Staryork Investment Ltd v. Cheung Chi Keung t/a Oi Tak Old People's Home

HCA002176/2003

HCA 2176/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2176 OF 2003

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Coram: Hon Reyes J in Chambers

Date of Hearing: 15 October 2003

Date of Decision: 15 October 2003

Date of Reasons for Decision: 21 October 2003

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REASONS FOR DECISION

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1.By a Summons ("the Interpleader Summons") dated 29 August 2003 the Defendant ("Oi Tak") applied for interpleader relief in respect of rent payable by him (as tenant of premises ("the premises") on the ground and 1st floor of the Fortune Centre in Yuen Long). The rent has been claimed by the Plaintiff ("Staryork") as landlord and the Claimant ("Wa Lee") as mortgagee. By Order dated 15 September 2003 Master Lung refused interpleader relief and dismissed the Interpleader Summons. By Notice of Appeal dated 23 September 2003 Oi Tak appealed against Master Lung's Order. After hearing the appeal, I dismissed the same. I state here the reasons for my decision.

Background

2.This case has a long history. Some of the background to the present application is set out in Deputy High Court Judge To's Judgment ("the Judgment") dated 13 May 2003 in HCMP No. 2242 of 2000 ("the 2242 Action"). By the latter Wa Lee sued Staryork in relation to a mortgage of certain units at Fortune Centre including the premises. In the summary of events below, I gratefully adopt the judge's findings in the 2242 Action.

3.In December 1996 Staryork bought units ("the 1st Units") on the ground floor of the Fortune Centre for $48 million. It made a substantial profit from the resale of some of the 1st Units. In August 1997 Staryork agreed to buy 2 units on the ground and all units on the 1st floor (collectively, "the 2nd Units") of Fortune Centre for $35 million. Lacking funds to complete the sale, Staryork initially obtained extensions of the completion date from November 1997 to February 1998. Staryork also obtained a loan facility of $10 million from Hongkong Bank. Staryork believed that the facility was secured on the 2nd Units alone, but in actuality (according to the loan documents) the facility was also secured on that part of the 1st Units retained by Staryork.

4.Having heard that Staryork was looking for financing, Wa Lee then offered to lend $10 million to Staryork at 100% per annum for 1 year on the security of the 2nd Units. Staryork accepted. Since the 2nd Units had already been mortgaged to Hongkong Bank, Staryork executed a sale and purchase agreement ("the Snyder Agreement") for the 1st and 2nd Units with Snyder Holdings Limited ("Snyder"), a BVI company related to Wa Lee. The Snyder Agreement provided for completion in a year's time. Again, Staryork apparently thought that the contract only concerned the 2nd Units. Wa Lee advanced $6 million to Staryork on 14 February and the purchase of the 2nd Units was completed on 20 February 1998. In April 1998 Wa Lee paid $2 million to Staryork, thereby making up the promised $10 million loan.

5.On 20 February 1999 Snyder commenced HCA No. 2940 of 1999 against Staryork for specific performance of the Snyder Agreement. On 22 March 1999 Staryork entered into a loan agreement ("the Wa Lee Loan Agreement") for $29.5 million with Wa Lee. As security for the loan Staryork executed a mortgage ("the Wa Lee Mortgage") of the 1st and 2nd Units in Wa Lee's favour. As further security for the $29.5 million loan, Staryork also signed a Rent Assignment ("the Assignment") and a Notice of Rent Assignment ("the Notice"), both in favour of Wa Lee, in respect of rental due on the 1st and 2nd Units (including the premises). At the same time Snyder and Staryork agreed to cancel the Snyder Agreement on condition that Staryork pay Snyder $20 million. The foregoing having all been done, HCA No. 2940 was discontinued by consent summons. Wa Lee then advanced $29.5 million to Staryork by various cheques. There was a cheque for $20 million to Snyder for cancellation of the Snyder Agreement, a cheque for $9.05 million ("the $9.05 million payment") to discharge the Hongkong Bank facility, cheques covering solicitors' legal fees, and a cheque for a balance of $371,650 payable to Staryork.

6.Staryork having subsequently defaulted on the instalments due under the Wa Lee Loan Agreement, Wa Lee sought to collect rent under the Notice from tenants in the 1st and 2nd Units (including the premises). By letter dated 14 July 1999 Messrs William W L Fan & Co. ("WLF") (Wa Lee's solicitors) instructed Oi Tak to pay rent directly to Wa Lee. Oi Tak thereupon contacted Staryork for an explanation. The latter said that it was negotiating a settlement with Wa Lee and asked Oi Tak to pay the monthly rental of $175,000 to Wa Lee pending such settlement. Accordingly Oi Tak paid rent to Wa Lee for 15 July 1999 to 14 August 2000 on a without prejudice basis.

7.By letter dated 17 August 2000 Messrs Chan & Tsu ("C&T") (Staryork's solicitors) informed Oi Tak that Staryork challenged the validity of the Wa Lee Mortgage, Assignment and Notice. Staryork demanded that Oi Tak pay rent to C&T instead of Wa Lee.

8.By letters dated 17 July and 19 August 2000, WLF asserted the validity of the documents challenged by Staryork and demanded that Oi Tak continue to pay rent to Wa Lee, otherwise Wa Lee would regard Oi Tak's tenancy agreement as repudiated and its tenancy as forfeited.

9.On 14 September 2000 Wa Lee commenced the 2242 Action against Staryork, claiming vacant possession of the 1st and 2nd Units and payment of principal and interest due under the Wa Lee Mortgage. On 15 September 2000 Wa Lee also started HCA No. 8996 of 2000 ("the 8996 Action") against Oi Tak and Staryork claiming vacant possession of the premises and rent and mesne profits against Oi Tak and a declaration that Staryork was not entitled to demand or receive rent from Oi Tak. Staryork counterclaimed in the 8996 Action for damages and restitution against Wa Lee.

10.By letter dated 23 September 2000 to WLF, Messrs Augustine C Y Tong & Co. ("ACYT") (Oi Tak's solicitors) stated that they had instructions to pay Oi Tak's monthly rent to Staryork's solicitors:-

"as stakeholder subject to the firm's strict personal undertaking not to release the rental unless and until the Court has granted the relevant order directing the payment of the rental and such Order served on our client."

ACYT sent a letter to similar effect, but enclosing a cheque for rental between 15 September to 14 October 2000, to C&T.

11.On 5 December 2000 C&T wrote to ACYT that Staryork was no longer prepared for C&T to hold rental payments as stakeholder subject to the undertaking imposed by Oi Tak. The following day ACYT instructed C&T to return the then sum of $350,000 held by C&T as stakeholder, as Oi Tak was not agreeable to such monies being paid to Staryork. Since then Oi Tak has deposited monthly rentals with ACYT as stakeholders. Together with the $350,000 returned by C&T, ACYT hold a total of $4,025,000 for the period from 15 August 2000 to 14 July 2002. Oi Tak's tenancy expired on 14 July 2002.

12.After a careful and exhaustive consideration of the evidence in the 2242 Action, Deputy Judge To found that Wa Lee had been engaged in a sophisticated loan-sharking operation. He concluded:-

"125. Accordingly, I find that the Snyder Agreement was not a genuine dale and purchase agreement. It was a security for [Wa Lee's] loan of $10 million to [Staryork]. It was illegal, being an agreement for a loan at excessive interest rate of 102% contrary to section 24 of the Money Lenders Ordinance. The Wa Lee Loan Agreement was forced on [Staryork] by duress. The agreement was entered into for the purpose of paying illegal interest ad repaying the illegal Snyder Loan. It was illegal as being contrary to public policy. The effect is that the Wa Lee Loan Agreement was void ab initio, the loan is irrecoverable and the mortgage in unenforceable. Likewise the restitutionary remedy of subrogation to the extent of the amount the Plaintiff paid to discharge the Hong Kong Bank Mortgage is not available to the Plaintiff. Accordingly, the Plaintiff's claims against [Staryork] ... are dismissed.

126. On the counterclaim, I award [Staryork] nominal damages of $1 for duress. I make a declaration that the mortgage, the rent assignment, the rent assignment notice and Kan's guarantee dated 22 March 1999 are void and of no legal effect. I order the registration of the [Wa Lee] mortgage by Memorial No. 856545 ['the Memorial'] be vacated if no notice of appeal is filed after one month."

13.On 14 May 2003 C&T informed ACYT of the outcome in the 2242 Action and, in consequence of Judge To's conclusion that the Wa Lee Mortgage and other supporting documents were void, asked ACYT to pay over the rent held by them as stakeholder. ACYT replied on 16 May 2003:-

"After perusing the Judgment of HCMP 2242 of 2000, we are of the opinion that although the Court has declared the Mortgage Memorial No. 856545 and the Rental Assignment dated 22nd March 1999 void and of no legal effect, the Judge has ordered that the registration of the said Mortgage be vacated if no notice of appeal is filed after one month.

In the circumstance, we will not proceed to forward the rental paid by the Tenant and stakeheld in our office unless and until confirmation of no application for appeal by the Plaintiff in the said HCMP 2242 of 2000."

14.On 17 May 2003 Staryork gave notice of its intention to proceed with its counterclaim in the 8996 Action. In light of Oi Tak's refusal to hand over its rental payments, Staryork also took out a writ on 13 June 2003 in the present action seeking payment of unpaid rental in the amount of $4,025,000 from Oi Tak.

15.On 10 June 2003 Wa Lee issued a Notice of Appeal in CACV No. 148 of 2003 against Judge To's decision. The 8 grounds of appeal may be summarised as follows (the sub-paragraph numbering below corresponding to the paragraph number of the relevant ground):-

(1)	The judge wrongly held that the $9.05 million payment was tainted with illegality.
(2)	The judge wrongly held that s. 24 of the Money Lenders Ordinance affected the $9.05 million payment. The section only rendered the $20 million used to repay Snyder under the Snyder Agreement unenforceable.
(3)	Despite duress making the Wa Lee Agreement voidable, Staryork had affirmed the Wa Lee Agreement to the extent of the $9.05 million payment.
(4)	Neither the Money Lenders Ordinance nor public policy require forfeiture of the $9.05 million payment in Staryork's favour.
(5)	Wa Lee was subrogated to Hongkong Bank's position as mortgagee/chargee of the premises "by reason of the use by [Staryork] of the HK$9.05 million advanced by [Wa Lee] to redeem its mortgage with the Hong Kong Shanghai Banking Corp. Ltd."
(6)	"The Deputy Judge erred in holding that the disputes about what happened in the office of Laurence Pang & Co. on 22nd March, 1999 were minor issues and not crucial to the dispute between [Wa Lee] and [Staryork] when the issue of whether the Kan Choi Ming of [Staryork] ('Kan') had knowingly and voluntarily signed the consent summons settling the Snyder Action and the cancellation agreement cancelling the Snyder Agreement was of crucial importance in deciding whether the Wa Lee Agreement was tainted by the illegality of the Snyder Agreement (paragraph 107 of the Judgment)."
(7)	"The Deputy Judge should have held that [Staryork] through Kan entered into and signed the consent summons settling the Snyder Action and the cancellation agreement cancelling the Snyder Agreement voluntarily and after the same had been explained to him and that the Wa Lee Agreement was thus not tainted by the Snyder Agreement..."
(8)	"Further to the above and to the extent that the Deputy Judge had decided that the Wa Lee Agreement was entered into by duress, the Deputy Judge should have decided that the same was merely voidable and not void and that the same had been affirmed by the conduct of Kan of [Staryork] since 22nd March, 1999 (paragraph 110 of the Judgment)."

16.Seemingly unaware of the Notice of Appeal, on 14 June 2003 ACYT wrote to WLF as follows:-

"With reference to the Judgment of Dep. Judge To dated 13th May 2003 in HCMP 2242 of 2000 declaring Mortgage Memorial No. 856545 and Rental Assignment dated 22nd March 1999 void and of no legal effect, we would be obliged if you could let us know:-

1.	whether your client as lodged any appeal in the said HCMP 2242 of 2000; and if so
2.	any issue on appeal that would affect, prejudice or otherwise relate to your claim in the present proceedings, in particular, rental or mesne profits paid or payable by our client for occupation of the suit premises; and
3.	the hearing date fixed for the appeal."

17.ACYT followed up with another letter to WLF 2 days later. It wrote:-

"We are instructed that [Staryork] has commenced HCA 2176/2003 against out client claiming the total monthly rental for the period between 15th August 2000 and 14th July 2002 in the sum of HK$4,025,000 as arrears of rental in respect of the suit premises. The said sum of HK$4,025,000.00 is being stakeheld by us pending the outcome of the captioned action.

Copy of the Writ of Summons in HCA 2176/2003 is enclosed herewith for your consideration.

As our client is always ready and willing to pay rental for the suit premises, we would be obliged if you could let us know within the next 3 days your client's position in the appeal of HCMP 2242 of 2000 as requested in our previous letter to you dated 14th June 2003 as well as whether your client objects to the payment to Staryork of the said monthly rental stakeheld by us and the monthly rental to be payable by our client hereafter.

In case no claim has been lodged by your client in the said HCMP 2242 of 2002, it follows that your client could not proceed with its claim for the rental in the captioned proceeding against our client and that our client would not defend Staryork's claim in HCA 2176/2003."

18.WLF replied to ACYT as follows on 19 June 2003:-

"We refer to your letters of 14th and 16th June 2003 upon which we have instructions to reply as follows:-

1.	Our client has lodged an appeal in HCMP No. 2242 of 2000 and has already applied for setting down of the appeal.
2.	As the appeal is on the whole judgment including the validity and legality of the subject mortgage, the outcome of it would undoubtedly have determining impact on the outcome of the present proceedings.
3.	The hearing date of the appeal has not yet been fixed.

In the premises, we have instruction to strenuously oppose to your client's proposed release of any monthly rental stakehold by your firm to [Staryork] or proposed payment of any future rental to the company pending determination of the appeal in [the 2242 Action] and [the 8996 Action]."

19.On 7 July 2003 Oi Tak (then acting in person) filed a brief Defence in Chinese referring to Wa Lee's claim for the rent in the 8996 Action.

20.On 23 July 2003 Staryork applied for summary judgment by Summons dated 23 July 2003. The initial return date for the Summons was 11 August 2003. The substantive application will be heard on 20 October 2003.

Discussion

21.The Interpleader Summons is brought under RHC Order 17, Rule 1 which provides:-

"	(1)	Where:-
		(a)	a person is under a liability in respect of a debt or in respect of any money, goods or chattels and he is, or expects to be, sued for or in respect of that debt or money or those goods or chattels by two or more persons making adverse claims thereto,...
		(b)	...
	the person under liability as mentioned in sub-paragraph (a) ... may apply to the Court for relief by way of interpleader."

22.The Court's jurisdiction to grant relief in such circumstances is "discretionary, but the exercise of the discretion must be judicial" so that, if the requisite criteria are demonstrated, an order will normally be made (see Hong Kong Civil Procedure 2002 ("HKCP"), Note 17/1/11 (p. 263)). To qualify for interpleader relief, an applicant must show "a real foundation for the expectation" to be sued by 2 or more persons in respect of the same subject-matter (HKCP, Note 17/1/5 (p. 262)). Alleged claims "must be actual and not merely anticipated" (HKCP, Note 17/1/7 (p. 263)) and there can be no real foundation for any expectation to be sued unless a prima facie case exists (Chan King Sheen v. K C Tsang & Co. [2002] 3 HKC 209 (CA), at §25). Nor can a person protect himself by interpleader proceedings against a claim on which the claimant has obtained judgment (HKCP Note 17/1/5 (p. 262); Randall v. Lithgow (1884) 12 QBD 525; H Stevenson & Son, Limited v. Brownell [1912] 2 Ch 344).

23.RHC Order 17, Rule 3(4) further provides:-

"Subject to paragraph (5), a summons [for interpleader relief] under this rule must be supported by evidence that the applicant:-

(a)	claims no interest in the subject-matter in dispute other than for charges or costs,
(b)	dies nt collude with any of the claimants to that subject-matter, and
(c)	is willing to pay or transfer that subject-matter into court or to dispose of it as the Court may direct."

The reference to "collusion" does not have a pejorative connotation, but simply means "playing the same game" as one of the claimants. A person seeking to interplead should be "in a real position of impartiality between the parties" (Chan King Sheen, at §24). HKCP Note 17/3/9 (p. 266) adds: "In addition to the matters which, under [Rule 3], must be deposed to, the applicant should not be guilty of delay, and he should explain any undue lapse of time."

24.I am not satisfied that the criteria for interpleader relief are met in this case.

25.My 1st reason for refusing relief is that I cannot ignore the effect of the Judgment, which is a valid and subsisting judgment of this Court until set aside on appeal. The effect of the Judgment is to undermine completely Wa Lee's claim to be paid rent by Oi Tak. Wa Lee's claim for payment is based on the Wa Lee Mortgage, the Assignment and the Notice, which have all been declared void by Judge To. Wa Lee has no entitlement to receive rental from Oi Tak by virtue of void documents. Until the Judgment is set aside on appeal as regards the validity of the 3 documents, Wa Lee has no claim at present.

26.The issue of a Notice of Appeal does not affect the analysis. An appeal does not stay the effects of the Judgment or prevent Staryork from enjoying its consequences. There has been no application by Wa Lee or anyone else to stay or enjoin the operation of the Judgment pending the outcome of Wa Lee's appeal against Judge To's conclusions in the 2242 Action.

27.Ms Chan, who appeared for Wa Lee in support of Oi Tak's interpleader application, argued that the Judgment was not capable of being stayed since it did not require Wa Lee to do any specific act. There was nothing to stay. If anything, Ms Chan continued, in directing that the Memorial be vacated from the Land Registry unless Wa Lee took out an appeal within 1 month, Judge To was signalling that he regarded the Judgment as only taking effect subject to an appeal. The dispute between Wa Lee and Staryork, Ms Chan's skeleton argues, "remains a live issue" and "[t]he Notice of Appeal having been filed within time, Wa Lee's interest in ... the rent which is the subject matter of the present dispute is still protected save for the bona fide purchaser without notice."

28.I disagree with Ms Chan. RHC Order 59, Rule 13 which deals with "Stays of execution, etc." pending appeal states:-

"	(1)	Except so far as the court below or the Court of Appeal or a single judge may otherwise direct:-
		(a)	an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;
		(b)	no intermediate act or proceeding shall be invalidated by an appeal.
	(2)	...."

If Wa Lee wished to prevent a person from performing an act in consequence of the Judgment (such as Oi Tak paying rent to Staryork), Order 59 Rule 13(1)(b) requires Wa Lee to obtain a direction from the Court temporarily suspending the operation of the Judgment or restraining the particular act. Otherwise, the "intermediate act", the act pending the determination of the appeal, would not be invalidated by the mere bringing of an appeal. Order 59 Rule 13 is not restricted on its terms to staying execution against the appellant or to the appellant obtaining a temporary reprieve from performing some action. One may loosely refer in speech to "staying an order". What one really means is suspending the effect of an order pending appeal by obtaining an apposite Court direction.

29.The fact that Judge To made removal of the Memorial registration from the Land Registry conditional on the absence of an appeal by Wa Lee, does not somehow render the Wa Lee Mortgage valid in the interim pending appeal. The retention of the Memorial registration at most preserves priority should Wa Lee succeed on appeal in establishing that the Wa Lee Mortgage is valid. As Hunter J famously explained in Financial and Investment Services for Asia Ltd v. Baik Wha International Trading Co. Ltd [1985] HKLR 103 (at 112I-113A), the Hong Kong land registration system is one of deeds registration, not title. Registration only goes towards establishing priority; it does not say anything about the validity of an underlying transaction. For the validity of the Wa Lee Mortgage underlying the Memorial, one must refer to the Judgment.

30.My view that I should abide by the logic of the Judgment is reinforced by 2 matters.

31.The 1st matter is that, before me in Court, Ms Chan herself acknowledged that, unless the Judgment is set aside on appeal, Wa Lee could not proceed against Oi Tak in the 8996 Action.

32.The 2nd matter is case law.

33.In Randall v. Lithgow Randall (Lithgow's judgment creditor) obtained a garnishee order nisi against an insurance company in respect of monies due on a policy. The company having failed to appear to show cause, the order was made absolute. Subsequently, faced with a rival claim for the same fund from Lithgow's assignees, the company applied to interplead. In refusing the company's application, Williams J stated (at 529):-

"[I]t is clear that the plaintiff Randall obtained on the 7th of April, 1883, a regular and until reversed, a valid order attaching in the hands of the insurance company a debt to the amount of 127l. 5s. 6d., admitted, or at least not disputed, to have been then due from them to the judgment debtor. This order remains valid and undisturbed to this day; there is nothing on the face of this order to earmark the debt due to Lithgow out of which the 127l. 5s. 6d., is to be paid, still less to identify it with Lithgow's claim for damages against the insurance company.

....

Then the question arises whether the insurance company being pressed with these rival claims are entitled to be relieved from their difficulty by the process of interpleader.

We think that they are not. The plaintiff is in the position of a judgment creditor of the insurance company for 127 l. 5s. 6d., upon his order of the 7th of April, and unless that judgment or order has been satisfied in whole or in part he is entitled to issue execution against the insurance company for that amount."

It is true that the Court observed that the company had only itself to blame for allowing the garnishee order to become absolute by failing to put in an appearance. But it seems to me that underlying the Court's judgment is the principle that effect must be given to a valid and undisturbed order of the Court.

34.In H Stevenson & Son, Limited v. Brownell the English Court of Appeal in refusing interpleader relief stated (at 347):-

"Is this a case to which interpleader procedure applies? The practice is now governed by the Rules of the Supreme Court, 1883, Order LVII, r.1. The material matter in this r.1 is sub-s.(a): 'Where the person seeking relief (in this Order called the applicant) is under liability for any debt, money, goods, or chattels, for or in respect of which he is, or expects to be, sued by tow or more parties (in this Order called the claimants) making adverse claims thereto.' The syndicate are not being sued by two persons; they were being sued by one and there was a threat that they might be sued by another. There are not two proceedings at all. One matter has ripened into a judgment, and there is nothing whatever to which this rule will apply. I do not see how we can hold that, because in the Act of 1831 the time within which interpleading procedure might be commenced was limited and that Act has been repealed, under the present practice it is possible to interplead at any time after judgment has been obtained by one claimant, and even after judgment has been given by consent. In my opinion to allow this interpleader would be altogether contrary to the language and spirit of the Rules; and without going into the other points I think the order should be discharged with the usual consequences but without prejudice to any question of costs between the syndicate and the claimants."

The case involved a judgment which Stevenson obtained by consent against Brownell, the party applying to interplead on the basis of a threatened claim by Healy. That is not precisely the situation here. But, if anything, the present circumstances are even stronger. Here one claimant has obtained a judgment against a rival which wholly destroys the basis of the latter's claim. Just as the Court in Stevenson thought that it was bound to give effect to the judgment, I believe that I am likewise obliged. The fact that in Stevenson the underlying judgment had been obtained by consent does not seem to be a material distinction.

35.Therefore, despite Wa Lee's pending appeal, I am entitled to have regard to the fact that a regular order of this Court exists and continues to apply. This means that, as of today, Wa Lee has no claim. At best, there can only be a potential claim by Wa Lee for payment of rent. Such potential claim may materialise later, but only if Wa Lee succeeds in persuading the Court of Appeal that the Wa Lee Mortgage, Assignment and Notice are and always have been valid documents.

36.I move to my 2nd reason for refusing relief. On the evidence before me, Oi Tak has not demonstrated that Wa Lee has a prima facie case on appeal that the Wa Lee Mortgage, Assignment and Notice were valid instruments from their inception.

37.Examining Wa Lee's 8 grounds of appeal, one notices that grounds (1) to (5) are effectively the same. By those grounds Wa Lee argues that the $9.05 million payment in discharge of Hongkong Bank mortgage, constituted a real benefit to Staryork such that, even if the Wa Lee Mortgage, Assignment and Notice were void, Wa Lee should at least be able to recover the $9.05 million payment. Although the precise legal basis is unclear from the Notice of Appeal, presumably recovery of the $9.05 million payment would be as money had and received to Staryork's benefit or by the doctrine of subrogation. Even if Wa Lee succeeded on grounds (1) to (5), that would at best only give Wa Lee a claim against Staryork for $9.05 million. It is not apparent to me how success on grounds (1) to (5) would validate the Wa Lee Mortgage, Assignment or Notice and give Wa Lee corresponding rights against Oi Tak. Ms Chan pressed upon me the subrogation argument in ground (5) as evidence that Wa Lee had a prima facie claim to the payment of rent by Oi Tak. For the reasons just given, I do not see how a subrogation claim against Staryork translates, without more, into a claim against Oi Tak for payment of rent.

38.Grounds of appeal (6) to (8) need to be read together to make sense. Collectively, they submit that the judge ought to have found that the Wa Lee Agreement was merely voidable and had been affirmed by Staryork's conduct. But it is difficult to see how the grounds as drafted could lead to the conclusion asserted.

39.Ground (6) argues that what the judge took to be "minor issues" were in fact "crucial" in deciding whether the Wa Lee Agreement was tainted by illegality. The ground gives Judgment §107 as its reference point. But there the judge simply said this:-

"On 22 March 1999, as instructed by Tam [a consultant of Wa Lee], Kan attended the office of LP [Messrs Laurence Pang & Co., solicitors] together with the [Staryork] company chop and seal. There, Tam told him that the loan had to be increased to $29.5 million to allow for solicitors' fees and that surplus will be returned to him. He and Chan [a co-director of Staryork] executed the Wa Lee Loan Agreement, a deed of mortgage in respect of both Sets of Property, a rental assignment, a rental assignment notice, and a personal guarantee for the loan. Kan also signed a cancellation Agreement in respect of the Snyder Action. Then Clive Chan [a solicitor] arrived and signed the Cancellation Agreement and the Consent Summons terminating the Snyder Action. Kan was given a cheque for the balance of $371,650."

Nowhere is there a reference to "minor issues" in Judgment §107.

40.The Notice of Appeal may instead have meant to refer to Judgment §108. That reads:-

"There is no need for me to go into details about what happened in the office of LP. There are also some dispute about whether Clive Chan had explained the Cancellation Agreement to Kan, whether Clive Chan was late and everything was signed pending his arrival and signature and whether Clive Chan arrived empty handed without bringing any document with him. There was also the unexplained chop of [Staryork] affixed on a piece of draft paper in the file of NKTC [Messrs, Ng, Tam, Ko & Chan, solicitors]. These are minor issues and not crucial to the dispute between Kan and Tam. Given the unfavourable view I formed of Clive Chan's credibility, I resolve the difference in favour of Kan."

There is indeed a reference to "minor issues" here. But it is difficult to see how an argument over whether the relevant issues were "minor" or "crucial" can advance Wa Lee's case, when the judge expressly resolves all such issues in favour of Kan's (that is, Staryork's) version of events.

41.Ground (7) is problematic because it asserts a conclusion without giving the rationale for the same. If the rationale is supposed to be ground (6) (namely, that the judge wrongly characterised "crucial" issues as merely "minor" matters), one runs into the difficulty just identified. What does it matter whether the judge described certain factual issues as "minor" instead of "crucial" when, however characterised, he resolved those issues in Staryork's favour and wholly rejected Wa Lee's evidence on the same? In essence, ground (7) invites the Court of Appeal to overturn the judge's views on the credibility of certain witnesses and his conclusions of fact based on those views. Wa Lee's endeavour on that score is bound to be uphill and arduous.

42.Ground (8) attempts to tie grounds (6) and (7) together. Unfortunately, ground (8) does not specify the bases on which it infers that Kan affirmed the Wa Lee Loan Agreement. Where on the facts is it alleged that the judge went wrong? The suggested reference point for the ground is Judgment §110. But that paragraph has nothing to do with later affirmation or non-affirmation of the Wa Lee Loan Agreement. Judgment §110 reads:-

"The fact that Tam arranged NKTC to replace C&T as the solicitors for [Staryork] speaks for itself. C&T had been protecting Kan's interest very well. There could be no reason other than the fear he was subjected to on 12 March 1999 that would have caused him to change his solicitors. The duress exerted on Kan on 12 March 1999 and renewed everyday with the two men stationed in his office thereafter remained operative in Kan's mind. I am satisfied that the Wa Lee Loan Agreement and the Cancellation Agreement were entered into by Kan on behalf of [Staryork] as a result of the duress."

If anything, in stressing the duress exerted on Kan, Judgment §110 reinforces Judge To's conclusions and makes it difficult to believe that by some unspecified conduct Kan could later meaningfully affirm the Wa Lee Loan Agreement as asserted by ground (8). Once again, ground (8) seems in essence to attack the judge's factual findings and assessments of credibility and, for that reason, the prospects of success on ground (8) cannot be high.

43.The result is that grounds (6) to (8), which on their face challenge the finding that the Wa Lee Loan Agreement and supporting security (the Wa Lee Mortgage, Assignment and Notice) were void, are unimpressive as prima facie evidence that Wa Lee has a real foundation of a claim against Oi Tak.

44.I turn to my 3rd reason for refusing interpleader relief. On an objective assessment of the evidence, it seems to me that Oi Tak is guilty of collusion. It has brought its present difficulties upon itself. I have reproduced above substantial parts of the correspondence passing among ACYT, WLF and C&T in the wake of the Judgment. It appears to me that, by ACYT's letters of 14 and 16 June 2003 to WLF, Oi Tak was instigating Wa Lee not just to lodge an appeal, but also to make a claim for the rent held by ACYT. In forming this view, I attach weight to the following words in ACYT's letter of 16 June 2003 to WLF:-

"We would be obliged if you could let us know ... whether your client objects to the payment to Staryork of the said monthly rental stakeheld by us and the monthly rental to be payable by our client hereafter."

What, one asks rhetorically, did Oi Tak expect Wa Lee would say when faced with such request? This was waving a red flag to a bull. Faced with such invitation from Oi Tak, Wa Lee would of course object to Oi Tak paying rent to Staryork.

45.My final reason for rejecting Oi Tak's application arises from the unexplained delay in applying for interpleader relief.

46.I agree with Mr Mumford SC (appearing for Staryork) that the time for seeking interpleader relief was in August 2000 when it was plain that Staryork and Wa Lee were both claiming a right to Oi Tak's rental payments. At the latest, interpleader might have been sought in December 2000 when C&T wrote to Oi Tak that Staryork was no longer prepared to allow C&T to hold Oi Tak's rental payments as stakeholder. Notwithstanding that it was obvious by then that there were rival claims, Oi Tak opted instead for its own privately devised solution of depositing monies with ACYT as stakeholder.

47.Even after the present action was started by Staryork against Oi Tak in June 2003, Oi Tak did not apply for interpleader until 29 August 2003. That seems to have been done in the face of Staryork's Order 14 Summons of 23 July 2003 and then only following the 11 August 2003 return date on the Order 14 Summons.

48.Oi Tak offers no explanation in its affidavit evidence for the significant time that has elapsed since its becoming aware of competing claims in mid-August 2000 and its applying for interpleader in late August 2003.

Conclusion

49.The 4 reasons discussed above, considered individually and cumulatively, led me to dismiss Oi Tak's application for interpleader.

50.Oi Tak having failed on the Interpleader Summons, Mr Mumford asked for Staryork's costs of that Summons to be borne by Oi Tak. I awarded Staryork its costs, such costs to be borne by Oi Tak in any event and taxed if not agreed. Mr Jim, counsel for Oi Tak, sought to make Wa Lee liable for Oi Tak's costs. However, since Wa Lee came to Court to support Oi Tak's application, I did not think that it was right to order Wa Lee to bear Oi Tak's costs. No order was made as to Wa Lee's costs, with the result that Wa Lee must bear its own costs.

Representation:

Mr E C Mumford SC, instructed by Messrs Chan & Tsu, for the Plaintiff

Mr Jacky Jim, instructed by Messrs Augustine C Y Tong & Co., for the Defendant

Ms Winnie Chan, instructed by Messrs William W L Fan & Co., for the Claimant