Woo Wai Ming and Others v. Choy Cheung and Others
Read the full judgment text of HCB 9/1970 on BabelCite. This HCB judgment was delivered on 18 December 1970.
1. On 23rd March 1970, an application was made for the registration of the Ka Lok Restaurant as a business under the Business Registration Regulations. It was signed by Woo Wai Ming and Ho Chok Sum; they certified that they were partners of this unincorporated body and that one Lo Luen and one Leung Hom Fat were also partners. The place of business was stated to be 9 Kingston Street, Causeway Bay; and the business was said to have commenced on 20th March 1970.
|
HCB000009/1970 IN THE SUPREME COURT OF HONG KONG BANKRUPTCY JURISDICTION NO. 9 OF 1970 -----------------
----------------- Coram: Hon. Blair-Kerr J. in Court Date of Judgment: 18 December 1970 ----------------- DECISION ----------------- 1. On 23rd March 1970, an application was made for the registration of the Ka Lok Restaurant as a business under the Business Registration Regulations. It was signed by Woo Wai Ming and Ho Chok Sum; they certified that they were partners of this unincorporated body and that one Lo Luen and one Leung Hom Fat were also partners. The place of business was stated to be 9 Kingston Street, Causeway Bay; and the business was said to have commenced on 20th March 1970. 2. There was evidence that in March the restaurant was re-decorated, that a cocktail party was held on 27th March, and that the restaurant opened for business on 28th March. It ceased to carry on business on 15th May 1970. 3. On 6th May 1970, sixty five employees of the restaurant (captains, waiters, cooks, cleaners and others) instituted 11 separate actions in the District Court against the Happy Terry Restaurant for arrears of wages. These actions in question were nos. 1545-1555 of 1970. Judgment for various sums totalling $27,158.90 was given on 15th May 1970. 4. On 9th May 1970, another group of employees instituted another action (no. 1578 of 1970); and judgment in that action against the restaurant was given on 27th May 1970. 5. On 29th May 1970, 54 of the plaintiffs in actions nos. 1545-1555 of 1970 served a bankruptcy notice calling upon the Happy Terry Restaurant to pay to these 54 employees, or their agents, within 7 days judgment debts totalling $23,644.70. 6. On 23rd June 1970, fourteen of the plaintiffs in actions 1545-1555 of 1970 and the 1st plaintiff in action 1578 of 1970 filed a petition in bankruptcy in which it was alleged that Woo Wai Ming, Ho Chok Sum, Lo Luen and Leung Hom Fat were indebted to the 15 petitioners in the sum of $26,604.56, which was the total of the following:-
7. It appears that the petition was served on Ho Chok Sum personally; but attempts to serve Woo Wai Ming, Lo Luen, and Leung Hom Fat were unsuccessful. As regards Leung Hom Fat, on 2nd July 1970 a registered letter was addressed to him at 9 Kingston Street, ground floor, and a signed carbon copy of that letter was also sent to him by registered post addressed to 173 Des Voeux Road West, 1st Floor. This was the address which he gave when he registered a business called Mee Sang (of which he was sole proprietor) in August 1952. The letters referred to the filing of the petition and to the fact that an attempt to serve him personally had been unsuccessful; and he was requested to give an address for service. The Postmaster General has certified that the letter addressed to Leung Hom Fat at 173 Des Voeux Road West, 1st floor, was delivered on 4th July 1970. 8. On 11th July 1970 there was an order for substituted service. In the case of Leung Hom Fat, it was ordered that sending a copy of the petition by registered post to 9 Kingston Street, ground floor, and publication of a notice in the Wah Kiu Yat Po would be deemed sufficient service of the petition. 9. A receiving order against Woo, Ho, Lo and Leung was made on 25th July 1970. On 28th July 1970, the petitioning creditors sought leave to amend the petition by the addition of the names "Clifford Charles Terhune" and "George Lumm" as debtors on the ground that it had come to the knowledge of the creditors that Terhune and Lumm were also partners of Happy Terry Restaurant. Leave to amend was given; and the creditors then applied to Briggs J. for a receiving order to be made against Terhune and Lumm. The learned judge refused the application. There was no evidence before the learned judge that these two individuals had ever been registered as partners of Happy Terry Restaurant; there was no judgment against them; and no evidence that they owed the petitioning creditors anything. The learned judge held that the issue of partnership should be decided in a separate proceeding before any receiving order could be made against Terhune and Lumm; and he dismissed the petition as against them, without prejudice to further proceedings being taken after the issue of partnership had been decided. 10. On 1st August, 1970, Leung Hom Fat applied to Mills-Owens J. under ss. 98(1) and 104 of the Bankruptcy Ordinance by notice of motion for a review of the receiving order made on 25th July, 1970. The learned judge made the following order:-
11. The applicant (defendant) complied with the order for security for costs; and the issue directed in paragraph I was tried on 30th November, 1st, 2nd and 18th December 1970. On 18th December 1970 I decided the issue against the defendant, that is to say I held that he was liable for the debts specified in the bankruptcy notice as being a partner in Happy Terry Restaurant at the material times when the causes of action arose. I ordered that the stay of proceedings in bankruptcy as against the defendant be lifted. I further ordered that the plaintiffs and the Official Receiver should have their costs of these proceedings (including the proceedings before Mills-Owens J.) and that such costs should be taxed on a common fund basis. I also ordered that the Official Receiver's costs should be paid out of the $3,000 paid into Court by the defendant; and I certified the proceeding before me as one fit for counsel to appear. I indicated that I would, in due course, record my reasons for coming to the conclusion that the defendant, LEUNG Hom Fat, was a partner in Happy Terry Restaurant; and I now proceed to do so. 12. It was common ground that the Ka Lok Restaurant was also known and carried on business under the name "Happy Terry Restaurant". Notepaper, envelopes, menus etc. all bore four Chinese characters (which can be Romanised as "Ka Lok Chau Lau") and also the English words "Happy Terry Restaurant". "Chau Lau", of course, mean "restaurant", and "Lok" means "Happy". The address (9 Kingston Street, Causeway Bay) also appeared in English and Chinese characters. 13. The plaintiffs' solicitor produced a certified copy of the Business Registration Certificate of the restaurant. Section 19(2) of the Business Registration Ordinance declares that such a document "shall be, in all legal proceedings civil or criminal, prima facie evidence as to the facts stated therein". As I have already indicated, one of the facts stated in that certificate is that the defendant is a partner of the Ka Lok Restaurant; and the plaintiffs relied on that certificate as being prima facie evidence of this fact. Of course, the certificate does no more than transfer the evidential burden. As Stratford J. A. said in R. v. Jacobson & Levy(1):-
14. Terhune could not be called as a witness by either side because he is now in England. Woo Wai Ming has disappeared; and a warrant for his arrest has been issued. LO Luen and HO Chok Sum have been in touch with the Official Receiver's Office; and, it would appear, they could have been called to give evidence. However, Mr. A. Chung, who appeared on behalf of the defendant, said that he had no instructions from his client to call LO Luen or Ho Chok Sum. The result was that a considerable proportion of the defendant's evidence was hearsay. 15. The plaintiffs called George Lumm. He is an American. He visited Hong Kong when he was in the American Army; and, after his discharge from the Army, he came to Hong Kong in August 1969. He and Terhune took a lease of 9 Kingston Street, ground floor; and they opened a restaurant named "Terry Town". Terhune appears to have taken the more active part in running this restaurant. In fact, Lumm said that he was not in Hong Kong in September 1969. The "Terry Town" Restaurant lasted for only one month. It ceased to carry on business about the end of September or the beginning of October 1969. 16. It appears that Terhune and Ho Chok Sum knew one another; and they, together with Lumm agreed to open another restaurant in the same premises. In January 1970 Terhune and HO Chok Sum signed a written agreement of some kind. I feel fairly certain that the prime movers in this venture were Terhune and HO Chok Sum. But, they were short of capital; and HO was given the task of looking for others who would be prepared to contribute capital for the purpose of establishing and running the restaurant. HO appears to have contacted Woo Wai Ming; Terhune introduced Woo to Lumm; and Lumm said in evidence that Woo introduced him to the defendant. 17. There is no doubt that Terhune and Lumm decided, at an early stage, to form a limited company. Lumm said in evidence that this was Terhune's idea. No doubt the failure of the Terry Town restaurant was a factor which influenced Terhune in his decision. At any rate, Terhune, Lumm, HO Chok Sum, LO Luen, and others visited the offices of Tong & Co., Solicitors, on a number of occasions. Mr. David Tong said in evidence that on 29th January 1970 he received instructions to incorporate a company named Happy Terry Restaurant, Ltd. The defendant's name was included in the papers given to Mr. Tong as a proposed share holder and director. 18. It is not clear why the company was not incorporated. Lumm said that he attended a number of meetings at which Woo, Lo, Ho and the defendant were present; and that there was a good deal of quarrelling amongst the four Chinese as to who should hold what position. From Lumm's evidence, it seems fairly obvious that it did not matter one whit to the four Chinese whether a limited company was formed or not, so long as the business of a restaurant was established. 19. The gist of the defendant's evidence was that he agreed to become a promotor of a limited company; that he told LO Luen that, under no circumstances, would he consider entering into partnership with strangers; and that his contribution of $22,000 was as a promotor and prospective shareholder of a limited company. 20. I may say at once that I rejected that evidence, and the evidence of his son who said that he advised his father not to enter into a partnership with strangers. The truth of the matter is simply this: The defendant and LO Luen knew one another. Towards the end of January 1970, LO Luen told the defendant about the proposed restaurant at 9 Kingston Street, ground floor, and he asked the defendant if he was interested in joining the venture and contributing some capital. The defendant inspected the premises and he agreed to join LO Luen and his friends in establishing the restaurant business at 9 Kingston Street, ground floor. 21. At the end of January, the defendant agreed to contribute $20,000; and about the beginning of February $10,000 was paid to LO Luen. According to the defendant, he raised this sum, gave it to his sister-in-law, and she drew a cheque for $10,000 on her own bank account in favour of the restaurant. That cheque was not produced in evidence. The defendant has not made any attempt to contact the bank on which it was drawn. He said in evidence:-
Obviously, it could not have been made out in favour of a limited company because no such company as "Happy Terry Restaurant Ltd." has ever been incorporated. If the cheque was drawn in favour of the restaurant, it must have been in favour of "Happy Terry Restaurant", or "Ka Lok Restaurant". 22. The defendant did attend a meeting at the office of David Tong & Co., solicitors, on 20th February 1970 at which the formation of the limited company was discussed. The minutes of that meeting were produced in evidence. They read, in part:-
The suggested capital was $300,000; and it was apparently decided that Terhune was to be Managing Director, that LO Luen was to be "Chief Manager", that HO Chok Sum was to be "Assistant Chief Manager", and that the defendant was to be "Assistant Manager". The minutes were signed by the defendant and others. 23. The defendant produced in evidence a cheque dated 20th February 1970 for $8,000, which was also drawn by his sister-in-law. On this occasion the payee was "Happy Terry Restaurant Co. Ltd.". This cheque was intended as the second instalment of the $20,000 which the defendant had agreed to contribute towards the establishment of the Happy Terry Restaurant. The cheque was chopped on the back "Happy Terry Restaurant" and signed by LO Luen. But it could not be cashed because there was no bank account in the name "Happy Terry Restaurant Co. Ltd.". The defendant said that Lo Luen asked him to delete the words "Co. Ltd." and ask his sister-in-law to initial the deletion; but that eventually it was decided to draw another cheque in favour of "Happy Terry Restaurant". That cheque was not produced in evidence. 24. A few days later he paid Lo Luen $2,000 in cash being the balance of the $20,000 which he had agreed to contribute. 25. The minutes of another meeting held on 18th March 1970 were produced in evidence. Present at this meeting were the defendant, Woo Wai Ming, Ho Chok Sum, Lo Luen, George Lumm and one Tse Cheung Wan. Tse had formerly been an employee of Terhune in the Terry Town Restaurant, and he was also employed by the Happy Terry Restaurant. In fact, Tse wrote the minutes of all meetings. George Lumm could not understand Chinese; and Tse did a certain amount of interpretation for Lumm's benefit. However, Lumm said in evidence that he felt that he was not being told the half of what was being said at these meetings. 26. At this meeting on 18th March 1970, it was agreed that Woo, the defendant, Ho, Lo, and Terhune would lend various sums. The minutes read, in part:-
The defendant, Woo, Ho, Lo and Tse signed these minutes. 27. It was at this meeting that the application for registration under the Business Registration Regulations was signed. I did not accept the defendant's evidence that he was unaware of what was going on. Lumm said that the defendant took an active part in all meetings, including this one. There is no doubt in my mind that the defendant was perfectly well aware that an application was being made for registration of the restaurant as a partnership business. He did not sign the application. But he was perfectly well aware that his name had been entered on the application form as being one of the partners. It is significant that although Lumm was at the meeting his name was not inserted as being a partner. 28. There was a considerable body of evidence (which I accepted) to the effect that in March and April 1970 the defendant was frequently seen in the restaurant giving directions to the staff and acting in what appeared to be a supervisory capacity, that is to say someone who was clearly involved in the running of the business; and, on a number of occasions, he was overheard discussing restaurant business with Woo, Ho, and Lo. In fact Tse said that the defendant was manager of the restaurant for a time; and, in a document written by Tse recording what had been decided at a meeting shortly before the restaurant commenced business, the defendant is shown as being manager. His daughter was employed as cashier in the office of the restaurant. 29. It is, of course, perfectly true that promoters associated only to form a limited company are not in partnership; and I express no view as to the intentions of Terhune and Lumm in associating themselves with the four Chinese. But I have heard nothing in this proceeding which has caused me to think for one moment that the defendant, or any of the other three Chinese, associated themselves with Terhune and Lumm for the purpose only of forming a limited company. The defendant and his son were telling deliberate lies when they told the court, in effect, that it was as a promoter of a limited company that he (the defendant) agreed to subscribe $20,000. At the end of January 1970, he agreed to become a partner of the restaurant which was being established at 9 Kingston Street, ground floor; and he took an active part in the running of the restaurant during the short period of its existence. Of course, if a limited company had been formed, I have no reason to think that he would have objected to being called a shareholder and director. But that is very different from saying that he associated himself with this group only as a company promoter. 30. I did not accept the defendant's evidence that he knew nothing about the bankruptcy proceedings. After the receiving order had been made, clearly someone had "schooled" him on the advantages of limited liability and in what respects a limited company differed from a partnership. 31. Counsel agreed that it was clear from the order of Mills-Owens J. that the motion itself was before me; and upon the conclusion of the trial of the issue of partnership, I dismissed the motion. 32. In my view, the defendant brought this motion in an attempt to delay the bankruptcy proceedings; and I considered that it was a fit case in which to order that the costs of the proceeding should be taxed upon a common fund basis and paid by the defendant.
18 DEC 1970 Representation: Mr. A. Chung of Messrs. W.I. Cheung & Co. for Leung Cham (Hom) Fat, a debtor. Mr. M. Lee of Messrs. Bernard Wong & Co. for the creditors. Mr. R. Henderson for the Official Receiver. Mr. M.D. Fairbairn of Messrs. Martin D. Fairbairn & Co. for Messrs. C.T. Terhune and G. Lumm. ...(illegible) (1) (1931) S.A. App. Div. p. 466 at p. 478. |