Standard Chartered Bank (Hong Kong) Ltd v. Leung Shu Kan
Read the full judgment text of DCCJ 272/2007 on BabelCite. This District Court judgment.
1. This is the Plaintiff bank’s application for summary judgment against the Defendant for the sum of HK$267,127.55 plus interest.
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DCCJ 272/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 272 OF 2007 ------------------------ BETWEEN
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------------------------ D E C I S I O N ------------------------ 1.This is the Plaintiff bank’s application for summary judgment against the Defendant for the sum of HK$267,127.55 plus interest. 2.For the purpose of this judgment, the essential background can be summarized as follows. Background 3.At the material time, the Defendant was a shareholder of a company known as Chi Hing Electronic Limited (“the Company”). The other 3 equal shareholders were Hon Yeung Kwong, Ng Yuk Piu (“Ng”) and Luo Guang Tong (“Luo”). The Defendant, Ng and Luo were also directors of the Company. 4.By an unlimited guarantee (“the Guarantee”) dated 21 April 2006 and signed by the Defendant, Ng and Luo, they guaranteed the repayment of any outstanding sums owed by Company to the Plaintiff. As set out in clause 1 of the Guarantee, the Defendant, Ng and Luo agreed to enter into the Guarantee in consideration of the Plaintiff granting or continuing to grant banking facilities to the Company. 5.The Company has failed to repay the loans advanced by the Plaintiff to it. By a demand letter (“the Demand Letter”) dated 20 December 2006, the Plaintiff demanded the Defendant as guarantor to repay the sum of HK$282,432.13 as the outstanding balance owed by the Company to the Plaintiff at that time. 6.The Defendant did not respond to the Demand Letter nor had he repaid to the Plaintiff any part of the outstanding sum as demanded. 7.As a result, the Plaintiff brought the present claim against the Defendant on 15 January 2007. Applicable principles 8.The principles applicable to a summary judgment application are well known. The burden is on the Defendant to show a triable defence which is not practically moonshine and is worthy of belief. The Defendant should also condescend to particulars in support of the defences raised. See: Hong Kong Civil Procedure 2007, paras 14/4/3, 14/4/4, 14/4/9. The Defence 9.By way of his affirmation dated 7 March 2007, it is principally the Defendant’s case that some time in April 2006, Ng asked him to sign on the signature page of the Guarantee and told him that he was signing it for and on behalf of the Company to raise money for its operation. Ng also told the Defendant that he would not incur any personal liability by signing the document. Given his trust in Ng, as Ng was the person in charge of the financial matters of the Company, the Defendant did not read the other pages of the Guarantee but signed the document as told, believing effectively that it was the Company’s document to raise fund. 10.As far I can understand from his evidence, in resisting the claim, the Defendant is raising the defences of non est factum and misrepresentation:
11.As I will explain below, I have come to the conclusion that the Defendant’s defences are not worthy of belief and summary judgment should be entered against him. The defence of non est factum 12.A person relying on the defence of non est factum bears a heavy burden. The defence is also not available to a person who is careless in signing a document. Unless there is good evidence to explain why it was reasonable for him to do so, a person is regarded as careless in simply signing any document placed before him and without making any necessary inquiry as to its nature or effect, and even if he did so because of his trust placed on others. See: Saunders v Anglia Building Society [1971] AC 1004, 1036A to H per Lord Pearson, 1016B to F per Lord Reid, and Lord Wilberforce at 1025D to F and 1026C to 1027F; Wan Chow Ki v Wan Chow Kan (unrep., HCA 1490/2002, 16 January 2004, Lam J), paras 10-12. 13.In the present case, the evidence shows clearly that the defence of non est factum is not open to any triable arguments. 14.First, the Plaintiff has adduced evidence to show that the Defendant in fact signed a warning notice (“the Warning Notice”) dated 18 April 2006 (i.e., few days before the date of the Guarantee) which set out expressly and clearly that he was required to sign an unlimited guarantee to secure the Company’s application for banking facilities. In the Warning Notice, the Defendant was further expressly asked to seek independent legal advice for the purpose of signing the guarantee. Similarly, the Defendant also signed a document known as the Third Party Acknowledgment (“the Third Party Acknowledgment”) dated of the same date of the Guarantee. Again, in the Third Party Acknowledgment, the Defendant expressly acknowledged that he was to sign an unlimited guarantee to facilitate the Plaintiff’s grant of banking facility to the Company, and that he personally would be required to pay all the monies owed by the Company to the Plaintiff upon the enforcement of the guarantee. There is no evidence to suggest that the Defendant did not understand the contents of the Warning Notice and the Third Party Acknowledgment. The Defendant also has not disputed that he signed them. Given these 2 documents, it is wholly incredible that the Defendant did not know that what he signed was a guarantee and that he would be personally called upon by the Plaintiff for repayment of the Company’s debt owed to the Plaintiff. 15.Secondly, it is also plainly unbelievable that if what the Defendant alleges bear any truth, he would not have promptly responded to the Demand Letter raising the objection that he did not know what he signed was a guarantee and that he had not agreed to providing the same. There is no evidence to suggest that the Defendant did not receive the Demand Letter. Cf: Chekiang First Bank Ltd v. Ng Chun Hing Benjamin (unrep., HCA 3473/3000, 12 December 2001), para 24 per Ma J (as he then was). The first time he raised these allegations was in his affirmation filed in opposition to the claim, some 3 months after the Demand Letter. 16.Finally, I was provided at the hearing the original copy of the Guarantee. It is a single spread document of 3 pages, with the terms and conditions in English printed on one side together with the signature page, and the Chinese version of the terms and conditions printed on the other side. It is the Defendant’s own case, as he confirmed at the hearing, that he simply did not read these conditions and terms when he signed the document. He sought to explain that he did so because he trusted Ng. However, he has not provided any particulars, other than the allegation that Ng was responsible for the finances of the Company, to justify why it was reasonable for him to so “trust” Ng to the extent of not reading any of the terms and conditions of the document he was signing. Given that the Defendant has been a businessman for at least some 10 years (as it is his evidence that he was a director and shareholder of the Company since 1995), I find the explanation clearly unreasonable applying the test in East Anglia Society, supra. As such, taking the Defendant’s own case, there is no doubt that the Defendant was careless in signing the document without reading any of it terms as alleged. In the premises, the defence of non est factum is simply not open to him. 17.For the above reasons, I will dismiss the defence of non est factum as being fanciful and practically moonshine. No triable issues could arise from this defence. The defence of misrepresentation 18.For the same reasons as set out in paragraphs 14 to 16 above, I have also come to the conclusion that the allegation of misrepresentation is similarly not worthy of belief and does not amount to any triable issue. 19.The Defendant having failed to show that there is a triable issue on the existence of the alleged misrepresentation, there is simply no question that the Guarantee be set aside against the Plaintiff. See: Wing Hang Bank v Crystal Jet International Ltd (unrep., CACV 255/2002, 12 May 2005, Ma CJHC, Suffiad and Lam JJ) at paras 38 and 39. 20.Further and perhaps more importantly, even if there had been the misrepresentation as allegedly made by Ng, given that it is not the Defendant’s case that the alleged misrepresentation was made by Ng as an agent of the Plaintiff, this could not have offered the Defendant any defence against the Plaintiff unless he could show that it is at least arguable that the Plaintiff has constructive notice of the alleged misrepresentation. 21.There is however nothing in the evidence to show that the Plaintiff should be put on inquiry. It is not even part of the Defendant’s allegations that the Plaintiff should be so put on inquiry. 22.Quite to the contrary, there is in fact nothing commercially unusual that the Defendant, as a director and shareholder of the Company, was willing and prepared to provide a personal guarantee to secure the Plaintiff’s provision of banking facilities. In the circumstances, and without more, there is nothing to remotely suggest that the Plaintiff should somehow be put on inquiry as to the potential risk that the Defendant’s agreement to provide the Guarantee was a result of some equitable wrongs. See: Bank of Communications v Yenwin Investments Ltd (unrep., HCA6014/1999, Cheung J, 3 May 2000), para 8 per P Cheung J (as he then was). 23.In the circumstances, and for the reasons set out in paragraphs 18 to 22 above, the Defendant’s allegations of misrepresentation similarly do not provide him any triable defence against the Plaintiff’s present claim. Other allegations 24.It is also the Defendant’s allegation in his affirmation that the one Madam Chung Wai Tze (“Ms Chung”), a staff officer of the Plaintiff, did not witness his signing of the Guarantee as purportedly stated on the Guarantee. He also says that Ms Chung in any event did not show him the terms and conditions of the Guarantee. Ms Chung has made an affirmation confirming that she had shown to the Defendant the terms and conditions of the Guarantee and in fact witnessed his execution of the Guarantee. She has also provided evidence that it was she who sent the Warning Notice to the Defendant for signature before the signing of the Guarantee and the Defendant signed the Third Party Acknowledgement before her. 25.For the reasons set out in paragraphs 12 to 23 above, I am of the view that whether Ms Chung in fact witnessed the signature of the Guarantee is irrelevant to the present determination. This dispute of fact has no impact one way or the other on my above reasoning. 26.Further, whether or not Ms Chung had shown the Defendant the terms and conditions of the Guarantee is also irrelevant. As a general principle, a bank does not have any general duty to explain the terms of a mortgage or guarantee to the mortgagee or guarantor. See: Kincheng Banking Corp v. Kao Yu Kuei [1986] HKC 212, 215G per Huggins VP. Nor does the bank has a general duty to disclosure so long as it does not misrepresent the position: Bank of Communications v. Wong King Sing & Ors [2002] 1 HKLR 358, paras. 25-28, pp. 364E-365G. Thus, the fact that the bank has failed to explain the terms of a suretyship contract to the surety does not per se provide a defence to set aside the contract. The claimed sum and interest 27.At the hearing, Mr Cheng acting for the Plaintiff provided a copy of the draw down advice dated 13 May 2006 of the Company’s facility which shows that the borrowing interest rate was 8.1% per annum. Mr. Cheng further explained upon instructions that the difference in the claimed sum of HK$267,127.55 set out in the Statement of Claim and the sum of HK$282,432.13 as set out in the Demand Letter was a result of the Plaintiff waiving its claim for the early redemption fee provided under the Company’s facility. The Defendant raised no objection or challenge to these calculations. In the circumstances, I accept the Plaintiff has proved that:
Conclusion 28.For the above reasons, the Defendant has failed to show that he has a triable defence against the Plaintiff’s claim. Summary judgment should be entered against the Defendant. Pursuant to clause 1(c) of the Guarantee, the Defendant as guarantor has also agreed to pay on an indemnity basis the Plaintiff all reasonable costs and expenses incurred by it in connection with the recovery by the Plaintiff of moneys due under the Guarantee. I do not see any good reasons not to enforce this provision, and neither has the Defendant made any submissions to suggest otherwise. 29.I therefore make the following order:
Representation: Mr. Steven Cheng of Messrs Siao, Wen and Leung for the Plaintiff. Defendant, Leung Shu Kan, acting in person, present. |
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