West Coast International Trading Ltd t/a Dandelion Fine Arts v. Chelsea Art Co Ltd

HCA 1636/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1636 OF 2010

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BETWEEN

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Before: Mr Registrar K.W. Lung in Chambers (Open to the public)

Date of Hearing: 14 April 2015

Date of Decision: 14 April 2015

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DECISION

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THE APPLICATION

1.This is the hearing of the plaintiff’s summons dated 5 January 2015 for leave to amend its Re-Amended Statement of Claim (“RASOC”) as per the draft Re-Re-Amended Statement of Claim attached thereto (“the RRASOC”).  The defendant agrees to the proposed further amendments in paragraphs 1(b), 5, 10, 11, 17, 18, 23-27 and (4) of the prayer for relief.  However, the defendant objects to the remainder of the proposed amendments set out as follows:

a. Amendments relating to the clarification of the cause of action of both conversion and detinue (§§ 9, 12, 19, 21 of the RASOC);

b. Amendments relating to the fake Painting (§11A of the RASOC); and

c. Amendments relating to the particulars of loss and damages (§12, 22A-22F, prayers (1), (2), (2a), (3) of the RASOC).

2.In the course of discussion today, the defendant points out that the plaintiff is not seeking to claim on detinue for the 2^nd painting only, but on all four paintings, which is contrary to what the plaintiff submits in the written submissions.  Mr. Wang, counsel for the plaintiff, confirms that the plaintiff now only claims on detinue for the 2^nd painting only by making clarification to paragraph 22A by deleting “and detinue” in the third line and adding after the words 4^th Paintings “and detinue of the 2^nd painting”.  Defence counsel agrees that this would clarify the plaintiff’s claim on detinue on the 2^nd painting only.  The defendant confirms that it has no objection to the proposed clarification. The discussion below will be on this basis.

3.The defendant opposes the above amendments on the following grounds:

a. The proposed amendments seek to slip in a completely new cause of action based on detinue.  However, the averments in the RRASOC are bound to fail as they are wholly deficient and fail to address even the basic elements of the tort of detinue. (“No merit in detinue”)

b. Furthermore, the proposed amendments are objectionable since they would introduce a new cause of action after the expiry of the applicable limitation period. (“Limitation”)

c. The proposed amendments regarding the plaintiff’s alleged consequential loss go with the plaintiff’s averments on detinue and, in any event, are bound to fail both in law and on the facts of the case. (“No merit on consequential loss”)

d. Lastly, there has been unexplained delay on the part of D in making the Amendment Application. (“Delay”)[1]

4.The parties are legally represented.[2]

5.Before discussion of the issues for the application, let me thank counsel for their assistance in preparing the written submissions with the facts stated therein and the issues of dispute, so that I may concentrate on the resolution of their disputes for my Decision.

THE FACTUAL BACKGROUND

6.I shall now adopt thefacts as set out by the defendant in the written submissions as the factual background of our discussion below:

“3. In this Action, P claims against D for conversion of four paintings (i.e. the 1^st, 2^nd, 3^rd and 4^th Paintings), which were allegedly stolen by Candy Tsang, P’s ex-employee, passed on to her husband, Thomas Yeung, and sold to D. It is D’s case that it purchased the 1^st, 3^rd and 4^th Paintings and another oil painting of Chen Yifei (陳逸飛) with the theme of “water village” dated May 1994 (“the May 1994 Water Village Painting”) from Thomas Yeung without knowledge of the alleged thefts or any dealing between Thomas Yeung, Candy Tsang and P. D subsequently re-sold the 1^st, 3^rd and 4^th Paintings and the May 1994 Water Village Painting. The 1^st, 3^rd and 4^th Paintings were traced back and returned to P. Subsequently, D managed to obtain the May 1994 Water Village Painting with a view to returning it to P. However, P disputes that the painting obtained by D is not the 2^nd Painting which was allegedly stolen by Candy Tsang.

4. P claims an order for the delivery up of the 2^nd Painting or alternatively damages, as well as damages for inconvenience and loss of enjoyment of all four paintings. D resists P’s claims on the basis that D had only purchased the May 1994 Water Village Painting but not the 2^nd Painting and P did not suffer any loss. D also relies on the defence of contributory negligence.”[3]

THE LEGAL PRINCIPLES

7.The defendant relies upon the relevant legal principles set out in Tsang Foo Keung v Chu Jim Mi Jimmy (unrep, HCA 7140/1995, 8 October 2013).  It is not necessary to rehearse those legal principles here. In particular, the defendant relies upon the following legal principles:

a. The guiding principle is that the amendments ought to be allowed for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings. It can be made at any stage of the proceedings, subject to RHC O.20 r.8(1A), which requires that the order is necessary either for disposing fairly of the cause or matter or for saving costs.

b. In effect, an opposition to the application for amendment is a mirror image of an application to strike out a pleading on the basis that it discloses no cause of action.  Therefore, an amendment should not be allowed if it is clear that it will not succeed at trial and/or bound to fail.[4]

c. Delay in the making of the application is one of the factors for the court’s consideration in exercising its discretion.  Hesson Development Ltd v Tang Ki Fan Tso [2004] 1 HKLRD B4 at §5.  But the court will require good explanation for the delay, especially if it is a last minute application.  DBS Bank (Hong Kong) Ltd v Sit Pan Jit (unrep., HCA 382/2009, 6 February 2014) at §19.

8.I shall now discuss each of the grounds of opposition as raised by the defendant.

NO MERIT IN DETINUE

9.It must be stated clearly at the outset of the discussion below that now the defendant has amended its defence to dispute the identity of the 2^nd painting, the subject matter in dispute in these proceedings.  The defendant originally did not dispute the identity and it had applied to this Court for amendment, which application was refused for lack of explanation.  The defendant appealed and succeeded.  If the defendant succeeds to dispute the identity of the 2^nd painting that it had bought and sold, then there is no question of liability on its part in respect of the loss of the 2^nd painting by the plaintiff.  The plaintiff maintains that the 2^nd painting was stolen from it and had been sold to the defendant.

10.The defendant says that the plaintiff’s proposed amendment to plead detinue is bound to fail for the reason that:

“(a) There is no averment of any demand made by P for the return of each of the four paintings when the paintings were in D’s possession and, if so, how and when it was made. At §§10 and 11 of the RASOC, P only alleged that it had demanded for the delivery of the 1^st and 2^nd Paintings and such demand was made in 2010 when the paintings were not in D’s possession [43-44].

(b) There is no averment of any refusal by D of P’s demands to return the four paintings to D.

(c) There is no averment that, at the time of the demand, D was in actual possession of any of the paintings or was estopped from denying that it was still in actual possession by reason of D’s own wrongful conduct.”[5]

11.The defendant’s argument is based upon the authority of Diplock LJ (as he then was) in General and Finance Facilities Ltd. v Cooks Cars (Romford) Ltd. [1963] 1 W.L.R. 644 at 648-651.  In the judgment, the learned judge was discussing the difference of an action on conversion and detinue as he said: “There are important distinctions between a cause of action in conversion and a cause of action in detinue.  The former is a single wrongful act and the cause of action accrues at the date of the conversion; the latter is a continuing cause of action which accrues at the date of the wrongful refusal to deliver up the goods and continues until delivery up of the goods or judgment in the action for detinue.”  This is on the basis of bailment of the property by the plaintiff to the defendant, the absence of which will render a different consideration as he said in the same paragraph: “In the absence of bailment, an unqualified refusal to comply with a demand for delivery up of a chattel made by the person entitled to possession may amount to conversion as an alternative to detinue if the defendant at the time of the refusal was in actual possession of the chattel.”[6]

12.The undisputed fact of this case is that the plaintiff had never bailed the 2^nd painting with the defendant.  The defendant relies upon “If he has wrongfully delivered it to a third person before the date of the demand the prior wrongful delivery constitutes the conversion, not the subsequent refusal to comply with the demand…” to support its argument that only conversion could be claimed.  In my view, the learned judge did not mean that the plaintiff was not entitled to claim detinue.  Rather, he opined that conversion took place upon the wrongful delivery of the property to the third person, not at the time of the refusal to comply with the demand.  It is the timing of the tort under discussion.  It is quite contrary to common sense that if the plaintiff is entitled to claim conversion in the first place, but is not entitled to claim on detinue if the defendant refused to return the property upon demand subsequently.  In Banks v Ferrari [2000] NSWSC 874 at paragraph 60 of the judgment, the court held that if the goods were not in the actual possession of the tortfeasor, “the tortfeasor must have wrongfully parted with possession.”

13.The defendant cannot say that there had not been demand by the plaintiff for the return of the 2^nd painting as in paragraph 11 of the RASOC, the plaintiff had, through its solicitors corresponded with the defendant’s then solicitors for the return of the 2^nd painting.  The plaintiff pleaded that the defendant had failed to deliver the 2^nd painting or pay damages in lieu thereof to the plaintiff.  To say the plaintiff had not pleaded that the defendant had refused to return the 2^nd painting to the plaintiff as pleaded in paragraph 11 verges upon a game of words.  This is simply not correct.  We must bear in mind what the Court of Final Appeal said: “It is important to bear in mind that litigation should not be treated as a game and Rules do not exist for the sake of compliance with them as an end in itself; they exist for the purpose of ensuring that disputes before the courts are justly resolved.”  See paragraph 34 of Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935 by the CJ.

14.I do not support the defendant’s argument on this issue.

LIMITATION

15.Since I have held against it on the “No merit” issue, time for the claim on detinue should commence in November 2010 instead of 2007.  This will bring the plaintiff’s claim on detinue within time.

16.There is no dispute that the defendant had obtained the 2^nd painting on 12 March 2007 and it sold it on 26 October 2007.[7]  The plaintiff has pleaded in paragraph 11 of its RASOC that its solicitors had in November 2010, made the demand by correspondence with the defendant’s then solicitors.  But the defendant had failed to return the 2^nd painting to it. To this paragraph, the defendant had admitted in its Re-re-amended Defence[8] that it had not returned the 2^nd painting to the plaintiff.  It had not denied the demand being made in November 2010 by the plaintiff.  It had amended its defence to dispute the identity of the 2^nd painting that the defendant had purchased from Thomas Yeung and says that it was not the plaintiff’s 2^nd painting.  If the defendant is successful, the plaintiff’s claim in respect of the 2^nd painting must fail, as admitted by Mr. Wang.

17.The argument on limitation fails.

NO MERIT ON CONSEQUENTIAL LOSS

18.The defendant first relies upon Chung J’s comments in the appeal on the plaintiff’s case.  I do not consider that it is helpful for my determination of discretion for the plaintiff’s application. Chung J.  has not ruled out the possibility of the plaintiff’s proposed claim for detinue in the hearing.  At least, this issue is arguable at the trial.  Since the defendant agrees with the Court of Appeal’s view in Natamon Protpakorn v Citibank, N.A. [2009] 1 HKLRD 455 that to deny the plaintiff’s application for amendment is akin to striking out of the plaintiff’s claim, it must be plain and clear case that the court should exercise its discretion against the plaintiff.  In case of doubt, the matter should be submitted to a trial.

19.The defendant agrees that it is correct that an intention to use or hire out goods may not be necessary for a claim for a reasonable hire charge.  Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1991) 32 NSWLR 175 at 182G-183A.  However, as submitted by the defendant, in that case, what is required is that the goods were in fact detained and used by the defendant for his own benefit.  However, what is the definition of “use” is ambiguous and subject to argument.  In this case, the defendant had sold the 2^nd painting for profit and used the money.  Would this amount to “use”?  This may be for the trial judge to resolve.

20.The defendant has no answers to the authorities cited by the plaintiff in its written submissions, derived from the judgment of the House of Lords in The Owners of The Steamship “Mediana” v The Owners, Master and Crew of the Lightship “Comet” [1900] AC 118 at 116 :

a. McGregor at §33-067 (A12) commented that the claimant “should be able to recover the market rate of hire for the goods between conversion and judgment, certainly where he was in the habit of hiring out the goods and possibly even where he was not”.

b. Clerk & Lindsell at §109 (A11) commented that “A similar rule has been applied to property the claimant never intended to hire out at all, where there was nevertheless a figure that might be called a reasonable hire charge, or something analogous”.[9]

21.What the defendant proposes is that the plaintiff can only be able to claim damages on detinue if it can prove that the defendant had detained the goods for its own benefit.  But in the same judgment, the court had also held that “if the use of an article has a recognisable hiring value then such value constitutes the measure of damages …” at 182D.  It seems that in that judgment, the court had not expressed its view whether though the defendant had not derived benefit from possession and refusal of return of the property to the plaintiff, nevertheless had cause damage to the plaintiff, then the plaintiff would still be entitled to claim damage on detinue.  Common sense and sense of fairness question why the plaintiff cannot claim against the defendant in those circumstances.  Whether the plaintiff is able to prove its loss or damage is the issue for the trial.

22.At most, this issue is arguable.  On the same legal principle as above, the issue should be submitted to trial.

23.The defendant fails on this issue.

24.Before I discuss delay, the defendant has, in the written submission at paragraph 30 argued that the plaintiff’s proposed amendment that the painting that the defendant intended to return to the plaintiff as the 2^nd painting was a fake painting is immaterial and unnecessary.  The defendant puts up the reason that because the defendant has now raised the defence that what the defendant had purchased from Thomas Yeung and sold it to a third party was not the 2^nd painting as alleged by the plaintiff, an issue of the identity of the plaintiff’s 2^nd painting as pleaded in the pleadings, the real issue for resolution of the trial is the identity of the painting.  Whether it is a fake painting is irrelevant now.

25.However, this argument has missed the point that the plaintiff has pleaded that the defendant had purchased the 2^nd painting from Thomas Yeung.  The original defence before the amendment was that the defendant had no issue on the identity of the 2^nd painting.  It only argued that what it had bought from the third party and intended to return to the plaintiff was that 2^nd painting.  The plaintiff argued that it was a faked painting. This return of the 2^nd painting happened after the plaintiff’s Statement of Claim.  This issue remains alive at trial if the plaintiff is able to prove that the painting stolen from it and sold by Thomas Yeung to the defendant was the 2^nd painting as pleaded.  The plaintiff has never abandoned its claim that the 2^nd painting stolen from it was sold to the defendant.  At trial, the defendant will be cross-examined for the reason to change its defence of identity, the reason of which was not given before me when I heard the application for amendment by the defendant.  Nor was it given before Chung J. on appeal as I could see from Chung J’s judgment.[10]  In passing, I think the plaintiff has not brought to my attention or to Chung J’s attention the decision of the Court of Appeal in Leung Kin Fook & Others v Eastern Worldwide Co Ltd & Another (unreported, CACV 184/1990, 8 February 1991, per Power JA at page 3)  This issue may touch on the credibility of the defendant’s evidence.  This will be an issue to be resolved by the court.  As I understand it, the parties will be arguing on the expert evidence for the verification of the genuineness of the 2^nd painting before Chung J, the docketed judge of this matter.

26.I do not accept the defendant’s argument on this issue.

DELAY

27.This is the gist of the defendant’s complaint:  “Had P acted on Chung J’s suggestion and applied for leave to amend its pleadings immediately after the Decision, this case would have been ready to be set down for trial at the CMC.  There has been a delay of more than 8 months since the handing down of the Decision and no explanation whatsoever has been given by P to explain such delay.  P’s conduct is in blatant disregard of the underlying objectives of the CJR as enshrined in RHC O.1A.”[11]

28.As conceded by the defendant, the present application, if disallowed, would be tantamount to striking out of the plaintiff’s proposed claim on detinue, the Court, in exercising its discretion should bear in mind the guidance of the higher courts.  In Wing Fai Construction Company Limited (in Compulsory Liquidation v Yip Kwong Robert & Others (2011) 14 HKCFAR935 at §75(5), the Court of Final Appeal adopted the following legal principles on delay:

‘I would also adopt what was said by Neuberger J in Annodeus regarding the court’s consideration of delay:- “Ninthly, it appears to me that it is normally relevant to consider the following factors. First, the length of the delay; secondly, any excuses put forward for the delay; thirdly, the degree to which the claimant has failed to observe the rules of court or any court order; fourthly, the prejudice caused to the defendant by the delay; fifthly, the effect of the delay on trial; sixthly, the effect of the delay on other litigants and other proceedings; seventhly, the extent, if any, to which the defendant can be said to have contributed to the delay; eighthly, the conduct of the claimant and the defendant in relation to the action; ninthly, other special factors of relevance in the particular case.’”

29.Here, we have the following scenarios for consideration:

a. there has not been any trial date fixed for the matter;

b. the issue of expert evidence is still to be determined by the trial judge;

c. the defendant has not shown any prejudice by the plaintiff’s delay in taking out the application;

d. on a global view of the progress of the matter, the defendant had caused the delay in the proceedings;

e. the Re-Amended Statement of Claim was filed on 3 May 2012;

f. the defendant only took out the application to amend on 23 October 2013, a delay of one year and five months;

g. the defendant has yet given any explanation for its withdrawal of its earlier admission of the identity of the 2^nd painting.

30.On a fine balance of the above relevant factors, it is clear that this Court should not dismiss the plaintiff’s application.

31.On the reasons above, I grant the order in terms of the plaintiff’s summons and as clarified by the plaintiff today and not objected by the defendant.

COSTS AND ORDER

32.On the question or costs, the costs should follow the event (with counsel certificate).  However, this Court should take into consideration that the plaintiff has made further amendment to the proposed amendments to the Statement of Claim.  The costs will be summarily assessed under O.62, r.9A at $72,000, taking into account that some costs has to be deducted for the plaintiff’s clarification today, to be paid by the defendant to the plaintiff within 14 days from the date of this order.

33.The court shall now make an order in terms as follows:

a. An order in terms of the plaintiff’s summons as clarified;

b. The defendant is at liberty to make consequential amendments within 28 days from the date of this order and the plaintiff be at liberty to make the consequential reply within 14 days thereafter;

c. The costs of the consequential amendments be to the defendant, to be taxed, if not agree, in any event;

d. Costs of the application and the hearing today be as per para 32 above.

Mr Clark Wang, instructed by Hau, Lau, Li & Yeung, for the plaintiff

Mr Justin Lam, instructed by Kao, Lee & Yip, for the defendant