Hotung Investment (China) Ltd v. Eric Shea Kim Hotung
Read the full judgment text of HCA 77/2012 on BabelCite. This High Court CFI judgment was delivered on 28 October 2020.
1. This is the hearing for assessment of damages suffered by the Plaintiff.
Cited by 4 cases · Cites 4 cases
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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 BETWEEN
________________________ Before: Master Norman Nip in Court Date of Hearing: 25 October 2019 and 3 July 2020 Date of Judgment: 28 October 2020 ________________________ J U D G M E N T ________________________ 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:
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:
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, 2nd 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:
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:
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:
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:
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:
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:
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:
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:
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:
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 of Inland Revenue v Poon Cho Ming John (No 2) (2020) 23 HKCFAR 74 at §4 as follows:
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:
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:
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:
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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