Tsui Yun Bun Barry v. Law Wan Tung (Formerly Known As Law Siu Yi Biby)

HCA 2596/2017

[2019] HKCFI 2955

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2596 OF 2017

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Before: Mr Recorder Stewart Wong SC in Chambers

Date of Hearing:  28 November 2019

Date of Decision:  5 December 2019

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D E C I S I O N

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A. INTRODUCTION

1.By an Amended Summons filed on 27 March 2019 (“the Amended Summons”), Ms Erwiana Sulistyaningsih (“ES”) applied to be added as a party to this action for the purpose of declaring her interest in relation to the charging order absolute dated 4 April 2018 (“the Charging Order Absolute”) granted in relation to a property being Flat J, 38/F, Block 5, Beverly Garden, 1 Tong Ming Street, Tseung Kwan O (“the Property”), and to set aside or to discharge the Charging Order Absolute, and to vacate the registration thereof as well as the charging order nisi dated 1 February 2018 (“the Charging Order Nisi”) at the Land Registry, on the basis that the creditor of the defendant (“Law”) would likely to be unduly prejudiced by the making of those Orders.

2.On 30 July 2019, ES’s application for joinder was dismissed by a Master with costs to Law.  The application to set aside therefore, by implication at least, also failed.  This is the appeal from the Master’s order.

3.The relevant facts, not in dispute, are as follows.

4.ES, an Indonesian national, was employed by Law as a domestic helper from 30 May 2013 to 9 January 2014. 

5.On 16 March 2015, ES issued a writ in the District Court[1], together with a statement of claim and a statement of damages, against Law, claiming damages for assault and battery, false imprisonment, negligence,breach of duty of care, breach of contract and breach of the Employment Ordinance[2].

6.On 28 April 2015, an interlocutory judgment, with damages to be assessed, was entered in favour of ES against Law as the latter did not file an acknowledgment of service.  The assessment of damages took place on 4 December 2017 before HH Judge Winnie Tsui.  Judgment was handed down on 21 December 2017 with damages assessed at HK$809,430.03 plus interest and costs (“DC Judgment”).  The judgment debt remains outstanding.

7.By an assignment dated 17 July 2015, Law purported to assign her half-share in the Property to the plaintiff (“Tsui”) (who was and is her husband and the owner of the other half-share) pursuant to a Deed of Separation dated 6 February 2015 (“the Transfer”).  By an action in the Court of First Instance[3], ES as the plaintiff sought an order against Tsui as the 1^st defendant and Law as the 2^nd defendant setting aside the Transfer pursuant to section 60 of the Conveyancing and Property Ordinance[4].  After a trial lasting two days[5], by a judgment handed down on 28 December 2017 [6] (“HC Judgment”), I found for ES and set aside the Transfer.  I also made an order that Law was to pay the costs of the action to ES, which I, by a decision dated 2 March 2018 [7](“Decision on Costs”) varied to an order that Tsui and Law were liable jointly and severally for the costs of the action.

8.In the meantime, on 13 November 2017, Tsui commenced the present action in the Court of First Instance against Law, seeking the repayment of HK$3,055,712, plus interest and costs, allegedly to be monies owing by Law to him.  The writ did not name the parties in full but used the abbreviated names of “Y B Tsui” and “W T Law” respectively, and was later amended to name them in full.  Law filed an acknowledgement of service dated 14 November 2017 indicating that she did not intend to defend.  On 20 December 2017, Tsui obtained a default judgment against Law.  On 30 December 2017, Tsui applied ex parte for a charging order against Law’s share of the Property.

9.In his affirmation in support of the application for the charging order, Tsui disclosed the debts owed by Law that he knew of.  Those include the DC Judgment with costs (said to be about “HK$810,000”), untaxed legal costs in the action before me, unpaid credit card bills totalling not less than HK$400,000, a claim by another person in a pending District Court trial which would take place in February 2018 where the claim was less than HK$200,000, various utility bills of about HK$25,000, and unpaid fees to a senior counsel in the sum of HK$130,000 “which was protested by” Law.  Leaving aside the pending District Court case, the untaxed legal costs, and the unpaid fees to the senior counsel in dispute, the total indebtedness of Law as at 30 December 2017 was about HK$4,290,000 (including the judgment debt owed to Tsui).

10.I found at §48 of the HC Judgment about Law:

“ On her own evidence, she had and has no other assets and owed(and still owe) a lot of money on credit card spending which she was and is unable to repay, and was and is clearly insolvent but for her interest in the Property, and I so find.”

This is of course a finding binding on Tsui, Law and ES, as they were all parties before me.  The default judgment had not been entered by the end of the trial and so what I said did not take into account that judgment debt, or the underlying debt said to be owed by Law to Tsui.

11.It is therefore clear that as at 30 December 2017, two days after I handed down the HC Judgment which in effect “reverted” the ownership of a half-share of the Property to Law, her only asset was that half-share, but with a liability of at least about HK$4,290,000.  Mr Ching, appearing for Law, accepts before me that that is the case, while Tsui, appearing in person, agrees that as at the time of his application for a charging order Law did not have sufficient means of her own to pay all her debts.

12.On 1 February 2018, the Charging Order Nisi was made.  The Master did not direct Tsui to serve any papers on ES or any other persons.  On 4 April 2018, the Charging Order Absolute was made. 

13.Solicitors for ES only discovered the Charging Order Nisi and the Charging Order Absolute when they did an updated land search on the Property in May 2018.

B. RECUSAL APPLICATION

14.Just before the hearing of the appeal on 28 November 2019, Law makes an application that I should recuse myself from hearing this matter on the ground of apparent bias, on the sole basis that I, at about noon on 26 November 2019, after I had received the skeleton submissions of Mr Ko for ES, but before I received Mr Ching’s on behalf of Law, I directed that a copy of each of the HC Judgment and the Decision on Costs be included in the hearing bundles.  I heard the recusal application on 28 November 2019 and dismissed it and said that I would hand down my reasons together with my decision on the appeal by ES.  These are my reasons for dismissing the recusal application.

15.ES is relying on the HC Judgment, in particular my finding of fraudulent conveyance against Tsui and Law, to question whether the debt on which Tsui was suing Law was a genuine debt.  As far as I understand Mr Ching’s submissions, since I directed the inclusion of the HC Judgment and the Decision on Costs in the hearing bundles, before I saw Law’s skeleton, he argues that the fair-minded observer would reasonably apprehend that I might already have accepted (or “sided with”, as Mr Ching puts it) ES’s case and would not deal with the matter impartially.  Mr Ching says it is all a matter of timing: if I had directed the inclusion of those documents after he had filed his skeleton, he would have no complaint.  He does not allege actual bias.

16.The law regarding apparent bias is not in dispute.  Mr Ching refers to Falcon Private Bank Ltd v Borry Bernard Edouard Charles Ltd [8] where Ribeiro PJ, giving the determination of the Appeal Committee of the Court of Final Appeal, said:

“Kwan JA, with whom the other members of the Court agreed, noted that this was an apparent bias case with no one suggesting actual bias. Her Ladyship referred to the test mentioned above and found the judgment of Doyle CJ in the Supreme Court of South Australia in IOOF Australia Trustees Ltd v SEAS Sapfor Forests Pty Ltd, especially helpful in a case involving friction between Bench and Bar:

... disqualifying bias is not established merely by pointing to circumstances indicating tension, or even some hostility, between the judge and counsel.  The relevant principles are directed towards ensuring the appearance and the reality of a fair hearing.  That is, one in which the case on each side is fairly considered.  Just as that does not require that a judge approach the merits of the case with no preconceived views about issues that might arise in the case, so long as the judge is willing to listen fairly to argument on either side, so the principle does not require that the judge not have, or at least not disclose, any adverse views about a particular counsel appearing in the case.  What is important is that the judge be willing to consider the case presented by that counsel fairly.  It is when the hostility between the judge and the counsel is such that the fair-minded observer might reasonably apprehend that the judge will not fairly consider the case being presented for the client that disqualifying bias is present.”

17.Even though that case concerned friction between judge and counsel, the general principle is the same for other cases of alleged apparent bias.  The question is whether the fair-minded observer might reasonably apprehend that the judge will not fairly consider the case before him.  In Falcon[9], Ribeiro PJ referred to his own judgment in Deacons v White & Case Ltd Liability Partnership[10], another determination of the Appeal Committee that:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased.” [11]

18.The circumstances must be such that it:

“would inevitably lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal had lost its detachment and would approach the case with its mind closed to persuasion”.[12]

19.It is therefore necessary to set out the relevant facts leading to my direction that the HC Judgment and the Decision on Costs should be included in the hearing bundles, at a time when I had the hearing bundles and ES’s skeleton but not Law’s.  The fair-minded observer is taken to be informed of the correct facts.[13]

20.In the affirmation of Mr Siu Kit Chung[14]dated 31 January 2019 made in support of ES’s application, under the heading of “Background”, he refers to the HC Judgment, in particular my finding at §60 that the Transfer was a fraudulent conveyance, and uses that in support of ES’s case that the present proceedings and the charging order are used to again defraud and to obstruct her from enforcing the DC Judgment against the Property.  Mr Siu (at §18) says that Tsui and Law had “acted dishonestly for a second time”, no doubt the first time being, according to him, the fraudulent conveyance.  Mr Siu produces a copy of the sealed judgment of mine, but not the reasoned judgment itself, and it is nowhere to be found in the hearing bundles.

21.In his affirmation dated 3 June 2019 in answer, Tsui refers to the HC Judgment and says that as far as he is concerned, that case has finished and should not be mentioned again.

22.In his affirmation dated 5 June 2019 filed on behalf of Law, Mr Ching refers to the allegation of dishonesty made by Mr Siu at §18 of his affirmation and denies it on behalf of Law.

23.In the skeleton submissions of Mr Ko filed on behalf of ES on 25 November 2019, he refers to the HC Judgment as part of the background.  He then, in support of ES’s application to add as a party, submits that this is not the first time that Law tried to avoid payment of the DC Judgment, referring to the earlier occasion where she assigned her half-share to Tsui which was then set aside by me under the HC Judgment.  He also submits, by reference to various findings in the HC Judgment, that Law was probably insolvent, that Tsui and Law had “once concerted to defraud [ES]” and the charging order was a second attempt to achieve the same purpose.

24.It is therefore clear from the above that ES is relying quite heavily on the HC Judgment in support of her case that Law was probably insolvent, as well as her case that the debt allegedly owed by Law to Tsui, the institution of the present action by Tsui to recover the debt, the entry of the default of judgment upon the lack of any intention to defend by Law, and the application for a charging order, are all part of a dishonest scheme by Tsui and Law to keep the latter’s share of the Property from the hands of ES in satisfaction of the DC Judgment, they having a previous similar attempt by way of the Transfer which I found in the HC Judgment to be a fraudulent conveyance.  Of course Tsui and Law deny that there was any dishonest scheme. Whether the aforesaid arguments of ES are good or bad, I have to consider them carefully and impartially upon hearing the submissions of all parties, including any submissions any of them may wish to make by reference to the HC Judgment, including its relevance and probative value to the issues before me.  Whether such arguments have any merits at all, and no matter what submissions are to be made by or on behalf of Tsui and Law, there can be no doubt that the fair-minded observer, knowing the contents of the affirmations and Mr Ko’s submissions and thus the reliance placed on the HC Judgment, would inevitably consider the HC Judgment to be a document which may have to be referred to at the hearing, no matter what Law is going to say in her skeleton.  Even if the HC Judgment is in fact irrelevant to anything, I have to consider it at the hearing so as to rule that it is so, and to dismiss ES’s reliance thereon.  I simply have to deal with whatever arguments all parties are going to make on the HC Judgment, and the direction by me on 26 November 2019 is simply to ensure that there will be ready access to such a document at the hearing should there be a necessity to refer to it. 

25.In his reply submissions, Mr Ching suggests that Mr Ko does not seem to need or want the HC Judgment to be included as he has not done so.  But it is in my judgment a question of having it readily accessible at the hearing to assist me in case reference, or further reference, is needed to make to it in the light of the heavy reliance on it by ES, which is in my judgment the fairest way to all parties. 

26.I fail to see how the direction that a document relied on by one party, which is not in the hearing bundles, is to be included, even before seeing the submissions of other parties, will suggest to the fair-minded observer that there is a real possibility or real danger that I am or may be biased in favour of the party relying on it.  Even if I were to reject that party’s argument I still need to consider the document first.

27.The Decision on Costs is nothing but an amendment to the costs order I make in the HC Judgment, and is directed to be included for the sake of completeness.  It is difficult to see how the fair-minded observer will discern any apparent bias from its inclusion in addition to the HC Judgment.

28.The application for recusal is dismissed for these reasons.

C. THE APPEAL BY ES

C1.   ES’s standing

29.The power of the Court to make a charging order is provided for, and regulated, by sections 20, 20A and 20B of the High Court Ordinance[15], and Order 50 of the Rules of the High Court.[16]

30.Section 20B(4) of the High Court Ordinance provides:

“The Court of First Instance may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order.”

31.Order 50, rule 7(1), provides:

“Subject to paragraph (2) on the application of the judgment debtor or any other person interested in the subject-matter of the charge, the Court may, at any time, whether before or after the order is made absolute, discharge or vary the order on such terms (if any) as to costs or otherwise as it thinks just.”

32.The first issue is whether ES has the standing to apply for a discharge of the Charging Order Absolute, ie whether she is “interested” in Law’s share of the Property.  ES of course has no legal, beneficial or security interests in the Property or Law’s share as such.  She is only an unsecured judgment creditor of Law, the half-owner of the Property.  However, the requirement is being “interested” in the property concerned, not having an “interest” in the property.  As pointed out by Fox LJ (with whom Mustill LJ (as he then was) agreed) in Harman v Glencross[17]:

“ ... the issue in the present case is whether the wife is ‘interested’ in property without having a proprietary interest in it in the strict sense. ‘Interested’ is not a technical term of property law and is wider in ambit than an ‘interest’ which is.”

33.In my judgment, a creditor, for the purposes of the making and discharging of a charging order in favour of a, or another, judgment creditor against the property of a judgment debtor which may otherwise be available for the satisfaction of the debt owed, is sufficiently “interested” in the property. 

34.I note the following provisions:

(1)  Section 20(3) of the High Court Ordinance provides:

“In deciding whether to make a charging order the Court of First Instance shall consider all the circumstances of the case and, in particular, any evidence before it as to—

(a) the personal circumstances of the debtor; and

(b)   whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”

(2)  Order 50, rule 1(3), provides:

“The application [for a charging order] shall be supported by an affidavit—

...

(b) stating the name of the judgment debtor and of any creditor of his whom the applicant can identify”.[18]

(3)  Order 50, rule 2(2), provides:

“Without prejudice to the provisions of paragraph (1) the Court may, on making the order to show cause, direct the service of copies of the order, and of the affidavit in support, on any other creditor of the judgment debtor or on any other interested person as may be appropriate in the circumstances.”

35.It is therefore clear to me that the intention of the charging order regime under the High Court Ordinance and Order 50 is that the interests of all creditors of the judgment debtor, including unsecured creditors, and not just those of the judgment creditor applying for a charging order, have to be taken into account, and Order 50, rule 2(2) expressly states that the Court may direct any creditor of the judgment debtor be served and thus given an opportunity to seek to argue why a charging order nisi, usually made ex parte[19], should be made absolute.[20]  It cannot have been the intention that the class of persons who are allowed to apply to discharge a charging order absolute after it has been made is to be restrictively construed so as to exclude a creditor whose position clearly has to be taken into account by the Court when considering whether to make a charging order, or before the charging order is made absolute, especially when that creditor is not served with the charging order nisi and thus made aware thereof.  Of course, in a case where the creditor knows of the charging order nisi but does not object to it being made absolute or if his objection is dismissed, it is difficult to see how he can then apply to discharge the charging order absolute after it is made (unless there is a material change of circumstances).

36.My view is supported by the judgment of Fox LJ (Mustill LJ agreeing) in Harman v Glencross.  In that case, the property in issue was jointly owned by the husband and the wife who were in the process of divorcing and the wife had made an application for ancillary relief asking for the husband’s share in the property to be transferred to her.  She was held to have the standing to apply to discharge the charging order granted against the husband’s share as being interested in the property.  Apart from the fact that she was a co-owner with a right to occupation which would be affected by the enforcement of the charging order, it was held by Fox LJ that she had the standing on the additional ground that she had made the application for ancillary relief claiming a transfer of the husband’s share in the property.  In such circumstances she was a person interested in the husband’s share.  Fox LJ did not question the proposition that unless and until such an order for transfer was made in her favour, the wife had no interest in or a proprietary right to the husband’s share.  This shows that, as the quote from that judgment I set out at §32 above makes clear, and which I respectfully agree, it is not necessary for the applicant for discharge to have an interest in the property in the strict property law sense.

37.In Banque Nationale de Paris plc v Montman Ltd [21], Hazel Williamson QC (sitting then as a Deputy High Court Judge in the Chancery Division), after considering Harman v Glencross, said[22]what the statute is looking for in terms of standing is:

“a person who can indeed be said to have some form of interest in the property which ... is either a proprietary interest or an interest akin thereto, in the sense that they are a person who at least has some interest such that their legal rights or liabilities are directly affected by the charging order.”

38.I agree with this proposition and ES is clearly in my judgment such a person as her legal right to have the DC Judgment satisfied from the assets of Law, including Law’s share in the Property, is directly affected by the Charging Order Absolute which confers a priority on Tsui.

39.The situation in Montman was different because in that case the debtor was a company in liquidation and all the creditor had was a right to have the liquidation duly administered.  If and in so far as Montman held that a mere unsecured creditor is necessarily not sufficiently interested in the property of a judgment debtor charged or to be charged under a charging order, for reasons above, I respectfully disagree.

40.Mr Ko also argues that the reference to a person “interested in the subject-matter of the charge” in Order 50, rule 7(1), is wider than section 20B(4) of the High Court Ordinance, which refers to a person “interested in any property to which the [charging] order relates”, and includes the underlying judgment debt.  I disagree. Plainly, the subject- matter of the charge means whatever is being charged, and not the matter being secured by the charge.  In any event, even if the subject-matter includes the relevant judgment debt secured by the charge, that means the judgment debt owed by Law to Tsui, and not the judgment debt owed by Law to ES under the DC Judgment.  ES cannot be said to be “interested” in the judgment debt owed by Law to Tsui.

41.Having decided that ES is interested in Law’s share of the Property, so that she has the standing to make an application to discharge the Charging Order Absolute under section 20B(4) of the High Court Ordinance and Order 50, rule 7(1), as submitted on behalf of Law, it is not necessary in my judgment to add her as a party to these proceedings formally.

C2.   Merits

42.Regarding the merits of the application to discharge, the first point taken by ES is that there had been material non-disclosure by Tsui when he applied for a charging order ex parte.

43.There has been some speculation on behalf of ES whether Tsui disclosed the DC Judgment when he applied ex parte, as she and her advisers did not have access to the files in this action.  However, as I stated above, Tsui did so disclose.

44.Mr Ko now relies on three matters which he said should have been disclosed by Tsui in the discharge of his duty of full and frank disclosure but which he did not:

(1)  The “apparent insolvency” of Law;

(2)  The “previous attempt by [Tsui] and [Law] to defraud [ES] as found in the [HC Judgment]”; and

(3)  Law had obtained a bank loan of HK$3,000,000 from a money lender called GS Credit in March 2018, after the Charging Order Nisi had been made but before it was made absolute.

45.The law on the duty to make full and frank disclosure in an ex parte application is well established.[23]  The following principles are relevant:

(1)  Material facts are those which are material for the Court, when determining the ex parte application, to know and which are necessary to enable the Court to exercise its discretion properly.  Those are facts which should have been put in the scales by the ex parte Court, and not only facts which are determinative one way or another.

(2)  Materiality is to be decided by the Court and not by the applicant or his legal advisers.

(3)  The applicant has a duty to make proper enquiries before making the application and the duty of disclosure covers not only facts known to the applicant but facts which he would have known had he made such proper inquiries.

(4)  The matter to be disclosed should normally not be made only in exhibits but must be referred to in the affidavits.

(5)  The fact that the non-disclosure is not deliberate but is innocent does not excuse the non-disclosure, but is a factor to take into account when the Court considers what order to be made as a result of the non-disclosure.

46.In an application for a charging order, a matter which the Court is mandated to consider is whether other creditors will be unduly prejudiced if priority is accorded to the applicant by granting a charging order in the property concerned: see section 20(3)(b) of the High Court Ordinance.  Thus, as stated by Buckley LJ (with whom Ormrod LJ agreed) in Rainbow v Moorgate Properties Ltd [24]:

“ ... I think it is wrong, when the court is aware of the fact that the debtor is, or is likely to turn out to be, insolvent, that one creditor should be given an advantage over other creditors by an exercise of the discretion of the court”.

47.According to the HC Judgment, handed down on 28 December 2017, Law was, and not just probably, insolvent (apart from her half-share of the Property), and that did not take into account the very substantial judgment debt owed to Tsui himself for more than HK$3,000,000.  Tsui disclosed debts of Law totalling at least HK$4,290,000 as at 30 December 2017.  She thus remained insolvent as at 30 December 2017 unless her half-share, being her only asset, was at the time worth at least that amount.  I accept that there is, as Mr Ching is at pains to repeat, no evidence on the value of the share, although it was likely to be more than HK$3,000,000 [25].  But that would only mean that it was not known to Tsui or anyone else for certain whether Law, having debts of at least HK$4,290,000 but with only one asset of unknown value, was or was not insolvent, but in the light of my finding in the HC Judgment, and the additional judgment debt owed to Tsui not taken into account in the HC Judgment, in my judgment that Law was in fact insolvent as at 30 December 2017 cannot be said to be other than at least probable (and not just a possibility).

48.In my judgment clearly this probable insolvency ought to have been disclosed, but it was not.  As stated, the question of insolvency or probable insolvency of the judgment debtor is one of the most material factors in the Court’s consideration of the application for a charging order.  A judgment handed down two days earlier had raised a clear doubt on Law’s solvency. It is not for Tsui to say that as there was no evidence of the value of the half-share added back he did not know whether the half-share could cover Law’s debts.  If he really did not know the true position, but having regard to my finding in the HC Judgment and the total amount of debts owed by Law which he knew, he ought to have made proper enquiries of the value of the Property.  At the very least, he ought to have informed the Court in his affirmation that there was this question over the solvency of Law notwithstanding the reversion of the half-share to her by the HC Judgment.  In such a case the Court was likely to direct him to file more evidence on the value of the Property.

49.It is true that a copy of the reasoned HC Judgment was exhibited to a subsequent affirmation of Tsui before the Charging Order Nisi was made but mere disclosure by exhibit is not sufficient. 

50.As I said, Mr Ching points to the lack of evidence on the value of the Property and argues that there is no basis to say that Law was probably insolvent.  But that is to address the argument that the burden of proving probable insolvency is on ES when she is seeking to discharge the Charging Order Absolute.  However, the issue I am now considering is different, namely whether, in the light of the HC Judgment which held that Law was insolvent (without the half-share), with no evidence on the value of the half-share added back, and with the total amount of known debts owed by Law, Tsui ought to alert the Court to Law’s probable insolvency. If he did not know the true position, as I said above he should then made proper inquiries or to tell the Court the uncertainty.

51.The above analysis is on the basis that the solvency or otherwise of Law in the period between 30 December 2017 and 1 February 2018 was not certain but was clearly a probability.  In fact, as I said above, before me, Tsui admits that Law was at the time unable to repay all her debts from her own resources including the half-share of the Property.  That is, as far as he knew, she was actually insolvent, not probably so.  This is certainly not disclosed by Tsui when he definitely ought to have. 

52.Mr Ching urges me not to rely on Tsui’s “admission” on Law’s insolvency as he may be confused.  I do not think that he is but even if he is, so that I discount the admission, as I discussed above, there is still material non-disclosure.  I need not deal with the other two alleged non- disclosures relied on by Mr Ko, in particular the third one where the matter occurred after the grant of the Charging Order Nisi, ie post–ex parte. 

53.Tsui says that the non-disclosure was not deliberate as he was not legally represented at the time, but innocent non-disclosure is still non- disclosure and as the question of the solvency of the judgment debtor is one of the most fundamental consideration as to whether the charging order ought to be granted, the non-disclosure is serious which, in my judgment, on this ground alone, the Charging Order Nisi ought to be discharged in the normal course[26].  With the Charging Order Nisi discharged, so must the Charging Order Absolute. 

54.With material non-disclosure shown which supports a case for discharging the Charging Order Nisi, and as a result the Charging Order Absolute as well, while I have a discretion not to discharge (or to re-grant) notwithstanding the material non-disclosure, such discretion should be sparingly exercised[27], and the burden must be on Tsui now to satisfy me that I should so exercise my discretion in his favour in all the circumstances.  What Tsui must persuade me in the first place is that the making of a charging order nisi is justified in all the circumstances, and not whether a charging order nisi ought to be made absolute.[28] In the light of section 20(3)(b) of the High Court Ordinance, the burden is on Tsui to show that ES will not be unduly prejudiced by the making of a charging order, and that in all the circumstances of the case it is appropriate to maintain or re-grant a charging order over Law’s share of the Property in favour of Tsui thus giving him a priority over other unsecured creditors of Law, including ES. 

55.Apart from the debts of at least HK$4,290,000 disclosed by Law, the evidence now adduced before me shows that Law is also indebted to the Director of Legal Aid for the costs of a failed application for leave to apply for judicial review[29], and she had also borrowed HK$3,000,000 from GS Credit, both of which remain outstanding.  The loan from GS Credit is secured by a charge on Law’s share of the Property and there is also a charging order in favour of the Director of Legal Aid for the unpaid costs.  In terms of priority, the charge in favour of the money lender has priority over the Charging Order Absolute which in turn has priority over the charging order in favour of the Director of Legal Aid, by reason of their respective registrations at the Land Registry.

56.As stated, there is no evidence of the value of Law’s share of the Property and what other assets she has, ie whether she is insolvent in the light of all the debts I refer to above (and of course she may have other debts).  There is no evidence of the exact amounts she owes to GS Credit (now) and the Director of Legal Aid.  The making of a charging order in favour of one of the few or many unsecured creditors of a debtor if the debtor is insolvent would certainly unduly prejudice all the other unsecured creditors. As Lord Brandon of Oakbrook[30]said in Roberts Petroleum Ltd v Bernard Kenny Ltd [31]:

“when a judgment debtor, whether he be a natural person or a corporate body, has become insolvent, all the unsecured creditors should be treated equally, each receiving the same proportionate share of the inadequate fund available as all the others.”

57.Thus, if Law’s share in the Property is sold, it is unclear whether, after paying off GS Credit and the Director of Legal Aid, there is any money left for ES and Tsui (and other unsecured creditors).  If there is, then the continuation or re-grant of a charging order in favour of Tsui will clearly unduly prejudice ES (and possibly the Director of Legal Aid if I do not discharge the Charging Order Absolute thereby maintaining its priority) by giving Tsui priority.  If there is no money left, then the question is whether paying off GS Credit would already exhaust the proceeds and if so the continuation or re-grant of a charging order serves no useful purpose for Tsui.

58.Because of lack of evidence as discussed above, Tsui has not shown to me that ES will not be unduly prejudiced by the maintenance or re-grant of a charging order, or that in all the circumstances of the case it is appropriate to make a charging order over Law’s share of the Property in favour of Tsui.

59.For Law, it is also argued that ES has taken no step to enforce the DC Judgment herself since December 2017.  But as Law does not appear to have any substantial assets apart from her share of the Property[32]and it is understandable that no steps are taken to enforce once it was found out in May 2018 that the Charging Order Absolute existed, before the same is discharged.  There is no basis to say that she has abandoned any right to recover sums she is entitled to under the DC Judgment.  As Mr Ko submits, ES cannot be blamed for not taking active steps to enforce the DC Judgment at any time before May 2018 because Law was applying for leave to appeal the DC Judgment and had in fact filed a notice of appeal against the HC Judgment, and it would not be prudent to seek to enforce the DC Judgment against the only known asset of Law in the meantime.

60.As stated above when I deal with the recusal application, those acting for ES question whether the debt alleged by Tsui to be owed by Law is genuine, and the motive of Tsui in commencing this action.  These are serious allegations of dishonesty which I cannot resolve on affirmations, nor do I need to in the light of my decision.      

D.DISPOSITION

61.The appeal is allowed.  I set aside the order of the Master below.  I make no order on paragraph 1 of the Amended Summons (regarding joinder) and make an order in terms of paragraph 2 thereof, discharging the Charging Order Absolute and vacating the registration of the Charging Order Nisi and the Charging Order Absolute at the Land Registry.

62.As to costs, since I allow the appeal and since both Tsui and Law have actively opposed the Amended Summons and this appeal, I make an order nisi that Tsui and Law are to be jointly and severally liable for the costs of the appeal of ES before me, and of the Amended Summons before the Master.  For the avoidance of doubt, I grant certificate for counsel below and before me.  ES’s own costs are to be taxed in accordance with the Legal Aid Regulations.  If Tsui or Law wish to apply to vary the costs order, he or she or they ought to do so within 14 days of the date of this Decision by way of a summons.

63.If any application to vary is made, I shall give further directions on how to dispose of the application.  If no application to vary is made, I direct summary assessment of the costs by me. Those acting for ES are to file and serve a bill of costs within 7 days of the expiry of the 14-day period for the application to vary to be made.  Tsui and Law are to file and serve their responses (if they so wish) within 7 days of the service, and those acting for ES are to reply (if she so wishes) within 7 days thereafter.  I shall then make a summary assessment in writing.

The plaintiff appeared in person

Mr Ching Ming Yu, of Ching & Co, for the defendant

Mr Tony Ko, instructed by Boase Cohen & Collins, assigned by Director of Legal Aid, for the intended intervener