RONG WEI v. CHIU SUNG FAI also known as ALLAN CHIU also known as CHIU SUNG FAI ALLAN AND ANOTHER

HCA 1509/2019

[2020] HKCFI 692

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1509 OF 2019

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D E C I S I O N

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A. Introduction

1.  There are 3 sets of applications before the Court:

(1)  The first set relates to garnishee proceedings (“Garnishee Proceedings”) with Bank of China (Hong Kong) Ltd (“BOC”) as the 1^st garnishee and Standard Chartered Bank (“SCB”) as the 2^nd garnishee.  The Defendants as judgment debtors hold bank accounts with BOC and SCB.

(2)  The second set is a Variation Application seeking to vary the injunction order granted ex parte by Wilson Chan J on 28 August 2019 as continued by K Yeung J on 13 September 2019 (“Injunction Order”) so as to allow payment out of two BOC accounts of D1 (“BOC Accounts”)and the SCB account of D2 (“SCB Account”) to satisfy orders granted under the Garnishee Proceedings.

(3)  The third set is an Amendment Summons to amend the Plaintiff’s initial summons which sought a variation of the Injunction Order.

2.  I am satisfied from the various affirmations of service that the Injunction Order, the Final Judgment entered in this case on 1 November 2019, the documents relating to the 3 sets of applications, the courts’ letters of directions for these applications and the Plaintiff’s written submission have been served out of jurisdiction on the Defendants with leave of the Court.

3.  The Defendants have never filed an acknowledgement of service.  Nor have they responded at all to this Court’s directions.  I am therefore satisfied that I can proceed to dispose of the 3 sets of applications on paper.

B.  Background

4.  This Action was commenced to enforce in Hong Kong an order after trial made by Donegan J in favour of the Plaintiff in the proceedings in the Supreme Court of British Columbia, Canada (Claim No. S174491) against D1 and D2 (“Canadian Order”).  The Canadian Order created a judgment enforceable by the Plaintiff against the Defendants.

5.  The Injunction Order was obtained in aid of the execution of the Canadian Order.  The basis of the proprietary injunction was Donegan J’s decision holding that D1 holds the funds in the BOC Accounts, and D2 holds the funds in the SCB Account, on trust for the Plaintiff.  The amount stated in the Injunction Order was based on the amount ordered by Donegan J to be paid by D1 and D2 to the Plaintiff (excluding the amount of punitive damages of CAD100,000): see §§2, 6-7 of the Canadian Order.

6.  In default of notice of intention to defend this action by the Defendants, the Plaintiff entered Final Judgment against them in the sum of CAD2,648,335.20 plus interest and fixed costs in the present action.

7.  I deal first with the Amendment Summons, then the Garnishee Proceedings and then the Variation Application.

C.  Amendment Summons

8.  The Plaintiff initially took out a summons dated 10 January 2020 (“First Summons”) seeking to amend the Injunction Order.  The amendment, if allowed, would have the effect of allowing the Plaintiff to withdraw funds in the BOC Accounts and SCB Account to meet any order to be made in the Garnishee Proceedings.

9.  It was plainly an error to ask for amendment. An amendment takes effect, not from the date of the amendment, but from the date of the original document which it amends: HKCP 2020, §20/8/2.  In this case, it would take effect from 28 August 2019, the date of the ex parte Injunction Order.  However, on that date, there were no garnishee proceedings and the judge never intended to allow the Plaintiff to withdraw from the BOC or SCB Accounts any sum of money.

10.  Upon requisition raised by this Court as to the appropriateness of amending the Injunction Order, the Plaintiff took out the Amendment Summons dated 11 March 2020 to amend the First Summons.  The aggregate effect of the First Summons and Amendment Summons is that the Plaintiff seeks to vary §§1-2 of the Injunction Order to authorize payment out of moneys in the BOC Accounts and SCB Account to the Plaintiff. The Plaintiff now seeks further amendment to vary not only §§1‑2 but also §3 of the Injunction Order.

11.  I am satisfied that the Amendment Summons sought the right relief of variation and not amendment of the Injunction Order. 

12.  §1 of the Injunction Order is a proprietary injunction restraining the Defendants from disposing of the funds in the BOC Accounts and SCB Account.  §2 is a Mareva injunction restraining only D1 from disposal of his assets up to the value of CAD2,548,335.20.

13.  §3 (in parallel with §2) is a Mareva injunction restraining D2 from disposal of her assets up to the same value.  The Amendment Summons plainly left her out of the variation, as a result of oversight of the Plaintiff.  It would not do injustice to D2 if the Court were to allow further amendment to the Amendment Summons to protect the Plaintiff’s interest where D2 has chosen not to respond at all.

14.  I therefore grant leave to further amend the First Summons to cover §§1-3 of the Injunction Order and deal with the First Summons as amended below.

15.  A note of caution to practitioners.  There are occasions where a defendant’s assets are subject to an injunction that survives a final judgment and the plaintiff seeks a garnishee order (or, for that purpose, a charging order) after judgment.  In general, the application for garnishee order nisi can be placed before a Master, accompanied by a solicitor’s letter stating that the defendant’s assets are subject to an injunction still in force.  The return date for the garnishee absolute can be fixed before a judge, to be heard with any summons for variation (not amendment) of the injunction. 

D.  Garnishee Proceedings

16.  I am satisfied that the papers for the Garnishee Proceedings have been served on BOC and SCB on 6 January 2020, and then over 7 days have elapsed before the Defendants were served out of jurisdiction on 16 January 2020 and at least 7 days before the initial hearing fixed on 12 February 2020.  The services were in accordance with Order 49, rule 3.

17.  SCB has taken a neutral stance and will abide by the court’s order.  Its attendance is excused.

18.  BOC has filed skeleton submissions with complaints of not much relevance but does not dispute the Garnishee Proceedings.

19.  RHC Order 49 rule 1 provides that:

“Where a person (in this Order referred to as “the judgment creditor”) has obtained a judgment or order for the payment by some other person (in this Order referred to as “the judgment debtor”) of a sum of money amounting in value to at least $1,000, not being a judgment or order for the payment of money into court, and any other person within the jurisdiction (in this Order referred to as “the garnishee”) is indebted to the judgment debtor, the Court may, subject to the provisions of this Order and of any written law, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.”

20.  The Plaintiff as judgment creditor has obtained a judgment for payment of money of over $1,000.  BOC and SCB are “within the jurisdiction” and “indebted to the judgment debtor”.  There are monies in the BOC Accounts and SCB Account that can settle part of the Final Judgment.

21.  Mr Chau, counsel for the Plaintiff, has fairly pointed out that on the face of §1 of the Injunction Order, the Plaintiff is asserting a proprietary claim over the funds in the BOC Accounts and SCB Account. If so, such funds do not constitute a debt legally owed to D1 by BOC and to D2 by SCB.  That was held to the case in Banco De Chile v Yong Ming Tai Technology Trade Co Ltd & ors[2019] HKCFI 1233, where DHCJ Le Pichon noted at §11:

“As the plaintiff maintains a proprietary claim in respect of the Funds remaining in the 1^st account, the Funds cannot be garnisheed by Maccaferri since they do not constitute a debt legally owed to D3 and remain subject to the proprietary injunction.”

22.  However, subsequent to the grant of the Injunction Order, the Plaintiff is now enforcing the Final Judgment which does not contain any proprietary relief.  The Plaintiff has effectively abandoned the proprietary claim over the funds in the BOC Accounts and SCB Account insofar as this Action is concerned.  The funds held in the BOC Accounts and SCB are debts owed by the Banks to the Defendants, which can be attached to satisfy the judgment sum.

23.  In the premises, I am satisfied that I should and do make the garnishee orders absolute against BOC and SCB respectively.

E.  Variation Application under the Amended Summons

24.  The Plaintiff applies to vary the Injunction Order too.  It serves the dual purpose of (i) allowing sums to be released to meet the garnishee orders absolute; and (ii) should this Court fall into error in granting the garnishee orders absolute, to authorize payments out of the funds under the proprietary injunction to satisfy the proprietary right of the Plaintiff.

25.  I am satisfied that the purposes are proper and that the Injunction Order should be varied accordingly.

26.  The Plaintiff accepts that upon BOC and SCB’s compliance with the Garnishee Orders, the balance of the Defendants’ indebtedness under the Final Judgment would be reduced accordingly and the injunction against the Defendants should be “downsized” accordingly: Herbert Smith Freehills (A Firm) v Chris Au & anor (unrep, HCA 3030/2015, 3 March 2017), §9, DHCJ Lee (as he then was).

27.  Not knowing the remaining balance in the BOC and SCB Accounts and their costs and fees, the Plaintiff is unable to ascertain the precise extent of downsize.

28.  In the premises, the Plaintiff undertakes, and this Court accepts the undertaking, to make an application, within 3 business days after receipt of the funds from SCB and BOC, to vary the Injunction Order further by reducing the amount frozen by the Mareva Injunction accordingly.

F.  Costs

29.  The Plaintiff should have the costs of the Garnishee Proceedings and Variation Application but not the Amendment Summons (which arose out of the Plaintiff’s own error).  The usual costs for garnishee proceedings before a Master is $5,200.  In this case, given the need to vary an injunction, the Defendants being out of jurisdiction and the additional procedural steps needed because of the adjournment of court proceedings arising out of COVID-19, I summarily assess and allow costs of $60,000 to be paid by the Defendants to the Plaintiff.  I also grant costs of $5,800 to BOC and $3,000 to SCB.

G.  Conclusion

30.  I order as follows:

(1) There be leave to amend the First Summons as per the draft attached to the Amendment Summons, with further amendment to include §3 of the Injunction Order in the terms of variation.

(2) There be Garnishee Orders Absolute as against BOC and SCB respectively as sought;

(3) The Injunction Order be varied to enable payment out to meet the Garnishee Orders.

(4) Within 3 business days after receipt of the funds from SCB and BOC, the Plaintiff do apply to vary the Injunction Order further by reducing the amount frozen by the Mareva Injunction accordingly;

(5) On a nisi basis,

(a) Costs be to the Plaintiff summarily assessed and allowed at $60,000;

(b) Costs of $5,800 be to BOC; and

(c) Costs of $3,000 be to SCB.

(6) All costs as assessed are to be borne by the Defendants.

31.  I thank Mr Chiu for his assistance.