Kwan Kwok Leung v. Wong Hei Yu Winny and Another
Read the full judgment text of DCCJ 5406/2007 on BabelCite. This District Court judgment.
2. In Parts II and III below, I set out in gist the respective claims of Madam Wong and the defences and counterclaims of Mr Kwan. The summaries are not meant to be comprehensive since Madam Wong’s present striking out application is not focused on those matters.
Cited by 2 cases
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DCCJ 5406/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 5406 OF 2007 ------------------------ BETWEEN
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---------------------- Coram: H H District Judge Marlene Ng in Chambers (open to the public) Date of Hearing: 24th November, 2008 Date of Handing Down Decision: 28th November, 2008 ---------------------------------------- D E C I S I O N -------------------------------------- I. Introduction 1.There is no dispute that :
2.In Parts II and III below, I set out in gist the respective claims of Madam Wong and the defences and counterclaims of Mr Kwan. The summaries are not meant to be comprehensive since Madam Wong’s present striking out application is not focused on those matters. II. Madam Wong’s pleaded claim 3.Madam Wong claimed that in/about May 2006 she started to order/purchase skin beauty products from Art Express for use at Organic Beauty. In/about October 2006, she closed down Organic Beauty and opened Spa Sensations through Pacific Wide as corporate vehicle. In/about June 2007, she decided to sell Spa Sensations on a going concern. At first, Madam Cheung expressed interest in purchasing the entire business, but later proposed to operate Spa Sensations together with Madam Wong as partners. 4.In/about July 2007, Madam Wong and Madam Cheung on behalf of Mr Kwan entered into a partnership agreement (“PA”) to operate Spa Sensations as partners in equal shares as follows :
5.Mr Kwan engaged solicitors to prepare a share acquisition agreement (“SAA”) which the Parties signed on 24th July 2007. On the same day, Mr Kwan paid HK$100,000.00 as part payment of the price. 6.Madam Cheung wanted to commence operation at the Premises as soon as possible, so on/bout 25th July 2007 she caused some beauty equipment and products to be moved to the Premises, and from/about that day she operated Spa Sensations with Madam Wong. Madam Cheung started to provide beauty treatment to her clients by using all facilities/staff at the Premises. Upon Madam Cheung’s suggestion, Madam Wong agreed to employ Madam Lam Sin Man (“Madam Lam”) as a staff member of Pacific Wide, and further agreed for all daily takings of Pacific Wide be taken to Art Express for calculation. 7.Pursuant to the SAA, on/about 12th September 2007, Madam Wong provided Madam Cheung with copy audited accounts and financial statements of Pacific Wide for the financial year from 1st July 2006 to 30th June 2007. Madam Wong also tendered originals of Pacific Wide’s books and recordsfor the period from 1st to 24th July 2007 for inspection, and such documents still remained in Madam Cheung’s possession, custody and control. 8.Madam Wong was at all material times willing and able to transfer 50% of her shares in Pacific Wide to Mr Kwan, and to sign all necessary documents to effect such transfer. But in breach of the PA and the SAA, Mr Kwan failed/refused to pay the balance price of HK$200,000.00 or part thereof, complete the sale and purchase of 50% of the shares of Pacific Wide, and/or contribute towards the monthly expenses of Spa Sensations, which were paid for by Madam Wong. Further, in breach of the PA, Madam Cheung failed/refused to deposit daily takings derived from customers she brought to Spa Sensations into Pacific Wide’s bank account, and converted the same. 9.Consequently, Spa Sensations suffered serious cash flow problems, and was unable to pay rent for the Premises from August to October 2007. The landlord recovered possession of the Premises on/about 9th October 2007, and Spa Sensations was forced to close down its business on the same date. 10.Madam Wong therefore claimed for the balance price of HK$200,000.00, half of the expenses of Spa Sensations which she had paid, an account of the daily takings received by Madam Cheung as Mr Kwan’s agent from 24th July to 9th October 2007, all necessary accounts and enquiries, and an order for payment of such sums found to be due to her upon taking such accounts and enquiries. III. Mr Kwan’s defence and counterclaim 11.The summary in this Part is exclusive of Mr Kwan’s averments on the BP Agreement and the Beauty Products referred to in paragraphs 26-33 below, which are the subject of Madam Wong’s present striking out application. 12.Mr Kwan claimed that by an oral agreement made in/about mid-July 2007 (“Oral Agreement”), Madam Wong agreed to sell and he agreed to purchase 50% of the shares of Pacific Wide for the sum of HK$300,000.00 on inter alia the following terms and conditions :
13.Mr Kwan engaged solicitors to prepare the SAA which the Parties signed on/about 24th July 2007. The SAA contained inter alia the following express conditions :
14.On/about 24th July 2007, Mr Kwan paid the deposit of HK$100,000.00 to Madam Cheung under the SAA. 15.Pursuant to the Oral Agreement, on/about 25th July 2007, Mr Kwan moved certain beauty equipment (“Equipment”) into the Premises. But Madam Wong refused to participate in the operations of Spa Sensations, and on 25th July 2007 wrongfully told her staff that she (a) no longer managed the spa, (b) had sold all her shares, and (c) had appointed Madam Cheung as the new manager responsible for the entire operation. So from 25th July 2007 onwards, Madam Cheung managed Spa Sensations and performed beauty treatments on new clients as well as existing clients of the Parties. 16.On 7th September 2007, Madam Wong faxed copy “subject to audit” draft accounting report of Pacific Wide for the financial year from 2nd March 2006 to 30th June 2007 to Mr Kwan. In breach of the SAA, such report did not cover the period up to 24th July 2007. Madam Wong also refused Mr Kwan’s suggestion to have solicitors stakehold the further deposit of HK$100,000.00 pending preparation of the audited accounting report. 17.On 12th September 2007, Madam Wong faxed signed copy of Pacific Wide’s audited accounting report for the period from 2nd March 2006 to 30th June 2007 to Mr Kwan, but in breach of the SAA it was still not made up to 24th July 2007. On 14th September 2007, Mr Kwan suggested (but Madam Wong refused) that she went through Pacific Wide’s chequebooks, invoices, receipts, accounts and bank statements of July 2007 with him. Apart from having received Pacific Wide’s bank statements for the period from 1st to 24th July 2007 in/about August 2007, Madam Wong had not tendered all original documents of Pacific Wide. 18.Mr Kwan claimed he was always ready and willing to pay the balance price to Madam Wong upon delivery of Pacific Wide’s audited accounting report for the period up to 24th July 2007. But in breach of the SAA, Madam Wong failed/refused to submit such report. 19.Further, in breach of the Oral Agreement and/or the SAA, Madam Wong failed to pay rent for the Premises since August 2007 and to pay for other obligations and outgoing expenses of Pacific Wide. Mr Kwan had to pay Madam Lam’s salary and to pay commission to one of Madam Wong’s staff on behalf of Madam Wong. 20.Mr Kwan claimed he was the owner of the Equipment that was moved to the Premises pursuant to the Oral Agreement. On/about 4th October 2007, without the knowledge/consent of Mr Kwan, Madam Cheung or other staff of Spa Sensations, Madam Wong changed the door locks and prevented Mr Kwan from entering the Premises. Overnight between 4th and 5th October 2007, Madam Wong and others removed various office equipment, keys, cash, books/records of Pacific Wide and equipment/beauty products belonging to her from the Premises. As a result, Madam Wong’s clients were left with unfinished prepaid treatment packages, and Mr Kwan performed those treatments at Beauty Gallery on behalf of Madam Wong. 21.On/about 9th October 2007, Madam Wong terminated the tenancy agreement and returned the keys of the Premises to the landlord. By reason of the matters disclosed in the letter referred to in paragraph 23 below, the landlord discarded the Equipment without Mr Kwan’s knowledge/consent on 9th October 2007. 22.By a letter dated 24th October 2007, Mr Kwan accepted Madam Wong’s repudiation thereby terminating the Oral Agreement and the SAA, and demanded return of the Equipment stored at the Premises and of the deposit paid under the SAA. By 2 further letters both dated 24th October 2007 and a letter dated 6th December 2007, Mr Kwan demanded return of the Equipment stored at the Premises, but Madam Wong failed to do so. 23.By a letter dated 12th December 2007, the landlord informed Mr Kwan that Madam Wong had on 9th October 2007 signed a Note of Abandonment (“Note”) stating that chattels left at the Premises as at that date were abandoned by her and the landlord could dispose of them at will. 24.By reason of the aforesaid matters, Madam Wong committed conversion of Mr Kwan’s properties to her own use and disposal, and Mr Kwan was unable to perform certain beauty treatments on his clients that required use of the Equipment. 25.Mr Kwan counterclaimed against Madam Wong for loss and damages as a result of her breach of the Oral Agreement and/or the SAA, and for loss and damages for conversion of the Equipment. IV. Mr Kwan’s pleaded claim in relation to beauty products 26.Mr Kwan claimed that by a written agreement between Art Express and Organic Beauty dated 4th July 2006 (“Written Agreement”), Art Express agreed to sell and Organic Beauty agreed to purchase beauty products, but title in such beauty products would not pass to Organic Beauty until full payment was made. 27.By an oral agreement in/about September 2006 between the Parties, they agreed to transfer Organic Beauty’s account with Art Express to Spa Sensations under the same terms/conditions as the Written Agreement. By a letter from Art Express to “the Plaintiff” (ie Madam Wong) dated 19th September 2006 (“AE Letter”), “the Defendant” (ie Mr Kwan) confirmed that Organic Beauty’s account would be transferred to Spa Sensations upon signing of an authorisation by “the Plaintiff” (ie Madam Wong), which would signify “the Plaintiff’s” (ie Madam Wong’s) acceptance of the terms/conditions of the Written Agreement. 28.In/about September 2006, “[the] Plaintiff” (ie Madam Wong) signed the relevant authorisation form (“Authorisation Form”). “As such, from about 1st August 2007 to 3rd October 2007, the Plaintiff [ie Madam Wong] agreed to purchase and the Defendant [ie Mr Kwan] agreed to sell certain beauty products, more particularly shown and set out in Schedule 3 attached [to the Re-Amended Defence and Counterclaim (“RAD&C”)] (“the Beauty Products”), in the total sum of HK$173,897.00 (collectively “the BP Agreement”). The Defendant [ie Mr Kwan] duly delivered the Beauty Products to the Premises.” But wrongfully and in breach of the BP Agreement, Madam Wong failed to pay for them. 29.Mr Kwan further averred that he was “the owner of the …… Beauty Products moved to the Premises pursuant to the Oral Agreement and the BP Agreement”. By reason of the matters set out in paragraphs 20 and 23 above and 31 below, Madam Wong converted Mr Kwan’s properties and was in breach of the BP Agreement amounting to repudiation thereof. 30.On 9th October 2007, the landlord discarded the Beauty Products without Mr Kwan’s knowledge/consent. 31.By a letter dated 24th October 2007 referred to in paragraph 22 above, Mr Kwan accepted Madam Wong’s repudiation thereby terminating the BP Agreement, and demanded return of the Beauty Products stored at the Premises. Despite requests by Mr Kwan, Madam Wong failed to deliver the same. 32.By 2 further letters dated 24th October and a letter dated 6th December 2007 also referred to in paragraph 22 above, Mr Kwan also demanded return of the Beauty Products stored at the Premises. 33.Mr Kwan claimed that Madam Wong converted the Beauty Products to her own use and disposal, and further claimed for loss and damages suffered by reason of such conversion and/or breach of the BP Agreement, including the market value of the Beauty Products in the sum of HK$173,897.00. V.Further and better particulars of the Defence and Counterclaim (“FBP”) 34.Madam Wong requested Mr Kwan to clarify “the reason or reasons for Madam Cheung allegedly using the Beauty Products on [Mr Kwan’s] clients as it was pleaded …… that the Beauty Products were sold to [Madam Wong]”. 35.In the FBP, Mr Kwan pleaded that since Madam Wong failed to pay for the Beauty Products delivered to the Premises and since clause 6 of the Written Agreement (“Clause 6”) provided that title in the Beauty Products would pass to Madam Wong only when full payment was made, there was at all material times no intention for the title in the Beauty Products to pass to Madam Wong unless and until payment was made in full. “As such, the Defendant [ie Mr Kwan] remained the owner of the Beauty Products.” VI. Striking out application 36.Madam Wong’s Reply and Defence to Counterclaim (“RDC”) averred that it was filed/served without prejudice to (a) her contention that paragraphs 7, 32, 34 and 38-40 of the Defence and Counterclaim (“D&C”) insofar as they pertained to the Beauty Products disclosed no reasonable cause of action or is frivolous or vexatious, and (b) any application that she might make to have them struck out. 37.On 29th September 2008, Madam Wong by summons (“Summons”) sought to strike out the same paragraphs as aforesaid of the Amended Defence and Counterclaim (“AD&C”) insofar as they pertained to the Beauty Products and answer (d) of paragraph 10(3) of the FBP on the grounds that they disclosed no reasonable cause of action (“First Limb”) and/or were scandalous, frivolous or vexatious (“Second Limb”). 38.Subsequent to the Summons, Mr Kwan applied to re-amend the AD&C to add further averments as to the Written Agreement, the BP Agreement and the Beauty Products in line with the FBP so that the pleaded defences and counterclaims in the RAD&C in relation to the BP Agreement and the Beauty Products were as set in paragraphs 26-33 above. 39.On 10th October 2008, by consent Master R Lai ordered inter alia that (a) Mr Kwan do have leave to re-amend the AD&C, and (b) Madam Wong do have leave to file and serve the Amended Reply and Defence and Counterclaim (“ARDC”), and to amend the Summons (“Order”). 40.Pursuant to the Order, Madam Wong filed the ARDC on 27th October 2008. In the ARDC, she averred it was filed/served without prejudice to (a) her contention that paragraphs 7, 7A, 7B, 22, 32, 33, 33A, 34 and 38-40 of the RAD&C insofar as they pertained to the BP Agreement and the Beauty Products disclosed no reasonable cause of action or were frivolous or vexatious, and (b) any application that she might make to have them struck out. 41.Pursuant to the Order, Madam Wong amended the Summons on 27th October 2008 (“Amended Summons”) to seek an order that the aforesaid paragraphs of the RAD&C insofar as they pertained to the BP Agreement and the Beauty Products and answer (d) of paragraph 10(3) of the FBP (ie the matters set out in paragraphs 26-29, 31 and 33 above) be struck out on the First and/or Second Limbs. 42.At the hearing before me, Ms Kei, counsel for Madam Wong, confirmed that Madam Wong would not seek to strike out paragraph 7 of the RAD&C (except the first sentence) as prayed for in the Amended Summons. It was an obvious error because paragraph 7 of the RAD&C does not have more than one sentence. Ms Kei also pointed out that although the Amended Summons asked for paragraph 40 of the RAD&C insofar as it related to “the BP Products” be struck out, there was in fact no reference to “BP Products” in paragraph 40 of the RAD&C. Ms Kei submitted that the phrase “BP Products” should read as “BP Agreement”. Ms Tam, counsel for Mr Kwan, had no objection, and she did not require any formal re-amendment of the Amended Summons. 43.On 29th September 2008, Madam Wong filed her affirmation in support of the Amended Summons. She explained that pursuant to her solicitors’ request for discovery, Mr Kwan’s solicitors provided copies of the Written Agreement, the AE Letter and the Authorisation Form, and various sales delivery orders in respect of deliveries of the Beauty Products to the Premises (“SD Orders”). Mr Kwan did not file any affidavit evidence. VII. Practice Direction 19.1 44.Paragraph 5 of Practice Direction 19.1 (“PD19.1”) provides as follows :
45.Ms Tam submitted that the first intimation of a potential striking out application was found in the RDC (see paragraph 36 above), but notwithstanding a letter from Madam Wong’s former solicitors dated 7th August 2008, the Summons, the ARDC, the Amended Summons and Madam Wong’s affirmation (which all alluded to Madam Wong’s right to strike out certain parts of Mr Kwan’s pleadings on the First Limb), the broad grounds as required under PD19.1 were not given untilMs Kei’s skeleton submissions of 20th November 2008. 46.Several matters of note. First, both counsel accepted the requirements in paragraph 5 of PD19.1 only apply to applications to strike out pleadings on the First Limb, but not to striking out applications relying on the Second Limb (which limb Madam Wong also adopted in the Amended Summons). There is no procedural irregularity in relation to Madam Wong’s striking out application based on the Second Limb. 47.Secondly, even if Madam Wong failed to provide the broad grounds within the prescribed time as required under PD19.1, I am not persuaded (and Ms Tam did not suggest) that the striking out application should be dismissed. Re Boon Voon King & ors, ex p Nedcor Asia Ltd [1998] 2 HKLRD 458 established that practice directions are issued under the inherent power of the court to regulate its own process and not under the rules of the court or other statutory power, and that the purpose of practice directions is to ensure efficient, expeditious and economical despatch of the court’s business. Whilst the court does have inherent power to dismiss a summons, Re Langton (deceased), Langton v Lloyd’s Bank Ltd & ors [1960] 1 All ER 657 suggested it was not desirable to make an order to dismiss an application for breach of local practice directions. In respect of the Amended Summons, I also bear in mind that Madam Wong also relied on the Second Limb, and as I find below, there is nothing wanting in respect of the legal principles and arguments relied on by Ms Kei for the striking out application on this ground. 48.More importantly, in the course of Ms Kei’s oral submissions in reply, she acknowledged that Madam Wong could not make out her application to strike out Mr Kwan’s pleadings in relation to the BP Agreement and the Beauty Products without referring to the Written Agreement, the AE Letter, the Authorisation Form and the SD Orders supplied by Mr Kwan and exhibited to her affirmation (“Mr Kwan’s Documents”, see also paragraph 10 of Ms Kei’s supplemental skeleton submissions). Since Order 18 rule 19(2) of the Rules of the District Court provides that no evidence shall be admissible on an application for striking out pleadings as disclosing no reasonable cause of action, such submission suggested that Madam Wong would be unable to maintain her striking out application under the First Limb. In the circumstances, Ms Kei abandoned reliance on the First Limb and confirmed that Madam Wong would only rely on the Second Limb for the Amended Summons. 49.Consequently, Ms Tam’s objections based on non-compliance with the requirements in PD19.1 fell away. At Ms Tam’s request, and Ms Kei having no objection, both parties agreed there be no order as to costs in respect of Madam Wong’s striking out application insofar as it relates to the First Limb. VIII. Legal principles on striking out 50.Hong Kong Civil Procedure 2009 Vol.1 para.18/19/4 at pp.350-351 provides as follows :
51.Hong Kong Civil Procedure 2009 Vol.1 para.18/19/8 at pp.352-353 provides as follows :
IX. Ms Kei’s submissions 52.Ms Kei submitted that the business of Spa Sensations was all along operated by Pacific Wide as a corporate vehicle and not by Madam Wong in her personal capacity, and the Beauty Products were all along sold by Art Express and not by Mr Kwan in his personal capacity. These matters were confirmed in the FBP (now incorporated as part of the RAD&C), and proved beyond doubt by Mr Kwan’s Documents. In the circumstances, Mr Kwan’s claim for the alleged loss of the Beauty Products was liable to be struck out under the Second Limb. 53.Ms Kei argued that Mr Kwan’s counterclaim for the market value of the Beauty Products (in contra-distinction to any claim for the price or for damages for breach of contract) was not based on breach of contract, but rather on a claim for conversion on the basis that Mr Kwan was the seller/owner of the Beauty Products delivered to the Premises, and that Madam Wong allowed the landlord to discard them. Mr Kwan even claimed he retained title in the Beauty Products as unpaid seller, but he never averred he was in actual possession or had possessory title of such products. In any event, Mr Kwan’s Documents suggested that at best it was Art Express that was the seller/owner who sold the Beauty Products to Spa Sensations operated by Pacific Wide. X. Ms Tam’s submissions 54.Ms Tam conceded that Mr Kwan’s pleadings insofar as they pleaded breach of the BP Agreement by Madam Wong were on their own liable to be struck out (ie paragraphs 7B, 22, 33, 33A, 34 and 40 of the RAD&C). 55.But Ms Tam reminded that Madam Wong did not seek to strike out the counterclaim for conversion. For example, Mr Kwan in paragraphs 22 and 40 of the RAD&C averred inter alia that “[Madam Wong committed conversion of [Mr Kwan’s] properties and/or breach of the BP Agreement ……” and “[by] reason of the conversion and/or breach of the BP Agreement, [Madam Wong] has suffered loss and damages”, but Madam Wong sought to strike out such paragraphs only “insofar as it relates to the BP Agreement”. Further, Madam Wong did not apply to strike out paragraphs 36-37 and 39 of the RAD&C, which specifically relate to the conversion claim (see paragraphs 23, 24 and 30 above). 56.Ms Tam argued that a claim for conversion was different from a claim for breach of contract in that it was not dependent on the existence of a contractual relationship or on identification of the seller and buyer of the subject chattels. So “a person who is in wrongful possession of goods and unlawfully disposes with such possession is guilty of conversion”. Mr Tam submitted that in order for a claimant to have title to sue for conversion, he must either be in actual possession or entitled to immediate possession of the subject chattels, but it was unnecessary to show absolute ownership or even ownership. For example, a person with possessory interest as an agent was entitled to sue. 57.Ms Tam submitted that particulars of the Written and BP Agreements were still relevant to Mr Kwan’s claim for conversion (which Madam Wong did not seek to strike out) in order to show how the Beauty Products came to be stored at the Premises and the subsequent wrongful interference, and they should remain intact and not be struck out. XI. Discussion 58.It is true that Mr Kwan’s pleadings included claims for breach of contract and for conversion. In relation to the Beauty Products, he claimed for loss and damages as a result of Madam Wong’s (a) alleged breach of the BP Agreement and (b) alleged conversion of the Beauty Products. I am not concerned with (a) since Ms Tam conceded that pleadings on such cause of action are on their own liable to be struck out. Hence, I do not propose to deal with Ms Kei’s suggestion that Mr Kwan’s counterclaim in relation to the Beauty Products rested on conversion and not on breach of contract. 59.Ms Tam placed strong emphasis on the fact that Madam Wong did not seek to strike out Mr Kwan’s cause of action on conversion. In my view, the reason is straightforward. Although Mr Kwan pleaded that Madam Wong converted both the Equipment and the Beauty Products, Madam Wong did not seek to strike out the claim for conversion of the Equipment, so she could not and did not apply to strike out the pleaded cause of action on conversion in its entirety. In so limiting her objection, the effect of the prayer of reliefs in her Amended Summons is to strip the pleaded conversion claim of all material averments as to the Beauty Products, thus leaving the material facts and averments in relation to the Equipment intact. 60.But Ms Tam submitted that by only removing the reference to breach of the BP Agreement, paragraph 22 of the RAD&C in pleading “[by] reason of the above wrongful acts, the Plaintiff committed conversion of the Defendant’s properties” actually preserved Mr Kwan’s claim for conversion of the Beauty Products. I disagree. If paragraphs 7A and 7B of the RAD&C were struck out according to the Amended Summons, there will be no reference to the BP Agreement and/or the Beauty Products in the context of a conversion claim at all in the paragraphs preceding paragraph 22 of the RAD&C, so the phrase “above wrongful acts” in paragraph 22 can only refer to the alleged conversion of the Equipment and does not support any alleged conversion of the Beauty Products as part of the “Defendant’s properties”. 61.Ms Tam submitted that the landlord’s letter dated 12th December 2007 in paragraph 36 of the RAD&C (see paragraph 23 above) by referring to the Note which stated that “chattels left at the Premises as at 9th October 2007 were abandoned by [Madam Wong] and that [the landlord] may dispose of them at will” actually comprised an allegation of wrongful interference of the Beauty Products. But since the Amended Summons sought to strike out the whole of paragraphs 7A, 7B and 33A as well as parts of paragraphs 22, 32, 33 and 35 (insofar as they related to the BP Agreement and the Beauty Products) of the RAD&C, the remaining parts of the RAD&C pertaining to the conversion claim that precede paragraph 36 do not refer to the Beauty Products at all, so the phrase “the chattels left at the Premises” in paragraph 36 refers to wrongful interference of the Equipment and not of the Beauty Products. 62.Ms Tam next referred to paragraph 37 of the RAD&C which pleaded a factual matter, ie on 9th October 2007 the landlord discarded the Equipment and the Beauty Products without Mr Kwan’s knowledge or consent. Reference to the Beauty Products in this context does not support a claim for their conversion because if the disputed averments in the RAD&C were struck out, the remaining parts of the pleadings preceding paragraph 37 of the RAD&C at best only aver wrongful interference of the Equipment. A plea that the landlord discarded the Beauty Products is neither here nor there when no material facts in respect of the essential elements of such claim have been pleaded. Further, paragraph 37 of the RAD&C describes the landlord’s alleged wrongful act in contra-distinction to Madam Wong’s alleged wrongful acts set out in paragraphs 33, 34 and 36 of the RAD&C (and Madam Wong has applied to strike out references to the BP Agreement and the Beauty Products in those paragraphs). In any event, Mr Kwan discontinued his claim against the landlord on 6th October 2008. 63.Ms Tam submitted that paragraph 39 of the RAD&C in pleading that as a result of Madam Wong’s conversion “[Mr Kwan] was unable to perform certain beauty treatments on his clients using equipment stored at the Premises” also maintained the claim for conversion of the Beauty Products. If Madam Wong is successful in striking out the offending pleas referred to in the Amended Summons, the analysis above shows there will be no references to the Beauty Products and/or the BP Agreement material to the conversion claim in the paragraphs preceding paragraph 39 of the RAD&C. In any event, there is no express reference to Beauty Products in paragraph 39 of the RAD&C, which essentially is a compliant by Mr Kwan of loss of use of the Equipment. 64.Next, if paragraph 40 of the RAD&C is stripped of the references to the BP Agreement and the claim for the market value of the Beauty Products, the pleaded claim for loss and damages therein is unobjectionable as it is limited to a claim for the market value of the Equipment and loss of profit. 65.In light of the above, I am of the view that just because Madam Wong did not seek to strike out the entire cause of action on conversion, it does not mean she recognises or accepts that the pleaded claim for conversion of the Beauty Products is viable. In fact, the Amended Summons, which seeks to strike out the offending passages in relation to the BP Agreement and the Beauty Products, suggest otherwise. 66.The true question is whether the cause of action for conversion of the Beauty Products is liable to be struck out on the Second Limb. 67.The crucial issue is whether Mr Kwan has sufficient title to sue and/or has sufficiently pleaded his title to sue. According to Clerk & Lindsell on Torts 19th ed (2006) para.17-40 :
68.Clerk & Lindsell on Torts 19th ed (2006) at para.17-56 at p.1034 went on to say that “[for] these purposes, it seems that the immediate right to possession on which the owner relies must be a proprietary right; a mere contractual right will not do. ……” 69.In the present case, there is no dispute that at the time of the alleged conversion of the Beauty Products the Defendant was not in actual possession of the same. 70.According to the RAD&C, by the Written Agreement Art Express agreed to sell and Organic Beauty agreed to purchase beauty products. The Written Agreement stated on its face that it was made between Art Express and Organic Beauty, and signed by Mr Kwan as marketing manager on behalf of Art Express and by Madam Wong with the company chop of Organic Beauty affixed thereto. Plainly, both on pleadings and evidence, Art Express (a limited company) but not Mr Kwan (an individual) was the seller of the beauty products. 71.According to the RAD&C, the AE Letter confirmed that Organic Beauty’s account would be transferred to Spa Sensations upon signing of the Authorisation Form signifying acceptance of the terms/ conditions of the Written Agreement. According to the AE Letter disclosed by Mr Kwan, it was written under Art Express’ letterhead, signed by Mr Kwan as marketing manager, and addressed to Spa Sensations for the attention of Madam Wong. The letter stated that “we write to confirm that we agree to transfer your account in name of Organic Beauty to your new SPA provide that the new BRC of SPA Sensations can be submitted at your earliest convenience. Please also arrange to fill in a new Authorisation Form with the new company chop of SPA Sensations & your signature, which will signify your acceptance on the terms & conditions of our previous Sales Contract between Organic Beauty & our company. ……” 72.A few observations can be made. First, the AE Letter was addressed to Spa Sensations, which was operated by Pacific Wide (limited company). It has not been pleaded or contended that Pacific Wide’s separate legal existence can be ignored or the corporate veil should be pierced. Secondly, the AE Letter requested for the “BRC”, ie business registration certificate, of Spa Sensations, and for the Authorisation Form to be signed by Spa Sensations with its new company chop. It is evident from the AE Letter that Art Express intended to deal with Spa Sensations and not with Madam Wong in her personal capacity. Thirdly, the AE Letter was under Art Express’ letterhead and signed by Mr Kwan as marketing manager. It is therefore plain and obvious that Art Express (and not Mr Kwan) was the seller of the beauty products, which view is reinforced by the reference in the AE Letter to the Written Agreement between Organic Beauty and “our company”. 73.Quite simply, the AE Letter does not support the averment in the RAD&C that it was a letter to “the Plaintiff” (ie Madam Wong) by which “the Defendant” (ie Mr Kwan) confirmed the transfer of the account to Spa Sensations upon signing the Authorisation Form by “the Plaintiff” (ie Madam Wong) which would signify “the Plaintiff’s” (ie Madam Wong’s) acceptance of the terms/conditions of the Written Agreement. 74.This is supported by the Authorisation Form, which referred to Madam Wong as spa director, and she signed such form as “負責人” of “SPA SENSATIONS O/B PACIFIC WIDE HOLDINGS LIMITED”. Quite clearly, Madam Wong signed not in her personal capacity but on behalf of Spa Sensations/Pacific Wide, so the Authorisation Form again does not support the plea in the RAD&C that “the Plaintiff” (ie Madam Wong) signed the Authorisation Form. 75.It is therefore plain and obvious that by about September 2008, the beauty products trading account was between Art Express as seller and Spa Sensations operated by Pacific Wide as purchaser. There is no support for the averment in the RAD&C that from about 1st August to 3rd October 2007, “the Plaintiff” (ie Madam Wong) agreed to purchase and “the Defendant” (ie Mr Kwan) agreed to sell the Beauty Products. 76.As regards the Beauty Products, the SD Orders of various dates between 1st August and 3rd October 2007 plainly showed deliveries by Art Express (not by Mr Kwan) to Spa Sensations operated by Pacific Wide (not to Madam Wong). The SD Orders were under Art Express’ letterhead with its round company chop affixed at the space for “Authorised By”, and addressed to “SPA SENSATIONS O/B PACIFIC WIDE HOLDINGS” with its round company chop affixed to the space for “Received By”. The names of the Parties did not appear anywhere on the SD Orders. There is again no basis for the averment in the RAD&C that “the Defendant” (ie Mr Kwan) delivered the Beauty Products to the Premises. 77.In the circumstances, the averments in paragraphs 7A and 7B of the RAD&C are frivolous and vexatious in that they are not capable of reasoned argument, without foundation or cannot possibly succeed. They do not properly reflect how the Beauty Products came to be stored at the Premises, and cannot be relevant to Mr Kwan’s alleged claim for conversion of the Beauty Products. To require Madam Wong to meet such averments is unfair and oppressive. 78.Given the concession that pleas in respect of the alleged breach of the BP Agreement are liable to be struck out, I see no reason why the first sentence in paragraph 33 (ie plea of breach of the BP Agreement in that Madam Wong failed to pay the price of the Beauty Products), paragraph 33A (ie plea of wrongful repudiation of the BP Agreement), paragraph 34 (insofar as it relates to the plea that Mr Kwan accepted Madam Wong’s repudiation thereby terminating the BP Agreement) and paragraph 40 (insofar as it relates to the plea of breach of the BP Agreement) of the RAD&C ought not be struck out since they relate solely to the claim in contract and do not aid any claim in conversion. 79.Next, although a cause of action for conversion is not necessarily dependent on any underlying contract or buyer/seller relationship or ownership of the subject chattels, the claimant still must properly plead his title to sue. In respect of Mr Kwan’s plea as to his title to sue for conversion of the Beauty Products, since he did not have actual possession at the material time, it is necessary to ascertain whether he has pleaded any immediate right to possession of the Beauty Products. 80.As discussed above, Mr Kwan pleaded that he agreed to sell the Beauty Products (which averment and/or contention I have rejected), and that he was “the owner” of the Beauty Products (see paragraph 32 of the RAD&C). 81.But there is no plea in the RAD&C that Mr Kwan was entitled to possession to the Beauty Products even though a claimant’s title to sue (ie possessory title with an immediate right to the goods) is necessarily an essential element of the cause of action for conversion that must be specifically pleaded (see, for example, sample statement of claim in Form 10 at p.205 of Atkin’s Encyclopaedia of Court Forms in Civil Proceedings 2nd ed (1995) Vol.39 (1995) issue). 82.It was suggested that the FBP expanded the RAD&C by pleading that since Madam Wong failed to pay for the Beauty Products, under Clause 6 title in such products would not pass to her pending full payment, and “…… the Defendant [ie Mr Kwan] remained the owner of the Beauty Products”. Even so, there is no plea in the RAD&C that Mr Kwan was entitled to possession of the Beauty Products. 83.Clause 6 provides inter alia that “…… 所有未繳付的貨品，仍屬代理公司的財產直至全數繳清” (my emphasis) and “代理公司” is defined in the Written Agreement as Art Express. In my view, the FBP do not reflect a fair reading of this clause. As stated in paragraph 70 above, the seller of beauty products in the Written Agreement was Art Express (ie “代理公司”). Under Clause 6, when the purchaser failed to pay for the beauty products, title in such products remained with “代理公司” (ie Art Express). Even under the Written Agreement, the party entitled to possession of the Beauty Products was at best Art Express and not Mr Kwan. 84.I also agree with the observation in Third Supplement to Clerk & Lindsell on Torts 19th ed (up-to-date to July 2008) at para.17-40 at p.161 as follows : “It is suggested that the claimant must himself have possession (or the right to it) and will not have title to sue merely because a company which he controls has it. Such a rule was held in Thunder Air Ltd v Hilmarrson [1008] EWHC 355 (Ch) to apply where the defendant was in such a possession: by parity of reasoning it is suggested that it must equally apply to a claimant” (my emphasis). 85.Here, Mr Kwan has not pleaded any particulars or material facts for making the following leaps in logic :
There is no plea of any proprietary right to possession on the part of Mr Kwan or that the corporate veil of Art Express and/or Pacific Wide should be pierced so that their separate legal existence can be ignored. 86.I also refer to the above analysis and say there is no evidential support for the aforesaid leaps in logic. Rather, Mr Kwan’s Documents suggest that Art Express sold and delivered the Beauty Products to Spa Sensations in the course of its business pursuant to the Written Agreement (which trading account had been assigned to Spa Sensations operated by Pacific Wide), and any retention of title was in Art Express’ favour. In my view, the plea in paragraph 32 of the RAD&C that Mr Kwan was the owner of the Beauty Products is frivolous and vexatious, and is liable to be struck out. At best Mr Kwan’s involvement was as marketing manager of Art Express (see the Written Agreement and the AE Letter). 87.Ms Tam after finishing her oral submissions in opposition and in the course of Ms Kei’s oral submissions in reply applied for leave (i) to amend Mr Kwan’s pleadings to plead that he had immediate right to possession of the Beauty Products at the time of the alleged conversion, and (ii) to file further affidavit evidence to oppose the Amended Summons. I refused such application at the hearing and now set out my reasons :
I am of the firm view that such application must be dismissed. 88.In the circumstances, without a viable plea or available evidence of title to sue for conversion of the Beauty Products, I am of the view that, on pleadings as well as on evidence, the relevant pleas are frivolous and vexatious. Such defect cannot be salvaged by the pleaded averments in relation to (i) the alleged conversion of the Equipment and/or (ii) the plea that the landlord discarded the Equipment and the Beauty Products, or by amendment to the pleadings. 89.In conclusion, the following averments in Mr Kwan’s pleadings fell to be struck out (and I so order) :
90.I further order that Mr Kwan do within 14 days from the date hereof file and serve the Re-Re-Amended Defence and Counterclaim and the Amended Reply to Request for Further and Better Particulars of the Defence and Counterclaim to reflect that the aforesaid averments have been struck out. I also give leave to Madam Wong to file and serve Re-Amended Reply and Defence to Counterclaim (if so desired) within 14 days thereafter. XII. Costs 91.Even though paragraph 5 of PD19.1 does not apply to a striking out application based on the Second Limb so that there is no need to refer to Tadano South China Company Limited v Brightford Limited & anor CACV152/2006 (unreported, 17th August 2006) cited by Ms Tam, Ms Tam still complained that Madam Wong’s affirmation did not give full alert of the basis for asserting that Mr Kwan’s pleadings were scandalous, frivolous and vexatious. It was said that if Madam Wong had properly done so, the hearing for striking out would have been rendered unnecessary, and substantial time and costs would have been avoided. 92.I reiterate what I have said in paragraph 87(a)-(c) above. Madam Wong had all along relied on the Second Limb, which was first raised in the RDC and maintained in the Summons and Amended Summons. She even filed affidavit evidence in support of the same. In my view, the pleadings and Madam Wong’s affirmation speak for themselves and point unerringly to the lacuna in Mr Kwan’s pleadings in respect of his title to sue for conversion of the Beauty Products. 93.Further, although Mr Kwan conceded that the claim for breach of the BP Agreement was liable to be struck out, he chose to stand on his pleaded claim for conversion of the Beauty Products until the failed attempt to seek leave to amend pleadings and file affidavit evidence at the tail end of the hearing. 94.Still further, after the Summons was issued, Mr Kwan (well knowing that a striking out application was on foot) saw fit to re-amend the AD&C, and the focus of such re-amendments was on the subject of the striking out application, ie the BP Agreement and the Beauty Products. So Mr Kwan already had a stab in bolstering his pleadings on the very subject of the striking out application. 95.Ms Tam also made the point that Madam Wong did not object to the re-amendments made in the RAD&C. I do not agree the Order made by consent reflected any concession or admission on the part of Madam Wong. First, notwithstanding such re-amendments, Mr Kwan at the very least conceded that the pleaded claim for breach of the BP Agreement was on its own liable to be struck out. Secondly, the Order granted leave to Mr Kwan to re-amend the AD&C, but at the same time also granted leave to Madam Wong to amend (not withdraw) the Summons, so both Parties knew that notwithstanding aforesaid re- amendments to the AD&C, Madam Wong would still pursue her striking out application pursuant to the Amended Summons. 96.In the circumstances, there is no reason to depart from the usual principle that costs follow event in respect of the Amended Summons. I therefore grant a costs order nisi that save and except there be no order as to costs of the Amended Summons limited to Madam Wong’s striking out application based on the First Limb, Mr Kwan do pay to Madam Wong costs of and occasioned by the Amended Summons, including all costs reserved (if any), to be taxed if not agreed with certificate for counsel. Although taxation of costs is reserved to the discretion of the taxing master, I should point out that, apart from submissions relating to paragraph 5 of PD19.1, the grounds for both the First and Second Limbs are largely the same, and Madam Wong should be substantially entitled to costs of the application.
Representation: Ms Carmen Kei instructed by Messrs C K Mok & Co for the Plaintiff by original action and 1st Defendant by counterclaim. Ms Bonnie Tam instructed by Messrs K M Cheung & Co for the Defendant by original action and Plaintiff by counterclaim. |
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