HOTUNG INVESTMENT (CHINA) LTD v. ERIC SHEA KIM HOTUNG

HCA 77/2012

[2020] HKCFI 2720

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 77 OF 2012

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J U D G M E N T

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INTRODUCTION

1.  This is the hearing for assessment of damages suffered by the Plaintiff. 

2.  By a judgment dated 28 April 2017 (“2017 Judgment”), final judgment was entered against the Defendant whereby he was ordered to deliver up within 14 days to the Plaintiff 300 ounces of American Eagle gold coins (“Gold Coins”) or any part thereof in his possession and an antique ivory screen as described in the will of the late Sir Robert Hotung (“Ivory Screen”), failing which damages would be assessed.  

3.  The 2017 Judgment was entered into after L Chan J had by his written decision dated 24 March 2017 (“2017 Decision”) given the Defendant conditional leave to defend the action by paying HK$481,640 into court within 28 days but which the Defendant had subsequently failed to do so. 

4.  Following the 2017 Judgment, the Defendant has never delivered up the Gold Coins or the Ivory Screen. This is therefore the hearing to assess the damages suffered by the Plaintiff as a result of the Defendant’s failure to deliver up the items. 

BACKGROUND

5.  The background to this action has been summarised in §§2-35 & 39-47 of the 2017 Decision and will therefore not be repeated in full below. 

6.  The Plaintiff is and was at all material times a Hong Kong incorporated company with the principal activities of holding family properties belonging to Mr Eric Edward Hotung (“EEH”) on trust for six of his eight children. 

7.  The Defendant is one of EEH’s children but is not a beneficiary of this particular trust. 

8.  The Plaintiff alleges that the Defendant has misappropriated, wrongfully detained and/or converted the Gold Coins and the Ivory Screen.  A chronology of events detailing the Plaintiff’s account of the material events may be found in §12 of the 2017 Decision.  Relevantly, the Plaintiff’s case is as follows:

(a)  The Plaintiff purchased the Gold Coins from a bullion brokerage firm, Mocatta & Goldsmid, for US$131,680 on 22 January 1986.

(b)  Upon purchase, the Gold Coins were kept in a safe deposit box in BNP Bank in Hong Kong.  They were under the custody of EEH as trustee/bailee for the Plaintiff.

(c)  In around 2004, BNP Bank no longer provided safe deposit box services and EEH transported the Gold Coins to another safe deposit box in Sun Trust Bank, Virginia, USA (“Deposit Box”).  

(d)  Subsequently in 2009, EEH appointed the Defendant a joint custodian and signatory of the Deposit Box. EEH also informed the Defendant that together with EEH, they held the Gold Coins as trustee/bailee for the Plaintiff.  

(e)  In around 2009 or earlier, the Ivory Screen was placed in the Deposit Box.  

(f)  In the later part of 2010 or early 2011, EEH gifted the Ivory Screen to the Plaintiff.  The Defendant also removed the Gold Coins and the Ivory Screen from the Deposit Box. 

(g)  Subsequently in 2011, EEH requested the Defendant to deliver up the Gold Coins and the Ivory Screen to him.  The Defendant promised to return the items on or before 31 August 2011. 

(h)  As the Defendant failed to return the Gold Coins and/or the Ivory Screen, the Plaintiff issued the present proceedings against the Defendant on 13 January 2012 seeking, inter alia, an order of delivery up of the Gold Coins and the Ivory Screen or for an amount equivalent to their value. 

9.  On 22 April 2016, the Plaintiff issued an application for summary judgment against the Defendant. 

10.  On 17 November 2016, Master H Au-Yeung gave the Defendant leave to defend the action on the condition that he paid US$141,405 into court by 29 December 2016. 

11.  By the 2017 Decision, L Chan J allowed the Defendant’s appeal by reducing the sum ordered to be paid into court to HK$481,640. 

12.  As the Defendant has neither paid the sum of HK$481,640 into court pursuant to the 2017 Decision nor delivered up the Gold Coins and the Ivory Screen pursuant to the 2017 Judgment, this Court is now tasked to assess the damages suffered by the Plaintiff. 

13.  In terms of evidence for the assessment hearing:

(a)  Mr Sean Eric Hotung (“SEH”), son of EEH and director of the Plaintiff, filed two factual supplemental witness statements dated 16 October 2017 and 16 July 2019 on behalf of the Plaintiff.  The Defendant also filed two factual supplemental witness statements dated 21 November 2017 and 16 July 2019.  However, only SEH testified at the hearing and the Defendant did not.  As accepted by the Defendant’s Counsel, Mr Anthony Michael Gormley, the Defendant’s two supplemental witness statements were accordingly expunged. 

(b)  Pursuant to leave granted by Master Ho on 3 April 2018 and 15 May 2019, the Plaintiff adduced expert reports from Mr Henry C H Li (“Mr Li”) of Emperio Gold and Silver Coins (Hong Kong) Limited dated 6 September 2017 and Ms Zhang Zhuohan (“Ms Zhang”) of the Association of Chinese Collectors UK dated 1 November 2018 in relation to the valuation of the Gold Coins and the Ivory Screen respectively. Both Mr Li and Ms Zhang testified at the hearing. 

(c)  The Defendant never sought leave to adduce expert evidence.  He produced appraisal reports attached to his supplemental witness statement dated 21 November 2017 and through discovery without leave. The same were ordered to be expunged by Master Ho on 15 April 2019 and 15 May 2019. 

THE LEGAL PRINCIPLES

14.  The 2017 Judgment is a final judgment against the Defendant for the delivery up of the Gold Coins and the Ivory Screen.  The basis of such judgment is that the Defendant possesses those items. 

15.  Hence, as submitted by the Plaintiff’s Counsel, Mr Mike Lui (who appeared with Mr Timothy Lam), the Plaintiff’s claim against the Defendant is in detinue, which is a continuation of the tort of conversion in persistently withholding those items and refusing to redeliver them.  See Chun Sang Plastics Co Ltd v Commissioner of Police [2018] 2 HKLRD 511 at §18 per DHCJ Seagroatt. 

16.  A plaintiff in an action for detinue asserts and maintains his/her property in the goods up to the date of the verdict or judgment.  For this reason, the damages awarded where the goods are not returned are the market value of the goods (together with any consequential damage that is not too remote) as at the date of the verdict or judgment and not the date of the defendant’s failure to return.  This is so even if the defendant liable in detinue has converted the goods by selling them, since the plaintiff in such a case is entitled to elect to claim in detinue rather than in conversion.  See Halsbury’s Laws of Hong Kong, 2^nd ed, Vol 47, §§380.435 & 380.453; Rosenthal v Alderton & Sons, Limited [1946] 1 KB 374 at 377-379 per Evershed J; Wilkinson v Verity (1871) LR 6 CP 206 at 210-211 per Willes J. 

17.  In the Plaintiff’s written opening submissions, it was suggested that the applicable date for assessment of damages in this case should be 22 May 2017.  During oral opening submissions, this Court queried whether in light of the abovementioned authorities, the relevant date should instead be 28 April 2017 which is the date of the 2017 Judgment.  Mr Lui explained that the 22 May 2017 date was proposed because the Plaintiff informed the Defendant of the 2017 Judgment on 8 May 2017 and demanded delivery up within 14 days thereafter.  Upon reflection, Mr Lui accepted during his oral closing submissions that the proper date should be 28 April 2017.  Mr Gormley did not otherwise dispute the adoption of 28 April 2017 as the assessment date. 

18.  In the circumstances, and given the authorities referred to in §16 above, I shall adopt 28 April 2017 as the date of assessment of the market values of the Gold Coins and the Ivory Screen in this case. 

GOLD COINS

19.  The Gold Coins in question are a series of American Eagle gold coins minted in 1986 comprising of 500 pieces of 1/10 oz, 400 pieces of 1/4 oz, 200 pieces of 1/2 oz and 50 pieces of 1 oz coins.

20.  In valuing the Gold Coins, the Plaintiff relies on the expert opinion of Mr Li.  He is the founder and managing director of Emperio Gold and Silver Coins (Hong Kong) Limited, a precious metal retailer and wholesaler in Asia specialising in the trading of gold and silver bullion and collectible coins, including American Eagle gold coins. He is also a registered representative of the Chinese Gold and Silver Exchange Society.  As at the time of Mr Li’s expert report dated 6 September 2017 (“Li Report”), he had worked in the field for more than 5 years. 

21.  There was no challenge to the expertise of Mr Li. 

Estimated Value of the Gold Coins and the Valuation Methodology

22.  According to the Li Report, the value of the Gold Coins was US$540,168 as at 22 May 2017.  It would appear that this date was chosen as the Plaintiff had been proceeding on the basis that the date of assessment would be 22 May 2017. 

23.  Mr Li’s valuation methodology as set out in the Li Report and elaborated in his testimony is as follows:

(a)  The spot price of gold was US$1,337.85 as at 6 September 2017 and US$1,258.85 as at 22 May 2017.  Such prices were obtained from the internet and are objectively verifiable public information. 

(b)  The market price of a gold bullion coin is comprised of the spot price of gold and the bullion premium. 

(c)  Mr Li used the spot price of gold and the market value of the American Eagle gold coins as at 6 September 2017 (as he was unable to find the market value as at 22 May 2017) to find out the relevant bullion premium.  In this regard, Mr Li obtained the market values of the American Eagle gold coins as at 6 September 2017 from Professional Coin Grading Service (“PCGS”), Numismatic Guaranty Corporation (“NGC”) and Apmex.  PCGS and NGC are professional valuation agencies and Apmex is an online trading platform for gold coins and other precious metals.  He then took the average from the 3 sources and calculated the following market prices of American Eagle gold coins as at 6 September 2017:

1 pc	PCGS (US$)	NGC (US$)	Apmex (US$)	Average Price (US$)
1/10 oz	170	250	174.05	198.02
1/4 oz	575	600	395.13	523.38
1/2 oz	1,000	1,050	735.25	928.42
1 oz	1,565	1,825	1,410.49	1,600.16

(d)  Mr Li then deducted the gold spot price from the average price from PCGS, NGC and Apmex as at 6 September 2017 and obtained the bullion premium.  He also calculated the bullion premium in the form of a weighting percentage by dividing the gold spot price by the average price.  These calculations are expressed in the form of a table at page 5 of the Li Report as follows:

Weight (Oz)	Average Price (US$)	Gold Spot Price as at 6 Sept / Weight (US$)	Bullion Premium (US$)	Weighting of Spot Price on Average Price (%)
1/10	198.02	133.785	64.235	67.56
1/4	523.38	334.4625	188.9175	63.90
1/2	928.42	668.925	259.495	72.05
1	1,600.16	1,337.85	262.31	83.61

(e)  Assuming that the weighting percentage (and hence the bullion premium) to be constant during the material times, Mr Li then multiplied the gold spot price as at 22 May 2017 with the weighting percentage to arrive at the market values of the Gold Coins totalling US$540,168. 

24.  In light of my query over the use of 22 May 2017 as the assessment date (see §17 above), I asked Mr Li during the hearing to calculate the market values of the Gold Coins as at 28 April 2017 based on his abovementioned valuation methodology.  After obtaining the gold spot price as at 28 April 2017 (being US$1,266.45), Mr Li then calculated the total market value of the Gold Coins as at 28 April 2017 to be US$543,427 as follows:

Weight (Oz)	Gold Spot Price as at 28 Apr / Weight (US$)	Weighting of Spot Price on Average Price (%)	Value per coin (US$)	Quantity (Piece)	Amount (US$)
1/10	126.645	67.56	187.45	500	93,725
1/4	316.6125	63.90	495.48	400	198,192
1/2	633.225	72.05	878.87	200	175,774
1	1,266.45	83.61	1,514.71	50	75,736
Total Amount				543,427

25.  Mr Gormley did not challenge Mr Li as to his valuation methodology or the accuracy of his figures or calculations.

Assumptions Made in Mr Li’s Valuation of the Gold Coins

26.  The Defendant’s main challenge of Mr Li’s valuation was directed at the assumptions made by him in relation to the conditions of the Gold Coins. 

27.  In this regard, as Mr Li did not have the opportunity to physically examine the Gold Coins, he assumed at page 4 of the Li Report that “the subject items are in virtually fully struck with miniscule imperfections visible upon close inspection”. 

28.  Mr Gormley attacked Mr Li’s assumption that the Gold Coins were in perfect condition when he had not conducted a physical examination of them.  Given Mr Li’s acceptance during cross-examination that the Gold Coins could be damaged (for example by a drop of one metre onto a concrete surface) and that he had no knowledge as to how the Gold Coins were stored or transported from Hong Kong to the USA, it was said that it was unreasonable for Mr Li to assume that the Gold Coins are still in perfect condition after being minted more than 33 years ago.

29.  In the circumstances, Mr Gormley submitted that in light of the uncertainty as to the conditions of the Gold Coins and thus the appropriate bullion premium to be ascribed to them, this Court should simply adopt the spot price of gold to assess the value of the Gold Coins since the spot price is not dependent on the conditions of the Gold Coins. 

30.  In my view, Mr Gormley’s submission is misplaced for the following reasons:

(a)  Mr Li explained in his testimony that as he did not have the opportunity to physically examine the Gold Coins, he assumed that they are in a “fair” (as opposed to “perfect”) condition for the purpose of his valuation.  This is what he meant by the Gold Coins being “virtually fully struck with miniscule imperfections visible upon close inspection”. 

(b)  Mr Li further explained that the grading of American Eagle gold coins would affect their value.  PCGS and NGC adopt a similar grading system and give the same price or value to American Eagle gold coins scoring in the range of 60 to 66 (in a scale with the top score of 70).  American Eagle gold coins scoring 67 or above have a much higher value, and in fact those with a score of 70 could be 4 times more expensive than those with a fair condition (ie scoring 60 to 66). 

(c)  Whilst Mr Li said that even in the worst scenario, American Eagle gold coins with the worst mark up to 66 would have the same value, that was because the worst American Eagle gold coins that he had ever come across in his experience would at least have a score of 63 and therefore shall fall within that class of gold coins with “fair” conditions. He was not ignoring the conditions of gold coins for the purpose of his valuation. 

(d)  Mr Gormley had confirmed in his written opening submissions that the Defendant still retains the Gold Coins and the Ivory Screen in question.  As such, to the extent that the Defendant is suggesting that the Gold Coins have been damaged (whether during their transportation from Hong Kong to the USA or otherwise) to such an extent that they are not worth any premium, one would have expected the Defendant or his expert to come forward and testify to their conditions or otherwise produce them for inspection. Yet, the Defendant has adduced no corroborative evidence whatsoever.  In the circumstances, it seems to me to be unreal for the Defendant to attack the reasonableness of Mr Li’s assumption of fair condition of the Gold Coins for the purpose of his valuation. 

Conclusion as to the Value of the Gold Coins

31.  In light of the above, I accept Mr Li’s opinion that the market value of the Gold Coins was US$543,427 as at 28 April 2017.  I therefore assess the damages suffered by the Plaintiff in respect of the Defendant’s failure to deliver up the Gold Coins to be US$543,427. 

THE IVORY SCREEN

32.  The Ivory Screen in question is an antique Chinese table screen made of six rosewood panels with ivory pictorials all hinged together.  The ivory inserts placed within the panels vary in size within the rosewood panels of approximately 25.4cm x 31.75cm. 

33.  In valuing the Ivory Screen, the Plaintiff relies on the expert opinion of Ms Zhang.  She is the holder of a certificate of Senior Art and Antiques Appraiser of the PRC and is the Executive President of the Association of Chinese Collectors UK.  She has more than 10 years of experience in the antique business specialising in Chinese antiques, porcelain, fine European jewellery and silver and has worked at Duton’s Auctioneer and Vine Auctioneers as a senior art appraiser.  She has also prepared appraisals of antique items for insurance companies such as Highworth Insurance and Assetsure Insurance. 

34.  There was no challenge to Ms Zhang’s expertise.

Factual Evidence of SEH

35.  Before turning to Ms Zhang’s evidence in detail, I will first deal with Mr Gormley’s challenge that the expert only conducted her valuation on the basis of high resolution digital photographs of the Ivory Screen (“High Resolution Photographs”) obtained from SEH and did not physically examine the antique item.  As SEH did not know with certainty who took the High Resolution Photographs or personally witness the handing over of the Ivory Screen by EEH to the Defendant, Mr Gormley submitted that I should view Ms Zhang’s opinion with scepticism. 

36.  With respect, I do not see any merit in Mr Gormley’s challenge for the following reasons:

(a)  SEH explained in his testimony that because of the 1997 handover, his father, EEH, sold his residence in Hong Kong in May 1997.  By June 1997, his father had shipped belongings in Hong Kong to a house that he had bought in Virginia.  His father was not an American and had stay restrictions.  SEH was an American and was hired by EEH to manage the property in Virginia.  He took up the job in May 1997 and ran the Virginia property until early 1999, during which time the Ivory Screen was in his custody.  In 1999, he was asked to return the Ivory Screen, so he arranged for its return in front of his father’s lawyer.  SEH is therefore familiar with the appearance of the Ivory Screen. 

(b)  Before returning the Ivory Screen, SEH had taken some polaroid photographs of it but they were of poor quality. After EEH passed away in September 2017, a departing staff member of his father named Ms Esther Sze turned over to him certain files and computer in her possession.  Whilst reviewing these items, SEH discovered the High Resolution Photographs which were then passed on to Ms Zhang. 

(c)  SEH confirmed in his testimony that he has no doubt that the High Resolution Photographs depict the Ivory Screen.  The Ivory Screen was in his possession from 1997 to 1999 and that SEH and his father had attended the Deposit Box in 2008 or 2009 where the item had been kept.  SEH is certain that his father only had one ivory screen and the High Resolution Photographs indeed show the Ivory Screen.  

(d)  In the circumstances, the fact that SEH does not know who took the High Resolution Photographs and did not personally witness the handing over of the Ivory Screen to the Defendant is largely immaterial and does not detract from SEH’s firm testimony, which I accept, that the High Resolution Photographs which he passed to Ms Zhang depict the Ivory Screen in question.  

Ms Zhang’s Valuation of the Ivory Screen

37.  Ms Zhang opines in her report dated 1 November 2018 (“Zhang Report”) that the Ivory Screen has a value of US$4 million as of the date of her report.  Upon query by this Court during the hearing as to the value of the Ivory Screen as at 28 April 2017, Ms Zhang confirmed that the value would be the same.  She testified that whilst there has been an annual growth in the value of antiques of several percentages, her valuation of US$4 million as at 1 November 2018 is already quite conversative. As such, her valuation as at 28 April 2017 would not be different. 

38.  This valuation of US$4 million is based on the following observations as stated in the Zhang Report:

(a)  The Ivory Screen “dates from the Qian Long (Chien Lung ) period of C. 1740”.

(b)  The “superb master craftsmanship of” the Ivory Screen “is of the highest quality in the arts of ivory”.

(c)  The “handicraft is of exceptionally good quality with fine details”.

(d)  The Ivory Screen is “considered to be a rare item and will definitely attract great interest from Chinese collectors”.

(e)  The Ivory Screen “comes from one of Hong Kong’s most prominent family, namely the Sir Robert Hotung collection.  This will attract more interest from collectors and its price will be multiple times the value of similar items from an average source”.

(f)  The Ivory Screen is “of a very good quality depicting high levels of skills used by the makers, making it a very desirable piece of art”.

39.  In her testimony, Ms Zhang identified six criteria which she took into account in valuing the Ivory Screen and explained her observations as follows:

(a)  First, its shape and form.  The Ivory Screen is a stationery, and in the area of antique valuation, stationery items are substantially more valuable than other items such as big screens even if the latter are larger in size.  The Ivory Screen is made up of six screens. An item consisting of more than one component is also worth more. 

(b)  Second, materials.  The Ivory Screen is made of elephant (as opposed to mammoth or walrus) ivory as well as Hainan rosewood.  Such materials are extremely valuable and exquisite. Although Ms Zhang had not physically inspected the Ivory Screen, she could tell that it is made of elephant ivory by looking at the macroscopic characteristics of the ivory, which ought to have 115 degree angles in cross-sections for elephant ivory. 

(c)  Third, year of production and origin.  The Ivory Screen was made by grandmasters in the studio in the Forbidden City in the early Qianlong era.  In reaching this view, Ms Zhang compared the Ivory Screen with an item in the Forbidden City Palace Museum, and noted that the skills involved in their making are very similar.  She noticed that there is no signature on the Ivory Screen, which is also consistent with the historical fact that in the Qianlong period, grandmasters making artworks were prohibited from putting their signatures on their works. 

(d)  Fourth, craftsmanship.  The craftsmanship of the Ivory Screen is very sophisticated.  The inscriptions demonstrate a very high level of detail with various tiny figures inscribed three-dimensionally, and the fact that those figures are inscribed within very small areas has made the Ivory Screen exceptional in terms of craftsmanship. 

(e)  Fifth, quality and condition.  No crack was detected upon examination of the High Resolution Photographs and this reinforces Ms Zhang’s opinion that the Ivory Screen is made of the best quality elephant ivory.  The value of an antique will multiply if it is well preserved.

(f)  Sixth, provenance.  The fact that the Ivory Screen comes from the Hotung family collection increases its value substantially. 

40.  Ms Zhang also explained that she made reference to various comparable antique items in her valuation, including an ivory screen which was auctioned for £330,000 in 2006 and the following three ivory items which were auctioned by Sotheby’s Hong Kong on 3 October 2018:

(a)  Qing Dynasty (Kangxi period) ivory brush holder with an estimated value of around HK$1.5 million. 

(b)  Qing Dynasty (Qianlong period) pair of ivory candleholders with an estimated value of around HK$7 million. 

(c)  Qing Dynasty (Qianlong period) pair of ivory panel with an estimated value of around HK$5 million. 

41.  Ms Zhang opined that the Ivory Screen is superior to the above comparables in terms of sophistication of sculpture work, materials used and conditions such that its value should be much higher.  Indeed, she said that her valuation of US$4 million is already a conservative estimate and the Ivory Screen is likely to be sold at a much higher price in an auction, since antiques from the Qianlong period are highly sought after by many Chinese collectors. 

42.  Mr Gormley invited this Court to be suspicious of Ms Zhang’s valuation given that the Ivory Screen is smaller in size than the screen and panel referred to in her comparables but yet has a much higher estimated value. 

43.  However, as explained by Ms Zhang in her testimony, size is only one factor and that smaller antique items are often worth more than the bigger ones.  Whilst Ms Zhang could not confirm the historical period for the screen auctioned in 2006, she stressed that the artistic quality of the Ivory Screen is much higher than those comparables auctioned by Sotheby’s Hong Kong.  She also noted that the comparable referred to in §40(c) above comprised of only one panel, whereas the Ivory Screen consists of six panels. 

44.  As regards the year of production and origin, Mr Gormley said that Ms Zhang could not identify the precise time in which the Ivory Screen was made. 

45.  However, Ms Zhang is able to deduce that the Ivory Screen was made in the early Qing Dynasty under the reign of Qianlong in around 1740 based on the following observations:

(a)  In 1694, the previous ban on sea trade was lifted and there was an import of ivory in the 1700s. 

(b)  The craftsmanship in the Ivory Screen with high quality three dimensional effect of the people, trees and mountains is unique to the Qianlong era. 

(c)  As mentioned in §39(c) above, the lack of any signature on the Ivory Screen is consistent with the fact that grandmasters making artworks were prohibited from putting their signatures on their works. 

46.  Mr Gormley further said that Ms Zhang could not identify which expert craftsman created the Ivory Screen.  He raised with Ms Zhang during cross-examination the possibility of the Ivory Screen being a counterfeit.  However, Ms Zhang ruled out such a possibility for the following reasons:

(a)  There was no technology in the 1740 era which could create counterfeit ivory products.  There were only very few grandmasters who could undertake such types of work and they were all working within the Forbidden City. 

(b)  There was also no technology subsequent to the 1740 era which could produce counterfeits in the likes of the Ivory Screen.  Whilst counterfeit technology existed in Europe in the 19^th century, this was limited to using an ivory look alike plastic material called “bakelite” to make balls, beads and boxes.  Since bakelite was unsuitable for carving, it could not be used to imitate items such as the Ivory Screen.

47.  In light of Ms Zhang’s explanations above and the lack of any evidence from the Defendant to contradict such explanations, I am not persuaded that there is any credible evidence before me which would suggest that the Ivory Screen is a counterfeit.

48.  Mr Gormley also reminded me that Ms Zhang was unable to identify the provenance of the Ivory Screen beyond that it was in the possession of Sir Robert Hotung.

49.  However, given Ms Zhang’s evidence that the Ivory Screen was made by grandmasters during the reign of the Qianlong emperor in around 1740 and that it could not be a counterfeit, I do not see any reason to reject or otherwise doubt her valuation on this basis. 

Conclusion as to the Value of the Ivory Screen

50.  Overall, despite Mr Gormley’s challenges, I accept the expert opinion from Ms Zhang who has given her evidence in a clear, coherent and fair manner.  In particular, I accept Ms Zhang’s valuation that the market value of the Ivory Screen was US$4 million as at 28 April 2017.

51.  I therefore assess the damages suffered by the Plaintiff in respect of the Defendant’s failure to deliver up the Ivory Screen to be US$4 million. 

COSTS

52.  Insofar as costs are concerned, the Plaintiff’s costs incurred in this action up to 28 April 2017 have already been awarded to the Plaintiff pursuant to the 2017 Judgment, so no further costs order is required from this Court in respect of that period. 

53.  As for the costs after 28 April 2017 (including the costs of and incidental to the assessment of damages), I can see no reason why the Plaintiff should not have its costs since it has been entirely successful in the assessment trial. 

54.  In this regard, Mr Lui submits that the costs to be awarded to the Plaintiff should be assessed on an indemnity basis. 

55.  Mr Gormley opposes costs to be ordered on an indemnity basis. 

56.  The principles regarding the court’s discretion to award costs on an indemnity basis as laid down in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 have been summarised by Bokhary NPJ in the recent decision of Commissioner ofInland Revenue v Poon Cho Ming John (No 2) (2020) 23 HKCFAR 74 at §4 as follows:

(a)  In certain circumstances, costs may be awarded on a more generous than usual basis of taxation so as to achieve a fairer result.  

(b)  It is for the receiving party to show that the case has some special or unusual feature.  

(c)  Such features are not confined to an ulterior motive, an improper purpose, deception or underhand conduct on the part of the paying party.  

(d)  Neither the attributes of the parties nor the character of the proceedings are irrelevant to the question of whether a more generous than usual basis of taxation should be ordered. 

(e)  The discretion to order a more generous than usual basis of taxation is not to be fettered or circumscribed beyond the requirement that such taxation be ordered only when it is appropriate to do so.  

(f)  As to that, the grounds on which a more generous than usual basis of taxation is to be ordered must be connected with the case.  That extends to – but no further than to – any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation. 

57.  In my view, there are special or unusual features in this case which justify the imposition of an indemnity costs order against the Defendant. 

58.  It would be apparent from my discussions above that the Defendant has been attacking the Plaintiff’s case on the basis that its experts have not physically examined the items in question. In this regard, SEH gave the following evidence which was not challenged by Mr Gormley during cross-examination:

(a)  The Defendant had refused to disclose the whereabouts of the Ivory Screen or allow the Plaintiff physical inspection of the Ivory Screen despite the Plaintiff’s repeated requests. 

(b)  The Plaintiff took out an application by way of summons filed on 14 May 2019 that the Defendant shall make the Ivory Screen available for physical examination by the Plaintiff’s expert.  The Plaintiff even offered to have its expert travel to the jurisdiction where the Ivory Screen was located to conduct the examination. However, at the hearing on 15 May 2019, the Defendant made clear that he would refuse inspection of the Ivory Screen, despite his Counsel admitting at the earlier hearing on 18 January 2019 that the Defendant had the Ivory Screen and would produce an expert report based on a physical examination.  The Plaintiff therefore had to abandon its application. 

59.  It seems to me that the Defendant’s conduct in refusing inspection of the Ivory Screen and at the same time attacking the Plaintiff’s expert for not having examined the item is obstructive and unreasonable. 

60.  Further, the egregiousness of the Defendant’s conduct is exacerbated by the delaying tactics that he has employed, including:

(a)  the non-delivery of the Gold Coins and the Ivory Screen pursuant to the 2017 Judgment;

(b)  the filing of two factual supplemental witness statements but not attending court to testify without any explanation for his absence;

(c)  his securing of an adjournment of the assessment of damages trial by indicating at the hearing on 18 January 2019 that he would also produce an expert report based on a physical examination of the Ivory Screen but then thereafter acted inconsistently. 

61.  Mr Gormley described the Defendant’s conduct (especially in relation to his change of mind over the submission of the Ivory Screen for inspection) as nothing more than the “ordinary course of litigation” between two parties engaged in a bitter feud. 

62.  However, the reality is that the Defendant has conducted a defence in these assessment proceedings without factual or expert evidence and which was wholly unmeritorious.  The Defendant’s conduct has unnecessarily lengthened these proceedings and resulted in wastage of the court’s resources. 

63.  In view of the Defendant’s conduct as described above, I am of the view that there exist special or unusual features in this case and that a fairer result would be for the Plaintiff to be awarded costs on an indemnity basis, together with certificate for two counsel.

INTEREST

64.  The Plaintiff has claimed interest against the Defendant in its Amended Statement of Claim. 

65.  During closing submissions, I invited Mr Gormley to address this Court on the issue of interest and he confirmed that he has no submission in this regard. 

66.  As for pre-judgment interest, I do not see any reason for departing from the conventional rate of 1% above prime rate: Chow How Yeen Margaret v Wex Pharmaceuticals Inc [2018] 3 HKLRD 163 at §§49-59 per Lam VP.  

67.  Further, since the cause of action in detinue accrues at the date of the wrongful refusal to deliver up the goods (Rosenthal at 378 per Evershed J; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644 at 648 per Diplock LJ), the applicable period of pre-judgment interest in this case should run from 1 September 2011 (being the day after the last day of return of the items as referred to in §8(g) above) to the date of this judgment. 

68.  As for post-judgment interest, I will follow the usual rule of awarding interest at judgment rate from the date of this judgment until full payment. 

ORDERS

69.  Based on the matters aforesaid, I make the following Orders:

(a)  The Defendant do pay the Plaintiff the sum of US$4,543,427 as damages suffered by the Plaintiff as a result of the Defendant’s failure to deliver up the Gold Coins and the Ivory Screen pursuant to the 2017 Judgment. 

(b)  The Defendant shall pay to the Plaintiff interest on the US$4,543,427 sum mentioned above at prime rate plus 1% from 1 September 2011 to the date of this judgment and thereafter at judgment rate until payment in full. 

(c)  The Defendant shall pay the Plaintiff’s costs incurred after 28 April 2017 (including the costs of and incidental to the assessment of damages), with certificate for two counsel, on an indemnity basis, to be taxed if not agreed. 

70.  I thank Counsel for their assistance. 

Mr Mike Lui and Mr Timothy Lam, instructed by Cheung & Co, for the Plaintiff

Mr Anthony Michael Gormley, instructed by Lo, Wong & Tsui, for the Defendant

HCA 77/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 77 OF 2012

____________

____________

______________

D E C I S I O N

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1.  This is an appeal by the defendant (“SK”) against the order of Master Herbert Au-Yeung made on 17 November 2016 giving him conditional leave to defend the claims of the plaintiff (“P”).

The parties

2.  At all material times, P was and is a limited company incorporated in Hong Kong.  Its principal activities are to hold the family properties formerly belonging to Mr Eric Edward Hotung (“EEH”) on trust for six of his eight children.

3.  SK is one of the children of EEH but not a beneficiary of this trust.  He is a beneficiary of some other trusts.

The claim, master’s order for conditional leave to defend and judgment

4.  P sued SK for misappropriation / wrongful detention / conversion of 300 ounces of American Eagle gold coins (“the Gold Coins”) and an antique ‘Ivory Screen’ as described in the will of the late Sir Robert Hotung (EHH’s father) (“theIvory Screen”).

5.  P applied for summary judgment against SK on 22 April 2016.  Master Au-Yeung gave SK conditional leave to defend P’s claims on 17 November 2016 in the following terms:

(1)  If SK pays US$141,405 into Court by 4 pm of 29 December 2016, SK may defend the action as to the whole of P’s claim, costs of the application for summary judgment be in the cause of the action with certificate for counsel;

(2)  If that sum is not so paid, P may enter judgment against SK for:

(a)  SK do within 14 days deliver up 300 ounces of American Eagle gold coins or any part thereof still in SK’s possession;

(b)  SK do within 14 days deliver up the Ivory Screen;

(c)  In the event of SK’s failure to deliver up any of the items, there be an assessment of damages suffered;

(d)  P shall be entitled to the costs of the whole action (including the costs of this application with certificate for counsel and all costs reserved, if any) to be taxed.

6.  SK filed a notice of appeal on 1 December 2016.  He also asked in the notice for a stay of the master’s order pending the determination of his appeal.  But he did not seek a hearing for the application for stay.

7.  P has also obtained an interlocutory injunction on 14 December 2016 enjoining SK from selling, disposing of or transferring the Ivory Screen to anyone other than P and/or diminishing its value whether it be the screen as described in §7 of the amended statement of claim or as in §7.2of the amended defence and whether it be within or outside Hong Kong.  The injunction was extended by consent to the conclusion of this action.

8.  SK failed to pay the US$141,405 into court on 29 December 2016.  Since he had not obtained a stay of the master’s order, judgment was entered against him on 13 January 2017 pursuant to and in terms of §2 of the master’s order.

9.  Since judgment has been given to P, SK’s application for stay of the master’s order as adumbrated in the notice of appeal has lapsed.  I would pay no regard to the written submissions by Mr Gormley, counsel for SK for stay of execution of the master’s order. 

The legal principles

10.  SK now appeals against the master’s order.  He is seeking unconditional leave to defend the action.  An appeal from a master to a judge in chambers is conducted by way of rehearing the application before the master.  The party appealing has to open the appeal.  The judge will give weight to the master’s decision but is not bound by it (Hong Kong Civil Procedure 2017, Vol. 1 §58/1/2, p. 1084).

11.  In an Order 14 application, a condition of paying some or all of the money or damages claimed into court, or giving security, is imposed where there is a good ground in the evidence for believing that the defence set up is a sham defence or the master is prepared very nearly to give judgment for the plaintiff or where there is something suspicious in the defendant’s mode of presenting his case, or the court is left with a real doubt about the defendant’s good faith.  Leave to conditional on the full amount being paid into court may be ordered where the defence is “shadowy” or there is little or no substance in it or the case is almost one in which summary judgment should be ordered (Hong Kong Civil Procedure 2017 Vol.1 §14/4/16 page 281).

The plaintiff’s claims

12.  P’s claims have been set out in the amended statement of claim and are supported by the 2nd and 3rd affidavits of EEH and the 8th and 9th affirmations of Sean Eric Hotung (“SEH”), P’s current director.  The material facts of P’s case are set out in a chronological table in the written submissions of Ms Ng, P’s counsel.  The following table of chronological events of P’s case is taken from Ms Ng’s table:

	Date		Event		Reference
(1)	1969		P was incorporated in Hong Kong to hold certain trust properties for six of children of EEH borne by Patricia Hotung.		SEH 8th [1/65/§8]
(2)	22.1.1986		P purchased the Gold Coins from a bullion brokerage firm, Mocatta & Goldsmith at the total costs of US$131,680.00.  The Gold Coins were kept in a safe deposit box in BNP Bank in Hong Kong.  They were under the custody of EEH as trustee/bailee for P.		EEH 2nd [1/59/§4] SEH 8th at [1/65/§§11-13] “SEH-32” [1/158] SEH 9th [1/94/§10] “SEH-37” [2/338-367]
(3)	Around 2004		BNP Bank no longer provided safe deposit box services and EEH retrieved the Gold Coins and later took them to USA.  In early 2004, EEH kept them in a safe deposit box in the State of New York at a branch of Citi-Bank for P.  In mid-2004, EEH transported them to a safe deposit box in Sun Trust Bank in Mclean, Virginia, USA (“the Deposit Box”).  They were kept in the Deposit Box under the name of EEH.		EEH 2nd [1/59/§4] SEH 8th [1/65-66/§§12-14]
(4)	4.3.2005		Hong Kong Court ruled in HCA 571/2003 that P and Hotung Enterprises Limited were trusts holding properties for six of EEH’s eight children.		EEH 2nd [1/59/§3]
(5)	2006		EEH started to entrust his assets with SK.  EEH made SK trustee and gave him powers of attorney to various funds and assets.		SEH 8th [1/66/§15]
(6)	2007		SK became EEH’s financial adviser.  He managed EEH’s Hong Kong office and its staff from 2007 until he fell out with EEH in around August 2011.		SEH 8th [1/66/§15]
(7)	17.7.2007		SEH became a director of P and became responsible to recover for P all its assets that have been taken away by others.		SEH 8th [1/65/§10]
(8)	2009 or earlier		The Ivory Screen was placed in the Deposit Box.		SEH 8th [1/67/§17]
(9)	2009		EEH appointed SK a joint custodian and signatory of the Deposit Box.  EEH informed SK that the Gold Coins in the Deposit Box were held by EEH and SK as trustee / bailee for P.		EEH 2nd [1/60/§6]
(10)	24.5.2010		SEH wrote an email to SK requesting for confirmation that the Ivory Screen was safe and not in the possession of Barbara Mak (a daughter of EEH), and that the Ivory Screen needed to be inspected.		SEH 9th [1/97/§19] “SEH-39” [2/385-386]
(11)	31.5.2010		SK replied SEH by email and confirmed that he saw the Ivory Screen with Marty (Martha Alafoginis – an employee of EEH) in the Deposit Box a couple of weeks ago.  SK said that the screen had been there since it came from NY (New York).		SEH 9th [1/97/§20] “SEH-39” [2/385-386]
(12)	Later part of 2010 or Early 2011		EEH made a gift of the Ivory Screen to P.		EEH 2nd [1/60/§6] SEH 8th [1/67/§17]
(13)	Later part of 2010 or early 2011		SK removed the Gold Coins and Ivory Screen from the Deposit Box.		EEH 2nd [1/60/§7]
(14)	Early 2011		SK told EEH that he had removed the Gold Coins and Ivory Screen from the Deposit Box and would produce them upon request.  EEH requested SK to deliver the Gold Coins and Ivory Screen to him.  SK promised to do so before August 2011 but failed to meet the promise.  He also declined the further requests of EEH or his solicitors to do so.		EEH 2nd [1/60/§§8-9]
(15)	May 2011		SEH met SK in Hong Kong at the restaurant Jimmy’s Kitchen in Central.  SK knew that the Ivory Screen belonged to P.  He also knew that SEH had access to EEH’s safe deposit box in Hong Kong.  SK proposed to SEH that they could split the proceeds and contents of the Deposit Box and EEH’s safe deposit box in Hong Kong.  SK told SEH that more than half of the Gold Coins (175 ounces) had been converted into cash.  SEH declined the offer.		SEH 8th [1/67/§18]
(16)	28.12.2011		SEH’s brother Robert confided to SEH that SK refused to return the Gold Coins and Ivory Screen until he received certain documents signed by EEH.		SEH 8th [1/67/§19] “SEH-34” [1/205-206] “SEH-35” [1/207-221]
(17)	13.1.2012		P issued the writ of summons herein against SK to recover the Gold Coins and Ivory Screen.		[1/1-16]
(18)	15.4.2014		SK filed his defence.
(19)	21.4.2016		SK amended his defence.		[1/27-35]
(20)	22.4.2016		P applied for judgment under Order 14.		[1/41-46]
(21)	17.11.2016		Master Au Yeung heard P’s Order 14 application and gave SK conditional leave to defend.		[1/57-7 to  57-9]
(22)	1.12.2016		SK filed the notice of appeal to judge in chambers against the master’s order.		[1/57-10 to  57-13]
(23)	29.12.2016		SK failed to pay into court the US$141,405 for conditional leave.
(24)	13.1.2017		Judgment entered in favour of P for the whole claim.		[1/57-26 to  57-28]
(25)	21.3.2017		Hearing of the Order 14 appeal and P’s summons to adduce Yau Yuen Mei’s affirmation on the value of the Gold Coins.

The plaintiff’s case on the Gold Coins

13.  EEH said in his 2nd and 3rd affidavits that the Gold Coins were purchased by P and belonged to P [1/59/§4 and 1/88/§§9-12]. 

14.  P also relied on some accounting documents to prove its ownership of the Gold Coins.  It produced a few pages of the ledger for 86/87 showing the purchase of four lots of American Eagle gold coins totaling 300 ounces (the Gold Coins).  It also produced a current account with Mocatta for 86/87 from its accounting papers showing these purchases at a total costs of US$131,680 or HK$1,021,558.56.  It also produced its audited account for the year ended 31 March 1989 which was audited by Pricewaterhouse Cooper (in its former name of Lowe Bingham & Matthews) showing its holding of an investment in bullion coins of a worth at HK$1,012,559 in 1988.  The same investment also featured in its audited account for the year ended 31 March 1990 which was audited by Fung & Chan [Exhibit “SEH-37” 2/340-344, 355 and 365].

15.  EEH had in the past also used the Gold Coins as part of his assets to secure loan facilities from the Hong Kong Bank.  He produced a copy of his loan application [Exhibit “EEH-3” 2/323] and said:

“The Court will note on page 15 of said exhibit that the Ivory Screen and 300 ounces of American Eagles Gold Coins are listed as assets in the application form. In the said application, I tried to use all assets under my control (including the Gold Coins and the Ivory Screen) to increase my credit-worthiness to secure a better loan. I would eventually repay the loan and I had no concern at that time that any of those properties would be in danger.” [1/89/§15]

16.  It is also P’s case that SK had sold some of the Gold coins.  SEH said in §18 of his 8th affirmation:

“In May 2011, I met the Defendant (SK) in Hong Kong at Jimmy’s Kitchen in Central. The Defendant knew that the Ivory Screen belonged to HICL (P) and he also knew that I had access to EEH’s safe deposit box in Hong Kong. The Defendant (SK) proposed to me that he would split with me the contents of the safe deposit box EEH had in the USA, if I would split with him the contents of the safe deposit box EEH had in Hong Kong. He informed me that more than half of the Gold Coins (175 ounces) had already been converted into cash and we could split the proceeds and contents of both boxes. I declined his offer.” (emphasis supplied)

17.  P had previously used this conversation to claim SK’s money kept in Wing Hang Bank Ltd. on the basis that such money was the proceeds of sale of some of the Gold Coins.  The bank took out interpleader proceedings in DCMP 2083 of 2012. 

18.  One Mr Chan Wing Hong Ricky, a director of P, has also said in an affirmation made in the interpleader proceedings on 25 January 2013 that the Gold Coins were purchased by P in 1986 at US$131,680 and SK was appointed a joint custodian with EEH of these coins when they were kept in USA.  But SK refused to return them at EEH’s request in August 2012 [1/164-5/§§13(4)-15].  Mr Chan also produced a page of P’s ledger dated 31 March 2012 recording P’s purchase of the Gold Coins (American Eagle Bullion Coins) [1/195].  He said SK was aware that the Gold Coins belonged to P as SK had full access to all of P’s audited accounts which listed P’s assets. 

19.  SK denied that he had access to P’s audited accounts, but he did confirm that when he worked for EEH, he had seen a document that mentioned that 300 ounces of American Eagle gold coins (the same as the Gold Coins) were held in a deposit box in New York sometime in 2009 [1/77/§16].

20.  Furthermore, on 28 December 2012, SK’s brother, Robert Eric Hotung (“REH”), wrote an e-mail to SEH and said that SK had had no intention of returning the Gold Coins unless and until he received certain documents signed by EEH.  P then realized that SK had no intent to return to it the Gold Coins and/or the proceeds of sale of the Gold Coins.  The e-mail said:

“... Of course, matters are tense between EH (EEH) and ESK (SK) as ESK has EH’s gold and is not about to return it until their differences are resolved – something about a piece of document? ...”

SK’s defence to the claim for the Gold Coins

21.  SK in his original defence filed on 15 April 2014 admitted that he had received the Gold Coins from EEH, but alleged that they belonged to EEH who gave them to him as personal gifts [1/27/original §4 and 1/28/original §7.2].

22.  However, when P amended its statement of claim to clarify that the Gold Coins were 300 ounces of American Eagle gold coins purchased by P on 22 January 1987 from Mocatta & Goldsmid, SK changed his stance in his amended defence.  He did not accept that he had received from EEH the 300 ounces of American Eagle gold coins.  This was surprising as Mr Chan Wing Hong Ricky had already made it clear that the Gold Coins that P was claiming from SK were the 300 ounces of American Eagle gold coins.  This was maintained in P’s amended statement of claim and SK admitted that these were the gold coins he received from EEH. 

23.  SK changed his case in the amended defence.  He pleaded that he had received from EEH some 291 ounces of assorted gold coins.  These coins comprised some Canadian Maple Leaf gold coins 1990, some American Eagle gold coins 1986, some American Eagle gold coins 1989 and a few other gold coins of other types [1/28/§7.2].  He produced an inventory list prepared by Messrs. Gary Adkins Associates Inc. in June and August 2014 to verify that he had these coins in his possession [2/434-435].  He said these gold coins did not appear in P’s records.  He also alleged that EEH had told him in 2009 that EEH wanted to transport some 600 ounces of gold coins from Virginia to the United Kingdom.  He thus argued that the Gold Coins as claimed by P are not the same gold coins that were given to him by EEH [1/77/§16].

24.  However, it is P’s case that SK had prior to 2014 sold some of the Gold Coins.  The inventory, if true, only showed that he had purchased some other gold coins afterwards.

25.  I have referred to the interpleader proceedings above.  They were tried by Deputy Judge Kent Yee.  On the question of whether SK had sold some of the Gold Coins, the Deputy Judge said in §§35 to 37 of the judgment as follows:

“35.  On the issue as to whether ESK Hotung (SK) has sold the gold coins without the consent of the Company (P), the Company’s evidence is that in May 2011, there was a meeting between ESK Hotung and his brother Sean Eric Hotung (“SEH”), who is a director of the Company.  SEH contends that in the meeting at Jimmy Kitchen in Central, ESK Hotung told him that more than half of the gold coins (175 ounces) had already been converted into cash.  ESK Hotung further suggested splitting other assets of the Company between SEH and him. There were further details given about the meeting.

36.  ESK Hotung in his 2^nd Affidavit dated 11 March 2013 dealt with this serious and well-particularised allegation by three words only: “It is false”.  His bare denial in these circumstances is demonstrably unimpressive.  This is so despite the draft Deed of Settlement and Release sent by the Company under the cover of a letter dated 6 February 2012, which was made on the assumption that all the 300 ounces gold coins could be returned to the Company.

37.  In any event, I note that ESK Hotung himself does not deny that he has sold the gold coins. I cannot understand why he fails to so if the gold coins remain intact in his possession.”

26.  Thus SK in his affirmation filed in the interpleader proceedings did not deal with the issue of whether he had sold some of the Gold Coins.  His reply to the alleged conversation he had with SEH is “It is false”.  This reply can mean that there was no meeting as alleged or he did not tell SEH in the meeting that he had sold any of the Gold Coins or that he only said he had sold a smaller quantity of the Gold Coins.  This reply is indeed “demonstrably unimpressive”.  If he had not sold any of the Gold Coins, why did he not say so?

27.  P thus has a strong case to say that SK had sold some of the Gold Coins and his inventory only showed some repurchased gold coins.

28.  However, SK tried to argue in his 2nd affidavit that the Gold Coins claimed by P are the same gold coins that are in his possession.  He said:

“In short, there is no controversy between the parties that a quantity of coins was transferred from EEH to me. Both descriptions of these coins are around 300 ounces of pure gold coins, and the Gifted Coins are predominantly American Eagles. It is understood that it is their ownership that is the subject of controversy between the parties.”

29.  In saying that both sides are referring to the same lot of gold coins, SK is in fact trying to twist P’s claim to a specific lot of American Eagle gold coins (the Gold Coins) to a claim for another lot of gold coins of various composition and to duck the issue of whether he had sold some of the Gold Coins and repurchased some other gold coins.  His position is an impossible one as P’s case is clear that the Gold Coins are all American Eagle gold coins 1986, but the gold coins he is keeping is comprised not only of American Eagle gold coins 1986, but also of Canadian Maple Leaf gold coins 1990, American Eagle gold coins 1989 and a few gold coins of other types [1/28/§7.2].  The 1989 and 1990 gold coins could not have been purchased by P back in January 1986 as they were only available in the market in 1989 and 1990 respectively. 

30.  SK’s case is simply that his lot of gold coins is not the American Eagle gold coins purchased by P in January 1986, but another lot that EEF gave him in January 2009.  He alleged that EEH owned many other gold coins as EEH at one time wanted to move 600 ounces of them from the US to the UK.  

31.  To boost his case that EEH had another lot or lots of gold coins, he made use of the e-mail sent by REH to SEH dated 28 December 2012 (see above) which referred to the Gold Coins as “EH’s (EEH’s) gold”.  He thus argued that REH was referring to gold coins owned by EEH and hence not P’s Gold Coins. 

32.  However, I take the expression “EH’s gold” in REH’s e-mail to mean either gold belonging to EEH or under his control.  I do not think REH was using very precise language in the e-mail.  He was using terms casually to express something SEH understood and SEH knew what he meant.  It must also not be overlooked that it was EEH who had asked SK to be the joint custodian of the Gold Coins and SK later refused the requests of EEH and his lawyers for their return.  Hence, the return of the Gold Coins was a matter between EEH and SK until this action was taken out.  It is thus not surprising that REH would have described the Gold Coins as “EH’s gold” when in fact they belonged to P.

33.  Furthermore, EEF had explained why he did not have any gold coin and he only had control of P’s Gold Coins.  I have already referred to his introduction of his loan application to Hong Kong Bank above [Exhibit “EEH-3” 2/323] in which he listed on page 15 the 300 ounces of American Eagles Gold Coins as his assets.  He said in §15 of his 3rd affidavit that he had tried to use all assets under his control (including the Gold Coins and the Ivory Screen) to increase his credit-worthiness to secure a better loan in the said application.  He further said:

“... I am obliged to bring the said loan application to the Court’s attention for two reasons:

a.  If 600 ounces of golds coins truly existed, regardless of origin, then the application would reflect 600, rather than 300 ounces of gold coins; and

b.  ...”  [1/89/§15]

34.  Though SK tried to suggest that both sides are referring to the same lot of gold coins, that cannot be.  He is just confusing matters.  The plaintiff’s Gold Coins are all American Eagle gold coins 1986. 

35.  Ms Ng, counsel for P also pointed out that SK had pleaded and referred to in his affidavit a Mr Bisrat Tesfazion, a former manservant of EEH as the witness who allegedly can prove that EEH did give him the Gold Coins and Ivory Screen as gifts.  But he has not provided any witness statement or affidavit by this person to support his case.

Decision on the claim for the Gold Coins

36.  To sum up the analyses, P’s case of its ownership of the Gold Coins is well supported by evidence in particular the reading together of the accounting documents and the contemporary audited accounts.  EEH has also made it clear that he himself did not own any gold coin.  He only used the Gold Coins for his loan application as the coins were in his control. 

37.  However, SK’s defence to this claim is confusing.  He at one time admitted that he had the Gold Coins which were a gift from his father EEH.  But when he could not come up with the same coins, he twisted P’s case to suit the coins that he is keeping. 

38.  P’s case of ownership is strong. EEH has denied of having given the coins to SK as a gift.  But even if EEH did so, no title could have passed from P to SK as SK is not a bona fide purchaser for value and in good faith.  On the whole, I agree with the master that SK’s defence is shadowy and condition was properly imposed for leave to defend the claim for the Gold Coins. I am also of the view that the plaintiff is very close to the judgment seat.

The plaintiff’s case on the Ivory Screen

39.  P pleaded in the amended statement of claim that EEH gave the Ivory Screen to P as a gift in early 2011.  It is a screen described in the will of the late Sir Robert Hotung (EHH’s father).  The screen was later placed in the Deposit Box.

40.  It is SK’s original case that EEH gave him an ivory screen in around January 2009 together with the gold coins he described in the amended defence as a gift.  The screen and coins were kept in his safe deposit box in SunTrust Bank in the US.  He then removed them from the deposit box on 22July 2010 and did not access the box again.  Since P’s case is that the Ivory Screen was only placed in the Deposit Box (which is the same deposit box referred to by SK) in 2011, SK therefore disagreed in the amended defence that he had taken away the Ivory Screen of P.

41.  P then revised its case in the 2nd affidavit of EEH and 8th affirmation of SEH on when the Ivory Screen was placed in the Deposit Box.  EEH said in §§6 and 11 of his 2nd affidavit:

“6.  ... In the latter part of 2010 or early 2011, I gifted the Ivory Screen as described in the Will of my father, Sir Robert Hotung to the Plaintiff and the Ivory Screen was already in the said deposit box.

...

11.  I expressly state and hereby confirm that there is and was only one batch of Gold Coins (the subject matter in the Plaintiff’s claim) and one Ivory Screen (the subject matter in the Plaintiff’s claim) ...” (emphasis supplied)

42.  SEH also said in §11 of his 8th affirmation:

“11.  ..., in early 2011, EEH gifted an antique Ivory Screen (“Ivory Screen”) as described in the will of the late Sir Robert Hotung to the Plaintiff.  The Ivory Screen was already in said safe deposit box in 2009 or earlier.”  (emphasis supplied)

43.  After P has revised its case to say that the Ivory Screen was in the Deposit Box in 2009 or earlier, SK also accepted that both sides were talking about the Ivory Screen and not that there were two ivory screens.  He said in §41 of his 2nd affidavit:

“... The Defendant’s position is clearly not that there were ‘two sets of gold coins and ivory screens.”

SK’s defence to the claim for the Ivory Screen

44.  Since there is only the Ivory Screen, the next question is whether EEH had given it to SK as a gift in around January 2009.

45.  SK pleaded in §7.7 of the amended defence that EEH had in early January 2010 added one Barbara Mak (“BM”), a daughter of EEH, as a signatory of the Deposit Box but inadvertently removed SK as a signatory of the box.  SK was however reinstated as a signatory on 20 January 2010 [1/29/§7.7]. 

46.  Since BM had been a signatory of the Deposit Box, SEH was worried that she might have removed or tempered with the Ivory Screen. He then sent SK an e-mail on 24 May 2010 asking SK to inspect the Ivory Screen at the Deposit Box.  SK replied SEH on 31 May 2010 that he had inspected the Ivory Screen a few weeks before that.  The e-mails are as follows [2/386]:

24 May 2010 from SEH to SK:

“when was the last time the Ivory Screen was checked? there is a rumor B (BM) is in possession of the I. Screen. It must be kept in mind she replicated a stain glass window from the 1800s. The screen needs to be properly checked—each piece of ivory too. ...”

31 May 2010 SK to SEH:

“Saw screen with marty a couple of weeks ago in suntrust box. It has been there since it came from NY as far as I know. ...”

47.  Ms Ng submitted for P that SK in the e-mail correspondence did not consider the Ivory Screen as his property or that EEH had given it to him in January 2009. 

Decision on the claim for the Ivory Screen

48.  I agree that if the screen had been given to him as a gift in January 2009, there was no reason why he would not have told SEH the same in his e-mail reply or at least showed gratitude to SEH for being concerned that his property might have been stolen by BM.  His defence that the Ivory Screen had been given to him by EEH as a gift in January 2009 is thus shadowy and I am of the view that the plaintiff is very close to the judgment seat.  I agree with the master that he should only be given conditional leave to defend this claim.

The Condition imposed

49.  SK has an alternative ground for the appeal.  He said the conditional leave for him meant final judgment as the condition was beyond his ability to comply. 

50.  He relied on Hong Kong Civil Procedure 2017, Vol. 1 §14/4/16, p. 282 which says:

“When granting conditional leave to defend, the Court is required to consider all the circumstances, which include the financial circumstances of the defendant, and for practical purposes should not impose a condition, e.g. the payment into court of such a sum as would make fulfilment of the condition impossible ... it would be a wrong exercise of discretion to grant the defendant leave to defend on condition that he should pay into Court an amount which he would never be able to pay, for that would be tantamount to giving judgment to the plaintiff, notwithstanding the court’s opinion that there was an issue or question which ought to be tried.”

51.  However, SK also acknowledged that he has the burden to adduce sufficient and proper evidence as to his means and must make full and frank disclosure of his means.  It is not enough for him to show that it is difficult for him to fulfil the condition sought to be imposed (Kwong Key Construction & Engineering Ltd v Sunlink Ltd, CACV 457/2002, Unreported 27 May 2003, Hon. Yeung JA & Ma JA).

52.  Ma JA (as he then was) said in §§19 and 20 of the judgment:

“19.  The relevant principles regarding the court’s approach as to the question of a defendant’s means in relation to an order for conditional leave, are well known. The courts in Hong Kong have consistently applied the principles set out in the speech of Lord Diplock in Yorke Motors (a firm) v Edwards [1982] 1 WLR 444. I have already referred to the decision of this court in Hwang v Morgan Guaranty, where two features were highlighted: -

(1)  Where a defendant seeks to argue his impecuniosity in order to avoid a financial condition being imposed, the onus is on him to put sufficient and proper evidence before the court as to his means. He must make full and frank disclosure. The reason for this evidential burden (on top of the legal burden) is that usually it is the defendant rather than the plaintiff who will have any knowledge of his own financial position.

(2)  A defendant must show not that it is difficult for him to fulfil the condition sought to be imposed, but that it is impossible for him to fulfil it. Here, the possibility of a defendant obtaining financial assistance from, say, friends, relatives, financial institutions or (in the case of a company) related or associated companies, must be satisfactorily dealt with by him.

20.  Once a defendant satisfies the court of these two matters, the correct order would then be unconditional leave to defend even if the defence is shadowy. As Godfrey J said in Unic Company v Centus Developments Limited at 648:-

‘Further, leave to defend should not be made conditional where on the evidence as to the financial circumstances of the defendant, it is plain, or even probable, that to give the defendant leave to defend only upon condition that he pays the whole sum into court would be tantamount to refusing him leave to defend at all.’”

53.  SK relied on his 3rd affidavit in this action to say that he is currently unable to pay P the outstanding costs of HK$244,001.00.  Hence, it is impossible for him to pay US$141,405.00 into Court.

54.  However, there is not a page of exhibit to support what he said.  There is no information of his bank accounts in Hong Kong or elsewhere save those in Wing Hang Bank where the proceeds have been paid into court.  There is also no information about his business or employment at all.  He also has not said a word about the possibility of his obtaining financial assistance from friends, relatives or financial institutions.  He has therefore failed completely in making disclosure of his means.  I therefore cannot disturb the master’s order on the ground of his impecuniosity. 

Funds in court purportedly being proceeds of some of the Gold Coins

55.  As a result of the interpleader proceedings, funds standing in SK’s account with Wing Hang Bank totaling US$79,656 have been paid into court.  These funds are supposed to be proceeds of sale of some of the Gold Coins.  Mr Gormley has asked me to take that into account and reduce the amount in the condition imposed by the master.  He has indeed raised this point in §22 of his skeleton used before the master. 

56.  Ms Ng argued that that sum was paid into court under a different set of proceedings and should not be taken into account on the amount to be paid in.

57.  I disagree with Ms Ng.  The amount ordered by the master is equivalent to the purchase costs of the Gold Coins. The funds deposited in court is supposed part of the proceeds of the Gold Coins.  It would be unfair to SK if such sum is not taken into account in assessing the sum to be paid in by him.

58.  Though Ms Ng has tried to adduce an affirmation of by a solicitor of P’s solicitors to show that the amount ordered by the master is too low to represent the value of the Gold Coins, she has not been able to persuade me why I should allow this affirmation to be used on appeal.

Order

59.  In the premises, I allow the appeal by reducing the sum ordered to be paid into court to HK$481,640.

60.  I therefore set aside the judgment entered on 13 January 2017.  I further order as follows:

(1)    (a)  If SK pays HK$481,640 into Court within 28 days from today, SK may defend the action as to the whole of P’s claim;

(b)  costs of the application for summary judgment before the master be in the cause of the action with certificate for counsel; and

(c)  SK do pay P 85% of the costs of the appeal.

(2)    If the sum of HK$481,640 is not so paid, P may enter judgment against SK for:

(a)  SK do within 14 days deliver up to P the Gold Coins as recorded and described in Exhibit “SEH-37” at bundle 2 pp. 340-344 or any part thereof still in SK’s possession;

(b)  SK do within 14 days deliver up to P the Ivory Screen;

(c)  In the event of SK’s failure to deliver up any of the items, there be an assessment of damages suffered to P;

(d)  P shall be entitled to the costs of the whole action (including the costs of this application before the master with certificate for counsel and all costs reserved, if any) to be taxed; and

(e)  SK do pay P the costs of the appeal.

HCA 77/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 77 OF 2012

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D E C I S I O N

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THE APPLICATIONS

1. There are two summonses before this Court:

a.  The plaintiff’s summons for further and better particulars.  The outstanding requests are 1(a), 1(c), 2(c), 3(c), 4(a) and 4(b);

b.  The defendant’s summons for amendment to the particulars given to the requests, which the plaintiff has raised no objection.

2. The Court will make an order in terms of the defendant’s summons for amendment, subject to the condition and costs below.

3. The plaintiff’s summons is contested and the parties are legally represented.^[1]

THE FACTUAL BACKGROUND

4. I shall adopt the plaintiff’s brief facts as set out in counsel’s written submissions.  They are as follows[2].

1.  Mr. Eric Edward Hotung (“EEH”) is the natural father of Mr. Sean Eric Hotung (“Sean”) and the Defendant.  Sean is appointed as one of the directors of the Plaintiff.

2.  In 1987, the Plaintiff purchased 300 ounces of American Eagle Gold Coins (“Gold Coins”) from a bullion brokerage firm, Mocatta & Goldsmidat at the total costs of US$131,780.00. In 1994, the Plaintiff placed the Gold Coins under the custody of EEH who held the Gold Coins as trustee and/or bailiff of the Plaintiff.  In 2004, the Gold Coins were placed in a safe deposit box at Sun Trust Bank in Mclean, Virginia, USA held under the name of EEH.  Between 2007 and 2009, EEH appointed the Defendant as joint custodian and signatory to the said deposit box.  As informed by EEH, the Defendant knew or ought to have known that the Gold Coins as kept in the said deposit box were held by EEH and the Defendant as trustees / bailiffs of the Plaintiff. 

3.  EEH had expressly informed the Defendant that the Gold Coins kept in the said deposit box belonged to the Plaintiff and that EEH and the Defendant held the Gold Coins in the capacities as express trustees on behalf of the members of the Plaintiff or words to that effect. 

4.  On the other hand, EEH gifted an antique Ivory Screen (“Ivory Screen”) as described in the will of the late Sir Robert Hotung to the Plaintiff.  The Ivory Screen was placed in the said deposit box by EEH together with the Gold Coins.

5.  In the latter part of 2010, in the absence of the prior knowledge and consent of the Plaintiff, the Defendant removed the Gold Coins and the Ivory Screen from the said deposit box.

6.  In March 2011, the Defendant orally informed his brother Sean that he had already sold some of the Gold Coins and only 125 pieces of Gold Coins were left in the said deposit box.  Despite demands, the Defendant failed and/or refused to return the Gold Coins and/or the Ivory Screen to the Plaintiff.

THE ISSUES IN DISPUTE

5. The defendant admits that he had taken away the gold coins and the ivory screen and defence counsel submits that the issues of dispute between the parties are[3]:

a.  Whether the Plaintiff is the owner of the Gifts as alleged; and

b.  Whether the Defendant’s father, EEH, gifted the Gifts as alleged.

6. The plaintiff has no dispute with the defendant on those issues.

7. However, as in this hearing turns out, in the amended answers to request 1(a), the defendant now says that he only admits that he had taken away those gold coins given to him by his father, not those gold coins that the plaintiff pleaded in the pleadings.  This, however, is not clear from §4 and §7 of the Defence.  They are, in fact, inconsistent with one and another.  Read together, they are embarrassing pleadings, which are not allowed under O.18 RHC.

8. I shall now direct that the amended particulars for request 1(a) shall not be admissible unless the defendant has amended his Defence to plead those facts above.

THE RELEVANT LEGAL PRINCIPLES

9. The relevant legal principles for this application are as follows:

a.  Order 18, rule 12 defines the parameter of the particulars of pleadings.

b.  Order 18, rule 12(1) of the Rules of the High Court provides that every pleading must contain the necessary particulars of any claim, defence or other matter pleaded.  The requirement to give particulars reflects the overriding principle that the litigation between the parties, and particularly the trial, should be conducted fairly, openly, without surprises and, as far as possible, so as to minimize costs: Hong Kong Civil Procedure (2016) at §18/12/1.

c.   In ADS v Wheelock Marden & Co Ltd [1994] 2 HKC 264 Bokhary JA (as he then was) said at 269E-270E that the functions of properly particularized pleadings are as follows:-

(a)  To inform the other side of the nature of the case that they have to meet as distinguished from the mode in which that case is to be proved;

(b)  To prevent the other side from being taken by surprise at the trial;

(c)  To enable the other side to know with what evidence they ought to be prepared and to prepare for trial;

(d)  To limit the generality of the pleadings, the claim and the evidence;

(e)  To limit and define the issues to be tried, and as to which discovery is required;

(f)  To tie the hands of the party so that he cannot without leave go into any matters not included (although if opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings).

d.  In assessing whether it is “necessary” to order the provision of further and better particulars, one must bear in mind the fundamental functions of pleadings, as stated by Ma CJHC (as he then was) in Wing Hang Bank Ltd v Crystal Jet International [2005] 2 HKLRD 795 at 799, that is, looking at the live issues.

10. I shall now deal with the plaintiff’s application.

DISCUSSION

Request 1(a)

11. The plaintiff’s request for necessary particulars of paragraph 4 of the Defence: “1(a)  Please state when (the date(s) and time(s) the Gold Coins were given to the Defendant.”  The defendant replies: “See Defence 7.  For the purposes of clarity, the Gold Coins claimed are a separate quantity of coins from those gifted to the Defendant by the Plaintiff.  The Defendant has never had possession of the Gold Coins as particularized in the Statement of Claim.”  The defendant now denies in the defendant’s purported answers that the ‘Gold Coins’ referred to in the Defence are the same ‘Gold Coins” of the Amended Statement of Claim. 

12. Today, the defendant confirms that he is pleading that the gold coins he had taken away were those given to him by his father, not the same gold coins mentioned in the Amended Statement of Claim.

13. This inconsistency in pleadings that will cause embarrassment at trial only reveals in the amended particulars.  However, throughout the discussion, it seems clear that the answer should have been clear from paragraph 7 of Defence, which referred to the same gold coins as pleaded in the Amended Statement of Claim.  That is to say, the plaintiff should not have raised this request in the first place.  Although the plaintiff argues that if not for the request, the defendant would not have revealed this inconsistency, I do not agree that the request should have been raised in the first place.  The amended particulars do not answer the request anyway.

14. I dismiss the plaintiff’s request.

Request 1(c), 2(c) and 3(c)

15. It reads “Please state how and under what circumstances the Gold Coins or Ivory Screen were given to the Defendant.”  The defendant’s responses: “Please specify the meaning of how and under what circumstances”.  The plaintiff complains that this answer does not answer the request.  However, when defence counsel has pointed out the various information under §7 of the Defence and the amended particulars in his written submissions, the plaintiff agrees that with those information, it can properly plead its case.  That means the plaintiff should not have pursued its requests after having obtained the amended particulars.

16. It should be borne in mind that particulars should be asked for proper pleadings of the case.  If a party cannot do so without those particulars, an application should be taken out.  Otherwise, it would be better to wait until after the exchange of the witness statements, which should reveal the evidence in support of the pleadings, rendering the application for particulars unnecessary.

17. These requests are unnecessary and are dismissed.

Request 4(a) and 4(b)

18. The Plaintiff says that it is entitled to know the whereabouts of the Gold Coins and Ivory Screen and it asks the defendant to state where all the Gold Coins and Ivory Screen were placed after they had been removed from the defendant’s STB Deposit Box.

19. The defendant argues that they are irrelevant to the issues of dispute and should not have been raised.

20. I agree with the defendant.  The court is not concerned with the whereabouts of the Gold Coins and the Ivory Screen.  It can simply make an order for their return or damages in lieu by the defendant.  The court will not spend time on the whereabouts of those articles at the trial. These requests are dismissed.

21. The plaintiff’s requests are dismissed.

22. As to the costs of the application and the hearing today, they should follow the event.  Although the plaintiff argues that if not for request 1(a), the defendant would not have revealed his inconsistency in the Defence, this does not give the plaintiff good reasons for taking out the application because the result was not intended by the plaintiff in the first place. Its application is now dismissed.  The plaintiff submits that because of the unclear answer supplied by the defendant, the plaintiff was not clear about the defendant’s stance.  However, this kind of mis-communication between the parties should have been sorted out between the legal representatives without taking the matter to court for adjudication. In any event, I have already found that the requests should not be pursued after having the amended particulars.  The costs for today should follow the event for the plaintiff’s summons.  Taking into account of the inconsistent pleadings of the Defence, the costs of the defendant for the application and today’s hearing is assessed under O.62 r. 9A at $36,000.  The plaintiff asks for $10,000 for the amended summons from the defendant.  I find that excessive. There is no costs schedule for the costs.  The defendant agrees that the costs should be $3,200 for reading the amended particulars and the 3-minute chamber’s hearing before Master Au-Yeung.  I agree.  Setting off each other’s costs, the plaintiff has to paid to the defendant $32,800 within 14 days from the date hereof.

ORDER AND COSTS

23. This Court now makes an order in terms as follows:

a.  The outstanding requests for plaintiff’s summons are dismissed;

b.  By consent, the defendant’s summons is allowed, subject to one condition that the amended particulars for request 1(a) should not be allowed unless and until the defendant has amended his Defence as mentioned above;

c.  The costs of the applications are as per paragraph 22 above.