Banque Nationale De Paris v Chan U Tong

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 25 OF 1967

(On appeal from O.J. Action No. 388 of 1967)

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JUDGMENT OF THE CHIEF JUSTICE

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PRESIDENT: This is an appeal against a decision of the judge whereby he granted to the defendant in the court below, the appellant before us, conditional leave to defend and the condition imposed was that he, the defendant, should pay one half of the sum, namely $25,000, into court. The claim of the plaintiff in the court below is somewhat tersely set out in the Statement of Claim as based on the liability of the defendant as a guarantor under a guarantee in writing dated 29th June, 1965 guaranteeing overdraft facilities granted by the plaintiff to the Texwood Mercantile Company. The Statement goes on to say that the Texwood Mercantile Company, having failed to comply with the terms of the overdraft facilities granted, the plaintiff claimed a sum of $50,000 and costs. Some question might perhaps arise as to whether that is an adequate Statement of Claim but it is, so far as these proceedings are concerned, supplemented by an affidavit of the sub-manager of the plaintiff company in which he sets out the terms of the alleged letter of guarantee, which is annexed to the affidavit, and also a certificate by himself as assistant sub-manager stating that the principal debtor in the present case, the Texwood Mercantile Company, was on the 1st of April 1967 indebted to the bank for $255,285.30. Then it is claimed that this certificate is sufficient to fulfil the requirements of Clause 16 of the document of guarantee which reads as follows:-

"A certificate by an officer of the Bank as to the monies and liabilities for the time being due or incurred to the Bank from or by the Principal and as to the service or receipt of any notices hereunder shall be conclusive evidence in any legal proceedings against any Guarantor or against the executor administrator or legal representative thereof.".

Some question might perhaps arise as to whether parties can prescribe in that way what will and what will not be treated as conclusive evidence before a court of law.

2. However, the defence which it was sought leave to pursue in the court below is disclosed in the affidavit of the defendant dated the 2nd of June 1967 in which he admits that his signature appears on the alleged guarantee and that he wrote it, but he claims that he did so because a certain Mr. SO Kit Man, sole proprietor of the Texwood Mercantile Company, had informed him that Mr. SO intended to apply for a grant of an overdraft from the plaintiff bank and wanted Mr. CHAN U TONG to act as guarantor. According to Mr. CHAN U Tong's affidavit he was doubtful that the bank would accept him as such. Consequently Mr. SO suggested that he should sign an application to act as guarantor first "so that investigation might be carried out by the said bank regarding my financial status. He also stressed that if the bank was satisfied after investigation, I would be notified of the amount to be guaranteed by the bank and a formal Letter of Guarantee would be executed afterwards." He went on to say that a document printed in English was then produced to him by Mr. SO and at Mr. SO's request Mr. CHAN wrote his name on it. But he said, "I had not gone through the contents of the said document as the understanding was that the document was only an application for the aforesaid purpose". He went on, however, to say that he remembered distinctly that the document presented to him for signature was a blank form and apart from the words in print nothing was typed or written thereon. He says that after receiving the letter of demand from the bank he consulted his solicitors and there he obtained a copy of the guarantee and on inspecting the document he discovered that the spaces which were originally left blank, and were blank when he signed it, had been filled in with additional words inserted by typewriter. He concluded by saying that "I say that there was a total mistake of fact as to the nature of the document signed by me. I further say that the said document was in any event null and void by virtue of the addition of the words thereto without my knowledge or consent". And he ended up by stating that he did not admit that the Texwood Mercantile Company was indebted to the plaintiff in the sum of $50,000 or any amount and put the plaintiff to the strict proof thereof.

3. When the matter was argued in the court below the learned judge made a note of what I think we might say are the reasons for his decision which read as follows: "Circumstances so greatly suspicious that I was almost prepared to give judgment forthwith"; but the Order which he made was leave to defend given to defendant on condition of $25,000 being paid into court within ten days. Counsel for the defendant contends that that should be altered to an order for unconditional leave to defend, and in support of his argument he has referred us to the Annual Practice 1967 at page 127 and also to the case of Lloyd's Banking Company v. Ogle⁽¹⁾. He places particular reliance on the statement by Baron Bramwell in respect of a claim then under consideration in that case, which was also a claim on a guarantee. The Baron said:-

"... where a guarantor bona fide says that he does not know that the debt is due, and that he requires it to be proved, I think the statute was not intended to operate to take that right from him.".

Counsel contends that that is precisely the position in the present case because he does not know and has not admitted what amount is due to the plaintiff by the Texwood Mercantile Company. Counsel went on to refer to Carlisle and Cumberland Banking Company v. Bragg⁽²⁾; a case where the defence was that the document, which the defendant in that case had also admittedly signed, was not the document which he thought it to be. The headnote reads:-

"The defendant signed a document, which purported to be a continuing guarantee by him, up to a certain amount, of the payment by R. of any sum which ??ight at any time thereafter be or become due from R. to the plaintiffs, a banking company, on the general balance of his banking account with them. In fact the defendant had been induced by the fraud of R. to sign the document, without reading it, and not knowing that it was a guarantee, but supposing it to be a document of a different character. Subsequently to the signature of the document by the defendant, R. forged the signature of an attesting witness to it, and handed it to the plaintiffs. The jury, in answer to a question put to them by the judge, found that the defendant was negligent in signing the document:-

Held, affirming the decision of Pickford J., that in an action on the supposed guarantee the defendant was not estopped from denying that he had contracted to guarantee the debt of R., inasmuch as he was under no duty to the plaintiffs in the matter, and the proximate cause of the plaintiffs' loss was the fraudulent action of R. and not the defendant's supposed negligence.".

Particular reliance was placed by counsel on a passage in Lord Justice Buckley's judgment appearing at page 495 where he said:-

"I will suppose a case in which he asks a person who brings him a document what its effect is, and he is told untruly that its effect is what it is not, and then signs it. In that state of things in general the document will not be his deed. The true way of ascertaining whether a deed is a man's deed is, I conceive, to see whether he attached his signature with the intention that that which preceded his signature should be taken to be his act and deed. It is not necessarily essential that he should know what the document contains: he may have been content to make it his act and deed, whatever it contained; he may have relied on the person who brought it to him, as in a case where a man's solicitor brings him a document, saying, 'this is a conveyance of your property,' or 'this is your lease,' and he does not inquire what covenants it contains, or what the rent reserved is, or what other material provisions in it are, but signs it as his act and deed, intending to execute that instrument, careless of its contents, in the sense that he is content to be bound by them whatsoever they are.".

Finally, he referred us to an Irish case, the case of The Governors and Company of the Bank of Ireland v. Patrick M'Manamy and others⁽³⁾. The headnote says:-

"The defendants signed a document purporting to be a guarantee, in the honest belief that it was a document of a wholly different nature, the mistake not being due to any negligence on their part.

Held, that they were not bound by the document, although there was no evidence that their signatures had been obtained by fraud."

Counsel says that in the present case there was clearly an issue which should have been tried as to whether the defendant had or had not put his signature on the document intending to execute a letter of guarantee to the bank for $50,000 in respect of...