Wintex Knitwear Co Ltd v. Manufacturers Marketing Associates Ltd and Others

HCA001905/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Mr. Commissioner LIU. Q. C. in Chambers

Date of Judgment: 15th October, 1977.

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DECISION

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1. The judgment debtor applies to be discharged from prison. His application has been met with the strongest possible opposition. The judgment debtor offered himself for cross-examination the conduct of which was in the hands of Mr. Cheal on behalf of the judgment creditor, who has an unsatisfied judgment debt in the region of Ninety odd Thousand dollars.

2. The circumstances are not entirely without suspicion, but it is more than suspicion that the judgment creditor has to satisfy the Court in order to succeed in its invitation to have the application of the judgment debtor dismissed. In opposition, the judgment creditor must prove, for the purposes of these proceedings, either unjustifiable extravagance in living or wilful removal of properties for the purpose of avoiding payment of the judgment debt or commission of any act of bad faith to defeat the fruit of judgment lawfully obtained.

3. The main issue revolves around the following matters:- firstly, the assumption of ownership of a Mercedes Benz by the wife with the assistance of a Finance Company; secondly, the sale of Flat A2 on the 7th floor of Scenic Villa yielding a net proceeds of sale of over $90,000.00; thirdly, the judgment debtor's offer to pay a quarter of his indebtedness in this action by way of settlement; lastly, the formation of Castle Bridge Enterprises Limited with an initial capital outlay of $10,000.00 for the alleged benefit of the judgment debtor's wife.

4. The Mercedes Benz was admittedly taken over by the wife with the assistance of a Finance Company on a hire-purchase arrangement two instalments of which have been paid by the wife. This vehicle was formerly the property of the 1st Defendant company for the use of the judgment debtor as its officer. The judgment debtor claims to be at a loss as to how the rest of the instalments are to be met. This Benz was deliberately taken over for the use of himself and is now entrusted to the care and custody of his loyal secretary. The financial position of the judgment debtor was then obviously precarious, and there was and is no justification for his retention of this type of car. The car was acquired in the name of his wife, but it would appear that the judgment debtor played an active role in the acquisition of this car through the medium of his wife. This reflects the judgment debtor's life style at the time of his indebtedness and, viewed together with his admitted divers expenses, was extravagance quite unjustifiable.

5. I turn next to the Ninety odd Thousand dollars net proceeds. Grave suspicion has been cast by the able cross-examination of Mr. Cheal as to the quick disposal of these net proceeds. On the admission of the judgment debtor, his wife left for Formosa with no less than $40,000.00 and had disposed of another $20,000.00 by way of living allowance for July and August prior to her imminent departure from Hong Kong. Out of these net proceeds, the air-fares for the family to Taipei in August were paid and some six months' school fees for 5 children in private schools in Taipei to the extent of $5,000. to $7,000. (which estimate was raised at the subsequent stage of the cross-examination to $7,000. to $8,000.) were paid. Such living expenses for July and August, the passage by air for the entire family and the private school fees are not consistent with the conduct of a reasonably frugal and honest debtor but are plain acts of unjustifiable extravagance. The $40,000.00 taken to Taipei is removal of property with a view to avoiding payment of judgment debt in the clearest possible term.

6. The judgment debtor explained that Castle Bridge Enterprises Limited was incorporated with an initial capital of $10,000. from the joint account at a time when financial disaster was in sight. It was formed at a time when all available resources of the judgment debtor ought to have been mustered for the settlement of his debts, either wholly or in part. The formation of this company, according to the evidence of the judgment debtor, was a maneuvre for hopefully securing future financial benefits for his family and his wife in Formosa. The judgment debtor conceded that the provisions made for his family out of the said net proceeds of sale of his flat and the maneuvre to incorporate the Castle Bridge Enterprises Limited with an initial capital of $10,000 were steps taken to ensure that his family would be provided for in the lean years to come. These maneuvres are unjustifiably prejudicial to his creditors. Comfort to his family should be secondary to his liabilities and obligations. The $10,000. initial investment in Castle Bridge Enterprises Limited is, in my view, also tantamount to a willful removal of property for the purpose of avoiding payment of the judgment debt in this action.

7. Lastly, the offer to pay a quarter of his liabilities to the judgment creditor in this action has been explained by the judgment debtor as an offer made with an expectation of possible loans from his associates who as a result of his imprisonment have now taken quite a different attitude. That source of assistance, according to the evidence of the judgment debtor, is not or may not be open to him after his imprisonment in execution of the judgment. Cross-examination on this offer has not succeeded beyond merely casting some suspicion on the judgment debtor, and I place no reliance on it.

8. In conclusion, it is clear that the judgment debtor has been unjustifiably extravagant in the conduct of his affairs and has also wilfully removed properties for the purpose of avoiding payment of the judgment debt in this action. I am satisfied that the judgment creditor has discharged its burden in proving these matters. Consequently, the application of the judgment debtor for discharge from prison must be dismissed, but I dismiss it not without some regret, as the judgment debtor appears to be an intelligent and able businessman and it may very well be that his discharge from prison will do more good than harm to the judgment creditor. However, it is not for me to judge what the best tactic is. Mr. Cheal on instructions of the judgment creditors has informed me that judgment creditor is greatly disappointed by the dealings with the judgment debtor in the past and that it is not prepared to accept his plea for an early release.

9. Before I rise, I consider it my duty to inform the judgment debtor that he is at liberty to renew his application from time to time, but the proper time for him to test the judgment creditor on a similar application would be in the course of about four weeks.

Representation:

Mr. J. Cheal of Messrs. D. W. Ling & Co. for Plaintiff / Judgment creditor.

2nd Defendant / judgment debtor in person.