Mak Man Por and Another v. Koo Sze Lar

HCA003382/1981

BETWEEN

__________

Coram: Hon. Liu, J. (In Chambers)

Date: 29 March 1982

Appeal against Master's decision.

___________

JUDGMENT

___________

1. I need not call upon Mr. Chan to reply.

2. This is an appeal against a decision of the learned Master given on the 25th September, 1981 granting leave to sign judgment against the defendant in the sum of $90,218.70 with interest and costs. It was explained by counsel for the plaintiffs that the sum in which leave was finally granted to enter judgment took into account the plaintiffs' concession to the amount set out in sub-paragraph (vii) of paragraph 13 of Madam Pun's affirmation filed herein on the 23rd July, 1981.

3. The plaintiffs' claim arose as a result of a Deed of Indenture dated the 19th November, 1980 executed between the plaintiffs and the defendant, whereby the defendant was to pay to the plaintiffs on dissolution of their partnership a total sum of $378,310.29.

4. It is quite unnecessary for me to descend into details of the partnership dispute. Suffice it for me to say that the 2nd plaintiff and the defendant traded in partnership under the name of Tai Yuen Hong as early as February 1963 and that a further partnership was formed by way of business extension between the 1st plaintiff and the defendant as a subsidiary of Tai Yuen Hong some time in May, 1971 by the name of Wing Yuen Hong. These partnerships apparently turned sour, to say the least, and it was found desirable to have the partnership relationship terminated. The Deed of Indenture dated the 19th of February, 1980 was the resultant document, whereby the parties formally severed their relationship. But although the plaintiffs acknowledged receipt of the said $378,310.29 in the Deed of Indenture, it is common ground that in fact $100,000 was left unpaid by the defendant. The retention of this $100,000 was, as far as the plaintiffs are concerned, contrary to the provisions of the Deed of Indenture and was allegedly tolerated as a high-handed maneuvre. However, no satisfactory explanation was offered for the plaintiffs' communication through their solicitors on or about the 2nd December, 1980 in the following terms:

"Please be advised that our clients only agree to the sum of $100,000.00 as mentioned in your letter of 18th November, 1980 being retained by your client on condition that he shall render to our clients full particulars of all expenses incurred by your client on behalf of ours and to account to our clients any balance thereof, if any, within a period of one month from to-day's date."

5. It was envisaged by Clause 5(e) of the said Deed of Indenture that "all godown storage charges, bank interest, coolie hire and all relevant errors and omissions", if any, in connection with the partnerships would be borne and paid for by the parties to the said Deed of Indenture in equal shares. Despite the said provision in Clause 5(e), it was not expressly authorised by the said Deed of Indenture to be deducted or retained any part of the said $378,310.29.

6. A sum of $100,000 was retained. Such retention was unauthorized by the provisions of the partnership dissolution deed. What is more striking, on the face of it, is that in the said Deed of Indenture the plaintiffs acknowledged payment of the sum of $378,310.29 in full by their receipt clause and that no attempt was made to clarify it.

7. In the Statement of Claim, the plaintiffs seek payment of this $100,000 or alternatively of the balance thereof after deducting expenditure incurred by the defendant on behalf of the plaintiffs, presumably pursuant to Clause 5(e) of the said Deed of Indenture.

8. The defendant's version was slightly different. It was alleged that the $100,000 was not retained under the provisions of the said Deed of Indenture but by virtue of a prior oral agreement, whereby the plaintiffs were to be paid by the defendant the balance thereof, if any, after deducting all the plaintiffs' fair share of the expenditure in between the date of the dissolution of the partnership indicated in the said Deed of Indenture, i.e. the 15th February, 1980 to the 19th November, 1980, i.e. the date of execution or the date of the said Deed of Indenture. Therefore, according to the defendant the retention of and the purpose for this $100,000 as a result of a prior oral agreement entered into before the execution of the said Deed of Indenture was to provide security for the plaintiffs' fair share of common expenditure, and such $100,000 was by no means intended to be the limit of the defendant's claim against the plaintiffs. In the result, the defendant now counterclaims over and above the $100,000.

9. It was submitted on behalf of the plaintiffs that the defendant's deduction of whatever expenditure to be borne by the plaintiffs for the affairs of the partnerships must be within the confines of the provisions of the said Deed. In particular, Mr. Lee, counsel for the plaintiffsargued, a limit of the defendant's claim was set by Clause 5(e) in the said Deed. What, in my view, seems to have been lost sight of is that both the retention of and the purpose for the $100,000 in question were subject matters of a prior oral agreement foreign to the said Deed of Indenture dated the 19th November, 1980. Therefore, both these matters must arguably be governed by an agreement extrinsic to the provisions of the said Deed of Indenture. The said Deed made no provision for its retention, and it must at least be arguable that the same Deed did not regulate its ultimate disposition.

10. Mr. Lee, counsel for the plaintiffs submitted that the allegation of the defendant was an afterthought. I do not share such criticism. As early as in paragraph 10 of Madam Pun's affidavit filed on the 24th September, 1981, such prior oral agreement was put on record. All the defendant sought to raise by the subsequent supplemental affidavit of Madam Pun was no more than that this retention of $100,000.00 and the plaintiffs' proper share of liability were principally dealt with by the oral agreement reached prior to the execution of the said Deed of Indenture but that if, in fact, the provisions of the said Deed could be construed as having the effect of governing these very matters, a proper reading of Clause 5(e) would provide an equally satisfactory solution in favour of the defendant.

11. That being the position, the other disputes between the parties can be little more than peripheral. In my view, the defendant has set up a fair probability of a defence, and judgment ought not in the circumstances be entered against him in this action. For all these reasons, I take the view that the defendant ought to be granted unconditional leave to defend, and I order that the appeal be allowed and that the order of learned Master be set aside; so should be the judgment entered pursuant thereto or in consequence thereof.

12. [Arguments on costs heard.]

13. I have had the advantage of submissions of both counsel on the question of costs. In the circumstances, I regard a fair order to be costs before the learned Master and of this appeal be costs in the cause.

Representation:

Mr. Philip Lee instructed by Messrs. Woo, Kwan, Lee & Lo for the Plaintiff.

Mr. Warren Chan instructed by Messrs. K.F. Wong & Co. for the Defendant/Appellant.