BANK OF COMMUNICATIONS CO LTD v. WAN KWOK KUEN AND OTHERS

DCMP 2503/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2503 OF 2007

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BETWEEN

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Reasons for Decision

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Introduction

1. The 3 Defendants opened an account with the Plaintiff in their joint names.  There was a dispute between the 1^st Defendant on the first part and the 2^nd & 3^rd Defendants on the other part.  As a result, the 1^st Defendant instructed the Plaintiff to suspend the Account.  The Plaintiff did as instructed.  The 2^nd & 3^rd Defendants then instructed the Plaintiff to reactivate the Account.  The Plaintiff enquired of the 1^st Defendant’s stance.  The 1^st Defendant instructed the Plaintiff to continue to suspend the Account.  The Plaintiff filed an originating summons to apply for relief by way of interpleader.  The 1^st Defendant supports, whereas the 2^nd & 3^rd Defendants resist, the interpleader.

Facts

2. Except for two aspects, which I shall deal with in due course, most facts of any significance are not in dispute for the purpose of the present hearing.  The Plaintiff’s affirmation (made by Yiu Kai Cheung Cino) can outline the Plaintiff’s dealing with the 3 Defendants [B 44-57].  I now summarize it.  

3. In 2004, the 3 Defendants opened a savings account with the Plaintiff in their joint names [“Account”].  The 3 Defendants signed various contractual documents, including the Agreement for General Banking Services (for individual and joint Accounts) [“Agreement”].  Schedule 3 of the Agreement provided that the Account would be operated by any 2 of the 3 Defendants [C 95].

4. Clause 16.1 of the Agreement provided that the Plaintiff could suspend the Account in the event of, amongst others:

In 2007, the 1^st Defendant instructed the Plaintiff to suspend the Account because:

5. The Plaintiff suspended the Account.  The 2^nd & 3^rd Defendants then instructed the Plaintiff to reactive the Account.  The 1^st Defendant instructed the Plaintiff to continue to suspend the Account.  The Plaintiff applied for interpleader.

6. The 1^st Defendant filed an affirmation [B 79-85], which outlined a dispute between the 1^st Defendant and the 2^nd & 3^rd Defendants as to how the money in the Account would be shared by the 3 Defendants.   The 2^nd & 3^rd Defendants each filed an affirmation [B 59-70; 71-74], which did not touch upon, or deny, such a dispute. 

Fact in dispute

7. There was a dispute amongst the parties as to when or whether a report to the police had been made by the 1^st Defendant about the robbery of the passbook by the 3^rd Defendant and others.  I do not think it significant.  The Plaintiff certainly has its own official record independent of the passbook.  The Account can be operated without the passbook.   

Legal principles

Interpleader in general

8. There is no dispute as on law.  According to O. 17, r. 1(a):

Where a person is under a liability in respect of a debt or in respect of any money, goods or chattels and he is, or expects to be, sued for in respect of that debt or money or those goods or chattels by two or more persons making adverse claims thereto … the person under liability as mentioned [herein] … may apply to the Court for relief by way of interpleader.

9. According to O. 17, r. 3(4), a summons for interpleader must be supported by evidence that the applicant:

“Collusion with any of the claimants”

10. This requirement was explained in Famous Zone Electronics Ltd v Hong Kong and Shanghai Banking Corp Ltd [1998] 3 HKC 723 by Sakhrani J at 727:

It is plain that collusion as used in O 17 does not necessarily connote anything sinister on the part of the applicant.  In Murietta v South American etc Co Ltd (1893) 62 LJQB 396 it was held that collusion in the sense in which it is used in the Order does not necessarily involve anything morally wrong.  As Wills J said at 397:

Collusion may be said to be an equivalent for playing the same game.

Wills J also observed that one of the things intended when the rules were drawn up was that the stakeholder seeking relief should be in a real position of impartiality between the parties.

I derive assistance also from what Williams J said in Thompson v Wright (1884) 13 QBD 632 of the rule requiring an absence of collusion on the part of the applicant.  Williams J said at 634:

The rule is intended to provide that a person professing to be impartial, and a mere stakeholder having placed himself in a difficulty as regards one party, through having made an admission, or entered into a contract, or otherwise, hampered his position, should not get himself out of the difficulty by asking the Court to help him make the parties litigate a different question to that applying to him.

My findings

11. Absent legal technicalities, the central question of the present hearing must be:  What do the parties want to achieve by taking such a stance?

12. The 2^nd & 3^rd Defendants’ chief complaint is that they could not use the money in the Account during the period of suspension.  I do not think it is a genuine complaint.  There is no evidence that they will or do suffer any loss and damage as a consequence.  At any rate, they may seek to recover loss and damage against the Plaintiff and/or the 1^st Defendant on the ground of a wrongful suspension of the Account.  I think the suspension is a sensible way to preserve status quo pending a judicial determination of the parties’ beneficial interest.  No parties will be put to any substantial or irreparable prejudice.    On the contrary, if the Plaintiff is unable to interplead, he will necessarily be made a defendant in the action between the parties.  This is a complication which will lead to more time and costs to all parties.   

13. I now deal with the legal technicalities.  The 2^nd & 3^rd Defendants’ counsel submits that the Plaintiff does not expect to be sued by any of the Defendants in respect of the money in the Account.  This is because he may only be sued for non-compliance with instructions hence liable for damages.  I think this approach is too restrictive.  The right to give instructions to the Plaintiff is but a means to an end.  The 3 Defendants are only concerned about the money in the Account.  The Plaintiff’s refusal to carry out that party’s instructions will lead to a reasonable expectation to be sued for the money. 

14. It is true, as the 2^nd and 3^rd Defendants’ counsel submits, that at the present moment, the 3 Defendants are joint owners who have an undivided share.  So it must follow that the present instance is only an adverse assertion of right.  I do not think this submission correct.  Such instructions can have no meaning unless attached to the money in the Account.  From the 2^nd Defendant’s uncontested evidence, however, we cannot ignore the adverse claim to the money based on the 3 Defendants’ respective beneficial interest, if any.   

15. The Agreement has certainly provided for the right to operate the Account by 2 authorized signatories.  As the 2^nd & 3^rd Defendants’ counsel correctly points out, the 1^st Defendant alone had no right to instruct the Plaintiff to operate it.  So it must follow that the 2^nd and 3^rd Defendants together could override the 1^st Defendant’s instructions.  I do not think, however, that this has properly taken into consideration the Plaintiff’s present knowledge of the dispute between the parties on their respective beneficial interest in the money.  The 1^st Defendant may transpire to have a share, or even a major share, in the beneficial interest.  Where the Plaintiff is made aware of such a dispute, he can no longer safely rely on the face value of the Agreement so as to carry out instructions given by 2 authorized signatories.   

16. The 2^nd & 3^rd Defendants’ counsel submits that the Plaintiff has colluded with the 1^st Defendant.  I do not think the Plaintiff’s suspension of the Account amounts to collusion with the 1^st Defendant.  Its reactivation will be an entirely different matter, though, because the status quo will be gone.  Had the Plaintiff reactivated the Account, I would have regarded it collusion with the instructing party.  Whether ordered by the Court or on a party’s instructions, the Plaintiff’s suspension of the Account is a sensible way to preserve the money.  I am prepared to allow the Plaintiff to interplead. 

Conclusion

17. I allow the Plaintiff’s Originating Summons in full.  The parties should address the Court on consequential directions to be made.  Costs usually follow the event.  I make an order nisi:

The aforesaid costs in paragraphs (a) and (b) shall not come from the monies in the Account.  This costs order shall become absolute after 14 days from today.

Representation: