Ming Tak Motor Vehicles Co Ltd v. Water Motors Group Ltd and Another
Read the full judgment text of HCA 2124/2014 on BabelCite. This High Court CFI judgment was delivered on 11 April 2018.
1. The plaintiff (“ Ming Tak ”) and the 1 st defendant (“ Water Motors ”) used to invest jointly in the buying and selling of taxis with licences from 2010 to 2014. This dispute between them is on how much one owes the other after the settlement of all their investments in the joint venture. The claims and counterclaims involve 10 taxis with licences. Water Motors abandoned two counterclaims as the amounts involved were small. The dispute therefore revolves around 8 taxis and licences.
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HCA 2124/2014 [2018] HKCFI 741 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2124 OF 2014 ____________
____________ Before: Hon L Chan J in Court Dates of Hearing: 4-8, 13 and 14 December 2017, 5, 8 January and 12 February 2018 Date of Judgment: 11 April 2018 ______________ J U D G M E N T ______________ 1.The plaintiff (“Ming Tak”) and the 1st defendant (“Water Motors”) used to invest jointly in the buying and selling of taxis with licences from 2010 to 2014. This dispute between them is on how much one owes the other after the settlement of all their investments in the joint venture. The claims and counterclaims involve 10 taxis with licences. Water Motors abandoned two counterclaims as the amounts involved were small. The dispute therefore revolves around 8 taxis and licences. 2.The licence numbers of the 8 taxis are:
3.Mr Chan Shek Wai, the 2nd defendant (“SW Chan”) is and was at all material times a director, shareholder and the general manager of Water Motors. Ming Tak also claimed that SW Chan had agreed to be liable and bound to pay Ming Tak what was owed to it by Water Motors. It thus sued SW Chan in this action for alleged breach of “assurance” and fiduciary duty. However, Mr Kee, counsel for Ming Tak withdrew these claims on the first day of the trial. 4.The following witnesses gave evidence at the trial:
5.Madam Ho Mei Lin (“Madam Ho”) was originally a witness for Ming Tak, but she did not appear to testify. Her witness statement dated 17 December 2015 at [B/132] was not admitted pursuant to the order made by B Chu, J on 7 September 2017 [A/98-2]. BACKGROUND 6.In about late 2009, Lui was introduced by Cheng to SW Chan. Lui, Water Motors and Cheng then invested in taxis and taxi licences jointly. Cheng later dropped out. 7.Lui and Madam Chen incorporated Ming Tak in about 2010. Ming Tak then substituted Lui in the joint venture with Water Motors. TERMS OF THE JOINT VENTURE Ming Tak’s pleaded terms of the joint venture 8.Ming Tak pleaded in the re-amended statement of claim (“statement of claim”) that Lui and Water Motors had begun to invest jointly in buying and selling of taxi licences in 2009. Ming Tak took over Lui’s role in 2010 after its incorporation. It alleged that the terms of the joint venture are that:
Water Motors’ pleaded terms of the joint venture 9.Water Motors pleaded in the re-re-amended defence and counterclaim (“defence and counterclaim”) that there are two types of trading contracts. Contracts that trade in taxis with licences to be delivered forthwith are called current contracts and those that trade in taxis with licences to be delivered in future are called future contracts. A future contract does not carry any right to any particular taxi except the type and year of make or any particular licence. The taxi and licence number would only be known upon delivery. The rights under future contracts are frequently sold and sub-sold among the members of a Hong Kong Association of Taxis and Mini Buses (“the Taxi Association”) before completion. Unless the future contract stipulates that completion must take place, the buyer in a downturn market could choose not to complete on the completion date by forgoing his initial deposit. 10.Prices of taxi licences in current and future contracts fluctuate fiercely. Trading in taxi licences is thus very speculative and risky. Decisions to buy or sell have to be made promptly. 11.Through Cheng’s introduction, Lui orally agreed with Water Motors and SW Chan that Lui and Water Motors would jointly trade in taxi licences and taxis on condition that Water Motors and SW Chan could make all decisions on the purchases and sales including prices of future contracts on or before their maturity without consultation with Lui. 12.Water Motors pleaded a number of reasons for Lui’s agreement to the said condition. They are summarized and rephrased as follows:
13.Lui’s role in the joint venture was later taken over by Ming Tak on the same conditions. Lui’s evidence on the terms of the joint venture 14.Lui said in his witness statement that he was a director and majority shareholder of one Ming Fat Motor the business of which was in trading in taxi licences and repair and maintenance of taxis. He transferred all his shares in the company to his former wife in 1997. He then did some ad hoc taxi licence investments in his own name. However, he did not have a shop to do business or the support of a finance company. He received few offers from the taxi licence agents who got all the offers to sell. His investment was thus ad hoc and occasional. 15.Lui had heard of SW Chan in 1985 when he was still with Ming Fat. SW Chan was an active figure in taxi licence trading. Lui was introduced to SW Chan by Cheng in about 2009 with a view to Lui jointly investing with Water Motors in taxi licences. The introduction was made at the shop of Water Motors where Lui, his wife Madam Chen, SW Chan and Cheng were present. Lui and Madam Chen went to the shop of Water Motors again to meet SW Chan in the middle of 2009. The shop was on the ground floor of a building on Thomson Road, Wanchai. The front window showed the numbers of some taxi licences for sale. There was at least four staff working in the shop. SW Chan introduced Lui and Madam Chen to the account clerk Madam Cheung and told them that Madam Cheung prepared all the documents and accounting statements. SW Chan also told Lui that for each investment in a taxi licence, there would be a written contract and a copy of it would be given to him for keeping. 16.Lui said SW Chan made the following representations to him in the presence of Madam Chen. SW Chan represented to him that he and Water Motors would be equal partners in their investments in taxi licences and would share the profit or loss equally. The capital for the investment could be provided by either or both of them as they might agree in each case. SW Chan (or Water Motors) would be responsible for all the formalities including the sale and purchase agreements. The price for each purchase and sale would be decided by them jointly with SW Chan representing Water Motors. 17.The joint venture of Lui and Water Motors then commenced business. The transactions were conducted smoothly and profitably in 2009. Lui then felt the need for a company for taxation purpose. He and Madam Chen incorporated Ming Tak which substituted Lui’s position in the joint venture with Water Motors. Lui decided all things including the buying and selling decisions for Ming Tak whilst Madam Chen only handled the accounts. 18.Lui also authorized Madam Chen to be in charge of the business of the joint venture, to supervise the documentation and discuss the terms of each and every transaction conducted by the joint venture. 19.Lui also verified the contents of the statement of claim and reply, but he did not expressly deal with any of the transactions involving the 8 taxi licences in dispute. He made a supplemental witness statement on the fifth day of the trial providing the details of his case on the trading of taxi with licence PE 3326 (Taxi 4) which I will deal with below. 20.In cross-examination, Lui admitted that Ming Tak was not a member of the Taxi Association and it was easier for a member to deal with a fellow member particularly in the sale of a future contract of a taxi with licence. There were also fewer people who would buy a taxi with licence from a non-member. Some taxi trading companies would not deal with non-members though some would. Membership of the Taxi Association was an advantage. He agreed that he entered into the joint venture with Water Motors because the latter had a shop. He further said that if one had no shop, one had no business. He also agreed that it was for Water Motors to decide in each case on who should provide the deposit for a purchase. The ratio of their investment was however negotiated for each and every transaction. 21.He and SW Chan always agreed on the sale price of their joint investments. When specifically asked if he had ever refused a sale proposed by SW Chan, he said he and Madam Chen had never declined any and they always agreed.
22.Madam Chen said in her witness statement more or less what Lui had said in his. She, however, said in §7.2 that the sale price was determined jointly by her on behalf of Ming Tak and SW Chan on behalf of Water Motors. But she said in oral evidence that Lui was responsible for negotiating for the purchase and sale price whilst she was responsible for the paper work. 23.In cross-examination, she, however, said that one of the terms of the joint venture was that the buy and sale price of each and every licence had to be agreed by Lui, she herself and SW Chan. She said this condition was agreed in Cheng’s presence on an occasion when Lui sold a taxi to the tripartite investment (of Lui, Water Motors and Cheng). This condition continued after Ming Tak had taken over Lui’s position in the joint venture. But she had never objected to any sale proposed by SW Chan. SW Chan had also not objected to any sale proposed by her and Lui. This was so even when the investment was a tripartite transaction involving a third party. If any party did not want to sell, that party would buy out the selling party. There was never any deadlock. 24.She also said at the end of her oral evidence that if SW Chan should sell a taxi with licence without first consulting Ming Tak, she would still accept it if the sale price was at the market price. Madam Chen’s record book 25.Madam Chen kept at home a record book of the investments made by Lui and Ming Tak in taxi licences (“D868-945”). She produced it during her oral evidence. She recorded in the book some particulars of the investments including Ming Tak’s share and the buy and sale price of the investments. She said she would once in a few days take out the copy contracts that she received from Water Motors and write down in her book the investment partners, purchase and sale price and other details of the investments. When she was busy and could not carry out the exercise once in a few days, she would do so once in one or two weeks. On those occasions, she might overlook some particulars of the transactions and not copy them onto the book. She said she would not copy the price wrongly as there were only one or two transactions per week. If there should be more transactions, she would note down the particulars on pieces of paper before recording them in the book. 26.The first two transactions recorded in the book were joint investments in February 2010 between Lui and Cheng as equal partners. Both were profitable transactions. Water Motors appeared as the third partner from the third transaction onwards. Cheng was a party to the 3rd and 4th and a few more transactions. But he disappeared after the sale of the 12th transaction on 19 August 2010. There were also a few transactions that were done by Lui himself and one tripartite transaction that did not involve Water Motors. Lui did 24 transactions before Ming Tak took over his place on 22 July 2010 in a joint purchase with Madam Ho of a future contract (without licence number) from one Wing Lee. Madam Ho’s 1/2 share was taken over by Water Motors on 16 August 2010. 27.The record book recorded more than 170 transactions from February 2010 to June 2013. Madam Chen said about 160 of them were joint investments with Water Motors. Hence, according to Madam Chen, there were at least 160 buy and a similar number of sale decisions that had to be agreed between the two sides during this period of 3 years and 4 months. But her evidence is that she had never objected to any sale proposed by SW Chan. SW Chan had also not objected to any sale proposed by her and Lui. 28.Madam Chen also said that for purchase contracts that were jointly made by Ming Tak and Water Motors, Water Motors account clerk Madam Cheung would note at the top right corner of the contract that it was a joint venture of Water Motors and Ming Tak and also the ratio of their investments. There was however an occasion when SW Chan scolded Madam Cheung for having wrongly noted a contract as a joint venture. Henceforth, Madam Cheung asked SW Chan to put his initial on the joint venture contracts. The joint venture description would also appear in some but not all of the sale contracts. Madam Chen would be given a copy of the sale contract and she would staple it with the copy of purchase contract given to her earlier. SW Chan’s evidence on the terms of the joint venture 29.SW Chan described in his witness statement the trading of taxi licences in future contracts and the financing for such trade. This is uncontroversial. 30.Regarding Cheng’s introduction of Lui to him in February 2010 for joint venture in trading taxi licences, he made it an express condition of the joint venture in Cheng’s presence that he would have the right to decide on all purchases and sales without consulting Lui. He would also have the right to decide on who should pay the initial deposit of an investment. He would notify Lui about any sale after it had been concluded. These conditions between Lui and Water Motors continued after Lui’s role was taken over by Ming Tak. He also said that both Waters Motors and Cheng were members of the Taxi Association but neither Lui nor Ming Tak was. Cheng later withdrew from the venture. 31.If Water Motors should enter into a contract on behalf of the joint venture, the contract would have a note at the top right corner stating that it was their joint venture and their ratioof investments. Since 13 June 2011, he also signed at the top right corner of a joint venture contract to confirm that it was such a contract. But he did not do so consistently. 32.SW Chan also explained the logistics in making a joint investment. In most cases Water Motors would enter into a purchase contract first. If Ming Tak should find the purchase agreeable, Lui would ask for a share of it. There was never any occasion when both sides would first agree to the purchase before Water Motors would commit to it. For the sale of contracts, he would tell Lui about them after they were made. Lui never complained against any sale price for being too low. 33.Upon being shown [D/590], [D/596], [D/601] and [D/637] which were joint investments of Ming Tak and Water Motors but with Ming Tak as the contracting party (with the contract made on Ming Tak’s letterhead), SW Chan agreed that Lui did not have to inform him of the sale price of those taxis and licences beforehand and he had no role in the decision-making process. 34.In case of withdrawal by any party, a withdrawal contract had to be signed by the partiers. But Water Motors would try not to buy out Ming Tak’s share as that could result in confusion. After the withdrawal, a settlement account would be prepared and payment made accordingly. 35.SW Chan emphasised a few times that he would only talk to Lui but not Madam Chen on matters of the joint venture. Cheng’s evidence on the terms of the joint venture 36.Cheng gave a short witness statement. He was a taxi licence agent and a member of the Taxi Association. He came to know Lui some 25 years ago when Lui was with Ming Fat Motor. He introduced Lui to Water Motors in February 2010 to form a joint venture to trade in taxi licences. He, Lui and SW Chan had expressly agreed that Water Motors was to be responsible for all formalities of the joint venture business and SW Chan had the right to decide on the price and date for all purchases and sales without consulting him and Lui. He withdrew from the joint venture after two transactions. He also said that he and Lui had jointly invested in taxi licences after Lui had left Ming Fat Motor (in 1997). 37.Cheng came to know SW Chan in the 1990s. He introduced Lui to SW Chan because Lui wanted a financier to finance his trading in taxi licences and he regarded Water Motors as being able to assist Lui on this. Madam Chen was not present when they agreed that Water Motors would have the right to decide on the price of all purchases and sales. He further said that in the trading of taxi licences, decisions had to be made by the boss of a trader in a snap second. It could not be dragged on. SW Chan was the boss of a trader. When Cheng agreed that Water Motors would have the power to decide on the price of purchases and sales, he knew that there were risks in such trade and SW Chan could commit to a losing deal without consulting him. The issue in the terms of the joint venture 38.For the 4 terms of the joint venture pleaded by Ming Tak and referred to in §8 above, the pleadings show a difference in the first term, but Lui said in cross-examination that it was for Water Motors to decide in each case on who should provide the deposit. That is what Water Motors has pleaded. Hence, there is no issue on the first term. 39.There is consensus on the second and fourth terms. It seems that Water Motors might have delayed the provision of settlement account for certain investments under the fourth term, but no relief has been sought by Ming Tak for breach of this term. Nothing more need be said about these two terms. 40.The only term that is argued between the parties is the third one; namely whether Water Motors through SW Chan had the sole power to decide the price for buying and selling of their investments in the licences and taxis without consulting Lui or subsequently Ming Tak. This is however only relevant to the transaction relating to Taxi 5. AGREEMENT ON THE SCHEDULES TO THE DEFENCE AND COUNTERCLAIM 41.The parties agree that if I should find for Water Motors on the facts and figures of the sale and purchase of any of the taxi licences and the prices thereof, then the rental, interests, charges and costs resulting in the profit or loss for the trading in that licence as set out in the relevant schedule of schedules 1 to 5 and 7 to 8 of the defence and counterclaim are accurate. THE TAXI AND LICENCE KB 2548 (TAXI 1) Pleadings on the taxi and licence KB 2548 (Taxi 1) 42.Ming Tak says that Taxi 1 (KB 2548) was a ½:½ investment. It referred to the settlement account [C/308] which showed a profit at $1,708,812.06. It was paid ½ of it at $854,406.03 as its share of the profit. This sum was added to the refund of the initial deposit to it at $478,000. The total sum paid was $1,332,406.03. However, the settlement account showed the deduction of a sum of $15,302.55 before arriving at the net profit of $1,708,812.06. The sum of $15,302.55 was allegedly paid to Madam Ho as interest. Nevertheless, Ming Tak says that no such interest had been paid to Madam Ho. It thus claims Water Motors ½ of that sum at $7,651.28 [A/8/15 to 15(b)]. 43.Water Motors pleaded in the defence and counterclaim that Taxi 1 was purchased under a current contract dated 26 January 2011 at $5,070,000 from one Lee Yu Man with delivery made on 27 January 2011 [C/301]. The purchase was by a joint venture of Ming Tak, Water Motors and Madam Ho in equal shares with each partner having paid a deposit of $478,000. The balance of $3,636,000 and other costs at $40,000 were covered by mortgage and re-mortgage of Taxi 1. 44.Water Motors further pleaded in §14(a)(1)B of the defence and counterclaim that Madam Ho withdrew from the joint venture on 29 February 2012 (which should be 8 December 2011) and Water Motors bought her share of the joint venture. The ratio of ownership of Taxi 1 between Water Motors and Ming Tak then became 1/3. Taxi 1 was then sold on 29 October 2012 at $6,840,000. The net profit was at $1,737,996.60. Ming Tak was entitled to 1/3 of it at $579,332.20. This sum when added to the refund of initial deposit at $478,000 made a total of $1,057,332.20. Since Ming Tak was paid by Water Motors $1,332,406.03, there was an overpayment of $275,073.83. Water Motors says that the $275,073.8 was overpaid by its mistake and counterclaims it on the ground of money had and received or alternatively constructive trust [A/27/14(a) (1) KB 2548, A/39/30 to 33 and Sch. 1]. 45.Ming Tak pleaded in its re-re-amended reply and defence to counterclaim (“reply”) that after the withdrawal by Madam Ho, Ming Tak and Water Motors shared her 1/3 share equally [A/68/8(1)]. Hence, the ratio of ownership of Taxi 1 between Water Motors and Ming Tak became ½:½. Ming Tak denies the counterclaim and maintains its claim. Lui’s evidence on the taxi and licence KB 2548 (Taxi 1) 46.Ming Tak, Water Motors and Madam Ho made a tripartite equal investment on 26 January 2011 in a taxi with licence KB 2548 at $5,075,000. Lui did not say anything on this in his two witness statements. He agreed in oral evidence that each of the three parties had paid $478,000 as deposit for purchasing this taxi and licence [C/303 and 304]. A sum of $3,640,000 was financed by ICBC for completion of the purchase [C/301 and 302]. 47.Lui said that he and Madam Chen were present when Madam Ho discussed with SW Chan on her withdrawal from this investment. But he had not taken part in the negotiation or making of the agreement of withdrawal by Ho. After Ho had left with Water Motors’ refund cheque for $478,000, Lui offered to pay Water Motors half of the $478,000 refunded to Madam Ho. But SW Chan said it was unnecessary as Lui had about $1.5 million with Water Motors. (The withdrawal agreement signed by Madam Ho was in fact dated 8 December 2011 and the refund cheque was post-dated by Water Motors to 29 February 2012.) 48.Regarding the disposal of the investment in Taxi 1, Lui’s evidence linked up Taxi 1 with Taxi 7. §19(2) of the reply pleaded that SW Chan had telephoned Lui on 31 October 2012 and told him that Taxi 7 (KC 8606) had been sold for $6,820,000. 49.Lui further said in oral evidence that SW Chan had phoned from New Zealand to him in Hong Kong on 31 October 2012 and offered to purchase Ming Tak’s ½ share in Taxi 7 (KC 8606) at the agreed price of $6,820,000 for the whole. Lui was then at Tin Ho Motors (天河車行). He agreed the deal with SW Chan and passed the phone to Madam Chen to confirm it with SW Chan. Lui hastened to add that he and SW Chan had in fact agreed that Water Motors would purchase from Ming Tak the ½ share of each of two taxis with licences at agreed value of $6,820,000 for each of them. The taxis were Taxi 7 (KC 8606) and another one that he could not recall. But Madam Chen’s oral evidence and the settlement account for Taxi 1 relied on by Ming Tak made it clear that the other taxi referred to by Lui was Taxi 1 (KB 2548). 50.This was the first time that Lui (and Madam Chen) said that Ming Tak had sold its ½ shares in Taxis 1 and 7 to Water Motors by an oral agreement made in the course of a long distance phone call initiated by SW Chan from New Zealand to Lui in Hong Kong. Ming Tak’s pleading however said that Taxi 7 as a whole was sold at $6,820,000. It did not say that it was a sale of Ming Tak’s ½ share to Water Motors or that such sale was clinched together with the sale of Ming Tak’s ½ share in Taxi 1 to Water Motors. §19(2) of Ming Tak’s defence to counterclaim simply pleaded [A/71]:
51.Lui also said on day 3 just before lunch that SW Chan had consulted him on selling Taxi 1 (KB 2548) to Heung Wing Motors Ltd for $6,840,000 and Lui agreed. This is in line with Water Motors’ case, as I will refer to below, that Taxi 1 was indeed sold to Heung Wing Motors on 29 October 2011 for $6,840,000. This however contradicts Lui’s evidence of an oral agreement of sale of Ming Tak’s ½ share in Taxi 1 to Water Motors at an agreed value of $6,820,000 for the whole of Taxi 1 made between him and SW Chan in a long distance phone call on 31 October 2011. Madam Chen’s evidence on the taxi and licence KB 2548 (Taxi 1) 52.Madam Chen repeated in her witness statement the facts pleaded in the statement of claim for the claim on Taxi 1. She maintained that Ming Tak had a half share in this investment after Madam Ho’s withdrawal and she relied on the ratio stated in the settlement account provided by Water Motors which Water Motors said was erroneous [C/308, 459 and 467]. 53.She agreed in oral evidence that Madam Ho was more familiar with her and Lui than with SW Chan. Regarding Madam Ho’s withdrawal, she said Madam Ho had telephoned her. Madam Ho said that she had told SW Chan of her intention to withdraw from the tripartite investment by getting back her initial deposit and with no gain or loss. Madam Chen did not know if SW Chan had so agreed with Ho. When she and Lui arrived at the shop, Madam Ho was already there. SW Chan then issued a cheque to Madam Ho and told Madam Ho that she had no more interest in the investment which was then owned by Lui and him in equal shares. Madam Chen could not recall if she had taken part in making the decision on Madam Ho’s withdrawal. After Madam Ho’s departure, Madam Chen offered half of the $478,000 to Water Motors, but SW Chan declined and said that he could manage. At that time, Ming Tak had about $1.98 million kept by Water Motors. However, Madam Chen’s record book only recorded that Taxi 1 was a tripartite equal investment of Ming Tak, Water Motors and Madam Ho [D2/899]. There was no mention of Madam Ho’s withdrawal resulting in Ming Tak becoming a ½ share investor in Taxi 1. 54.Taxi 1 was sold by a contract dated 29 October 2012 to Heung Wing Motors at $6,840,000 [C/306]. But Ming Tak was unable to produce a copy of the sale contract. The settlement account provided by Water Motors to Ming Tak, which was relied on by Ming Tak, stated that the agreed value for Taxi 1 was at $6,820,000 [C/308, 459 and 467]. Madam Chen explained that Ming Tak had orally agreed to sell its ½ shares in Taxis 1 and 7 in October 2012 to Water Motors at agreed valued of $6,820,000 for each of Taxis 1 and 7. Hence, she did not have any copy sale contract for sale of Taxi 1 to Heung Wing Motors. 55.Madam Chen further said that Ming Tak at that time had no intention of selling its ½ shares in Taxis 1 and 7. It was SW Chan who telephoned from New Zealand to Lui in Hong Kong and offered to purchase Ming Tak’s ½ shares in the two taxis with licences with each valued at $6,820,000. Since the offer was at the then market price, Lui agreed. After SW Chan and Lui had made the oral agreement on the phone, she took over the phone and confirmed the deal with SW Chan. When SW Chan returned from New Zealand, he instructed the accounting clerk Madam Cheung to prepare settlement accounts with agreed value at $6,820,000 for each of the two investments. Madam Chen’s record book on the taxi and licence KB 2548 (Taxi 1) 56.Madam Chen recorded in her record book that Taxi 1 was a tripartite equal investment including Ho. It was purchased on 26 January 2011. The book also recorded Ho’s withdrawal. But it did not record the two alleged sales of Ming Tak’s shares in Taxis 1 and 7 to Water Motors [D2/899 and 904]. She said she had forgotten to do so. There was also no withdrawal agreement signed by Ming Tak to sell its interests in Taxis 1 and 7 to Water Motors. I have also referred to Ming Tak’s defence to counterclaim on Taxi 7 which said that Taxi 7 was “sold” at $6,820,000. SW Chan’s evidence on the taxi and licence KB 2548 (Taxi 1) 57.SW Chan said in his witness statement that Taxi 1 was a tripartite joint investment of Water Motors, Ming Tak and Madam Ho. Hence, Ming Tak should be given 1/3 of the profit resulting therefrom. He did not refer to the withdrawal of Madam Ho. 58.He said in oral evidence that when he gave Madam Ho the refund cheque, Lui and Madam Chen were not present. He had not consulted Lui before deciding to refund $478,000 to Madam Ho. After Ho’s withdrawal, the investment ratio between Water Motors and Ming Tak was 2/3:1/3. Lui also had not offered to pay Water Motors ½ of the $478,000 refunded to Ho. If Ming Tak should have ½ of Ho’s interest, SW Chan would have given Lui a copy of Ho’s withdrawal agreement [C/305]. But SW Chan did not do so as Ming Tak had no share of Ho’s interest. 59.He denied the allegation of Lui and Madam Chen that he had phoned in from New Zealand at the end of October 2012 to make the oral contract with Lui to purchase Ming Tak’s ½ shares in Taxis 1 and 7. Save and except a four-day holiday in Thailand from 19 to 23 October 2012, he was in Water Motors’ office for October and November 2012 and not in New Zealand. SW Chan’s travel records 60.Since Lui and Madam Chen only mentioned during the trial that SW Chan had in fact called Lui from New Zealand, I allowed Water Motors to produce a statement of travel records of SW Chan issued by the Immigration Department dated 10 January 2018. Mr Kee for Ming Tak did not find it necessary to cross-examine SW Chan on these records. 61.The records show that SW Chan had left Hong Kong through the airport control point at 16:11 hours on 19 October 2012 and returned through that control point at 16:40 hours on 23 October 2012. He then left at the airport control point again at 19:18 hours on 22 November 2012. Hence, he had not been to the airport control point from 16:40 hours on 23 October 2012 to 19:18 hours on 22 November 2012. 62.Before 28 October 2012 and after 2 November 2012, he had departed from and returned to Hong Kong for a few two-day periods running from Friday afternoon to Sunday afternoon. He did so through the control points at Lok Ma Chau and Lok Ma Chau Spur Line. I do not regard such short periods of absence as sufficient for him to go via Lok Ma Chau or Lok Ma Chau Spur Line to New Zealand and back. In any case, he remained in Hong Kong from 15:00 hours on 28 October 2012 to 14:47 hours on 2nd November 2012. I accept that this is conclusive evidence that SW Chan was in Hong Kong on or about 31 October 2012. 63.SW Chan further said that he would not have discussed with Lui over the phone on a figure as large as $6,820,000. There was also the need to enter into withdrawal agreements. It was very troublesome. He would have preferred to sell the licence in the market. (The sale of Taxi 1 to Heung Wing Motors Ltd on 29 October 2011 was at $6,840,000 or $20,000 more than Lui’s alleged agreed valuation of $6,820,000.) 64.The settlement account for Taxi 1 as given to Ming Tak stated the realization price as an agreed valuation at $6,820,000. SW Chan could not explain why it was so stated [C/308, 459 and 467]. Madam Ho’s witness statement on the taxi and licence KB 2548 (Taxi 1) 65.Madam Ho has made a witness statement for Ming Tak. Madam Ho described in her statement the trading in taxi licences and joint ventures in such trade. She also said that in a joint venture, all partners will have to agree on when to sell as that could be determinative of the outcome of the investment. 66.She then referred to the joint venture in Taxi 1 in which she had been a 1/3 party. She said she contacted SW Chan and Madam Chen separately telling them of her wish to withdraw. They agreed. She then went to Water Motors’ shop to get the cheque for the refund of $478,000. At that time, both Lui and Madam Chen were there. Before the cheque was released to her, SW Chan asked Madam Chen if Ming Tak would agree to Ho’s withdrawal so that the investment would be between Water Motors and Ming Tak in equal shares. Madam Chen agreed. 67.Mr Kee, counsel for Ming Tak however informed the court at the end of day one of the trial that Ming Tak was not going to call Madam Ho. Her witness statement was thus not admitted pursuant to the order made by B Chu, J on 7 September 2017 [A/98-2]. The settlement account for the taxi and licence KB 2548 (Taxi 1) 68.The settlement account for Taxi 1 provided by Water Motors stated at the top that it was a tripartite investment of Water Motors, Ming Tak and Madam Ho. This was contrary to the fact that Madam Ho had withdrawn before this investment was realized. It also recorded the agreed valuation for the purpose of settlement at $6,820,000. This is in line with Ming Tak’s case that it was not a sale to outsider but a sale of its interest to Water Motors at an agreed value. It also included a charge on the profit a sum of $15,302.55 as interest paid to Madam Ho for her initial deposit of $487,000. But the parties agreed that Ho withdrew only with full refund of her deposit and no more. There was thus no basis for this interest of $15,302.55 to be charged on the profit. There is no evidence on whether this sum was paid to Ho and, if so, why or how it was paid. 69.A comparison of the settlement account as relied on by Ming Tak [C/308] and the account in schedule 1 of the defence and counterclaim shows a number of differences. The account relied by Ming Tak has a smaller sale price of $6,820,000 when schedule 1 states it at $6,840,000 (for the sale to Heung Wing Motors). Apart from this which is already noted above, the account at [C/308] also omitted two sums of $3,195 charged on the profit for licence renewal in 2011 and 2012. It has an additional but inexplicable sum of $15,302.55 as interest paid to Madam Ho for her deposit of $478,000. The insurance premium for 2012 recorded in it was $200 more than that in the account in schedule 1. It stated a net profit for the investment at $1,708,812.05 but schedule 1 reported a net profit at $1,737,996.60. 70.Since the dispute in this investment is just the ratio of sharing between the two investors, there should not be any difference between the two sets of settlement accounts. The acceptance by Ming Tak of the facts stated in the account in schedule 1 means that the settlement account relied on by Ming Tak in this action is inaccurate by reason of the differences I pointed out above. The issues for Taxi 1 71.The dispute between the parties is whether the ratio of ownership of the investment between Water Motors and Ming Tak should be ½:½ or 2/3:1/3. 72.Furthermore, Mr Kee submitted in his closing submissions for Taxi 7 (KC 8606) that the issue boils down to whether there was a long distance telephone conversation between Lui and SW Chan on 31 October 2012 and whether Taxi 7 was sold at $6,820,000. I think this is also an issue for Taxi 1 as Ming Tak’s case is that it had sold its ½ shares in both Taxis 1 and 7 at agreed value of $6,820,000 per investment to Water Motors in the long distance phone conversation. But Water Motor’s case is that Taxi 1 was sold at $6,840,000 to Heung Wing Motors Ltd on 29 October 2012 [C/306]. If Ming Tak is right, then Water Motors should have sold Taxi 1 to Heung Wing Motors on 29 October 2012 for $6,840,000 without Ming Tak’s knowledge and then two days later (on 31 October 2011) dishonestly purchased Ming Tak’s ½ share in the investment at a slightly lower price of $6,820,000 thereby depriving Ming Tak a $10,000 profit. This, if true, seems to be a breach of fiduciary duty on the part of Water Motors too. THE TAXI WITH LICENCE KB 3437 (TAXI 2) Pleadings on the taxi with licence KB 3437 (Taxi 2) 73.Ming Tak pleaded in the statement of claim that its profit from the investment in Taxi 2 should be at $408,811.32, but it was only paid $204,405.66 [A/8/15(b)]. Hence, it claims the balance of $204,405.66. 74.Water Motors pleaded in the defence and counterclaim that it purchased a taxi in a future contract (without a licence of unspecified number) at $5,085,000 as a ½:½ investment with Ming Tak on 31 January 2011 [A/27/§14(2), 28/§14(a)(2)] and [C/309]. Taxi 2 (taxi with licence KB 3437) was delivered to it under this contract [C/315-316]. Lui then introduced Madam Ho to take up Ming Tak’s share of this investment at a reduced price of $4,910,000 for the whole of Taxi 2 on or about 7 March 2011 [C/320]. Madam Ho paid $480,000 deposit to Water Motors to take over Ming Tak’s ½ share in Taxi 2. 75.Water Motors further pleaded that when Ming Tak withdrew from the investment on about 7 March 2011 and sold its ½ share to Madam Ho, the market price of Taxi 2 had been reduced to $4,910,000 producing a net loss in the investment at $178,376.46. Ming Tak thus had to pay Water Motors ½ share of the loss at $89,188.23. Furthermore, Ming Tak had been mistakenly paid $204,405.66 as profit by reason of the wrong settlement account prepared by Madam Cheung. Water Motors thus counterclaims the 2 sums totalling $293,593.89 [A/28/14(a)(2) KB 3437, A/39/30 to 33 and Sch. 2]. 76.Ming Tak pleaded in the reply that Madam Ho was never involved in the investment in Taxi 2 [A/68/8(2)]. Lui’s evidence on the taxi with licence KB 3437 (Taxi 2) 77.Lui did not say anything about Taxi 2 in his two witness statements. He said in cross-examination that Ming Tak had not withdrawn from its ½ share in Taxi 2. He did not know that Madam Ho had become a ½ share investor of Taxi 2. Upon settlement of this investment, Water Motors firstly gave Ming Tak a settlement account with 1/4 of the profit for Ming Tak [C/455]. When he complained, Ming Tak’s share was revised to 1/3 [C/327]. Upon his further complaint, Ming Tak’s share was finally changed to ½ [C/326 and 463]. Madam Chen’s evidence on the taxi with licence KB 3437 (Taxi 2) 78.Madam Chen relied on the settlement account provided by Water Motors for this investment which showed that Ming Tak had a ½ share of the profit [C/326 and 463]. She denied in oral evidence that Madam Ho had taken up Ming Tak’s ½ share in this investment on 7 March 2011. She instead suggested that Water Motors could have sold its own ½ share to Madam Ho. 79.Ming Tak produced two copy sale contracts as evidence that Ming Tak had a share in this investment. The first was a future contract dated 23 July 2012 for the sale by Water Motors to Lik Hang Motor Ltd of a future taxi with licence of unspecified number at $6,300,000. Delivery was to be made on 14 August 2012 [C/324]. The numbers KB 3437 and RN 2798 were written at the top right corner of this copy contract. 80.The second was also a copy future contract dated 1 August 2012 for the sale by Water Motors to Shun On Motors Traders Ltd a future taxi with licence of unspecified number at $6,325,000. Delivery was to be made on 15 August 2012 [C/325]. The top right corner stated that it was a Water Motors and Ming Tak co-operation with the licence no. KB 3437 in brackets. There was also a copy signature of SW Chan on top of these words. SW Chan denied that he had ever signed any sale contract from which this copy was produced. 81.Madam Chen thought the sale of Taxi 2 in the first contract had been cancelled and it was sold again under the second contract. 82.The parties agree that Taxi 2 (with licence KB 3437) was initially purchased from Shun On Motors at $5,085,000 as a ½:½ investment of the joint venture [C/309 and 310]. Water Motors produced a string of documents showing that Taxi 2 was exchanged for a taxi with licence RN 2798. The exchanged taxi was then sold and delivered to Lik Hang Motor for $6,300,000 pursuant to the first contract dated 23 July 2012. Water Motors also produced another string of documents showing that a taxi with licence JX 8429 was exchanged for a taxi with licence RN 2945. The exchanged taxi was then sold and delivered to Shun On for $6,325,000 pursuant to the second contract dated 1 August 2012. 83.The settlement accounts stated that Taxi 2 (with licence KB 3437) was sold at $6,300,000 to Shun On [C/455, C/327, C/326 and C/463]. However, the price of $6,300,000 was obtained from the sale to Lik Hang (and not to Shun On) under the first contract. Madam Chen thought the first contract had been cancelled and the sale was then effected under the second contract to Shun On. But the price of the sale to Shun On was at the higher sum of $6,325,000. Hence, the settlement accounts stated the sale was to Shun On but used the price of the sale to Lik Hang. When cross-examined on this, Madam Chen said she had raised a query about it but could not recall what the answer was. 84.Madam Chen then changed her evidence and agreed that she would not have bothered if the sale price was $6,300,000 or $6,325,000. (The second contract in fact sold to Shun On a taxi with licence RN 2945 for $6,325,000 and RN 2945 was exchanged from JX 8429. It had nothing to do with KB 3437 or Ming Tak.) 85.Madam Chen further said that after she was given the settlement account at [C/455], she returned to the shop of Water Motors on the next day and asked SW Chan why Ming Tak’s share of profit was just 1/4. SW Chan then passed her account to a girl behind him and then gave her a fresh settlement account at [C/327]. She again queried SW Chan why Ming Tak’s share was just 1/3. SW Chan took it back again and then gave her the fresh account with ½ share of profit for Ming Tak at [C/326 and 463]. Madam Chen’s record book on the taxi and licence KB 3437 (Taxi 2) 86.Madam Chen’s record book recorded the sale of Taxi 2 at $6,325,000 to Shun On [D2/900] with delivery effected on 15 August 2012. That is in line with her oral evidence, but is at odds with the settlement account which states that the sale to Shun On was at $6,300,000. The documents of Water Motors however show that the sale of Taxi 2 was to Lik Hang at $6,300,000. SW Chan’s evidence on the taxi with licence KB 3437 (Taxi 2) 87.SW Chan repeated Water Motor’s pleadings in his witness statement. His oral evidence is not exactly the same as the pleadings. He said the whole investment in Taxi 2 was first sold to Madam Ho at $4,910,000 (rather than Madam Ho buying Ming Tak’s ½ share of the investment as pleaded). It was a sale at a loss. Madam Ho paid a cheque for $960,000 as deposit [C/320-1 to 320-4]. But he forgot to enter into a contract with Ho for her to buy up the whole of Taxi 2. After the transaction, SW Chan then had tea with Madam Ho and they agreed that she would sell back ½ share of Taxi 2 to Water Motors at the same price for the whole of Taxi 2. SW Chan initially was unwilling to buy back the ½ share as Water Motors had to pay back $480,000 deposit to Madam Ho. However, Madam Ho offered to accept the $480,000 in instalments and SW Chan agreed. They then entered into a joint venture agreement on 7 March 2011 [C/320] with $480,000 deposit paid by Water Motors to Ho by post-dated cheques. 88.The agreement provided that Water Motors and Madam Ho had a joint venture on 7 March 2011 in Taxi 2 (KB 3437) on a ½:½ basis with the agreed value of the whole of Taxi 2 at $4,910,000. Each party had to pay an initial deposit of $480,000. The balance of the purchase price at $3,950,000 was financed by a bank named therein. 89.The sum of $442,000, being part of the deposit of $480,000, was paid by Water Motors to Madam Ho by 8 sequential post-dated cheques the particulars of which are as follows:
90.Mr Law, counsel for Water Motors and Chan, submitted that the pleading is just a telescoped version of SW Chan’s evidence. The end result is that Madam Ho had purchased ½ of Taxi 2. I think Mr Law’s reasoning makes sense. 91.Madam Ho later withdrew from the joint venture and sold her ½ share in Taxi 2 to Water Motors. SW Chan said he initially refused Ho’s withdrawal as the market was falling. Madam Ho then offered to have the refund of her deposit be repaid to her in instalments and SW Chan agreed. They then signed an agreement of withdrawal on 2 November 2011 and Water Motors refunded $490,000 to Ho by four sequential cheques with three being post-dated [C/322, 322-1, 322-10 to 322-12]. The particulars of the four cheques are:
92.SW Chan also denied that he himself had given Madam Chen amended versions of the settlement account for Taxi 2. He maintained that he would not have talked to Madam Chen on business matters. 93.The documents produced by Water Motors also showed that one City Motors Ltd had bought a new taxi (without licence) from Crown Motors Ltd. by a contract dated 29 March 2012 at a price of $254,242. It paid a deposit of $20,000 leaving a balance of $234,242. City Motors later advised Crown Motors that it had the licence KB 3437 (Taxi 2) [C/324-2]. In fact, City Motors had sold the rights in the contract with Crown Motors to Water Motors [C/324-3]. The licence KB 3437 was then surrendered to the Transport Department for cancellation. The department then issued a new number RN 2708 to Water Motors on 8 August 2012 for use with the new taxi [C/324-5]. Water Motors then paid off the balance of $234,242 to Crown Motors on 10 August 2012 [C/324-1] and Crown Motors delivered a new taxi with new licence RN 2708. Water Motors then delivered the new taxi with new licence RN 2708 to Lik Hang on 10 August 2012 for completion of the first contract dated 23 July 2012 [C/324-4 and 324]. This explains how Water Motors had used Taxi 2 to obtain a new taxi with a licence for delivery to Lik Hang to fulfil its obligation in the contract with sale price at $6,300,000. 94.The documents also show that Water Motors had used a taxi with licence RN 2945 to complete the contract it made with Shun On on 15 August 2012 at the price of $6,325,000 [C/325 to 325-3]. The settlement account for the taxi and licence KB 3437 (Taxi 2) 95.I have already spelt out the problems of the settlement account as relied on by Ming Tak; namely the identity of the purchaser of Taxi 2 and the amount of the sale price. The sale was to Lik Hang at $6,300,000 or to Shun On at $6,325,000, but not to Shun On at $6,300,000. 96.Water Motors’ settlement account at schedule 2 of the defence and counterclaim deals with this investment on the basis of the case of Water Motors that it was sold by Water Motors and Ming Tak to Water Motors and Madam Ho at $4,910,000. It thus cannot be compared with the settlement account relied on by Ming Tak. However, of the three versions of settlement accounts produced by Ming Tak, one version differed from the other two. The account that gave Ming Tak a ¼ share of profit charged $234,292 [C/455] as the costs for buying a new taxi for delivery to Shun On whilst the accounts that gave Ming Tak 1/3 and ½ share of profit only charged $222,292 as such costs [C/327 and 326]. The difference is $12,000. The issues for Taxi 2 97.The major dispute is on whether Ming Tak had withdrawn from the joint investment. Ming Tak says it had never withdrawn from this joint venture and Madam Ho was never a partner in it [A/68/8(2)]. Ming Tak further says that its share of profit should be $408,811.32, but it was only paid (Water Motors says mistakenly) $204,405.66 by Water Motors [A/8/15(b)]. It thus claims the balance of $204,405.66. 98.Water Motors says that when Ming Tak withdrew, there was a loss of $178,376.46 in the joint venture. Ming Tak should have borne ½ of it at $89,188.23. Water Motors thus counterclaims $89,188.23 and the mistaken overpayment of $204,405.66 or a total of $293,593.89 (Water Motors’ closing submissions, at §43). 99.There is also the issue of whether Taxi 2 was sold to Lik Hang at $6,300,000 or to Shun On at $6,325,000. THE TAXI WITH LICENCE KC 3776 (TAXI 3) Pleadings on the taxi with licence KC 3776 (Taxi 3) 100.Ming Tak claims that its share of profit in the investment in Taxi 3 should be $116,720.17. But it was only paid $30,003.78. Hence, it claims the balance of $86,716.39 [C/454] and [A/8/15(b)]. 101.Water Motors pleaded that it made a future contract with a vendor (one Cheng Yung Fui) on 9 March 2011 to purchase a taxi with a licence of unspecified number at $4,880,000 with delivery to be made on 5 July 2011. The delivery date was later amended to an earlier date on 27 May 2011 [C/330 and 331]. (Cheng delivered Taxi 3 (KC 3776).) Water Motors used Taxi 3 to exchange with one Chun Sing Motor Company on 25 April 2012 for a taxi with licence ED 3008 and $15,000. 102.Water Motors also entered into a future contract dated 29 March 2012 with one Szun Yick Motors Co Ltd selling a taxi with licence to Szun Yick at $5,730,000. The taxi with licence ED 3008 was delivered to Szun Yick on 30 April 2012. Ming Tak’s share of profit was at $278,213.98 which was in excess of Ming Tak’s claim for this investment at $86,716.39 [A/28/14(a) (1) KC 3776, A/39/30 to 33 and Sch. 3] 103.Ming Tak did not respond to this taxi and licence in its reply. Lui’s evidence on the taxi with licence KC 3776 (Taxi 3) 104.Lui did not say anything about Taxi 3 in his two witness statements. He just stuck to the settlement account provided by Water Motors to Ming Tak which Ming Tak relied on at [C/454]. He did not accept the larger underpayment admitted by Water Motors. Madam Chen’s evidence on the taxi with licence KC 3776 (Taxi 3) 105.Madam Chen also did not say anything about Taxi 3 in her witness statement but just stuck to the settlement account she relied on at [C/454]. 106.The parties agreed that the joint venture had by a sale and purchase contract dated 9 March 2011 purchased a future taxi with a licence of unspecified number from Cheng Yung Fui at $4,880,000 with delivery to be made on 5 July 2011 [C/330]. (Water Motors said that the completion date was later amended to 27 May 2011 [C/331].) 107.Water Motors produced a bundle of documents showing that Cheng Yung Fui delivered Taxi 3 (KC 3776) on 27 May 2011. Water Motors had borrowed $4,390,000 from City Motors Ltd (or City Motor Finance Ltd) on 27 May 2011 to complete the purchase [C/332 to 333 and 342 to 343]. The licence KC 3776 was registered in the name of City Motors at the Transport Department as security for the lending on 27 May 2011 and 15 June 2011 [C/336 and 337]. The registered owner of this licence was changed to Ming Tak on 30 June 2011 and 3 May 2012 [C/338 to 339]. 108.On 29 March 2012, Water Motors entered into a future contract to sell Szun Yick Motors a taxi with a licence of unspecified number at $5,730,000 with delivery to be made on 30 April 2012 [C/334]. On 25 April 2012, Water Motors exchanged KC 3776 with Chun Sing Motors for a taxi with licence ED 3008. Chun Sing had to pay Water Motors $15,000 for the exchange [C/335]. It is Water Motors’ case that after KC 3776 was redeemed from City Motors, it was registered in the name of Ming Tak until it was exchanged with Chun Sing Motors for the taxi with licence ED 3008. The licence ED 3008 was then fixed to another taxi for delivery to Szun Yick Motors to complete the sale at $5,730,000. ED 3008 was then registered in the name of one Yeung Man Leung on 25 April 2012 [C/340]. The purpose of the exchange was to obtain a taxi that answered the requirements of the sale contract between Water Motors and Szun Yick Motors. 109.Ming Tak, however, produced a copy sale and purchase contract dated 26 January 2011 in which Water Motors agreed to sell to one Madam Chik Sau Kuen (“Madam Chik”) a current taxi with licence KE 2845 at $5,150,000 [C/329]. Delivery was to be made on 27 January 2011. The copy contract has some handwriting that seemed to record that Taxi 3 (KC 3776) was delivered to Madam Chik in place of KE 2845. But this is not entirely clear. It is however Ming Tak’s case that KC 3776 was indeed delivered to Madam Chik in place of KE 2845 on 27 January 2011. The settlement account relied on by Ming Tak stated the sale price of Taxi 3 (KC 3776) at $5,150,000 and the sale was completed on 8 May 2012 [C/454]. However, Madam Chen could not explain why Taxi 3 (KC 3776) was still registered in Ming Tak’s name on 30 June 2011 [C/338]. In fact, Water Motors only obtained Taxi 3 on 27 May 2011. It could not have delivered it to Madam Chik on 27 January 2011 in place of KE 2845. Madam Chen also suggested that Water Motors could have purchased Ming Tak’s ½ share in Taxi 3, but that could not explain why this taxi would still be registered in Ming Tak’s name. Madam Chen’s record book on the taxi and licence KB 3776 (Taxi 3) 110.Madam Chen’s record book recorded the undisputed purchase of a future taxi with licence from Cheng Yung Fui on 9 March 2011 at $4,880,000. Cheng completed this contract on 27 May 2011 by making delivery of Taxi 3. It did not record the sale of Taxi 3 [D/905]. 111.Though Ming Tak said that the sale of KE 2845 to Madam Chik was completed by the delivery of Taxi 3 on 27 January 2011, Madam Chen’s record book stated that KE 2845 was purchased on 30 September 2010 at $4,500,000 from Tin Ho Motors and was sold to Eagle Star Group Ltd (“Eagle Star”) for $4,760,000 with delivery made on 17 May 2011. Half of the profit was at $37,422.70 [D/884]. It does not say that its sale had been completed by the delivery of Taxi 3 (KC 3776) on the much earlier date of 27 January 2011 and hence does not support Ming Tak’s case. SW Chan’s evidence on the taxi with licence KC 3776 (Taxi 3) 112.SW Chan adhered to the defence and the settlement account pleaded in schedule 3. The settlement account in schedule 3 recorded the exchange of Taxi 3 for ED 3008. A taxi with licence ED 3008 was then used to complete the sale at $5,730,000. The settlement account for the taxi and licence KB 3776 (Taxi 3) 113.Both the settlement account relied on by Ming Tak [C/454] and schedule 3 of the defence and counterclaim [A/51 to 52] stated the purchase price of Taxi 3 at $4,880,000. They however had sale price that differed substantially from one another. The sale price in the settlement account relied on by Ming Tak was at $5,150,000 resulting in a profit of $233,440.33. Since Ming Tak has been paid $30,003.78, it therefore claims the balance of $86,716.39. 114.The account in schedule 3 however stated the sale price at $5,730,000 resulting in a profit of $556,427.96. Ming Tak’s half share should be at $278,213.98. The sum payable to Ming Tak should thus be ($278,213.98 - $30,003.78 =) $248,210.20 [A/40]. 115.Apart from the difference in the sale price, there are many differences between the settlement account and the account at schedule 3 like the amount of insurance premium and an interest payment of $12,325.53 in the settlement account. 116.I also note that there is another settlement account issued by Water Motors to Ming Tak but is not relied on by Ming Tak [C/341 and 462]. This account gives the profit at $198,828.73 which is $34,611.60 less than the account relied on by Ming Tak [C/454]. The difference between the two accounts lies in the amount of interest paid for the financing after completion of purchase of Taxi 3. The account not relied on by Ming Tak stated that interest was paid for a loan from City Motors from 27 May to 9 June 2011 at $6,645.14. There was then another sum of interest at $219,098.63 paid for the remaining period until sale. The account relied on by Ming Tak also contained a charge of interest at $6,645.14 paid to City Motors for a loan from 27 May to 9 June 2011. But it then stated that Taxi 3 was mortgaged and the mortgage instalments paid totalled $172,272. There was then a further payment of interest at $12,325.53. It is unknown why both mortgage instalments and further interest were payable. I also cannot tell which settlement account is right. Of course, if Water Motors is right, both of them are wrong. The issue for Taxi 3 117.The dispute is whether Taxi 3 was sold to Madam Chik at $5,150,000 or (after exchange for ED 3008) to Szun Yick Motors for $5,730,000. THE TAXI WITH LICENCE PE 3326 (TAXI ４) Pleadings on the taxi with licence PE 3326 (Taxi 4) 118.Ming Tak claims that it was entitled to a profit of $292,099.18 for the investment in Taxi 4 (PE 3326). But it was only paid $274,599.18. It claims the balance of $17,500 from Water Motors [A/8/15(b)]. It however did not set out the basis of how the profit was arrived at. The basis was only revealed by Lui in his oral evidence. Ming Tak abandoned its claim on day 4 (7 December 2017). But Water Motors’ counterclaim remains. 119.Water Motors pleaded that Ming Tak was paid $274,599.18 when it was only entitled to $10,000 as profit from this investment. Hence, it counterclaims $264,599.18 [A/40/A, B and sch 4]. 120.Ming Tak pleaded in the reply that the joint venture had purchased Taxi 4 at $5,000,000 as equal investors on 8 April 2011. Half of the investment was sold to Tin Shing Motors Holdings Ltd (“Tin Shing”) on the same day at $5,020,000 for the whole Taxi 4. That resulted in the ownership ratio between Tin Shing, Water Motors and Ming Tak at 2:1:1 respectively. In mid-April 2011, Water Motors repurchased from Tin Shing the ½ share for the joint venture also at the agreed price of $5,020,000 for the whole Taxi 4. As a result, Water Motors and Ming Tak became equal owners of Taxi 4. Taxi 4 was later sold for $5,630,000. Lui’s evidence on the taxi with licence PE 3326 (Taxi 4) 121.There is no dispute that the joint venture had purchased Taxi 4 on 8 April 2011 from Shun Yick Motors at $5,000,000 (though the contract is dated 11 April 2011) [C/348]. Lui made a supplemental witness statement on 8 December 2017 during the trial to set out his case on the sale and repurchase of Taxi 4. He said that the joint venture sold the whole Taxi 4 on the same day (8 April 2011) to an equal joint venture of Tin Shing and Water Motors at the slightly higher price of $5,020,000. Tin Shing was represented by one Mr Lau [C/347]. Water Motors then shared its ½ share in Taxi 4 with Ming Tak. The end result was that Taxi 4 was owned by Tin Shing, Water Motors and Ming Tak at the ratio of 2:1:1 respectively. As a result of this sale, Ming Tak was given a profit of $7,500 as commission [C/346 and 350]. 122.On a later day in April 2011, Tin Shing through Mr Lau sold its ½ share in Taxi 4 back to Water Motors at the same price. After the repurchase of Tin Shing’s ½ share, SW Chan told Lui and Madam Chen that Taxi 4 would be owned by Water Motors and Ming Tak in equal shares. Lui and Madam Chen agreed. 123.Ming Tak also produced a copy contract dated 11 April 2012 made between Water Motors and one Ng Chi Chung for sale of Taxi 4 to Ng at $5,630,000 with completion on 24 May 2012. Lui said that this was given to Ming Tak because it had a share in Taxi 4 [C/353]. 124.Lui also referred to a letter dated 13 January 2014 from Water Motors to it [C/469-1] in answer to its demand letter dated 5 January 2014 [C/469]. Water Motors said in the letter that it had purchased Tin Shing’s 1/3 interest in Taxi 4 and hence it had 2/3 interest in Taxi 4 whilst Ming Tak had only 1/3. Lui used this as evidence to show that Ming Tak indeed had some interest in Taxi 4 after the repurchase from Tin Shing though he disputed Ming Tak had only a 1/3 share. 125.Lui also said orally that in the settlement account given by Water Motors to Ming Tak, a sum of $50,000 was deducted from the profit as commission payment. But he had only received $7,500 commission [C/346 and 350]. Hence, he thought that the total commission shared with Water Motors should be ($7,500 x 2 =) $15,000 and Water Motors should not have charged $50,000 as commission expenses. There was thus an excessive deduction of commission from the profit at $35,000. Ming Tak thus claimed ½ of this sum at $17,500. (The settlement account in fact stated that this $50,000 was deducted as commission paid to Tin Shing and not shared by Water Motors and Ming Tak.) Ming Tak abandoned this claim on day 3. 126.However, Lui did not go by his supplemental statement in his oral evidence. He insisted in cross-examination that the whole of Taxi 4 had been sold to Tin Shing absolutely by the contract dated 8 April 2011 [C/347] and Tin Shing became the absolute owner of Taxi 4. The repurchase by Water Motors was also of the whole Taxi 4. In the repurchase, SW Chan gave a commission of $15,000 to $20,000 to Lau of Tin Shing. He then told Lui that the repurchase was for Water Motors and Ming Tak as equal investors. (Lui’s supplemental statement is in line with Madam Chen’s evidence. It has not been canvassed on whether Madam Chen had made input to the preparation of this statement.) Madam Chen’s evidence on the taxi with licence PE 3326 (Taxi 4) 127.Madam Chen said in oral evidence that she was not present when Taxi 4 was sold to Tin Shing and she just relied on what Lui had told her. But she was present at the repurchase. 128.Lui told her that the sale to Tin Shing was of ½ of Taxi 4 at the price of $5,020,000 for the whole. After the sale, the ratio of ownership between Tin Shing, Water Motors and Ming Tak was at 2:1:1 respectively. 129.Within about 10 days after the sale, Lau of Tin Shing came to Water Motors. SW Chan, Lui and Madam Chen went with Lau for tea. Upon their return, SW Chan offered to repurchase the ½ of Taxi 4 from Tin Shing at the same price. Lau agreed and left. SW Chan then asked Lui if Taxi 4 was going to be held at ½:½ between Water Motors and Ming Tak. Both Lui and Madam Chen nodded their heads to signify their agreement. 130.Madam Chen also disagreed that Tin Shing had purchased the whole of Taxi 4 or that the repurchase from Tin Shing was by Water Motors alone. Madam Chen’s record book on the taxi and licence PE 3326 (Taxi 4) 131.Madam Chen’s record book states that Taxi 4 was purchased by a contract dated 8 April 2011 at $5,000,000 and then sold to Tin Shing on the same day at $5,020,000 with profit $7,500. The sum of $7,500 had also been paid to Ming Tak [C/346 and 350]. The ownership of Taxi 4 after the sale was then held by Tin Shing and Water Motors together as to ½ and by Water Motors and Ming Tak together as to the other ½ [C/908]. In a nut shell, the ratio of ownership between the three parties of Tin Shing, Water Motors and Ming Tak was at 1:2:1. The record book does not mention the repurchase of from Tin Shing. SW Chan’s evidence on the taxi with licence PE 3326 (Taxi 4) 132.SW Chan said in his witness statement that Taxi 4 was purchased by the joint venture on 8 April 2011 and sold as a whole on the same day at a profit of $20,000. After the completion of the purchase and sale transactions, Water Motors dealt with Taxi 4 again on its own account. However, the account clerk Madam Cheung did not follow up with the records on the cancellation. She wrongly regarded that Water Motors and Ming Tak were still in joint venture and thus calculated the profit after sale in a settlement account at ½:½ for the parties. 133.SW Chan further said that Lau of Tin Shing did not come to Water Motors to clinch the repurchase. Lau was in his nineties and it was not convenient for him to have come from Kowloon to Hong Kong to visit Water Motors (Lau has since passed away). SW Chan had in fact went to Tin Shing in Kowloon to pay Tin Shing’s share of rental in PE 3326 to Lau and had tea with him. 134.SW Chan said the repurchase took place at Tin Shing’s office and not Water Motors’ shop. He referred to a contract dated 16 June 2011 which provided that Water Motors had purchased Taxi 4 from Tin Shing at $5,020,000 with an initial deposit of $300,000 [C/351]. The contract had a highlighted sentence saying that Water Motors had paid Tin Shing $15,000 and all profit or loss thereafter would be on Water Motors’ account. The balance of the purchase price (at $4,720,000) was advanced by Tin Shing to Water Motors at the prime rate less 1.5% with Taxi 4 as security. This contract, however, has written across it the words “Water Motors and Tin Shing had agreed to cancel it on 22 June”. SW Chan said that the terms in this contract governed the repurchase and had been performed, but he did not know why the words of cancellation were written there. 135.SW Chan also referred to some certificates of registered owners issued by the Transport Department. They show that PE 3326 was registered in the name of one Chan Chor Lan on 11 May 2010 and 30 April 2011 [C/344 and 350-1]. It was then registered in the name of Tin Shing on 16 June 2011 and 24 May 2012 [C/350-3 and 350-2]. This is in line with SW Chan’s evidence that Taxi 4 was mortgaged to Tin Shing. 136.Taxi 4 was then sold to one Ng Chi Chung at $5,630,000 by a contract dated 11 April 2012 with delivery made on 24 May 2012 [C/352 and 352]. Completion appeared to have taken place on the later date of 23 May 2012 when payments were made to Tin Shing for Taxi 4 [C/354 and 355]. 137.When SW Chan was shown the letter dated 13 January 2014 from Water Motors to Ming Tak [C/469-1] which said that Ming Tak had a 1/3 share in Taxi 4, he disagreed with this statement in the letter. He also said that he was reading the letter for the first time in the witness box. 138.SW Chan also said that if Ming Tak had a share in the repurchase of Taxi 4, Lui would have asked for a copy of the repurchase contract [C/351 and 351-1]and he would have asked Madam Cheung to give a copy of it to Lui. Madam Cheung would also write on the contract that it was a joint venture between the two parties and then give a copy of it to Lui. The settlement account for the taxi and licence PE 3326 (Taxi 4) 139.The settlement account that Water Motors gave Ming Tak and relied on by Ming Tak stated that Ming Tak had a ½ interest in Taxi 4 and was entitled to a profit of $274,599.18 [C/356 and 458]. It also recorded a payment of $50,000 as commission to Tin Shing. But neither side has suggested that there was such a payment. 140.Schedule 4 of the defence and counterclaim merely set out the purchase of Taxi 4 at $5,000,000 and sale to Tin Shing at $5,020,000. It is in accordance with Water Motor’s case that the repurchase of Taxi 4 and its subsequent sale had nothing to do with Ming Tak. The issues for Taxi 4 141.The issues are what share of Taxi 4 had been sold to and repurchased from Tin Shing and whether the repurchase was by Water Motors alone or by the joint venture. THE TAXI WITH LICENCE PW 5957 (TAXI 5) Pleadings on the taxi with licence PW 5957 (Taxi 5) 142.Ming Tak claims that Taxi 5 (PW 5957) was purchased on 10 January 2011 at $4,925,000. However, SW Chan wrongly procured Water Motors to sell it to Madam Chik on or around 29 February 2012 at an undervalue of HK$5,140,000 without the knowledge and agreement of Ming Tak. The market price for Taxi 5 in 2013 was at around $6,740,000. Water Motors thus sold it at $1,600,000 below the market price. Ming Tak was already paid $122,122.13 as its share of profit in this investment. It thus claims the balance of ($800,000 - $122,122.13 =) $677,877.87 from Water Motors [A/9/18 to A/10/22]. 143.Ming Tak tried to rely on an expert report of Dr. Lam Pun Lee saying that the sale of Taxi 5 in early 2012 was at an undervalue and the price would be much higher if it was sold in early 2013. I have ruled that this report was irrelevant and inadmissible on day 2. 144.Water Motors pleaded in the defence and counterclaim that it had entered into a current contract dated 10 January 2011 with Shun On to purchase a taxi with licence JY 5461 at $4,925,000 with completion on 12 January 2011. Water Motors also entered into a future contract with Madam Chik on 14 February 2011 agreeing to sell her a taxi with a licence of unspecified number at $5,140,000 with delivery to be made on 17 February 2011. SW Chan and Chik later agreed orally that JY 5461 would be delivered to Madam Chik under this future contract. 145.Water Motors further pleaded that the taxi licence market was on the downturn on 17 February 2011 and Madam Chik did not want to take delivery on that day. SW Chan agreed with her to postpone the delivery and completion for a year but she had to pay interest to Water Motors on the balance of purchase price until then. 146.In the meantime, Water Motors discovered that there was another taxi bearing a faked JY 5461 licence plying for hire in the city. Water Motors then surrendered its JY 5461 licence to the Transport Department in exchange for a new licence PW 5957 on 29 February 2012. Water Motors then affixed PW 5957 to a taxi and delivered the same (Taxi 5) to Madam Chik on the same day for completion of the contract. The net gain in this investment was $425,843.17 and Ming Tak’s share was $212,921.59. Water Motors further pleaded that Ming Tak had been paid $122,122.13 and should be paid a further sum of $90,799.46 [A/33/18 to A/35/20 and sch. 5]. Lui’s evidence on the taxi with licence PW 5957 (Taxi 5) 147.Lui did not deal with Taxi 5 in his two witness statements. He said in cross-examination that if SW Chan should have consulted him on whether JY 5461 (the predecessor of Taxi 5 (PW 5957)) should be sold to Madam Chik at $5,140,000, he would not have objected to it. He also had no particular preference on the identity of the buyer. He would also have agreed to Madam Chik completing her purchase with finance provided by Water Motors to pay for the balance of purchase price. Madam Chen’s evidence on the taxi with licence PW 5957 (Taxi 5) 148.Madam Chen complained in her witness statement that SW Chan had procured Water Motors to sell Taxi 5 (PW 5957) to Madam Chik on about 29 February 2012 at the undervalue of $5,140,000. She said the lowest market price in the first few months of 2012 was approximately $6,740,000. Ming Tak was paid $122,122.13 as profit out of this transaction. Madam Chen said if the sale should have been at the market price of early 2012, Ming Tak would have a further profit at $677,877.87. Hence, Ming Tak sues for the shortfall. 149.The undisputed market price of current taxi licence in fact rose from $4,900,000 on 1 January 2012 to $5,720,000 on 30 April 2012 [B/244 to 246]. The market price for current taxi licence from 1 January 2013 to 30 April 2013 however fluctuated between $6,750,000 and $7,020,000 [B/249 to 251]. Madam Chen was wrong in saying that the lowest market price in early 2012 was approximately $6,740,000. She was in fact relying on the market price of the first few months of 2013 when she complained that the sale in February 2012 was at an undervalue. 150.The undisputed market price for current taxi licence on 14 February 2011 was at $5,030,000 [B/239]. In oral evidence, Madam Chen said that if she should have been consulted by SW Chan, she would have agreed to the sale of Taxi 5 to Chik on about 14 February 2011 at the value of $5,140,000. She also agreed that it was common for the seller to provide finance for the balance of the price for as long as a year. Madam Chen’s record book on the taxi and licence PW 5957 (Taxi 5) 151.The record book correctly recorded that JY 5461 was purchased from Shun On at $4,925,000. But it wrongly recorded the contract date as 12 January 2011 when the correct date was 10 January 2011. It also recorded that the licence was exchanged to Taxi 5 (PW 5957) [D/899]. SW Chan’s evidence on the taxi with licence PW 5957 (Taxi 5) 152.SW Chan repeated the defence and counterclaim for Taxi 5 in his witness statement [B/107, §5]. The contract for sale to Madam Chik of a taxi with licence of unspecified number at $5,140,000 was dated 14 February 2011 with delivery to be made on 17 February 2011 [C/373]. Taxi 5 was delivered in place of JY 5461, but the delivery date was delayed to 29 February 2012 with interest on the balance of the purchase price at $208,624.90 paid by Madam Chik to Water Motors [C/274 to 376, 384 and 392 to 393]. SW Chan said orally that he had advised Lui of the sale after making the contract with Madam Chik. 153.Chik had paid a deposit of $400,000 and Water Motors provided finance for the balance of the purchase price until February 2012. SW Chan said that he had not advised Lui about the provision of finance as that had nothing to do with Ming Tak. The settlement account for the taxi and licence PW 5957 (Taxi 5) 154.The settlement account provided by Water Motors to Ming Tak [C/358 and 460] shows that 1/2 share of the profit of this investment was at $122,122.13. But this account is inaccurate in that it understated the purchase price at $4,825,000 when it was $4,925,000 as there was the deposit $100,000 paid by Water Motors to the seller Shun On [C/357]. It also allowed to Ming Tak a 1/2 share in the rental income and interest paid by Chik to Water Motors and charged Ming Tak ½ of the interest that Water Motors paid its financers pending delivery to Chik on 29 February 2012. That is not in line with SW Chan’s evidence that the financing provided to Chik after the original delivery date of 17 February 2011 had nothing to do with Ming Tak. Ming Tak has also not claimed that it had financed Chik’s purchase and hence should not be entitled to the rental or interest paid by Chik, nor should it be liable for the interest paid by Water Motors. 155.The account in schedule 5 of the defence and counterclaim is accurate on the purchase and sale prices for Taxi 5. But it also gave Ming Tak a 1/2 share in the rental income and interest paid by Madam Chik to Water Motors and charged Ming Tak ½ of the interest that Water Motors paid its financers pending the delayed delivery on 29 February 2012. It resulted in a ½ share of the profit for Ming Tak at $212,912.59. Since $122,122.13 had been paid, it admitted that $90,799.13 was still due to Ming Tak. 156.The account at schedule 5 is erroneous. I would only include the interest at $24,336.99 incurred by Water Motors for financing the purchase up to the day before the original delivery date of 17 February 2011 and ignore all the rental income, the interest paid by Madam Chik to Water Motors and the interest that Water Motors paid its financers all from 17 February 2011 to the delayed completion on 29 February 2012. The profit from this investment is thus at ($5,140,000 + ($2,064.52 + $8,000 + $9,600) - $4,925,000 - $24,336.99 =) $212,327.53. Half of this is $106,163.77. Since Ming Tak had been paid $122,122.13, if I should find for Water Motors along this line, there would be nothing due to Ming Tak despite Water Motors’ willingness to pay it $90,799.46. Since there is no counterclaim relating to Taxi 5, in the event that I should find for Water Motors along this line, I would also not award Water Motors the excess that it had paid Ming Tak under this investment. The issues for the taxi and licence PW 5957 (Taxi 5) 157.The dispute on this licence boils down to whether the investment in Taxi 5was sold to Madam Chik at $5,140,000 on 14 February 2011 or on around 29 February 2012 and whether the decision to sell should have been made jointly or could have been made solely by SW Chan on behalf of Water Motors. If the decision had to be jointly made but SW Chan had failed to consult Lui on this sale, whether Ming Tak had suffered any loss because of the breach by SW Chan. Water Motors in any event admits that there was an underpayment of $90,799.46to Ming Tak [A/41/D]. THE TAXI WITH LICENCE JW 2788 (TAXI 6) AND CONTRACT NO. L12065K Pleadings on the taxi with licence JW 2788 (Taxi 6) and contract no. L12065K 158.Ming Tak pleaded that the joint venture had entered into a future contract no. L12065K with Shun On on 21 June 2012 to purchase from Shun On a future taxi with a licence of unspecified number to be delivered on 20 April 2013 at $5,780,000. An initial deposit of $80,000 was paid [C/397 and 399]. But Water Motors failed to advise Ming Tak whether the licence and taxi purchased in this contract had been sold and, if so, at what price [A/10/22(e)]. Ming Tak further pleaded that the licence of the taxi delivered by Shun On in this contract was JW 2788 (Taxi 6). It seeks an account of the profit of the taxi with the licence JW 2788 or if the licence JW 2788 was not delivered under the contract no. L12065K, the taxi with licence as delivered under that contract. 159.Water Motors pleaded that it had sold all the rights in the contract no. L12065K to another party at the same price of $5,780,000 on the same day when it entered into it with Shun On. Hence, there was no gain or loss arising from this investment [A/36/22(b)]. It further pleaded that the registered owner of Taxi 6 (JW 2788) at the material time was not Shun On. Lui’s evidence on the taxi with licence JW 2788 (Taxi 6) and contract no. L12065K 160.The date for delivery of a taxi with licence of unspecified number under contract no. L12065K was 20 April 2013. Lui said in oral evidence that he reminded SW Chan on that day at Water Motors’ shop of the scheduled delivery. SW Chan replied that the delivery had already been made and the licence was JW 2788 (Taxi 6). SW Chan also pointed at this licence number as written on a white board hung in the shop. There were dozens of licence numbers written on the board. He told Lui to write down this number. Later Lui enquired with him on what had happened to Taxi 6 and he told Lui that it had been exchanged for another licence SC 3353 which had been hired out for rental. Lui maintained what he said in cross-examination. Madam Chen’s evidence on the taxi with licence JW 2788 (Taxi 6) and contract no. L12065K 161.Madam Chen said in her witness statement that the joint venture had entered into a future contract as equal investors to purchase a taxi with licence of unspecified number at $5,780,000. The contract was numbered L12065K. But Water Motors had not advised Ming Tak of whether the licence so bought had been sold and, if so, at what price [B/128]. 162.She said in oral evidence that she and Lui went to Water Motor’s shop on 20 April 2013 and reminded SW Chan that a taxi with licence was to be delivered to Water Motors on that day. SW Chan replied that the delivery had already been made and pointed to JW 2788 (Taxi 6) as written on the board hung in the shop. JW 2788 later disappeared from the board. She asked SW Chan what had happened to it. He replied that it had been replaced by SC 3353. He then pointed to SC 3353 which was parked in front of the shop. 163.On the copy of contract numbered L12065K produced by Ming Tak during the trial, there are written on the top right corner “20/4/13” and “JW 2788” and on the top left corner “SC 3353” and Chinese words meaning “licence fee” and “14/7/14” [C/399-1]. Madam Chen admitted that the writing on the top left corner of this copy was hers. The parties also agreed that the copy of the contract given by Ming Tak to its solicitors and the copy which Madam Chen showed to Madam Lo of Water Motors at the end of 2013 or early 2014 [C/399-2] did not have the number “SC 3353” or the Chinese words meaning “licence fee” and “14/7/14”. 164.For the copy produced by Ming Tak’s solicitors in discovery [C/399], there are the number “SC 3353” and words “Hung Yat” written on the top left corner. But Ming Tak’s solicitors admitted that they were probably written by their former clerk when preparing the case. It is thus clear that Ming Tak had a copy of the contract that only had “20/4/13” and “JW 2788” written on the top right corner and without “SC 3353” or the Chinese words meaning “licence fee” and “14/7/14”. 165.Madam Chen explained that after SW Chan had told her that SC 3352 had replaced Taxi 6 (JW 2788), she went home and made a further copy of the copy contract given to Ming Tak previously. She then wrote “SC 3353” and the Chinese words meaning “licence fee” and 14/7/14 on the newly made copy. She explained that she did so because she was not sure if “SC 3353” was the correct number. 166.Thus she allegedly had two copies of this contract both of which had “20/4/13” and “JW 2788” written on the top right corner. But one of them also had “SC 3353” and the Chinese words meaning “licence fee” and 14/7/14 on the top left corner. The copy she gave Ming Tak’s solicitors was without the writing on the top left corner. She did not give the solicitors the other copy because she was worried that SC 3353 was not the correct number. 167.Despite her worry that “SC 3353” might not be the correct number, she did not clarify the same with SW Chan. Madam Chen’s record book on the taxi and licence JW 2788 (Taxi 6) and contract no. L12065K 168.Madam Chen’s record book stated that a future contract was made on 20 June 2012 at $5,780,000 with delivery made on 20 April 2013. It further recorded that the licence on the taxi was JW 2788 (Taxi 6) and Water Motors had arranged a new hybrid taxi of licence SC 3533 to replace it. SW Chan’s evidence on the taxi with licence JW 2788 (Taxi 6) and contract no. L12065K 169.SW Chan said that Ming Tak’s case on JW 2788 did not tally with the records of Water Motors. He referred to the joint venture contract produced by Water Motors which did not have “20/4/13” and “JW 2788” written on the top right corner [C/397]. Furthermore, Shun On, the vendor in the contract, was not the owner of Taxi 6 (JW 2788). He maintained that the rights in the future contract no. L12065K were sold by Water Motors on the same day which resulted in no gain or loss. 170.In oral evidence, SW Chan denied of having told Madam Chen that Taxi 6 was delivered under the future contract. He repeated that he had never talked to Madam Chen on the business of the joint venture of Water Motors and Ming Tak. He only talked to Lui on such matters. Madam Chen only did the book keeping. He also denied of having told Madam Chen that Taxi 6 had been replaced by SC 3533. He said if he should have told her so, he would also have written down the two licence numbers for her. He also said that Taxi 6 had nothing to do with Ming Tak. 171.In cross-examination, he also denied that Madam Chen had reminded him on 20 April 2013 that a taxi with licence was scheduled to be delivered to Water Motors on that day as he would not have talked to her on business matters. He also denied that he had pointed to SC 3533 and told Madam Chen that JW 2788 had been replaced by it. He maintained that the rights in the contract no. L12065K had been sold to one Ng Man Bill (吳文彪) on the same day when it was made and at the same price [C/398]. 172.At my insistence, Water Motors produced a bundle of documents on day 5 to explain the purchase and sale of Taxi 6 (JW 2788) by Water Motors. Two certificates of the Transport department certified that on 21 June and 28 December 2012 Eagle Star was the registered owner of JW 2788 [C/400 and 401]. Water Motors had entered into a contract with Eagle Star dated 5 October 2010 for purchase from Eagle Star a taxi with a licence of unspecified number at $6,760,000 to be delivered on 28 December 2012 [C/400-1 produced on day 6]. A completion statement dated 28 December 2012 issued by Eagle Star to Water Motors, two copy cheques drawn by Water Motors in favour of Eagle Star, two bank statements and a receipt of Water Motors acknowledging delivery by Eagle Star of a taxi with licence JW 2788 showed that Eagle Star had completed the sale to Water Motors a taxi with licence JW 2788 at $6,760,000 on 28 December 2012 [C/402 to 405]. This shows that JW 2788 was sold and delivered to Water Motors on 28 December 2012 by Eagle Star and not by Shun On, the vendor in the contract no. L12065K. Hence, JW 2788 (Taxi 6) had nothing to do with Shun On or contract no. L12065K. 173.Water Motors then mortgaged Taxi 6 to Hang On on 4 January 2013 for $5,400,000 [C/406]. Three certificates from the Transport Department showed that Hang On was its registered owner on 15 January, 17 April and 20 April 2013 [C/407 to 409]. 174.Water Motors had entered into a contract with Crown Motors on 30 November 2012 to purchase from Crown Motors a hybrid taxi [C/411]. The stock number assigned by Crown Motors for this taxi is 245654. Water Motors made payment and took delivery under this contract on 27 June 2013 [C/410]. It abandoned the use of licence JW 2788 as a taxi licence in exchange for a new taxi licence SC 3533. The new licence was affixed on the new taxi [C/411]. It then registered SC 3533 under its name on 2 July 2013 [C/412]. Its case is that the licence JW 2788 was kept for use not as a taxi licence but for other purpose. 175.On 10 November 2014, Water Motors mortgaged SC 3353 to Hung Yat Taxi Motors Ltd (“Hung Yat”) for a loan of $6,300,000 [C/4123] and Hung Yat then registered SC 3533 under its name on 26 November 2014 [C/413-1]. 176.On 27 May 2015, Water Motors entered into a contract to sell a taxi with licence of unspecified number to one Leong Wa Lin at $7,530,000 and delivery was made on 24 July 2015 [C/413-4 to 413-5]. 177.SC 3533 was scrapped on 16 July 2105 and the Transport Department issued a new licence TM 6870 to Hung Yat to replace it [C/413-8 to 413-10]. Hung Yat then became the registered owner (in fact a mortgagee) of a taxi licence TM 6870 [C/413-11]. 178.Water Motors redeemed Taxi TM 6870 from Hung Yat on 24 July 2015 [C/413-14 to 413-15]. Leong Wa Lin was then registered as the owner of taxi with licence TM 6870 on 30 August 2015 [C/413-17]. The settlement account for the taxi and licence JW 2788 (Taxi 6) and contract no. L12065K 179.The case of Water Motors for contract no. L12065K is that there was no gain or loss. Hence, no settlement account had been prepared for it in the schedules in the defence and counterclaim. It is also Water Motors’ case that the buy and sell of Taxi 6 (JW 2788) had nothing to do with Ming Tak. Hence, it has not supplied any settlement account to Ming Tak for this licence. The issues for JW 2788 (Taxi 6) and contract no. L12065K 180.The issues for contract no. L12065K is whether all the rights in it had been sold by Water Motors for the joint venture to someone else on the same day at the same price or whether Taxi 6 (JW 2788) was delivered to Water Motors under this contract and, if so, what is Ming Tak’s share of profit out of this investment. THE TAXI WITH LICENCE KC 8606 (Taxi 7) Pleadings on taxi with licence KC 8606 (Taxi 7) 181.Water Motors also pleaded in the counterclaim that by reason of the erroneous settlement accounts prepared by Madam Cheung, it had overpaid Ming Tak for the joint investment in Taxi 7 (KC 8086) at $832,658.19 [A/39/30C and schedule 7]. 182.Ming Tak pleaded in the reply that for the investment in Taxi 7, SW Chan had telephoned Lui on 31 October 2012 and told him that this taxi had been sold for $6,820,000. Hence, there was no overpayment. Lui’s evidence on the taxi with licence KC 8606 (Taxi 7) 183.There is no dispute that the joint venture had purchased Taxi 7 (KC 8606) on 24 February 2011 at $4,980,000 from Tin Ho Motors [C/414]. 184.Lui did not mention Taxi 7 in his witness statements. He said in oral evidence that SW Chan had telephoned him from New Zealand on 31 October 2012 and agreed with him that Water Motors would purchase Ming Tak’s ½ shares in Taxis 1 and 7 at the agreed value of $6,820,000 for each of the two taxis. 185.Water Motors had, on the basis of a settlement account it supplied to Ming Tak, paid Ming Tak $1,316,080 ($911,080 as 1/2 share profit plus $405,000 as refund of deposit). The profit was calculated on the basis that Taxi 7 was sold for $6,820,000 [C/433]. Ming Tak relies on this account. 186.Water Motors said that the settlement account for Taxi 7 was erroneous as the sale was of a taxi with licence that had been exchanged with Taxi 7. That sale was contracted on 18 February 2012 at $5,385,000 [C/430] and completed on 24 April 2012 [436-2 to 436-4]. Madam Chen’s evidence on the taxi with licence KC 8606 (Taxi 7) 187.Madam Chen also did not mention Taxi 7 in her witness statement. In cross-examination, she maintained that Ming Tak’s 1/2 share in Taxi 7 was sold to Water Motors at an agreed value for Taxi 7 at $6,820,000. She denied that the taxi with licence that had been exchanged with Taxi 7 was sold for $5,385,000 on 18 February 2012. She asserted that Water Motors had effected the sale of the exchanged taxi and licence on its own account and that sale had nothing to do with Ming Tak. Madam Chen’s record book on the taxi and licence KC 8606 (Taxi 7) 188.The record book recorded that Taxi 7 was purchased by a contract dated 24 February 2011 at $4,980,000 and Ming Tak paid a deposit of $405,000 for it. Nothing was written about the alleged disposal of Ming Tak’s ½ shares in Taxis 1 and 7 to Water Motors at an agreed value of $6,820,000 for each of them on 31 October 2012 [D/904]. SW Chan’s evidence on the taxi with licence KC 8606 (Taxi 7) 189.SW Chan said in his witness statement that the account clerk Madam Cheung had made mistakes in calculating the profit of the investment on Taxi 7. 190.He elaborated in his supplemental witness statement on this investment. He said Water Motors purchased Taxi 7 from Tin Ho Motors by a contract dated 24 February 2011 at $4,980,000. The purchase was for the joint venture. Delivery was to take place on the next day [C/414 to 415]. A deposit of $405,000 was paid by Ming Tak. The balance of the purchase price and miscellaneous costs at $4,580,000 was financed by Tin Ho Motors from 25 February 2011 at interest rate of 1.5% below the prime rate [C/427 and 434]. Water Motors later obtained a loan for $4,500,000 at a lower interest rate of 1.75% below the prime rate from Cheng Yung Fui. Taxi 7 was then redeemed from Tin Ho Motors and mortgaged to Cheng on 22 June 2011 [C/428]. 191.Water Motors then entered into a future sale contract with Shun Yick Motors dated 18 February 2012 to sell to Shun Yick a new taxi with licence of unspecified number at $5,385,000. Delivery was to be made on 15 April 2012 [C/430], but was delayed to 24 April 2012. 192.Water Motors then entered into an exchange contract on 24 April 2012 with Cheng Yung Fui to exchange Taxi 7 (KC 8606) for Cheng’s old taxi with licence KF 5711 plus $4,000 [C/431]. Water Motors then scrapped the old taxi and surrendered the licence KF 5711 to the Transport Department. 193.Shun On entered into a contract with Crown Motors on 23 May 2011 to purchase a new taxi. After Water Motors had surrendered the licence KF 5711, it bought from Shun On the contractual rights to buy a new taxi from Crown Motors. Crown Motors then sold and delivered to Water Motors a new taxi with a new licence RH 9520 in place of the surrendered KF 5711 [C/436-1]. Water Motors then delivered the new taxi with licence RH 9520 to Shun Yick Motors to complete the contract of 18 February 2012 for $5,385,000 [C/436-2 to 436-4]. 194.However, SW Chan could not explain why Madam Cheung would have used $6,820,000 as the agreed value for Taxi 7 in preparing the settlement account [C/433]. The settlement account for the taxi and licence KC 8606 (Taxi 7) 195.The settlement account relied on by Ming Tak used the undisputed purchase price of $4,980,000 in a contract dated 24 February 2011. Madam Chen’s record book recorded these particulars. It also recorded Ming Tak’s payment of deposit at $405,000. The copy contracts produced by both sides show that the completion date was 25 February 2011 [C/414 to 415]. The balance of purchase price and miscellaneous costs at $4,580,000 was financed by the vendor Tin Ho Motors from completion on 25 February 2011 at interest rate of 1.5% below the prime rate [C/427 and 434]. The financier was changed to Cheng Yung Fui at a lower interest rate of 1.75% below the prime rate from 22 June 2011 [C/428]. 196.It is Ming Tak’s case that SW Chan had telephoned Lui from New Zealand on 31 October 2012 and agreed with Lui to purchase Ming Tak’s ½ share in Taxi 7 at the agreed value of $6,820,000 for Taxi 7. Hence, the interest for the loan of should be paid from 25 February 2011 to 21 June 2011 (116 days) at 1.5% below the prime rate and then from 22 June 2011 to 30 October 2012 (497 days) at 1.75% below the prime rate. However, the settlement account only calculated interest for the second period from 22 June 2011 to 29 June 2012 orfor 374 days only. That was 123 days short of the required interest period. 197.Since the purchase was completed on 25 February 2011 and the alleged sale was completed on 31 October 2012, the period for the taxi to be let out for rental should have been from 25 February 2011 to 30 October 2012. But the settlement account only calculated rental for the period from 25 February 2011 to 30 June 2012 which was 4 months too short. 198.The dates Madam Cheung used for calculation of interests and rental at 29 and 30 June respectively are incorrect regardless of whether the sale was completed on 24 April 2012 as contended by Water Motors or on 31 October 2012 as used by Ming Tak. There is nothing to indicate why Madam Cheung should have used her dates and not the date of Ming Tak or Water Motors. 199.Furthermore, the daily interest used by Madam Cheung for the period when Taxi 7 was mortgaged to Tin Ho was at $470.55 per day ($54,583.56/116 days). But she used the much higher sum of $648.08 per day ($242,382.74/374 days) for the period when Taxi 7 was mortgaged to Cheng Yung Fui. That was in excess of the daily interest paid to Tin Ho by more than 37.73%. But the principal lent by Cheng was $80,000 less than that of Tin Ho and the interest rate charged by him was 0.25% lower. The correct daily interest charged by Cheng was agreed to be at $431.50 as shown in schedule 7 of the defence and counterclaim. 200.Madam Cheung also charged $3,000, $3,000 and $1,000 as costs for changing the mortgagee and mortgage account from Tin Ho to Cheng. The agreed costs for such purposes as shown in schedule 7 of the defence and counterclaim are however different. They are $1,000, $1,000 and $1,000. Madam Cheung also omitted the costs at $275,309 for procuring a new taxi from Crown Motors for delivery to the buyer Shun Yick Motors. 201.From the above, it is no exaggeration to say that Madam Cheung’s settlement account for Taxi 7 is full of errors and the cause(s) of which cannot be explained at all. 202.The settlement account in schedule 7 of the defence and counterclaim is prepared on the basis of the purchase price of $4,980,000, the sale price of $5,385,000 and the completion date on 24 April 2012. Ming Tak’s 1/2 share of the profit is calculated at $78,421.81. Ming Tak is also entitled to a refund of deposit at $405,000. The total to be paid to it is $483,421.81. However, it has been paid $1,316,080. Water Motors therefore counterclaims for $832,658.19. The issues for Taxi 7 203.The issue for Taxi 7 is whether the investment was sold at $5,385,000 and completed on 24 April 2012 or whether SW Chan had telephoned from New Zealand to Lui in Hong Kong on 31 October 2012 and orally agreed with Lui to purchase Ming Tak’s 1/2 share at the agreed value of $6,820,000 for Taxi 7. THE TAXI WITH LICENCE JX 2709 (Taxi 8) Pleadings on taxi with licence JX 2709 (Taxi 8) 204.Water Motors pleaded in the counterclaim that Taxi 8 was a tripartite investment between Water Motors, Ming Tak and one Mr Kwok. It further pleaded that by reason of Madam Cheung’s erroneous settlement account, it had over paid Ming Tak in this joint investment at $17,128.69 [A/39/30C and schedule 8]. 205.Ming Tak did not respond to this counterclaim in its reply. Lui’s evidence on the taxi with licence JX 2709 (Taxi 8) 206.Lui did not mention Taxi 8 in his evidence. Madam Chen’s evidence on the taxi with licence JX 2709 (Taxi 8) 207.Madam Chen did not mention Taxi 8 in her witness statement. There is no dispute that it was purchased from Dah Cheung Motors Co Ltd by a contract dated 21 November 2011 at $4,940,000 with delivery to be made on 18 September 2012 [C/438 to 439]. Water Motors’ case is that it was then exchanged for other licences and the exchanged licence was eventually sold to one Kam Hing Motors by a contract dated 21 September 2012 for $6,750,000 with completion scheduled on 11 October 2012 [C/450 and 451]. Madam Chen agreed in oral evidence that she had accepted this sale at the time. She also agreed with this sale when giving oral evidence as it was at market price. Madam Chen’s record book on the taxi and licence JX 2709 (Taxi 8) 208.The record book stated that Taxi 8 was purchased from Dah Cheung Motors by a future contract dated 21 November 2011 at $4,940,000 with delivery to be made on 18 September 2012 [D/912]. There is no record about its disposal. SW Chan’s evidence on the taxi with licence JX 2709 (Taxi 8) 209.SW Chan said in his witness statement that Madam Cheung had made mistakes in calculating the profit of Taxi 8. He elaborated in his supplemental witness statement on this investment. Since there is no dispute on the purchase price at $4,940,000 and Madam Chen accepted the sale price at $6,750,000 in her oral evidence, there is no need to spell out SW Chan’s evidence on this investment. The settlement account for the taxi and licence JX 2709 (Taxi 8) 210.Though Madam Cheung used the correct figure of $6,750,000 for the sale price, she stated the purchase price mistakenly at $4,890,000 when the undisputed purchase price was at $4,940,000. She also calculated rental from mid-night of 5 June 2011 to 4 October 2012 when the undisputed dates of taking delivery from the vendor Dah Cheung Motors and making delivery to the purchaser Kam Hing Motors were 18 September 2012 and 11 October 2012 respectively [C/438 to 439, D/912 and C/450 and 451]. She also charged interest from 5 June 2011 to 11 October 2012 when the period should be from 18 September 2012 to 11 October 2012. In the light of Madam Chen’s agreement with the case of Water Motors, this settlement account is again full of errors. 211.The settlement account in schedule 8 is prepared on the basis of a purchase price of $4,940,000 and a sale price of $6,750,000. The 1/3 profit payable to Ming Tak is $500,631.21. However, Ming Tak had already been paid $517,759.90 [C/457]. Hence, Water Motors is counterclaiming $17,128.69. The issue for Taxi 8 212.There is no issue for Taxi 8 and Ming Tak should repay $17,128.69 to Water Motors. LETTER FROM MADAM LO AND HER WITNESS STATEMENT 213.Water Motors issued a letter dated 2 January 2014 to Ming Tak claiming that the settlement of account between them for Taxis 1 to 5 and 7 to 8 plus 2 taxis of licences PG 3483 and JX 4655 should result in profits for Ming Tak at $3,701,591.19. But Water Motors had paid Ming Tak $3,798,976.68. Ming Tak should therefore repay Water Motors the overpayment at $97,385.40 [C/461]. 214.Water Motors stated that the amounts of profits for the 9 taxis with licences are:
215.Ming Tak disagreed. It replied on 5 January 2014 and asserted that the settlement of account for Taxis 1 to 4 and 7 to 8 shows that Water Motors had underpaid Ming Tak by $158,427.45. That was before the account for Taxi 5 (PW 5957) was settled [C/469]. Ming Tak stated the profits as follows:
216.Water Motors responded by a letter dated 13 January 2014. It acknowledged the consensus of both sides on the settlement accounts for Taxis 2, 3, 7 and 8. It further said that Ming Tak only had a 1/3 share of each of Taxi 1 (KB 2548) and Taxi 4 (PE 3326). The reason for Taxi 1 was that Water Motors had purchased Madam Chik’s 1/3 share of Taxi 1 (KB 2548) and thus should have 2/3 share of this investment. Regarding Taxi 4, it was because Water Motors had repurchased the 1/3 share from Tin Shing and hence should have 2/3 share of the investment. Regarding Taxi 5, it had been sold to Madam Chik on 10 January 2012 at $5,140,000. The letter also maintained the figures mentioned in its letter dated 2 January 2014. It ended by reiterating the demand of $97,385.49 from Ming Tak [C/469-1]. 217.Ming Tak at the trial relied on Water Motors’ response letter of 13 January 2014 as evidence that it had an interest in Taxi 4 though it was seeking a ½ and not a 1/3 share of profit. 218.Since Ming Tak only produced Water Motors’ response letter dated 13 January 2014 during the trial and SW Chan said that he was reading it for the first time in the witness box, I allowed Water Motors to adduce evidence by Madam Lo, the drafter of the letter, to explain why she should have said in the letter that Ming Tak had a 1/3 share of the Taxi 4 investment. 219.Madam Lo made a witness statement dated 24 January 2018. She said that she had made a mistake in saying that Ming Tak had a 1/3 share in Taxi 4. She made the mistake because she had noticed the heading of the settlement account prepared by Madam Cheung [C/356] which stated that Taxi 4 was a tripartite investment between Water Motors, Ming Tak and Tin Shing. She thus thought that each of them had initially invested in a 1/3 share in Taxi 4 and Water Motors later bought out Tin Shing’s 1/3 share and became a 2/3 share owner. She was very busy at that time and had not look for the relevant documents from the warehouse for checking. She also had not asked SW Chan to confirm the correctness of the contents before sending the letter out. Mr Kee did not choose to cross-examine Madam Lo on her witness statement. THE ISSUES AND DECISIONS The decision making power in the purchase and sale transactions 220.Water Motors pleaded a number of reasons to justify why Lui and subsequently Ming Tak had to give SW Chan or Water Motors the power to decide the price for buying and selling the licences without consulting Lui or Ming Tak. I have set forth the pleaded reasons in §12 above. 221.Lui said in evidence that after he had transferred all his shares in Ming Fat Motor to his former wife in 1997, he did not have a shop to do business or the support of a finance company in his investment in taxi licence. He received only a few offers from the taxi licence agents. He said that if one had no shop, one had no business. He was also not a member of the Taxi Association. It was easier for a member of the association to deal with another member particularly in the sale of a future contract of a taxi with licence. There are also fewer people who would buy a taxi from a non-member. Some taxi trading companies would also not deal with non-members either. Membership of the Taxi Association was an advantage. At that time, he could only do some ad hoc and occasional investments in his own name. 222.In about 2009, when Lui was introduced to SW Chan, Water Motors was operating in a ground floor shop in Wanchai. It had at least four staff. Its front window showed some taxi licences with numbers for sale. It was also a member of the Taxi Association. 223.Lui also said that he made all the decisions for himself and Ming Tak including all the purchase and sale decisions whilst Madam Chen only handled the accounts. They had no staff to deal with the formalities or to arrange finance to complete the purchases. 224.He said that the ratio of ownership of each joint investment was individually negotiated, but he agreed with Water Motors’ case that it was for Water Motors to decide in each case on who should provide the deposit. He and Madam Chen also confirmed that they had never objected to any sale proposed by SW Chan. They always agreed. 225.Madam Chen said in §7.2 of her witness statement that the sale price was determined jointly by her on behalf of Ming Tak and SW Chan on behalf of Water Motors. She changed in oral evidence and said that Lui was responsible for negotiating for the purchase and sale price whilst she was for the paper work. In cross-examination, she changed again and said that one of the terms of the joint venture was that the buy and sale price of each and every licence had to be agreed by Lui, she herself and SW Chan. She said this condition was agreed to in Cheng’s presence and it continued when Ming Tak took over Lui’s place. However, she said that neither side had ever objected to any sale proposed by the other, nor was there ever a deadlock. If any party did not want to sell, it would buy out the selling party. If SW Chan should sell a licence with taxi without first consulting Ming Tak, she would still accept the sale if it should be at the market price. 226.About 160 of the transactions recorded in Madam Chen’s record book are joint investments of Ming Tak and Water Motors. If each and every of the purchase and sale decisions had to be agreed before the contract was made, there were at least 160 purchase decisions and a similar number of sale decisions that had to be agreed between the two sides during this period of 3 years and 4 months. But both Lui and Madam Chen said there was never any disagreement. Madam Chen also said that she would not object to a sale even if she was not consulted beforehand if the price was at the market price. 227.SW Chan said that when Cheng introduced Lui to him in February 2010 for the joint venture, he expressly made it a condition that he had the right to decide on all purchases and sales without consulting Lui. He would only notify Lui about any sale after it was concluded. 228.SW Chan also said that in practice, Water Motors would enter into a purchase contract first. If Ming Tak should find the purchase price agreeable, Lui would ask for a share of it. There was never any occasion when both sides would agree to the purchase price first before Water Motors would commit to the purchase. For a sale, he would tell Lui about it after it was concluded. Lui had never complained about any sale on the ground that the price was too low. In case of withdrawal by any party from an investment, a withdrawal contract would be signed, a settlement account prepared and payment to be made accordingly. 229.Cheng was a taxi agent and a member of the Taxi Association. He and Lui had jointly invested in taxi licences after Lui had left Ming Fat Motor. He introduced Lui to SW Chan because Lui wanted a financier to finance his trading in taxi licences and he regarded Water Motors as being able to assist Lui. He said in taxi licence trading, decisions had to be made by the boss of a trader in a snap second. It could not be dragged on. SW Chan was the boss of Water Motors, a trader. He, Lui and SW Chan had expressly agreed that Water Motors was to be responsible for all formalities of the investments of the joint venture and SW Chan had the right to decide the price and date for all purchases and sales without consulting him and Lui. He agreed to this condition knowing that there were risks in such trade and SW Chan could commit to a losing deal without consulting him. 230.Lui’s evidence shows that when he was introduced to SW Chan, Water Motors was already in the business of buying and selling taxi licences. It had a ground floor shop and staff and its front window showed some taxi licences for sale. It was also a member of the Taxi Association. But Lui was only doing ad hoc and occasional investments in his own name. The formation of the joint venture would make available Lui’s capital to Water Motors. That was certainly an advantage to Water Motors. But Water Motors was already in business and could continue with its business without Lui’s additional capital. Lui however needed a shop, staff, financier and membership of the Taxi Association to carry on normal trading. He later also used Water Motors’ shop as the registered address of Ming Tak. Lui’s evidence satisfied many of Water Motors’ pleaded reasons (referred to in §12 above) for Lui agreeing to give SW Chan the power to decide on the price to buy or sell without consulting Lui. In fact, the power was only relevant to sale of their investments as Lui would decide whether to join after Water Motors had contracted to buy. I think this evidence of SW Chan is reasonable and I accept it. 231.There were a few joint venture contracts [D/590], [D/596], [D/601] and [D/637] which had Ming Tak as the contracting party vis-à-vis the third party. SW Chan agreed that in these investments, Lui did not have to consult him on the sale price before committing to a sale. This shows that the party dealing with the contractual formalities would have the power to decide on the price for the sale. Ming Tak’s pleaded case is that SW Chan was to be responsible for all the formalities including all the sale and purchase contracts and for obtaining finance for the balance of purchase price upon completion of purchases. If the party responsible for the contractual and financial matters of an investment would also have the power to decide the buy and sell of that investment, then Water Motors, being the party entrusted with the responsibility to handle the contractual and financial matters for the joint venture, would also have the power to decide on the sale price without the need to consult Ming Tak. The few contracts made by Ming Tak for the joint venture were exceptions, but the same principle also applied and Ming Tak decided on the price of their sale. 232.Furthermore, the absence of any disagreement in the 160 sale decisions shows that there was little room for disagreement as the concern of Lui and Madam Chen was that any sale would be at the prevailing market price. 233.Mr Kee submitted that it is in line with commercial sense that SW Chan had to obtain Lui’s consent before selling off a taxi licence. The reasons are that Ming Tak was a contributor to the initial deposit in some investments. It had an interest in each of the jointly invested licence. By reason of the joint venture with Ming Tak, the risk of Water Motors in the licence investment was reduced by 50% in the event of loss. It was therefore unreasonable for Water Motors to decide and conduct a sale at a loss, which Ming Tak may or may not agree to, without consulting Ming Tak and then to ask Ming Tak to shoulder ½ of the loss. 234.Mr Kee’s reasons make good sense and appear to be fair. But they do not take into account of the special features of the trade in taxi licences like the volatility of the market, the advantage of being a member of the Taxi Association, the need to have a shop and staff to do business, the ability to arrange finance to complete the purchases and the fact that SW Chan and Water Motors had experience and were already in the trade. Regarding the point of reducing Water Motor’s loss by 50% or making Ming Tak shouldering ½ of the loss of a losing sale without it having been consulted beforehand, it must not be overlooked that the same rule would operate in the same way in a profitable sale and Ming Tak would be given ½ of the profit of an investment also without it being consulted beforehand. 235.I also accept that volatility of the market dictated that trading decisions had to be made quickly. 236.Since Lui at that time could not have traded properly on his own, he had little bargaining power to refuse SW Chan’s demand for the sole power to decide on the price for purchase and sale as a condition for forming the joint venture. 237.I also find Cheng a truthful and reliable witness. He is a taxi licence agent and surely knows the market practices. His evidence is simple, direct and straight forward. I find his evidence truthful. I also find the evidence of SW Chan on this issue reasonable and believable. I have also pointed out that Lui’s evidence supported Water Motors’ case substantially. In the premises, I disbelieve the evidence of Lui and Madam Chen on this issue in so far as it is in conflict with that of SW Chan and Cheng. 238.In the light of the above analysis, I find that Lui and SW Chan had agreed that Water Motors through SW Chan had the power to decide the price for buying and selling their joint venture investments of taxi licences and taxis without consulting Lui. This condition of joint venture continued when Ming Tak took over Lui’s place in the joint venture. THE RELIABILITY OF THE SETTLEMENT ACCOUNTS Discussion 239.Water Motors pleaded in the counterclaim that at all material times, its accounting records and accounting formalities were prepared and handled by the account clerk Madam Cheung. However, Madam Cheung was incompetent in her work which resulted in overpayments having been made by Water Motors to Ming Tak. 240.SW Chan said in oral evidence that he was responsible for buying and selling of taxi licences. Madam Lo, the other director of Water Motors was responsible for the back office work. The settlement accounts were the responsibility of Madam Cheung. He did not check the settlement accounts before they were given to Ming Tak. He also did not deliver the settlement accounts to Lui. Madam Cheung was dismissed by Water Motors on 13 May 2013 because her arithmetic was no good and she did not know about her work clearly. 241.I now consider the settlement accounts prepared by Madam Cheung for Taxis 1 to 5 and 7 to 8. 242.The settlement account for Taxi 1 (KB 2548), stated in the title that it was a tripartite investment of Water Motors, Ming Tak and Madam Ho, but gave ½ share of the profit to Ming Tak. The title is wrong as Madam Ho had withdrawn from this investment. 243.The settlement account recorded the agreed valuation of Taxi 1 at $6,820,000. This is in line with Ming Tak’s case that it was not a sale to an outsider but a sale of its interest to Water Motors at an agreed value. But if this agreed value is correct, then SW Chan must have cheated $10,000 off Ming Tak. The reason being that Water Motors had already sold Taxi 1 to Heung Wing Motors on 29 October 2012 at $6,840,000. Lui had also said orally that SW Chan had consulted him on selling Taxi 1 to Heung Wing Motors Ltd for $6,840,000 and Lui agreed. However, I cannot see why SW Chan in these circumstances would have preferred to commit a breach of trust to cheat Ming Tak for $10,000. I have also found that SW Chan was in Hong Kong and not in New Zealand on 31 October 2012. Hence it made Ming Tak’s story of SW Chan phoning in from New Zealand on 31 October 2012 unbelievable. If I disbelieve Ming Tak’s case of an oral agreement made in this alleged long distance phone call, then I will also find that Water Motors had not purchased Ming Tak’s ½ share in Taxi 1. What is left is the contemporaneous documentary evidence showing that Taxi 1 as a whole was sold to Heung Wing Motors for $6,840,000 on 29 October 2012. There is also no obvious reason showing why Madam Cheung would have made the errors in this settlement account. 244.The parties have also accepted the calculations in schedules 1 to 5 and 7 to 8 as correct if I should find for Water Motors on the facts of the purchases and sales for Taxis 1 to 5 and 7 to 8. With regard to Taxi 1, a comparison of the settlement account relied on by Ming Tak [C/308] and that in schedule 1 of the defence and counterclaim shows a number of differences. The settlement account included a $15,302.55 interest charge as having been paid to Madam Ho for her initial deposit of $487,000. But this is contrary to the case of Water Motors or Ming Tak. There is also no basis or evidence to show why this sum was payable. The settlement account also omitted two sums of $3,195 charged on the profit for licence renewal in 2011 and 2012. The insurance premium for 2012 recorded in it was $200 more than that in the account in schedule 1. 245.The settlement account for Taxi 2 (KB 3437) stated that Taxi 2 was sold for $6,300,000 to Shun On. But the sale to Shun On was for $6,325,000 with delivery made on 15 August 2012 whilst the sale for $6,300,000 was to Lik Hang with delivery made on 10 August 2012. The account certainly contains an error and that is not self-explanatory. 246.Ming Tak also produced three versions of settlement account for Taxi 2 though it relied on only one of them. The three versions differ from one another. The one giving Ming Tak a ¼ share of profit had charged $234,292 [C/455] as the costs for buying a new taxi for delivery to Shun On whilst those that gave Ming Tak 1/3 and ½ share of profit only charged $222,292 as such costs [C/327 and 326]. The difference is $12,000. There is no apparent reason for the difference. 247.The sale price in the settlement account for Taxi 3 (KB 3776) [C/454] as relied on by Ming Tak is at $5,150,000. That gave rise to a profit of $233,440.33 or $116,720.16 for a ½ share. Since Ming Tak had been paid $30,003.78, it therefore claims the balance of $86,716.39. However, the sale price relied on by Water Motors is at $5,730,000 resulting in a profit of $556,427.96 (schedule 3). Ming Tak’s half share should be at $278,213.98. The sum payable to Ming Tak should thus be ($278,213.98 - $30,003.78 =) $248,210.20 [A/40]. 248.There is another settlement account for Taxi 3 but not relied on by Ming Tak [C/341 and 462]. It gives the profit at $198,828.73 which is $34,611.60 less than the settlement account relied on by Ming Tak [C/454]. The difference lies in the amount of interest paid for the finance by mortgage or by loan for the balance of the purchase price. There is no clue as to which version is correct. 249.The settlement account for Taxi 4 (PE 3326) stated that Ming Tak had a ½ interest in Taxi 4 and was entitled to a profit of $274,599.18 [C/356 and 458]. It however recorded a payment of $50,000 as commission to Tin Shing. But neither side has suggested that there was such a payment. 250.The settlement account for Taxi 5 (PW 5957) [C/358 and 460] shows that a 1/2 share of the profit was at $122,122.13. But it understated the purchase price at $4,825,000 by omitting the deposit $100,000 paid by Water Motors to the seller Shun On [C/357]. It also allocated to Ming Tak a 1/2 share in the rental income and interest paid by Chik to Water Motors and charged Ming Tak ½ of the interest that Water Motors paid its financers from 17 February 2011 on 29 February 2012 pending the delayed delivery to Madam Chik. Neither Water Motors nor Ming Tak says that Ming Tak should be allocated such sums. 251.Water Motors did not provide any settlement account to Ming Tak for Taxi 6 (JW 2788) or contract no. L12065K as Water Motors says that the rights in the contract were sold at the same price on the same day and there was no gain or loss. 252.The settlement account for Taxi 7 (KC 8606) used the allegedly agreed value of $6,820,000 for the disposal of Taxi 7 [C/433]. This is the price Lui alleged that SW Chan had used to buy out Ming Tak’s ½ share of Taxi 7 in a long distance call from New Zealand on 31 October 2012. But this alleged buy out is associated with the question of whether SW Chan would have cheated Ming Tak $10,000 off its profit of Taxi 1 as discussed above. I have also found that SW Chan was in Hong Kong on 31 October 2012 and not in New Zealand. Hence, there was no oral agreement as alleged by Ming Tak. 253.Furthermore, regardless of whether the sale was completed on 24 April 2012 as contended by Water Motors or on 31 October 2012 as contended by Ming Tak, Madam Cheung’s account was wrong. On Ming Tak’s case, the period of interest for the loan to finance the balance of purchase price was from 25 February 2011 to 30 October 2012. But the settlement account only calculated interest up to 29 June 2012. That was 123 days too short. Rental was also calculated from 25 February 2011 to 30 June 2012 instead of 30 October 2012. That was 4 months too short. There is nothing in the account to explain why Madam Cheung should have used her dates and not the dates of Ming Tak or Water Motors. 254.The amount of interest is also problematic. When Taxi 7 was mortgaged to Tin Ho, the daily interest was at $470.55 ($54,583.56/116 days). However, when Taxi 7 was mortgaged to Cheng Yung Fui, the daily sum charged was at $648.08 ($242,382.74/374 days). That exceeded the daily sum paid to Tin Ho by more than 37.73%. But the principal lent by Cheng was $80,000 less than that of Tin Ho and Cheng’s interest rate was 0.25% lower. The correct daily interest charged by Cheng should be as agreed by the parties at $431.50 in schedule 7 of the defence and counterclaim. 255.Madam Cheung also charged $3,000, $3,000 and $1,000 as costs for changing the mortgagee and mortgage account from Tin Ho to Cheng when the agreed costs for such purposes as shown in schedule 7 of the defence and counterclaim are $1,000, $1,000 and $1,000. She also omitted $275,309 for procuring a new taxi for delivery to the buyer Shun Yick Motors. 256.From the above, it is no exaggeration to say that Madam Cheung’s settlement account for Taxi 7 is full of errors and the cause(s) of which are not apparent in the account. 257.The settlement account for Taxi 8 (JX 2709) misstated the purchase price at $4,890,000 when the undisputed price was $4,940,000. Madam Cheung also miscalculated rental income from mid-night of 5 June 2011 to 4 October 2012 when the undisputed dates of delivery by the vendor and the completion of sale were 18 September 2012 and 11 October 2012 respectively [C/438 to 439, D/912 and C/450 and 451]. She also charged interest from 5 June 2011 to 11 October 2012 when the period should be from 18 September 2012 to 11 October 2012. This settlement account is also full of errors. Decision on the reliability of the settlement accounts 258.The settlement accounts prepared by Madam Cheung for Taxis 1 to 5 and 7 to 8 including those relied on by Ming Tak are full of errors. There are errors of dates and amounts because they are at variance with undisputed facts and documents or agreed facts. There are also errors of dates and amounts because they are in line with allegations of Ming Tak which are unbelievable. There are also charges or payments that neither party has agreed to. There are also differences between different versions of settlement accounts for the same taxi and licence. There are no inherent explanations for the existence of these errors. None of the 7 settlement accounts relied on by Ming Tak is error free. The settlement accounts are therefore unreliable and unbelievable. I cannot rely on them to resolve the disputes between the parties herein. CREDIBILITY OF WITNESSES 259.Lui and Madam Chen revealed their case on many issues only for the first time during their oral evidence. Lui revealed his case on Taxi 4 in his supplemental witness statement made and disclosed in the course of the trial. SW Chan suffered from the same problem but to a much lesser extent. His problem lies more in brevity of pleadings and witness statements than in belated revelation of his case only at the trial. 260.As demonstrated by my analyses of the evidence of the transactions on the 8 taxi licences below, the evidence of Lui and Madam Chen was very often contradicted by contemporaneous documents and not even supported by Madam Chen’s own record book. SW Chan’s evidence on the other hand was usually though not invariably in line with and supported by the contemporaneous documents. 261.Mr Law in his closing submissions (§15) said that SW Chan did not dodge the questions in cross-examination and his answers were direct, to the point and reasonable. I agree. 262.Having considered the evidence of all the witnesses and documents and also my analyses below on the 8 investments, I find SW Chan’s evidence truthful and reliable. I reject the evidence of Lui and Madam Chen to the extent that it is in conflict with SW Chan’s. DECISION ON TAXIS 1 TO 8 Taxi 1 (KB 2548) 263.The first of the two issues I have identified for Taxi 1 is on whether the ratio of investment between Water Motors and Ming Tak should be ½:½ or 2/3:1/3. The question is whether Water Motors had purchased Madam Ho’s 1/3 share in Taxi 1 on its own account or for both Water Motors and Ming Tak. 264.Though Ming Tak has pleaded that the initial deposit for each investment would be paid by either side or by them jointly as might be agreed, Lui agreed in evidence that it was for Water Motors to decide in each case on who should provide the deposit for a purchase. That is in line with Water Motors’ case. Hence, if Water Motors should be tight in cash flow, it can always decide that the deposit for a particular purchase should be funded by Ming Tak. 265.The deposit of $478,000 refunded to Madam Ho was paid by Water Motors by a cheque post-dated to 29 February 2012 though the withdrawal agreement was made on 8 December 2011. If the purchase of Madam Ho’s 1/3 interest in Taxi 1 was by the joint venture, then there was no obvious reason why Water Motors would have made the refund by a post-dated cheque to mature nearly three months away. It could and should have directed Ming Tak to make the refund immediately. 266.Mr Kee however submitted that SW Chan’s evidence on the visit of Madam Ho to Water Motors’ shop for the refund of deposit is not credible. SW Chan said in cross-examination initially that Madam Ho came to the shop early in the morning on 8 December 2011 and Lui and Madam Chen only came at about 2 pm. However, SW Chan later clarified that by “early in the morning”, he was referring to 12 pm. I think this is a small point and it is difficult to be precise on such matters when it happened over 5 years ago. 267.The second issue, which is a combined issue with Taxi 7, is whether SW Chan had made a long distance telephone call from New Zealand to Lui in Hong Kong on 31 October 2012 and agreed with Lui for Water Motors to purchase Ming Tak’s ½ shares in Taxis 1 and 7 at the agreed price of $6,820,000 for each of the two taxis. This has to be considered against Water Motor’s case as supported by contemporaneous documents that Taxi 1 was sold at $6,840,000 to Heung Wing Motors Ltd two days earlier on 29 October 2012 [C/306]. I have dealt with this point above. If Ming Tak is right, then Water Motors should have dishonestly purchased Ming Tak’s ½ share in the investment at $6,820,000 two days later thereby cheating Ming Tak of $10,000. I do not think this was the case. Lui had also said orally that SW Chan had consulted him on selling Taxi 1 (KB 2548) to Heung Wing Motors Ltd for $6,840,000 and Lui agreed. 268.I have also found that SW Chan was in Hong Kong on 31 October 2012 and could not have made the long distance phone call from New Zealand on that day. I therefore find that there was no such call or any alleged oral agreement made in the call. 269.Ming Tak’s case on the disposal of Taxi 1 as pleaded is also different from the evidence of Lui and Madam Chen. The pleading says that the sale was to an outside party. But the evidence of Lui and Madam Chen was that Ming Tak’s ½ shares in Taxis 1 and 7 were sold to Water Motors. 270.Madam Chen’s record book also made no mention of the two alleged sales of Ming Tak’s ½ shares to Water Motors [D2/899 and 904]. For such sales at such high prices, it is unlikely that Madam Chen would have forgotten about them altogether. 271.Madam Chen also admitted that Madam Ho was a closer friend to her than to Water Motors. Madam Ho’s witness statement was in support of Ming Tak’s case. Ming Tak’s failure to call Madam Ho weakens its case on Taxi 1 (see Wisniewski v Central Manchester Health Authority[1998] PIQR 324 at 340). 272.SW Chan’s evidence on the sale of Taxi 1 is supported by documents. 273.Weighing all the evidence relating to Taxi 1 and in the light of my finding on credibility on witnesses above, I find that Ming Tak has failed to prove its claim on Taxi 1 on a balance of probability. I also find that Water Motors has proved on a balance of probability that the repurchase was made by it on its own account and without the involvement of Ming Tak. Hence, the ratio of ownership of Taxi 1 between Water Motors and Ming Tak after the withdrawal of Madam Ho was 2/3:1/3. Taxi 1 was also sold to Heung Wing Motors Ltd for $6,840,000 on 29 October 2012. Taxi 2 (KB 3437) 274.The major dispute on Taxi 2 is whether Ming Tak had withdrawn from the joint investment and replaced by Madam Ho [A/68/8(2)]. Water Motors counterclaims $89,188.23 from Ming Tak on the ground that when Ming Tak withdrew, there was a loss of $178,376.46 in the joint venture. Water Motors further counterclaims the mistaken payment to Ming Tak at $204,405.66. The total sum counterclaimed is $293,593.89. 275.There is also the issue of whether Taxi 2 was sold to Lik Hang at $6,300,000 or to Shun On at $6,325,000. 276.Lui and Madam Chen both denied that Ming Tak had withdrawn from this investment. Madam Chen even suggested that Water Motors could have sold its own ½ share to Madam Ho. 277.However, the documentary evidence of Madam Ho’s payment of $960,000 to Water Motors, the joint venture agreement made between Madam Ho and Water Motors on 7 March 2011, and the payment by Water Motors to Madam Ho of $480,000 deposit with $442,000 of which paid by 8 sequential post-dated cheques are the contemporaneous documents that support the case of Water Motors that Madam Ho had initially bought out the whole of Taxi 2 from Water Motors and Ming Tak but then sold ½ of it back to Water Motors. 278.The joint venture agreement provided that Water Motors and Madam Ho had entered into it on 7 March 2011 to invest in Taxi 2 on a ½:½ basis with the agreed value of the whole of Taxi 2 at $4,910,000. Mr Kee’s submissions that Water Motors might have split its ½ share between itself and Madam Ho is an echo of Madam Chen’s evidence, but it is contradicted by the terms of the written agreement between Water Motors and Madam Ho which clearly deals with the whole of Taxi 2 at the agreed value of $4,910,000. 279.I also consider that SW Chan would not have asked Madam Ho to pay a deposit at $960,000 [C/320-1 to 320-4] if Ming Tak and Water Motors were not selling the whole of Taxi 2 to Madam Ho. Though there is no withdrawal agreement by Ming Tak from this investment, it was unlikely that SW Chan would have overlooked Ming Tak’s ½ share when he sold Taxi 2 as the purchase contract of Taxi 2 had the joint venture’s ½:½ ownership written at the top right corner [C/309 and 310]. The possibility of carelessness on the part of SW Chan was also not raised at the trial. Ming Tak’s failure to call Madam Ho further weakens its case on Taxi 2 (see Wisniewski v Central Manchester Health Authority). 280.Madam Chen’s record book recorded the sale of Taxi 2 to Shun On at $6,325,000 when the documents showed that it had been sold to Lik Hang at $6,300,000 on 10 August 2012. The sale to Shun On at $6,325,000 was for RN 2945 with delivery effected on 15 August 2012. It had nothing to do with Taxi 2. The settlement accounts prepared by Madam Cheung also mistakenly stated that Taxi 2 was sold at $6,300,000 to Shun On [C/455, C/327, C/326 and C/463]. These two documents are unreliable and cannot create doubt over SW Chan’s evidence. 281.I accept SW Chan’s evidence on this investment as he is supported by contemporaneous documents. The documents also proved that Taxi 2 was sold to Lik Hang for $6,300,000. 282.In the premises and in the light of my finding on credibility of witnesses above, I find on a balance of probability that Ming Tak has failed to prove its claim on Taxi 2. I further find that Water Motors has proved on a balance of probability the complete withdrawal of Ming Tak from this investment and that Water Motors is entitled to all the profit derived from the investment in Taxi 2. Taxi 3 (KC 3776) 283.The dispute is whether Taxi 3 was sold to Madam Chik at $5,150,000 or (after exchanging for ED 3008) to Szun Yick Motors for $5,730,000. 284.The parties agreed and Madam Chen’s record book also records that Water Motors had on behalf of the joint venture made a future contract with Cheng Yung Fui on 9 March 2011 for purchase of a taxi with a licence of unspecified number at $4,880,000 with delivery to be made on 5 July 2011 which was later amended to 27 May 2011 [C/330 and 331]. Water Motors produced some contemporaneous documents proving that Cheng delivered Taxi 3 (KC 3776) on 27 May 2011. Water Motors then used Taxi 3 to exchange with Chun Sing Motor Company on 25 April 2012 for a taxi with licence ED 3008 and $15,000. Water Motors then entered into a future contract dated 29 March 2012 with Szun Yick Motors Co Ltd agreeing to sell a taxi with licence to it at $5,730,000 with delivery to be made on 30 April 2012. The taxi with licence ED 3008 was delivered to Szun Yick on 30 April 2012 to complete the said future contract. 285.Ming Tak’s case is that Taxi 3 (KC 3776) was delivered to Madam Chik in place of KE 2845 on 27 January 2011. This cannot be correct as KC 3776 was only delivered to Water Motors on 27 May 2011. It was also registered in Ming Tak’s name on 30 June 2011 [C/338]. 286.Madam Chen’s record book stated that KE 2845 was purchased on 30 September 2010 at $4,500,000 from Tin Ho Motors and sold to Eagle Star Group Ltd (“Eagle Star”) for $4,760,000 with delivery made on 17 May 2011. Half of the profit was at $37,422.70 [D/884]. It does not say that Taxi 3 (KC 3776) was delivered in place of KE 2845 on the earlier date of 27 January 2011. It does not support Ming Tak’s case. 287.The settlement account prepared by Madam Cheung used a sale price of $5,150,000 for Taxi 3. But the contemporaneous documents produced by Water Motors are against it. 288.In the premises, I find that Ming Tak has failed to prove on a balance of probability its case on Taxi 3. I further find that Water Motors has proved on a balance of probability that Taxi 3 (ED 3008) was exchanged for the taxi with licence ED 3008 which was then sold and delivered to Szun Yick for $5,730,000. I also hold that Water Motors should pay Ming Tak the sum of $248,210.20 [A/40] as the outstanding amount of profit of the investment in Taxi 3. Taxi 4 (PE 3326) 289.I have crystallized the issues in this investment as whether it was just ½ of Taxi 4 that had been sold and then repurchased from Tin Shing and whether the repurchase was by Water Motors alone or by the joint venture. 290.Ming Tak claims that it was entitled to a profit of $292,099.18 for the investment in Taxi 4 (PE 3326), but was only paid $274,599.18. It claims the balance $17,500. It abandoned its claim on day 4 (7 December 2017). There are contemporaneous documents proving that Ming Tak had already received a share of profit at $7,500 upon the sale of interest of Taxi 4 to Tin Shing. On Water Motor’s case, that is all the profit for Ming Tak. Hence, if Water Motors is right, it should be given judgment of $274,599.18 for the counterclaim. 291.There is no dispute that Taxi 4 was purchased on 8 April 2011 at $5,000,000. Lui said in his supplemental witness statement that the whole Taxi 4 investment was sold on the same day to an equal joint venture of Tin Shing (as represented by Mr Lau) and Water Motors at $5,020,000. Water Motors then shared its ½ share with Ming Tak equally. The ratio of ownership between Tin Shing, Water Motors and Ming Tak then became 2:1:1 respectively. Ming Tak was given $7,500 commission as its share of profit in this sale. Tin Shing through Mr Lau later sold its ½ share in Taxi 4 back to Water Motors at the same price of $6,020,000 for the whole of Taxi 4. SW Chan, Lui and Madam Chen then agreed that Taxi 4 would be owned by Water Motors and Ming Tak in equal shares. Ming Tak also produced a copy contract dated 11 April 2012 that sold Taxi 4 to Ng Chi Chung at $5,630,000 with completion on 24 May 2012. It used the copy contract as evidence of its ownership of an interest in Taxi 4. 292.However, Lui in oral evidence did not follow his statement but insisted that the whole of Taxi 4 had been sold to Tin Shing absolutely on 8 April 2011. He also maintained that the repurchase from Tin Shing was also of the whole Taxi 4. He said SW Chan had told him that the repurchase was for Water Motors and Ming Tak as equal investors. Despite the deviation of his oral evidence from his supplemental witness statement, the end result was the same. 293.Madam Chen said that Lui had told her that ½ of Taxi 4 was sold to Tin Shing at the price of $5,020,000 for the whole. This is in line with Lui’s supplemental statement but not Lui’s oral evidence. After the sale, the ratio of ownership among Tin Shing, Water Motors and Ming Tak was 2:1:1 respectively. The subsequent repurchase was also of ½ of Taxi 4 at the same price. 294.The record in Madam Chen’s record book made after the sale to Tin Shing means an ownership ratio between of Tin Shing, Water Motors and Ming Tak at 1:2:1. 295.Ming Tak also relies on the letter dated 13 January 2014 from Water Motors to Ming Tak which alleged that Ming Tak had a 1/3 share in Taxi 4. However, Madam Lo has explained in her witness statement that she just followed the settlement account prepared by Madam Cheung and did not have an independent input on this point. Madam Lo was not cross-examined on her witness statement and I accept her evidence. Hence, this letter only repeated what was in the settlement account and cannot add anything more to Ming Tak’s case. 296.SW Chan said that Taxi 4 was sold as a whole to Tin Shing at a profit of $20,000. This is in line with Lui’s oral evidence. SW Chan then said that Water Motors repurchased the whole of Taxi 4 at the same price but on its own account. He and Lui differed on whether Ming Tak had a ½ share after the repurchase. 297.SW Chan also produced a signed contract dated 16 June 2011 providing that Water Motors had purchased the whole of Taxi 4 from Tin Shing at $5,020,000 with an initial deposit of $300,000 [C/351]. The contract had a highlighted sentence saying that Water Motors had paid Tin Shing $15,000 and all profit or loss thereafter would be on Water Motors’ account. The balance of the purchase price (at $4,720,000) was advanced by Tin Shing to Water Motors at the prime rate less 1.5% with Taxi 4 as security. But the contract has written across it the words that “Water Motors and Tin Shing had agreed to cancel it on 22 June”. SW Chan said that this contract had been performed. 298.Regardless of whether contract was cancelled before performance or performed to the full, the fact that Tin Shing had signed it means that Tin Shing had tried to sell the whole of Taxi 4 back to Water Motors. That supports SW Chan’s evidence and is in line with Lui’s evidence that the whole of Taxi 4 had been sold to Tin Shing, but is contrary to the evidence of Madam Chan, her record book or Lui’s supplemental witness statement. 299.In the light of my finding on the disposal of Taxi 4 to Tin Shing and my finding above on the credibility of witnesses, I further find that Ming Tak has failed to prove its case on Taxi 4 on a balance of probability and Water Motors has proved on a balance its counterclaim on Taxi 4. I accordingly give judgment to Water Motors on the counterclaim in the sum of $274,599.18. Taxi 5 (PW 5957) 300.There is no dispute that Taxi 5 (PW 5957) was purchased on 10 January 2011 at $4,925,000. The issue is whether itwas sold to Madam Chik on around 29 February 2012 at HK$5,140,000 and whether the decision to sell had to be jointly made or could be solely made by SW Chan on behalf of Water Motors. I have already decided that Water Motors had the sole power to decide the sale price without consulting Ming Tak. The contemporaneous documents show that Taxi 5 was sold to Madam Chik by a contract dated 14 February 2011 for $5,140,000 with delivery scheduled on 17 February 2011 [C/373]. Madam Chik paid interest to Water Motors from 10 January 2011 to 29 February 2012 for the finance it provided to her for the balance of the purchase price. Mr Kee for Ming Tak also accepted on day 1 of the trial that Taxi 5 was sold off by a contractdated 14 February 2011. 301.Lui also said in cross-examination that if SW Chan should have consulted him on whether the licence JY 5461 (the predecessor of PW 5957) should be sold to Madam Chik at $5,140,000, he would not have objected to it. He would also have agreed to Madam Chik completing with finance provided by Water Motors for the balance of purchase price. 302.Madam Chen said that if she should have been consulted by SW Chan, she would also have agreed to selling Taxi 5 to Madam Chik on 14 February 2011 at $5,140,000. She accepted that it was common for the seller to provide finance for the balance of the price for a year. 303.Since both Lui and Madam Chen would have agreed to the sale to Madam Chik on 14 February 2011 at $5,140,000 if they had been consulted by SW Chan, Ming Tak therefore had suffered no loss even if SW Chan should have consulted them but failed to do so. 304.Furthermore, I have already held that SW Chan had the right to decide on a sale and its price without prior consultation with Ming Tak. I therefore find that Ming Tak has failed to prove on a balance of probability its claim in relation to Taxi 5. I further find that Water Motors has proved on a balance that Taxi 5 was sold by it to Madam Chik on about 14 February 2011 at $5,140,000 and there was nothing improper in this sale. 305.I have pointed out above the errors in both the settlement account and the account in schedule 5 of the defence and counterclaim. The profit from this investment is ($5,140,000 + ($2,064.52 + $8,000 + $9,600) - $4,925,000 - $24,336.99 =) $212,327.53. Half of this is $106,163.77. Ming Tak had been paid $122,122.13. There is therefore nothing due to Ming Tak regardless of Water Motors’ preparedness to pay it $90,799.46. There is no counterclaim relating to Taxi 5 and I would also not give judgment to Water Motors for the excess. Water Motors might have been late in providing a settlement account of this investment to Ming Tak. But there is no claim for any relief arising from this. Taxi 6 (JW 2788) and contract no. L12065K 306.Water Motors says that it had entered into contract no. L12065K on 21 June 2012 for the joint venture to purchase from Shun On a future taxi with licence of unspecified number to be delivered on 20 April 2013 at $5,780,000. It however sold all the rights in this contract for the joint venture to Ng Man Bill on the same day at the same price. 307.Ming Tak’s case that it had learnt from SW Chan that JW 2788 was delivered by the vendor and then replaced by SC 3353. But it was only revealed by its witnesses in oral evidence. Its evidence says that SW Chan had told Lui and Madam Chen that JW 2788 was delivered under this joint venture contract, but Water Motors had not accounted to it the ½ share profit. However, the contemporaneous documents show that the registered owner of JW 2788 at the material time was not Shun On and hence Shun On could not have delivered it to Water Motors. I also see no reason why Ming Tak could not have set out its case in the pleadings and witness statements. 308.Madam Chen also said that SW Chan had told her that JW 2788 had been exchanged for SC 3353 and she wrote SC 3353 on an extra copy of the contract L12065K. She used an extra copy because she was not sure if SC 3353 was the new number. But she never sought to confirm the correctness of SC 3353 with SW Chan. 309.Mr Kee submitted that according to the evidence of SW Chan, there were about 40-50 vehicle registration numbers written on the large white board hung in the shop. If SW Chan had not told Madam Chen the registration number JW 2788, she would not have picked out this number out of the 40-50 numbers [C/399]. But this submission is premised on the assumption that I would accept the evidence of Madam Chen and Lui that they had indeed learned of the number JW 2788 as and when it was written on the white board. This submission would have no merit if I should disbelieve Lui and Madam Chen and hold that there was no occasion when SW Chan had pointed out any licence number on the board to them and they just fabricated the occasion and the number of SC 3353. 310.I also refer to the certificates of the Transport Department which certified that Eagle Star was the registered owner of JW 2788 on 21 June and 28 December 2012 [C/400 and 401]. The contemporaneous documents also show that JW 2788 was delivered to Water Motors on 28 December 2012 [C/402 to 405] by Eagle Star and not by Shun On. Hence, JW 2788 had nothing to do with Shun On or contract no. L12065K. 311.I do not believe in Lui and Madam Chen on their case on Taxi 6 as their case only came out for the first time in oral evidence. There is no reason why they could not have set out the same in pleadings and witness statements. Such evidence is also contradicted by contemporaneous documents. I also refer to my finding on credibility of witnesses. 312.Furthermore, even if SW Chan should indeed have pointed at JW 2788 on the white board as the taxi delivered under contract no. L12065K and subsequently told Madam Chen that JW 2788 had been replaced by SC 3353, SW Chan must have done so erroneously as the documents show that JW 2788 had nothing to do with Shun On or contract no. L12065K. I agree with Mr Law in his closing submissions (§38) that even if I should find that SW Chan had indeed made the mistakes, no relief can be given to Ming Tak for such errors as Ming Tak has not furnished any pleading or evidence of its reliance on SW Chan’s mistaken representations or that it had suffered any loss flowing from such reliance. 313.In the premises, I find that Ming Tak has failed to prove on a balance of probability that the licence and taxi delivered by Shun On under the contract no. L12065K was JW 2788. I further find that Water Motors has proved on a balance that JW 2788 has nothing to do with the contract no. L12065K. Ming Tak thus fails in this claim. Taxi 7 (KC 8606) 314.There is no dispute that Taxi 7 was purchased by the joint venture on 24 February 2011 at $4,980,000 from Tin Ho Motors [C/414]. The issue is whether it was sold to Shun Yick Motors by a contract dated 18 February 2012 at $5,385,000 and completed on 24 April 2012 or whether SW Chan had telephoned from New Zealand to Lui in Hong Kong on 31 October 2012 and orally agreed with Lui that Water Motors would purchase Ming Tak’s 1/2 share at the agreed value of $6,820,000 for Taxi 7. 315.The contemporaneous documents support the evidence of SW Chan. I have also held above that SW Chan was in Hong Kong and not in New Zealand on 31 October 2012. Hence, I disbelieve Ming Tak’s case of the alleged oral contract made between Water Motors and Ming Tak through SW Chan and Lui respectively in the long distance phone call on 31 October 2012. 316.Mr Kee relies on Water Motors’ letter dated 13 January 2014. The letter acknowledged the correctness of the settlement account for, among others, Taxis 7. However, Madam Lo has already given unchallenged evidence that she just followed Madam Cheung’s settlement account in composing the letter. Since I have found that the settlement accounts including that for Taxi 7 are unreliable, Ming Tak cannot rely on that account in its claim relating to Taxi 7. 317.In the premises, I find that Water Motors has proved on a balance of probability that it had mistakenly overpaid Ming Tak $832,658.19 [A/39/30C and schedule 7]. Taxi 8 (JX 2709) 318.There is no dispute on the purchase price at $4,940,000 for Taxi 8 and Madam Chen accepted the sale price at $6,750,000 in her oral evidence. There is therefore no issue between the parties on Taxi 8. Water Motors should be given judgment on the counterclaim for mistaken overpayment at $17,128.69 [A/39/30C and schedule 8]. Net amount of overpayment by Water Motors to Ming Tak 319.I now calculate the amounts overpaid and underpaid by Water Motors to Ming Tak in these 8 investments.
320.The following table sums up the amount overpaid by Water Motors to Ming Tak and the net overpayment at $1,444,843.58:
Whether overpayments are recoverable on the basis of unjust enrichment 321.Both Mr Law and Mr Kee refer to the analytical framework for unjust enrichment which has been set out by the Court of Final Appeal in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, at §67 and in Big Island Construction (HK) Limited v Wu Yi Development Company Limited & Anor (2015) HKCFAR 364 also at §67. The four questions to be asked in the framework are:
322.Regarding the burden of the respective parties on each of the questions, Mr Law further referred to Goff & Jones: The Law of Unjust Enrichment (9th ed)at §§1-09, 1-12 and 1-28: -
323.Hence, the burden of proof is on Water Motors on the first three questions and the burden of the last question is on Ming Tak. Mr Kee accepts that if Water Motors should successfully prove on the facts that there were overpayments made to Ming Tak, then Ming Tak would not dispute that it was enriched and such enrichment was at the expense of Water Motors. But he holds Water Motors to proof that such enrichment was unjust. He referred to the judgment of Lord Hope of Craighead inKleinwort Benson Ltd v Lincoln City Council (1999) 2 AC 349, at p. 409B:
324.Mr Law, in answer to Mr Kee, also referred to Kleinwort Benson Ltd v Lincoln City Council where Lord Hofmann said at 399C-D:
325.Mr Law thus submitted that once it is proved that a payment was made under a mistake of fact, then it is proved that the enrichment was unjust. The only outstanding question is the fourth one of whether Ming Tak, as the defendant to the counterclaim of unjust enrichment, has any defence to the counterclaim. I agree with Mr Law on this point. I move on the fourth question. 326.The defence as submitted by Mr Kee relies on Water Motors’ letter dated 13 January 2014. He submitted that Water Motors had made 4 representations by the letter; namely:
327.In fact, Water Motors also said in the letter that after its recalculation, Ming Tak should refund a net sum of $97,385.49 to it for settlement of the taxi investments in Taxis 1 to 5 and 7 to 8 plus 2 taxis of licences PG 3483 and JX 4655 (§§213 to 216 above). The demand for this sum is also relied on by Ming Tak in its defence. 328.Mr Kee submitted that the letter of Water Motors apparently concluded that the calculations of the settlement accounts for Taxis 2 (KB 3437), 3 (KC 3776), 7 (KC 8606) and 8 (JX 2709) were correct. The fact that they were erroneous and the errors not discovered was because of Madam Lo’s failure to dig out the relevant transaction documents to ascertain the accuracy of the amounts and sharing ratios. Such errors and Madam Lo’s failure to discover them had nothing to do with Ming Tak. The blame for such errors should be on Water Motors and not on Ming Tak. If the court should order restitution in favour of Water Motors, it would be shifting the blame to Ming Tak, which is unconscionable and inequitable. 329.Mr Kee further submitted that Ming Tak was entitled to rely on the representations in the said letter as an estoppelof Water Motors’ counterclaim for overpayments as Ming Tak had acted on them by signing a withdrawal agreement dated 23 March 2014 [D475 to 478]. Ming Tak also believed the representations in the letter to be true and hence accepted the deduction by Water Motors of $97,385.49 from the money payable to it under an investment with Water Motors and a third party in a taxi with licence HS 159. 330.However, Madam Chen, when signing the withdrawal agreement for Ming Tak, added a proviso saying that Ming Tak doubted the correctness of the sum of $97,385.49 deducted by Water Motors. Ming Tak also expressly reserved in the proviso the right to claim this sum from Water Motors after investigating the accounts [D/475]. Ming Tak in fact did not accept Water Motors’ assertions of 1/3 shares in the profits of Taxis 1 and 4 for Ming Tak. It started this action in May 2014 to pursue its claims for ½ shares in the profits of Taxis 1 and 4 in §§15(b) to 17 of the statement of claim. Hence, as a matter of fact, Ming Tak had not relied on or acted on the so-called representations of Water Motors in the letter dated 13 January 2014. Since Ming Tak had not relied on or acted on the so-called representations, there is nothing unfair to order restitution in favour of Water Motors. 331.Mr Law has also rightly pointed out that Ming Tak has not pleaded any detriment that it had suffered by reason of its reliance on the so-called representations. 332.In the premises, I hold that Ming Tak has not made out any defence to Water Motor’s counterclaim of restitution of the sums overpaid to it. Constructive trust 333.Water Motors also pleaded an alternative that a constructive trust was created over the sums overpaid to Ming Tak. Ming Tak relied on the same grounds as used to support the estoppel defence to resist this claim. Those grounds failed to establish any estoppel and cannot resist this constructive trust claim either. JUDGMENT 334.Since I have held that Ming Tak has no defence to the counterclaim of overpayments totalling $1,444,843.58, I give judgment that Ming Tak should pay to Water Motors the sum of $1,444,843.58. INTEREST 335.I also order Ming Tak to pay Water Motors interest on the said sum of $1,444,843.58 at the judgment rate from the date of filing of the counterclaim to the date hereof. COSTS 336.Since Water Motors has succeeded on the counterclaim which overtopped Ming Tak’s claim substantially, I make a costs order nisi that Ming Tak do pay Water Motors the costs of this action including the counterclaim with certificate for two counsel to be taxed. I also make a costs order nisi that Ming Tak do pay the costs of SW Chan up to the commencement of the trial with certificate for two counsel to be taxed.
Mr Vincent Kee, instructed by A M Mui & Kwan, for the Plaintiff Mr Lewis Law and Mr Ho Lok Hin, instructed by Leung, Tam & Wong, for the 1st and 2nd Defendants | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment