CHUN SANG PLASTICS CO LTD v. COMMISSIONER OF POLICE AND ANOTHER

CACV 37/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 37 OF 2011

(ON APPEAL FROM HCA NO 2278 of 2008)

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BETWEEN

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J U D G M E N T

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Hon Cheung CJHC:

Appeal

1.  At issue in this appeal are 6 containers of plastic raw materials in the custody of the 1^st defendant, the Commissioner of Police.  The parties asserting entitlement to or rights of ownership over the containers are respectively the plaintiff, Chun Sang Plastics Company Limited, and the claimant, Y T Cheng (Ching Tai) Limited.  Interpleader proceedings were duly commenced pursuant to the provisions of Order 17, the Rules of the High Court (Cap 4A).  Pursuant to directions given, the dispute between the plaintiff and the claimant was, by consent, heard by Master de Souza, sitting in court.  The hearing lasted 7 days.  Affirmation evidence was relied on, but the deponents were subjected to cross-examination. On 15 February 2011, the Master handed down a judgment, holding that the plaintiff had the entitlement to or rights of ownership over the subject containers.  He also awarded costs against the claimant. 

2.  By a notice of appeal dated 1 March 2011, the claimant appealed from the master’s judgment and order to this Court.  On its own motion, the Court raised with the parties the question of whether an appeal lay from the master’s decision to the Court of Appeal. 

Right of appeal after trial by master

3.  The answer to this prior question of jurisdiction turns on the proper interpretation of the relevant provisions in the High Court Ordinance (Cap 4) and the Rules of the High Court.

4.  Section 14 governs appeals to the Court of Appeal in civil matters.  Section 14(1) sets out the prima facie position:

“ Subject to subsection (3) and section 14AA, an appeal shall lie as of right to the Court of Appeal from every judgment or order of the Court of First Instance in any civil cause or matter.”

5.  Section 14AA deals with the requirement of leave for interlocutory appeals and therefore does not concern us. Section 14(3) to which section 14(1) is subject, in so far as is material, reads: 

“(3) No appeal shall lie―

…

(f) without the leave of the Court of First Instance or the Court of Appeal, from a judgment or order of the Court of First Instance given or made in summarily determining under rules of court any question at issue in interpleader proceedings:

Provided that this paragraph shall have no effect in relation to any interpleader issue which is tried by a judge whether with or without a jury.”

6.  It should be noted that section 4 of the High Court Ordinance provides that the Court of First Instance shall consist of the Chief Judge of the High Court; such judges and recorders as the Chief Executive may appoint; and such deputy judges as the Chief Justice may appoint.  It should also be noted that although the word “judge” is not defined as such in the Ordinance, it is plain from the provisions in Part II of the Ordinance, dealing with, amongst other things, the appointment, professional qualifications and term of office of judges that “a judge”, as used in the Ordinance, does not include the Registrar of the High Court, or the senior deputy registrars, deputy registrars and assistant registrars (ie the masters) attached to the High Court, whose positions are governed by the provisions under Part V of the Ordinance.

7.  Turning to the Rules of the High Court made under the Ordinance, interpleader proceedings are governed by Order 17.  For our present purposes, it is important to draw a distinction between a summary determination of an interpleader issue and the determination of an interpleader issue after trial.  The former is governed by Order 17, rule 5(2), which reads:

“Where―

(a) the applicant on a summons under this Order is a bailiff, or

(b) all the claimants consent or any of them so requests, or

(c) the question at issue between the claimants is a question of law and the facts are not in dispute,

the Court may summarily determine the question at issue between the claimants and make an order accordingly on such terms as may be just.”

8.  The trial of an interpleader issue is, on the other hand, governed by Order 17, rule 5(1)(b) and rule 11.  The material parts of the two rules read respectively:

“(1) Where on the hearing of a summons under this Order all the persons by whom adverse claims to the subject-matter in dispute (hereafter in this Order referred to as ‘the claimants’) appear, the Court may order―

…

(b)  that an issue between the claimants be stated and tried and may direct which of the claimants is to be plaintiff and which defendant.”

“(1) Order 35 shall, with the necessary modifications, apply to the trial of an interpleader issue as it applies to the trial of an action.

(2) The Court by whom an interpleader issue is tried may give such judgment or make such order as finally to dispose of all questions arising in the interpleader proceedings.”

9.  It should be noted that an interpleader issue may be determined, whether summarily or otherwise, by a judge or by a master. Indeed “the Court” as used in the Rules means, unless the context otherwise requires,

“the Court of First Instance or anyone or more of the judges thereof whether sitting in court or in chambers or the registrar or any master …” (Order 1, rule 4(2))

10.  Paragraph 6(2) of Practice Direction 14.2, governing proceedings before masters, provides specifically that trials pursuant to Order 17, rule 11, shall be heard by a master in open court.

11.  Order 58 is entitled “Appeals from Masters”. Rule 1(1) reads:

“ (1) Except as provided by rule 2, Order 5, rule 6, and Order 12, rule 1, an appeal shall lie to a judge in chambers from any judgment, order or decision of a master, irrespective of whether the judgment, order or decision was given or made on the basis of written submissions only or after hearing.”

12.  However, in relation to certain decisions made by a master, an appeal shall lie directly to the Court of Appeal.  This is governed by rule 2:

“ An appeal shall lie to the Court of Appeal from any judgment, order or decision (other than an interlocutory judgment, order or decision) of a master, given or made―

(a)   on the hearing or determination of any cause, matter, question or issue tried before him under Order 14, rule 6(2) and Order 36, rule 1;

(b)   on an assessment of damages under Order 37 or otherwise; or

(c)   on the hearing or determination of an application under Order 84A, rule 3; or

(d)   on the hearing or determination of an application under Order 49B; or

(e)   on the hearing of a petition for winding-up or bankruptcy.”

13.  Rule 7 governs appeals in interpleader proceedings:

“ (1) Any judgment, order or decision of a judge given or made in summarily determining under Order 17, rule 5(2)(b) or (c), any question at issue between claimants in interpleader proceedings shall be final and conclusive against the claimants and all persons claiming under them unless leave to appeal to the Court of Appeal is given by the judge or the Court of Appeal.

(2) Where an interpleader issue is tried by a judge (with or without a jury), an appeal shall lie to the Court of Appeal, without leave of the judge or that Court, from any judgment, order or decision given or made by the judge on the trial.”

14.  It is plain from these provisions that for a summary determination of an interpleader issue by a judge,

(a)   if leave to appeal is granted by the judge or by the Court of Appeal, an appeal shall lie to the Court of Appeal;

(b)   if leave to appeal is refused, the determination by the judge is final and conclusive against the relevant parties.

15.  However, as regards a determination of an interpleader issue after trial before a judge, an appeal shall lie as of right to the Court of Appeal, and no leave to appeal is required.

16.  In this regard, it should be noted that despite the different wording used, there is no difference in substance between the provisions in section 14(3)(f) of the Ordinance and those in Order 58, rule 7 of the Rules.

17.  Plainly, they do not cover a determination of an interpleader issue, whether summarily or after trial, by a master.  In relation to that, Order 58, rule 1(1) applies, and an appeal lies from such a determination to a judge in chambers.

18.  Mr George Chu, appearing for the claimant, contends otherwise.  He argues that the word “judge” in Order 58, rule 7 should be given a wide meaning to include a master.  In this regard, he submits that the commentary in Hong Kong Civil Procedure 2011, Vol 1, para 58/7/1 to the effect that “judge” does not include a master, is incorrect.

19.  I do not accept counsel’s construction. Although the word “judge”, unlike “the Court”, is not defined in the Rules, it is obvious that when used in the context of Order 58, rule 7, it does not include a master.  In fact, the definition of “the Court”, already referred to above, draws a distinction between a judge of the Court of First Instance on the one hand and the Registrar or a master on the other.

20.  Moreover, Order 58, rule 7(2) refers to the trying of an interpleader issue by a judge, “with or without a jury”.  This is a strong indication that the word “judge” does not include a master, who, of course, does not sit with a jury.

21.  Furthermore, Order 58, rule 7(1) provides that unless leave to appeal is obtained, a summary determination of an interpleader issue by a judge is final and conclusive.  If the word “judge” is construed to include a master, it would mean that the master’s decision is final and conclusive, unless leave to appeal is granted. I do not believe that that could possibly represent the correct position, and certainly Mr Chu did not go that far when arguing for his wider interpretation.

22.  A quick reading of the other provisions in Order 58 would also go against Mr Chu’s contention.  As mentioned, Order 58, rule 1(1) provides specifically that an appeal shall lie to a judge in chambers from any judgment, order or decision of a master.  Clearly, a distinction is drawn between a master and a judge.

23.  Section 14(3)(f) of the Ordinance refers to both the Court of First Instance and “a judge”.  As explained, section 4 of the Ordinance, setting out the constitution of the Court of First Instance, does not refer to masters.  Instead, the positions of the Registrar and masters are specifically dealt with in Part V of the Ordinance.  By the same reasoning, therefore, there is no way one can read “the Court of First Instance” or “a judge” in section 14(3)(f) as including the Registrar or a master.

24.  Mr Chu refers to a comment made in Clarke, Hong Kong Civil Court Practice, Vol 1, [5066] – [5102] that the inclusion of rule 7 in Order 58, which is entitled “Appeals from Masters”, seems strange.  Counsel argues this supports his contention that the word “judge” should be given a wide meaning to cover a master so as to remove the oddity.

25.  I do not accept the argument.  The “strange” position observed by Clarke arises precisely because the author takes the view that “clearly [‘a judge’] does not include the Registrar or a master” and Order 58, rule 7 “does not apply to decisions of masters”, a point he makes not only in [5066] – [5102], but also in [4750] – [4782].

26.  The apparent anomaly disappears once one remembers that our Order 58, rule 7 is borrowed from the old Rules of the Supreme Court in the United Kingdom.  Order 58 in the old English rules was entitled “Appeals from Masters, Registrars, Referees and Judges”. Rules 3, 4 and 5 dealt with appeals from district registrars, official referees and special referees.  Order 58, rule 6 of the old English rules dealt with an appeal to the Court of Appeal “from any judgment, order or decision of a judge in chambers”.  Rules 3 to 6 were not adopted in Hong Kong. We are therefore left with rules 1, 2 and 7 only, and rule 7 deals with appeals from judgments (etc) of judges in interpleader proceedings.  In other words, under the old Order 58 in the UK, there was nothing strange to find rule 7 in Order 58.  Although in Hong Kong, Order 58 is simply entitled “Appeals from Masters”, given the legislative origin of our Order 58, rule 7, there is really nothing strange about the inclusion of rule 7 in Order 58.  In any event, it is difficult to see how this can support an argument that the word “judge” in rule 7 includes a master.

27.  Mr Chu relies on a passage found in the judgment of Lord Denning MR in Purcell v F C Trigell Ltd [1970] 3 All ER 671, 674 f to j:

“… Section 31(1)(h) of the Supreme Court of Judicature (Consolidation ) Act 1925, provides that no appeal shall be―

‘without the leave of the court or judge making the order, from an order of the High Court or any judge thereof made with the consent of the parties…’

…

The plaintiff says that that consent order comes within S 31(1)(h) so that no appeal lies without the leave of the district registrar.  The defendants say it does not come within S 31(1)(h) because the registrar is not the ‘court or judge’.  The defendants say that ‘court’ means the court sitting in banc; and that ‘judge’ means a judge of the High Court sitting in open court or in chambers.  I cannot agree with that submission.  Ever since the Supreme Court of Judicature Act 1873, the words ‘court’ or ‘judge’ have been used to include a master or registrar when he is exercising the powers which a High Court judge can exercise in chambers.  The master or registrar is the delegate of the judge for the purpose.  I think, therefore, that the consent of the district registrar ought to have been obtained.  As it was not obtained, there was no jurisdiction to hear the appeal from the consent order.  …”

28.  In my view, this does not support counsel’s contention.  First, the Master of the Rolls was dealing with a different section.  Secondly, as mentioned, in our rules, we have a specific definition of “the Court”, which refers to both judges and masters, thereby drawing a clear distinction between the two.  Thirdly, as explained, in the context of Order 58, rule 7, there is, as a matter of interpretation, no scope for expanding the meaning of the word “judge” to include a master. Likewise, for the reasons already given, it is quite impossible to expand the meaning of the “Court of First Instance” or that of “a judge” to include a master in section 14(3)(f) of the Ordinance.

29.  Mr Chu points out that in para 17/5/10 of The Hong Kong Civil Procedure 2011, Vol 1, which is the same as para 17/5/11 of The Supreme Court Practice 1999, Vol 1, it is said that:

“ An appeal from an interlocutory order of a master lies to a judge in chambers. This includes all matters of an interim nature. An appeal from a final order of a master made by way of summary determination lies to a judge in chambers. An appeal from a final order made after trial of an issue lies to the Court of Appeal. …”

30.  Mr Chu points out that no distinction is drawn by the editors between a final order by a judge after trial, and one made by a master after trial, in terms of the right of appeal to the Court of Appeal. 

31.  I accept that an ambiguity exists when the passage is read on its own.  But when it is read together with Order 58, rule 7 and the accompanying commentary, there can be no room for doubt.  In any event, for the reasons already given, as a matter of interpretation of the relevant provisions in the Ordinance and in the Rules, the contention of counsel must be rejected.

32.  Mr Chu submits that not to allow an appeal from a determination of an interpleader issue by a master after a full trial in open court to be made to the Court of Appeal does not make good sense.  It would also lead to an anomaly when the same rules allow appeals to the Court of Appeal from decisions of masters made under comparable circumstances.  That may be so, but all it means is that there may be a case for amendment of the relevant provisions, a matter to which I will presently return.  It does not follow that the existing provisions should be given a meaning that its language does not bear.

Right of appeal after trial by consent

33.  However, that is not the end of this appeal. Rather fortuitously, it was upon the joint application of the plaintiff and the claimant that the interpleader issue came before Master de Souza for trial.  In other words, Master de Souza was seized of the trial of the interpleader issue under Order 17, rule 11 by the consent of both parties.  This twist in the events brings the case within the ambit of Order 36, rules 1 and 4.  These rules provide for, amongst other things, the trial of any cause or matter (other than a criminal proceeding by the government), or any question or issue of fact arising therein, before a master, with the consent of the parties.  The master shall for the purposes of trial have the same jurisdiction, powers and duties as a judge in the like circumstances, and the trial before the master shall, as nearly as circumstances admit, be conducted in the like manner as the like proceedings before a judge.

34.  For our present purposes, the crucial consequence of this is that under Order 58, rule 2(a) (extracted above), an appeal lies to the Court of Appeal from any judgment, order or decision (other than an interlocutory one) of a master, given or made on the hearing or determination of any cause, matter, question or issue tried before him under Order 36, rule 1.

35.  In my view, the scope of Order 36, rules 1 and 4 and Order 58, rule 2(a) are sufficiently wide to cover the trial of an interpleader issue before a master by consent.  It is true that in most cases, Order 36, rule 1 would be resorted to where otherwise, the master would not have the necessary jurisdiction to try the matter in question.  Order 36, rule 1 would, in such an event, entitle the parties to overcome that difficulty and confer the requisite jurisdiction on the master to try the matter by consent.  There could be practical advantages for taking that course.  An obvious one is that solicitors may appear before the master trying the case, and counsel need not be instructed.  The obvious intention of Order 36, rule 4 as well as Order 58, rule 2(a) is to equate, as far as possible, a trial before a master by consent with a trial before a judge; therefore, amongst other things, in relation to both, an appeal from the first instance decision lies straight to the Court of Appeal.  

36.  In my view, this does not preclude, however, the possibility of invoking Order 36, rules 1 and 4 (and thus Order 58, rule 2(a)) in a matter which a master has, in any event, jurisdiction to try, irrespective of the parties’ consent.  One such matter is the trial of an interpleader issue pursuant to Order 17, rule 11.  If the true intention and purpose behind Order 36, rules 1 and 4 and Order 58, rule 2(a) is to afford the parties some discretion and leeway in terms of the choice of forum, and thus some practical advantages such as the saving of costs, I can see no reason why that same consideration should not apply to a trial of an interpleader issue before a master by consent, just because the master would have the necessary jurisdiction to try the matter even without the consent of the parties.

37.  I am happy to come to that conclusion given the unsatisfactory position that the existing Rules give rise to, in terms of the right of appeal after trial of an interpleader issue before a master.

38.  The current position is unsatisfactory because after a full trial of the interpleader issue before a master, the right of appeal would take the parties not to the Court of Appeal, but only to a judge of the Court of First Instance, where the appeal would be heard de novo. Witnesses would have to be called and cross-examined again.  There would, in effect, be a new trial before the judge.  From the judge’s decision, there would then be a further appeal, as of right, to the Court of Appeal.  There is an unnecessary duplication of efforts and costs under this procedure of appeals.

39.  There is, therefore, a case for amending the Rules to give a right of appeal directly from the master’s decision given after a full trial to the Court of Appeal.

40.  Pending any possible changes of the Rules in future, the position under the current Rules is that the Court of Appeal would only have jurisdiction to hear an appeal from a determination of an interpleader issue after a full trial if it was made by a judge, or, if it was heard before a master by consent pursuant to Order 36, rule 1, which is what happened in the present case.  In short, I conclude that this appeal is competent because it falls within Order 36, rule 1 and Order 59, rule 2(a).

Substantive merits

41.  I therefore turn to the substantive merits of the appeal. 

42.  Very briefly, the claimant was the importer of the subject containers from South Korea.  Its case is that it contracted to sell the containers to one Playbox Ltd, the order having been placed by Playbox’s employee, Howard Au Yeung. Au Yeung, the “rogue” in the present case, had a company of his own, East Profit Development Company, which he used to conduct secret transactions.  Indeed, the plaintiff, the claimant, Playbox and East Profit were all traders in plastic raw materials.  Trading between the claimant, a substantial player in the market, and Playbox began in December 2007.  In all, there were about 50 successful transactions between them.  Au Yeung was the person responsible for negotiating and placing orders on behalf of Playbox with the claimant.  He would deal directly with a Chan Shu Kai, a sales account executive of the claimant.  Chan has since resigned from the claimant “after his trustworthiness was called into question following the events that gave rise to the present proceedings”.

43.  The disputed goods, plastic raw materials PPB330FO, were purchased from a Korean supplier on 4 September 2008.  Payment was made by the claimant by letters of credit at sight.  The 6 containers in dispute were but a portion of the goods to be shipped to Hong Kong by the Korean supplier.  

44.  On 2 and 3 September 2008, the claimant contracted to sell the 6 containers of plastic materials to Playbox.  On 17 and 18 September 2008, containers of the plastic materials in the claimant’s possession were in a deliverable state.  The claimant then assigned the 6 containers in question for delivery to Playbox under 4 invoices.  Delivery of the containers was effected on the same two days by delivery of the relevant release orders to the office of Playbox.  The contract of sale stipulated that the payment term was “7 Days By Cheque”.

45.  The master found that the property in the goods was therefore passed to Playbox and all that remained to be performed under the contract was payment by Playbox on or about 24 or 25 September 2008.  The master found that that must have been the plain intention of the contracting parties.  However, the goods remained unpaid.

46.  The master further found that following delivery of the relevant release orders to Playbox, the claimant had parted possession with the goods.  Its unpaid seller’s lien over the goods had ceased to exist as it was no longer in possession of them.  There was no evidence of any reservation of title by the claimant, the master found.

47.  On the other hand, it is not disputed that the plaintiff purchased or purported to purchase the same goods from East Profit on 17 and 18 September 2008 at the price of US$1,500 per metric ton or HK$210,600 per container.  The transaction was conducted between Au Yeung using his company and one Lam Kwan Ming of the plaintiff.  The master found that the contract was properly evidenced by relevant invoices, delivery orders and deposit slips proving payment for the goods sold by East Profit and delivered to the plaintiff.  According to the master, it was a normal sale and purchase activity with a seller that the plaintiff had dealt with with no problems in the past.

48.  The master dealt with a suggestion that the sale of the subject containers by East Profit to the plaintiff was at an undervalue.  He accepted Lam’s evidence that the type of plastic materials in question was less in demand when compared with another type (Everjar 3015), the quoted price for which at the material time was used by the claimant to argue that the resale of the containers was at an undervalue. Lam also said in evidence that it was a falling market at the time.

49.  Rejecting the claimant’s allegation of collusion between the plaintiff and Au Yeung to defraud the claimant, the master found that the evidence went no way to establishing that the plaintiff was acting in concert with Au Yeung, knew or even suspected the subterfuge that Au Yeung was about.  He found that Lam had provided cogent and believable evidence that the plaintiff had bought the goods from East Profit in the normal course of trading.  A proper contract was entered into and, according to the master, the goods were duly paid for at a price not so exceptionally low as to render the transaction questionable.  He found that it was “a genuine contract for sale and purchase”, and the plaintiff had acquired possession of the goods for valuable consideration.

50.  The master concluded that the plaintiff should be entitled to retain the goods as against the claimant.

51.  In this appeal, Mr Chu for the claimant takes a number of points.  First, he contends that the plaintiff did not acquire title to the containers at any time because Au Yeung or his company East Profit, never acquired title to the containers which they could transfer to the plaintiff.  He relies on the “nemo dat” rule (nemo dat qui non habet – no one gives who possesses not).  Secondly, he argues that the plaintiff was not a bona fide purchaser without notice, and therefore did not take free from the claimant’s interest in the containers.  Thirdly, he argues that the master has adopted the wrong burden and standard of proof. 

Nemo dat and possessory title

52.  In relation to the first argument, in my view, counsel has looked at the wrong end of the matter.  It is true that the master did not make any specific finding on whether, and if so, how, East Profit acquired title or rights over the containers, which had been sold by the claimant to Playbox (as per his finding), for resale to the plaintiff. However, it is common ground that prior to the police seizure of the containers, the plaintiff was in possession of them.  That gave the plaintiff a possessory title which could only be defeated by someone with a better title.  R v Otto 90 A Crim R 492, 496.  Unlike, say, a conveyancing situation where a vendor has to prove his title, it is not for the plaintiff, who was in possession of the containers prior to seizure, to establish its title.  It is for the claimant to show a better title, or an interest that the plaintiff did not take free from. 

53.  Therefore, the focus must first be on the title, or remaining interest, that the claimant has over the goods.  It is not disputed that the claimant was originally the owner of the containers.  It bought them from the Korean supplier.  However, the master found as a fact that it entered into a valid contract of sale of the containers with Playbox. Delivery was effected and property passed.  There was no reservation of title. In those circumstances, after completion of the sale and purchase, the claimant no longer had any title or interest in the containers.  All it had was a contractual right to sue Playbox for the unpaid purchase price. 

54.  Mr Chu argues that Playbox denied entering into or authorising such a purchase through Au Yeung. 

55.  But that is beside the point.  It is not denied that Au Yeung had the ostensible authority to enter into the purchase contract on behalf of Playbox with the claimant.  There was made a binding contract between Playbox and the claimant.  The fact that Au Yeung was not authorised by Playbox to enter into the contract was an internal matter between Au Yeung and Playbox.  It did not affect the claimant’s position vis-à-vis Playbox.  So far as the claimant was concerned, it got what it intended to get – a binding contract with Playbox.

56.  There is no specific challenge against the master’s finding that a contract of sale had been entered into between the claimant and Playbox.  In any event, on the evidence before the master, he was entitled to come to that conclusion.  Likewise, his conclusions on the passing of property and the lack of any evidence of any reservation of title after the parting of possession are unassailable.

57.  This is fatal to the claimant’s claim to the containers. 

Voidable contract and notice

58.  However, Mr Chu argues that the contract between the claimant and Playbox was a voidable one, giving the claimant a residual interest in the containers.  He argues that the claimant had notice of that interest.  Mr Chu has in mind sections 25 and 27 of the Sale of Goods Ordinance (Cap 26) and section 10 of the Factors Ordinance (Cap 48).

59.  Mr Chu argues that the contract was voidable because of the fraud practised by Au Yeung on the claimant regarding the true identity of the purchaser.  I have already explained that given Au Yeung’s ostensible authority to act for Playbox, there was made a binding contract between the claimant and Playbox, as intended by the claimant.  It is therefore difficult to see how the claimant could say that nonetheless the binding contract was voidable at its own instance.  I reject Mr Chu’s argument. 

60.  Mr Chu further argues that the contract was voidable, or better put, was only a conditional one in the sense that the passing of property was conditional on payment of the purchase price. 

61.  I have no difficulty in rejecting this argument.  The master found on the evidence that there was no reservation of title or interest after parting with possession of the containers.  The contract itself specifically provided for payment by cheque in 7 days’ time, without saying that payment was a condition to anything.  The claimant’s argument on conditional contract must be rejected. 

62.  That must also spell the end of Mr Chu’s argument based on notice.  The notice argument is only relevant if the contract was voidable, or if, somehow, the plaintiff still retained some interest in the containers notwithstanding the parting of possession with the containers. 

63.  Mr Chu relies on several matters to support his argument on notice.  He says that the sale between East Profit and the plaintiff was at an undervalue; there was an agreement between Au Yeung and the plaintiff to buy back the plastic materials if they could not be sold; the name of the claimant appeared in the release orders; and the transaction between East Profit and the plaintiff was a speculative one and the plaintiff ought to behave more prudently. 

64.  These arguments can be disposed of shortly. First, the master has specifically considered the evidence of Lam on the question of price.  He accepted Lam’s evidence.  It was a finding of fact open to the master to make on the evidence before him.  There is no basis for this Court to disturb his finding. 

65.  Secondly, the buy-back provision was not one unique to this particular contract.  According to the evidence, it was a common provision appearing in previous transactions between the plaintiff and East Profit.  There is no suggestion that those earlier transactions were anything other than normal transactions between the two. 

66.  Thirdly, as regards the appearance of the claimant’s name in the release orders, Mr Chu accepted at the hearing that that must have been a very common occurrence.  It could hardly have given the plaintiff the sort of notice Mr Chu suggested. 

67.  Finally, the fact that the transaction in question was a speculative one in a volatile market is, in my view, neither here or there.  That by itself cannot have given the plaintiff any notice of the claimant’s (supposed) interest in the containers. 

Burden and standard of proof

68.  Mr Chu’s final argument based on the burden and standard of proof must be rejected.  Counsel argues that implicitly, in paragraphs 16 to 18 of his judgment, the master has placed the wrong burden of proof on the claimant, and has in any event adopted the criminal standard of proof in requiring the claimant to establish a case of collusion between the plaintiff and Au Yeung. 

69.  I disagree.  All the master said was that the evidence went no way to establishing that the plaintiff was acting in concert with Au Yeung, knew or even suspected the subterfuge that Au Yeung was about, and that Lam had provided cogent and believable evidence that the plaintiff had bought the goods from East Profit in the normal course of trading.  There can be no possible suggestion that the master has adopted the wrong burden or the wrong standard of proof.  He who asserts must prove.  Moreover, in relation to a serious allegation like collusion, whilst the standard of proof remains the balance of probabilities, when assessing the probabilities, the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probabilities.  Re H [1996] AC 563; HKSAR v Lee Ming Tee (2003) 6 HKCFAR 336.

Outcome

70.  For these reasons, I would dismiss the appeal with costs to the plaintiff.

Hon Tang VP:

71.  I have had the advantage of reading the Chief Judge’s judgment in draft.  With respect, I agree and have nothing to add.

Hon Fok JA:

72.  I have had the benefit of reading the judgment of the Chief Judge in draft.  With respect, I agree with his reasons for dismissing the appeal.  I only wish to add that, since I agree with the Chief Judge’s conclusion that it is only fortuitously because the parties consented to the trial of the interpleader issue before the master that this court has jurisdiction to entertain this appeal, I consider there would be good sense in amending the Rules in the manner suggested.