MARIGOLD FINANCE LTD v. THE COLLECTOR OF STAMP REVENUE AND OTHERS

HCMP 2263/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2263 OF 2011

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J U D G M E N T

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1.  The plaintiff applies for an order that the 2^nd and 3^rd defendants do pay the sum of $1,194,463 to it, being refund of stamp duty (“the refund”).

The facts

2.  The plaintiff was, at the material time, and is a money lender.

3.  The 3^rd defendant (Mr Sun) borrowed 2 sums from the plaintiff:

(i)  $2,000,000 on 29 April 2010 repayable by 29 April 2011, to finance, amongst others, the purchase of an uncompleted property at Flat B on 51^st floor of the Oakhill, 28 Wood Road, Hong Kong (“the property”) ; and

(ii) $2,700,000 on 9 November 2010 repayable by 9 February 2011.

4.  Mr Sun had given a power of attorney dated 16 August 2010 in favour of Mr Liu Jin to deal with the property (“the Liu PA”).  It appeared that the Liu PA was given in relation to a loan of RMB 2 million made by the 2^nd defendant (Mr Leung) to Mr Sun, as evidenced by a loan receipt dated 16 August 2010 (“the loan receipt”).  The loan receipt stated that should Mr Sun fail to repay by 15 November 2010, he would transfer the property to Mr Leung in discharge of the loan; and Mr Liu could deal with the transfer procedure on behalf of Mr Sun.

5.  The loan receipt appeared to be witnessed by a Mr Choi, clerk of Messrs Baker & McKenzie, solicitors who prepared the Liu PA and who acted for the developer vendor of the property.

6.  Both loans fell into default.

7.  Under a power of attorney dated 14 January 2011, Mr Sun appointed Mr Wong Kin Lung of the plaintiff as his attorney (“the Wong PA”) to, amongst others, fully deal with the property, including cancelling the sale and purchase agreement and making an application to the Stamp Duty Office for the refund.  At the same time, Mr Sun revoked the Liu PA.

8.  The notice of revocation of the Liu PA was allegedly sent to Mr Liu on or about 14 January 2011 but there was no documentary proof.

9.  Mr Sun failed to make a further payment of the purchase price ($1,405,250) to the developer by the due date on 4 February 2011. 

10.  As a supplement to the Wong PA, Mr Sun by notice dated 4 March 2011 instructed Messrs Baker & McKenzie to direct all correspondence in relation to the property to his attorney, Mr Wong, at Room 1708, 17/F, Enterprises Square Three, 39 Wang Chiu Road, Kowloon Bay.

11.  On 7 June 2011, Messrs Baker & McKenzie sent a letter to Mr Sun, c/o Mr Wong, terminating the sale and purchase agreement and forfeiting the deposit.

12.  In June 2011, Mr Sun allegedly agreed that in order to reduce the loans owed to the plaintiff, the refund would belong to the plaintiff and he would sign documents so that the refund could be made directly to the plaintiff (“the oral assignment”).

13.  At about the same time, Mr Wong approached Mr Choi seeking release of the original sale and purchase agreement to the plaintiff so that the latter could obtain the refund.  Mr Choi refused and rejected the suggested undertaking from the plaintiff’s solicitors to return the original after the refund.  He said that the developer would need the original to make any further claim against Mr Sun.  He also told Mr Wong that Mr Liu and Mr Leung had been complaining about him since his firm had failed to require Mr Sun to execute an irrevocable power of attorney so that the Liu PA was revoked.  Mr Choi said that Messrs Baker & McKenzie would act for the plaintiff and Mr Wong in seeking the refund from the Stamp Duty Office.  He told Mr Wong that the Stamp Duty Office would only refund the stamp duty to Mr Sun himself or Messrs Baker & McKenzie which paid the stamp duty on behalf of Mr Sun in the first place.

14.  As suggested by Mr Choi, Mr Wong procured Mr Sun to sign the application for the refund, asking for issue of the cheque to Messrs Baker & McKenzie.  At the same time, on 27 June 2011, Mr Sun gave irrevocable written instructions to Messrs Baker & McKenzie that upon receipt of the refund, it should issue a cheque for the net balance payable in favour of the plaintiff and deliver it to Mr Wong his attorney.

15.  Upon advice from its solicitors, Messrs SH Leung & Co, the plaintiff obtained a confirmatory assignment dated 18 October 2011 (“the October assignment”) from Mr Sun to confirm that the right to the refund had been assigned to the plaintiff by him in June 2011.

16.  On 19 October 2011, Messrs SH Leung & Co sent a copy of the October assignment to the Stamp Duty Office to seek the refund.

17.  It transpired that Mr Leung had by then obtained a court order dated 2 September 2011 (“the order”) in HCMP 449 of 2011 against Mr Sun, he and the Collector of Stamp Revenue (“the Collector”) being absent.  The order directed that the stamp duty be paid to Mr Leung in partial satisfaction of the final judgment in that action.  According to Mr Wong, the plaintiff only knew about this order for the first time shortly prior to 19 October 2011.

18.  On 27 October 2011, the Collector replied to Messrs SH Leung & Co.  Whilst asserting that he did not have any knowledge of whatever agreement, oral or written, between Mr Sun and the plaintiff in relation to the refund, the Collector informed the firm that he was taking steps to release the refund to Mr Leung within 7 days from 27 October.  It asked the plaintiff to take the appropriate action to assert any right over the stamp duty.

19.  On 31 October 2011, Messrs SH Leung & Co informed the Collector that the order was obtained without disclosure to the court of the plaintiff’s prior interest in the refund and the plaintiff had no prior knowledge of the proceedings.  The firm asserted that the Collector was under a duty to take out interpleader proceedings.

20.  Mr Sun confirmed in writing on 2 November 2011 (“the November confirmation”) that he had orally “sold” the stamp duty to the plaintiff on 27 June 2011; and that the October assignment was signed.  Mr Sun alleged in that document that in August 2011, he had had 3 meetings with Mr Leung in Wanchai about debt-restructuring and Mr Leung knew that the stamp duty did not belong to Mr Sun but the plaintiff.

21.  On 3 November 2011, Messrs SH Leung & Co sent the November confirmation to the Collector, and asked that release of the refund be withheld until conclusion of the plaintiff’s pending application, but the Collector had already released the refund to Mr Leung on the day before. 

22.  The plaintiff did not issue the present originating summons until 8 November 2011.  Save for matters referred to as allegations above (paragraphs 12 and 20), I accept the plaintiff’s version of facts since none of the defendants filed affirmations.

The application

23.  These proceedings started off as interpleader proceedings.  As the Collector had already paid over the sum to Mr Leung, the proceedings were, in my view rightly, discontinued against the Collector.

24.  At this hearing, the proceedings against Mr Sun were also abandoned as the plaintiff recognized that he could pursue an action against Mr Sun anyway.

25.  The question then is: what is the cause of action against Mr Leung?  Mr A Leung, solicitor for the plaintiff, identified 2:

A.  That the plaintiff had beneficial interest in the sum which had priority over Mr Leung’s right under the order;

B.  Money had and received on the ground of unjust enrichment to Mr Leung.

That the plaintiff had beneficial interest in the sum which had priority over Mr Leung’s right under the order

26.  Mr A Leung accepts that no notice of assignment had been given to the Collector.  He relies, rather, on the “oral assignment” made by Mr Sun in favour of the plaintiff in June 2011 as evidenced in the October assignment.

27.  In principle, an assignment is valid even without notice being given to the debtor.

“As between assignor [in the present case, Mr Sun] and assignee [in the present case, the plaintiff], an equitable assignment, whether voluntary or for value, is absolute and complete without notice having been given to the debtor or fundholder, for notice does not render the title perfect, and formerly was not even a step in the title. Moreover, notice is not necessary as against third persons who stand in the same position as the assignor, such as persons claiming under a subsequent assignment as volunteers, or a creditor who has obtained a charging order, or an order appointing a receiver, or a third party debt order, even though in the last case the judgment creditor gives notice to the trustee before the assignee, or the trustee in bankruptcy of the assignor.” Halsbury’s Laws of England, Vol 13, para 40.

28.  In Holt v. Heatherfield Trust Limited [1942] 2 KB 1, a judgment creditor obtained a garnishee order nisi.  It was held that a prior assignee (whose assignment was held not to be fraudulent) who had not given notice was entitled to the money in priority over the judgment creditor.  Atkinson J held,

“Bearing in mind these two results, first, that the assignment was a perfectly good equitable assignment, which could be turned into a legal assignment at any moment by giving notice, and which without notice, the assignee could have sued upon so long as he joined the assignor as defendant, and, secondly, that a judgment creditor is in no better position than the assignor and cannot garnishee anything which the assignor could not honestly deal with, it seems to me perfectly clear that the plaintiff’s title is a good one, and I so decide. I hold that his claim to the money is good.”

The assignee plaintiff was accordingly given judgment.

29.  But had there been an equitable assignment by Mr Sun in favour of the plaintiff prior to the order?

30.  The plaintiff’s assertion that there had been an oral assignment was contradicted by its stance of representing Mr Wong to be his attorney (paragraph 14 above) as opposed to his assignee.  Mr A Leung explained that it was due to what Messrs Baker & McKenzie told the plaintiff, namely, that the Stamp Duty Office would only refund to either the plaintiff or Messrs Baker & McKenzie.  That may well be true, but the plaintiff had missed the best chance to inform the fundholder of the assignment.  It casts doubt on the plaintiff’s assertion and brings into question whether the oral assignment was an afterthought.

31.  I am not satisfied on a balance of probabilities that there had been an oral assignment.  The 1^st cause of action fails.

Money had and received on the ground of unjust enrichment to Mr Leung

32.  This cause of action was never relied on in the affirmations of the plaintiff.  In any case, there could hardly be any unjust enrichment on the part of Mr Leung, who was a creditor of Mr Sun and had properly sought judgment and then the order under Order 77 of the Rules of the High Court.  The order was never set aside even by the time of the hearing.

33.  The case cited by Mr A Leung, Likpin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 contained very special facts of a gaming club receiving money under a wagering contract and had been unjustly enriched at the expense of the true owner.  It was ordered to repay the true owner.  The facts were wholly distinguishable from the present case.

34.  There is no merit in this cause of action.

Conclusion

35.  The plaintiff has failed to establish any valid cause of action against the 2^nd defendant.  The claim against the 3^rd defendant was not pursued.  The action is accordingly dismissed.