The Hong Kong and Shanghai Banking Corporation v. Mohandas Detaram Sakhrani also known as Detaram Sakharani Mohan

CACV000143/1984

IN THE COURT OF APPEAL

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BETWEEN

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Coram: Cons, Barker & Fuad, JJ.A.

Date of hearing: 25th September 1984

Date of judgment: 25th September 1984

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JUDGMENT

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Fuad, J.A.:

1. By consent, we are hearing these two appeals together. The matter arose in this way. On the 26th January 1977 the Hongkong & Shanghai Banking Corporation ("the Bank") obtained judgment against Mr. D.S. Mohan in the sum of HK$9,817,265 with interest. This was in High Court Action No. 2750 of 1976. As at the 11th June this year, something over $3.5 million of the judgment debt remained unpaid. In High Court Action No. 291 of 1977 the Bank obtained judgment against Mr. Obi Mohan in the sum of  $9,746,307. This was on the 17th February 1977. Of this judgment debt, as at 11th June 1984, something over $3,100,000 remains unsatisfied. These are the Bank's figures - the true amount of the judgment debt is in dispute.

2. On the 20th June 1984 the Bank obtained ex parte orders from the Master under Order 49B for the two judgment debtors to be examined as to their means. The same hearing date was fixed: the 26th July 1984 for both examinations.

3. The judgment debtors each applied to the Master by inter partes summons to set his orders aside or alternatively to have the examinations as to means postponed until the determination of High Court Action No. 4611 of 1978. In that action the judgment debtors sued a leading firm of solicitors, and their senior partner; a leading firm of chartered accountants; the Bank; and a well-known company who carry on the business of merchant bankers, underwriters and financial advisers, and who, it is said, are closely associated with the Bank. We have been told by Mr. Rogers, who appears for the appellants, that in fact the action will not proceed against the chartered accountants and the merchant bankers. The action has been set down for hearing on the 1st October 1984 and 39 days have been reserved for the trial.

4. The Master refused the judgment debtors' applications on the 19th July 1984 and they appealed to a Judge of the High Court. Bewley, J., in turn, dismissed both the appeals on the 3rd September. The Mohans (Mr. Obi Mohan is the son of Mr. D.S. Mohan) now appeal to this Court.

5. As the Judge understood the appeals before him, the Mohans did not seek to have the Master's order set aside but asked that the matter should be stood over until the conclusion of the hearing of Action No. 4611 of 1978, and until the determination of another action (High Court Action No. 5854) in which the Bank is suing Mr. Obi Mohan.

6. The Judge had before him affidavits sworn by an Assistant Solicitor of the firm acting for the Mohans. The affidavits begin by explaining that there were four insurance policies (whose surrender value was approximately US$40,000 in 1977) which had been assigned to the Bank as collateral securities and these had not been surrendered. Then it is said that there is a continuing dispute about the amount of the judgment debts and the sales of certain shares. It is averred that if the shares had been sold at a reasonable, or the market, price the judgment debts would have been satisfied in full.

7. The affiant continues that the pleadings in High Court Action No. 4611 of 1978 showed that evidence would be called at the trial about the sales of the shares, since that issue related to the question of damages: ".......... the question of the sales of the shares and whether the judgment debt ought to have been satisfied would be the subject of evidence and investigation in the trial. "  The affiant suggests that the Bank's attempt to enforce the judgments over seven years after they were entered was calculated to put pressure on the Mohans in their conduct of the action. To allow them to be examined as to their means at this stage would greatly prejudice the conduct of the pending action "in that the plaintiff would be permitted to probe the defendant's financial position before trial, that is to interrogate him without the permission of the Court. " This, it is said, amounted to an abuse of the process of the Court. The affidavits conclude with the somewhat strange (and one would think, misplaced) allegations that a Legal Aid Certificate in favour of Mr. Obi Mohan for the pending action was discharged in October 1983 as a result of action taken by the solicitors acting for the Bank. I will comment here that the maker of the affidavit should have been very cautious indeed before including this allegation which he had heard from someone else.

8. An affidavit in reply, sworn by a partner of the solicitors firm acting for the judgment creditor, begins by saying that there were a number of errors and omissions in the affidavit filed on behalf of the Mohans which could best be drawn to the attention of the Court at a later stage. However, as regards the four insurance policies, only two had in fact been assigned to the Bank, and their surrender value was less than HK$16,000 in the summer of 1981. It is pointed out that the pleadings in High Court Action No. 4611 of 1978 (which were exhibited) as amended on the 2nd August 1981 pursuant to an order of the Court of Appeal, revealed that there was now no issue about the proper value of the shares sold. The affiant makes the point that none of the correspondence exhibited to the affidavit upon which the judgment debtors principally rely had been disclosed upon discovery in High Court Action 4611 of 1978 "despite the strong contentions that these matters will be the subject of evidence and investigation in the trial'. "

9. An explanation for the delay in applying for the Mohans to be examined as to their means is put forward - only recently had the Bank considered, on information available, that the Mohans might have in their possession or control assets against which the outstanding judgment debt could be satisfied - a particular matter which gave weight to the Bank's belief was that in June 1984 the Bank had become aware that an order had been made in the matter of Mohan's Limited (in liquidation) by which all further proceedings in the winding-up were stayed. The Bank knew that the Mohans were shareholders of that company and believed that they might well receive substantial dividends in the winding-up. The maker of the affidavit concludes by strongly rejecting the allegation that his firm were in any way acting improperly in connection with the Legal Aid Certificate in favour of Mr. Obi Mohan which had been withdrawn.

10. In affidavits affirmed by Mr. Obi Mohan, he complains that after six years of non-action, "the plaintiff suddenly enforced the judgment without prior notice or warning to me."  He suggests that the revival of High Court Action 5854 of 1982 was a move on the part of the Bank "to put pressure on me just before the commencement of my action. " Neither he nor his father would be entitled to any dividend in the winding-up of Mohan's Limited because they had each, in 1984, for valuable consideration, transferred their shareholdings to a Mrs. Kala Sakhrani Mohan. As regards the two insurance policies (not four) if the Bank had chosen to surrender them in 1977 their total value would have been over US$30,000.

11. On behalf of the Mohans it was argued before the Judge, and before us, that the failure of the Bank to disclose the fact that two actions were pending prevented the Master from properly exercising his discretion as at the date of the first application. In his judgment, after setting out the arguments and referring to the authorities cited to him, the Judge said this:

"I think those cases can be distinguished from this one. In the first place, the plaintiff only had to prove the judgment debt in order to obtain an ex parte order. The Court always has a discretion as to the hearing date in any proceedings. The date selected was approximately one month after the application. If that did not suit the defendants, it was open to them to take out a summons and apply to have it changed, as in fact they did. That they failed makes no difference. No prejudice has resulted from the plaintiff's failure to refer to the pending litigation in the affidavit, since all facts relevant to the proper time for the examination were put before the Master at the hearing of the summons on 19th July. I do not see why the plaintiff should be obliged to raise the issue of the pending litigation, not knowing that the defendants intended to object to the hearing date. It was not a matter relevant to the weighing operation as to whether or not the Court should grant the order sought.

It would have been different had false information about the judgment debt been given in the plaintiff's affidavit. The Court would then quite properly have been able to say that it had been misled on a material matter and consequently the order must go. In this instance the Court was not deceived. "

12. I will say at once that I am by no means persuaded that it was incumbent on the Bank in all circumstances of the case to burden the affidavit filed in support of the ex parte application with the fact that two actions in which the parties were involved were pending. I think the Judge was perfectly right when, after referring to Wardle Fabrics Limited v. G. Myristis Limited^(l), he said that here no weighing operation was involved of the kind that influenced the decision in the Wardle Fabrics case⁽¹⁾ and in Ex parte Princess Edmond de Polignac ⁽²⁾.

13. If I am wrong about the need to have disclosed the fact of the two pending actions, I do not think the present is the sort of case that would have justified the Plaster at the inter partes hearing in summarily dismissing the application on the ground alone that there had been suppression of material facts in the original application. In any event it must be remembered that the appeal before Bewley, J. was in effect a hearing de novo and he had all the relevant material before him. I find no substance for the complaints made against the Judge's conclusion on this aspect of the matter.

14. The second point taken before the Judge and renewed before us was that the Bank had acted oppressively after so many years of inaction (Mr. Rogers tells us that it was in fact from January 1978 to June 1984) and when the Mohans were preparing for complicated litigation concerning the same subject matter, on the grounds in the Judge's own words, that "it would give (the Bank) a preliminary run at cross examination and thus an unfair advantage. " In his judgment the Judge reviewed the material contained in the affidavits. He was clearly much influenced by the fact that there was no evidence as to who was going to finance High Court Action No. 4611 of 1978. He implicitly accepted the contention of Counsel for the Bank that in the absence of evidence to the contrary, it was reasonable to draw the inference that the Mohans had funds available to prosecute the action, the costs of which were likely to be "enormous". He was satisfied that the Bank had established adequate grounds for examining the Mohans now rather than later, provided the Bank did not thereby gain any collateral advantage in respect of the trial. After making reference to the cases cited to him, the Judge accepted that the true value of the shares that were sold in partial satisfaction of the judgment debts might arise in the pending action by virtue of the amended Statement of Claim, supplemented as it was by further and better particulars supplied, but held the view that this could have no relevance to the disclosure and disposal of assets which were matters to be enquired into under Order 49B. He pointed out that the relevant rule specifically limited the scope of the questioning by the creditor by the words "subject to the directions of the Court". He found no disadvantage to the Mohans in allowing the examination to proceed.

15. The Judge gave his decision dismissing the Mohans' appeal on the 3rd September. As we have seen, the examina-tions as to means were due to be conducted on the 26th July, but on that date the Master made an order staying the proceedings pending the determination of the appeal to the Judge and the proceedings were further stayed.

16. Of the cases referred to us by Mr. Rogers, perhaps the most useful is Re Bletchley Boat Co.⁽³⁾, for Brightman, J. (as he then was) summarizes certain principles that seemed to him to emerge from the cases cited to him. At page 1231 he says:

"...... first, it is not a conclusive objection to an order for the private examination of a person that proceedings have been commenced against that person, or against others. It is a matter which has to be taken into account. Secondly, it is prima facie an objection to such an order that interrogatories have already been administered in the action which has been started, so that a private examination would be a second bite at the cherry. Thirdly, it is prima facie an objection to an order for a private examination that the examinee is an important witness for the defence to an action brought by the company so that the effect of the examination will be to subject the defendant's witness to a premature scrutiny of his evidence. Lastly, I think it emerges from the North Australian Territory case, (1890) 45 Ch.D. 87, that the court ought to act with very great care indeed before it directs the private examination of a person who is already, or is about to be, the defendant to an action, so that the private examination might be said to be assisting the company to get a favourable judgment in the action which it has already started, or is about to start, and is not merely assisting the liquidator in a general way. "

17. These principles have been applied in other winding-up eases and in bankruptcy cases. When considering the effect of these authorities, in my view it is necessary to bear in mind the difference in scope between private examinations of persons in company and bankruptcy matters, and the examination of a judgment debtor as to his means. But I think one needs no authority for the proposition that if the Court has reasonable grounds for fearing that a party seeking to examine a debtor in the circumstances that obtained here, has as his real purpose the gaining of an advantage over and above the ordinary advantages that his rights in pending litigation give him, the Court will refuse to order the relief sought. This is but one manifestation, it seems to me, of the inherent jurisdiction of the Court to see to it that its process is not abused.

18. I have no doubt, however, that Bewley, J. was fully justified in dismissing the appeals that came before him. He was, it is necessary to bear in mind, exercising a discretion with which I, for my part, would be very slow to interfere. Indeed I gravely doubt whether the Judge would have been entitled, on the material before him, to have reached the conclusion that the Bank's application was made for ulterior motives I do not see how the Mohans can be prejudiced by the order the Judge made. The person conducting the examinations as to means has ample power (indeed he has the duty) to prevent questioning that goes beyond the ambit of the enquiry. He will not, of course, permit any attempt to examine the debtor for the purpose of extracting evidence for the pending actions.

19. It must be said, too, that a judgment creditor is entitled to take any proceedings at any time in aid of execution, subject only to any relevant law or rule of Court. It is not suggested that any statute or rule has been infringed by the Bank. The Court must do nothing to prevent a judgment creditor from obtaining the fruits of his judgment without good cause.

20. With due respect to Mr. Rogers' valiant efforts, in my judgment no reason whatsoever has been disclosed, either in the material before the Judge, or in argument before us, that would disentitle the Bank from going ahead.

21. For the reasons I have attempted to give, I would dismiss these appeals.

Cons, J.A.:

22. I agree with the reasons given by my Lord. I would only emphasize what seems to me the premature nature of the proceedings taken here by the defendants. I would have thought the better course would have been to accept the order for examination and then if and when any questions were asked which, in the view of the defendants, would have been oppressive to them in view of their pending actions against the Bank and the others to take the objection at that stage. I find it very difficult to say that a party should not be allowed to ask questions when we do not know what those questions will be. I too would dismiss the appeals.

Barker, J.A.:

23. I agree with both judgments which have just been delivered and there is nothing I can usefully add to them.

(1)    [1984] Fleet Street Reports 263

(2)    [1917] 1 K. B. 486

(3)    [1974] 1 All E.R. 1225

Representation:

Mr. Anthony Rogers, Q.C., with Mr. Kevin Chan (Fairbairn & Kwok) for the Appellants.

Mr. Michael Bunting (Baker & McKenzie) for the Respondents.