Cbg Financial Investments Ltd (in Liquidation) v. Cheung Long Chung

HCA004673/1983

IN THE HIGH COURT OF JUSTICE

BETWEEN

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Coram: Hon. Liu J. (In Chambers)

Date: 28th June, 1983.

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JUDGMENT

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1. I will, in due course, reduce this judgment into writing.

2. The plaintiff company ceased trading as from the 2nd February 1983. The defendant caused the cheque in the sum of $500,000 to be drawn on the 31st January and had the same cashed on the following day, the 1st February 1983. The plaintiff company has since gone into liquidation, and in a private examination of the defendant on the 19th April 1983, admissions were made and explanations given. On the 12th May 1983, the plaintiff company in liquidation issued an Order 14 summons which was heard on the 27th May by the learned Master.

3. Before the learned Master, admissions of the defendant were heavily relied upon and what purports to be explanations by the defendant in his private examination the plaintiff's legal adviser was not prepared to accept, particularly when there was then no verification on affirmation by the defendant.

4. At the material time, the company had five directors: four personal directors and one company director by the name of CBG Nominees Limited. All the personal directors, Messrs. Chan, Pang, Siu and Ng affirmed to the effect that the withdrawal of $500,000 by cheque of the defendant was without any authorization and that none of the directors was aware of such withdrawal until afterwards. The defendant was himself a director of the plaintiff company before its liquidation from the 26th May 1981 to the 9th December of the same year.

5. We have also the affirmation of Miss Maggie Leung, the accounts cleric, to the effect that at the time of the drawing of the cheque for $500,000, the defendant gave her no instructions as to against which account it was to be debited.

6. Relying on a technicality which I have gone into more substantially in my observations, on behalf of the defendant, his legal advisers refrained from filing any affirmation at all in reply within the very limited time available. The defendant's applications for a longer adjournment in order to properly prepare his affidavit in opposition had earlier been refused. The learned Master granted judgment against the defendant. We have now tae defendant's affidavit dated the 22nd filed on the 23rd June 1983 pursuant to leave granted by this court subsequent to the submissions made on his behalf.

7. It is from this decision of the learned Master that the defendant now appeals, but in substance, with the defendant's affirmation which was not placed before the learned Master, the matter will have to be examined afresh. Be that as it may, there does not seem to be any significant difference in form, because as an appeal from the learned Master, this court was to hear the appeal de novo in any case. Naturally, with the defendant's affirmation matters would simply have to be gone into from the very inception.

8. In these Order 14 proceedings, disclosure has been made of a Hong Kong Bank account and a Chartered Bank account of the plaintiff company. The Hong Kong Bank account is referred to in Mr. Robertson's last affidavit, agreed to be read on his undertaking to have it duly filed and therein marked "ALR-2". As at 26th January 1983, the plaintiff company's account with the Hong Kong Bank was overdrawn to the extent of $1,834,724.34. On the 29th January 1983, three payments-in were made into the plaintiff company's Hong Kong Bank account by the defendant totalling $484,281.51. As at the close of business on the 29th January 1983, the plaintiff company had overdrawn in its account with the Hong Kong Bank $1,835,571.08. That debit balance took into account, inter alia, the said three payments-in by the defendant. The company's indebtedness with the Hong Kong Bank was, therefore, reduced by the total amount of these three payments-in and, therefore, the three payments-in were wholly devoured in the process of such reduction and no longer retained their separate identity as sums capable of being held to the account of anyone including the defendant.

9. That is the plaintiff's account with the Hong Kong Bank. The defendant himself had a running account with the plaintiff company byway of facilities granted, and I turn out to examine that more closely. First of all, I should say a word or two about the historically background of it. From the computer print-outs of the plaintiff company's account records marked "ALR-4" attached to Mr. Robertson's first verifying affidavit filed, on the 13th May 1983, we can find on page 2 the defendant's own account for his granted facilities with the plaintiff company as at the end of January 1983. It reads "Director's Current Account ^__ L.C.C.". The defendant admitted the initials L.C.C. in the plaintiff company's ledger as representing his name. The defendant was only a director from the 26th May to the 9th December 1981, but I should also mention in passing that it is common ground that throughout the defendant had 90% shareholdings in the company with his wife holding the remaining 10%. However, that has no relevance.

10. At the time of the $500,000 cheque dated the 31st January 1983 and cashed on the 1st February 1983, there were five directors including the company director, CBG Nominees Limited. One of the defendant's assertions in his private examination seemed to be that he was granted personal facilities in the use of the moneys of the plaintiff company and that all the moneys so used or drawn out by the defendant under such facilities granted from the plaintiff company's purse would be for the defendant's own account with the plaintiff company and debited against his personal account with the plaintiff company known as "Director's Current Account ^__ L.C.C." Such, so the defendant alleged, remained the position after he had ceased to be a director of the plaintiff company. However, as it can be seen later, the defendant did not choose to run this line of defence for the $500,000 cheque in his affirmation.

11. The other pages of the exhibited computer print-outs to "ALR-4", page 42, 43 and 44, contain entries, starting from the bottom half of page 42, exclusively for the defendant's said facilities. As at the 31st January 1983, the debit balance in the defendant's Director's Current Account ^__ L.C.C. for his said facilities as shown on the computer print-outs bearing a date of the 31st January 1983 stood at $4,829,669.56, which should have, so the plaintiff conceded, taken into account the defendant's three payments-in. These computer print-outs in fact ended with the last entry on the 28th January 1983 for a debit balance of $4,829,669.56. An explanation was given on behalf of the plaintiff that the defendant's three payments-in totalling $484,281.51 should appear only in later entries of the computer print outs of the defendant's own account with the plaintiff company just because there was invariably a few days' delay in entering transactions into the plaintiff company's computer records. The three payments-in must have, therefore, been absorbed in the reduction of a very substantial debit balance in the defendant's own account with the plaintiff company by the time when the plaintiff company stopped trading. I need not consider if the defendant was ultimately or is now still indebted to the plaintiff company or the extent of such indebtedness, if any. What is reasonably clear is that in the then state of the accounting as recorded, these three payments-in of the defendant's must have been integrated into the assets of the company and lost their separate identity. In any case, the defendant has admitted having made these payments into the plaintiff company's account with the Hong Kong Bank. Once paid in, they obviously became the plaintiff company's assets. The plaintiff company's Hong Kong Bank account and the computer print-outs of the defendant's own running account with the plaintiff company merely illustrate this fact.

12. I turn next to the Chartered Bank account from which the $500,000 cheque dated the 31st January 1983 was drawn. Copy of that cheque has been exhibited in various affirmations. It can also be seen from a copy  exhibited to the affirmation of Maggie Leung filed on the 13th May 1983 and therein marked "LLW-1". Payments-in were made into the plaintiff company's Hong Kong Bank account and withdrawal was taken from the plaintiff company's Chartered Bank account. Even if the defendant had been minded to draw an equal amount of the $500,000 cheque from his own three payments-in, the withdrawal from a different account with the Chartered Bank is yet a further confirmation of a transfer and loss of individual identity of these three separate sums totalling $484,281.51 previously paid by the defendant on the 29th January 1983 into the Hong Kong Bank account.

13. The first contention on the defendant's affirmation advanced by counsel on his behalf was that CBG Nominees Limited, the company director of the plaintiff company, had general authority to withdraw money for the plaintiff company's needs. It can be seen from the documents exhibited relating to the Chartered Bank account of the plaintiff company that the defendant was the accredited representative of this company director, CBG Nominees Limited. In paragraph 3 of the defendant's affirmation filed on the 23rd June 1983, it is alleged "the withdrawal of the said sum of $500,000, subject matter of this action, was originally intended to be used for the purpose of saving the CBG group of companies including the plaintiff". The defendant went on in the same paragraph: "At the time when I withdrew the said sum of $500,000, I had in mind the deposit(s) which are placed with the plaintiff on the 29th January 1983 as aforesaid. In the circumstances, I verily believe that I am entitled to the said sum of $484,281.51". What the defendant had in mind and what he now believes should have only very little bearing on what he actually did because on his only affirmation in reply in these Order 14 proceedings, he claimed not to have withdrawn the $500,000 for his own use. He withdrew it, so the defendant chose to stand, for the needs of, inter alia, the plaintiff company. Clearly, the defendant was relying on CBG's general authority to withdraw money for the plaintiff company's need as alleged at the end of paragraph 1 of his same affirmation.

14. The accounts clerk, Maggie Leung, in affirmation filed on the 13th May 1983 categorically stated that the defendant gave her no instructions as to against which account such $500,000 was to be debited. In the private examination of the defendant, he did seek to explain at page 6 (or 14) of the transcript that he allegedly informed Maggie Leung that the sum should be deducted from his personal account as the sum was for his personal use. The defendant in his affirmation has plainly fallen short of supporting this earlier explanation proffered in his private examination. The defence must be bound by the defendant's affirmation filed at a later stage with the specific intention of using it in. these Order 14 proceedings. The court is, of course, to assume that the defendant will be in a position to substantiate his allegations at the trial but, what is his version? The defendant now says that it was intended for saving CBG group of companies including the plaintiff company that the $500,000 was taken out or withdrawn. From paragraphs 1 and 3 of his affirmation filed herein on the 23rd June 1983, the defendant is obviously seeking to rely on his capacity as an accredited representative of CBG Nominees Limited which had allegedly general authority to withdraw the plaintiff company's funds for the plaintiff company's needs. If it could be said that the recent assertion of the defendant in his affirmation filed on the 23rd Jane 1983 is, somewhat, ambiguous, we must not minimize the defendant's obligation to particularize his lines of defence with reasonable exactitude and clarity.

15. That factual basis of the defendant's as borne out by his affirmation, as I have understood it to be, was resorted to by his counsel and it was submitted that with money drawn on the proper authority as an accredited representative of CBG Nominees Limited, the company director of the plaintiff company, there could be no question of any conversion. However, counsel fairly conceded that in his capacity of a contended trustee of this $500,000, the defendant must be guilty of conversion once he commenced using it for his own purpose "when the scheme of arrangement failed to materialize".

16. The defendant also claimed a set-off. A set-off is, it is common ground, only available in respect of debts due between the same parties in the same right. On the factual basis embraced by the defendant and advanced on his behalf no claim against the defendant as a trustee could be set off against what was claimed to be a debt in the sum of $484,281.51 allegedly owed him by the plaintiff company.

17. It was further contended on his behalf that a set-off of $484,281.51 against so much of the $500,000 he withdrew on the 1st February 1983 was possible because the claim in this case against the defendant was a personal claim and that it was permissible to set off part of a personal claim against loans made to the company by the defendant. The three payments-in on the 29th January 1983 were not alleged to be loans. I was invited to infer as "a legal consequence" that they were. I am unable to do so. It is not even alleged that the plaintiff company is indebted to the defendant to that or any extent. The converse is more true that it is the defendant who seeks to put the plaintiff to proof as to its alleged claim against him, the defendant in these proceedings. The defendant has withdrawn $500,000 from the plaintiff company's account. The defendant must clearly set up some case of withdrawal with authority or that he was still entitled to the three payments-in totalling $484,281.51 for the purpose of such contended set-off and not merely relying on, to say the least, vague assertions.

18. In an attempt to further support his client's case, counsel argued in the alternative that what the defendant did was no more than retrieving the three payments-in on the 29th January 1983. As I understand him, Mr. Lee of counsel submitted that the defendant withdrew the $500,000 as an accredited representative of and under the general authority given to CBG Nominees Limited, but that he, the defendant, at the time of the withdrawal, "had in mind the deposit which he placed with the plaintiff on the 29th January 1983". In another words, whatever capacity in which he withdrew the $500,000, the defendant took the money out as if he had retrieved what he had paid in earlier. When the defendant purported to act in his withdrawal in this "as if" capacity of a retriever, it must be presupposeu that he had no such real capacity. Let it be analysed on a different plane. It is a fact that not only did the defendant withdraw $500,000 and not just $484,281.51 which the court was asked to infer being still his, the defendant concluded his affirmation by saying "I denied that I am liable to the plaintiff up to the sum of $484,281.51". Plainly, therefore, the defendant does not dispute the liability for the balance over this $484,281.51 out of the $500,000. Insofar as this balance is concerned, admittedly the defendant cannot legitimately claim to be a retriever. We must also not forget that deposit and withdrawal were made into or from different bank accounts. Ignoring all the somewhat illogical flexibility displayed in these proceedings, the defendant simply cannot be said, in my view, to be withdrawing the same sum of $500,000, on the same occasion, from the same account, by the same cheque in two different inconsistent capacities.

19. After the completion of submissions made on behalf of the plaintiff company, the defendant applied for leave to address the court on a new front, namely that the defendant was, in fact, withdrawing the $500,000 under the "Director's Current Account facility" extended to him by the plaintiff company. The new front sought to be argued was founded, as I was told, on a capacity of the defendant quite inconsistent with that so dearly embraced by his counsel in his earlier submissions. Moreover, it was submitted that the defendant never "intended to withdraw the money in any particular capacity". No evidence had been introduced to throw any light on or in support of this alleged lack of intention. Lastly, user alleged in the new front was also not altogether in line with that alleged in the defendant's affirmation.

20. I hold that none of these submissions advanced on behalf of the defendant has raised any bona fide triable issue. In the circumstances, it remains for me to dismiss the appeal against the defendant with costs for the plaintiff.

Representation:

Mr. Robertson of Official Receiver's Office for Official Receiver and Liquidator of Plaintiff in Liquidation.

Mr. Sammy Lee instructed by Messrs. Peter Mo & Co. for the Defendant.