DERRENS APPAREL AND SOURCING LTD AND OTHERS v. POON KIN FAI AND ANOTHER

HCA 1424/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1424 OF 2007

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J U D G M E N T

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1.  A prevalent, unsavoury practice is carried on in the world of small business activity in Hong Kong, concerning unpaid bills. 

2.  Many traders who find they cannot collect what is owed, instead of, or as well as, putting the matter in the hands of a bona fide debt collector for legitimate action, resort to using those who rely on unlawful recovery.  They are the sort who engage thugs who make an uninvited direct approach to the debtor at his workplace and home, and perhaps also telephone continuously and at odd hours, and by this means exhort, badger, threaten, intimidate, bully, harass and embarrass him, this for a significant cut out of what they can recover.

3.  This case arises out of such activity.

4.  These are the circumstances.

5.  The 3^rd plaintiff is employed by the 1^st plaintiff as a receptionist at its offices in Castle Peak Road, Tsuen Wan.  The 2^nd plaintiff is also employed by the 1^st plaintiff, as production director.  He is a Hong Konger, but as his duties include supervising the operations of factories in China, he frequently travels to China, indeed he spends most of his time in China.

6.  Mr Tse the 2^nd plaintiff deposed that until May last year he was a co-shareholder and director with his wife in a company carrying on business as a garment merchandizing agent called Surpass International (HK) Limited.  He gave up his interests in Surpass in May 2006 when he and his wife separated.

7.  However he was aware that Surpass had dealings with a company called Star Textile Limited who supplied garments.  Payment for these garments remaining for the meantime unpaid was guaranteed by his now ex-wife, Madam Ho.  He is also aware that Surpass has not paid and that Star Textile has issued a writ against Surpass and Madam Ho.  He, Mr Tse, is not a guarantor, has not been joined and has played no part in the proceedings.

8.  Against this background the 3^rd plaintiff Miss Liu deposed that on 25 May this year two men whom she described as fierce looking came to the office.  They confronted her and rudely asked whether Mr Tse was in and if not where he was.  She said he was not in and tried to get him on the telephone but he did not answer.  One of them said he owed them over $5 million and he should pay immediately.  Then he handed to her several pieces of paper and left.

9.  Those pieces of paper have been exhibited.  They are various invoices from Star Textile Limited to Surpass International (HK) Limited for various amounts for garments supplied, in US and HK dollars.  There is also a guarantee signed by one Yvonne Ho.

10.  There was a telephone call that afternoon.  She recognised the voice as that of one of the visitors.  He said he was called Ho and was from Star Textile.

11.  He again demanded payment from Mr Tse and threatened with consequences in foul language if he did not.

12.  Miss Liu felt frightened and reported events to her boss Mr George Fong.

13.  There were further telephone calls in similar vein on 5 June, 9 June, 15 June and 27 June.  On one occasion Ho threatened Miss Liu’s person.

14.  She related these events to both Mr Fong and Mr Tse.

15.  Mr Fong instructed solicitors to write to Star Textile telling them to back off, but this was before the end of May and as I have stated the abuse continued through June.

16.  Mr Tse himself also received calls, about 10 in all, conducted in abusive and intimidating language.  Each time amounts of money were demanded.

17.  This led to this action filed on 30 June against the defendants.  They are husband and wife and known by Mr Tse to be the sole shareholders and working directors of Star Textile.

18.  The endorsement reveals that what is claimed is an injunction to put an end to the harassment, nuisance and intimidation complained of, and to restrain the defendants or their agents from attending at or in the vicinity of the workplace of Mr Tse and Miss Liu.

19.  The defendants have been targeted because Mr Tse has deposed that he has reason to believe that Ho and his cronies have been acting under the instructions of the defendants.  His belief stems from his past experience with Star Textile.  The husband and wife directors run and control the operation and make all decisions.  They have but three employees who will only act if directed by one or other of the two bosses.

20.  At the same time as they filed their writ the plaintiffs applied inter partes for an interlocutory injunction, pending trial or further order, in like terms.

21.  There was difficulty about service, and in the event the matter proceeded ex parte.  Burrell J made the order applied for on 6 July that was extended on 20 July to the return date.

22.  The defendants having been served have filed affidavits in opposition; this is the restored return date.

23.  The defendants confirm they are directors of Star Textile, that Surpass is indebted to their company in the sums of US$594,000 odd and HK$477,000 odd, which comes to about HK$5.1 million, that the indebtedness is guaranteed by Yvonne Ho.

24.  Star Textile has issued the writ to which Mr Tse referred.

25.  The remainder of the affidavits effectively set out the defendants’ case to defeat the injunction asked for; namely, that taking the plaintiffs’ allegations at their highest, the creditor is Star Textile and if anybody instructed and directed Ho and his cronies to impose themselves it would have been Star Textile.

26.  Yet although the letter before action was sent to Star Textile, Star Textile is not being sued.

27.  What is interesting and pertinent is what is not deposed to; there are no denials that Ho and the others received any instructions to trace Mr Tse for repayment of the debts.

28.  What is in contention is as to whether the plaintiff have established the first of the requirements for an interlocutory injunction as laid down in American Cyanamid.

29.  Mr Wong for the defendants took up the point that emerged in the affidavits they filed; namely, that if there was a tortfeasor it was not either of the shareholders and directors but the company Star Textile Limited.  After all it was the company that was carrying the debt and suing for it and Ho, that is the thug called Ho, represented he was of Star Textile.

30.  Mr Wong took me to case law supporting the principle that a director cannot automatically be held accountable for tortious acts of the company he represents, however small the company is and however powerful his control is.  As was said by Lord Justice Slade giving the judgment for the Court of Appeal in the case C Evans & Sons Ltd v Spritebrand Ltd & Anor [1985] 1 WLR 317 at p.329:

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Commercial enterprise and adventure is not to be discouraged by subjecting a director to such onerous potential liabilities.  In every case where it is sought to make him liable for his company’s torts, it is necessary to examine with care what part he played personally in regard to the act or acts complained of.”

31.  Mr Hon for the plaintiffs for his part takes no issue with this principle.  But as he says,

“	it does not prevent a finding of fact that in the particular circumstances of a case a director might be held to be personally responsible.”

And he says,

“	the plaintiffs and more particularly Mr Tse have identified the defendants as primary joint tortfeasors given his (Mr Tse’s) belief founded on his knowledge of how they conduct their business and how they run Star Textile.”

32.  He said the plaintiffs had no wish to pierce the corporate veil or target the defendants simply by virtue of their office.

33.  And he points to the fact that there has been no denial whether on oath or otherwise that the instruction that Ho the thug was acting under had not been given personally to him.  Of course they had the opportunity to do so but there has been no word, no rebuttal.

34.  The threshold is that there has to be established a serious question to be tried.  I find that has been achieved.  And that being the only issued for me to resolve, I grant the application asked for.

(After Discussion)

35.  The costs of the plaintiffs including those reserved shall be in the cause.