Cheung Tung Leung t/a Tin Lung Electric-plating Fty v. Kwan Tai Watch Case Factory Ltd and Another

HCA007474/1984

HEADNOTE

Competing judgment creditors have priority against the proceeds of an execution sale according to the order in which their respective writs of fi fa were delivered to the bailiff regardless of which writ the debtors' goods were seized or sold under.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Mantell, J. in Chambers

Dates of hearing: 10th & 11th June, 1985

Date of handing down of judgment: 4th July, 1985

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JUDGMENT

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1. The question raised by this appeal is which of two competing judgment creditors has a prior claim to the proceeds of execution when the sale has been effected under the second writ to be delivered.

2. On 23rd May, 1985, Master Hansen had to contend with an inter-pleader summons issued by the Chief Bailiff in the following circumstances. Both plaintiff and claimant had succeeded in separate actions against the same defendant. The plaintiff's judgment was first in time and had been partially satisfied. The claimant then entered judgment and sued out a writ of fi fa. That writ was delivered to the Bailiff on 12th March, 1985. Two days later the plaintiff sued out a writ of fi fa which was delivered to the bailiff on 21st March, 1985.  In the meantime the bailiff had attempted in vain to execute the first writ. On 25th March, 1985 an attempt to execute the second writ also failed.   The bailiff wrote to both the plaintiff and claimant asking for instructions. The claimant did not reply but the plaintiff's solicitor instructed the bailiff to enter the premises by force. Acting under the plaintiff's instructions and in pursuance of the second writ the bailiff gained entry and seized the defendant's goods which were later sold at auction.

3. It was at this point that the bailiff asked the court what he should do with the proceeds. Acting no doubt on the principle that the first writ to be delivered should have priority the Master declared that the proceeds of execution should go first to satisfy the claimant's judgment and it is against that decision appeal is now made.

4. The effect of section 28 (1) of the Sale of Goods Ordinance, which has its genesis in section 15 of the Statute of Frauds, is, subject to the proviso, to bind the property in the goods of the judgment debtor from the time when the writ of fi fa is delivered to the Bailiff, but not to vest any title to the goods in either the Bailiff or the execution creditor. It is true that in the old cases there are to be found contrary expressions of view but the question was finally disposed of by the majority opinion of the court in Giles v. Grover ⁽¹⁾. "It appears to me, said 'Tindal L.C.J.⁽²⁾ that the property in the goods seized under the fi fa is not in any manner altered by the seizure but it continues in the debtor until the actual transfer thereof by the sheriff's sale under the writ to a stranger".

5. It is equally plain upon the authorities that, as between competing, execution creditors, precedence goes to he who first delivers his writ to the Bailiff. I quote from the judgment of Ashurst J. in Hutchinson v. Johnston ⁽³⁾ :

"The general principle of law, and which has not been contradicted by any of the cases cited, is that the person whose writ is first delivered to the sheriff is entitled to a priority; and that the goods of the party are bound by the delivery of the writ."

The same case is treated by Tindal L.C.J. in Giles case as authority for the proposition  that until after sale the rule will hold and obliged the sheriff (bailiff) having seized goods under one writ and having discovered that another writ had been delivered at an earlier time to proceed to sell under the first writ, as to which Jones v. Atherton ⁽⁴⁾ is also authority.

6. But here it is said that the consequence of sale is not merely to divest the execution debtor of his title but to confer upon the judgment creditor under whose writ of fi fa the sale was effected a prior claim to the proceeds notwithstanding the existence of an earlier writ. The proposition, which might seem surprising at first, is not without judicial support. Smallcomb v. Buckingham⁽⁵⁾ and Rybot v. Peckham referred to by Ashurst J. in Hutchinson v. Johnston have been cited, as have obiter passages in the judgments in Giles v. Grover. In so far as the authorities do support, the proposition they are difficult to reconcile with the well accepted rule that execution enures for the benefit of all execution creditors in accordance with their priorities, a difficulty noted by the learned author of a standard work on execution ⁽⁶⁾ and they are certainly at variance with the clear opinion of Lord Denman C.J. in Drewe v. Lainson ⁽⁷⁾.

"The duty of the sheriff, when he has several writs of execution, is clear. He has to execute them according to their priority; which, as to writs of fieri facial, is according to the time of their delivery to him. By "executing" is meant, that he is to apply the proceeds of goods seized in that manner. It is not material whether he seizes the goods under the first or the last writ: as soon as they are seized, they are, in point of law, in his custody under all the writs which he then has; and, when he sells them, he sells, in point of law, under all the writs. This is obviously so: for, if the proceeds are more than sufficient to satisfy the first, he must supply the surplus to the second, and so to the third and others; and, as the amount for which the goods will sell is uncertain, he cannot be said to sell under the first writ only."

It may be that Smallcomb's case and Rybot's case can be distinguished on the ground that in a sense, the proceeds had been passed over to the execution creditor in each case and further that those passages in the judgments in Giles v. Grover which seem to run counter to Lord Denman's statement of principle are also only dealing with the case where proceeds have been paid out in a manner which has not accorded with priority. In such cases it may be that the only remedy left to the first execution creditor is against the sheriff or bailiff. For my part, I am disposed to adopt and follow Lord Denman's exposition. So it follows that, subject to the appellant's second line of argument, the claimant whose writ was the first must have a prior claim to the proceeds of execution.

7. The second limb of the attack upon the Master's decision is that, by reason of the claimant's failure to respond to the letter which the Bailiff send out asking for instructions, the claimant has lost his right to be preferred to the plaintiff. On the authorities I do not doubt that there may be circumstances where by reason of lathes or by the countermanding of the writ a party may lose his priority. Here there was no countermand to the writ and no delay which could conceivably be said to amount to lathes. If the failure to respond to the bailiff's letter put the claimant at risk to a degree, that danger was averted when the claimant renewed his interest before the proceeds of sale were distributed.

8. In my judgment, this appeal must fail and I make an Order Nisi for costs in favour of the claimant.

(1)    [1832] 1 Clark and Finnelly page 843

(2)    at page 892

(3)    [1787] 1 Durnford and East's Reports page 729 at page 731

(4)    7 Taunton's Reports page 23

(5)    87 English Reports page 715

(6)    C. Johnston Edwards at page 118 of the Law of Execution (1888 edition)

(7)    Adolphus and Ellis's Reports page 537

Representation:

K.B. Ng (Liang, Ng, Lie & Lai) for Plaintiff

H.Y. Wong (K.M. Lai & Li) for Claimant