CHU LAI MAN (also known as JERMAN LAI MAN CHU) v. ELLIOT JAMES & TYNDAL LTD

DCCJ 101/2022

[2025] HKDC 1760

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 101 OF 2022

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BETWEEN

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JUDGMENT

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1.  This case concerns a contract dispute. At all material times, the plaintiff is a Hong Kong citizen and an art collector, and the defendant is a company incorporated under the laws of Hong Kong.

2.  The defendant has legal representation up to around June 2024 (see Order of Master Vienne Luk dated 21 June 2024, Trial Bundle p.58-59) but, as it seems, has not taken any active part of the action after that date acting in person. It has also failed to attend the trial.

Background

3.  The plaintiff is and was all along the owner of a painting titled “Simple Makeup” and has engaged the defendant to sell it.

4.  It is not in dispute that the parties entered into a Sales Contract on or about 14 June 2016 (“the Contract”).

5.  The Contract consisted of an Order Form (“the Form”, Trial Bundle p. 90) and a Supplement A for Purchasing Order EJT-10036 (“Supplement A”, Trial Bundle p. 92).

6.  The Form stipulated that:

a.  The “P.O. No.” is EJT-10036;

b.  The plaintiff is to purchase a painting titled “Leaving” for HK$185,000;

c.  The artists of “Leaving” is “Ren Zhen Yu”;

d.  The amount is “fully inclusive of shipping and five years storage and insurance”; and

e.  The purchase is “subject to finding a lease for a minimum 12 months at 8% of the purchase price HK$168K for your Hou Qing artwork (which refers to “Simple Makeup” the artist of which is Hou Qing) in order to help for a quicker sale of the artwork (see Supplement A)”

7.  Supplement A stated:

“This is to confirm that in the unlikely event that Elliot James & Tyndal are unsuccessful in selling your Hou Qing titled “Simple Makeup”, within the said 12 month period for the agreed Net Value Return figure (HK$185K), Elliot James Tyndal will take back the artwork (Title: Leaving) by artist Ren Zhen Yu, sell it, enabling all your monies to be refunded in full.”

8.  The defendant failed to sell “Simple Makeup” within the “said 12 months period” or at all, and it also failed to sell “Leaving” nor “refund in full” the plaintiff’s money up until this trial.

The plaintiff’s case

9.  The plaintiff’s case is that in or around April 2016, she was approached by David O’Neal, one of the shareholders of the defendant, who was offering assistance in selling “Simple Makeup”.

10.  David suggested that she could either pay a few thousand dollars as “service fee” or, alternatively, can purchase another artwork at the defendant. The plaintiff opted for the latter option and entered negotiation to buy “Leaving” and agreed for the purchase subject to the Form and Supplemental A entered into with the defendant (Paragraphs 6 and 7 of the plaintiff’s Supplemental Witness Statement, Trial Bundle p. 107)

11.  The plaintiff has filed and served two witness statements and has given evidence in court.

12.  She explained that the “Net Value Return figure” stipulated in Supplement A referred to an agreement of the minimum value of the artwork to be sold: the defendant made a valuation of the artwork (in this case, HK$185,000 as stated) and the plaintiff had agreed to that.

13.  The plaintiff also explained that although the Form was dated 27 April 2016, she only attended the defendant’s office in Causeway Bay on 14 June 2016 and signed the Supplement A. That was the first time she attended the defendant’s office.

14.  Pursuant to the Contract, the plaintiff has paid the defendant in 4 deposits up to the total sum of HK$185,000 (Trial Bundle 97-100).

15.  However, despite various chasers by telephone calls and emails by the plaintiff, the defendant failed to sell “Simple Makeup” within 12 months nor “Leaving” afterwards for a “refund in full” as stipulated in Supplement A.

16.  The plaintiff also gave evidence that the defendant did not inform her of any progress of any attempt to sell either artwork.

17.  Finally, the plaintiff wrote an email to the defendant on 10 September 2019 stating that since the defendant “was unable to sell… “Simple Makeup” within 12 month period, I hereby request a full refund of HK$185,000 by returning the artwork… “Leaving” to Elliot James & Tyndal…” However, the defendant failed to reply to the email.

18.  The plaintiff explained in court that in fact, both “Leaving” and “Simple Makeup” have all along been in possession of the defendant who has been arranging for their storage etc.

19.  On 26 October 2021, the plaintiff received an email from a company called “Dailey Art Management Ltd” (“Dailey”) with an invoice for artwork for “Leaving” and “Simple Makeup” from 1 November 2021 to 31 October 2022. Dailey further offer that “if you like to withdraw your artwork(s) from our care, please let us have your instructions…” (Trial Bundle p. 119-121)

20.  The plaintiff told the court that she has never had any contact with Dailey and was surprised as to how it got her email contact. She wrote again to the defendant enclosing this and raising questions but has again received no reply. In any case, she did not pay Dailey nor gave instructions to withdraw the two paintings.

21.  The plaintiff then instructed solicitors who wrote to the defendant on 23 November 2021 (Trial Bundle p. 104-105) stating, inter alia:

“…our client engaged in Contract with you on the purchase of the painting “Leaving” from you at the price of HK$185,000 subject to your full refund of the payment (deposit)…made if…the assignment…for the sale of the painting “Simple Makeup” cannot be completed in 12 months…

It is confirmed…by you that you have failed to complete the assignment.

Based on such, we are therefore instructed to again accept your repudiatory breach of the said Contract.

Accordingly, the Contract is terminated and you are liable to return…the deposit paid….”

22.  The defendant failed to refund HK$185,000 and thus the plaintiff commenced the current action on 9 August 2023.

The defendant’s case

23.  As stated above, the defendant has not taken part in the action since June 2024 and did not attend the trial. The defendant has only an Amended Defence and did not filed and served any witness statements.

24.  In the Amended Defence, the defendant appeared to dispute the interpretation of the Contract in that it was made subject to a full refund on the term or condition precedent that the defendant completes the sale of “Simple Makeup” with 12 months (failure of which the Contract will be terminated etc.) (Paragraph 4A of the Amended Defence, Trial Bundle p.38).

25.  The defendant elaborated this argument in paragraph 6A of the Amended Defence, disputing that Supplement A “did not contain, either expressly or by implication, a term to the effect of the Refunds Arrangement as alleged or at all”.

26.  The defendant stated further that it “will refer to the full terms and effect of the Supplement A at the trial of this action” (paragraph 6B of the Amended Defence).

27.  However, the defendant did not disclose any evidence nor attend the trial to explain its position regarding “the terms and effect” of Supplement A.

28.  The defendant also argued that there was no consideration to support Supplement A (paragraph 6C of the Amended Defence, Trial Bundle p. 40)

29.  Further, the defendant argued to the alternative that even if the defendant repudiated the Contract, “the plaintiff did not within a reasonable time or at all accepted such repudiation but on the contrary elected to treat the Contract as still binding and operative, and is according not entitled to rely upon the alleged repudiation.” (paragraph 9A of the Amended Defence, Trial Bundle P. 40)

Consideration

30.  The first ground of the defence was that the defendant appeared to be disputing the interpretation of the terms of Supplement A. However, it had not pleaded nor given any evidence, as to its interpretation.

31.  On the interpretation of a contract clause:

“It is trite, that as a matter of construction of a legal document, the meaning of the document is what the parties using the words against the relevant background would reasonably have understood to mean. Words should be given that “natural and ordinary meaning” (Investors Compensation Scheme Ltd. v West Bromwich Building Society [1998] 1 WLR 896), but the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, who has all the background knowledge, would have understood the parties tro have meant (Rainy Sky SA v Kookmin Bank [2011] UK SC 50).” (Shek Kin Pong & Ors v Ftlife Insurance Co. Ltd [2019] HKCFI 1781)

32.  The court agrees with the plaintiff that the “natural and ordinary meaning” of Supplement A must mean that there was a refund arrangement: if the defendant failed to sell “Simple Makeup” within 12 months for the agreed price of HK$185,000, it would take back “Leaving” to sell it to enable a refund of HK$185,000 in full.

33.  It is important to note that Supplement A does not stipulate that the refund would only be conditioned upon successful sale of “Leaving”, or that the amount of refund would be whatever the sale price was. It specified that the plaintiff could recover “all your monies to be refunded in full”.

34.  Thus, the “natural and ordinary” meaning of these wordings must be that if the defendant failed to sell “Simple Makeup” within 12 months, it would take back and try to sell “Leaving” (at whatever price) but would refund HK$185,000 in full in any case.

35.  Clearly, this refund arrangement must be the understanding of the parties at the time.

36.  It is not disputed that the defendant failed to sell “Simple Makeup” on or before 14 June 2017 (i.e. 12 months from the date of the Contract) after which also failed to sell “Leaving” nor pay any refund to the plaintiff.

37.  Incidentally, the plaintiff also gave evidence that the defendant failed to pay her the leasing of the painting for 12 months for 8% of the price. Presumably, the defendant also failed to secure such a lease.

38.  The evidence from the plaintiff was that, despite many chasers, the defendant failed to update on the progress of any attempt for the sale nor to arrange for the refund.

39.  In my consideration, the Contract was based upon an agreement for the sale of “Simple Makeup” within 12 months, failure of which there would be the refund arrangement. Such continual non-compliance to either commitments by the defendant was clearly substantial and sufficient enough to amount to a repudiation.

40.  The plaintiff has clearly accepted the repudiatory breach by the email on 10 September 2019. Her solicitors’ letter of 23 November 2021 further confirmed this position.

41.  The second ground of defence was that there was no consideration to support Supplement A.

42.  Firstly, despite the fact that the Form was dated 27 April 2016 and the Supplement A was dated 14 June 2016, it was clear that both were part of the Contract. The Form specifically referred to Supplement A. Supplement A also specifically referred to “Purchase Order EJT-10036”, which was exactly the “P.O.” (“Purchase Order”) stated on the Form.

43.  Further, I also accept the evidence from the plaintiff that she has only attended the defendant’s office once to sign the Contract. As above, the defendant did not dispute that both the Form and Supplement A was signed on or about 14 June 2016 (paragraphs 4 and 6 of the Amended Defence, Trial Bundle p. 38 and 39).

44.  The defendant has not pleaded nor adduced evidence that, for example, that after signing of the Form, there was a separate negotiation for Supplement A. So it cannot be questioned that Supplement A was somehow a contract made latter and independently of the Form.

45.  Secondly, I also accept the plaintiff’s evidence that the primary purpose of her purchase of “Leaving” was to facilitate the selling of “Simple Makeup” and she would not purchase “Leaving” if the defendant failed to sell “Simple Makeup”. That was the clear intention stated in Supplement A regarding the refund arrangement.

46.  Therefore, the Contract (which included the Form and Supplement A in the whole factual matrix) was clearly supported by consideration.

47.  The defendant’s final ground was that the plaintiff did not accept the repudiatory breach within a reasonable time or at all. I have some problem understanding this ground of defence. There is no evidence that the Contract was subject to any term that “time was of the essence”. Under the circumstances, the plaintiff has clearly allowed more than reasonable time for the defendant to sell. There is also no question that the plaintiff has “elected to treat the Contract as still binding” given her email of 10 September 2019 and the letter from her solicitors on 23 November 2021.

48.  I also agree with the plaintiff that the defendant should be considered in possession and control of the two paintings. The plaintiff’s evidence was that she was never involved in storage arrangements. The defendant has all along been dealing with arrangement for sale and storage of the two paintings. So it is self-evident that the storage agreement was entirely between the defendant and Dailey. It was entirely inappropriate for the defendant to seek the plaintiff to pay for storage by, as it seems, releasing the contact information of the plaintiff to Dailey without her consent. Indeed, I note that the plaintiff has refused to instruct Dailey for withdrawal of the paintings.

49.  There is no evidence on whether there were further payments for storage to Dailey by the defendant or whether the defendant was attempting to abandon possession of the two paintings. There is also no evidence of any discussion between the parties regarding the return of the paintings but clearly, the proper way forward is for the defendant to return “Simple Makeup” to the plaintiff. Nevertheless, the plaintiff has not asked the court to grant any relief in this regard.

Conclusion

50.  The court finds for the plaintiff and would order that:

a.  The defendant pays the plaintiff the judgment sum of HK$185,000 being the refund in full to the plaintiff by the defendant pursuant to the Contract;

b.  There be interest on the judgment sum at half judgment rate from the date of the Writ to the date of the Judgment and thereafter at judgment rate until payment in full; and

c.  The defendant shall pay the plaintiff’s cost of the action (with certificate for counsel granted) to be taxed if not agreed.