RELIANCE INDUSTRIAL CORPORATION LTD v. HAI SANG LOGISTICS LTD

HCA 396/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 396 OF 2003

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J U D G M E N T

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The claim

1. The plaintiff's claim against the defendant is for the sum of US$152,660.40 being the value of 20 coils of stainless steel ("the 20 coils") which were stored with the defendant and which the defendant wrongfully and without the prior knowledge and consent of the plaintiff released to Mr Lam Lin Tung ("Mr Lam") on or about 20 January 2003. The plaintiff's claim arises from a breach of duty on the part of the defendant as a bailee for reward of the 20 coils.

The defence

2. The defendant denies that it was ever a bailee of the 20 coils for the plaintiff. Its case is that it stored the 20 coils together with other coils of stainless steel for Mr Lam at the public storage area at Stonecutters Island. The defendant's case is that it took delivery of the coils of stainless steel from the plaintiff as agent or servant of Mr Lam and has stored them for Mr Lam (para 8 of the re-amended defence). Its case is that it was not a bailee for the plaintiff but was a bailee for Mr Lam. It, therefore, did not owe the plaintiff any duty as bailee.

3. The defendant also alleges that at a meeting held on or about 12 December 2002 at the Café of the Grand Tower Hotel in Mongkok, Kowloon an oral agreement was reached between the plaintiff, Mr Lam and the defendant whereby it was agreed that upon Mr Lam paying HK$245,086 and insurance money of HK$3,244 making a total of HK$248,330 the plaintiff would have no objection to Mr Lam taking delivery of the 20 coils from the public storage area ("the alleged compromise agreement"). It is alleged that pursuant to the alleged compromise agreement on or about 27 December 2002 Mr Lam paid the said sums to the plaintiff and thereafter on 20 January 2003 Mr Lam took delivery of the 20 coils from the public storage area (paras 20 and 21 of the re-amended defence).

4. It is also alleged by the defendant that Mr Lam was the owner of the 20 coils when the defendant took delivery of the same, including the other coils as property in the goods had passed to Mr Lam. It is further alleged, in the alternative, that when Mr Lam fully paid the purchase price of the goods property in the goods passed to him and Mr Lam was taking delivery of his own goods. In the further alternative, it is alleged that Mr Lam took delivery of the 20 coils on 20 January 2003 pursuant to the alleged compromise agreement (para 22 of the re-amended defence).

5. It is further averred by the defendant that Mr Lam was the true owner of the goods and as Mr Lam had demanded delivery of the same the defendant was obliged at law to deliver the same to him (para 23 of the re-amended defence).

6. The defendant further alleges that the plaintiff has been paid for the coils and suffered no loss of damage at all or alternatively, the damages suffered had been reduced or mitigated (para 24 of the re-amended defence).

The issues

7. It seems to me that these are the following issues:

(1) was the defendant the bailee of the plaintiff or Mr Lam when the 20 coils were released to Mr Lam on or about 20 January 2003?

(2) was there the alleged compromise agreement?

(3) whether the defendant can rely on the defence of jus tertii, namely, the right of Mr Lam as the true owner of the 20 coils?

(4) if it can, then whether the property in the 20 coils had passed from the plaintiff to Mr Lam?

(5) if the defendant is liable to the plaintiff for conversion, whether the defendant is liable to the plaintiff for the full value of the 20 coils?

The witnesses

8. I heard evidence from Mr Danny Wong Wing Ming("Mr Wong") a director of the plaintiff and from Mr Leung Pak Kan,("Mr Leung") of the defendant. I have no hesitation in finding Mr Wong to be a truthful, honest, credible and reliable witness whose evidence I accept. I cannot say the same for Mr Leung who was not a credible witness. He was evasive and not truthful. He was also unreliable. Where Mr Leung's evidence is at variance with the evidence of Mr Wong I much prefer the evidence of Mr Wong , whose evidence I accept without hesitation, to that of Mr Leung, whose evidence I reject.

The evidence and findings

9. The background facts are that the plaintiff and Mr Lam entered into contracts whereby the plaintiff sold and Mr Lam purchased quantities of stainless steel in coils.

10. By contract no IC/02-2648 ("contract 2648") dated 23 August 2002 the plaintiff sold and Mr Lam purchased 250 metric tons of stainless steel in coils for the total amount of US$370,000 with the description and on the terms as set out in the contract.

11. By another contract being contract no. 1C/02-2655 ("contract 2655") dated 27 August 2002 the plaintiff sold and Mr Lam purchased a total quantity of 640 metric tons of stainless steel in coils for the total amount of US$1,030,400 with the description and on the terms as set out in the contract. The goods were to be exported from Korea. It was agreed that Mr Lam should within 3 days of the contract remit the sum of HK$1,600,000 to the plaintiff's bank account. It was also agreed that Mr Lam should remit the entire purchase price to the plaintiff's bank account two working days before the handing over of a bill of lading by the plaintiff to Mr Lam. It is clear from the contract that Mr Lam was to pay the full purchase price of the goods to the plaintiff two working days before the plaintiff would hand over the bill of lading to Mr Lam. There is no dispute that the reference to the bill of lading was also a reference to the delivery order.

12. By a further contract being contract no. IC/02-2656 ("contract 2656") dated 28 August 2002 the plaintiff sold and Mr Lam purchased a total quantity of 1500 metric tons of stainless steel in coils for the total amount of US$1,800,000. This was for stainless steel from India with a letter of credit to be opened by Mr Lam in favour of the Indian supplier. Mr Lam was required to remit HK$1,400,000 to the plaintiff's bank account before 29 August 2002 as a deposit. After the letter of credit had been issued the plaintiff would return the deposit to Mr Lam. Under contract 2656, however, the plaintiff would only earn commission of US$20 per metric ton to be paid by Mr Lam. The letter of credit was to be established directly in favour of the Indian supplier.

13. Mr Wong gave evidence, which was uncontradicted by evidence from the defendant and which I accept, that the plaintiff received full payment from Mr Lam under contract no 2648 and that Mr Lam received all the goods shipped under that contract. Contract 2648 was fully performed by the end of September 2002. Mr Wong said that in fact Mr Lam had made overpayments of the sums of HK$51,731 and HK$7,056 making a total of HK$58,787 which was overpaid by Mr Lam under contract 2648. Mr Lam was given credit for this in respect of the later contracts.

14. Mr Wong also gave evidence that Mr Lam was required to pay a deposit of HK$1,600,000 to the plaintiff's account within 3 days of the signing of contract 2655, namely, on or before 30 August 2002. It was also provided in the contract that Mr Lam should make full payment for the goods 2 working days before the plaintiff would hand over the delivery order. Under contract 2656, Mr Lam was required to pay a deposit of HK$1,400,000 to the plaintiff's account before 29 August 2002 and to open the letter of credit directly to the Indian supplier which was to be opened before 10 September 2002. In breach of contracts 2655 and 2656 Mr Lam failed to pay the deposits in accordance with the terms of the contracts. Also, in breach of contract 2656 he failed to open the letter of credit for the full 1500 metric tons before 10 September 2002. Mr Lam only established a letter of credit for 1000 metric tons on or about 19 November 2003.

15. Mr Wong also said that Mr Lam paid HK$1,000,000 on 5 September 2002 and another HK$1,000,000 on 10 September 2002 into the plaintiff's bank account. He did not appropriate or give instructions as to how the sums were to be apportioned between the two contracts. The plaintiff treated and appropriated the first HK$1,000,000 paid on 5 September 2002 as a deposit under contract 2655. In respect of the second HK$1,000,000 paid on 10 September 2002 the plaintiff treated and appropriated HK$300,000 as a further deposit under contract 2655 and the balance of HK$700,000 as a deposit under contract 2656.

16. The plaintiff issued invoice no I-9551 dated 11 October 2002 in respect of contract 2655 to Mr Lam on learning that the vessel carrying the goods under that contract would arrive on or about 21 October 2002. The invoice amount was HK$8,066,450 as particularized in the invoice. After giving credit (a) for the deposit of the total of HK$1,300,000 treated and appropriated as deposit under this contract and (b) for the overpayment by Mr Lam of the total sum of HK$58,787 under contract 2648, the balance payable by Mr Lam to the plaintiff under the invoice was HK$6,707,663. Mr Lam failed to settle the outstanding balance under this invoice within 2 working days before the delivery order would be given by the plaintiff to Mr Lam in accordance with the contract.

17. Mr Wong also said that on or about 22 October 2002 the goods under contract 2655 packed in 140 coils arrived in Hong Kong. As Mr Lam had failed to make full payment the plaintiff was not prepared to release the goods to Mr Lam.

18. There is no dispute that the defendant collected the delivery order from the plaintiff for the 140 coils and stored the same at the public storage area. The dispute between the parties is whether the defendant stored the same on behalf of the plaintiff or on behalf of Mr Lam. Was the defendant the bailee of the plaintiff or the bailee of Mr Lam?

19. Undoubtedly the goods were stored with the defendant. The plaintiff learnt that the defendant was a logistics company acquainted with Mr Lam and had storage space at the public storage area of Stonecutters Island.

20. In his witness statement Mr Wong gave the impression that he personally was informed by Mr Lam and Mr Lam's sister that the defendant was a logistics company with storage space at the public storage area at Stonecutters Island and that he accepted Mr Lam's suggestion that the goods under contract 2655 be stored with the defendant after arrival in Hong Kong on or about 22 October 2002. In his witness statement he also said that he arranged for the goods to be stored with the defendant as the plaintiff's bailee who held the same as the plaintiff's bailee.

21. However, in evidence Mr Wong said that it was not him but that it was Mr Brent Yip Yiu Pan("Mr Yip") of the plaintiff, the person who handled all the shipping matters, who had dealt with these matters. He apologised for what was contained in his witness statement and explained that he treated references to himself as referring to the plaintiff. I am of the view that the misleading impression given in his witness statement was the result of carelessness on Mr Wong's part and that he did not try to mislead the Court. He confirmed in evidence that it was not him but Mr Yip who discussed the storage of the goods under contract 2655 with Mr Lam and Miss Lam.

22. Mr Wong also explained that contrary to what is stated in the letter of demand and at para. 4 of the statement of claim, it was Mr Yip and not him who had requested Mr Leung not to release the 20 coils to Mr Lam. It seems to me that this again was carelessness on Mr Wong's part in giving instructions when the letter of demand and the statement of claim were settled. Mr Leung denied that he was asked not to release the 20 coils to Mr Lam but I do not believe him. I prefer the evidence of Mr Wong to that of Mr Leung.

23. I am satisfied that Mr Wong's credibility has not been undermined. I accept Mr Wong's explanations for the mistakes made in his witness statement and the pleading. I find that Mr Wong was a truthful, honest, credible and reliable witness. I have no hesitation in accepting his evidence.

24. It is abundantly clear that there is no dispute between the parties that the defendant was a bailee for someone. Either it was for the plaintiff or for Mr Lam.

25. There is no dispute that a total of 120 coils of the goods were released to Mr Lam on divers dates between 4 November 2002 and 4 December 2002 after partial payments were made by Mr Lam to the plaintiff. Mr Wong said that whenever Mr Lam made partial payment of the price under contract 2655 Mr Yip would phone Mr Leung to confirm that the defendant could release the relevant and corresponding quantity of goods. I accept his evidence.

26. There is also important contemporaneous documentary evidence in support of the plaintiff's case.

27. By a fax dated 4 November 2002 the plaintiff instructed the defendant to release a maximum of 40 coils to Miss Lam . There is no dispute that on or about 4 November 2002 40 coils were released by the defendant to Mr Lam or Miss Lam. By another fax dated 6 November 2002 the plaintiff instructed the defendant to release a maximum of 30 coils to Miss Lam. There is no dispute that on or about 6 November 2002 30 coils were released by the defendant to Mr Lam or Miss Lam.

28. On or about 3 December 2002 the plaintiff sent a fax ("the 3 December fax") to the defendant (wrongly dated as 3 November) referring to the two prior releases of the goods on 4 November and 6 November leaving a balance of 70 coils with the defendant. In respect of the 70 coils remaining the plaintiff gave instructions to the defendant by the 3 December fax to release 50 coils to Miss Lam. There is no dispute that the defendant released 50 coils of the said goods to Mr or Miss Lam on 4 December.

29. At the bottom of the 3 December fax is a handwritten message to Mr Yip from the defendant, dated 4 December 2002 with an imprint of the defendant's chop, informing Mr Yip that the defendant had a total of 20 coils left. The 3 December fax with the handwritten message was faxed to the plaintiff on 5 December 2002 as shown in the fax header. Thus by the handwritten message the defendant was informing the plaintiff that after the release of the coils it still had 20 coils in its custody as at 4 December 2002.

30. Mr Leung said that he did not regard any of the plaintiff's said faxes as instructions from the plaintiff to release the goods to Mr Lam or Miss Lam. He just ignored the faxes when he received them. He also said that as regards the handwritten message at the bottom of 3 December fax he simply provided the information to Mr Yip as he was his friend and had asked for the information. He was unconvincing and I reject his evidence. He failed to satisfactorily explain why the defendant had kept the faxes. These were disclosed by the defendant so the defendant must have kept the faxes. I do not believe Mr Leung. He was evasive and not telling the truth about these matters.

31. Mr Leung's evidence is also contradicted by the contemporaneous documentary evidence. These clearly show that the plaintiff was giving instructions to the defendant to release quantities of the coils from time to time and after such instructions were received by the defendant the relevant quantities were in fact released to Mr Lam or Miss Lam.

32. Mr Wong gave evidence that on 2 December 2002 the plaintiff stopped Mr Lam from getting some goods from the defendant. This was the subject of a complaint by Mr Lam to Mr Wong in the letter Mr Lam sent to Mr Wong dated 3 December 2002. There would be no reason for Mr Lam to complain to the plaintiff if indeed it were the case that the defendant had held the goods for Mr Lam and could get the goods anytime from the defendant as Mr Leung had said in evidence. Mr Leung was evasive when asked about whether the plaintiff had successfully obstructed Mr Lam from obtaining some of the goods from the defendant on 2 December 2002. I do not believe Mr Leung when he said that he held the coils in the storage area for Mr Lam and not for the plaintiff.

33. Mr Wong also said that in fact the plaintiff had made a mistake and should have released 50 more coils to Mr Lam out of the 70 coils remaining with the defendant on 3rd December. That was why the plaintiff sent the 3 December fax to the defendant asking the defendant to release 50 coils to Mr Lam. I believe Mr Wong.

34. On 4th December 2002 Mr Wong responded to Mr Lam's complaint by a fax of that date. Mr Lam was clearly informed that if he wanted to collect the balance of the quantity of goods under contract 2655 he had to pay the plaintiff the amounts due by him to the plaintiff in the total amount of HK$870,996 before 10 December 2002. The amount of HK$870,996 included the outstanding purchase price and insurance premium under contract 2655 as well as the commission due to the plaintiff under contract 2656 which Mr Lam was obliged to pay to the plaintiff. Mr Lam, therefore, knew that if he wanted to collect the 20 coils he had to pay the plaintiff the said sum of HK$870,996.

35. Mr Wong also gave evidence that on or about 12 December 2002 he had a meeting with Mr Lam, Mr Leung and Miss Lam at the Café of the Grand Tower Hotel. There is a dispute between the parties as to whether the parties entered into the alleged compromise agreement at this meeting. Mr Wong was adamant that he maintained his stance as set out in his fax to Mr Lam of 4th December and stressed that the total sum of HK$870,996 had to be paid in full before he would agree to release the 20 coils. He denied that he had ever agreed to release the said 20 coils upon payment of the sum of HK$248,330. He denied that there was the alleged compromise agreement.

36. Mr Leung initially said in his evidence, both in chief and cross-examination, that during the meeting of 12 December 2002 there was no discussion by anyone as to whether or not the 20 coils would be released. He, however, later on in evidence said that at the meeting the plaintiff agreed to release the 20 coils to Mr Lam on payment of the further sum of about HK$200,000. He said that he went to the meeting at the request of Mr Yip who failed to attend and that he only went there as a middleman, although he regarded himself as a party to the alleged compromise agreement that he says was reached at the meeting. He was evasive and inconsistent in his evidence. I do not believe him. I believe Mr Wong. By 12 December 2002 there was no reason for Mr Wong to change his previous stance as set out in his fax of 4 December. I find that the alleged compromise agreement was never made.

37. It seems to me that the contemporaneous documentary evidence makes it abundantly clear that the plaintiff, Mr Lam and the defendant at all material times treated the defendant as the bailor of the coils under contract 2655. This reflected what the true situation was namely, that the defendant held the goods as bailee for the plaintiff and not for Mr Lam.

38. Mr Hung submitted that the faxes from the plaintiff to the defendant amount to subsequent conduct of the parties and were not admissible, save for admissions. He relied on Overseas Trust Bank Ltd v. Lee See Ching John & another [1999] 3 HKC 197. That case provides no assistance to the defendant. In that case the deceased died leaving a substantial amount of cash in fixed deposit accounts with various banks. Some of the accounts were in the deceased's own name, some in names of family members or trusted friends or employees. The deceased operated the accounts in other persons' names without reference to the named account holder. The court was concerned with what evidence was admissible to displace the operation of the presumption of advancement of the moneys in the account in the absence of evidence of the deceased's intentions. It was held that admissible evidence to prove the deceased's intention in relation to the accounts was limited to the deceased's acts or declarations at the time of the gifts or so near them and to later acts or declarations against his interest or of his estate. That case is clearly distinguishable and affords no assistance to the defendant.

39. The faxes of 4th November, 6th November and the 3 December fax from the plaintiff to the defendant were agreed documents and the admissibility of the same was agreed. That being so Mr Hung cannot maintain that these documents are inadmissible.

40. In any event, I have no hesitation in finding that the faxes are relevant and admissible. The issue between the parties is whether the defendant was holding the 140 coils for the plaintiff or for Mr Lam for the period from on or about 22 October 2002 to on or about 20 January 2003 when the balance of the 20 coils were released to Mr Lam. The faxes were sent by the plaintiff to the defendant and on 4 December 2002 Mr Leung wrote down the number of coils on the 3 December fax and faxed it back to the plaintiff on 5th December 2002. The faxes were contemporaneous correspondence between the parties during the period of the relationship of bailor and bailee and are clearly relevant and admissible. There is no merit in Mr Hung's submission.

41. I have no hesitation in finding that the defendant held the goods under contract 2655, which it received on or about 22 October 2002, on behalf of the plaintiff and not on behalf of Mr Lam. If they were held on behalf of Mr Lam it would not have been necessary for the plaintiff to give instructions for their release from time to time . Mr Lam could have taken them from the defendant at any time. It would also have been unnecessary for Mr Lam and Mr Leung to have a meeting on 12 December 2002 with Mr Wong. It is clear that save for the release of the 20 coils on or about 20 Jan 2003, for each and every release of the coils under contract 2655 the plaintiff did give instructions for the release to the defendant and it was only after such instructions were given that the same was released by the defendant to Mr Lam or Miss Lam.

42. In my judgment the defendant was storing the goods under contract 2655 as bailee for the plaintiff who was the bailor.

43. Issue (1) is resolved in favour of the plaintiff. In my judgment, the defendant was the bailee of the plaintiff when the 20 coils were released to Mr Lam on or about 20 January 2003.

44. Issue (2 ) is also resolved in favour of the plaintiff. In my judgment there was no alleged compromise agreement.

45. There can be no dispute that the bailee owes a duty to the bailor not to do any intentional act inconsistent with the bailor's rights in the goods the subject of the bailment. He has a duty not to convert them (para 1-10 Clerk & Lindsell on Torts, 18th Edn.).

46. As to issue (3), the defendant seeks to rely on the defence of jus tertii, namely the right of Mr Lam as the true owner of the 20 coils. The plaintiff disputes that the defendant is entitled to rely on jus tertii.

47. It is stated at para 1083 Vol 16 Halsbury's Laws of England 4th Edn Re-Issue that:

"An estoppel somewhat similar to that between landlord and tenant arises at common law from the relation of bailor and bailee. As a general rule a bailee is estopped from denying the title of the bailor from whom he received the goods, and he is equally estopped from denying the title of one to whom he has attorned as his bailee, undertaking to hold the goods for him. As in the case of a tenant, however, the estoppel ceases if the bailee is evicted by title paramount."

48. In Biddle v. Bond 6 B. & S. 225 it was held that the estoppel against a bailee from disputing the title of his bailor, and setting up a jus tertii, ceases when the bailment on which the estoppel is founded is determined by what is equivalent to an eviction by title paramount. It is, however, not enough that the bailee has become aware of the title of a third person, or that an adverse claim is made upon him, so that he may be entitled to an interpleader. It was also said by the Court in that case that a bailee can set up the title of another only if he defends upon the right and the title, and by the authority of that person (at page 234).

49. In Rogers, Sons & Co. v Lambert & Co. [1891] 1 Q.B. 318 it was held that the bailee of goods cannot avail himself of the title of a third person to the goods as a defence except by further showing that he is defending the action on behalf and by authority of such third person.

50. Mr Hung submitted that the defendant acted under the authority of Mr Lam the true owner and it, therefore, was not bound by the estoppel and could raise the jus tertii. I am unable to accept Mr Hung's submission. The authorities show that the bailee cannot avail himself of the title of a third person unless he can show that he is defending the action on behalf and by authority of such third person. There is no evidence at all that the defendant is defending this action on behalf and by authority of Mr Lam. The defendant released the 20 coils to Mr Lam on or about 20 January 2003 without the prior knowledge and consent of the plaintiff. On my findings, the defendant held the goods on behalf of the plaintiff as from about 22 October 2002. If Mr Lam had an adverse claim to the 20 coils, the defendant ought to have interpleaded. Instead the defendant released the 20 coils to Mr Lam. It is plain that the defendant defends this action in its own right and in its own interest. The defendant has alleged that it was a party to the alleged compromise agreement which I have found was never made. In my judgment, the defendant has failed to show that it is defending the action on behalf and by authority of Mr Lam. In my judgment the defendant cannot rely on the defence of jus tertii. Issue (3) is resolved in favour of the plaintiff.

51. As the defendant cannot set up the jus tertii issue (4) does not arise.

52. In my judgment the defendant is liable to the plaintiff for the tort of conversion when it released the 20 coils to Mr Lam without the prior knowledge and consent of the plaintiff. The plaintiff is entitled to damages for conversion.

Measure of damages

53. I turn to the measure of damages. As is stated at para 14-119 Clerk & Lindsell on Torts 18th Edn:

"A claimant in conversion can generally recover the value of the goods, whether or not this represents his actual loss. Thus he can claim the value of goods destroyed, notwithstanding the fact that he had previously sold them to a third party to whom risk had passed, and that third party had actually paid him. Again, a buyer whose seller wrongfully retakes the goods can recover in full, even though he may not have paid for them and by the retaking is relieved of the obligation to do so,".

54. The plaintiff claims the full value of the 20 coils. The 20 coils have been identified by the coil numbers written by Mr Leung in the 3rd December fax. I am satisfied on the documentary evidence that the total weight of the 20 coils was 50.75 metric tons. The unit price per metric ton is stated in contract 2655 to be US$1,700. That comes to the total sum of US$152,660.40 (50.75 x US$1,700), the amount claimed. The plaintiff has established that the said sum is the full value of the 20 coils. This was not really disputed by the defendant.

55. Mr Hung submitted, however, that the plaintiff is not entitled to claim the full value of the goods. On the evidence the plaintiff received HK$248,330 on or about 27 December 2002 from Mr Lam. He submitted that the plaintiff has, therefore, received full payment for the goods and the Court should not award the full value of the goods as damages as this would amount to a windfall for the plaintiff.

56. Mr Hung referred to para 615 Vol. 45(2) Halsbury's Laws of England 4th Edn Reissue where it is stated:

"There is no universal rule for the assessment of damages in conversion. Conversion varies widely both in form and in effect and requires a flexible remedial response. In general, damages in conversion are compensatory, their object being to repair the actual loss which the claimant suffers by reason of the conversion. This conforms to the general rule that damages in tort must(so far as money can do so) put the person whose right has been invaded in the same position as if it had been respected. Accordingly, an award of damages in conversion must operate neither by way of penalty to the defendant nor by way of windfall to the claimant."

57. Mr Shum submitted that the above passage at para 615 Vol. 45(2) Halsbury's Laws of England does not deal with the situation of a bailor and bailee relationship and that in this case there was no question of a windfall. He also submitted that the Court should not enquire into the dispute between the plaintiff and Mr Lam in assessing damages for conversion based on the full value of the goods. He relied on para 14-119 Clerk & Lindsell as set out above.

58. Mr Shum derives considerable support from the authorities he relied on.

59. In The Charlotte [1908] P. 206 the sellers of wood goods shipped the goods to their agents under a bill of lading who forwarded it to the buyers and authorized them to retain it against their acceptance at four months, or cash less discount. The buyers elected to pay in cash but their cheque was not credited as paid until three days after the vessel carrying the goods had been in a collision with another vessel and the goods had been damaged. The goods were sold on behalf of underwriters. The underwriters subsequently paid the buyers for a total loss and the sellers retained the proceeds of the cheque representing the invoice value of the goods. In an action for damages for the collision brought against the other vessel by the owners of the goods in the carrying ship, the names of the buyers were given as plaintiffs, but the Court held that the buyers had no right of action, as the property in the goods was not vested in them at the time of the collision. By leave the names of the sellers were added as plaintiffs. The Court of Appeal held that the passing of the cheque from the buyers to the sellers did not deprive the underwriters of their right to recover the loss from the wrongdoer in the name of the sellers, who were the owners of the goods at the time of the collision.

60. Lord Alverstone C.J. said at page 215 that:

"Then it is said that because [the sellers] received a cheque ................ and cashed it, therefore [the sellers] cannot sue in their names for the benefit of whom it may concern........................................................................................ I can see no legal principle upon which that proposition can be maintained, and no authority has been cited to us in support of such a proposition. Therefore it seems to me that this action being in the name of the owners of the cargo, when the name of [the buyers] is given at first, when objection is taken that the property had not passed to them, and when the names of other plaintiffs are added, then the question is whether [the sellers] have the right to sue, either for themselves or for the benefit of persons who have the real interest; and it seems to me that the mere passing of the cheque cannot be held to deprive the underwriters who had to pay, of their right to recover in the name of the vendors who were the owners of the cargo at the time of the collision."

61. And Kennedy LJ said at page 217 that:

"I am unable to understand upon what grounds those who represent the wrong-doers can successfully argue that because [the sellers] have , as a matter of fact, had the transaction carried out by the payment of that cheque some days after the collision, [the sellers] have in some way lost their rights. If they are the proper parties to say, "This was our cargo that was lost, pay us the damage," can it be any answer to say, "You have been paid by the vendees, who, relying upon the insurance for the benefit of whom it might concern, have sent the money to you, as it were in advance"? I confess I am unable myself to understand that reasoning. I do not see what the legal foundation for that is ― how it can be said that the wrong-doers can say, "Because the vendee has paid you, and relies upon your giving him the benefit of the policy, we have not anything to pay you for having damaged your cargo."

62. In Henderson & Co. v. Williams [1895] 1 Q.B. 521 the owner of goods at a warehouse was induced by the fraud of F. to instruct the warehouseman to transfer the goods to the order of F. and the goods were accordingly placed at F.'s disposal. F. then sold the goods to an innocent purchaser who, before paying the price, obtained a statement from the warehouseman that he held the goods at the purchaser's order. On the discovery of F.'s fraud, the warehouseman refused to deliver the goods to the purchaser. In an action by the purchaser against the warehouseman it was held that the warehouseman, having attorned to the purchaser, was estopped from impeaching his title, that the refusal to deliver was a conversion , and that the measure of damages was the market value of the goods at the date of the refusal.

63. Lord Halsbury said at page 529:

"That brings me to the only remaining question, namely , the question of damages; and I confess I am wholly unable to understand the mode in which these damages were assessed. If I am right in the conclusion at which I have arrived, the truth is that the plaintiffs here were entitled to the market value of the goods. It is immaterial in what form the payment was made. If I were to go into that question I should say that the extinguishment of [F.'s] debt and the return of his cheque would be an ample consideration; but I protest against being involved in any such inquiry. These goods were under these circumstances the goods of the plaintiffs. They ought to have been delivered , and were refused. That is a conversion of these goods; and it appears to me, therefore, that the ordinary rule of law applies, that the plaintiffs complaining of conversion of their goods are entitled to the market value of those goods at the time of the conversion."

64. As I have found, the defendant cannot rely on the defence of jus tertii. That being so, the relationship of bailor and bailee is clear. The defendant has a duty not to convert the 20 coils. By releasing the same to Mr Lam on or about 20 January 2003 without the prior knowledge and consent of the plaintiff the defendant is liable for the tort of conversion. The damages recoverable by the plaintiff are the full value of the goods namely, US$152,660.40. The Court should not enquire into the dispute between the plaintiff and Mr Lam. However, from the evidence of Mr Wong, which I accept, the 20 coils were to be released to Mr Lam only upon the full payment of HK$870,996 to the plaintiff by Mr Lam. That was a matter between the plaintiff and Mr Lam. The plaintiff never received the full payment of HK$870,996. I fail to see how the bailee as the wrong-doer can rely on the payment of the sum of $248,330 on 27 December 2002 by Mr Lam to the plaintiff to defeat or diminish the plaintiff's entitlement to the full value of the 20 coils as damages for the defendant's tort of conversion. There is no question of the plaintiff receiving a windfall.

65. I accept Mr Shum's submissions and reject Mr Hung's submissions.

66. The case of Solloway & Another v McLaughlin [1938] A.C.247 relied on by Mr Hung provides no assistance to the defendant. In that case a client of a stockbroker on a margin account instructed his stockbroker to buy a number of shares for him of a certain company at the then market value and at the same time he deposited with the brokers shares of the same company as margin. The shares declined in value, the client received requests for further margin and he deposited more of the same class of shares and also paid a sum in cash. The stockbrokers, however, while purporting to buy, contemporaneously sold shares of the same company and used their client's shares to complete those sales. They also sold at once the shares which the client had deposited as margin. When the client at a later date closed his account, the stockbroker went into the market and bought the necessary number of shares at the then market price, which was substantially lower than at the date when the client gave his original order to buy and deposited the shares as margin, and delivered them to the client. It was held that the transactions were part of a fraudulent system of business and were themselves fraudulent in their inception, continuance and completion. A broker, although not under an obligation to retain for his client the specific shares which might be delivered to him under the contract made for his client, had to get into his possession and retain an equivalent number of shares. The brokers never had the right to deal with the shares deposited by the client and their disposal of them amounted of conversion. The client was entitled to damages measured by the value of the shares at the date of the conversion less the value of the shares received from the wrong-doer stockbrokers at the time he received them. Solloway is clearly distinguishable and provides no assistance to the defendant.

67. In my judgment the plaintiff is entitled to the full value of the 20 coils from the defendant as the measure of damages. I give judgment to the plaintiff in the sum of US$152,660.40 with interest thereon from the date of conversion, i.e. from 20 January 2003 at 1% above prime rate until judgment and thereafter at judgment rate until payment. I also make an order nisi that the defendant do pay the plaintiff its costs of the action.