ALI ZULIFQAR v. WING LUNG BANK LTD

DCCJ 2493/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.2493 OF 2012

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DECISION

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1.  The defendant applied by summons filed on 16 Jan 2013 (“the summons”) to strike out the statement of claim endorsed to the writ of summons (“SOC”) on the ground that plaintiff’s claim discloses no reasonable cause of action and/or it is frivolous or vexatious or is an abuse of process of the court, or alternatively, for dismissal of plaintiff’s claim in these proceedings.

2.  The summons was taken out under O.18 r.19 of the Rules of District Court, Cap.336H (“RDC”).

3.  On 19 Apr 2013, the summons came before Deputy District Judge S.P. Yip. After hearing the plaintiff, then an undischarged bankrupt, in person, the summons was ordered to be adjourned sine die with liberty to restore and, subject to such adjournment, all proceedings of plaintiff’s claim in this action be stayed pending his application for leave from the High Court to proceed with the claim.

4.  More than 3 years later, on 30 Aug 2016, plaintiff filed and served on defendant a notice of intention to proceed with the action under O.3 r.6 of RDC.

5.  On 26 Oct 2016, plaintiff further by letter to defendant’s solicitors invited them to attend court to fix a date for the summons to be restored for hearing.

6.  The restored summons came before me with plaintiff again appearing in person. He was assisted by court Urdu interpreter, as he was before Deputy District Judge S.P. Yip in 2013. He confirmed receipt of hearing bundle, defendant’s skeleton & authorities, and his readiness to proceed with the hearing.

7.  By the time the summons was restored for hearing before me in 2017, the plaintiff had already been discharged from his bankruptcy on 26 July 2016. He opposed the summons and asked that he be allowed to continue the action.

Background

8.  On 24 July 2012, plaintiff in person issued the writ of summons endorsed with SOC against defendant.

9.  According to SOC, plaintiff’s claim is for $306,132.75. He wrote in SOC: “I had a fixed deposit of $300,000 with the Wing Lung Bank Ltd. There was unauthorized withdrawal of $306,132.75 from my account No.612-861-01138-7 (“plaintiff’s account”) on 11 Nov 2009. I was away during that period of time. Due to such unauthorized withdrawal, I suffer huge losses as follow: 1) loss of business 2) loss of profit 3) loss of credibility 4) break of bank contract 5) and other losses as well (bold abbreviations added by me).” And he signed the statement of truth as required.

10.  Two days later, on 26 July 2012, bankruptcy order was made against plaintiff by Recorder A. Chow S.C. in HCB 6146/2011 on a creditor’s petition from another bank than defendant.

11.  On 8 Oct 2012, the defence was filed on behalf of defendant by defendant’s solicitors. The defendant reserved its right, among others, to strike out plaintiff’s claim.

12.  It was pleaded that, by a maturity instruction dated 11 Nov 2009 (“the instruction”), plaintiff authorized and instructed defendant to uplift his deposit No.01-0001-000 in sum of $306,900 (“plaintiff’s deposit”) held under plaintiff’s account and to transfer the balance (after deducting penalty of $767.25), which came to be $306,132.75, to account No.612-000-9535-9 (“Azico’s account”) held by one Azico International (Hong Kong) Ltd (“Azico”) of which plaintiff was a director and the majority shareholder at the material times.

13.  After the said transfer to Azico’s account, a sum of $298,652.57 was applied by defendant towards settlement of overdue export bill due from Azico to defendant, leaving a balance of $7,480.18 in Azico’s account.

14.  It was alternatively pleaded that defendant was entitled to apply the said sum of $306,132.75 towards satisfaction of such debt due from Azico to defendant by virtue of provision of 1) a deed of guarantee given by plaintiff dated 25 July 2008 in defendant’s favour securing liability of Azico to an extent of $700,000 (“the guarantee”); 2) a security deed dated 25 July 2008 executed by plaintiff in defendant’s favour (“the security deed”) under which he mortgaged plaintiff’s deposit as security for Azico’s debts to defendant in connection with banking facilities granted; 3) account rules governing the operation of plaintiff’s account (“the account rules”); and 4) by virtue of common law right of set-off.

Defendant’s evidence

15.  One Ms Lai Hin Ying (“Ms Lai”), relationship manager of commercial banking department of defendant, filed an affidavit on 16 Jan 2013 in support of the summons.

16.  On top of deposing to plaintiff’s bankruptcy on 26 July 2012, Ms Lai deposed that, on enquiry, the Official Receiver (“OR”) gave no consent to plaintiff to proceed with, and the replacement trustee in bankruptcy, Fred Lee & Christine Chow (“the trustee”), would not take over the conduct of, the action. In light of plaintiff’s bankruptcy and such stance of the trustee, she asked that the action be dismissed.

17.  Further or alternatively, Ms Lai said plaintiff’s claim should be struck out as disclosing no reasonable cause of action, as being frivolous and vexatious, and as being abuse of process of the court.

18.  Ms Lai deposed to plaintiff giving the guarantee and the security deed for defendant granting banking facilities to Azico and referred to the bank’s power of set-off and/or enforcement of security etc thereunder.

19.  Azico, Ms Lai said, defaulted in payment of export bill under its facilities and owed defendant overdue export bill in sum of US$38,300 after 12 Oct 2009. She went on to depose to the instruction given by plaintiff to uplift plaintiff’s deposit and to transfer it to Azico’s account (after deduction of penalty) towards settlement of such overdue bill in sum of $298,652.57, leaving a balance of $7,480.18 with Azico’s account. As such, there is, she said, no impropriety and plaintiff’s claim is unfounded.

20.  Further, she was advised by defendant’s solicitors and believed that by reason of the provisions under the guarantee, the security deed and the account rules, defendant was entitled to apply plaintiff’s deposit to set-off indebtedness due from Azico.

21.  To update the position, Ms Lee referred this court to a letter dated 28 Dec 2016 from the trustee to her firm confirming that it had not given consent to plaintiff to proceed with the action, restore the summons or take any further step in the proceedings, though it was giving plaintiff an opportunity to make written representation if he wished for such refusal to be reconsidered.

Plaintiff’s evidence

22.  On 27 Feb 2013, plaintiff in person filed his affirmation. He said he set up Azico in about 2003 as his watch trading company, with him holding 99.9% shares and as one of the 2 directors.

23.  He made all decisions relating to Azico but he was helped by its general manager, Afsheen, in its daily operation. As he had only secondary education in Pakistan, he left most paper work and dealing with Afsheen. Afsheen has worked for Azico since it was set up. As he often travelled, he gave authority to Afsheen to run the business smoothly including signing cheques on defendant.

24.  Plaintiff referred to plaintiff’s deposit in plaintiff’s account opened with defendant. Afsheen had, he said, authority to deposit and withdraw money from Azico’s account for company use only.

25.  While he was away, plaintiff said, Afsheen forged documents, including plaintiff’s signature on the instructions, to instruct defendant to release plaintiff’s deposit before maturity and transfer the money to Azico’s account from where Afsheen withdrew the money. It was Afsheen who sent the instructions by fax to defendant from a company in China he owned. The date of the instruction was 11 Nov 2009 and plaintiff was away from Hong Kong between 19 Sept 2009 and 22 Dec 2009 according to travel records of his issued by the Immigration Department.

26.  Plaintiff pointed out that defendant bank had never sought clarification or confirmation about the subject transaction by making any call to him. He said he reported the scam to police in Dec 2010 and they had not finished their investigation so far. He produced a copy statement he gave to police in Jan 2011 about such theft of plaintiff’s deposit with defendant.

27.  For the above reasons, plaintiff asked this court to allow the action for him to claim damages from defendant resulting from its negligence.

28.  On enquiry of this court, plaintiff produced a copy summons dated 2 July 2014 taken out by him in HCB 6146/2011 returnable before Anthony Chan J. on 23 July 2014 for various applications involving, among others, actions taken out by him but stayed due to his bankruptcy, including the action before me. He confirmed to me that his lordship did not give him leave to proceed but invited him to seek the same from OR or from the trustee.

Defendant’s submissions

29.  Miss Lee of defendant’s solicitors appearing for defendant (“Miss Lee”) advanced 2 main lines of argument in support of the summons.

30.  First, she submitted that, on the basis of various provisions of Bankruptcy Ordinance, Cap.6 (“BO”) and various cases, plaintiff has no standing to sue defendant. Such cause(s) of action plaintiff has against defendant had, upon bankruptcy of plaintiff, vested in OR and, later, the trustee. It does not revert to plaintiff even after discharge of bankruptcy. And plaintiff has no consent from either OR or the trustee to sue in this action. On this basis alone, plaintiff’s claim should either be dismissed or struck out.

31.  Secondly, plaintiff’s claim was purportedly based on alleged unauthorized withdrawal of plaintiff’s deposit in Nov 2009 but defendant’s evidence showed clearly that the said withdrawal was made pursuant to his instructions.

32.  In any event, the defendant was entitled to exercise its right to set-off plaintiff’s deposit both under contract and common law and apply the same towards settlement of debt due to defendant from Azico of which plaintiff was guarantor.

33.  As such, plaintiff’s claim is, she submitted, also liable to be struck out as disclosing no reasonable cause of action or being frivolous and vexatious.

Plaintiff’s submissions

34.  Plaintiff first pointed out that the cases cited by Miss Lee are distinguishable as they related to parties already made bankrupt before they brought their actions. When he issued the writ of summons in this action, he was not a bankrupt.

35.  He then emphasized that he was just responding with the summons taken out by defendant. He defended himself only.

36.  He next produced a letter he wrote to the trustee on 26 Aug 2016 whereby he sought consent for proceeding with, among others, the action before me. That showed the true position, he said, the trustee had not revealed. But, again, he confirmed to me that the trustee has so far not given him any reply or consent to proceed with the action despite he went to its office.

37.  Afterwards, plaintiff produced a copy 3-page “skeleton submission of applicant” in this action signed by him on 15 Apr 2013 which he would like to adopt before me, which course Miss Lee had no objection and I agreed.

38.  Plaintiff went on to remind this court such facts he affirmed in his affirmation in 2013, including the facts that his general manager, Afsheen, had forged his signature on the instructions to withdraw plaintiff’s deposit held in plaintiff’s account while he was away but defendant had not contacted him for confirmation. If someone forged his signature to withdraw his money, plaintiff submitted that defendant should repay it to him.

39.  He repeatedly emphasized that, despite leave was given to it to do so, defendant had not seen fit to file any reply affirmation in 2013 to refute his claims in his affirmation, whose factual allegations should be preferred by this court than those of defendant. Finally, he said police is still today investigating the theft he reported in 2010.

Analysis

40.  I have carefully and fully considered all evidence, materials, submissions and authorities before me.

41.  O.18 r.19 of RDC reads:

“(1)  The Court may, ... on application, at any stage of the proceedings order to be struck out ... any pleading or the indorsement of any writ in the action ... on the ground that-

(a)  it discloses no reasonable cause of action...; or
(b)  it is ... frivolous or vexatious; or
(c)  ...; or
(d)  it is otherwise an abuse of the process of the Court,
and may order the action to be ... dismissed ...
(2)  No evidence shall be admissible on an application under paragraph (1)(a).”

42.  According to Hong Kong Civil Procedure 2017, Vol.1 (“HKCP”), para 18/19/4 at pp.458-9, it is only in plain and obvious cases that the court should exercise its summary powers to strike out any pleading under this rule. There should be no trial upon affidavit. Disputed facts were to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law. The claim must be obviously unsustainable, the pleading unarguably bad and it must be impossible, not just improbable, for the claim to succeed. One should be careful not to drive a plaintiff from the judgment seat.

43.  According to para 18/19/7 at p.460 of HKCP, the expression “frivolous or vexatious” includes proceedings which are an abuse of the process. A proceeding is frivolous when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed. A proceeding is vexatious when it is oppressive and/or lack bona fides.

44.  I have reminded myself of the above applicable rules and principles of law of O.18 r.19, RDC, in considering the application before me.

45.  I propose first to deal with 1^st line of argument relied upon by Miss Lee.

46.  By reason of ss.12, 58 & 61(b) of BO, upon an adjudication of bankruptcy, OR takes charge of a bankrupt’s property and as far as rights of suit are concerned, subject to one exception, it is OR who determines whether or not a right of action vested in the bankrupt should proceed. Rights of suit or action are choses in action thus coming within the definition of “property” in s.2 of BO.

47.  The one exception is that a bankrupt retains the right, without any interference from OR as trustee in bankruptcy, to bring or continue in proceedings relating to claims which are personal to him. By “personal” are meant claims which relate to the bankrupt’s body, mind or character without immediate reference to his rights of property: Chung Kau v Hong Kong Housing Authority & Others [2004] 2 HKLRD 650, CA, 654D-F, per Ma CJHC (as he then was).

48.  Upon the making a bankruptcy order, the property of the bankrupt shall vest in OR, who will hold the property first as provisional trustee and then as trustee. If a person other than OR is appointed as provisional trustee or trustee, the property shall forthwith pass to and vest in the person so appointed (s.58 of BO).

49.  The property of the bankrupt vested in OR shall include the bankrupt’s right to sue in respect of certain causes of action at the commencement of the bankruptcy, namely on the day of the bankruptcy order (ss.2, 43(1) and 30 of BO), with the exception of rights of suit involving claims for damages for personal injuries and defamation: Cheung Wing Kwan Tommy v Hong Kong Export Credit Insurance Corp [2012] 2 HKLRD 1255, CA, para 21 at 1261-2, per Kwan JA.

50.  The property vested in the trustee in bankruptcy is not returned to the bankrupt upon the automatic discharge of the bankruptcy order. Although the discharge releases a bankrupt from all the bankruptcy debts (subject to s.32(1), 32(3)-32(8) of BO), it has no effect on the functions (as far as they remain to be carried out) of the trustee and the operation of the provisions of BO (s.32(2)).

51.  Consequently, following the discharge of the bankruptcy order, the trustee is still under a duty to complete the administration of the bankrupt’s estate, including realizing all realizable property vested in the trustee and distributing the proceeds to the creditor. As for the bankrupt, notwithstanding his discharge, he is still under legal duty to continue to assist the trustee in completing the administration of the estate, including realizing the property vested in the trustee and distributing the proceeds to the creditors (s.30A(8) of BO): Cheung Wing Kwan Tommy, supra, para 22 at p.1262, per Kwan JA.

52.  The above principles of law coming from the said 2 court of appeal decisions are, I think, applicable and binding on me, as they are submitted on behalf of defendant by Miss Lee.

53.  Applying the above to the allegations pleaded in SOC and the undisputed evidence before me, plaintiff’s cause of action against defendant, I think, accrued as early as in Nov 2009 when the alleged unauthorized withdrawal of plaintiff’s deposit took place.

54.  While the said right of action remained with plaintiff at the commencement of this action on 24 July 2012, on the commencement of plaintiff’s bankruptcy i.e. the making of the bankruptcy order against him on 26 July 2012, the said right of action as plaintiff’s property would, I think, vest in OR and then the trustee, and remains today so vested in the trustee despite his discharge from bankruptcy, unless it falls within the exception of right to suit in respect of proceedings relating to claims which are personal to plaintiff. Unless so it falls within the said exception in the first place, the said right of action does not, I think, revert to plaintiff after his discharge from bankruptcy and the trustee retains the right to determine to proceed or not.

55.  Looking at SOC, plaintiff’s cause of action against defendant does not, I think, fall within such exception and it should have vested in OR and then the trustee, and remains so vested in the trustee today despite plaintiff’s discharge from bankruptcy.

56.  Be it that plaintiff deposed of “negligence” in his affirmation on top of “break of bank contract” he alleged in SOC, his claim made, I think, immediate reference to his property. As he wrote in SOC, his claim is for $306,132.72, which was the amount of plaintiff’s deposit transferred away from plaintiff’s account.

57.  Even considering contents of plaintiff’s affirmation, I fail to see how such alleged unauthorized withdrawal of plaintiff’s deposit caused him to suffer “loss of business”, “loss of profit” and “loss of credibility” as he alleged in SOC. In any event, the earlier two must, I think, also relate to his property and the last could only be incidental to his property claim.

58.  As such, as of today, only the trustee has, I think, the right to decide to proceed with this action or not. The OR and the trustee gave, and the trustee still gives, plaintiff no consent or permission to proceed with this action despite the summons was adjourned in Apr 2013 and despite plaintiff last wrote to the trustee in Aug 2016. It would be pointless in my view to give plaintiff more time to seek the same in these circumstances.

59.  For the above reasons, it is plain and obvious to me that plaintiff has no standing to continue pursuing this action. Plaintiff’s claim is unsustainable and this action cannot possibly succeed. It is frivolous, vexatious and an abuse of process of this court and it should, in my view, come to an end.

60.  In view of my conclusion above, I do not find it necessary to rule on Miss Lee’s 2^nd line of argument.

Disposition

61.  In exercise of my discretion under O.18 r.19, RDC, I make an order in terms of para 1(b) of the summons i.e. plaintiff’s claim in these proceedings be dismissed.

Costs

62.  At this stage, I see no reason why costs should not follow the event. I make a costs order nisi in terms of para 2 of the summons i.e. costs of these proceedings including this application be paid by the plaintiff to the defendant, to be taxed if not agreed.

63.  In the absence any written application by way of summons to vary the said costs order nisi within 14 days of the date of this decision, the same shall become absolute and effective.