XCHRX CHEANG KUOK SAM v. CHUI KIN WING

H.C.A. No. 1366/93 &

M.P. No. 1602/93

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. By summons in both the Action and in the Miscellaneous Proceedings, the Attorney General sought : to be joined as 2nd Defendant; discharge of a charging order and a stay of execution of that order, and costs. Events have to some extent overtaken those summonses. The Plaintiff has agreed to join the Attorney. The property, the subject of the charging order, has been sold and the proceeds held in court pending the outcome of these applications. The 1st Defendant being now in jail in U.S.A. has played no effective part. The live issue, therefore, when this hearing opened was the validity of the charging order.

2. On 11th September 1992, the Attorney General on behalf of the Government of U.S.A. obtained a restraint order pursuant to s.10 of the Drug Trafficking (Recovery of Proceeds) Ordinance (the Ordinance) as modified by the Drug Trafficking (Recovery of Proceeds) (Designated Countries and Territories) Order 1991. The restraint order restrained, amongst others, the Defendant from disposing of any property in Hong Kong and in particular of a flat at Savanna Garden, Tai Po (the property). That restraint order was registered in the Land Registry on 17th September 1992. Subject to certain variations including that to allow sale of the property, the order remains in force. Ultimately, a court in U.S.A. made a confiscation order against the Defendant. That order was registered in Hong Kong as an external confiscation order under the 1991 Order and was registered in the Land Registry on 23rd September 1993.

3. The Plaintiff issued his writ in the action on 17th September 1993. He claimed re-payment of a loan of HK$3m and a declaration that the Defendant had created a charge valid in law over the property in favour of the Plaintiff to secure re-payment of that loan. The charge arose from an agreement between the Plaintiff and the Defendant made partly orally and partly in writing, the written part taking the form of a sale and purchase agreement by which the Defendant agreed to sell the property to the Plaintiff. The Defendant having failed to serve and file a defence, the Plaintiff took out a summons on 24th March 1993 for judgment in default. It was supported by an affidavit from the Plaintiff's solicitor which simply summarised (very briefly) the statement of claim, explained why order 13 rule 6 precluded the Plaintiff from applying for judgment in default of notice of intention to defend, and said that the time for filing a defence expired on 24th March and that none had been filed or served.

4. The Defendant, being then in custody in Hong Kong and not yet in U.S.A., attended the hearing of that summons on 23rd April. He does not appear to have objected to the application. A master made an order giving the Plaintiff leave to enter judgment, both for re-payment of the loan and for the declaration sought. On 10th May, the Plaintiff entered judgment for re-payment of the loan of HK$3m only.

5. Meanwhile, on 6th May, the Plaintiff's solicitor by affidavit dated 29th April applied for a charging order nisi on the property on the basis of a "judgment entered on 23rd April" for payment to the Plaintiff of the sum of HK$3m. A master made the order sought on 6th May. The application was made ex-parte upon the basis of the usual affidavit from the Plaintiff's solicitor. The affidavit exhibited a copy of the appropriate Land Register. That copy showed the Defendant to be owner, as the solicitor deposed in her affidavit. Although the solicitor did not depose in her affidavit, the Register also showed that on 2nd October 1992 there had been registered a memorial of the restraint order obtained by the Attorney General.

6. Notice to show cause in relation to the charging order was heard on 25th May when, in the absence of any opposition, the charging order was made absolute. On 15th June 1993, the Plaintiff commenced the Miscellaneous Proceedings seeking to enforce the charging order by way of sale. On 30th June, the Plaintiff's solicitor wrote to the Attorney General informing him of the two sets of proceedings and observing :

"Since our client has now obtained a Charging Order absolute on the Property, we reckon that our client has obtained an equitable charge on the property which ranks prior to your client has obtained an equitable charge on the property which ranks prior to your Restraint Order although your Restraint Order was registered prior tin time to our client's Charging Order. Our client now intends to apply to Court for an order for sale of the Property by virtue of his capacity as the equitable chargee. Hence, H.C.M.P. No. MP1602 of 1993 was issued. We welcome receiving from you your client's comments on our client's said proceedings, if any."

7. There followed an exchange of correspondence in which the Attorney General made a number of complaints. Finally, the Attorney General issued the two summons with which I am now seized. The summons in each set of proceedings was supported by an affidavit of Ms. Judith Maguire, Senior Crown Counsel, in which she asserted :

1. The Plaintiff and his advisors had been aware of the restraint order before the action was commenced.

2. No application had been made in M.P.2830/92relating to the restraint order.

3. The Plaintiff failed to make the Attorney General a party to the action and miscellaneous proceedings and failed even to notify him of the applications.

4. The loan was a sham designed to cover up a gambling debt or a money laundering exercise.

8. Further affidavits were filed on both sides. The Attorney General's application finally came on before me on 18th July. For the Attorney, Mr. Barlow made two broad submissions :

1. The charging order should be set aside because of material non-disclosure and because the Attorney had neither been joined in nor notified of the proceedings.

2. The debt is anyway unenforceable and no valid charging order could be made on such a basis. To fortify this submission, Mr. Barlow had asked for and obtained the presence of the Plaintiff for cross-examination.

9. During Mr. Barlow's submission, Mr. Edward Chan, Q.C., for the Plaintiff accepted that, if Mr. Barlow should persuade me that the alleged loan was a sham being a disguise for gambling or drug activity, the Plaintiff must fail. He pointed out, however, that if Mr. Barlow failed on the sham transaction point but succeeded in getting the charging order set aside on the alternative ground, that success would be academic. He said that the Plaintiff still has his order in relation to his equitable interest. The Plaintiff can fall back on that order, enter judgment and obtain release of the funds in court subject to the Attorney contesting that order or the existence of an equitable interest. Mr. Chan suggested, therefore, that I should deal with this issue so that these proceedings might be settled for once and for all.

10. Mr. Barlow submitted correctly, in my view, that this particular issue was not before the court because of the way in which the Plaintiff had relied upon his money judgment. After argument, however, during which I think Mr. Barlow acknowledged the desirability of concluding these proceedings and that any procedural disadvantage to the Attorney would be minimal, I gave leave to the Plaintiff to issue and have heard at the same time a summons seeking release of the funds. That summons put the question of the Plaintiff's equitable interest before me.

11. The net effect was to leave three issues for me to determine, namely :

1. Was the loan a device to disguise a gambling or money laundering transaction. If so, it was accepted that the Plaintiff's claim is unenforceable and the funds in court should be paid into general revenue under the Ordinance.

2. If there was a genuine loan by the Plaintiff, did the Defendant by the sale and purchase agreement, as part of a larger agreement, confer on the Plaintiff an equitable interest by granting an equitable mortgage or charge over the property. If so, it was accepted that the Plaintiff should take the fund.

3. If the Plaintiff had obtained no equitable interest should the charging order be set aside thereby removing the Plaintiff's priority as a secured creditor.

12. The Defendant has been extradited to U.S.A. He was alleged to have conspired to smuggle huge quantities of heroin into U.S.A. between January 1987 and June 1989. In January 1994, he pleaded guilty to one charge of importing heroin into U.S.A. He is now presumably serving an extended period of imprisonment. Since leaving Hong Kong, he has for perhaps obvious reasons played no effective part in these proceedings, as I remarked earlier.

13. The Plaintiff's case, therefore, rests largely upon the evidence of the Plaintiff. That evidence derives from three sources. First, two statements, one of which was prepared by his solicitors, made to the police in November 1992 when the police began to investigate the Defendant's activities. Second, two affidavits made in order to resist the Attorney's application. Third, cross-examination of the Plaintiff by Mr. Barlow.

14. The Plaintiff, according to his affirmation, lives and works in Macau. Since about 1989, he has been an agent for the Casino there and has arranged gambling tours. The tours appear to be for serious gamblers because travelling expenses and hotel commodation were paid by the Casino. These gamblers used a special kind of the gambling chip purchased from the Plaintiff, on the basis of which he received a monthly commission from the Casino.

15. The Plaintiff first came to know the Defendant in 1987 upon introduction by another of the Plaintiff's clients. The Defendant was a gambler using the organised gambling tours. In about November 1988, the Plaintiff needed to raise funds to pay for the necessary gambling chips. He finally approached the Defendant who agreed to lend the money, with the friend who had introduced them acting as guarantor. The loan was repaid to the Defendant about a month later by way of a cash cheque drawn by the Casino on its bank in Macau. Over the next two or three years, the Plaintiff saw the Defendant on a few occasions.

16. On 2nd May 1992, the Plaintiff accidentally met the Defendant at a banquet in Macau. The Defendant asked the Plaintiff to lend him HK$3m which he needed urgently in relation to his property investment business in PRC. The Defendant said he was willing to pledge the property as security and, if he could not repay within 3 months, would convey the property to the Plaintiff. The Plaintiff made enquiries of a friend in Hong Kong who conducted a land search which he brought to Macau on 4th May. The search showed that the Defendant was registered owner of the property which was subject to a legal charge in favour of a bank to secure facilities to the extent ofHK$1.36m.

17. The Plaintiff telephoned the Defendant and said he would lend HK$3m on condition the Defendant signed an agreement for sale and purchase of the property to the Plaintiff. Through a friend, the Plaintiff was introduced to the solicitors who still represent him. An appointment was made for the Plaintiff and Defendant to meet there at 3 p.m. on 6th May 1992. In the meantime, the Plaintiff arranged for a cash cheque drawn by the Casino on its Hong Kong bank to be issued against money owed to him by the Casino. Armed with this cheque, he arrived for the appointment at the solicitor's office on 6th May. He and the Defendant confirmed the loan and an agreement to enter into a sale and purchase of the property, but if the Plaintiff could repay the loan, the sale and purchase agreement would be cancelled. If the Defendant could not repay in time, the Plaintiff would take the property as owner.

18. On 4th August 1992, the Defendant asked the Plaintiff to postpone the completion date to 5th September to give him more time to repay. The Plaintiff agreed. Two days later, the Defendant with his solicitor went to the Plaintiff's solicitors' office to sign a supplemental agreement to record the extension of time. The Plaintiff told the Defendant he was reluctant to postpone repayment and that if the Defendant failed to repay by 5th September, he would proceed to completion. The Defendant failed to repay the money by 5th September and asked for a further extension until 15th September. The Plaintiff agreed to extend repayment until 10th September. The Plaintiff called the Defendant on 9th September to remind him of the date for completion. On 14th September, the Plaintiff noted from the newspaper that the Defendant had been arrested in connection with alleged drug trafficking.

19. When the Plaintiff and the Defendant went to the solicitor's office on 6th May, they were attended by a legal executive, Helen Ho. Miss Ho made an affirmation in these proceedings which the Plaintiff has confirmed to be true. Miss Ho's evidence is, in my view, of crucial importance. It is necessary, therefore, to look at it in some detail. Miss Ho said that on 6th May the Plaintiff told her that he and the Defendant wished to enter into a sale and purchase agreement immediately in respect of the property. Miss Ho told them it was impossible to do any such agreement that day because there had been no land search and no title deeds and documents were available. She said that the whereabouts of the title deeds was not known nor was it known whether the property was subject to a mortgage or other encumbrance. Further, she said that the parties needed separate representation. If the Plaintiff and the Defendant wished to sign something that day, they could do it themselves. Miss Ho's firm would not be responsible for any such document. She would, however, draw up the formal agreement for sale and purchase for their signature on a later date.

20. Miss Ho deposed that both the Plaintiff and the Defendant said they would like to proceed in any case. The Defendant said he did not know of any legal firm. Miss Ho suggested Messrs Richard Tai & Co. Miss Ho started to take instructions from the Plaintiff for the formal agreement for sale and purchase. The Defendant produced a rates receipt to show he was owner. Both Plaintiff and Defendant agreed the purchase price was HK$3m which would be paid immediately with completion to take place within 3 months. They said they would do a provisional agreement that day to evidence sale, purchase and payment. The Defendant said there was an outstanding mortgage in favour of a bank for just over HK$1m.

21. Miss Ho said she advised the Plaintiff of the danger of paying the whole price immediately, particularly as there was no reliable evidence to show the Defendant was owner of the property. She added that it was not known whether the bank would release the title deeds, what was the amount of the outstanding loan and whether there was any other encumbrance registered against the property. She explained the usual procedure to the Plaintiff namely that normally an initial deposit would be paid prior to signing of a formal agreement and the balance of 10% of the purchase price would be paid upon signing the formal agreement. Finally, the balance of the price would be paid upon completion when vacant possession is obtained. The Plaintiff said he understood but that he and the Defendant were friends and trusted each other. As the Defendant needed the money immediately, the Plaintiff would take the risk and pay the whole purchase price immediately.

22. Miss Ho then advised the Plaintiff that the Defendant might default in redeeming the outstanding mortgage and, if so, the Plaintiff would have to repay the bank. The Plaintiff said he understood but, if necessary, he would discharge the mortgage.

23. Miss Ho said that the Plaintiff then explained that the HK$3m was in fact a loan to the Defendant. The Defendant preferred the Plaintiff to purchase his property and had agreed that they should enter into an agreement for sale and purchase. If the Defendant repaid within 3 months "they would further negotiate the matter". The Plaintiff said he would notcharge interest. Miss Ho asked whether. he should take a second mortgage and advised him that, if he was carrying on the business of lending money, the whole loan and security might be void under the Money Lenders Ordinance. The Plaintiff said he was not in such business but just helping a friend. Miss Ho then explained that it was necessary to obtain consent from the first mortgagee in order to create a second mortgage and that it might be difficult to obtain such consent. Until the consent was obtained, a second mortgage could not be prepared. Both Plaintiff and Defendant then asked Miss Ho not to bother with what had been said about the loan. They both said they did not want a second mortgage but a normal agreement for sale and purchase. They said Miss Ho should forget what they had said about the loan and take care of the case as if she had never been told about it.

24. Miss Ho then enquired whether the agreement should contain a clause providing for cancellation if the Defendant repaid the money. The Plaintiff was very firm that there was no need for such a clause. The Defendant was equally firm that this should be left untouched in the agreement and that the parties would take care of it for themselves. Miss Ho made clear to them that if they signed an agreement without such a clause, the Defendant would be bound to sell to the Plaintiff if the Plaintiff did not agree to cancel the agreement, whether or not the Defendant repaid. She emphasised that an agreement for sale and purchase is binding and cannot be rescinded without the consent of the other party. Both Plaintiff and Defendant said they understood the consequences of entering such an agreement.

25. Miss Ho proceeded to take instructions. She explained that once the agreement was signed, stamp duty had to be paid and might not be recoverable even if the agreement was later cancelled. The Plaintiff said he understood and was willing to pay the duty. The Plaintiff and the Defendant agreed that the formal agreement would be signed on 19th May and completion would be 3 months later on 6th August. The Plaintiff and the Defendant wished to sign a provisional agreement immediately. Miss Ho told the Plaintiff again that she would not advise him to enter into any agreement at that stage. As the parties did not know how to state the agreed terms in writing for the purpose of a provisional agreement, they asked whether Miss Ho had any form. Miss Ho gave them a standard form of a provisional agreement prepared by her firm. She explained the standard terms which Plaintiff and Defendant accepted and asked her to fill in the blanks. Because the purchase price was to be fully paid immediately, Miss Ho suggested that in order to protect the Plaintiff's interest, the Plaintiff being her client, there should be provision for payment of stamp duty by the defaulting party if the agreement was not completed; and that the Defendant should execute an irrevocable power of attorney in favour of the Plaintiff upon signing the formal agreement to secure the Defendant's obligation to the Plaintiff. Miss Ho explained that if the Defendant failed to complete, the Plaintiff could use the power of attorney to execute the assignment.

26. Miss Ho took the completed provisional agreement to a solicitor for approval. Thereafter, the Plaintiff and the Defendant read the terms of the provisional agreement again and signed in the presence of a friend who had come with them. The Plaintiff then handed the cash cheque to the Defendant who acknowledged receipt by signing a photo copy of the cheque. The Plaintiff gave the provisional agreement to Miss Ho so that she could proceed with the formal agreement.

27. The following day, Miss Ho set the usual conveyancing procedure in motion by writing to Messrs Richard Tai & Co. Arrangements were made for the formal agreement to be signed at her office on 19th May. On 19th May, it was discovered that the title deeds were held by another firm of solicitors whom the Defendant had apparently instructed in connection with an earlier agreement to sell the property. The Defendant explained that the other firm of solicitors had been introduced by a friend and were not personally known to him. That is why he had asked Miss Ho to suggest a firm in connection with the current transaction. He telephoned the other solicitors and instructed them to return all the title deeds to the mortgagee bank. Miss Ho then interpreted the formal agreement to the Plaintiff. A clerk from the Defendant's solicitors interpreted the agreement and power of the attorney to the Defendant. Both parties signed the agreement and the Defendant signed the power of attorney. The Plaintiff provided a cheque for HK$83,500 for stamp duty and registration fees.

28. On 22nd May, the original provisional agreement was sent for registration by Miss Ho. On 3rd June, she sent a copy of the formal agreement for registration. The conveyancing proceeded smoothly and Miss Ho prepared for completion. On 5th August, the Plaintiff advised her by telephone that he had agreed to postpone completion until 5th September. Miss Ho asked him to bring the Defendant to her office the following day to sign a supplemental agreement to record the extension. The Plaintiff and the Defendant, together with a clerk from the Defendant's solicitors, attended Miss Ho's office on 6th August and a supplemental agreement was signed. On above 4th September, the Defendant's solicitors asked for a postponement of completion until at least 15th September. Eventually, Miss Ho contacted the Plaintiff who said he only agreed to postpone completion until 10th September. On 9th September, Miss Ho received a letter from the Defendant's solicitors which recorded that the Defendant was reluctant to complete the transaction and that the Defendant had informed them that there was an arrangement for a loan of HK$3m to be secured by the property. The Defendant's solicitors said they were ceasing to act for the Defendant. Miss Ho informed the Plaintiff about what had happened. The Plaintiff said he would resolve the matter with the Defendant. Completion did not take place on 10th September. On 11th September, the Plaintiff said that the Defendant was willing to complete and deliver vacant possession. Miss Ho told the Plaintiff that he would have to pay off the existing mortgage. The Plaintiff said it would be no problem and asked whether he could execute the assignment under the power of attorney. Miss Ho said this was possible but it would be better if the Defendant executed the assignment himself. The Plaintiff said he would ask the Defendant to do this. On 14th September, the Plaintiff told Miss Ho that the Defendant had been arrested.

29. It is important to note that on 11th September, after receiving the letter from the Defendant's solicitors, Miss Ho wrote both to the solicitors and the Defendant. She said that her firm was acting for the Plaintiff as purchaser of the property. She referred to the agreement for sale and purchase. She said that the Defendant had failed to fulfil his obligations and broken the agreement. She said the Plaintiff was still able and willing to complete the purchase in accordance with the agreement. She said that her firm was instructed to institute legal proceedings for specific performance of the agreement.

30. In cross-examination of the Plaintiff, Mr. Barlow brought out a number of points. The Plaintiff's own record is not unblemished. In 1980, he had been sentenced to 12 months imprisonment in Macau and fined approximately 14,000 patacas for possession of an illegal weapon and assault occasioning actual bodily harm. The Plaintiff, while admitting the convictions, denied he had actually assaulted anyone. He also denied that these offences were related to triad activities.

31. Despite probing by Mr. Barlow, the Plaintiff was unable to explain satisfactorily, at least to me, precisely how he operated his business in Macau. He agreed somewhat surprisingly that he did not keep any records of his business.

32. When making a statement to the police in November 1992, the Plaintiff had been shown five cheques issued by the Casino and which had been received by the Defendant. These cheques were between February 1988 and July 1989 and with the $3m cheque for the loan amounted to HK$8.75m. HK$4.5m of that amount had been by way of cash cheques. The Plaintiff could throw no light upon these payments.

33. Finally, the Plaintiff had in his initial statements said that the date upon which he accidentally met the Defendant was 2nd May 1992. The police having traced the Defendant's movements, with the help of the Immigration Department, were able to demonstrate.that the Defendant had been in Hong Kong on that date. The Plaintiff, in his second affidavit, explained that he had mistaken the date of the banquet which he was attending. The Plaintiff did in fact adduce evidence from the person who held that banquet which was to celebrate the birth of a child. The date was confirmed as 26th April.

34. Mr. Barlow invited me to infer that, both the Plaintiff and the Defendant being involved in the gambling business in a big way, the correct inference to be drawn from the evidence available is that the Defendant obtained the money at the gaming tables and it was being repaid to him; alternatively that the Plaintiff's syndicate was lending him money for more gambling. If not for gambling purposes, then Mr. Barlow said that the money was related to the Defendant's drug trafficking activities, the Casino being used as a bank. I accept that the Plaintiff was a far from satisfactory witness and I accept that there is a great deal of suspicion attaching both to the $3m and to the earlier payments. Suspicion however is not enough. I am unable to say that on the balance of probabilities, the payment was other than what the Plaintiff asserted it to be namely, a loan. Accordingly, I have to go on to consider the second issue.

35. Mr. Barlow submitted that the sale and purchase agreements, the agreement to extend the time for completion and the power of attorney constituted a complete agreement between the parties. That agreement is easy to construe upon its own wording. Accordingly, no extrinsic evidence is necessary as an aid to construction, and insofar as such evidence would be evidence of the subjective intention of the parties to that agreement, it is inadmissible. See Prenn v. Simmonds [1971] 1 WLR 1381.

36. Mr. Chan conceded that that was a correct statement of the law. He submitted however that the various documents do not constitute a complete contract. As pleaded, the contract was partly oral and partly in writing. He said that extrinsic evidence is therefore admissible to show that the documents were not intended to contain all the terms of the agreement between the parties, to show the nature of the transaction and the true relationship of the parties. He relied upon Halsbury's Laws, 4th Edition, volume 12, paragraphs 1483 and 1485.

37. I was not taken to any of the authorities themselves on this topic. I will assume, without deciding, that in the circumstances of this case extrinsic evidence is admissible. In my judgment, however, such evidence far from assisting the Plaintiff only goes to support Mr. Barlow's contention that the transaction between the parties was nothing more nor less than an agreement for sale and purchase for the property. I have already set out the evidence of Miss Ho, whose evidence was expressly confirmed both in affidavit and cross-examination by the Plaintiff. In my view, that evidence makes it plain that, whatever intentions the Plaintiff and the Defendant may have had when they entered Miss Ho's office on 6th May, they had, after all the problems facing them had been outlined, abandoned any idea of some form of security transaction and entered into an unconditional agreement for the sale of the property to the Plaintiff. I am quite unable to accept Mr. Chan's submission that what the Plaintiff and Defendant intended and what they achieved was an equitable mortgage or charge over the property to secure the loan being made by the Plaintiff.

38. It is, of course, true that according to Miss Ho the Plaintiff said : "they would further negotiate the matter" if the Defendant repaid. In cross-examination, the Plaintiff explained that this meant that he would, of course, re-transfer the property to the Defendant. However, the Plaintiff and Defendant having expressly rejected the idea of a cancellation clause, I do not think that this piece of evidence takes the matter further in favour of the Plaintiff. It will also be remembered that when the Defendant's solicitors advised that the Defendant was unwilling to complete, Miss Ho, on instructions, warned the Defendant that the Plaintiff would seek specific performance of the agreement for sale and purchase. That is wholly inconsistent with any claim for the existence of an equitable mortgage or charge.

39. I am satisfied that the Plaintiff and the Defendant entered into no more than an agreement for the sale and purchase of the property. I am quite unable to find that the Defendant simply charged his property in favour of the Plaintiff as security for the loan. It being acknowledged by Mr. Chan that, if the transaction was no more than a sale and purchase agreement, the Plaintiff cannot succeed on this issue in view of the way in which the Plaintiff has conducted his case, I must turn to the 3rd issue.

40. Before I do so, however, I should indicate that there were additional arguments involving the Land Registration Ordinance, Cap.128 and the Conveyancing and Property Ordinance Cap.219. I do not propose in the circumstances to deal with those arguments, save to say that the point in relation to the Land Registration Ordinance effectively disappeared once it was acknowledged that the equitable charge, if equitable charge it was, was not registrable and that the Attorney General could not confiscate more than the Defendant's interest. Therefore, if the Defendant had indeed encumbered the property in May 1992, the Attorney could not succeed against the Plaintiff. As to the Conveyancing and Property Ordinance, reliance was placed by the Attorney General upon sections 5 and 6. His argument was that an equitable interest in land can only be created in writing. The Plaintiff's equitable interest, having been created at least partly orally, had only the force and effect of an interest at will, pursuant to section 6. Mr. Chan's argument was that the documents conveyed an interest to the Plaintiff. What was created by word was the equity of redemption, so that the equity of redemption alone would be at will and that would be at the will of the Plaintiff. Suffice it to say that, had I been called upon to determine this issue, I would have been minded to determine it in favour of Mr. Barlow. I do not think it possible to split the interests in the way contended for by Mr. Chan.

41. I turn to consider whether the charging order should be set aside. It is contended, first, that the Attorney should have been joined in the Plaintiff's Action. I do not think that can be right. Like Mr. Chan, I have difficulty in seeing what defence could properly have been pleaded by the Attorney General. I can understand, therefore, why the Plaintiff, with counsel's advice, decided not to join the Attorney. Nonetheless, the Plaintiff and his solicitors were aware of the restraint order at the time the Action commenced. Plainly, if the Plaintiff succeeded in obtaining the declaration he sought, the value of the property restrained by the Attorney would be diminished. The Attorney, therefore, did have an interest. It would have been proper, in my view, for the Attorney to have been notified of the proceedings. This would have given the Attorney an opportunity at least to interview the Defendant, although whether any material assistance might have been gained is perhaps unlikely.

42. To my mind, however, there is no question but that the Attorney should at least have been notified that the Plaintiff intended to apply for a charging order. The charging order if obtained, as, of course, it was, turned the Plaintiff into a secured creditor who, the Attorney acknowledged, would have a prior claim over the property upon a confiscation order being made. By obtaining that security as he did, the Plaintiff stole a march on the Attorney.

43. The application for the charging order was made ex-parte on affidavit in the usual manner. It is true that that affidavit followed the requirements of Order 50 Rule 1(3). That rule requires the affidavit to state the name of any creditor of the judgment debtor. It is correct to say that the Attorney was not a creditor of the Defendant. However, section 20 of the Supreme Court Ordinance, Cap.4 requires the court in deciding whether to make a charging order to "consider all the circumstances of the case". The position and interest of the Attorney plainly falls within that rubric. The Plaintiff's solicitor should, without any doubt, have drawn to the attention of the master the Attorney's position. In my judgment, that information was material to the master, first in deciding whether to make an order nisi; and second, if the order nisi was made, in deciding whether the Attorney should be notified so as to have the opportunity to be heard.

44. Mr. Chan attacked this argument on two broad fronts. First, he said that the Attorney's presence was only necessary when it became necessary for the court to determine the conflicting claims for priority, that is, when the Plaintiff began enforcement proceedings by seeking an order for sale in the Miscellaneous Proceedings. The Attorney was given notice of the Miscellaneous Proceedings, hence the current applications. In my view, it only needs to be observed that if the Attorney had been notified of the proposal to seek a charging order the issues between the Plaintiff and the Attorney would have been determined very much earlier and at much less expense than has now been incurred. That seems to me to speak for itself.

45. I am satisfied, therefore, that the failure to draw to the attention of the master the Attorney General's interest was material non-disclosure. Further, it was deliberate non-disclosure because the Plaintiff and his solicitors were aware of the Attorney's restraint order. No attempt has been made by the solicitors to explain on affidavit the reason why they proceeded as they did. Mr. Chan has, of course, attempted to explain the omission by way of argument based upon the legal position. In my view, that is insufficient. Some form of explanation was called for.

46. Mr. Chan next argued that the discharge of a charging order, like the discharge of an injunction obtained ex-parte, is discretionary. He alleged that the Attorney has been equally dilatory in the way in which he has approached the case. He pointed out that the Attorney, if he had properly searched the Land Register, would have discovered the entry relating to the sale and purchase agreement. The Plaintiff could then have been notified of the application to restrain the property. Further, although the Attorney was advised about the Miscellaneous Proceedings by the letter dated 30th June 1993, it was not until December that the application to discharge the charging order was made. Only then did the basis of the Attorney's attack, namely material non-disclosure and other procedural defects, become apparent.

47. I do not think that there is anything in this. It was unfortunate that the Attorney relied upon an old search of the Land Registry so that he was not aware of the Plaintiff's interest at the time he applied for a restraint order. I do not think that that carries much weight in relation to the present application. It is certainly true that several months passed before the Attorney made his application for discharge. During that time, however, the correspondence shows that there was considerable activity during which attempts were made, finally successful, to agree to the disposal of the property, so that the various completing interests attached to the proceeds of sale. I do not think the Attorney's behaviour in the circumstances to be particularly reprehensible.

48. The authorities are well-known. A party should not be allowed to retain an advantage obtained ex-parte involving material non-disclosure. If the non-disclosure was deliberate, the advantage should be removed and not restored. If the non-disclosure was not deliberate then, depending upon the circumstances, the court may decide not to discharge the order, alternatively to discharge it but make a fresh order upon the basis of the material then before it. In all the circumstances of this case, I am satisfied that the charging order and the charging order nisi should be discharged.

49. It is not necessary for me to go into the other interesting arguments in relation to the propriety of the order giving leave to enter judgment for the declaration sought by the Plaintiff. Nor the argument that under the Ordinance the Attorney obtains priority over all unsecured creditors from the date of the making of a restraint order under section 10. That can wait for another occasion, although I observe that I see nothing in section 10 read with section 14 to suggest that an order under section 10 is somehow distinguishable from the usual type of Mareva order in this respect. I tend to agree with Mr. Chan that section 14 simply gives guidance to the court as to how it should exercise its powers under section 10.

50. Accordingly, I order that the charging orders absolute and nisi be discharged. I further order that the proceeds of sale of the property now in court be paid into the general revenue in accordance with the Ordinance.

51. I make an order nisi that the Attorney should have the costs of his own applications and also the Plaintiff's application for payment out.

52. The Plaintiff's application for payment out of the proceeds of sale is dismissed.