Koo Ho Paul v. Ying Fat Plastic Factory Ltd.

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1997, No. 122
(Civil)

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J U D G M E N T

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Rogers, J.A. :

1. This is an appeal from a judgment of Cheung, J. dated 21st May 1997 whereby he allowed an appeal by a judgment creditor and dismissed an appeal by the garnishee from an order absolute made by the Registrar on 17th April.

2. The history of the matter is that a judgment in the sum of $1,896,871.67 was entered against the Defendant, Hegner Limited which trades under the name Tak Sing Export Co. Mr. Paul Koo and his father were directors. It appears to be a medium size company. Clearly, from time to time the directors took cash advances. Mr. Paul Koo says that he used those cash advances to pay debts of the company.

3. The garnishee order nisi which was made by Master Jennings on 12th December does not specify any particular sum which is said to be owing from the garnishee to the debtor but simply refers to the debts in general.

4. The Registrar, on 17th April, relied upon an admission by the garnishee Mr. Paul Koo that he had received a sum of $600,000 from the company of which $149,000 had been left remaining in his possession and paid into the solicitors' account. The Registrar ordered the garnishee to pay the sum of $600,000 less the amount which had been paid into the solicitors' account.

5. Cheung, J. however went into the matter himself and his order was that the appeal by the garnishee would be dismissed and the appeal of the judgment creditor be allowed to the extent of the whole of a sum of HK$933,545.72 less the sum of HK$149,925.88, that is to say, the sum of HK$783,619.84. As I have already indicated, the sum of $149,925.88 was the sum which was in the Defendant's solicitors' account.

6. Our attention has been directed to the evidence in this matter and in particular to that of Mr. Paul Koo who was not represented below but is represented here. His main contention was that although he had received the sum of $600,000, he had paid debts owed by the company. In one of his affidavits, he produced cash vouchers and copies of bills said to be owed by the company to the tune of some $80,000, the rest is missing.

7. Counsel who appeared for the Plaintiff, the judgment creditor, said that he was unable to say whether those bills had been properly paid or not but he said the onus lay upon the garnishee to establish that those bills had been paid by the garnishee and that the garnishee had not been reimbursed as the cash vouchers might indicate he had been.

8. Having looked at some of the vouchers and accounts, I can see that the whole matter is in what can best be described as a complete mess. I do not consider that a clear picture emerges or can emerge from a consideration of the accounts as produced. In those circumstances, I fail to see how a clear and indisputable picture can be drawn as to the amount owing by the garnishee to the judgment debtor. The learned Judge below sought to unravel the situation and went through the accounts and came to the conclusion that not only had the sum of $600,000 been paid by the judgment debtor to the garnishee, as was the basis of the Registrar's decision, but to that $600,000 had to be added the sum of HK$333,545.72 which was shown in one of the accounts by the company. Whether the sum has to be taken to be the balance left after the $600,000 has been taken into account as having been paid to Mr. Koo or is in addition to the $600,000 seems to me to be a question of the accuracy of that particular entry in the accounts. One of the other ledgers having admittedly been inaccurate as having shown the $600,000 being paid to Mr. Koo's father rather than Mr. Koo himself, it seems to me, that this matter must be carefully examined and cannot be decided on a summary basis.

9. Our attention has been drawn to authorities which are referred to in the White Book at Order 49 rule 5 where it is said in relation to the question of what should happen on the return of a garnishee order. Rule 5 reads :

"Where on the further consideration of the matter the garnishee disputes liability to pay the debt due or claimed to be due from him to the judgment debtor, the Court may summarily determine the question at issue or order that any question necessary for determining the liability of the garnishee be tried in any manner in which any question or issue in an action may be tried ,without, if it orders trial before a Master, the need for any consent by the parties."

10. The notes to the White Book at 49/5/2 say that :

"The words indicate that there is a discretionary power; and in Newman v. Rook, ..... similar words in s.64 of the Common Law Procedure Act 1854, were held to mean a garnishee must set up a prima facie case before he could get an issue ordered; so, too where the garnishee satisfies the Master that there is no attachable debt, an issue will not be ordered. ..... If there is any reasonable doubt the matter should be tried ..... A higher Court will be reluctant to question the exercise of such a discretionary power."

11. Having looked at the cases supporting this passage, it is clear that the case of Newman v. Rook (1858) 4 C.B. (N.S.) 434 was a case where the basis upon which it was said that the money should not be paid over was something that could be clearly and easily determined by the Court. It was a question primarily of law on the basis of orders which had been made.

12. Here, what is in issue is not such a simple matter, it is really a question of taking an account between the garnishee and the judgment debtor. The plaintiff has chosen not to take winding-up proceedings against the judgment debtor. That is a course which might solve many of its problems because of course in a winding-up the liquidator would have to determine who the creditors and debtors of the company are and seek to recover all debts owed to the company. In that way, an account would have to be taken between the company and Mr. Koo and it seems to me that much of the judgment creditor's problems would be solved without it having to expend a great deal of money or effort. Nevertheless, if it wishes to pursue these proceedings, it seems to me that the only course would be to have an account taken between the judgment debtor and the garnishee.

13. In my view, the Judge has attempted to unravel facts in this matter in a way which it was not possible to do. It was not possible to come to clear conclusions in this case as to what sums are owing and even on the documents we have been shown, there must be doubt as to exactly what sums were paid by the garnishee on behalf of Hegner Limited and what sums were not.

14. In those circumstances, it seems to me that the only course that can be taken is to set aside the garnishee order absolute and order that a proper account be taken between the judgment debtor and the garnishee.

Leong, J.A.:

15. The matter cannot be resolved summaries by looking at the accounts produced to decide if there is an indisputable amount owed by Mr. Koo to the judgment debtor. There are doubts as to whether Mr. Koo as he claimed, had spent the money he advanced for the judgement debtor. I agree that an account should be taken between the garnishee and the judgment debtor before the matter can be resolved.

16. I agree with the order proposed by my Lord, Rogers, J.A. that the garnishee order be set aside and an account be taken.

Godfrey, J.A. :

17. I agree.

18. The judge below was plainly wrong to exercise his discretion here against ordering to be tried the issue "whether there was any debt due in any and what amount", to the judgment debtor from the garnishee at the date of the garnishee order nisi (compare the precedent for the order for trial of such an issue to be found in Form No. 126, Atkin's Court Forms, 1996 Issue, Vol. 19(1), Title "Execution", p.565) and, instead, attempting summarily to determine that issue for himself. What was and is required here is the taking of an account between the judgment debtor and the garnishee in which the garnishee will verify by affidavit an account of what was received by him from the judgment debtor and of his dealings with the money, vouching each item of expenditure by proper documentary evidence.

19. Accordingly, this appeal must be allowed, and an appropriate order made accordingly.

20. We will direct counsel for the appellants to sign a minute of an appropriate form of order, to be approved and signed by counsel for the respondents, and lodged in chambers for our approval.

21. The costs below will be costs in the issue. The appellant will have his costs of the appeal.