STANDARD CHARTERED BANK AND ANOTHER v. THE OFFICIAL RECEIVER

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J U D G M E N T

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Silke, V-P :

1. I have had the opportunity of reading in draft the judgment about to be delivered by Kempster JA and I am in agreement with his conclusions, his reasoning therefore and the order he proposes.

2. Jones J was left with some very hard swearing in the first matter which came before him, at the conclusion of which he upheld the rejection by the Official Receiver of the first proof based upon a loan by the deceased, Madam Lau, to the bankrupt, Sabrina. He was, in the second matter, faced with a directly opposite situation: a loan by the deceased to Bylamson Bermuda who in turn made a loan to Sabrina. All this involving the same documentary evidence.

3. As Mr Lewis, who appeared for the Official Receiver here and below, said in the course of the argument: no transaction involving the persons with whose dealings we are here concerned is ever what it seems. I am not without sympathy for the view the judge took which is best expressed by saying "a plague on both your houses''.

4. However the documents, shorn of the equivocal, to use a neutral word, evidence of the personalities directly concerned and in that I include the statement of one of them made from the Bar in different proceedings and the contents of that part of the transcript which we have seen of the evidence given by Sabrina in her American Bankruptcy proceedings in which recourse to the "Fifth Amendment'' figured prominetly - clearly indicated the existence of a loan; that the money carne from, the deceased; that the recipient was Bylamson Bermuda (arid that that company made a loan in the equivalent amount to Sabrina. All this oh the 26 November 1982. On 29 October 1988 Bylamson Bermuda assigned Sabrina's debt to the Administrator of the deceased's estate.

5. While the Official Receiver, who has of course the interests of other creditors, in mind, was, understandably, uncertain as to the vires of that assignment he raised no answered requisition in respect of it before rejecting the proof. Nothing was placed before him, nor introduced into evidence, which rebutted the presumption of regularity which attended the making of the document. His uncertainty may well have been bolstered by his apparent application of too, high a standard of proof.

6. I would therefore, with respect, differ from Jones J when he upheld the rejection of the second proof while agreeing with him in upholding the rejection of the first.

7. I too would allow Civil Appeal 80 of 1989 and dismiss Civil Appeal 126 of 1989 and, in so doing, give some comfort, I trust, to the Official Receiver.

Kempster, JA :

8. Reinforced by a direction from Nazareth J the Standard Chartered Bank Hong Kong Trustee Limited ("the Administrator'') in its capacity as administrator of the estate of Madam Lau Sui Ling, deceased, appeals from orders of Jones J made on 26 July 1988 and 28 April 1989 dismissing appeals from the decisions of the official Receiver, in his capacity as trustee of the property of Madam Sabrina Au-yang Lam Lai Ming ("Sabrina''), a bankrupt and Madam Lau's daughter, rejecting proofs of debt dated 2 May and 5 November 1988 respectively. Neither the official Receiver nor the judge were satisfied by either.

9. Both proofs relate to the receipt, acknowledged in writing by Sabrina on 26 November 1982, of HK$6 million from Bylamson & Associates International Ltd ("Bylamson Bermuda'') as a sum repayable on demand. By the earlier proof it was contended that the monies constituted a loan by the deceased to Sabrina and by the second that they constituted a loan to her by Bylamson Bermuda and that the debt thereby arising had been assigned to the Administrator, under seal, on 29 October 1988. While only one appeal can succeed the Administrator contends that one of them must and favours the earlier. Silke V-P has drawn the analogy of the twin prongs of Cardinal Morton's fork.

10. Madam Lau Siu Ling, a very wealthy woman, died on 8 October 1985 and, on the instructions of her surviviny executors, the Administrator sought and on 9 February 1987 was granted Letters of Administration with the will of the deceased annexed. A receiving order was made against Sabrina on 26 September 1984 and she was adjudicated bankrupt on 1 November following.

11. The documentary evidence as to what transpired on 26 November 1932 demonstrates that Madam Lau, by Stephen Lam and Sabrina acting under a power of attorney dated 23 September 1974, by writing instructed Cititrust (Cayman) Ltd by their agents in Hong Kong, Citibank, to credit the Hang Seng Bank account No. 280-436627-001 of Bylamson & Associates (HK) Ltd with HK$6 million for and on behalf of Bylamson Bermuda; such sum being part of the proceeds of Madam Lau's deposit with Cititrust (Cayman) Ltd maturing that day. Both Blamson companies were owned by the lam family. As further evidence, admitted under RSC 059 r 10(2), also demonstrates these instructions were implemented forthwith by Citibank's draft for HK$6 million while cheque No. 376234 for a like sum was issued to Sabrina by Bylamson & Associates (HK) Ltd and its account credited and debited accordingly. It was for this cheque that Sabrina gave a receipt to Bylamson Bermuda.

12. When examined in concurrent bankruptcy proceedings in the USA Sabrina said, in effect, both that she had borrowed this sum from her mother in whose favour she had mortgaged certain properties in California and also that she had borrowed the money from "Bylamson''.

13. Still on 26 November Sabrina's brother, lam Shau Wai, purported to execute three interest nearing promissory notes amounting in all US$800,000 in favour of Madam Lau for and on behalf of Sabrina and of her husband william Au-yang. At the rate of exchange then prevailing this sum was the equivalent of HK$5,300,000. However, it was conceded in related proceedings before Liu J that the only known power of attorney granted by Sabrina and her husband to Lam Shad Wai bears a date subsequent to 26 November 1982. In fact it was dated 29 November 1983 and is limited in its terms. No reliance is placed on these documents.

14. On 26 may 1983 Blyamson Bermuda wrote to Sabrina claiming interest at varying rates on HK$6 million lent to Sabrina on 26 November 1982. The receipt which Sabrina had signed made no mention of interest and the claim would not appear to be sustainable.

15. Paragraph 43 of an affidavit sworn on behalf of the Administrator on 23 March 1988 refers to the contents of a letter from Sabrina dated 11 January 1988 but does not exhibit the document. We regarded the circumstances as sufficiently exceptional to allow us to receive this document also, as an exhibit to a further affidavit, pursuant to RSC 059 r 10(2).

16. Paragraph 7 of the letter reads: -

"From the files belonging to the deceased which are in your possession, you know that during 1981 and up to the middle of 1982, tae deceased had made loans to Bylamson, which at the highest point amounted to about HK$6.2 million. Interest at prime rate was paid periodically, and the principal was repaid in full in mid 1982. One of the documents clearly shows the deceased made a new loan of HK$6 million to Bylamson & Associates (HK) Ltd on November 26, 1982. Apparently you were aware of this loan from the deceased to Bylamson as early as October 1986. Under the circumstances you should have demanded immediate repayment of the loan plus interest when you were first appointed administrator. But apparently, you have not done so. You have obviously not undertaken any meaningful process of collecting . Bylamson's debt to Lau Sui Ling but instead have put forward Rogerio's accusations that I, rather than Bylamson, owe Lau Sui Ling the said sum, and acted upon them as if they were true".

17. This constitutes yet another explanation of the matter by Sabrina. No credence can realistically be attached to anything she has written or said since her bankruptcy.

18. The documents relating to the movement of HK$6 million on 26 November 1982 do not support the submission that Madam Lau lent that sum to Sabrina but are consistent with the alternative submission that Madam Lau made such a loan to Bylamson Bermuda and that Bylamson Bermuda made a corresponding loan to Sabrina. Certainly the deceased's money can be traced into her hands but it is not suggested that she was in receipt of a gift or voluntary payment. No more is it submitted that any specific alternative transaction took place or that she holds the ponies on a resulting trust. Having regard to the terms of the receipt which she signed that day this is hardly surprising. In my opinion that receipt binds Sabrina and the Official Receiver, who for present purposes stands in her shoes, to accept that the monies constituted a loan to her. Any presumption of advancement is rebutted. All that remains, therefore, is to inquire whether there was or is means whereby the lender may be identified. Again nothing I have said or heard persuades me to go outside the parameters of the documents and, as Jones J said on 26 July 1988: -

"All the documentary evidence shows that if a loan was made it was made by Bylamson Bermuda to Sabrina".

He did not accept the testimony of Stephen Lam, even though it was not challenged in detail, and I do not think that this is a case in which we can go behind the assessment, made by the seeing and hearing judge as to his credibility. The assertions made by Rogerio Lam in his letter of November 13, 1987 and, unsworn, before Liu J on 22 April 1988 are suspect as being unsubstantiated by the documents and made by an interested party.

19. The Official Receiver's duty under rule 114 of the Bankruptcy Rules and Rule 22 of the Proof of Debt Rules (Cap 6) is to examine every proof and the grounds of the debt and in writing to admit or reject it in whole or in part or to require further evidence in support of it. As was stated by Bigham J and approved by Cozens Hardy MR on appeal: -

"The trustee's right and duty when examining a proof for the purpose of admitting or rejecting it is to require some satisfactory evidence that the dent on which the proof is founded is a real debt. ... But until Mr Chatterton furnishes him with the means of forming an opinion I think the trustee cannot do otherwise than reject the proof."

In re Van Laun [1967] 1 KB 155 at p 163; 2 KB 23 at p 30. We have to enquire whether or not the official Receiver had been furnished with the means of Forming an opinion and, if he was, was right in rejecting the proofs or one of them.

20. The receipt, standing alone, is to be construed as an acknowledgment by Sabrina of a loan wade to her by Bylamson Bermuda That Bylamson Bermuda was of a like mind is demonstrated by its letter of May 26, 1983 albeit the claim for interest was misconceived. These documents suffice to afford the official Receiver who, having regard to the use of the expression "beyond a reasonable doubt" in paragraph 13 of an affidavit sworn oh his behalf on 7 April 1989 may have applied too high a standard when rejecting the proofs, the means of concluding that HK$6 million was lent to Sabrina by Bylamson Bermuda. There being no issue as to the validity of the assignment he was, in my opinion, wrong to reject the proof dated 5 November 1988 as was Jones J to dismiss the Administrator's appeal in that regard on the footing that a loan had not been established. I would allow Civil Appeal No. 80 of 1989 and direct that the proof in question be admitted to rank in Sabrina's bankruptcy. I would dismiss Civil Appeal No. 126 of 1989. The efficacy of the Cardinal's fork persists.

Barnes, J :

21. I agree.