The China And South Sea Bank Ltd v Tan Soon Gin George

IN THE COURT OF APPEAL

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J U D G M E N T

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Cons, V.-P. delivered the judgment of the Court:

1. This is an appeal by Mr. George Tan against a judgment in the sum of HK$33,496,438.34, and various awards of interests and cost, in favour of the Plaintiff Bank which was entered against him in Order 14 proceedings on the 30th April 1984. At the same time the Master in question rejected Mr. Tan's application to strike out the Statement of Claim and for the action to be dismissed. His Appeal a judge in chambers in both respects was dismissed by Rhind J. the following month. The further appeal to this Court was originally set down to be heard on the 30th October of the same year, but shortly before the date of the hearing the parties agreed that the date should be vacated with liberty to restore the appeal to the list in due course. That order was duly made.

2. The Bank's claim is based on what was said in the Statement of Claim endorsed upon the Writ to be "a guarantee dated the 18th May 1982 and signed and given" by Mr. Tan. The document is directed to he Basil, with the opening paragraph in these words -

"In consideration of your having agreed to advance at my request to CARRIAN HOLDINGS LIMITED whose registered office is situate at Carrian Centre, 151 Gloucester Road, Hong Kong (hereinafter called 'the Principal') the sum of HK$30,000,000.00 Hong Kong Currency I, GEORGE TAN of Flat B and D on the 18th floor of Seaview Garden, Cloudview Road, Hong Kong, Gentleman HEREBY UNDERTAKE AND GUARANTEE that I shall on the 18th day of August 1982 pay to you the said sum of $30,000,000.00 (hereinafter called 'the Principal Sum') and shall pay interest for the same in the meantime at the rate of 1.5% over the Hong Kong and Shanghai Banking Corporation's Prime Lending rate from the 19th day of May 1982 payable monthly in equal calendar monthly payment on the 18th day of each calendar monthly without deduction. If the Principal Sum or any part thereof shall not be paid on the date of repayment I will pay to you interest on so much of the said Principal Sum as shall for the time being unpaid at the rate as aforesaid by equal calendar monthly payment on the 18th day of each calendar month without deduction."

3. The loan was effectively rolled over on the 18th August for a further three months by an indenture made between the Bank, Mr. Tan, Carrian Holdings Ltd. (CHL) and another company called "Filomena Ltd". Repayment thus became due on the 10th November 1982.

4. The Bank's Statement of Claim further alleged that CHL had failed and/or refused to repay the $30 million and interest on the due date and despite repeated demands and requests the money remained, with further interest, unpaid at the date of the Writ; a letter demanding payment of the sums guaranteed by him had been sent to Mr. Tan on the 31st October 1983, but he had not complied.

5. Mr. Tan's Defence admitted his signing, on the date alleged, a guarantee which had been subsequently varied. It did not admit that the guarantee imposed upon him liability as claimed, nor did it admit the further allegations we have just set out.

6. The appeal has been argued before us under four heads. None, other than the initial construction point, was taken before the judge below, although it is fair to say that not one of the counsel who have appeared before us were involved in any of the earlier proceedings.

7. Before consideration of the arguments we should mention that the guarantee signed by Mr. Tan did not stand in isolation. The minutes of a board meeting of CHL held on the same day show that the Company then resolved to apply for the loan from the Bank through Filomena, that Filomena had agreed to execute a mortgage of shares, together with a Power of Attorney and a guarantee in favour of the Bank, and that Filomena had already deposited certain shares certificates with the Bank as security. For these assurances CHL was to pay Filomena $60,000 per annum. A copy of the document executed by Filomena is exhibited to the affidavit of Mr. Tan who states therein his belief that having regard to the price at which the Carrian Investments Limited shares were then traded on the stock exchange, the shares which had been deposited by Filomena were worth not less than 200% of the loan of KK$30 million. CHL also executed a document, an "Undertaking For Repayment of Loan", a short document in terms similar to the opening paragraph of Mr. Tan's guarantee which we have already set out.

The Construction Point

8. For guidance as to general principles we were referred to paragraphs 143 and 151 of the Fourth Edition of Halsbury's Laws of England Volume 20 -

"143. PRINCIPLES OF CONSTRUCTION. The principles of construction governing contracts in general apply equally to contracts of guarantee. Dealing with a guarantee as a mercantile contract, the court does not apply to it merely technical rules but construes it so as to reflect what may fairly be inferred to have been the parties' real intention and understanding as expressed by them in writing, and so as to give effect to it rather than not.

The name given to a contract, for example 'insurance' or 'guarantee', is not conclusive as to its true nature.

151. SURETY'S CONTRACT STRICTLY CONSTRUED it has been said that a surety is a favoured debtor. He is entitled to insist upon a a rigid adherence to the terms of his (the surety's) obligation by the creditor, and cannot be made liable for more than he has undertaken; for, although his contract is not, unlike that of an insurer, uberrimae, fidei, it must be construed strictly."

9. Then turning to Mr. Tan's guarantee, our attention was directed to the last sentence of the opening paragraph. This, so the argument ran, is the only part of the guarantee which deals with the question of non payment of the Principal Sum and does not imply thereby that non payment would amount to default on the part of Mr. Tan himself but provides merely for what is to happen in that eventuality; add to that what had been done by others, in particular Filomena, and one finds an intention that the Bank should look...