WONG CHOW HOI SZE ELSIE v. CROWN WINE CELLARS LTD

CACV 262/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 262 OF 2015

(ON APPEAL FROM HCA NO 43 OF 2014)

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REASONS FOR JUDGMENT
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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.  This is an appeal against the decision of Deputy High Court Judge Campbell-Moffat SC giving the Defendant unconditional leave to defend in this action. On 8 April 2016, we dismissed the appeal with costs. We now give reasons for our decision.

2.  The Plaintiff’s claim was made in respect of a stock of 797 bottles of fine wine stored at the Defendant’s cellars.  The original owner of the stock was the husband of the Plaintiff.  The husband ran into financial difficulties and in September 2005, he purported to transfer the stock to the Plaintiff.  In February 2006, a bankruptcy order was made against the husband.  The trustees in bankruptcy wrote to the Defendant to dispute the transfer of ownership of the wines.  In the meantime, the Plaintiff demanded the Defendant to release the wines to her in November 2006.   In light of the dispute as to title and the non-payment of some of the charges and the lack of arrangement to pay for the requisite wine duty, the Defendant did not release the same to the Plaintiff. 

3.  Due to the accumulation of storage charges (which the Plaintiff disputed), the Defendant sold part of the stock of wine in 2013 at the price of US$172,650.10 (converted to HK$1,335,728.06).  After deducting the storage and legal costs, there was a net balance of $227,783.47 with 55 bottles of wine which were unsold. 

4.  The dispute as to title was only resolved in 2014 in the interpleader proceedings issued by the Defendant.  The trustees in bankruptcy decided not to contest the title.  By a consent order made on 12 November 2014 in HCMP 730 of 2014, the court ordered the balance of the sale proceeds and the 55 bottles of wine be delivered to the solicitors for the Plaintiff and the Defendant had complied with that order.

5.  The present action was commenced on 3 January 2014 before the launch of the interpleader proceedings.  However, by the time the summons herein was taken out by the Plaintiff on 17 December 2014, the consent order in the interpleader proceedings had taken effect.

6.  Though the summons asked for relief under Order 14, Order 14A as well as the striking out of the defence pursuant to Order 18 Rule 19, by the time the case reached this court we were only concerned with the application for summary judgment.  This is because when the summons was heard by Master C Chow on 10 June 2015, she granted summary judgment as follows:

“ Final judgment be entered in this action against the Defendant for the sum of HK$1,335,728.06 with interest thereon less the sum of HK$227,783.47 already paid to the Plaintiff under HCMP 730 of 2014 and the sum of HK$70,608.78 being the storage charge as of 31 October 2006 together with the costs of this action including the costs of this application to be taxed if not agreed with certificate for Counsel.”

7.  The Defendant appealed against the decision of the master and on 20 July 2015 Deputy High Court Judge Campbell-Moffat SC allowed the appeal and granted the Defendant unconditional leave to defend.

8.  The Plaintiff appealed to this court and by her Notice of Appeal of 27 November 2015 she sought to restore the summary judgment granted by the master.  The Notice of Appeal did not seek other relief pursuant to the summons.

9.  We came to the conclusion that this is not an appropriate case for summary judgment for reasons different from those given by the judge.  We accept that if bailment is established, the Plaintiff might have a good argument in terms of a bailee being estopped from denying the title of its bailor.  However, the Plaintiff had not formulated her case in the Writ or the Statement of Claim based on bailment.  At paragraph 2 of the Statement of Claim, she only advanced her claim based on her ownership of the wine. 

10.  Though arguments on bailment were advanced by way of submissions, it is elementary that if summary judgment were to be granted, it could only be granted on the claims set out in the statement of claim.  If there were defects in the statement of claim, it had to be amended before one can seek summary judgment.  See Hong Kong Civil Procedure 2016 paragraphs 14/1/5 and 14/1/6. 

11.  This is not an arid point on pleadings.  Due to the failure on the part of the Plaintiff to plead a case of bailment, we cannot be certain that all evidence relevant to bailment is before the court.  In light of the history of the matter, this is not a straightforward case of bailment.  The wine stock was deposited with the Defendant by the husband of the Plaintiff.  If the Plaintiff were to become the bailor, there had to be attornment by the Defendant. However, due to the lack of focus on the question of attornment, Mr Yuen (appearing for the Plaintiff) could only point to some inconclusive evidence pertaining to the question of attornment. As the Plaintiff had not pleaded a case of bailment or attornment, we are not prepared to regard the pleas in the defence as conclusive on the matter.  On the materials before us, there is an arguable issue on whether the Defendant had become a bailee of the wine stock for the Plaintiff by attornment.  Much depends on the factual matrix at the material time and the position had not been clearly set out in the affidavit evidence. 

12.  Further, quite apart from that problem in the Plaintiff’s case, the Plaintiff also failed to persuade us that the defence of lien and withholding the release of wine pending payment of outstanding storage charges and concrete arrangement to cover the wine duty was unarguable.  The credit card of the Plaintiff had expired in November 2006 when her solicitors demanded for the release of the wine stock.  Though there was a suggestion of making arrangement for delivery of the stock out of Hong Kong to obviate the need to pay wine duty, no concrete arrangement had ever been put forward.  It is therefore arguable that even if she were the bailor, the Plaintiff had not put herself in a position to demand for the release of the wine stock.

13.  Thirdly, Mr Yuen told us that the Plaintiff sought summary judgment in respect of the balance of the sale proceeds on the basis of a restitution claim as opposed to a claim for damages.  We observed that the Plaintiff had actually received the 55 bottles and the net balance in the sum of $227,783.47 from the Defendant.  Whether that amounted to a waiver of tort or other form of election may be arguable.  In any event, that being the case, we think it must be arguable that the Defendant should be entitled to credit in respect of the storage charges from 2006 to 2013.  The Plaintiff had benefitted from preservation of the wines by the Defendant since, on the evidence before us, the market values of the wines had risen from $312,660.30 (in 2006, as stated in the letter of 13 November 2006 from the solicitors of the Defendant) to the sale price of $1,335,728.06 in 2013 (with 55 bottles left behind). 

14.  Before us, Mr Yuen was unable to dispute these propositions derived from China Pacific SA v Food Corporation of India [1982]AC 940: (1) a bailee, including a gratuitous bailee, owes a duty of care to the bailor to take such measures to preserve the goods and there is a correlative right for the bailee to charge the bailor with the expenses reasonably incurred in fulfilling that duty; (2) there is an exception to that rule when the bailee exercises his right of lien and the expenses were incurred by him exclusively for his own benefit and from which the bailor derived no benefit. 

15.  As it is plainly arguable that the preservation of the wines from 2006 to 2013 had resulted in benefit to the Plaintiff (in terms of her seeking to reap the proceeds of sale in 2013), it must be arguable that the Defendant should be able to charge her for the expenses in relation to such preservation.

16.  We further note that the Plaintiff did not advance such a restitution claim in the writ though a claim for the balance of the sale proceeds was included in the prayers in the Statement of Claim.  Mr Yuen quite properly accepted that the writ needed to be amended. 

17.  For all the foregoing reasons, the Plaintiff is not entitled to summary judgment and we agree with the judge that the Defendant should have unconditional leave to defend.