GOLDEN DYNASTY (HK) LTD v. TSUI HING WAI AND OTHERS

DCCJ 5269/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5269 OF 2007

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JUDGMENT

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BACKGROUND

1.  The 1^st defendant is an ex-employee of the plaintiff which is a jewellery supplier.  The 3^rd defendant, who is the sole director of the 2^nd defendant, is the 1^st defendant’s wife.

2.  The plaintiff claimed that while the 1^st defendant was still under its employment, he, among other things, had improperly obtained some items of the plaintiff’s jewellery and had received payments from the plaintiff’s customers without accounting the same to the plaintiff. 

3.  The plaintiff further alleged that the 1^st defendant had put the jewellery on sale in the shop known as Vivienne Jewellery Company run by the 2^nd defendant.

4.  On these bases, the plaintiff obtained a Mareva Injunction against the defendants on 28^th November 2007 under which the defendants were, inter alia, restrained from disposing of or removing from Hong Kong assets up to the value of $481,623.  On the same day, the plaintiff was also granted an Anton Piller Order against the 2^nd defendant, pursuant to which the plaintiff subsequently searched and retrieved a certain amount of jewellery from Vivienne Jewellery Company.  The retrieved items (“the Retrieved Jewellery”) are set out in the Appendix of this Judgment.

5.  A Statement of Claim was served on the defendants afterwards in which the plaintiff claimed against the defendants, among other things, for an order of delivery of certain jewellery items or alternatively for payment of $481,623. 

6.  The 1^st defendant was all along defending the present case without legal representative whereas the 2^nd and 3^rd defendants were represented.  However, the 2^nd and 3^rd defendants discharged their solicitors subsequently and they and the 1^st defendant did not even appear in the Case Management Conference on 29^th March 2011.

7.  At the trial on 1^st September 2011, all the defendants were absent. However, since I am satisfied that Notices of Hearing have already been properly served on them, I am of the view that the trial may be proceeded in their absence.

8.  When a trial proceeds in the absence of the defendants, the plaintiff may prove his claim, so far as the burden of proof lies on him.  The proof will be limited to the allegations in the statement of claim.  Having proved his claim, the plaintiff is entitled to such relief as he claims and such other relief as is consistent therewith.  (Deng Minghui trading as Tianye Industrial (Hong Kong) Company v Chau Shuk Ling Elaine (HCA749/2005, unreported, 30^th September 2010) at para.9 and Hong Kong Civil Procedure 2011, Vol. 1, para. 35/1/1 at p. 716)

THE PLAINTIFF’S CLAIMS

9.  In his Opening Submissions, Mr. Pang for the plaintiff confirmed that the plaintiff would primarily ask for an order for payment against the defendants.

10. He has called Ms Cheung Hoi Ying, the plaintiff’s account manager, to prove the plaintiff’s case.

11. Ms Cheung told this Court that according to the plaintiff’s record, a customer known as Jadeite & Nephrite Elegant Collection (“Jadeite”) was indebted to the plaintiff for the sum of $57,849.  However, upon investigation, it was found that Jadeite had in fact paid the 1^st defendant for the said sum but he had failed to account to the plaintiff for the said amount. When the plaintiff confronted the 1^st defendant about this, the 1^st defendant issued two post-dated cheques to settle part of the said sum.  However, the plaintiff did not deposit such cheques in the end.

12. Ms Cheung also explained that according to the plaintiff’s record, another company known as Wing Cheong Jewellery Jade Hong (“Wing Cheong”) had placed 10 orders for jewellery for the total price of $485,323 in the period between March and May 2007 under a number of invoices (“the Invoices to Wing Cheong”), out of which $244,080 has been subsequently found to have been settled by cheques issued by Prosper Light Trading Limited (“Prosper Light”), leaving an outstanding balance of $241,243.  It was further discovered by the plaintiff that the 1^st defendant had presented 5 other cheques of Prosper Light in purported payment of part of the said balance of $241,243.

13. Having looked into the matter, the plaintiff found that Wing Cheong actually did not purchase the items of jewellery under the Invoices to Wing Cheong and that the 1^st defendant was the sole director of Prosper Light.  Mr. Pang submitted that it may be inferred that the real buyer of those items of jewellery were in fact the 1^st defendant instead of Wing Cheong.

14. The plaintiff had deposited 2 out of the 5 cheques of Prosper Light in the total sum of $62,000 and they were duly honoured.  Having discovered the relationship between Prosper Light and the 1^st defendant, the plaintiff did not deposit the other 3 cheques issued by Prosper Light.

15. According to Ms Cheung, Golden Bauhinia (H.K.) Jewellery Limited (“Golden Bauhinia”) was another customer of the plaintiff.  By reference to the plaintiff’s account record, Golden Bauhinia was owing the plaintiff the sum of $182,531 being outstanding purchase price of certain jewellery in around early October 2007. Those jewellery items were allegedly sold by virtue of a number of invoices issued by the plaintiff to Golden Bauhinia (“the Invoices to Golden Bauhinia”).  However, the plaintiff’s investigation revealed that Golden Bauhinia as a matter of fact did not purchase any of the items under those invoices.  Comparing the specimen signature and company chop provided by Golden Bauhinia with those appearing on the Invoices to Golden Bauhinia, the signature and the company chop affixed on the Invoices to Golden Bauhinia did not seem to be genuine.

16. The plaintiff also found that the 2^nd defendant had issued some cheques in purported settlement of part of the outstanding amount of $182,531. However, the plaintiff did not deposit any of those cheques.  Given the close relationship between the 1^st defendant and the 2^nd defendant, Mr. Pang submitted that it may be inferred that the real buyer of those items of jewellery were in fact the 1^st defendant instead of Golden Bauhinia.

17. Ms Cheung stated that she were there when the Anton Piller Order dated 28^th November 2007 was executed on 30^th November 2007.  As a result of the search, the Retrieved Jewellery was found to be put on sale by Vivienne Jewellery Company.  She stated that she could identify the plaintiff’s jewellery because the plaintiff’s logo was invariably engraved on its products.  Moreover, it was found that the plaintiff’s tags were still enticed to those products which were being sold by the 2^nd defendant.

18. As aforesaid, the defendants were absent in the trial and hence Ms Cheung’s evidence was not tested by cross-examination.  However, in the absence of any evidence contradicting that given by Ms Cheung, I am prepared to accept her evidence.

19. I find the plaintiff’s case against the 1^st defendant proved in that:

(1)  The 1^st defendant had received $57,849 from Jadeite without accounting the same to the plaintiff;

(2)  The 1^st defendant was in fact the real buyer of certain items of jewellery purportedly sold to Wing Cheong and Golden Bauhinia and the outstanding price of those items amounts to $361,774.

20. In the premises, I find that the 1^st defendant should be liable to the plaintiff in the total sum of $419,623 ($57,849 + $361,774).

21. The 3^rd defendant should be liable to the plaintiff for the same sum pursuant to a guarantee dated 26^th February 2007 entered into by her in favour of the plaintiff under which she agreed to indemnify the plaintiff for any loss caused to the plaintiff by the 1^st defendant.

22. In respect of the 2^nd defendant, I accept it can be inferred that the 1^st defendant had put the plaintiff’s jewellery on sale at the shop run by the 2^nd defendant.  As aforesaid, it is evident that some of the plaintiff’s products were found at the 2^nd defendant’s shop when the Anton Piller Order was executed.  It should also be borne in mind that the 1^st defendant’s wife is the sole director of the 2^nd defendant.

23. It matters not whether the 2^nd defendant had knowledge about the 1^st defendant’s defect in title in the jewellery in question.  The 2^nd defendant’s duty to the plaintiff is absolute and it acts at its peril. (Clerk & Lindsell on Torts, 20^th edition (2010), at paragraph 17-72).  In any event, it may be inferred that the 2^nd defendant had such knowledge in the circumstances of the present case.

24. In the premises, the 2^nd defendant is liable for conversion, and the damages should be the outstanding price of the jewellery in question, namely $361,774 ($179,243 + $182,531).  However, the 2^nd defendant should not be held liable in respect of the sum of $57,849 which relates to the plaintiff’s transaction with Jaideite because Jaideite accepted that it had indeed purchased jewellery from the plaintiff at the price of $57,849.  Hence, there is no conversion involved.

25. According to Ms Cheung’s evidence (which I accept), the current market price of the Retrieved Jewellery is in the amount of $300,891.

26. In the circumstances of this case, I take the view that it is fair to make a delivery up order in respect of the Retrieved Jewellery and the monetary judgment to be granted in the plaintiff’s favour should be adjusted according to the current market value of those items.

CONCLUSION

27. I therefore order that:

(1)  The items seized pursuant to the Anton Piller Order dated 28^th November 2007 from Vivienne Jewellery Company (as set out in the Appendix of this Judgment) be delivered to the plaintiff;

(2)  The 1^st, 2^nd and 3^rd defendants be jointly and severally liable to pay the plaintiff the sum of $60,883 ($361,774-$300,891);

(3)  Without prejudice to (2) above, the 1^st and 3^rd defendants be jointly and severally liable to pay the plaintiff the sum of $57,849;

(4)  Interest on the sums of $361,774 and $57,849 be paid by the defendants at the rate of 1% above the prime rate as from time to time quoted by HSBC from the date of the writ up to today;

(5)  Interest on the sums of $60,883 and $57,849 be paid by the defendants at judgment rate from today until full payment;

(6)  The defendants do pay the plaintiff’s costs of this action (including all reserved costs), to be taxed if not agreed.

28. As aforesaid, the plaintiff has obtained a Mareva Injunction against the defendants on 28^th November 2007 under which the defendants were, inter alia, restrained from disposing of assets up to the value of $481,623.  In the light of my judgment herein, I see no reason why such an order should not be continued until full payment of the sums referred to in paragraph 27(2) and (3) herein or further order of this Court subject to the amendments that:

(1)  the restriction on disposal of assets against the 1^st and 3^rd defendants should only be up to $118,732 ($60,883 + $57,849); and

(2)  the restriction on disposal of assets against the 2^nd defendant should only be up to $60,883.

29. In the avoidance of doubt, it is further ordered that the plaintiff be released from the undertaking given under paragraph (6) of Schedule 3 of the Anton Piller Order and that the plaintiff’s solicitors be released from the undertakings given under paragraphs (2), (3) and (4) of Schedule 4 of the said Order.

Appendix – List of Retrieved Jewellery