PONG, SEONG TERESA AND OTHERS v. CHAN NORMAN

HCA 627/2010

[2018] HKCFI 788

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 627 OF 2010

_________________________

_________________________

DECISION AND REASONS

_________________________

APPLICATION

1.  This is an application by the judgment creditors to ask the court to imprison the judgment debtor under Order 49B rule 1B (1) (a) to (c) of the Rules of the High Court (“O.49 r.1B (1) (a) to (c) RHC”).

BACKGROUND

2.  Parties to the disputes were neighbors at a building at Kardoorie Hill, Kowloon.  For the present purpose, it suffices to say that the judgment creditors (the plaintiffs) commenced 2 actions (the present action was called by the Trial Judge as “Harassment Action” and, HCA 726/2010, “Nuisance Action”) against the defendant herein (“Mr. Chan”)/his mother.  After trial, the judgment creditors won and the Trial Judge commented Mr. Chan as follows.

“47. Mr Chan is obviously a highly qualified professional, a matter he places some emphasis in his witness statements. He is proficient in English and Cantonese. Throughout his evidence, Mr Chan is very guarded and is generally evasive. He refuses to accept any matter which may be supportive of the plaintiff’s case or destructive of his case, even in the face of contemporaneous documents and records. On the whole, I find Mr Chan’s evidence to be incredible. As the following evidence show, Mr Chan seems to have little respect for the truth and is prepared to say anything to suit his own purposes …”

3.  In the Harassment Action, the Judge granted an injunction against Mr. Chan from assaulting, harassing, threatening or pestering the plaintiffs, including shouting, speaking obscenities or foul language towards them, taking photos of theme without consent, causing damage to their residence and spraying or applying any paint thereof.

4.  In the Nuisance Action, the Judge also granted an injunction against Mr. Chan and his mother from causing or allowing loud thumping noises, excessive and unreasonably loud television or radio noises, and so forth, affecting the plaintiff therein.

5.  The Judge also awarded costs to the judgment creditors.

6.  Mr. Chan and his mother took up the matter to the Court of Appeal but lost them again on 11 March 2015 (with reasons handed down on 19 March 2015).

7.  The judgment creditors thereafter sought to recover their costs and parties agreed on 30 August 2016 the sum of $1,500,000 to settle them.

(a)  $1,100,000 for the Harassment Action

(b) $200,000 for CACV 186/2014 (appeal from Harassment Action)

(c)  $130,000 for the Nuisance Action

(d) $70,000 for CACV 187/2014 (appeal from Nuisance Action)

8.  The total sums of $200,000 in both (c) and (d) (wherein Mr. Chan and his mother are defendants and appellants above was paid, but not (a) and (b) in the amount of $1,300,000 (wherein only Mr. Chan is defendant and appellant).

9.  The judgment creditors sought different ways to try enforce them, including injunction, prohibition orders and examination.

10.  Regarding the examination, warrant of arrest was issued against Mr. Chan for his failure to attend court. On 7 March 2017, he (under bailiff custody) was brought before Madam Justice Barns.  After hearing from parties, the learned Judge made the usual discovery directions and warning against Mr. Chan as well as adjourning the examination to be dealt with by a Master.

11.  The examination was thereafter conducted before me on 20 April 2017 and 21 August 2017.  The judgement creditors thereafter issued the present summons seeking to imprison Mr. Chan.  Other than the transcripts of the examination, parties also specifically prepared the following documents.

(a)  Affidavit in support: 14^th affirmation of Lau Yue Sum

(b) Affirmation in opposition: affirmation of Mr. Chan filed on 30 November 2017

(c)  Affirmation in reply: 18^th affirmation of Lau Yue Sum

12.  Parties appeared before me on 22 March 2018. Mr. Vincent Chiu of counsel acted for the judgment creditors, and Mr. Chan appeared in person.  Having heard from them, I adjourned my decision to be given with reasons handed down today.  Here it is.

13.  Mr. Chiu submitted that all the 3 grounds under O.49B r.1B (1) RHC are established.

(a)  Mr. Chan is able to satisfy the judgment, wholly or partly.

(b) Mr. Chan has disposed of his assets with a view to avoiding satisfaction of the judgment or the liability which is the subject of the judgment, wholly or partly.

(c)  Mr. Chan has wilfully failed to make a full disclosure and to answer questions as required under the rule and court order(s).

 Mr. Chiu further submitted that this court should imprison Mr. Chan. The judgment creditors were willing to pay the fee as per O.49B r.2 RHC. 

14.  As to Mr. Chan, he said that the accusations against him were factually untrue.  The application was based on misstated exaggerated or speculative facts and imaginations. It should be dismissed. Mr. Chan also prayed this court to accept his apology and regret not performing excellently or accurately as far as court proceedings were concerned.

THE LAW

15.  The applicable law relating to O49B r.1B (1) RHC is clear.  The basic principles can be found at pages 1010-1011 of the Hong Kong Civil Procedure 2018.

“Standard of proof - the court must be satisfied beyond reasonable doubt [emphasis added] before making an order under sub-rule 1, whether by reason of paras (a), (b) or (c), being analogous to proceedings for contempt which have long been recognised to be of a criminal nature and must be proved to the criminal standard of proof. The same standard of proof applies to sub-rule 2 …

Order for imprisonment - the jurisdiction of the court to send a debtor to prison under O.49B r.1B (1) should be exercised with care and circumspection. It would be wrong and oppressive to imprison a debtor in light of the evidence before the master who do not accept that he had been evasive under examination. The debtor was shown to have a mere subsistence income and no assets. Unless it could be proved he had other assets it would be oppressive to even consider sending him to prison…

Where the evidence indicated opportunity and potential for substantial income but there was no evidence of the amount of any income actually received, the finding by the master that the debtor was able to satisfy the judgement wholly could not be supported. The order for imprisonment based on the finding was therefore wrong. The discretion could hardly have been rightly exercised if the failure to pay was the result of inability to do so…, where it was held that for an application under O.49B r.1B (1) (a) to succeed it must be proved that the judgement debtor has “means” currently available to satisfy the judgement debt…”

16.  With the above principles in mind as well as the evidence and submissions before me, I will see if the 3 grounds or any of them is established.  Subject to it, I will also see whether discretion should be exercised to imprison Mr. Chan in the circumstances, and if so, for how long?

IS MR. CHAN ABLE TO SATISFY THE JUDGMENT DEBT WHOLLY OR PARTLY?

17.  Mr. Chiu submitted, according to the authority of Glory Link Investment v Young Pui York [2016] 4 HKC 157, the debtor must have existing assets instantly and currently available to him to pay wholly or partly the judgment, and even on Mr. Chan’s own evidence, it was apparent that he had the means to do so.

18.  Mr. Chiu referred to the evidence of Mr. Chan.  He was able to raise 16.9 million from his family members to maintain his lavish style of living.  During examination, Mr. Chan acknowledged that, on some occasions, he was able to raise funds without mentioning any reasons.  He is still borrowing money from them.  Hence, Mr. Chan has the funds instantly and currently available to him to repay partly or wholly of the judgment debt.

19.  Mr. Chan disagreed and explained in his affirmation in opposition that:

“4. The allegation that I have means to pay the judgment debt was purely founded on my ability to borrow from my family members of about $16.9 millions. But the plaintiffs turned blind eye to the fact that a major portion of it had been spent long before the judgment debt arose. After the same arose, my family refused to lend me money for the purpose of paying debts. Therefore, I actually have no means now to repay.”

20.  Upon consideration, bearing in mind that the standard of living goes to ‘beyond reasonable doubt’ in the issue, I do have some reservation on this ground.  Indeed, such question was indeed raised at the examination:

“…

MR CHIU︰Dr Chan，咁我向你指出，其實你有能力向我幾位嘅當事人喇，幾位原告人，去還個律師費嘅，係咪？你有…

被告人︰唔清楚。

MR CHIU︰唔清楚。

被告人︰我唔清楚。

MR CHIU︰你唔清楚。

被告人︰答你個answer就係唔清楚。

MR CHIU︰係喇，你有能 — 我嘅意思係話，我哋咁睇番喇，你就問咗呢幾位人士借咗，夾夾埋埋其實都差不多喇，一千七百萬，其實實際就係$16,900,000，咁其實幾位原告人問你索取嘅律師費都係，而家仲剩低$1,300,000。

被告人︰咁如果佢哋唔借畀我呢？

MR CHIU︰如果佢哋唔借畀你…

被告人︰你點 — 咪住，第一樣嘢，呢個係個 — 你哋第一，你哋打官司冇畀個estimate我，打官司開始，第一樣嘢，第二樣嘢係我個 — 呢個係我個responsibility，做乜我個responsibility 要好唔啱、好illogical咁樣，關呢啲我嘅 — 借錢畀我嘅人呢？唔關佢哋事㗎喎，呢啲我自己嘅事，我自己嘅affairs，我自己嘅錢，係individual，你唔好拉埋晒去其他第三者身上。

MR CHIU︰咁但係你 — 頭先你話，你嘅expenses，譬如話你嘅enjoyment、entertainment、living expenses、necessities，嗰啲都係你嘅responsibility嚟㗎喎，係咪呢？

被告人︰嗰啲係我嘅，係喇。

MR CHIU︰係喇，…

被告人︰我自己︰

MR CHIU︰…都係你嘅responsibility。

被告人︰係，such as 喇，係，頭先我哋講嗰啲嘢喇。

MR CHIU︰係喇，咁有咩嘢唔同呢？如果你需要係畀原告人律師費，$1,300,000。

被告人︰唔同呀。

…”

(Transcript on 21 August 2017, at pages 15 to16)

“…

MR CHIU︰就寧寧舍舍嗰$1,300,000嘅律師費係借唔到？

被告人︰係唔肯借。

MR CHIU︰就唔肯借喇。

被告人︰係。

MR CHIU︰Okay。但係你借錢嘅時候，有冇講話係一定要畀嗰$1,300,000律師費？定還是係你可能會 —

被告人︰有講過，我有 — 有借過，係喇。

MR CHIU︰有講過，有借過。

被告人︰係。

MR CHIU︰咁但係借，好似頭先話佢entertainment，就冇問題喇？

被告人︰嗰啲有時唔使講嘢，有時冇 — 唔需要講reason。

MR CHIU︰唔需要講reason。

被告人︰係喇，有時借錢嘅時候，唔使講reason。

MR CHIU︰唔，唔。

被告人︰有時佢問下你，好似今日、或者聽日、或者下個禮拜呀，每日睇人心情㗎咋。

MR CHIU︰哦。

被告人︰係喇。

MR CHIU︰咁如果唔使問reason，可唔可以借到$1,300,000？

被告人︰今時今日唔得。

MR CHIU︰今時今日唔得。

被告人︰係。

MR CHIU︰係喇，唔問原因就借唔到$1,300,000，但係2016年9月30號嗰陣時…

被告人︰ 2016年9月30號，嗰陣時？

MR CHIU︰係囉。

被告人︰問過 — 我問過話，有單cases喎，有啲cases喎，借唔到。

MR CHIU︰咁有冇可以話，嗰陣時係咪都 — 即係2016年9月嘅時候喇，咁你有冇諗過係唔問原因咁借$1,300,000呢？

被告人︰我冇諗過咁多嘢喎，嗰陣時。

MR CHIU︰係。

被告人︰冇諗過咁多嘢。

MR CHIU︰冇諗過，冇諗過。

被告人︰係喇，即是我有時做嘢嘅時候，跟住就 — 係喇。

MR CHIU︰即係係咪你嘅意思係，冇諗過去唔問原因咁樣，可以借到錢個情況之下，就去借$1,300,000，然之後去畀原告人嘅律師費呢？

被告人︰講多次，講多次。

MR CHIU︰咁你係咪即係你冇諗過去借錢，去畀原告人嘅律師費呢？

被告人︰唔係，有諗過，亦都問過借錢。

MR CHIU︰有諗過，問過，…

被告人︰係喇。

MR CHIU︰…咁但係你就冇問 — 冇喺唔畀原因嘅情況之下，去問 — 借$1,300,000喇？

被告人︰唔記得。

MR CHIU︰唔記得。

…”

(Transcript on 21 August 2017, at pages 58 to 59)

21.  With the above, I agree with Mr. Chiu that the evidence of Mr Chan was not satisfactory.  He was guarded.  He was evasive.  He was shifting. However, it does not necessarily follow that the family members/friends of Mr. Chan or any of them are/is willing to lend him money (even if so, for how much?) to repay the judgment debt or any part thereof.

HAS MR. CHAN DISPOSED OF HIS ASSESTS TO AVOID PAYING THE JUDMGENT DEBT, WHOLLY OR PARTLY?

22.  Mr. Chiu said that Mr. Chan had disposed of his assets to avoid paying the judgment debt, in whole or in part.  He put this ground under 2 heads.

(a)  Mr. Chan spent his available funds on playing, enjoying life and entertainment purposes.

(b) He transferred his shares in the company called Gallop Medical Centre Limited (冠林醫務中心有限公司) (the “clinic”) to his wife at “minimal” consideration.

23.  Mr. Chan disagreed and explained in his affirmation of opposition.

(a)  It was a misunderstanding. “Living and entertainment” was meant “money to feed and to entertain his new born babies”.

(b) The clinic had made no profit for 9 years.  It had to be transferred to someone more capable so that the staff could then continue to be paid.

24.  Upon consideration, I am not satisfied that (a) has been proved. However, as to (b), I refuse to accept the explanations from Mr. Chan. There can be no doubt that he only transferred the shares in the clinic to avoid the same being executed by the judgment creditors.   

(a)  I can see the force of argument by Mr. Chiu. As he pointed out in his skeleton,

“33. In fact, Mr Chan made it clear that he would rather use the borrowed funds to maintain his own lifestyle of spending more than HK$200,000 per month instead of paying the Outstanding Judgment Debt: LYS‑28 50O to 51G [B/658‑9]; 62Q-63D [B/670-1] (emphasis added):

被告人︰…要我問 — 要我令到問人借錢。

MR CHIU︰係喇，咁即係話，其實你都係寧願維持番而家嘅生活嘅質素喇，生活嘅狀況，living standard喇，都唔想畀當事人嘅訟費。

被告人︰唔係。

MR CHIU︰又唔係，okay。

被告人︰唔係，我冇講過呢樣嘢，亦都冇suggest過呢樣嘢。

MR CHIU︰Okay。

被告人︰係喇，即係我想愛有之前嘅life style。

MR CHIU︰係。

被告人︰係喇，跟住其他啲嘢，你呢點話就點話喇，即是我自己maintain番我自己嘅life style 嘅。

MR CHIU︰Maintain番個life style。

被告人︰係喇。

MR CHIU︰Okay好，你嘅life style就係，睇番你122頁嗰度。係喇，你第4項expenses嗰度，你嘅life style就係每個月，就使呢度加加埋埋咁多錢喇，係咪咁嘅意思？

被告人︰係。

MR CHIU︰係喇，咁我計咗條數，呢度加埋就係206,000 鈫一個月喎，即係當我除番一百 — 十八萬嗰度，計番一個月咁計喇。

被告人︰唔，唔。

MR CHIU︰咁你覺得你嘅life style就係二十萬一個月嘅使費？

被告人︰係。

MR CHIU︰Okay，明白。咁你點樣維持呢？你如果你 — 你而家二萬八千鈫一個月嘅收入，你每個月 — 每個禮拜可以攞到五千鈫左右，…

被告人︰借囉。

MR CHIU︰…匯豐嗰度，係喇，借，係喇，就係問頭先122頁嗰三 — 第三行嗰度，嗰三位人士去借喇。

被告人︰係喇，佢哋肯借，但係亦都唔係時時借到，你問人借錢嗰啲嘢。

……

MR CHIU︰咁我就係 — 我嘅問題就係，點解嗰$16,900,000入面，既然有啲錢借畀你嘅人都冇問你點使，咁點解唔攞嗰啲錢…

被告人︰有時問 — 有時問我點樣使。

MR CHIU︰係，咁有時冇問喇。

被告人︰亦都係有時唔借，係喇。

MR CHIU︰我問緊係冇問嗰陣時喇，咁點解嗰啲錢唔可以攞嚟畀咗原告人嘅律師費呢？

被告人︰因為都唔夠囉。

MR CHIU︰唔夠。

被告人︰係囉，譬如…

MR CHIU︰即係畀少少都唔肯㗎喇？

被告人︰係喇。

MR CHIU︰畀啲都唔肯？

被告人︰係喇。”

Nonetheless, the crux lies on: whether one likes it or not, it could still be the way how Mr. Chan lived. He borrowed and spent to maintain his lifestyle. However, he did not spend the money to avoid paying the judgment debt.

(b)By the time of the transfer of the shares in the clinic, Mr. Chan was aware of the subject costs order because his appeals were dismissed on 11 March 2015.  Although the costs orders had not been taxed or agreed, he had to pay them sooner or later. With the available evidence before this court, the clinic is the only valuable asset held by Mr. Chan. One also needs to read the accounting documents having disclosed by Mr. Chan with caution.  Only partial documents were disclosed and the disclosure is not a complete one. Worse still, with the available discovery, there was a qualified opinion by the auditors for financial status for the year from 1 April 2009 to 31 March 2012.

“Basis for qualified opinion

In common with many other owner‑managed entities, the Company’s recorded turnover represents consultation income of HK$877,803 over which there was no system of control on which we could rely for the purposes of our audit. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the recorded turnover was free from material misstatement.”

Last but not least, irrespective of the value of the shares of the clinic, but for the transfer, the judgment creditors could have levied execution on the same. The argument that the clinic ran at a loss for 9 years is neither here nor there.   

HAS MR. CHAN FAILED TO MAKE A FULL DISCLOSURE AND/OR ANSWER QUESTIONS?

25.  Mr. Chiu said that Mr. Chan had failed to make a full disclosure.  It was deliberated and intentional.  It also frustrated the effort of the judgment creditors in locating his assets.  Mr. Chan failed to meet the disclosure obligations under the order of Madam Justice Barns. He further failed me when I made the order during the examination.  Last but not least, Mr. Chan also refused to answer questions put to him in particular his refusal to tell the court his place of residence.

26.  Mr. Chan did not agree.  He said that he had not failed the Judge.  He supplied what he had.  He explained that he had lost some of the documents during his change of residence.  He also did not fail me as he had signed and returned the authorization letters to the lawyers for the judgment creditors.  It was not him who omitted the ID card number.  He also answered every question during the examination to the best of his ability.

27.  Upon careful thought, again, with the high standard of proof required in the present application, I do not consider that Mr. Chiu has established that Mr. Chan must have failed to disclose under the order of the Judge.  There was some disclosure of documents. There was an affidavit explaining why he could not do better.  Although Mr. Chan did not disclose details of his moving and they were also not forthcoming from the questions put to him during examination, the judgment creditors did not have any evidence to show that Mr. Chan was lying.  Similarly, one may dislike or disbelieve (on balance) the oral answers given by Mr. Chan at examinations, I do not consider that Mr. Chan could be said to have failed to answer questions put to them.  In the end, Mr. Chan did provide his address at Fanling. 

28.  Nonetheless, in relation to the order of discovery given by me during the examination, it is entirely different matter.  I have no doubt that Mr. Chan fails me in it. He not only did not comply with his obligation to obtain and supply with the documents, but also went on to “obstruct” the practical way to do so as directed by the court.

29.  Upon discussing with both parties, on 20 April 2017 and in the middle of the examination, I ordered that:

“1. 被告人（判定債務人）須於下次押後聆訊日即2017年8月21日上午10時（預留3小時）或之前，將下列所有文件正本提供予第一原告人，第二原告人及第三原告人（判定債權人）的代表律師，並於押後盤問聆訊日帶同所有文件正本呈堂︰

(a) 在過去6年被告人（判定債務人）在香港上海匯豐銀行賬戶118‑479880‑833的銀行戶口存摺及月結單；

(b) 在過去6年在醫管局支付被告人（判定債務人）薪金記錄；及

(c) 被告人（判定債務人）須提供其過去6年之稅單及稅款評估書。

…

3. 如被告人（判定債務人）無法提供上述文件，則被告人（判定債務人）須於2017年5月4日或之前簽訂同意書（見Appendix I至III）同意第一原告人，第二原告人及第三原告人（判定債權人）的代表律師向上述有關機構索取上述的資料；

…”

30.  Mr. Chan was invited to sign the authorisation letters at the examination (Appendix I to III hereto) because they were simple and straight forward. Copies of these documents referred thereto could be made available before the court at the resumed examination even though they were lost or misplaced as alleged by Mr. Chan. He asked me for time to consult legal advice before signing. I agreed.  

31.  However, afterwards, he came back to the solicitors of the judgment creditors with additional wordings (which was a demand to the relevant third party to send to him by “registered mail” “certified true copy” of “all past present and future correspondence” with solicitors for the judgment creditors).  In my view, it is an unreasonable demand which only aimed at preventing the judgment creditors to obtain the documents showing the financial position of Mr. Chan.  Of course, one does not forget that Mr. Chan also failed to fill in his ID card number thereon. (Appendix IA to IIIA hereto).  

EXERCISE OF DISCRETION?

32.  With the above, Mr. Chiu has succeeded in establishing 2 grounds, O.49B r.1B (1) (b) and (c) RHC.  Upon consideration of the circumstances of the present case, including in particular the followings, I take the view that discretion should be exercised to imprison Mr. Chan.

(a) The judgment debt in the sum of $1,300,000 comes from a consent order on the part of the judgment creditors and Mr. Chan to pay costs of the Harassment Action and its appeal.

(b) Regarding the sum of $1,300,000, he has not paid the judgment creditor anything apart from a cheque for 1000 which was only sent to the solicitors acting for the judgment creditors on 8 November 2017.

(c) He disposed of his shares in the clinic to avoid the same being executed.

(d) He failed to disclose the financial documents as specially directed by the court.  He even went further to obstruct it.

FOR HOW LONG?

33.  By the list of authorities from Mr. Chiu, he adduced a number of cases under O.49B r.1B RHC.

34.  In Osk Asia Futures Limited v Lam Chin Bin Stanley (HCA 10335/2000, unreported), on 13 July 2002, Master K. Y. Chan (as he then was) found beyond reasonable doubt that the debtor failed to make a full disclosure of all his assets and investment.  By breach of O.49B r1B(1)(c) RHC, the learned Master imprisoned the debtor for 1 month.

35.  In Ip Suk Ching v Luk Kam Heung (HCA 1215/2006, unreported), on 10 December 2008, Master Hui ruled, inter alia, that the debtor failed to disclose a number of documents under a consent order.  As a result, there was a breach of O.49B r.1B (c) RHC and the learned Master imposed an imprisonment order for 1 month.

36.  In Timekeeping System Inc v Stephen John Oberlander & another (HCA 612/2007, unreported), on 7 August 2009, Master Ko (as he then was) found that the debtor in that case disposed of the proceeds ($162,000) from sale of certain shares to avoid satisfying the judgment debt ($1.8 million).  Having taken into account of the circumstances of the case, including the age and health condition of the judgment debtor, the learned Master ordered the debtor to be imprisoned for 14 days.

IMPRISONMENT FOR 1 MONTH

37.  Mr. Chiu further submitted that the present case was not the worst case of this type.  I agree but it is still a bad one.  Mr. Chiu proposed a period of 2 months if all 3 grounds would be established. He succeeded in 2 grounds. Within them, I do not entirely agree on all the allegations of the judgment creditors. With the benefit of the above authorities and bearing in mind the particular facts of the present case, including those in paragraph 32 above, I take the view that a total period of imprisonment for 1 month appropriately reflects the conduct of Mr. Chan having found by this court.  I so order accordingly. I also fix the support and maintenance allowance at the rate of $725 a day pursuant to O.49B r.2 RHC.

COSTS

38.  I see no reason why Mr. Chan should not pay costs of the examination.  There will be an order nisi that Mr. Chan do pay costs of the judgment creditors for the application, including counsel fee for the hearing on 22 March 2018, to be taxed, if not agreed.

CONCLUSION

39.  To conclude, I make the following orders:

(a) The bailiff do take the judgment debtor herein, Chan Norman, and deliver him into the custody of the Commissioner of Correctional Services to be kept in prison for debt for a period of one (1) month unless he shall be sooner discharged in due course of law.

(b) The support and maintenance allowance of the imprisonment is fixed at the rate of $725 a day.

(c) There is an order nisi that the judgment debtor herein, Chan Norman, do pay the judgment creditors costs of the application, including certificate for counsel for hearing on 22 March 2018, to be taxed, if not agreed.

Appendix I至III