HAPPY WISE INVESTMENT LTD v. CHENG SIU LUNG EDWIN

DCCJ 1228/2024

[2024] HKDC 921

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1228 OF 2024

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REASONS FOR DECISION

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Introduction

1.  Before me is the Plaintiff’s summons filed on 8 May 2024 for the following:

(a)  There be a declaration that the Plaintiff is the rightful owner of the following handbags (collectively the “Handbags”):-

(i)  a Hermes Kelly handbag of 28 cm in size and rouge pavonine in colour with color code 2R, made of Togo leather with gold hardware, and with code number CPV242TT (“Kelly 28”); and

(ii)  a Hermes Kelly handbag of 25 cm in size and braise in colour with colour code 95, made of crocodile leather with silver hardware, and with code number CP 1733AP (“Kelly 25”);  

(b)  there be an order for delivery up to the Plaintiff the Handbags;

(c)  the Defendant do pay the Plaintiff damages for conversion and detinue to be assessed;

(d)  interest;

(e)  further and/or other relief(s) as the Honourable Court deems just;

(f)  a penal notice be endorsed; and

(g)  the Defendant do pay the Plaintiff costs of this action, including the costs of this application, to be assessed

pursuant O 19 r 7 of the Rules of the District Court (“RDC”) and (“Summons”).

2.  Ms Sally Wong made submissions on behalf of the Plaintiff.

3.  After the Plaintiff served its Writ of Summons dated 22 February 2024 with its Statement of Claim (“SOC”), the Defendant has not filed or served any notice of intention to defend and defence, nor has it filed or served any affirmation in opposition to the Plaintiff’s Summons.

4.  The Defendant was absent at the hearing. Ms Wong confirmed that all the relevant papers in this application have been properly served on the Defendant at his last known address. An affirmation of service from Chan Yik Him Clement filed on 3 June 2024 was produced to that effect in respect of the service of the Writ of Summons (together with three copies of the acknowledgment of service form) and the SOC.

5.  An affirmation of service of Chan Yik Him Clement filed on 3 June 2024 affirmed that a sealed copy of the Summons was served on the Defendant on 10 May 2024 by ordinary post to the Defendant’s address. The affirmation of service of Ngai Wing Leung filed on 5 June 2024 affirmed that the Summons served by ordinary post has not been returned undelivered.

6.  I am satisfied that the Defendant has been given proper notice of the hearing and it is appropriate to proceed to hear the Plaintiff’s application notwithstanding the Defendant’s absence.

7.  At the end of hearing the Summons, I gave judgment for the Plaintiff. These are my reasons.

Service of the Proceedings and the Summons

8.  I note that by letter dated 20 February 2024, Messrs Ivan Tang & Co, Solicitors for the Plaintiff, wrote to Messrs Keith Lam Lau & Chan (“KLLC”), the Defendant’s solicitors at the time, asking them whether they had instructions to accept service. Messrs Ivan Tang & Co. did not receive any response to this letter (§8 of the Affirmation of Ngai Wing Leung).

9.  The Plaintiff filed the Affirmation of Chan Yik Him Clement confirming that it has duly served the Writ with the SOC, and the Summons on the Defendant. The Summons was served on the Defendant on 10 May 2024 by ordinary post to the Defendant’s address. The Affirmation of Ngai Wing Leung affirmed that the Summons served by ordinary post has not been returned undelivered.

10.  Neither a notice of intention to defend nor any defence was filed by the Defendant.

11.  I also note that the Plaintiff has served a Notice of Intention to Enter Judgment pursuant to O 19 r 8A of the RDC. This was also served on the Defendant by ordinary post. However, O 19 r 8A does not apply where no notice of intention to defend the proceedings has been filed.

12.  As the Defendant has not filed any defence, the Plaintiff is entitled to apply for judgment pursuant to O 19 r 7 of the RDC.

13.  The principles concerning the grant of a default judgment under O 19 r 7 have been summarised by DHCJ William Wong SC in Times Square Ltd v Lee Kwun Kit [2020] HKCFI 438 at §14:

(a)  In an application for judgment on the default of service of a defence under O 19 r 7, the court cannot receive any evidence, but must give judgment according to the pleadings alone: Leung Pak Ki v The Estate of Pang Kau [2016] HKEC 515 at §5; 升力科技有限公司 v C & C International Technology Ltd [2017] HKEC 118 at §8).

(b)  The court is tasked to see whether P appears to be entitled to a judgment on its SOC. The statement of claim must show a case for the order that P seeks to obtain: 升力科技有限公司 v C & C International Technology Ltd [2017] HKEC 118 at §7. See §19/7/14 of the Hong Kong Civil Procedure 2024, Vol 1.

(c)  The court’s power to grant default judgment is discretionary and not mandatory: see §19/7/14 of the Hong Kong Civil Procedure 2024, Vol 1; Seto Yim King v Soo Hooyet Dew [2019] HKCFI 2640 at §12.

(d)  With respect to the Plaintiff’s claim for declaratory relief, it is not the normal practice of the court to make a declaration without a trial as in the case of a judgment in default of defence or of notice of intention to defend the proceedings: Patten v Burke Publishing Ltd [1991] 1 WLR 541 at 543A-H (citing Wallersteiner v Moir [1974] 1 WLR 991, 1029-1030); Hong Kong Civil Procedure 2024, Vol 1 at §§19/7/14, 19/7/20; Seto Yim King at §12.

(e)  However, it has been repeatedly emphasised that this is only a rule of practice and not of law, and will give way to the paramount duty of the court to do the “fullest justice to the plaintiff to which he is entitled.” Hence, the court has been prepared to grant declaratory relief in default judgments, especially where the plaintiff has a “genuine need for declaratory relief”, or where “doing the fullest justice to the plaintiff justifies the grant of appropriate declaratory relief”: see Hong Kong Civil Procedure 2024, Vol 1 at §§19/7/14, 19/7/20; Patten v Burke Publishing Ltd [1991] 1 WLR 541 at 544B, D-E, F-G per Millett J (as he then was); Seto Yim King at §§13, 16, 17 (which granted declarations relating to the plaintiff’s title, interest and rights in a property).

(f)  Given the nature of an application for default judgment which is akin to an ex parte application, the plaintiff must make a full and frank disclosure to the court of matters which militate against the grant of declaratory relief, so that the court can properly assess the merits of granting the same without the benefit of full submissions from both sides: Sky Joy Investment Ltd v Zheng Dunmu unreported judgment HCA 395/2016, 16 August 2017 at §50 per Deputy High Court Judge William Wong SC.

Plaintiff’s SOC

14.  The Plaintiff carries on business under the business names of Happy Wise Watch & Jewellery and Happywise Watch & Jewellery Company at Shop B113A, Holiday Inn Golden Mile, 50 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the “Shop”). It engages in, inter alia, resale of valuables, including but not limited to branded handbags, jewelleries and watches.

15.  On 24 January 2019, a Mr Wong Shing Yau (“Mr Wong”) attended the Shop. Mr Wong sold to the Plaintiff and the Plaintiff, as a bona fide purchaser for value, purchased from Mr Wong the Handbags for a total sum of HK$320,000.

16.  The Plaintiff paid the sum of HK$320,000 to Mr Wong and Mr Wong transferred the ownership and delivered the possession of the Handbags to the Plaintiff. Since then, the Plaintiff became the owner of and is entitled to exclusive possession of the Handbags.

17.  Subsequently, the Handbags were retrieved by the police due to a report made by the Defendant to the police. According to the information provided by the police to the Plaintiff, the Defendant claimed to have sold the Handbags to a client and received a forged cashier order as payment.

18.  In around March 2021, the Police informed both the Plaintiff and the Defendant that the Handbags could be returned to their owner(s). Yet, the Defendant denied the Plaintiff’s ownership and entitlement to exclusive possession of the Handbags.

19.  Due to the dispute over the ownership and entitlement to exclusive possession of the Handbags between the Plaintiff and the Defendant, the Plaintiff, the Defendant and KLLC, the Defendant’s solicitors at the time, agreed that pending the resolution of the dispute regarding the ownership of the Handbags, KLLC was to be the stakeholder of the Handbags.

20.  Up to today’s date, the Handbags remained and still remain in the possession of KLLC.

21.  By letter dated 20 June 2023 issued by Messrs Ivan Tang & Co, the Plaintiff’s solicitors, to the Defendant, the Plaintiff asserted its ownership and entitlement to exclusive possession of the Handbags and demanded the Defendant to allow or cause to be allowed the Plaintiff to collect, or alternatively, to deliver or cause to be delivered to the Plaintiff the Handbags in KLLC’s possession.

22.  However, wrongfully and inconsistent with the Plaintiff’s ownership and entitlement to exclusive possession of the Handbags, the Defendant has failed, neglected, and/or refused to allow the Plaintiff to collect and/or to deliver or cause to be delivered to the Plaintiff the Handbags in KLLC’s possession and has denied the Plaintiff’s access to the Handbags in KLLC’s possession.

23.  As a result, the Defendant has committed the torts of conversion and/or detinue.

24.  Based on the matters pleaded, the Plaintiff is entitled to return of the Handbags, or alternatively, payment of the current market value of the Handbags, being HK$540,000 (HK$120,000 for Kelly 28; HK$420,000 for Kelly 25).

25.  By a letter dated 28 June 2023 issued by KLLC to Ivan Tang & Co, KLLC undertook that it would be bound by and comply with the decision of the Court in relation to the Handbags (including but not limited to any order for delivery up of the Handbags made by the Court) and, if the Court so ordered, allow or caused to be allow the Plaintiff to collect, or alternatively, to deliver or cause to be delivered to the Plaintiff the Handbags in KLLC’s possession.

26.  The Plaintiff claims the following: (1) a declaration that the Plaintiff is the rightful owner of the Handbags; (2) an order for delivery up to the Plaintiff the Handbags or alternatively, payment of HK$540,000 being the value of the Handbags; (3) damages for conversion and detinue; (4) interest; (5) further and/or other relief(s) as this Honourable Court deems just; and (6) costs of this action.

Discussion

27.  The Plaintiff purchased from Mr Wong the Handbags, and paid the sum of HK$320,000 to Mr Wong. The Plaintiff obtained good title to, became the owner of, and was entitled to exclusive possession of the Handbags. The Plaintiff based its case on being a bona fide purchaser for value without notice.

28.  I agree that even on the Defendant’s case to the police that the Defendant received a forged cashier order as payment for the sale of the Handbags, the nemo dat rule does not assist the Defendant.

29.  In Tam Ying Man v Leung Ka Chun and others (unreported judgment of DHCJ Marlene Ng (as she then was), HCA 2166/2011, 31 August 2016) observed as follows (at §107):

“The defence of bona fide purchaser for value without notice, which constitutes an exception to the nemo dat potest dare quod non habet principle, is available to defeat proprietary restitutionary claims. Where the defence applies, the defendant is considered to have obtained good title to the property so the plaintiff’s property rights are extinguished and the proprietary claim is defeated absolutely. The burden of establishing such defence was on Ds.”

30.  The Defendant’s property rights (if any), are extinguished and the proprietary claim is defeated given the Plaintiff was a bona fide purchaser for value without notice. This was uncontested due to the non-appearance of the Defendant. I am satisfied that the Plaintiff has shown a case in the SOC for the order that the Plaintiff seeks to obtain. I see no reason not to accept the Plaintiff’s case on the facts.

31.  The tort of conversion exists to protect proprietary or possessory rights in property; it is committed by an act inconsistent with those rights and it is a tort of strict liability: Kuwait Airways Corp v Iraqi Airways Co (No 3) [2002] 3 All ER 209, per Lord Nicholls (at p 222), as referred to in Chun Sang Plastics Co Ltd v Commissioner of Police [2018] 2 HKLRD 511. To constitute conversion, detention must be adverse to the owner, excluding the owner from the goods. It must be accompanied by an intention to keep the goods. Whether the existence of this intention can properly be inferred depends on the circumstances of the case. A demand and refusal to deliver up the goods are the usual ways of proving an intention to keep the goods adverse to the owner: Kuwait Airways Corp per Lord Nicholls at p 222.

32.  The person who takes is treated as being under a continuing strict duty to restore the chattel to its owner: Kuwait Airways Corp per Lord Hoffman at p 243.

33.  Detinue is a continuation of the tort of conversion in the persistent withholding of goods and a refusal to re-deliver them: Kuwait Airways Corp per Lord Hoffman at p 243.

34.  In most cases where there is unlawful detention of a chattel, a claimant can constitute an action in detinue along with the tort of conversion: NKOK, Inc v Maylok Toys Industries Company Limited & Another [2023] HKDC 7 at §32, per DDJ Vincent Lung; Tort Law and Practice in Hong Kong (3^rd edition) at §7.046.

35.  As pleaded in the SOC at §§7 and 8, by letter dated 20 June 2023 issued by Messrs Ivan Tang & Co, the Plaintiff’s solicitors, to the Defendant, the Plaintiff asserted its ownership and entitlement to exclusive possession of the Handbags and demanded the Defendant to allow or cause to be allowed the Plaintiff to collect, or alternatively, to deliver or cause to be delivered to the Plaintiff the Handbags in KLLC’s possession.

36.  Wrongfully and inconsistent with the Plaintiff’s ownership and entitlement to exclusive possession of the Handbags, the Defendant has failed, neglected and/or refused to allow the Plaintiff to collect and/or to deliver or cause to be delivered to the Plaintiff the Handbags in KLLC’s possession and has denied the Plaintiff’s access to the Handbags in KLLC’s possession.

37.  Accordingly I am satisfied that the Plaintiff has shown a case for conversion and detinue on the pleadings.

Declaratory relief

38.  The Plaintiff seeks a declaration that it is the rightful owner of the Handbags.

39.  It is not the normal practice of the court to make a declaration without a trial. However, this is a rule of practice and not a rule of law: Guaranty Bank and Trust Company v ZZZIK Inc Ltd, unreported judgment of DHCJ Cooney SC, HCA 1139 of 2016 (18 July 2016) at §37; Mesirow Financial Administrative Corporation v Best Link Industrial Co Limited, unreported judgment of Recorder Lisa Wong SC, HCMP 1846 of 2015 (25 January 2016) at §35. The paramount duty of the court is to do the fullest justice to the Plaintiff to which it is entitled.

40.  In QL Credit Gain Finance Co Ltd v Bok Fat Yuen Spender [2021] HKCFI 679, although there were consent summonses before the court seeking to declare various documents null and void and to vacate registration of a legal charge/mortgage, Queeny Au-Yeung J held (at §14) that the declarations do serve useful purposes in terms of clearing any doubts over the parents’ title to the property. As between the plaintiff and the parents, the declarations would also remove any question of the defendants’ liability over the loan and mortgage. The declarations sought were appropriate to give the fullest justice to the plaintiff and the parents. See also Hong Kong Civil Procedure 2024, Vol 1, at §15/16/2.

41.  In Seto Yim King, the plaintiff in that case was 82 years of age. Keith Yeung J was of the view that doing the fullest justice to the plaintiff justified the court in granting the plaintiff appropriate declaratory relief. He granted declarations relating to the plaintiff’s title, interest and rights in a property:

“(a) a declaration that the defendant’s title, interest and/or rights in and/or over the Property has been absolutely extinguished by virtue of section 17 of the Limitation Ordinance;

(b) a declaration that the plaintiff has been in adverse possession of the Property for a period of no less than 20 years prior to the commencement of the Limitation (Amendment) Ordinance 1991 and the present action, and has thereby acquired and is entitled to possessory title, interest and/or rights in and/or over the Property.” (at §17)

42.  I consider it necessary and appropriate to make the declaration sought by the Plaintiff in order to clear any doubts over the parties’ title to the Handbags. The declaration sought is appropriate to give the fullest justice to the Plaintiff.

Disposition

43.  For all these reasons, I formally make an order in terms of §§1, 2, 3, 4, and 7 of the Plaintiff’s Summons.

44.  Costs should follow the event. I order that costs of this action, including the costs of this application, be paid by the Defendant to the Plaintiff to be summarily assessed.

45.  For the purpose of the summary assessment of costs, I direct that:-

(a)  The Plaintiff do serve its statement of costs on the Defendant and file an affidavit of service confirming the same within 3 days hereof;

(b)  The Defendant do, if so advised, lodge and serve its list of objections to the Plaintiff’s statement of costs within 7 days thereafter; and

(c)  Assessment of costs shall be conducted on paper without a further hearing.

46.  I thank counsel for her helpful submissions rendered to the court.