Lin Guifei, As the Administratrix of the Estate of Lee Kin Wah, Deceased v. Lui Chung Since Deceased, Lui Po Kin Ricky, Appointed By an Order Dated 28th March 2025 To Represent the Estate of Lui Chung, Deceased and Another
Read the full judgment text of HCA 596/2021 on BabelCite. This High Court CFI judgment was delivered on 8 May 2025.
1. This action was commenced by the Plaintiff in her capacity as the administratrix of the estate of her late husband Lee Kin Wah, deceased (the “ Deceased ”), who passed away on 17 September 2016 at the age of 92. The claim concerns a mahjong parlour business operated in Ground Floor, No. 9 Yi Pei Square, Tsuen Wan, New Territories, Hong Kong (the “ Business Premises ”). The Business Premises is not owned by any of the parties.
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HCA 596/2021 [2025] HKCFI 1904 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 596 OF 2021 __________________ BETWEEN
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__________________ JUDGMENT __________________ I. INTRODUCTION 1.This action was commenced by the Plaintiff in her capacity as the administratrix of the estate of her late husband Lee Kin Wah, deceased (the “Deceased”), who passed away on 17 September 2016 at the age of 92. The claim concerns a mahjong parlour business operated in Ground Floor, No. 9 Yi Pei Square, Tsuen Wan, New Territories, Hong Kong (the “Business Premises”). The Business Premises is not owned by any of the parties. II. BACKGROUND 2.In the 1970s, the Deceased, the 1st Defendant (that is, Lui Chung, who passed away in early March 2025 and whose estate his son Lui Po Kin Ricky (“Ricky Lui”)[1] was appointed torepresent in the present action) and some other business partners including Mr Lui Ming, formed a partnership to operate a mahjong parlour business. They entered into a written Chinese agreement dated 18 July 1973 (the “Partnership Agreement”). Its title is “聯發公司股份簿”. It provides:-
3.Accordingly, under the Partnership Agreement, the Deceased was entitled to 2.5 out of 20 shares of the partnership (that is, 12.5% of the whole “shareholding”) and the proportional share of profit, and was the holder of a mahjong licence issued by the Government for operating a mahjong business in the name of “聯發公司”. For convenience, I shall refer “聯發” as “Luen Fat”. 4.On or around 27 June 1987, Lui Ming (mentioned in Clause 7 of the Partnership Agreement), one of the partners, passed away. The remaining partners continued to operate the same mahjong business in the name of “Luen Fat”. 5.In or around 2005, the 2nd Defendant joined the then partners as an additional partner to carry on the mahjong business in the Business Premises in the name of “Luen Fat”. 6.On 24 October 2008, the Plaintiff and the Deceased got married. 7.According to the Business Registration Certificate numbered 55341740 dated 15 June 2015, the mahjong business was registered in the name of “聯發麻雀娛樂” (Luen Fat Mahjong Playing), which was on 18 August 2015 changed to “聯發麻雀娛樂公司” (Luen Fat Mahjong Playing Co.). In the Business Registration Certificate, the Deceased, the 1st Defendant and the 2nd Defendant were the only named owners. This partnership is defined in the Amended Defence as the “Last Partnership”, “last” in the sense that it was the last partnership of which the Deceased was a partner. 8.On 17 September 2016, the Deceased passed away. 9.As the Deceased passed away on 17 September 2016, the mahjong licence granted in favour of the Deceased on 13 November 2015, which would otherwise expire on 29 November 2016, terminated automatically upon the Deceased’s death. It is pertinent to note that Condition 12, a standard condition, of the licence provided that:-
10.On 9 November 2016, the mahjong business ceased in the Business Premises. 11.On 31 December 2016, upon the 1st Defendant’s application, the business was deregistered. 12.Since 1 January 2017, the 1st and 2nd Defendants and the Deceased’s son Mr Lee Chi Fu (the “Deceased’s Son”) have carried on a mahjong business in the name of “聯發麻雀娛樂公司” (Luen Fat Mahjong Playing Co.), the same name as the Last Partnership’s, under business registration certificate no 55838278, which states that the 1st and 2nd Defendants and the Deceased’s Son were the owners. 13.It is not in dispute that for the Last Partnership, the 1st Defendant was the one responsible for the daily operation and management and in control of the business throughout. 14.On 9 November 2017, the Plaintiff filled in and signed the Schedule of Assets and Liabilities of the Deceased for the purpose of applying for grants. In the Schedule, under the section “Business”, “聯發公司” was typed out and stated as “operation has already ceased”. Further, the percentage was stated to be 12.5% 15.On 10 September 2018, a mahjong licence granted in favour of the Deceased’s Son to carry out a mahjong business in the Business Premises. 16.On 8 January 2019, the Plaintiff obtained grants of letters of administration in respect of the Estate. 17.On 26 February 2019, the Plaintiff’s then solicitors Messrs Hugill & Ip (“H&I”) issued a letter to Luen Fat Mahjong Playing Co., demanding:-
18.On 4 March 2019, having received no written reply, H&I issued a further letter to Luen Fat Mahjong Playing Co:-
19.On 6 March 2019, Luen Fat Mahjong Playing issued a reply letter to H&I stating that (1) the company had met and resolved to cooperate; (2) because of a lapse of more than two years, it would need time to verify the accounts; and (3) after the verification, they would immediately inform H&I. 20.On 3 June 2019, the 1st and 2nd Defendants issued to H&I a cashier order of even date for HK$312,696.20 (the “Cashier Order”) as payment for the estate of the Deceased. In reply, by letter dated 5 June 2019, H&I informed the 1st and 2nd Defendants that they had ceased to act for the Plaintiff and returned the Cashier Order. 21.Subsequently, in August and September 2019, the 1st and 2nd Defendants issued two letters to the Plaintiff at the address of Flat G, 34/F of a building in Tsuen King Garden, informing the Plaintiff that a cashier order of HK$312,696.20 for the Deceased’s payments had been sent to and returned by H&I, and asked the Plaintiff to contact them for the Cashier Order. There was no reply. I should add that the address is not the address the Plaintiff uses in the Writ of Summons herein. 22.On 24 March 2020, the Plaintiff’s new solicitors Messrs KCL & Partners (“KCL”) issued a letter, stating, among others:-
23.On 11 May 2020, Luen Fat Mahjong Playing replied in writing, stating in essence that the partners operating the mahjong business in the name of Luen Fat were not the same as those at the time of the death of the Deceased and the licence now for the business was not the one held by the Deceased, so the contents of the KCL letter were not related to them. It also stated that they opened the KCL’s letter because the intended recipient’s name and address (that is, the Last Partnership) was the same as theirs. 24.Also on 11 May 2020, the 1st and 2nd Defendants issued a joint letter in their own names:-
25.On 3 June 2020, the Plaintiff made an application in HCAL 1102/2020 for leave to apply for judicial review of the decision to grant the Mahjong licence to the Deceased’s Son on 10 September 2018. Chow J (as he then was) dismissed the application on 16 November 2020 in [2020] HKCFI 2888. III. PLAINTIFF’S CLAIM 26.According to the Plaintiff’s case (pleaded in §§13 and 14 of the Amended Statement of Claim):-
27.The Plaintiff claims that after the Deceased’s death on 16 September 2016, the 1st and 2nd Defendants continued to carry on the Mahjong Business under the name of “聯發麻雀娛樂公司” (Luen Fat Mahjong Playing Co) from 1 January 2017 onwards, without taking of the partnership account or final settlement of account concerning the Deceased’s share of the Partnership. The Amended Statement of Claim defines this Luen Fat Mahjong Playing Co from 1 January 2017 onwards as the “Post-2017 Luen Fat”. The particulars are set out in §17 of the Amended Statement of Claim:-
28.The Plaintiff raises an alternative claim that if the Post-2017 Luen Fat does not amount to carrying on the Mahjong Business, then the 1st and 2nd Defendants effectively utilised the goodwill and/or reputation of the Mahjong Business without account to the Plaintiff or the Mahjong Business. 29.Based on the above, the Plaintiff claims that:-
IV. THE 1ST AND 2ND DEFENDANTS’ DEFENCE 30.The 1st and 2nd Defendants’ defence can be summarised as follows:
V. ISSUES 31.The issues, as essentially set out in the Joint Statement of Issues, are:-
VI. WITNESSES 32.The Plaintiff is the only witness for the case of the Deceased’s estate. The 1st Defendant’s son Ricky Lui (now representing the 1st Defendant’s estate) and the 2nd Defendant each were witnesses for the Defendants. 33.It is noted that even before the 1st Defendant passed away in early March 2025, the 1st Defendant had not made any witness statement and the witness for the 1st Defendant had always been Ricky Lui. Therefore, Ricky Lui is not a substitute witness in that he made a witness statement or adopted the 1st Defendant’s witness statement only upon the 1st Defendant’s death. VII. PARTNERSHIP OR PARTNERSHIPS? 34.Before I determine the issues, it is necessary for me to determine whether the Partnership (the one at the outset, as defined in the Amended Statement of Claim) is the same partnership as the Last Partnership by the time of the Deceased’s death. The Amended Statement of Claim seems to suggest that this is the Plaintiff’s case, using the definition “Partnership” to describe the partnership by the time of the Deceased’s death. 35.First, as mentioned above, Lui Ming, a partner of the Partnership, passed away in 1987. Section 35 of the Partnership Ordinance provides that:-
36.It is said that “this rule is applied strictly”: see Lindley and Banks on Partnership (21st ed) §24-69. The Plaintiff has pleaded no contrary agreement, whether written or oral, express or implied, under section 35(1). Nothing in the 1970 Partnership Agreement mentioned what would happen upon a partner’s death. 37.Mr Ronald Pang (leading Mr Nicklaus Pannu-Yuon), counsel for the Plaintiff, submitted in his written Opening Submissions that such an agreement was clear from reading the terms of the Partnership Agreement. I do not accept such submissions.
38.Therefore, at latest, upon the death of Lui Ming, the Partnership was dissolved by virtue of section 35. 39.Second, as a matter of law, a new partnership is formed when partners leave and/or new partners join: see Lindley and Banks on Partnership, supra, §§3-06 – 3-07 citing Hadlee v Commissioner of Inland Revenue [1989] 2 NZLR 447 at 455, upheld by Privy Council in [1993] AC 524. While Clause (9) may mean that it was possible for a new partner simply to take up the outgoing partner’s shares, it is clear that the number of partners has changed from the original number of nine under the Partnership Agreement to the number of three or seven under the Last Partnership (the exact number being a matter I shall discuss later). In the absence of any plea and evidence as to how the old “shares” of an outgoing partner were taken up by the incoming partners, the Plaintiff cannot rely upon Clause (9) to say that it has all been strictly performed to displace the default position at law. 40.Therefore, in my view, the Partnership, as a matter of the law, cannot be the same partnership by the time of the Deceased’s death, there having been a partner’s passing and partners leaving and new partners joining. It is therefore more accurate to describe the Last Partnership as a partnership in its own right. 41.This is consistent with the factual evidence presented before me:-
42.The Plaintiff initially suggested that whether the partnerships were the same or not, they were all governed by the same Partnership Agreement. After my exchange with Mr Pang (for the Plaintiff) during the Opening Submissions on Day 1, he informed me on Day 2 before calling the Plaintiff to give evidence that he would abandon this suggestion. Mr Pang was, in my view, right to do so because:-
43.As such, the Partnership Ordinance applies to govern and regulate the Last Partnership. VIII. THE NUMBER OF PARTNERS AND WHO WERE THEY? 44.I should say something about the number of partners in the Last Partnership. 45.The Plaintiff pleads in §5 of the Amended Statement of Claim that the Deceased, and the 1st and 2nd Defendants were the partners named in the Business Registration Certificate numbered 55341740 dated 15 June 2015. §3(6) of the 1st and 2nd Defendants’ Amended Defence names seven partners (including the Deceased, the 1st and 2nd Defendants and persons not parties to the present proceedings) and specifies their shares, including the Deceased with 5%. On the pleadings, therefore, there appeared a dispute over the number of partners. 46.Inconsistent with her own Amended Statement of Claim, I §17 of her Witness Statement, the Plaintiff said:-
47.The 2nd Defendant’s evidence is inconsistent with the Defendants’ case that there were seven partners. In cross-examination, the 2nd Defendant explained that the other “partners” than the Deceased, the 1st and 2nd Defendants were “shadow partners” (暗中股東). Ricky Lui’s evidence is, however, consistent with the Defendants’ case that there were seven partners. 48.During the closing submissions, both parties confirmed that their respective cases were the same here – only the Deceased, the 1st and 2nd Defendants were the only partners of the Last Partnership. Therefore, I do not need to assess the inconsistent evidence above, and both parties should be bound by their confirmation, which I accept as a fact here. 49.I now turn to the Issues. IX. ISSUE (1): WAS THE LAST PARTNERSHIP GOVERNED BY THE 1970 PARTNERSHIP AGREEMENT? 50.By my analysis in §§34-43 above, I find that the Last Partnership was not governed by the Partnership Agreement. X. ISSUE (2): WAS THE PARTNERSHIP DISSOLVED AT THE DEATH OF THE DECEASED? 51.By my analysis in §§34-41 above, I find that the partnership, that is, the Last Partnership, was dissolved at the death of the Deceased on 17 September 2016. XI. ISSUE (3): IS THE PLAINTIFF ENTITLED TO THE RELIEF UNDER SECTION 44 OF THE PARTNERSHIP ORDINANCE? A. The law 52.Section 44 of the Partnership Ordinance provides:-
53.In other words, if the following conditions are all satisfied:-
54.To determine the extent of the profits attributable to the use of the outgoing partner’s share of the partnership assets is not simply referring to the share held by the outgoing partner. It is a task of complexity. The Court has to look at, among others, the nature of the business and how profits are made (for example, whether the profits are more from the assets themselves or from the skills of the continuing partners), to determine how much the partnership’s assets attribute to the profits: see Lindley and Banks on Partnership, supra, §§25-44 – 25-51. 55.Given the complexity of the task, usually the outgoing partner or the estate would choose option (b): see Lindley and Banks on Partnership, supra, §25-53. 56.But before all that, the fundamental question is: are the Conditions satisfied? 57.It is clear that Conditions (1) and (5) are satisfied. The disputes are over Conditions (2), (3) and (4). B. Conditions (2): “business of the firm” carried on? 58.Mr Brian Chok, counsel for the 1st and 2nd Defendants, submits that the “business of the Last Partnership” was not carried on. 59.There is no definition on “business of the firm”. From its natural and ordinary meaning, it means the business of the previous partnership. In my view, it is not necessary that it should be exactly the same as the business of the previous partnership. It is sufficient if it is substantially the same. An ordinary person would look at all the relevant circumstances, including (non-exhaustively) the nature of the business, the place of the business and how long the two businesses were apart in terms of time, to determine whether they are substantially the same. 60.In the present case, both the business of the Last Partnership and that of the Post-2017 Luen Fat are mahjong business. Although the commencement of the business of the Post-2017 Luen Fat was more than a year apart from the Last Partnership, the reason was that the application for a new Mahjong licence would take time. Further, the Post-2017 Luen Fat is carried out in the same Business Premises. 61.On balance, I find that the Post-2017 Partnership carried on the “business of the firm”. Thus, Condition (2) is satisfied. C. Condition (3): With the Last Partnership’s capital or assets? 62.For Condition (3), upon my finding that the previous partnership business was carried on, the burden lies upon the Defendants to prove that the partnership assets were not utilised to generate profits in the business being carried on: see Manley v Sartori [1927] 1 Ch 157 at 165, a case on the English equivalent of section 44 of the Partnership Ordinance; adopted in Chu Ka Sun Winston & Another v Mo Wan Lung Peter & Others [1985] 2 HKC 365 at 370G per Clough J. Although the latter is not a case on section 44 of the Partnership Ordinance, the reason for the burden of proof was adopted. 63.Since the burden lies upon the Defendants, it is no answer by saying that the Plaintiff has not properly pleaded what assets were utilised: see Chu Ka Sun Winston & Another v Mo Wan Lung Peter & Others, supra at 372D-E. 64.I start with the following evidence first, which is largely not in dispute.
65.In my view, the Defendants have, by the above evidence, made out a prima facie case that the partnership assets have not been utilised. 66.During the opening submissions, Mr Pang (for the Plaintiff) clarified that the assets utilised, according to the Plaintiff’s case, are (a) the Deceased’s share of profits and remunerations retained by the Last Partnership (“Asset (a)”); (b) goodwill (“Asset (b)”); and (c) the décor, apparatus and equipment (“Asset (c)”). 67.For Asset (a), namely, the Deceased’s share of profits and remunerations retained by the Last Partnership. The share of profits and remunerations would stay on the debit side of the Last Partnership’s balance sheet as assets. I therefore accept that without any distribution, these would be the assets of the Last Partnership. 68.Though not distributed, the amount under the Cashier Order issued in June 2019, as analysed in §64(2) above, was not utilised in the Post-2017 Luen Fat. However, the Defendants’ case that this amount was all the Deceased’s entitlements is not necessarily true. If the Deceased’s entitlements go beyond this amount, this means that there were some cash or other forms of assets of the Last Partnership not accounted for, in the absence of any suggestion that the 1st or 2nd Defendant obtained more than they were entitled to. If there were some cash or other forms of assets unaccounted for, then in my view, the Defendants would not be able to discharge their legal burden of proof that they did not utilise the Deceased’s share beyond the amount under the Cashier Order. 69.The question is, should I make any finding that the Deceased’s entitlements go beyond the amount represented by the Cashier Order. To answer this question, in my view, the completeness of the accounts and financial statements is crucial. If they are complete, then I can see no reason to say that there was any part of the Deceased’s unaccounted for and that the Deceased’s entitlements would go beyond the amount represented by the Cashier Order. If they are incomplete, then I would see whether it is appropriate to find that the Deceased’s entitlements would go beyond the amount represented by the Cashier Order. 70.It is convenient at this juncture to mention that on 12 July 2022, upon the Plaintiff’s application, Master Sabrina Ho granted an Order, inter alia, that the 1st and 2nd Defendants do within 7 days from the date of the order disclose, among others the books and accounts, journal entries, ledgers, vouchers and financial statements (audited and unaudited) of the Mahjong business between 1 January 2013 and 31 December 2021. The Defendants have produced, among others, financial statements, ledger accounts and trial balance sheets. 71.The 1st and 2nd Defendants, via the 3rd Defendant’s affirmation, say that they have disclosed all they have in power, custody and power. They say that in 2017 and 2018, because the attic above the Business Premises, four to five decades old, was flooded during typhoons, the records of the Last Partnership stored in the attic were destroyed or were not in good conditions, and when tidying up the Business Premises in October 2018 in preparation for the commencement of business of the Post-2017 Luen Fat, the documents, either destroyed or in poor conditions, were discarded. The Defendants managed to disclose the aforesaid documents because they were copies kept by the accountant firm which prepared financial statements for the Last Partnership. This explanation is contrary to the Defendants’ admission in §15 of the Amended Defence, verified by the 1st and 2nd Defendants but not Ricky Lui, that “the books and accounts of the Last Partnership are in possession of the Defendants”. 72.The 2nd Defendant, when giving oral evidence, was not asked about this inconsistency. Ricky Lui, who did not sign the statement of truth for the Amended Defence, was. In answer, Rick Lui could not explain the inconsistency. However, since the 2nd Defendant was not asked about the inconsistency, I do not think it fair to draw any adverse inference simply on this inconsistency. 73.But such inconsistent explanation remains. Not only that. Even on the Defendants’ own evidence, in respect of the amount of HK$312,696.20 under the Cashier Order, certain parts have not been accounted for. The components of this sum, according to the Defendants, are:-
74.While I can see from the disclosed ledgers and the financial statements the book value of the partnership assets and can understand how HK$223,706.20 is arrived at (by the Deceased’s 5%) as share of the partnership assets, as Mr Chok (for the Defendants) fairly accepts, there is no plea and no evidence, whether from the ledgers or financial documents, Ricky Lui or the 2nd Defendant, or otherwise, as to how the Deceased’s salaries, bonus and tips are worked out. One would expect that such information would be available in the ledgers, but the disclosed ledgers do not show a shred of such information at all. Mr Chok cannot give any explanation on how, either. This means, and so I find, that the 1st and 2nd Defendants did not keep proper accounts of the partnership at least in respect of the Deceased’s liabilities. 75.Not only did they fail to keep proper accounts of the partnership’s liabilities vis-à-vis the Deceased, they also failed to keep proper accounts of the partnership’s assets. During cross-examination, Ricky Lui said, and during re-examination, he confirmed again, that there was some HK$1,000,000 odd cash left in the safe which was all distributed to the partners in late December 2016 or early 2017. This amount obviously was not recorded in the financial statements of the Last Partnership ended on 31 December 2016 only. The balance sheet only shows the cash in the bank in the sum of HK$4,474,123.70, the very sum on which the Defendants say the Deceased’s share of the partnership assets is based. In the absence of any evidence or even suggestion that for the HK$1,000,000 odd cash in the safe, the Deceased had already obtained his share and so this was not included in the amount represented under the Cashier Order, this must mean that the HK$1,000,000 odd cash in the safe was unaccounted for and the Deceased’s share to the cash in the safe had not been distributed to the Deceased. 76.Where appropriate, if a partner responsible and in control of the partnership does not keep proper accounts, the Court may, with no diffidence, draw inference against that partner: see Al-Najjar v Mujeed [2022] EWHC 686 (Ch) at §42 per Charles Morrison (sitting as Deputy Judge of the High Court). 77.In the present case, as discussed above, there is no breakdown or any explanation for the amounts of the debts due and owing to the Deceased, and there is basis for me to find that the Deceased’s share to the unaccounted cash in the safe had not been distributed to the Deceased. In such circumstances, I draw an inference from the absence of a complete account of the partnership’s liabilities and assets, that the Deceased’s entitlements go beyond the HK$312,696.20 represented under the Cashier Order. 78.Logically, that this amount did not show up in the accounts of the Last Partnership produced before me does not necessarily mean that this amount has been utilised by the Post-2017 Luen Fat to generate profits. However, the burden lies upon the Defendants to disprove that this amount has been so utilised, but the Defendants have not adduced anything about this amount. It is no answer for the Defendants to rely on the financial statements of the Post-2017 Luen Fat because there is simply no evidence as to the source of funds of the Post-2017 Luen Fat. 79.In the circumstances, the Defendants fail to discharge their burden to disprove, and therefore I find, that the amount beyond has been utilised by the Post-2017 Luen Fat. 80.Therefore, Condition (3) is satisfied. 81.I do not need to find what this amount beyond the Cashier Order is. As Mr Pang (for the Plaintiff) submits that once I am satisfied that some of the Last Partnership’s assets have been utilised, it is not necessary for me to make any definitive findings on what assets have been utilised and what not. He relies on the following dicta in Chu Ka Sun Winston & Another v Mo Wan Lung Peter & Others, supra at 370:-
82.I accept this as a general proposition of law. The reason is obvious – upon proper compliance with a court order for taking of account, more information may come up as to what assets have been used and how they have been used. It is therefore inappropriate for the court at this stage to go further. For completeness sake, I should mention that there are the exceptions to this general rule: see Lindley and Banks on Partnership, supra, §§23-119 and 23-378, but Mr Pang (for the Plaintiff) does not rely on any of these exceptions. 83.In the context of section 44 of the Partnership Ordinance, this general rule still applies. This is because only upon taking of the partnership account can then there be proper basis to know what exact assets have been utilised and how. 84.During closing submissions, there was an exchange between the Bench and the Bar Table on a possible scenario where during the taking of account, no evidence of this amount beyond the Cashier Order could be found. Since I am not dealing with the taking of account, I do not have to express any view on this, save and except that I note Mr Pang (for the Plaintiff)’s submissions that in that scenario, the Court would simply find that no profit has been generated from that amount, without the need for that Court there to overrule or set aside my finding here that the amount has been so utilised to generate profit. 85.In the event that I would have to make any findings on Asset (b) and Asset (c), I would make the following findings. 86.For Asset (b), namely, goodwill, there is no plea of any particulars and no evidence of how the alleged goodwill was established. For example, how much the Last Partnership spent on advertisement and other kind of promotion with reference to “Luen Fat”, and any revenues made as a result of such promotion. These are all the basic elements one would find in any pleading and evidence for goodwill. However, there is none. Therefore, on the evidence, I would find no goodwill owned by the Last Partnership, and it follows that no goodwill of the Last Partnership has been used by the Post-2017 Luen Fat. 87.In relation to Asset (c), namely, the décor, apparatus and equipment (by which the Plaintiff means the décor, apparatus and equipment in the mahjong room of the Business Premises), there are no photographs for comparison. The only evidence is the Plaintiff’s own evidence. According to her, during her three visits (viz, on 26 February 2019, 8 March 2019 and 8 April 2019) to the Business Premises in 2019 to discuss or demand for the Deceased’s share of profit and remunerations etc, she saw that the décor, apparatus and equipment was the same as that before the Deceased passed away in 2016. During cross-examination, when asked how she saw the décor, apparatus and equipment, the Plaintiff said that:-
88.In such circumstances, her impression could only be rough. I cannot rely on such rough impression to say that the same décor, apparatus and equipment has been used by the Post-2017 Luen Fat. 89.In any event, for the Plaintiff to be in a position to say that the décor, apparatus and equipment were the same, the Plaintiff would have to have a detailed recollection of the mahjong room of the Last Partnership. However, having heard her evidence on this matter, I find that she did not have any such recollection at all, because in the first place, she had not had acquired any such recollection:-
90.In other words, there is no basis for the Plaintiff to make any comparison to say that the décor, apparatus and equipment were the same. 91.Lastly, I should mention that the Plaintiff accepts that the mahjong tables were electrical tables and would have to be replaced every 2-3 years. Given that the tables were not used for the period of 2017 and part of 2018, and there had been renovation in September 2015, the likelihood is that the Post-2017 Luen Fat replaced them, even if the tables were left in the Business Premises. 92.Having considered the above evidence in relation to Asset (a), I would find that the Post-2017 Luen Fat has not utilised the décor, apparatus and equipment of the Last Partnership. D. Condition (4): Any final settlement of accounts of the Last Partnership? 93.A settled account of a partnership means an account agreed between all the partners: see Lindley and Banks on Partnership, supra, §23-183. 94.Here, the Defendants have not been able to explain how the figure in the Cashier Order was worked out, except for the part relating to the net asset value. Further and in any event, even on the Defendants’ evidence, the Plaintiff refused to accept the Cashier Order. Thus, the account has not been agreed, and there has been no settlement of account at all. This Condition is satisfied. E. Remedy under section 44 95.In conclusion, all the Conditions in section 44 of the Ordinance are satisfied. 96.As mentioned in §53 above, there are options (a) and (b) for the Plaintiff to choose as the remedy. Since I shall order taking of account only at this stage, there is no need for the Plaintiff to elect, and for me to decide, on the remedy. The Plaintiff, however, will have to during the taking of account. XII. ISSUE (4): HAVE THE 1ST AND 2ND DEFENDANTS MISAPPROPRIATED ASSETS AND FUNDS BELONGING TO THE PARTNERSHIP BY ESTABLISHING THE POST-2017 LUEN FAT AND HOLD THE MISAPPROPRIATED ASSETS AND TRACEABLE PROCEEDS AND THE PROFIT GENERATED THEREFROM ON TRUST? 97.For the claim of misappropriation, the burden lies upon the Plaintiff. The Amended Statement of Claim is not very clear on what assets were misappropriated. Mr Pang (for the Plaintiff) confirmed during the Opening Submissions that they are the same assets which the Plaintiff claims have been utilised by the Post-2017 Luen Fat, that is, those set out in §66 above. For the same reasons, I find that there has been misappropriation of the Deceased’s share of the Last Partnership beyond the HK$312,696.20, and that there is no misappropriation of goodwill and décor, apparatus and equipment. 98.I should add that normally for a claim of misappropriation, the amount misappropriated is known. In my view, in the context of partnership and in the present circumstances, where section 44 is also invoked and an account is to be taken, it is an exception that the amount misappropriated is left unknown until the taking of the account. XIII. ISSUE (5): HOW MUCH SHARE OF PROFIT DID THE DECEASED GENERALLY RECEIVE PER MONTH? 99.There are two questions here. The first is what the Deceased’s share of the Last Partnership was. The second is what was the usual amount the Deceased received. The second question seems unnecessary in the light of Mr Pang’s seeking for an account only. But since I have heard the evidence, for completeness sake, I would still make findings in the event that such findings would be necessary. I emphasise that the second question is in relation to the Deceased’s receipts in the past. The actual amounts the Deceased was entitled to is another matter, and can only be known upon taking of account. 100.For the first question, initially, the Plaintiff appeared to say that the Plaintiff’s share was all along 12.5% as stated in the Partnership Agreement. However, in all likelihood, the share of the Deceased was entitled to under the Partnership Agreement could not be necessarily the same as under the Last Partnership for the reasons that first, the partnerships were not the same; second, the Partnership Agreement, as I found above, does not govern the Last Partnership; and third, the numbers of partners were not the same. 101.As mentioned above, in §11 of his Witness Statement, the 2nd Defendant, who was one of the partners of the Last Partnership, lists out the shares of the Last Partnership as follows:-
102.During cross-examination, the Plaintiff changed her stance and accept that for the Last Partnership, the Deceased’s share was 5%. She made some explanation that there had been unilateral dilution and there should have been changes in 2005 to 2015. I must say that the evidence in this respect is confusing. But the long and short of her evidence is that she accepts that for the Last Partnership, the Deceased’s share is 5%. 103.On such evidence, I find that the Deceased’s share of the Last Partnership was 5%. 104.For the second question, the Plaintiff’s evidence is that the Deceased would receive a total of over HK$100,000 in cash each month as his share of profit. In §8 of her Witness Statement, she gave the following breakdown:-
105.The existence of these items (not the amounts) is supported by the writings put on the brown envelopes containing the payments for the Deceased which the Plaintiff says she received from Lam Sung (the bookkeeper of the Last Partnership) on behalf of the Deceased during his lifetime. Further, the Defendants do not dispute the amount of Items (1) and (3). For Item (2), the Plaintiff, having accepted that the Deceased’s share was 5% only instead of 12.5%, it should be HK$200. For the remaining Items, since they depended on the profits made, the Defendants dispute. 106.Since Lam Sung was the bookkeeper of the Last Partnership, he would have assisted the Court if he would give evidence. However, neither side called him to give evidence. The Plaintiff says that she did not think about calling him because he had from time to time said that he could not be of any use to her and asked her to go after the 1st Defendant for whom he had already given the Deceased’s share of money to keep. In response to why she did not summon him to give evidence, the Plaintiff says that she does not have the address of Lam Sung, although before mid-2023 (when she was preparing her own witness statement for the present litigation), she was still able to reach him by phone. 107.The Defendants could call Lam Sung, but did not. They did not do so because they did not think that the present litigation concerns him. 108.In my view, neither side has provided any good reason not to call Lam Sung to give evidence, or at least ask Lam Sung to prepare a written statement or affirmation. As such, I do not think it appropriate to draw any adverse inference against any party from the absence of Lam Sung. 109.For the Plaintiff’s case of such substantial amounts due and owing to the Deceased, the ledger accounts would have shown the same. However, on the fact of it, they do not. 110.The main part of the Plaintiff’s case on the amount is that a substantial amount of the Deceased’s entitlements was put under “Entertainment – Red Packet”. The Plaintiff’s case is that this item is not expenses as the Defendants allege but is in fact the partners’ daily and monthly bonuses. This is one of the main planks based on which the Plaintiff sets out her case that the total amount the Deceased was entitled to should be more than HK$100,000, because otherwise, based on the ledgers and the financial statements, the Plaintiff could not point to anywhere to say that the Deceased was entitled to such a big sum (unless the ledgers and the financial statements were inaccurate, but I have found to the contrary above). In the words used in §34(f) of her Witness Statement, after the Plaintiff tabularised in §34(e) the “Entertainment – Red Packet” expenses shown in the ledgers produced by the Defendants for September 2018 to March 2020 totalling HK$1,591,062.50,:-
111.In cross-examination, the Plaintiff explained that she was aware that before cigarettes were prohibited in public premises, Luen Fat gave cigarettes to customers and the expenses for that were booked under “Entertainment”. She was also aware that after cigarettes were prohibited, red packets of HK$30 each were given instead. She also frankly admitted that she did not have personal knowledge of whether the amount would be more than HK$30 depending on what Mahjong games the customers played, and that the Deceased would know more. She also accepted during cross-examination that to her knowledge, these red packets were, like the cigarettes, booked under “Entertainment”. 112.When pointed to the obvious inconsistency between her oral evidence and §34(f) of her Witness Statement, she could not offer any explanation. She just said that she could not estimate the amounts of the expenses of “Entertainment”. This is besides the point. 113.I also note the 2nd Defendant’s explanation that if the Deceased, holding 5%, would receive almost HK$100,000 per month as the Plaintiff alleges, then this would mean that the business would have made a very substantial profit. The 2nd Defendant says that only persons who do not know the business would say so. I do accept that the 2nd Defendant’s explanation does cast doubt on the Plaintiff’s evidence. 114.On the other hand is the failure to keep proper accounts of the Last Partnership, as I have found in §§75-75 above. 115.Having considered all these, if I would have to make a finding on the amounts the Deceased usually received, on balance, I would draw the following adverse inferences in favour of the Plaintiff from the 1st and 2nd Defendants’ failure to keep proper account:-
XIV. RELIEF 116.In the circumstances, I make the following order against the 1st and 2nd Defendants:-
117.As regards costs, Mr Chok (for the 1st and 2nd Defendants) asks me to order that the costs shall be paid out of the Last Partnership. However, I do not see why costs should not follow the event especially when I have found that the Defendants have misappropriated and utitilised the assets of the Last Partnership. 118.There should be apportionment of costs, because only during the Opening Submissions did the Plaintiff abandon her stance that the Partnership Agreement governed the Last Partnership. In my view, a considerable amount of time and costs had been incurred on this issue. I shall apportion 15% to this abandoned issue. Therefore, the Plaintiff would be entitled to 85% of the costs and the Defendants would be entitled to 15% of the costs. Adopting a broad-brush approach, setting off each other, the Plaintiff would be entitled to 70% of the costs. 119.Therefore, I make a costs order nisi that the Defendants shall pay the Plaintiff 70% costs of the action (including all costs reserved), to be taxed if not agreed. For the avoidance of doubt, there shall be certificate for one counsel only. 120.Lastly, I thank Mr Pang, Mr Pannu-Yuon and Mr Chok for their assistance.
Mr Ronald Pang leading Mr Nicklaus Pannu-Yuon, instructed by Franki Ho & Associates, for the Plaintiff Mr Brian Chok, instructed by Bobby Tse & Co., for the 1st and 2nd Defendants [1] Strictly speaking, after Ricky Lui is appointed to represent the estate of Lui Chung, Ricky Lui becomes the 1st defendant to represent the estate of Lui Chung. However, since the appointment was made only on 28 March 2025, the working day before the commencement of the trial, all the documents refer to Lui Chung as the 1st Defendant. For convenience and to avoid any confusion, in this Judgement, I refer to Lui Chung as the 1st Defendant. |
Cases cited in this judgment