Stephen Liu Yiu Keung v. Keen Lloyd Resources Ltd.

HCA 2528/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2528 OF 2005

____________

____________

Before: Hon. Barma J in Chambers (open to the public)

Date of Hearing: 10 May 2006

Date of Judgment: 9 June 2006

_______________

J U D G M E N T

_______________

1.This is an application by Keen Lloyd Resources Limited (“the Defendant”), a company in compulsory liquidation, to strike out the proceedings brought against it by Mr Stephen Liu Yiu Keung (“the Receiver”), a receiver appointed by the Bank of China (Hong Kong) Limited (“the Bank”) in respect of some 46 properties in Hong Kong (“the Properties”) which were charged by the Defendant to various banks which were subsequently merged to form the Bank.  There was also before me an application by the Receiver for summary judgment in respect of part of the relief sought by him, but, at the hearing, this application was adjourned to  be heard at a later date.

2.By this action, the Receiver seeks an account of rents received by the Defendant since his appointment on 15 February 2001, ancillary discovery, and an order for payment of such sum as might be found due on the taking of such account.  The Receiver also seeks payment of the sum of HK$1,111,204.74, plus interest, contending that this sum represents rental payments received after his appointment, which are recoverable either as money had and received by the Defendant to his use, or as monies held by the Defendant as constructive trustee for him.  There is also a claim for damages for conversion of this sum of money by the Defendant to its own use.

3.The striking out application is made on the ground that the statement of claim discloses no reasonable cause of action.  It was common ground between Mr Beresford, appearing for the Defendant, and Mr Fung S.C., appearing for the Receiver, that I should proceed on the basis that the matters pleaded in the statement of claim were true.  The Defendant’s argument is that the Receiver, as such, has no title to sue in respect of the causes of action relied upon, and that no such title to sue is disclosed in the statement of claim.

4.The Receiver was appointed (together with Mr Matthew O’Driscoll, who has since resigned) on 15 February 2001.  Thereafter, the Defendant and an associated company commenced proceedings against the Bank and the Receivers, claiming that the Bank was not entitled to seek recovery of loans which had been made to the Defendant, and seeking a declaration that the appointment of the Receivers was invalid.  In the course of those proceedings, the Defendant obtained an interlocutory injunction restraining the Bank from proceeding with recovery action in relation to the loans and from enforcing the charges over the Properties.  The Receivers were also restrained from acting as receivers of the Properties.  In order to obtain the injunctions, the Defendants gave undertakings to cause tenants of the Properties to pay their rental into specified bank accounts.  After the Defendant went into liquidation, the injunction was discharged by consent.

5.The claim relates to sums of money in the hands of the Defendant which, the Receiver believes, respresent rental income in respect of some of the Properties received by the Company or its liquidators, but which he contends should have been paid to him as Receiver.  He complains that despite his requests, the liquidators have failed to provide him with information or clarification as to the source of such monies, or to pay them over to him.

6.It is common ground that the charges under which the Receiver was appointed were given by the Defendant to the Bank.  It is also common ground that the Receiver does not claim any interest in the subject matter of these proceedings.

7.The argument for the Defendant is as follows:-

(1)     Accepting, for present purposes, that the charges under which the Receiver were appointed were valid, and that the Bank was entitled to appoint the Receiver thereunder, the appointment of the Receiver did not operate so as of itself to vest any cause of action in the Receiver.

(2)     An attorney cannot sue in his own name on behalf of his principal where no cause of action vests in the attorney.

(3)     The Receiver having acquired no rights of action by virtue of his appointment, he cannot sue in his own name as receiver.  A receiver can only sue in his own name where he can demonstrate a basis, apart from the fact of his receivership, for bringing an action that is available to him personally.  In any other situation, where the charge by which he is appointed permits it, he may bring proceedings using the name of his appointor, but not in his own name.

(4)     In this case, there is no basis on which the Receiver can bring this action in his own name, and the proper party to bring this action is the Bank, not the Receiver.

(5)     Accordingly, the Receiver has no title to sue, and the action brought by him should be struck out.

8.For the Receiver, Mr Fung contended that:

(1)     The powers of the Receiver are to be gathered from the terms of the charges under which he was appointed, in particular clause 11.14 thereof, and/or from the terms of the Conveyancing and Property Ordinance (Cap. 219), in particular sections 50 and 51.

(2)     There is no hard and fast rule against a receiver suing in his own name in respect of assets which are the subject-matter of his receivership.  Nor is there any legal or moral objection to his doing so.

(3)            While the general rule is that an action should usually be instituted in the name of the company whose assets are under receivership, the receiver can sue in his own name if he can find a proper basis for doing so, and there is no exhaustive list of situations where he can do so.

(4)     A receiver has a proper basis to sue in his own name if the instrument under which he is appointed specifically so provides, particularly if he has also entered into possession of the asset in question.

(5)     As the Properties were charged, they did not form part of the assets available to the Defendant in liquidation, and the court should give the greatest respect to the rights of the person whose interests are not being administered in the winding-up proceedings.

9.Mr Beresford’s submission that an attorney cannot sue in his own name on behalf of his principal where no cause of action vests in the attorney is supported by Jones & Saldanha v Gurney (1913) W.N. 72 and Davis v Anthony (unreported, English Court of Appeal, 5 July 1995).  In the latter case, the Court of Appeal accepted (as the judge at first instance had pointed out) that if an attorney were to be permitted to sue in his own name, undesirable consequences could follow, in that (for example) an impecunious company might be able to avoid having to give security for costs, or the real plaintiff might be able to avoid liability for costs in the event that his claim failed.  To those examples might be added the possibility that a foreign plaintiff might equally be able to avoid having to give security for costs, or that a person who should properly be the plaintiff in proceedings might be able to avoid having to make proper discovery.

10.In the present case, it was suggested by Mr Beresford that there was cause for concern in respect of the discovery that might potentially be unavailable if the Receiver were to be allowed to sue in his own name.  Mr Fung took issue with this, suggesting that, on the contrary, substantial information had already been provided by the Bank to the Defendant.  However, both sides accepted that the likelihood or otherwise of abuse in the particular case was not a matter which should be determinative of this application.  I think that this must be right.  In my view, it is not necessary, nor is it appropriate, to attempt to evaluate, in the context of a striking out application, whether or not any abuse would be likely to ensue.  It seems to me that the principle exists to prevent potential abuse of the sort described, and it matters not, in any particular case, whether or not some such abuse is in fact likely to occur.

11.It is true, as Mr Fung pointed out, that neither of those cases involved a receiver seeking to sue in his own name.  However, it seems to me that the rationale underlying them is just as much applicable to a situation in which a receiver seeks to sue in his own name, instead of using the name of his principal, whether that be (as is usually provided for in the terms of the charge) the company over whose assets he is appointed, or (as may sometimes be the case) his appointor.

12.So far as receivers are concerned, the authorities and textbooks are all to much the same effect - the general rule is that a receiver cannot sue in his own name as a receiver, but there are exceptional cases in which he can do so.

13.In Re Sacker (1888) 22 QBD 179, a receiver petitioned for the bankruptcy of a person who had been ordered to pay over to him the proceeds of certain goods comprised within the charge under which the receiver was appointed.  It was held that the receiver was not entitled to present a petition, as he was not a creditor of the alleged debtor.  Fry L.J. stated (at p.185) that the general rule was that:-

“... a receiver cannot maintain an action to compel obedience to an order for the delivery of goods or the payment of money to him by a party to the action.  There may, no doubt, be exceptional cases in which a receiver can bring an action in his own name – when, for instance, he is the holder of a bill of exchange.  In that case he can maintain an action, not because he is a receiver, but because he is the holder of the bill.  So, too, if his is possessed of chattels as receiver, and those chattels are unlawfully detained from him, he may well be able to maintain an action to recover them as being the person in possession of them, quite independently of the fact that he is a receiver.  And there may be other cases in which, having an independent cause of action, the fact that he is receiver does not disqualify him from suing.  But in such cases, he does not sue in his character of receiver.”

14.Similarly, in Robertson v Oskar (1983) 8 ACLR 570, a decision of the Supreme Court of Western Australia, Kennedy J. said (at p.572):-

“There is no doubt that a receiver, as such, is not ordinarily entitled to bring an action in his own name, since no property is vested in him by virtue of his appointment ... and there is no vesting in him of any cause of action ...”

15.All of the leading textbooks contain statements to the like effect - see e.g. Kerr and Hunter on Receivers and Administrators (18^th ed) at para 7-13; Picarda, The Law Relating to Receivers, Managers and Administrators (3^rd ed) at p.114; and Halsbury’s Laws of England, Vol 39 at para 914, which sets out perhaps the most comprehensive list of exceptions, where it is stated:-

“Although a receiver may not generally maintain an action in his own name, since no property is vested in him, yet if he has an independent cause of action, the fact that he is receiver does not disqualify him from suing.  He may, for instance, sue as the holder of a bill of exchange or promissory note, or as the occupier of business premises, or as the bailee of chattels to whom possession has been delivered by order of the court, or as the assignee of a debt, or a landlord, if the letting has been in his own name, and he may sue on a covenant for payment of rent to himself, even though he is not a party to the lease; and a receiver and manager may sue in respect of his business transactions for the recovery of goods improperly detained or for the price of goods sold and delivered by him or delivered under a contract which has been assigned to him, although in the case of an assigned contract, this is subject to any right of set-off to which the original contractor is entitled.”

16.While I would accept that no list of exceptions will be exhaustive, it does seem to me that it is possible to discern from the cases and textbooks that all of the instances of a receiver being entitled to sue in his own name are cases in which there is a cause of action vesting in him personally.  Thus, the receiver who because of his receivership receives a cheque made out to him in his own name is able to sue personally on the cheque as he is the named payee and holder of it.  Similarly, as the bailee of chattels to whom possession has been delivered, he has a possessory title which would suffice to entitle him to maintain an action for conversion, or in bailment.  Where he has let premises of which he is the receiver in his own name, he will be entitled to sue as a party to the contract.  Similarly, where in the course of his receivership of a business undertaking he enters into contracts in respect of which he incurs personal liability, he will be entitled to sue on such contracts.  Where a contract has been assigned to him, he can sue as assignee.  But in each of these situations, there is something beyond the mere fact of his receivership that gives rise to a cause of action in him, even though the additional factor may only have come into being as a result of his being appointed receiver in the particular case.

17.Mr Fung also relied on the decision of the House of Lords in Moss Steamship Company, Limited v Whinney [1912] AC 254, in which it was held that a receiver was entitled to sue to recover monies paid by him to carriers who had threatened to exercise a lien over cargo shipped by him in respect of freight owing in respect of previous shipments by the company over whose business he was appointed receiver, such shipments having been made before his appointment.  I do not think that this authority assists the Receiver.  It is clear that the basis on which the decision was reached was that the receiver in that case acted in his personal capacity in respect of the shipment in question, and that the carriers were therefore not entitled to exercise a lien in respect of unpaid freight owing to them not by him personally, but by the company of which he was appointed receiver.  As the receiver was held to be carrying on the business personally, and had personally paid the amount of disputed freight to avoid the carriers exercising their lien, it was not surprising that he was in a position to bring an action in his own name.

18.In the present case, the causes of action relied upon by the Receiver are a claim for money had and received, a claim as beneficiary under a constructive trust, and a claim in conversion.  As to the first two of these claims, I do not see that the Receiver is in a position to maintain either of them personally, since it is the Bank, and not he personally, to whom the Defendant was indebted, and in favour of whom the charge was given.  Accordingly, if the monies which are sought to be recovered do in fact represent rental payments in respect of some of the Properties for a period after the appointment of the Receiver, they might be monies to which the Bank has a claim, but it is difficult to see how the Receiver (rather than the Bank) could properly be regarded as a beneficiary of any constructive trust that might exist in relation to them.  As for the claim in conversion, I have difficulty in seeing how it could be said that the receiver can maintain such a claim, as it would not seem that either the cheques in question nor their proceeds were ever in his possession.

19.As for Mr Fung’s argument that the terms of the charge under which he was appointed give the Receiver specific power to sue in his own name, the immediately relevant provision in the charges (a sample of which was referred to at the hearing), would appear to be clause 11.14, which provides that “any Receiver may act in his own name or in the name of the Borrower”.

20.Mr Beresford submitted that, as that this provision follows shortly after clause 11.10, which has the effect of deeming the Receiver to be the agent of the borrower (i.e. the Defendant), it cannot apply in this case, as any such agency ceased on the appointment of liquidators in respect of the Defendant.  That any agency on behalf of the Defendant ceased on the appointment of liquidators in respect of it was not disputed by Mr Fung.

21.In my view, whether or not such deemed agency has come to an end, clause 11.14 does not entitle the Receiver to bring proceedings such as the present proceedings in his own name.  First, it does not (contrary to Mr Fung’s submission) specifically authorise him to bring legal proceedings in his own name.  There is no mention in clause 11.14 of legal proceedings at all.  There are clearly many acts that a receiver might wish to do in relation to the property over which he is appointed receiver apart from bringing legal proceedings, and the clause accordingly would have substantial content even if it did not (as I think it does not) extend to the bringing of legal proceedings.  Further, even if it were construed as extending to the bringing of legal proceedings in cases where the receiver has no cause of action vested in himself, it does not seem to me that the parties could by agreement circumvent the legal principle against an agent bringing proceedings in his own name on behalf of his principal where no cause of action vests in him, particularly as that principle is based on what appear to me to be sound reasons.

22.I would also add that I do not think that clauses 8.2 and 8.4 of the charge, to which Mr Fung also referred, take the matter any further from the Receiver’s point of view.  Neither of these provisions deals with the question of the Receiver’s power to bring legal proceedings in his own name.

23.Mr Fung also relied on the provisions of sections 50 and 51 of the Conveyancing and Property Ordinance (Cap. 219).  So far as section 50 is concerned, section 50(1) implies into all legal charges a power to appoint a receiver where the secured monies have become due, section 50(2) deems any receiver so appointed to be the agent of the mortgagor, and section 50(3) provides that any receiver so appointed may act in his own name or the name of the mortgagor.  Section 50(6) confers on such a receiver the power to demand and recover the land of which he is appointed receiver, and the income thereof, by action, distress or otherwise, in the name either of the mortgagor or mortgagee.  Reading these provisions together, it does not seem to me that they provide any basis for concluding that the Receiver is entitled to bring proceedings in his own name where he has no cause of action vested in him.  So far as section 50(3) is concerned, again, it seems to me that the provision has substantial content even in the absence of such a power, and I do not regard it as authorising the bringing of proceedings by a receiver who has no cause of action vested in himself.  This conclusion is, I think, supported by the provisions of section 50(6), which suggest that where a receiver does bring proceedings, he should do so in the name of either the mortgagor or mortgagee.  That sub-section does not suggest that he may sue in his own name.

24.So far as section 51 is concerned, that section and the provisions of the Fourth Schedule set out the powers of the mortgagee and receiver.  However, these provisions do not deal with the question of the person in whose names proceedings should be brought, and do not, in my view, require a departure from the principle which I have referred to above, by which a receiver or other agent is not able to sue in his own name where no cause of action is vested in him.  Further, and in any event, it does not seem to me that these proceedings are of the nature specified in the Fourth Schedule, in that they are not for possession of the mortgaged property, nor do they relate to it, relating as they do to alleged rental proceeds rather than the land itself.

25.Finally, Mr Fung pointed out that in other proceedings involving the Receiver, the Receiver had successfully  brought claims for possession in his own name.  However, it does not seem that the question of the Receiver’s locus to sue in his own name was an issue in those proceedings, and they are therefore of limited assistance here.

26.For these reasons, I have come to the clear conclusion that the Receiver is not entitled to sue in his own name in respect of the claims advanced in these proceedings, and I therefore strike out the statement of claim, dismiss this action, and make an order nisi that the Receiver should pay the Defendant’s costs of this application and of the action to be taxed on the party and party basis if not agreed.  This does not, of course, mean that the Bank is without recourse if it should have a valid claim – there is nothing to prevent it from bringing proceedings itself in its own name, as I think would have been the appropriate course here.

Mr Patrick Fung, SC instructed by Messrs Simmons & Simmons, for the Plaintiff

Mr Roger Beresford, instructed by Messrs Jones Day, for the Defendant