Ng Chan Kwong v. Yew Hak Yam

Case No.HCA 515/1974

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCA000515/1974

IN THE HIGH COURT OF HONG KONG

ACTION NO. 515 OF 1974

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BETWEEN
	NG CHAN KWONG	Plaintiff
	and
	YEW HAK YAM	Defendant

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Coram: Li, J.

Date of Judgment:

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JUDGMENT

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1. In this action the plaintiff claims for a declaration of trust, dissolution of partnership and the rendering of partnership accounts. The defendant does not deny that there was once a joint venture or a partnership but contends that such joint venture or partnership had been terminated upon terms by consent of the parties long before the commencement of this action and that the plaintiff is not entitled to ask for the accounts.

2. The plaintiff's case is that sometime in 1970 he made an oral agreement with the defendant whereby the latter would finance a joint venture to redevelop the property known as 51 Prince Edward Road and 43, 45, 47 Tung Chau Street (hereinafter referred to as "the properties") which the plaintiff and his brothers inherited from their late parents and which at the time were under mortgage. The terms were that the defendant would put up funds to discharge the mortgage on the properties and to advance money to discharge the plaintiff's other financial obligations. The plaintiff would then put the properties valued at $700,000 to the joint venture the capital of which was $1m. $400,000 of the value of the properties would be deemed to be the contribution of the plaintiff's shares to 40% of the capital. The balance of the $300,000 in value of the properties would be set off by sums paid by the defendant in discharge of the mortgage on the properties and of the plaintiff's financial obligations as well as various advances made to the plaintiff from time to time. It was also agreed that the defendant's share in the joint venture would be deemed to be 40% i.e. $400,000 of the $1,000,000 capital, that one Suen Ah Fat's share be 20% by the latter contributing $200,000 to the joint venture and that any expenses over and above the defendant's contribution of $400,000 ($300,000 of which was to be utilised in paying off the mortgages and for advances to the plaintiff) would be first deducted from the profit of the joint venture after the development. If the defendant had paid more the $300,000 in paying off the mortgages and as advances to the plaintiff such excess would be deducted from the plaintiff's share of profits after the development. In the meanwhile the defendant would finance and manage the project till its fruition. Pursuant to this agreement the properties were assigned to defendant. Meanwhile a King On Construction and Investment Co. Ltd. (hereinafter referred to as the King On) was formed to carry out the project of the joint venture. The defendant was to assign the properties to King On and the parties shares in the joint venture would be deemed to own shares in King On. No assignment was executed by the defendant to the King On. Sometime in 1972 the defendant suggested to the parties to sell the properties at a profit which was agreed in principle though no selling price was yet set. Without knowledge and consent of the plaintiff, the defendant sold the properties at $4.1m., kept the proceeds of sale and refused to render accounts of the joint venture profits.

3. The defence case is that in 1970 the plaintiff was in financial difficulty and offered to sell the properties to defendant for $700,000. The defendant found out that the plaintiff previously agreed to sell the same to a 3rd party for $340,000. They renewed their negotiation. As a result it was agreed that a joint venture to redevelop the properties be established in the form of a company named the King On to be incorporated with the capital of $1m. of which the plaintiff's share would be 40%, the defendant's shares would be 60%. The plaintiff would still sell the properties to the defendant for $700,000 but the defendant would resell the same to the King On for $1m. The defendant would advance money to discharge the mortgages on the properties as well as the plaintiff's financial obligations up to the amount of $300,000. However, the defendant would not be obliged to resell the properties to the company at all if the defendant's advances to the plaintiff exceeded $300,000 and the excess had not been repaid by the plaintiff. Later one Suen Ah Fat was invited to join the King On by taking up 20% of the shares out of the defendant's 60%. Advances and payments were made to and on behalf of the plaintiff between 1970 and 1972 to the sum exceeding $300,000 which excess the plaintiff was unable to repay the defendant. Further in 1971 the plaintiff approached the defendant for assistance to form a garment factory named Grandview Garment Manufacture Ltd. (hereinafter referred to as the Grandview) with an authorised capital of $500,000 of which the plaintiff agreed to take up 1/5 of the shares. The remaining 4/5 of the shares were to be taken up by defendant and three of defendant's friends in equal proportion. By March 1972 the Grandview suffered a loss of over $40,000. In July 1972, the plaintiff wanted to take up all the shares in the Grandview and asked for defendant's assistance. It was agreed between the plaintiff and the defendant that all the shares in the Grandview be sold to the plaintiff at par value and that the defendant would put up another $400,000 to pay himself $100,000 for his 1/5 share in the Grandview and $100,000 each to the defendant's three friends in respect of their respective shares. In consideration plaintiff would relinquish his 40% interests in the properties and in the King On. By that time the defendant had paid for the outgoings of the Grandview to the sum of about $300,000. For this reason the defendant gave a cheque to plaintiff for $200,000 to be paid into the Grandview account to make up a total of $500,000 as capital.

4. Further, the defence alleges that as early as 1970 it was known to the parties that the redevelopment for the properties could not complete without acquiring an adjoining house known as No.49 Prince Edward Road. It was thus agreed that the adjoining house be acquired by the defendant for $200,000 and that the defendant would be allowed to resell this adjoining property to the King On for $300,000 thereby increasing the capital of King On to that of $1.3m.

5. The defendant also paid another $100,000 to the plaintiff as balance of payment for plaintiff's giving up his interests in the properties. Thus the plaintiff had no longer any interest in the properties which were subsequently sold by the defendant and was not entitled to ask for accounts.

6. In reply the plaintiff joined issues with the defendant. While agreeing that advances had been made to plaintiff in excess of $300,000 and that the defendant had put up $400,000 to enable the plaintiff to acquire up to 80% of the share capital in the Grandview the plaintiff's case was that such advances and payment were agreed to be repaid only by way of set off from the plaintiff's share of profits after the completion of the redevelopment of the properties when accounts were finally settled. Later, when the parties agreed in principle to sell the properties it was agreed that the plaintiff would take up $400,000 of shares in the Grandview in place of his holdings in the King On which would be wound up anyway. The plaintiff never relinquished his interests in the properties in exchange for shares in Grandview. The plaintiff further denies that he ever agreed to the defendant reselling the properties to King On for $1m. Nor did the plaintiff agree to the defendant reselling the property at 49 Prince Edward Road at $300,000 thereby increasing the capital of the King On to $1.3 million.

7. In view of these the issues involved are:

	1.	The terms of the joint venture and
	2.	Whether the joint venture had been terminated by the plaintiff accepting all the shares in the Grandview and by the payments as alleged in the defence.

Since the defence has admitted the existence of a joint venture and alleges its termination I am of the opinion that the burden of proving its termination rests on the defendant. However the burden of proving the terms of the joint venture rests with the plaintiff.

8. Before I consider the issue involved it is of assistance to refer to the following indisputable facts in this case: By early 1970 the plaintiff and some of his brothers were beneficially entitled to the properties left by their parents the last of whom died in 1966. They applied for letters of administration to administer the properties without any result till then. In the meanwhile the properties were mortgaged and they had no fund to redeem the mortgage though the mortgagee pressed for payment. They were also indebted to Messrs. Lo and Lo, legal in the form of fees to the sum of $14,000 odd. The plaintiff tried to enlist friends to redevelop the properties to be valued at a sum substantially lower than the value of $700,000. However, this plan did not materialise because his friends were also in lack of funds. The plaintiff was in financial difficulty. That was how the defendant came in.

9. It is not necessary to consider at this stage whether the plaintiff approach the defendant for help or the defendant offered his assistance. Suffice it to say that eventually the plaintiff and defendant came to terms. On the 29th October 1970 the plaintiff and defendant entered into an agreement of sale and purchase whereby the plaintiff agreed to sell to the defendant the properties free from incumbrances for $700,000 and the payment of $100,000 was made by defendant to Shea & Co. to redeem the mortgages on behalf of the plaintiff. In addition $14,000 odd were paid to Messrs. Lo & Lo to discharge the legal fees payable by plaintiff. On the 13th November 1970 the King On was incorporated. On the 22nd February 1971 the plaintiff assigned 51 Prince Edward Road of the properties to the defendant. On the 14th July 1972 43, 45 and 47 of Tung Chau Street of the properties were assigned to defendant. On neither occasion was any payment made to the plaintiff. However, certain payments were made by the defendant on behalf of the plaintiff and a total sum of $80,000 odd was advanced to the plaintiff from time to time between October 1970 and July 1972. Further a house adjoining the properties known as 49 Prince Edward Road was acquired for $200,000 for the purpose of the joint venture in June 1971. It was realised by the parties as early as the end of 1970 that the redevelopment of the properties could only be effected if the site of No.49 was included in the scheme. Hence the acquisition.

10. In the meanwhile the Grandview was incorporated on 29th June 1971 with an authorised capital of $500,000. The plaintiff agreed to take up 1/5 of the shares capital of the Grandview and the defendant and his three friends agreed to take up in equal shares the balance of the $400,000 worth of the authorised capital.

11. On 3rd October 1972 the defendant gave a cheque Exhibit D to plaintiff for $200,000 which was endorsed by plaintiff and paid into the Grandview account, On 11th October 1972 defendant gave plaintiff another cheque for $100,000 - Exhibit F which was paid into plaintiff's account.

12. Referring to the issues in dispute it is appreciated that both parties rely on oral agreements. The plaintiff and the defendant give different versions of their agreement. The documentary evidence can provide merely a guide as to the channel through which their agreement was to be carried out. Only a total of three witnesses have been called. Neither Mr Au of Shea & Co. who advised on the transaction in respect of the joint venture nor Mr C.M. Sin, auditor of the Grandview has been called to give evidence. Looking at the evidence as a whole I am inclined to believe that it was the plaintiff who approached the defendant for financial assistance or co-operation. The plaintiff at the time was hard pressed to redeem the properties under mortgage. His friends Chiu Sin Kwok and Wu Fung Sang were unable to carry out their original project to develop the properties. However, that does not mean the bargaining power was enti one sided. The plaintiff had properties with good potential, albeit under mortgage. The mortgage debt did not exceed $100,000. His original intention was to seek financial support to redevelop the properties so that he could participate in the profit after redevelopment. I believe that it was with such expectation in mind that he approached the defendant. I do not accept the defendant's evidence that the plaintiff originally intended to sell the properties to the defendant for $700,000. The reason why the agreement of sale and purchase of the properties was signed between the plaintiff and the defendant was that at the time the King On had not yet been incorporated. In the meanwhile the plaintiff was hard pressed to redeem the properties. The defendant must put up cash immediately for the purpose. I have the impression that the defendant is a far more knowledgeable person in financial matters than the plaintiff. He was the person who would pay for the development of the properties. He also wanted protection. In the Articles of Association of the King On he made sure that he (the defendant) would have absolute control of the King On - see Articles 26 and 27 of document A-12. The aforesaid sale and purchase agreement (document A-3) was signed on the 29th October 1970. The King On was not incorporated until the 13th November 1970. Pending the establishment of the King On the defendant wanted full protection of his interests. The payment of stamp duty twice over for two assignments instead of one direct to the King On was a small price to pay for such protection. The extra stamp duty payable would be part of the expenses of the joint venture. Anyway as the events turned out there was no necessity to assign the properties to the King On and there was no need to pay extra stamp duty.

13. Having found as aforesaid there is no question of the defendant reselling the properties to King On for $1m. Even if I am wrong I do not believe that the plaintiff would agree to the defendant reselling the properties to the joint venture for $1m. and thereby take a profit of $300,000. The basis for the defendant's allegation is that the plaintiff originally agreed to sell the same properties to another company the Iau Heng, for $340,000 only. He found this out when Messrs. Lo and Lo presented their bill for disbursement. However the defendant said in evidence that he had not seen the draft agreement between the plaintiff and Iau Heng (document A-31) before. The reason is that he does not understand any English. He said he found out on seeing the bill from Lo and Lo - A-29. This document (A-29) is also in English. The defendant would not have known unless the plaintiff told him. The plaintiff's version is that he put his card on the table. He told defendant everything including his original arrangements with Iau Heng to form a Yau Fat Company for the redevelopment. For that the plaintiff was to assign the properties for the sum of $450,000 plus an extra 10% priority claim to the profits apart from his shares in the joint venture. It will be appreciated that in the plaintiff's version the properties valued at $700,000 would be deemed to be $1m. once they were assigned to the King On. By virtue of Clause 2 of the sale and purchase agreement between the plaintiff and the defendant (Clause 2 in document A-3) the plaintiff would be paid in cash to sum of $300,000 out of which $100,000 would go only to the plaintiff's solicitors for redeeming the mortgage of the properties. Clause 2 of A-3 provides:

"2. The purchase money shall be HONG KONG DOLLARS SEVEN HUNDRED THOUSAND (HK$700,000.00) which shall be paid and satisfied to the Vendors as follows:-

(a)

HK$100,000.00 (Hong Kong Dollars One Hundred thousand) as deposit and part payment of the purchase money, on or before signing of this Agreement, to be paid to Messrs. Shea & Co. Solicitors as stakeholders who shall:-

	(1)	pay out of the sum of $100,000.00 towards the repayment of the principal and interest due and owing under the mortgage of the said premises and registered in the Land Office by Memorial No.568507.
	(2)	pay out of this said sum of $100,000.00 all estate duty, charges, disbursements and legal costs relating to the application for Letters of Administration de bonis non to the estate of the said Ng Sze (or Shi) (or Shu) Kwan (or Kwun) (or Kwon) alias Ng Ding Sam alias Ng Kin Sui deceased and Letters of Administration to the estate of the said Li Pik (or Pek) Wan deceased; and
	(3)	all costs and expenses for the proceeding to the Supreme Court of Hong Kong to approve the said sale. Provided always that if the Vendors fail to obtain the Letters of Administration de bonis non to the estate of the said Ng Sze (or Shi) (or Shu) Kwan (or Kwun) (or Kwon) alias Ng Ding Sam alias Ng Kin Sui deceased and the Letters of Administration to the estate of the said Li Pik (or Pek) Wan deceased or the approval of the said Court on or before the day of 197, the Purchaser shall have the option of cancelling this Agreement in which event the said deposit of $100,000.00 shall be returned by the Vendors to the Purchaser but without interest or compensation and all the costs payable under the preceding paragraph (i) shall be borne by the Vendors alone and the parties hereto shall enter into a cancellation Agreement to record such cancellation.

(b)

the balance of $600,000.00 (Hong Kong Dollars Six Hundred Thousand) on completion."

Yet even before completion the defendant had been advancing monies to the plaintiff exceeding $100,000 - see documents A-36 to A-46. Incidentalky this shows that the parties were not acting on the provisions of the written documents. If the plaintiff's evidence is true then the following result obtains:- The plaintiff will receive in cash of $300,000 of which $100,000 will be utilised to pay off the mortgage. In addition the plaintiff will have 40% interest in the King On. The defendant will be $300,000 out of pocket but will get paid $200,000 by Suen Ah Fat. But defendant also has 40% interest in King On. Suen Ah Fat will be $200,000 out of pocket and acquire a 20% interest in King On. On this basis if the properties were subsequently sold by the King On at no more than $400,000 then the King On would suffer a loss of $600,000 but the plaintiff would get a further sum of $160,000, the defendant $160,000 and Suen $80,000 on the winding up of the King On. In that event the plaintiff would get a total of $300,000 plus $160,000, a total of $460,000. The plaintiff would be in the same position as if he had sold the property to Iau Heng or Yau Fat Company. The defendant would receive a total of $200,000 plus $160,000 i.e. $360,000 and obtain a net gain of $60,000. Suen Ah Fat would obtain $80,000 sufferring a net loss of $120,000. If the properties were sold subsequently by King On at $1m. then the plaintiff would receive $300,000 plus $400,000 = $700,000 thereby being about $200,000 to $300,000 better off than his sale to Iau Heng or Yau Fat. The defendant would obtain $400,000 with a net gain of $300,000. Suen would break even for his 20% interest for $200,000. Such would be the result if the joint venture broke even. On the other hand if the defendant's evidence is true and the properties were sold subsequently by the King On for $400,000 the net return for the sale would be $400,000 minus the $300,000 i.e. $100,000. That would be so because the defendant would have a claim for $300,000 on his reselling the properties to the King On. In that event the plaintiff would have received $300,000 (paid by the defendant) plus 40% of the $100,000 i.e. a total of $340,000. It must be appreciated that $100,000 out of the $300,000 is in fact for paying off the mortgage. The net result is that the plaintiff receives only $240,000. The defendant on the other hand would have received $200,000 (to be paid by Suen Ah Fat) plus $300,000 to be taken off the sale price and a further $40,000 being 40% of the $100,000 a total of $540,000. This sum, after taking off the $300,000 the defendant is liable to pay to the plaintiff for the redemption of the mortgage will give the defendant a net profit of $240,000. Suen Ah Fat will receive $20,000 for his capital.

14. The aforesaid calculation is made on the basis that the proper value of the properties as they stood in October 1970 was about $40,000 which is not excessive. The calculations will show that whereas the plaintiff would have to put up all the properties for a pittance if the defendants evidence were true whilst the defendant would gain a huge profit by putting up no more than approximately $100,000. This was the position vis-a-vis the plaintiff and the defendant. It does not require too much imagination to realise that the allegation as put forward by the defendant was quite unacceptable to the plaintiff. For these reasons and for the reason that I do not believe there was a genuine sale of the properties to the defendant in the first instance I am inclined to believe the plaintiff's evidence that the properties were at all times intended to be sold to the King On for the purpose of a joint venture at $700,000 and to be revalued at $1m. as the capital of the King On only.

15. The defendant has admitted the existence of the joint venture in 1970 up to July 1972. Thus soon after the assignment of No.51 of Prince Edward Road of the properties to him on the 22nd February 1971 the defendant promptly recovered for himself the sum of $542,000 (at least in book value) from the King On as deposit money for the sale of the properties by him to King On. This is approximately 2/3 of the value of the properties at $700,000 plus the $120,000 he paid in cash for the property at 49 Prince Edward Road.

16. As to the purchase of the property at 49 Prince Edward Road it was agreed that the total price was $200,000. I do not accept that the parties to the joint venture agreed that the defendant could resell it to the King On for $300,000. No reason had been given for this unjustifiable profit by a simple transaction through the defendant. The joint venture was in existence at the time. The assignment was on the 14th June 1971 - See A-24. As a partner to the joint venture or as a director to the King On it was quite improper for the defendant to carry out such transaction. In either position the defendant was a trustee to the joint venture or servant to the King On. I accept the evidence that the property at 49 Prince Edward Road was acquired by the defendant for the benefit of the joint venture or for the King On with the funds put up by himself or with the $200,000 put up by Suen Ah Fat. That was his obligation in the bargain. Such sum would be treated as expenses of the joint venture. In fact the defendant did not have to pay out more than $120,000 for this transaction. He mortgaged this property for $80,000 on the 16th June 1971 - see A-8.

17. I further accept the plaintiff's evidence that all the expenses in the joint venture and all advances to him made by the defendant were agreed to be deducted or set off after profits had been taken at the end of the joint venture. It must be realised that at the beginning of the agreement all the plaintiff had were the properties. Pending redevelopment there was no means with which the plaintiff could repay the advances to him. To accede to the arrangement that he must repay all advances exceeding $300,000 before the properties would be assigned to the King On the plaintiff might as well effect an outright sale which was never his intention. I also believe that the sole reason for the plaintiff to assign No.51 Prince Edward Road of the properties separately to the defendant for $300,000 on the 22nd February 1971 was to enable the defendant to mortgage this property to raise fund to finance the project. It was not for the reason that the plaintiff's brother, the beneficial owner of Nos.43, 45 and 47 in Tung Chau Street of the properties was still a minor. In fact this second set of the properties was assigned to the defendant on the 14th July 1972 (see A-71) while the plaintiff's brother was still a minor. At no time did any cash change hands. The full price was never paid on completion. Despite the acknowledgement given at A-63 and A-64 by the plaintiff to his then solcitors no money had then been paid to the plaintiff. Pausing here, I may observe that it is yet another instance of the parties not acting in accordance with the sale and purchase agreement (A-3) and that there was no genuine sale of the properties to the defendant.

18. Resuming my consideration on the arrangements it is observed that soon after completion the defendant lost no time to mortgage the properties together with 49 Prince Edward Road for a sum of $500,000 on the 23rd May 1972 and the 14th July 1972 - see A-9 and A-10 respectively. In short the defendant did not have to dig into his pocket much to finance the project but was juggling in figures and manipulating with the properties. On the first issue I have come to the conclusion that the terms of the joint venture were as follows:- The plaintiff would put up the properties to be valued at $700,000. For this the plaintiff would receive in cash a sum of $300,000 to pay for the redemption of the mortgage and other financial obligations. Any other advance to the plaintiff beyond the $300,000 would be set off the plaintiff's share of profit after the fruition of the joint venture. In addition, the properties would be assigned eventually to the King On which would revalue them at $1m. The plaintiff would then retain 40% shares in King On as represented by the balance of $400,000 unpaid to him. The defendant would put up the aforesaid $300,000 to obtain a 40% in King On. In addition the defendant obtained $200,000 from Suen Ah Fat who paid this sum to acquire the balance of 20% interest in the King On. The defendant could utilise the properties or to put up funds to finance the project of redevelopment.

19. There is no dispute that the defendant never assigned the properties in the joint venture to the King On. Instead he entered into an agreement to sell them to another company at $4.1m. on the 3rd October 1972 - see A-69. The defendant never accounted for the profits. However it is pleaded that the joint venture had come to an end by July/August 1972 as far as the plaintiff is concerned because the plaintiff had sold all his shares in the King On for shares in the Grandview. The defendant's evidence is that in May/June 1972 the plaintiff had a dispute with one of the share holders who was the factory manager. At the time the Grandview had suffered a loss of some $40,000. But the plaintiff agreed to take over all the shares of other shareholders in the Grandview at par value. The plaintiff asked the defendant for financial support to acquire all the Grandview shares. As a result it was agreed between the plaintiff and the defendant that the plaintiff would give up his shares in the King On for $400,000 to be paid to the other 4 shareholders of the Grandview. Copies of instruments of transfer are produced in documents A-21, A-22 and A-23. In return copy of instrument of transfer of 400 King On shares by plaintiff to defendant's wife Lo Ping Wah is produced in document A-20. The defendant said that:-

	"When I discussed with plaintiff in July 1972 I had already paid the plaintiff's share in Grandview in 1971 - by end of 1971. It was paid in various sums, up to $100,000, from time to time by way of defraying the outgoings of the company. I had paid out total of $170,000 I made known I had paid for him and plaintiff was well aware of it. That was by the end of 1971. Payments made out of my own money and from money of Luen Fong Company (which I owned). In March 1971 when plaintiff consulted me as to financing the factory he was to operate we agreed I was to defray these expenses and the money was to come from the $300,000 out of sales of 51 Prince Edward Road. Thus plaintiff's $100,000 shares in Grandview had been paid out of his $300,000.
	The $297,000 odd in A-30 included the $100,000 previous paid in on plaintiff's behalf. Thus I paid only $170,000 odd into Grandview from my own money. Bearing in mind I had paid $170,000 odd in cash for the expenses the plaintiff's idea was that I had to clear my own mortgage debt myself the amount would be $300,000. He said I would have to pay another $200,000.
	Because plaintiff wanted to buy all the shares in Grandview he had to sell his interests in King On. Thus in July 1972 plaintiff and I came to an oral agreement whereby plaintiff agreed to give up his interests in King On and in return he was to get payment of $200,000 after assignment to me of the Tung Chau Street properties, and to have all shares and interests in Grandview - including mine plus another payment by me of $100,000. The $100,000 arrived at by taking account of several factors viz: land value of properties deemed to be $500/sq.ft. (market value) (total area 4188 sq.ft.) the cost of these properties to company i.e. $1.3m. compensation paid to tenants $263,000 odd; architects fees $50,000; sundries $50,000; 15% profits tax. As result of these calculations a sum of $357,000 odd. Plaintiff's share was 40% out of 130%."

The plaintiff's evidence is that when the dispute arose the defendant urged him (the plaintiff) to take over the Grandview with him (the defendant) and promised financial support. It was agreed that the plaintiff would take over the shares of the defendant's three other friends thereby acquiring 80% interests in the Grandview while the defendant would retain his 20% shares therein. It was also agreed that the defendant would advance money to the plaintiff for the purpose, such advance to be set off by the plaintiff's share of the profit in the joint venture. The defendant had paid into the Grandview a total sum of $170,000. On the 3rd October 1972 the defendant paid in through the plaintiff another $200,000. Thus the total sum was $370,000. The defendant promised to make up another $30,000 to form the sum of $400,000 for the plaintiff's take over. As to the $100,000 paid to the plaintiff by the defendant on the 11th October 1972 it was part payment of the plaintiff's share of profits in the joint venture in advance. A receipt in document A-58 was produced which reads:

	"Hereby received from Mr. Yew Hak Yam Hong Kong Dollars One Hundred Thousand Only being profits of King On Investment Company Limited which I am entitled to receive for my part of the share.
	made as proof
	sg. Ng Chan Kwong
	11th October, 1972."

20. Having regard to the fact that the defendant had never assigned the properties to the King On prior to the sale of the properties a transfer by the plaintiff of his King On shares to Lo Ping Wah should not affect the plaintiff's interests in the joint venture. At the time when the defendant entered into an agreement to sell the properties to Tai Yuen Co. for $4.1m. he was in the position of trustee for all parties to the joint venture or for the King On. As such he was liable to account for the proceeds of sale. Even if I am wrong in such assumption I still find no credence in the defendant's evidence. According to the defendant, as early as 16th March 1971 (see document A-58), the plaintiff was pressed by Messrs. Lo and Lo to redeem the mortgage of his other property in 40 Argyle Street and 154 Lai Chi Kok Road. The plaintiff approached the defendant for further advance of money for the purpose. The defendant said:

"I see A-59 (dated 16/3/71). Plaintiff discussed this with me after getting A-59 I told him various payment had gone up to $300,000. I warned him that should payment on his behalf should exceed the $300,000 then his $400,000 share in King On should be utilized for repayment. Plaintiff agreed. Further, pending the repayment of sums in excess of the $300,000 the property would not be assigned to company. With that understanding I paid off the 2 mortgaged properties 154 Lai Chi Kok Road and 40 Argyle Street to sum of $71,000 odd.

No draft agreement or articles to form written evidence. Only minutes of the account."

With such a warning in mind it was unlikely that the plaintiff would approach the defendant to form the Grandview in April 1971. It would be more unlikely that the plaintiff agreed to take over all the shares in the Grandview in July 1972 so that he (the plaintiff) would lose all his interests in joint venture. By July 1972 the Grandview had been in operation for about one year and was a losing concern. In cross-examination the defendant admitted that the Grandview had no assets except a few machines. On the other hand property value kept on rising at that time. Even a fool would not give up something which enhanced in value for shares in a company which had no assets and was losing money. Least of all would the plaintiff agree to pay for them at par. I am of the opinion that the plaintiff would do this only if the defendant agreed to set off such advances from the plaintiff's share of profits in the joint venture. By 1972, with the value in the land rising the plaintiff was assured of some profit in the joint venture. The defendant was not taking any serious risk. If there had been a bargain in July 1972 as alleged by the defendant it is surprising that no payment was made to the plaintiff until the 3rd October 1972. By 14th July 1972 everything had been completed. Even 43, 45 and 47 Tung Chau Street of the properties had been assigned to the defendant. Had there been such agreement for the plaintiff to give up his interest in the joint venture payment should be made to the plaintiff by then. When first payment was effected on 3rd October 1972 the $200,000 cheque was endorsed by the plaintiff and paid into the Grandview account. When second payment of $100,000 was effected the plaintiff gave defendant a receipt in the form of A-58 which document was disclosed by the defendant. It is a Chinese document. The translation though not disputed is not entirely correct. Even if I give it an interpretation most favourable to defendant it still show that up to October 1972 the plaintiff was entitled to share the profits in the joint venture after the defendant agreed to sell the properties to Tai Yuen. There could not be an agreement by the plaintiff to give up the interests in the joint venture.

21. In cross-examination defendant admitted that his friends Suen, Wong of Yeung had not paid any capital for shares in the Grandview even though they were listed as shareholders in the company return. If so, there was no necessity for the plaintiff to raise any money to repay them. I am of the opinion that the whole operation of transferring shares and the advance of the $200,000 on the 3rd October 1972 was part of the defendant's scheme to juggle in figures so as to make up a plausible story. Further, there was no transfer of the Grandview shares by the defendant. As late as the 26th August 1972 the defendant was listed as a shareholder in the Grandview - see document A-60. There was no mention that the defendant would transfer his shares to plaintiff. Even the company return dated 6th September 1972 and signed by defendant showed that the defendant was a director and a shareholder of 100 shares in the Grandview - see Exhibit N.

22. Finally I come to the evidence of transfer by the plaintiff to Lo Ping Wah of the King On shares. According to the defendant it was the plaintiff who prepared the instrument of transfer A-20 and Exhibit A-20(A). The plaintiff said that the defendant induced him to put his signature on a blank instruments under the pretext that the plaintiff's signature was required for the purpose of winding up the King On. Both A-20 and A20(A) are copies. The defendant failed to produce the original or to account for its absence. They have little probative value. Attached to Exhibit A-20 is a bought and sold note relating to the transfer. It is also undated. But the stamp office stamp showed that it was tendered for stamp duty purpose and dated on the 29th December 1973. Besides, the plaintiff was never asked to pay stamp duty on any of these documents. In the circumstances I am inclined to believe the plaintiff that the instrument of transfer and the sold note were all prepared by the defendant and that they were signed by the plaintiff in blank form to be used for the purpose of winding up the King On.

23. I find on the 2nd issue that the plaintiff had not sold his interest in the joint venture or the King on in exchange for shares in the Grandview and that whatever advance by the defendant for the purpose was agreed to be set off by the plaintiff's share of profits in the joint venture when account was rendered. I further find that the plaintiff never intended to sign the instruments of transfer and the sold note to dispose of his King On shares in favour of Lo Ping Wah.

24. In view of the foregoing I shall grant the declarations claimed in paragraphs 1 and 2 of the prayer in the statement of claim and order that the partnership be wound up and that all necessary accounts be taken and made for the purpose before the Registrar.

Representation: