Case Detail

HCA1110/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1110 OF 2006

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BETWEEN
	BANK OF CHINA (HONG KONG) LIMITED	Plaintiff
and
	LEIGH HARDWICK	Defendant

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Before: Hon Anthony Chan J in Chambers

Date of Hearing: 12 August 2013

Date of Decision: 28 August 2013

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D E C I S I O N

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1. This is an appeal from the decision of Registrar Lung dated 10 June 2013 (“Decision”) dismissing the defendant’s Summons dated 3 April 2013 for leave to amend his Defence. By another Summons dated 8 August 2013 (“Summons”), the defendant seeks, in substance, to replace the draft Amended Defence annexed to the earlier Summons with another version (“Amended Defence”) which contains an additional defence.

2. The arguments in this appeal turn upon whether the new defences deployed in the Amended Defence are bound to fail. There is no dispute that if they are bound to fail, no leave should be granted for the amendment. For the purpose of this appeal, there is also no dispute that this court should take the pleaded defences at the highest.

Factual background

3. The material facts can be stated briefly. The plaintiff is a bank. It extended an instalment loan of HK$4,830,000 to one Wel-express Development Limited (“Company”) in 1997.

4. There is an all monies deed of guarantee dated 6 June 1997 (“Guarantee”) signed by the defendant and one Madam Hung Chun Wai (“Madam Hung”) guaranteeing the liabilities (limited to HK$4,830,000) of the Company to the plaintiff.

5. It is common ground that at all material times the defendant and Madam Hung were the only registered shareholders (50% each) and directors of the Company.

6. The Company defaulted on the repayment of the loan. A judgment was obtained by the plaintiff against the Company in respect thereof. In this action, the plaintiff seeks to enforce the Guarantee against the defendant.

7. In his original Defence, the only defence advanced by the defendant was that he did not sign the Guarantee. However, a forensic report was obtained by him recently in respect of what purported to be his signature on the Guarantee and it was confirmed that the signature is likely to be his own.

Amended Defence

8. In the Amended Defence, it is alleged that the defendant was a mere nominee of Madam Hung, with whom he had an intimate relationship, in respect of his shareholding in and directorship of the Company.

9. It is further alleged that if the defendant had signed the Guarantee (which is not admitted), it was done in the following circumstances. By reason of his relationship with Madam Hung, the defendant reposed absolute trust and confidence in her. From time to time, the defendant was asked by Madam Hung to sign documents (such as board minutes) to satisfy formal requirements.

10. To the best of his recollection, on various occasions in around 1996 or 1997, the defendant was asked to sign a bulk of papers under the representation of Madam Hung that they were for the Company’s formality purposes. The defendant was not told that the Guarantee was amongst the papers or that the documents might give rise to personal liability on his part. However, the defendant did check some of the documents and found that board minutes and annual return were included. He signed the documents believing in and induced by the representation.

11. Although it has not been explicitly pleaded, it is tolerably clear that the defendant is advancing a case of fraudulent misrepresentation having been practised by Madam Hung on him.

12. For completeness, in reliance on an email from Madam Hung dated 11 April 2004 (“Email”), the defendant alleges that the plaintiff was aware of the fact that he did not agree to become a guarantor of the Company.

13. Based on the foregoing, 3 defences have been advanced – misrepresentation, undue influence and non est factum. In respect of the first 2 defences, the plaintiff is alleged to have constructive knowledge or was put on enquiry regarding the wrongs committed against the defendant.

14. As regards the defence of non est factum, it is alleged that the defendant genuinely believed what he was told by Madam Hung and had therefore made a fundamental mistake as to the nature of the transaction despite having exercised reasonable caution in the matter.

15. Further, it is alleged that there was no word or conduct on the part of the defendant to indicate his intention to be bound by the Guarantee and there was therefore no delivery of that document[1]. In the absence of delivery, the Guarantee is not a deed but a simple contract. Any claim based upon a simple contract had a limitation period of 6 years and was time-barred by the time the writ in this action was issued (24 May 2006) given that the demand for payment under the Guarantee was made by the plaintiff against the defendant on 18 November 1999.

Misrepresentation and undue influence

16. Mr Kwong, who appeared for the defendant, has very properly and helpfully conceded that there can be no arguable defence under these heads.

17. In recent years, it is not unusual for Masters hearing interlocutory applications to reduce their reasons for decision into writing (there is of course no requirement for the same). One can only admire the efforts made in doing so in light of the fact that Masters have a very heavy workload. However, with the benefit of a decision in hand, parties (certainly those represented) will be able to fully assess the merits of their case. In this case, the Decision is reasonably detailed. The applicable law and how it was applied were set out therein.

18. I agree with the Decision on the lack of merits in the defences of misrepresentation and undue influence. They have no proper foundation given the fact that the defendant was a shareholder and director of the Company. There is no suggestion that the loan in question was anything other than a normal business transaction in the interest of the Company. There was no reason for the plaintiff to be put on enquiry as to any misrepresentation or undue influence of Madam Hung.

19. As regards the Email, the document simply does not support the allegation made (see para 12 above). The concession made by Mr Kwong was therefore perfectly proper and consistent with his duty to assist the court to adjudicate this appeal fairly and expeditiously: see Order 1A, rules 1 and 3 of the Rules of the High Court.

Non est factum

20. The principles relating to the doctrine of non est factum are well-established and not disputed. It requires proof of 3 elements: (i) permanent or temporary inability to understand the document; (ii) the document must be “fundamentally”, “radically” or “totally” different; and (iii) the person signing must not have been careless: see Cartwright, Misrepresentation, Mistake and Non-disclosure, 3^rd edn, §§13.55-13.58.

21. There is a heavy burden of proof on the person seeking to invoke the doctrine: Saundersv Anglia Building Society[1971] AC 1004 at 1016B.

22. I do not believe that the defendant can satisfy the first requirement. There is no plea that he was under any disability. He plainly was not. Rather, his case is that he was misled on the nature of the document he was signing. On this point (putting aside the issue whether he was careless), it is pertinent to note the dicta of Lord Reid in Saundersv Anglia Building Society at 1016C-D:

“I do not say that the remedy can never be available to a man of full capacity. But that could only be in very exceptional circumstances: certainly not where his reason for not scrutinising the document before signing it was that he was too busy or too lazy. In general I do not think he can be heard to say that he signed in reliance on someone he trusted. But, particularly when he was led to believe that the document which he signed was not one which affected his legal rights, there may be cases where this plea can properly be applied in favour of a man of full capacity.”

23. My attention has also been drawn by Mr Man, who appeared for the plaintiff, to footnote 222 on p 660 of Cartwright where the author referred to the passage cited above and suggested that it would be better to exclude from the application of this doctrine cases involving a man of full capacity, otherwise the certainty of written contracts would be seriously destabilised. With respect, I am inclined to agree.

24. In any case, I am unable to see very exceptional circumstances in this case. Unfortunate it may be, circumstances similar to those before this court are not uncommon – mothers or wives signing documents without reading them but relying upon what their sons or husbands had told them.

25. The defendant also cannot satisfy the second requirement. On his own case, he was signing formal documents for the Company. I agree with Mr Man that such formal documents were, or at least could be, documents with legal consequences. The complaint, therefore, is that the defendant did not know that the particular legal consequence was that he was assuming personal liability of the Company’s debt. That does not make out a case of radical or total difference.

26. Finally, it cannot be said that the defendant was not careless in signing the Guarantee. As Lord Pearson said in Saunders v Anglia Building Societyat 1035G:

“If a person forbears to read the document, he nearly always should be reckoned as negligent or otherwise debarred from succeeding on the plea of non est factum.”

27. The defendant had the opportunity to inspect the documents he was signing. Indeed, he looked at some of them. Had he looked at the Guarantee, even in a cursory manner, he would have noticed that there was a figure of HK$4,830,000 appearing above the signature clause and he would have been alerted as to the nature of that document.

28. For completeness, I should mention the authority of Trustees of Beardsley Theobalds Retirement Benefit Scheme v Yardley, unrep, [2011] EWHC 1380 (QB) on which Mr Kwong heavily relied. In that case, Mr Yardley was the victim of a fraud by which he was induced into signing (without reading) a legal document believing that he was merely witnessing other signatures. The defence of non est factum was upheld “on the exception facts of [that] case” (para 55 of the judgment).

29. However, it should be noted that the main defence in Yardley, which succeed, was undue influence. Having upheld the main defence, the court then dealt with the other defences, including non est factum, briefly. With respect, I agree with Mr Man that Yardley is of limited assistance as an authority on non est factum because there was little analysis or reason on how the 3 elements were satisfied in that case.

Delivery of the Guarantee

30. Again, there is no argument on the law. As stated in Emmet & Farrand on Title, Vol 2,§20-005, regarding the delivery of a deed:

“… it is clear that actual physical delivery, a handing-over, of the document as of a chattel, is sufficient without the necessity for any words, formal or otherwise (Thoroughgood’sCase(1612) 9 Co Rep 1366).”

31. Further, as stated in Barnsley’s Conveyancing Law and Practice, 4^th edn, p 449:

“This concept of legal delivery is totally mystifying to lay people, and its legal significance is not fully appreciated by practitioners. It does not connote a physical handing over to the other side. The maker of a deed may retain it in his own possession and yet deliver it in law, provided he makes clear that he intends it as his deed presently binding on him. Delivery is therefore a question of the grantor’s intention, which need not be communicated to the grantee. A deed of gift of unregistered land may be perfectly valid and effective to vest the legal title in the donee, despite the latter’s ignorance of the transfer. Delivery of a document as a deed requires that the party whose deed it is stated to be should by words or conduct expressly or impliedly acknowledge his intention to be immediately bound by its provisions. The most expressive mode of indicating this intention is to hand the document over, saying: ‘I deliver this as my deed’. But the ceremony whereby an executing party utters such words as he places a finger on the paper wafer (as a token adoption of it as his seal) has largely fallen into disuse. Consequently delivery is now usually inferred from conduct, eg from the mere facts of signing and sealing.”

32. In light of these authorities and given that the defendant had, on his own case, signed the Guarantee and given it back to Madam Hung or her secretary, the act of delivery had been performed. Put another way, he intended to be immediately bound by the document he signed.

33. Valiantly, Mr Kwong argued that by reason of the fact that the defendant was tricked and therefore did not know what he was signing, he could not have formed the intention to be immediately bound by the Guarantee.

34. There are two problems with this argument. Firstly, it is a non est factum argument via the backdoor. Mr Kwong submitted that the additional element of delivery allows such an argument to be made. I cannot agree. I am unable to see why a deed is treated differently when it comes to non est factum. No authority has been referred to by Mr Kwong in support of his argument. On the other hand, as pointed out by Mr Man, Saundersv Anglia Building Society was concerned with a deed.

35. Secondly, I agree with Mr Man that the argument is unsustainable because, under the law of contract, the court does not enquire into the subjective state of mind of the contracting parties but gives effect to the objective meaning of the words or conduct of the same. Indeed, Mr Kwong’s argument is inconsistent with the authorities cited in paras 30 and 31 above.

Prejudice

36. For completeness, I should mention that Mr Man has, quite fairly, accepted that in light of the defendant’s concession on the defences of misrepresentation and undue influence there is no longer any basis for maintaining a case of prejudice which may result from the amendment sought by the defendant.

Conclusions

37. For these reason, I dismiss the appeal as well as the Summons. I make an order nisi that the costs of and occasioned thereby be to the plaintiff to be taxed if not agreed.

38. Last but not least, I am grateful for the assistance rendered by both counsel in these matters.

	(Anthony Chan) Judge of the Court of First Instance
	High Court

Mr Bernard Man, instructed by Tsang, Chan & Wong, for the plaintiff

Mr Alan Kwong, instructed by Angela Wang & Co, for the defendant

[1] The additional defence referred to in para 1 above.

HCA 1110/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1110 OF 2006

_______________________________

BETWEEN

	BANK OF CHINA (HONG KONG) LIMITED	Plaintiff
	and
	LEIGH HARDWICK	Defendant

_______________________________

Before: Mr Registrar K.W. Lung in Chambers (Open to the public)

Date of Hearing: 10 June 2013

Date of Decision: 10 June 2013

_______________________________

DECISION

_______________________________

The application

1. This is the defendant’s application under RHC O.20 r.8 for leave to amend the Defence as per the draft Amended Defence annexed to the Summons dated 3 April 2013.

2. The plaintiff opposes this application. Miss E. Ling, counsel acts for the defendant and Mr. B. Man, counsel acts for the plaintiff.

The factual background

3. I shall adopt the summary of the facts stated in Mr. Man’s written submission for the background:

“ a. P is a bank. It extended an instalment loan of HK$4,830,000 to one Wel-express Development Limited (“the Company”) in 1997.
b. There is an all monies deed of guarantee dated 6 June 1997 (“the Guarantee”) signed by D guaranteeing the liabilities (limited to HK$4,830,000) of the Company to P.
c. It is common ground that all material times, D and one Madam Hung Chun Wai (“Madam Hung”) were the only registered shareholders (50% each) and directors of the Company.
d. The Company has defaulted. P has obtained judgment against the Company.
e. In this action, P seeks to enforce this Guarantee against D.
f. In his original Defence, D’s only defence was that he did not sign the Guarantee: Def 4 [22-24].”

4. I shall also supplement the background with Miss Ling’s submission.

“The Defendant and Madam Hung were the shareholders and directors of Wel-Express Development Limited (the “Company”). It is the Defendant’s case that he only became the shareholder and director of the Company upon the request of Madam Hung, with whom he was in an intimate relationship. The Defendant was merely a nominee of Madam Hung in relation to the Company and had no interest therein.”

5. In his original defence, the defendant pleaded that he had never signed the Deed of Guarantee. However, after the forensic expert had advised him that the signature was likely to be his, he took out the Summons to amend his Defence to provide an explanation as to why his signature would appear on the Deed of Guarantee. He intends to plead, by way of the proposed amendments, that he had been tricked into doing so.

The defences in the Amended Defence

6. By the proposed amendments, the defendant relies on the following defences, which I quote from Miss Ling’s written submissions:

“(1) Misrepresentation – Madam Hung had led the Defendant into believing that the documents he signed were for formality purposes and did not know that they included any personal guarantee. Such conduct, which is intended to conceal facts may amount to a misrepresentation. Chitty on Contracts (31^st ed), Vol 1, §6-019.
Madam Hung’s email at [D1/61][1] states that the Plaintiff knew that the Defendant never intended to be the guarantor for the Company, and yet the Defendant was not given the document to read in its entirety or an opportunity to discuss it with a legal adviser, nor was the document explained to him or his signing of the same witnessed. Since the Plaintiff had knowledge, or ought to have known, of the misrepresentation, the Deed of Guarantee is voidable. Chitty on Contracts (31^st ed), Vol 2, §44-031; Trustees of Beardsley Theobalds Retirement Benefits Scheme v Yardley [2011] EWHC 1380 (QB), §§46-52.
(2) Undue influence – the Defendant had reposed absolute trust and confidence in Madam Hung. Being a mere nominee of Madam Hung in the Company, the guarantee by the Defendant, who had no interest in the Company, was “not otherwise readily explicable”. This gives rise to a presumption of undue influence which the Plaintiff has to adduce evidence to rebut. Further, the misrepresentation and non-disclosure by Madam Hung also constitute actual proof of an abuse of her ability to influence the Defendant.
By reason of the matters and authorities stated in (1) above, the Defendant had knowledge of the undue influence, and, thus, the Deed of Guarantee is voidable.
(3) Non est factum – the Defendant had made a mistake as to the very nature of the transaction. The Defendant genuinely believed, as a result of Madam Hung’s misrepresentation and/or undue influence or otherwise, that the documents he signed were for formality purposes and did not know that they included any personal guarantee.[2]”

Grounds of objection

7. Mr. Man’s grounds of objection to the proposed amendments to the Defence are as follows:

(1) The pleas introduced by the amendment are unarguable. They are hopeless and should not be allowed.
(2) Paragraph 4(6A) is objectionable for the further reason that it will cause prejudice to the plaintiff which is not compensable by costs.[3]

The legal principles

8. Miss Ling relies upon the general legal principles on amendments as set out in Hong Kong Civil Procedure 2013, §20/8/6. It will be convenient to note that amendments of the pleadings are generally permissible except for mala fide application or amendments, which will cause prejudice to the other party or parties that cannot be compensated by costs.

9. Miss Ling also relies upon Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 at §§45, 48, 50, that an amendment will survive objection provided it cannot be demonstrated that it is bound to fail. In effect, an opposition to the application for amendment is a mirror image of an application to strike out a pleading on the basis that it discloses no cause of action pursuant to RHC, O.18 r.19. The Court of Appeal set out the general legal principles at §§25 and 26 as well:

“Principles on amendment
(Per Cheung JA)
25. It is well established that, generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings’ (per Jenkins L.J. in G. L. Baker Ltd v. Medway Building and Supplies Ltd [1958] 1 WLR 1216 at 1231); see also paragraph 20/8/6 of Hong Kong Civil Procedure 2008. Leave is readily granted to amend before the trial unless it can be demonstrated that the new claim based on the proposed amendment is bound to fail (see Hancock Shipping Co. Ltd v. Kawasaki Heavy Industries Ltd [1992] 1 WLR 1025). While the Court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation (see e.g. Kings Quality Homes Ltd v. A. J. Paints Ltd [1997] 3 All ER 267).
26. It must be borne in mind that to preclude the plaintiff in this case to amend her statement of claim, the initial version of which already had been struck out, is a drastic measure. The defendant seeks to drive the plaintiff from the judgment seat even before she has the chance to put forward her case at the trial, and clearly this can only be done in plain cases. Whilst this principle is usually stated in the context of striking out applications, considering the stand taken by the parties in this application, whereby leave to amend is objected to, it is equally appropriate to adopt the same approach in this instance.
(Per Stone J)
45. Resistance to the current application to amend – which represents the subject-matter of the present appeal – constitutes, in effect, the mirror image of a strike out,
48. It is established principle that leave to amend is liberally granted in order to enable determination of the real issues in dispute, and against this tangled factual matrix, I venture to suggest that it is difficult to understand why the plaintiff’s revised pleading against the defendant should not be permitted the opportunity of detailed consideration at trial, after completion of due interlocutory process; in the latter context, and in the circumstances as have arisen, discovery seems to me likely to be of particular relevance.
50. At trial the plaintiff may win, the plaintiff may lose – as to which eventuality naturally I express no view whatever at this stage – but manifestly this is not the point currently at issue, which is whether this plaintiff is to have the opportunity to put the case as now pleaded against this defendant before a judge of the High Court for adjudication.”

10. Mr. Man has no dispute over the above authorities and legal principles.

11. The court has to determine the issues without going into the factual issues, which will be subject to examination in the trial.

Discussion

12. Miss Ling submits that the defendant relies upon the defences of misrepresentation, undue influence and non est factum. See paragraph 6.

13. This case bears significant similarity to the case of Wing Hang Bank Limited v Liu Kam Ying & Others [2002] HKC 57, in which the bank claimed against the 5^th defendant as the guarantor jointly liable together with other two guarantors for their company (D6)’s liability of over $12 million. The 5^th defendant pleaded the same defences of non est factum, undue influence and misrepresentation as this case. Mr. Justice Ma (as he then was) dealt with each of the defences in his judgment, setting out the legal requirements for the defences as follows:

“12. I deal with each of these defences in turn.
Non est factum
13. The 5^th defendant’s case here is that the document he signed (i.e. the Guarantee) was different in nature to what he intended to sign. The particulars of this defence are that the 5^th defendant thought that he was signing purely on behalf of the 6^th defendant and not in his personal capacity.
14. In my view, ……Further, the 5^th defendant is a man of full age and capacity. There is no reason at all why he should not be bound by the terms of the Guarantee which clearly states his liability on a personal basis. If he did not read the terms, this was negligent on his part and the defence of non est factum is unavailable in these circumstances.
15. In my judgment, the defence of non est factum fails.
Undue influence
16. The principles of undue influence have recently been the subject of an extensive review by the House of Lords in Royal Bank of Scotland v. Etridge (No.2) [2001] 3 WLR 1021. I have tried to summarize the relevant principles in my judgment in Bank of China (Hong Kong) Limited v. Wong King Sing [2002] 1 HKC 83.
17. Where third parties such as banks are involved and it is alleged that the relevant contract (in the present case a guarantee) came about as a result of undue influence being exerted on the party sued thereunder, there are three questions that the Court must deal with :
(1) Has it been proved that the transaction was affected by undue influence in the first place?
(2) Was the third party put on inquiry?
(3) If the third party was put on inquiry, did he take reasonable steps to satisfy himself that there was no undue influence?
See : Royal Bank of Scotland v. Etridge at p.1054 at para.101 per Lord Hobhouse of Woodborough.
18. Only if all three questions are answered in favour of the party being sued, would the defence succeed. In the present case, even if I could be satisfied that questions (1) and (3) could be answered in favour of the 5^th defendant (and I should not be taken to accept that this is the case), question (2) just cannot be satisfied on the evidence served by the 5^th defendant.
(19) to (21) [analysis of the facts]
21. In my judgment, the defence of undue influence likewise fails.
Misrepresentation
22. The defendant alleges here that the 4^th defendant misrepresented to him his liability under the Guarantee by saying that he (the 5^th defendant) would never be personally liable under it. Even if true, there is no allegation that the 4^th defendant was acting as the plaintiff’s agent when this alleged misrepresentation was made.
23. The defence, therefore, also fails.”

14. It can be instantly seen the difficulties faced by the defendant in his defences.

15. As far as misrepresentation is concerned, even if the defendant had relied upon the representations of Madam Hung that those documents were signed for formality purposes, there is no allegation that Madam Hung was acting as the plaintiff’s agent when this alleged misrepresentation was made.

16. On the issue of undue influence, the fact that the defendant had reposed trust and confidence on Madam Hung and their intimate relationship do not raise a presumption of undue influence. Yet, the defendant has the difficulty in establishing that the plaintiff was put on inquiry.

17. The defendant pleaded in the Amended Defence at paragraph 4(6A)(e) that the plaintiff ought to know, had constructive knowledge and/or was put on enquiry for the following three reasons:

(i) that the Deed of Guarantee was not executed in the presence of any witness and no solicitor or a law firm’s staff had explained the contents of the Deed of Guarantee and the defendant was never advised to seek independent legal advice before signing the Deed of Guarantee.
(ii) that the plaintiff was informed by Madam Hung that the defendant actually did not agree to become a guarantor of the company; and

(iii) that the defendant was a mere nominee of Madam Hung and he had no interest in the company.

18. I agree with Mr. Man that even if the standard procedure was not followed, that would not change the relationship between the defendant and the Company from the eyes of the bank: Li Sau Ying v Bank of China (Hong Kong) Ltd [2004] 7 HKCFAR 579 §41, the relationship between the surety and the debtor must be looked at “with the eyes of the bank”. Then what about the position between the plaintiff and the defendant? There seems no law or rule that the execution of the Deed of Guarantee has to be before or witnessed by a solicitor or a law firm’s clerk, still less to require the bank to assign a solicitor to give advice to the defendant to obtain independent legal advice. The validity of the Deed of Guarantee will not be affected by absence of such formalities as suggested by the defendant. Miss Ling has no argument on this issue. She submits that she would rather rely upon the fact that the bank was put on inquiry instead. But this is a separate issue from the way the Deed of Guarantee was executed.

19. The defendant has filed an affidavit dated 24 April 2013 in support of his application for the proposed amendments to his Defence. At paragraph 29 of his affidavit he said:

“ …By an e-mail dated 11 April 2004, Madam Hung replied that she never wanted me to be a guarantor for the Company and that no one, including the Bank, informed her that I was the guarantor of the Company and that the bankers of the plaintiff knew that she didn’t want me to be a guarantor…”

It seems that Mr. Man is correct to say that this email said that Madam Hung had told the plaintiff that Madam Hung did not want the defendant to be a guarantor. He further argues that not wanting to be a guarantor is never a defence; only not agreeing to be a guarantor could possibly be. This is far from saying that Madam Hung had, on behalf of the defendant, told the plaintiff that the defendant was unwilling to sign any Deed of Guarantee for the company. I have put this to Miss Ling for her views. She admits that the proposed amendments to the Defence are based upon the email at page 61 of the hearing bundle. She fairly agrees that Madam Hung had not stated in her letter on what basis she was of the view that the bank knew that she did not want the defendant to be a guarantor, which is different from the fact that the defendant did not want to be a guarantor himself. Miss Ling also admits that Madam Hung would not be available to give evidence at trial. However, she submits, that if the defendant were allowed to amend the Defence, the defendant may be able to make discovery from the plaintiff’s documents to support his case. However, this is not permissible as held in The New China Hong Kong Group Limited (in Creditors’ Voluntary Liquidation)& Another v Ng Kwai Kai, Kenneth & Others, Kenneth & Others by Fok JA sitting as an additional judge of CFI in HCA519/2010, 11 February 2011 at paragraph 70“…….It is an abuse of the court’s process to start a case without a solid foundation hoping that something will turn up in the course of the proceeding, for example at the stage of discovery or on cross-examination, or to stop time from running: Nomura International plc v Granada Group Ltd [2008] Bus LR 1 at §37, Re a company, ex parte Burr [1992] BCLC 724 at p. 736d-f, and Re Saul D. Harrison & Sons plc [1995] 1 BCLC 14 at pp. 21d-22e.” The same rationale should apply to defending a case.

20. It is simply unbelievable that knowing that the defendant had refused to sign the Deed of Guarantee, the bank nevertheless accepted the Deed of Guarantee executed by the defendant and in reliance upon which, the bank agreed to lend money to the company. This simply defies common sense.

21. The third reason of being a nominee of Madam Hung is only relevant to the defence of undue influence.[4] However, the defendant will have the same predicament as in Wing Hang Bank case, viz. there is no pleading that the plaintiff was put on inquiry. The defendant has not pleaded that his relationship with Madam Hung, that he was only a nominee of Madam Hung and that he had no interest in the company were all told to the plaintiff. In fact, the defendant pleaded at §4(6A)(e)(iii) of the draft Amended Defence that he never dealt with the plaintiff at all. There is no factual basis upon which the defendant can rely to say that the plaintiff should be put on inquiry.

22. For the reasons above, the defendant fails his proposed defences of misrepresentation and undue influence.

23. On the third defence of non est factum, Miss Ling submits that the Defendant had made a mistake as to the very nature of the transaction. The Defendant genuinely believed, as a result of Madam Hung’s misrepresentation and/or undue influence or otherwise, that the documents he signed were for formality purposes. It seems that the law of contract does not recognize the defendant’s conduct as a mistake. See §§ 19 and 20 of the judgment of the Court of Final Appeal in Kowloon Development Finance Limited v. Pendex Industries Limited & Others FACV 21/2012, delivered by Lord Hoffmann NPJ on 10 May 2013. In any event, the issue of mistake is not pleaded in the proposed Amended Defence. The defendant’s conduct is only an act of negligence on his part and according to Wing Hang Bank’s case, the plea of non est factum is not available to him. This defence also fails.

24. Mr. Man has also made submissions on the issue of prejudice, relying on paragraph 63 of the judgment of Johnson Controls Hong Kong Ltd. v Associated Engineers Limited HCCT 47/2011 by Hon Au J. on 28 February 2012. I agree with him that the issue of putting the bank on inquiry relates to factual issue dated back some 13 years ago. However, for the reasons above, it will not be necessary for me to make reference to this issue. If the defendant is able to give particulars to support the fact that the defendant had informed or told the bank through Madam Hung that he was unwilling to be a guarantor for the company, I may have to give further consideration to this issue. Miss Ling has admitted that the defendant will not be able to have Madam Hung to give those particulars, I shall not go further into this issue.

25. I shall, accordingly, dismiss the defendant’s summons for the proposed amendments to the Defence.

26. On the question of costs, which should follow the event and is to be assessed summarily under O62 rule 9 RHC(with counsel’s certificate) at $80,000 to be paid the defendant to the plaintiff within 14 days from the date hereof.

27. I shall now make an order in terms as follows:

a. The defendant’s summons be dismissed with costs;
b. The costs of this application, including the costs reserved and today’s hearing as per paragraph 26.
(K.W. Lung)
Registrar, High Court

Mr. Bernard Man, instructed by Tsang, Chan & Wong, for the plaintiff

Ms. Ebony Ling, instructed by Angela Wang & Co, for the defendant

[1] Defendant’s bundle at page 61

[2] §14 of Miss Ling’s written submissions

[3] § 2 of Mr. Man’s written submissions

[4] §14(2) of Miss Ling’s written submissions

BANK OF CHINA (HONG KONG) LTD v. LEIGH HARDWICK

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