CHIU YU FONG v. LAU KWONG WING

HCA 6099/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.6099 OF 1999

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BETWEEN

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D E C I S I O N

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1.  This is an appeal against the decision of a master given on 22 September 2010. The master ordered the discharge and vacated the registration from the Land Registry a charging order absolute made on 20 July 1999 on the defendant’s beneficial interests in a flat in Prince Edward Road that he jointly owned with his wife. The ground of the decision was that the defendant had fully paid the plaintiff the judgment sum for which the charging order absolute was made.

2.  The plaintiff now complains that the master had come to the decision after a trial, but the trial was without the consent from the parties under Order 36, rule 1.  Hence, the master had no jurisdiction to decide the dispute in the way he did.  Order 36, rule 1 and rule 4(1) provide:

“1. In any cause or matter other than a criminal proceeding by the Crown, the Court may, with the consent of the parties, order that the cause or matter, or any question or issue of fact arising therein, be tried before a master or that the master do inquire and report thereon and, in the case of inquiry and report, giving consequential directions.

…

4. (1) Subject to any directions contained in the order made pursuant to rule 1 -

(a) the master shall for the purposes of the trial or inquiry (including any interlocutory application therein) have the same jurisdiction, powers and duties (including the power of committal and discretion as to costs) as a judge, exercisable or, as the case may be, to be performed as nearly as circumstances admit, in the like cases, in the like manner and subject to the like limitations; and

(b) every trial and all other proceedings before a master shall, as nearly as circumstances admit, be conducted in the like manner as the like proceedings before a judge.”

The facts

3.  The following facts are from the judgment of the master.  The matter arose out of a judgment entered in favour of the plaintiff on 5 May 1999 for $650,000 plus interest from 1 September 1998 until payment and fixed costs at $1,550.  The judgment was granted pursuant to a repayment agreement made between the plaintiff’s deceased husband and the defendant.  Pursuant to the judgment, the plaintiff obtained a charging order absolute on the property as jointly owned by the defendant and his wife on 20 July 1999. 

4.  The defendant repaid two sums of $50,000 each on 27 July 1999 and 3 November 1999.  The amount outstanding as at 3 December 2002 was at $858,120.  In December 2002, the plaintiff engaged a debt collector to pursue the defendant for payment.  The debt collector was called Wah Tai Commercial (Credit Management) Company (“Wah Tai”).  The plaintiff entered into a written debt collection contract with Wah Tai and gave it a written collection authorisation.  She signed both documents. 

5.  It is the defendant’s case that a Mr Heung purportedly from Wah Tai demanded him in December 2002 to pay the sum of $858,120.  Heung also showed him in a meeting the collection authorisation and a copy of the repayment agreement with the original signature of the plaintiff endorsed on it which the defendant recognised.  The defendant promised Heung that he would pay later.

6.  Later when the defendant was in the Mainland, he was cheated to meet Heung and Heung’s associates.  He was then in their control for three to four days, during which he went around looking for money to repay the plaintiff.  He sold his interests in a fishpond business for RMB350,000 and borrowed RMB400,000 from a friend.  He paid these moneys to Heung in return for some temporary receipts and was then set free.  He paid Heung a further sum of $80,000 on about 22 January 2003 in Hong Kong.  He was then given an official receipt of Wah Tai for $858,120 in exchange of the temporary receipts.  Heung also handed over to him the repayment agreement, a copy of the repayment agreement with the plaintiff’s signature endorsed on it, the debt collection authorisation, a photocopy of the business registration certificate of Wah Tai and a copy of the Hong Kong identity card of a Mr Man, the sole proprietor of Wah Tai.

7.  The defendant’s case is that he had fully paid the plaintiff through Wah Tai, and the charging order should be discharged and vacated from the Land Registry.  The plaintiff, however, denied that she had received any money from Wah Tai.  She also disputed Wah Tai’s authority to receive money on her behalf.

8.  It appeared from some correspondence between her solicitors and the police that Mr Man of Wah Tai had sometime in June 2003 denied the receipt of the repayment by the defendant and further denied that he had authorised the issue of the official receipt.  The current dispute between the plaintiff and the defendant was already in existence then.  The plaintiff then demanded the whole debt from the defendant less the $100,000 received and opposed the discharge of the charging order.

9.  In around December 2009, the defendant and his wife were desirous of selling their flat.  The defendant then issued a summons on 14 December 2009 for discharge of the charging order. 

10.  Both the plaintiff and the defendant have made affirmations to set forth their different cases.  On the first day of hearing on 24 May 2010, the master referred to these affirmations.  The plaintiff’s counsel said that he wanted to cross-examine the defendant.  The defendant’s counsel also said he wanted to cross-examine the plaintiff if the defendant should be cross-examined.  The master also suggested to conduct the cross‑examination in chambers open to the public for convenience rather than to do so in open court.  Both sides agreed to this.  The master then ordered under Order 38, rule 2(3) that both the plaintiff and the defendant be cross-examined on their affirmations. 

11.  The defendant gave evidence and was cross-examined first as the burden was on him to prove the payments.  After his evidence was concluded, his counsel closed his case.  The plaintiff’s evidence and cross‑examination then followed.  After the plaintiff’s evidence, the master also assessed the costs for the application of the charging order at $7,000 and adjourned the matter to 19 July 2010.

The plaintiff’s application to adjourn

12.  On 9 July 2010, the plaintiff’s solicitors wrote to the defendant’s solicitors, saying that a second opinion of another counsel advised that the dispute between the parties could only be resolved by a trial of the issues rather than determined by a master summarily under the defendant’s summons of 14 December 2009.  The issues raised by the plaintiff’s solicitors are:

(1) whether the defendant had paid the sum of $858,120 or any part thereof to one Mr Heung allegedly of Wah Tai as evidenced by a receipt No. 1047 allegedly of Wah Tai dated 22 January 2003 and signed by one Man Sai-wing; and

(2) whether such payment by the defendant as aforesaid discharged the defendant’s liabilities towards the plaintiff under the judgment herein dated 5 May 1999.

13.  The plaintiff’s solicitors also said that the resolution of the issues were final in nature because the resolutions would determine the substantive rights of the parties.  They also said that it was not a mere procedural matter as the master had no jurisdiction to try the matter under Order 36, rule 1.  They also referred to para 50/9A/39 of the Hong Kong Civil Procedure 2001 which states:

“50/9A/39 Issue directed (rr 1-9A) - If the title to the stock or shares is disputed, an issue may be directed to be tried between the plaintiff and the claimant, in which case the practice is to adjourn the application to make the charging order absolute until after the decision of the issue.

This note was expressly approved by the Court of Appeal in Rosseel NV v Oriental Commercial and Shipping (UK) Ltd [1991] E.G.C.S. 94, CA. What is said applies equally where the dispute is over the beneficial ownership of land; where the dispute is one of fact the normal course will be for the court to exercise its discretion to direct an issue to be tried.”

14.  The defendant’s solicitors declined the suggestion of having a trial of the issues.  The plaintiff then issued a summons on 14 July 2010, seeking to adjourn the defendant’s summons for discharge of the charging order pending the trial of the said issues.  The plaintiff by this summons further proposed various directions for the preparation of the trial of the issues.  The summons was returnable on 19 July 2010 when the defendant’s summons would continue to be heard.

Master’s decision on the application to adjourn

15.  On 19 July 2010, the master was not convinced that he should adjourn the matter pending the trial of the issues and dismissed the plaintiff’s summons.  The master took the view that under Order 32, rule 11, which governs the jurisdiction of the Registrar and masters, he had the jurisdiction to deal with the defendant’s summons which is an interlocutory application.  Order 32, rule 11(1) provides:

“(1) The Registrar and any master shall have power to transact all such business and exercise all such authority and jurisdiction as under any Ordinance or by these rules may be transacted and exercised by a judge in chambers except in respect of the following matters and proceedings (the exceptions are not relevant to this appeal).”

16.  The master also took the view that even if he had to determine factual disputes and points of law in the defendant’s summons, that did not affect his jurisdiction to deal with this summons.

17.  The master also referred to his jurisdiction to make decisions that would affect substantive rights of the parties under Order 14 and determine questions of law under Order 14A.  The master noted that the defendant was invoking Order 50, rule 7 to discharge the charging order, but not Order 36 for trial before a master by consent, and despite the taking of evidence and cross-examination of witnesses, the matter remained an interlocutory application.

18.  The master also discussed the cases relied on by the plaintiff’s counsel, namely, Fredericks and Pelhams Timber Buildings v Wilkins, Read [1971] 1 WLR 1197 and P.B.J. Davis Manufacturing Company Limited v Fahn, Fahn [1967] 1 WLR 1059.  Fredericks and Pelhams is a case of interpleader proceedings which was decided by a master summarily under Order 17, rule 5(2) of the Rules of the Supreme Court in England. The English Court of Appeal allowed the claimant’s appeal and ordered a new trial before the official referee.  The Court of Appeal was of the view that where there was a serious claim to goods of considerable value raising the prospect of difficult points of law, summary disposal of an interpleader issue by a master under Order 17, rule 5(2) was inappropriate even by consent of the parties. 

19.  The master took the view that this decision of the English Court of Appeal was facts-sensitive, and this decision, which was justified by its own circumstances, was not meant for general application.

20.  Davis Manufacturing is also a case of interpleader proceedings which was decided summarily under Order 17, rule 5(2).  The master there, instead of giving a special appointment for taking evidence and cross-examination of witnesses, just decided the disputes straight away out of hand.  The appeal by the execution creditor was allowed by the English Court of Appeal which ordered a special appointment be made for witnesses to give evidence and to be cross‑examined.

21.  The master drew a distinction between this case and Davis Manufacturing.  Unlike Davis Manufacturing, this matter was set down for full argument and cross-examination of the plaintiff and the defendant.  Unlike Fredericks and Pelhams, the issues here were all well-defined.  The parties had filed their affirmations without complication. There was no application for discovery or interrogatories.  The parties had full opportunities to lead evidence and to cross-examine the deponent of the other side.  The matter was not to be decided out of hand.

22.  The master also held that it was too late for the plaintiff to ask for a trial.  The master said that there was also no suggestion by any party of the possibility of a trial under Order 36 until then.  The master also took into account the needs for increasing the cost-effectiveness of the court procedure to ensure the expeditious resolution of cases, to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings, to ensure fairness between the parties and to ensure that the resources of the court are distributed fairly.

23.  The master also took the view that any appeal from his decision on the defendant’s summons would go before a judge who would have no difficulty in conducting the appeal simply because oral evidence has already been taken by the master.  The master opined that a transcript of the evidence could be made available to the judge.  For these reasons, the master dismissed the plaintiff’s summons of 14 July.

24.  The master then considered the evidence and the submissions of the parties at length and decided in favour of the defendant on the two issues raised by the plaintiff.

Nature of the hearing

25.  Since the plaintiff’s attack of the master’s judgment is grounded on the lack of jurisdiction, it is necessary to understand the mode of conduct adopted by the master.  The master had the benefit of reading the affirmations of both sides.  He ordered the cross-examination of the deponents under Order 38, rule 2(3).  He then heard submissions and resolved the disputes of facts.  I think that was certainly a determination of triable issues in a trial.  It was a trial on affirmations with cross‑examination of the deponents.  It was not an interlocutory matter.

Analysis

26.  I now consider the nature of matters that usually come before a master.  Many of them are interlocutory matters that involve court procedure.  They are mostly for the preparation of cases for trial.  They do not by themselves decide the substantive rights of the parties.  A master need not give any reason for his decision in an interlocutory matter.  Appeal from his decision in such matter is to a judge who would deal with the matter from afresh.  Any further appeal on such matter requires leave from the judge or the Court of Appeal (see section 14AA of the High Court Ordinance, Cap.4).

27.  There are also many matters that come before a master which require the determination of substantive rights of the parties. These determinations are made in a summary way, but they normally do not call for the resolution of any triable issue.  Examples are applications for summary judgment under Order 14 or Order 86, applications to strike out actions and proceedings, applications for judgment under Order 14A.  A master can also deal with them without giving any reason, and any appeal is to a judge who would hear the matter from afresh.  Any further appeal to the Court of Appeal, however, does not require any leave of the court (see section 14(1) of the High Court Ordinance and Order 59, rule 21).

28.  In addition, there are also matters that come before a master that would require the resolution of triable issues by the calling of witnesses and their cross-examination.  These are trials by consent under Order 14 rule 6(2) and Order 36 rule 1, and assessment of damages under Order 37 or otherwise.  A master has to give reasons for his decisions in these matters, and any appeal would go straight to the Court of Appeal (see Order 58, rule 2).

29.  There are exceptions to this.  An appeal from a decision of a master under Order 44, rule 11 goes to a judge, but Order 44, rule 12 provides for the appeal to be dealt with by the judge in a way similar to an appeal in the Court of Appeal.

30.  In interpleader proceedings, a master may also hear oral evidence with cross-examination and to decide triable issues summarily under Order 17, rule 5(2).  However, section 14(3)(f) of the High Court Ordinance provides that there shall be no appeal from such decisions.

31.  I have also been referred to Order 49, rule 5 where a trial before a master can be ordered even without consent of the parties, but such an order is made with the exercise of judicial discretion, and the view of the English Court of Appeal in Fredericks and Pelhams is appropriate here.

Decision

32.  All in all, I am of the view that the master did not have jurisdiction to conduct the trial and to resolve the dispute of the parties as he did.  The judgment is not an interlocutory decision.  It decided the parties’ substantive rights after the resolution of the triable issues. 

33.  Judging from the dialogue in the transcript, I am quite sure that if anyone should have been alerted to the need for consent for the trial under Order 36, rule 1, the parties would have given their consent and there would not have been this procedural attack.  If the parties should have given their consent under Order 36, rule 1, the plaintiff’s appeal would also have gone to the Court of Appeal direct.

34.  In the premises, I allow the plaintiff’s appeal against the master’s decision on the defendant’s summons dated 14 December 2009.  I also grant extension of time for the plaintiff to appeal against the master’s decision on the plaintiff’s summons dated 14 July 2010 and allow this appeal too.

Costs orders nisi

35.  I make the following costs orders nisi. The costs of the defendant’s summons of 14 December 2009 up to and including the costs of 24 May 2010 be in the cause of the dispute between the parties and thereafter be to the plaintiff in any event.  The costs of the plaintiff’s summons of 14 July 2010 be in the cause of the disputes.  The costs of the appeal be to the plaintiff and to be assessed summarily before me at a 9.30 am hearing to be fixed by the parties and to be paid after assessment.

Directions

36.  I also give the following directions for the resolution of the dispute.  The defendant do file and serve his claim for discharge of the charging order within 14 days from today.  The plaintiff do file and serve her defence to the claim within 14 days thereafter.  The defendant do file and serve his reply, if any, within 14 days thereafter.  The parties do exchange lists of documents within 28 days from the close of pleadings.  There be inspection of documents within 7 days thereafter.  The parties do file and exchange witness statements as to facts within 42 days after inspection.  There be a case-management conference to be held on a day to be fixed.