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

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J U D G M E N T

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1. This action arose out of a dispute between the plaintiff, on the one hand, and the defendants on the other. The plaintiff and the 1st and 3rd defendants used to be partners of two partnerships called Jeb Shun Photographic Company and Jeb Shun Output Service Company.

2. The plaintiff claimed that the partnership assets had been converted by the 2nd defendant in November 1995 when, at that time, there was merely a discussion of whether to admit one Kung Wing-hong into the businesses and for the businesses to be carried on by the 2nd defendant. Hence this action by the plaintiff against the defendants for various relief.

3. The action was tried before the Honourable Cheung J in March 2001, who gave judgment in favour of the plaintiff on 16 March of the same year. It was adjudged by the learned judge, among other matters, that damages are to be assessed for the conversion by the 2nd defendant of a number of machinery, equipment and furniture which have been listed in paragraph 11C(1) of a set of answers to interrogatories furnished by the 1st defendant on 17 July 2000 and confirmed by Mr Kung's answers to interrogatories filed on 18 July 2000. These appear at pages 164 and 173 respectively, of the bundle of pleadings and documents presented for the purpose of this assessment.

4. Under two judgments made by Deputy Judge Lam on 24 October 2001 and 18 January 2002, the meaning of the relief by Cheung J in his judgment of 16 March 2000 has been clarified. I am to assess the market value of the items converted by the 2nd defendant and the date of assessment should be 30 March 2001. Of any sum that I may assess, I shall award one-third of that to the plaintiff as the 1st and 3rd defendants are each entitled to one-third of such value.

5. I should also mention that Deputy Judge Lam has, on 24 October 2001, ordered interim payment in favour of the plaintiff in the sum of $36,966.67, and whatever sum I shall assess and award to the plaintiff, the interim payment has to be deducted therefrom.

6. The plaintiff has called one witness, Mr Stewart Wong, the valuer. Before the assessment started off, the solicitors for the 2nd defendant applied to be excused from this exercise on the ground that there was a letter from the 2nd defendant saying that there was no instructions for the solicitors to represent it in this assessment. I rule against the application on the ground that once solicitors are appointed, they are solicitors on record and they have a duty to the party appointing them as well as to the court. Whether the solicitors should appear at this hearing is not a matter to be decided on by the 2nd defendant. The 2nd defendant cannot decide on which step in the proceedings should be dealt with by its solicitors and which step should be ignored.

7. Once solicitors accept an appointment to act for a party in a litigation, they will be solicitors representing that party until an order is made allowing them to cease to act or until they are discharged per the Rules of the High Court. They should, therefore, appear for the 2nd defendant in all the steps in this action. If there should be any valid ground for them to be excused I would have allowed the application but there is no valid ground.

8. I am told that there is no costs on account but that is not a ground for the solicitors to be excused, although it may be a ground for an application to cease to act. I therefore refuse the application and I am grateful for the assistance by the solicitors for the 2nd defendant in this exercise.

9. I now come to the evidence of the valuation. Mr Stewart Wong, the valuer, has produced a report, dated 12 October 2001, which can be found at pages 211 to 219 of the bundle. At the hearing he produced a revised report based on information he gathered since then, and based on an inspection of a number of the items in question, which inspection was conducted by him after the preparation of the first report, but also in October 2001. I now refer to his revised report.

10. There are altogether 15 items of machinery, equipment and furniture, the value of which has to be assessed.

11. The first item is a set of Agfa Selectset 5000 Laser Imagesetter. From information given by the supplier, this item was purchased in June 1994 at the price of $800,000. Mr Wong assessed its worth, as at 1 November 1995, at $550,000, and then he obtained information from the second-hand market that it was having a worth of $95,000 on 21 March 2001. After deducting 15 per cent for the betterment or repair of the second-hand item, he arrived at a market value of $80,000 for the equipment as at 21 March 2001. I accept this valuation for this item.

12. The second item is a Shutterdrive 1000MB x 2. For this equipment, Mr Wong gave it a purchase price, in June 1994, of $50,000. He came to this by a process of allocation because items 1 to 7 were purchased as a set at a total cost of $1.575 million, and items 1 and 3 had prices of $800,000 and $300,000 listed for them by the supplier. So the remaining sum of $475,000 was the purchase price for the other items. Mr Wong made an allocation and arrived at the sum of $50,000 for item 2, and then he deducted that for depreciation and arrived at $29,000 as at 1 November 1995. There being no market comparable in March 2001, therefore, he gave it a residual value of $70,500, and I accept this valuation as correct.

13. Moving on to item (3), which is an Optronics Colorgetter III Pro Scanner. This is a scanner for industrial use and not the type of scanner for domestic or office use, and it is a big model. The purchase price, back in June 1994, was $300,000, as confirmed by the supplier, Alpha. By depreciation, Mr Wong gave the value of $200,000 as at 1 November 1995. But then there is a second-hand market for this kind of equipment, and he found that a similar model of a similar age could be acquired at $50,000. And again, giving an allowance for the betterment which the supplier would carry out, he valued this item, as converted by the 2nd defendant in March 2001, at the price of $35,000. And I also accept this to be accurate.

14. The next item is a Mac Quadra, which is a computer. By allocation of purchase price, Mr Wong estimated that it had a worth of $150,000 in June 1994, which was depreciated to $88,000 on 1 November 1995. There is no comparable in the market so he gave it a 15 per cent residual value and came to the figure of $22,500. Again, I accept this figure as correct.

15. Item (5) is a Mod 600 MD and 88 MB R Plus removable hard drive. This is a piece of hardware in a computer system. Again, by the process of allocation of balance of purchase price, he estimated that it had a worth of $80,000 in June 1994 and depreciated it to $47,000 on 1 November 1995. Again, there is no market comparable so he gave it a residual value of 15 per cent and came to $12,000, of which I accept to be correct.

16. Item (6) is a Mac S/W Pagemaker Qxpress, Illustrator and Photoshop. This is a set of software for use in Mac computers. The valuation is at $19,600. This figure was arrived at after quotation had been supplied by one Teamate Soft. The quotation as relied on, in fact, was dated 15 February 2002 and appears to be slightly cheaper than an oral quotation obtained some time in 2001. Taking into account an item not included in the report of 12 October 2001, the valuation in the revised report is slightly cheaper than in the first report, and I am happy to accept this slightly cheaper figure as the correct figure, which is, $19,600.

17. For item (7) it is a sort of software installed in some hardware gadgets or external hard drives. The software, in fact, is made up of 10 sets of Chinese fonts. There is no market comparable, and after price allocation, which came to $115,000 in June 1994, which was depreciated to $67,500 on 1 November 1995, Mr Wong came to the figure of $17,000 as the residual value - or 15 per cent residual value of these software computer programs.

18. Item (8) is a set of Konica RST Rapid Automatic Processor, Model GR-27. There was a second-hand market in March 2001 and a quotation has been obtained - which is at page 230 of the bundle. It is a quotation of a comparable model of comparable age and Mr Wong has not made any betterment, repair, reduction because a processor is rather simple and such betterment and repair exercise is not necessary before a second-hand model is being sold. And he arrived at the second-hand value of $28,000 and I accept this as correct.

19. Item (9) consists of two sets of Eskofot Processor 280-DL. These processors work differently from that in item (8) and these processors can provide light to the film by way of adjustment, in the course of processing, so as to alter the condition of the film. In the revised report, Mr Wong assessed the value of the articles by reference to second-hand market price at $28,000 because he gave them 17 per cent residual value. He assessed the second-hand market value for these two processors at $28,000 on the basis that they were purchased in 1995. However, since the compilation of the revised report, he came to learn that one of the two processors was purchased in 1991 and the other in 1994. He, therefore, further revised his valuation and came to the figure of $15,000 for the processor purchased in 1994, and $10,500 for the one purchased in 1991. He did that after deducting 30 per cent for the betterment exercise. So the total value is $25,500. I accept his latest revision for this item at $25,500.

20. Moving on to the next item, which is item (10), and it is a set of D.S Autofocus Auto-exposure Vertical Compact Camera. Mr Wong was able to find out the purchase price in June 1990 at about $86,000. He depreciated that to $42,000 on 1 November 1995, and then valued this at $15,000 on 21 March 2001 on the basis of a 17 per cent residual value. When he was asked why he adopted 17 per cent instead of the usual 15 per cent that he has been using for some other items, he said that for cameras there are people who would like to collect them as antiques, and this being a camera, he took that into consideration and gave it 2 more per cent. But he has not elaborated on this either in his original report or in the revised report, and when queried about this he said that he is happy to accept 15 per cent as the residual value, which is also a fair valuation according to him. I, therefore, apply 15 per cent residual value as the fair valuation in March 2001. And this gives the figure of $12,900.

21. The next item is an old fax machine. Mr Wong gave it $500 in his revised report because it was purchased at $1,500 in 1995. However, upon being questioned about the current price of new fax machines in the market, he was happy to revise his valuation down to $225, of which I accept.

22. Item (12) consists of four sets of air-conditioners. In his original report he valued them at $2,500, but after inspecting two of the four air-conditioners, he revised his valuation upwards to $500 per air-conditioner, or a total of $2,000. And I accept his valuation.

23. Item (13) consists of eight lighting tables. They have been in use since 1993. Mr Wong assessed their value as at $1,500 per table, and further depreciated them to $400 per table as at 21 March 2001, which gives a total valuation of $3,200, and I accept this as correct.

24. Item (14) is a film cabinet. It was purchased in about 1990 and, Mr Wong, exercising his experience, assessed its value as at 1 November 1995 at $750, and he further depreciated that down to $300 for its market value on 21 March 2001.

25. The last item is item (15), which consists of some miscellaneous articles and stationery. Mr Wong included in this valuation a vacuum cleaner, a refrigerator and certain fans and came to the valuation of $5,000 as at 1 November 1995, and depreciated that to $2,000 as at 21 March 2001.

26. Since the answers to interrogatories do not refer to the refrigerator, fans and vacuum cleaner, he was asked why he should give a valuation for these items as well. Mr Wong, in answer, advised the court that he was given information about the existence of these items by the plaintiff. Unfortunately, such information has never been provided to the court at the trial and I am not prepared to accept such hearsay evidence at this stage. I therefore ask Mr Wong to confine his valuation on the items that he saw in the inspection, and he then gave a valuation of $1,300 for the eight tables and desks and ten chairs and stools that he saw.

27. That gives a total valuation of $267,025. One-third of that is $89,008. After deducting the interim payment of $36,966.67, the award that I shall make in favour of the plaintiff is $52,041.33. I also order costs against the 2nd defendant together with certificate for counsel.