Chun Sang Plastics Co Ltd v. Commissioner of Police and Another
Read the full judgment text of HCA 2278/2008 on BabelCite. This High Court CFI judgment was delivered on 23 March 2018.
1. In 2008/2009 the plastics product industry underwent severe price fluctuations, particularly on a downward trend in the midst of what has been called the global economic tsunami. The plaintiff company was one of those severely affected by this phenomenon in this particular trade but the critical period of this upheaval for it was brought about by the intervention of the police in seizing a significant quantity of containers of these plastic goods and withholding them from the plaintiffs, who
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HCA 2278/2008 [2018] HKCFI 661 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2278 OF 2008 ______________
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_______________________ J U D G M E N T _______________________ 1.In 2008/2009 the plastics product industry underwent severe price fluctuations, particularly on a downward trend in the midst of what has been called the global economic tsunami. The plaintiff company was one of those severely affected by this phenomenon in this particular trade but the critical period of this upheaval for it was brought about by the intervention of the police in seizing a significant quantity of containers of these plastic goods and withholding them from the plaintiffs, who were bona fide purchasers for value, as the defendants well knew, thus inhibiting their normal course of trading. That action on the part of the police was unjustified, in ignorance of the law, and borne out of incompetence and thorough misjudgment. It is pertinent to make these comments at the outsetof this judgment, as all the documentation, correspondence and agreed facts and actions, point inevitably to the conclusion I have expressed. THE GOODS CONCERNED AND THE PLAINTIFF’S TITLE TO THEM 2.Annex A, which is agreed, sets out the material particulars of the 17 containers of plastic goods. All were purchased by the plaintiff between 16 September 2008 and 3 October 2008, being the period over which the invoices were dated, and all were paid for between 16 September 2008 and 6 October 2008. The payments totalled HK$3,427,529. It is important to note that at this stage the plaintiff possessed trade goods, properly documented, in containers at two locations — Cheong Wing and United Arab. 3.Those containers of goods had been purchased as follows:
4.Again it is to be noted that all had been paid for by the plaintiff on occasions between 1 and 3 weeks before the events of 9 October 2008. 5.When they were seized by the police on 9 October, two containers (Nos 4 and 6) were at United Arab premises, and the remaining 15 were at Cheong Wing’s premises. THE POLICE ACTION AND ITS ILLEGALITY 6.On 9/10 October 2008 the Police seized and detained all 17 containers having located their whereabouts at the two shipping premises. Cheung Wing Containers and United Arab Shipping. The fact that all of them were in the legitimate ownership of the plaintiff company, and had been paid for was or should have been well-known to the police had they made full and proper inquiries. I have been quite unable to rely on the police evidence in this case, as it has gradually emerged, almost with reluctance on the part of the defendants. 7.No warrant was obtained by any of the police officers concerned to justify their high-handed and illegal action. It seems to have been impulsive, born out of an obsession with the notion that all the goods were stolen at some earlier stage by Au Yeung or that they had been obtained by some deception. This fundamental misjudgment and the simple ignorance of the law of civil tort or of breach of contract permeated their actions thereafter. Some of them were simply bizarre. 8.Reliance is placed, as justification for this arbitrary action, upon the meaning of section 55 of the Police Force Ordinance. I set out the material parts:
The remainder of the section is not pertinent. 9.The defendants’ counsel has argued — having intimated his contention from the start in answer to my question — that “thing” included a shipping warehouse or container premises, and that therefore a warrant is not necessary for such search and detention. This is not tenable. It is unarguable that the methods of transport are mobile methods and therefore prompt action, without recourse to a warrant, is permitted in the circumstances,but “thing” has to be ejusdem generis in relation to means of transport and is not to be equated to fixed premises and its contents. “Thing” can only mean, in that context, something of the same nature as the specified methods of transportation. 10.Accordingly, the detention and seizure was unlawful. Secondly, it was also unnecessary — documentation and evidence from the two warehouse premises already showed the plaintiff’s ownership of the sealed containers of goods (even though at some later stage the containers themselves might have to be returned, paid for or simply rented). 11.Had the police sought a warrant from a magistrate or judge theywould have had to disclose all the documentation concerning the possessionand ownership of the goods. This postulation is of course premised on the basis that the police officers concerned would have disclosed fully all the material so that the magistrate or judge would have been able to see the full picture. If that had been the case a warrant would not have been granted. Any potential or current claims or problems should be resolved by civil action not speculative police action. In any event I have serious doubts that the police would have made such necessary full and frank disclosure in view of the way that they were, at a later stage, able to obtain a production order against the plaintiff from the late Mr Justice Mackintosh. 12.The police ignored section 28(1) of the Theft Ordinance (Cap 210) which states:
13.This is the section which gives the police the power to do what they did but only if they followed the proper procedure. For the reasons given earlier I have serious doubts whether the police would have provided on oath a complete and honest statement of the necessary information, but even if they had done so, in my judgment a magistrate would not have granted them a warrant to seize and detain the containers. 14.The police and the Department of Justice would also do well to remind themselves of Article 29 of the Basic Law of Hong Kong as well as Article 14, the commentary in §15-21 of Archbold Hong Kong 2018 (at p 1031) which they have also ignored or overlooked. 15.Of course this is itself speculative and a purely academic consideration. No warrant was sought. The seizure and detention was illegal and that illegality tainted police action and that of the Department of Justice thereafter. And that is, in effect, an end to this dispute. The defendants committed the torts of conversion and detinue. CONVERSION―TRESPASS TO GOODS―TROVER 16.The tort of conversion exists to protect proprietary or possessory rights in property; it is committed by an act inconsistent with those rights and it is a tort of strict liability. In Kuwait Airways Corp v Iraqi Airways Co (No 3) [2002] 3 All ER 209, Lord Nicholls said (at p 222):
17.Lord Hoffmann in the same case added (at p 243):
DETINUE 18.Detinue is in reality a continuation of the tort of conversion in the persistent withholding of goods and a refusal to re-deliver them. This is precisely what the police did, aided and compounded by the actions and ignorance of the Department of Justice. THE COMPLAINTS FROM OTHER COMPANIES IN THE CHAIN OF PURCHASE Y T Cheng 19.One of the initial complaints was from a company known as Y T Cheng. Its employee was interviewed on 9 October 2008 at police station and made a written statement that evening. It contained an allegation that a man called Au Yeung, who was involved with various companies including East Profit and Play Box, had failed to make payment for six containers of plastic goods (Items 9 to 14 in Annex A) and could not be contacted. Y T Cheng had traded with businesses through Au Yeung forsome time, in particular East Profit. He had provided cheques for paymentbut these had been dishonoured. Y T Cheng had traded with Play Box over a period from December 2007 involving 50 transactions and all cheques for payment had been cleared. His contact at Play Box introduced him to Au Yeung who placed most of the orders. 20.The complaint concerned six containers of goods. On 18 September 2008 Y T Cheng handed to East Profit the delivery and release orders. Payment was promised by Au Yeung (East Profit) within a couple of days. Au Yeung repeated the promise on or about 4 October. That did not materialise. Y T Cheng’s representative (Chan Shu Kai) met up with East Profit’s representative, Chan Ka Yuen on 9 October. The latter said that Au Yeung must have placed the orders. The six containers were traced to Cheong Wing’s container storage yard. The matter was reported to the police. It is to be noted that East Profit had clearly held out Au Yeungas its employee. The documents of title to the goods had been released by Y T Cheng to East Profit. On this bare information — as to non-payment — the police were to act. There may have been an earlier oral complaint by Y T Cheng on 8 October but the police evidence is too unreliable to be sure of this. Y T Cheng clearly had a civil remedy by way of suing on the failure to pay and, if necessary, seeking an injunction in respect of the located containers of goods, but they had already parted with possession of and title to the goods. Wah Sun Hong 21.On 10 October (the next day) a company called Wah Sun Hong made a complaint through its employee (Chieng Wai Lam) that also related to Au Yeung. From December 2007 it conducted transactions with Play Box. It was paid in cash by Play Box, who at a later stage said that it would conduct its business through Au Yeung of East Profit. There were many transactions through Au Yeung and East Profit with 3-day credit periods being extended to East Profit and satisfactory payments being made. 22.On 30 September, Au Yeung (Play Box and/or East Profit) asked to collect the goods for two transactions. However by then Play Box had not paid for the last three transactions. Au Yeung promised to transfer payments directly. However the cheques were dishonoured. Again the complaining company had good cause of action either for non-payment or on the dishonoured cheques. Luen Fung Hong 23.Again on 10 October 2008 there was a complaint from, this time, Luen Fung Hong through its employee Cheng Kin Chung. That company had employed Au Yeung in the past but they were now dealing with him in the shape of East Profit. Up to 20 September 2008 Luen Fung Hong had completed 287 transactions involving over HK$102 million. Such was the extent (and/or strength) of their business that Luen Fung Hong extended credit to the value of HK$6 million to Au Yeung’s business (East Profit). 24.Interestingly, Luen Fung Hong had previously employed Au Yeung as a salesman, but had dismissed him for dishonestly arranging secret commissions for himself on similar transactions. Yet despite this they were happy to continue trading with him in his new guise. 25.Between 22 and 26 September, East Profit placed 13 orders, and after 26 September Au Yeung (East Profit) ordered goods to the value of HK$1,310,353 and gave Luen Fong Hong post-dated cheques. Those dates had not been reached at the time of their complaint and there had been no notification from the bank of the status of these cheques. The goods were in five containers held at Wing Cheong’s storage premises inKwai Chung. All were now in the possession and ownership of the plaintiff having been purchased from East Profit. On 14 October Luen Fung Hong confirmed that East Profit had paid for containers 15, 16 and 17. 26.Earlier, on 14 October, Madam Lam of the plaintiff had attended Wanchai police station and produced all invoices and payment records relating to the 17 containers of goods. On 16 October the plaintiff’s solicitors wrote to the police explaining the law under the Sale of Goods Ordinance in relation to the title to goods, re-affirming that the plaintiff was the lawful owner, that by virtue of the large volume of goods detained the plaintiff was unable to carry on normal business in a falling market, and serious financial losses were being sustained. Virginia Glory 27.On the same day (16 October) Virginia Glory claimed that containers 3 to 8 had been sold by them to Au Yeung. It had first met Au Yeung as a sales representative of Luen Fung Hong, who then set up the company East Profit. 28.From 25 August 2008 they completed 27 transactions satisfactorily to the value of almost HK$17 million. However on 6 October Virginia Glory were notified that two cheques from East Profit had been dishonoured. In the next six transactions involving HK$3,711,942 worth of goods had not been paid for. 29.However on 27 September Virginia Glory had extended credit in terms of time and amount to East Profit and later personal guarantees were obtained from the two directors of East Profit in relation to any sums owed by East Profit for goods supplied to them. Virginia Glory has several avenues for civil action in respect of the default of East Profit. 30.This then was the material upon which the police acted to the plaintiff’s detriment. It interpreted the complaints as criminal complaints alleging theft of goods and raising the inference that the plaintiff was handling stolen goods. It proceeded to seize and detain the 17 containers referred to earlier. 31.One of the earliest questions put to Madam Lam in her cross-examination was, in effect, “would you agree that the police had nothing to gain by their seizure of these containers?” She agreed. The question was however pointless. It was no part of the plaintiff’s case that police officers stood to gain personally from their actions. They were however in complete disregard of any common-sense or legitimate approach compounded by indecision and a distortion of what was complained of by some of the companies involved in transactions. At some stage or other, the police elevated a simple potential civil cause of action to a criminal offence of theft, and, later, fraud. 32.This approach in cross-examination seemed to ignore the real issues in this case: why did the police interfere, without lawful authority, in an aspect of the trade in plastics, on the dubious and unexplored complaint from some companies by seizing and detaining the containers, when the only legitimate complaint was that one of the middlemen had given dishonoured cheques in payment? These companies failed to assert any positive claim of title or ownership despite being asked what was their stance, on a number of occasions. MATERIAL SUBSEQUENT EVENTS 33.I shall identify these although in toto they are largely irrelevant in view of the police’s unlawful actions. They illustrate at best, as far as the police are concerned, a catalogue of activity and inactivity and confusion which compounded the situation and aggravated the plaintiff’s commercial predicament. 34.On 17 October the police wrote to the plaintiff’s solicitors, inter alia:
35.The solicitors had already done so in no uncertain terms. 36.The police released three containers (15 to 17) to the plaintiff on the same day in light of the fact that payment had been made by East Profit to Luen Fung Hong. 37.On 21 October the plaintiff’s solicitors wrote again to the police demanding the release of the containers, and, in effect undertaking to pay damages to the previous owners ie those who had sold them to East Profit and had not been paid, if the Court [viz the Civil Court] decided title belonged to those previous owners. 38.In reply the police said “They were well aware of the fluctuation of the cost of the raw materials and understood the predicament of P [plaintiff].” — but did nothing to alleviate this. 39.The four company complainants on being asked to decide whether or not they asserted title to the goods, were equivocal in their answers,hedging their positions until the result of the police investigation was known. Some of them had certain credit terms with East Profit which affected the dates of due payment, which was yet another factor which should have caused the police to wake up to the reality of the situation, which was that they had allowed themselves to be embroiled in a confused situation, the resolution of which was appropriate for determination by the civil courts only. 40.The plaintiff commenced this action against the police and the Department of Justice on 18 November 2008. The Department of Justice (the 2nd defendant) advised the police on the same date that there was insufficient evidence to implicate the plaintiff (in any criminal action) and that it was unnecessary for the police to retain the seized containers of goods in specie (ie as such, in their existing form) as long as they were photographed and properly documented. However it added that the police should not release the containers to any company or individuals for the time being unless the beneficial owner is determined by the Court in interpleader proceedings. This was conflicting advice. 41.The full extent of that advice was not however communicated to the plaintiff. There was merely a statement as follows:
42.Irrelevantly, it enclosed an extract from the department’s Statement of Prosecution Policy and Practice (2002). I will refrain from any comment upon the so-called “consideration” by “lawyers of this department” other than to say that they had failed to consider thefundamentals of the police action. I am left with the thought that there was a defensive and protective element in the department’s consideration which verged on the perfunctory. 43.Letters sent by the department to the solicitors for the complaining companies once again seemed to encourage them to crystallise claims of ownership. Again there was no categorical assertion of title to the goods by any of them. Had they decided they wished to pursue any such claim, then the civil court was the appropriate forum. 44.The advice to the police that they should photograph the containers and document them fully (they already had full documentation of their chain of ownership) came late in the day. But that course was the maximum legitimate action open to the police at the very first moment, unless they chose to act lawfully by obtaining a warrant. They had failed on both counts. 45.Nonetheless the real thrust of the Department of Justice’s tentative advice was ignored. The containers were not released and as a consequence the original unlawful police action was compounded further. PERIPHERAL ISSUES OF AGGRAVATION 46.These were largely evidenced by conflicts between the plaintiff’s representatives, in particular Madam Lam, and one or more police officers. 47.Firstly there was the exchange between Madam Lam over the matter of the need for a search warrant and the particular officers’ denial. The reference by him to getting a warrant the next day, and the need to have instruction from a superior officer lest his pension be at risk, has the ring of truth about it and I believe Madam Lam. 48.I suspect that the mention of the need for a warrant caught the officer by surprise, and that he did say that he would get one the next day. But of course to try and obtain a warrant post factum would be tantamount to an admission that one should have been obtained at the outset, and probably, if sought later, would not have been successful because it would be necessary for disclosure of all the circumstances to be made fully, and if done, a warrant would not have been obtained. On the evening of 9 October Madam Lam had provided the police with all the company’s documentation proving bona fide purchase and payment for all the goods in the containers over a period of at least one week and at most three weeks before the police’s intervention. 49.Similarly in relation to Madam Lam’s assertion that the police sergeant stated that he was experienced in such matters and that the appropriate method of resolving such situations was for the value of the containers (ie the goods contained) to be divided amongst the complainants. I believe her. Even at this early stage following the police seizure and detention of the containers, I suspect that the police were concerned at the repercussions of what they had done and were keen to find a way out of the problem which they had created for themselves. 50.This was a theme they repeated later and there is at least one example of some of the companies adopting this approach but it was never realistically a course which the plaintiff company was likely to adopt in view of their clear title to and payments made for all the goods seized, well before they were seized. 51.Within 24 hours of these exchanges Madam Lam was alerted by an employee of Cheong Wing (one of the two container storage companies) to the fact that the police had seized a further quantity of containers. Two of them, she realised, had already been sold by the plaintiff to a Mainland company, so immediate delivery to it was required. She contacted Wanchai Police Station and took with her relevant documentation. An Inspector Szeto at Wanchai Police Station agreed to release the two containers. Madam Lam arranged transport for the two containers but on its arrival an officer from Kwai Chung Police Station refused their release. 52.By letter of 17 October the police stated that East Profit (Au Yeung’s company) had obtained the containers of goods from intermediate companies who were now complaining that its/his cheques in payment hadbeen dishonoured and therefore they had not been paid. What the police didnot say was that those companies had given possession of and documents oftitle to those goods and that some if not all of them had extended periods of credit to East Profit and/or obtained guarantees from its directors to secure payments. It was obvious to any right-thinking observer that there was no basis for an allegation of theft, that title had properly passed at the time that possession of the containers was given to East Profit, and that the remedy for the complaining companies lay in civil action. 53.I accept Madam Lam’s evidence concerning Inspector Ng of Kwai Chung Police Station that the latter had passed on to her the complaining companies’ agreement that if the plaintiff was agreeable to divide the value of the containers of goods with them in equal shares, the officer would release them to the plaintiff. Understandably, the plaintiff refused this unattractive solution to the police’s stance. I have no doubt that the proposed solution, whoever initiated it, was seen by the police as a way out of the impasse which they had created. THE INTERPLEADER PROCEEDINGS AND THEIR AFTERMATH 54.On 17 October 2008 the police wrote to the plaintiff to the effect that, inter alia, they would seek urgent advice from the Department of Justice on the way of handling the seized goods. 55.The plaintiff’s solicitors continued to maintain the basis of their client’s claim, and the complaining companies, in answer to the police’s inquiry as to whether they asserted ownership over the seized goods, declined to make any such positive assertion, until Y T Cheng did so at a later stage. 56.On 23 October 2008 the police again sought advice from the Department of Justice as to the culpability of Madam Lam (of the plaintiff) and on the “necessity to retain the containers for the purpose of investigation and/or prosecution.” It had not relied to the earlier request of 17 October. 57.Eventually, on 18 November 2008 the Department of Justice advised the police that “there was insufficient evidence to implicate the plaintiff and it was unnecessary for the police to retain the seized containers of goods … as long as they were photographed and properly documented, but they were not to be released unless the beneficial owner is determined by the Court in interpleader proceedings.” Part of that instruction was communicated to the plaintiff — but not that concerning the retention of the containers. By now almost six weeks had elapsed since the seizure. 58.On 30 December 2008 the police have made a decision to release the containers to the plaintiff and informed United Arab and OOCL accordingly, seeking from the two companies a wavier in respect of the containers’ hire charges between the police seizure. Again I suspect that the motive for this was to aid police interest rather than that of the plaintiff. As I shall deal with, later the police unwisely, a euphemism perhaps, started to dictate terms concerning the containers when handed over and how they were to be dealt with by the plaintiff. 59.On 9 January 2009 the police took out an interpleader summonsjoining Y T Cheng as a claimant and a further twist in this irresponsible saga infused after the Master’s judgment. 60.The hearing lasted five days in total, concluding on 17 November2010, some 22 months after it was taken out. Judgment was not given until 15 February 2011. By that time many of the containers had been in police custody for over two years and four months. The findings of Master de Souza included the following:
61.Notwithstanding that court order the Department of Justice failedto release the goods. Instead it ignored it and proceeded to give Y T Cheng time and latitude to appeal the decision and apply to stay its execution. This was indefensible and unlawful. It should have complied immediately. Instead it embroiled itself in the furtherance of the dispute between the plaintiff and Y T Cheng and sat back, arms folded metaphorically, and encouraged a furtherance of the dispute thereby favouring Y T Cheng for no good reason whatsoever. I do not need to repeat the content of the letters from the Department of Justice which evidenced this behaviour. It demonstrates both obstruction and incompetence. 62.In the event thanks to the bias clearly demonstrated by the Department, Y T Cheng eventually made an application for a stay of execution. That was refused. 63.Not until 16 May 2011 did the Department decide to advise — the word should have been “instruct” — the police to release all the goods to the plaintiff without further notice. 64.What in fact happened thereafter was simply a course of obstructive behaviour on the part of the police, aided and abetted by the Department of Justice through the direction of a Senior Government Counsel,which insisted that the plaintiff was entitled only to the goods in the containers,the seals of which had not been broken, and which had been in the possessionof the plaintiff until seized by the police in their original state. The argument was that Y T Cheng owned or were entitled to possession of the containers and that the plaintiff had to remove all the goods from them by arranging their own container transport so that the police could hand over the empty containers to Y T Cheng. The police and the Department could not resist meddling in the matter further when they had no legitimate interest. Wholly reasonably the plaintiff wanted the containers back in the exact state in which they had been seized, detained and moved by the police. It was the plaintiff’s responsibility to deal with the containers in any event. 65.Eventually the defendants gave way but not before the plaintiff had to have recourse to the High Court to enforce the judgment in their favour and obtain an injunction prohibiting the police from interfering further with the containers. A form of compromise was reached after the to-ing and fro-ing of argument and action and by 23 May 2011 the police released the goods. Two years and seven months had been elapsed since the original seizure. THE CHRONOLOGY OF THE RELEASE OF THE CONTAINERS 66.On 17 October 2008 the police released three containers (Items 15 to 17) to the plaintiff at Cheong Wing’s yard, with seals intact. On 30 December 2008 the police took eight containers (Items 1 to 8) to Pacific Cargo premises and released them to the plaintiff with the seals intact. Finally on 23 May 2011 the police released six containers (Items 9 to 14) to the plaintiff for the latter to open them and transfer the contents to new containers. SUMMARY OF CONCLUSIONS 67.The police acted unlawfully in seizing and detaining the 17 containers and section 55 of the Police Ordinance did not empower them to do so. 68.They may have been able to obtain a warrant to act under section 28 of the Theft Ordinance (Cap 210) had they met the full requirements. All the evidence concerning police action and thinking suggests that they would not have given fair and proper disclosure to enable them to do so. In any event they never tried to take this course. 69.They committed the tort of conversion. They had no entitlement to act as they did in relation to the goods of the proper owner who had possession of the goods. 70.They detained the containers without any lawful justification, to the plaintiff’s detriment, and backed by the failure of the Department of Justice to understand the law (as well as the requirements of common sense) delayed for over 2 ½ years the release of the remaining containers in the face of a clear decision by the court. 71.The police’s use of the claims by Y T Cheng and others against Au Yeung of East Profit, in order to lay the basis of suggested offences by the plaintiff’s directors/owners was spurious. Ultimately, although they arrested Au Yeung and kept him in custody, he was acquitted, I was told, of all the charges they brought against him. 72.I have not thought it necessary, and certainly it is not relevant, to deal with the other 24 transactions between the plaintiff and Au Yeung in respect of which the police sought and obtained an order against the plaintiff under dubious circumstances. It is sufficient to say no more than that the police’s pursuit of the matter involving the plaintiff was misconceived and a distraction. 73.The actions of the defendants paralysed a significant aspect of the plaintiff’s business, and I am satisfied crippled the business in due course. This was also to a large extent brought about additionally by the police contacting the plaintiff’s customers and commercial contacts and letting them know that they were investigating matters of stolen goods alleging the plaintiff’s involvement. The fact that the plaintiff’s bank cancelled the overdraft or credit facility was directly or indirectly due to the overall police activity. The damage thus caused to the plaintiff was extensive and long-lasting. 74.I have made it clear that the plaintiff succeeds in its claims of conversion and detinue. But what of the allegation of misfeasance in a public office? 75.Essentially it is misconduct by an officer in the discharge of his public office and duty. Abuse of position as a police officer can amount to misfeasance. I have had regard to the decision in Attorney General’s Reference (No 3 of 2003) [2004] EWCA Crim 868. 76.Whilst I am satisfied that the police’s seizure and detention of the containers was a misuse of section 55 of the Police Ordinance, and an arbitrary action, and that its failure to act in accordance with section 28 of the Theft Ordinance was inexplicable, it was in effect supported and continued condoned by the Department of Justice, whose failings were identical and whose ignorance of the law was abysmal. However I am satisfied that neither defendant intended to harm the plaintiff though both defendants became indifferent to the plaintiff’s predicament and later turned a blind eye to it despite acknowledging its existence. 77.In my judgment the defendants’ conduct falls short, but only just, of the nature and stigma of misfeasance in public office. At the outset of this trial counsel for the plaintiff applied to amend the Statement of Claim to include an allegation of recklessness. Although it is clear to me that this ought to have been included in the original pleading, and with some justification, 10 years had passed and so in view of that considerable delay I refused the application. 78.The conduct of both defendants illustrated a high degree of incompetence and ignorance. It is clear to me that the standard of instruction in respect of the law, and of supervision of police officers is seriously deficient and lamentable. The ability of certain employees of the Department of Justice to comprehend straightforward law and give sensible advice, and act itself in accordance with reasonable standards, has been shown to be, on the facts and incontrovertible evidence in this case, to fall well short of what the public is entitled to expect. DAMAGES 79.The plastics trade was probably no different from many other aspects of trade at the time of the financial crisis of 2008/2009 with businesses eager to buy at a low price and sell high. In many if not most cases contracts for the sale of goods would be at a higher price than would be paid for the goods wherever the source. The contract would be fixed (and possibly paid) before the seller would be able to buy the goods which he had contracted to sell. In a falling market, time would be of the essence with all the middle men fighting to ensure that they would be able to make some profit. 80.Some losses would have to be accepted along the way, via the chain of buyers and sellers, in order to stay in the market. Losses on some contracts would be offset by profits on other. Cash flow would be vital to survival, credit would have to be given at times to maintain the flow of business, banks might tighten their own credit arrangements, cheques might have to be post-dated to await the inflow of funds, and there might be miscalculations leading to dishonoured cheques in such a financial maelstrom. Such had been the picture of commerce for decades, if not centuries. It was into this critical aspect that the police stepped blindly having misunderstood the situation presented by a few disgruntled traders. The action they took was bound to cause loss to businesses whose assets they froze indefinitely. A. Diminution in the value of the goods, containers and associated charges over the periods 9 October 2008 to 23 May 2011 81.Subject to liability this was agreed at HK$682,612 (rounded up by one cent). The defendants sought to change their stance on this but I accept the plaintiff’s evidence and documents. Accordingly the plaintiff is entitled to this sum. B. Damages for loss of profits/business 82.I am satisfied that the police actions in conversion, detinue and trespass to goods generally caused such loss. I have to take account however the effect of the downturn and price fluctuations in the trade generally but the police action undoubtedly aggravated that by reason of all its actions over a substantial period of time. 83.It is indisputable that the plaintiff was unable to trade normally over that long period. I have already set out the relevant chronology illustrating that effect. The consequence is also a matter of common sense. 84.I accept the evidence of Mr Cheng of the plaintiff with regard to the company’s profitability. The financial picture shows variations and so I have to take that into account together with other unknown factors such as the nature of the trade itself. The business ceased in or about 2012 or at the latest 2014. I do not have enough evidence to complete this picture. The evidence of Madam Lam concerning the loss of suppliers and purchasers which I accept reveals a devastating loss of goodwill resulting from the police inquiries. 85.Taking the figures for the year 2009 and comparing them with the healthy picture for 2006 and 2008, and not ignoring the relatively modest figure for 2007, I am compelled to take a broad brush approach. Not until May 2011 was the plaintiff able to trade in the last release of goods. 86.This has been a somewhat difficult topic to assess but the starting point is Mr Cheng’s evidence in his statement concerning the picture for the plaintiff company, supported by his wife and co-director, Madam Lam. Their evidence was not challenged. 87.However I have only their figures for a limited period viz the trading years 2006/2007 to 2009/2010. Madam Lam said that the plaintiff company struggled on until 2014 but I have nothing to help me in respect ofthat period. I do know of course that the last containers of goods were not released until late May of 2011 so I am entitled to consider that the blight on the company’s existence continued until the end of 2011, at least. 88.The defendants well knew, as they conceded in correspondence, that the fact that the goods had been detained caused a predicament for the plaintiff and I have found that the contact by the police with the plaintiff’s customers aggravated the commercial relationship. That inevitably created a vacuum in their normal course of trading. 89.The financial year ending 31 December 2007 shows a gross profit of over HK$650,000 out of which the company was able to pay remuneration, including directors’ salaries, of HK$560,000. There was a modest accounting loss of HK$23,690. 90.The next year, ending 31 December 2008 (the seizure was in October of that year) showed a higher gross profit of just under HK$1 millionwith remuneration paid of just under HK$800,000. The accounting loss was HK$12,450. The first six months of that year were the best trading period, with losses from the detention probably not featuring until late in the year, or early the following year. 91.Then the figures for the year ending 31 December 2009 show a healthy situation with a gross profit of HK$1,747,263 and reduced remuneration of HK$711,042. 92.This is followed by a disastrous year ended 31 December 2010. It is difficult to see a pattern across that period but it does suggest a catastrophic trading picture, in accountancy terms, from January 2010 onwards. I do not think that this can be explained by the financial crisis and its effect upon the plastics trade alone. The effect of the defendants’ actions in the period of over 2 ½ years until the last containers were releasedmust have been critical. The defendants’ argument on this aspect of damages is not realistic and they have provided no evidence, expert or otherwise, to gainsay the plaintiff’s evidence, limited though that is. Bare accounting figures do not of course tell the full story and I have had to rely to some extent on probability, reasonableness and the wholly likely consequences of the defendants’ actions and inaction over a significant period causing the predictable and admitted adverse effect on the business of the plaintiff. 93.I consider the plaintiff’s losses to be roughly equivalent to the loss of directors’ remuneration in the sum of HK$360,000 per annum for three years (approximately 2010, 2011 and 2012) making a total of HK$1,080,000. 94.The award under this head will be HK$1,080,000. C. Exemplary damages 95.I do not consider that there should be an award under this heading in view of there being no finding of misfeasance although I have some sympathy for the plaintiff. D. Aggravated damages 96.The overall circumstances and the actions of the defendants should normally make an award under this head appropriate. I accept that both Mr Cheng and Madam Lam were adversely affected in themselves by what occurred. I do not need to repeat all the factors. They stand out clearly and sharply. The intense worry about the survival or otherwise of the business preying on Madam Lam’s mind in particular was a natural effect and long-lasting. However they are not themselves plaintiffs in this action and there is clear authority that I cannot make an award under this head to a corporate plaintiff. The suggested award of HK$300,000 to Madam Lam would otherwise have been appropriate. 97.The total award is therefore $1,762,612. 98.There will be judgment for the plaintiff for this sum. The defendants will pay the plaintiff its costs of this action on an indemnity basis. This will be an order nisi becoming absolute within 14 days unless the defendants seek to argue against it. I do not encourage the defendants to try and oppose this order. All the circumstances showing the abject failure of the defendants in so many respects already set out by me in this judgment which do not need repetition make it clear that the plaintiff should recover its costs on such a basis. Any objection to this order nisi must be made on paper, no more than 1 (one) page, to be lodged with the court by 4 pm on Tuesday, 27 March. 99.There will also be an order that interest should be awarded on the figures for damages at the appropriate rates and for the usual periods — half judgment rate for accrued losses, and 2% for general damages. THE DEFENDANTS AND THEIR FAILURE TO GIVE PROPER DISCLOSURE/DISCOVERY 100.The responsibility in this regard for the serious failures bordering on obstruction or negligence is essentially that of the Department of Justice which also represents the Commissioner of Police. 101.It was obvious from the nature of the plaintiff’s allegations against the police action that complete disclosure was required of all statements, records and reports made as a consequence of police activity between 8/9 October 2008 to the point when the police were ultimately forced to release the containers. Up to the fifth day of this seven-day trial that had not taken place. When the plaintiff’s solicitors gave notice by letter dated 26 February 2018 — almost a decade after the material events — that the police were to provide copies of all reports, statements etc and produce the originals at trial, they were met with the following reply from the Department of Justice, which I set out verbatim, in a letter also dated 26 February 2018: “ As for your request for the Police files, we are of the view that such request at this stage is completely unacceptable. Any requires for specific discovery should be raised with the defendant much earlier and the broad scope of disclosure requested by you amountedto fishing. Hence, we would not agree to your request for discovery.” 102.The department’s comment about the lateness of the request is irrelevant. Its obligation dated from the discovery stage of this action, years ago. True it is that a suspicious, mistrustful legal representative of the plaintiff might have been alerted to the serious deficiency on the defendants’ part — and in my judgment entitled to be so, especially in the light of the subsequent behaviour of the police and the Department of Justice — but it might equally have been the case that the police failed abysmally to do things properly and in accordance with regulations and proper practice, as part of a cover-up, or, equally to be condemned, total disregard for individual rights and common-sense. I had cause to call in question the department’s sense of what is fair and good sense in a decision I made in Chan Chuen Ping v Commissioner of Police [2014] 1 HKLRD 142 (19 November 2013), as yet unreported. 103.This current instance demonstrates a complete lack of understanding of the requirements of litigation as well as individual entitlements and nothing has been learnt from my decision referred to, or even the basic requirements of civil procedure. The consequence was that two whole days were lost whilst the documents were supplied and copied. Even the defendants’ own counsel was unaware of their existence.[1] As it transpired none of the documents made any difference to the nature and substance of the case against the defendants, but simply recorded the consistent and persistent steps to keep the containers away from the plaintiff until eventually and belatedly all of them were handed over to the plaintiff, though not without intervening traumas and further obstruction.
Mr Kelvin Leung, instructed by Hau, Lau, Li & Yeung, for the plaintiff Mr Jonathan Kwan, instructed by the Department of Justice, for the 1st and 2nd defendants [1] Mr Kwan asked for an adjournment for seven days but I was not prepared to accede to that for obvious reasons. In fact he had the advantage of the weekend to consider the material. | ||||||||||||||||||||||||||||||||||
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