Citibank N.A. v. Chow Tat Sang and Others
Read the full judgment text of HCA 9175/1983 on BabelCite. This High Court CFI judgment.
1. This is an examination of a judgment debtor. It is made pursuant to the provisions contained in the Debtors (Arrest and Imprisonment) Ordinance 1984. The judgment creditor who I will refer to as Citibank are the plaintiffs in these proceedings and the judgment debtor who I will refer to as Mr. Chow is the 4th defendant in the proceedings. Citibank obtained judgment against the 5 defendants in these proceedings on the 22nd August 1983. The lst and 2nd defendants are Mr. Chow's mother and fathe
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HCA009175/1983 Headnote Debtors (Arrest and Imprisonment) Ordinance 1984 - Principles to be adopted on such applications - Burden of proof on judgment creditor - Period of time covered by the investigation - Factors to be weighed in exercising discretion to imprison judgment debtor - In this case no order made for imprisonment. No. 9175 of 1983 IN THE SUPREME COURT OF HONG KONG HIGH COURT _________ BETWEEN
_______ Coram: The Hon. Mr. Justice Mayo Dates of Hearing: 30, 31 January 1984, 1 February 1984 __________ DECISION __________ 1. This is an examination of a judgment debtor. It is made pursuant to the provisions contained in the Debtors (Arrest and Imprisonment) Ordinance 1984. The judgment creditor who I will refer to as Citibank are the plaintiffs in these proceedings and the judgment debtor who I will refer to as Mr. Chow is the 4th defendant in the proceedings. Citibank obtained judgment against the 5 defendants in these proceedings on the 22nd August 1983. The lst and 2nd defendants are Mr. Chow's mother and father. The 3rd and 5th defendants are Mr. Chow's brothers. Citibank obtained judgment for $59,750,207.51 together with interest which sum represented monies which they had advanced to a group of companies and a sole proprietorship which was owned and controlled by members of the Chow family. Mr. Chow's liability arose out of a guarantee he signed on the 12th May 1983 which was a continuing guarantee the consideration for which was Citibank's forbearance in pursuing remedies available to them in respect of the monies they had advanced to the companies and business operated by the Chow family. 2. Two partners in the firm of Deloitte Haskins and Sells certified public accountants have been appointed receivers of the companies within the group and Mr. Joseph Lo, a member of that firm has made an affirmation on the 24th January 1984 which provides a considerable amount of background information concerning the affairs of these companies. Mr. Geoffrey J. Mansfield who is a vice president of Citibank swore an affidavit on the 23rd January in which he also provides a considerable amount of information concerning these companies and in particular the role which he claims was assumed by Mr. Chow in these affairs. One of the main thrusts of Mr. Mansfield's evidence is that Mr. Chow assumed a key role in the affairs of these companies. 3. Mr. Chow also made an affirmation on the 14th January. In this affirmation he provides a short resume of his involvement in the affairs of these companies and also gives particulars of all assets he claims belong to him at the present time. Mr. Chow supplemented his evidence by giving further evidence in the witness box and was then subjected to a long and searching cross-examination which was conducted by Mr. Allman Brown who was representing Citibank. A large part of this cross-examination was centred upon bank accounts which had been kept by Mr. Chow with the Bank of America and the Bank Nationale de Paris for a period extending back to 1980. Considerable problems were encountered in this cross-examination. As a result of the trading difficulties encountered by the group of companies a report appears to have been made to the Independent Commission Against Corruption and they are in possession of a large volume of the companies records and documents. Efforts have been made to retrieve some of the records required for the purposes of this examination but clearly in the time which has been available to Mr. Chow it has not been feasible for him to retrieve from ICAC all of the material which may be available to enable him to give detailed answers to all of the questions which were put to him by Mr. Allman Brown. It was necessary for him to place a measure of reliance upon his memory and to give general rather than specific answers to questions which were put to him. This difficulty was reduced by virtue of Mr. Chow's evidence to the effect that although he was for a time a director of some of the companies he claimed that he only acted on the instructions of his parents and in effect he assumed the role of a relatively junior employee. 4. Before cross-examining Mr. Chow on the various bank statements which were available Mr. Allman Brown laid the ground carefully and asked Mr. Chow to give details of his income throughout the period. Mr. Chow said that he was in receipt of a small income slightly in excess of $3,000 a month and he was also reimbursed for expenses he incurred on behalf of the company. It soon became apparent upon going through the bank statements of the Bank of America and the Bank Nationale de Paris that there was no regular pattern concerning moneys being credited to these accounts. In addition to this over a period slightly in excess of a year in 1981 very substantial payments were made into and of these accounts. The explanation given by Mr. Chow for these payments was that he had made payments for the companies in the absence of his parents and when they had returned. he had been reimbursed. There was such a large number of these payments in and payments out that I am doubtful whether Mr. Chow's explanation is accurate. What the payments do indicate to me is that Mr. Chow was very much more deeply involved in the affairs of these companies than he was prepared to admit. According to his evidence he only concerned himself with functions normally exercised by junior employees such as being a salesman. He also agreed that on occasions he conveyed messages to his parents from parties such as bankers. At no time did he concede that he exercised any of the roles of an executive nature which are normally undertaken by a proprietor of a business or a director of a company performing the usual functions of such an office. He kept repeating that even when he signed cheques he did so blind on the instructions of his mother. I do not believe that this evidence bears much resemblance to the reality of the situation. Even taking into account the fact that Mr. Chow was only aged 21 when he returned from Canada in 1979 to join the business he appears to have had much more education than his parents. He was the recipient of a Bachelor of Arts degree which was conferred upon him by the University of Toronto. It was my impression from observing Mr. Chow in the witness box that he has a reasonably good grasp of business affairs and I think that it is likely that he performed a much more important role in the conduct of the affairs of these companies than he was prepared to admit. This view is further fortified by the admission he made that one of the signatures attached to the accounts which were submitted to Citibank was his signature. I accept the evidence in Mr. Mansfield's affidavit that these accounts were important accounts and that the decision of Citibank to make these advances was partially based upon the information conveyed by these accounts. 5. Amongst the evidence deduced by Citibank were various ledgers which were obtained by the receivers when they assumed their appointment. An examination of these ledgers indicated that Mr. Chow had been indebted to the group of companies for an amount slightly in excess of $1.6 million. There were other entries in other ledgers indicating at other times that there were two other loans payable by Mr. Chow to the companies of amounts in the region of $1.5 million. I am satisfied that the reconstruction of these ledgers suggested by Miss Eu who was representing Mr. Chow that the totality of these entries in fact related to the one debt and that the different amounts recorded the situation at different dates. Mr. Allman Brown placed considerable reliance upon this evidence to support his contention that Mr. Chow had not made a full disclosure of his financial affairs and to call in question his credibility. Mr. Chow denied that he owed the company or any of them anything approaching the amounts referred to. He agreed that he had on a number of occasions obtained small loans from the companies. None of these loans had exceeded $8,000 and all of them had been repaid. He also conceded that at some time in 1980 or 1981 there had been discussions with the accountants concerning an entry recording his indebtedness to one of the companies for over a million dollars. He had taken the matter up when it had been raised and had informed the accountants that this was accounting error. His explanation had been accepted by the accountants. He also strongly denied any knowledge of the contents of these ledgers. In the light of the observations I have made earlier concerning the records of these companies and the fact that many of them are presently in the custody of ICAC I am satisfied that it would be unsafe and unwise to attempt to draw any definite inferences from the limited number of entries on the ledgers which were available to me as evidence. It is unlikely that these ledgers contain the full position and I would require more evidence before drawing conclusions which were adverse to any party. We do not know who posted the entries in the ledgers or what information was available to them when they did so. There must inevitably be a large element of speculation in any conclusions which are drawn from the evidence which was available to me. 6. I now propose considering the law which is applicable to this examination. The law relating to the examination of debtors is contained in the new rule 1A of Order 49B of the Rules of the Supreme Court and the power of the court following such an examination is contained in the new rule 1B. The parts of these rules relevant to the present application are as follows: "Examination of debtor
7. Power of the Court following Examination
8. Mr. Allman Brown submitted that it was apparent from the drafting of these rules that the burden of proof in the application lay upon the judgment debtor. In particular he placed reliance upon 1A(ii). I do not think that this is correct. Undoubtedly the rule imposes upon a judgment debtor a duty. This is a duty which must be discharged. It does not, however, take matters further than this. The application for the examination is taken out by the judgment creditor and it is still incumbent upon him to establish that the judgment debtor has been failing in his duties. This view appears to be borne out by the drafting of rule 1B. The Court must be satisfied of one or more of the matters referred in sub-paragraphs (a), (b) or (c) of rule 1B(i). 9. The next matter for me to consider is the period of time which has to be covered in the examination. The answer to this is found in paragraphs (a), (b) and (c) of rule 1B(i). It is clear from these sub-rules that what the legislature has in mind is the circumstances existing which relate to the judgment. I think that it is right to adopt a fairly liberal interpretation of these provisions. Clearly the examination is not limited simply to the circumstances existing at the time of the judgment being entered. It is legitimate to extend the investigation to the circumstances existing when the commitment or claim came into existence. I am satisfied that the investigation in this case should certainly extend to the period of time when Mr. Chow signed the guarantee on the 12th of May 1983 when he assumed the liability in this case. It would also be realistic to extend the scope of the investigation slightly beyond this as it may well prove to be impossible to obtain a coherent reconstruction of the affairs of any person unless some antecedent history is also included within the investigation. However, even adopting a liberal approach to the matter I do not see how it can be convincingly argued that it is right for the court to extend the investigation in this case to what Mr. Chow was doing in 1979 to 1982 when he was involved in the affairs of the various companies. He is being sued as a guarantor, not as a principal debtor. It is common ground that Citibank did not make substantial advances to the group of companies until the middle or end of 1982. Any inquiry of affairs prior to this period would appear to be beyond the scope of inquiry envisaged by these rules. 10. There is a further difficulty in this case. I do not think that Citibank could in any event succeed in establishing that Mr. Chow has disposed of any assets with a view to avoiding satisfaction of the judgment. What assets are being referred to? Citibank have not begun to discharge the burden of proof that Mr. Chow has disposed of any such assets. It would accordingly appear that Citibank can only succeed in this application if they are able to establish that Mr. Chow has wilfully failed to make a full disclosure as is required under the rules. I accept that there were a number of aspects of Mr. Chow's evidence which were not very satisfactory. There are also suspicious circumstances. I do not, however, consider that I should exercise my discretion to order the imprisonment of Mr. Chow simply on the basis of suspicion. I am satisfied that Citibank have failed to discharge the burden placed upon them of establishing that Mr. Chow has failed to make a full disclosure as is required and accordingly this application is dismissed. 11. I have also considered the question of costs. Mr. Allman Brown argued that I did not have power to make an order for costs. He referred me to rule 1C(c). This rule refers to the practice adopted when a judgment creditor obtains the order he is seeking. My reading of this rule is that it relates to the mechanics of payment and in no way fetters my residual power to order costs. While I have every sympathy for the predicament Citibank find themselves in and fully appreciate their motives in pursuing this application I nonetheless feel that I would not be justified in departing from the usual practice of awarding costs to the successful party. Mr. Chow will have his costs and there will be liberty to apply.
Representation: Mr. Andrew Allman Brown, instructed by Messrs Wilkinson & Grist for Plaintiff Miss Audrey Eu, instructed by Day & Co. for 4th Defendant/Applicant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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