PENROSE INDUSTRIES LTD v. TAM YAN LUNG

HCA 5783/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5783 OF 2000

____________

____________

_______________

J U D G M E N T

_______________

1. This is an action by the Plaintiff, a company incorporated under the Companies Ordinance, Cap 32, against the Defendant for money appropriated by the Defendant.

2. The Defendant was a director and company secretary of the Plaintiff company. He had the management of the Plaintiff company, including obtaining purchase orders from clients, placing orders with suppliers and manufacturers, arranging delivery of goods and collection of payment from clients. Between November 1998 and June 1999, the Plaintiff, through a middleman, Jo Al Inc., entered into various sale and purchase agreements of garments with a customer in the United States, known as Bennini Inc. As the Plaintiff had not received payment from Bennini Inc in respect of some of its purchase orders, the Plaintiff made inquiries from Daisy Kuo of Bennini Inc. It was thus discovered that the Defendant appropriated the following payments made by Bennini Inc to the Plaintiff.

3. On 19 July 1999, the Defendant, without the authority of the Plaintiff, wrote to Bennini Inc directing it to pay part of the purchase price of garments in the sum of US$120,000 (equivalent to HK$933,600) into his personal account with the Standard Chartered Bank. Accordingly, on the same day, Bennini Inc made the payment into the Defendant's account and informed the Defendant by letter that the payment was in settlement of certain specified invoices and in partial settlement of invoice numbers TI-99-0044 and TI-99-0053A. Despite that the Defendant did not pay over the money to the Plaintiff.

4. On 16 July 1999, the Defendant, without the authority of the Plaintiff, directed Bennini Inc by fax to pay a sum of US$20,000 (equivalent to HK$155,600) owed by Bennini Inc to the Plaintiff into the account of Ng Mau King, an ex-employee of the Plaintiff who worked under the Defendant, with the Hongkong and Shanghai Banking Corporation Limited. On 13 August 1999, Bennini Inc made the payment into the said account by wire transfer, but the Defendant did not account for the said sum to the Plaintiff.

5. As the Defendant's bank statement shows, on or about 11 August 1999, the Defendant received a sum of HK$154,812.15 from Jo Al Inc. The Defendant admitted in his affirmation that the sum was a payment from Bennini Inc.

6. Again, between 4 November 1999 and 5 May 2000, the Defendant, without the authority of the Plaintiff, directed Bennini Inc to pay seven cheques, totalling US$21,000 (equivalent to HK$163,380) due from Bennini Inc to the Plaintiff to Chao Fung Wah, who is the Defendant's sister-in-law. These payments were never accounted for by the Defendant.

7. It is not disputed that the above sums had been received by the Defendant from Bennini Inc. The Defendant's defence is that the money was applied, with the knowledge of the Plaintiff, to settle the Plaintiff's debt due to its supplier, Hong Kong Rich Bong Garment Company ("Rich Bong"). Three receipts purporting to be Rich Bong's acknowledgment of receipts of payment in the total sum of HK$1,405,824.10 were included in the trial bundle. The authenticity of those receipts is disputed by the Plaintiff and I give no weight to those receipts.

8. The Plaintiff denied it had entered into any contract for supply of goods with Rich Bong and that the goods supplied to the Plaintiff allegedly by Rich Bong were in fact supplied by Flash Enterprises. As the airway bills and bills of lading in respect of the goods show, the shipper was not Rich Bong but Flash Enterprises. I have no doubt that the defence was not a bona fide one. In any event, the Defendant failed to attend court and give evidence in support of his defence.

9. In his witness statement prepared for this action, the Defendant alleged that the money paid to Ng Mau King and Chao Fung Wah were repayments of loans borrowed by him on behalf of Bennini Inc. This is not pleaded in the defence and is inconsistent with the documents from Bennini Inc stating that the payments were to the Plaintiff. In any event, there is no evidence from the Defendant in support of his allegation.

10. Having heard the Plaintiff's witness, I accept his evidence. On the totality of the evidence, I find that there is no substance in the Defendant's defence. In conclusion, I am satisfied that the Plaintiff has proved its case that the Defendant has misappropriated the sum of $1,407,392.15 from the Plaintiff. Accordingly, I enter judgment in favour of the Plaintiff in the amount of $1,407,392.15 as claimed with interest at judgment rate from the date of writ until payment and costs. The costs are to be taxed if not agreed. The money in the sum of HK$212,936.32 being stakeheld by Messrs Lam & Lau be released to the Plaintiff in satisfaction of the judgment debt.