of a valid estoppel are satisfied, he is precluded from exercising or asserting his right or title or claim ..." It is to be noted that the "other conditions of a valid estoppel" would include damage or prejudice arising from the representation and it is upon this point that the main difference between the submissions on behalf of appellant and respondent arise. The appellant claims that mere knowledge of the fact of the forgery on the part of the respondent, with the further knowledge that the appellant in reliance upon it was exercising a right e.g. the right of possession, inconsistent with the title of the respondent, is sufficient to give rise to a duty of disclosure - though he concedes that no estoppel would arise unless damage was suffered by appellant at the time or subsequently. The respondent on the other hand contends that no duty to speak arose because although he became aware of the forgery and of the possession of the property by the appellant, he did not know that the appellant was acting to his own prejudice by expending moneys, relying on the forged documents. It is pertinent to note at once that in view of the judgment of the Court of Appeal in De Bussche v. Alt 8 Ch.D.286 at p.314 once an act infringing upon the right of a second person is completed without the knowledge of that person, his subsequent delay will not be acquiescence such as to give rise to an estoppel. Thus the respondent's failure to notify the appellant in December, 1945, cannot be deemed acquiescence in the forgery itself. Any enquiry must therefore be directed towards events subsequent to that date.

4. Perusal of the numerous cases in which acquiescence of this kind has been set up and upon which the passage from Spencer Bower quoted above is based, shows that the acts during the commission of which the owner of the legal right is said to have been standing by and thereby committing a breach of a legal duty to disclose, are patently acts which must of their own nature cause damage to the person doing them if he is not allowed to take advantage of them. Thus in Savage v. Foster (1722) 9 Mod.35 the act in question was the purchase of a property; in Stiles v. Cowper (1748) 3 Atkyns 692 the building of a house; in Hardcastle v. Shafto, (1793) 1 Anstr. 184 and in Jackson v. Cator (1800) 5 Vesey 678, the carrying out of improvements. In Ramsden v. Dyson 1 English & Irish Appeal cases 129, the rule was formulated in the following well known passage (at p.140).

"          If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of Equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own."

In Ramsden v. Dyson, the act alleged was again the building of a house and other buildings and the mistake which was perceived was the very fact of the expenditure. In the present case the respondent is alleged to have stood by while the appellant exercised the right of possession which is of course inconsistent with respondent's own right. Possession of house property is not a right, the exercise of which patently or even usually causes substantial financial loss - it would normally be regarded as an advantage. It has been held that respondent had no knowledge that money was being expended on repairs. Can it be said that a duty to disclose arose under the circumstances? I think not. In the cases where a person has been held estopped by acquiescence, he has usually looked on while the money was being spent and then stepped in to take the benefit - an element of something approaching fraud or dishonesty has invariably been present. A case of bad faith and bad conscience must be made out on highly probeble grounds. Dann v. Spurrier, 32 E.R. 95. It cannot be said that a person "stands by" in respect of actions of which he is unaware. The following passage from the judgment in Jones Brothers (Holloway) Ltd. v. Woodhouse (1923) 2 K.B.D. 117 at p.125 is relevant as showing circumstances in which a duty might arise; the case is one where a third party claimed to be the owner of goods seized and sold by the sherriff :-

"It may perhaps be that if they had known beforehand that it was intended that the goods should be sold, they would have been under a duty to tell the sherriff that the goods were theirs and that they did not want them to be sold; but before they knew of the intended sale, it had already taken place." It is to be observed that the circumstance of the seizure itself was apparently not deemed sufficient to fix them with such knowledge, even though they made no further enquiry, and it was held there was no duty to disclose. Similarly, no question of fraud arising, no duty would be thrown on the respondent in this case to seek out the appellant to enquire whether he was expending moneys to his own detriment.

5. The view that no duty of disclosure arises unless the person deceived as to his rights suffers or is about to suffer loss to the knowledge of the person sought to be estopped does not appear to be inconsistent with the decisions in the bank cases. The full facts of Ewing (William & Co. v. Dominion Bank 1904, A.C. 806 are not set out in the report but that an element of dishonesty was present appears from the following passage at p.807 "Messrs. Ewing, wishing apparently to screen Wallace, did not give the bank any information that the note was forged." In Greenwood v. Martin's Bank, 1932 1 K.B.D. 371, and 1933 A.C. 51, according to the evidence one of Greenwood's avowed objects in keeping silent was to protect his wife - a course which, pursued over a long period, amounted to virtual dishonesty towards the Bank and which he must have known would be detrimental to the Bank's interests. The case of Ogilvie v. West Australian Mortgage and Agency Corporation, 1896 A.C. 257, is one where the plea of estoppel failed. In that case the person against whom estoppel was set up was found by the jury to have acted honestly and in what he believed to be the best interests of the bank. The bank suffered loss but he did not know it was doing so and had no reason to believe that it would, as he had been told by an agent of the bank that it was in the interests of the bank that he should make no report at that time. The plea failed also in McKenzie v. British Linen Co. (1881) 6 A.C. 82 but upon the ground that the bank had suffered no prejudice. At page 101 Lord Blackburn said:- "It would be quite a different thing if it were proved that McKenzie knew that the Bank had put the second bill with his name on it to Fraser's credit, and knew that at a time when he had reason to believe that he would be permitted to draw against it. His silence then would certainly prejudice the bank;" It seems here that the certainty of the prejudice combined with McKenzie's knowledge of it was being regarded as the determining factor in deciding whether a duty to disclose existed or not.

6. In the present case the respondent paid a short visit to Hong Kong but remained in ignorance of the acts which the appellant was said to have been committing to his own prejudice. He was informed that a moratorium prevented the transfer of land and left instructions that legal action be taken at the first possible moment. There was no taint of fraud or dishonesty in his conduct and for the reasons given above, I consider he was under no duty to disclose and therefore made no representation upon which estoppel could be founded. I should add that it is also my opinion that in the absence of evidence that action has been taken under the guarantee obtained by the appellant, prejudice has not been fully proved. I agree that the appeal should be dismissed.