CHOI KEUNG v. CHOI LEUNG CHUEN

HCA 296/2018

[2021] HKCFI 277

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 296 OF 2018

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J U D G M E N T

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A.  Introduction

1.  In this Action, the Plaintiff (“P”) claims against the Defendant (“D”) for conversion of a classical Chinese scroll consisting of a painting of vegetables and accompanying Chinese calligraphy (“Painting”).  P alleges that in 1998, he entrusted the Painting to D for D to try and sell on his behalf.  Without P’s knowledge, and allegedly in breach of his duties as bailee, D sold the Painting at an auction in November 2017 for HK$2,980,000.  P claims this sum from D as damages. 

2.  D denies the existence of the alleged bailment relationship and claims instead that he purchased the Painting from P for HK$30,000 in 2000.  As such, P no longer had any proprietary interest in the Painting when D sold it at an auction in 2017.

B.  Factual background

3.  P is about 60 years of age and works as a stall vendor at a tourist spot in Hong Kong.  D is P’s fifth uncle and has engaged in a travel agency business for many years. 

4.  In 1998, P bought 5 pieces of artwork in Nanjing for RMB 60,000, one of which was the Painting.  P then brought the Painting to Christie’s for appraisal which offered to have the Painting auctioned in England with a reserve price of HK$80,000. 

5.  Sometime between 1998 and 2000, P handed the Painting over to D.  As alluded to above, the precise circumstances leading up to the transfer are hotly disputed between the parties. 

6.  In or around 2000, D issued P with a cheque for HK$30,000, which P cashed.  D says that this sum represented the purchase price for the Painting, whereas P says that this was a loan D extended to him while he was in a period of financial difficulty (“Alleged Loan”).  It is common ground that no part of this sum was ever repaid by P to D. 

7.  The Painting remained with D until 2017.   

8.  In November 2017, D sold the Painting at an auction through Sotheby’s for HK$2,980,000.  Of this sum, D received HK$2,176,000, and the difference of HK$580,000 was retained by Sotheby’s as commission.   

9.  On 20 November 2017, P was informed of the sale of the Painting by Choi Hoi Nam (“Hoi Nam”), D’s younger daughter. 

10.  P confronted D about the sale of the Painting in a series of telephone calls and WhatsApp messages between 21 November 2017 and 29 November 2017.  In his messages, D claimed that he was not responsible for the sale of the Painting at the auction, as he had sold the Painting to a Japanese friend 5 years ago for roughly HK$50,000.  When D called the Japanese friend to enquire about the sale, the Japanese friend informed D that he himself sold the painting at a low price 2 years ago, and declined to disclose the identity of the buyer to D. 

11.  D now admits to having fabricated this story of the Japanese buyer to prevent P from further questioning him about the sale of the Painting.

C.  Evidence

12.  As is clear from the foregoing discussion, this case turns entirely on whether P transferred the Painting to D pursuant to a sale or a bailment.  It is not disputed that if P did entrust the Painting to D for him to look for a buyer, then D is liable in conversion for having sold the Painting without P’s consent.  Conversely, P accepts that his claim must fail if the Court finds that P did in fact sell the Painting to D.  The parties’ evidence as to the nature of the transaction is therefore of critical importance. 

13.  At trial, P testifies on his own behalf and also calls as witnesses Wong Hiu Lan (“Madam Wong”) and Hoi Nam.  Madam Wong is D’s ex-wife.

14.  In his witness statement, P explains that he was never a person of means and that he bought the Painting in Nanjing with the intention of reselling it at a profit.  He initially considered selling the Painting through Christie’s, but ultimately decided to enlist D’s help in selling the Painting as D worked in the travel industry and thus might know people who would be interested in the Painting.  P went to see D in his office sometime in 1998 where D acceded to his request and P handed over the Painting to him.  According to P, the parties did not discuss any target sale price, but agreed that D would report to P if someone made an offer to buy the Painting for him to make a decision.  P also assured D that he would give D a reward if the Painting was successfully sold.[1]

15.  P says that over the next 20 years, he would occasionally discuss the status of the Painting with D at family gatherings, and that his continued ownership of the Painting was common knowledge amongst  members of the Choi family.[2]

16.  As for the Alleged Loan, P claims that while he did offer to repay the sum to D, D told him not to worry about it as D had not yet managed to sell the Painting.[3]

17.  In his closing submissions, Mr Arthur Yip, counsel for D, makes a few criticisms of P’s evidence which are in my view unfounded. 

18.  First, Mr Yip points out that neither (1) the Alleged Loan, nor (2) P’s alleged promise of a reward if D managed to sell the Painting, were pleaded by P in his Statement of Claim (“SOC”) or in Reply, and submits that this is relevant to the Court’s assessment of the credibility of P’s evidence.[4]  However, I do not see why P was obliged to plead these matters in his SOC.  Neither fact is essential to P’s case of bailment and conversion.  In fact, on P’s case the Alleged Loan had no connection whatsoever with the Painting.  Nor was P obliged to set out his case in relation to the HK$30,000 payment in his Reply after it had been raised by D as part of his case of sale and purchase: by virtue of Order 18 rule 14(1) of the Rules of the High Court, the absence of a reply to a defence gives rise to an implied joinder of issue on that defence.  In these circumstances, I do not think the absence of pleadings has any bearing on P’s credibility as far as these 2 matters are concerned.

19.  Second, Mr Yip places great reliance on the fact that on P’s own case, there was never any discussion between the parties as to (1) the target price of the alleged bailment, (2) the manner in which the Painting was to be stored, (3) the parties’ responsibility for the costs of safe-keeping, maintenance and repair of the Painting, and (4) D’s liability for loss and damage to the Painting during the alleged bailment. However, this is not inherently implausible, bearing in mind that the alleged bailment was (at least on P’s case) an informal arrangement between trusted family members.  Furthermore, the absence of any agreement on these matters is not fatal to the existence of a bailment relationship: one simply falls back on the bailee’s obligation of reasonable care[5] and the bailee’s duty to reimburse a bailee for reasonable expenses[6] under the general law. 

20.  That said, on balance, I agree with Mr Yip that P’s evidence does not hold up under scrutiny.

21.  First, P’s case all along was that he bought the Painting in Nanjing for resale at a profit.[7]  However, this version of events means that P allowed D to hold onto the Painting and try to sell the Painting for nearly 2 decades.  This proposition must be rejected as wholly implausible.  There is simply no reason why P would let D do so when, as he himself asserts, he was a person of limited means and the acquisition of the Painting was a substantial investment for him.[8]  P clearly had viable alternative means for selling the Painting: he could have simply taken the Painting back to Christie’s.  As Mr Yip submits, and I accept, it is unlikely that D would have had better access to the art collector’s market than an established auction house.  While D was certainly an art hobbyist, there is no evidence that D was a seasoned collector and trader of paintings and calligraphic works.[9]

22.  Under cross-examination, P accepts that he never once thought to ask D for the Painting back.  He is unable to proffer any  explanation for his inaction when this is put to him.[10]

23.  Second, P’s assertion that the HK$30,000 payment was a loan extended to him by D is similarly doubtful.  Even assuming in his favour that the parties were content for the Alleged Loan to be for an open-ended period of time and not bear interest, it is incredible that this sum was never repaid.  P’s explanation for this in cross-examination, namely that the parties agreed that the Alleged Loan would only be repaid when D sold the Painting does not sit well with his case that the payment and the Painting were unrelated.  It is also difficult to see why the parties would have resorted to such an arrangement, given P’s evidence that the purpose of the Alleged Loan was to alleviate a short-term liquidity issue he was facing at the time and he repaid all other relatives from whom he had borrowed monies.[11]

24.  Third, P’s version of events suffers from factual inconsistencies.  In his oral evidence, P confirms that he handed over the Painting to D at D’s office at Clifford Center (香港中心), the address printed on D’s business card.[12]  He recalls that it was an open-area office without any conference rooms.[13]  However, as evidenced by a Land Registry search record which D produced as an exhibit at trial, and as Madam Wong confirms in cross-examination, D’s office was in Cheung Sha Wan Plaza from 1997 to 1999, and he only moved to Clifford Center afterwards.[14]  She also testifies that D’s office in Cheung Sha Wan Plaza was partitioned and had a conference room, whereas D’s office at Clifford Center were open plan without any conference rooms.[15]  Given the above, there is simply no way that P handed the Painting over to D in 1998 as he asserts. 

25.  At this point, it is necessary to deal with a point raised by Mr Edward MH Chan, counsel for P, that the Land Registry search record should be disregarded on the basis that it was sprung on P during the trial.  While I agree that it would have been better if D had produced this document earlier, I do not think that P is thereby deprived of an opportunity to respond.  The location of the parties’ meeting had always been an issue in this action: D distinctly referred to the parties’ meeting at Clifford Center in his WhatsApp conversation with P after the Painting had been sold.[16]  Furthermore, the land search is a matter of public record, and, as such, has been accessible to both parties all along.  I do not think that such evidence should be shut out when it is clearly relevant to the resolution of the present dispute.  Finally, insofar as there is any prejudice to P in that the land search is only produced after P finished giving evidence, it is open to Mr Chan to cross-examine D and D’s witnesses on the location of the parties’ meeting when they give evidence. 

26.  Fourth, P’s case is not corroborated by the other witnesses including his own witnesses.  In their witness statements, Madam Wong and Hoi Nam state that D informed them of the entrustment arrangement and the Alleged Loan at the time.[17]  However, their evidence takes on a different light under cross-examination.  When probed by Mr Yip, Madam Wong is unable to say whether D first took the Painting back home in 1998 (as P says) or in 2000 (as D says).[18]  She is unable to recall the year in which D informed her about the HK$30,000 payment, and accepts that it may have been in 2000.[19]  Furthermore, based on her oral evidence, D only told her that he obtained the Painting from P (今日阿強攞咗幅畫嚟), and did not say that he was holding the Painting for P.[20]  Similarly, Hoi Nam clarifies in her oral evidence that D did not say that the Painting belonged to (屬於) P, and only stated that the Painting came from P (佢話畀我聽呢幅畫係經強哥嗰度得嚟嘅).[21]  While Madam Wong and Hoi Nam might have assumed that the Painting still belonged to P, [22] there is no evidence (and certainly none before the Court) in support of this belief.

27.  P’s claims that he would occasionally mention the Painting at family gatherings and that it was “common knowledge” amongst the Choi family members that D was only holding the Painting for P all that time are also unsupported by the evidence.  None of the other witnesses, who all regularly attended the Choi family gatherings, are able to recall any instance where the issue of the Painting was brought up.[23]  In fact, P himself is unable to remember the year and location of any gathering in which he raised the issue of the Painting with D, until confronted with the answers he previously supplied in his Answers to D’s Request for Further and Better Particulars.[24]

28.  Conversely, D’s evidence is on the whole cogent. D explains that he acquired the Painting from P in 2000 after P called him and asked to meet with him.  At the time, he knew very little about the Painting and was not even sure whether it was a genuine antique painting.  However, he agreed to purchase it given his longstanding interest in calligraphy and art appreciation, and given his desire to help P who he knew was in some financial difficulty at the time.[25]

29.  It will be noted that D’s evidence is consistent with P’s testimony that their meeting occurred in Clifford Center.  It explains why P never asked for the Painting back all these years, and why D issued the cheque for HK$30,000 to P, a sum which P himself admits has never been repaid.

30.  The unchallenged evidence of D’s behaviour in relation to the Painting during the period between 2000 and 2017 is also entirely consistent with him being the owner of the Painting.  Both Madam Wong and Hoi Nam testify that D showed them the Painting when he first brought it home.[26]  They also confirm that D asked Hoi Nam to scan the Painting for him, and discussed the possibility of sending the Painting to Taiwan for repair with Madam Wong.[27]  Neither Madam Wong nor Hoi Nam suggest that D thought it was necessary to seek P’s approval when he dealt with the Painting. 

31.  Mr Chan submits that it makes no sense for P to have sold the Painting to D for HK$30,000, when he acquired it together with 4 other less valuable paintings for RMB 60,000, and when Christie’s offered to sell the Painting at a reserve price of HK$80,000.  However, neither fact renders D’s case implausible or incredible.  There is no evidence before the Court as to the value of the other 4 paintings.  Similarly, the fact that Christie’s offered to sell it at a reserve price of HK$80,000 was not a guarantee that the Painting would be sold at that price.  In any event, given D’s admitted financial problems in 2000, the idea that P might have wanted to quickly realise the Painting is not improbable. 

32.  P also suggests that D’s case is undermined by the evidence of his niece and employee, Ms Choi Wing Shan (“Wing Shan”), who testifies that the meeting at D’s offices took place “shortly after” she returned from Japan in March 1998.[28]  However, as she subsequently explains, she simply did not consider the two-year gap to be a particularly long period of time relative to the overall length of her employment with D.  I accept her explanation.  More importantly, Wing Shan’s evidence that the meeting when P brought the Painting to D occurred in 2000 is consistent with P and D’s evidence that the transfer took place at D’s office at Clifford Center.[29]  

33.  The main flaw in D’s evidence concerns his admitted lie in his WhatsApp conversation with P in late 2017 that he had sold the Painting years earlier and was not responsible for the sale of the Painting at Sotheby’s.  This episode is certainly damaging to D’s credibility.  However, on balance, I do not think it is fatal to his case.  As D explains in his witness statement when coming clean about the lie, he lied not because he sold the Painting in breach of the alleged entrustment arrangement, but because he did not want P to have any hard feelings if P learnt that he sold the Painting at such a high price.[30]  I find D’s explanation inherently credible.  As noted above, the story which D fabricated was crafted in such a way that no further enquiries were possible; D reached a dead end when the “Japanese buyer” declined to disclose the identity of the subsequent purchaser.  As such, one can readily see that it was an attempt (albeit an unwise one) to forestall further questioning by P with regards to the Painting. 

34.  I echo Chu J’s observation in Lam Rogerio Sou Fung v Tan Soon Gin George, HCA 2576/2005, unreported, 5 May 2011, §41 that witnesses can regularly lie, and that lies themselves do not necessarily mean that the entirety of that witness’s evidence is to be rejected.  In the present case, there is no suggestion that D is untruthful in his witness statement or in cross-examination.  Furthermore, as explained above, his case is not only inherently probable but also corroborated by the other witnesses.  For these reasons, I accept D’s evidence that he purchased the Painting from P in 2000 for HK$30,000.  I find that P has failed to prove the existence of a bailment of the Painting on a balance of probabilities.  It follows from this P’s case of conversion must fail.

35.  For the avoidance of doubt, I make clear that I have not found it necessary to rely on the principle in Re H (Minors) (Sexual Abuse: Standard of Proof)[31] in reaching my findings above.  I reject Mr Yip’s submission that P’s allegations against D are in substance allegations of misappropriation and dishonesty, such that P must adduce sufficiently cogent evidence in light of the inherent improbability of such allegations (Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387, §183, per Ribeiro PJ).[32]  This is because conversion is a tort of strict liability (Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 & 5) [2002] UKHL 19 [2002] 2 AC 883 (HL), §78 per Lord Nicholls).  All P must prove is that the Painting was bailed to D and that under the terms of the bailment D was not entitled to sell the Painting without P’s consent.  P does not allege, and need not prove, that D did so under any particular state of mind.

D.  Conclusion

36.  In conclusion, I dismiss P’s claim.  I make an order nisi that P do pay D’s costs of the action, to be taxed if not agreed.