XCHRX LEUNG WING YIU v. SIU KING YUEN AND OTHERS

HCA 5382/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5382 OF 1996

____________

____________

______________

J U D G M E N T

______________

1. I have already given detailed background about these proceedings and this appeal in my judgment of 5 November 2001 and I would not repeat the same here.

2. In the light of my judgment of 5 November 2001, the appeal is now only concerned with the 2nd Defendant and the Plaintiff. At the outset I will deal with the point raised by Mr Chong on behalf of the 2nd Defendant. His submission is that the rationale of my judgment of 5 November 2001 applies equally to the 2nd Defendant, notwithstanding that the 2nd Defendant was not a partner in the partnership. He said so because of paragraph 4 in the order of Cheung J as set out at p.21 of the judgment of Cheung J dated 16 March 2001. That paragraph directed that there would be payment to the 2nd Defendant of all sums found due after the taking of account in sub-paragraph 3 of the order. Sub-paragraph 3 provided for account to be taken by the Master of all monies collected by the Plaintiff and/or Mr Siu and/or Mr Yeung from the new companies, customers and debtors from 1 November 1995 to the date of that order.

3. As stated in my judgment of 5 November 2001 the reason why I say an overall account should be taken is based on the rationale that as between the partners, there is a right akin to a right of set off (see paragraph 12 of my previous judgment). That does not apply to the 2nd Defendant. I have to ask myself whether the order of Cheung J conferred a right of set off upon the 2nd Defendant by reason of the paragraph highlighted by Mr Chong. In general law there is no right of set off because obviously the matters which are directed to be taken into account pursuant to those provisions of the order of Cheung J were not related to furniture, machinery and equipment. I also discern nothing in the order of Cheung J that there should be such a right of set off as far as the 2nd Defendant is concerned. Therefore I hold against Mr Chong on this point. In the light of that I have to deal with the appeal against the order for interim payment by the Master on the basis that there is nothing in the order of Cheung J to prevent the Plaintiff from making that application at this stage.

4. Mr Simon Lam appearing for the Plaintiff pinpointed three outstanding issues. The first question is the date of valuation. Mr Lam argued that the date should be in November 1995. On the hand, Mr Chong said the relevant date should be 14 days after the date of the order of Cheung J.

5. In my judgment reading the order of Cheung J as a whole, it is the intention of Cheung J that the cut off point should be the date of the order. This is reflected in the following provisions in the order:

"(1) An account be taken by the Master of all profits made by the new Company, [that is the 2nd Defendant] during the period from 1 November 1995 to the date of this order.

(2) An account be taken by the Master of all profits made by Mr Siu and Mr Yeung from all business activities of the new company, [that is the 2nd Defendant] during the period from 1 November 1995 to the date of this order.

(3) Payment to the Plaintiff of all sums found due after taking of the accounts and the Plaintiff is to receive sums on behalf of the firms.

(4) Payment to the Plaintiff of interest on sums found at half of judgment rate from 1 November 1995 to the date of this order."

And also at p.21 of Cheung J's judgment, there is an order for:

"(1) an account be taken by the Master of all debts due collected by Mr Siu and/or Mr Yeung and/or the Plaintiff from the firm's customers and debtors from 1 November 1995 to the date of this order.

(3) an account be taken by the Master of all sums collected by the Plaintiff and/or Mr Siu and/or Mr Yeung from 2nd Defendant's customers and debtors from 1 November 1995 to the date of this order."

6. Hence, it is obvious that although the firm was dissolved on 16 January 1996, the intention of the order was that the Plaintiff would still be entitled to benefit from the businesses up to the date of the order. Looking the matter in this way, it is quite clear that up to the date of the order, the use of the furniture, machinery and equipment by the 2nd Defendant should be regarded as with the acquiescence if not express consent of the Plaintiff because otherwise it would be unfair that the Plaintiff should obtain the benefit from such use.

7. In my judgment what paragraph 5 of Cheung J's order provided for is as follow.

8. Upon clarification of the matter by the judgment of Cheung J, the 2nd Defendant was given an option: that is either to deliver up the furniture, machinery and equipment within 14 days or to pay damages for conversion of those furniture, machinery and equipment. The conversion referred to in that paragraph must in my judgment be referring to conversion arising out of the fact that the 2nd Defendant refused to deliver up the furniture, machinery and equipment within 14 days. For these reasons, I agree with the submission of Mr Chong that the correct valuation date should be 14 days from the date of the order. Hence the relevant valuation would be the 2001 valuation. In term of the exact valuation of the plant and machineries, the Plaintiff's expert and the Defendants' expert provided different figures. According to the Plaintiff's expert, the 2001 valuation come up to a figure of $273,000 whilst the figure of the Defendants' expert is $110,900. This being an interim payment application, the court is not in a position to resolve the difference between these experts.

9. Bearing in mind the history of the matter and adopting the relevant test as set out by Stuart Smith LJ in the case of Stringman v McArdle[1994] 1 WLR 1653, the court is to fix a quantum which does not exceed a reasonable proportion of the damages which in the opinion of the court the Plaintiff is likely to recover. Applying that criteria, I propose to take the figure of the Defendants' expert at this stage. In doing so, I bear in mind that in fact the assessment will come on for hearing in February.

10. The third issue that I have to resolve today is whether there should be deduction with regard to the hire purchase payments. This is in respect of items 1-7 in the list of the plant and machinery. The 2nd Defendant has made substantial hire purchase payments with regard to those items.

11. Mr Lam submitted that there should not be any deduction with regard to those. He made a number of points in relation to that. But the one which impressed me is his last point. That is the 2nd Defendant has been using those plant and machineries over the years and the high purchase payment should be regarded as rent for the same. In the hire purchase agreement these payments were in fact described as rental.

12. I should also mention that Mr Lam also cited the case of Chabbra Corporation v Jag Shakti [1986] 1 AC 337, in which the Privy Council decided that the damages for conversion is to be measured by the full market value of the goods.

13. Mr Chong on behalf of the Defendant referred me to the exception mentioned by Lord Brandon at p.345:

"The only exception to the general principle just stated is when B has one or more cross claims against A arising out of the same or some connected transaction. In that case, B may be entitled to set off or deduct the amount of any such cross claim or cross claims from the full market value of the goods in arriving at the amount of the damages recoverable from him by A."

14. In this connection, he referred to sub-paragraph 4 of Cheung J's order at p.21 of his judgment of 16 March 2001. However, that paragraph did not provide for deduction or payment to the 2nd Defendant by the Plaintiff of these hire purchase payments. What this paragraph provided for is payment to the 2nd Defendant in respect of money collected by the Plaintiff from the customers and debtors from 1 November 1995 to the date of the order. Therefore, that order does not give rise to any cross claim in respect of these hire purchase payments. There is also no evidence before me to suggest that upon the account being taken pursuant to paragraph 3 of that part of the order of Cheung J, there would be any amount due from the Plaintiff to the 2nd Defendant. So in my judgment that passage in the judgment of Lord Brandon does not help the 2nd Defendant.

15. Moreover, as I mentioned in the course of arguments, since there will be account taken as to the profit generated to the 2nd Defendant during the period from 1 November 1995 to the date of the order, this hire purchase payments could be regarded as expenses to be deducted from the income of the company. And as I have said, the tenor of the whole of the order of Cheung J is to regard the date of the order as cut off point. If a further deduction is made with regard to the value of these plant and machinery in the calculation of the damages for conversion, there would be deducting the same twice and that would not be fair to the Plaintiff. For these reasons I hold that items 1-7 should not be disregarded in the consideration of the interim payment figure.

16. Applying the aforesaid approach, the figure that I have arrived at for an appropriate sum for interim payment is $36,966.67. I shall allow the appeal of the Plaintiff to that extent and vary the order of Master Yuen accordingly.