GENERAL EASE LTD v. TONG WEI

DCCJ192/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 192 OF 2002

BETWEEN

J U D G M E N T

1.  At the trial hearing of this action, the defendant’s solicitor, Mr Chan, informed the court that he has no instructions from his lay client.  Neither had the defendant made an appearance in court throughout the hearing of the trial.  The defence called no evidence during these proceedings.

2.  The plaintiff called two witnesses:  Miss Lo Man I, who took over the directorship in December 1999 of the plaintiff company after the defendant resigned in November 1999; and Mr Yeung Jin Kien, the general manager of Hubei Provincial Chemical Import and Export Corporation which is a state-owned company incorporated in the People’s Republic of China and it is the holding company or mother company of the plaintiff company incorporated in Hong Kong.

3.  The defendant was the plaintiff company’s director between 1993 and 1999.  He was entrusted with the management of the plaintiff in Hong Kong.  According to Miss Lo’s evidence, the defendant borrowed a director’s loan from the plaintiff company during the period he was a director, amounting to the sum of $295,880.97.  This is supported by the plaintiff’s financial reports of 1998 to 2000.  Because the plaintiff company had maintained overdraft facilities with the bank, the defendant’s loan attracted interests charged by the bank at 10 per cent per annum.  Between April 1997 to December 2001, the interests incurred on the sum borrowed by the defendant as director’s loan amounted to $140,543.46.

4.  According to the company ledgers and the accounting documents, in fact, the defendant had borrowed a much larger sum from the company during the period he was its director.  This sum borrowed was reduced to $295,880.97 after the defendant repaid some $575,602.97 on 27 March 1999 to the plaintiff company.  Subsequently, when the mother company’s auditors checked the plaintiff company’s accounts and vouchers in 1999, it was discovered that the defendant had, in fact, misappropriated further sums amounting to $404,975.72 for alleged payments to various companies, company debtors and company staff, etc. 

5.  After hearing the plaintiff’s witnesses giving evidence in court and after careful consideration of the plaintiff company’s accounts and ledgers, I am satisfied on a balance of probabilities that the plaintiff has successfully proved its claim against the defendant that the defendant did borrow $297,880.97 from the company before he resigned in November 1999, and the company had to pay $140,543.46 in interest on the same sum between April 4th 1997 and December 2001.

6.  I am also satisfied that the defendant had misappropriated a total sum of $404,975.72 from the plaintiff company.  Therefore, I give judgment to the plaintiff in the total sum of $841,400.18 and there will be interest on the aforesaid judgment from the date of the writ to the date of judgment at half judgment rate and thereafter at full judgment rate until full payment in settlement of the judgment.

7.  As Miss Koo, counsel for the plaintiff, had decided to abandon the claim for a declaration of the plaintiff’s ownership of the 200,000 shares in Guangshan Railway Company Limited, the scripts of which have been surrendered by the defendant to the plaintiff company, but the defendant had failed to execute any effective transfer of sale since December 1999, I make no order of a declaration of trust.  Miss Koo asked that since the defendant had surrendered the shares to set off his debts to the plaintiff the court may consider making a charging order.

8.  I find from the evidence of Miss Lo that the defendant’s intention to set off the shares against part of his debts to the plaintiff was the reason of his agreement to transfer the scripts or authorise the collection of the scripts by Miss Lo on 10 December 1999.  He obviously did not intend to transfer the ownership of the shares to the plaintiff company and that was why he had refused to sign the transfer form and execute their transfer to date.  I am satisfied that was the defendant’s intention and the plaintiff company was given the share certificates as a lien on the defendant’s debts or part of his debt to plaintiff company rather than that the shares should be held on trust by the plaintiff.

9.  I am satisfied the plaintiff therefore is entitled to levy a charging order against the defendant’s 200,000 shares in Guangshan Railway Company Limited.  The plaintiff should apply for a charging order against these shares and the dividend paid throughout the years against the nominee company according to the rules of the District Court.

10.  Finally, costs go the party who succeeds in the action and the defendant should pay the plaintiff’s costs to be taxed if not agreed.