REGISTRAR, DISTRICT COURT v. LI KAI AND ANOTHER

DCMP 1091/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1091 OF 2004

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JUDGMENT

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1.  This is a trial as a result of the interpleader proceedings taken out by the Registrar of the District Court.  By my order dated 14 April 2004, the 1^st the 2^nd Claimants have been ordered to stand as the Plaintiff and the Defendant respectively in the proceedings herein.

2.  The facts of the present case are as follows.  In March 2003, one Mr. Poon Hon Kuen and one Ms. Lo Sau Lan (“the Clients”) retained the Defendant as their solicitors for a criminal case which was subsequently transferred to the District Court with the case reference DCCC No. 346 of 2003 (“the Criminal Case”).  In the Criminal Case, the Clients were each required to put up a cash bail of $50,000 (“the Bail Money”) to secure their attendance in the proceedings.  According to the Defendant, the Clients reached an agreement with his firm whereby it was agreed that: (i) a sum of $200,000 was to be paid by the Clients as the agreed legal costs for the Defendant in defending the Criminal Case; and (ii) the Clients assigned the interest in the Bail Money to the Defendant to settle part of such costs.  To facilitate the collection of the Bail Money, the Clients executed 2 power of attorney in favour of the Defendant and deposited with his firm the original receipts for the Bail Money.  The trial of the Criminal Case took place from 5 to 11 August 2003, and the Clients instructed another solicitors firm, Messrs. C.K. Mok, to act for them in place of the Defendant.  After the trial, both Clients were convicted of the offences as charged, which involved two counts of theft and two counts of false accounting, and the case was adjourned to a later date for sentence.

3.  On 26 August 2004, the Defendant sent the Clients’ documents to Messrs. C.K. Mok and requested for an undertaking by the Clients to settle the agreed legal costs, which was refused.  A few days later on 2 September 2004, the Defendant’s clerk made an attempt to collect the Bail Money from the Registry of the District Court, but a clerk of the account office told him that the Bail Money would only be released after the hearing for sentence.  On 11 September 2003, Deputy Judge Chainrai passed the sentence in the Criminal Case.  With the consent of the Clients, the said Deputy Judge also made a compensation order in favour of the Plaintiff, being the victim of the crimes committed by the Clients, and that the Bail Money be paid out of the District Court to him for such purpose.

4.  The Plaintiff and the Defendant now both claim for the payment out of the Bail Money, and so the Registrar of the District Court took out the present proceedings for the court to resolve the dispute between the parties.

5.  There is no evidence to rebut the Defendant’s case in respect of the making of the costs agreement and his request for the payment of the Bail Money from the Registry of the District Court, and so for the purpose of the present proceedings, I am prepared to accept such Defendant’s factual allegations as the truth.

6.  The Plaintiff’s claim is a straightforward one, as he just relies on the order made by Deputy Judge Chainrai under s. 73 of the Criminal Procedure Ordinance, Cap. 221 (“the CPO”), which reads as follows:

“ 73.  Power to award compensation
(1)	Where a person is convicted of an offence, the court may, in addition to passing such sentence as may otherwise by law be passed or making an order under section 107(1), order the person so convicted to pay to any aggrieved person such compensation for –
	(a)	personal injury;
	(b)	loss of or damage to property; or
	(c)	both such injury and loss or damage,
	as it thinks reasonable.
(2)	The amount ordered as compensation under subsection (1) shall be deemed a judgment debt due to the person entitled to receive the same from the person so convicted.
(3)	If before an order for compensation is made, any money –
	(a)	was taken from the person so convicted on his apprehension, arrest, being taken into custody or his surrender to custody; or
	(b)	was paid into court by the person so convicted,
	the court may, on making the order, order that the compensation be paid out of any money so taken or paid.
(4)	Subsection (3) shall not apply to any money that is a first charge for the benefit of the Director of Legal Aid within the meaning of section 18A(1) of the Legal Aid Ordinance (Cap. 91).
(5)	Payment of the compensation may be enforced at the instance of any person entitled thereto in the same way as a judgment debt.”

Hence, the sentencing judge can just make a compensation order alone under sub-section (1), or as that in the present case, make an additional order for the compensation be paid out of the bail money under sub-section (3).

7.  The Defendant’s claim is one based on equitable assignment.  According to the Defendant’s case, the compensation ordered by the court is only a judgment debt by virtue of s. 73(2) of the CPO, and so the Plaintiff only enjoys the right of a judgment creditor.  On the other hand, the Bail Money was subject to an equitable assignment from the Clients in favour of the Defendant.  Once assigned, the Clients had no right to represent to Deputy Judge Chainrai that the Bail Money was available to meet any compensation order.  Further, the court did have notice of the Defendant’s interest, and so the Defendant as the assignee is entitled to claim for the payment out of the Bail Money.

8.  To determine who is entitled to the Bail Money, we have to examine the relative interests of the parties in respect of the same.  For the Defendant, he has an equitable interest arising out of the equitable assignment.  On the other hand, the interest of the Plaintiff was conferred by a court order which the court was entitled to make under the law.  In my judgment, such interest supersedes any equitable interest enjoyed by a third party.  In fact, the trial had been adjourned for quite some time to enable the Defendant to consider whether there was any way to challenge the order by Deputy Judge Chainrai, and ultimately, the Defendant decided not to take any action in respect of the same.  In such case, the court has to give effect to the court order.  As I see it, the interest conferred by the court order is absolute, and it is not possible for this court to hold that the Defendant’s interest in the Bail Money does have priority over a court order.

9.  One can perhaps test the validity of the aforesaid reasoning in this way.  Assuming that Deputy Judge Chainrai was notified of the Defendant’s claim in early September 2003.  Before sentencing the Clients, she invited the Defendant to attend the hearing.  After hearing the Defendant’s submission, she nevertheless relied on s. 73  and proceeded to make a compensation order in favour of the Plaintiff and that the Bail Money be paid out for such purpose.  In such case, was the Defendant subsequently entitled to ask the Registrar to stop the payment to the Plaintiff?  Obviously, as conceded by Mr. Wong for the Defendant, the answer is no.  The reason why the Defendant is not entitled to do so is not because he has been heard before the sentencing, but because the interest conferred by the court order is paramount.  The interest of the Plaintiff, which was conferred by the court under the operation of the law, would supersede any other interest enjoyed by a third party.  If the Defendant was not satisfied with the order, the only way was to challenge the judge’s decision by way of judicial review.

10.  This would have been sufficient to dispose of the case, however I would also like to express my view on the practice of assigning the interest in bail money to satisfy the legal costs of solicitors.  I am not sure whether it is a common practice amongst solicitors in Hong Kong, but such practice may defeat the object of requiring defendants in criminal cases to provide bail money, which is a concern raised by Veit J. in the Canadian case of Re Webster and the Queen 94 C.C.C. (3d) 562; 1994 C.C.C. Lexis 2664.  In that case,  the accused in a criminal case assigned the interest in the bail money to his lawyer.  The accused failed to appear in court, and the lawyer filed a motion for relief against forfeiture of the bail money, which was dismissed by Veit J.  In his judgment, the learned judge said the following:

“Moreover, there is no public interest argument to support the position of the assignees.  If the accused assigns the bail, the accused has lost all interest in it; therefore, the assignment does not operate as an incentive for the accused to attend court.  If the accused does not show up for trial, he does not get the bail deposit back.  If the accused does show up for trial, he does not get the bail deposit back – the bail money goes to partial payment of the lawyer.  The assignment of bail moneys, therefore, does not operate to advance the purposes of bail.  Parliament’s purpose in establishing bail was not to provide for lawyers; it was to ensure attendance for trial.”

11.  In the Webster case, Veit J. seemed to accept that the interest in the bail money was assignable, but as the lawyer was not entitled to a more favourable position that that of the accused, the lawyer’s motion could not succeed in that case.  In order not to defeat the object of bail money, it is certainly an attractive proposition for the court to say that the interest in bail money is not assignable.  However, in the absence of detailed submission on this issue, in particular appropriate representation from the Law Society, I am not prepared to make a ruling on this matter.  However, solicitors who rely on such kind of arrangement to satisfy their legal costs are taking grave risk.  If an accused fails to comply with any bail terms, the court must be entitled to estreat whole or part of the bail money irrespective of the interest of the solicitors.  In my view, so far as the disposal of bail money kept in the court is concerned, the relationship should be one strictly between the court and the accused.  In exercising its criminal jurisdiction, the court should be able to treat the accused as the sole owner of his bail money and not concern itself with the interest beyond that of the accused.  If the accused does not reveal to the court the interest of his solicitors in the bail money and the latter suffer any loss as a result, the solicitors should only be allowed to seek compensation from the accused himself.  Ultimately, it is the solicitors, with full knowledge of the risk involved, who decide to trust their own client.  In any event, such kind of practice should not be encouraged.

12.  By reason of the aforesaid, I make a declaration that the Plaintiff is entitled to the payment out of the Bail Money.  I also make an order nisi that the costs of this action be to the Plaintiff with certificate for counsel.  The order nisi is to be made absolute 14 days after the date of the handing down of this judgment.