HENGFEI HOLDING LTD v. DUIBA GROUP LTD AND ANOTHER

HCA 1204/2020

[2025] HKCFI 3757

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1204 OF 2020

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BETWEEN

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JUDGMENT

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Introduction

1.  This is the trial of the Action on liability.

2.  In this Action, the Plaintiff sues the Defendants in conversion and detinue on the basis that they had wrongfully detained a share certificate (“Share Certificate”)[1] in respect of the Plaintiff’s 27,824,400 shares in the 1^st Defendant (“Shares”). The Share Certificate was at first kept by the 1^st Defendant’s then solicitors Allen & Overy (“A&O”) in their Hong Kong office at the material time. It was deposited by the 1^st Defendant into the Plaintiff’s account with CMB International Securities Limited [2] (“CMBI”) on 7 January 2020. On 29 February 2020, CMBI handed over the Share Certificate to the Plaintiff.

3.  A key issue, in fact the 1^st Agreed Issue, is whether the Plaintiff had made a valid demand for the return of the Share Certificate on the following dates (“Relevant Dates”): (i) 25 July 2019; (ii) 24 November 2019; (iii) 26 November 2019; (iv) 27 November 2019; and (v) 10 December 2019. The Defendants’ stance is that it had not since all the alleged demands were equivocal and/or conditional.

Salient Background

4.  The following is taken largely from the parties’ helpful Statement of Agreed Facts, Agreed Dramatis Personae and Agreed Chronology.

5.  The Plaintiff is a limited company incorporated in the BVI in March 2018 and at all material times was wholly owned and controlled by Mr Xu Hengfei (“Xu”), its sole shareholder and sole director. Xu was a founding member of the 1^st Defendant as well as its executive director and chief technology officer from 31 May 2018 until 2 March 2020.

6.  The 1^st Defendant is a company incorporated in the Cayman Islands in February 2018 in preparation for its IPO in Hong Kong. On 7 May 2019, the 1^st Defendant’s shares were listed on the Main Board of the Hong Kong Stock Exchange Limited (“SEHK”). The 1^st Defendant and its subsidiaries, including Hangzhou Duiba Internet Technology Company Ltd (“Hangzhou Duiba”), its main operating entity, will be referred to as the “Duiba Group”. The Duiba Group carried on business as a software-as-a-service provider and an interactive advertising platform operator in the PRC.

7.  The 2^nd Defendant (“Chen”) was at all material times a founder, executive director and the CEO of the 1^st Defendant. At all material times, he was the controlling shareholder of the 1^st Defendant holding 46% of its shares. By contrast, the Plaintiff’s Shares represented about 2.5% of the 1^st Defendant’s total shareholding upon the completion of the IPO.[3]

8.  Chen had 2 associates who took instructions from him viz Ms Chen Ting (“Ms Chen”) and Ms Kuang Ye (“Ms Kuang”).

9.  Ms Chen joined Hangzhou Duiba in May 2014 as its general manager and chief administrative officer. That was when Ms Chen first got to know Chen and had since worked closely with him. She was an executive director of the 1^st Defendant between October 2019 and May 2021. She later went back to Hangzhou Duiba to work as its general manager and chief administrative officer.

10.  Ms Kuang, also known as “曼曼” or “Christy”, was at all material times secretary of the Board of Directors of the 1^st Defendant, but not its Company Secretary as defined in the Listing Rules.

11.  On or about 18 April 2019, prior to the listing of the 1^st Defendant, the Plaintiff executed a Deed of Lock-up Undertaking in favour of the 1^st Defendant (“Lock up Deed”) whereby it agreed not to sell the Shares during the six-month period after the 1^st Defendant’s listing (“Lock up Period”). The Lock up Period expired on 7 November 2019.

12.  The 1^st Defendant’s share price did not do well after the listing. From 7 May to 12 June 2019, its share price dropped from HK$6.01 to HK$3.99. [4] On 12 June 2019, the 1^st Defendant announced a share repurchase scheme to support its share price. On 7 November 2019, the expiry of the Lock up Period, its share price rose to HK$4.79. On 7 January 2020, when the Share Certificate was deposited into the Plaintiff’s CMBI account, its share price was HK$4.10. On 28 February 2020, the share price dropped to HK$3.56.[5]

13.  The Plaintiff through Xu had since July 2019 made a total of 5 demands for the return of the Share Certificate.

The Parties’ cases, the agreed issues and the witnesses

14.  In its Opening at para 52, the Plaintiff’s case [6] is stated as follows:

(1) Despite repeated demands, the Defendants refused, failed or delayed in returning the Share Certificate to the Plaintiff from 7/8 November 2019[7] to 29 February 2020. The Defendants’ refusal, failure or delay in returning the Share Certificate until 29 February 2020 constituted conversion and detinue.

(2) As a result, the Plaintiff was deprived of the use and possession of the Share Certificate and could only dispose of the Shares after 31 March 2020.

(3) By then, the 1^st Defendant’s share price had plummeted. The Plaintiff therefore claims the difference between (a) the share proceeds it would have obtained but for the Defendants’ conversion and detinue and (b) the share proceeds it actually obtained.

15.  By the time of its Closing, the Plaintiff summarised its case in its executive summary as follows:

(1) The Plaintiff through Xu had since July 2019 made a total of 5 demands for the return of the Share Certificate. All the demands were recorded in contemporaneous documents. The 1^st Defendant, however, failed or refused to return the Share Certificate until about 7 January 2020 i.e. when the Share Certificate was first deposited into the Plaintiff’s account with CMBI.

(2) By reason of the matters aforesaid, there is a clear case that the 1^st Defendant’s failure to return the Share Certificate from 7 November 2019 to 7 January 2020 constituted conversion and detinue.

16.  In their Opening at para 27, the Defendants’ case[8] is summarised as follows:

(1) No clear and unequivocal demand for the return of the Share Certificate was made on any of the Relevant Dates.

(2) To the extent that any such demand was made, it was relinquished when Xu subsequently asked the 1^st Defendant (i) to continue holding onto the Share Certificate whilst he was considering the Proposed Donation[9], and/or (ii) to assist Xu in making the necessary arrangements and handling the paperwork to facilitate the sale of the Shares.

(3) The Defendants deny having failed or refused to return, or delayed in returning, the Share Certificate.

(4) Accordingly, the Defendants deny liability for conversion and/or detinue of the Share Certificate.

17.  By the time of their Closing at paras 1 and 2, the Defendants’ submissions have been clarified and expanded as follows.

18.  First, no valid demand was made on any of the Relevant Dates.

(1) The alleged demands were all equivocal and/or conditional, and cannot give rise to any liability for conversion/detinue.

(2) Whether the Plaintiff subjectively wanted the Share Certificate to be returned is immaterial, as is Xu’s subjective (and ex post facto) understanding of the words he used to purportedly demand for such return. The issue is whether, objectively, the Plaintiff communicated its demands unequivocally and unconditionally on any of the five dates which the Plaintiff seeks to rely on, to which the answer is “no”.

19.  Second, the Defendants did not refuse to return the Share Certificate to the Plaintiff.

(1) On Xu’s own admission during cross-examination, on 12 December 2019, he instructed Ms Kuang to deposit the Shares into his securities account and to handle all relevant administrative matters which would involve delivering the Share Certificate to CMBI. Ms Kuang had duly complied with such instructions and her evidence is unchallenged.

(2) Insofar as the Defendants had failed to return the Share Certificate before 11 December 2019, such failure resulted from Xu’s discussions with Chen on 27 November 2019, during which Xu agreed to consider the Proposed Donation and did not refuse the Proposed Further Lock-up Period[10]. In the event that Xu acceded to the latter, the Share Certificate would naturally be kept by the 1^st Defendant’s lawyers, pursuant to the previous arrangement under the Lock-up Period. That Xu was amenable to the Proposed Further Lock-up Period gave the impression that the Plaintiff had withdrawn any prior demand for the Share Certificate. Pending Xu’s consideration, the Defendants did not refuse to return the Share Certificate. When Xu finally decided on 12 December 2019 to agree to the Proposed Donation only and to deposit the Shares into a securities account, the Defendants complied with his instructions without hesitation.

(3) It is not open to the Plaintiff to rely on the Defendants’ failure to return the Share Certificate by 7 November 2019 (i.e. the last day of the Lock-up Period) as the basis of such refusal. Aside from the fact that the Plaintiff had made no clear demand for the Share Certificate by then, the Plaintiff has not properly pleaded a case of deliberate failure to return the same against the Defendants - it is left with a case of an inadvertent failure, which is not actionable in conversion/detinue.

20.  Third, specifically in relation to the Plaintiff’s case against Chen, the alleged basis of his liability is that he was the “mastermind” of the 1^st Defendant’s alleged conversion/detinue and that his liability arose from “knowing assistance and procurement”, but the Plaintiff’s counsel has conceded that this case is unpleaded.[11] It follows that no case lies against Chen.

21.  Fourth, should this Court find that the 1^st Defendant is liable in conversion/detinue, its liability (i) accrued no earlier than 27 November 2019, when the Plaintiff demanded the return of the Share Certificate for the first time; and (ii) ended on 12 December 2019, when the Plaintiff instructed the 1^st Defendant to deliver the Share Certificate to CMBI, which the 1^st Defendant did.

22.  The Agreed List of Issues consists of 4 items:

(1) Whether there was a valid demand by the Plaintiff on one or more of the following days viz 25 July, 24 November, 26 November, 27 November and 10 December 2019?

(2) If so, whether there was a refusal, failure or delay by the 1^st Defendant and/or the 2^nd Defendant in handing over the Share Certificate to the Plaintiff from 7/8 November 2019 to 29 February 2020?

(3) If so, whether the 1^st Defendant and/or the 2^nd Defendant committed the tort of conversion and/or detinue?

(4) If so, when did the 1^st Defendant and/or the 2^nd Defendant commit the conversion and/or detinue?

23.  It seems to this court wholly unnecessary to divide into 4 what is really 1 issue ie whether the 1^st Defendant and/or the 2^nd Defendant committed the tort of conversion and/or detinue by refusing, failing or delaying the return of the Share Certificate to the Plaintiff in the face of a valid demand and when did that happen. In the course of this Judgment, this court will endeavor to resolve that 1 issue by examining the evidence in light of the law as this court understands it.

24.  At trial,

(1) the Plaintiff called 1 witness : Xu;

(2) the Defendants called 3 witnesses: Chen, Ms Chen and Ms Kuang.

25.  The parties have filed 1 witness statement for each of their witnesses. They will be referred to as Xu 1, Chen 1, Ms Chen 1 and Ms Kuang 1.

26.  Further, on Day 7 of the trial, Ms Kwok Hoi-yan of Computershare Hong Kong Investor Services Limited (“Computershare”), the Hong Kong Share Registrar of the 1^st Defendant, testified on subpoena with regard to this court’s queries concerning the significance of the Share Certificate to the Plaintiff/Xu’s plan to dispose of his Shares upon the expiry of the Lock up Period and the whereabouts of the original Share Certificate. Her assistance is helpful for which this court is grateful.

27.  This court has carefully considered the testimony of all witnesses at the trial and assessed it against the contemporaneous documentary evidence which is plenty and the known and undisputed circumstances of this case. As a matter of longstanding practice and out of abundance of caution, this court has also reviewed its own notes taken at the trial and the official transcripts of the trial in order to refresh its memory.

Deliberation

The Law

28.  The essence of conversion lies in the unlawful appropriation of another’s chattel: Clerk and Lindsell on Torts 24th Ed para 16-02. The ordinary way of showing a conversion by unlawful retention of a claimant’s property is to prove that the defendant, having it in his possession, refuses to surrender it on demand. Such a demand is generally a precondition for conversion claims based on unlawful detention: Clerk and Lindsell on Torts para 16-23.

29.  In this regard, the demand must be unconditional in its terms and specific (while the refusal must be unequivocal): Clerk and Lindsell on Torts para 16-25; Schwarzschild v Harrods Ltd [2008] EWHC 521 at [20] (Eady J). The question about “demand” is one of determining what objectively the recipient of the demand would reasonably have understood by the words used, against the background of the particular factual circumstances in the case: R (on the application of Atapattu) v Secretary of State for the Home Department [2011] EWHC 1388 (Admin) at [65] (Stephen Morris QC).

30.  Conversion can result only from an intentional act. The required intent is to interfere or deal with the goods by exercising dominion over them on one’s own behalf or of someone other than the plaintiff. Thus, no conversion is committed by mere negligence: Fleming’s The Law of Torts 11^th Ed para 4.140.

31.  The action of detinue[12] lies at the suit of a claimant having a right to immediate possession for the wrongful detention of his chattel: Clerk and Lindsell on Torts para 16-03. The wrongful detention is normally evidenced by the refusal of a defendant who is in possession to deliver up on demand. The legal redress is the return of the chattel or payment of its value, together with damages for its detention: Clerk and Lindsell on Torts para 16-03.

32.  Detinue is a continuing cause of action which commences on the date of the wrongful refusal to return and continues until redelivery or judgment: Fleming’s The Law of Torts para 4.200. Like conversion, it can be called an intentional tort in that the defendant’s conduct in refusing to return the goods must have been intentional, and not merely inadvertent or negligent: Fleming’s The Law of Torts para 4.220.

1^st Demand dated 25 July 2019

33.  Mr Cheuk submits in its Closing that it is the Plaintiff’s primary case that it had made a demand on 25 July 2019 and the 1^st Defendant failed or refused to return the Share Certificate to his client on 7 November 2019 [13]. In order to understand the background and context of the 1^st Demand, Mr Cheuk refers to 2 messages dated 9 and 10 May 2019 before going into the demand on 25 July 2019.

34.  Mr Cheuk relies on the following extracts of the WeChat messages between Xu and Ms Chen:

,

(9 May 2019)
Mr Xu:	上市后，我的股份是在什么账号下吗？我知道现在禁售，但我想知道一下
Ms Chen:	还没有进行统一开户 是有六个月禁售期，然后中介还没有那么快安排开户 估计一个月左右安排
Mr Xu:	中介是招银国际吗
Ms Chen:	嗯
(Translation)
Mr Xu:	After listing, which account will my shares be held? I know they are in lock-up now, but I want to know
Ms Chen:	Have not conducted the unified account opening There is indeed a 6-month lock-up period, and the intermediary has not yet arranged for the account opening so soon Guess it will arrange in approximately one month
Mr Xu:	Is CMB International the intermediary?
Ms Chen:	Yes
(10 May 2019)
Ms Chen:	尊敬的股东您好，兑吧（1753.HK）已经顺利上市。受限于全体股东6个月禁售协议的约定，您的股票证书原件仍需要在公司香港律师处保管至2018年11月6日，待6个月禁售期结束律师会将股票证书原件寄送给您。届时您持凭股票证书原件找到开户券商经纪人在CCAS系统上做存仓，存仓后即可在交易系统上查询并交易您的股票。
(Translation)
Ms Chen:	Dear shareholder, Duiba (1753.HK) has been successfully listed. As per the restrictions under the 6-month lock-up period agreement for all shareholders, the originals of your share certificates will have to be kept at the company’s Hong Kong lawyers’ office until 6 November 2018, the lawyers will send the originals of the share certificates to you when the 6-month lock-up period ends. At that time, with the originals of the share certificates, you may find a stock broker of a securities firm to deposit the shares into the CCASS system, after the deposit, you can immediately inquire and trade your shares in the trading system.
(25 July 2019)
Mr Xu:	和你确认一下，目前阶段，我不能进行股权质押，是吗
Ms Chen:	股权质押需要公司书面同意执行董事签字，另外需要向联交所申请备案并作皮罗， 披露 所以做 (最) 好是不做股权质押
Mr Xu:	但是银行需要一个小本本的凭证，这个凭证目前是锁定的吧
Ms Chen:	一本本的凭证?
Mr Xu:	股权归属人的证明，目前是不是联交所那边持有的。后续应该归还本人的
Ms Chen:	你说的是股票证咯
Mr Xu	应该是吧，银行靠这个进行质押的
Ms Chen:	现在还在律师那，要在禁售期结束前一天发回
(Translation)
Mr Xu:	To confirm with you, at the current stage, I cannot carry out the share pledge, right?
Ms Chen:	A share pledge requires the written consent by the company signed by executive directors, and also requires an application and filing to the Stock Exchange and the making of disclosure (homonym)
Ms Chen:	Disclosure
Ms Chen:	So it would be best (homonym) not to do the share pledge
Mr Xu:	But the banks need a small book of certificate, this certificate is locked, right?
Ms Chen:	Small book of certificate?
Mr Xu:	Proof of share ownership, is it held by the Stock Exchange now. It should be returned to me later on
Ms Chen:	So you are talking about share certificates
Mr Xu:	Probably yes, the banks carry out share pledges based on this
Ms Chen:	They are still at the lawyers’, need to be returned a day before the end of the lock-up period
(emphasis added)

35.  Mr Cheuk submits that on 25 July 2019, Xu expressly demanded for the handover of the Share Certificate to him upon the expiry of the Lock-up Period ie on 7 November 2019 and that the demand was clear and unequivocal.

36.  On the other hand, Ms Lau SC submits in her Closing that there was no valid or effective demand on 25 July 2019.

37.  Ms Lau SC submits when Xu said “it should be returned to me later on”, a reasonable person in Ms Chen’s position would not have understood him to be demanding the return of the Share Certificate. The reasons are as follows.

(1) Xu was only clarifying what he meant by “a small book of certificate” in the context of his enquiry about a possible pledge over the Shares. To do so, Xu mentioned the Share Certificate “should be returned to me later on”.

(2) Xu did not even specify the date when the Share Certificate was supposed to be returned.

(3) Although Xu asserted in cross-examination on Day 2 that he was expecting Ms Chen to return the Share Certificate to him immediately after she had received it from A&O, this was not communicated to Ms Chen and could not affect how a reasonable person in her shoes would have understood Xu’s WeChat message as a demand for the Share Certificate.

38.  Ms Lau SC further submits that an objective reading above is consistent with Ms Chen’s oral evidence that she understood Xu to be asking about the pledging of the Shares and the status of the Share Certificate, as opposed to seeking its return.

39.  With respect, this court cannot agree with Ms Lau SC.

40.  The context of the said messages is that Xu wanted the Share Certificate back so that he could deal with his Shares. How Xu intended to deal with the Shares, whether to pledge them, sell them in the stock market or anything else, is beside the point and would not affect the gist of his demand or Ms Chen’s understanding of it. In fact, it seems clear to this court that subjectively Ms Chen was well aware of what was demanded from her. Objectively, a reasonable person in the shoes of Ms Chen, even if Xu had not given a specific date of return, could only understand him to mean he wanted it back as soon as practicable. Given the Share Certificate was with the 1^st Defendant’s lawyers, it could be handed over to Xu/the Plaintiff at a moment’s notice, subject to the agreed Lock up Period. On the evidence, there was no alleged difficulty for A&O to do so. It just did not happen.

41.  Importantly, Ms Chen understood Xu to be asking for the Share Certificate upon the expiry of the Lock up Period, as evident from her reply that “现在还在律师那，要在禁售期结束前一天发回”.

42.  Hence, even if Ms Chen at first understood Xu’s inquiry to be about the pledging of the Shares and the status of the Share Certificate, that cannot mean Ms Chen did not also understand Xu to be asking for the return of the Share Certificate. This court asks: what was the point of making the inquiry about the Share Certificate if not for its return? Importantly, the issue is what objectively Ms Chen would reasonably have understood by the words Xu used, against the background of the particular factual circumstances in the case. This court is of the view that Ms Chen, or anyone in her shoes, fully understood Xu was demanding something specific ie the handing over of the Share Certificate, the demand was unconditional and it should be upon the expiry of the Lock up Period.

43.  Ms Lau SC further submits even if there had been a valid demand on 25 July 2019, the 1^st Defendant did not refuse to return the Share Certificate. This is said to be because the Plaintiff’s case that the 1^st Defendant had instructed A&O to withhold the Share Certificate after the expiry of the Lock up Period was only raised by the Plaintiff’s counsel for the first time during Chen’s cross-examination[14] and was not pleaded. Nor did it not appear in Xu 1. Thus, this allegation of deliberate/intentional failure to comply with the 1^st Demand cannot be raised at trial. Given the Plaintiff has not advanced any other case of deliberate failure to comply, it is left with a case of inadvertent failure which cannot found a case of conversion or detinue.

44.  Factually, this court is not satisfied there was any inadvertent failure by Ms Chen to pass the Share Certificate to the Plaintiff. On the evidence, it is clear to this court that she knew Xu wanted the Share Certificate by the expiry of the Lock up Period, as evident from her WeChat reply message set out above. Since Ms Chen was fully aware of Xu’s demand to get back the Share Certificate and when, the 1^st Defendant’s failure to do so could not have been inadvertent. Rather, it was intentional and this court shall so find.

45.  Legally, subject to the right to make brief enquiries, a person in possession of the goods of another must normally deliver them up forthwith on demand. Indeed, delay in complying with the demand will not only render the defendant liable in conversion, but will normally make him an insurer of the goods: Clerk and Lindsell on Torts para 16-26. However, the need for immediate delivery may be qualified in at least two cases, as elaborated in Clerk and Lindsell on Torts para 16-27. Having considered them, the qualifications are irrelevant for the present purpose.

46.  There is some suggestion in Schwarzschild v Harrods Ltd at [20] – [22] that mere inaction or neglect in the face of a demand is unlikely to be sufficient to constitute an unequivocal refusal because mere inaction is often likely to be equivocal. Since whether mere inaction is an equivocal refusal is a question of fact, it all depends on the circumstances of the case. This court does not take Schwarzschild v Harrods Ltd to be laying down a general legal proposition as such.

47.  But even assuming the Court in Schwarzschild v Harrods Ltd was laying down a general legal proposition, this proposition must be regarded as very doubtful, as the learned editors of Clerk and Lindsell on Torts at para 16-25 fn 124 explain. Their reasoning is that in a suitable case, an unequivocal refusal may be inferred from mere inactivity in the face of an unequivocal demand. Otherwise a defendant in possession of a claimant’s property could stymie conversion proceedings by doing and saying nothing. A similar reasoning is proffered by the learned editors of Fleming’s The Law of Torts para 4.210 who opine that while the refusal to redeliver must normally be express, if there is a sufficient demand, failure to take notice can be regarded as a refusal; otherwise, the defendant could simply ignore the demand.

48.  In R (on the application of Atapattu) v Secretary of State for the Home Department at [89], the learned Deputy High Court Judge Stephen Morris QC explained his view on the matter as follows.

“My conclusions are as follows…Thirdly, where demand and refusal is relied upon, the refusal must be clear or unequivocal. Fourthly, however that does not mean the refusal must be found in express words. A refusal may be inferred from other action or inaction... Whether such action or inaction amounts to an unequivocal refusal is a question of fact, in all the circumstances. Thus, fifthly, delay in responding to a demand, beyond a reasonable time, is a common example of a refusal inferred from circumstances”. (emphasis added)

49.  This court fully agrees with the reasoning expressed by the learned editors of Clerk and Lindsell on Torts, Fleming’s The Law of Torts and the conclusions of the learned Deputy Judge in R (on the application of Atapattu) v Secretary of State for the Home Department. As we are concerned with a question of fact, this court is inclined to and shall find as a fact that the failure of the 1^st Defendant to hand over the Share Certificate to the Plaintiff forthwith in the face of the 1^st Demand constituted an unequivocal refusal.

50.  If so, this court finds the 1^st Defendant is liable to the Plaintiff in conversion and detinue of the Share Certificate for its failure to hand it over forthwith on 7 November 2019.

2^nd Demand dated 24 November 2019

51.  After the 1^st Defendant had failed to return the Share Certificate to the Plaintiff in compliance with the 1^st Demand, Xu made the 2^nd Demand to Ms Chen. Ms Chen told Xu that the 1^st Defendant’s lawyers had already posted the Share Certificate to the 1^st Defendant[15], but it had not arrived. It was Ms Kuang who contacted the lawyers and Xu was asked to follow up with Ms Kuang about it. The message relied upon by Mr Cheuk on this 2^nd Demand is the following.

(24 November 2019)
Mr Xu:	股票限售到期了吗，是可以拿凭証了吗
Ms Chen:	律所寄了还沒到, 曼曼联系的
Mr Xu:	然后可以自由選擇放到哪个証券賬号？
Ms Chen:	這个我不能确定。曼曼來公司你在和他沟通下
(Translation)
Mr Xu:	Has the lock-up period for shares expired? Can the certificates[16] be obtained?
Ms Chen:	The law firm has posted them, but they have not arrived yet, [Kuang Ye] contacted them
Mr Xu:	Then can freely choose which securities account to deposit into?
Ms Chen:	I am not sure about that. Please communicate with [Kuang Ye] when she comes to the company

52.  Mr Cheuk submits that there was again a clear and unequivocal demand and a failure to return.

53.  Ms Lau SC disagrees and submits in her Closing that no reasonable person in Ms Chen’s shoes would have understood what Xu said above as a demand for the return of the Share Certificate. This is because Xu was merely making an enquiry (or inviting the Defendants’ comments) as to whether he “could” obtain the Share Certificate, and (ii) Ms Chen confirmed in Chen 1 that this was her understanding of what Xu was asking.

54.  What Ms Chen actually said in Chen 1 at paras 26 to 28 is as follows.

“26. ... On 24 November 2019, Mr Xu sent me a WeChat message to ask whether the Listing Lock-up Period has expired, and whether he can obtain the Share Certificates (page 5 of Annex 2).

27. In response, I said that Duiba’s company lawyers should have mailed the Share Certificates but they have yet to arrive, and that Ms Kuang Ye was the actual person liaising with them. On hindsight, this remark was not correct because I subsequently found out that by that time no action had been taken by Duiba’s company lawyers to mail the Share Certificates to Duiba. I just assumed that the company lawyers would mail them to them after the end of the Listing Lock-up Period, and therefore the information I gave to Mr Xu at the time was incorrect.

28. Based on my response, Mr Xu then asked whether he could choose which securities account to deposit the Share Certificates into. I responded that I was not sure and suggested that he spoke with Kuang Ye. To my mind, this exchange was just another casual conversation with Mr Xu whereby he enquired the status of his Share Certificates. Again, no unequivocal demand was made by Mr Xu for the return of the Share Certificates by any particular date.”

(emphasis added)

55.  This court does not accept Ms Chen’s testimony that in her mind, Xu was merely making an “enquiry” about the status of the Share Certificate instead of making a “demand” for it. In this court’s view, that message between Xu and Ms Chen on 24 November 2019 cannot be looked at in isolation. Rather, it must be considered in light of the 1^st Demand and the 1^st Defendant’s failure to comply with it.

56.  The context of that message was that (i) the share price of the 1^st Defendant had dropped since its IPO on 7 May 2019 and had shown no sign of significant recovery, and (ii) the 6-month Lock up Period had already expired. As a matter of inherent probabilities, Ms Chen, as an experienced business person and an executive director of the 1^st Defendant at the time, would surely have understood Xu’s so-called enquiry was not just an enquiry – rather he was making a demand for the Share Certificate so that he could deal with the Shares. The clearest sign that Ms Chen understood this was a demand was her reply that “律所寄了还沒到”. If Ms Chen understood the message as an enquiry, all she had to say would have been the Share Certificate should still have been with the lawyers and she would find out about its status from Ms Kuang or from the lawyers directly. Alternatively, Ms Chen could simply have asked Xu to contact Ms Kuang.

57.  In any event, the test is what objectively the recipient of the demand viz Ms Chen would reasonably have understood by the words used, against the background of the particular factual circumstances in the case. In this court’s view, any reasonable person in the shoes of Ms Chen would have understood Xu to be making a “demand” for, instead of an “enquiry” about, the Share Certificate and shall so find.

58.  Ms Lau SC again makes the point in her Closing that even if there had been a valid 2^nd Demand on 24 November 2019, the 1^st Defendant did not refuse to return the Share Certificate to the Plaintiff. Rather, Ms Chen was under the mistaken belief that the Share Certificate had already been sent by post and at most, the 1^st Defendant, through Ms Chen, had failed to return the Share Certificate inadvertently.

59.  Whether or not Ms Chen was under a mistaken but honest belief is irrelevant as the Plaintiff is not suing the 1^st Defendant in misrepresentation. There is thus no need to dwell on the parties’ submissions in this regard. Rather, the Plaintiff is complaining about the tort of conversion and detinue committed by the 1^st Defendant for its failure to hand over the Share Certificate in the face of the 2^nd Demand.

60.  Mr Cheuk submits at para 39 of his Closing that assuming this court is not with the Plaintiff on the 1^st Demand but with it on the 2^nd Demand, then the 1^st Defendant had committed conversion and detinue from 24 November 2019 until 7 January 2020. For the present purpose, this court is prepared to give Ms Chen and the 1^st Defendant the benefit of the doubt that she was under an honest but mistaken belief and had therefore delayed in complying with the 2^nd Demand.

61.  However, after a reasonable time had elapsed and the 1^st Defendant had still failed to comply, as a matter of law, that is an unequivocal refusal and this court shall so find. Regarding when a reasonable time had elapsed after 24 November 2019, this court finds, on a generous view of the matter, that 3 days would be more than enough for the 1^st Defendant to find out about the mistake, rectify it and to procure A&O to pass the Share Certificate to it for onward transmission to the Plaintiff or to pass the Share Certificate to the Plaintiff directly. This the 1^st Defendant had failed to do.

62.  If so, even if this court is wrong to find the 1^st Defendant is liable to the Plaintiff in conversion and detinue of the Share Certificate by 7 November 2019, this court shall find the 1^st Defendant liable to the Plaintiff in conversion and detinue of the Share Certificate for its failure to hand it over by 27 November 2019.

63.  As Mr Cheuk submits in his Closing at para 39, there is no need for the Plaintiff to rely on or for the Court to examine the remaining 3 demands on 26 and 27 November or 10 December 2019. This court agrees and indeed sees no point in rendering an academic discussion about them. Ultimately, this court will only give Judgment based on its findings regarding the 1^st Demand. This court’s findings regarding the 2^nd Demand is just a fall-back position for the benefit of the Plaintiff and the convenience of the Court of Appeal should the matter be taken further.

Liability of the 2^nd Defendant

64.  In Mr Cheuk’s Closing at para 75, he submits that the 2^nd Defendant is an executive director, the CEO and a founder of the Duiba Group. He was one of the ultimate controlling shareholders of the 1^st Defendant at all material times. The Plaintiff has pleaded that it had made a demand on 25 July 2019 and the Defendants, which included both the 1^st and the 2^nd Defendants, failed or refused to return the Share Certificate to the Plaintiff on 7 November 2019.

65.  Mr Cheuk therefore submits that on a fair reading of the case as pleaded by the Plaintiff, it is, apart from making a claim against the 1^st Defendant, also making a claim against Chen on the basis that he, as the actual controller of the 1^st Defendant, procured the 1^st Defendant not to hand over the Share Certificate to the Plaintiff on 7 November 2019.

66.  This court does not agree with Mr Cheuk for a number of reasons.

67.  First, as a matter of law, a person who knowingly procures another person to commit an actionable wrong will be jointly liable with that other person for the wrong committed. Moreover, a person who assists another to commit a tort is jointly liable for the tort if the assistance is more than trivial and is given pursuant to a common design between the parties: Lifestyle Equities CV & Anor v Ahmed & Anor [2024] UKSC 17 at [135] – [136]. As Lord Leggatt put it:

“[135] To summarise, there is a general principle of the common law that a person who knowingly procures another person to commit an actionable wrong will be jointly liable with that other person for the wrong committed. The liability of the procurer is an accessory liability. Where the primary wrong is a breach of contract, this accessory liability takes the form of a distinct tort. Where the primary wrong is a tort, however, there is no need to posit a separate tort of procuring another person to commit a tort. Where the general principle applies, the procurer is made jointly liable for the tort committed by the primary wrongdoer.

[136] There is a further, distinct principle of accessory liability by which a person who assists another to commit a tort is made jointly liable for the tort committed by that person if the assistance is more than trivial and is given pursuant to a common design between the parties. On the facts of a particular case both principles may be engaged. But on the present state of the law assistance which falls short of procuring the primary wrongdoer to commit the tort cannot lead to liability unless it is given pursuant to a common design.”

68.  As Ms Lau SC submits, even if the 1st Defendant were found to be liable in conversion and/or detinue, it does not follow that Chen would necessarily also be liable. Rather, it is incumbent upon the Plaintiff to plead and prove that Chen comes within either of the above principles for him to be held jointly liable for the 1st Defendant’ tort. As far as pleading is concerned, this court has earlier in this Judgment referred to the Plaintiff’s failure to plead a case of “knowing assistance and procurement” against Chen. This court is also not satisfied that the Plaintiff has proved it against him.

69.  While Mr Cheuk in his Opening at para 48 refers to certain trite principles ie an agent who commits a tort on behalf of his principal and the principal himself are joint tortfeasors; so is the employee who commits a tort in the course of his employment and his employer; and a company director and the company itself may be regarded as joint tortfeasors where the director “is sufficiently bound up in [the company’s] acts” to make him personally liable: Clerk & Lindsell on Torts at [4-04], this court does not see any serious attempt on his part to establish any of those trite principles are applicable so as to make Chen liable for the tort of the 1st Defendant. To the credit of Mr Cheuk, he has all but given up to go after Chen: as can be seen from the Executive Summary to his Closing, he has conspicuously omitted to mention Chen’s liability at all.

70.  Second, on the evidence, there is nothing that can be construed as Xu having made the 1^st or the 2^nd Demand on Chen for the Share Certificate. On the contemporaneous correspondence ie the WeChat messages, the 1^st and 2^nd Demands were all made to Ms Chen as a representative of the 1^st Defendant, not Chen. A demand on Ms Chen was a demand on the 1^st Defendant. It cannot without more be translated as a demand also on Chen himself.

71.  Third, on the evidence, the Share Certificate was held by A&O as the 1^st Defendant’s lawyers and agents. There is no suggestion that A&O held the Share Certificate on behalf of Chen personally. The Plaintiff simply cannot establish that Chen was in possession of the Share Certificate which is a legal requirement of the claim in conversion or detinue. If so, whether or not a demand has been made on Chen is irrelevant.

72.  To conclude, this court is of the view that the Plaintiff has failed to establish a claim against Chen in conversion and detinue of the Share Certificate and shall so find.

Disposition and costs order nisi

73.  There shall be Judgment in favour of the Plaintiff against the 1^st Defendant for its conversion and detinue of the Share Certificate on 7 November 2019 until 7 January 2020 with damages to be assessed by a Master.

74.  The Plaintiff’s claim against the 2^nd Defendant is hereby dismissed.

75.  This court does not see why costs should not follow the event.

76.  Costs of the Action on a nisi basis shall be to the Plaintiff, to be taxed if not agreed on a party and party basis, and paid by the 1^st Defendant forthwith, certificate for Counsel.

77.  Costs of the Action on a nisi basis shall be to the 2^nd Defendant, to be taxed if not agreed on a party and party basis, and paid by the Plaintiff forthwith, certificate for Senior Counsel.