In Hengfei Holdings Ltd v Duiba Group Ltd and another, the Hong Kong Court found that D1 was liable for converting and detaining P’s share certificate, and clarified the law of conversion and detinue.
“ … in a suitable case, an unequivocal refusal may be inferred from mere inactivity in the face of an unequivocal demand.”
Core dispute
- The plaintiff (Hengfei Holding Ltd) alleged conversion and detinue against:
- 1st Defendant: Duiba Group Ltd (the listed company)
- 2nd Defendant: Mr Chen Xiaoliang (Duiba’s CEO and controlling shareholder)
- The chattel: a share certificate representing the plaintiff’s 27,824,400 Duiba shares.
- Key issue: Whether the plaintiff made a valid, unequivocal demand for return of the certificate on specified dates, and whether the defendants refused, failed, or delayed in returning it so as to constitute conversion/detinue.
Legal principles applied
- Conversion by unlawful detention typically requires: (i) the defendant’s possession and (ii) refusal to surrender on a valid demand. A demand must be unconditional and specific; refusal can be inferred from inaction beyond a reasonable time.
- Detinue (as applicable in Hong Kong) is a continuing cause of action commencing on wrongful refusal to redeliver on demand.
- In a suitable case, an unequivocal refusal may be inferred from mere inactivity in the face of an unequivocal demand. Otherwise a defendant in possession of a claimant’s property could stymie conversion proceedings by doing and saying nothing.
Findings on demands and refusals
- Evidence: WeChat exchanges between Mr Xu (for the plaintiff) and Ms Chen (Duiba executive), in which Xu asked about the “small book” proof (share certificate), confirmed it was with lawyers, and Ms Chen replied it would be returned “the day before the end of the lock-up.”
- Court’s view: Objectively, Xu made a clear, unconditional demand for the certificate upon expiry of the lock-up. Ms Chen understood it that way.
- Refusal: Duiba’s failure to hand over the certificate forthwith on 7 November 2019 (lock-up expiry) amounted to an unequivocal refusal; the court rejected the “inadvertence” argument and found the failure intentional on the facts.
- Result: Conversion and detinue established from 7 November 2019.
Key takeaways
- Clear, contemporaneously evidenced demands through company representatives can suffice; precise date need not be spelled out where context makes timing obvious (e.g., lock-up expiry).
- Refusal can be inferred from failure to comply forthwith or within a reasonable time after demand, even without express words.
Read the judgment here at: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=171755&currpage=T
Mr Calvin Cheuk acted for the Plaintiff.
