MARVELLOUS TEXTILES LTD v. CHAN KIN FAT

DCCJ 5277/07

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5277 OF 2007

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REASONS FOR DECISION

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Introduction

1.  At the end of a hearing on 23^rd April 2008, I gave summary judgment for the Plaintiff in respect of its claim in this action.  I ordered that the Defendant do:

(a)   deliver up to the Plaintiff the Mercedes-Benz motor vehicle registration no.MJ338 (‘the car’);

(b)   pay the Plaintiff the costs of this action, including the costs of the application for summary judgment, to be taxed if not agreed, with a certificate for counsel.

Set out herein below are the reasons for my decision.

Issue

2.  At issue in this action is the ownership of the car.   The Plaintiff’s case is that it is the owner of the car, that despite repeated demands, the Defendant has wrongfully detained it and refused to return it.   The Defendant’s case is that the Plaintiff is only a trustee of the car, that he is the beneficial owner of the car, and he is therefore entitled to keep it.

Background

3.  The Plaintiff is a limited company doing textile business.  The Defendant is a shareholder of the Plaintiff holding 30% of its shares.  There are 2 other shareholders who together hold the remaining 70% of the Plaintiff’s shares.  

4.  Apart from being shareholder, the Defendant was also a director of the Plaintiff.  In addition, he was employed by the Plaintiff as manager.

5.  Towards the end of 2007, the relationship between the Defendant and the other 2 shareholders went sour, in consequence of which his employment as manager was terminated in a directors’ meeting held on 31^st October 2007 (‘the directors’ meeting’).   He was also removed from the board of directors on 3^rd January 2008.

6.  The car was purchased by the Plaintiff in February 2006 at the price of $728,284.40 on hire purchase.  It has all along been registered under the Plaintiff’s name.   The initial deposit was in the sum of $196,000 (‘the initial deposit’), of which $146,000 was paid by the Plaintiff, and the remaining $50,000 was provided by the Defendant by trading in his old car.   The balance of the purchase price was paid with a bank loan taken out by the Plaintiff.  The loan was to be repaid by 42 monthly instalments starting from April 2006 (‘the instalment payments’).   All the instalment payments have so far been made by the Plaintiff by autopay.  

7.  Since its purchase, the car had all along been assigned to the Defendant for his use until he was asked to return it to the Plaintiff upon the termination of his employment in the directors’ meeting.

8.  The background facts stated above are not in dispute.

Defendant’s Evidence

9.  The Defendant’s evidence is that he was the real purchaser of the car, that it was registered under the Plaintiff’s name only for “tax arrangement”, and the Plaintiff is a mere trustee of the car.

10.  He said that his beneficial ownership of the car can be seen from the fact that he provided $50,000 of the initial deposit by trading in his old car.  

11.  He further said that the instalment payments were in fact part of his salary as manager.  Thus, the instalment payments were made by the Plaintiff on his behalf. 

The Initial Deposit

12.  About 2 weeks before the directors’ meeting, Messrs Jennifer Lee & Co acting on behalf of the Defendant wrote to the Plaintiff’s solicitors by letter dated 17^th October 2007 (‘the letter’) demanding the Plaintiff to reimburse the Defendant for all the expenses that he had paid on behalf of the Plaintiff.  One of the expenses was the trade-in value of the Defendant’s old car in the sum of $50,000.

13.  What the Defendant’s solicitors wrote in the letter was as follows:

“In addition, we enclose herewith a vehicle sales invoice no.1160484 in respect of the purchase of the Company’s vehicle.  Our client had traded in his M-Benz C230 for a sum of HK$50,000 as part of the deposit for the Company’s vehicle.  Again, the Company has still failed and/or refused to reimburse the sum of HK$50,000 to our client.”

14.  This is a clear and unequivocal admission on the part of the Defendant that:

(a)   The Plaintiff is the legal and beneficial owner of the car.

(b)   The sum of $50,000 provided by the Defendant by trading in his old car was paid on behalf of the Plaintiff.  Such payment did not and was never intended to confer any beneficial interest in the car on the Defendant.

15.  It should also be mentioned that in the course of the hearing, it was pointed out to the Defendant that if the Plaintiff was merely a trustee of the car, there would have been no reason for the Plaintiff to provide $146,000 as part of the initial deposit.  The Defendant then said that the sum of $146,000 was in fact a loan from the Plaintiff to pay the initial deposit on his behalf.

16.  But the Defendant accepted that this alleged loan of $146,000 from the Plaintiff to enable him to pay the initial deposit was never mentioned in either his Defence or his affirmation.   He also accepted that the alleged loan was never recorded anywhere in writing and was never put forward in any correspondence.

The Instalment Payments

17.  The Defendant did not dispute that in the 2006/2007 financial year (ie from 1^st April 2006 to 31^st March 2007), , his monthly salary was $20,000 from 1^st April 2006 to 31^st August 2006, which was increased to $40,000 from 1^st September 2006 to 31^st March 2007.

18.  His case was that from 1^st April 2006 onwards, aside from his salary, he had additional income from the Plaintiff represented by the amount of the instalment payments.

19.  He did not dispute that the amount of instalment payments was $14,268 per month from April to November 2006 and $14,218 from December 2006 to March 2007.

20.  Accordingly, on the Defendant’s case, his total income as manager of the Plaintiff in the 2006/2007 financial year would have been in the total sum of $551,016, calculated as follows:

($20,000 x 5) + ($40,000 x 7) + ($14,268 x 8) + ($14,218 x 4)

21.  However, the employer’s return of employee’s remuneration filed by the Plaintiff for the 2006/2007 financial year shows that the Defendant’s income was only in the sum of $380,000.  In other words, the Defendant’s income consisted of only his salary and nothing else:

 ($20,000 x 5) + ($40,000 x 7) = $380,000

22.  In the course of the hearing, the Defendant accepted that the income he reported to the Inland Revenue Department in his salaries tax return for the 2006/2007 financial year was only in the sum of $380,000.

Response to Plaintiff’s Demand

23.  The Defendant also accepted that notwithstanding the Plaintiff’s demand for the return of the car in the directors’ meeting as well as the subsequent letter from the Plaintiff’s solicitors dated 23^rd November 2007 chasing him up for the return of the car, neither he nor his solicitors had written to the Plaintiff or its solicitors to assert his beneficial ownership of the car or to demand the Plaintiff transferring the car back to under his name.

Principles

24.  In an application for summary judgment, the defendant must show that there are triable issues.  He has to satisfy the court that what he says is credible, and that there is a fair or reasonable probability that he has a real or bona fide defence.  

25.  In determining those matters, the court should not embark on a mini trial on affidavits, and the court cannot and should not attempt to resolve issues of fact on affidavits. 

26.  However, where the defendant’s case is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear his defence is a sham, summary judgment should be given to the plaintiff unless there ought to be a trial for some other reason.

Conclusion

27.  As can be seen from the analysis above, the Defendant’s case has been thoroughly contradicted by contemporaneous documents and circumstances. 

28.  It is plain from such documents and circumstances that there is no truth in the Defendant’s evidence that he is the beneficial owner of the car, that he provided the initial deposit, or that he made the instalment payments.   His evidence is wholly incredible and his case is a complete sham.   He has no real or bona fide defence to the Plaintiff’s claim.

29.  There are no other reasons for a trial.

Order

30.  In the course of the hearing, the Defendant stated that the car was still in his possession.

31.  Notwithstanding the relief set out in the summons for summary judgment, Mr Vaughan for the Plaintiff sought final judgment for an order for the delivery up of the car to the Plaintiff.  He was content not to seek the alternative relief of damages for detinue or conversion to be assessed.

32.  Order 14 rule 9 of the Rules of the District Court provides that where the claim to which an application under rule 1 or 5 relates is for the delivery up of a specific chattel and the Court gives judgment under this Order for the applicant, it shall have the same power to order the party against whom judgment is given to deliver up the chattel without giving him an option to retain it on paying the assessed value thereof as if the judgment had been given after trial.

33.  In the result, I made the order as stated above.