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Secretary For Justice For And On Behalf Of The Commissioner Of Police v Chun Ngai Jewellery Design Co Ltd (In Compulsory Liquidation) And Others

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
Judgment Date26 April 2017
Year2017
Citation[2017] 2 HKLRD 1114
Judgement NumberHCMP1362/2015
Subject MatterMiscellaneous Proceedings
CourtHigh Court (Hong Kong)
HCMP1362A/2015 SECRETARY FOR JUSTICE FOR AND ON BEHALF OF THE COMMISSIONER OF POLICE v. CHUN NGAI JEWELLERY DESIGN CO LTD (IN COMPULSORY LIQUIDATION) AND OTHERS

HCMP 1362/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1362 OF 2015

_________________________

IN THE MATTER of Order 17 of the Rules of the High Court (Cap 4A)
and
IN THE MATTER of an application by The Secretary for Justice for interpleader relief against the claims between the Claimants herein

_________________________

BETWEEN
SECRETARY FOR JUSTICE FOR AND ON BEHALF OF THE COMMISSIONER OF POLICE Applicant
and
CHUN NGAI JEWELLERY DESIGN CO LTD (IN COMPULSORY LIQUIDATION) 1st Claimant
ZIBA JEWELLERY LIMITED AS CENTRE POINT TRADING COMPANY 2nd Claimant
BLUE DIAM COMPANY LIMITED TRADING AS BLUE DIAM COMPANY 3rd Claimant
(discontinued)
ARIHANT GEMS INTERNATIONAL LIMITED TRADING ARIHANT GEMS 4th Claimant
TOP SUCCESS JEWELLERY COMPANY LIMITED 5th Claimant
TRENDY GROUP INTERNATIONAL HOLDINGS LIMITED 6th Claimant
KA HO JEWELRY CO., LIMITED 7th Claimant
POLYGOLD ENTERPRISES LIMITED TRADING AS POLYGOLD JEWELLERY COMPANY 8th Claimant
FIRESTAR DIAMOND LIMITED 9th Claimant
(discontinued)
PAN PACIFIC DIAMOND COMPANY LIMITED 10th Claimant
VEER DIAMOND LIMITED 11th Claimant
BANTHIA VIRENDRA TRADING AS NIKITA GEMS 12th Claimant
IN DIAMONDS LIMITED 13th Claimant
DIASUN EXPORTS LIMITED 14th Claimant
EMA (HK) LMITED 15th Claimant
(discontinued)
HO MEI CHUN 16th Claimant
CHAN WING HUNG 17th Claimant
CHEUNG SUK YEE 18th Claimant
OI WAH ESTATE AND INVESTMENT LIMITED TRADING AS TAK WAH PAWN SHOP 19th Claimant
WONG YICK CHONG, POON KWOK KEUNG, YEUNG YIN WAI AND LEUNG YUET PING TRADING AS WAH ON SENG KEE PAWNSHOP 20th Claimant
(Defendant)
REKHA DAGA TRADING AS K.V.IMPEX 21st Claimant
ELIYAHU YONA DIAMONDS (ASIA) LIMITED 22nd Claimant
(Plaintiff)

_________________________

Before: Deputy High Court Judge Lee in Chambers

Date of Hearing: 11 April 2017

Date of Judgment: 26 April 2017

_________________________

JUDGMENT

_________________________


INTRODUCTION

1. This is an appeal by the 20th Claimant (“the Pawnshop”) against the decision of Master Chow[1] who decided in an interpleader proceedings taken out by the Commission of Police that the subject diamond (“the Diamond”) was the property of the 22nd Claimant (“EY”) and ordered that it be returned to EY.

2. There is no dispute that EY was the original owner of the Diamond which was subsequently seized by the Police from the Pawnshop. The person who had pledged the Diamond was one surnamed Tsang who has now been declared a bankrupt and whose company, Chun Ngai Jewellery Design Co Ltd,[2] has now been in liquidation.

3. The contestants of the Diamond are the Pawnshop and EY. The question for this court is whether the master was right that, as between the two of them, EY has a better claim to the Diamond than the Pawnshop.

CONTENTIONS OF THE PARTIES

4. EY’s case is that it had all along retained the property of the Diamond even after its possession was passed to their consignee IN Diamonds Ltd (“IN”).[3] Since Tsang’s company[4] had obtained only possession of the Diamond from IN and then Tsang personally pledged it with the Pawnshop without EY’s knowledge and consent, neither Tsang’s company nor Tsang had property of the Diamond. Therefore, as between EY and the Pawnshop, the former has a better claim to the Diamond than the latter whose title could be no better than Tsang’s. This, it is submitted, is a clear application of the maxim “nemo quod non habet”. As regards s 27(2) of the Sale of Goods Ordinance (“SOGO”) (Cap 26) and s 3(1) of the Factors Ordinance (“FO”) (Cap 48) (“the two provisions”), both of which are relied upon by the Pawnshop, EY submits that the party seeking to rely on the protection under the two provisions has to be the party taking under the deposition that is being challenged. In the present case, it is the deposition to the Pawnshop that is being challenged and so that it is the fides of the Pawnshop that has to be considered. It is further argued that the Pawnshop cannot rely on the two provisions as it had not acted in good faith and that was evidenced by the fact that the Diamond had been pledged to them grossly undervalued. Lastly, it is argued that Tsang’s company and Tsang were separate legal entities, so that any property which Tsang’s company may have in the Diamond had nothing to do with Tsang and that there is no evidence to show that Tsang was acting as the agent of his company when he pledged the Diamond with the Pawnshop.

5. The Pawnshop’s case consists of several alternative limbs. Firstly, it is argued that although IN was not the owner when it sold the Diamond to Tsang’s company, there was evidence that IN subsequently obtained property of the Diamond from EY, so that Tsang’s company’s title in the Diamond became perfected through the doctrine of “title feeding”: Blundell-Leigh v Attenborough.[5] As such, even though Tsang’s payment cheque to IN was subsequently dishonoured, IN’s remedy against Tsang’s company (and similarly EY’s remedy against IN) lied in damages only. Secondly, even assuming that IN had never had the property of the Diamond, it was a “buyer in possession” so that when it sold the Diamond to Tsang’s company, the effect of the two provisions was such that the latter obtained a good title to the Diamond. Furthermore, there can be little doubt that Tsang, who was the sole shareholder and director of his company, was acting with the authority of his company when he entered into the Pawn Agreement with the Pawnshop and it matters not that the pledge was done in the name of Tsang rather than Tsang’s company. This is because Tsang’s company was an undisclosed principal. Therefore, when the Diamond was not redeemed within the time limit as stipulated in the Pawn Agreement[6], the Pawnshop was entitled to exercise its contractual right under to sell the Diamond to others in order to recover its loan advanced. Thirdly, it is argued that if Tsang’s company was not the owner, it was a “buyer in possession” from IN so that the Pawnshop could still obtained the property of the Diamond by the operation of the two aforesaid provisions and by virtue of the Pawn Agreement.

6. Despite the Pawnshop’s expressed reliance on the Pawn Agreement and its various references in their affirmations filed for the purpose of the interpleader proceedings before the master, the same had never been exhibited. Therefore, there is now an application by the Pawnshop to adduce the memorandum of the Pawn Agreement as fresh evidence for the purpose of this appeal. The application is opposed by EY.

THE ISSUES

7. There is no dispute between the parties that, as the loan by the Pawnshop to Tsang was more than $100,000, the Pawnbrokers Ordinance, Cap 166, is not applicable to the present case.[7] It has been the expressed position of the Pawnshop that they rely on the terms of the Pawn Agreement rather than s 17 of that Ordinance.

8. In view of the contentions of the parties, the major issues in the present case are as follows:

(i) whether the memorandum of the Pawn Agreement should be admitted as fresh evidence for the purpose of this appeal;

(ii) whether the property of the Diamond had already been passed from EY to IN;

(iii) if not, for the purpose of this case whether it is relevant to consider if Tsang’s company had become the owner of the Diamond through its purchase from IN by operation of the two provisions;

(iv) if so, whether Tsang’s company had obtained a good title to the Diamond through its purchase from IN by operation of the two provisions; and

(v) if not, whether the Pawnshop had obtained a good title of the Diamond through its dealing with Tsang’s company or Tsang by operation of the two provisions.

GENERAL LEGAL PRINCIPLES

9. It is well‑established that the present appeal is by way of an actual rehearing and I should treat the matter as though it came before me for the first time. I will give the weight it deserves to the previous decision of the master but I am in no way fettered by the previous exercise of her discretion: see §58/1/2, Hong Kong Civil Procedure 2017 (“HKCP”).

THE FACTS

10. The following facts, which are not in dispute, are adapted from the written submission of Mr Yau (and with him Mr Bache Sit), counsel for the Pawnshop:

(a) The Diamond (with the GIA certificate) was consigned by EY Diamonds to IN on an unknown date.[8]

(b) Later on 22 May 2012, IN consigned the same to Tsang’s company. [9]

(c) On 23 May 2012, Tsang pledged the Diamond with the Pawnshop for HK$450,000.[10]

(d) On 11 June 2012, Tsang on behalf of his company agreed to purchase the Diamond from IN. Tsang’s company paid the price by way of a cheque post‑dated to 28.06.2012 of HK$834,940.[11]

(e) After securing the sale to Tsang’s company, IN agreed to purchase the Diamond from EY Diamonds at US$102,340 (approximately HK$798,252).[12] The agreement was evidenced by an invoice dated 18 June 2012 (“the Invoice”) issued by EY Diamonds.[13] The important part of the Invoice, which was expressed in somewhat ungrammatical language, is as follows:

“The goods described and valued below are delivered to you for examination and inspection and are the property of Eliyahu Yona Diamonds Ltd. And subject to their order and shall be returned to them on demand. Such merchandise until returned to them and actually received, are at your risk from all hazards. No right or power is given to you to sell, Pledge,...

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