PREMIERE AGRI TECHNOLOGIES ASIA INC AND ANOTHER v. WONG SIU HUNG JOHN AND OTHERS

HCA 790/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 790 OF 2001

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ASSESSMENT OF DAMAGES

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Background

1. By an agreement dated 18 May 1994, the 1st Plaintiff employed the 1st Defendant as the General Manager of the 2nd Plaintiff.  On or about 7 January 2000, the 1st Defendant admitted to the Plaintiffs that he had set up the 2nd Defendant in March 1999 to compete with the Plaintiffs.  The secret profits were in the sum of US$180,000.00

2. The parties entered into a termination agreement dated 7 January 2000 whereby the 1st Defendant was dismissed summarily.  He returned the said sum of US$180,000 to the 2nd Plaintiff who then agreed not to pursue the matter further.  However, the Plaintiffs later discovered that the 1st Defendant had concealed other fraudulent transactions and secret profits.  On 17 February 2001, the Plaintiffs commenced the present proceedings against the 1st and 2nd Defendants for, inter alia, rescission of the termination agreement, accounts and damages.

3. In an interlocutory application, the Plaintiffs obtained an order for inspection of the banking records of the 2nd Defendant.  It was then disclosed that funds had been transferred to the account of the wife of the 1st Defendant.  She was therefore made the 3rd Defendant herein, being a party to the conspiracy to injure the Plaintiffs.

4. In the Re-re Amended Defence of the 1st Defendant filed herein on 30 November 2002, he did not admit or denied all allegations against him.  It was also said that he only signed the termination agreement under threat, duress and inducement.  Nonetheless, the 1st Defendant was made bankrupt on 15 July 2003 by his own petition and the Plaintiff has since then decided not to pursue the matter against him further.  The 2nd Defendant was and is a BVI company and has never taken any step herein.

5. On the other hand, by the Defence filed herein on 23 October 2002, the 3rd Defendant denied the Plaintiff’s claim against her.  By paragraph 7 thereof, she specifically:

“i.    denies that the said acts of the 3rd Defendant were taken pursuant to any conspiracy as described or at all;

ii.    denies that the Plaintiffs suffer any loss resulting from the said acts;

iii.    says that the various sums of money as referred to in sub-paragraphs (1) to (23) under the heading of “Third Defendant” neither belonged to the Plaintiffs nor were secret profits;

iv.    says the 3rd Defendant had every right to carry out the said acts.”

6. As between the Plaintiffs and the 3rd Defendant, it went on to the discovery stage.  However, the Plaintiffs complained that the 3rd Defendant failed to disclose the documents in her possession and successfully obtained an unless order from Master Levy on 21 March 2003.  The 3rd Defendant still failed the Plaintiffs and the matter went to Master de Souza and, then Deputy High Court Judge Muttrie.  Both of them agreed that judgment should be entered for Plaintiffs against the 3rd Defendant for non-compliance of the unless order.  The argument was further taken up to the Court of Appeal.  On 30 September 2003, the 3rd Defendant’s appeal was dismissed.  In the Reasons for Judgment dated 10 October 2003, the Hon Le Pichon JA said that:

“24.      That the plaintiffs were prejudiced by the 3rd defendant’s failure to provide a full list of documents that were or had been in her possession, custody or power is obvious.  The absence of such a list of objectionable inasmuch as the existence or otherwise of relevant documents is left entirely open-ended.  Plainly, it would be unfair to the plaintiffs to have the trial conducted on such a basis.  The 3rd defendant has unquestionably compromised the proper administration of justice by failing to give a full and proper disclosure of documents which the efficient and fair disposal of the action required.  In my view, the judge had every reason to conclude that such discovery as had been provided by the 3rd defendant was illusory.  He was quite right to dismiss the 3rd defendant’s appeal.

Order

25.    The judgment entered for the plaintiffs against the 3rd defendant provided for the payment by the 3rd defendant to the plaintiffs of, inter alia, damages under paragraph 35B of the amended statement of claim to be assessed.  These related to four items namely:

(1)    US$50,000 paid to Mr Shi

(2)    secret profit paid to the 3rd defendant of US$71,550.06

(3)    secret profit paid to the 3rd defendant of HK$700,106.71

(4)    damages under paragraph 35 of the amended statement of claim

Mr Beresford accepted that there were difficulties in relation to the claim under paragraph 35 and, upon instructions, agreed to abandon the plaintiffs’ damages claim under the fourth head.  Accordingly, this court dismissed the appeal save that it ordered that paragraph 1 of the judgment entered on 10 June 2003 be amended by adding “items 1, 2 and 3 of” after the words “damages under” and there is to be added the following paragraph:

              ‘4.    There be liberty to apply for such further or other relief as the plaintiffs shall be so advised.’ ”

7. Upon the above order, the Plaintiffs proceeded to assess damages against the 3rd Defendant.  Usual directions for discovery were obtained from Master de Souza on 22 October 2003 and the matter was set down for assessment for 1 day before Master Mimmie Chan on 26 March 2004.  Despite objections from the Plaintiffs, the 3rd Defendant managed to persuade the Master to, inter alia, adjourn the assessment to a date to be fixed with 3 days reserved.

8. The assessment then came before me.  On or about 3 September 2004, the solicitors for Plaintiffs sent to the court bundles of documents as well as Counsel’s skeleton.  On 4 September 2004, Messrs. Chan, Wong & Lam, solicitors acting for 3rd Defendant throughout the proceedings until then, filed also a separate bundle to the Court for the coming assessment.

9. On the scheduled date for assessment, 6 September 2004, one Mr. Lee from Messrs. Y.C. Lee, Pang & Kwok appeared before me for the 3rd Defendant.  He said that a notice of change of solicitor had been filed on 4 September 2004.  He was instructed to apply for an adjournment.  By the affirmation of the 3rd Defendant made also on 4 September 2004, it was said that:

“2.    I have been working in Shanghai since 2002 and so I entrusted Mr. Chan Man Hon (“my former solicitor”) of Messrs. Chan Wong Lam to handle this case on my behalf.

3.    I was informed by my former solicitor in May or June 2004 that there would be a hearing in September 2004 (“the said hearing”).  The nature of the said hearing was unclear to me but my former solicitor said that I would be required to give testimony at the hearing.  He would do the preparation work and would rehearse the matter with me about a week before the said hearing.

4.    ……

5.    At the end of August 2004, I asked my former solicitor when I would need to go to Hong Kong for my preparation of the said hearing.  Then my former solicitor agreed to meet me on 1st September 2004.  In order to prepare for the meeting, I asked my former solicitor what I should do.  He only said he would do all the preparation work and I needed not do anything.  I felt very uncomfortable as I would be required to give testimony in Court.  Therefore, upon suggestion of a friend, I consulted another solicitor for advice on how I should prepare for the meeting and the hearing.  This solicitor friend commented that without reading the papers of this action, he was not in a position to give any advice.  Then I realized that a lot of documents requested by this solicitor friend including some interlocutory judgments that I was told that had been rendered against me had not been given to me.  Indeed, I neither knew nor was informed that these were written judgments.

6.    On 30th August 2004, I demanded and received from my former solicitor some documents including copies of the Judgment of this action dated 25th July 2003 made by Deputy High Court Judge Muttrie in Chambers and the Reasons for Judgment of Action no. CACV 246/2003, dated 30th September 2003 handed down by The Honourable Mr. Justice Rogers, Vice President and The Honourable Madam Justice Dorren Le Pichon, Justice of Appeal (“Reasons for Judgment”).  From which, I was shocked to note that judgment had already been entered against me by the Court on 10th June 2003 which was further affirmed on 25th July 2003 and re-affirmed by the Court of Appeal on 30th September 2003.  However, I have never been informed by my former solicitors about the true nature of such judgments nor have I ever seen them.  I was given the impression that I could still set aside the “interlocutory judgments” entered against me in the coming hearing.

7.    ……

8.    Upon my arrival in Hong Kong on 3rd September 2004, I consulted my present solicitors and decided to change my solicitors in this matter.  Therefore, I seek leave from the Court to adjourn this case so that my new solicitors can have sufficient time to peruse all documents and advise me…….”

10. Mr. Beresford, Counsel for the Plaintiffs, strongly opposed the application.  Having heard arguments from the parties, I refused to grant any adjournment and agreed to give written reasons later.  Here are them:

 (a)    It is not disputed that the Court has an inherent jurisdiction to adjourn the hearings in the interest of justice, upon such terms he thinks fit.

(b)     Useful guidelines can be located in paragraph 35/3/1 at p.572 Hong Kong Civil Procedure 2004:

“The following matters should be taken into account when deciding whether or not to grant an adjournment:

1.    The importance of the proceedings and their likely adverse consequences to the party seeking the adjournment.

2.    The risk of the party being prejudiced in the conduct of the proceedings if the application were refused.

3.    The risk of prejudice or other disadvantage to the other party if the adjournment were granted.

4.    The convenience of the court.

5.    The interests of justice generally in the efficient dispatch of court business.

6.    The desirability of not delaying future litigants by adjourning early and thus leaving the court empty.

7.    The extent to which the party applying for the adjournment had been responsible for creating the difficulty which had led to the application.

(R. v. Kingston-upon-Thames Justices, ex p. Martin [1994] Imm.A.R. 172, DC).”

(c)    Applying the above guidance to the present case, I notice that:

(1)    By the assessment, the Plaintiffs seek to recover from the 3rd Defendant a total of US$121,550.06 and HK$700,106.71 together with interest and costs.

Particulars

(i)    US$50,000 paid to Mr Shi

(ii)    secret profit paid to the 3rd defendant of US$71,550.06

(iii)    secret profit paid to the 3rd defendant of HK$700,106.71

(2)     With the said judgment from the Court of Appeal, as far as the 3rd Defendant is concerned, the only real question left to be decided is the quantum of damages to be assessed.  Liability is not and cannot be an issue to be disputed.  Both the Affirmation of the 3rd Defendant notarised on 3 November 2003 and 4th Affirmation of the 1st Defendant made on 19 February 2004 were filed herein for the purpose of assessment.  During the assessment, among others, I read over these 2 documents to the 3rd Defendant.  They did represent the case she wanted to put before Court.  I do not consider that there be any prejudice or risk of prejudice suffered by the 3rd Defendant for the assessment to be continued.

(3)     The prejudice or disadvantage to be suffered by the Plaintiffs is great if further adjournment will be allowed.  The 1st Defendant has made himself bankrupt.  The 2nd Defendant never appears.  The 3rd Defendant is now residing in Shanghai.  There is an apparent risk that the Plaintiffs will never recover anything from the Defendants.

(4)     3 dates from the Court’s diary has been reserved for the adjourned assessment of damages.

(5)     On 26 March 2004, this Court exercised her discretion in favour of the 3rd Defendant for an adjournment.  Fresh dates for assessment were fixed on 30 March 2004 by agreement.  By 6 September 2004, the parties knew the new dates for more than 6 months.

(6)     In the said “1st” application for adjournment in March 2004, the solicitors for the 3rd Defendant argued, inter alia, that certain people from the Plaintiffs had to attend to be cross-examined and leave should be given to allow the 1st Defendant to testify for the 3rd Defendant.  The Plaintiff was only entitled to nominal damages.  The respective legal advisers started to argue the question in February 2004.  On this occasion, the “2nd” application for adjournment, it was made only at the very last minute.  Effectively, no prior notice was given to the Plaintiffs.  The reason for application boiled down to “lost of confidence” in the solicitor.  A new solicitor firm was hired shortly before the assessment.  Without laying any blame on the new solicitor, he knew nothing about the case and only insisted to ask for an adjournment on the ground of “justice”.  As pointed out by Mr. Beresford, the “lost of confidence” argument was doubtful as

(i)    Paragraph 2 of the said Affirmation of the 3rd Defendant states that:

“By the Amended Judgment dated 10th June 2003, I was adjudged to pay the Plaintiffs damages under items 1, 2 and 3 of the paragraph 35B of the Amended Statement of Claim herein to be assessed.”

(ii)    The 3rd Defendant was present at last hearing on 26 March 2004.

(7)     Any prejudice or difficulty, if applicable, suffered by the 3rd Defendant, is self-induced and, in any event, she might look to her former solicitor for redress.

11. At about noon on 6 September 2004, a Notice to Act in Person signed by the 3rd Defendant was placed before me.  The assessment then proceeded with on that basis.  A learned interpreter was arranged to assist the 3rd Defendant to understand the documents and proceedings before the Court.  To start with, I briefly identified the papers, issues and court procedures.  Mr. Beresford led everybody go through the Plaintiff’s Amended Statement of Claim, then his skeleton and authorities.  When Mr. Beresford came to those paragraphs touching on the 3rd Defendant directly, I asked him to slow down and drew the 3rd Defendant’s attention to them.

12. From time to time while Mr. Beresford was opening his case, the 3rd Defendant represented that she needed time to read the papers.  She did not understand and she could not handle the matter.  I took these as de facto and repeated applications for adjournment.  I declined them and informed the 3rd Defendant that this Court would not allow any delay in the matter.  I would try my best to assist her procedurally up to the limit allowed by Mr. Beresford.  After all, the question key remained: tell the Court the truth, nothing but the truth.

13. On 7 September 2004, the 3rd Defendant asked if she could appeal my decision to refuse her application(s) for adjournment.  It transpired that she attended before the Duty Judge yesterday evening.  She could not get the assistance she wanted.  The 3rd Defendant further mentioned that she had sought assistance from the Director of Legal Aid (“DLA”).  I replied that it was not uncommon for a party to find one or more “interlocutory” ruling(s) unhappy during a trial.  However, the trial would still be continuing and that party’s right to appeal was not affected.  Further, attending the office of DLA was neither here nor there.  Section 15 of the Legal Aid Ordinance (Cap. 91) required a memo from DLA to be filed with the Court before the statutory stay could start to operate.  There was no such memo in the Court’s record.  Alternatively, even if such memo had been filed, I would probably exercise my discretion to uplift the stay.  The assessment continued.

14. Mr. Beresford called his only witness Ms. Shiu Siu Fan Anliza.  She adopted her statement of 14 January 2002, with minor clerical amendments, as her evidence.  At about 10:30 a.m., I stood down the case to allow the interpreter to explain Ms. Shiu’s statement to the 3rd Defendant.  It took up the rest of the morning.  At about 12:45 p.m., the court resumed, the 3rd Defendant appeared to be unable to cross-examine Ms. Shiu.  I attempted to sum up the 3rd Defendant’s case by leading her to go through her Amended Defence, her said Affirmation notarized on 3 November 2003 as well as the said 4th Affirmation of the 1st Defendant.  She confirmed that it was indeed her case.  I further attempted to tell her that she should try to put her case to Ms. Shiu and/or to look for faults inconsistencies and loopholes from Ms. Shiu’s evidence.  I explained that I could not go further to step into the arena.  Here came the lunch break and I adjourned the matter to be resumed in the afternoon.

15. The assessment resumed at about 2:30 p.m.  There was no cross-examination on Ms. Shiu.  There was also no re-examination.  The Plaintiffs’ case closed.

16. The 3rd Defendant started to present her case.  She told me that the 1st Defendant would not come.  She asked if she could rely only on the affirmations.  I answered by saying that she had full control of her case.  She had to make up her mind.  There was no absolute rule that the Court could not accept evidence by way of affirmations.  However, without stepping into the witness box to give evidence and be cross-examined, the Court would usually attach lesser “weight” to the “written evidence”.  She elected not to risk herself to be exposed for cross-examination.  She asked me to rely on the documents statements and affirmations filed by her former solicitors.  Her case closed.

17. Both Mr. Beresford and the 3rd Defendant gave their respective closing speeches to me.  I adjourned the matter for judgment to be handed down.

18. The Plaintiffs’ case is that: the Defendants formed a conspiracy to defraud the Plaintiffs.  The 1st Defendant made use of his position in the Plaintiffs.  A BVI company, the 2nd Defendant, was formed to hide the wrongdoings.  The wife was made the sole owner of the 2nd Defendant to further cover up the matter.  The Plaintiffs discovered partially the fraud.  The 1st Defendant confessed and was sacked.  He returned US$180,000 to the Plaintiffs.  It turned out that the 1st Defendant did not disclose everything and so, the present proceedings were commenced.  The 3rd Defendant failed to disclose relevant documents and made the Plaintiffs difficult, if not impossible, to assess the rightful damages.  Upon the limited documentation in hands, the Plaintiffs sought to recover “profits” made by the Defendants out of the known transactions.

19. On the other hand, the 3rd Defendant’s case is that: she should have never been brought into this litigation.  She should be able to dispute liability.  No one asked her for any document.  Her former solicitor did not advise her properly.  She relied on the case of the 1st Defendant completely.  There was nothing wrong with the 1st Defendant’s dealings.  Further, she was an innocent housewife and simply followed the directions from her husband.

20. Upon carefully consideration of the evidence, authorities and submissions by both parties, I have come to the conclusion that the Plaintiff’s assessment is to be allowed in full.  My reasons appear as follows.

 (a)    I agree with the submission of Mr. Beresford that, as a matter of law, it was not open for the 3rd Defendant to dispute liability any further.  This Court is bound by the Judgment of the Court of Appeal herein dated 30 September 2003.  It is indeed the very basis how the proceedings have been carried forward from then until now and towards the future.

(b)     In any event, I accept the evidence of the Plaintiffs on balance of probabilities.

(1)     The 1st Defendant set up of a BVI company, the 2nd Defendant, secretly held in the name of his wife, the 3rd Defendant, to conduct same business with his employer, the Plaintiffs.  It is a classic model of betraying employee breaching his fiduciary duties and making secret profits behind the back of the boss, trying to cover up the same with something eventually being revealed.

(2)     There is insufficient evidence to persuade me to accept that the confession by the 1st Defendant on or about 7 January 2000 was made under threat, duress and inducement.  It does not make any sense at all by inducing or forcing an employee to admit something amounting to or amounting almost to criminal offence together with a summary dismissal.  Further, the repayment of US$180,000 speaks for itself.

(3)     Even assuming that the 3rd Defendant was not bound by her Defence (see paragraph 5 of this Judgment), in my view, she is not an innocent housewife as she represented to me during the hearing.

(i)    She married to the 1st Defendant in 1991.  She was then an air-stewardess.  She is now in charge of a restaurant in Shanghai.

(ii)    She signed her witness statement in English and affirmations in English without the assistance of any interpretation.

(iii)    She acquired a BVI company, the 2nd Defendant, under her sole name.  Two bank accounts were opened for the company, one in Macau and one in Hong Kong.

(iv)    There were substantial monetary transactions within these 2 accounts.  The 3rd Defendant was the sole signatory for all of them.

(v)    Substantial funds were also taken out from these accounts and transferred to the personal accounts of the 3rd Defendant.

(vi)    The Court of Appeal, upon careful analysis, found her having “unquestionably compromised the proper administration of justice by failing to give a full and proper disclosure of documents”.

(vii)    The above undisputed or indisputable facts are more convincing to me than the explanation offered by the 3rd Defendant during her final submission.

21. In the circumstances, I find the 3rd Defendant liable to pay the loss and damages suffered by the Plaintiffs in the total sums of US$121,550.06 and HK$700,106.71 as prayed under paragraph 35B of the Amended Statement of Claim herein.  There will also be interest on the said sums at the rate of 12.5% per annum from the commencement of the present proceedings on 17 February 2001 until today, and thereafter at judgment rate until payment.  I have not heard from the parties as to the question of costs but there appears to be no reason to depart from the rule that costs should follow event.  Hence, I further grant a cost order nisi, which will be made absolute within 14 days from today, that the 3rd Defendant shall bear costs of the assessment for the Plaintiffs, including certificate for counsel for hearings on 6 and 7 September 2004.