HANG CHEONG MOULD FTY. (A FIRM) v. RODOPI LTD. AND OTHERS

1992 No. A912

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. On 3rd February 1992, Ryan, J. on an ex parte application by the plaintiff in this action ordered, inter alia that the 1st defendant and the 2nd defendant be restrained from selling, supplying or otherwise parting with possession of 108 industrial moulds currently in the premises of the 2nd defendant and delivered to the 2nd defendant by the 1st defendant or its agent on 1st February 1992. In support of such ex parte application, an affirmation by Mr Fung Kin Ka, then in draft was read to the court. This affirmation was subsequently filed on 8th February 1992.

2. By a summons issued on 15th February 1992, the 1st defendant seeks to discharge Ryan, J.'s order. In support of such application, an affidavit by Mr Pierre Oliver De Barrin, chairman of the 1st defendant, whom I shall refer to for the sake of brevity as "POB", together with an affirmation by Mr Linus Wong, were filed on 17th February 1992 when the hearing of the application for discharge of the injunction commenced. On that occasion I gave leave for the joinder of Earnway Industries Ltd. (which from now on I shall refer to as "Earnway" for the purpose of brevity) as 3rd defendant and for the plaintiff to file evidence in reply within one week of 17th February 1992. In the event, the plaintiff only filed an affirmation in reply on 4th March 1992. Earnway also filed an affirmation by one of its solicitors which was later replaced by an affirmation by Miss Wong Suk Ching filed on 6th March 1992.

3. I was asked by the 1st defendant to exclude the second affirmation of Mr Fung for failure to comply with my directions. But upon hearing argument, I allowed the affirmation on terms that the 1st defendant may file evidence in reply thereto. Mr Xavier thus tendered a second affidavit by Mr De Barrin, and a second affirmation by Mr Linus Wong, both of which were sworn on 6th March 1992 and filed on 7th March 1992.

4. The evidence before the Court was voluminous. It contains countless assertions and counter assertions of fact, some of which can only be determined by the hearing of oral evidence. I can, therefore, only refer to such part of the evidence as I consider necessary and relevant for the purposes of this ruling.

5. The court is asked to discharge the injunction on four grounds. Firstly, that there had been material non-disclosure. Secondly, that there was no evidence of likelihood of disposal of the moulds. Thirdly, that there was no evidence of the plaintiff's ability to honour the undertaking as to damages given to the court and fourthly, that there had been failure to show the plaintiff's interest in the action.

6. I shall first deal with the question of material non-disclosure. It is trite law that in an ex parte application, there must be full disclosure of all material facts. Lord Cozens-Hardy, M.R. in R. v. Kensington Income Tax Commissioners (1917] KB 486 at page 505 referred to the application for an ex parte application as:-

"... very much governed by the same principles which govern insurances, matters which are said to require the utmost good faith, 'uberrima fides'."

At page 504 of the report, Lord Cozens-Hardy, M.R. applied the following dicta in Lord Langdale's judgment in Dalglish v. Jarvie 2 Mac. & G. 231 at page 238-

"It is the duty of a party asking for an injunction to bring under the notice of the Court all facts material to the determination of his right to that injunction, and it is no excuse for him to say that he was not aware of the importance of any facts which he has omitted to bring forward.

...

It is quite clear that every fact must be stated, or, even if there had been evidence enough to sustain the injunction, it will be dissolved. That is to say he would not decide upon the merits, but said that if an applicant does not act with uberrima fides and put every material fact before the Court it will not grant him an injunction even though there might be facts upon which the injunction might be granted, but that he must come again on a fresh injunction."

Then at page 506 of the report, Lord Cozens-Hardy, M.R. had this to say:-

"If you make a statement which is false or conceal something which is relevant from the Court, the Court will discharge the order and say 'You can come again if you like, but we will discharge this order, and we will apply the general rule of the Court to applications like this.' There are many cases in which the same principle would apply. Then it is said 'That is so unfair; you are depriving us of our right to a prohibition on the ground of concealment or misstatement in the affidavit.' The answer is that the prerogative writ is not a matter of course. The applicant must come in the manner prescribed and must be perfectly frank and open with the Court."

7. Of course, the Court was dealing with a prerogative order in that case, but the same principles would certainly apply to the exercise of the Court's equitable jurisdiction. The same sentiments were echoed by Warrington, L.J. at page 509 of the report when he said:-

"It is perfectly well settled that a person who makes an ex parte application to the Court that is to say, in the absence of the person who will be affected by that which the Court is asked to do - is under an obligation to the Court to make the fullest possible disclosure of all material facts within his knowledge, and if he does not make that fullest possible disclosure, then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may have already obtained by means of the order which has thus wrongly been obtained by him."

8. Equally Scrutton, L.J., at p.514, had the same feeling and he says, citing Wigram V.-C., in the case of Castelli v. Cook (1849) 7 Hare, 89, 94:-

"A plaintiff applying ex parte comes (as it has been expressed) under a contract with the Court that he will state the whole case fully and fairly to the Court. If he fails to do that, and the Court finds, when the other party applies to dissolve the injunction, that any material fact has been suppressed or not properly brought forward, the plaintiff is told that the Court will not decide on the merits, and that, as he has broken faith with the Court, the injunction must go."

9. All three judges, hold an important place in the firmament of the common law. I have indicated that the underlying principle derives from the maxim : "He who comes to equity must come with clean hands". I would add to this, the rider that material non-disclosure amounts to an abuse of the court's process and that is why the court must purge the abuse by refusing to continue with the injunction without descending onto the merits.

10. At the ex parte application before Ryan, J., which was made by Mr McCoy who is now replaced by Lai, both of counsel, the plaintiff relied on an affirmation made by Mr Fung Kin Ka who described himself as the supervisor of the plaintiff's company. Of course, describing the plaintiff as a company is a misnomer, it is in fact a firm made up of partners. It has now been discovered by the 1st defendant, through a business registration search, that Mr Fung was and is a partner of the plaintiff. I shall refer to this affirmation as the first affirmation of Mr Fung because he subsequently filed a second affirmation in response to the application for discharge of the ex parte order.

11. The first affirmation began by recounting that on 1st February 1992, there took place a purported search by the police who were accompanied by POB of the plaintiff's premises without warrant for moulds, said to belong to the 1st defendant and reported to the police to have been stolen. Mr Fung claimed that he "knew that the moulds either belonged to the plaintiff's company, other companies or to Earnway" (which has, as its business address, one floor below the plaintiff). Mr Fung said he tried to stop the police from recovering the moulds and a "999" call resulted in a visit by three uniformed officers who after speaking with their colleague, one Mr Lam, on the scene, left. POB identified 108 moulds as his to the police, and at 2 p.m. that day, these moulds were taken away by the police despite Mr Fung's strong protest. Then at 6 p.m. that day, Mr Fung met Mr Law, the managing director of Earnway, inside the Report Room of Tsing Yi Police Station. In their presence, the police, by one Inspector Lam, confirmed that they had seized the 108 moulds POB had identified to be his. Inspector Lam also said that due to shortage of space in the police station, and as he was satisfied that POB was the true owner and as there was an Anton Piller Order in respect of the moulds, he had released the moulds to POB. Mr Fung and Mr Law tried to persuade Inspector Lam that : "These goods belong to us but he did not listen to us and sent us away." Mr Fung later in his affirmation said that he verily believed that : "The defendant company is not entitled to the 108 moulds. The police officers had wrongfully seized the 108 moulds and released them to the 1st defendant who had no rights in the moulds".

12. What the plaintiff was essentially putting forward to the Court on the occasion of the ex parte application was that it was the victim of an illegal search and property in which the defendant had no rights were illegally seized by the police and handed to the 1st defendant who thereby obtained as a windfall the fruits of such illegal action. Presented with a picture like this, no court would hesitate to give an injunction.

13. But even on the face of the affirmation, there are two disturbing factors which call out for explanation, namely:

(1) The police had said to Mr Fung that they were satisfied that the goods belonged to POB. Police officers do not generally do something like this unless they had good reasons. What were the reasons? Even if the police officers gave no reasons, could there have been an objective state of affairs which-gave rise to this behaviour?

(2) There was an Anton Piller Order issued in High Court Action No.A9453 of 1991 against Earnway whereby Earnway had to deliver to the 1st defendant certain moulds belonging to the 1st defendant. As the plaintiff was not a party to these proceedings, and Mr Fung had met Mr Law of Earnway at the Police Station on 1st February 1992 when the Anton Piller Order was referred to by the police, Mr Fung must certainly have been aware of its existence if not of its terms. By the time of the application, he had access to a copy, and possibly more information from Mr Law as to its state of enforcement. Afterall, that order was made on 9th December 1991. As some of the moulds were said to have belonged to Earnway, the Anton Piller Order would have put the plaintiff on notice as to whether any of the moulds in the plaintiff's possession were the subject of the Anton Piller Order. In the light of Mr Fung's own assertion in para.19 of his first affirmation that the 1st defendant had no rights to the moulds, the presence of the Anton Piller Order must have at least called for an explanation from Earnway.

14. It has now been pointed out by the 1st defendant to this Court that of the 108 moulds seized by the police, many of them contained the name "Rodopi" marked on them, as well as model and/or part numbers which are model and part numbers used by Rodopi, namely the 1st defendant.

15. During the time POB and the police were in the plaintiff's premises, Mr Fung of Earnway was seen to have been taking notes of moulds identified to be Rodopi's and when POB tried to look at other moulds, Mr Fung said that they did not belong to Rodopi. Further, a female member of staff of Earnway was seen at the plaintiff's premises during the time the examination took place who was identified as such by the police. This may explain the subsequent appearance of Mr Law of Earnway at the Tsing Yi Police Station.

16. More fundamentally, the position put forward to Ryan, J. was that the plaintiff and Earnway and other companies owned the moulds, see paras. 8 and 13 of Mr Fung's first affirmation. It was not until 17th February when counsel for the plaintiff appeared before this Court that it was said that the plaintiff claims as a bailee with a lien. Mr Fung, in a second affirmation filed on 4th March 1992, said that the moulds in suit had been in the plaintiff's lawful custody long before the recent events giving rise to present proceedings (see para. 4) and some of the moulds were new built on orders placed by the 3rd defendant and were not fully paid for. Mr Fung then produced a list of the moulds as Exhibit "FKK4" (which I shall refer to simply as "FKK-4") to his second affirmation showing the extent of his lien. "FKK4" showed that the majority of the moulds were built by Earnway and the extent of the unpaid lien exercised over such moulds extended to a sum which added together came to slightly over HK$40,000. As to the moulds said to have been built for parties other than Earnway, the lien related largely to item 108 listed against one Hing Tai which it is said owed the plaintiff a sum of $190,000.

17. Thus, he goes on to say in para. 5 of his second affirmation that the plaintiff was:

"... in lawful possession of the moulds with a lien on outstanding mould price and other service charges. In robbing us of the moulds with the help of the police, the 1st defendant disturbed our lien and exposed us to liability towards our customers."

18. A lien is possessory in nature and derives from a strictly defined set of circumstances, such as non-payment for services rendered in relation to the improvement or manufacture of the article in question. To say, as Mr Fung did in his first affirmation, that the goods belonged to the plaintiff, other persons or Earnway, does not begin to truly characterise the legal basis of the right upon which the ex parte injunction was sought and given.

19. There is more to the obfuscation presented to the Court at the ex parte hearing.

20. It was represented to the court by Mr Fung that the illegal entry and seizure took place in the plaintiff's premises only and these premises were identified as A4, 13th Floor, Tsing Yi Industrial Centre (hereinafter referred to simply as "Unit A4") and that Earnway had as its business address one floor below. The clear inference was that Earnway had not4ing to do with Unit A4.

21. The Anton Piller Order which was shown to the Court contained two addresses, one the unit immediately below on the 12th floor and another unit on the 7th floor. Mr Fung in a second affirmation filed on 4th March 1992 now informs the Court that the plaintiff occupied only part of Unit A4, in fact, half of its area. The plaintiff's area consisted of an office and workshop occupying about 2,000 sq.ft., of the 4,000 odd sq.ft. of Unit A4 and this was leased to the plaintiff by Earnway. Earnway occupied the remaining area. Earnway was, in fact, the owner of Unit A4.

22. Mr Fung was present at the time the moulds in suit were removed by the police. As the plaintiff sought injunctive relief on its own behalf, there being no other plaintiff, of all the moulds in suit, it was important that it placed all relevant information before the Court to show the precise nature of its rights over the moulds. In view of the split occupation of Unit A4, it was important firstly to inform the Court of this fact and secondly, to inform the Court as to which of the moulds were taken from which part of the premises, so as to explain why the plaintiff can claim to be wronged by the seizure, particularly if any of the moulds were taken from the part of the premises of which the plaintiff had no right to possession.

23. Furthermore, the Anton Piller Order required Earnway to deliver up the moulds owned by the 1st defendant. The fact that moulds marked "Rodopi" were seen in Unit A4, which it has now been disclosed is owned by Earnway, would have put any person upon inquiry as to whether there is more to Earnway's protestation that it owned the moulds. At least the Court should have been informed as that certainly would have a bearing on the Court's exercise of its discretion.

24. Mr Linus Wong in a second affirmation of 6th March 1992 (but filed in 7th March 1992) informs the court that save for three moulds, namely items 82, 83 and 108 of Exhibit "WSC-6" of the affirmation of Miss Wong Suk Ching of 2nd March 1992 filed on behalf of Earnway in High Court Action No.9453 of 1991, and a set of moulds referred to in item 107 in the said WSC-6 which were removed by the police from the workshop, all the moulds in suit were removed from outside the workshop, namely the area in which Earnway retained possession. I have no doubt that if a court had been told that Unit A4 was in fact owned and part occupied by Earnway; the moulds had Rodopi markings and numbers on them; that the majority was found in that part of Unit A4 in which Earnway had possession; that the plaintiff had a lien only in respect of the handful set out in "FKK4", it would have thought long and hard before giving an order in the form that was given. As the Court was deprived of this information which is clearly within the knowledge of Mr Fung, the order made was unfairly obtained and in the circumstances, I have no hesitation in discharing the order.

25. A party making an ex parte application must realise that a judge presented with a bundle, often a very large bundle of papers and with a short time to make a decision, must rely totally on the information put before him or her. A particularly heavy onus is therefore placed on a party to make full disclosure. Any fact which would have been relevant to the judges' decision is material and must therefore be disclosed.

26. Having come to my decision to discharge the ex parte order on the grounds stated above, I do not propose to dwell on the 1st defendant's other reasons for discharge except to make two further observations.

27. Firstly, the 1st defendant says that there was no evidence of likelihood of disposal before the Court. There was, in fact, evidence of sorts in the form of para. 20 of the first affirmation of Mr Fung. But even that fails to comply with rules relating to affidavit evidence when hearsay evidence is given. The "reliable source" relied on as having provided the information that the 1st defendant had contracted to sell the moulds was not named. Accepting that it is often only possible to show risk of disposal from circumstantial and frequently indirect evidence, at least the source should have been disclosed.

28. Secondly, it is said that there was no evidence to show the plaintiff's ability to honour its undertaking as to damages. I would hesitate to suggest that there is an invariable rule to disclose means in every ex parte application. The duty must derive from the circumstances of each case. This is a case where a very large number of moulds bearing Rodopi markings were the subject of an injunction. As the moulds were for production, the consequential losses may well be large. In the circumstances, I believe that it would have been relevant for an applicant to inform the Court of its financial ability to honour the undertaking as a matter which, in these circumstances, would weigh with the court in making a decision. Without laying down any invariable rule, I believe that it is, in any event, good practice in all cases to give information to the court as to financial ability to meet the undertaking and where the applicant is low on or devoid of means, to give information as to such circumstances, as would, in the interest of justice, require that the injunction should nonetheless be issued.

29. Mr Xavier has informed me that the 1st defendant has, after it had reasonable opportunity to examine the moulds in suit, realised that certain of the moulds were not its property and but for the injunction would have returned the moulds. The 1st defendant is now free to do so.

30. I now come to the inter partes application.

31. On 6th March 1992, the plaintiff sought and obtained leave from this court to amend the inter partes summons for continuation of the injunction. In its amended form, the summons seeks the return of all 108 moulds to the plaintiff, or alternatively an injunction to issue against the 1st and 2nd defendants whether by themselves, their servants or agents from selling, pledging, relinquishing possession, damaging or otherwise disposing of the said moulds, save and except that the 1st defendant may be permitted to use the moulds for the plastic injection moulding manufacturing process in the ordinary course of business on terms that the 1st defendant do either pay $5m or such other sum as the Court deems fit, or otherwise provide acceptable security, and that in the event of the 1st defendant transferring possession of any of the moulds to persons other than parties of this action, that such persons shall be deemed agents of the 1st defendant who shall procure an undertaking from such persons to comply with the Court's order, that such undertaking be filed in Court and an indemnity given by the 1st defendant against loss.

32. The 3rd defendant, Earnway, supported the plaintiff's application. The case of the plaintiff as supported by Earnway and as appears from counsel's arguments and affirmations filed by Mr Fung on behalf of the plaintiff and Miss Wong Suk Ching on behalf of the 3rd defendant, may be summarised thus:

(a) 'That the Anton Piller Order restricted the 1st defendant's entry to two premises only neither of which were Unit A4. And in entering Unit A4, by its directors and staff, the 1st defendant committed trespass.

(b) That the moulds in suit were delivered long before the disputes between the 1st and the 3rd defendants and there was therefore no question of the plaintiff company conspiring with the 3rd defendant to evade the Anton Piller Order.

(c) That it was the 1st defendant's false report of theft which resulted in the illegal entry and seizure by the police of the moulds in suit.

(d) That the illegal action of the police disturbed the liens of the plaintiff and the 3rd defendant in the moulds.

(e) That receiving the moulds from the police and retaining such moulds amounts to conversion by the 1st defendant.

(f) That the Court should not condone such illegal action and restore the position to that pertaining before the illegal action, namely, returning the moulds to the plaintiff.

(g) That by 0.29, r.6, a person claiming the recovery of specific property from a party who does not dispute the plaintiff's title but claims to be entitled to retain the property by virtue of a lien as security for any sum of money, the court may order the party claiming recovery, to pay into court the amount of the money claimed as security and upon such payment that the property be given up. The 1st defendant may therefore keep the moulds upon full payment of the amounts claimed by the 3rd defendant, such claims being to all intents and purposes, bona fide made.

33. Since both the plaintiff and the 3rd defendant claim a lien over the moulds, it is necessary to look at the juridical nature of a lien. The concept of "lien" arise from the common law. It is a principle of the common law that a bailee has a lien over a chattel if he has spent skill and labour on its improvement. This is generally known as the repairer's lien and he may retain the goods until he is paid for his services. As such, the lien is possessory only. Once possession is lost, so does the lien. Another legal characteristic of a lien, is that it is specific to a particular chattel for non-payment of a particular debt. It is therefore enforceable only against the debtor and those acting for him. Further, as with all common law rights arising by operation of law, liens arise only where there is no agreement to the contrary.

34. Let us then look at the rights claimed by the plaintiff. The rights were not spelt out in Mr Fung's first affirmation. Mr Fung merely said that the moulds "either belong to the plaintiff, other companies or to Earnway Industries Ltd", see para. 8.

35. In his econd affirmation, he was more informative. In para. 4 of this affirmation, he indicates that the plaintiff had lawful custody of a substantial portion of the moulds in suit long before the recent events giving rise to the present proceedings. He then states that some of the moulds were new built by the plaintiff on orders placed by the 3rd defendant and to the extent that the purchase price has not been fully paid, the plaintiff claims a lien. Others were third party moulds given to the plaintiff by the 3rd defendant for modification and repair, in addition to certain metal moulds being built for a customer named Hing Tai who have nothing to do with the defendants in the present action.

36. In "FKK4" of his affirmation, prepared after a joint inspection of the premises on 28th February 1992, Mr Fung sets out the source of each of the moulds in suit, i.e. where each mould came from, the applicable purchase order or delivery note, the date on which the moulds were said to have been left with the plaintiff, the reason for delivery of the moulds to the plaintiff, and any sums owing on the moulds. Perusal of "FKK4" would show that all of the moulds were sourced to Earnway with the exception of 6 which were sourced to Hing Tai and one to the plaintiff. Of the 101 sourced to Earnway, liens for relatively small sums were claimed against 15. The sums owed totalled slightly over HK$40,000.

37. The position taken by the plaintiff is that it has lawful possession over all the moulds in question as a bailee and as to some of them, it had in addition a lien against the parties owing it money for work done on such moulds.

38. Arising from the same joint inspection held on 28th February 1992, Earnway produced a list sourcing the moulds in suit as "WSC-6" to an affirmation dated 2nd March 1992 of Miss Wong Suk Ching, filed in HCA9453 of 1991 and exhibited as "WSC-1" to an affirmation filed 6th March 1992 in the present action.

39. Insofar as "WSC-6" sources the moulds in suit to the 1st defendant, I am informed by Mr Xavier that the 1st defendant accepts the sourcing and intends, subject to the discharge of the ex parte injunction which has now happened, to return the remainder to the plaintiff. The 3rd defendant, Earnway, however, claims a lien over the moulds sourced to the 1st defendant in "WSC-6".

40. The 3rd defendant's claim over these moulds arise from 2 sets of alleged circumstances. In paras.5 and 10 of Miss Wong Suk Ching's affirmation of 6th March 1992, it is asserted that the 1st defendant is indebted to the 3rd defendant in the sum of over $2m, as to HK$763,600 of which for outstanding mould charges including the mini HiFi referred to para. 16 of Mr de Barrin's first affidavit, whereas the balance represents the unpaid price for goods manufactured by the "defendant" for the "plaintiff" using the moulds. Here, of course, the "defendant", since the affirmation was filed in Action 9453 of 1991, refers to Earnway and the "plaintiff" refers to the 1st defendant in the present action. Such goods, it is said, had been delivered and accepted by the 1st defendant.

41. Miss Wong deposes to advice from her legal advisers, which she verily believes, that the 3rd defendant has a lien over the moulds for the outstanding charges for manufacture of the moulds and the unpaid price of goods made with the moulds and sold to and accepted by the 1st defendant. That is not, with respect, the end of the story.

42. A lien is attached to specific property and arises from unpaid charges for services rendered in connection with the making or improvement of that property. Applying the legend to "WSC-6", there are only five moulds, namely numbers 16, 21, 24, 25 and 27 sourced to the 1st defendant for which it is said the price has not been paid. No mention is made as to what the unpaid price is in respect to each item. In contrast, there are ten items for which it is said the price has been paid, numbers 18, 22, 28 to 34. As to the rest of the moulds sourced to the 1st defendant, the legend is uninformative. It merely says "from remarks (1)". Thus, for the moulds in suit sourced to the 1st defendant in "WSC-6", the Court is told that there are five for which unstated prices remained unpaid. As to these, there is a prima facie case that the 3rd defendant may have a lien. It is, however, wholly uncertain as to the basis of the lien for the rest, save the assertion of a general lien being claimed over all the moulds in respect of unpaid price of the goods made from the moulds and sold and delivered to the 1st defendant. As to this, whilst the 3rd defendant may have a lien over the goods so manufactured before their delivery, once delivery is effected, their only recourse lies an action on the price. No lien can attach to the moulds used for manufacture of the goods. A lien only arises where improvement and/or repair had been effected to the moulds for which money is due and owing.

43. Thus, as far as the 3rd defendant is concerned, the Court is presented with an uncertain picture. Whilst on the face of "WSC-6", there is a prima facie case for a lien on five moulds, even then it is not known as to what amounts are owing in respect of each of such moulds. As to the rest, the position is wholly uncertain.

44. As this is the plaintiff's application for the return of the moulds, the Court must now turn to the plaintiff's causes of action. The plaintiff's generally endorsed writ' merely claims damages without stating the causes of action relied on. Mr Fung, in para. 8 of his second affirmation, states "that the plaintiff's causes of action are trespass and conversion in respect of the 1st defendant's unlawful entry into our premises and the unlawful removal, detention or disposal of our metal moulds". I have been urged by counsel for the plaintiff to find that an illegal entry and seizure by the police have taken place at the instigation of the 1st defendant.

45. I have carefully read the affidavits filed on behalf of the plaintiff and the 1st defendant in the action and find that it is impossible to come to any concluded view. I would, however, be willing to find that there is a serious issue to be tried as to whether the police had acted wrongfully and thereby trespassed in the plaintiff's premises and converted the moulds by removing and disposing of them to the 1st defendant.

46. To the extent that the 1st defendant may have acted in concert with the police, or instigated the police action, there may well be causes of action against them in trespass and conversion either as joint tortfeasors with the police or by themselves, but that must await a fully pleaded case and then, trial.

47. Having found a triable issue, the Court has next to consider whether damages represent an adequate remedy before beginning to consider whether or not to invoke its equitable jurisdiction.

48. Firstly, as to trespass. That has already occurred if there had been trespass. There is no threatened act of a new trespass and the Court must leave the matter to rest in a claim for damages.

49. As to conversion, the goods were, it is claimed illegally wrested from the plaintiff's lawful possession by the police and given to the 1st defendant.

50. The claim of the plaintiff is, however, no more than one of a lien on certain of the moulds and mere custodial possession over the rest.

51. The moulds are now in the hands of the 1st defendant who are the owners of the moulds, save those which it intends to return. The 1st defendant's ownership is undisputed. Miss Wong Suk-ching, in para.10 of her affirmation of 2nd March 1992 filed in HCA 9453 of 1991, states :-

"The defendant (which is Earnway) does not dispute the plaintiff's (which is Rodopi) ownership to the moulds but some of the moulds were admittedly commissioned by the plaintiff and manufactured by the defendant, the plaintiff has not fully paid the prices and I am advised by the defendant's legal advisers and verily believed that the defendant has a lien over the moulds."

52. From the plaintiff's position, it had lost its lien and to the extent that it is unable to recover on the $40,000 odd which Earnway owed it, it would have suffered loss. As to the moulds which are not owned by the 1st defendant, they are to be returned. As the moulds which are owned by the 1st defendant, but for which the 3rd defendant claims a lien, the 3rd defendant can hardly make the plaintiff responsible for their removal to the 1st defendant's possession as that was the act of a third party, namely, the police, from whom the 3rd defendant may well seek legal redress.

53. To the extent that the seizure may have caused the plaintiff to be in breach of any contractual obligation, the claims have not been particularised. In view of the intended return of the goods by the 1st defendant, the likelihood of such claims may well be low. In any event, it was open to the plaintiff, in mitigation of its possible loss, to seek variation of the injunction on terms that certain of the moulds be returned to their owners. It would be in the interest of Rodopi to agree. It has not been alleged by the plaintiff that the moulds were left with it for remunerative warehousing nor is the plaintiff a manufacturer who requires the moulds for manufacturing. Thus, there cannot be any consequential loss apart from what has already been stated.

54. Insofar as conversion of the moulds are concerned, I therefore find no basis for saying that compensatory damages, which are the only damages sought in this case, do not represent an adequate remedy.

55. On the basis that I be wrong in my assessment, I shall now begin to consider whether the equitable jurisdiction of the court should be invoked. I shall guide myself by embarking upon a consideration of the matter in the following two stages :-

(a) Whether the balance of convenience favours the plaintiff, and if it does;

(b) Whether in all the circumstances, the court should invoke its equitable jurisdiction to compel the 1st defendant to return the moulds or place restraints on their use.

56. The plaintiff is neither a manufacturer nor a warehouseman for remuneration. The 1st defendant has already indicated to this court that such of the moulds, as it does not own as shown in "WSC-6", it intends to return to the plaintiff. It has an action on foot against the 1st and 2nd defendants and may well join the police. There is no evidence before me as to why the plaintiff, if it were successful, would not be able to recover, from either the 1st defendant or the government, if the police were to be joined. As the-removal of the moulds was the act of a third party, the plaintiff is not subject to suit save to the extent that it was made in breach of any contractual obligation. The extent of such claim has not been particularised and can, in fact, now be mitigated by the return of such moulds as are not owned by the 1st defendant. Indeed, such mitigation was open to the plaintiff all along.

57. The plaintiff's interest as a bailee, assuming the goods were in his possession, a fact which the split occupation of Unit A4 and Mr Linus Wong's evidence now throws into doubt, cannot be enforced against a paramount owner which the lst defendant undoubtedly is, nor can the plaintiff enforce its lien against the 1st defendant. A lien may only be enforced against the 3rd defendant who is the plaintiff's debtor. The only residual interest of the plaintiff, if it be interest at all, lies in its wish to protect the 3rd defendant's lien as particularised in Wong Suk Ching's affirmation of 2nd March 1992, the last sentence of para.10 of which states : "The defendant (Earnway) has no intention of using any of the moulds and will undertake not to do so".

58. On the other hand, the 1st defendant is a maker and exporter of telephones whose lifeline lies in these moulds. In Mr de Barrin's voluminous evidence filed in this action, he referred to the fact that the 1st defendant produced telephones which were in great demand and which in fact, had been awarded the Governor's Award. The disappearance of the moulds had caused drastic problems for the lst defendant's business. Many letters of credit had been opened for orders which could not be met and these letters of credit have now expired. The 1st defendant is continuing to expend fixed overheads monthly at the rate of US$250,000. Without the moulds, the 1st defendant would be deprived of any means of generating income and would have no alternative but to close its business. Mr deBarrin informs this Court by para.45 of his second affidavit dated 6th March 1992 that since February 1992, two groups of investors have agreed to restructure the finances of Rodopi and at present, HK$4m. has been injected into Rodopi's business.

59. I have not been told whether such investment was contingent on the 1st defendant being able to continue to produce the telephones for which there has been considerable demand. However, it would offend common sense that any investor would continue, or indeed, begin to venture so much money if the 1st defendant was unable to continue to produce. Thus, with the moulds the 1st defendant has the chance to become a viable business again, whereas if it had not, there would be no alternative to closure. The loss which the 1st defendant is likely to suffer bears no comparison to the loss likely to be suffered by the plaintiff or the 3rd defendant. At worst, the plaintiff and the 3rd defendant had lost their security in the moulds. The continuation of the 1st defendant's business would at least ensure that they can recover such debts or damages as they may have against the 1st defendant.

60. Thus, I find that the balance of convenience does not favour the plaintiff nor the 3rd defendant insofar as I have to consider the 3rd defendant's interest in this exercise. If I be wrong, I shall next consider whether in all the circumstances, I should invoke the equitable jurisdiction of the court.

61. It is basic to the exercise of the court's equitable jurisdiction that a person who comes to it must come with clean hands. That is a primary requirement which any supplicant in a court of equity must fulfil. He cannot for example say "the respondent has dirtier hands", and so he has the better claim to equitable relief. The supplicant must first show that he is clean-handed and then if he passes this test, the court will then take into account the dirty hands of the respondent (if any) in the exercise of its jurisdiction.

62. The plaintiff has presented a less than clear picture of the ownership of the moulds to the court on the ex parte application. That has resulted in the discharge of the ex parte injunction but I must say that the episode leaves the court with continuing doubts as to the bona fides of the plaintiff. As early as 17th February 1992, when Mr de Barrin's first affidavit was filed in this action, the plaintiff was informed by paras.45 - 52 of the affidavit that the plaintiff and/or Earnway had been using Unit A4 to infringe the copyright of the 1st defendant. There had been no reply to such allegations. When, Mr Xavier, in a piece of astute detective work, pointed out last Friday, 6th March 1992, that certain delivery notes, notably page 73 of "FKK-5", may be fabricated due to the fact that they contain New Territories telephone numbers without the "zero" prefix well in advance of it being dropped on 30th December 1989, there was no explanation forthcoming save the assertion by counsel for the plaintiff that there could be an innocent explanation which may be given at the trial.

63. Mr Fung, who was a partner to the plaintiff, has kept this fact from the Court and the 1st defendant had to point this out by a business registration search. The impression he gave the Court was that he was a supervisor, in other words, a servant. This is conduct which is less than ingenuous.

64. Insofar as I have to consider the 3rd defendant's conduct in the exercise of my equitable jurisdiction, I am indebted to Mr Xavier for his careful examination of the affidavit evidence. From 9th December 1991, the 3rd defendant had been ordered to deliver up the 1st defendant's moulds. Since Unit A4 is owned by the 3rd defendant and the majority of the moulds are held in that part of A4 which was not in the plaintiff's exclusive possession, there can be no doubt that the 3rd defendant knew that the moulds were kept there. In any event, if the plaintiff was the 3rd defendant's bailee, I would find it highly surprising that the 3rd defendant would not know that the moulds seized from A4 were not the subject matter of the Anton Piller Order. The 3rd defendant never explained why the order was not complied with.

65. Also from 9th December 1991, when Mr de Barrin's affidavit evidence in HCA No.9543 was filed, there were allegations of a conspiracy between the 3rd defendant and the plaintiff's staff Mr Willy Hau and Linda Lau. Various transcripts of recorded telephone conversations between Mr Hau and Mr Samuel Law were exhibited and in part read to this Court by Mr Xavier. These transcripts do not put the 3rd defendant in good light. They show that the 3rd defendant, by its director, Mr Samuel Law, was sending persons to intimidate the 1st defendant's staff and sought to influence the 1st defendant's PRC supplier (Soundway) so as to make it difficult for the 1st defendant to survive. The Cantonese vernacular "play him (POB) to death" was used by Mr Law, as shown in the transcripts.

66. The documents disclosed in POB-41 to POB-45 of Mr de Barrin's second affidavit filed in this action on 6th March 1992, painstakingly explained to me by Mr Xavier, show a prima facie case of a company connected with the 3rd defendant, namely, Basictex, in the form of common shareholding by Mr Samuel Law, actually buying up goods which should have been sold to the 1st defendant and goods which were in fact shown in some of the documents to have been sold and delivered to the 1st defendant never got to the defendant but ended up with a firm by the name of "China Resources Trading". It is suggested by Mr Chaine that such conduct is capable of innocent explanation in that the 1st defendant's customers, feeling impatient with the 1st defendant's continuing inability to deliver, resorted understandably to Basictex. But that does not explain why some of the documents showed the PRC manufacturer (Soundway) as having delivered certain telephones to Rodopi Ltd. or Rodopi Manufacturing Ltd. when these goods did not in fact reach their consignees. However, exactly the same quantities, with the same shipping marks, were sent to China Resources Trading. These documents link Linda Lau, Willy Hau former employers of the 1st defendant and Mr Yu of Soundway to the 3rd defendant and leave one, together with the transcripts, with the impression that the balance of probability lies firmly in favour of Mr de Barrin's allegation of a concerted effort by Mr Law of the 3rd defendant and the 1st defendant's former staff Linda Law and Willy Hau to drive the 1st defendant out of business.

67. I do not find such conduct worthy of the assistance of a court of conscience which a court of equity finally is. In any event, the Anton Piller Order, until its discharge, is effective and the 3rd defendant is bound to deliver the moulds therein mentioned to the 1st defendant. Making an order in the terms sought in the inter partes summons would detract from the Anton Piller order.

68. Finally, I have been urged by Mr Chaine to apply O.29, r.6. Upon consideration of the rule, I find it has no application here. The rule is applicable to a situation where a plaintiff or a defendant in a counterclaim claims against specific property in the hands of a person who holds a lien. We are not faced with such a situation since the goods have been placed in the hands of the owner, albeit by an alleged illegal act. The question for the Court is whether the lien should be restored. Restoration involves invoking the equitable jurisdiction of the Court since the common law remedy lies only in damages. In any event, only the 3rd defendant can claim a lien against the 1st defendant and the extent of that lien is, to this date, uncertain to this Court. Having decided that I will not invoke the equitable jurisdiction of the Court, this question, therefore, does not arise to be decided.

69. It remains for me to thank counsel for their interesting and helpful arguments in this matter. I would hope that they would not regard it as a mark of disrespect if I did not deal with all of their arguments. The need to bring this matter to a speedy conclusion necessitates the course I have taken and I hope that my vote of gratitude to counsel would make up in part for my inability to deal with all of their interesting arguments. I shall now hear applications for costs and consequential directions, if any are needed.

(Submissions on Costs)

70. Mr Xavier applied for costs for both applications in any event to be taxed on an indemnity basis. Whilst Mr Lai does not contest the application for costs on the basis that the general rule is that costs should follow the event, he asks the Court not to make an order for taxation on an indemnity basis. He argues-that since the plaintiff relied completely on the advice of his legal advisers, it should not be penalised. I cannot, however, agree with the argument as legal advisers are agents of the plaintiff and the 1st defendant should not be made to suffer from their actions. The ex parte application had been discharged by non-disclosures which I consider to be grave. I therefore consider that for the application for discharge, the plaintiff should pay the 1st and 2nd defendants' costs in any event, to be taxed on an indemnity basis, and I so order. As. for the inter partes summons, I will make the usual order that the plaintiff do pay the 1st and 2nd defendants' costs in any event, to be taxed on a party-to-party basis.

71. Mr Xavier asked for an inquiry as to damages. As he was not ready to suggest detailed directions, I gave him liberty to apply for an inquiry. He further undertook to this Court that the 1st defendant will not sell the moulds sourced to it in WSC-6 and will produce such moulds to court upon being so directed, provided that the lst defendant may take such moulds to the PRC for use.