Tse Kam Hung v. Bank of China (Hong Kong) Ltd
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DCCJ 3029/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3029 OF 2004 -------------------- BETWEEN
AND BETWEEN
-------------------- Coram : H.H. Judge Chow Dates of Hearing : 13th, 14th May and 2nd June 2008 Date of Handing Down Judgment : 31st July 2008
-------------------- JUDGMENT --------------------
1.In this action, the Plaintiff Tse Kam Hung (“Tse”) claims against the Defendant Bank of China (Hong Kong) Limited (“BOC”) for a declaration that the guarantee entered into on 31 August 1998 by him is null and void and is not binding on him; alternatively, he asked for an order that the guarantee be set aside, or the Plaintiff’s liabilities under the guarantee be partially discharged and/or reduced by virtue of the conduct of the Defendant. On the other hand, BOC counterclaims against Tse for:-
On 6th September, 2004, judgment was entered in favour of BOC in the Counterclaim against Chan Ki in the sum of $785,319.42 together with interest on the sum of $775,965.32. 2.On 24 June 1997, Chan Ki (“Chan”), a friend of Tse, contracted to purchase Flat E, 29th Floor, Block 2, Maywood Court, Kingswood Villas (“the Property”) at $3,160,000. In August 1998, Chan Ki told Tse that she had purchased the Property, and that she had applied a mortgage loan of $1,638,000 from Yien Yieh Commercial Bank (“Yien Yieh”, the predecessor of BOC). She asked Tse to be her guarantor. He agreed. Subsequently she brought along an application for mortgage loan, and Tse signed that document. 3.Towards the end of August 1998, Chan Ki asked Tse to approach the office of Messrs. Baker & McKenzie “B&M” to execute documents in relation to the guarantee. On 31st August, 1998, Tse attended the office of B&M. There a male staff of B&M gave a document written in English and Chinese to him, telling him that it was the standard guarantee of Yien Yieh and that the guaranteed amount was $1,638,000 plus interest. He asked Tse if he had any question. Tse said that he did not have any. That staff did not explain the content of the guarantee to Tse, but asked him to sign the guarantee. Tse did so. Then that staff asked Tse to sign an acknowledgment of guarantee, without explaining its contents to him. Afterwards a solicitor came into the room and attested Tse’s signature on the guarantee. Then that solicitor asked Tse to sign a Third Party’s Acknowledge. After that a female staff came in and asked Chan Ki to execute documents for completing the purchase of the Property. That female staff asked Tse to countersign on a document. Subsequently Tse learned that it was a facility letter. She did not explain the content of this document to him. 4.Tse was not given any copy of the documents signed by him. 5.It is Tse’s evidence that in or about October/November 2003 Chan Ki requested him to accompany her to BOC because she wanted to ask for a reduction of interest rate and an extension of repayment period. One day in or about October / November 2003 Chan Ki and Tse met Kwan King Fat (“Kwan”) of BOC in the office of BOC. Chan Ki made the above request. 6.On the other hand, it is Kwan’s evidence that on 21 November 2003 Chan Ki rang him up, enquiring if the BOC would agree for sale of the property at an offer of $870,000. He met Chan Ki and Tse in his office. Chan Ki and Tse wanted BOC to consent to the sale of the Property at $870,000. Kwan said that he had to seek the approval from his superior first. Kwan obtained 4 verbal valuation of the Property. He made a report to his supervisor recommending sale of the Property by Chan, Tse denied that there was such a meeting. 7.On 24 November 2003 Kwan rang up Chan Ki, saying that BOC she might proceed with the sale of the Property at $870,000. He did not tell Tse this decision. Chan Ki contracted to sell the Property at $870,000 in December, 2003. 8.There is only one meeting between Chan Ki, Tse and Kwan. Kwan did record down in writing the date of the meeting being on 21 November 2003. There is no written record made by Tse. That being the case, the meeting must have been held on 21 November 2003. Kwan’s evidence is more reliable. I accept his evidence in total. I find that on 21 November 2003 Chan Ki and Tse attended his office. Both of them proposed and agreed to sell the Property at $870,000. Since Tse agreed to this figure of $870,000, he cannot make a complaint of it subsequently. 9.In January 2004, BOC released the Property from the mortgage and Chan Ki assigned the Property to the buyer. BOC received $819,000. Arthur K.H. Chan & Co. Solicitors demanded Tse for payment of $802,881.64. 10.Tse claims that the guarantee is null and void; alternatively, the guarantee is to be set aside or partially discharged, because the contents of the guarantee was not fully explained to him. He also claimed that the contents of the Acknowledgment of Guarantee, the Third Party’s acknowledgment and the confirmation letter were not fully explained to him. He alleged that BOC secretly agreed with Chan Ki, and allowed her to sell the Property, without his knowledge and agreement, at a consideration of $870,000, which was below the then market value. BOC did not inform him of the sale, and so he was deprived of the right of subrogation. 11.The Plaintiff’s Counsel submits that “It is accepted that the bank does not owe a duty of care to advise the guarantor. The guarantor, as a contracting party has to take care of his legal rights himself, … … However, if BOC chose to explain the contents of the guarantee to Tse, BOC undertook the duty to explain fully and properly … … if an explanation is proffered to the guarantors, then there is a duty to take reasonable care to ensure that it is accurate … … The failure of a full explanation shall be a breach of the duty on the part of the principal, ie BOC.” He also submits that “On the guarantee, I respectfully submit that the explanations proffered by the staff of B&M on behalf of Yien Yieh was manifestly inadequate and was falling short of full and accurate.” These submissions are not correct. In his two witness statements Tse said that the male staff did not explain the contents of the guarantee to him. So the above submissions cannot stand. There is simply no evidence to support the submissions. On the other hand, I accept the evidence of BOC. A certain part of the guarantee was explained to Tse. There is no evidence that such explanations were inaccurate, so as to render the guarantee not binding. BOC is under no legal duty to give to Tse a full explanation of the entire guarantee document. It did not commit any breach because it only gave explanations to certain parts of the guarantee document. 12.The Plaintiff’s Counsel also submits that the Court has the jurisdiction to declare a certain term null and void and/or not binding on the parties, if there is no explanation of a certain term. But he has not cited any authority to support this proposition. He refers to Halsbury’s Laws of England:-
There is no evidence that BOC acted in bad faith towards the guarantor. He did not specify what default Chan Ki had made. Certainly there is no evidence that BOC connived at any default made by Chan Ki. His submission cannot stand. 13.It did pass Tse’s mind at the material time to ask for a copy of the guarantee, but he did not do so. BOC is not under any legal duty to supply copies of the documents signed by Tse. 14.The right of subrogation does not arise in this case because the guarantor did not pay to the creditor what is due to the latter under the guarantee. 15.The parties to an agreement are bound by that agreement. Tse signed the guarantee. So he is bound by it. There is simply no legal or factual basis to support the Plaintiff’s claims. I dismiss all of them. 16.I have to rule on the admissibility of PD1. This document primarily aims to show the amount of interest on the principal unpaid. This covers the period from 28 April 2004 to 15 May 2008. It was served on the Plaintiff in the course of the trial. Under section 49 of the District Court Ordinance, this Court has the discretion to order interest on a sum adjudged in favour of one party to run from the date the cause of action accrued to that party, to the date judgment is entered in favour of that party. PD1 only shows particulars of the interest up to 15 May 2008, and not up to the date of the judgment. If admitted, it would not serve any useful purpose under section 49. So it is of no use to admit it in evidence. I therefore would not adjust it as evidence in this case. 17.I accept Kwan’s evidence that notices of interest rates were displayed in the Bank’s various branches. 18.Clause 9 (b) of the guarantee provides that “A certificate by any of the Bank’s duly authorized officers as to the moneys and liabilities for the time being due or owing to the Bank from or by the Principal shall be binding on me / us and conclusive evidence in any legal proceedings against me / us in all courts of law and elsewhere.” As at 7th June, 2004, the understanding debt of the debt of the 1st Defendant was $785,319.42 ($775,965.32 being principal due, and $9354.1, being accrued interest). Under paragraph 40 of the affirmation of Kwan (dated 7th December, 2004) he affirmed that Tse is liable to pay to BOC this amount, interests on $775,965.32 as well as $1,700, being the surveyors’ report fee. Under Clause 9 (b) of the guarantee, this piece of evidence is conclusive evidence. 19.There is no defence to the counterclaim. Accordingly I enter judgment in favour of BOC on its counter-claim (payable within 14 days from today) as follows:-
Costs 20.I make an order nisi, to be made absolute in 14 days’ time, that the Plaintiff is to pay costs of this action to the Defendant, on a full indemnity basis, with certificate for Counsel.
The Plaintiff: represented by Howard Wong of M/S Yam & Co., Solicitors. The Defendant: represented by Mr. Jeremy S.K. Chan, instructed by M/S Arthur K.H. Chan & Co., Solicitors. |