Li Chow Lan v. Yum Mor Lin

HCA006449/1994

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Rogers in Court

Dates of Hearing: 1st, 5th-9th, 12th-15th and 22nd February 1996

Date of Handing down Judgment: 28th March 1996

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JUDGMENT

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1. This judgment is in respect of two actions. Originally, the actions were set down to be tried at the same time as Companies Winding-Up No. 182 of 1995. That was a petition seeking the winding-up of Top Queen Ltd. (which I shall refer to below as "the Company"). At the commencement of the hearing, the Respondents to the winding-up petition indicated that they withdrew their opposition to the winding-up and in the circumstances, a winding-up order was made. Nevertheless, the hearing in respect of the other two actions proceeded.

2. Action No. 3921 of 1995 was an action brought by Madam Yum Mor Lin against Madam Li Chow Lan, her father Lee Fuk and a Mr. Wong Siu Tung. That action may be summarized as the trespass action. In point of time it came later than Action No. 6449 of 1994 which may be referred to as the loan action.

3. Before dealing with the issues between the parties, it will be convenient to set out the underlying facts. In doing so, I propose to set out the facts as I find them without necessarily dealing with each and every counter allegation. I should state as a general matter that I consider that the parties, to a large extent, had selective memories. The facts of this case undoubtedly caused considerable consternation to the parties and generated considerable ill-feeling. Having listened to the evidence, I consider that there is also an element of distortion of memory by reason of lapse of time and the aggravation which this case has generated.

4. When this case was called on, it was clear that the parties had by no means prepared their cases to an equal extent. The preparation of the case on behalf of Madam Yum Mor Lin had quite obviously been very much more assiduous than that of the other parties. This was evidenced at the very beginning by the fact that statements of further witnesses on behalf of Madam Li Chow Lan, Mr. Lee Fuk and Mr. Wong Siu Tung were sought to be introduced. Indeed, the additional statements had to be prepared. This in itself caused a delay at the commencement of the trial. In view of the imbalance in the preparedness of the parties, I considered it was convenient for the matter to be treated on the basis that Madam Yum Mor Lin was the Plaintiff and therefore Mr. Mak on behalf of Madam Yum Mor Lin opened the case. Madam Li's action was treated as, in effect, a counterclaim although her counsel was invited to address me at the beginning as well, if he so wished, and indeed a written opening was provided primarily on Madam Li's case. Likewise, the concluding speeches were left flexible so that each party had an opportunity to address the issues to their satisfaction.

History of the Actions.

5. Madam Yum and Madam Li had been acquainted for many years. At one stage, Madam Yum ran a shop. That was called the Hang Fat Jeans Shop. That shop was closed in 1991. Sometime in 1992, Madam Yum worked with Madam Li. Madam Li had a business under the name Rita Japan Fashion Company. There is a dispute between the parties as to whether Madam Yum acquired an interest in Rita Japan Fashion Company or whether she was at all times an employee. I have been shown no relevant documents relating to Rita Japan Fashion Company. I therefore have no contemporaneous documents to decide the issue one way or the other. Madam Yum says that she put approximately $40,000.00 into the business. That was probably in 1992. Madam Yum also said that she was paid $6,000.00 per month with no commission, but that she would receive half the profit. Madam Li for her part says that Madam Yum put no money into Rita Japan Fashion Company and the arrangement was that Madam Yum was paid a salary of $6,000.00 per month plus a commission which was worked out as a percentage of turnover. I have to say that Madam Li was not very precise as to what percentage she says that Madam Yum was paid.

6. The Plaintiff called one additional witness, a Madam Ian Sio Wa, who worked in Rita Japan Fashion from July 1992. She had been a salesgirl there. She gave evidence that she regarded herself as having two bosses, namely Madam Yum and Madam Li who, as far as she was aware, were partners. Madam Ian Sio Wa said in evidence that she had heard Madam Yum and Madam Li discuss the question of transferring Madam Yum's money into the new business, namely the Thai restaurant which is central to these Actions. She said that thereafter Madam Yum became an employee.

7. In the, perhaps unsatisfactory, state of the evidence, I hold on the balance of probabilities that Madam Yum was indeed a partner of Madam Li in Rita Japan Fashion until the events of the summer of 1993 to which I shall now come.

The Inception of the idea of a Thai restaurant

8. At some stage, probably in April 1993, Madam Yum and her husband Mr. Chow Yum Heung and Madam Li and her husband Mr. Mui Wing Wan decided to open a restaurant. For the purposes of this decision, I consider it matters not whose idea it was. It is clear however that Mr. Chow was acquainted with a Miss Wong Lum Lum. Miss Wong was the sister of someone who had run a Thai restaurant successfully. It seems that Mr. Chow was in a position to secure Miss Wong's assistance in running the restaurant.

Decision to operate as a company

9. Apparently from an early stage, the parties and in particular, Madam Yum and Madam Li agreed to operate the business of the Thai restaurant by means of a limited company.

10. I pause here to say that having seen and heard the parties, I have my doubts as to the extent to which they were all aware of precisely what a company was and the distinction between running a company and running a business as a firm.

11. Madam Li was acquainted with an accountant Mr. Ho Wing Cheung. He appears to have rendered assistance in the formation of the Company and in the conduct of some of the Company's business. Mr. Ho said that on about the 19th or 20th May 1993 he had spent about 3-4 hours explaining to 'them' the structure of a limited company. He was not explicit as to whom 'them' referred. He clearly was referring to Madam Yum since the line of questions related to her and he may also have been referring to her husband. One can only envisage that if that amount of explanation were required, the person to whom it was given probably knew little or nothing about limited liability companies.

12. Having seen and heard Madam Yum in evidence, I formed the conclusion that although Madam Yum now knows that a company is distinct from the individuals who may own its shares, she still does not have a full understanding. At the end of her re-examination Madam Yum was indeed asked some questions relating to this, but her answers are really of less use than they might appear as she was clearly very tired at that stage. It seemed a little curious to me that Madam Yum should have been made the Company Secretary. I can only surmise that her task was to sign the documents Mr. Ho prepared for her to sign.

13. The parties wasted little time in locating a suitable premises in Kowloon City and by the 13th May, these were rented. By that stage, the formalities in relation to the Company had not been completed. The lease of the premises was therefore put into the names of Madam Yum and Madam Li although at all times it was appreciated that the rent would be borne by the company operating the business.

14. It was appreciated that the establishment of the Thai restaurant would cost a considerable amount of money. For their part, Madam Yum and her husband apparently put the estimate at at least $1 million, whereas Madam Li says that the estimate at the time was $2 million. It was also appreciated, apparently, that the operation of the restaurant would not be expected to break even for at least 6 months.

15. It appears that the ability, or perhaps willingness, of the two personalities behind this restaurant, to finance the running of it were not the same. Madam Yum was content to put approximately $400,000.00 into the running of the restaurant. She envisaged doing this by means of taking her investment out of Rita Japan Fashion and having that transferred into the restaurant. Her estimate was that by then her share of Rita Japan Fashion was $200,000.00. She was also prepared to put some money into the restaurant. She envisaged at the time it would be about $1-200,000.00 which would make her total investment in the Company to be about $400,000.00. She says, and I accept, that such money as she put into the running of the restaurant would be her husband's money.

16. I should say at this stage that a considerable challenge was put against Madam Yum and Mr. Chow that they never at any stage had the financial ability to make the investment. Mr. Chow, however, said, and I accept, that for a period he had a considerable income. He was a manager of 2 restaurants in the People's Republic. In addition to a flat wage, he was paid a handsome commission on the monthly takings of those restaurants. That was paid in cash. A substantial part of it was spent on entertainment and expenses in the People's Republic. This was doubtless necessary. What was not so spent was brought to Hong Kong in cash. One day a week he drove a mini-bus as a relief driver. Again, I have no difficulty in accepting what Mr. Chow said: that primarily he was a man who did not rely upon banks to a great extent. Mr. Chow gave all the appearances of someone who operated his finances largely on a cash basis. I accept that his income paid in cash from operations in China during the periods he was working there could easily have been in the region of $130,000.00-140,000.00 per month, particularly in the better months.

Finance of the Restaurant

17. It is Madam Li's contention that the parties agreed that a total of $2 million would be lent to the Company by the directors of the Company in proportion to their shareholding. Madam Li said both in her witness' statement, which was treated as part of her evidence-in-chief, and in her cross-examination that it was agreed in June of 1993 that she would find the finance both on behalf of herself and her father, Lee Fuk, and on behalf of Madam Yum. Madam Li's contention was that it was agreed that she would lend $800,000.00 to Madam Yum which would be paid directly to the Company as Madam Yum's loan. It was Madam Li and Mr. Mui's evidence that there were never any financial difficulties on their part because Mr. Mui's business was able to provide finance which Madam Li and Mr. Lee Fuk required for running the restaurant. Their respective shareholding would be 40% and 20%.

Loan document dated 24th June 1993

18. One of the documents which featured heavily in this action was the letter dated the 25th June 1993 addressed to Miss Li Chow Lan and signed by Madam Yum. It is headed 'Loan' and states that "I, Yum Mor Lin of HKID No. G506012(6) hereby confirm you that the amount of HK$800,000.00 ( ) is owing to you as at 25th June 1993 for the purpose of investments and directors' loan to Top Queen Limited.".

19. Although this document is dated the 25th June 1993, it is common ground that it was not signed on that date. Madam Li said in her evidence that it was signed on the 10th August 1993. She says that she had asked Mr. Ho, the accountant, to prepare it. Madam Li says that she and Madam Yum went to Mr. Ho's office. In cross-examination, Madam Li elaborated on what she says happened on the 10th August. She said that there was a meeting at Mr. Ho's office, the purpose of which was to talk about the management of the restaurant. She said that three things were discussed the first was the wages for the staff, secondly where to put the money taken in running the restaurant, and thirdly whether money should be put into the night safe. Madam Li said the meeting went on until 8 o'clock at night. She had said earlier that the document itself was signed in a restaurant after leaving Mr. Ho's office when she and Madam Yum were alone.

20. Mr. Ho's recollection is somewhat different. Originally, he had said in his witness' statement that the document was taken away on the 10th August. However, after the matter had been ventilated in cross - examination and re-examination, he said that he had originally mentioned the date of 10th of August because that was the last of three occasions that Madam Yum and Madam Li came to his office before lunch. However, he was not sure whether the document was given to Madam Li in July or August. From the emphasis which he put on his answers, it seemed that the document was in fact given to Madam Li sometime in July. Certainly, his recollection of his providing the document to Madam Li before lunch does not accord with Madam Li's identification as to the time when the document was obtained by her and the signature made as being in the evening.

21. Unfortunately, Madam Yum's explanation as to the signing of this memorandum is not without its difficulties either. It was her case, until the hearing of this Action, that the document was signed at the behest of Mr. Ho. It was pleaded and stated in the witness' statement that the document had been explained, or rather misexplained, by Mr. Ho. When Madam Yum gave evidence, however, she was clear that Mr. Ho had not explained it to her. She said that it was a document which Madam Li gave her to sign along with other documents. She admits that she filled in the blanks in the document, namely, her name, her ID card number and the amount in figures. It is perhaps significant to note here that although there is a space for the amount to be written in words, only the figures have been written. This accords with my view of Madam Yum's knowledge of English which I doubt extends to being able to write the numbers in words.

22. Before leaving this document, I should mention that Madam Yum and her husband went to Mr. Ho's office on the 24th February 1994. That was sometime after a solicitors' letter had been written to Madam Yum on behalf of Madam Li claiming the repayment of $800,000.00. According to Mr. Ho, there was some disturbance and in particular, Mr. Chow was using foul language. Nevertheless, Mr. Ho did find the blank form of the letter dated the 25th June 1993 on his computer. He printed it out and wrote a notation saying that it had been taken away from his office after the 25th June 1993 and that the form had not been explained to Madam Yum nor had a copy been kept on the company file.

23. I do not accept Madam Li's evidence in relation to this document. I do not accept that Madam Yum signed it of her own accord in a restaurant on the 10th August 1993. I consider that more likely it was a document which was given to Madam Yum to sign along with one or more other documents. I consider Mr. Ho's memory of the document being taken away before lunch is correct and his memory of giving it on such a visit seemed correct. It also accords with Madam Yum's evidence that she was certainly not at dinner with Madam Li on the 10th August because that was her son's birthday. That was probably sometime in July of 1993 when the documents which had been prepared by Mr. Ho were being signed. I find that on a balance of probabilities no explanation was given to Madam Yum as to what this document was. I accept Madam Yum's statement that she thought that it related to the share capital of the company.

24. Madam Li's evidence that the financing of the company, inter alia by the loan of $800,000.00 from her to Madam Yum, was agreed by mid-June does not accord with the evidence given by Mr. Ho. In his witness statement, which was adopted as part of his evidence-in-chief, he indicates at paragraph 6 that he was informed by Madam Li that at the directors' meeting on the 25th June 1993 there would be directors' loans of HK$2 million to the company. The paragraph goes on to indicate that Mr. Ho was also informed by Madam Li that she would be lending Madam Yum $800,000.00. However in re-examination, Mr. Ho was asked about the minutes of the board meeting of the 25th June 1993. He had prepared those minutes. Those minutes purport to record agreement to provide directors' loans in proportion to the shareholding. In re-examination, Mr. Ho was asked about this document. He was asked in particular whether he was present when matters recorded in the minutes were discussed. He said:

It seems clear to me that there was, as I have already said, no agreement as to the directors' loan and specifically not as to the amount. As I will come to, I consider there was no agreement as to Madam Li lending Madam Yum $800,000.00 or indeed any amount to make the loan to the company.

25. From all the evidence, it would appear that the loan document was prepared sometime in July or, in my view far more unlikely, August. It was prepared by Mr. Ho on Madam Li's instructions. There were a number of company papers which were signed at the same time, and I consider that Madam Yum signed those that she did without understanding the contents of the documents she was signing.

26. Madam Yum in the witness box was a very straightforward witness. As I have said, she appeared to me to have only a small understanding of company matters. I accept her evidence that she did not understand any suggestion that Madam Li had lent her $800,000.00 and that when Madam Li's lawyers first wrote in 1994, it must have come as something of a shock that the suggestion was made.

27. Having listened to the parties and heard their explanations as to the events of the summer of 1993 and as to the documents which were prepared, I find that the parties did not reach agreement as to the way in which the business of the Company would be financed. Madam Yum's understanding was that the money for running the restaurant would come first from Madam Li and that thereafter she, Madam Yum, would provide such finance as was required. As a consequence Madam Li would be entitled to be repaid first out of the profits of the Company. I find that Madam Yum thought that the registered capital of the Company would be $2 million and that her share of the registered capital would be $800,000.00. Madam Li was to have the same size share and Lee Fuk was to have the remainder, i.e. 20% of the capital. I find that she did not understand that it had been put to her that she should lend the Company $800,000.00. Nor did she consider that she was required to find $800,000.00 in cash. Still less did Madam Yum understand that Madam Li would be lending $800,000.00 to Madam Yum which would be paid directly to the Company.

28. In the witness box Madam Li gave the appearance of being a more sophisticated person than Madam Yum. She gave her evidence in a guarded and deliberate manner. She gave the appearance of someone who would not relish contradiction. Mr. Mui Wing Wa, Madam Li's husband, had an apparently successful business, Double Trading Company. Madam Li also worked in Double Trading Company. Madam Yum was, in comparison to Madam Li, a far less sophisticated person.

29. Matters did not proceed altogether smoothly in relation to the running of Top Queen Limited. Indeed, Mr. Ho said that there was a quarrel at the meeting on the 25th June 1993. What that quarrel was about was never fully explained and probably does not matter.

30. The Wong Lum Lum Thailand Restaurant commenced business on the 1st July 1993. During the summer and autumn of 1993, it appears that Madam Li put a considerable amount into the company. It is Madam Li's contention that by the 30th November 1993, she had paid a sum of HK$2,535,725.95. However, on the 12th February her counsel conceded that from that figure, HK$193,380.00 must be deducted as amounts wrongly claimed to have been paid. In addition, having considered the accountant's report and heard Mr. Mills in the witness box, it is apparent that the accounting records produced by Madam Li are not altogether satisfactory. Whereas for a proper auditor's needs for submission as allowable expenses to the tax authorities, there would be grounds for challenging a great deal more, it seems to me that Madam Li has not, on any footing, been able to establish the following sums said to be included in the total figure. In the first place, under note (iv) of sub-heading (A) in paragraph 5.3.3 of Mr. Mills' report, there is a figure of $78,852.00. These, as Mr. Mills' statement makes clear are payments for which there are no supporting documents Secondly, there are the transactions which are not accurately reflected in the cash book totalling, $9,067.00. On my calculation, this leaves a sum of $2,254,427.95 as having been paid by Madam Li up until the 30th November 1995.

31. I also find that Madam Yum, for her part, had made cash contributions to Top Queen Limited prior to 1st December 1993 in the sum of $340,509.00. This is made up of the payments which are particularised under paragraph 9 of the Amended Defence of Madam Yum in the loan action, save for the item (d) and taking into consideration the further sums of HK$5,600.00, HK$10,000.00 and HK$25,000.00 as supported by the documents on pages D-3/54, D-3/34 and D-3/69 respectively.

32. It is quite apparent to me, however, that by the end of November a further strain between the parties had emerged. The restaurant was not running as successfully as the parties would have liked. It is apparent that Madam Li, was also running into some difficulties because Rita Japan Fashion Company was not making sufficient to pay the rent. Her fashion company had to be closed in December 1993.

33. There were meetings between Madam Li and her husband and Madam Yum and her husband in October 1993 and Mr. Mui was, as a result, prevailed upon to provide further finance. At one stage, relations between the parties reached the extent that Mr. Chow temporarily ceased to be employed at the restaurant. It is unnecessary to dwell upon the precise events and reasons therefor. What can be mentioned, however, is that whereas Madam Li was in control of the banking and financial records of the company, she, for her part, was suspicious that the money collected in the restaurant apart from such sums as were necessary for cash payment to suppliers was not being deposited in the bank account. On Madam Yum's part, she was suspicious that the finances of the company were being hijacked by Madam Li with the result that there was not sufficient money to pay the Company's bills. The suppliers were complaining and indeed the decorator was at one stage on the verge of dismantling equipment which he had installed but which had not been paid for.

34. Matters came to a head at the end of November. As I have already indicated, Madam Li's other business was about to close in December through lack of finance. Madam Yum had herself been given notice of dismissal from Rita Japan Fashion on the 29th November. Madam Li had raised finance in two ways. In the first place, she had apparently pawned her jewellery. In the second place, she had mortgaged her property to provide both a loan and an overdraft. By November of 1993, no doubt the interest payments and capital repayments were becoming burdensome and the prospect of financing the continuing losses of the restaurant was bleak and unattractive. On the 30th November at about 11 p. m., Madam Li, her husband, her two younger brothers and about 5, or possibly a few more, other people went to the restaurant. There was a good deal of evidence both from Madam Li, her husband, Madam Yum and her husband as well as three employees of the restaurant as to what took place that evening. Again, it is necessary in some respects to piece together what happened.

35. I find that the 2 employees of the restaurant who gave oral evidence, namely Wu Che Ying and Chaladsunthornwatee Boonnam gave their evidence in a straightforward manner. I have no difficulty in accepting what they said both about this incident and later incidents. In effect what took place was that Madam Li came to the restaurant with a view to closing it down. She went to the cashier and requested the money from the till. The cashier refused that request because it was not yet closing time for the restaurant. When Madam Yum returned to the restaurant, an argument took place. I have no doubt a great deal was said on that occasion between the parties. Much of what was said was probably in the heat of the moment. Madam Yum and Mr. Chow were not agreeable to closing the restaurant. I have no doubt those about them including an Ah Tai, whose full name was apparently Chan Wai-ming, expressed their views in a forceful manner.

36. It has been suggested on a number of occasions by each of the parties that on various occasions, various of the people claimed to be members of a triad society. I make no finding about this. I appreciate, however, that running a restaurant in the vicinity of Kowloon City is an occupation not suitable for the faint hearted. I have no doubt that it is a tough area and to survive in such a business operating late at night in such an area, one has to be tough. No doubt those engaged in the business particularly someone such as Chan Wai-ming who was in charge of the carparking services would express themselves in very forceful language should they see the need.

37. There was evidence that Mr. Chan had been demanding protection money and that had been paid by the business and that Madam Yum had agreed to pay it. That Mr. Chan may have demanded and received protection money does not, it seems to me, affect the issues involved in this action. I see no basis for saying that either Madam Yum or her husband were parties to that demand. They seem to have been victims of it and paid the protection money but to my mind there is a clear distinction.

38. Madam Li seemed at pains to tar Madam Yum and her husband with an image of threatening behaviour. Whilst Mr. Chow may have expressed himself forcefully I do not consider that he resorted to threats or violence. One matter which was apparent in this respect is that during her cross-examination Madam Li said that Madam Yum had used a knife to threaten Mr. Ho at his office when she went there with Mr. Chow in February 1994 in connection with the Loan document. Mr. Ho, in his witness statement had said that Madam Yum and her husband had spoken in very loud voices, used foul language and made a scene such that all the staff were scared but he nowhere suggested that he had been threatened with a knife or that either Madam Yum or her husband had used a knife. When asked about the incident during the course of his cross-examination Mr. Ho repeated the effect of what he had said in his statement but, again, there was no suggestion of the use of a knife. This was an instance where Madam Li was exaggerating or inventing her evidence. I would infer that she did that to suit her own case and perhaps mask the seriousness of her own actions on the 30th November 1993 and her involvement in the incidents in April 1995.

39. I consider that Madam Li's intention on 30th November, was to close the restaurant, so that she would incur no further expense in running it, and, thereafter, she would probably try to salvage what could be salvaged by sale of the business insofar as it was possible. Madam Li, no doubt, considered that there would be no future in selling the operation to Madam Yum whom she regarded as not being of sufficient means to be able to afford to buy it on her own account, let alone probably pay out Madam Li for her investment. On the other side of the coin, Madam Yum regarded Madam Li as reneging on her part of the deal to keep the restaurant open. There was no doubt some antagonism built up not only through the previous month but because of the imminent closure of Rita Japan Fashion Company and the consequent dismissal of Madam Yum.

40. Madam Yum was doubtless concerned about the unpaid bills of the restaurant. Consistent with her vague notion of the attributes of a company, it is apparent that she probably considered that personal liability attached to the debts incurred in running the restaurant.

41. I accept that during the course of the interchange which took place at the restaurant on the evening of the 30th November, Madam Li said that she was not prepared to finance the running of the restaurant anymore. I also accept she had said words to the effect that if Madam Yum wished to run the restaurant she should bear the responsibility herself and take care of the Company's debts. However, as Madam Yum admitted in her evidence, she knew after the 30th November that Madam Li wanted to sell her shares and that Madam Li was doing calculations for that purpose and specifically having the accounts prepared. Indeed, over the course of the succeeding months, there were meetings primarily between Mr. Chow and Mr. Mui, but also involving Mr. Chan with a view to Madam Li's and Lee Fuk's shares being bought.

42. Nevertheless, I find as a fact that Madam Li and her contingent departed empty handed probably in the early morning of the 1st December. They came to no agreement with Madam Yum. Something may have been said about the staff pay day being on the 5th December, but, again, I do not accept that Madam Yum and her husband agreed to close the restaurant after 5 days.

The Takeover of the Restaurant

43. After 30th November Madam Li and Mr. Lee Fuk did not return to the restaurant with a view to running it nor did they pay anything further towards running it. Indeed, the company chop used for signing cheques was sent round to Madam Yum. The reality of the situation is that after the 30th November 1993, Madam Yum took over the running of the Wong Lum Lum Thailand Restaurant. She did not pay for that privilege. Not only could the Company not give Madam Yum, a director, its assets but Madam Yum could not, because she was a director, purchase the assets of the Company without the matter being decided by the other directors and shareholders without Madam Yum's intervention.

44. As a matter of reality, however, none of this happened. On the 30th March 1994, Madam Yum applied for a business registration of Wong Lum Lum Thailand Restaurant in her own name. Thereafter, it appears that various applications for recognition by credit card companies and for a restaurant licence were made, and clearly, it seems to me, Madam Yum had taken over the business of the restaurant. In my view, as a matter of reality, I hold that Madam Yum took the business of the company as from the 1st December 1993. Thereafter, she used the assets, in particular the fixtures and fittings of the restaurant as well as the kitchen equipment and the restaurant's furniture and equipment. Madam Yum herself paid the rent for the restaurant on the 30th December 1993. On the 31st March, she paid the rent from the 23rd December 1993 to the 22nd February 1994. In addition, Madam Yum saw to it that the outstanding bills with the trade creditors were paid off to the tune of some $938,548.15.

45. The running of the restaurant after the 30th November 1993 was, on the evidence, as I hold, not profitable until after July 1994. Madam Yum produced a chart showing the income and expenditure in relation to the restaurant which was in trial bundle A-2 at page 1060. Despite the fact that the figures contained in that chart have not been audited, I consider that they are, on a balance of probabilities, accurate. They show a steadily improving figure as to profitability of the restaurant and when considered it can be seen that there was a gradual change in the pattern of the running of the restaurant, including a change in the source of supply for many of the food items. If the figures for the deficit for the months from December to July are totalled, it can be seen that in that period, a shortfall of some $900,000.00 had to be catered for. In my view it was catered for by payments financed by Mr. Chow, no doubt from his significant cash income generated primarily by the PRC restaurants.

46. In July of 1994 the writ in the loan action was issued on behalf of Madam Li. The action hardly proceeded at all and in effect came to a grinding halt.

The Alleged Purchase of Madam Li's Shares

47. It was contended on behalf of Madam Li, Mr. Lee Fuk and Mr. Wong Siu Tung that at a board meeting on 30th March 1995, the minutes of which were signed by Madam Li, Mr. Lee Fuk and Mr. Mui, approval was given for the transfer of Madam Li's and Mr. Lee Fuk's shares in the company to Mr. Wong Siu Tung. I hold as a fact that there was no valid board meeting. I hold as a fact that notice of such meeting was never given to Madam Yum. I accept Madam Yum's evidence and I do not accept Mr. Mui's evidence in that regard.

48. I would also add that on the facts as they have been presented Mr. Mui was never a director of the Company. In the bundles of documents there was a minute of a Board meeting of the 19th November 1993. The minute says that Mr. Mui was appointed a director. The minute is drafted with the attendance record showing Madam Yum as having been present although she did not sign against her name. Mr. Mui, Madam Li and Mr. Lee Fuk on the other hand did sign against their names. Madam Li said in evidence in chief that she had not given notice of the meeting to Madam Yum. However, Mr. Mui claimed to have done. Madam Yum for her part denied ever being given notice of the meeting of the 19th November. I accept Madam Yum's evidence that she was never given notice that there would be a meeting. At the time the restaurant was still running and although things may not have been ideal I consider that the relations between the parties were such that Madam Yum would still have gone to such a meeting had she been asked. Furthermore, the suspicious facet of the minute of this Board meeting is that it was never entered into the books of the company. The books were kept by Madam Li or at least under her control. Hence the minute of the Board meeting on the 30th March 1995 has been entered. That follows on the page opposite the minute of the meeting on the 15th June 1993. I hold that there never was any meeting on the 19th November 1993. Mr. Mui never was appointed a director of the Company.

49. In the result the purported participation of Mr. Mui at the Board meeting of the 30th March 1995 clearly would have rendered such a meeting invalid as he was not a director of the Company. The failure to give Madam Yum notice of the meeting again vitiated the validity of the meeting.

50. It was alleged that Madam Li and Mr. Lee Fuk had sold their shares to Mr. Wong Siu Tung for a total of $996,000.00. I find this whole episode quite bizarre. The facts as presented by Madam Li, Mr. Mui and Mr. Wong are unbelievable and for the reasons which I will set out, I consider that the whole incident was no more than a sham in order to enable Mr. Wong to cause sufficient difficulties for Madam Yum and those running the Wong Lum Lum Thailand Restaurant such that they would be forced either to agree to a sale of the restaurant or else to buy Madam Li's and Mr. Lee Fuk's shares for a sum which they were otherwise unwilling to do.

51. Mr. Wong Siu Tung gave evidence. At the time of the alleged purchase he was not shown any audited, nor even any unaudited, accounts of the restaurant. He was apparently totally unclear of the position of Madam Li and Mr. Lee Fuk after he had allegedly acquired the shares. He had no idea as to the basis of the valuation of the shares at $996,000.00. Up to the date of trial he had not paid a cent of the $996,000.00 and was vague as to when he would pay. It seems that the first time Mr. Wong visited the restaurant was the 8th April 1995. The instruments of transfer were not stamped. Mr. Mak on behalf of Madam Yum did not take the point that the instrument was not admissible but pointed out that had it been a genuine transfer, there would undoubtedly have been a stamping. That Mr. Wong never became a shareholder of the company is confirmed by the fact that his name has never been entered on the share register. The share register was exhibited. Under Article 22 of Table A, which forms part of the Articles of the Company, a transferor is deemed to remain a shareholder until the name of the transferee is entered on the register.

52. Perhaps it was these and other difficulties and inconsistencies which lead the Defendants in the intimidation action to plead that Mr. Wong was an "intended purchaser".

53. Insofar as Mr. Wong purported to hold directors' meetings, again I consider that he was in no position to do so as he never was a director of the company. He was not validly appointed.

54. Further Visits to the Restaurant by Mr. Wong and Others.

55. In the evening of the 13th April 1995, Mr. Wong Siu Tung went to the Wong Lum Lum Thailand Restaurant in the company of approximately 40-50 people. They caused a disturbance and frightened the customers in the restaurant at the time into leaving. It would appear that all the customers hurriedly left the restaurant without stopping to pay their bills. They did that apparently at the behest of Mr. Wong. Miss Chaladsunthornwatee Boonnam said, and I accept, that Madam Li also appeared at the restaurant on that evening.

56. It appears to me quite clear that this was an attempt by Mr. Wong to obtain by force and intimidation that which Madam Li and her husband had been unable to obtain by negotiation or legal action. I appreciate that they may have felt a sense of frustration in the lack of progress in negotiations and in the loan action but that did not justify what fell little short, if at all, of thuggery.

57. The police were called on that occasion. After a discussion between Madam Yum and her husband and Mr. Wong the whole group went to the police station. Later, a locksmith had to be called to remove a lock that had been put on one of the doors.

58. On the 24th April 1995, Madam Yum was asked to attend the offices of Messrs. T. L. Wong & Co. where she met Mr. Mui, Mr. Wong Siu Tung and others. She was asked to agree to a resolution that the business of the restaurant would be closed with immediate effect. She declined to agree to such a resolution and as a consequence, the meeting broke up.

59. At about 11.30 p. m. that evening, Mr. Wong re-appeared at the restaurant in the company of 10 people who, according to the cashier, Miss Yip Chi Chiu, behaved badly and threateningly. Miss Chaladsunthornwatee Boonnam, again whose evidence I accept, said that the first thing that Mr. Wong did was to hit the table hard with his hand in a threatening manner. Madam Li and her father also came to the restaurant that evening. Their presence at the restaurant on 24th April was perhaps less understandable if it was in the context of having sold their shares for nearly $1 million and not having incurred any expense in running the restaurant since 30th November 1993. Their presence indicates a continuing live interest on their part. Mr. Wong's purpose that evening was again to close the restaurant. To an extent he succeeded in his purpose because despite the fact that the police were called, the restaurant was closed and a lock was put on the door. I hold the closing of the restaurant was directly caused by the threats and intimidation of Mr. Wong in which Madam Li and Mr. Lee Fuk joined even if they had not directly connived. It was not until the 26th April that a writ was issued on behalf of Madam Yum and an ex parte injunction was granted to restrain the interference with the restaurant's business. After that Madam Yum was able to re-open the restaurant.

60. Whilst appearances can be deceptive and what would appear at first to be an off hand manner might in reality be a disguise for nervousness, I have to say the Mr. Wong's appearance in the witness box gave every confirmation of the attitude that could be expected of one who had acted in the manner that the witnesses on behalf of Madam Yum have said he did on the 13th and 24th April. Nothing he said nor the manner in which he said it gave any indication that the alleged purchase of the shares in the company was a genuine transaction.

61. Although a solicitor from Messrs. T. L. Wong & Co. was present on this occasion, no attempt was made to call the solicitor as a witness.

THE ACTIONS

The Loan Action

62. The Statement of Claim in the loan action states very simply that "On or before the 25th June 1993, the Plaintiff lent to the Defendant a sum of HK$800,000.00 as evidenced by a memorandum signed by the Defendant." In the Further and Better Particulars of the Statement of Claim, it is alleged that it was agreed in May 1993 that the shareholders would make a loan of HK$2,000,000.00 to the company and that (Madam Yum's) share would be HK$800,000.00. It is then said "In or about May 1993 it was agreed between the Plaintiff and the Defendant that the Plaintiff would lend the money to the company for the Defendant.".

63. As I have already found, there was never any such agreement. Furthermore according to the figures which have been supplied by Madam Li, by the 23rd June 1993 only HK$1.6 million had been put into the company. On any footing, the claim in my view is bad.

64. Mr. Hingorani who had only accepted instructions on behalf of Madam Li shortly before the trial grappled with the difficulties with which he was faced and sought in his reply speech to put forward an Amended Claim. Paragraph 1 of the draft Amended Statement of Claim pleaded an oral agreement by Madam Li to lend Madam Yum the sum of HK$800,000.00 representing the sum which Madam Yum had agreed to invest in the company in April 1993. Such amendment must be unallowable. It would conflict even with the evidence of Madam Li, let alone with my findings. It would conflict with the Further and Better Particulars to which I have referred. For those reasons the amendment has not been permitted.

65. In my view, Madam Li's claim fails. This does not mean that she will necessarily fail to recover any of the money which she and her husband have put into the Company. In accordance with my holding, Madam Yum has clearly taken the business and such physical assets of the company as existed at the restaurant premises. Madam Yum will have to account to the liquidator for those as well as perhaps for any profit which she has made. On the other hand, Madam Yum will be entitled to take into account the payments which were made after the 30th November 1993 in respect of Company's debts incurred before the 1st December 1993. Credit will also have to be given in respect of the unremunerated work which Madam Yum and her husband have put into the restaurant. Furthermore, just as Madam Li is entitled to recover whatever sums she can in respect of the loans made prior to the 1st December 1993 so is Madam Yum.

The Intimidation Action

66. As I have already found, Madam Yum was, at least since the 30th March 1994 or more realistically 30th November 1993 in de facto possession of the premises. She was running the business of Wong Lum Lum Thailand Restaurant. When Mr. Wong Siu Tung went to that restaurant on the 13th April 1995, he had no legal right so to do. As I have found, he brought with him approximately 40-50 other people who likewise had no business in the restaurant. They were there to threaten Madam Yum and those running the restaurant. In my view, they committed the tort of trespass and they wrongfully interfered with the business of the restaurant. I have no hesitation in holding that a sum of $4,199.80 was lost in takings due both to the customers leaving the restaurant without paying and the persons who accompanied Mr. Wong consuming food for which they did not pay.

67. The events of the 24th April 1995 again constituted an unlawful interference with the business. Moreover, on this occasion, Madam Yum was forced, against her wishes to have the restaurant closed and locked up, which it so remained until after the ex parte injunction on the 26th April. It remained closed because of the fear held by Madam Yum, and those running the restaurant, of what Mr. Wong and his assistants might do and the disturbance and violence they might cause. On this occasion Mr. Lee Fuk as well as Madam Li was there. Then is no doubt in my mind that Mr. Wong and Madam Li and Mr. Lee Fuk committed the tort of intimidation for which they are responsible. I have no hesitation in holding that the Defendants are responsible for the loss which has been put as $7,300.00 for the 24th April; $12,000.00 for the 25th April and $3,200.00 for the 26th April. In addition, there was no serious challenge to the claim for $1,000.00 in respect of the replacement for the damaged lock nor the $4,850.00 in respect of the security measures following those events.

68. More difficulty arises in respect of the claim for continuing loss as a result of the alleged downturn in business following these events. As Mr. Hingorani pointed out, there was no direct evidence of persons who failed to patronise the restaurant as a result of the events of the 13th and 24th April. There is evidence that as a result of the events of April 1995 some of the staff were scared to come back to the restaurant and therefore left their employment. But I am not satisfied that there was any distinct downturn in business resultant from the events in April. Considering the useful chart which is set out at page 1060 of bundle A2, it can be seen that from December through to August 1994, the turnover of the restaurant showed a substantial increase. From September 1994 through to March 1995, the turnover fluctuated. It reached a high in two of the months of over $482,000.00, but in January and March 1995, the turnover was barely over $380,000.00.

69. Again sheets of monthly income and expenditure have been provided in respect of months after those on the sheet at page 1060. Likewise, I accept those as accurate despite the fact they are unaudited.

70. Despite the events of the 13th and 24th of April, the turnover appears to have been reasonable in April 1995 and indeed in May 1995 the turnover was still above $400,0000.00. The turnover in June of 1995 was some $387,000.00 and in July the figure was just over $400,000.00. Thereafter there seems to have been something of a fall off. The turnover of the restaurant in October 1995, for example, was only $286,579.00. I regret that without a great deal of evidence, I would not be disposed to attribute that decline in income which largely took place in the second half of the year to public apprehension in respect of what had taken place at the restaurant in April.

Aggravated Damages

71. Mr. Mak on behalf of Madam Yum has urged that the circumstances of this case are fit and proper for an award of exemplary and aggravated damages.

72. I consider that the facts of this case do come within the principles set out in the speech of Lord Devlin in Rookes v Barnard [1964] A. C. 1129. Here, Mr. Wong acting as he was to gain some payment which would benefit both himself and Madam Li and Mr. Lee Fuk, doubtless thought that he could adopt "strong arm" tactics to achieve that purpose with impunity. The share sale, as I have held, was a sham. The conclusion to which I am therefore driven is that Mr. Wong was deliberately brought in to do what he did by the shareholders. Indeed they were both present when Mr. Wong succeeded, temporarily at least, in having the restaurant closed down. In my view it is appropriate in this instance to consider whether it is necessary to award damages to punish and deter others who might be disposed to attain the ends which they desire by violence and threats. As Lord Devlin said when considering the second category of case in which an award of exemplary damages can be made and would serve a useful purpose in vindicating the strength of the law, they can be awarded when it is necessary to teach a wrongdoer that tort does not pay.

73. I bear in mind the strictures which Lord Devlin laid down on pages 1227-8 as to the circumstances necessary for an award. In this case I consider that Mr Wong Siu Tung deliberately set out to use threats of violence and physical force to achieve the closure of the restaurant. The fact that he might have backed off the use of force had sufficient money been offered for payment of the shares is neither here nor there. The subsequent solicitors' correspondence is not, in any event, indicative of Mr. Wong and the other Defendants being willing to take a reasonable amount in satisfaction for their claim to the shares in the company.

74. For completeness I would add that I consider that Mr. Wong's actions were primarily motivated by his desire to benefit himself, Madam Li and Mr. Lee Fuk. In these circumstances I do not consider that the first limb of the basis on which aggravated damages may be awarded as enunciated by Lord Devlin is satisfied. In other words I do not consider that it has been adequately made out that Mr. Wong or the other Defendants were acting out of malice as opposed to furthering their own interests. On the other hand the manner in which Mr. Wong acted, clearly in my view aggravated the injury done to Madam Yum and her business. On that score I consider that there is scope for an award of aggravated damages.

75. I take into account the fact that it has been alleged against Mr. Chow and Mr. Chan that they used threats when they dealt with Mr. Mui and others. I find that they were probably rough and spoke in a direct manner, but I am not satisfied, even on a balance of probabilities, that they threatened violence. I have not lost sight of the fact that I did not, of course, see Mr. Chan in the witness box, but as, I have already held, in so far as Mr. Chan had demanded protection money he did so on his own account and not for Madam Yum or her husband.

76. In all the circumstances of the case I consider that an appropriate award of exemplary and aggravated damages considering the conduct as a whole, taking into account the level of damages which I have awarded would be $100,000. If anything, I consider I have erred on the low side.

77. I make an Order Nisi that Madam Yum do have the costs of both Actions. I hereby ask counsel to prepare a draft order for my approval.

Representation:

Mr. Andrew Mak instructed by Messrs. Tommy Lai & Co. for the Plaintiff in A3921/95 and the Defendant in A6449/94.

Mr. Jeevan Hingorani instructed by Messrs. R. B. Chan & Co. for the Defendants in A3921/95 and the Plaintiff in A6449/94.