Wide World Exports Ltd v. Henry Victor Ardy
Read the full judgment text of HCA 2835/1971 on BabelCite. This High Court CFI judgment.
1. This is an application for a stay of execution of the judgment given in favour of the plaintiff of the action.
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HCA002835/1971 IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 2835 OF 1971 -----------------
----------------- Coram: Li, J. (In Chambers) Date of Judgment: 20th July, 1973 at 4.15 p.m.
----------------- ----------------- DECISION ----------------- 1. This is an application for a stay of execution of the judgment given in favour of the plaintiff of the action. 2. The grounds of this application are twofold. The first is that if the judgment debt were satisfied then and in the event of the Defendant being successful on appeal, it would be difficult for him to recover the judgment debt from the plaintiff because of the financial circumstances or arrangement of that company. The second ground is that the Defendant simply has not sufficient means at the moment to satisfy the judgment debt. 3. I shall deal with them separately. As far as the first ground is concerned, it is disclosed by affidavits filed by Mr. Fairbairn and Mr. Ardy, the Defendant, that the financial arrangement of the plaintiff is such that its financial resources may be stopped from abroad and that if any money is paid to the plaintiff such money can be taken away by Mr. Spiegel who is in de facto control of that respondent company. In the event of the applicant being successful on appeal the plaintiff can rid itself of funds completely so as not to be in a position to repay the defendant. In this connection I have heard evidence in cross-examination, I have considered the affidavits filed also by Mr. Spiegel on behalf of the plaintiff. Taking the circumstances together I find that there is no merit on this ground. It appears that the plaintiff have been in business in Hong Kong for some years. It is true that a lot of the company funds had been taken out of the company in the form of undisclosed commission. However, it means that in order to defeat the defendant claim had he succeeded on appeal, the plaintiff will have to be wound up and lose not only the goodwill but the very valuable asset of quotas that the plaintiff is in possession. Indirectly it will cause a financial loss to V.I.P. Imports in New York of which Mr. Spiegel, the person in the facto control of the plaintiff a greater loss than whatever the plaintiff have to pay out in the form of repayment of a judgment debt. 4. I then consider the second ground - whether it would cause the defendant hardship if execution of judgment is not stayed. This, as I can observe from whatever is written on the subject - Order 59 of the White Book and of the rules - I have a discretion in the matter. In exercising the discretion I have to balance the two principles: one is that the successful plaintiff should not be deprived of the fruit of his judgment; on the other hand, the execution may cause unusual hardship to the unsuccessful litigant. On this I have heard evidence that although the defendant has no liquid cash at the moment, he is a registered and beneficial owner of a house in Bournemouth in England. The house was purchased sometime in 1960 at the cost of £5,900. There had been a valuation some time ago which was grossly less than the amount of the judgment debt. However, there had been no recent valuation. Since the judgment the defendant has not taken any steps to find out how much that house is worth. All he has come before me is that had there been no stay of execution he would be forced to dispose of his house and probably at a time when the market value of the house is not at its best. That, I do not view as any peculiar hardship to any debtor who has not made preparation in satisfaction of a debt at any moment when he is called upon to do so. Hardship it may be, but it is no more or no less than any ordinary debtor who has suddenly been called upon to satisfy his debt. It is not the same that he virtually has no money and if judgment were not stayed he would practically have to go to the debtor's prison. He has assets available. Without knowing all the intricate details of the property market in England one can easily say on a conservative estimate, that a house in Bournemouth, a six bedroom house, fit to let to tenants until very recently, is not considerably lower than the amount of the judgment debt which is roughly about £17,000 to £18,000. 5. Under the circumstances I find that I cannot say that there is any special circumstances causing extreme hardship if I do not order a stay. However, I have given the matter some thought. I do not want to be unduly harsh on the defendant. In principle I would say that the stay of execution must be refused with costs. In the present circumstances I am prepared to accede a little to the application since I am also given the discretion to lay down conditions. In this case that the formula of this order should be: application to stay of execution is refused subject to the condition that the enforcement of this order be delayed for ten days pending negotiation or arrangement by the defendant to either pay the sum of the judgment debt into court, or alternatively, to offer a banker's guarantee to the court that in the event of the defendant failing in his appeal his judgment debt will be satisfied by him. And the costs of this application should go to the respondent.
Representation: Mr. M.H. Jackson-Lipkin (Hastings & Co.) for the Plaintiff/Respondent Mr. R. Wei (Fairbairn & Co.) for the Defendant/Applicant IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 2835 OF 1971 -----------------
----------------- Coram: LI J. in Court Date of Judgment: 3rd July 1973 at 2.35 p.m. ----------------- JUDGMENT ----------------- In this action the Wide World Exports Limited (herein referred to as the Plaintiff Company) sues Henry Victor ARDY its former Manager and Director (herein referred to as the Defendant) for fraud and fraudulent conversion. It is the Plaintiff Company's case that during the Defendant's tenure of office as Director and Manager of the Plaintiff Company the Defendant had falsely and fraudulently signed on various dates, to which I shall refer, three minutes of Directors' meetings which never took place. The first of these minutes dated the 6th January, 1971, purport to appoint the Defendant as Chairman of the Board of Directors of the Plaintiff Company. The second dated the 10th February 1971, purport to resolve that if the Defendant, as Chairman of the Board of Directors should resign he would be given 6 months' salary in respect of such resignation. The third dated the 18th August 1971, purport to resolve that the Plaintiff Company had agreed to the Defendant's salary being raised from $5,000 to $10,000 per month. It is further alleged that on or about the 13th of September 1971 the Defendant wrongly and in breach of duty drew a cheque in the sum of $58,594.75 in favour of the Foreign Exchange and Investment Limited without authority and converted the said sum to his own use. Similarly, on the 14th September 1971 he drew a cheque wrongly and in breach of duty in the sum of $94,423.75 in favour of the Foreign Exchange and Investment Limited without authority and converted the said sum to his own use. Then on the 17th September 1971, the Defendant wrongly and in breach of duty drew a cheque in the sum of $35,000 by signing a payment voucher inscribed with the letters "I.O.U." drew the said sum of money and converted it to his own use. Similarly, on the 20th September 1971, the Defendant wrongly and in breach of duty drew a cheque in the sum of $45,000 by signing a payment voucher inscribed on it the letters "I.O.U.", and similarly converted the sum of $45,000 to his own use. On or about the 22nd September 1971, the Defendant, with a cheque in the sum of $1,300 drawn on the Plaintiff Company's account in favour of Aden Camera Company Limited, purchased an electronic calculator without repaying the sum to the Plaintiff Company or returning the said calculator to the Plaintiff Company. On or about 27th September the Defendant, without authority, drew a cash cheque on the Plaintiff Company's account in the sum of $1,850 and gave the Plaintiff Company to believe that he had purchased a clock from Lane Crawford Limited as a farewell gift to the Defendant himself. It is further alleged that he fraudulently signed a payment voucher purporting to give himself $80,000 representing an increase of salary to the extent of $5,000 for the month of August 1971, $60,000 as 6 months' salary on his resignation, $10,000 as Christmas bonus and another $5,000 for his pay in lieu of 2 weeks annual holiday. Finally, the Defendant resigned and left the company without giving lawful notice. Thus in the premises the plaintiff claims damages for breach of duty, the sums of $58,964.75 and $94,423.75 the two sums of $35,000 and $45,000, the further sums of $1,300 and $1,850 and lastly, damages for breach of contract to the extent of $5,000 being the equivalent of one month's salary in lieu of notice. By his statement of defence the Defendant admits that the three minutes dated the 6th January, 10th February and 18th August 1971 respectively, were drawn up and signed by him but denies that such minutes were drawn up and signed fraudulently or wrongfully or without authority. It is the Defendant's case that, by the 16th December 1970, one, Mr. Spiegel, a former Director of the Plaintiff Company resigned leaving only two Directors in the Plaintiff Company namely, the Defendant and one, Mr. Arthur Thornton. Mr. Thornton on divers occasions indicated to the Defendant that he, Thornton, did not want to mix up with the Spiegel affairs. The appointment of the Defendant as Chairman an of the Board of Directors was therefore agreed to by Thornton at a discussion between Thornton and the Defendant in the Plaintiff Company premises. Hence he drew up and signed the minute dated the 6th January 1971, to that effect. The Defendant further contends that prior to the 16th December 1971, there was a discussion between Mr. Spiegel, Mr. Mains of Lowe, Bingham & Matthews, to whose evidence I shall later refer, and the Defendant. In the course of this discussion Mr. Spiegel agreed that the Defendant should be entitled to 6 months' salary on his resignation. To use the Defendant's evidence, the agreement was 'if you leave me or I fire you'. The Defendant notified Spiegel that this agreement would be confirmed in a minute of a Board meeting in due course. Subsequently, such matter was discussed between himself and Mr. Thornton whereupon the Defendant informed Thornton of Spiegel's agreement. Thornton had no objection. Thus the minute to that effect was drawn up and signed by the Defendant dated the 10th February 1971. As to the minute dated the 18th August it was drawn up pursuant to a discussion between himself and Thornton, at which it was agreed that the Defendant's salary as Chairman of the Board of Directors should be increased to $10,000 per month so that the salary would be commensurate with his responsibilities and his high position in the Plaintiff Company. The Defendant alleges that each time when each of these minutes was drawn up and signed he gave instructions to the confidential secretary of the Plaintiff Company to forward them to the Accounts Department of Lowe, Bingham & Matthews and to the Accounts Department of the Plaintiff Company. The Defendant admits having drawn cheques in the sums of $58,594.75 and $94,423.75 respectively on the 13th and 14th September 1971, but contends that such sums were drawn pursuant to Mr. Spiegel's instructions by long distance telephone about the end of August and early September to acquire $26,000 US currency at the best rate. He says that these two sums of money in Hong Kong currency were used to obtain the $26,000 US through the Shanghai Commercial Bank. The U.S. dollars, when acquired, were put in a cash box or partly with a cash box in the Plaintiff Company's safe to await the return of Mr. Spiegel who happened to be away from the Colony at that time. Conversion of these two sums is therefore denied. The Defendant further admits that he signed the two payment vouchers inscribed with IOU's to the extent of $35,000 and $45,000 respectively. He contends that these were temporary receipts and that he drew the two cheques until such time as a proper payment voucher could be prepared and one was, in fact, prepared and drawn up dated the 27th September 1971. The Defendant contends that he had already given one month's notice to resign on the 27th August 1971 and by the time he actually resigned on the 27th September 1971, he was entitled to 6 months' salary of $60,000, Christmas bonus of $10,000, the balance of his increased salary in August of $5,000, and salary in lieu of his 14 days annual holiday in the sum of $5,000. The Defendant admits that he drew the cheques in the sum of $1,300 in favour of Aden Camera Company Limited for the purchase of an electronic calculator. But he contends that the purchase of this calculator was originally for use in the Accounts Department of the Plaintiff Company. The calculator was subsequently found to be unsuitable. Aden Camera Company Limited refused to accept this calculator in return for a larger one. Thus the small calculator was left with the Plaintiff Company by the Defendant with a note that it was to be given to a manufacturer by the name of Million Garment Factory as a gift. The Defendant further contends that it was normal for the company to give gifts to other firms. The Defendant also admits that he drew a cash cheque to pay for the clock he purchased from Lane Crawford Limited, which was actually purchased and the sum was $1,850. The Defendant contends that he acted in good faith in the honest belief that the clock was an appropriate and merited gift to a person who had done so much for the Plaintiff Company. Finally, the Defendant admits that he resigned on the 27th September 1971 but that the Defendant had given due notice on the 27th August 1971. The Plaintiff Company was incorporated in Hong Kong in 1966. This is evident from the Certificate of Incorporation which is included in Exhibit P.8. It is a Hong Kong Company. The constitution of the Board of Directors had change from time to time. But for the purposes of this case, at all material times, the Directors were, Mr. Thornton, Mr. Spiegel, Mr. LO Chung-kay and the Defendant. Mr. Thornton at all material times was the major shareholder of the Plaintiff Company, owning 149 shares out of 150. The Secretary of the Company was at all material times the Strath Nominee Limited, which is a subsidiary of Lowe, Bingham & Matthews, a firm of Chartered Accountants. Lowe, Bingham & Matthews was auditors of the Plaintiff Company. Strath Nominee Ltd. kept all the official records of meetings, and minutes of Directors meetings. The Defendant himself joined the company as a Manager. There is some reference to him as General Manager or as Export Manager. But the title is not important. It is sufficient to say that he was employed to run the administration of the Plaintiff Company. He joined on the 15th June 1970, after an interview with Mr. Spiegel who was then a permanent Director of the Plaintiff Company. The Defendant was then appointed to the Board and authorised to sign cheques and various important documents for the Plaintiff Company as from the 29th June 1970. There is some dispute as to when his authority began. There were two different dates one was the 29th June 1970, the other was the 16th December 1970. But for the purposes of this case I accept that the Defendant literally exercised such powers since the 29th June 1970 and he was so appointed and so authorised. Mr. Spiegel, the then permanent Director up to the 16th December 1970, resigned. There is a dispute as to the validity of his resignation. There, again, for the purposes of this case I am prepared to consider the facts on the basis that Mr. Spiegel is legally a complete stranger to the company since he resigned on the 16th December 1970. Stranger, legally, because he severed his connection with the company. At no time had the Defendant any share in the Plaintiff Company although there was intention to allocate one share to him. Such allocation was not, in fact, carried out. Further, the Defendant's salary, although started at $4,000 per month was raised eventually up to $5,000 per month as from the 1st June 1971. All these facts I have enumerated are not in dispute. Before I come on to the issue as to the disputed facts, I would like to dispose of a couple of preliminary points. There is some dispute as to whether Mr. Spiegel after the 16th December 1970, is still a de facto master of the Plaintiff Company, and further, whether the Plaintiff Company's principal business is that of a buying agent of V.I.P. Imports of New York, which is an American Company of which Mr. Spiegel is the President. The Defendant denies knowledge and certainly challenges these two propositions in no uncertain terms in the course of the trial. However, having regard to the sum total of the evidence I have no doubt that Mr. Spiegel is at all times the beneficial owner and de facto master of the Plaintiff Company and that the Plaintiff Company's main business is that of operating as a buying agent for V.I.P. Imports. To say otherwise, or to say that the Defendant had no knowledge of these facts amounts to turning one's eyes against facts. To begin with Mr. Spiegel was, at one time, a permanent Director. He exercised his de jure control in his position as a Director. He exercised de facto control through Mr. Thornton, even after his resignation. He interviewed the Defendant before the appointment was made. He negotiated terms with the Defendant before the appointment was made. On the Defendant's own evidence he negotiated with the Defendant the terms just before he resigned, in December 1970. Even after his resignation or purported resignation, Mr. Spiegel continued to dismiss staff, gave instructions to the staff generally, including the Defendant. He could take money out of the Plaintiff Company without even signing a receipt. Thus, in cross-examination, the Defendant admitted that in theory, Mr. Spiegel could draw money out of the company without any limit. The Defendant further admitted that Mr. Spiegel often by passed him, when he (Speigel) obtained money from the Company Accountant. It is difficult to see why the Defendant should use the term 'in theory'. From the evidence it is quite clear and abundantly clear that that was done and actually done and he himself permitted Mr. Spiegel to do that when he was Manager and Director. He himself handed money to Spiegel from time to time. Further, it is the Defendant's evidence that even at the end of August 1971 the Defendant obtained the amount of $26,000 US on the bidding of Mr. Spiegel when the latter was in New York. All the staff referred to Mr. Spiegel as the boss. It is also the Defendant's evidence that the Plaintiff Company depended entirely on the payment by V.I.P. Imports of New York. This payment was in the form of commissions. In the course of his evidence the Defendant referred to his invidious position of having a huge staff and various contractual liabilities on his hands if V.I.P. Imports should stop payment. V.I.P. Imports in New York even put an officer by the name of Mr. Barry Wood in Hong Kong to supervise the manufacturing of merchandise. Mr. Wood was accommodated in the Plaintiff Company premises when the Defendant was a Manager, and was provided with a secretary, a private secretary, in that premises. There is no doubt to my mind that the Plaintiff was the master and owner of the Plaintiff Company in fact, although in law he had no connection with it. I can well understand the reason why that was so and why the Plaintiff Company worked in close association with V.I.P. Imports in New York. But I feel that it is not the function of this Court to enforce the Revenue laws of another country. In so saying, I am not suggesting for one second that there was anything irregular on the part of Mr. Spiegel. I have no evidence. There is such a difference between tax evasion and tax avoidance. If it can be done properly it is perfectly legitimate for any person to steer the course of his business in a way to avoid tax. I choose the word deliberately - 'to avoid' and not 'to evade'. I have no evidence of anything but that, if any course of action is taken in this case to conduct business, of 'tax avoidance'. However I have no knowledge, I must confess, of any tax system in other countries. Another point that I should mention is that although the Plaintiff Company was incorporated and purported to operate strictly in accordance with provisions of Articles of Associations, which is exhibited in page 3 of Exhibit P.2 and that there was a cloak of legal formalities, yet, on closer scrutiny, that it was not so. A lot of things were done on an informal basis and if I may use such terms without meaning offence, 'in a slap-dash manner'. For instance, a lot of so-called meetings of Directors were, in fact, as I understand them, paper meetings in the sense that there was no actual physical presence of Directors at the meetings but the minutes were recorded for such resolutions in the so-called meetings, in accordance with previous agreements. This would be perfectly valid by virtue of Article XXIII of the Articles of Associations of the Plaintiff Company. But in all cases the minutes were signed by only one Director and therefore did not comply entirely with the requirements of Article XXIII of the Articles of Associations. The informality was carried out to such an extent that it would appear from the records of Directors meetings there had been duplication of action from time to time, namely, that it appeared that between the years 1968 and 1970 Mr. Spiegel resigned twice as a Director. In the same year of 1970 the Defendant was appointed a director twice and authorised twice to sign cheques. However, the invalidity of the minutes had not been pleaded by either parties. This is a point of law which I am not entitled to take upon myself in a civil action. Indeed, I have been invited by the Defendant to ignore this legal point. Otherwise a lot of other complicated legal issues will be raised. I shall not, therefore, let myself be influenced or affected in my consideration of minutes of meetings of Directors dated 6th January, 10th February, 18th August 1971, the genuiness and falsity of each of these represent the greater part of the foundation of both parties' case. Indeed, the pleadings are framed in such a manner so as to narrow down the issues precisely. The Defendant relies entirely on Mr. Thornton's consent and agreement for each and every one of those three minutes. Thus, all I have to consider are matters of fact, without having to consider any other matters of law. The validity of the three said minutes depends on entirely the fact whether Mr. Thornton did on did not agree or approve. Having disposed of these preliminary points I find that the basic issues in this case appear to be as follows:
The Plaintiff's evidence is that after Mr. Spiegel's return a thorough search was conducted and diligent enquiries were mad in the Plaintiff Company. There was no trace of any original of the three minutes dated 6th January, 10th February and 18th August of the Directors meetings. Copies of which were produced by the Defendant in documents in page 1, 2 and 3 of Exhibit D.2. The Plaintiff also produced three copies, I say copies, not originals, signed by the Defendant of these three minutes in the record book held by Strath Nominee Limited, Exhibit P.8. As I said a while ago, all the official records were kept by Strath Nominee Limited. I shall come to the circumstances in which these three copies went into this Book of Record, Exhibit P.8, in due course. There is also found in the Plaintiff Company's Accounts Department File which was used to cross-examine a Defence witness by the name of Stella MA. The three copies in the file, again, were not originals. They were in that file in the Accounts Department. I shall also come to the circumstances in which these copies went to that Accounts Department Minutes File. Now, I come to the circumstances in which the three copies of Minutes went into the Record book of Minutes held by Strath Nominees Ltd. The Plaintiff called one Mr. Mains as a witness. Mr. Mains was at one time employed in the Auditing Department of Lowe, Bingham & Matthews, the Plaintiff Company's Auditors. He had not worked at all in the Strath Nominees Ltd. He had since resigned, as I understand, from Lowe, Bingham & Matthews and he is now working in Canada and practising in Canada. However, during his presence in Hong Kong in the year 1971 and during his course of employment with Lowe, Bingham & Matthews, he frequently went to the Plaintiff Company in his capacity as the Plaintiff Company's Auditor. He knew the Defendant. One day, after the Defendant had left the Plaintiff Company - which I presume to be some time now the end of September or very early in October - he lunched with the Defendant at the Hong Kong Club. In the course of their conversation, the Defendant told him in these words, "I have prepared some Minutes about my registration and to be forwarded to you." Some time later, he received by post the three documents in Exhibit D.2, Pages 1, 2 and 3. He was surprised to receive them for several reasons. First of all, these three documents were not resignation papers. It had nothing to do, directly, with the Defendant's resignation. Secondly, all these documents were fairly old - one dated January, one February, the other August. By the time he received them, it was early October. Thirdly, as a person who worked in the Auditing Department, that is the Plaintiff Company's Auditors, he was surprised that such Minutes of Directors' Meetings should be addressed to him instead of being addressed to the Company's official Secretary, namely, the Strath Nominees Ltd. For these reasons, he brought and showed these to Mr. Spiegel on the latter's return from New York and spoke to him about it. Presumably, that is how these Minutes got on to Exhibit P.8. Mr. Mains' evidence goes further. He said that some time in December 1970, there was a meeting between himself, Mr. Spiegel and the Defendant. They were discussing the prospect of appointing the Defendant to the Board of Directors. The Defendant expressed concern over the daily dismissal of staff from time to time and he wanted security of tenure. As a result it was agreed by Mr. Spiegel (to use the exact words - "if I fire you") that if the Defendant was dismissed then the Defendant would receive six months' salary in compensation. There is Mr. Thornton's evidence, who quite frankly says that although he is a majority shareholder and Director, he is no more and no less Mr. Spiegel's agent vis-a-vis the Plaintiff Company. He would never sign, approve or agree to anything concerning the Plaintiff Company without being previously instructed by Mr. Spiegel. The normal procedure, he says, is that if there is any paper to be signed, any Minutes to be signed, or anything to be done by him concerning the Plaintiff Company, Mr. Spiegel would have informed him well before-hand, and the Defendant would then telephone him to arrange for a convenient time to send the papers for him to sign. He says that without such previous instruction by Mr. Spiegel, he will never agree to do anything concerning the Plaintiff Company. He has never been to the Plaintiff Company premises at all during the Defendant's tenure of office. He had been there once before the Defendant joined the Company; he had been there once after the Defendant left the Company and that was about the sum total of his visits to the Plaintiff Company. He never discussed any business with the Defendant not even the Plaintiff Company's business. On one occasion, the Defendant telephone him and said he would like to deliver some accounts around to him for perusal and even that Mr. Thornton declined because Mr. Spiegel was then away and there was no way at that time to communicate with Spiegel before he perused the Accounts. Thornton says that at no time did he, agree, approve or consent to any of the Resolutions that were purported to be passed and set out in the Minutes dated the 6th January, 10th February and the 18th August in 1971. He says the first time he saw these Minutes was well after the Defendant had left the Plaintiff Company. There is Mr. Spiegel's evidence that he is the boss of the Company. He is the sole authority for employing, dismissing, promoting staff, or raising their salaries or giving them bonuses. He is the sole authority and that authority is guarded with great jealousy. He would never delegate such authority to anyone. He exercised such power even after the 16th of December, 1970. Even the Defendant's salary was approved by him and the increase to $5,000 as from the 1st of June, 1971 was also approved by him. He referred to the discussion in December 1970 about the Defendant's terms of six months' salary as compensation on resignation. In this respect he corroborated the evidence of Mr. Mains. He said, he only agreed to pay six months' salary as compensation if he should dismiss the Defendant. Even so, he obtained a blank form of resignation from the Defendant just in case that he was betrayed. He wanted protection for himself. He says that he never had any knowledge that the Defendant was to be appointed as Chairman of the Board or that his salary was to be raised to $10,000 per month in August 1971. He says that the Company was his creation and as a matter of policy, the Company never gave gifts to manufacturers. The Company only gave gifts to customers. Nor did the Company give gifts to employees, whether it was on retirement or whatever occasion. The only exception was the red packet during Chinese New Year and the Chinese dinner party for the staff. There was no written regulation as to how the Plaintiff Company should be run and he never saw Exhibit D.1, Pages 2 to 5, the purported Regulations of the Plaintiff Company as drawn up and signed by the Defendant. He said that no one had the right to usurp his function and the matter of Christmas bonus was entirely at his discretion. When he interviewed the Defendant in the first instance in May or June 1970, it was agreed between them that the Defendant would take certain Saturday mornings off in lieu of the annual fortnight's holiday. The Defendant's reason was that he was connected with a Hong Kong Symphony Orchestra and each year, at certain periods, the Defendant would like to take Saturday mornings off to do rehearsals with the Orchestra. The tenacity of Mr. Spiegel's control over the Plaintiff Company can well be shown by the system of Telex. When he was here he worked in the Plaintiff Company and he would give instructions. Even when he was in New York or other parts of the world, there was a system of Telex communication between the Plaintiff Company and himself where he gave the most minute detailed instructions. I think one instance is that even the postage of a magazine, a document was referred to in his Telex. He was kept informed by this system of all matters that happened in the Plaintiff Company. He said he certainly had no notice in August that the Defendant was about to resign. Had there been such notice given, he would certainly have been informed by one of the officers or one of the secretaries in the Plaintiff Company. He further says that there was no instruction from him to the Defendant to draw money from the Plaintiff Company to buy US$26,000. But he was told of some money - not the US$26,000, but some money - in the safe drawer - I call it the safe drawer, some refer to it as a combination lock drawer - of a desk which the Defendant used when he was Manager. He was informed by Mr. Barry Wood who was in Hong Kong that there might be some money in a box in that drawer. When he returned, he gave instructions to open the drawer and when the box was presented to him, he found nothing in the box and it was completely without any money. Then there is the question of so-called destruction or dismembering of files. He admits in cross-examination that because the confidential secretaries complained to him of a rather cumbersome system of what was called "index sheets" in the files, he gave consent to take off those index sheets from the files of the Company. But at no time did he order any destruction or dismembering of any file. The business of the Company had to go on, he said. If files were destroyed, the business of the Company would be completely disrupted. Finally, I will briefly refer to Mr. Barry Wood's evidence. Mr. Wood is a representative of V.I.P. Imports of New York posted in Hong Kong to supervise the merchandising by manufacturers of imports to America. He says that he only learned of the resignation of the Defendant after the Defendant left the Company, namely, on the 27th of September, 1971. As soon as he learned of that the next day or day after, he had the Defendant's desk to his room because he wanted to use the Defendant's desk. When that desk was transported to his room, he could not open the combination lock drawer or safe drawer. As a result, he telephoned the Defendant that night and asked for the combination. The Defendant's reply was that he (the Defendant) would not like to give the combination of that drawer to Mr. Wood because he did not want to get Mr. Wood involved. The Defendant also offered the information that there was some tea money in a cash box in that drawer. So when Mr. Spiegel returned from New York in October, he told Mr. Spiegel about this. It was as a result of this that Mr. Spiegel said he expected to find some money in a cash box. He further says that while he was in Hong Kong and before the Defendant left he was never asked to forward any Minutes of the Directors' meeting to anybody. It was put point blank in cross-examination to him that he was in a position to take out the money, the US dollars, from that safe drawer and he strenuously denied it. There are also evidence called by the Plaintiff but they are rather matters relating to the side issue and details. It is sufficient for me to remark on Miss Baudouy's evidence and the deposition of Maria CHEUNG. Miss Baudouy was the secretary of Mr. Spiegel and Maria CHEUNG was at one time the secretary to the Defendant. Both these ladies mentioned the unworkable system of the index sheets. Both of them agreed that as a result of their complaint, they were allowed to take out the index sheets from the files of the Plaintiff Company. But both denied that they dismembered or destroyed the files of the Company. In fact the question of distroying or dismembering files was never put to Maria CHEUNG in cross-examination. It was put to Miss Baudouy who strenuously denied it. Such are generally the Plaintiff evidence. The Defence evidence is mainly found in the evidence of the Defendant. Mr. Ardy who gives evidence says that after he joined, he soon found that Mr. Spiegel was very reluctant to delegate his authority. As a result, in November 1970, he had a discussion with Mr. Spiegel concerning the Regulations and the running of the company and how to keep up the morale of the staff. Presumably, as a result of these discussions and agreement, he had the Regulations in Page 2 to 5 of D.1 typed by his wife. Then it was put on record. But, according to him, this was restricted to himself, the Accountant and the Company's Secretaries. He said that V.I.P. Imports in New York virtually controlled the Plaintiff Company through Mr. Spiegel, even after Mr. Spiegel had retired on 16th December, 1970. This retirement was approved at a Directors' meeting in which the Defendant said that he was never present. There was no directors' meeting at all on the 5th January. The Defendant reiterated and contended that the Minutes of the 6th January, 10th February and 18th August 1971 were each drawn up and prepared by himself after an actual discussion with Mr. Thornton. The Resolutions recorded therein were, each and every one, with the consent, approval and agreement of Mr. Thornton. The Minutes on the 6th January, 10th February were typed by the Defendant's wife, Mrs. Ardy, in their home. The Minutes dated the 18th August 1971, Exhibit D.2 Page 3, the notice to resign dated the 27th August 1971 (Exhibit D.1 Page 10) were typed by one Henry LUNG, a former accountant of the Plaintiff Company. Each of these Regulations, Minutes and the notice was taken back to the office. As far as the Minutes were concerned, they were taken back to the office, given to the secretary with instructions that they should be forwarded to the Company's Secretaries, and Lowe, Bingham & Matthews. The reason he gave for having the Minutes and the Regulations and the Notice to resign typed at his home was that he found that there was divided loyalty and that the secretaries were inefficient in the office, They were loyal to Mr. Spiegel rather than to the Company. He had a complete distrust of them. He also said that after each time the Minutes were typed and handed to the secretaries, he retained copies, each of which was given to one Stella MA in the Accounts Department of the Plaintiff Company. He said that he found the system of undisclosed commission being kept in the Plaintiff Company most unsatisfactory. From time to time, he had to hand over vast sums of money in the form of undisclosed commission to Mr. Spiegel. It was often done behind closed doors and with no other people present. The two sums of money, namely, the $58,595.75 and $94,423.75 drawn from the Company's funds dated the 13th and 14th September, 1971, respectively, were drawn out in the form of undisclosed commissions. This was done at the request of Mr. Spiegel who instructed the Defendant by long-distance telephone from America, to acquire a total amount of US$26,000 to be handed over to Thornton. He drew the aforesaid sums for the purpose. But he left the US$26,000 in his safe drawer i.e. the combination lock drawer. He did not give it to Thornton because Thornton adopted a "couldn't care-less" attitude and the Defendant himself did not want to carry out such work. He says he gave notice to resign on the 27th August by a letter addressed to the secretary of the Company, dated the 27th August, in Exhibit D.1 Page 10. Of the calculator, he says that originally two small electronic calculators were obtained on approval from the Aden Camera Company Ltd. and later they were found to be unsuitable for the Accounts Department. But the Aden Camera Company Ltd. were willing to accept only one in exchange for a larger one. That was because the Aden Camera Company Ltd. had no large electronic calculator in stock. They had to arrange with another firm and supply a large one to the Plaintiff Company. They did not want to lose the commission on the deal of the smaller electronic calculators. Therefore they only accepted one in return. The one that was left with the Plaintiff Company the Defendant said it was sent to the Million Garment Factory as a gift in recognition of their punctuality in performing the contracts with the Plaintiff Company. Referring to the I.O.U.'s, the Defendant says that they were temporary receipts for what he was entitled to on his resignation. I don't think this requires any further explanation. And the Defendant maintains that as a Manager and Director, it was fair for him to obtain a farewell gift befitting for a Director who was resigning and retiring. He further made another point in connection with Henry LUNG. He said that he was promoted with Spiegel's consent at a meeting at Red Rose Restaurant and yet he was dismissed on the 5th August, 1970. He also referred to the system of dismembering and destroying files, he discovered since May 1970. He called one Stella MA. This was the Company's accountant or one of the Company's accountants since Henry LUNG left. Stella MA said that she was given the custody of what is called "a Minute File" in the Accounts Department. She kept that file since and filed in it any Minutes or any document that was given to her by the Defendant. She said that she saw Page 1 of D.2 but she could not remember when she saw it. She saw Page 2 Exhibit D.2 about the same time as she saw Page 3 Exhibit D.2, after about the 27th of August 1971 which was the pay-day of the Company. In cross-examination she admitted the file that was traced in the Accounts Department of the Plaintiff Company to be the one. That file purports to contain Minutes of meetings right from the start of the Company in 1966 up to date. Having looked at the file she admitted there was a long period of time for the gap between 1968 and 1971 - from August or July 1968 up to August or September 1971 - the only three copies of Minutes included in that file were the three Minutes alleged to have been handed to her by the Defendant. Those are the 3 minutes found in the Accounts Department viz: copies of Pages 1-3 in Exhibit D.2. She said she saw Exhibit D.1 at Page 9, which is a covering letter in these terms to the Accountant: "Please be advised that my salary has been increased to $10,000 per month with effect from the 1st of August, 1971." It is dated 21st August 1971 and signed by the Defendant. She said she saw this letter about the same time as she saw Exhibit D.2 Page 3, which is dated the 18th August 1971. She said she filed Exhibit D.1 Page 10 and Page 11 at about the same time, namely, on the 27th September, 1971. Incidentally, Page 10 is a notice of intended resignation to the secretary of Wide World Exports Ltd. and Page 11 was the letter informing of the immediate resignation. She admits that she had no authority to give advance of salary or to give loans to any member of the Staff, but she said that the I.O.U.'s in Exhibit P.3, Pages 131 and 132 were temporary receipts given by the Defendant in respect of the two sums of $35,000 and $45,000 which were finalized by covering voucher Exhibit P.3 Page 146. She also refers to Exhibit P.1 Page 21, which is a letter signed by Mr. Spiegel and addressed to the Inland Revenue Department, stating the Defendant's salary between April and September 1971 as $34,000. The effect of this reference shows that Mr. Spiegel accepted the proposition that the Defendant's salary in the month of September was $10,000. She also refers to two small calculators and then it was changed to a big one. She says the smaller of the two was then given to the Defendant or returned to the Defendant. She also gives evidence referring to the system of acquiring US dollars. The normal practice was for the people of Foreign Exchange and Investment Company Ltd. to bring the US bank notes required by the Plaintiff Company. Then the Plaintiff Company would give the Foreign Exchange and Investment Company Ltd. a cheque to cover the amount of US dollars. These would in turn be recorded by payment vouchers and receipt vouchers in the Accounts Department of the Plaintiff Company. She is cross-examined in her statement to the police which is contained in Exhibit P.6. She is asked since she knew early in 1971 that the Defendant was Chairman of the Board, why she should refer to the Defendant as General Manager and Director only in her statement to the police. I am afraid her answer was as illogical and difficult to understand as some of her other answers. However, she admits that she never saw Mr. Thornton before the trial. Mr. Henry LUNG, another Defence witness, confirmed the typing of the Minutes and typing the notice to resign. He also confirmed that his promotion and raise in salary was known to Mr. Spiegel at a meeting. He also corroborated the Defendant's evidence that he was told that the secretaries in the Plaintiff Company were not trustworthy and therefore he was asked to go back to the Defendant's home to help the Defendant in typing. That was in 1971. That was the time when Henry LUNG had already left the Plaintiff Company for quite some time. Then Mrs. Ardy gave evidence that her husband asked her to help because of the heavy work involved in the company. She said she helped him because he had to work late and she seldom found her husband home. Thus her offer to help was a compromise so that she could see more of her husband. That was why she typed the minutes in Exhibit D.2, page 1 and page 2. Mr. Hsieh's evidence is useful at least in one aspect. As far as acquisition of foreign currency is concerned, his bank does not deal with foreign currency. If any customer or client of the bank liked them to buy foreign currency, they would only act as an intermediary. They would not even touch the currency. They would telephone Foreign Exchange Investment Company Limited to bring the currency to the bank and then inform the bank's customer to come to the bank to complete the transaction between themselves. That is all the bank does. Such is the sum total generally of evidence between the two parties. There is of course in certain aspects a direct conflict of evidence. I shall not refer to all the details but only consider some of the salient features of the evidence of the two parties. Having considered the evidence as a whole, and having observed the demeanour of witnesses and the way they answered the questions I have no hesitation in accepting the plaintiff's witnesses. I hasten to add that at least two of the defence witnesses in the person of Mrs. Ardy and Mr. Hsieh of the Shanghai Commercial Bank. They answered questions to the best of their personal knowledge. However, these witnesses corroborate only to side issues and not the main issues that are relevant in the pleadings. First of all, Mr. Mains and Mr. Thornton are straightforward and independent witnesses. I say so because they have no reason to tell any lies or any falsehood. They are independent in the sense that Mr. Mains is now not even in Hong Kong. He has an independent job, he is working in Canada, and there is no necessity for him to hide anything even for the firm of Lowe, Bingham and Matthews, let alone the plaintiff company. Mr. Thornton is the director of Premacast Company Limited. He has his own busness. I don't know what is the detail of arrangement between him and Mr. Spiegel, but apparently he is the major shareholder of the plaintiff company, and if he should choose to take over the whole of the plaintiff company there is not a thing that Mr. Spiegel could do. Legally the company is his. He is the director and he owns 149 out of 150 shares of the plaintiff company. If he chooses to accommodate Mr. Spiegel it is entirely a matter of grace, But I don't see how Mr. Thornton would accommodate Mr. Spiegel to such an extent as to commit perjury in this very court. Such independence in addition to their demeanour in the witness stand satisfied me that they are both honest witnesses. Spiegel, as a witness, is an interested party in fact, in the sense that he has a de facto interest through Mr. Thornton. However his evidence is mostly factual: he admits to his power of control which is corroborated by the plaintiff witnesses and also in part by the defendant's own admissions, namely, the drawing of money without limit from the plaintiff company. He quite frankly admits he is a person who has to guard his authority very jealously. He is anxious to avoid questions about his tax position in the United States, about the arrangement of his various companies and subsidiaries. The impression he gave me through his counsel of trying to avoid these questions is because they are irrelevant to the main issues. I can understand also his reluctance to give publicity to details. There need not be anything illegal about it. Tax-payers as well as tax authorities always like to play a cat and mouse game. Tax authorities have various schemes to tighten a net and cast the net wider. Tax-payers would like to steer away from the net. Tax-payers never likes to let the tax authorities know how he can steer away from such a net, so that the net may not be further cast wider or knitted tighter. He frankly admits that he does not recall any meetings at the Red Rose Restaurant at which, presumably, there might be a discussion about Henry LUNG's promotion or salary. He frankly admits having taken out the index sheet of a file, though he denies any order for the dismembering or destruction of the office files. He vigorously denies as was put to him, that he took any money out of that combination safe drawer secretly one morning on his return, and then made a report to the police. The impression he gives to me, without meaning any offence at all, is that of a miniature of an American business tycoon, which is often exaggerated and presented with humour in the Hollywood films. But that doesn't in any way mean that he will say anything that is not true. His evidence, at least, is consistent. The same, lamentably, cannot be said of the defendant's demeanour and evidence. In his answer to cross-examination he gave me the impression that he was building up his evidence as the trial went on. He was certainly evasive. The glaring example, is his evading the answers to questions put to him as to his motive in notifying the tax authorities in America - or rather the American treasury agents in Hong Kong and the Inland Revenue Department regarding Spiegel's tax position. The motive is obviously clear, but he would not have it, he would not say it. There is his evidence about the electronic calculator, which is, to begin with, at variance with his pleadings. In the Pleadings he alleged that he purchased "a calculator" for the use of the Accounts Department in the plaintiff company and that when it was found unsuitable a note was left to the effect that the small calculator be given to Million Garment Factory as a gift. In his evidence he never referred to the note and he never gave any evidence as to whom he left the note with or whether it generally a note, or where he left the electronic calculator. Further, in his evidence, which is another variation, he said that he obtained on approval "two small electronic calculators". I, at one stage, asked him what he understood by the term 'on approval' and if 'on approval' how was it that the calculator could not be returned at all, His answers to these questions were pathetic. I shall now consider the origin of the three minutes in sequence in accordance with the reference to them by the defendant. The first one in Page 2 of Exhibit D.2 is the one dated the 10th of February, 1971. It reads that:
It purports to be carbon-copied to Lowe, Bingham & Matthews, Secretaries and Solicitors. Now, the origin of the minutes is a discussion in December. Each party gave a different version as to what transpired at the discussion which I have already mentioned. The defendant's reason for asking six months' salary was that, in view of the daily dismissal of staffs, he wanted security in his tenure of office. If that is the case, it is a little surprising that the six months' salary in compensation should be payable in the event of the defendant's resignation. This is something more. Mr. Spiegel must be giving him something far more than he asked for. Was it likely that Mr. Spiegel as a business man and a hard business man at that - would ever give something which is not even asked for? At his closing address, the defendant said that the blank resignation form given to Mr. Spiegel was to protect the company in the event of the defendant dying suddenly. For this reason the Defendant also wanted protection in case the plaintiff should use that blank resignation form. That was why it was agreed that he would be given the six months' salary even if he resigned. That was to cover the danger that the plaintiff might make use of the blank form. However, this point was only raised by the defendant in the closing address. It was never put to Mr. Mains or put to Mr. Spiegel during cross-examination. Further the Defendant's evidence was that it was agreed such a resolution be put in the minutes of the next meeting. The next meeting, according to the defendant's own words, was dated 6th January 1971. However, there was nothing about the 6 months' salary recorded in the minutes of the directors' meeting on the 6th January 1971. Incidentally, the minutes of the 6th January 1971 were those which resolved to raise the defendant's status to be Chairman of the Board. In the minutes of the 10th February 1971 the six months' salary was payable on resignation of the Chairman. If there was any truth in the Defendant's evidence the natural and the logical step to be taken was to put the two resolutions together in one minute sheet. However, they were drawn up in two different minutes, one dated 6th January 1971 and the other 10th February 1971. Finally even if 6 months' salary were agreed in December 1970 to be payable on Defendant's resignation it was payable when the Defendant resigned as director or manager. There was no question of the Defendant resigning as the term "Chairman" be recorded in the minutes in Page 2 of Exhibit D.2 is yet another mystery. Then the Minutes on the 6th of January. At that time, as I have said, Spiegel was in fact in control of the company, Spiegel was then in Hong Kong. It is surprising that neither Mr. Thornton nor the defendant ever approached Spiegel in the subject of the minutes in Page 1 of Exhibit D.2. Thornton denied that he was ever in the premises of the plaintiff company. From a perusal of Exhibit P.8, it appears that in all meetings of directors of the plaintiff company, the Chairmen of the meetings were mostly appointed ad hoc. Besides, the Chairman has no increased power. There is no point in fact in having a permanent Chairman of the Board. The Minutes dated the 18th August purported to raise the salary of the Defendant as Chairman. They are on Page 3 of Exhibit D.2. The document reads:
Well, there again it refers to the Chairman. If there any increase was merited the increase was not from the 1st of January in that year when the defendant was purportedly appointed Chairman. A further question is that the Defendant's salary was raised to $10,000 not for the reason as recorded but in reference to the rent being paid for Mr. Spiegel's home. It was calculated on the combination of $5,000 of the Defendant's salary plus the rent and rates payable for No.1 Cox's Road making a total of nearly $10,000, but the raise in salary was at a time very near to the contemplation of the Defendant's resignation. I am surprised that a person who said that he was thoroughly disgusted with the system under which the plaintiff company was run and yet could think of asking for a raise in the salary about ten days before he allegedly gave notice of resignation. The regulations, Exhibit D.1 page 2 to 5, cover some very detailed regulations for the running of the staff in the company. Now, it is sufficient to say that I have read through it and I find these regulations give the general manager - at that time it was the defendant - the widest possible discretionary power. They contain some ridiculous powers as those providing for salary payable on the resignation of the staff. On the one hand, they provide that a number of the staff is entitled to three to six months' salary, even though he resigns. On the other hand, such salary is payable only in the absolute discretion of the general manager. In other words, the general manager is an absolute monarch. Such are the regulations drawn up, presumably, by the defendant himself. I come now to the notice of resignation dated the 27th August. The only evidence in this matter is the letter in Exhibit D.1 page 10. There is no evidence that the message was sent by telex to Mr. Spiegel. Knowing the system of business that was conducted there was no explanation why such notice was not sent by telex, in exactly the same way as the one dated the 27th of September 1971 - Exhibit P.1 17E, which was another notice. If notice was given on the 27th of August, one would have expected someone with any sense of responsibility at all to make preparation for the handing over of the manager's job to another. There is no mention of any successor, no question of preparing for the Defendant's leaving. As far as the defendant was concerned, he even signed the Directors' Report in preparation for a Shareholders' Annual General meeting and such report contained a passage to the effect that he, offered himself to be re-elected as the Director. That meeting was intended then to be held on the 30th of August 1971. Admittedly, the defendant said there were a lot of mistakes, and a glaring mistake, contained in the Balance Sheet. He never sent out the directors' report. He only signed them and put them in his drawer. He signed some copies of them to be returned to Lowe Bingham and Matthews to be corrected. The question is: why sign them? The sending of the minutes of directors' meetings Exhibit D.2 Pages 1 to 3 was done, according to the defendant, by the company staff. He distrusted them. He felt that they were inefficient, and they had divided loyalty, so much so that he had to go home to ask his wife to work for him and type for him. He asked Henry LUNG to work for him and type for him. Yet after minutes (Exhibit D.2), the notice of resignation (Exhibit D.1 Page 10), the regulations (Exhibit D.1 Page 2 to 5) had been typed he took them back to the office in open envelopes to be sent by the secretaries whom he distrusted. While I am still on this subject I would like to examine the wordings in the notice of resignation in Exhibit D.1, page 10, it reads:
Then there is the text in his telex notifying his actual resignation in Exhibit P.1, page 17. The message reads as this:
If notice had been given, there would be no necessity for the words, "with immediate effect" in the telex. All that was in the telex was to say "In accordance with my notice of 28th of August, I am leaving on 27th September." The wordings in the letter to the Secretary of the Plaintiff Company page 11 of Exhibit D.1, dated the 27th September, were the same. They read:
If the Defendant had already given his notice to the Secretary on the 27th of August, there was no reason why the Defendant should give notice again on the 27th of September, and use the words "with immediate effect". These are the anomalies, illogicalities, of the defendant's action and his evidence. Admittedly, Stella Ma had all these copies. But she only filed those copies given to her by the defendant. And when one observed the three documents, pages 1, 2 and 3 of Exhibit D.2, they purport to be copied to Lowe, Bingham & Matthews, Secretaries, Solicitors. There is no reference of these being copied to the Accounts Department. But they were handed to Stella Ma. That explains why copies of the minutes are found in the file kept in the Accounts Department of the Plaintiff Company. However, that does mean that such minutes were records of resolutions agreed to by Mr. Thornton or that they had been notified to the Secretary of the Plaintiff Company. Henry LUNG and Mrs. Ardy said that they only typed what was told to them by the defendant. There was the suggestion that these minutes of directors' meeting might be kept in the minutes files and records of the Plaintiff Company and that they were destroyed and thrown away as a result of the dismembering files. But such suggestion was not even put by Counsel for the Defendant to Maria CHEUNG when she gave evidence on depositions. The company regulations, the minutes of directors' meetings, and the notice to resign were, in my opinion, the preparation, work and doings of the Defendant himself. I have come to the conclusion that these are not genuine documents, genuine in the sense that it was done openly with the agreement, approval or consent of Mr. Thornton. The regulations were rightly within the discretion of the Defendant as he was the manager of the Plaintiff Company. But even the act in their preparation was open to doubt. The matter was discussed in November 1970. Eventually they were prepared, and they were prepared in February 1971. They gave the manager the widest possible power. The regulations were not, to my mind, made even if the defendant had the discretion to make them not in good faith. They were made merely to enhance the Defendant's power and position in the Plaintiff Company. I also find as a fact that Mr. Thornton never agreed to or approved the minutes dated the 6th of January, the 10th of February or the 18th of August 1971, namely, Exhibit D.2, pages 1, 2 and 3, and that such minutes were never sent out by the Defendant at all. In this respect I accept the evidence of Miss Baudouy and Maria CHEUNG that they were not even told of the existence of such minutes and certainly they were not instructed by the Defendant to send them to anyone. I also come to the conclusion that Exhibit D.1, page 10, the notice of intended resignation was for the reasons I have given, never sent out at all. Having come to this conclusion, the claim for the six months' salary in lieu of resignation goes by the board. The $10,000 salary basis has no foundation. There will be no justification for the Defendant to draw the two sums of $35,000 and $45,000. As to the purchase of the US$26,000, I have to consider that the Defendant, at that time, was, thoroughly disgusted with the system of undisclosed commissions. If that be the case, his wisest and most logical move was to quit the company straight away. Even if he did not quit the company, he should regularise the position. He had no business to accede to Mr. Spiegel's request, if such request were ever made to use undisclosed commission for the purchase of U.S. Dollars. However, he acceded to such a request but he refused to obey the second half of the instructions, namely, to hand over the US$26,000 to Mr. Thornton. That is the first illogical aspect of the action. The Defendant gave the reasons why he refused to give the money to Mr. Thornton. The first reason he gave in his evidence was that: "I thought Mr. Spiegel should do it himself." However, there is no evidence that he told Spiegel he (Spiegel) should do it himself. The only thing the Defendant said was that the money would be left in the drawer. The second reason he gave was that: "I did not want to do Spiegel's dirty work." The second reason is in direct contradiction to his obedience to Spiegel's first half of request. And then in cross-examination he gave me the impression that he did not want to give it to Thornton because he did not like him. This is the third reason and it is again illogical because Mr. Thornton was the person who, according to the Defendant agreed with the Defendant to raise his salary from $5,000 to 10,000 per month. Having regard to such evidence, it is difficult to accept the proposition that there was any long distance telephone call from Mr. Spiegel. There is more to it. I had a look at the desk which was produced as an Exhibit in court. The drawer that was produced as an Exhibit in court was identified. The Defendant at first admitted them to be his desk and drawer. Later he withdrew his admission that they were his desk and drawer. Anyway, to put US$26,000 in a drawer for a long period after one leaves the Plaintiff Company for good is hardly the action of an adult person. I find that from experience the Defendant should have known (if there was any truth in his allegations about the minutes of directors' meetings), he should have arranged to have them signed by Mr. Thornton as the other director. If he had any sense as far as the US$26,000 was concerned, he should have handed them to Mr. Thornton and asked for a receipt to protect himself. I cannot imagine for one moment that the Defendant was not aware, as an adult person, and as an experienced person of the propriety of these requirements. As a director and manager he had the discretion to buy the electronic calculator. But there again, having regard to the evidence, I cannot accept the fact that the calculator was purchased for use in the Accounts Department and later on given to the Million Garment Factory. I cannot say that it was an act of good faith. Had it been purchased originally for the use of the Accounts Department, there would be no justification in putting on the payment voucher in Page 139 in Exhibit P.3 the word "gift". After all it was never originally intended as a gift. But that is not the only point for doubt. Stella Ma said that they returned the calculator to the Defendant. The Defendant's pleading contended there was only one calculator and not two. No allegation was made of obtaining 2 calculators. Even if there was any doubt, the simplest way to resolve it is for the Defendant to call an officer from the Million Garment Factory. That has not been done. That is yet another factor which drives me to the conclusion that the calculator was appropriated by the Defendant. There is the question of a farewell gift to himself. As a managing director he had the discretion to give himself a gift. But I would hesitate even to think of any person trying to buy himself a gift on retirement with company funds. When Spiegel retired as permanent director, he never had a gift to himself. When other people retired or resigned, they were never given a gift. Discretion there might be, but it was not company policy. I have to rule that that was not an act of good faith. I mentioned the words "good faith" time and again because at his closing address, the Defendant referred me to one short sentence on page 528 of Palmer's Company Law which reads that:
Even if there is discretion, the court will interfere where the act is not one of good faith. The Defendant also cited to me a certain passage of Article 67 of Table A. He just cited this passage to me and then this sentence in Palmer's Company Law. I take it to mean that what the Defendant did was within his discretion as a managing director and that the court should not interfere. But there is the question of good faith. It is for the court to find whether the discretion has been exercised in good faith. Having regard to the bulk of the evidence concerning the other matter and other issues, I find that the matter of Christmas bonus was entirely within Mr. Spiegel's discretion. There is evidence that in the year 1970 the Defendant was given a Christmas bonus of $3,000. There was no earthly reason why he was given a Christmas bonus of $10,000 in 1971 on his resignation. It was not an act of good faith when the Defendant purported to give himself such bonus. There remains the question of annual holidays. I accept the evidence that he traded in these holidays for his days off on Saturday mornings. He had some of the Saturday mornings off. He might have returned later in the afternoon. But one of the conditions at the Defendant's interview was that he took the Saturday mornings off in lieu of his fourteen days' annual holiday. In any event, he resigned without giving notice. In normal employment terms he had forfeited his holidays as such. Having regard to the remarks I have made and in view of the aforesaid reasons, I have to answer the questions one by one. To the question whether the minutes dated the 6th January, 10th February and 18th of August were drawn up with Mr. Thornton's knowledge, agreement, or consent the answer is no. To the question whether the Defendant drew the two sums of money, the $58,594.75 and $94,423.75 as a result of Mr. Spiegel's request to obtain U.S. Dollars, and the money was then left in the drawer in the Defendant's desk, my answer again is no, and that the money was not, I repeat not, left in the drawer. The third question is whether the Defendant purchased the calculator for $1,300. I have to answer that the calculator was purchased with the $1,300 but was not given to the Million Garment Factory, and that the act of purchase, the use of it, and the failure to return it to the plaintiff company was not an act of good faith. In short, it is not a bona fide gift to the Million Garment Factory. The fourth question is whether the Defendant acted in good faith when he purchased the clock for his farewell gift. Again I find that it was invidious and it was not an act of good faith for any person to buy a farewell gift to himself with other people's money. The fifth question is whether he drew the $80,000, namely, the combination of the $35,000 and $45,000 in good faith. The answer obviously must be no in view of my finding as to the minutes and regulations and Mr. Spiegel's discretion in giving Christmas bonus. Finally, the last question is whether he gave a month's notice to the Plaintiff Company. The answer is again no. The total result is that I have to give judgment to the plaintiff in the following of their claim, namely, the $58,964.75, the $94,423.75, the $35,000 and the $45,000, the $1,300 and the $1,850. The $80,000 claim is just a repetition of the other two sums of $35,000 and $45,000. In other words, there will be judgment for the plaintiffs in the prayer of paragraphs 2, 3, 4, 5, 6, 7. There is no evidence of any special damage for the Defendant's breach of duty. Nor is there any evidence of special damage as a result of breach of contract. I will just award $5,000 as a month's salary in lieu of notice under paraph 9 of the prayer. The costs should follow the events and the cost of the action will go to the plaintiff.
Representation: M.H. Jackson-Lipkin (Hastings & Co.) for Plaintiff Defendant in person. |