Lok Keung and Another v. Leung Pak Chung and Others

Read the full judgment text of HCA 365/1966 on BabelCite. This High Court CFI judgment was delivered on 6 July 1968.

1. This case concerns catering debts incurred by a school known as the de St. Paul's College, Castle Peak. The school was established in the year 1965 in premises which belonged to the first defendant, Mr. Leung Pak Chung. The premises had been under requisition by the War Department, until about 1963 or 1964 when they were derequisitioned. Mr. Leung looked around for a tenant and was eventually approached by the second defendant's husband. The second defendant is Madame Kwok. Her husband is not

Case No.HCA 365/1966
Court
High Court CFI
Date06 Jul 1968
Judge
Case Document
100%Judiciary

HCA000365/1966

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.365 OF 1966

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Between:
Lok Keung and Tang Sit Woon Plaintiffs

AND

Leung Pak Chung 1st Defendant
Kwok York Lan 2nd Defendant
Cheung Chi Kong and Chey Yin 3rd Defendant

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Coram: Mills-Owens J.

Date of Judgment: 6 July 1968

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JUDGMENT

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1. This case concerns catering debts incurred by a school known as the de St. Paul's College, Castle Peak. The school was established in the year 1965 in premises which belonged to the first defendant, Mr. Leung Pak Chung. The premises had been under requisition by the War Department, until about 1963 or 1964 when they were derequisitioned. Mr. Leung looked around for a tenant and was eventually approached by the second defendant's husband. The second defendant is Madame Kwok. Her husband is not a party to the proceedings. It is agreed that he was at all material times an undischarged bankrupt. An agreement for a tenancy was arrived at between him and Mr. Leung. On the 21st June 1965 a written Tenancy Agreement (Exh.U) was entered into between Madame Kwok (as tenant) and Mr. Leung (as landlord). The Agreement provided for the premises being let for the term of 3 years from the 1st June 1965, the rent for the first three months being $7,500, in all, and the rent thereafter being $7,500 per month. The letting was expressed to be for use as a school or for business, and a deposit of $15,000 was to be made. The Agreement was duly approved by the Tenancy Tribunal. Following this, or possibly during the course of the negotiations for the tenancy, a considerable sum of money was spent by Madame Kwok in repair and decoration of the premises. As the school intended to be established was to provide for a large number of boarders as well as day pupils it became necessary to have the catering provided for and this is where the two plaintiffs came into the matter. On the 14th August 1965 a Catering Agreement (Exh.A) was entered into between the two plaintiffs and Madame Kwok, whereby the plaintiffs became the caterers for the school for a period of three years commencing 1st September 1965. The school venture came to grief by December 1965, and the whole contest concerns moneys alleged to be due to the plaintiffs under the Catering Agreement, i.e. $37,217.17 for meals supplied, recoupment of their expenditure in erecting a kitchen, and return of the deposit of $30,000.00 made under the Agreement; the plaintiffs also claim for the loss, arising out of the disappearance, of utensils purchased by them for use at the school.

2. It is desirable to say a word about the various parties. The first plaintiff was really no more than a sleeping partner of the second plaintiff, although he (the first plaintiff) testified to one, alleged, important discussion between them (the plaintiffs), Madame Kwok, and the first defendant Mr. Leung. The second plaintiff Mr. Tang Sit Woon was the active partner; he saw to the erection of the kitchen, bought the utensils, and generally ran the catering business. The first plaintiff had his own full-time employment elsewhere. Both are intelligent men; the second plaintiff had considerable previous business experience. The first defendant Mr. Leung was, as I have said, the landlord, but it is alleged that he was also the real, undisclosed, person who carried on the school, through the second defendant Madame Kwok; or, at least, that he was a partner in the school venture or held himself out as such. Madame Kwok is an intelligent person. She was the supervisor of the school and, as I have said, she was the person named as tenant in the Tenancy Agreement, and the party to the Catering Agreement.

3. Madame Kwok has taken the plaintiffs' part in these proceedings, saying that Mr. Leung was her principal - or, it may be, her partner - it has never been made clear what precisely he was supposed to be - the undisclosed principal of Madame Kwok, or a partner, or a person holding himself as such. The third defendant Mr. Cheung Chi Kong is alleged to be liable for the moneys due to the plaintiffs on two grounds, namely by reason of an alleged express contract by him, made by word of mouth, to repay the plaintiffs the moneys due to them (and now claimed) if they would continue catering for him on his taking over the school; secondly by virtue of the Fraudulent Transfer of Businesses Ordinance (Cap.49) i.e. as an alleged transferee of the school business. There is another third defendant by the name of Chey Yin (another rendering is Tse Yin); he was said by Madame Kwok to be an employee of the defendant Mr. Cheung Chi Kong, implying that he was a mere 'front' for Mr. Cheung in his capacity of transferee. Madame Kwok supports the plaintiffs' case against him, Mr. Cheung, also.

4. There is another person whose position is ambiguous. That is Mr. Woo Cheung Ying who is registered as, and admittedly was, a partner of Madame Kwok in the school venture. But he has not been sued, and he was not a party to either the Tenancy Agreement or the Catering Agreement; and he has not been called as a witness.

5. At the trial Madame Kwok desired not to take part in the proceedings, whether by giving evidence or otherwise. She was prepared to admit liability for the sums claimed by the plaintiffs for arrears due for meals supplied and for the deposit. Eventually she was subpoenaed as a witness for the plaintiffs and, as I have said, she took their part fully against the first defendant Mr. Leung Pak Chung - equally as she fully supported them against the third defendant, Mr. Cheung Chi Kong. In fact, it appears, she has little to lose. The whole school venture has failed, she expended large sums in starting the venture, she has unsatisfied judgments against her obtained by other creditors of the school, and she has suffered imprisonment as a civil debtor at the hands of the third defendant Mr. Cheung Chi Kong. It may well be inferred that her husband was concerned in the school venture but he was not a party to the Tenancy Agreement or to the Catering Agreement nor, ostensibly a principal or partner in the venture.

6. The first defendant Mr. Leung strenuously denies that he was anything more than the landlord. The third defendant Mr. Cheung strenuously denies that he was anything other than himself a creditor of the school. The plaintiffs are anxious to recover from whomever they can. It appears that a judgment against Madame Kwok alone would be of little, if any, value to them. I imagine she is impecunious.

7. On the conclusion of the trial, I reserved judgment generally but indicated that I would be finding in favour of the first defendant, Mr. Leung, as, so far as he is concerned, the case appeared to me to be quite clearly to be resolved in his favour. There were two main pieces of evidence against him. First it was said that on about the 22nd, 23rd or 24th July 1965, before the school was opened but while decorations and repairs were going on and, possibly, the kitchen was being built, a discussion took place between him, Madame Kwok, and the two plaintiffs. At that meeting, which was said to be of very short duration, he is alleged to have said that Madame Kwok was his agent and that anything that required to be discussed could be discussed with her; so that, as it is alleged, when the Catering Agreement was entered into by Madame Kwok with the plaintiffs she did so as his agent or partner; as it is alleged, he held Madame Kwok out as his agent or partner with whom all details of the catering might be discussed by the plaintiffs and by whose actions he could consider himself bound. Secondly, there was produced a document (Ex.Y) signed by Madame Kwok, acting for the school, the de St. Paul College, 18 1/2 miles Castle Peak Road, whereby she agreed to give Madame Wong Yiu Hing a 'red share of 20%'. Madame Wong Yiu Hing mentioned in this document is the wife of Mr. Leung and, admittedly, he received this document from the hands of Madame Kwok's husband. In fact Mr. Leung himself produced the document at the trial. It is in keeping with the straightforwardness of his evidence, in my view, that he did so. There is no suggestion that either he or his wife ever received any share of the deposit of $30,000 made by the plaintiffs or any share of any profits or takings of the school business, or contributed anything towards its expenses; nor is there any acceptable evidence that he or his wife has ever taken part in carrying on the school business. It is said, in effect, that he was an undisclosed principal, or an undisclosed partner, in the name of his wife. But the whole case against him, in my view, is an impudent attempt to fix him with liability. I do not believe that any such discussion as the two plaintiffs and Madame Kwok deposed to ever took place. Mr. Leung is not a party to the Catering Agreement and no acceptable explanation has been forthcoming in this respect. The first plaintiff said he did not know why Mr. Leung was not made a party to the Catering Agreement. The second plaintiff said that he 'saw no need' to mention to the solicitors preparing the Catering Agreement that Mr. Leung was Madame Kwok's principal, or a partner. Madame Kwok's explanation for Mr. Leung not signing the Catering Agreement was that Mr. Leung had said 'he would not be in Hong Kong most of the time', and she agrees that she did not tell the solicitors preparing the Catering Agreement that Mr. Leung was her partner, or principal. On the face of it Madame Kwok is a party to the Agreement in a personal capacity. Mr. Leung was not entered as a partner in the application made for registration under the Business Registration Ordinance, namely Exh.O, which was made and signed by Madame Kwok on the 21st July 1965. It will be recalled that the Catering Agreement was entered into on the 14th of the following month. Madame Kwok did not join Mr. Leung as a co-plaintiff in an action brought by her against Mr. Cheung. As to the circumstances in which the document Exh.Y purporting to agree to give to Madame Wong, Mr. Leung's wife, a 20% red share came into existence, I am satisfied that Mr. Leung has given a correct account. He said that Madame Kwok was in arrears with the first rent payable, namely the reduced rent of $7,500.00 payable for the whole period of the three months, June, July, and August 1965. He pressed for payment and Madame Kwok's husband pressed him to take the document Exh.Y as a form of assurance and as a present. It sounds peculiar, but I accept Mr. Leung's evidence that he took it reluctantly, placing no value in it and, in fact, never even communicating it to his wife. It is, obviously, not signed by the registered partner Mr. Woo Cheung Ying without whose concurrence it could not have had the effect of an agreement to make Madame Wong (or Mr. Leung) a partner of Madame Kwok and Mr. Woo. Such a document could, I suppose, although it was not so argued, in an appropriate case be put forward as evidence of a sub-partnership, but that would not make the sub-partner a partner in the original partnership (see Ex pte Barrow, 2 Rose 255). The document, Exh.Y, is dated the 9th July 1965 and the application for registration under the Business Registration Ordinance (Exh.O) is dated the 21st of the same month. The application for registration, Exh.O, was signed by Madame Kwok. It would appear that she also regarded the document Exh.Y as of no legal significance, as she did not even enter the name of Madame Wong or Mr. Leung as a partner in the application for registration. Madame Kwok has no reason to support Mr. Leung's case; on the contrary; in his capacity as landlord he evicted her from the school for non-payment of rent and recovered judgment for the arrears of rent against her. The plaintiffs never applied to Mr. Leung for the moneys alleged to be due to them. The second plaintiff said that just before the writ was issued he went to Mr. Leung's residence in Mody Road, Kowloon, to ask him for payment but found him not in Neither of the plaintiffs made any further effort, in writing or otherwise, to apply to Mr. Leung for payment. Cross-examination of the plaintiffs and of Madame Kwok by Mr. Zimmern, in my view, amply demonstrated that the claim against Mr. Leung was without foundation - quite apart from the other features which I have mentioned. Finally, it may be asked: why, if Mr. Leung was Madame Kwok's principal or partner, did she not make it known to the creditors of the school, including Mr. Cheung Chi Kong, the third defendant in his capacity as a creditor at whose hands she suffered civil imprisonment for the debt due to him.

8. Turning to the case against the third defendant, Mr. Cheung Chi Kong, the allegation made by Madame Kwok is that he took over the school on two occasions. The first occasion, as she alleges, was in early January, 1966, when pursuant to the takeover Mr. Cheung sent one Wong Ping to collect school fees at the school on his behalf. The consideration for the transfer, Madame Kwok says, was Mr. Cheung's agreement to pay off the creditors by a compounded payment of 20% of the amounts due to them. Mr. Cheung, she says, went back on the agreement to pay her creditors although he had collected school fees to the extent of some $20,000. So, as she says, she took back the school. Then, later in January, Madame Kwok says, Mr. Cheung again took over the school under a document signed by her while she was still in prison on account of a debt due to Mr. Cheung on a cheque for $5,000.00 drawn by her on the school account; and she signed this document in return for Mr. Cheung's promise to release her from prison. The plaintiffs say that they refused to accept the offer of 20% and that thereupon Mr. Cheung agreed to pay them in full if they would continue catering, for him, at the school. Madame Kwok goes further, saying that Mr. Cheung, throughout, planned to take the school from her, and that his first step towards carrying his purpose into effect was to acquire the cheque for $5,000.00 which was a cheque drawn by her in favour of one of her creditors on the school account. It is agreed by Mr. Cheung that he did, in fact, cash a cheque for $5,000.00 of the de St. Paul's College signed by Madame Kwok for a friend of his and that he sued her on the cheque, recovering judgment. It is a fact also that Mr. Cheung levied execution on this judgment at the school premises and that when the school desks and chairs were sold by the bailiff in execution they were bought by Mr. Cheung's wife (known as Madame Lee). They were then hired back to Madame Kwok for her to continue the school.

9. The person Wong Ping referred to above was called as a witness for the plaintiffs. He admitted that he had at one time been an employee of Mr. Cheung and he admitted signing a document (Exh.T) stating that he had collected school fees on behalf of Mr. Cheung. But, in his evidence; he denied that he ever collected fees on Mr. Cheung's behalf - he was, he said, an employee at the school and took orders from a superior officer there. He signed the document Exh.T, he said, just because someone came to his house and asked him to do so, but the contents were not the truth. He did, however, say that he was introduced to the school by a Madame Lee. It is suggested that this Madame Lee is the wife of the third defendant Mr. Cheung, but that, in my view, has not been established. Madame Kwok's version was different. She said that Wong Ping signed the document Exh.T at the school because she had complained to the Police that he had embezzled school fees. No application was made to treat Wong Ping as a hostile witness. As it appeared to me, both the document Exh.T and the evidence of Wong Ping were worthless from the point of view of credibility.

10. Madame Kwok's evidence is obviously coloured by her ill feeling towards Mr. Cheung who was responsible for putting her in prison for the debt due on the cheque for $5,000.00. The second plaintiff, Mr. Tang Sit Woon, gave evidence purporting to establish that Mr. Cheung had agreed to pay the debt due to the plaintiffs under the Catering Agreement (amounting to $37,217.17, apart from the deposit of $30,000.00) in full if the plaintiffs would continue catering for him. I can place no reliance upon Mr. Tang as a witness in this respect, or indeed in any other respect not corroborated independently. In any event if there was any such agreement to pay the plaintiffs in full it was a fraud upon the other creditors. But I do not believe that any such agreement was made. Mr. Tang was an untruthful witness, in my view, as respects the claim made against the first defendant, Mr. Leung, and was an untruthful witness also as respects the claim made against the third defendant, Mr. Cheung.

11. But this is not to say that the whole story of a transfer of the school to the third defendant, Mr. Cheung, is a fiction. There are features of the evidence which imply at least an intention on the part of Mr. Cheung to interest himself in the school. There is the fact of his acquiring the cheque for $5,000 in what appear to me to be dubious circumstances (by which I mean that he had no knowledge as to the credit-worthiness of the school at the time); there is the fact of the purchase of the school desks and furniture by his wife; there is his admitted interest in other schools; there are his admittedly frequent visits to the de St. Paul's School, which he says, falsely as I think, were simply as a creditor endeavouring to recover his debt on the cheque; there is a document (Exh.S) which might well have been signed by him - when one compares the signature with an admitted signature of Mr. Cheung on another document (Exh.DD). The document Exh.S contains a promise to give an interest in the school business to Madame Kwok's sons. It is signed 'P.P.' (presumably 'per pro') 'C.B. Chang'. 'C.B. Chang' does not represent any rendering of Mr. Cheung's name and initials, but as I have said the signature 'C.B. Chang' bears a very close resemblance indeed to the signature, admittedly Mr. Cheung's, on the document Exh.D.D. Mr. Cheung says the document Exh.S is a forgery and points to the fact that it was produced from Madame Kwok's custody. No expert handwriting evidence has been given. In the present proceedings alone, however, Mr. Cheung has signed documents in three different ways. But, in the whole of the circumstances, I cannot say that it has been proved that Exh.S was in fact signed by Mr. Cheung either on behalf of himself or of someone else. Then there is the important document (Exh.JJ) signed by Madame Kwok on her release from prison which coincides in point of time with her document (Exh.AA) discontinuing an action (O.J. 162 of 1966) which she had brought against Mr. Cheung and another in which she claimed recovery of school fees allegedly collected by them, an injunction to restrain them from entering or remaining on the school premises, and other relief. Mr. Cheung, in my view, was most anxious that the document Exh.JJ should not be revealed. It is, ostensibly, a power of attorney in Mr. Cheung's favour authorising him to deal with the landlord of the school, Mr. Leung, on Madame Kwok's behalf. It was only when Mr. Chan, the solicitor who prepared the power of attorney, was called as witness and testified to it having been executed by Madame Kwok at the prison that Mr. Cheung fully acknowledged its existence. Mr. Cheung endeavoured to say that he had not received a copy of it. Mr. Chan proved that he had, and proved also that in all probability Mr. Cheung was to pay for its preparation. Mr. Cheung endeavoured to minimise the possible effect of the document by saying that it was prepared because Madame Kwok's husband had persuaded him to agree to intervene between them and the landlord Mr. Leung so as to induce Mr. Leung not to evict them from the school premises. There is no evidence whatsoever that Mr. Cheung had any special influence with Mr. Leung; it is probably the case that he was not even acquainted with him. The conclusion is inescapable, in my view, that the document had some ulterior purpose. Then there is the brochure (Exh.FF) dated May 1966 announcing the opening of a new school, named the Ching Shan School, at the school premises. Mr. Cheung's wife, admittedly, was one of the persons interested in this venture. Mr. Cheung says she has her own money and that it was entirely her own business, not his.

12. In Mr. Cheung's favour is the fact that on the 7th January 1966 Madame Kwok published in the Wah Kiu Yat Po a notice (Exh.R) stating that the school was to be closed and that: "I myself shall still be responsible for repayment of debts", and that apparently she never revealed to the other creditors, at creditors' meetings or otherwise, that Mr. Cheung had an interest in the school. A similar notice by Madame Kwok (Exh.W) appeared in the Gazette of the 14th January 1966. She also says, for what it is worth, that on each occasion when, allegedly, the school was transferred to Mr. Cheung he caused the name and signboard of the school to be changed, which would indicate the opening of a new school business not the continuance of the old school business consequent on a transfer. The second plaintiff says the same thing. There was put in evidence a notice (Exh.B) appearing in a newspaper and dated the 1st January 1966 to the effect that the school was being reorganized and inviting applications from students for places. It is signed "Tse Yin" as Secretary-General for an un-named Board of Trustees. It has not, in my view, been proved that Tse Yin was Mr. Cheung. It is in Mr. Cheung's favour also that he is obviously an intelligent man of affairs and would certainly, in my view, have been aware of the danger he was running if he took a transfer of the school - as a subsisting business - without giving the notices required by the Fraudulent Transfer of Businesses Ordinance. I can place no reliance on the oral testimony given against him by Madame Kwok and the plaintiffs. I do not accept that he ever undertook to pay the plaintiffs what was due to them in return for their agreement to continue catering for him.

13. The question remains whether Mr. Cheung has been proved on the balance of probabilities to have been a transferee of the business of the school and so liable under the Fraudulent Transfer of Businesses Ordinance. In the case of Tsang Chee Wah & others v. Marist Brothers(1) it was held by Wicks J. that the school there concerned was not a business but a profession. No doubt each case must be determined on its own facts. In the present case I have no doubt that the de St. Paul's College was being conducted as a business, as a private school with a view to profit, as it is notorious so many private schools are conducted. As Mr. Henry Hu pointed out, teaching may be a profession, and a headmaster or supervisor may be carrying as his profession, but running a school may well be the carrying on of a business, particularly in the circumstances prevailing in Hong Kong. Mr. Hu relied upon Commissioners of Inland Revenue v. Maxse(2) where Swinfen Eady M.R. said at p.652: "The truth is that Mr. Maxse is a journalist and editor, and is also carrying on the business of publishing a magazine......" This authority appears to me to be most apt in the circumstances of the present case. Mr. Hu also relied on the case of Nield v. I.R.C.(3).

14. Turning to the words of the Ordinance, section 3(1) provides as follows :-

"3. (1) Whenever any business or any portion of any business is transferred, with or without the goodwill or any portion thereof, the transferee shall, not withstanding any agreement to the contrary, become liable for all the liabilities, .................. arising out of the carrying on of the business by the transferor, unless due notice in accordance with this section has been given and has become complete at the date of the transfer."

'Transfer' is not defined. and it is difficult to understand what the Ordinance means when it refers to a transfer with or without the goodwill; prima facie, transfer of a 'business' implies transfer of the goodwill. However, some meaning must be given to section 3(1); it may be that 'with or without the goodwill' means with or without an express assignment of the goodwill; or it may contemplate a case where the transferor reserves the right to trade in competition with the transferee or to continue himself to use the trade name. 'Business', I suppose, includes a miscellany of things - the trade name (which is but part of the goodwill): the book-debts; and the stock-in-trade and chattels. The question also arises whether a transfer for the purposes of the Ordinance requires writing. Writing is unnecessary for the transfer of the stock-in-trade and chattels, which are usually passed by delivery in order to save stamp duty. Book-debts may be assigned in equity without writing. And it appears that goodwill, also, may be assigned without writing (see I.R.C. v. Angus & Co., I.R.C. v. Lewis(4), per Lord Esher M.R.; the proposition was admitted in argument (ibid. at p.587)). No doubt also. goodwill passes without express assignment on a transfer of the property to which it is attached. subject, of course, to any express reservation. Referring to cases on the Ordinance: in Gibb Livingstone & Co. Ltd. v. Kuo Chu Hsieh and L.Rondas & Co.(HK) Ltd.(5)  Gould J. was concerned with a written instrument alleged to be a transfer of a business (see also in the Full Court (1952) 36 H.K.L.R. 253); in Ng Kan v. Chan Puk Wing(6) Williams J. held the transfer of a fishing junk by bill of sale not to be a transfer of the fishing business; in The Union Trading Co. Ltd. v. Kwok Man Chau Ka and others(7) (in the Full Court, ibid. p.28) there was a document expressly indicating a transfer; in A. Goeke & Co. v. Messrs. Chy Loong(8), Lindsell J. held that where the defendants resumed control of a business after licensing it to others there was a 'transfer' to the defendants within the meaning of the Ordinance; in T.O. Wong & Co. Ltd. v. Leung Pui and Another(9) in the Full Court before Hogan C.J. and Reece J., the question was whether creditors of a business had taken over such control of the business as to make them transferees for the purpose of the Ordinance. The decision that the creditors were transferees may be said to rest on the following passage from the judgment of Hogan C.J., with which Roece J. concurred, (at p.304) -

"Clearly the mere purchase of some assets of a particular business, whether through Court proceedings or otherwise, should not normally be regarded as resulting in a transfer of that business but, in circumstances such as prevailed in the present case, where the purchasers in question were already exercising a close and immediate control over all the operations of the business and where, by their purchase, they acquired and had transferred to themselves virtually all the assets of the business and thereby precluded other creditors from having recourse to these assets, I think it is right to conclude that the effect of this purchase and the arrangement subsisting with the debtor was to constitute the appellants transferees of the business or a portion of the business within the meaning of the Fraudulent Transfers of Businesses Ordinance."

The trial judge, Gould, J., (ibid p.305 at pp.308-9) had said:-

"The important fact is that the defendants were in full possession and control and operating the business as owners - having in fact acquired essential assets. I am disregarding the matter of goodwill (I should imagine it to be in any event of very dubious value in the circumstances) in the light of the wording of section 3(1) where it says '.... with or without the goodwill or any portion thereof ......' A licence to carry on a business in consideration of a monthly payment and subject to a right in the licensor to resume possession in certain eventualities was held in the case of Gooke & Co. v. Chy Loong(8) to be a transfer within the meaning of the Ordinance. The present case in which there has been complete parting with possession and acquisition by the defendants of the major assets is at least as strong."

Earlier in his judgment, Gould, J. had said (at p.308) -

"This is another of the cases in which the relationship between the parties has not been defined by any written instrument or by any proved specific verbal agreement and in which as a consequence the Court is called upon to ascertain legal relationship from circumstances."

15. The case now before me is another such case. The 'power of attorney' (Exh.JJ) was, possibly, in all but form a transfer of the tenancy of the school from Madame Kwok, the tenant, to Mr. Cheung, but it does not fit in with the case made against him because it was not made until the 3lst March 1966, by which time the de St. Paul's College had ceased to operate for some tow months. It may possibly have been a step towards carrying into effect an intention by Mr. Cheung, or his wife Madame Lee and her associates, to commence a new school business later in the year, namely in May 1966 when the brochure Exh.FF was issued. There is no evidence that the landlord Mr. Leung was made aware of the power of attorney or was approached for his consent to an assignment of the tenancy. Nor is there any evidence that Mr. Woo Cheung Ying, Madame Kwok's registered partner, ever at any stage concurred in a transfer of the business of the school to Mr. Cheung. The desks and furniture of the school were acquired openly by Mr. Cheung's wife on a bailiff's sale in execution and, in any event were immediately hired back to Madame Kwok for her to continue the school business. One thing appears certain; no sensible person would have taken a transfer of a school business which had failed so disastrously and whose supervisor had been imprisoned for civil debt, and prosecuted also for fraud; the obvious thing to do was to commence a new school, under a new name and entirely divorced from the reputation of the de St. Paul's College, and in my view that is a reasonable interpretation to be placed upon the evidence so far as it affects the third defendant, Mr. Cheung Chi Kong, if indeed the evidence goes so far as to warrant such an interpretation.

16. This is not a case of a surreptitious transfer of assets of a subsisting business or of creditors being defrauded by a third party. It is a case of an attempt to fix liability on the third party on an entirely technical basis, 'supported' by evidence of an oral agreement accepting liability for existing debts. As I have said, I reject that evidence and am not satisfied, on the balance of probabilities that there was a transfer of a subsisting business, although there was, possibly, an attempt to establish a new school business - a new venture to which the site and buildings readily lent themselves, and a venture which, if it was to succeed, it would have been imperative to distinguish from the de St. Paul's College formerly carried on by Madame Kwok.

17. Accordingly I dismiss the claims against the first and third defendants with costs. Madame Kwok, the second defendant, admits the sums claimed under the Catering Agreement namely the $37,217.17 representing meals supplied and the $30,000 deposit, making a total of $67,217.17. I see no reason to hold her responsible for the utensils which disappeared from the school premises. As regards the claim made by the plaintiffs for their loss in erecting the kitchen it appears that they are entitled to succeed against Madame Kwok in this respect owing to the premature determination of the Catering Agreement; it is expressly provided for by clause 5(f). There will therefore be judgment against the second defendant for $67,217.17 and for damages, to be assessed by the Registrar, under clause 5(f), with costs. Costs of 1st plaintiff as a legally aided person to be taxed pursuant to regulation 15 of the Legal Regulations.

6th July, 1968.

(R.H. Mills-Owens)
Puisne Judge.

Representation:

Henry Hu instructed by Lo & Lo (on legal aid assignment) for 1st plaintiff.

2nd plaintiff in person.

A. Zimmern instructed by Yung, Yu, Yuen & Co. for 1st defendant.

2nd defendant in person.

1st of 3rd defendant in person.

2nd of 3rd defendant absent.

(1) (1952) 36 H.K.L.R. 396.

(2) (1919) 1 K.B. 647.

(3) (1948) 2 A11 E.R. 1071.

(4) (1889) 23 Q.B.D. 579 C.A. at pp.593-4.

(5) (1951) 35 H.K.L.R. 121.

(6) (1938) 30 H.K.L.R. 48.

(7) (1938) 30 H.K.L.R. 19.

(8) (1931-1932) 25 H.K.L.R. 15.

(9) (1957) H.K.L.R.