J.H. TRACHSLER (HONG KONG) LTD v. BJOERN LOHSE AND OTHERS

Case Number 1987: 2906

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

Between

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JUDGMENT

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Preliminary.

1. There were, at the commencement of these proceedings, eight defendants. The dispute has been settled against all save the fifth, sixth and seventh defendants, but, because the others feature in the evidence heard by me, it would be convenient at this stage to identify them. The first defendant was Eugene George Yourieff ("EGY"), who was, for many years, the general manager of the plaintiff in Hong Kong. The second defendant was David Yourieff ("DY"), the son of EGY and his reluctant successor as general manager. The third defendant, Mr C.Y.Poon, was, before his dismissal, the plaintiff's marketing manager. The fourth defendant was Northern Technical Services Limited ("Nortec"), which was the unconscious root cause all the trouble. The eighth defendant was Miss Ida Chow. She was also, before she was sacked, an employee of the plaintiff. I will refer to these, collectively, as the "former defendants".

2. The fifth defendant, Bjoern Lohse ("BL") is a German lawyer practising in Hong Kong. He assisted in setting up Nortec, and, it said by the plaintiff, culpable for some of the wrongs done to the plaintiff. The sixth defendant is a company operated from within the seventh defendant, and which was, at some time, a director of the fourth defendant. The seventh defendant is the German firm of lawyers operating in Hong Kong, which employed SL and which is, the plaintiff alleges, vicariously liable for the alleged wrong-doing of BL. These I will call the "present defendants".

The plaintiff's evidence

3. Broadly - I will got to the details later - the plaintiff complains that the former and present defendants conspired together to defraud it by assisting in the setting up of, and operating, a business - that of Nortec - in competition with the business of the plaintiff, while the former defendants remained employed by the plaintiff and had a contractual duty not to do so. Me plaintiff also alleges that the former and present defendants were trustees under a constructive trust in favour of the plaintiff, and that the present defendants are liable for a breach of that trust.

4. The main witness for the plaintiff was DY, the second defendant. He had agreed to give a proof of his evidence to the plaintiff's solicitors as a term of the settlement of the action against him. What follows in this part of my judgment is, unless otherwise mentioned, drawn from his evidence.

5. The plaintiff is a long-established company, trading in photographic, office and other equipment (including sewing machines) in Hong Kong, Macau and China. It we served long and, by all appearances, until the cause of this dispute arose, well and loyally by EGY as its general manager, and, latterly, as a director. DY joined the plaintiff's employ when be returned to Hong Kong from university in the United States is 1981.

6. The plaintiff is wholly owned and controlled by a company in Switzerland - J.H. Trachsler S.A..

7. Apparently, the business of the plaintiff in Hong Kong proceeded smoothly and happily under the hand of EGY until 1983. Then, Mr Walter Koch become a director of the plaintiff and of he Swiss company. He did not see eye to eye with EGY regarding the running of the plaintiff, and, with justification or not, MY and DY looked upon him with suspicion and anxiety. Mr Koch, who gave evidence for the plaintiff, agrees that there were difficulties in his relationship with EGY.

8. In the minds of EGY and DY, this attitude towards Mr Koch was substantiated in September 1984, when a letter was sent to EGY, who was then in the United States of America, by the Swiss company. This letter intimated that the board of directors intended to discuss the retirement of EGY and the change of management of the plaintiff. EGY was, at this time, about 70 years of age, so this move, objectively, should not have been surprising.

9. Shortly after this letter was dispatched, Mr Koch came to Hong Kong. He spoke to DY over dinner. Before this conversation, DY was unaware of the letter to his father. Mr Koch told DY that the board wished EGY to retire in June 1985, and that DY was to take over as general manager. DY was not pleased about this. He said in evidence that he was extremely disturbed by the news. He did not like the idea of replacing a sacked father, and he was also uneasy about his own future under the distrusted Mr Koch.

10. DY felt the need to discuss his problem with someone, and he chose the fifth defendant - BL. DY had met BL about a year before through their shared interest in sailing. They had become close friends. BL also knew EGY.

11. DY knew BL was a German lawyer, and that he could not appear in court in Hong Kong. He did not know of any other restrictions on BL's right to practise in Hong Kong. He met BL over lunch about a week after Mr Koch's visit. He told BL what Mr Koch had told him. He also told BL that he was very disturbed about the matter and expressed his concern for the future of his father and himself. He told BL that he, DY, would not be a director of the plaintiff and would be at the mercy of Mr Koch. At some time, perhaps then, perhaps on another occasion, he also expressed his concern for Mr Poon, a close associate and old friend of his father's.

12. DY and BL discussed what could be done to safeguard their futures. It was suggested, it is not clear by whom, that another company could be set up to carry on a business for EGY. This company would also provide security for DY and Mr Poon if their position with the plaintiff turned sour. BL said that the setting up of this other company could be done easily; that this was his job.

13. The mechanics were discussed in very general terms at this meeting, but BL did say that they could have nominees for directors and shareholders. DY says that, before this, he had heard of nominee directors and shareholders, but that he did not know the detail of how the concept worked. After this discussion, he understood that the idea could be used to conceal, for whatever reason, the true control of, and beneficial ownership of shares in, a limited liability company.

14. After this meeting, DY met his father in Germany. He told EGY of his discussion with BL, and he suggested to his father that he should set up his own business. EGY was non-committal, saying he wished to discuss the matter with the board first.

15. In early November 1984, when both EGY and DY had returned to Hong Kong, they discussed the matter with Mr. Poon. EGY told them that he was dissatisfied with the way the board meeting had gone. In particular, he was unhappy because he had not been given the opportunity of discussing a proposal that he should open his own business in Hong Kong to hold certain competing agencies. I was told that one supplier in particular was complaining about the plaintiff also dealing in a rival's products.

16. The upshot of this discussion was that EGY, DY and Mr Poon decided to set up another company to allow EGY to continue working, and to provide a "stepping-stone" for DY and Mr Poon in the event that their fears regarding Mr Koch should prove justified. They thought of all resigning, but they feared that this would destroy the plaintiff - which they did not want to do - and decided that they would try to buy the plaintiff's shares at some later date.

17. EGY told DY and Mr Poon that he was to retire at the end of August 1985, and that he was to have some continuing relationship with the plaintiff. What this relationship was to be was unclear to DY, although he denied it was a consultancy. It is plain to me, on the papers I have seen, that, whatever one might choose to call the relationship, it involved, during the relevant time, a continuing relationship between EGY and the plaintiff under which EGY would make available his experience and expertise to the plaintiff.

18. It was decided that the new company would be set up and start business as soon as possible. They decided that they would hold one share each, and DY passed on the idea of having these shares held by nominees. DY says that EGY objected to this for himself, saying that he felt he had every right to start another business. DY says that he was aware that he would not be allowed to go into another business. He told his father that he thought it better that they all should adopt the nominee arrangement. This was agreed, and that the directors would also be nominees. BL was to provide these nominee services.

19. On 6 November 1984, DY met BL again. He told BL to proceed to set up the new company for himself, his father and Mr Poon as soon as possible. BL knew that EGY was to retire from the plaintiff, but that DY and Mr Poon would continue to work for the plaintiff for the foreseeable future. DY says that BL knew that the board had originally proposed that EGY should retire in June 1985; he is not sure whether he told him that this had been moved to the end of August of that year. BL said it would hot take long to set up the company; they would use a shell company and change its name. He asked DY to come up with some preferred names.

20. DY supplied a list of names shortly thereafter. These were -

Northern Technical Services Limited

Nortec Limited

Northern Technical Consultants Limited

China Technical Services Company Limited

China Services Company Limited, and

Trachsler Limited.

21. DY says that they did not intend to use the name Trachsler, but wanted to have it reserved so that they could use this as some kind of lever when the negotiated for the purchase of the plaintiff's shares.

22. BL, writing on behalf of the seventh defendant, applied to reserve these names. Only the English versions of the first three names were available and the first name was chosen. The shell company's name was changed to Northern Technical Services Limited on 28 December 1984. DY discussed with BL the share-holding and the holding of the shares by nominees. As to directors, BL volunteered to be, one of these and suggested Sinclair Roche as the other. BL's firm would be the company secretary. On 10 December 1984, DY sent to BL the full names and addresses of himself, EGY and Mr Poon.

23. DY says that BL knew what kind of business the new company would be undertaking, but, other than saying he told him that the new company would be buying from the plaintiff, he says that BL "would have known" that the new company would engage in the trading in the same sort of goods as the plaintiff without specifying how BL would have known that. Although DY is not able to be specific about how BL acquired this know-ledge, and the fact of it might otherwise have been left in doubt, BL, in his evidence, confirmed that he knew that the new company would be dealing in the same line of goods as the plaintiff.

24. In December 1984, at DY's instigation, BL applied to register the names Traxler Limited and Tracksler Limited, and also the names San Sui Hong Limited and Shin Shui Khang Limited, which, although unregistered, were the Cantonese and Putonghua names, respectively, used by the plaintiff. This succeeded except in respect of Tracksler Limited. The reservation of these names, other than Tracksler Limited, was renewed by BL from time to time; the last application for renewal before me is dated 24 March 1987.

25. On 11 December 1984, BL wrote to Sinclair Roche in relation to the purchase of the shelf company, giving the new name for the company (Northern Technical Services Limited), the registered office and secretary as his firm, the shareholders as Sinclair Nominees for Mr Poon and Roche Nominees for EGY and the directors as BL and a nominee.

26. According to a letter by BL to Nortec dated 25 January 1985, Nortec was ready to commence business from that date. Nortec did indeed commence business shortly after that. EGY was, at that time, of course, still employed by, and a director of, the plaintiff. As I have said, the registered office of Nortec was the premises of BL's firm at Wilson House. There, according to DY, the mail was handled by Miss Susanna Wong, BL's secretary. She opened the letters secretarial and company matters were dealt with there, and business papers were passed onto others handling Nortec's business at the plaintiff premises at Watson's Estate. For these services, Miss Wong was paid $500 per month. Initially, Nortec used the telex of BL's firm, until it acquired its own, which was kept at Wilson House.

27. Trading matters for Nortec were dealt with at the plaintiff's premises at Watson's Estate. Ida Chow handled the documentation, and sales and quotations were dealt with by another employee of the plaintiff, Miss Lilian Yip. It is clear from the papers supplied to me that EGY, DY and Mr Poon also dealt with the business affairs of Nortec. DY arranged a meeting or meetings to introduce miss Wong to Ida Chow and Lilian. Yip so that they could better liaise over Nortec's business. BL knew that Ida Chow and Lilian Yip were employed by the plaintiff, and, at the same time, were working for Nortec.

28. BL was a signatory of Nortec's bank account, and rendered other normal company secretarial services to Nortec, including attending to tax matters and drawing up and signing minutes. BL's firm charged fees for this work. From September 1985, Nortec also paid rental to BL's firm for office space at Wilson House.

29. For capital, Nortec received loans from DY and Mr Poon in the sums of $100,000 and $180,000 from EGY. It was agreed that interest on these sums would be paid at the rate of 1% per month.

30. When EGY retired from the plaintiff, he, through a company, became a consultant for Nortec, from 1 September 1985, at a monthly fee of $15,000. The terms of his appointment were contained in a letter signed by BL on behalf of Nortec.

31. The business of Nortec did well from the beginning, which is not surprising seeing that it was using the ready-made base of the plaintiff for its activities.

32. On 4 March 1985, the board of Nortec (in the personalities of BL and Mr Handcock of Sinclair Nominees Limited) resolved that a new share be issued to BL.

33. At the Annual General Meeting of Nortec on 20 March 1986, at which BL presided as Chairman, the shareholders (Mr Handcock again for Sinclair Nominees Limited and Roche Nominees Limited and BL) resolved that Continental Recoveries (Hong Kong) Limited (the sixth defendant) be appointed as an additional director. DY knew nothing about the sixth defendant other than that it was "one of BL's companies".

34. On 1 July 1986, the directors of Nortec, chaired by BL, recommended a dividend of $140,000 per share; that is, to each of EGY, DY and Mr Poon. The minutes of the board of Nortec of 30 October 1986 record the acceptance of the resignation of Sinclair Nominees Limited as a director on 29 October. This left, as directors, only BL and the sixth defendant. DY seems to have the idea that the sixth defendant replaced Sinclair Nominees Limited. He says this was BL's idea so that he would not have to bother with Sinclair Roche.

35. DY also gave evidence about the leasing additional premises known as 506B Watson's Estate in the name of Nortec, but for the plaintiff's purposes. I will leave that matter until later.

36. Mr Koch paid a visit to Hong Kong in June 1986. He, of course, knew nothing about Nortec, but the visit seems to have stirred DY into seeing a solicitor about what was going on. He saw Mr John Whyte on 16 July. DY explained the relationship between Nortec and the plaintiff and the story of the lease of 506B Watson's Estate. Mr Whyte's advice was unequivocal; that they should all resign from the plaintiff immediately, and that the lease should be transferred to the plaintiff. DY says he was taken aback by the suggestion that they should resign; it gave him the feeling that the situation was more serious than he had thought. He understood that Mr Whyte was saying that they should not be doing what they were doing; that it was wrong. He was, he says, alarmed by Whyte's reaction.

37. After this, he arranged for the transfer of the lease to the plaintiff and then, on 23 July 1986, he saw BL. He reported what Mr Whyte had told him, and, in particular, that Mr Whyte advised that they should resign. BL brushed this off; he said that lawyers like John Whyte were too conservative that things like that were going on all the time in Hong Kong. So, he says, he did not act on Mr Whyte's advice; his anxieties were alleviated by BL's attitude.

38. It is quite clear, from what DY told me and the documents I have seen, that EGY, DY and Mr Poon misused their position as employees of the plaintiff to the advantage of Nortec, and, of course, to their own advantage. They took business from the plaintiff and directed it to Nortec, and, when they obtained goods from the plaintiff, they caused the plaintiff to supply these on the most favourable terms. Then, the people doing this injury to the plaintiff took commission on the sales to Nortec. Mr Whyte was, of course, quite right to convey to DY that this was wrong, and DY would have been wise to have paid more attention to his advice.

39. At some stage, DY instructed the preparation of a sign bearing the names of both the plaintiff and Nortec. What was in DY's mind in this respect is hard to imagine, but he eventually realised it was a stupid idea, and the sign was stored at Wilson House. He says he discussed why it was not a good idea to erect this sign with BL.

40. DY says that BL, suggested Moore Stephens as auditors for Nortec and that BL did all the work with the auditors in finalising the accounts. The audits were carried out at BL's office.

41. In June 1986, someone signing himself as "T.K.T." sent a letter to Mr Koch saying that he was a former employee of the plaintiff and exposing the situation regarding Nortec.

42. Mr Koch asked Messrs. Peat, Marwick, Mitchell and Co., accountants, to investigate the report. This they dial, and found out enough to make them suspicious. This investigation took some time and it was not until 19 March 1987 that DY was confronted with the evidence. He was asked to explain certain matters. What was put to DY and his explanations are set out in a letter by Peats to DY dated 20 March 1987. DY admits that the explanations he gave were not the truth.

43. Naturally enough, DY was alarmed by the questions, and immediately sought the advice of John Whyte.

44. He showed Mr Whyte the letter of 20 March. Mr Whyte advised DY that he should tell the truth.

45. On 3 April 1987, DY had another meeting with Peats. On 8 April 1987, DY, with Mr Whyte's assistance, wrote a letter to Peats. On 10 April, he had another meeting with Peats. At the meetings on 3 and 10 April, and in his letter of 8 April, DY, more or less, disclosed the truth of the matter.

46. By letter of 16 April, Peats reported to Mr Koch. In May, it was decided in Berne that "there is no longer any possibility of carrying on in JHT-HK with the 6 `leading personalities' who are to blame" and Mr Koch was dispatched to Hong Kong to sort the matter out.

47. On 19 May 1987, DY, Mr Poon and others were dismissed, and the present proceedings were commenced on the same day.

48. Shortly after proceedings were commenced, DY met BL on a social occasion. Both said words to the effect of "what a mess!". BL said he did not know whose idea the scheme was, DY's or his. DY replied that he did not know either.

49. Mr John Whyte, the solicitor of Johnson, Stokes and Masters mentioned by DY, gave evidence. He had known the Yourieff's since the late sixties, although they were not close friends. He also knew BL through the Yacht Club.

50. He described the meetings with DY mentioned by him. Mr Whyte did not open a file on the matter and did not render a fee note. He seems to have treated the consultations on a friendly basis.

51. His recollection of the first meeting in about July 1985 was that DY described his relationship, and that of his father, with the plaintiff. Then he mentioned the gist of the problem, which was that they wanted to leave the plaintiff and start their own company. DY also mentioned another key employee of the plaintiff's but Mr Whyte could not remember his name.

52. DY told him that there was a company in existence, and it had started the same sort, or a similar, business as that of the plaintiff. He was also consulted on a lease. In regard to the lease, Mr Whyte advised that it should not have been in the new company's name; that it was the plaintiff's lease. As to the relationship with the plaintiff, Mr Whyte advised DY that it was clear, in contract and law, and apart from any question of good faith, that he and his father could not work for both companies.

53. Mr Whyte was next consulted shortly before these proceedings began. He said that DY telephoned for an appointment. He could not remember what DY said over the phone, but Mr Whyte drew the conclusion that he was in "hot water". When he saw DY, he had some papers with him, including a letter from the plaintiff's auditors. He could not remember the details of what DY told him, but he deduced that the new company had gone ahead and had diverted orders and the like from the plaintiff to itself. Mr Whyte told DY that the matter was serious. DY, he recalled, had a draft letter in reply to the auditors queries, and Mr Whyte did not consider this satisfactory. He told DY to come clean with the auditors. Later, he vetted a draft of another letter to the auditors which became that of 8 April 1987. He says that, in 1987, DY mentioned BL and the gist of what he said about him was that he was very much involved and instrumental in setting up the new company. This evidence is of some relevance because BL suggested in his evidence that, when the business of Nortec was exposed, DY assured him, initially, that he was not involved in the problem.

54. In cross-examination, Mr Whyte said that his impression of EGY was that he was a gentleman; an honest and decent man.

The documents

55. Apart from the oral evidence led before me, I was also supplied with two files of documents, split into various bundles according to topics. It was conceded by Miss Li, for the present defendants, that these documents were authentic, but the truth of there contents was not admitted.

56. During her submissions after the evidence was heard, Miss Li presented an argument that I could not take these documents into account, save in so far as they were referred to, and, presumably, identified, by a witness. I made it clear to Miss Li at the time that I could not understand this point. If the documents were accepted to be authentic, as Miss Li confirmed they were, my view was, and remains, that I am able to draw such assistance from them as arises from the fact that they are what they appear to be. Naturally, I accept that, if there is a matte of fact stated in a document, that fact is not verified by being so stated.

57. For example, there are a number of documents supplied to me that are, on the face of them, communications from the plaintiff, through EGY, DY and Mr Poon, to customers and suppliers indicating that Nortec is, in some way, connected with the plaintiff, or acting with its knowledge and consent, and inviting dealings with Nortec. The concession that these documents are authentic must mean that I can accept the documents as establishing that EGY, DY and Mr Poon did write these communications, and say the things contained in them. The documents are not, of course, evidence of the truth of any factual statements in them; indeed, the statements that the plaintiff was a party to Nortec's dealings were, we know, lies, and part of the undertaking of the conspiracy.

The present defendants' evidence

58. BL gave evidence before me. He said that he was a German lawyer. He had studied at Kiel and Hamburg for about seven years, and underwent a further two years as a trainee. He completed his training in early 1983 and worked for the seventh defendant, which was a firm largely specialising in commercial and maritime law. He came to Hong Kong soon after this, where the only other lawyer was a Mr Kraemer, another employee of the seventh defendant. He said that he was aware of the Law Society restrictions on foreign law firms; he had read his firm's undertaking to the Society several times. It was normal for his firm to provide secretarial, registered offices and nominee services to clients.

59. The sixth defendant was a company owned by the firm which was used as a vehicle to collect insurance claims. It was also used as a nominee company. He, Dr Dabelstein and Mr Rhomberg were the directors.

60. BL's evidence is, in the main, consistent with that of DY, although the differences are significant.

61. He agreed he had become a close friend of DY. He liked his father, and his impression of him was that he was an honourable, well-liked and respected man. He knew that DY was employed by the plaintiff and that EGY was its general manager. He knew that the plaintiff dealt in photographic and surveillance equipment.

62. His recollection was that in about September 1984, DY told him that EGY's retirement had come up, but that his father did not want to retire. He says they talked in general terms about setting up a company for his father. They talked about the structure of the company, and he told DY that he could provide one. He mentioned nominees as part of the possible structure of the company.

63. DY then went to Europe. When he returned, they spoke again about setting up the company. DY told him about his father's visit to Switzerland. DY said that the company wanted to retire him and that he and EGY were upset about this. DY said that his father wanted to start his own company, but, before giving instructions to BL, he would discuss with his father again. DY said that he was also thinking of retiring from the plaintiff because the Swiss decision was intolerable. DY did not say when EGY was going to retire specifically, although he was given to understand by DY that he had no current contract and could retire any time.

64. A few days later, BL said, DY told him to proceed to set up the new company. BL told him of the requirements; two directors, two shareholders, a registered office, a company secretary, but firstly he needed the company's name.

65. BL understood that the purpose of the new company was to provide an opportunity for EGY to carry on after retirement. The new company would take advantage of a potential market in the same business as the plaintiff. He understood that the plaintiff had competing agencies and the plaintiff could not deal with all suppliers. The new company could take advantage of a market otherwise uncovered. DY also mentioned using the company to assist an Indian friend of EGY regarding Indian currency restrictions. There was also a matter of using the company to meet expenses relating a sailing boat.

66. BL asked DY if he needed nominees, and DY said they did. As to the reason for using nominees, BL said this was so outsiders could not see who owned the shares. If nominees were not used, it would be easy for those dealing with the new company to see that it was being operated by the same persons as ran the plaintiff. For the same reason, BL's office was used as the registered address.

67. DY gave him the names to submit for reservation of a company name. He understood that the name Trachsler was not for use by the new company, but in connection with the purchase of the shares of the plaintiff.

68. BL purchased a shelf company from Sinclair Roche, in which EGY was to hold one share, for which BL's firm would provide a nominee, and Mr Poon would hold the other, for which Sinclair Roche would provide the nominee. Later, DY acquired a beneficial interest in a share, and BL held this share on his behalf. He knew that Mr Poon worked for the plaintiff. He was to hold a share because he was the China expert and he understood Nortec was to do most business with China. DY also mentioned that Mr Poon was part of the proposal to buy the shares in the plaintiff. He understood that a offer for these shares had been made already.

69. BL understood from DY that EGY was to run Nortec from BL's office BL said he could not have a trading company operating from his office, but DY said he should not worry; EGY would come in only two or three times a week, and work for a couple of hours.

70. By December 1984, BL understood EGY had retired.

71. He recalls a proposal to have lunch with his secretary, Susanna, DY and Ida Chow to discuss Nortec matters, but BL says he could not attend, although they discussed Nortec generally before he had to go.

72. In January 1985, BL says he went to the Plaintiff's office to deliver the trust share documents. There he met EGY, Mr Poon, Ida Chow and Lilian Yip, and show around the premises. Then he had lunch with DY.

73. BL says he did not agree to Susanna receiving $500 per month for doing Nortec's work. She, he says, would have told him if she had so agreed.

74. The services provided for Nortec at BL's office was, apart from the corporate and secretarial work, the provision of a room, the use, initially, until Nortec got its own, of a telex machine, the sending of telexes on the dictation of Ida Chow, the receipt of telexes and re-directing mail. BL says that his office did not open any Nortec mail; just put it aside for collection by a messenger.

75. BL says that he did very little for Nortec except on DY's express instructions. When he signed documents, other than formal secretarial documents, he did so on DY's request, when the document would be sent to him with a note saying, to the effect - "Please sign and return".

76. He was asked to be a signatory on the bank accounts by DY, and he found nothing strange in that. He knew EGY, DY, Mr Poon and Ida Chow were the other signatories.

77. BL says that DY did not tell him of the conversation with Mr Whyte in July 1985, and he certainly did not say words to the effect that Mr Whyte was a conservative lawyer and everyone was doing it. The only time he heard of advice by Mr Whyte was in March 1987, when DY told him that Mr Whyte had advised him to co-operate with the auditors of the plaintiff in regard to their investigations into the activities of Nortec.

78. He says no trading goods were delivered to his office.

79. The audit for Nortec was done at BL's office, with Ida Chow sending there any books and papers that the auditors required.

80. BL knew that Nortec was trading in the same line of business as Nortec, and that the business was being run by EGY, with help from DY, Ida Chow and Mr Poon, but, he says, he did not know that Nortec was diverting business from the plaintiff. It did not occur to him that what was being done was in breach of any contracts; mainly because of the upstanding character of EGY.

81. It was his idea, he says, that Continental Recoveries should be a nominee director in place of Sinclair Roche. He says this was because they were paying nominee charges to Sinclair Roche, when Continental Recoveries was a nominee company that could be used for this purpose.

82. In March 1987, after the auditors had asked questions of DY, DY came to his office with two cartons of papers, two signs and a bag of brass letters. One of these signs had the names of both the plaintiff and Nortec; BL described this as quite unique. He did not recall the other sign.

83. BL says that he does recall a social occasion, after these proceedings were commenced, when he met DY for dinner, with their companions. He thought it likely that he did make some remark about the situation being a "mess", but he did not say anything about whose idea it had been. He presumed that they touched on the situation with Nortec, but, in the middle of a public restaurant, he does not think they would have spoken openly.

84. At this time, he says he was very upset and angry about the situation; angry with the Yourieffs. He also realised that he had not taken an indemnity when he checked his file. So, he asked DY to confirm that he had acted only on instructions and would not be part of the matter. He says that DY confirmed this and told him not to worry. He told DY he wanted to resign as a director, but DY would not accept this, saying that he would not accept being appointed director in his place.

85. Later on, says BL, DY started to blame him for the situation, saying that he had given bad advice. DY also said that he was surprised that one could look behind nominees. Later Still, BL says, over lurch, DY started talking about settling the matter and looking for a contribution from BL. DY said that his family could not afford the money to settle and that BL should help. For BL, DY said, it would be no big problem because he could get reimbursed by his professional insurance. DY also said that, although they were friends, his family was more important, and BL should not be surprised if he put the blame on BL. BL says that DY said this more than once, and once said that his solicitors had advised that they could sue BL for negligence. He pressed BL for a contribution towards a global settlement, and threatened to drag BL in if he did not offer anything. On another occasion, DY said that he had had difficulty holding his solicitor back from informing the Law Society.

86. Under cross-examination, BL said that he had studied Hong Kong company law sufficiently for his purposes in acting as a director.

87. EL gave evidence about his dealings with the Hong Kong Law Society. After answering some questions about this, he was asked to produce his office file on the topic. He asked if he could take advice from his solicitor about this. I gave him leave to do so while a witness. Clearly, BL anticipated that if he produced the file, some of the questions asked about it would be awkward. He was right.

88. I need not go into the detail of BL's evidence about his conduct in relation to the Law Society. It is sufficient to say that it is clear to me, on BL's own evidence and the documents produced by him in relation to his firm's dealings with the Society, that his firm carried on business in Hong Kong with scant regard to its undertaking to the Society; the undertaking that he said he had read several times. In seeking to chow that his firm did comply with the undertaking when it obviously did not, BL lied to and misled the Society several times, and sought to suborn a false statutory declaration. When the Law Society got to the heart of the matter, but, unfortunately, without a great deal of persistence, BL neglected to answer its queries, in the hope that the whole unpleasant thing would go away.

89. Overall, BL's behaviour with regard to his firm's undertaking to the Law Society was disgraceful. The conduct of the partners of the firm, who must have known that the undertaking was being disregarded, is no better. They have not helped the cause of foreign law firms in Hong Kong; most of whom, no doubt, render a valuable and efficient service in compliance with their undertakings to the Law Society.

90. In spite of his evidence that he had agreed that Nortec should carry on its business from his office and, indeed, that EGY would physically do so from his spare office, BL said, in relation to another company, that it would inappropriate to do so because the office was small and there were matter of confidentiality to take into account.

91. BL conceded that his firm was remarkably unsuccessful in its operations in Hong Kong, and had usually made a loss. The pattern of losses makes it difficult to understand why the firm continued to operate. Any reasonable lawyer must have come to conclusion that there was no demand in Hong Kong for the firm's services in advising on German law, which, after all, was the sole justification of its existence in the territory.

92. For the services of the sixth defendant in acting as nominee director for Nortec, the fee was taken by the seventh defendant.

93. BL produced a chop reading "Northern Technical Services" which had been kept at his offices. It is surprising that he did not volunteer that this chop was kept at his offices when he was asked about other chops; questions obviously aimed at finding out whether a Nortec chop was kept at BL's office.

94. BL spoke about signing blank receipts for Nortec; a small number. He was not happy about signing blank receipts. He was asked to sign them by DY. He asked what they were needed for, and DY replied that they might have to be sent out quickly. He signed because DY said did not want a person for whom BL was a nominee shown on them. Mr Poon and Ida Chow had a relation ship with the plaintiff that was known in the trade, and their names on a receipt would reveal their association with Nortec.

95. When asked why the audit was done at his office, rather than at the plaintiff's office, he said he did not really know; he guessed it was more convenient for the auditors. He conceded this was not the normal or a usual practice, but the Yourieffs had suggested it. Documents required by the auditors were brought there from the plaintiff's premises.

96. BL signed the accounts of Nortec. He did not read the whole of these. When asked if, as a director he did not have a duty to ensure they were accurate, he said he had asked his client if he could sign. Asked why he acted as an intermediary, he said that he may have said that DY should contact the auditors directly, but he could not remember if he did. He could not remember if he had told the auditors the names of the beneficial owners of the shares in Nortec but he would have done if asked, even without seeking permission to do so. He knew that the Yourieffs were concerned to keep their identity secret, but not very concerned.

97. He did not recall signing any cheques for Nortec but he might have done. He was made a signatory because one of the others might have been out of town, and because EGY was going to work at his office. In view of the fact that there were so many signatories, he conceded that there was no good reason why he should have been authorised to sign cheques. He had no idea why he had signed several documents. He assumed that they had been sent to him with a note - "please sign and return". He did not recall asking anyone about some documents he signed. He did not recall not signing any when requested to do so. He agreed there was no reason why he had to sign these documents. He did not recall querying any document; he thought that DY telephoned before hand and explained them. In spite of these explanations, he still does not appear to know why he signed the documents.

98. At some stages of his cross-examination, BL denied knowing of any friction or problems between the Yourieffs and their head office, but later conceded that he knew that there were disagreements with someone from Switzerland.

99. BL said that when DY first discussed his problems with him they were at the stage of considering whether to make an offer for the shares of the plaintiff.

100. When DY returned from Europe and discussed the matter further, DY said that the question of his father's retirement had been discussed but not finalised.

101. His understanding was that a nominee director had the same duties as an ordinary director.

102. DY explained to him that Nortec would operate in the same field of business as the plaintiff, but in respect of business not available to the plaintiff, because one or two competing agencies would not be available to the plaintiff. Nortec would take on new agencies not represented by the plaintiff. The purpose of concealing the identities involved was to avoid outsiders identifying Nortec with the plaintiff because they would identify the personalities behind Nortec as working for the plaintiff.

103. When he was told to set up Nortec, BL says that he thought the retirement of EGY was imminent. No one told him this; he assumed so because the new company was to enable EGY to carry on business, and, by implication, EGY could not carry on such business if he were not retired. He dial not think that EGY would do anything wrong because he was an upstanding gentleman. This, in spite of the fact that he knew that DY and Mr Poon were involved in the new company and would continue to work for the plaintiff. In any event, he did not think that Nortec would be competing in business available to the plaintiff.

104. When he applied to register the names for Nortec, he did not think too much about applying for the name Trachsler. He understood the purpose was something to do with purchasing the plaintiff, but he told DY that there was no way that they would get the name. He was told, he thinks, that if they bought the plaintiff, they would not be allowed to keep the name, and wanted to use the reserved name to preserve the goodwill. He is sure he was told the same thing about the plaintiff's Chinese names.

105. BL signed the consultancy agreement of 1 September between EGY and Nortec, which was the date following that on which EGY retired and the date on which BL started charging Nortec for rent of his office space. It was presented to him as it stood and he signed it. He says he read it, but does not recall who gave it to him. It was not explained to me why BL signed this agreement.

106. In relation to the dividend declared, BL said he just did as he was told regarding this, without making sure it was desirable or justified. He recognised his duty in this regard, but acted on the instructions of his client.

107. BL knew that Nortec was going to used as a vehicle to assist in avoiding Indian exchange control regulations. He thought this wrong; but did nothing about it.

108. BL said that his case was that, throughout, he thought that Nortec existed to deal with suppliers who could not be dealt with by the plaintiff. He conceded that it was not normal for an employee to earn money from another company operating in the same line of business, but he did not find it surprising in this case.

109. Towards the end of his cross-examination, BL said there was another reason he was given why this arrangement was in order. He was told about the competing agencies, but he was also told that Nortec was to deal with companies that would not deal with the plaintiff because of "tad experiences"; because they were not satisfied with the plaintiff. DY told him this. He did not mention this earlier because he was not asked and he forgot.

110. BL conceded that he was aware that what DY, Mr Poon and Ida Chow were doing would have been sarong without the consent of the plaintiff. He did not ask if the plaintiff consented, because it was very obvious to him that it had. He assumed it had consented, but, in spite of his recognition of the abnormality of the situation, he did not think to ask for assurance that his assumption was correct.

111. BL says that in the last days of March, DY, with EGY waiting in the car outside, arrived at his office, looking, it was clear enough, for a place of concealment for the incriminating papers of Nortec, two signs - one the "quite unique" sign bearing the names of both the plaintiff and Nortec - and the bag of brass letters. He denied that DY had delivered the signs to him when they were made. BL says he was upset by this and asked what was going on. DY replied to the effect that "let's just store these here and we will talk tomorrow." He said he had to rush because his father was waiting in the car.

112. The next day DY did tell him the position after he had seen John Whyte. BL says he was very upset and wanted to resign, but DY would not accept it. He thought he could not resign in those circumstances, and, in any event, because Nortec would cease trading, it was not urgent,

113. Almost at the very end of his evidence, during re-examination, BL hinted that he did not know that DY was beneficially involved in the business of Nortec at all; he was, he suggested, no more than a conduit pipe for his father. When it was pointed out to him that he had received instructions from DY from time to time and he was asked his understanding of DY's role in Nortec, he says that they were good friends and this was a convenient way to get instructions from EGY to him. He said that speaking to EGY directly was not easy because EGY had slurred speech.

Assessment of credibility.

114. Before considering the plaintiff's allegations in detail, and the extent to which, if any, they have been proved, it is convenient to consider the credibility of the witnesses.

115. Other than DY and BL, the only other substantial witness on the issue of liability was John Whyte. I accept Din Whyte's evidence; indeed his credibility was not seriously challenged.

116. My general impression of DY as a witness was favourable. I appreciate that, in his business dealings with the plaintiff, he was less than honest, and when, initially confronted with his wrong-doing, he attempted to dissemble and mislead. In his evidence, however, I believe he has been truthful. What he says has the ring of truth about it. I am satisfied that he has not attempted to embroider or exaggerate, nor has he sought to pretend that he remembered when specific details were conveyed to BL. When he could not recall when or where he had told BL details, he said so, but was firm on the fact that BL must have learned certain things from him. An example of this is his vagueness on when and how BL was told of the plaintiff's specific business activities and the competing activities of Nortec, but his sureness that BL "must have known". And indeed BL confirmed in his own evidence that he did know.

117. My impression of BL was unfavourable. As I listened to him, I had no clear picture of what BL was trying to tell me as to his attitude to the competing business of Nortec. Having heard him, read my note of his evidence and thought about the matter, I am convinced that he was not telling me the truth about his intentions and knowledge.

118. He says that he knew that Nortec was set up in a field of business that would compete with the plaintiff. He knew, he says, that DY, Mr Poon and Ida Chow would continue to be employed by the plaintiff while they operated Nortec's competing business. He knew, he says, that elaborate precautions were taken to avoid people knowing that EGY, DY, Mr Poon and Ida Chow were involved in this competing business.

119. All this was, he says, in order as far as he was concerned. Why he says he believed so is not clear to me. On occasions, he seemed to say that he did not think that EGY would do anything improper because he was an upstanding gentleman. How this belief fits in with DY, Mr Poon and Ida Chow doing the wrong thing, inevitably with the knowledge of the upstanding gentleman, was not explained. He also says he was told it was all right because the agencies that Nortec would be taking over were those that the plaintiff could not handle. Again, he says that the business that Nortec; would handle would be with those who had had "bad experiences" with the plaintiff.

120. All this, to my mind, is little short of utter nonsense. Even if it were true that it was BL's understanding that Nortec would deal only with over-lapping agencies and dissatisfied customers, it is not credible that any reasonable person, let alone a trained lawyer, would believe that any businessman in his right mind would be happy to accept a position whereby its own employees would handle competing agencies and unhappy business associates in another business for their own benefit. And yet it did not, BL says, enter his mind to ask DY himself if the plaintiff consented to this arrangement, let alone inquire of the plaintiff as to this admittedly odd situation.

121. And then I am told, perhaps because BL saw the shakiness of his other positions, that maybe he did not know that anyone other than EGY was involved in running Nortec, and that DY was a mere conduit for EGY's instructions; perhaps because of some speech impediment afflicting EGY.

122. This he says in spite of the fact that it is abundantly clear from the rest of his evidence that he knew well that DY had a financial stake in Nortec; he was the beneficial owner of one of three shares, he made an unsecured loan to the company and received a substantial dividend. It was either very naive or very cynical to raise this point at a very late stage of his evidence. On this occasion, as on others, I got the impression that BL would say in evidence whatever he thought would suit his case best at that time.

123. BL's evidence that he believed that the admitted secrecy concealing who was behind Nortec was for the purpose of hiding the true facts from those who might have direct business dealings with Nortec, so that they would not know that the people running the plaintiff were the same people running Nortec, does not make any sense. BL himself did not deal with the suppliers and customers of the plaintiff and Nortec; he knew that the only other people who could deal on behalf of Nortec would be the people known to be working for the plaintiff, and it would be immediately obvious to anyone who had dealt with both the plaintiff and Nortec that the people representing each were the same. How nominee shareholdings, and the other precautions to which BL was a party, could prevent dealers and suppliers, dealing on a business basis, from learning that, for example, Mr Poon, acting for the plaintiff, was the same person as Mr Poon, acting for Nortec, is a mystery to me. The real situation would not be kept away from the competing agencies handled by the plaintiff or those who had had "bad experiences" with the plaintiff; the people with whom, BL professes, he thought Nortec would deal. The only purpose the nominee holdings and directorship could serve would be to conceal the true position from those who had not previously had dealings with the plaintiff, or those who might be curious, such as someone acting for the Swiss representatives of the plaintiff, and look for information in the Companies Registry.

124. One is always reluctant to label a witness as a liar, especially a witness who is a lawyer, whose duty it is support the functions of the courts, but I am left with the very definite impression that BL should not be believed when he pleads ignorance of the motives and intentions of EGY, DY, Mr Poon and Ida Chow, and states that he believed that the plaintiff was a willing party to the harm being done to it.

The plaintiff's claim.

125. The plaintiff's action is based on a conspiracy to defraud or liability as constructive trustees.

126. There could have been little doubt as to the liability of EGY, DY, Mr Poon and Ida Chow on these grounds, and that, no doubt, is why they have settled the action against them. The liability of the fifth, sixth and seventh defendants must depend on the liability of the fifth defendant, because anything the sixth and seventh defendants did, or knew, wan done, or known, through BL.

127. It is alleged by the plaintiff that the fifth and seventh defendants, with intent to defraud the plaintiff, conspired with the others, apart from the sixth defendant, to do certain acts while EGY, DY, Mr Poon and Ida Chow were employed by the Plaintiff.

The acts alleged

(a)(i) to set up the fourth defendant to carry on a similar business to that of the plaintiff;

(ii) to carry on business through the fourth defendant in competition with and so to injure the plaintiff's business;

(iii) to hide and disguise from the plaintiff their interests in the fourth defendant during the employment;

(b) to appropriate or use documents of the plaintiff, or copy them, for use in the fourth defendant's business -

(i) containing confidential information relating to finances, budgets, customers and discounts;

(ii) containing information relating to the employees, customers, prices, products, profits, discounts and business organisation of the plaintiff;

(c) to use for the purpose of setting up the business of the fourth defendant, knowledge and information of the organisation of the business of the plaintiff acquired by reason of employment;

(d) to cause or persuade customers and agents of the plaintiff to transfer their business or to do business with the fourth defendant;

(e) without the authority or knowledge of the plaintiff, to represent or hold out to customers and agent of the plaintiff that the fourth defendant was the agent or representative of the plaintiff;

(f) to procure or persuade other staff and employees of the plaintiff to perform work and services for the fourth defendant in the office and during the working hours of the plaintiff;

(g) the acquisition of the fourth defendant from Sinclair Roche;

(h) the appointment of the seventh defendant as the fourth defendant's secretary;

(i) the change of the fourth defendant's name;

(j) the appointment of Sinclair Nominees and the fifth and sixth defendants as directors of the fourth defendant;

(k) the holding of the shares of the fourth defendant to be held in trust for EGY, DY and Mr Poon;

(1) the change of the registered office of the fourth defendant;

(m) the commencement of the competing business of the fourth defendant; and

(n) the receipt of substantial financial benefits by EGY, DY, Mr Poon, the seventh defendant and Ida Chow from the fourth defendant.

Findings on acts alleged

(a)(i) This is clearly proved on the evidence.

(ii) The carrying-on of the business in competition is also proved. There was no need to allege or prove any intention to injure.

(iii) Clearly, there were precautions taken to hide the interests. Indeed, until the eleventh hour, DY was denying that he knew who held the beneficial interests in Nortec.

(b) The precise extent to which EGY, DY, Mr Poon and Ida Chow used the plaintiff's documents for the purposes of the business of Nortec is not known, but this scarcely matters. There can be little doubt that they abused their positions as employees of the plaintiff in this regard as in others, and I find that they did.

(c) Whatever may be the position of an ex-employee using this kind of information, there is no doubt that an employee cannot use this information in a rival business, and EGY, DY, Mr Poon and Ida Chow did so.

(d) The documents presented to me show clearly that this is just what was done. This is clear on the face of the documents, without any finding as to the truth of any statement therein. Indeed, some of these documents contain positive lies.

(e) That this was done is clearly proved.

(f) There is an absence of detail in this respect, but it matters not. It is clearly proved that the whole of the business activities of Nortec were carried out by the plaintiff's employees, at the plaintiff's premises.

(g) to (1) That these acts were done by BL are proved, and admitted by the defendants.

(m) This act was certainly committed, but there is an overlap with other particulars.

(n) This is proved.

128. The present defendants deny the conspiracy to do the acts mentioned in paragraphs (a) to (f), (m) and (n). It is admitted that BL agreed to do the acts mentioned in paragraphs (g) to (1), but denied that this made him a party to any conspiracy, or that he so agreed wrongfully and with intent to defraud.

129. It is alleged that BL knew, at all material 'times, that -

(a) until he retired on 31 August 1985, EGY was a director and general manager of the plaintiff;

(b) DY had been employed by the plaintiff;

(c) Mr Poon had been employed by the plaintiff;

and that he knew or ought to have known that EGY, DY and Mr Poon owed duties to the plaintiff of fidelity and loyalty.

130. The defendants admit that BL came to know that -

(a) EGY was a director and the general manager of the plaintiff until his retirement, the date of which is unknown to them;

(b) DY was employed by the plaintiff and became the general manager on an unknown date; and

(c) Mr Poon was employed by the plaintiff in some unknown capacity,

but it is denied that the defendants knew these things at all material times.

131. The plaintiff says that as director of the sixth defendant at all material times after its appointment as director of Nortec on 20 March 1986, BL's knowledge is the knowledge of the sixth defendant, which from 20 March thereby adopted the conspiracy. This allegation would be proved, as I have said, if BL's knowledge was such as to make him a party to the conspiracy.

132. The plaintiff also says that, as employer of BL, the seventh defendant is vicariously liable for BL's acts. Miss Li, for the defendants, concedes that if BL is liable, so is the seventh defendant.

133. The plaintiff further alleges that BL and his firm are liable for the sums they received from Nortec as constructive, trustees thereof, and that BL, his firm and the sixth defendant are liable to account as constructive trustees for the property of the plaintiff received and/or dealt with by them. They are also, it is said, liable for the loss and damage suffered by the plaintiff generally from the breach of trust in dealing with the property of the plaintiff and the property of the fourth defendant - which was beneficially owned by the plaintiff - by reason of knowingly assisting in that breach.

134. A later joining of the conspiracy is alleged against the sixth defendant, and against the others in the alternative.

135. I find that there was a conspiracy as alleged, and, if BL had the requisite knowledge, he was a party to that conspiracy; and the seventh defendant would be vicariously liable.

136. Accordingly, the later joining is only relevant to the sixth defendant. In this respect, the knowledge of BL would be the knowledge of the sixth defendant, and, if that knowledge was sufficient to make BL a party to the conspiracy, the sixth defendant lent its assistance to the conspiracy in promoting its purpose and would also be liable.

BL'S knowledge

137. So, at this stage, the liability of the present defendants comes to rest on the extent to which BL knew what was being done by the former defendants. There can be no doubt that what he did advanced the cause of EGY, DY, Mr Poon, Nortec and Ida Chow in the conspiracy and the breach of trust, and there has been no real attempt to deny this. But, BL would have me believe, he was a dupe; the others used him and misled him, although, if he was ignorant and misled, it is difficult to put one's finger on any part of his evidence in which he says: "It was in this respect: I was deceived." He does not suggest that DY, or anyone else, told him that the plaintiff was happy with the very strange arrangement; he did not even ask if the plaintiff had consented. If BL went along with, and considerably assisted in advancing, this conspiracy believing that all was in order, he is both extremely gullible and extraordinarily stupid. I do not believe he is either.

138. What was the extent of his knowledge? It is easier to approach this question from the other direction, and ask: What is it that BL says he did not know about the conspiracy?

139. He says that he did not know that EGY did not retire from the plaintiff until the end of August 1985. No one told him when EGY was due to retire, and he did not ask. He assumed EGY would retire when Nortec was set up because the whole purpose of Nortec was to provide an alternative business for EGY. Be says he had been led to understand that EGY would conduct the business of Nortec from the offices of his firm. The strange thing is that EGY did not take up office space at BL's office, and BL knew that EGY was continuing to operate from the plaintiff's premises. On top of that, on 1 September 1985, the day after EGY's retirement from the plaintiff, AL signs a consultancy agreement between Nortec and EGY, and then begins to charge rental to Nortec for office space. He asks no questions about this; not even about charging Nortec rent for the space. All this he accepted on the basis that ECY would do nothing wrong. Even if he thought this initially, it is odd that he did not think about querying matters when he learned that EGY was conniving in some exchange control fiddle and in allowing employees of the plaintiff to conduct a rival business.

140. I do not believe BL in this respect. I believe that DY told BL that the proposal by the board in Switzerland was that EGY would retire in June 1985, even if he did not tell him that this date was subsequently changed to August. Apart from my findings on credibility, it is probable that DY would hove told BL this. It is admitted by BL that DY discussed with him the news that EGY was to be obliged to retire. In this context, it is likely that the date when this disaster was to happen was mentioned.

141. But, in the result, it matters little because if I find that BL knew of the machinations of EGY, DY, Mr Poon and Ida Chow in the advancement of the conspiracy, whether or not he knew that EGY was still employed by the plaintiff when the conspiracy was operating is irrelevant; he must be liable as a party. The fact that the conduct of EGY might have been less reprehensible if he were not employed by the plaintiff cannot make any difference to my findings.

142. BL says further that he did not know that tae plaintiff was not a consenting party to the establishment of the rival business to be operated by its employees, from its own premises and with former suppliers of the plaintiff and dealers who had had "bad experiences" with the plaintiff.

143. This is an extraordinary situation, but BL makes no inquiries at all; not even a question to his very close friend: "This is all a bit unusual, David; are you sure it's alright with Trachsler?" or "Inevitably, Nortec is going to take business away from Trachsler, David. Why on earth are they happy to go along with it?"

144. My finding is that BL did not make these inquiries because there was no need for him to do so; he knew what was going on. He was in the matter from the beginning, and, whatever his motives - to get business for his ailing firm or to help a good friend - he got involved with his eyes wide open. I do not believe that he thought for one moment that the plaintiff would consent to such an extraordinary arrangement.

145. I believe DY when he says he reported his conversation with John Whyte to BL to the effect that the whole thing was quite wrong, and believe DY when he says that BL's reaction to this was to brush it off.

146. Apart from my assessment of the credibility of the witnesses, DY's version is also in accordance with the probabilities. There is no doubt that, Mr Whyte did warn DY about what he and the others were doing. BL and DY were close friends, and there is plenty of undisputed evidence that DY took his troubles to BL. So why should he not take this one to his friend? The only possible reason is that DY wanted to conceal the advice from BL, but there is no evidence that he concealed anything else from RL. There is also the fact that DY did nothing about Mr Whyte's advice. The probability is that something happened to persuade DY to ignore the advice, and it is likely that this was something was the attitude taken by his good friend, who was a lawyer and who had been his guide in the Nortec enterprise from the beginning.

147. This finding, of course, means more than BL knew, from this stage, of the conspiracy: his reaction is consistent only with prior knowledge of what the former defendants were doing.

148. It is not, of course, necessary to find that BL knew precisely how EGY, DY, Mr Poon and Ida Chow would go about conducting the rival business of Nortec, if he knew that their activities were inconsistent with their duties to their employer. I find that he dial knew that this was the case. There is no evidence that BL knew the terms of the contracts that each of the former defendants had with the plaintiff, but what the former defendants did to the plaintiff was clearly inconsistent with the most basic of an employee's obligations to his employer, implied; if not expressed. Any reasonable person, more especially a lawyer, would know that the law would not allow an employee to act lawfully as the former defendants acted in this case. Indeed, BL admits as much, saying that this conduct would have be unacceptable without the consent of the employer; he assumed that the employer had given its consent.

149. I have already held that BL knew there was no such consent. Even if I am wrong in that finding, the situation must be, at the very least, that BL deliberately and dishonestly, avoided making the obvious inquiry about whether or not that consent had been given, and that is sufficient to impute the required guilty knowledge to him for the purposes of liability.

Finding on liability.

150. It follows from what I have found that the former defendants wrongfully and with intent to defraud the plaintiff conspired together to do the acts, or, at least, most of those acts, alleged in the statement of claim, and that BL knew of this conspiracy, joined it and advanced its cause. I find, as has been conceded, that the seventh defendant is vicariously liable for this conduct by BL. I also find that the sixth defendant, knowing of the conspiracy through BL's mind, joined it by accepting appointment as a director of the fourth defendant from 20 March 1986, and is also liable to the plaintiff.

151. I also find that the former defendants were in a position as constructive trustees for the plaintiff, and that, by setting up the fourth defendant and operating its competing business, they fraudulently and dishonestly breached that trust. I find that the present defendants are liable to account for any of the plaintiff's property received by them because they knowingly and dishonestly assisted the breach. As I have said, the seventh defendant's liability is vicarious.

Quantum

152. I have found the assessment of the quantum of the liability of the present defendants difficult and complex. I comfort myself by appreciating that I am not alone in this; the plaintiff's accountants had several stabs at preparing the claim estimate before the one stated to be "revised July 1989" settled very late in the day.

153. Miss Li submits that the plaintiff cannot claim both damages arising out of the conspiracy and secret profits. Mrs Kaplan, for the plaintiff, does not accept this argument, although she concedes, of course, that her client cannot receive the same money twice. This being the case, I doubt if there is any significant difference in the practical effects of the two approaches by counsel. For example, Miss Li says that if an item is added back into the profits of Nortec for the purposes of assessing the plaintiff's damages on the basis of those profits, the plaintiff cannot also claim that item as profit in the hands of one of the defendants. Mrs Kaplan accepts this, and, indeed, common-sense dictates that this must be so.

154. In Belmont Finance Corp v. Williams Furniture Ltd [1980] 1 All ER 393, the court, against one defendant, awarded damages for conspiracy and stated that it was accountable for much the same money under a constructive crust, but noted that the plaintiff could not recover from that defendant more than the greater of the sum due as damages and the sum due as constructive trustee.

155. To my mind, the argument is largely academic, and I shall consider the relief due to the plaintiff primarily as damages, but seek to ensure that no injustice is done to either party by counting the same money twice, or failing to take it into account it at all.

156. The plaintiff paid certain sums to EGY on his retirement. There was argument as to whether these sums were contractually due to EGY or gratuitous. The plaintiff alleges that the payments were made under a mistake of fact, namely that EGY had carried out his duties properly and that the plaintiff had no cause to dismiss him. A claim for recovery on the basis of mistake of fact can be against EGY only; liability on this basis carrot be found against the present defendants. The amounts claimed under this head, however, also appear as a claim for damages arising out of the conspiracy in the claim estimate, and I will deal with this claim, and others of a similar nature, under that head in due course.

157. The plaintiff is entitled to recover the damages it has suffered as a result of the conspiracy; it is entitled to be placed in the position it would have been in if the wrong had not been done to it. The plaintiff seeks to assess these damages under three main heads -

i. The profits earned by Nortec, on the argument that, if the conspiracy bad not been implemented, these profits would have been earned by the plaintiff; these profits of Nortec being adjusted by adding back certain items that would not have been incurred if the plaintiff had had the opportunity of earning the income.

ii. The expenses incurred by the plaintiff's parent company in Switzerland arising out of the conspiracy and which are the liability of the plaintiff.

iii. The expenses incurred by the plaintiff as a result of the conspiracy.

158. Miss Li accepts, in "broad principle", the justification for the method mentioned in paragraph i. above for the assessment of that part of the plaintiff's damages. Rightly, Miss Li argues, however, that, to ascertain the true loss suffered by the plaintiff, I must take into account what expenses would have been incurred by the plaintiff in earning the income. Miss Li submits that I should take into account-

i. That, in earning the income, the plaintiff would have been obliged to pay commission to its employees.

ii. That the plaintiff would have teen obliged to pay tax on the profits if it had earned them.

iii. That certain items added back to increase Nortec profits should not properly be deal with in this way.

The profits of Nortec

159. For the period 21 September 1984 - the date of Nortec's incorporation - to 31 March 1986, the plaintiff calculates Nortec's profit for the purposes of assessing its own loss as follows -

160. The starting figure of profit before taxation is not challenged.

161. Items 1. and 2. would not have been incurred if the income had been that of the plaintiff, and, in my view, are correctly added back.

162. The consultancy fee mentioned in item 3. is the amount paid to EGY under the consultancy agreement with Nortec signed by BI, that I have already mentioned. The plaintiff was already paying EGY a consultancy fee, and it is improbable that the plaintiff would have paid him this additional sum if it had been earning the income. This item is properly added back.

163. The alleged excessive interest added back under item 4. relates to the loans advanced to Nortec by EGY, DY and Mr Poon as working capital. The interest charged on these loans was 1% per month. The plaintiff gays that a reasonable rate would be 7% per annum, and seeks to add back the excess. There is nothing to indicate that, if the plaintiff had been earning the income, it would have incurred the expense of interest on raising capital at all. In my view, nothing less than what is accepted by the plaintiff as in excess of a reasonable rate should be added back.

164. Item 5. relates to management charges. This is something equivalent to directors' emoluments charged by the conspirators, which, if the plaintiff had been earning the income, would not have been incurred. Accordingly, they are properly added back.

165. The professional fees in item 6. relate to payments to BL's firm, other than a sum of $3612 paid to solicitors in respect of a tenancy agreement. There is no evidence of what tenancy agreement is concerned hers so I cannot allow that sum of $3612 to be added back. The expenses of the fees paid to BL's firm would not have been incurred by the plaintiff in earning the income, and are properly added back.

166. The last item 7. relates to the rent and rates paid for 506B Watson's Estate, less that charged to the plaintiff, and the rent paid to BL's firm. This amount I will put into a suspense account until I come to deal with the matter of leasing 506B Watson's Estate substantively.

167. For the year ending 31 March 1987, Nortec suffered a loss of $22416, but, if one adds back what the plaintiff says should be added back, a profit of $330476 results. The items added back are of the same nature as those mentioned above, and, for the same reasons, I allow them, other than the rent and rates of $30000, which I again hold in suspense.

168. For the year ending 31 March 1988, there was a loss of $70973, but a profit of $57094 with the add back items taken into account. Again, for the same reasons, I allow these add back items, but suspend judgment on the rent and rates.

The expenses of the parent company

169. These expenses come under various heads.

170. Firstly, there are the expenses of the travelling and accommodation of Mr Koch in dealing with the disaster that happened to the plaintiff's operations in Hong Kong. I accept that these expenses were properly incurred. I accept that it was reasonable for Mr Koch to travel by first class air as this was the mode of travel he was entitled to use when going about the business of his employer. Although these expenses are not as perfectly vouched as might be desired by a meticulous auditor, I accept Mr Koch's evidence that they were indeed incurred and that the plaintiff has a liability to the parent company to meet them, if it has not already done so.

171. Secondly, there are the travelling and accommodation expenses of Mr Grieb who came to Hong Kong to take over the management of the plaintiff when the conspirators were sacked. He also went to Tokyo to meet suppliers in the interests of the continuing business of the plaintiff, and I consider this a reasonable step to take. Again, I accept that the plaintiff has a liability to meet these expenses.

172. Thirdly, there are certain other miscellaneous expenses. In regard to these, I find the evidence to be too vague and unsatisfactory to enable me to make an accurate assessment of the extent to which they were in fact incurred, if at all.

173. Lastly, there are the expenses of the accountant's professional fees in investigating the matter and damage control, although part of the fees should be allocated to the litigation itself. The amount that should be allocated to the litigation costs is unclear. In this, regard, I make a deduction of $30000. In doing this, the plaintiff may say that I have erred in favour of the defendants. If so, so be it; it was for the plaintiff to satisfy me of a more precise amount.

The plaintiff's expenses.

174. Under this head; the plaintiff claims certain amounts paid to EGY, DY, Mr Poon, Ida Chow and two other employees, and amounts paid in respect of rent and rates for 506B Watson's Estate. Mrs Kaplan does not press for the sum paid to the other employees.

175. As to the sums paid to the conspirators, these relate, in the case of EGY, the same sums that are alleged in the state-ment of claim to have been paid to him under a mistake of fact, and sums paid to them as bonuses and commission on sales.

176. The retirement benefits paid to EGY may well be recoverable from him as payments under mistake of fact on the basis that they would not have been paid if the plaintiff had known about his conduct. But the plaintiff cannot recover them from the present plaintiffs on this premise. It cannot be suggested, and it is not alleged, that EGY received these sums under any constructive trust. EGY did not come into possession of the money to hold for the plaintiff; it was paid to him out and out as his property. Therefore, in my judgment, the present defendants cannot be liable to account for them on this ground. They are recoverable from the present defendants as damages arising out of the conspiracy, or not at all.

177. I cannot see any acceptable argument that would enable these amounts paid to EGY, or, indeed, the bonuses and commissions paid to any of the conspirators, to be recovered from the present defendants as damage flowing from the conspiracy. The object of damages is to put the plaintiff into the position it would have occupied if the conspiracy had not been entered into. If the conspiracy had not happened, these expenses would have been incurred. It is true that if the fact of the conspiracy had been known, the plaintiff might not have paid these amounts to the conspirators, but this possible ground for recovery cannot be used against the present defendants.

178. In this connection, I do not think it matters one way or another whether or not the amounts paid under this head were paid as a contractual right or gratuitously.

179. Another way of looking at these claims in relation to the customary bonuses and commissions paid is to ask if the plain-tiff would have incurred these expenses, if it had sacked the conspirators when the conspiracy started and employed others to earn the income. Just as the plaintiff is entitled to have the profits of Nortec without the expenses it would not have incurred if it had earned the income itself, it cannot recover the expenses it would have incurred in earning the income in its own name. There is nothing to suggest that the bonuses and commissions paid were anything other than reasonable and such as would have been naturally payable if other employees had been in the place of the conspirators. In fact, the commissions are probably lower than would have been the case if the sales had been to customers other than Nortec, because the sales to Nortec were at a discount.

The dividends paid

180. Dividends amounting to $420000 were paid to EGY, DY and Mr Poon from profits of Nortec for the year ended 31 March 1986.

181. These paynents have, of course, already been taken into account in calculating the plaintiff's claim on the basis of Nortec's profits for that year.

The trade debt

182. There is said to be at outstanding amount of $203700 due by Nortec to the plaintiff in respect of trade transactions entered into between them.

183. Miss Li says that this is an ordinary trade debt, and is recoverable by the plaintiff from Nortec. There is no reason to suppose that it would not be paid in the ordinary course. It is not, she submits recoverable from the present defendants in this action. Mrs Kapian, on the other hand, says that, although this may be a trade debt and otherwise recoverable, it is also part of the damages suffered by the plaintiff by reason of the conspiracy, and, as such, is recoverable from the present defendants.

184. I accept Mrs Kaplan's submission. The fact of the matter is that, if the conspiracy had not been entered into, the plaintiff would have acquired the benefit of the sales reflected in this debt, and, it must be assumed, it would have been paid. It has not been paid, and has suffered the loss.

185. Another way of approaching at the matter is look at it from the point of view of the assessment of the plaintiff's damages on the basis of the adjusted profits of Nortec. One can say that, if the plaintiff had conducted the business of Nortec, it would not have incurred a trade debt to itself, and the profits would have increased accordingly. If the profits are notionally increased by the amount to this debt, the plaintiff would recover the debt in this way.

186. Although I have found that a trade debt due by Nortec to the plaintiff would be recoverable from the present defendants as damages arising under the conspiracy, the only evidence I can find that there is such a debt due is the evidence of Mr Tsang, the plaintiff's accountant, that this appears so from the books. I do not know when it was incurred, how it is made up or the details of what goods were supplied and delivered, if indeed this is the basis of the debt.

187. I may have overlooked other evidence of the debt because, in the trial before me, the dispute centered on whether it was recoverable from the present defendants, rather than its existence. For this reason, I leave the matter open for further submissions when I hear counsel on costs and ancillary matters.

188. It would seem inconvenient for this issue to be litigated afresh. As will appear later, other matters are to be remitted to a Master for inquiry under order 36. One course, with the consent of the parties, might be to remit this issue also.

The rent and other expenses for 506B Watson's Estate

189. The story about the lease of premises situated at B506 Watson's Estate is a little complicated.

190. According to DY, additional premises were required by the plaintiff because the increase in business and the lack of space made working conditions intolerable. DY could not, however, enter into a lease in the name of the plaintiff because he did not have proper authority to do so. Accordingly, he commenced negotiations and leased premises of 5776 square feet for the plaintiff for 3 years from 1 June 1985 in the name of Nortec at a rental of $25992 per month.

191. In a letter dated 20 May 1985, EGY told Switzerland that the plaintiff was "fortunate to come to an arrangement with a firm to share their vacated storage area and also the use of limited office space for a period of one year after which time the agreement will be subject Lo throe months notice from either side.". He did not, of course, mention that the "firm" to which he referred was Nortec in which he had a financial interest.

192. There is amongst the papers supplied to me, dated 29 May 1985, a document purporting to be a lease of the godown area of unit B506 for a term of one year from 1 June 1985, with Nortec as the landlord and the plaintiff as the tenant, and stipulating far rental in the sum of $16000 per month, ex-clusive of rates, electricity and other charges. The area of the godown area is not mentioned. This is signed by BL for. Nortec, but is not signed by the plaintiff. In accordance with this arrangement, Nortec charged the plaintiff rent for B506 at the rate of $16000 per month for the months of June and July 1985, together with a half share of the management fee and the rates.

193. On 16 July 1985, as I have said, DY saw John Whyte and received the advice that the lease should be transferred to the plaintiff. No doubt, Fir Whyte assumed that the plaintiff needed the lea for its own purposes.

194. By a telex dated 19 July 1985, EGY explained to Switserland that "no sooner had we taken the add space when we recd notice that we would have to vacate our Aberdeen godown when the lease runs out in Dec. This of course brought us right back to square one again n thus prompted us to accept the landlord's original offer of the whole area of 506B, for an add ten thousand per mth which brings the total area to 4540 sq. ft.". Notice to quit on 15 December 1985 in respect of the Aberdeen premises is dated 25 May 1985.

195. In his reply, Mr Koch accepted what was said in the telex and asked for a copy of the tenancy agreement. A tenancy agreement was entered into by the landlord and the plaintiff on 1 August 1985 for a term of 34 months at a rent of $25992 per, month. It is this lease that the plaintiff, in its statement of claim, alleges was not required for the plaintiff's purposes, and was entered into by EGY in breach of his duty as a director.

196. After the fuss arose, the plaintiff, on 11 August 1987, surrendered this lease because Mr Grieb, who had taken over as general manager of the plaintiff in Hong Kong, decided that the plaintiff did not need the extra space. He said in evidence that the plaintiff, carrying on much the same kind of business as during the conspiracy, could manage adequately with only the premises at 1306 Watson's Estate.

197. The question for decision here is whether, if there had been no conspiracy, the plaintiff would have incurred the expense of leasing 506B, either as direct damages or as an expense to be added back to he profits of Nortec for the purposes of calculating the plaintiff's damages by this method. It does not matter in what way the expenses are brought to account if the expenses would not have been in curred in operating what should have been the plaintiff's business.

198. The difficulty in reaching a finding in the plaintiff's favour in this regard is that the only direct oral evidence as to the necessity of leasing 506B at the time the lease was entered into comes from the plaintiff's principal witness DY, and he says he had no doubt that it was needed for the plain-tiff purposes. Mr Grieb's evidence, which I accept, is useful, but relates to a different time, and his decision as to the need, of the plaintiff may have been dictated by a more frugal management style inspired, perhaps, by the disaster that had befallen the plaintiff. Mr Koch's evidence in this regard does not advance the matte very far. He seemed to think that more space was needed for the plain-tiff's business, and that, after 506B was taken on, all the space was being utilised, but, of course, he did not know if it was being used for the plaintiff's purposes or for the business being conducted by Nortec.

199. It is, of course, open to me to reject the evidence of DY in this respect, although I have otherwise accepted him as a credible witness. My conclusion is that DY was telling the truth when he says the plaintiff required further space, but I do not believe that the whole of 506 B was needed by it. Nor do I believe that the whole of 506B was taken for the purposes of Nortec's business. There was really no reason why the whole of 506B should have been required for the business of Nortec. It is clear that it conducted its business using the employees and goodwill of the plaintiff so why should it need to use extensive additional premises? The conspirators had offices in the plaintiff's premises. Even EGY, after his retirement kept an office there. What need was there for them to have other offices? It is also clear that Nortec used the stock of the plaintiff, by purchasing it and selling it on, so it had no need of a large amount of space for this purpose.

200. It is clear from the behaviour of the conspirators themselves, in keeping part of 506B and leasing the remainder to the plaintiff, that the plaintiff did not require the whole of the new premises. I believe that the use of 506B was split between a legitimate use for the plaintiff and a use by Nortec for its business. As to the proportions of the split, I accept it as probable, on the basis of the equal sharing of the rates and management fee, that it was roughly half and half. There is no reason to think that this changed at any time; the lease of the whole of 506B to the plaintiff being induced by Fir Whyte's advice, and not any change in the extent of use by the two businesses.

201. Having got to this stage, I do not think that the plaintiff has established a claim to have any part of this rent included in its claim for damages. I do not believe it has been established that these expenses would not have been incurred if the plaintiff had earned the income received by Nortec, or if the conspiracy had not been undertaken. If 506B was not needed for the plaintiff, it was needed for the business of Nortec. The conspirators were seeking to make money, not to incur unnecessary expense. It would not be logical to think that they would have taken on part of 506B if this was not needed for the illegitimate trade being done by them. It is also not logical to find that the plaintiff would not have needed this space if it had carried on the business of Nortec. The carrying on of the two businesses on the same premises, using the same staff and essentially the same stock would have resulted in an economy in the use of space rather than an overuse.

202. Accordingly, as to that part of 5068 used for the plain-tiff's own business, I cannot find that it was not required, and, as to that part used by Nortec, I cannot find that it would not have been necessary for the purpose of producing Nortec's income, if this had been earned by the plaintiff, and in respect of which the plaintiff is to receive the benefit under my award. I must reject this part of the plaintiff's claim. It follows that the rent and rates sought to be added back to Nortec's profits, which I earlier left in suspense, should not properly be dealt with in that way.

The tax position

203. Miss Li argues that, once I have assessed any damages suffered by the plaintiff, I should deduct from these damages, in so far as they represent profits that the plaintiff would have earned but for the conspiracy, the tax that would have been payable as if they had been earned as profits in the plaintiff's hands. Otherwise, Hiss Li contends, I will be over-compensating the plaintiff; giving it more than it has lost.

204. It is agreed by counsel that, if the plaintiff had earned the damages I award by way of profits, those profits would have been taxable. Where counsel differ is whether or not the damages I award in lieu of lost profits would themselves be taxable. If they are taxable, I must leave it to the taxman to ensure that the plaintiff is not over-compensated.

205. The plaintiff would be liable to tax, if at all, under section 14 of the Inland Revenue Ordinance (Chapter 112). The relevant parts of this provision say "... profits tax shall be charged ... on every person carrying on a trade, profession or business in Hong Kong in respect of his asses-able profits arising in and derived from Hong Kong ... from such trade, profession or business ... .'"

206. Section 26 of the Ordinance provides that " ... no part of the profits or losses of a trade, profession or business carried on by a person who is chargeable to tar. ... shall be included in ascertaining the profits in respect of which any other person is chargeable to tax ... ." Miss Li submits that this section prevents the profits of Nortec being included in ascertaining the plaintiff's profits for tax purposes. This may be so, but the award of damages to the plaintiff is to be ascertained, inter alia, by assessing its own loss of profits arising from the conspiracy; Nortec's profits, adjusted as necessary, is taken only as a just and convenient measure of the plaintiff's own loss of profits. If Nortec had made no profit at all, this would not prevent the plaintiff from recovering its own loss of profits; it would have had to resort to some other way of proving its loss. Accordingly, as I see it, Nortec's profits are not being include to ascertaining the plaintiff's profits; rather, it might be said, in the exercise concerning me, they are being included to ascertain the plaintiff's losses.

207. The question remains: Are the damages I award to the plaintiff taxable in its hands as assessable profits under section 14? The answer to that question as so framed is - no. But if the question is varied to ask if the damages are to be taken into account in ascertaining the plaintiff's assessable profits, the answer, in my view, is - yes. The amount I award as damages to the plaintiff to compensate it for loss of profit arising from the conspiracy must appear in the plaintiff's profit and loss account as a revenue receipt; it is not capital. How, in that event, is the plaintiff able to argue that it should be ignored for the purposes of ascertaining its profits as arising in or derived from its business? The amount is directly traceable to its business; it car have no other source. Whether or not the plaintiff pays tax, and in what amount, in the year concerned will, of course, depend on its overall profit (or less) position.

208. Even if I am wrong in this respect - which is quite possible because the matter was not, understandably in view of the large number of issues in the case, fully argued before me and I am not a tax expert - I cannot accept that it comes anywhere near being clear "beyond peradventure" that the award would not be accountable for tax purposes (Stoke-on-Trent City council v. Wood Mitchell & Co. Ltd. [1980] 1 W.L.R. 254 - per Roskill LJ at page 259).

209. For these reasons, I make no deduction from the plaintiff's damages for tax reasons.

210. An analogous situation applies to the damages awarded to compensate the plaintiff for its liability in respect of expenses directly traceable to the conspiracy. It may be that the plaintiff has obtained some tax relief in respect of these expenses. If so, that relief will be set-off against its liability to bring back into account in its profit and loss account the award I make in respect of those expenses.

Interest on the award

211. Counsel suggest - and it is suggestion that I take up with relief - that, because they have been unable to assist me in calculating interest on my award in view of the imponderables, once I find the rate of interest that should be applied to the various ascertained amounts making up the award, and the dates from which this interest should be calculated, I should refer the mathematical calculations to a Master, who will be able to arrive at the right sums with the assistance of the parties and their expert accountants.

212. Overall, I believe that an interest rate of prime rate plus 1% would be reasonable.

213. In respect of profits of Nortec for the period ended 31 March 1986, I allow the sum of $762623 (that is, the amount claimed, less the rent and rates for 506B in the sum of $40909 and the fee for the unknown tenancy of $3612). Interest should be calculated from September 1985, being a rough mid-way point in the fourteen month earning period.

214. For the year ended 31 March 1987, on the same basis, I award $300060, with interest calculated from 1 October 1986.

215. For the year ended 31 March 1988, the award is $52094, with Interest from 1 October 1988.

216. In respect of the travelling and accommodation expenses of Messrs Koch and Grieb, I allow 37941 Swiss Francs, 155930 Yen and $44604. I have deducted certain minor items for which I am not satisfied there is adequate proof. I cannot fix the date accurately from which interest is payable these sums because I am not certain on the evidence were the expenses were met by the plaintiff. However, the amcunts have been paid by the plaintiff or its parent company, and if the plaintiff has not repaid the parent company, is may be liable for interest to it. Using a broad brush approach, I world fix 1 July 1987 as the date from which interest is payable.

217. On the other hand, on the principle contained in Tate & Lyle Food and Distribution Limited v. GLC (1981) 3 All ER 149, the plaintiff is not entitled to interest on these expenses from the time it enjoyed the benefit of a tax deduc-tion in respect of them, because, from that time, it cannot be said that the plaintiff was kept out of the money to which it way entitled. This, I estimate, rough as it may be, that the plaintiff would have received the tax benefit for these expenses at the end of 1988. Accordingly, interest is not payable on these sums after 31 December 1988.

218. I have found that the plaintiff is entitled to recover the professional fees of its accountants to an amount of $234163. These fees were paid, as to $5113, on 15 February 1987, as to $59050, on 16 December 1987, and as to the balance on 4 February 1988, and interest will accrue, on those sums, from those dates. But again, because it would have had the benefit of a tax deduction in respect of these sums at the end of 1968 (basing this, hopefully correctly, on accrual of tax benefit at the time of liability, rather than the time of payment), no interest is payable after 31 December 1988.

219. As for the so-called trade-debt of $203700, I leave this matter in abeyance for further submissions as mentioned earlier.

The total award

220. I calculate the total award to be $1393544 (excluding the trade debt of $203700 for the time being), 155930 Yen and 37941 Swiss Francs, together with interest as calculated on the basis set out above, and I give judgment accordingly.

Ancillary matters

221. I will hear counsel on costs, on the matter of the trade debt, and on any ancillary matters with which I must deal. In particular, I would be happy to hear of any mathematical slips I have made on my calculations.