Chiu Yu Fong the Administratrix of the Estate of Wong Tse Keung Deceased v. Lau Kwong Wing

HCA 6099/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6099 OF 1999

BETWEEN

Coram : Master Ko in Chambers

Date of Hearing : 24 May and 19 July 2010

Date of Judgment : 8 September 2010

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J U D G M E N T

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1.There are 2 applications before the court:

(a)  The Defendant’s summons to discharge a charging order in favour of the Plaintiff on the ground that the judgment debt has been satisfied.

(b)  The Plaintiff’s summons to adjourn the Defendant’s summons pending a trial before a Master.

BACKGROUND

2.The following background is not disputed.

3.The Defendant was indebted to Wong Tse-Keung.  According to a repayment agreement dated 16 December 1997 signed by Mr. Wong and the Defendant, the then outstanding amount was agreed at $650,000.

4.Mr. Wong died on 13 January 1998.  Letters of administration have been granted to his widow Madam Chiu.

5.By this action, which was commenced in 1999 by Madam Chiu as the administratix of Mr. Wong’s estate, the Defendant was sued for the amount due under the repayment agreement.

6.The Defendant did not defend the claim and judgment was entered on 5 May 1999 in favour of the Plaintiff for $650,000 plus interest from 1 September 1998 until payment and fixed costs of $1,550.

7.On 20 July 1999, the Plaintiff obtained a charging order absolute to charge the judgment debt together with the costs of the charging order application against the Defendant’s interest in a property jointly owned by the Defendant and his wife.

8.The Defendant made 2 repayments of $50,000 each to Madam Chiu on 27 July 1999 and 3 November 1999 respectively.  By a calculation sheet, the parties agreed the outstanding amount as at 3 December 2002 inclusive of interest to be $858,120.

9.In December 2002, Madam Chiu engaged a debt collector called Wah Tai Commercial (Credit Management) Company (“Wah Tai”) to pursue the Defendant for payment.  The engagement was evidenced by a debt collection contract and a debt collection authorization, both signed by Madam Chiu and one Man Sai-Wing who was the sole-proprietor of Wah Tai.

THE DEFENDANT’S CASE

10.According to the Defendant, he was contacted by one Mr. Heung at the end of December 2002 who claimed to be from Wah Tai and representing the Plaintiff to demand and collect the sum of $858,120.  When they met in Mongkok a few days later, Mr. Heung (who attended with 2 men) showed the Defendant the debt collection authorization and a photocopy of the repayment agreement endorsed with the original signature of Madam Chiu.  The Defendant was able to recognize Madam Chiu’s signature on both documents.  He told Mr. Heung that he would pay later, as he then had no money.

11.At that time, the Defendant (and his business partner) was running a fish pond business in China.  On 15 January 2003, the Defendant was contacted by one Mr. Sit who claimed to be interested in buying some abalone fry from him.  A meeting was arranged at a hotel in Shenzhen to discuss the deal further. 

12.When the Defendant turned up at the meeting in Shenzhen, he saw Mr. Heung (again accompanied by 2 men) waiting for him.  The Defendant says he was then detained in China for 3 to 4 days.  During that period of time, Mr. Heung and his associates followed him around whilst he went about in China finding money to repay the Plaintiff.  He sold his interest in the fish pond business for RMB 350,000 and borrowed RMB 400,000 from a friend.  He was allowed to leave for Hong Kong only after he had handed over the money to Mr. Heung and he was issued with temporary receipts.

13.Later in Hong Kong, the Defendant paid a further sum of HK$80,000 to Mr. Heung on about 22 January 2003.  The Defendant was given an official receipt of Wah Tai (bearing the company chop of Wah Tai and the signature of Mr. Man) for the amount of HK$858,120 paid in exchange for the temporary receipts.  Mr. Heung also handed over to him the repayment agreement, a photocopy of the repayment agreement endorsed with Madam Chiu’s signature, the debt collection authorization, a photocopy of the business registration certificate of Wah Tai, and a photocopy of the Hong Kong identity card of Mr. Man.

14.It is thus the Defendant’s case that he has fully repaid the Plaintiff by payments made through Wah Tai.

THE PLAINTIFF’S CASE

15.The Plaintiff denies having received any money from Wah Tai.

16.She doubted the alleged payments to Mr. Heung and challenged Mr. Heung’s authority to receive any money on her behalf.  She insists that the whole judgment debt other than the $100,000 repaid in 1999 remains outstanding. 

THE PROCEEDINGS BEFORE ME

17.Recently, the Defendant and his wife wanted to sell their property.  The Defendant, through his solicitors, requested the Plaintiff to discharge the charging order but to no avail.  He therefore took out his summons in December 2009 to discharge the charging order. 

18.The application is opposed by the Plaintiff.  The parties attended 2 call-over hearings before the Defendant’s summons was set down for argument. 

19.When the argument came before me on 24 May 2010, I was informed that the deponents of the affirmations filed by the parties (i.e. Madam Chiu and the Defendant) was present for cross-examination, although no direction under Order 38, rule 2(3) had been given.  At the invitation of the parties, I made an order for cross-examination of the deponents. 

20.Parties then led evidence on the Defendant’s summons.  After evidence was closed, Mr. Yip (the Defendant’s counsel) made his closing submission. 

21.Two new issues then emerged:

(a)   The costs of the charging order application, which had been added to the judgment pursuant to the charging order absolute, had not been quantified.

(b)  Parties were in dispute as to how the payments alleged by the Defendant should be appropriated to the judgment debt.

22.At the invitation of the parties, I made a gross sum assessment of the costs of the charging order application at $7,000 and adjourned the argument for parties to conduct research.

23.The Plaintiff took out her summons during the adjournment.  I allowed her to interject as her application was framed as a challenge to my jurisdiction (as Master) to bring the Defendant’s summons to fruition. 

24.When the hearing resumed on 19 July 2010, I dismissed the Plaintiff’s summons after hearing submissions.  I said I would give reasons together with my judgment on the Defendant’s summons.

DISCUSSION

(a)  The Plaintiff’s summons

25.By her summons, the Plaintiff applies to adjourn the Defendant’s summons pending a trial of the following issues:

(a)   Whether the Defendant has paid the sum of HK$858,120 or any part thereof to Mr. Heung allegedly of Wah Tai as evidenced by the official receipt?

(b)  Whether such payment discharged the Defendant’s liabilities towards the Plaintiff under the judgment?

26.In addition, the Plaintiff prays for the following directions to bring about the trial:

(a)   the Defendant be named as the plaintiff and the Plaintiff be named as the defendant;

(b)  the parties do plead to the aforesaid issues;

(c)  the parties do exchange lists of documents within 28 days from close of pleadings;

(d)  there be inspection of documents 7 days thereafter;

(e)   the parties do file and exchange witness statements as to facts within 42 days after inspection;

(f)    a case management conference be held on a date to be fixed;

(g)  there be liberty to apply; and

(h)  the costs of the Plaintiff’s summons be in the cause of the trial.

27.Mr. Chain (who represents the Plaintiff in respect of this application only) submits that I (as Master) lack jurisdiction to determine the Defendant’s summons.  As I understand him, his argument goes like this:

(a)   The Defendant’s summons was taken out under Order 50, rule 7.  It is an interlocutory application which deals with procedural matters as opposed to substantive rights of the parties.

(b)  The present dispute involves 2 issues (see above).  The first one involves substantial dispute of facts and the second one is potentially a difficult point of law. 

(c)  Relying on Fredericks & Pelhams Timber Buildings v Wilkins, Read [1971] 1 WLR 1197 and PBJ Davis Manufacturing Co Ltd v Fahn [1967] 1 WLR 1059, he submits that I should not determine the issues summarily.  Instead, the issues should be tried. 

(d)  He says that with a trial, the Plaintiff would be able to scrutinize the travel record and financial position of the Defendant and to administer interrogatories on him as to whether he had repaid the alleged loans to his friend and relative and why he had waited so long to discharge the charging order. 

(e)   He submits that Masters, as a general rule, do not have jurisdiction to try substantive disputes unless by consent of the litigants and he relies on Order 36, rule 1 and Kwok Ying Lung v Ko Chi Hung [2001] 3 HKC 480.  He contrasts Order 50, rule 7 with Order 49, rule 5 which provides for trial before a Master without the need for any consent by the parties for disputes of liability by garnishee.  He says that this jurisdictional point was simply overlooked and the parties have not in fact consented to a trial before me.

(f)    He suggests that I should invoke the court’s inherent jurisdiction to regulate its own procedure to adjourn the Defendant’s summons and to direct a trial in terms of Plaintiff’s summons.

(g)  He says that the correctness of his submission is fortified by the fact that if I proceed to determine the dispute summarily, any appeal would lie to a judge in chambers and the judge would have difficulties deciding how to approach the oral evidence received by me.

28.I am not convinced by his argument.

29.The Defendant’s application is an interlocutory application made under Order 50, rule 7.  Pursuant to Order 32, rule 11, Masters have jurisdiction to deal with interlocutory applications such as the Defendant’s summons. 

30.The fact that I may need to determine factual disputes and decide points of law in determining the Defendant’s summons does not affect my jurisdiction to deal with the application.  As a matter of fact, Masters make decisions day in day out affecting substantive rights of litigants, e.g. summary judgment under Order 14 and summary determination of question of law under Order 14A. 

31.It is important to remember that the Defendant is invoking Order 50, rule 7 but not Order 36.  Madam Chiu and the Defendant were cross-examined pursuant to an order under Order 38, rule 2(3).  The fact that there is oral evidence does not change the nature of the proceedings before me.  It remains an interlocutory application albeit with cross-examination of the deponents.  It is wrong, in my view, to examine the Defendant’s application through the spectacles of Order 36.  Order 36 (which is concerned with trial by a Master by consent) is not engaged and Kwok Ying Lung (which confirms that parties’ consent is a prerequisite to such a trial and that such consent must be written into the order) does not apply.

32.Mr. Chain cited Wilkins and Fahn in an attempt to convince me that the present dispute should not be determined summarily.  He relied on, in particular, the following passage from Wilkins (at 1201G-1202A):

“I now turn to a series of further matters which in the aggregate have led me to the conclusion that there must be a new trial generally. The case is one which manifestly called for a careful examination at trial of a number of facts – which might vary according to any particular item – and which was potentially liable to raise at least one difficult point of law, depending on quite precise facts: for the law as to gifts of chattels was rightly conceded by Mr. Stable to be somewhat artificial – a point to which I will return. The claimant’s affidavit of December 1 was of some length and raised on the face of it a serious claim to divers chattels of an overall considerable value – and the prospect of difficult points of law. It was plainly not a case for ordering summary determination under RSC O.17, r.5(2) with its consequent limitations on the right of appeal (see RSC O.58, r.8(1)) and other incidents. The order of December 16 – not expressed to be by consent: cf. The Supreme Court Practice (1970), vol.2, para.174, form PF 34 – was thus inappropriate, and would have been so, even if the master had secured consent.”

33.In my view, these decisions are facts sensitive.  They do not provide general guidance on when a dispute should be determined summarily and when a trial should be ordered.

34.In Wilkins, the judgment creditor levied execution against the judgment debtor and the sheriff seized the contents of a farm at which the claimant and the judgment debtor had cohabited.  The claimant issued an interpleader summons to claim for the contents of the farm.  She claimed that the contents belonged to her because the judgment debtor had intended to make a gift to her of the farm and of all its contents.  Her claim was disputed by the judgment creditor.  The Master directed the summons to be determined summarily under RSC Order 17, rule 5(2) (which is the same as our Order 17, rule 5(2)). The hearing came before the same Master and he, in a reserved judgment, made an order barring the claimant’s claim. 

35.On appeal, the English Court of Appeal was critical of the way the Master had handled the matter saying (at 1203F-H):

“Unfortunately, despite the full arguments of counsel both on law and facts addressed to the master in the court below, he confined his written judgment to a single page – perhaps in implementation of what he considered should be summary procedure. … The claimant was entitled to a fuller and more reasoned judgment on a matter that was of such importance to her.”

36.The Court identified a number of unsatisfactory matters in the proceedings before the Master, which can be summarized as follows:

(a)          There was a problem with discovery.  The sheriff had compiled an inventory of the goods and chattels seized and supplied a copy to the judgment creditor.  Although the document was used at trial and referred to by the Master, the claimant was never given one.

(b)         The scope of the dispute before the Master was uncertain.  There was a lack of any particulars of the items in issue.  There was confusion as to whether the horse tack had been seized by the sheriff and whether it was an item in dispute before the Master.    

(c)         The claimant was not given a chance to give full oral evidence in chief before the Master as a normal interpleader issue.  She was only cross-examined on her affidavit.

(d)         The claimant was subjected to vigorous cross-examination.  When she complained about the tone of the questions, the Master told her: “If you decline to answer the question, I will probably give summary judgment against you.”

(e)          At one stage, the Master seemed to have had in mind an issue as to whether any gifts, even if made, should be treated as void as a joint fraud on the debtor’s creditors although such issue had never been raised before the hearing.

37.All these have prompted the Court to say (at 1202F-H):

“The interpleader issue to be tried is obviously of real importance to the claimant, who is entitled to a trial that is not only fair but so appears. If the words “summary determination” in RSC Ord.17, r.5(2), came to be interpreted in some other way, that would be unfortunate. It must be remembered that, whilst that sub-rule permits the precise formulation of an issue, and pleadings to be dispensed with, the word “summary” does not entitle the master to deal “out of hand” a question that requires to be tried (cf. PBJ Davis Manufacturing Co Ltd v Fahn, Fahn (Claimant) [1967] 1 WLR 1059) or indeed, save perhaps in quite exceptional circumstances, otherwise than by a hearing conducted in the same way as the normal trial of an issue.”

38.The Court ordered a re-trial before an official referee “because of the aggregate of these unsatisfactory matters, and the absence of findings on which this court could form its own conclusions” (at 1203H).

39.In my view, the passage quoted by Mr. Chain must be read in its proper context.  It is not surprising in the circumstances of that case that the Court of Appeal had come down on the Master on the way he determined the interpleader summons.  The Court’s criticism on the “summary” manner in which the Master handled the proceedings is not meant for general application.

40.That brings me to Fahn, which also involved an interpleader summons.  On the hearing of the summons, the Master declined the judgment creditor’s request for a special appointment but made an order in favour of the claimant straight away. 

41.On appeal, Lord Denning said this (at 1061A-F):

“On the hearing of the summons it was open to the master “summarily” to determine the question: see RSC (Rev. 1965), Ord.17, r.5(2). But “summarily” there does not mean that he can determine it straight away out of hand. It only means that he can determine it himself without directing an issue: see in re Tarn. The usual practice of the master, when he “summarily” determines the question, is to give a special appointment at which evidence can be taken orally and the witness cross-examined; and the relevant documents produced. In this case the solicitor for the execution creditor asked for a special appointment. But the master said it was only a fortnight before the end of term. He could not fit in any special appointment. So he would deal with it straight away. He did so. He made an order in favour of the claimant, the wife. The order was that “the claim be allowed and the sheriff withdraw from possession of the goods seized by him under the writ of fi fa.”

The execution creditor appeals from that order of the master. He contends that the master ought to have given a special appointment and ought not to have determined the matter out of hand as he did.

I fear that the master was in error in deciding it straight away as he did out of hand. When a wife puts in a claim to all the furniture in a house, I think that the execution creditor can properly ask that she give her evidence on oath and be cross-examined; and that there should be discovery of documents in order to test whether her claim is good.  The master should give a special appointment for the purpose.  So I think here that the master’s order must be set aside and a special appointment made.”

42.Again, Fahn is not concerned with when a dispute should be determined summarily or by means of a trial.  The Court there actually directed an appointment for the interpleader summons to be determined summarily under RSC Order 17, rule 5(2) as opposed to a full blown trial.

43.In my view, one must not over-generalize the criticisms made by the Court of Appeal in these cases on the particular way the Masters had “summarily” determined the matters.  Unlike Fahn, the Defendant’s summons had been set down for full argument with cross-examination of the deponents.  Unlike Wilkins, the issues in the present dispute are well-defined (see the issues identified by Mr. Chain above).  Parties filed their affirmations without any complication. There was no application for discovery or interrogatories.  Parties had been given full opportunity to lead evidence-in-chief and to cross-examine the other side’s deponent.  I am not going to determine the summons “out of hand”.

44.What Mr. Chain is trying to say through these cases is that given the substantial disputes of facts and the difficult point of law, the dispute underlying the Defendant’s summons should be tried.  In my view, it is now too late to ask for a trial.

45.By Practice Direction 14.2, para.2, all interlocutory applications should initially be listed before a Master.  The Master presiding at call-over hearings will decide how the application should be disposed of taking into account the views of the parties.  We have had 2 call-over hearings on the Defendant’s summons.  I have not been shown the transcript of those hearings and do not know what had transpired there.  It is implicit in Mr. Chain’s submission that no one had raised the possibility of a trial under Order 36 before the summons was set down for argument. 

46.I can see no justification for directing a trial now.  In deciding whether I should exercise my discretion to order a trial, I am guided by the underlying objectives set out in Order 1A which include the following:

(a)   to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b)  to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c)  to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d)  to ensure fairness between the parties; and

(e)   to ensure that the resources of the Court are distributed fairly.

47.As I have pointed out above, the issues in this dispute are well-defined. Mr. Chain does not dispute that the Plaintiff could have applied for discovery or administered interrogatories on the Defendant if that was considered necessary.  We have already heard evidence from the Defendant and Madam Chiu.  Mr. Yip has already made his closing submission, subject to his further submission on appropriation.  Directing a trial now will mean all these efforts (and costs) will be wasted.  Such wastage is certainly inconsistent with the underlying objectives mentioned above.

48.It is true that any appeal from my decision on the Defendant’s summons would go to a judge in chambers: see Order 58, rule 1.  But I do not believe  oral evidence having been received by me would pose any difficulty to the judge.  Insofar as it is necessary, parties can apply under Order 58, rule 1(5) for leave to adduce the transcript of the relevant oral evidence for the purpose of the appeal.  In the course of writing this judgment, I noticed a recent example in which a judge dealt with an appeal under Order 58 from a decision of a Master after hearing evidence (see Chow Fu Hsien v K Vision International Investment (HK) Ltd, unreported, HCA 2884/2004, Mr. Recorder Benjamin Yu SC, 20 July 2010).

49.For all these reasons, I have dismissed the Plaintiff’s summons.

(b)  The Defendant’s summons

50.I now turn to the substantive dispute. 

51.I should start by commenting on the approach advocated by Mr. Lo (who represents the Plaintiff in respect of this application only).  He submits that I should adopt the approach laid down in A v C (No.2)  [1981] 1 QB 961 and M Corp v B Inc [1986] HKLR 657 in dealing with the Defendant’s evidence.  I do not agree.

52.The plaintiffs in those cases had obtained Mareva injunction against the defendants.  In A v C, the defendant applied to vary the injunction to enable it to pay certain legal expenses out of the assets subject to the injunction.  In M Corp, the defendant applied to vary the injunction so that it might effect certain payments out of the bank account subject to the injunction.   Their applications were refused because neither of them had produced evidence to enable the Court to determine whether they had other assets available to satisfy the injunction.

53.As  explained by Power J (as he then was) in M Corp (at 660 H-I):

“What the Court is really concerned with are the assets of the defendant and it is for the defendant to place before the Court evidence as to those assets. He must place the Court in a position where it can, to paraphrase the words of Robert Goff J in A v C assess whether any other assets of the (defendant) were available to pay the (amounts owing) or, if they were so available, why the defendants were seeking to make use of the assets which were subject to the Mareva injunction for this purpose.”

54.The Defendant here is not subject to any Mareva injunction and we are not concerned about whether he will have assets available to satisfy the judgment.  As a matter of fact, the Defendant says he has already done so.

55.Insofar as Mr. Lo is suggesting that the Defendant must demonstrate by evidence that he had the financial resources back in January 2003 to satisfy the judgment, I do not think the authorities support him.  In any event, it is the Defendant’s case that he had to borrow from friends and relatives before he could repay the Plaintiff.  Any question pertaining to such loans could and should have been dealt with in cross-examination. 

56.In my view, I should adopt the normal civil standard of proof (i.e. on balance of probabilities) in assessing the evidence in this case.

57.Mr. Lo and Mr. Yip have not commented adversely on the broad issues formulated by Mr. Chain.  I shall adopt them in the ensuing discussion.  To recapitulate, they are:

(a)   Whether the Defendant has paid the sum of HK$858,120 or any part thereof to Mr. Heung allegedly of Wah Tai as evidenced by the official receipt?

(b)  Whether such payment discharged the Defendant’s liabilities towards the Plaintiff under the judgment?

58.On the first issue, the Defendant says he has effected payment through Mr. Heung of Wah Tai but Madam Chiu says she has received nothing.  In fact, both of them could be telling the truth.

59.Madam Chiu did not witness the dealings between the Defendant and Mr. Heung.  The Defendant does not seriously challenge Madam Chiu’s contention that she has received nothing from Wah Tai.  So their evidence does not in fact contradict each other.

60.We have not seen any evidence from Wah Tai.  The Defendant says he does not know the full name of Mr. Heung and is unable to locate him.  Madam Chiu says she visited the business premises of Wah Tai in around January 2003 and found it to be closed.  She tried to contact Mr. Man but in vain.  She has since reported the matter to the police.  According to her, the police have spoken to Mr. Man and Mr. Man has denied issuing the official receipt.

61.I should be very careful in assessing such hearsay evidence.  Madam Chiu says she learnt that information from one Mr. Kam of the police but there is no evidence from Mr. Kam.  It is not known if Mr. Man has made any statement to the police and I have seen no such statement.  Madam Chiu has written to the police to enquire whether Mr. Man had made any statement.  In her latest affirmation (which was filed during the adjournment), she exhibited a reply from the police stating that the investigation had concluded with insufficient evidence to prosecute anyone and that all evidence had been destroyed.  Mr. Yip has objected to the filing of this affirmation without leave and Mr. Lo has conceded that the Plaintiff will not rely on it for the purpose of the Defendant’s summons.

62.In any event, Mr. Man certainly has his reasons to lie if he turns out to be the one who ran away with the Plaintiff’s money.  The Defendant has had no opportunity to test the veracity of his denial.  There is also nothing upon which the Court can assess the accuracy and reliability of such hearsay statement. In those circumstances, I have decided to place no weight on such evidence.

63.The Plaintiff has certainly attempted to cast doubt on the Defendant’s case.

(a)   The Plaintiff queries why the Defendant would suddenly agree to repay after so many years. 

The Defendant explains that he repaid because he had been detained in China and was afraid of his safety.  When it was put to him that he had not mentioned all these in his affirmation filed in support of the application, the Defendant adduces his police statement dated 8 April 2003 to rebut any suggestion of recent fabrication. 

I note that the account given by the Defendant to the police is not on all fours with his evidence.  For example, he merely told the police that Mr. Heung and others had followed him around in China (as opposed to detaining him) and he specifically denied having been intimidated or assaulted by Mr. Heung.  Be that as it may, the general thrust of the story is consistent, namely, that he was under the watchful eyes of Mr. Heung and his associates whilst he went about in China finding money to repay the Plaintiff.  If he had been allowed to do so, I see no reason why he would not return to Hong Kong before trying to repay the Plaintiff.

(b)  The Defendant has produced a written agreement to evidence the sale of his interest in the fish pond in China (Exhibit D4).  The agreement provided that the Defendant agreed to sell his 50% interest in 2 companies, namely, 饒平金江水產有限公司 and 金江實業〔香港〕公司 to the purchaser at a consideration of RMB 350,000.  According to the Defendant during cross-examination, 金江實業〔香港〕公司 should be a Hong Kong business. 

The Plaintiff’s solicitors conducted business registration search but could find no Hong Kong business with such a name.  When this was put to the Defendant in cross-examination, he explained that he had left all paperwork to his business partner.

It has not been established in evidence whether 金江實業〔香港〕公司 carries on any business in Hong Kong such that section 5 of the Business Registration Ordinance (Cap.310) applies.  Assuming it does, I do not think the fact of non-registration would affect the transaction. 

Section 15(1)(c) provides that any person who fails to make any application required under section 5 shall be guilty of an offence and shall be liable to a fine at level 2 and to imprisonment for 1 year.  It does not provide that any act done in the name of an unregistered business shall be void or invalid.  After all, unincorporated corporations do not enjoy separate legal identity and anything done in the name of such a business is referable to its proprietor(s). 

In his closing submission, Mr. Lo has doubted whether anyone would want to buy a business without formal documentation.  I think this is a valid point to take and have taken it into consideration in my final analysis.

(c)   The Plaintiff also questions how the Defendant could come up with loans of RMB 400,000 and HK$80,000 within a short time. 

The Defendant has explained in evidence that he had not planned to repay the Plaintiff by means of loans.  He was driven to do so because he was detained in China and was afraid of his safety. 

(d)   It is said that it is incredible for the Defendant to hand over so much money without first contacting Madam Chiu to confirm the authorization.

The Defendant has explained that he did not doubt Mr. Heung’s authorization because he was shown the debt collection authorization and a photocopy of the repayment agreement at their first meeting and he could recognize Madam Chiu’s signatures on these documents.

The Defendant has been criticized for omitting to mention in his evidence-in-chief the fact that he had been shown a photocopy of the repayment agreement endorsed with Madam Chiu’s signature (see transcript for the 24 May 2010 hearing at 20L-21E). I do not think such criticism is entirely justified.  At one stage, the Defendant did say that the debt collection authorization was only part of the documents shown to him at the first meeting (see transcript for the 24 May 2010 hearing at 8E). 

(e)  It is said that the Defendant should have followed the instruction on the repayment agreement to pay Madam Chiu by cheques.  There is a handwritten statement on the repayment agreement: “另外，我要求劉光榮先生以支票付款時將收款人改寫我太太趙如芳女士”.

The Defendant has explained that he merely handed over to Mr. Heung what he had received from others.  In any event, I note that the Defendant has in fact repaid to Madam Chiu in cash before – in terms of the two $50,000 payments in 1999.

(f)   The Defendant was also criticized for alleging cash payments.  By alleging cash payments, so the Plaintiff argues, there will be no trace to follow up and the Defendant cannot be asked to produce any proof of payment. 

On this, the Defendant says it was not the usual practice for mainland Chinese to use cheques and he just handed over to Mr. Heung what he had received from others.

(g)  According to the business registration record kept by the Inland Revenue Department, Wah Tai ceased business on 20 January 2003.  Mr. Lo submits that the Defendant should be taken to have constructive knowledge of that fact, as Wah Tai’s business registration record is a public record.  He argues that it was unbelievable that the Defendant would still hand over HK$80,000 on about 22 January 2003 when he already knew that Wah Tai had ceased business.

Section 8(2) of Cap.310 provides that: “Where a business ceases to be carried on, any person who was carrying on such business shall, within 1 month of the cessation, notify the Commissioner in writing thereof.”  So, Mr. Man had 1 month from 20 January 2003 to report.  It is not known whether he did it before or after 22 January 2003 and when Wah Tai’s public record was updated.  I am not satisfied that the Defendant should be imputed with such knowledge at the time of the last payment. 

(h) Lastly, the Plaintiff queries why the Defendant would wait so long to discharge the charging order if he had fully repaid the Plaintiff back in 2003.

This is not the first time the Defendant has alleged full repayment.  He must have done it in 2003 which prompted the Plaintiff to file a report to the police.

The Defendant says he raised the matter this time because he wanted to sell the property.  He instructed his solicitors to write to the Plaintiff to ask for a discharge, but the Plaintiff did not respond.  So, he took out the present application.  The Defendant and his wife have now sold the property.  An assignment dated 10 May 2010 has been put in evidence (Exhibit D10).  No issue is taken by the Plaintiff on the sale.

64.I accept that the Defendant’s case is not perfect.  The Plaintiff and her legal advisers have certainly done a lot in trying to undermine the Defendant’s case.  I have carefully considered all the points taken both individually and collectively.  In the end, I do not think that is sufficient to outweigh the documentary evidence adduced by the Defendant in support of his case. 

65.If the Defendant had not paid Mr. Heung, he would unlikely be issued with the official receipt containing the statement “茲收到劉光榮欠趙如芳女士港幣捌拾伍萬捌仟壹百貳拾元正日後互不拖欠” and, more importantly, given the repayment agreement.

66.In his closing submission, Mr. Lo has suggests that Mr. Heung might have somehow come to these documents after Wah Tai had ceased business.  But the Defendant was shown the debt collection authorization at their first meeting in December 2002 before Wah Tai ceased business.  Furthermore, if Mr. Heung had only picked up the documents discarded by Wah Tai, he would unlikely be able to come up with a photocopy of Mr. Man’s identity card. 

67.Another possibility, of course, is that the Defendant has colluded with Mr. Man (and Mr. Heung) to cheat Madam Chiu.  But the Defendant has been subjected to cross-examination by Mr. Lo and there is really nothing which tends to support such a possibility.

68.No point is taken on the conversion of RMB 750,000 into Hong Kong dollars. I therefore find as a fact that the Defendant has paid the sum of $858,120 to Mr. Heung as evidenced by the official receipt.

69.Turning to the second issue, I am also satisfied that such payment has discharged the Defendant’s liabilities towards the Plaintiff in terms of the judgment and the costs of the charging order application.

70.The Plaintiff has denied having authorized anyone to accept payment from the Defendant.  It is Madam Chiu’s evidence that she only “authorized Man Sai Wing (“Mr. Man”) who carried on the debt collecting business under the trade name of Wah Tai to assist me to chase after the Defendant for settling the debt with me and I at no point of time gave authorization to Mr. Man and/or any other person to accept payment on my behalf.”  I do not believe her on this.

71.It is not Madam Chiu’s case that the Defendant had been avoiding her.  I do not believe she would engage a “debt collector” just to chase after the Defendant but not actually to collect the debt. 

72.More, importantly, her allegation is contradicted by contemporaneous documents.  It was expressly provided in the debt collection authorization that Wah Tai had full authority to chase after the Defendant and to collect the debt (“全權委托華泰商業〔理財〕公司追收以上一切欠款”).  By clause 1 of the debt collection contract, she further agreed to and did handover the repayment agreement to Wah Tai to facilitate Wah Tai’s work. There is nothing in either the debt authorization or the debt collection contract to prohibit Wah Tai from accepting payment.  If she had only instructed Wah Tai to chase after the Defendant, there was no reason for her to hand over the repayment agreement as she would be dealing with the Defendant directly in terms of payment after Wah Tai had established contact for her.

73.According to Article 72 in Bowstead and Reynolds on Agency, 18^th Edition (2006):

“When a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority.”

By signing the debt collection authorization and endorsing on the photocopy of the repayment agreement, and providing the repayment agreement to the debt collector, Madam Chiu has, by conduct, permitted it to be represented that whoever is in possession of those documents has the authority to chase after the Defendant for the debt and to receive payment on her behalf.

74.The difficult point of law contemplated by Mr. Chain has not arisen.  This is how Mr. Chain framed the issue:

“Master, again, as I have said, I’m not here to argue the merits with Master, you will of course again know it is trite that, really, the common law on an agent’s authority to collect payment is always highly circumscribed and looked at with jealousy.

An auctioneer, for example, other than an authority to accept a deposit, has no general authority to accept payment of the purchase price. A solicitor, Master, an officer of the court retained by a party, again, as a starting point – of course, at the end of the day, it comes back to facts – but as a proposition of law, Master, even a solicitor retained by a party has no general authority to accept payment. An estate agent who are [sic] there to sell properties, again, as a starting point, has no general authority to accept payment.

All these illustrate, Master, that the common law looks at an agent’s authority to accept payment with jealousy and it’s highly circumscribed. Of course, Master, we are now really sort of just – the world has developed and we are now really in the 21^st century. The old cases may have all to be looked at in that light.

And in fact, one irony of all these arguments, Master, is really that, in the olden days, the law tends to look at cheques etc. with, again, reservation. And there are numerous decisions under the common law to say that an agent who is authorized to receive payment is only authorized to receive cash but not, for example, a cheque or other negotiable instrument. That is the 19^th century deal and umpteen cases in that.

But Master, that reservation about these negotiable instruments, is in my respectful submission, may require the courts’ renewed consideration in the modern day commercial context.  In this case, in fact, if the matter does proceed to that stage, we will be arguing that even if a debt collector here has the authority to receive payment, he ought to take a cheque made out to the principal.”

75.To start with, such contention is inconsistent with Madam Chiu’s evidence that she had not authorized anyone to accept payment.  In any event, I have already accepted that Wah Tai had been authorized to collect the debt from the Defendant.  All payments were made in cash.  Neither the debt collection authority nor the debt collection contract requires Wah Tai to receive cheques. According to para.3-021 of Bowstead and Reynolds on Agency, 18^th Edition (2006): “An agent who is authorized to receive payment of money has prima facie no authority to receive payment otherwise than in cash…”.

76.All in all, I am satisfied that the payments made by the Defendant to Mr. Heung has discharged the Defendant’s liabilities towards the Plaintiff.

77.There are 2 more points to tackle.

78.On 24 May 2010, Mr. Lo submitted that the Defendant’s payments should be appropriated to satisfy interest on the judgment debt first.

79.Mr. Yip has now come back with an authority.  In Florence Deeley v Lloyds Bank Ltd [1912] AC 756 at 783, Lord Shaw of Dunefermline adopted Eve J’s statement on the general rule as follows:

“According to the law of England, the person paying the money has the primary right to say to what account it shall be appropriated; the creditor, if the debtor makes no appropriation, has the right to appropriate; and if neither of them exercises the right, then one can look on the matter as a matter of account and see how the creditor has dealt with the payment, in order to ascertain how he did in fact appropriated it. And if there is nothing more than this, that there is a current account kept by the creditor, or a particular account kept by the creditor, and he carries the money to that particular account, then the Court concludes that the appropriation has been made; and having been made, it is made once for all, and it does not lie in the mouth of the creditor afterwards to seek to vary that appropriation.”

80.Mr. Lo does not dispute the above authority.  He initially insisted on 19 July 2010 that the calculation sheet supported his contention.  But when he was asked to illustrate by means of calculation how that was so, he eventually conceded that the calculation sheet did not in fact support him.

81.Lastly, Mr. Yip has put forward a revised schedule of calculation showing that the amount outstanding as at 22 January 2003 should be $834,988.73 taking into account the costs of the charging order application and interest. 

82.I note that Mr. Yip has assumed in his calculation that interest on the costs of the charging order application had accrued since 1 September 1998. That is not correct.  Such costs was only added to the judgment by the order dated 20 July 1999.  This correction has the effect of reducing the outstanding amount in Mr. Yip’s calculation.  However, the general tenet of Mr. Yip is still valid, namely, that the $858,120 paid as evidenced by the official receipt has fully discharged the Defendant. 

CONCLUSION

83.There are obvious risks associated with engaging debt collectors.  In Wong Wai Hing v Hui Wei Lee[2001] 1 HKLRD 736, it was held that a creditor may be liable as a principal for the tortuous or unlawful acts committed by the debt collector agent engaged by him.  The creditor may also find himself in a dilemma when the debtor later claims to have repaid through the debt collector but the debt collector cannot be found to confirm it.  This is essentially what happened here.

84.For the reasons stated above, I am satisfied that the Defendant has fully discharged his liabilities towards the Plaintiff under the judgment and the charging order absolute.  I therefore make an order in pursuance of Order 50, rule 7 to discharge the charging order and to vacate the relevant registrations.

85.Costs normally follow the event.  I make a costs order nisi that the Plaintiff do pay the Defendant the costs of the Defendant’s summons (including all reserved costs) and the costs of the Plaintiff’s summons with certificate for counsel to be taxed if not agreed.

Mr. Benjamin Chain and Mr. Anthony Lo , instructed by Messrs Y.T.Szeto & Co, for the Plaintiff

Mr. Arthur Yip, instructed by Messrs Dundons, for the Defendant