XCHRX NG WING KEUNG PAUL v. AXA CHINA REGION TRUSTEES LTD.

HCA7341/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.7341 OF 2000

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J U D G M E N T

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1. There are before me two summonses. The first one an Interpleader Summons taken out by the defendant under Order 17 of the Rules of High Court, the other an Order 14 summons for summary judgment taken out by the plaintiff. Both summonses can be dealt with together.

The Background Facts

2. The plaintiff was an insurance agent engaged by the claimant as such as from July 1984. The plaintiff voluntarily terminated his service as an agent to the claimant by giving one month's notice to the claimant by letter of 10 April 2000. Thus effectively his service as an agent of the claimant ceased on 9 May 2000.

3. The defendant is a company set up by the claimant to be, inter alia, the trustee of the provident fund established by the claimant for the benefit of its agents. For this purpose, a Trust Deed was entered into between the defendant and the claimant dated 1 September 1989. The defendant and the claimant are and were at all material times members of the same group of companies.

4. It is not disputed that the plaintiff, upon termination of his service as an agent of the claimant, is entitled to provident fund of HK$3,977,809.62 from the defendant and which sum together with the interests accrued thereon has now been paid into court by the defendant (pursuant to an Order of the Master dated 28 August 2000) as part of the interpleader by the defendant.

5. During the period when the plaintiff was the claimant's agent, on 6 July 1995, the plaintiff and the claimant entered into a Special Shadow Loan Scheme Agreement ("the Shadow Loan Agreement"). Without going into any detail, it suffice to say for present purposes that a dispute has arisen between the claimant and the plaintiff over loan interest as provided for by the Shadow Loan Agreement and the claimant is claiming against the plaintiff (inter alia) a sum in excess of HK$3 million being loan interest under the Shadow Loan Agreement as at 10 May 2000. That dispute between them is the subject of a separate action being High Court Action 5422 of 2000.

6. Clause 7.2 of the Shadow Loan Agreement provides :

"The [claimant] and the [plaintiff] agree that if, at the Scheme End Date, any amounts are payable by the [claimant] or any other member of the Group to the [plaintiff] (whether by way of commissions, bonuses or otherwise) (together the "Relevant Amounts"), then the amount of the Loan Interest to be paid by the [plaintiff] to the [claimant] pursuant to Clause 7.1 shall be reduced by the aggregate of the Relevant Amounts, and the [plaintiff] agrees with the [claimant] (acting for itself and as trustee for each other relevant member of the Group) that, to the extent of such reduction, the obligations of the [claimant] and/or other relevant member of the Group to pay the Relevant Amounts to the [plaintiff] shall be correspondingly reduced. The [claimant] shall notify the amount of any such reduction to the [plaintiff] in writing as soon as practicable after the Scheme End Date and the [claimant's] determination shall, in the absence of manifest error, be conclusive and binding."

The Order 14 application

7. The present claim by the plaintiff against the defendant is brought under the Trust Deed. The plaintiff relies upon clause 18 of the Trust Deed which provides as follows :

"Benefits Not Assignable or Chargeable

18. A benefit to which any person is or may become entitled shall not be assignable or chargeable except as provided for under clause 17."

8. It is conceded by the claimant that the provisions of clause 17 of the Trust Deed do not apply to the present case. The plaintiff submits that because clause 18 of the Trust Deed prohibits the benefit to which the plaintiff is entitled from being assignable, therefore there can be no defence open to the defendant but that the plaintiff must be entitled to judgment and to be paid the amount of his provident fund in full.

9. The defendant on the other hand submits that there is a conflicting claim for the amount of the provident fund by both the plaintiff and the claimant and since the defendant holds the amount of the provident fund merely as a trustee, it is entitled to interplead and has now paid the full amount of that provident fund into court.

10. The claimant, while conceding that clause 17 of the Trust Deed does not apply to the present case and therefore the exception provided for in clause 18 does not arise, argues that by clause 7.2 of the Shadow Loan Agreement, there is nevertheless an equitable assignment of the amount of the provident fund by the plaintiff to the claimant or at least of so much of it as is required to cover what the claimant says is due to the claimant from the plaintiff under the Shadow Loan Agreement, a matter which is being litigated by them in High Court Action 5422 of 2000. Therefore the claimant submits that the amount paid into court by the defendant should be held in court pending the determination of that dispute by the court and should not, before such determination, be released to the plaintiff.

The interpleader application

11. Insofar as the interpleader application is concerned, the point has been taken by the plaintiff that firstly, there can be no competing claim by the claimant because the claimant can have no valid cause of action against the funds held by the defendant since clause 18 of the Trust Deed is clear and there can be no assignment of those funds.

12. Linked to the first point, a second point has been taken by the plaintiff that because of the close relationship between the defendant and the claimant, being sister companies in the same group, I should find that they have been acting in collusion on the basis that under the terms of the Trust Deed, the defendant had no possibility of entertaining the claim of the claimant, yet, the defendant has seen fit to issue interpleader application and to pay the money into court instead of paying it over to the plaintiff.

13. On either score, the plaintiff says that it was not open to the defendant to seek relief by way of interpleader.

Decision

14. I accept that clause 18 of the Trust Deed is clear and expressly prohibit any assignment. However, there is also clause 7.2 of the Shadow Loan Agreement (to which the plaintiff was a party) which must also be considered.

15. The objection by the plaintiff that there is no cause of action for the claimant to be claiming against the fund held by the defendant is clearly erroneous. The claimant's cause of action arises from clause 7.2 of the Shadow Loan Agreement. Moreover, the fact that the claimant has, by letter dated 9 June 2000, indicated such claim to the defendant and therein expressly stated they will consider injunctive relief to freeze payment of the provident fund, is sufficient for the defendant to take the view that there is an adverse claim in respect of those funds. It is not for the defendant to have to decide which of the competing claims should succeed. That is the very essence of interpleading. The determination as to the merits of the competing claims must be left to the courts to determine. It follows from this that the fact that the claimant and the defendant are sister companies in the same group is, per se, not a sufficient reason to say that they are colluding. That is essentially what the plaintiff is saying. I therefore do not accept the plaintiff's objections to the interpleader application by the defendant.

16. As for the Order 14 application, firstly, I accept as a matter of law that no form of words is required for an equitable assignment as long as the words used clearly show an intention that the assignee is to have the benefit of the chose in action and the assignment may be addressed to the debtor or to the assignee. Applying that to the words of clause 7.2 of the Shadow Loan Agreement, I am of the view that those words are sufficient to give rise to an equitable assignment, the assignor being the plaintiff and the assignee the claimant.

17. Secondly, and no doubt the crux of the present dispute, must be the question whether or not the claimant can invoke the equitable assignment arising from clause 7.2 of the Shadow Loan Agreement in the light of the express terms of clause 18 of the Trust Deed.

18. In my view, the claimant can for the following reasons. Clause 18 of the Trust Deed which prohibits any assignment of a benefit to which any person is or may become entitled thereunder, if effective, is such that it allows the trustees under the Trust Deed (i.e. the defendant herein) to prevent a transfer of the chose in action to a third party to whom the benefit under the Trust Deed has been purportedly assigned. However, in the present case, it is not the defendant who is seeking to rely on the provisions of clause 18 (since the defendant has now paid those funds into court) but the plaintiff. How can the plaintiff, who is a party to the Shadow Loan Agreement, be heard now to complain about such assignment when, being a party to it, he must be taken to have agreed to the provisions of clause 7.2 of the Shadow Loan Agreement when he entered into it.

19. In so saying, I find support in the words of Lord Browne-Wilkinson in the House of Lords judgment of Linden Gardens Ltd v. Lenesta Ltd [1994] 1 AC 85 at 108, where, after analyzing the decision of Darling J in the case of Tom Shaw and Co. v. Moss Empires Ltd (1908) 25 TLR 190, he had this to say:

"... a prohibition on assignment normally only invalidates the assignment as against the other party to the contract so as to prevent a transfer of the chose in action: in the absence of the clearest words it cannot operate to invalidate the contract as between the assignor and the assignee..."

Accordingly, the plaintiff cannot rely on clause 18 of the Trust Deed to invalidate the equitable assignment arising from clause 7.2 of the Shadow Loan Agreement between him and the claimant.

Order

20. I shall therefore make the following orders :

1. The plaintiff's application for summary judgment is dismissed;

2. The moneys paid into court by the defendant to remain in court pending determination of the dispute between the plaintiff and the claimant in High Court Action 5422 of 2000; and

3. The plaintiff's claim in respect of prayers 2 and 3 of the plaintiff's Statement of Claim be stayed in the meantime until further order.

Costs order

21. In so far as the application for summary judgment is concerned, there will be a costs order nisi that the costs of that application and the hearing be to the defendant to be borne by the plaintiff in any event.

22. As for the interpleader application is concerned, there will be a costs order nisi that the defendant will have its costs of the interpleader application which, together with the costs as between the plaintiff and the claimant in respect of that application, be costs in the cause of High Court Action 5422 of 2000.