Tse on Lai v. Cheung Ka Keung

Read the full judgment text of HCA 7139/1993 on BabelCite. This High Court CFI judgment was delivered on 17 May 1996.

1. This case arises from certain events which occurred between 1988 and 1993, culminating in 2 documents signed on 12 April 1993. In the first document, the Defendant agreed to sell to the Plaintiff a property known as Workshop No.P, 2nd Floor, Camel Paint Building, Block III, 60 Hoi Yuen Road, Kowloon ("the Property"). In the second document, the Defendant disposed of his rights and liabilities in a business in the People's Republic of China by the name of Kam Wah Precision Factory Co. Ltd. ("K

Case No.HCA 7139/1993
Court
High Court CFI
Date17 May 1996
Judge
Case Document
100%Judiciary

HCA007139/1993

  1993 No.A7139

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN:    
  TSE ON LAI Plaintiff
  and  
  CHEUNG KA KEUNG Defendant

Coram: Yuen, Dep. J. in Court

Dates of hearing: 14, 17, 18, 19 July, 14, 15, 18, 19 September, 13 October 1995

Date of handing down of judgment: 17 May 1996

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JUDGMENT

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1. This case arises from certain events which occurred between 1988 and 1993, culminating in 2 documents signed on 12 April 1993. In the first document, the Defendant agreed to sell to the Plaintiff a property known as Workshop No.P, 2nd Floor, Camel Paint Building, Block III, 60 Hoi Yuen Road, Kowloon ("the Property"). In the second document, the Defendant disposed of his rights and liabilities in a business in the People's Republic of China by the name of Kam Wah Precision Factory Co. Ltd. ("KW").

2. Before I define the issues, I shall briefly set out the facts.

FACTS

3. The Defendant was a machine specialist. In September 1987, he caused his wife to form a partnership with one LAU Tin Chu ("Lau"). According to the Defendant's wife Madam PANG Kei Yuet, the Defendant did not wish to enter into the partnership himself because he was liable as a guarantor in relation to another business.

4. The partnership was called Global Machinery Company ("GMC").

5. In 1988, the Plaintiff approached the Defendant with a view to establishing a machinery business in a place called Kwun Yiu, in Nam Hoi County in the People's Republic of China. Kwun Yiu was the Plaintiff's home town and he was familiar with the local officials. The Plaintiff had the connections, and the Defendant had the technical expertise, necessary for the business.

6. On 8 October 1988, a document written in Chinese was signed by the Plaintiff and the Defendant. It was entitled "Contract" (sometimes referred to as "the Co-operation Agreement"), and named as "Parties to the Contract" the Plaintiff as Party A and the Defendant as Party B. GMC was named a "witness" and its chop affixed. I shall refer to this Contract as "the 1988 Contract".

7. There is a dispute as to whether the Defendant had entered into the 1988 Contract in his own capacity or on behalf of GMC. There is a dispute regarding Lau's participation which I shall deal with in due course.

8. Subsequently (in May 1989) a company called Global Machinery Co. Ltd. ("GMCLtd") was incorporated. It was owned by Lau and the Defendant's wife in equal shares. The Defendant also alleges that GMCLtd took over GMC's interests in KW.

9. The 1988 Contract was not drafted with any degree of sophistication. There were only 4 substantive provisions:-

  (1) that under the name of GMC, both parties agreed to co-operate in investing in and forming KW in Kwun Yiu. KW was a joint venture with the County Government;  
  (2) the Plaintiff was to be Vice-Chairman of the KW Board and the Defendant was to be the Managing Director of the Factory. Both parties held their respective positions as representatives of GMC;  
  (3) the Plaintiff and the Defendant were each to have a half share in the profits and liabilities in the investment in KW;  
  (4) the Plaintiff was not to participate in GMC's existing Hong Kong business.  

10. There was some debate before the Court as to the nature of the 1988 Contract which I shall refer to in due course.

11. The Joint-Venture-with the County Government was not in writing, or at least no document has been produced by either party in evidence.

12. There seems to be little dispute however that amongst the things done to set up the KW business, KW provided finance for GMC to purchase machines on its behalf. GMC made a profit by billing KW at prices higher than the cost price of the machines.

13. By mid-1989 if not earlier, GMC had made about $500,000 by this exercise. The parties agreed that this amount should be kept with GMC (or according to the Defendant, with GMCLtd).

14. The dispute in the present case arose as follows.

15. In January 1989, KW paid by Letter of Credit for 20 machines (which were sometimes referred to as "electrical discharge machines" and sometimes as "sparking machines"). The value of the LC was $2.1m.

16. Twenty such machines were sent into China, although the LC described the goods as spare parts. Apparently the machines had to be imported into the PRC this way, and they were dissembled and put back together when they reached KW.

17. However the 20 machines did not serve their purpose in the PRC, and it was decided by KW that these machines should be sent back to Hong Kong, where GMC (or according to the Defendant, GMCLtd) would sell them for KW.

18. There was no dispute that these 20 machines were indeed sent back to Hong Kong. The Defendant says that they were received in a poor state; parts were missing and the machines required repainting and servicing.

19. Eighteen of these machines were sold, and the remaining two were exported to Thailand. The proceeds were received by GMC (or according to the Defendant, GMCLtd). The whereabouts of these proceeds was a significant factor in the present dispute.

20. In 1992, there was discontent between Lau and the Defendant as to GMC and/or GMCLtd's business in Hong Kong. The business ran into financial difficulties, so much so that even staff salaries were in arrears.

21. The Plaintiff was apparently concerned about how the unstable situation at GMC/GMCLtd would affect the KW investment.

22. There then occurred a series of events which gave rise to the present litigation.

In February or March 1993, at a meeting in the Astor Hotel between the Plaintiff, the Defendant and Lau, the Plaintiff suggested that in the light of the growing dispute between the Defendant and Lau, he (the Plaintiff) alone should take over the investment in KW. He drafted a Chinese agreement (exhibit "P-1") to his effect. This however was not agreed to.

23. In March 1993, the Plaintiff met an official in Kwun Yiu by the name of CHOU Kong Sing. As a result of certain allegations made by Chou, the Plaintiff was anxious to find but from the Defendant what had happened to the proceeds of sale of the 20 machines which had been sent back to Hong Kong by KW.

24. The Plaintiff says that he was unable to get hold of the Defendant to ask him about Chou's allegation. Instead, he met up with Lau at the King Wah Restaurant. At this meeting, Lau told the Defendant that the machines had been sold, and that as far as GMC (or GMCLtd) was concerned, the proceeds were no longer with it. He thought they had been remitted back to KW.

25. At this meeting, Lau also promised to give the Plaintiff an extract of GMC (or GMCLtd) accounts relevant to its monetary transactions with KW. This was subsequently done.

26. A copy of the extract which was in the form of a computer print-out was also before the Court. Although the extract was done by a Miss CHAN Ching Yin an accountant with GMC and GMCLtd, Lau supervised her in preparing the company's accounts, and the Defendant's wife also admitted that to an extent, she also inspected the accounts periodically, although she said she had not seen the extract before.

27. After the Plaintiff's meeting with Lau, he decided that instead of trying to get hold of the Defendant in Hong Kong, he would confront the Defendant when he attended a machinery exhibition in Taiwan.

28. At the end of March 1993, the Plaintiff and Lau met with the Defendant and others (including the Defendant's cousin) in Taiwan. The Plaintiff sought an explanation of the Defendant's monetary dealings with KW. At that stage, the Plaintiff was accusing the Defendant of having take some $1.3m. in funds.

29. The Defendant was taken aback by this and unprepared for the exercise the Plaintiff required of him. It was agreed that the parties would meet up again in Hong Kong and the accounts would be gone into there.

30. A meeting was duly held in Hong Kong upon the parties' return from Taiwan. The Defendant's wife, who was familiar with the accounts, was asked by the Defendant to attend. According to her, she was able, by referring to the books of Ka Ming (a company owned by the Defendant and herself), to satisfy the Plaintiff as to all but 2 of the figures which the Plaintiff had queried.

31. However, there was still uncertainty as to the state of GMC (and GMCLtd's) accounts, and what exactly were the profits of the KW investment. Eventually, it was decided that the accounts of GMC (and GMCLtd) would be passed to an independent certified public accountant Messrs. C.C. Luk & Co. to prepare a set of accounts.

32. The Plaintiff however did not wish to have to wait for the result of that exercise. He was particularly concerned with the proceeds of sale of the 20 machines. According to him. the County Government was prepared to forgive that debt in consideration of taking over KW entirely.

33. The Plaintiff continued to press the Defendant regarding the disposal of the proceeds of sale. Eventually, there was a meeting at GMC (and GMCLtd)'s office in Hoi Yuen Road on 12 April 1993.

34. At this meeting, the Plaintiff demanded payment of the sum of $1m. He arrived at this sum as follows:-

  (a) the value of the 20 machines $2,100,000  
  (b) the value of a 2nd LC issued by KW 400,000  
  (c) repayment made between 1st and 2nd LCs 350,000  
  (d) profit agreed to be kept at GMC 500,000  
  (e) Defendant's deemed expenses 650,000  
  (f) his half share                                                   = 1,000,000  

35. However, he was prepared to discount the sum to $800,000 as he wanted a quick settlement rather than wait for the preparation of the accounts.

36. The Defendant at first resisted the Plaintiff's demands. It is his case that as a result of duress (which I shall refer to later), he eventually agreed to pay the Plaintiff the sum of $800,000.

37. He did not however have the money available, and so the Plaintiff demanded security over the Property which was in the Defendant's sole name.

38. The Defendant counter-offered the Hoi Yuen Road office of GMC (and GMCLtd) as security which was rejected by the Plaintiff. The Defendant's wife also counter-offered their residence in Sceneway Gardens as security, but this was also rejected.

39. Eventually, 2 documents were signed. They were both in Chinese. The first was written out by the Plaintiff. It was entitled "Sale and Purchase Agreement". It stated that the Defendant had received from the Plaintiff $800,000 being down payment for the purchase of the Property at the price of $3m. Completion was to be on 31 July 1993. However, should the Defendant return the sum of $800,000 before the date of completion, the Plaintiff agreed to cancel the sale and purchase agreement.

40. The second document was written by Lau but only the Plaintiff and the Defendant were parties to this document which was entitled "Contract". This provided that after the Defendant had repaid the sum of $800,000 to the Plaintiff, the Defendant would not be "responsible" for "all the rights and liabilities" of KW, and the Plaintiff would be solely responsible therefor. It also provided that in respect of the Sale and Purchase Agreement, should the Defendant repay the Plaintiff at least $500,000 on the due date, "both parties may reach another agreement".

41. Accordingly, it is common ground that the 1st agreement was not truly an agreement for the sale and purchase of the Property, but rather a document evidencing security for payment of $800,000 said to be owing by the Defendant to the Plaintiff, coupled with a right to the Plaintiff to purchase the Property for a further $2.2m. in the event of non-payment.

42. There was no repayment or completion on 31 July 1993. A week previously, the Plaintiff's Solicitors had written to the Defendant asking for the identity of his Solicitors and for the title deeds to the Property. This was followed up by another letter dated 29 July 1993. The Defendant gave no reply to either letter.

43. The writ was issued on 9 August 1993 seeking specific performance, alternatively return of the sum of $800,000, damages in lieu of or in addition to specific performance and a declaration that the Plaintiff was entitled to a lien over the Property in the sum of $800,000.

44. The Plaintiff has however indicated to the Court that he is no longer seeking specific performance as he is financially unable to complete. He seeks damages in lieu, alternatively the rescission of the Sale and Purchase Agreement and payment of the sum of $800,000, alternatively a declaration that the 1988 Contract has been terminated, all necessary accounts and inquiries thereunder, alternatively payment of the sum of $800,000 by way of account stated.

45. The Defendant's defence was in the main that

(1)   he was under duress when he acknowledged he owed the Plaintiff $800,000 and signed the Sale and Purchase Agreement;  
(2)   the acknowledgment was contingent upon verification by the certified public accountants who were going to prepare the accounts (which as it turned out were never done);  
(3)   there was in any event a total failure of consideration because:-  
  (a) in entering into the KW business with the Plaintiff, he was only acting for GMC. After GMCLtd's incorporation, the interests in the KW business were transferred by GMC to GMCLtd and therefore he (the Defendant) did not personally owe the Plaintiff anything;  
  (b) in any event, he did not owe the Plaintiff anything because he had paid the net proceeds of sale of the 20 machines to KW by way of TT remittances and cash payments.  

46. The Defendant has also counterclaimed for a declaration that the Sale and Purchase Agreement was voidable and has been avoided by him, alternatively that the agreement was void and of no effect, an order directing the Plaintiff to vacate the lis pendens and for damages caused and occasioned by the registration.

ISSUES

47. A large number of disputes as to facts has emerged in the course of the trial. There is a surprising lack of relevant contemporaneous documents. I regret to say also that none of the witnesses stood out as being particularly impressive.

48. I have not sought to resolve all the disputes of facts that arose in the course of the trial. As I see it, the relevant issues are as follows:-

  (1) Duress  
    Was the Defendant under duress when he acknowledged he owed the Plaintiff $800,000 and signed the 2 agreements on 12 April 1993?  
  (2) Conditional Acknowledgment  
    Was the acknowledgment of debt conditional upon the certified public accountants' work on the accounts?  
  (3) Total Failure of Consideration  
  (a) Did the Defendant enter into the KW business in his personal capacity, or as a partner in GMC? If as a partner in GMC, were its interests in the KW business transferred to GMCLtd upon its incorporation?  
  (b) Was there an account stated between the parties?  

49. Finally, there is the question of the appropriate relief. That would of course depend on my findings on the issues above.

(1) Duress

50. The onus is on the Defendant to prove that he signed the 2 agreements of 12 April 1993 because of, or partly because of, duress.

51. The Defendant alleged that the Plaintiff threatened him by saying that he would report him to the ICAC or the police, and "great troubles would surface". According to the Defendant, he understood the threats to refer to two things.

52. The first concerned kickbacks or commissions to salesmen. The second was that according to the Defendant, GMC (and/or GMCLtd) as dealer had an obligation to hire-purchase companies to report any moving of machines to places outside Hong Kong. Apparently, they were aware that goods under hire-purchase were taken outside Hong Kong, but had not reported that to the hire-purchase companies.

53. The Defendant alleged that the Plaintiff first threatened him in Taiwan and subsequently also at the meeting on 12 April 1993.

54. The Defendant's wife also alleged that at the end of the meeting after the parties' return from Taiwan, she was in the corridor when the Plaintiff said to her that if he tried to expose the company's affairs in order to create trouble, she and the Defendant could be sent to jail; if that happened, she should think what would happen to their children. She did not however mention this threat to the Defendant.

55. She also alleged that at the 12 April 1993 meeting which she joined later, the Plaintiff said that they (meaning the Defendant and herself) would be "in a crisis". Although the Plaintiff did not specifically mention any hire-purchase agreements, she felt he was referring to them.

56. She also alleged that the Defendant's face looked pale and he asked her what they should do.

57. The Plaintiff denied that he had used any threats on the Defendant or his wife. Lau who was present at both the meeting in Taiwan as well as the meeting on 12 April 1993 also testified that the Plaintiff had not threatened the Defendant about reporting him to the authorities.

58. I accept from my observation of the way the Plaintiff gave evidence in Court that he has a rather brusque manner. By contrast, the Defendant appeared to be very nervous. Whether that was because he was unused to being in Court I do not know. His wife however clearly demonstrated from the way she gave evidence that she was an intelligent person, who was careful about money and well able to look after her husband's financial affairs.

59. On the conflict of evidence outlined above, the Defendant has failed to persuade me that any such threats were used or that his will was so overborne or deflected as to render the agreements of 12 April 1993 void or voidable.

60. In relation to the alleged threats, the Defendant's evidence was far from satisfactory. Regarding the kickbacks, the Defendant's evidence was at first that he was worried because in the course of the company's sales, it had received kickbacks or commissions. Subsequently, however, he said that the kickbacks were received by salesmen and were paid by the hire-purchase companies. He never explained how either of those situations would result in his being prosecuted by the ICAC or the police.

61. Further, according to the Defendant, he suspected that the Plaintiff's source of information was Lau, as the Plaintiff himself was not involved in the business in Hong Kong. Thus, it would be Lau who would provide any incriminating information.

62. But the Defendant admitted that it was Lau himself who was in charge of the salesmen. That being the case, if the matter was indeed reported, Lau would be incriminating himself first and foremost. The unlikelihood of such a situation made the Defendant's allegations much less credible.

63. Then, there is the threat regarding the hire-purchase arrangements. The Defendant did not produce a single dealership agreement or guarantee to show how he (or his company) would be liable to the hire-purchase companies if the customers leasing the goods took them out of Hong Kong. The most that he said was that it would lead to loss of business for his company. He did not say how that would have led to the possibility of his being prosecuted by the ICAC or the police or going to jail.

64. The Defendant's wife could not add much to the Defendant's evidence. She admitted that the Plaintiff did not specifically mention any hire-purchase agreements. She admitted also that if the Defendant refused to sign the agreements. she did not know what the result would have been.

65. An important factor in my rejection of the duress defence is that after the agreements of 12 April 1993, and indeed even after the completion date of 31 July 1993, the Defendant never took any steps to disavow or dispute the agreements.

66. Although the Defendant had lawyers at the time for other litigation, he never instructed them to disavow these important agreements, or to complain about the way he alleged they had been extracted from him. He never took any steps whether personally or through his Solicitors to attempt to set them aside.

67. As such, even if there had been any duress (which I do not find), the Defendant had affirmed the agreements.

68. Further, after the due completion date of 31 July 1993, and in the course of the present litigation, the Defendant made an Affirmation on 19 November 1993. In that Affirmation, there was no mention of any alleged threat of reporting to the ICAC, and there was also no mention of the alleged threat concerning hire-purchase arrangements.

69. I would also find that apart from the alleged threats of prosecution, no illegitimate pressure had been put on the Defendant. According to both the Defendant and his wife, after the meeting at which the Defendant's wife brought out the Ka Ming accounts, the Plaintiff had not pressed with the original accusation that the Defendant had taken $1.3m. That shows that the Plaintiff was not bent on accusing the Defendant of having taken money, irrespective of whether that was true or not.

70. Further, after that meeting, independent certified public accountants were appointed as agreed. As it turned out, these accountants were unable to prepare a set of accounts as the documents were incomplete. However as at the 12 April 1993 meeting, the Defendant (on his own admission) did not know that the accountants did not have the complete accounts. He admitted that because independent accountants had been appointed, he had nothing to fear even if there were still any accusations of his having taken money.

71. Accordingly, the Defendant has failed to satisfy me that he entered into the 2 agreements of 12 April 1993 under duress, whether involving the threat of reporting him to the ICAC or the police, or involving any sort of illegitimate pressure.

(2) Contingent Acknowledgment

72. I reject the argument that the agreements were signed just to placate the Plaintiff for the time being, and that the agreements were contingent upon the preparation of accounts by the certified public accountants.

73. The agreements had specific dates for repayment of the $800,000 (or at least $500,000), when there was no evidence that it was known or expected that the accountants would be ready with the accounts by then.

74. I do not accept that the Defendant would have signed the 12 April 1993 agreements in the way they were drafted if it was the intention of the parties that the agreements would only be contingent upon verification of the accounts by the accountants.

(3) Total Failure of Consideration

75. In relation to this defence, the first consideration must be who were the parties to the 1988 Contract?

The Contracting Parties

76. I find that the party who contracted throughout with the Plaintiff was the Defendant, and not GMC. Although the 1988 Contract was crudely drafted, and however unsophisticated the parties may have been, I find they did not intend GMC to be the contracting party.

77. The Defendant's name was set out against the identity of "Party B". He signed it in his personal capacity without any endorsement as to any representative capacity. GMC was stated to be the "witness" and its chop affixed against such capacity only. Therefore the documentary evidence shows that the Defendant had entered into the 1988 Contract in his personal capacity only.

78. The Plaintiff's evidence was that subsequently, the Defendant agreed to give half of the profit deriving from his own share in the business to Lau. That however did not concern the Plaintiff as that profit-sharing was a matter between the Defendant and Lau only. As far as the Plaintiff was concerned, his agreement was with the Defendant only.

79. Lau's evidence was that when he found out about the Defendant's involvement in the KW business, the Defendant agreed to give him half his profit, but he did not agree to bear any losses.

80. The Defendant's evidence was that it was orally agreed that he would give half of his "benefit for representing Global to Lau". It is notable that the Defendant did not testify that Lau would have to bear any loss. Although Lau did contribute some capital to the business, that was an arrangement between him and the Defendant, and there was no evidence that the Plaintiff agreed to it.

81. I have taken into account the fact that in the draft unsigned agreement (exhibit "P-1"), the Plaintiff had included Lau. However as the KW business had financial dealings with GMC, I find it was not unreasonable for the Plaintiff to have included Lau in that unsuccessful proposal.

82. If Lau was intended to be in the business together with the Plaintiff and the Defendant, I cannot believe that the parties would have drafted or signed the 1988 Contract in that way. Or if subsequent to the signing of the 1988 Contract, Lau was added to the business deal, I cannot believe that the parties would not have varied the 1988 Contract in writing to reflect that.

83. I find that the 1988 Contract was made between the Plaintiff and the Defendant alone in his personal capacity.

84. GMCLtd was incorporated in 1989. The Defendant alleged that he informed the Plaintiff of that at the time and he (the Plaintiff) had no objection to GMCLtd taking over his (the Defendant's) share in the KW business.

85. I do not accept that allegation. The Plaintiff says that he did not even know of the incorporation until 1991. Be that as it may, if GMCLtd was intended to take over the Defendant's or GMC's rights and liabilities in the KW business, one would have expected the parties to have recorded that in a document along the lines of the 1988 Contract given that the Plaintiff and Lau hardly knew each other.

86. It is also notable that in the 12 April 1988 agreements and in the unsigned draft agreement exhibited as "P-1", there was no mention of the limitted company.

Nature of the Contract

87. There was some debate as to whether a partnership had been formed or a joint venture.

88. I find that the relationship had more of the hallmarks of a joint venture than a partnership. Since GMC was a partnership between the Defendant's wife and Lau, the Defendant must have been aware what a partnership was. The 1988 Contract was expressed in terms of "co-operation" in "investment", rather than as a partnership.

89. The 12 April 1988 agreements as well as exhibit "P-1" also did not mention the existence of any partnership. Some of the matters usually associated with a partnership were also absent, e.g. a firm bank account, agreement as to drawings of partners, etc.

90. I find therefore that the relationship between the Plaintiff and the Defendant was that of joint venturers.

Account stated

91. At the crux of the case is whether the Defendant had agreed that he owed the Plaintiff $800,000. If there was no debt, then there would no question of any security, and the agreements of 12 April 1993 would be ineffectual.

92. I have earlier in this Judgment set out how according to the Plaintiff, the figure of $800,000 had been arrived at with reference to items (a) to (f).

93. Whether there really was an account stated would to an extent depend on the credibility of the figures comprised in the account stated (as alleged by the Plaintiff). If the figures were not credible, then that must impinge upon the veracity of the party asserting the account stated.

94. As to (a) the value of the 20 machines, after some initial opposition, the Defendant agreed that the gross proceeds of the sale of the machines was about $2m. His defence was that the net proceeds were only $700,000-$800,000, and that he had paid the net proceeds to KW by way of remittances and cash payments.

95. He referred to expenses such as transport and storage expenses, repainting and servicing costs, replacement of lost items, commission, etc.

96. However he did not call any witnesses (other than his wife to support his allegation. He was also unable to produce any documentary evidence of these expenses. Insofar as any supporting documents had been given to the certified public accountants, the Defendant did not obtain any copies to support his allegation.

97. I would especially have thought that an astute businesswoman like the Defendant's wife who on her own evidence was careful with accounts (she examined the bank statements of GMC and GMCLtd every month and inspected Miss Chan's figures regularly) would have taken it upon herself to find out what it cost to put the machines right for resale.

98. She tried to explain this omission by saying that "as Lau was the boss", Miss Chan only obeyed his instructions. I do not accept that evidence at all. She was an equal partner with Lau in GMC, and equal shareholders in GMCLtd. She and the Defendant owned Ka Ming, which bailed out GMC (or GMCLtd) by paying staff salaries during its financial crisis. In that position, and with her strong personality, she would have successfully obtained access to relevant information if she had wanted to.

99. The Defendant then alleged that of the net proceeds of $700,000-$800,000, he remitted part by TT and part by cash payments, receipt of which was acknowledged. The evidence of remittances and receipts came up to $450,000-$500,000, even though the Defendant said all in all, he had caused up to $1.5m. to be so paid.

100. However the receipts were expressed to be for other investments e.g. the Jinan and Loong Mun planers and other equipment. If the Defendant had remitted or paid money in repayment of the proceeds of sale of the 20 machines, in the ordinary course of business one would have expected the receipts to say so, and not to say that the money was in payment of other equipment. Accordingly, I reject the Defendant's evidence that those remittances and receipts were evidence of repayments of the proceeds of sale of the 20 machines.

101. Returning then to the items which made up the Plaintiff's calculation, (b) and (c) are linked. There was evidence that a 2nd LC was issued for $400,000. However the Plaintiff's evidence was that no goods were ever shipped for this payment and that the arrangement with the Bank was that this was to help the KW business repay $350,000. The Defendant did not dispute this.

102. Regarding item (d), there was also no dispute that at the latest by May 1989, there was a profit of $500,000 which the parties agreed would be kept by GMC.

103. Then as to item (e), the only evidence from the Plaintiff was that he just came up with this figure so as to arrive at a round sum of $2m. The Defendant's evidence was also that the Plaintiff had arrived at the figure of $2m. although he said the Plaintiff did not say how he had got to this figure.

104. The Defendant said that all in all, he had caused some $1.5m. to be paid to KW, but as I have said above, there was no sufficient documentary evidence of that. As it turned out, the documentary evidence showed only $450,000-500,000 sent to KW.

105. The division of the $2m. into half was in accordance with the equal share between the Plaintiff and the Defendant. In effect the parties were splitting up the County Government's deemed payment for their interest in the KW joint venture. In this respect, I note that the Plaintiff is still Vice-Chairman of KW but he asserts that he no longer has any shareholding or investment of value in KW.

106. Taking all the above matters into account, I accept that the parties had agreed to a final settlement of the KW investment on the basis of $800,000 to be paid by the Defendant to the Plaintiff on an account stated.

107. It is notable that when the Plaintiff told the Defendant and his wife at the meeting of 12 April 1993 that he wanted $800,000 from the Defendant by way of settlement of the account between them and wanted the Property as security, the reaction of the Defendant and his wife was not to refuse him as the accounts had gone to the independent accountants, but to offer other properties as security.

RELIEF

108. As to the appropriate relief, the Plaintiff no longer asks for specific performance as he has no means to complete. I do not see how the Plaintiff would be entitled to damages in lieu of specific performance where the parties were not really intending to sell and purchase the Property, but only to use it as security for payment on the account stated.

109. Accordingly, I order that the Defendant do pay the Plaintiff the sum of $800,000 together with interest at the commercial rate of 1% over prime from 31 July 1993 to judgment, and after judgment at the judgment rate.

110. I dismiss the Defendant's counterclaim save that I would order the lis pendens to be vacated. I do not make any order for damages for wrongful registration (none has been proved), because in my view, the first agreement of 12 April 1993 could have been registered as a charge upon the Property.

111. I also make an order nisi that the Defendant do pay the Plaintiff's costs of the action, and order that the Plaintiff's own costs be taxed in accordance with Legal Aid Regulations.

  MARIA YUEN
  Deputy Judge of the High Court

Representation:

Mr. A. Hung (instr'd by Messrs. Erwin Young, Chu & Law) for the Plaintiff

Mr. T. Jenkins-Jones (instr'd by Messrs. Yip Tse & Tang) for the Defendant