Arthur Antonio Da Silva and Another v. Gabriel Richardo Dias-azedo and Another

HCA 2158/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2158 OF 2009

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BETWEEN

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Before: Deputy High Court Judge Carlson in Chambers

Date of Hearing: 23 February 2010

Date of Judgment (Handed Down): 3 March 2010

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J U D G M E N T

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Introduction

1.This is an application by the Plaintiffs, Mr and Mrs da Silva to have made absolute a Garnishee Order nisi in respect of a debt said to be owing to the Defendant, Mr Azedo by the Garnishee Grant Thornton which is an international accountancy practice of whom the Defendant had been senior partner in Hong Kong. This is resisted by Grant Thornton on the basis that there is no amount owing by it to Mr Azedo.

2.How all of this has come about can be explained very briefly. Mr and Mrs de Silva and Mr Azedo, who are prominent members of Hong Kong’s Portuguese community, had been life-long friends. In 1995, Mr and Mrs de Silva established a trust fund amounting to US$2.339 million which they entrusted to the management of Mr Azedo who was then the managing partner of Grant Thornton. In September 2009, Mr Azedo disappeared, has not been seen since and is thought to have left Hong Kong. On 27 November 2009, Mr and Mrs de Silva obtained judgment in default of appearance against him in the sum of US$2,339,922.07. The application before me follows on from an Order nisi made by Master Yu in respect of a sum of HK$5.5 million which is the amount credited to Mr Azedo’s partnership account with Grant Thornton. It is this Order, in respect of this amount, which I am asked to make absolute.

3.For the sake of completeness, I should relate that Mr Azedo has also been sued by a Mrs Angela Gardner who had entrusted over HK$9 million with him. In her case there is a Mareva injunction freezing other funds owing to Mr Azedo but as yet no final judgment has been entered in that action. When this application was first before me, I adjourned it and directed that Mrs Gardner be informed of the application by Mr and Mrs de Silva so as to give her an opportunity to appear and make any representations that she might wish to in her capacity as a creditor of Mr Azedo’s. Her solicitors have written to the court to say that they do not wish to appear nor say anything on this application.

The Issue

4.Mr Fung, SC who appears for Mr and Mrs de Silva, has addressed me on a range of issues but it seems to me that really there is only one matter which ought to claim my attention in deciding whether, on this occasion, I should make the Order nisi an absolute one. As Mr Stock on behalf of Grant Thornton has submitted, Mr and Mrs de Silva can do no better than Mr Azedo in relation to any debt owing by Grant Thornton to him. It is in the nature of garnishee proceedings that the judgment creditor stands in the shoes of the judgment debtor in claiming any debt owing by the garnishee to the judgment debtor. The court in making a garnishee order directing payment by the garnishee to the judgment creditor will by the making of that order provide a valid receipt to the garnishee and thereby extinguish any debt (to the extent of the garnishee order) owing by the garnishee to the judgment debtor. In so ordering, the garnishee is protected from any subsequent suit by the judgment debtor against it for the amount and to the extent of the court’s order. So much is trite and not in dispute.

5.In this situation, Grant Thornton (as garnishee) is submitting that it owes the judgment debtor (Mr Azedo) nothing, so that if I make the order asked for by Mr and Mrs de Silva, Grant Thornton gratuitously would be paying them a debt owed to them by Mr Azedo. This as well is trite. The question here is whether Mr Fung can today prove that a debt is in fact owed by Grant Thornton to Mr Azedo. Perfectly understandably, he is entitled to point to the accounts which show that Grant Thornton owe Mr Azedo $5.5 million. Nevertheless, that is not the end of the matter because as Grant Thornton’s evidence shows this account is not the final word on the matter. It is only a provisional account and that given some time, Grant Thornton is well able to demonstrate that the final outcome will be that it is Mr Azedo who owes it money, in which case these garnishee proceedings are incompetent and must fall to be dismissed.

6.Mr Fung has stressed the position of Mr and Mrs de Silva as innocent victims of Mr Azedo who have acted with dispatch in obtaining judgment against him which they are now trying to enforce by all reasonable and lawful means at their disposal. Of this, I have no doubt. He then seeks to contrast the position of Grant Thornton who he says has dragged its feet in relation to finalising its accounts which, on their face, shows a debt owing to Azedo for $5.5 million.

7.Mr Stock submits that in circumstances where Mr Fung bears the burden of proving that there is such a debt owing, he must fail given the state of the evidence that these accounts are yet to be finalised and having regard to Grant Thornton’s other claims against Mr Azedo. Faced with this situation, Mr Stock submits that I should therefore summarily dismiss these garnishee proceedings, failing which I should, at the very least, adjourn to allow the accounts to be finalised and to await the outcome of Grant Thornton’s pending action against Mr Azedo, now being actively prepared on its behalf, to be tried.

Conclusion

8.Both counsel have referred me to authorities which to varying degrees bear on this type of case. For my part, I see this very much as a case of the management of the application by the court against the background of the substantive issues raised by the application and the current state of Grant Thornton’s evidence. So far as Mr and Mrs de Silva are concerned, they have done all that they can by obtaining a final judgment against Mr Azedo.

9.My sense of this is that it would be quite wrong to ignore the fact that the accounts relied on by Mr Fung are provisional. Mr Fung has complained that Grant Thornton has been dilatory in the sense that these are 2008 accounts and so there may be something in that, but it is also right to say that this has only “blown up” since September 2009 when Mr Azedo disappeared leaving behind innocent creditors such as Mr and Mrs de Silva and Mrs Gardner.

10.What I have decided to do is to allow Grant Thornton more time to prepare its final accounts. I don’t think that it would be right, in the first instance, to say that the de Silvas should have to wait for the outcome of any action by Grant Thornton against Mr Azedo. What I propose to say is that I will adjourn this application until 1 June 2010 at 9:30 a.m. before me when I would expect that Grant Thornton will have prepared its final version of the relevant partnership accounts or, at the very least, a credible and verifiable account as between the partnership and Mr Azedo, and so that is the order that I will make. The costs of this application will be reserved to that date.

Daniel Fung SC of Gary Lam, instructed by Messrs Haldanes for the 1st and 2nd Plaintiffs

Alexender Stock, instructed by Messrs DLA Piper Hong Kong for the 2nd Defendant

The 1st Defendant did not appear and was not represented