IP SUK CHING v. LUK KAM HEUNG

HCA 1215/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1215 OF 2006

_________________________

Coram : Before Master Hui in Court

Date of Hearing  :   8 May 2007, 23 August 2007, 12 December 2007,  22 January 2008, 21 April 2008, 18 August 2008  & 13 October 2008

Date of Judgment :  10 December 2008

_______________

R U L I N G

_______________

The Application

1. This is an application on the part of the Judgment Creditor for an order of imprisonment and further or alternatively, an order to satisfy the judgment by instalments under Order 49B of the Rules of High Court.

Examination under Order 49B

2.  The Judgment Creditor applied for an examination of the Judgment Debtor under Order 49B.  The application was granted by Master Lung on 12 February 2007.  The Master gave usual directions as to the production of documents.

3. The examination first took place before me on 8 May 2007.  Upon the application of the Judgment Debtor, I granted leave to her to comply with the order of Master Lung dated 12 February 2007 within 28 days.  The examination proceeded notwithstanding my order.

4. The examination was adjourned as the Judgment Debtor did not feel well in the course of the examination.  The hearing was adjourned to 23 August 2007 when the case went part-heard again.  The hearing was then further adjourned to 12 December 2007 for submission.  The hearing was again part-heard and adjourned to 22 January 2008.

5. On 22 January 2008, Mr. Yip, Counsel for the Judgment Debtor was not available because of medical reason.

6. When the hearing was resumed on 21 April 2008, Mr. Suen, Counsel for the Judgment Creditor, informed the Court that the Judgment Debtor did provide some documents to the Judgment Creditor shortly before the hearing.  Mr. Yip submitted that the Judgment Debtor only received the documents a week prior to the hearing and that the documents were those requested for by the Judgment Creditor.

7. Eventually, by consent, I ordered, inter alia, that the Judgment Debtor do have leave to file her 7^th affirmation and granted her leave to file further affirmation to exhibit bank statements or records on or before 18 July 2008.  The examination was then further adjourned to 18 August 2008.

8. On 18 August 2008, I granted leave to the Judgment Debtor to file her 8^th and 9^th affirmations out of time.

9. In the light of the fresh evidence and provision of new documents, I allowed Mr. Suen to further examine the Judgment Debtor in relation to the new documents.  In the course of further examination, the Judgment Debtor requested to seek urgent medical treatment.  I granted the application and eventually the examination was adjourned to 13 October 2008 as the Judgment Debtor was not fit to attend the hearing after treatment.

10. The examination continued on 13 October 2008 as scheduled and parties did make oral submissions thereafter.  The Judgment Creditor asked the Court to send the Judgment Debtor to prison and/or order the Judgment Debtor to pay the judgment by instalments.

11. Having heard submissions, I directed, inter alia, that the Judgment Debtor to file further affirmation to exhibit all the correspondences between her and/or her legal advisers and the Bank of China in relation to the obtaining of documents concerning the liabilities of a real property at Shatin, jointly owned by the Judgment Debtor and her husband (“the Property”), due to the bank under a mortgage.

12. As a result, the Judgment Debtor filed her 10^th affirmation on 17 October 2008.

13. On 29 October 2008, the Judgment Creditor put in her further supplemental written submission.  Mr. Suen informed the Court that he did not prepare to make further oral submission.

14. The Judgment Debtor did not advise the Court of her stance as to whether she need to make further oral submission notwithstanding repeated requests were made by the Court for such confirmation. 

15. In the light of this, I shall treat the Judgment Debtor does not wish to make any further submission.

16. The parties were not available to attend Court for this ruling until 10 December 2008.

Background and History of the Case

17. Before I go on to deal with the merits of the application, I think I should set out the background and history of the case.

18. The Writ of Summons was taken out on 6 June 2006 and the claim was for a sum of HK1.13 million being money lent by the Judgment Creditor to the Judgment Debtor between 17 January 2003 and 26 August 2005.  Five post-dated cheques (dated 28 November 2005, 30 January 2006 and 28 February 2006 respectively) for a total sum of HK$1.13 million were issued by the Judgment Debtor in favour of the Judgment Creditor.  The cheques were dishonoured.

19. The Judgment Debtor put in her Defence on 24 July 2006.

20. Summary judgment application was taken out on 7 August 2006.

21. On 1 December 2006, Master de Souza entered summary judgment against the Judgment Debtor.

22. The Judgment Creditor obtained a charging order nisi in respect of the Property on 10 January 2007.  The order became absolute on 5 February 2007.

23. A week later, on 12 February 2007, Master Lung granted the application for this examination under Order 49B as stated hereinabove.

The Judgment Creditor’s  application

24. Mr. Suen submitted that the Court should imprison the Judgment Debtor and further or alternatively, order the Judgment Debtor to satisfy the judgment by instalments.

25. For imprisonment, Mr. Suen submitted that the Judgment Debtor

i. has willfully failed to make a full disclosure as required under Order 49B rule 1A(2);

ii. has disposed of assets with a view to avoiding satisfaction of the judgment or the liability which is the subject of the judgment, wholly or partly; and

iii. is able to satisfy the judgment, wholly or partly.

Failure to make Full Disclosure

26. Order 49B rule 1A(2) provides that “the Judgment Debtor shall at his examination, make a full disclosure of all his assets, liabilities, income and expenditure and of the disposal of any assets or income and shall, subject to the directions of the Court, answer all questions put to him”.

27. There is no dispute that the Court must be satisfied beyond reason doubt before making an order for imprisonment or an order under Order 49B rule 1B(2).  The jurisdiction of the Court to send a debtor to prison under Order 49B should be exercised with care and circumspection.

28. It is true that the Judgment Debtor had failed to make full disclosure at the outset of the examination.  However, during the course of the examination, which spread over more than 18 months (as it had been adjourned on divers occasions as aforesaid), the Judgment Debtor had from time to time disclosed further documents.

29. It should be noted that after the first hearing and during the adjournment of the examination, I made an order by consent (“the Consent Order”) on 16 July 2007 that:

i. the Judgment Debtor is required to produced the particulars (including but without limitation to the name of payer, the name of payee, the purpose of transaction) in respect of any transaction in the amount of $20,000 or above in all the bank account of the Judgment Debtor during the last 5 years together with supporting document by way of affirmation within 14 days; and

ii. the Judgment Debtor is required to produce 16 items of documents as set out in the schedules annexed to the consent application (“ the Outstanding Documents”).

30. In purported compliance with the Consent Order and other orders to produce documents of the Court, the Judgment Debtor filed her 6^th affirmation on 17 August 2007 and exhibited some of the Outstanding Documents.

31. At paragraph 2 of the said 6^th affirmation, the Judgment Debtor said that she did not have/or could not find the documents/ records for (i) medical expenditure of her pet; and (ii) household miscellaneous expenses.  While they are not the expected answers, they, to say the least, disclosed the fact that the Judgment Debtor no longer has the documents in question and thus cannot produce them.  It therefore became a matter for the Judgment Creditor to pursue in the examination or to take further action.  The Judgment Creditor did not press on these in the examination.

32. At paragraph 3 of the said 6^th affirmation, the Judgment Debtor referred to her 4^th and 5^th affirmation to deal with the other Outstanding Documents.

33. The 4^th affirmation is dated 18 April 2007 and the 5^th affirmation is dated 28 May 2007.  They are all filed prior to the Consent Order.

34. It was due to the fact that the Judgment Debtor had failed to produce the Outstanding Documents, whether under her previous affirmation or otherwise, that lead to the Consent Order.  I cannot see how the Judgment Debtor could in her 6^th affirmation refer back to her 4^th and 5^th affirmation to comply with the Consent Order which requires the Judgment Debtor to produce copies of the Outstanding Documents.

35. Some further documents were produced under the 7^th affirmation to 9^th affirmation of the Judgment Debtor.  In the last paragraph of the respective affirmations, the Judgment Debtor repeatedly asserted that the documents produced were all the documents that she could find or retrieve.

36. The Judgment Creditor was not happy about the manner and extent of disclosure made by the Judgment Debtor. On 11 August 2008, the Judgment Creditor complained again by letter (“the said Letter”) that the Judgment Debtor had still failed to fully disclose the following:

i. Bank statements showing the liabilities of the Property;

ii. The betting account statement with the HKJC (only those for the period from 28 July 2004 to 27 July 2007) were disclosed;

iii. Particulars of the transactions which are over $20,000 during the last 5 years;

iv. Credit card statements with Standard Chartered Bank (card no. 4509 3608 6009 9528) for the period from May 2002 to March 2004;

v. Details of the life insurance policy held by the Judgment Debtor with Citibank;

vi. Medical expenditure records for the Judgment Debtor’s pet;

vii. Documentary records of the Judgment Debtor’s household miscellaneous expenditure;

viii. Passbook/bank statement of the Judgment Debtor’s account with Chiyu Bank (no. 039 7501 0115 101) for the period from February 2002 to May 2006;

ix. Bank statements of the Judgment Debtor’s account with Bank of China (no. 064 7960 0017 791) for the period from February 2002 to February 2003;

x. The passbook/statement of any other bank account in Hong Kong or elsewhere (it was raised because the Judgment Debtor only declared that she did not have any other fixed deposit account); and

xi. Shares and stock trading transaction records.

37. The documents as set out in the said Letter were the subject matters of the Consent Order.

38. I shall first of all deal with the documents showing liabilities of the Property.  The only documents disclosed are the land search record, mortgage deed and the letter from the solicitor of the Judgment Debtor to the Bank of China dated 17 January 2008 requesting for “mortgage deed and the payment records of the mortgage loan for the past 5 years”, a follow up letter by the solicitors dated 27 January 2008 and the reply of the bank dated 27 January 2008 enclosing the mortgage deed and the reply that “there are no payment records of the mortgage loan provided for the past 5 years”.

39. Mr. Suen in his further supplemental written submission dated 28 October 2008 stated that the Judgment Debtor only asked for the “payment records of the mortgage loan for the past 5 years” but nothing else.

40. The Judgment Creditor had on divers occasions stated the reasons why they pressed for the documents concerning the liability owed to the bank and secured by the Property.  The Judgment Creditor would like to see if it worth to enforce the judgment against he Property. 

41. It is obvious that the bank only replied to the request as framed by the Judgment Debtor.  The request, in my judgment, failed to identify all the documents or information as required by the Judgment Creditor.

42. There is no dispute as to the law and principle applicable to this sort of cases.  The Judgment Creditor must establish that the failure to make a full disclosure must be deliberate and intentional as opposed to accidental and negligent. 

43. The Consent Order was granted on 16 July 2007.  More than one year has lapsed before the last hearing and the Judgment Debtor has still failed, apart from the documents mentioned above, disclose any further document or information as to the liabilities owing to the Bank of China and secured by the Property. It is thus not open to the Judgment Debtor to say that she does not know what documents the Judgment Creditor is asking for.

In the light of the circumstances, the only conclusion I can draw is that the Judgment Debtor willfully failed to disclose the liabilities secured by the Property.

44. The next type of information that the Judgment Debtor had failed to disclose or provide are the particulars of transactions in the amount of $20,000 or above.  The particulars include but not limited to the name of the payer, name of the payee and the purpose of the transactions.

45. In the said Letter, the solicitors for the Judgment Creditor had pointed out that the Judgment Debtor had failed to provide full particulars.  A table identifying over 200 transactions was enclosed for the easy reference of the Judgment Debtor.  Notwithstanding this, the Judgment Debtor paid no heed to the said Letter.

46. There was no explanation, whether from the Judgment Debtor or from her legal advisers, as to why the Judgment Debtor failed to provide all the particulars as ordered.

47. Once again, the only conclusion that I can draw is that the Judgment Debtor willfully failed to disclose the particulars.

48. In my judgment, the Judgment Debtor has also failed to disclose item (ii), (iv), (v), (viii), (x) and (xi) of paragraph 36 above (the Judgment Debtor had supplied (ix) under her 8^th affirmation).  The Judgment Debtor offered no explanation for failing to disclose the same.  I am of the view that the Judgment Debtor willfully failed to disclose these documents.

Disposal of Assets

49. The Judgment Creditor made a lot of complaints under this head.  They are, in gist, as follow:

i. there are over 200 transactions of $20,000 or above without explanation as to their purposes;

ii. the Judgment Debtor exhibited a luxurious lifestyle – spending huge sums in purchasing Chinese medicine and making substantial donations to Buddhist group;

iii. there is no document to support the transfer of money to the siblings of the Judgment Debtor; and

iv. the Judgment Debtor failed to give satisfactory explanation to some transactions.

50. I will only consider those dispositions which took place on or after 28 November 2005.  This is the date when the first post-dated cheque was due for payment and when the liability which is the subject of the judgment first came into the picture.

51. The complaints of purchasing Chinese medicine and donations fall outside the ambit as they were made prior to November 2005 with the last purchase in October 2005.

52. The Judgment Creditor must prove her case beyond reasonable doubt.  The fact that the evidence and explanations given by the Judgment Debtor are not satisfactory can, at the most, lead to the rejection of the same.

53. While there is direct evidence to establish disposition of assets after 28 November 2005, the Judgment Creditor can only rely on inference to establish that the dispositions were made “with a view” to avoid the judgment or the liability which is the subject of the judgment as there is no direct evidence in this regard.

54. The inference cannot be drawn lightly.  The Court must not draw any inference unless it is the only and irresistible one.  In my judgment, there could be lots of reasons for the transactions and transfer of money.

55. It is my ruling that the Judgment Creditor has failed to prove this head.

Judgment Debtor is able to satisfy the judgment

56. Mr. Yip accepted that the Judgment Debtor is able to pay the judgment debt by instalment at the rate of $7,000 per month.  Further, if the private vehicle being used by the Judgment Debtor be sold, the Judgment Debtor could pay $10,000 per month.

57. Mr. Suen submitted that in the light of the income and expenditure figures provided by the Judgment Debtor, she should be able to pay at $10,000 per month.

58. The Judgment Debtor is currently receiving $18,000 per month from her husband for her living.  In her expenditure list, exhibited to her affirmation filed in 2007, the total monthly expenditure was $16,5000.  The Judgment Debtor has ceased hiring domestic helper and is no longer required to pay medical expenses of her pet.  These cut down the monthly expenditure to $9,000.  For this reason, it is clear that the Judgment Debtor is able to pay the judgment debt at $9,000 per month.

Should imprisonment be imposed?

59. Mr. Yip submitted that I should not exercise my discretion to imprison the Judgment Debtor.

60. In deciding how to exercise my discretion, I have to consider the background of the case and the seriousness of the matters in question.  If the Judgment Creditor’s application is solely on the ground that the Judgment Debtor is able to satisfy the judgment, I would have no hesitation to dismiss it.  First, when the application was made, there was no evidence that the Judgment Debtor was able to satisfy the judgment.  There were changes to the spending needs of the Judgment Debtor that brought her under Order 49B rule 1B(1)(a).  Second, the amount that the Judgment Debtor can repay per month is only a small sum when compared with the judgment debt.

61. This application, however, is also based on Order 49B rule 1B(1)(c).  This, in my ruling, is far more serious.  The conduct on the part of the Judgment Debtor is totally unacceptable.  She has over a year to comply with the Consent Order and to disclose the documents in questions but she chooses not to do so.  I see no reason why I should not impose imprisonment.

62. Mr. Yip submitted that an imprisonment order under Order 49B rule 1B(1) and an order to pay the judgment debt under Order 49B rule 1B(2) are mutually exclusive.  He did not provide any authority to support this proposition.

63. Mr. Suen pointed out that Order 49B rule 1B(1) and Order 49B rule 1B(2) cater for different situations.  The Court may impose imprisonment if the Judgment Debtor “is able to satisfy the judgment” (rule 1B(1)(a)) or if the case falls under rule 1B(1)(b) or (c).  Under Order 49B rule 1B(2)(a), the Court may order the Judgment Debtor to satisfy the judgment if the Judgment Debtor “is able or will be able to satisfy the judgment”.

64. Further, Order 49B rule 1C provides that “an order for imprisonment under this Order shall not satisfy or extinguish any judgment debt” and Order 49B rule 1B(6) states that “ an order under paragraph (1), (2) or (3) shall not prevent execution of the judgment by other means unless the Court so directs”.  It means that the Judgment Creditor may enforce the judgment by other means notwithstanding an imprisonment order.  There is thus clearly no reason why the Court cannot make imprisonment order and payment order at the same time. 

65. For these reasons, it is my ruling that the orders are not mutually exclusive.

66. The Judgment Debtor has the means to pay the judgment debt.  The Court should make an order under Order 49 rule 1B(2)(a).

Conclusion

67. The Court imposes an imprisonment order for a period of 1 month.

68. The Court also orders the Judgment Debtor to pay the judgment debt by monthly instalment at $9,000.

69. I will hear further from Counsel as to the wordings of the Order and on the question of costs.