THE STANDARD CHARTERED BANK v. JULIA LIVESEY and Another

1997, No.HCMP 11

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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THE FACTS

1. Lan Min Hung had a current account with the Standard Chartered Bank. He was issued with a cheque book. In due course, two blank cheques were stolen from that book. They were stolen by the 2nd Respondent, Kong Kiu Kei ("R2"). He filled in those cheques himself. One cheque was for $92,700.00, and the other was for $397,300.00. He forged Mr. Lan's signature on them, and in August and September 1995 he paid them into an account with the Hong Kong Bank in the name of the company of which he was the sole proprietor. The two cheques amounted to $490,000.00, and those sums were debited from Mr. Lan's account and credited to R2's company's account.

2. It did not take Mr. Lan long to discover what had happened. On 19th September 1995, the Standard Chartered Bank, acting on Mr. Lan's behalf, requested the Hong Kong Bank to transfer to it the credit balance in R2's company's account, to the extent that it did not exceed $490,000.00. The credit balance in R2's company's account was only $404,330.52 at the time, and the Hong Kong Bank transferred that sum to the Standard Chartered Bank. Since then, the Standard Chartered Bank has held that sum on behalf of Mr. Lan in a special account.

THE PROCEEDINGS IN THE MAGISTRACY

3. In due course, R2 was charged with the theft of the two cheques, and the theft of the sums of $92,700.00 and $397,300.00 which R2 had obtained by completing the particulars, and forging Mr. Lan's signature, on the two cheques. On 16th July 1996, he was convicted of those charges at Kwun Tong Magistrates' Court. The magistrate who convicted him was the 1st Respondent. He was fined $10,000.00 on each charge, making $30,000.00 in all, and was sentenced to a total of 10 months' imprisonment suspended for 18 months. He was also ordered to pay the travelling expenses of the prosecution witnesses, which were assessed at $2,900.00, and the sum of $1,100.00 towards the costs of the prosecution.

4. There was one other order which the magistrate purported to make on 16th July. She ordered R2 to pay compensation to Mr. Lan in the sum of $490,000.00. She was not told that the Standard Chartered Bank was holding $404,330.52 on behalf of Mr. Lan, because she ordered that the credit balance in R2's company's account be transferred to such account and in such manner as Mr. Lan directed, and that the sum so transferred should be set off against the order for compensation.

5. However, three months later on 17th October 1996, it came to the magistrate's attention that she had exceeded her powers in ordering R2 to pay compensation in the sum of $490,000.00. She had purported to order the compensation under section 98 of the Magistrates Ordinance (Cap. 227), but the maximum amount of compensation which may be ordered under section 98 is $100,000.00. She thought at the time that there was nothing which she could do about the matter, because the time during which she could review her order of 16th July, and vary it if necessary, had expired. She therefore advised R2 to appeal against the compensation order out of time.

6. The case came before the magistrate again on 25th November. I cannot tell why it came before her in view of the fact that she had previously expressed the view that she could not review her order of 16th July. Despite that, however, she made an order in relation to the sums being held on Mr. Lan's behalf by the Standard Chartered Bank. That order was as follows:

(i) The sum of $126,700.00 was to be paid into court. $92,700.00 represented compensation to Mr. Lan, and the balance of $34,000.00 represented the aggregate of the fines, expenses and costs payable by R2.

(ii) The balance of the sums being held by the Standard Chartered Bank on behalf of Mr. Lan was to be repaid to R2 by paying it into R2's company's account with the Hong Kong Bank.

By then, the magistrate had plainly come to the view that, because the order she had made on 16th July was beyond her jurisdiction, the order was a nullity. Since the order was a nullity, it had to be treated as never having been made, and that enabled her to make a new order in its place.

7. Two things concerned the Standard Chartered Bank about the order made by the magistrate on 25th November. First, a large amount of the money stolen by R2 from Mr. Lan was to be repaid to R2. Secondly, Mr. Lan would in effect be paying R2's fines, expenses and costs for him. Accordingly, the Standard Chartered Bank applied to the magistrate to vary her order of 25th November. That application came before the magistrate on 4th December. The magistrate accepted that the first of the Standard Chartered Bank's concerns was a legitimate one. Accordingly, she rescinded her order requiring the balance of the money held by the Standard Chartered Bank to be paid into R2's company's account with the Hong Kong Bank. However, she confirmed that part of her order relating to the sum of $126,700.00. In these proceedings, the Standard Chartered Bank applies for judicial review of that part of her order.

THE MAGISTRATE'S ORDER RELATING TO THE $126,700.00

8. In my view, the magistrate should not have made the order relating to the sum of $126,700.00 which she did. There are two reasons for that:

(i) A magistrate's power to order compensation under section 98 of the Magistrates Ordinance does not include the power to make an order for compensation against a third party, nor does it include the power to make an order for sums to be paid into court. A compensation order under section 98 can only be made against a person convicted of a criminal offence, and not a third party such as the Standard Chartered Bank, and the sums payable under such an order may only be paid to an "aggrieved person", i.e. to Mr. Lan and not into court. In order to ensure that Mr. Lan received compensation, at any rate for $92,700.00, the magistrate should have ordered R2 to pay that sum to him, though in that event what would have happened is that the release by the Standard Chartered Bank of that sum to Mr. Lan would have been treated as the satisfaction by R2 of such a compensation order.

(ii) It was Wednesbury unreasonable for the magistrate to require the balance of $34,000.00 to be paid into court. As I have said, that had the result of requiring the victim of R2's crimes to finance the payment of R2's fines, costs and expenses.

CONCLUSION

9. Mr. Nicholas Bradley, who has represented the magistrate on this application, does not dissent from these views. To the extent that it is in his power to do so, he is prepared to consent to orders which have the effect of Mr. Lan receiving the whole of the sum of $404,330.52 held by the Standard Chartered Bank, of R2 being made to pay by way of compensation the difference between that sum and $490,000.00, and of R2 having to pay the fines, costs and expenses himself. That can be achieved in the following way:

(i) I quash the orders for compensation totalling $490,000.00 made by the magistrate on 16th July 1996 which the magistrate had no power to make.

(ii) I declare that the Standard Chartered Bank is entitled to release the sum of $404,330.52 to Mr. Lan. That leaves a balance of $85,669.48 in respect of which Mr. Lan is out of pocket. I remit the case to the magistrate with a direction that she orders R2 to pay compensation to Mr. Lan in that amount. After all, that achieves what the magistrate intended to do when she originally sentenced R2 on 16th July.

(iii) I quash the orders made by the magistrate on 25th November and 4th December.

The net effect of all that is that R2 will have to pay the sum of $85,669.48 to Mr. Lan, which will compensate Mr. Lan for all the sums stolen from him by R2, and that R2 will have to pay the fines, costs and expenses out of his own resources. R2 does not object to paying the sum of $34,000.00 to Mr. Lan. After all, he told me that he had reached a private agreement with Mr. Lan to reimburse him the sum of $34,000.00 which the fines, costs and expenses amounted to. The effect, though, of my order is that that reimbursement has to be financed by R2 out of his own pocket, and not out of the sum of $404,330.52 currently held on Mr. Lan's behalf by the Standard Chartered Bank.