HONOUR FINANCE CO LTD v. CHAN MANG

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JUDGMENT

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Clough, J.A.:

1. The plaintiff in these proceedings is a judgment creditor against the defendant for the sum of $2.1 million odd plus interest. On the 8th March 1989, at the conclusion of the examination of the defendant under Order 49B, Master O'Donnell refused to accede to the plaintiff's application for an order for the imprisonment of the defendant under Order 49B rule 1B (1) (c) for failure to make full disclosure under rule 1A (2). The Master also refused to make an instalment order against the defendant under rule 1B (2) (a). His order was confined to directing that the defendant pay the costs of the examination. The plaintiff now appeals to this court against the Master's order pursuant to Order 58 rule 2(d). By its appeal the plaintiff does not seek from this court an order for instalment payments by the defendant. The relief sought is an order for the imprisonment of the defendant for a period not exceeding three months under rule 1B (1) (c).

2. The plaintiff company is a Hong Kong Company and a registered money lender under the Money Lenders Ordinance (Cap. 163). The debtor was a victim of "Black Monday" (19th October 1987). On the 1st May 1987 his employers determined his employment which had provided him with a wage of $4,000 per month. Prior to that he had invested all his savings and had built up a fund of about $250,000. When he lost his job he became a full time speculator on the stock exchange, dealing on a margin account with the Pak Shing Group of companies. By the 14th October 1987 he had a credit of $1 million odd in his margin account. On Black Monday he was ruined and he found himself owing the Pak Shing Group the amount which (together with accruing interest) the plaintiff obtained judgment for against him after taking an assignment of his debt from the Pak Shing Group on the 27th January 1988, shortly before the issue of the plaintiff's writ indorsed with a statement of claim on the 25th March 1988.

3. The defendant, who is about 53 years of age, has three adult sons from whom he receives no financial support. He also has a daughter aged 26 who went to Australia to be a university student for three years at his expense on the 23rd September 1987 when he was financially sound. At all material times since the defendant incurred his liability which led to his judgment debt his wife has been employed at a wage of about $3,000 per month (including tips) as a cleaner for a catering company. Since the 1st January 1988 the defendant has been employed part time as a telephone operator by a commercial concern at a monthly wage of about $2,500. Their combined income is therefore about $5,500 per month.

4. The examination of the debtor began effectively on the 25th November 1988 and was adjourned to the 8th March 1989 when it was concluded. The appeal bundle includes a full transcript of the examination and submissions taken at the expense of the plaintiff in addition to the Master's notes of proceedings. Extensive discovery was made by the defendant of statements relating to his bank accounts and those of his wife, together with documentation supporting the defendant's evidence regarding the earnings of both of them and documentation relating to transfers of money to the defendant's daughter in Australia and payments of education fees made by her in that country.

5. The examination of the defendant was wide ranging put at its conclusion the master rejected the plaintiff's solicitor's submission that the defendant had been evasive and should be imprisoned to force him to make full disclosure, or alternatively that he should be ordered to make instalment payments.

6. By its perfected grounds of appeal the plaintiff contends that the Master should have concluded that the defendant had failed to make full disclosure of his assets or income pursuant to rule 1A (2) regarding the financial situation of his family as alleged by the defendant, because neither the defendant nor his wife could have afforded to support their daughter in her studies in Australia after the first academic year commencing in September 1987.

7. This is the same argument as was advanced below after the defendant, when being cross-examined about his outgoings and the amount he contributed to household expenditure, including food, had said that his wife had to maintain their daughter and that even if she did not spend the money she earned it would not be sufficient for the daughter whose school fees were A$8,000 per year. The plaintiff's solicitor had pointed out in a very long question to him that if the defendant and his wife paid all their daughter's annual school fees amounting to A$8,000 (equivalent to HK$48,000) out of their joint annual income (taken at HK$60,000) they would only be left with HK$12,000 for their living expenses. It was at this point in his examination that the defendant admitted that he could not afford to finance his daughters education in Australia in the second and third years of her course.

8. On appeal the same argument has been advanced on the footing that the defendant and his wife would probably have to pay over A$10,000 per annum for the daughter while she is in Australia because the annual figure of A$8,000 for fees does not include living expenses. The inference sought to be made (although this was never in terms put to the defendant) is that the defendant must have concealed assets which are being applied towards the cost of his daughter's education in Australia when they should be applied towards the discharge or reduction of his debt to the plaintiff.

9. The Master clearly did not accept that this was the only inference. He did not accept that the defendant had been evasive when under examination. For my part I am not persuaded that he misdirected himself in reaching this conclusion. The defendant had disclosed that on the 16th September 1987 (when he was still solvent and in credit with the Pak Shing Group) he had drawn $60,000 from his account with the Hongkong Bank for his daughter who went to Australia to begin her educational course on the 23rd September 1987. That must have been equivalent to about A$10,000. He also disclosed two payments of A$1,000 made to the daughter from his wife's resources. One such payment amounting to the equivalent of HK$5,698 was made on the 29th February 1988, the other payment amounting to the equivalent of HK$6,260 was made on the 8th September 1988. The defendant further produced a receipt dated the 13th July 1988 issued to his daughter in Australia in respect of A$4,000 education fees paid by her. The defendant explained that these fees had been paid by his daughter from the A$10,000 he had given to her when she left for Australia.

10. In my opinion the master was justified in accepting the disclosure of these payments as exhaustive and consistent with the defendant's evidence that his wife, who earned about HK$3,000 per month, and not the defendant himself, was paying what she could towards their daughter's education and living expenses in Australia. The fact that the daughter was still in Australia on the 8th March 1989 when the examination concluded does not, in my opinion, give rise to the only reasonable or the necessary inference that the defendant had failed to make full disclosure of his assets in the course of his examination. There was for example nothing to suggest that the daughter was not herself earning money in Australia. The Master who saw and heard the defendant give evidence was not prepared to draw the inference submitted for the plaintiff and it seems to me that he is not to be faulted in his conclusion, particularly in a situation where the onus was on the plaintiff.

11. Furthermore, this is not a case in which the debtor can be shown to have owned substantial tangible assets before judgment. The defendant was a man of modest means living in a housing estate flat before he took up full time dealing on the stock exchange a matter of months before Black Monday. His earnings are now a mere $2,500. It is his assets and income, and not his wife's equally modest earnings of $3,000 per month, which are required to be disclosed under rule 1A (2) and are subject to the process of execution to enforce the judgment debt. In the present case the plaintiff seems to have considered, wrongly, that the wife's earnings and assets were also accountable.

12. The Master has, in any event, a discretion (expressly conferred) whether to make an order for imprisonment of a judgment debtor under rule 1B(1). This defendant had been shown to have a mere subsistence income and no other assets. It seems to me that unless and until it could be shown that he had other assets it would be oppressive to even consider sending him to prison.

13. The jurisdiction of the court to send a debtor to prison under Order 49B rule 1B(1) is to be exercised with care and circumspection as with any other jurisdiction affecting the liberty of the subject. The plaintiff as assignee of the debt is fully entitled to relief under order 49B in a proper case. But, in my judgment, it would have been wrong and oppressive to imprison the defendant in the light of the evidence before the Master who did not accept that the defendant had been evasive under examination.

14. I would dismiss this appeal and I would not encourage other like appeals.

Cons, V.-P.:

15. I agree with my Lord. The appeal is based entirely on the assumption that the daughter was not able to support herself in any way or able to obtain support from any source other than her father. That was not established below. Indeed no attempt was even made to establish it and the appeal must necessarily fail.

Jones, J:

16. I agree that this appeal should be dismissed.