ALEKSANDER JANEZIC AND OTHERS v. YEO TENG HWEE aka YEO TENG HWEE CHRISTOPHER AND OTHERS

HCA 9/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9 OF 2009

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BETWEEN

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J U D G M E N T

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1.  This is an appeal by the Claimant against the Decision of Master Ko dated 23^rd September 2009 whereby Master Ko made a Garnishee Order Absolute against the Fubon Bank (Hong Kong) Limited (“Fubon”) in favour of the Plaintiffs ordering that Fubon (Garnishee) do forthwith pay to the Plaintiffs (Judgment Creditors) the amount of debt due or accruing from Fubon to the 2^nd Defendant (Judgment Debitor), or so much thereof as was sufficient to satisfy the balance of judgment debt (and interest and costs) arising out of a Judgment entered on 22^nd January 2009 by the Plaintiffs against the 1^st, 2^nd and 3^rd Defendants in this Action in the sum of US$587,325.73 and €15,000.00.

2.  At the hearing before me, the Claimant appeared in person and the Plaintiffs did not appear and were not represented.

Background

3.  This unfortunate case has had a rather chequered history. It is the subject of a Judgment handed down by Saunders J. on 14^th April 2009 which Judgment was referred to by Master Ko in his Reasons For Decision handed down on 28^th December 2009 which I have to consider in this Appeal.

4.  In his Reasons For Decision, Master Ko has given a succinct summary of the factual background which I gratefully adopt and set out below : -

Background

5.  The background of this action and other related proceedings have been fully set out in Saunders J’s judgment dated 14 April 2009 (“the Judgment”).  I shall only highlight some of the more relevant matters below to put the application in context.

6.  The Plaintiffs, Mr Thakur and one Mr Al Husseini are all victims of the fraudulent “cold calling” scheme perpetrated by the 1^st Defendant (“Christopher Yeo”) through First Prime and Pacific Wealth.  They all suffered a loss represented by the money they deposited into various bank accounts operated by Christopher Yeo and in the names of First Prime and Pacific Wealth.  More particularly :

(a)  The 6 Plaintiffs deposited a total sum of $597,325.73 and €15,000 into various bank accounts (including a total sum of US$249,370.18 deposited by the 2^nd, 3^rd and 4^th Plaintiffs into Fubon Bank).

(b)  Mr Al Husseini deposited a total sum of US$139,400 into Fubon Bank.

(c)  Mr. Thakur deposited a total sum of US$92,894.85 into Fubon Bank.

7.  The judgment obtained by the Plaintiffs in this action is a global judgment.  It does not set out the respective entitlement of each plaintiff or the basis of their entitlement.  Apart from the subject garnishee order nisi in respect of First Prime’s money in Fubon Bank, the Plaintiffs also obtained a garnishee order nisi in respect Pacific Wealth’s money in Cathay Bank.

8.  Mr Al Husseini has also obtained judgment against First Prime in HCA 124/2009 for US$139,400 plus interest and costs.  He subsequently obtained a garnishee order nisi in respect of First Prime’s money in Fubon Bank.

9.  Insofar as Mr Thakur is concerned, he has only commenced an action in HCA 521/2009 against First Prime, Christopher Yeo and one First Prime International Limited claiming, inter alia, the total sum of US$450,501.93 (including the US$92,894.85 he deposited into Fubon Bank as mentioned above).  No judgment has been entered in that action

10.  Faced with competing claims, Fubon Bank took out an interpleader proceeding on 9 February 2009 in HCMP 223/2009 for disposal of the money standing in credit in First Prime’s bank accounts.  First Prime has two bank accounts in Fubon Bank : a current account and a US$ fixed deposit account.

11.  On 13 March 2009, the Plaintiffs’ two garnishee orders nisi and Mr Al Husseini’s garnishee order nisi all came before the Registrar.  The learned Registrar made all these garnishee orders absolute despite Mr Thakur’s objection.  Mr Thakur appealed.

12.  Both the interpleader proceeding and Mr Thakur’s appeal came before Saunders J on 7 April 2009.

13.  By the Judgment handed down on 14 April 2009, the learned Judge ruled (at paragraph 57) that :

“In those circumstances it seems sensible that each of those three groups of  claimants, the three Croatian defendants [i.e. the 2^nd, 3^rd and 4^th Plaintiffs herein], Mr Al Husseini and Mr Thakur, should be entitled to trace their funds, retrieve them, and any balance in the account at Fubon Bank, (after the Bank’s costs), be available to any other general creditors.”

And the learned Judge concluded (at paragraphs 61` and 62) that :

“For the foregoing reasons the appeal against the orders of the Registrar makingthe garnishee orders absolute, and the consequent costs orders, must be allowed.  The garnishee orders absolute are set aside, and the garnishee orders nisi restored.  All orders for costs made by the Registrar below are set aside…” (emphasis added)

“No submissions were made to me in respect of the appropriate course to be adopted should it be necessary to determine the competing claims between theclaimants.  The solicitors for the Croatian defendants [i.e. the Plaintiffs herein], and for Mr Thakur should be able to agree on an appropriate procedure.  Leave is reserved to the parties to apply should they not be able to agree upon an appropriate order.  I note however that already boasts of these parties have expended far too much in the way of legal costs in these proceedings.  The sensible and just way of resolving the matter appears to me to lie in paragraph 57 of this judgment.”

14.  Upon further application by the parties, Saunders J made an order on 22 April 2009 that the money in First Prime’s current account at Fubon Bank be paid out as follows :

(a)  HK$60,000 be paid to Fubon Bank as their costs;

(b)  US$249,370.18 be paid to the 2^nd, 3^rd and 4^th Plaintiffs (and Mr Thakur be entitled to payment of his legal costs in the sum of HK$300,000 from this amount);

(c)  US$139,400 be paid to Mr Thakur; and

(d)  the balance be paid to the 1^st, 5^th and 6^th Plaintiffs.

15.  Saunders J’s above orders have left the money in First Prime’s US$ fixed deposit account with Fubon Bank undisposed of.  According to Fubon Bank’s affirmation filed in HCMP 223/2009, there was a credit balance of US$10,144.18 in that account as at 9 February 2009.”

5.  I should point out that in paragraph 14(c) of Master Ko’s Reasons For Decision quoted above there is a clerical error. The figure which Saunders J. ordered to be paid by Fubon to the Claimant was US$92,894.85 and not “US$139,400”. The Claimant confirmed to me that he had indeed received that sum of money.

6.  It is also clear from the above that the subject-matter of the Charging Order Absolute and this Appeal is the credit balance in the sum of US$10,144.18 remaining in the U.S. dollar fixed deposited account with Fubon held in the name of the 2^nd Defendant (“the US Dollar Account”).

The Claimant’s Argument

7.  Before Master Ko, the Claimant took a number of points which the Master dealt with one by one.

8.  The really substantial point taken by the Claimant was that, based on the Judgment of Saunders J., he should have the benefit of a “constructive trust or proprietary interest” in all moneys in the accounts with Fubon held in the name of the 2^nd Defendant. Thus, he should also have a claim over the money in the U.S. Dollar Account.

9.  I agree with Master Ko that the Claimant had misinterpreted the Judgment of Saunders J.. The reason why Saunders J. made the Order set out in paragraph 14 of the Reasons For Decision quoted in paragraph 4 above (subject to correction of the clerical error referred to in paragraph 5 above) was that the relevant Plaintiffs and the Claimant had actually remitted the specific sums into the account of the 2^nd Defendant with Fubon (other than the U.S. Dollar Account) which sums had never been withdrawn. Thus, the relevant Plaintiffs as well as the Claimant had the benefit of a “constructive trust or proprietary interest” and were able to trace the money. The same, however, cannot be said about the money remaining in the U.S. Dollar Account. Neither the Plaintiffs nor the Claimant ever remitted any money into the U.S. Dollar Account.

10.  The Charging Order Absolute made by Master Ko in favour of the Plaintiffs was on the basis that they were entitled to execute on the assets belonging to the 2^nd Defendant because they had a Judgment entered against the Defendants which had not been fully satisfied. The problem with the Claimant is that he has only commenced an action, High Court Action No. 521 of 2009, against the Defendants. He has not secured any judgment.

11.  In my judgment Master Ko was absolutely correct in making the Charging Order Absolute.

12.  Before me, the Claimant submitted that Master Ko did not take into account fully the points he made. I do not agree. In his Reasons For Decision, Master Ko has in fact set out in detail and carefully dealt with all the points made by the Claimant.

13.  The Claimant also asked for a stay of the Charging Order Absolute so as to enable him to take steps to wind up the 2^nd Defendant. I can see no justification for such a stay.

14.  In all the circumstances, much sympathy though I may have for the Claimant who together with the Plaintiffs are all victims of the fraud of the Defendants, I have no alternative but to dismiss the Claimant’s Appeal.

HCA 9/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9 OF 2009

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REASONS FOR DECISION

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1.  Judgment has been entered in this action in favour of the Plaintiffs against the 2^nd Defendant (“First Prime”) and the 3^rd Defendant (“Pacific Wealth”) in the sum of US$597,325.73 and €15,000 plus interest and costs.

2.  The Plaintiffs have taken steps to enforce the judgment by means of garnishee proceeding in respect of First Prime’s money in Fubon Bank (Hong Kong) Limited (“Fubon Bank”).  This is the Plaintiffs’ application to make the garnishee order nisi absolute.

3.  Fubon Bank is taking a neutral stance.  The application is, however, opposed by the Claimant (“Mr Thakur”).

4.  At the conclusion of the hearing, I ordered the garnishee order nisi to be made absolute.  What follows are my reasons.

Background

5.  The background of this action and other related proceedings have been fully set out in Saunders J’s judgment dated 14 April 2009 (“the Judgment”).  I shall only highlight some of the more relevant matters below to put the application in context.

6.  The Plaintiffs, Mr Thakur and one Mr Al Husseini are all victims of the fraudulent “cold calling” scheme perpetrated by the 1^st Defendant (“Christopher Yeo”) through First Prime and Pacific Wealth.  They all suffered a loss represented by the money they deposited into various bank accounts operated by Christopher Yeo and in the names of First Prime and Pacific Wealth.  More particularly:

(a)  The 6 Plaintiffs deposited a total sum of US$597,325.73 and €15,000 into various bank accounts (including a total sum of US$249,370.18 deposited by the 2^nd, 3^rd and 4^th Plaintiffs into Fubon Bank).

(b) Mr Al Husseini deposited a total sum of US$139,400 into Fubon Bank.

(c)  Mr Thakur deposited a total sum of US$92,894.85 into Fubon Bank.

7.  The judgment obtained by the Plaintiffs in this action is a global judgment.  It does not set out the respective entitlement of each plaintiff or the basis of their entitlement.  Apart from the subject garnishee order nisi in respect of First Prime’s money in Fubon Bank, the Plaintiffs also obtained a garnishee order nisi in respect Pacific Wealth’s money in Cathay Bank.

8.  Mr Al Husseni has also obtained judgment against First Prime in HCA 124/2009 for US$139,400 plus interest and costs.  He subsequently obtained a garnishee order nisi in respect of First Prime’s money in Fubon Bank.

9.  Insofar as Mr Thakur is concerned, he has only commenced an action in HCA 521/2009 against First Prime, Christopher Yeo and one First Prime International Limited claiming, inter alia, the total sum of US$450,501.93 (including the US$92,894.85 he deposited into Fubon Bank as mentioned above).  No judgment has been entered in that action.

10.  Faced with competing claims, Fubon Bank took out an interpleader proceeding on 9 February 2009 in HCMP 223/2009 for disposal of the money standing in credit in First Prime’s bank accounts.  First Prime has two bank accounts in Fubon Bank: a current account and a US$ fixed deposit account. 

11.  On 13 March 2009, the Plaintiffs’ two garnishee orders nisi and Mr Al Husseni’s garnishee order nisi all came before the Registrar.  The learned Registrar made all these garnishee ordersabsolute despite Mr Thakur’s objection.  Mr Thakur appealed.

12.  Both the interpleader proceeding and Mr Thakur’s appeal came before Saunders J on 7 April 2009. 

13.  By the Judgment handed down on 14 April 2009, the learned Judge ruled (at paragraph 57) that:

“In those circumstances it seems sensible that each of those three groups of claimants, the three Croatian defendants [i.e. the 2^nd, 3^rd and 4^th Plaintiffs herein], Mr Al Husseini and Mr Thakur, should be entitled to trace their funds, retrieve them, and any balance in the account at Fubon Bank, (after the Bank’s costs), be available to any other general creditors.”

And the learned Judge concluded (at paragraphs 61 and 62) that:

“For the foregoing reasons the appeal against the orders of the Registrar making the garnishee orders absolute, and the consequent costs orders, must be allowed.  The garnishee orders absolute are set aside, and the garnishee orders nisi restored.  All orders for costs made by the Registrar below are set aside…” (emphasis added)

“No submissions were made to me in respect of the appropriate course to be adopted should it be necessary to determine the competing claims between the claimants.  The solicitors for the Croatian defendants [i.e. the Plaintiffs herein], and for Mr Thakur should be able to agree on an appropriate procedure. Leave is reserved to the parties to apply should they not be able to agree upon an appropriate order.  I note however that already boasts of these parties have expended far too much in the way of legal costs in these proceedings.  The sensible and just way of resolving the matter appears to me to lie in paragraph 57 of this judgment.”

14.  Upon further application by the parties, Saunders J made an order on 22 April 2009 that the money in First Prime’s current account at Fubon Bank be paid out as follows:

(a)  HK$60,000 be paid to Fubon Bank as their costs;

(b) US$249,370.18 be paid to the 2^nd, 3^rd and 4^th Plaintiffs (and Mr Thakur be entitled to payment of his legal costs in the sum of HK$300,000 from this amount);

(c)  US$139,400 be paid to Mr Thakur; and

(d) the balance be paid to the 1^st, 5^th and 6^th Plaintiffs.

15.  Saunders J’s above orders have left the money in First Prime’s US$ fixed deposit account with Fubon Bank undisposed of.  According to Fubon Bank’s affirmation filed in HCMP 223/2009,there was a credit balance of US$10,144.18 in that account as at 9 February 2009.

The Plaintiffs’ application

16.  According to Mr Ip’s 4^th affirmation filed in support of the application, the Plaintiffs have already obtained payment of:

(a)  US$131,294.79 from Cathay Bank under the garnishee order relating to Pacific Wealth’s money in Cathay Bank; and

(b) US$223,890.77 from Fubon Bank in pursuance of Saunders J’s order.

Hence, the amount remaining unpaid under the judgment stands at US$232,140.17 and €15,000 plus interest and costs.

17.  The Plaintiffs now want to obtain the money in First Prime’s US$ fixed deposit account with Fubon Bank to further satisfy their judgment. 

18.  Fubon Bank and Mr Al Husseini have indicated, though their respective solicitors, that they do not wish to take part in this application.

Mr Thakur’s opposition

19.  It is most unfortunate that Mr Thakur is not legally represented at the hearing.  Much time was wasted in dealing with his misunderstanding and confusion about this case and for him to articulate his opposition.

20.  A number of points were taken by Mr Thakur.  First, he accuses the Plaintiffs of improperly taking money from Cathay Bank and says we should also be dealing with the Plaintiffs’ garnishee order nisi in respect of First Prime’s money in Cathay Bank: see paragraph 3(d) of Mr Thakur’s 4^th affirmation.

21.  Unfortunately, no one has drawn up Saunders J’s order dated 14 April 2009 and paragraph 61 of the Judgment seems to suggest that both the garnishee order nisi relating to Fubon Bank and the garnishee order nisi relating to Cathay Bank have been restored: see the emphasis in thequotation in paragraph 13 above.

22.  Mr Ip, who participated in the hearing before Saunders J, recalls that the hearing was concerned with Fubon Bank only.  He further refers me to the written submission of Mr Thakur’s counsel to confirm that Mr Thakur had not challenged the Cathay Bank garnishee order.

23.  In any event, the Plaintiffs have already obtained payments from Cathay Bank and that should be the end of that garnishee proceeding.  I agree that we should only deal with the garnishee order nisi relating to Fubon Bank.

24.  Secondly, Mr Thakur complains that he has not been paid his legal costs of HK$300,000 as ordered by Saunders J.

25.  In response, Mr Ip refers me to a letter from Fubon Bank’s solicitors confirming payment of a sum of HK$300,000 directly from Fubon Bank to Mr Thakur’s solicitors.  Eventually, Mr Thakur accepts that he has been paid his costs.

26.  Thirdly, Mr Thakur says the Plaintiffs have not been consistent in accounting for the money they received from Fubon Bank.  Hegoesso far as to accuse the Plaintiffs’ solicitor of concealing the truth and misleading the court: see paragraph 3(e) of Mr Thakur’s 4^th affirmation.

27.  Mr Thakur must havemisunderstood the situation. 

28.  On 22 April 2009, Saunders J ordered:

(a)  US$249,370.18 to be paid to the 2^nd, 3^rd and 4^th Plaintiffs; and

(b) the balance in the account (after satisfying all other payments) to be paid to the 1^st, 5^th and 6^th Plaintiffs.

By their letter, Fubon Bank confirmed payment of:

(a)  a sum of US$210,660.50 (i.e. US$ 249,370.18 – HK$ 300,000) to the 2^nd, 3^rd and 4^th Plaintiffs; and

(b) the balance to the 1^st, 5^th and 6^th Plaintiffs. 

Hence, Mr Ip deposed to in his affirmation that the Plaintiffs have received the total sum of US$223,890.77 from Fubon Bank.

29.  Mr Thakur, however, has a point when he said that that part of the Plaintiffs’ judgment representing the US$249,370.18 which the 2^nd, 3^rd and 4^th Plaintiffs had deposited into Fubon Bank should be taken to have been fully satisfied.  This is because the learned Judge did order the full amount of US$249,370.18 to be paid to the 2^nd, 3^rd and 4^th Plaintiffs.  The reason why they have received a lesser sum of US$210,660.50 instead of the full amount is because the learned Judge also ordered paymentof Mr Thakur’s costs out of the money received by the 2^nd, 3^rd and 4^th Plaintiffs.  The fact that Mr Thakur eventually obtained payment directly from Fubon Bank does not alter the fact that such costs came out of the Plaintiffs’ money.

30.  In my view, the Plaintiffs should have taken the full amount of US$249,370.18 into account (rather than the US$210,660.50 actually received) in calculating the outstanding balance of the judgment.  Hence, the amount remaining unpaid under the judgment should really be US$193,430.49 and €15,000 plus interest and costs.

31.  Be that as it may, this should not affect the outcome of this application as there are insufficient funds in First Prime’s US$ fixed deposit account to fully satisfy the Plaintiffs’ remaining judgment.

32.  Fourthly, Mr Thakur argues that his remaining claim in HCA 521/2009 (after deducting the US$ 92,894.85 he has received) is also based on “constructive trust or proprietary interest” and should be repaid with priority.

33.  Mr Thakur has misread the Judgment.  Saunders J was referring to the US$92,894.85 which Mr Thakur had deposited into Fubon Bank (see paragraph 27 of the Judgment) when the learned Judge said at paragraph 35 (as amended by the Corrigenda dated 22 April 2009) that:

“The claims by three of the Croatian defendants, the 4^th 5^th and 6^th defendants [i.e. the 2^nd, 3^rd and 4^th Plaintiffs herein], Mr Al Husseini and Mr Thakur, based upon a constructive trust or proprietary interest, are identical in all respects.  It is right that the three Croatian defendants and Mr Al Husseini have entered judgment and obtained a garnishee orders nisi, but that goes nowhere to any distinction between the quality of the three claims to the funds in the Fubon bank account.”

34.  Mr Thakur has confirmed at the hearing that his remaining claim in HCA 521/2009 represent the money he deposited into other banks but not Fubon Bank.  As such, his remaining claim is not based on “a constructive trust or proprietary interest”. 

35.  The learned Judge has commented (at paragraph 36 of the Judgment) that the balance of the Plaintiffs’ claim (after deducting the US$249,370.18 which the 2^nd, 3^rd and 4^th Plaintiffs deposited into Fubon Bank) does not have priority:

“The balance of the sum claimed generally against First Prime by the three Croatian defendants who deposited funds in the Fubon Bank, and the remaining Croatian defendants, for which judgment has been entered, relates to deposits paid into other banks, not the Fubon Bank.  While the Croatian defendants may have a right to take steps in execution in reliance upon the judgment they have obtained, their claim for any other funds or balance due to them by First Prime, by way of general damages, apart from a proprietary claim, to funds in the Fubon Bank account, must logically follow in priority to any claimant who has a right to a proprietary interest in funds in the account.”

36.  Mr Thakur’s remaining claim is similar in nature to the balance of the Plaintiffs’ claim.  The difference between them is that Mr Thakur does not havea judgment and so he is not entitled to take steps in execution just like the Plaintiffs. 

37.  Now that all claims with priority have been satisfied, there is nothing to stop the Plaintiffs from taking steps to attach their outstanding judgment on the remaining funds of First Prime in Fubon Bank. 

38.  Lastly and which is perhaps Mr Thakur’s main complaint, he relies on paragraph 57 of the Judgment (quoted in paragraph 13 above) and argues that he and other general creditors should be entitled to share in the remaining funds ofFirst Prime in Fubon Bank.

39.  In my view, Mr Thakur is reading paragraph 57 of the Judgment out of context.  As I have explained above, the learned Judge has envisaged that after satisfaction of all claims with priority the Plaintiffs may take steps in execution.

40.  When this application first came before me on 10 August 2009, Mr Thakur requested for an adjournment for him to take legal advice and to consider petitioning for the winding up of First Prime and Pacific Wealth: see paragraph 4 of his 4^th affirmation.  An adjournment was granted. 

41.  When the hearing resumed on 23 September 2009, Mr Ip confirms that no winding up proceeding has been commenced against First Prime.  In those circumstances, allowing the Plaintiffs’ application will not have the effect of preferring one creditor over another.

Conclusion

42.  None of the objectionsraised by Mr Thakur has any substance.  In my view, the Plaintiffs should be entitled to enjoy the fruit of their judgment by executing on First Prime’s money in Fubon Bank.  I have therefore made the garnishee order absolute on 23 September 2009.

43.  On costs, Mr Ip has asked for indemnity costs against Mr Thakur as Mr Thakur has made serious allegations against the Plaintiffs’ solicitor and much time at the hearing was wasted in dealing with Mr Thakur’s own confusion.

44.  I have decided only to award costs on a party and party basis to the Plaintiffs.  First, costs normally follow the event and so Mr Thakur should rightly pay for the Plaintiffs’ costs caused by his own failed opposition.  Secondly, both the Plaintiffs and Mr Thakur are in fact victims of a crime and they have all lost substantial sums of money.  What Mr Thakur did in terms of his opposition was an attempt to minimize his own loss and, in so doing, he might have overstepped the line.  Given the chequered history of this case, the competing interest of the victims, and the fact that Mr Thakur was not legally represented, I do not think there is sufficient unusual feature to justify indemnity costs.     

45.  After receiving further submissionson quantum, I ordered Mr Thakur to pay the Plaintiffs the costs of the hearings on 10 August and 23 September 2009, assessed by summary assessment on a party and party basis at $12,800.

HCMP 223/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 223 OF 2009

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(Heard together)

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J U D G M E N T

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Introduction

1.  HCMP 223/2009 is an interpleader proceeding which relates to the sum of US$523,751.75 standing to the credit of First Prime Group Ltd, (First Prime), at Fubon Bank (Hong Kong) Ltd, (Fubon Bank), as at 9 February 2009.

2.  HCA 9/2009 is an action brought by six persons collectively, also the 3^rd to 8^th defendants in the interpleader proceedings, and who may collectively be referred to as the Croatian defendants.

3.  The applications which resulted in the orders now under appeal were made were in both HCMP 223/2009 and HCA 9/2009.  The applications, for disposal of the interpleader summons in HCMP 223/2009, and for garnishee orders absolute in HCA 9/2009, were heard together by the Registrar on 13 March 2009.

Background

4.  The 2^nd to 9^th defendants in the interpleader proceedings are the victims of a fraudulent “cold calling” scheme perpetrated by a Mr Yeo Teng Hwee, also known as Yeo Teng Hwee, Christopher, through two companies, First Prime and Pacific Wealth Global Ltd, (Pacific Wealth), both of which are British Virgin Islands companies.

5.  The modus operandi of Mr Yeo was to have associates telephone people, unknown to either Mr Yeo or his associates, (this is known as “cold calling”), and persuade those persons to deposit money in bank accounts operated by Mr Yeo, in the names of First Prime, and Pacific Wealth, for the purpose of purchasing shares on the United States stock market.  In fact, no share purchases were made at all.  In January 2009, Mr Yeo faced criminal charges in Hong Kong in relation to the funds paid to the company bank accounts by various people, including the defendants in these interpleader proceedings.  He pleaded guilty to those charges, and has subsequently been imprisoned.

6.  As a result of the telephone calls that were made US$523,751.75 is held by Fubon Bank in an account for First Prime.  Competing claims are made against the fund now in that account, and consequently Fubon Bank has commenced these interpleader proceedings.

The interpleader proceedings

7.  The Fubon Bank has standing to the credit of First Prime Group Ltd, as at 9 February 2009, US$523,751.75.  On that day, by solicitors, Fubon Bank commenced these interpleader proceedings pursuant to O 17 RHC.  Named as the defendants in the interpleader proceedings the nine defendants whose names are set out in the title above.

8.  The affidavit in support of the interpleader proceedings by the Legal Counsel to Fubon Bank sets out that four claims have been made to the fund held by Fubon Bank.  They were first, a Restraint Order obtained by the Secretary for Justice, second, HCA 9/2009, a writ issued by the Croatian defendants, third, HCA 124/2009, the writ issued by the 2^nd defendant, Mr Al Husseini, and forth, an intended action notified to Fubon Bank by the solicitors for the 9^th defendant, Mr Thakur.  The Secretary for Justice has subsequently withdrawn the Restraint Order and is no longer involved in the proceedings.

9.  There is not the slightest doubt that the bank has acted entirely properly in commencing the interpleader proceedings.  At the hearing of the appeal I fixed the costs payable to Fubon Bank in a gross sum of $50,000, ordered that that sum be deducted from the fund held by Fubon Bank, and released Mr Maurellet and his solicitors from further attendance.

10.  In the interpleader proceedings a Notice to Act was duly filed, on 24 February 2009, separately, by the solicitors for Mr Al Husseini, and the solicitors for Mr Thakur, and on 25 February 2009, by the solicitors for the Croatian defendants.

11.  Mr Thakur, who brings the present appeal, has no complaint about Mr Al Husseini being paid the amount claimed by him, US$139,400, from the fund.  Consequently, Mr Al Husseini has taken no part in the proceedings before me.

12.  It is necessary to set out the circumstances and the state of each of the claims.

The Croatian defendants’ action:

13.  Three of the Croatian defendants, the 3^rd, 7^th, and the 8^th defendants, deposited a total sum of US$249,370.18 in Fubon Bank between 28 November 2007 and 18 April 2008.

14.  In addition to those deposits, the 3^rd, 7^th and 8^th defendants deposited US$93,690.15 in a Hong Kong bank known as the Cathay Bank.  Deposits were also made by the Croatian defendants in various overseas bank accounts.  The 3^rd, 7^th and 8^th defendants also deposited US$48,394.50 in Lloyds TSB Bank PLC, UK.  The 8^th defendant deposited €15,000 in Lloyds TSB Bank International, and US$26,945 50 in the Hellenic Bank Public Company Ltd, Cyprus.  The 4^th and 6^th defendants deposited US$86,291.63 in the Societe Generale Cyprus Ltd bank in Cyprus.  The 6^th defendant deposited US$58,041.28 in an account in Maybank International Ltd, Malaysia, and a further US$24,592.49 in another account at Maybank.

15.  In all the 3^rd to 8^th defendants, collectively, deposited a total sum of US$597,325.73, and €15,000, to the credit of the various bank accounts held by First Prime, and Pacific Wealth.

16.  On about 31 December 2008, the Croatian defendants obtained a Mareva order against Mr Yeo, First Prime and Pacific Wealth, and an order permitting them to inspect the bankers records at Fubon Bank and Cathay Bank.  Leave to serve proceedings out of the jurisdiction was obtained.

17.  Then, on 2 January 2009, the Croatian defendants issued a writ, HCA 9/2009, against Mr Yeo and the two companies.  That writ was indorsed with a claim seeking declarations, first that a total sum of US$475,435.73 transferred to various banks worldwide in the name of the Croatian defendants was held on a constructive trust for them.  The indorsement further claimed that the sum of US$249,370.18, standing to the credit of three of the Croatian defendants in Fubon Bank was a sum to which those three defendants had beneficial ownership and/or proprietary rights.  Unspecified damages for breach of contract and conspiracy to defraud the various plaintiffs were also included in the claim.

18.  On 14 January 2009, a comprehensive statement of claim was filed, in which the amounts deposited by the various Croatian defendants were set out, as I have set them out in paragraphs 13-15 above.  The causes of action pleaded were breach of contract, breach of agents duties, conspiracy to defraud and/or injure, breach of trust and or fiduciary duty, and money had and received.

19.  Mr Yeo was served with the writ, in his personal capacity, and for First Prime and Pacific Wealth, and instructed solicitors.  On 14 January 2009, he made an affirmation in which he said he had no assets, whether real or personal or capital, except two bail receipts for two sums of HK$200,000 and HK$10,000 which he said were moneys borrowed by his wife from various friends.  In that affidavit he set out the outstanding credit held by the two companies at Fubon Bank, US$523,751.75, First Commercial Bank, (only US$500), and Cathay Bank, US$146,871.75.

20.  On 22 January 2009, consequent upon a joint application by the solicitors for the Croatian defendants, and the solicitors for Mr Yeo and the two companies, judgment was entered against First Prime in the sum of US$587,325.73 and €15,000 or its Hong Kong dollar equivalent, plus interest agreed in the total sum of US$33,000 to 22 January 2009.  Costs were agreed at US$10,000.  The judgment is a global judgement for those sums, and does not specify whether any particular sum deposited by any particular defendant was a sum held by First Prime under a constructive trust in favour of that defendant, or that any particular defendant had a proprietary interest in any particular sum in any particular bank.

21.  The judgment provided that notwithstanding the Mareva order, and subject to a Restraint Order obtained by the Secretary for Justice being discharged, First Prime had leave to pay out of the Fubon Bank account US$513,519.13 to the Croatian defendants in partial settlement of the judgment.

22.  On 5 February 2009, the Croatian defendants obtained a garnishee order nisi against Fubon Bank in respect of the sums for which judgment had been obtained.  The return date to make the order absolute was Friday 13 March 2009.

Mr Al Husseini’s action

23.  Mr Al Husseini, the 2^nd defendant in the interpleader proceedings, was also a victim of the scheme.  During the relevant period, Mr Al Husseini had deposited US$139,400 in to the Fubon Bank account.  On 9 January 2009, solicitors for Mr Al Husseini had notified Fubon Bank that Mr Al Husseini asserted a proprietary interest in the sum of US$139,400 in the Fubon Bank account, which they said was held by Mr Yeo and First Prime on a constructive trust for Mr Al Husseini.

24.  A writ, HCA124/2009, was issued by Mr Al Husseini, and on 16 January 2009, First Prime consented to judgment in favour of Mr Al Husseini in the sum of US$139,400.  Again, the consent judgment does not specify whether Mr Al Husseini was entitled to the sum for which judgment was entered by virtue of a constructive trust or that he had a proprietary interest in the sum.

25.  On 23 January 2009, Mr Al Husseini obtained a garnishee order nisi against Fubon Bank in respect of the sums for which judgment had been entered.  The return date to make the order absolute was Wednesday 18 February 2009.

26.  On 12 February 2009, the solicitors for the Croatian defendants wrote to the solicitors for Mr Al Husseini explaining why they did not consider that Mr Al Husseini had any priority on his claim over the Croatian defendants.

Mr Thakur’s steps

27.  Mr Thakur, the 9^th defendant in the interpleader proceedings, whom I understand to be a Taiwanese resident, was also a victim of the same scheme.  Between 14 December 2007 and 16 March 2008, by three deposits, Mr Thakur deposited US$92,894.85 to the account of First Prime at Fubon Bank in Hong Kong.

28.  On 4 February 2009, the solicitors for Mr Thakur wrote to Fubon Bank giving notice that they had instructions to take civil proceedings against First Prime and Pacific Wealth.  The letter made it clear the solicitors were aware of the Mareva injunction obtained by the Croatian defendants, and that by that injunction Fubon Bank were required to hold the fund at that time.  But it appears that they did not issue proceedings against Mr Yeo, or First Prime, or Pacific Wealth immediately.  Consequently, until now, Mr Thakur has not secured a judgment against First Prime, and has not been able to commence garnishee proceedings.

29.  Mr Thakur has now filed an affidavit in which he exhibits a statement of claim in respect of an intended action against First Prime.  I am told from the bar that this action is in the course of being filed in court and served.  A less comprehensive statement of claim had been put before the Registrar during the proceedings from which this appeal arises.  The statement of claim, in so far as it asserts a constructive trust and a proprietary interest in the funds deposited, is in virtually identical terms to the statement of claim filed by the Croatian defendants.  I am told from the bar that the solicitors for Mr Thakur have been in discussion with Mr Yeo and that a consent judgment against First Prime is expected to be entered within the next few days.

Important factors

30.  First, it is important to note that the deposits in the Fubon Bank account over which the interpleader proceedings arise have been made by only three of the Croatian defendants, the 3^rd, 7^th and 8^th defendants, and by Mr Al Husseini and Mr Thakur.  The total sum deposited in Fubon Bank by those five individuals is US$481,665.03, a sum that is less than the total fund held by Fubon Bank.

31.  Second, it is important too to note that the deposits made Mr Al Husseini and Mr Thakur were made within the same time span as the deposits made by the three Croatian defendants, and that subsequent to the first deposit being made by any of those parties, no funds have been withdrawn from the account.

32.  Third, it is important to note that the judgment sealed by the Croatian defendants against First Prime is a global sum, apparently attributable to all of the Croatian defendants, collectively, and is not a judgment that confirms that any of the Croatian defendants are entitled to any particular funds, either by way of a constructive trust, or a proprietary claim.  As already indicated, Mr Al Husseini’s the judgment is silent as to whether he is entitled to a proprietary interest in the fund.

33.  That said, the three Croatian defendants, Mr Al Husseini and Mr Thakur, all of whom deposited funds into the Fubon Bank account, which funds still appear to be in that account, arguably have a strong claim to the funds they deposited, either by a constructive trust or a proprietary claim.

34.  Any concern as to mixing of funds, raised by Mr Hui, for the Croatian defendants, in opposition to Mr Thakur sharing in the Fubon Bank funds, and based upon the decision in Foskett v McKeown [2001] AC 102, applies equally to each of the three groups of persons who deposited funds in the Fubon Bank account.  But the reality of the situation here is that there is no concern arising on the issue of mixing of funds.  The three Croatian defendants, Mr Al Husseini and Mr Thakur, all deposited funds in the Fubon Bank account over the same period.  I am informed that no funds have been withdrawn from that account, since the deposits were made.  In those circumstances the funds deposited are identifiable as part of the sums standing to the credit in the account.  A concern would arise only if funds been with drawn during the relevant period and further funds from a different source then deposited.

35.  The claims by three of the Croatian defendants, the 3^rd, 7^th and 8^th defendants, Mr Al Husseini and Mr Thakur, based upon a constructive trust or proprietary interest, are identical in all respects.  It is right that the three Croatian defendants and Mr Al Husseini have entered judgment and obtained a garnishee orders nisi, but that goes nowhere to any distinction between the quality of the three claims to the funds in the Fubon bank account.

36.  The balance of the sum claimed generally against First Prime by the three Croatian defendants who deposited funds in the Fubon Bank, and the remaining Croatian defendants, for which judgment has been entered, relates to deposits paid into other banks, not the Fubon Bank.  While the Croatian defendants may have a right to take steps in execution in reliance upon the judgment they have obtained, their claim for any other funds or balance due to them by First Prime, by way of general damages, apart from a proprietary claim, to funds in the Fubon Bank account, must logically follow in priority to any claimant who has a right to a proprietary interest in funds in the account.

The garnishee orders are made absolute

37.  On 13 March 2009, in the face of opposition from Mr Thakur’s counsel, the Registrar, in the course of dealing with both the interpleader proceedings, and the applications to make the garnishee orders absolute, made the following orders:

1.  Mr Al Husseini’s garnishee order to show cause in HCA 124/2009, was made absolute;

2.  the Croatian defendants’ garnishee order to show cause in HCA 9/2009 was made absolute;

3.  Mr Al Husseini’s costs in HCA 124/2009 in the sum of HK$10,000, were to be paid, as to HK$4,000 from the Fubon Bank account, and as to HK$6,000 by Mr Thakur;

4. the Croatian defendants costs in HCA 9/2009 in the sum of HK$10,000, were to be paid, as to HK$4,000 from the Fubon Bank account, and as to HK$6,000 by Mr Thakur;

5.  the Fubon Bank’s costs were to be paid by Mr Thakur, assessed on a gross sum of HK$60,000, payable forthwith;

6.  the Croatian defendants costs in the interpleader proceedings were to be paid by Mr Thakur, assessed at a gross sum of HK$20,000, payable forthwith.

38.  It is not clear to me how the Registrar considered of that those orders could have dealt with the interpleader summons.  The issue still remained that the Croatian defendants sought more under their judgment than was held in the bank account, and is apparently no resolution of any issue of priority between the Croatian defendants and Mr Al Husseini.

The appeals by Mr Thakur

39.  On 19 March 2009, by his solicitors, Mr Thakur appealed the decisions made by the Registrar both as to the making of the garnishee orders absolute, and the costs orders.

40.  Subsequently, the solicitors for the Croatian defendants filed a summons requiring Mr Thakur to give security both for costs in the appeal, and for the costs ordered.  The Registrar, having heard the solicitors for the Croatian defendants, and counsel for Mr Thakur, ordered that security be given in the sum of HK$80,000, that sum to be paid into the court by 2 April 2009, failing which the appeal was to be dismissed.  Costs on the application for security for costs were assessed at a gross sum of HK$34,000 to be paid by Mr Thakur to Fubon Bank, forthwith.

41.  The Registrar refused to stay any of the orders, notwithstanding that the refusal to stay would have meant that Fubon Bank could have paid out the funds it held to the Croatian defendants and Mr Al Husseini, and that there was a strong argument that the appeal would thereby be rendered nugatory.

42.  Next, Mr Thakur, unrepresented, went before Chu J on 3 April 2009, and sought a stay of proceedings, pending appeal, in respect of all the orders made.  Chu J made an order staying the order for security for costs, pending the appeal, but refused a stay in relation to the orders making the garnishee orders absolute.  Chu J ordered that 50% of the Croatian defendants costs on the stay application must be paid by Mr Thakur, and that 50% of Mr Thakur’s costs on the stay application would be costs in the pending appeal.

43.  I have subsequently, on the application of Mr Thakur, (unrepresented), granted an interlocutory injunction restraining Fubon Bank from disposing of the funds held in the First Prime account, with the exception of the deduction of the costs awarded to them, until further order of the court.

The appeal against the order for security for costs

44.  Before me, Mr Hui, for the Croatian defendants accepted that the Registrar had no jurisdiction to order for security for costs in respect of the appeal, and in particular that the Registrar did not have power to order the dismissal of the appeal in the event that the security was not provided.

45.  In those circumstances Mr Thakur is entitled to judgment on his appeal against the order for security for costs.  The appeal is allowed, and the order of the Registrar requiring security for costs on the appeal is set aside, as is the order purporting to require that the appeal be dismissed if the security was not paid.  There will be an order nisi that the costs on that appeal, and before the Registrar, and on the application to stay before Chu J, be to Mr Thakur, to be paid by the Croatian defendants, on a party and party basis with a certificate for counsel on the appeal.

The appeal against the making absolute of the garnishee orders nisi

46.  The Registrar did not give written reasons for any of the decisions made.  I am told by counsel for the Croatian defendants that the basis of what constituted, effectively, a summary dismissal of Mr Thakur’s claim, was that the Registrar took the view that the draft statement of claim submitted by Mr Thakur’s solicitors fell short of substantiating the claim made by him.

47.  That there are no written reasons is of no moment, because it is clear that an appeal from the Master to a Judge in chambers is by way of an actual rehearing of the application, and in appropriate circumstances with further evidence.  As I have already indicated a statement of claim setting out the basis of Mr Thakur’s claim against First Prime was exhibited to an affidavit to be filed by Mr Thakur, handed in by counsel, during the hearing of the appeal.

Discussion

48.  The procedure for dealing with claims of third persons, other than the judgement creditor, when there is a garnishee order nisi, is dealt with by O 49 r 6.  By R 6(1) RHC, if in garnishee proceedings, it is brought to the notice of the Court that some other person than the judgment debtor claims to be entitled to the debt sought to be attached, or has or claims to have a charge or lien on that debt, the Court may order that person to attend before the court and state the nature of his claim with particulars.  By r 2, such a claim may be summarily determined and such order made as the Court thinks just.  That order may include an order that any question or issue necessary for determining the validity of the claim by such other person may be tried in the same manner as is set out in O 49 r 5, which makes provision for the circumstance when the garnishee disputes liability.

49.  In the present case, the Registrar was apparently not satisfied that Mr Thakur had a sufficient claim.  That was plainly not the case.  The evidence before the Registrar demonstrated that Mr Thakur had made deposits to the Fubon Bank account in the same way as the Croatian defendants, and during the same period of time.  It may well have been that the Registrar doubted the formulation of the claim in the statement of claim was put before her, but the fact of the deposits was clear, as was the clear inference arising that Mr Thakur would have a proprietary claim to the fund in those circumstances.  If that were not clear to the Registrar, it is now plain from the statement of claim put to me by Mr Thakur’s counsel.

50.  The argument made by Mr Hui that a claimant for a constructive trust must be able to trace the money, and show that was not mixed with money belonging to others, or not dissipated, applies equally to the three Croatian defendants who paid funds into the Fubon Bank account.  Clearly, for the Croatian defendants who did not pay funds directly into the Fubon Bank account there can be no claim for a constructive trust or proprietary interest, in the Fubon Bank funds.  It was plainly wrong to make the garnishee orders absolute, when the effect would be to give priority to those defendants, over Mr Thakur, who arguably has a proprietary claim over those funds.

51.  I simply cannot see that merely because they have a judgment, for a non-specific global sum, from which they have obtained a garnishee order nisi, the Croatian defendants are entitled to any priority over Mr Thakur in relation to his claim for a proprietary interest in the funds held by Fubon Bank.  Mr Hui did not cite any authority for that proposition.  At the very least there was plainly triable issue in relation to Mr Thakur’s claim that he had a proprietary interest in the funds which gave him priority over the Croatian defendants who had not deposited funds to the Fubon Bank account.

52.  The proper course to follow appears from the authorities.  Where there is a clear conflict of evidence constituting a triable issue, that issue should be properly investigated before an order absolute is made: Go Fun Properties & Investment Ltd v So Bik Har Winfield Constructors Corp & Anor [1980] HKC 66 CA.  That is also the position in England: George Lee & Sons (Builders) Ltd v Olink & Anor [1972] 1 WLR 214.

53.  The argument that a proprietary claim will have priority over other claims is consistent with the statement contained in Hong Kong Civil Procedure 2009, as may be seen from paragraph 49/3/9, where it is said that until a judgment creditor obtains actual payment, a receiver for debenture holders, even though appointed subsequently to a garnishee order absolute, will obtain priority over the judgment creditor.  The conclusion I draw from that reference is that where a judgment creditor has not obtained actual payment of a debt by way of a garnishee order, the fact that he has a garnishee order nisi gives him no priority over other creditors.

54.  It being plainly established now that Mr Thakur is in precisely the same position as the three Croatian defendants who deposited money in the Fubon Bank, the proper course is to make an order to enable the question as to whether or not persons who claim a constructive trust, or a proprietary interest in funds in the Fubon Bank should be entitled to those funds ahead of the general creditors of First Prime.

55.  Mr Hui said that Mr Thakur’s position in relation to Mr Al Husseini was inconsistent, in that he was content for Mr Al Husseini to draw from the fund.  But it is not inconsistent at all.  If there is any inconsistency at all, it is in the position of the Croatian defendants who have not deposited funds to the Fubon Bank account, in asserting that they should have the monies ahead of Mr Al Husseini or Mr Thakur.

56.  As I understand Mr Thakur’s position, he is perfectly content for each of the five claimants, the 3^rd, 7^th and 8^th defendants, Mr Al Husseini and himself, all of whom deposited arguably traceable funds into the Fubon Bank during the relevant period, to have those funds returned to them.  That is entirely logical, for although the funds have become mixed within the account, I am told that no funds have been withdrawn from the account, and that consequently the deposits made can be traced directly to the accumulated balance.

57.  In those circumstances it seems sensible at each of those three groups of claimants, the three Croatian defendants, Mr Al Husseini and Mr Thakur, should be entitled to trace their funds, retrieve them, and any balance in the account at Fubon Bank, (after the Bank’s costs), be available to any other general creditors.

Which proceedings?

58.  Mr Hui, in his skeleton, but without any oral argument, contended that there were procedural defects in Mr Thakur’s appeals.  First, he said that the garnishee orders absolute, and the costs orders, were made by the Registrar in HCA 9/2009, the writ issued by the Croatian defendants, and that consequently the appeal made by Mr Thakur, in the proceedings under HCMP 223/2009, was not based on any order in these proceedings.

59.  The same argument was mounted in relation to the appeal against the order for security for costs.  Mr Hui said that order too, was made in the proceedings under HCA 9/2009.  The appeal, Mr Hui said, purported to be made in the proceedings under HCMP 223/2009.  Thus he said both appeals should be dismissed.

60.  Both of these arguments are entirely unmeritorious technical arguments.  I have regard to the fact that Mr Thakur was unrepresented at the time the appeals were filed.  In any event, it is plain from the order sealed by Fubon Bank in these proceedings, that the orders making the garnishee orders absolute, and now challenged, were made by the Registrar in the course of hearing both sets of proceedings, including the interpleader proceedings, in which Mr Thakur was a party.  Although he has made a claim in respect of the funds over which the Croatian defendants held a garnishee order nisi, and may properly be described as a claimant to those funds, Mr Thakur has never been a party to HCA 9/2009.  If it were necessary, I would make any appropriate order rectifying the technical position in which Mr Thakur finds himself to enable the appeals to be heard.

Conclusion

61.  For the foregoing reasons the appeal against the orders of the Registrar making the garnishee orders absolute, and the consequent costs orders, must be allowed.  The garnishee orders absolute are set aside, and the garnishee orders nisi restored.  All orders for costs made by the Registrar below are set aside.  The interim injunction made by me restraining Fubon Bank from disposing of the funds until the interpleader and garnishee proceedings have been disposed of will continue until further order of the court.

62.  No submissions were made to me in respect of the appropriate course to be adopted should it be necessary to determine the competing claims between the claimants.  The solicitors for the Croatian defendants, and for Mr Thakur should be able to agree on an appropriate procedure. Leave is reserved to the parties to apply should they not be able to agree upon an appropriate order.  I note however that already boasts of these parties have expended far too much in the way of legal costs in these proceedings.  The sensible and just way of resolving the matter appears to me to lie in paragraph 57 of this judgment.

Costs

63.  Mr Thakur has succeeded in all respects in respect of both appeals.  He is entitled a costs order nisi, here and below, with a certificate for counsel where necessary, to be taxed on a party and party basis, against the Croatian defendants.

HCA9/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9 OF 2009

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REASONS FOR DECISION

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1.  On 31 March 2009, the claimant obtained from Cheung J ex parte an order for interim stay of two sets of order made by the Registrar.  The first order (“the GOA”) is dated 13 March 2009 made in this action whereby the garnishee order in favour of the plaintiffs involving in respect of the 2^nd defendant’s accounts with Fubon Bank, the garnishee, was made absolute. The second order is made on 26 March 2009 in HCMP223/2009, whereby the claimant was ordered to pay into court HK$80,000 as security for costs of his appeal against the Registrar’s decision on 13 March 2009.  HCMP223/2009 is an Interpleader action brought by the garnishee in which the plaintiffs, the claimant and the plaintiff in another action, HCA124/2009, made competing claims to the money in the 2^nd defendant’s bank accounts maintained with the garnishee.

2.  Prior to making the ex parte application, the claimant had applied for a stay of the GOA pending appeal against the order, but the application was dismissed by the Registrar with costs on 26 March 2009.  The claimant had by notice of appeal dated 1 April 2009 appealed against the refusal of stay.  Both the appeal against the GOA (“the 1^st Appeal”) and the appeal against the refusal of stay (“the 2^nd Appeal”) are scheduled to be heard on 7 April 2009.

3.  This is the hearing of the inter-partes summons for the continuing of the ex parte stay until the hearing of the two appeals on 7 April 2009.  At the conclusion of the hearing, I grant a stay of the order of security for costs but dismiss the application for interim stay of the GOA. I now reduce my oral reasons into writing.

Stay of the security for costs order in HCMP223/2009

4.  As the order for security for costs was made in HCMP223/2009, application for stay of the order should be made in HCMP223/2009 and not in this action.  Hence, as a matter of proper procedure, the summons filed on 31 March 2009 should not include a stay of the order for security for costs, and the claimant should have issued another summons in HCMP223/2009 to seek a stay of the security for costs order.

5.  Having regard to the fact that the claimant now acts in person (he was previously represented by solicitors and counsel), and the matter stated below, I am prepared to treat the application for stay of the security for costs order as if it was an application made in HCMP223/2009 and to deal with it accordingly.    

6.  I should also point out that for similar reasons, the appeal against the security for costs order should be made in HCMP223/2009.  Insofar as the claimant had included the appeal against the security for costs order in the notice of appeal dated 1 April 2009 filed in this action, this is irregular. The claimant should take step to rectify this.

7.  The security for costs ordered on 26 March 2009 was made under Order 23 rule 1 of Rules of the High Court and on the basis that the claimant is ordinarily resident out of Hong Kong.  The costs for which security was ordered are in respect of the appeal against the Registrar’s decision made on 13 March 2009 in connection with the competing claims to the money in the bank accounts with the garnishee.  As part of her order, the Registrar provided that in the event the security was not paid into court by 2 April 2009, the claimant’s appeal would be dismissed.

8.  Under Order 23 rule 1(1)(a) of Rules of the High Court, the Court may order a plaintiff to an action or proceedings before the Court of First Instance to provide security for costs where the plaintiff is ordinarily resident out of Hong Kong and the Court thinks it just to do so, having regard to all the circumstances of the case.  

9.  In ordinary cases, the power under Order 23 rule 1 to order security for costs may be exercised by the Registrar or a Master.  In the present context, however, it is doubtful whether the power can or should properly be exercised by the Registrar having regard to the fact that the security for costs is in respect of an appeal against the Registrar’s own decision.  This is different from ordering payment into court as a condition for giving leave to appeal. There is also doubt whether the Registrar’s power extends to ordering the dismissal of the appeal in the event the security is not provided.  Additionally, it is doubtful whether the claimant comes within Order 23 rule 1. He is not a plaintiff in HCMP223/2009 and it does not appear that he has made a counterclaim in it.     

10.  In the circumstances, I consider that the claimant has an arguable appeal against the order for security for costs in HCMP223/2009. I therefore grant a stay of the order for security for costs pending the determination of the appeal against the order.

Interim stay of the garnishee order absolute (GOA) in this action

11.  If the court were to grant an interim stay of the GOA pending the 2^nd Appeal (i.e. appeal against the Registrar’s refusal of stay), this would tantamount to allowing the 2^nd Appeal.  This is because the hearing of the 2^nd Appeal is to take place on the same day as the hearing of the 1^st Appeal (i.e. appeal against the GOA).  That being the case, there has to be cogent and strong reasons before the court should exercise its discretion to order an interim stay of the GOA pending the 2^nd Appeal.  This is because ordinarily a successful litigant should not be deprived of the fruit of the judgment.

12.  In considering the claimant’s application, I have taken into account the following matters.

13.  First, it is trite law that an appeal does not operate as a stay of the order.  Hence, the fact that the claimant is appealing against the GOA does not by itself provide a good reason for allowing a stay of the GOA.

14.  Second, the claimant has not demonstrated that he has good prospect of success in the appeal against the GOA. The plaintiffs in this action are judgment creditors, as they had obtained a judgment against the 2^nd and 3^rd defendants (who are the judgment debtors).  As judgment creditors, they are entitled to enforce the judgment by garnishee orders, against monies standing to the credit of the judgment debtors: see section 21 of High Court Ordinance, cap.4 and Order 49 rule 1 of Rules of High court.  The plaintiffs’ right to attach the money in the 2^nd defendant’s account with the garnishee is therefore not dependant on their establishing that all the money in the account is held on trust for them. 

15.  In contrast, although the claimant is claiming against the 2^nd defendant in HCA521/2009, he has yet to obtain a judgment.  Since he is not a judgment creditor, the claimant has to establish he has a better claim to the money in the bank account if he were to successfully oppose the garnishee order absolute.  The claimant says he had deposited US$92,894.85 into the 2^nd defendant’s account with the garnishee and this is the basis of his claim.  However, this will not be sufficient to defeat the plaintiffs’ claim to the money in the 2^nd defendant’s bank account.  The claimant has to positively show or identify that part or all of the money in the 2^nd defendant’s bank account does not belong to the 2^nd defendant, but belongs to him (for example, they are money held on trust for him), so that it is not attachable by a garnishee order.  It has to be demonstrated that the claimant’s money deposited into the bank account had not been dissipated or become mixed with other funds belonging to other parties. There are no such materials before the court.

16.  The claimant points out that the judgment obtained by the plaintiffs is a consent judgment and made at a time when the 1^st defendant was awaiting criminal trial or sentence.  He seems to suggest that the judgment obtained by the plaintiffs may not be reliable. As a matter of fact, however, the 1^st defendant was sentenced on 14 January 2009, before the judgment in this action was entered on 22 January 2009.  In any case, the judgment obtained by the plaintiff is a valid and subsisting judgment. In enforcement proceedings, including garnishee proceedings, the court cannot go behind a judgment. 

17.  In his affirmation made on 31 March 2009, the claimant also contended that without a stay of the GOA, his appeal against the GOA would be rendered nugatory.  This argument however ignores the fact that the claimant is not a judgment creditor.  The claimant is not in a position to attach his claim to the money in the 2^nd defendant’s account with the garnishee.  The claimant says the writ in his action was served yesterday. As such, it would be some way to go before the claimant’s action concludes in his favour. Hence, even if he were to succeed in the appeal against the GOA, it does not mean he can lay hands on the money in the bank account.  It is therefore, to say the least, premature to conclude that the claimant is bound to suffer irreparable loss or damage if the GOA is not stayed. 

18.  For these reasons, I refuse the application for interim stay of the GOA pending the appeal against the Registrar’s refusal of stay.

Costs

19.   The claimant asked that costs be reserved.  I do not agree this is appropriate.  The plaintiffs had successfully opposed the interim stay of the GOA, there is no good reason to deprive them of the costs.  As to the claimant’s costs of the application for stay of the order for security of costs, it should be made the claimant’s costs in the pending appeal against the GOA.  There will be a 50:50 apportionment of the costs involved.

Order

20.  Accordingly, I make the following order on the claimant’s summons in this action dated 1 April 2009:

(1) Paragraph 1 of the summons is dismissed.

(2) 50% of the plaintiffs’ costs of the summons be paid by the claimant.

(3) 50% of the claimant’s costs of the summons be the claimant’s costs in the pending appeal against the garnishee order absolute.

21. I also make an order in HCMP223/2009 for a stay of the order for security of costs made on 26 March 2009. 

Mr John Hui instructed by Messrs Oldham, Li & Nie for the plaintiffs.

The claimant unrepresented, appeared in person.

Messrs Wilkinson & Grist for the garnishee, not appearing.