The Canton Trust and Commercial Bank Ltd (in Liquidation) v. Choi Chok Ming and Another

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 550 OF 1971

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Coram: Briggs, J. in Court

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J U D G M E N T

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1. On May 12^th 1965 an order was made for the winding up of the Plaintiff Company.  Until that time the Company carried on the business of banking with branches in Kowloon City and Mong Kok.

2. At the relevant time the Defendants were partners in a knitting factory called Hunter Garment Factory.  One of the customers of the Plaintiff was the Wah Keung Knitting Factory.

3. From time to time the Defendants guaranteed the overdraft facilities given to Wah Keung by the Plaintiff.  The first occasion appeared to have been in June 1961.

4. On the 9^th of August 1963 the Defendants guaranteed the due payment of all advances made by the Plaintiff to the Wah Keung Knitting Factory to the extent of $10,000.

5. The guarantee is in writing and is couched in the widest terms.  It is stated to be a “continuing guarantee”.  The first part of the document reads as follows:-

“ In consideration of advances to be made by you to Messrs. Wah Keung Knitting Factory of 38, Nullah Road, Ground Floor, Kowloon (whether by lending them money or by allowing them to overdraw their account or by discounting for their Bills of Exchange or Promissory Notes or by purchasing their bills or by giving them letters of credit or incurring liabilities on their account or by all or any of those means or in any other manner whatoever).

We, undertake to pay you all such advances and all debts now owing or accruing to you by the said Wah Keung Knitting Factory to the extent not exceeding in the whole ($10,000,00) Dollars Ten Thousand Only with Interest thereon respectively at the rate of Forty (40ȼ) per thousand per day while such advances are unpaid.”

6. The Wah Keung Knitting Factory owes the Plaintiff a very large sum of money which has not been paid. The Plaintiff therefore seeks to enforce the guarantee against the Defendants.

7. The Defendants admit that they signed the guarantee.  Various defences were pleaded but the only defence pursued at the trial was that the guarantee had been cancelled.

8. The second Defendant gave evidence and said that one Tso Keung of the Wah Keung Knitting Factory approached him for a guarantee on several occasions.  He said that on each occasion the guarantee was in respect of the release of moneys under specific letters of credit issued by the Plaintiff in favour of the Wah Keung Knitting Factory.

9. He also said that this was the case so far as the guarantee which is the subject matter of this action is concerned.  He said that he was told by Tso Keung that the transaction which necessitated the guarantee had been completed and that he had therefore informed an officer of the Plaintiff Bank whom he named.  He was a senior officer in the Mong Kok Branch of the Bank, not the Kowloon City Branch, with which Branch the guarantee had been made.  He said he asked that officer to cancel the guarantee and was told that would be done.  This was the last transaction of this kind between the parties before the Plaintiff ceased to carry on business.  The Defendants called Mr. Tso Keung who gave his evidence on subpoena.  The Bank official was not called as a witness.

10. Mr. Tso said he only once approached the second Defendant for a guarantee.   It was the first occasion which was in 1961.  We know that because all the previous guarantees have been exhibited.  They all bear the stamp “cancelled” on their face which is not the case with the most recent, that of August 9^th 1963.  He said that he was the man in charge of the Wah Keung Factory and that he did not have further dealings with the Defendant.

11. The second Defendant was not an impressive witness and I do not think that he really remembers the specific occasion of this particular guarantee.  What he said was no more than that on each occasion when the purposes of the guarantee had become complete it would be cancelled.  This was the common practice.

12. Mr. Tse can be said to be an unbiased witness.  He stands to lose or gain nothing whichever party wins this action.  He gave his evidence readily and I believed him.  I do not think he was concerned with this guarantee at all.  And that the second Defendant must be mistaken.  I find that I cannot accept his evidence that the guarantee was cancelled.

13. The plaintiff relies of course on the letter of guarantee itself.  It has not been cancelled.  It is still valid.

14. There is also the fact that the other guarantee which were cancelled were stamped “cancelled”.  Again the Defendants were not the only guarantee of the Wah Keung Knitting Factory’s account.  For on the same date, August 9^th 1963, a firm called The Johnson knitting Company also signed a letter of guarantee in exactly similar words, also for $10,000.  That guarantee has not been cancelled either.  It seems to me that this is some proof that the guarantee on which the Plaintiffs base their case was a guarantee of the overdraft facilities given to the firm and not a specific guarantee in respect of a single transaction.  Indeed the wording of the guarantee itself clearly states this.

15. Finally the second Defendant told me that a demand was received from the liquidators of the Bank in 1966.  There was a further demand on the 7^th of July 1969 made by the solicitor for the liquidation.  In their reply to that demand, the Defendant’s solicitor did not state that the guarantee had been cancelled. Indeed this defence did not see the light of day until the defence was filed.

16. The guarantee is for $10,000 with interest at the rate of 40 cents per $1,000 per day.  As at the date of the hearing of the case the principal and interest due came to a total of $29,349.59. There will be judgment for the Plaintiff for that amount with costs.  The judgment debt will bear interest at 8 % per annum from October 13, 1972 until payment is made.

Patrick Woo (John Ip & Co.) for Plaintiff.

Benjamin Liu (C.C. Lee & Co.) for Defendant.