Richard Lau Hon Wang v. Feld International Industries Ltd
Read the full judgment text of HCA 2710/1977 on BabelCite. This High Court CFI judgment was delivered on 23 July 1979.
1. This is an application for discharge from the debtors' prison under Order 49(B). The facts leading to this application are as follows.
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HCA002710/1977
Coram: Li, J. in Chambers. Date of Judgment: 23 July 1979 ----------------- JUDGMENT ----------------- 1. This is an application for discharge from the debtors' prison under Order 49(B). The facts leading to this application are as follows. 2. The applicant was a director of a company by the name of Lau & Sons Textiles (International) Ltd., (hereinafter referred to as Lau & Sons.) In that position he contacted the respondent in the United States of America using the name of Textiles International and induced the respondent to enter into two contracts with Lau & Sons whereby the respondent agreed to purchase a quantity of cloth from Lau & Sons and to open letters of credit in its favour of Textiles International in 1974/75. The applicant then arranged to ship some cloth which were virtually rags in purported performance of those two contracts. The cloth were grossly sub-standard and they were valueless and useless. Meanwhile the applicant appropriated the sums of US$154,920 through those letters of credit for which he induced the respondent to open in favour of Textiles International. When this was found out the respondent successfully sued Lau & Sons and obtained judgment in the sum of US$205,389.70. Before the fraud was discovered, however, the applicant left for Australia but returned to Hong Kong in 1977. He was arrested, charged and convicted and sentenced to imprisonment. On 14th February, 1978 the respondent brought a personal action against the applicant for fraud and wrongful conversion relating to the same subject matter and obtained judgment against him in the sum of HK$1,020,265.86. In June 1979 the defendant was released after serving his prison terms. The respondent formally caused the applicant to be arrested and put into debtors' prison for the applicant's inability to pay for the judgment debt in that personal action. 3. The applicant filed an affirmation dated 14th June, 1979 showing that he has only $93.47 to his credit. He filed also a lengthier affirmation on 4th July, 1979 accounting for the loss of some $700,000 which he brought with him to Australia in 1975. At the hearing the applicant also gives evidence. He admits that prior to his departure for Australia in 1975 he had with him a sum about HK$1.3 million most of which was money he obtained from the letters of credit opened by the respondent. He says that he spent some $360,000 in purported performance of the contract with the respondent; $200,000 which he paid to a travel agency in which he once worked and from which he obtained some as advances and $120,000 to Lau & Sons the moneys of which he embezzled. He was left with about $700,000 in Hong Kong to bring to Australia in order to start a new business. His venture in Australia resulted in a total loss of that $700,000. The details of account are set out in his affirmation dated 4th July, 1979. 4. The respondent has filed affidavits through their solicitors merely to confirm the money obtained by the applicant and the history of the case as I have summarized as before. In the course of cross-examination, however, the applicant admits that he had not disclosed some 5,000 volumes of the "Kung Fu" books by Bruce Lee stored in Australia. The applicant explains that such volumes of books are of no value because due to the length of time lapse the sale of these volumes probably would not be enough to pay for the storage charges. On these evidence counsel for the respondent contends that I should not order the release of the applicant because the applicant had not accounted for the money he paid over to the travel agency and Lau & Sons. Further the applicant had concealed 5,000 volumes of books and his share-holdings in the Wonder World Holidays International Ltd. 5. Rule 6(3) of Order 49B provides:-
6. Counsel for the applicant contends that on the evidence before me the application should be allowed. The applicant has complied with Rules 1 and 2 of Order 49B. The respondent has not proved that the applicant as a judgment debtor, had wilfully concealed or transferred or removed any property or committed any act of bad faith for the purpose of avoiding payment of the debt. Whatever payment the applicant made in June/July 1975 or money taken to Australia in July 1975 was paid and taken away well before he was a judgment debtor. There was no judgment against the applicant until 25th May, 1979. He directs my attention to the case of Lai Cheuk-biu v Robertson Wilson Co., Ltd., 1978 H.K.L.R. 168 in which Huggins, J.A. said at p.170:-
He further contends that adopting the principle of strict interpretation the terms "debt" must be interpreted as meaning the "judgment debt" and that any transfer or removal prior to judgment by the applicant was not acts of a judgment debtor within the meaning of Rule 6(3). To keep the applicant in prison is to punish him twice in relation to the same matter. 7. Before I deal with the points raised by counsel for the applicant, I have to consider the evidence of fact before me. Counsel for the respondent quite rightly points out that the applicant has not complied with Rule 6(2) of Order 49B. In neither of his affirmations had the applicant disclosed the 5,000 volumes of Bruce Lee "Kung Fu" books and his shareholdings Wonder World Holidays International Ltd., until such were put to him in cross-examination. The applicant's explanation is that these are valueless. I am unable to accept his explanation Rule 6(2) requires the applicant to disclose, in his written application, a full account of all property of whatever nature and of the places where the property is to be found except his wearing apparels and implements of trade. The question of value is a matter for me after hearing the parties concerned. Such disclosure may lead the respondent to further inquiries as to the applicant's assets. The failure to comply strictly with the requirement of Rule 6(2) is sufficient for me to retain the applicant in prison. 8. The aforesaid will be sufficient to dispose of the application. However, both counsel for the applicant and the respondent respectively invite me to give my interpretation on the provisions of Rule 6(3). This is strictly not necessary for my decision. However, arguments have been put before me in the matter. I am inclined to state my views in the event of an appeal so that the point may be considered by the Court of Appeal. Having regard to all the rules in Order 49B and adopting the strict interpretation I am of the opinion that the word 'debt' must refer to the judgment debt and not to the debt prior to judgment. The judgment creditor may only enforce his judgment debt by imprisonment from which a judgment debtor may apply for his release. Any fraudulent act to avoid payment of a liquidated debt can be met by invoking the provisions of Order 44A, if such act is discovered in time. 9. I am more doubtful if concealment, transfer, removal of property or acts of bad faith committed after the cause of action for the debt has arisen but before judgment may not defeat an application for release after judgment. Had it been otherwise, the provisions in Rule 6(3) are no more than dead letters. To give an example, any debtor can, as soon as his creditor issues a writ, conceal and remove property prior to judgment. If and when he is found out to have hidden assets and such assets are of sufficient value to pay off the whole of the judgment debt it seems that he should be released under Rule 4 of Order 49B. No judgment creditor once paid in full is interested in keeping a judgment debtor in prison after full payment. Indeed if the concealed assets are insufficient to pay off the whole debt the judgment debtor may be retained in prison. In this way dishonest judgment debtors who have means to pay off the whole debt are preferred to those who have not sufficient assets in the event of a fraudulent concealment. I am of the opinion that the term judgment debtor in the phrase "or that the judgment debtor, for the purpose of avoiding payment of the debt, has wilfully ............. " is used for the purpose of identifying a debtor who is subsequently adjudged a judgment debtor. The timing of the judgment debtor's fraudulent acts should not have any bearing on the effect of Rule 6(3) provided it is clear that the concealment, transfer, removal or acts of bad faith are for the purpose of avoiding payment of the eventual judgment debt be they committed before or after judgment. 10. The applicant in this case admitted having obtained from the respondent over $1 million by fraud prior to his departure for Australia. He knew that was a debt owed to the respondent which would take action to recover it. He had no defence to the action. His liability for a judgment debt was imminent. He knew well that the liquidated debt would soon take the form of a judgment debt. Then he set about disposing of part of this sum by paying it over to various firms in which he worked and to which he said he was indebted. No documentary evidence is produced that he did so. In his evidence he said that he obtained advances from Lau & Sons amounting to $50,000. But he paid over to this company the sum of $120,000 without explaining for the balance of $70,000. That was a fraudulent transfer. He took with him $700,000 to Australia. How he lost it in Australia is irrelevant. But the removal of assets had only one purpose and that was to avoid having to repay the judgment debt if found due to the respondent. 11. The applicant is about the most dishonest business man I have come across. From beginning to end he is determined to defraud the respondent in order, in his own words, to get even with the respondent. 12. For the aforesaid reason application is refused. In all fairness to the applicant I should mention that his conduct in disposing of the money he obtained by fraud before judgment was given against him is also one of the reasons why I refuse his application.
Representation: Y.C.Mok (Wong, Hui & Souza) for applicant. E.Chan (Johnson, Stokes & Master) for respondent. |