THREE DIMENSIONS LTD v. LAM CHI KIT, KELLY AND OTHERS

HCA 956/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

court of FIRST INSTANCE

ACTION no. 956 of 2009

____________

BETWEEN

____________

___________________

D E C I S I O N

___________________

1.   This is the return date of an injunction which was originally granted ex parte and has been continued. The injunction is an injunction in the Mareva form, save that what it does is it injuncts the three Defendants from removing money from three specified bank accounts. It does not seek, as many Mareva injunctions do, to require the Defendants to keep certain amounts within their power and not spend them. It is limited only to the particular bank accounts.

2.   The case of the Plaintiff is that the 1st Defendant was its employee and the person who dealt with its customers. The Plaintiff deals with basically gifts, stationery, Christmas decorations and the like. The way it operates is that the Plaintiff issues purchase orders to a linked company, which is now called Jiaming Metal Products Manufacturing Company Limited, but until 1 January 2008, it was called Jiahua Metal Products Manufacturing Company Limited.

3.   It is the Plaintiff’s case that, at some stage, probably whilst that change of name was in preparation, the 1st Defendant must have registered a BVI company also in the name of Jiahua Metal Products Manufacturing Company Limited because the 1st Defendant was able to open up a bank account on 22 November 2007, using that name.

4.   What then happened was, on 31 December 2007, the 1st Defendant admits that he sent the following email to at least one of the Plaintiff’s customers, if not more, it said:

“Dear Customer,

How are you!

Thank you for your support. In order to serve you better and to promote trade and development, we would like to inform you that, from January 1, 08, we have made a changes to our company name to ‘Jia Hua Metal Products Manufacturing Co. Limited’ & factory name to ‘Dongguan Jia Ming Metal Products Manufacturing Company Limited’.”

5.   That last sentence of the change of the factory name was, of course, quite correct, but the first statement that the name of the Plaintiff had been changed to Jia Hua Metal Products Manufacturing Co. Limited was, I regret to say, blatantly false.

6.   The 1st Defendant’s explanation for that is that, in short, he was not an employee of the Plaintiff but was a partner in the business of which the Plaintiff was part and he had become increasingly disillusioned over the years, that he had been squeezed out, that he was not getting his just deserts and so had taken matters into his own hands. What he did was he persuaded at least one of the companies to whom this email had been sent to issue him purchase orders and pay money to Jiahua Metal Products Manufacturing Company Limited that went into one of the bank accounts which is the subject of that injunction order. That money has subsequently, in part, been distributed to at least the other two accounts which are the subject of the injunction order. A very little part of the money has been sent to Jiaming to pay for the goods and, as the Plaintiff says, to disguise the fact that the full price of the goods has not been paid by the 1st Defendant or the 2nd Defendant.

7.   The Plaintiff has said, in answer to this allegation, that there was a partnership, that originally, yes, there was an arrangement back in about 2000 or 2001 when there was another company which was also called Three Dimensions Limited, but that company failed and the 1st Defendant, although he was a shareholder of that company, was not prepared to invest any more money into it. As a result, that company folded up.

8.   It is said that the 1st Defendant then started his own publishing/advertising business in Shenzhen and the address of his office is given as Fu Tian District, and it was only subsequently, after the 1st Defendant had operated that business for a short period, that he requested the person primarily in charge of the Jiaming factory and the major person who is behind the Plaintiff to consider giving the 1st Defendant work.

9.   It is then said that there were plans to set up the new company to develop direct sales transactions with their overseas customers and, because the 1st Defendant had experience with overseas purchasers, it was agreed that he would be employed as the sales manager of the new company, in about mid-April 2003. He was to be paid a salary of $17,000 and a sum of $8,500 was paid to him for half the month of April on 10 May 2003. The employer’s returns of that employment for the last two years have been exhibited.

10.   In the face of that and particularly in the face of the email of 31 December 2007, which was only discovered when the events leading up to this case were discovered by the Plaintiff, I fail to see how the 1st Defendant, at this stage, can maintain that he was in partnership. Even, on the supposition that there had been a partnership, if he had a disagreement with his other partners, sending this email was no more than, on the face of it, even on his own case, taking business away from the partnership.

11.   But that really is not the answer. The answer, quite simply, is that this email and his explanation and the employer’s returns, show that the 1st Defendant was an employee of the Plaintiff and he has simply tried to take away the business, using the opportunity of the change of name of the Chinese manufacturing company as a cover for it.

12.   On that basis, it would seem quite clear that the Plaintiff’s claim is a proprietary claim and, being a proprietary claim to the moneys that were received in the 2nd Defendant’s bank account and, ultimately, by the 1st Defendant and the 3rd Defendant, it would not be right to permit the Defendants to spend that money.

13.   The Defendants, who have been given a partial exemption to the injunction order which allows them to spend some money, do not contest the restriction of the living expenses to $20,000 per month but say that the business expenses of $10,000 per month and the legal expenses in a total of $60,000, are insufficient. To the extent that the amount of $10,000 a month for business expenses and $60,000 in total for legal expenses is insufficient, clearly, the Defendants have a point. I cannot imagine litigation of this nature being conducted on a budget of $60,000; nor can I imagine any business which is worthwhile having expenses of merely $10,000.

14.   On that aspect, my attention has been drawn to the fact that the business address of the 2nd Defendant was given as the 23rd floor of a block in a housing estate in Wong Tai Sin, hardly a typical business address.

15.   Be that as it may, I still cannot see that it is right, in the circumstances of this case, to allow money to be spent over which the Plaintiff, at present, appears to have a very legitimate proprietary claim. To do so would be allowing the Defendants, on the face of it, to spend the Plaintiff’s own money in contesting the Plaintiff’s claim which, on the face of it, is wrong.

16.   The 1st Defendant claims to have many business contacts and no doubt, having worked in this field for nearly 10 years, he probably has. Whether or not he can conduct his business afresh without recourse to the moneys in these accounts, I know not. But the fact remains that the injunctions only cover these specific three bank accounts. In those circumstances, I do not consider it would be right to allow the 1st Defendant to spend money out of those accounts.

17.   Therefore, whilst continuing the injunction until trial or further order, I decline to vary the exceptions to the order which it contained which permit the Defendants to spend the amounts of money set out therein.