SAPPHIRE TECHNOLOGY LTD v. LEUNG CHI WAI

HCA 442/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 442 OF 2006

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D E C I S I O N

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1.    This is the plaintiff’s application for interim payment under Order 29 Rules 11 and 12.  The basis is that if the action proceeded to trial, the plaintiff will obtain judgment against the defendant for a substantial sum whether by way of damages or otherwise. 

2.    There was an alternative application under Order 14, but because of the presence of a cause of action based on fraud, that application was not proceeded with. 

3.    The plaintiff’s pleaded causes of action are: fraudulent misrepresentation, money had and received, breach of employees’ duties and constructive trust.  The cause of constructive trust requires the defendant to account to the plaintiff the profit he made by using the plaintiff’s money.  Since this application is for interim payment, this cause is not relevant for this application.

4.    The defendant was employed by the plaintiff as a production materials control officer, “PMC officer” in short.  The period of employment was from 1 April 2004 to 6 February 2006 when the defendant resigned.

5.    The plaintiff is a company trading in computer motherboards and in particular VGA display cards.  It has a long-term manufacturer, Excelsior Technology Limited, which operates in Dongguan of the Mainland.  Excelsior is a manufacturer of the plaintiff, not part of the plaintiff.  Its manufacturing process is carried out in Dongguan.  It delivers the finished products to the plaintiff in Hong Kong.  The materials required for the manufacturing are supplied by the plaintiff or its suppliers to Excelsior.  Whenever Excelsior is running out of any material, its staff would notify the plaintiff’s PMC officers and request for supply of such material.  Upon such request being made, the PMC officer concerned would prepare the relevant purchase order and submit the same to his manager for approval.  Once the order is approved by the PMC manger, it would be returned to the PMC officer for it to be placed with the relevant supplier.  The supplier would then procure the necessary material as stipulated in the purchase order and deliver the same to the plaintiff in Hong Kong or directly to Excelsior in the Mainland.

6.    There would be a delivery order to accompany the goods to be delivered.  If the goods should be delivered to Excelsior in the Mainland, the staff of Excelsior would stamp a receipt chop on the delivery order and sign on it to acknowledge receipt of the goods.  The supplier would then present the acknowledged delivery order to the plaintiff’s PMC officer for payment.  The PMC officer would then present the acknowledged delivery order and the copy purchase order to the plaintiff’s Finance Department for payment of the purchase price.  The Finance Department would then issue a cheque for payment of the goods stipulate in the delivery order.  The cheque would then be given to the PMC officer concerned for delivery to the supplier.

7.    The defendant had set up two companies.  The first one was called is Wing Kei Hong.  It was set up on 2 September 2004.  The second one was called Hop Shing Industrial Company.  It was set up on 11 September 2004.  The defendant was the sole proprietor of both companies. 

8.    It is the plaintiff’s case that the defendant had prepared a number of false purchase orders purportedly on behalf of the plaintiff.  They were addressed to Wing Kei Hong and Hop Shing Industrial Company for purchase of goods from these two companies.  The defendant would then prepare false delivery orders purportedly issued by Wing Kei Hong and Hop Shing Industrial Company.  These false delivery orders corresponded to the relevant purchase orders which were purportedly issued by the plaintiff to these two companies.  These delivery orders all had the receipt chops and authorized signatures of Excelsior.  They were copied and transposed by the plaintiff from genuine delivery orders onto the false delivery orders.  The defendant then submitted these false delivery orders and the corresponding copy purchase orders to the plaintiff’s Finance Department for payment.  In due course, he obtained cheques payable from the plaintiff’s bank account to these two companies.  These cheques were cleared and payments made in favour of the bank accounts of these two companies. 

9.    The plaintiff says that between 2 September 2004 to about 27 January 2006, the defendant had by the above means misappropriated at least $4,884,200 from the plaintiff.  This sum was appropriated through 23 transactions done in the name of Wing Kei Hong and 17 transactions done in the name of Hop Shing Industrial Company.  The particulars of these transactions have been set out in two schedules annexed to the plaintiff’s Amended Statement of Claim.

10.    The defendant has filed an Amended Defence to the plaintiff’s Amended Statement of Claim on 22 September 2006.  However, it contains only bare denials.

11.    This application was taken out by the plaintiff on 10 September 2007.  On 28 September 2007 Waung J gave directions for the defendant to file an affirmation in opposition within one month therefrom, but the defendant has not filed any.  This morning I asked the defendant what did he have to say to this application, he said he had nothing to say.

12.    Based on the facts that I have outlined above, the defendant was convicted of a count of theft in the case of DCCC509/2006 and was sentenced to 5 years’ imprisonment

13.    In the premises, I am satisfied that if the action proceeded to trial, the plaintiff would obtain judgment against the defendant for a substantial sum either as damages or for money had and received.  The damages would be on account of either or both of fraudulent misrepresentation and breach of employees’ duties.  I therefore order the defendant to pay the plaintiff the sum of $4,884, 200 as interim payment under Order 29 Rules 11 and 12.  I also order the defendant to pay the plaintiff the costs of this application.