ASHBY RECOVERIES LTD AND ANOTHER v. MELBOURNE TRADING (HK) CO

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS NO. MP 789 OF 1990

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JUDGMENT

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1. This hearing arises from an interpleader summons issued by the Attorney General in respect of a consignment of raw silk in the custody of the police. The original defendants were Ashby Recoveries Limited and Melbourne Trading (H.K.) Company, the competing claimants, who were originally cited as 1st and 2nd defendants respectively.

2. The original first defendant is the subrogated underwriter to the consignee under a marine insurance policy of a consignment of 50 bales of silk stolen on 29th August 1989 from berth 4 of Hong Kong International Terminals Limited (H.I.T.) at Kwai Chung. The original second defendant claims to be the owner of certain silk (said by the 1st defendant to be the same silk) seized from its warehouse in Tuen Mum by the police on 31st October 1989. The second defendant denies that the seized silk is the consignment underwritten by the first defendant, and that is the crux of the issue.

3. This relative simplicity was not however long to survive. By an order of 8th May 1990, the court added as third defendant the consignee of the stolen silk, Seritex Inc., a U.S.A. company. By the same order, the Attorney General was released and the new third defendant was substituted as plaintiff. Paradoxically, the underwriters were left as 1st defendants, although their interests, for purposes of these proceedings, were scarcely different from those of their insured, the new plaintiff.

4. The confusion was compounded by an order that the matter be disposed of summarily, with the result that an issue was not stated for trial and the burden of proof was not established. The unsuitability of summary disposal was emphasized by the ensuing hearing, lasting four days and comprehending both affidavit and oral evidence.

5. At the outset, the court, with the consent of the parties, ordered that the 1st and 3rd defendants, as hitherto cited, be newly cited as 1st and 2nd plaintiffs, and the 2nd defendant be the sole defendant. This reflects the burden of proof, which, after informal discussion, was agreed to be on the plaintiffs as now cited. Insofar as the defendant was in possession of the goods at seizure, it followed that it would be entitled to them in the event that the plaintiffs failed to establish their case.

6. The only remaining point to be noted is that following the failure of an auction sale, the court gave leave to the defendant to purchase the goods for the sum of $512,000.00. This sum was paid into court, where it remains pending the outcome of these proceedings.

7. The stolen consignment of raw silk amounted to 50 bales of "Chinese White Steam Filature", with identifying marks "CSC" within a triangle and the words "NEW YORK" and some serial numbers. These marks appear on the combined transport bill of lading at exhibit HJC-3 to Hazel Cochrane's affidavit of 30th January 1991.

8. The raw silk seized from the defendant also amounted to 50 bales. It was said by Chan Chi Wai, a partner in the defendant firm, to have been purchased on 31st August 1989 from a business acquaintance, Tang Kwok Leung, who first approached him regarding the goods earlier that day. This emerges from Mr. Chan's answers to interrogatories filed on 22nd May 1990. Mr. Chan went on to affirm that when he was first so approached, he viewed the goods and agreed the price at the Lam Soon Warehouse in Cheung Sha Wan. The silk he said was on a goods vehicle which was driven into the warehouse car park. He then took delivery and paid the next day, 1st September, by one cash cheque for rather more than half and the balance by a further cheque post-dated to 7th September.

9. It therefore emerges that the quantities of the two lots of raw silk are the same, and that the one was stolen two days before the other was offered for sale. Without more, these two points of coincidence would not of course be sufficient to establish identity between the goods. The evidence of the parties has therefore been directed to establishing or refuting a chain of connection between what happened on and between the two dates of 29th and 31st August 1989.

10. This is a summary hearing and I do not propose to recite the evidence exhaustively. In deference however to the trouble and expense to which both sides have gone I will give my reasons in as brief a form as may be consistent with clarity.

11. I should firstly mention the witness who was not called, namely Tang Kwok Leung from whom Mr. Chan Chi Wai of the defendant firm bought the goods at the Lam Soon warehouse. There is a danger in assuming too much from the failure to call a witness. However, he was a business acquaintance of Mr. Chan and his copy identity card was attached to his receipt for the price at HJC 4 to Hazel Cochrane's affidavit of 30th January 1991. He could surely have given useful comment on the provenance of the goods, and his absence without explanation does not help the defendant.

12. Evidence on affirmation was given for the plaintiffs by Wong Hon Chung and Ha Cheuk Choi, and the former was tendered for cross-examination on his affirmation. They are respectively the Controller and Deputy Controller at Hong Kong International Terminals (H.I.T.), Container Freight Station, Kwai Chung. It was from the Freight Station that the plaintiffs' 50 bales of silk were said to be stolen on 29th August. Both these witnesses checked the vessel file records for the period 3rd August to 17th September 1989 and found there to have been only one consignment during that period matching the description on the bill of lading for the plaintiffs' stolen cargo. Counsel for the defendant eventually conceded as undisputed that the plaintiff's cargo was stolen from H.I.T. on 29th August 1991.

13. The Lam Soon warehouse was the venue of the delivery of the goods by Tang Kwok Leung to the defendant in the person of Chan Chi Wai. In order to draw the connection between its stolen goods and those delivered to the defendant, the plaintiffs sought to call Soong (or Sung) Sui Wah. Soong was convicted with four others in the District Court of stealing 50 bales of raw silk belonging to H.I.T. 30th August 1989. This was admitted by the defendant under a notice to admit facts, and is anyway admissible under section 62 of the Evidence Ordinance. Soong's evidence was therefore important to establish any knowledge he may have had of the disposal of the stolen goods.

14. At the hearing on 16th May 1991, plaintiffs' counsel sought to admit Soong's cautioned statement to the police, given during the criminal investigation and admitted by the judge at the subsequent trial. The court declined at that stage to admit this statement and an adjournment was granted to call Soong. Soong's statement was duly made subject to a hearsay notice by the plaintiffs, which was counter-noticed by the defendant. He was then personally served with a subpoena for the hearing on 19th August 1989. On that day he failed to appear and a handwritten letter was delivered to the court purporting to be from Soong himself and claiming be was too ill to attend court. There ensued a further contested application to admit Soong's cautioned statement.

15. In deciding that issue, the court noted that the adjournment in May had been granted at the instance of both parties, who each wanted to interview Soong. The defendant's counsel indicated that his instructing solicitors had tried to do so, but failed; he now applied for a further adjournment for Soong's oral evidence. The court bore in mind the numerous adjournments and the efforts made by the plaintiffs to secure Soong's personal attendance and found that the balance of justice favoured the admission of his statement into evidence. It is particularly relevant in this connection that Soong cannot possibly be partial to either side.

16. Soong's statement, which is attached to the hearsay not notice of 13th August 1991, says that he delivered the stolen silk to the Lam Soon Industrial Building in Cheung Yue Street. On reading the statement it is also clear that this delivery was on 31st August 1989, so the thief delivered the stolen goods to his buyer on the same date and at the same place as Chan Chi Wah for the defendant took delivery of the disputed goods from his seller. There is a discrepancy of one day between the date alleged and admitted for the theft by Soong (30th August) and the date deposed to by the witnesses Wong and Ha for the theft from H.I.T. (29th August). I discount this as an error on one side or the other as those latter witnesses clearly indicated that there were no similar goods in the possession of H.I.T. for a considerable period on either side of the two dates in question.

17. Ha Cheuk Choi, the Deputy Controller at H.I.T., in his affirmation of 29th January 1991 gave further evidence relied upon by the plaintiffs. After the 50 bales of raw silk were stolen from H.I.T., he attended Kwai Chung Police Station on 1st November 1989 and was asked to examine the 50 bales of raw silk seized from the defendant. At his request he was given instruments to weigh and measure the seized goods. He weighed and measured one bale and multiplied his findings in each case by 50. The results of his calculations were in each case extremely close to the weight and measurements for the stolen consignment given in the bill of lading produced at HJC 3 to Hazel Cochrane's affirmation of 30 January 1991. The discrepancies between the figures on the bill of lading and those on Mr. Ha's measurements were in fact no more than 0.27% for the weight, and 0.17% for the volume. Given the nature of Mr. Ha's method of calculation, these figures are indeed persuasive that the two consignments were identical.

18. Further support was adduced by the plaintiffs in the form of fax correspondence between their solicitors and an employee of China National Silk Import and Export, Sichuan Branch, the original shippers of the stolen consignment. These documents were produced under two hearsay notices of 12th August 1991. Although the notices had not expired by the date of hearing, the evidence is admissible by reason of the recipient, Mr. Xiang Yong, being stated to be beyond the seas and the lack of objection from the defendant. In three separate faxes Mr. Xiang indicated that he and three colleagues went to Kwai Chung police station to inspect the 50 seized bales of raw silk. By reason of the trademark coupled with the quality, standard, colour and feel of the silk they examined, he said that he and his colleagues found the seized goods to be the same as those they had consigned.

19. There was also oral evidence from Mr. Ho Kai Leung, an employee of China Resources Transportation and Godown Co. Ltd., the Hong Kong Agents for the Chinese shippers. The witness said he was asked by the police in early November 1989 to inspect some bales of silk at Kwai Chung police station; I infer from this that the goods inspected were those seized by the police although this was not expressly stated. The witness said he saw a vague triangle outline on two of the bales, which would be consistent with the shipping marks on the stolen consignment. Under cross-examination he agreed he had seen the mark "MBO" on the bales and agreed that this mark could be inconsistent with the goods stolen from H.I.T. Later in re-examination he amended this comment by saying that the presence of this mark was neutral.

20. The defendant relied on a Survey report produced by Mr. Lam Wai Ki, a cargo surveyor, as LWK-1 to his affirmation filed on 1st June 1991. The witness examined the seized bales at Kwai Chung police station on 6th May 1991 and found the same mark "MBO" as mentioned by the witness Ho Kai Leung. He also found one bale of "SANMEIPAI" brand, whereas other bales he examined were of "BLOSSOM" brand. I understand that the brand used by the consignors is "BLOSSOMS", although there has not been any further evidence pointing to he significance or otherwise of the "SANMEIPAI" mark on one bale. I accordingly attach no weight to this factor.

21. Similarly, the evidence of the mark "MBO" has not been developed by the defendant. As it stands, this evidence is marginally in the defendants' favour, but the defendant is required to go much further if it is to displace the weight of evidence adduced by the plaintiffs.

22. The plaintiffs have shown that the theft of their goods from H.I.T., occurred at roughly the same time as the theft from H.I.T. perpetrate by those convicted of stealing the goods seized from the defendant. The plaintiffs have shown that there were no similar goods in the possession of H.I.T. at that time, apart from their own goods. They have shown that the weight and volume of goods seized almost exactly matched their own stolen goods. They have shown that the goods stolen by Soong and his associates were delivered to the Lam Soon warehouse on the same day as Mr. Chan Chi Wai for the defendant took delivery of the disputed consignment. The plaintiffs have moreover the evidence of Xiang Yong of the shippers that the disputed consignment was the one consigned by them to Seritex.

23. Against all this evidence, the defendant's evidence is flimsy. The evidence of the "MBO" mark was not argued to any logical conclusion, and the best potential evidence for the defendant, that of Tang Kwok Leung, was not called. The defendant seemed content to rely on its possession of the disputed consignment and the burden of proof which the plaintiffs had consequently to assume. Even the survey evidence of Lam Wai Ki was not filed until 1st June 1991, seven months after the seizure of the goods and after this hearing had commenced.

24. I have no hesitation in finding that the plaintiffs have amply discharged their burden of proof with evidence which is utterly convincing that the disputed consignment is their stolen silk. The proceeds of the sale of the silk in the sum of $512,000.00, plus interest accrued thereon meanwhile is accordingly awarded to the plaintiffs.

25. Counsel agreed that costs should follow the award and these are ordered to the plaintiffs, including costs of all adjournments, with a certificate for counsel.