ARTHUR ANTONIO DA SILVA AND ANOTHER v. GABRIEL RICHARDO DIAS-AZEDO

HCA 2158/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2158 OF 2009

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BETWEEN

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R U L I N G

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Introduction

1.  Chronology is important in this matter.  On 23 February 2010, I made absolute a garnishee order nisi in the sum of $1,000,000.  The garnishee (HSBC) had made a mistake.  The correct amount should have been for $200,000.  I amended the order absolute to reflect the correct amount on 16 August 2010.  I did this under the “slip rule”.  It had been submitted to me on behalf of the garnishee that the correct course to take was to set aside the order and require the judgment creditors to begin the process all over again.  I heard argument on this and I gave judgment saying why only an amendment was required.  I do not propose to rehearse the arguments here.  The judgment is in the papers and can be read if necessary.

2.  The amendment that I made relates back to the date of the original order on 23 February 2010 [see RHC Ord 20/8/2].

3.  In the judgment of 16 August, I direct that Mrs Gardner, who is another of the judgment debtor’s creditors should be given an opportunity to show cause why the garnishee should not pay out to the judgment creditors.  Her solicitors have written to say that she objects to a payment out.  She has extant bankruptcy proceedings against the judgment debtor and says that a payment out to the judgment creditors would amount to a preference over her and other judgment creditors.

Mrs Gardner’s Conduct in These Proceedings

4.  Mrs Gardner, like the judgment creditors in this matter, is the innocent victim of the judgment debtor’s dishonest conduct, as are almost certainly the other creditors that he has left out of pocket before he disappeared from Hong Kong.  That said, Mrs Gardner’s conduct has been inconsistent in relation to this matter.  This is what she has done so far.  On 10 February this year, when the judgment creditors were applying to have this garnishee order, and another relating to Standard Chartered Bank, made absolute I was informed by counsel for the judgment creditors that Mrs Gardner had obtained a Mareva injunction against the judgment debtor.  In view of this, I adjourned the application to 23 February and directed that Mrs Gardner’s solicitors should be written to and asked whether she wished to be heard.  They replied to say that Mrs Gardner had no objection to my making the garnishee order absolute.

5.  On 24 March, Mrs Gardner’s solicitors wrote to the judgment creditors’ solicitors and informed them, for the first time, of two things.  Firstly, that they had obtained a default judgment for US$9,796,879.63 against the judgment debtor on 14 January 2010, which was about six weeks before the making of the garnishee order absolute, and secondly, that they had issued a bankruptcy petition against him on 23 March 2010.

6.  Complaint is made on the judgment creditors’ behalf, and in my view with justification, that those representing Mrs Gardner had not revealed any of this to them nor to the court.  This was first made known only after I adjourned payment out of the amount held in the garnishee proceedings.  Her solicitors had remained silent throughout all of this period, including the fact that on 22 January 2010, they had issued a statutory demand to enforce the default judgment.  It is plain that as early as then they were contemplating issuing a bankruptcy petition.  It is a poor show on their part.

How Should I Proceed

7.  It is submitted on the judgment creditors’ behalf that I should pay no regard to what is said by Mrs Gardner’s solicitors who have wrongly accused the judgment creditors’ solicitors of misleading the court when they have done no such thing.  It is only now that, like the court, they have been made aware of the obtaining of a default judgment by Mrs Gardner and the steps subsequently taken to enforce that judgment. 

8.  As the now amended garnishee order, by relation back, pre-dates the issue of the bankruptcy petition, I should simply proceed to order a payment out to the judgment creditors.

9.  I consider that the judgment creditors have been hard done by on this occasion.  Firstly, by Mrs Gardner’s extraordinary silence throughout these proceedings and also by HSBC who were responsible for the mistake in the first place which resulted in the delay in payment out of the garnisheed amount.  Had HSBC not made the mistake, payment out would have been made well before the issue of the bankruptcy petition, and by section 45(1), Bankruptcy Ordinance (Cap. 6), the trustee-in-bankruptcy would have had no claim to this amount.  But as things have turned out, the judgment creditors can no longer take advantage of the section.  Section 45(2)(b) says that an attachment of a debt is completed by receipt of the debt which is what is required before the exception under section 45(1) can be taken advantage of.

10.  In such circumstances, I do not consider that I ought to order a payment out and I therefore propose to leave this amount and its disposal to the bankruptcy court.

11.  As to the costs of this argument and of the proceedings resulting in the judgment for 16 August, I will await the receipt of written submission as previously ordered.