STANDARD CHARTERED BANK HONG KONG TRUSTEE LTD v. THE OFFICIAL RECEIVER

IN THE SUPREME COURT OF HONG KONG KONG

IN BANKRUPTCY

No. 297 OF 1984

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J U D G M E N T

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1. On the 26th July 1988, I dismissed an appeal by the Standard Chartered Bank Hong Kong Trustee Limited (the appellant), the adminstrator of the estate of Madam Lau Sui Ling, deceased (the deceased) against a decision of the Official Receiver rejecting a proof of debt for HK$6,000,000. The present appeal by the appellant is against a rejection by the Official Receiver of a further proof of debt for the same sum based upon virtually identical facts.

2. It is therefore necessary to recapitulate some of the facts that I set out in my previous judgment.

3. The deceased died on the 8th October 1985. By her will she appointed four of her children, including Stephen Lam and Sabrina Lam (Sabrina), to be the executors and trustees of her will. One of the other two executors predeceased the deceased. The residuary estate has been bequeathed to eight of the deceased's children in equal shares, two of the beneficiaries being Stephen Lam and Sabrina. A receiving order was made against Sabrina on the 26th September 1984 and she was adjudicated bankrupt on the 1st November 1984. Sabrina who is believed to be living in the United States did not give evidence in the first appeal nor in these proceedings.

4. The appellant on the instructions of the surviving executors obtained Letters of Administration with the will annexed to the estate of the deceased on the 9th February 1987.

5. The debt relates to a loan that is alleged to have been made to Sabrina on the 26th November 1982. On that date Stephen Lam and Sabrina acting as attorneys for the deceased, wrote to Cititrust (Cayman) Limited Trustee, with instructions to transfer $6,000,000 from a time deposit that matured on that date to be credited to an account with Bylamson & Associates International Limited, Bermuda (Bylamson Bermuda) with Bylamson & Associates (Hong Kong) Limited (Bylamson (H.K.)) with the Hang Seng Bank Limited, Hong Kong. A cheque for this sum was drawn on the same day by Citibank N.A. payable to the Hang Seng Bank for the account of Bylamson (H.K.). The account for Bylamson (H.K.) revealed that $6,000,000 was credited on that date and withdrawn on the same, day by means of a cheque in favour of Sabrina. A receipt also dated the 26th November 1982 was signed by Sabrina acknowledging receipt of $6,000,000 as a sum advanced and that it would be repaid on demand.

6. On the 26th May 1983 Bylamson Bermuda wrote to Sabrina claiming interest on the loan of $6,000,000 from the date of its commencement in a sum of $322,273.97. Stephen Lam was one of the signatories to this letter.

7. When the appellant sought directions from the court under 0.85, r.2 of the Rules of the Supreme Court, Liu, J. said that there was prima facie evidence that Sabrina was indebted to the deceased's e state. Although as I have said Sabrina did not give evidence in either appeal, reference was made to evidence that she gave in her bankruptcy proceedings in the United States that she had received a sum of $6,000,000 from Bylamson.

8. In the first appeal I rejected the argument presented by the appellant that a loan had been made by the deceased but that if a loan had been made, it was from Bylamson Bermuda. On the 29th October 1988 Bylamson Bermuda under seal, assigned the debt of $6,000,000 to the appellant. Following the assignment, the appellant submitted the second proof of debt to the Official Receiver the subject of this appeal, on the grounds that there was sufficient evidence of a loan by Bylamson Bermuda to Sabrina. That argument, which was rejected by the Official Receiver, has been rehearsed before me. A letter from Bylamson (H.K.) to the appellant dated the 20th April 1989 confirms that the sum of $6,000,000 was deposited in the account to be held for Bylamson Bermuda and that upon their instructions a cheque for this amount was paid to Sabrina. However, both Rogerio Lam and Stephen Lam, directors of the Bylamaon companies, have testified in previous proceedings that the loan was made by the deceased and was not a debt due to the company. Yet, Stephen Lam, as one of the signatories to the assignment, now purports to say that Sabrina was so indebted. Stephen Lam did not give evidence upon the present appeal, but did so on the first appeal when I found him to be an unimpressive witness.

9. Miss Yuen, counsel for the appellant, submitted that there could only be one of two possible scenarios to determine the true facts with regard to the loan. As the first scenario that the loan was made direct by the deceased to Sabrina has been rejected, she submitted that it necessarily follows that the loan must have been made by the deceased to Sabrina through Bylamson Bermuda. However, the evidence is, not only conflicting, but confusing. Originally the appellant's evidence was based upon the contention that there was a direct loan from the deceased to Sabrina with Bylamson Bermuda, acting as agent whereas it is now contended that the money was owed to Bylamson Bermuda. However, there is no evidence that the money was ever received by Bylamson Bermuda. The bank statement of Bylamson (H.K.) and the cheque made payable to Sabrina merely show that the money was received by Bylamson (H.K.) and then paid out to Sabrina. Stephen Lam described in his evidence in the first appeal that money was credited to Bylamson (H.K.), then transferred by way of internal accounting to Bylamson Bermuda, after which it returned to Hong Kong and was then paid to Sabrina, but there was no documentary evidence to support his testimony. Further the only evidence that Stephen Lam had that the loan was from the deceased to Sabrina was what he was told by Sabrina.

10. In order to accept a proof of debt, the Official Receiver is required to satisfy himself that there is a real debt due, see In re VAN LATIN Ex parte CHATTERTON [1907] 2 K.B. 23. In this case there is a complete lack of evidence that Bylamson Bermuda, ever received the money or lent it to Sabrina. The money only passed through Bylamson (H.K.). Despite the purported assignment of the debt to the appellant, both Stephen Lam and Rogerio Lam had previously asserted that Bylamson Bermuda never received the money. There is therefore a complete conflict of evidence.

11. Two different versions have been put forward but it cannot be said that because the first argument was rejected that the second is necessarily correct. I accept the submission made by Mr Lewis, counsel for the Official Receiver, that upon the present state of the evidence, the real nature of the transaction is not known. The Official Receiver was entirely right to reject the proof of debt for the evidence is wholly unsatisfactory and cannot be relied upon to justify the appellant's claim that there is a real debt due. As a result the appeal is dismissed and there will be an order nisi for costs to the Official Receiver on the common fund basis.