STANDARD CHARTERED BANK (HONG KONG) LIMITED v. LEUNG SHU KAN DCCJ 272/2007

S’s words:-
Many Guarantors still intend to deny they are responsible to pay as per the Guarantee documents they have signed. The defence of non est factum and misrepresentation are two usual alleged grounds. But when one really wants to use the same, please be aware of summary judgment application.

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Date of Handing Down Written Decision: 5th July 2007

This is the Plaintiff bank’s application for summary judgment against the Defendant for the sum of HK$267,127.55 plus interest.

By an unlimited guarantee (“the Guarantee”) dated 21 April 2006 and signed by the Defendant, Ng and Luo, they guaranteed the repayment of any outstanding sums owed by Company to the Plaintiff. As set out in clause 1 of the Guarantee, the Defendant, Ng and Luo agreed to enter into the Guarantee in consideration of the Plaintiff granting or continuing to grant banking facilities to the Company.

The defence of non est factum
A person relying on the defence of non est factum bears a heavy burden. The defence is also not available to a person who is careless in signing a document. Unless there is good evidence to explain why it was reasonable for him to do so, a person is regarded as careless in simply signing any document placed before him and without making any necessary inquiry as to its nature or effect, and even if he did so because of his trust placed on others. See: Saunders v Anglia Building Society [1971] AC 1004, 1036A to H per Lord Pearson, 1016B to F per Lord Reid, and Lord Wilberforce at 1025D to F and 1026C to 1027F; Wan Chow Ki v Wan Chow Kan (unrep., HCA 1490/2002, 16 January 2004, Lam J), paras 10-12.

The defence of misrepresentation
Quite to the contrary, there is in fact nothing commercially unusual that the Defendant, as a director and shareholder of the Company, was willing and prepared to provide a personal guarantee to secure the Plaintiff’s provision of banking facilities. In the circumstances, and without more, there is nothing to remotely suggest that the Plaintiff should somehow be put on inquiry as to the potential risk that the Defendant’s agreement to provide the Guarantee was a result of some equitable wrongs. See: Bank of Communications v Yenwin Investments Ltd (unrep., HCA6014/1999, Cheung J, 3 May 2000), para 8 per P Cheung J (as he then was).

Other allegations
Further, whether or not Ms Chung had shown the Defendant the terms and conditions of the Guarantee is also irrelevant. As a general principle, a bank does not have any general duty to explain the terms of a mortgage or guarantee to the mortgagee or guarantor. See: Kincheng Banking Corp v. Kao Yu Kuei [1986] HKC 212, 215G per Huggins VP. Nor does the bank has a general duty to disclosure so long as it does not misrepresent the position: Bank of Communications v. Wong King Sing & Ors [2002] 1 HKLR 358, paras. 25-28, pp. 364E-365G. Thus, the fact that the bank has failed to explain the terms of a suretyship contract to the surety does not per se provide a defence to set aside the contract.