Yeung Wai Lun v. Sin Suet Ping

HCA001960/1993

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Deputy Judge M. Yuen in Court

Dates of hearing: 25, 26, 27, 28, 31 July 1995

Date of Judgment: 26 February 1996

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JUDGMENT

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Background

1. This case concerns the ownership of a property known as Office D, 3rd Floor, Wah Fai Mansion, 38-40 Granville Road, Kowloon ("the Property").

2. The Plaintiff and the Defendant are registered as tenants-in-common in equal shares, having acquired the Property in December 1986.

3. In this action begun in 1993, the Plaintiff claims that he has paid for the Property entirely out of his own funds, and that therefore the Defendant holds her half of the Property on resulting trust for him.

4. The Defendant does not deny that she herself has never paid for the Property.

5. Her case is that her husband Cheung Kai Ming ("Cheung") was a partner of the Plaintiff in a business known as "Taihase Development Trading Company", that the Property was acquired with this partnership's funds, and that she holds her share in the Property as nominee or trustee for her husband, and not for the Plaintiff.

6. Alternatively, if no partnership was formed, or if the Property was not bought with partnership funds, she claims that Cheung contributed to the purchase of the Property from his "share of profits" of "carrying out" a business with the Plaintiff.

Disputes of Fact

7. Many disputes of fact have been thrown up in the course of the trial. The Plaintiff and Cheung gave evidence over a number of days and were cross-examined in great detail.

8. I regret to say that neither the Plaintiff nor Cheung were impressive witnesses, although I have borne in mind that the events in question occurred nearly 10 years ago. The Defendant herself was unable to contribute much, as understandably, her knowledge of events was peripheral, and mostly on the basis of information supplied by Cheung.

9. The Court cannot hope to resolve all disputes of facts, great and small, which have emerged in the course of this trial, which has been long on disputes, but short on documents.

10. It must concentrate on the true issues between the parties (which are set out below) and resolve the facts pertinent to those issues.

Contemporaneous Documents

11. In resolving those factual disputes, I have looked to such contemporaneous documents as there are, as the best guide to the events as they occurred.

Onus

12. I have also considered the onus of proof. Where, as set out below, the contemporaneous documents show that the source of funds for the purchase of the Property came from resources controlled by the Plaintiff solely, the onus is on the Defendant to show that those resources were partnership funds.

Issues

13. The issues are:-

(1) Was there a partnership?

14. The essential features of a partnership are that there must be a contract between the partners to engage in a business with a view to profit.

15. First and foremost therefore the Defendant must prove an agreement. In this case, that has been the subject of much dispute.

Defendant's case

16. The Defendant's case was that Cheung and the Plaintiff had orally agreed in late 1985 to enter into a partnership for the sale of vehicle spare parts in the People's Republic of China.

17. In the course of his evidence, Cheung alleged that the agreement was to operate a business whereby buyers in the PRC would order goods which Cheung would source in Hong Kong, and deliver to China.

18. Invoices to the buyers would be issued in the PRC by one Tsang Shing Kim Hang Company, in which the Plaintiff's brother had an interest. Cheung alleged that the agreement was that Kim Hang would take 30% of the profit, and the balance split 50-50 between the Plaintiff and himself.

19. According to Cheung, the partnership existed between October 1985 and April 1987, when he left after an argument with persons at Kim Hang.

20. It appeared at first from Cheung's evidence that there was a settlement after the alleged partnership broke up, but by the end of his evidence, it was not clear that any agreement had been reached on settlement.

Plaintiff's Case

21. The Plaintiff's case briefly was that there was an intention to enter into partnership with Cheung, but only at a later stage.

22. There was no present intention to do so, because first, he himself had to dissolve a pre-existing partnership with one Ng Siu Kin, secondly Cheung had to leave one Yuet Fat Company, and thirdly, Cheung had certain liabilities to the Hong Kong and Shanghai Bank from acting as guarantor for hire-purchase loans in a previous business that Cheung had.

23. Pending the resolution of those matters, Cheung was hired as an employee at HK$5,000 p.m. to help in the delivery of goods to the PRC.

24. The Plaintiff said that the assignment of a half-share in the Property to Cheung's wife (at that time, his girlfriend) was to demonstrate his (the Plaintiff's) sincerity in his intention to admit Cheung into partnership later.

25. My impression of the Plaintiff's evidence was that he wished to play down Cheung's involvement in his business, but I have no doubt that he was at the time cultivating Cheung with a view to keeping a useful man within his business.

26. No other witnesses were called by either party (apart from the Defendant who, as I have said, had little direct knowledge of the relationship between the Plaintiff and Cheung).

27. No application for business registration was made. By way of comparison, the partnership which the Plaintiff had formed with Ng was registered in March 1985; and a sole proprietorship of the Plaintiff in the same name was registered less than a week after the assignment of the Property in December 1986. I have however not put the lack of registration in the forefront of my deliberations.

28. After considering all the evidence, in particular the contemporaneous documents, I have come to the view that the Defendant has failed to discharge the onus upon her that a partnership had been formed. In arriving at this conclusion, what has persuaded me is the absence of some important indicia of a partnership.

No documentary support of alleged partnership agreement

29. There was not one document evidencing the creation or the existence of a partnership between the Plaintiff and Cheung. This was despite the fact that according to Cheung, he was entering into a business dealing with two parties, the Plaintiff and Kim Hang, who were related to each other.

30. One would therefore have thought that the outsider in such an arrangement, i.e. Cheung, would have at least drawn up an agreement, however crudely drafted, however informal, to set out the terms agreed.

31. This is particularly so when, according to Cheung's later evidence, no money passed his hands (except small amounts of cash). Invoices were issued by Kim Hang (the company of the Plaintiff's brother), and the Plaintiff was put in charge of money that found their way to Hong Kong.

No books or accounts of alleged partnership

32. No partnership books or accounts were produced, and no application for specific discovery of these accounts was ever made by the Defendant although Cheung claimed to have looked at them at some stage.

No drawings against alleged partnership

33. Cheung alleged that the Plaintiff and he drew $5,000 p.m. each from the partnership.

34. However, there were only produced cheques signed by the Plaintiff in favour of Cheung, drawn on an account at the Nanyang Commercial Bank (No.14471) belonging to the partnership with Ng. No evidence was called to show that the Plaintiff had also drawn the same amount every month.

No bank account opened for alleged partnership

35. Although according to Cheung, the partnership was created in October 1985, no partnership bank account was opened. Cheung claimed that the partnership funds were deposited at (a) a Hang Seng Bank personal savings account operated by the Plaintiff solely (No.218-6-008963) or (b) in the Nanyang Commercial Bank account belonging to the Plaintiff's partnership with Ng.

36. I find it very difficult to believe that a person in business to make profit would allow his partner to deposit partnership funds into a personal account. This is especially when Cheung admitted that the funds in that account could have been mixed with the Plaintiff's personal money.

37. I find it even more difficult to believe that a businessman would permit his partnership's funds to be deposited into an account opened in the name of another partnership (the Plaintiff's partnership with Ng), to be mixed with funds belonging to a different business.

38. A current account was opened at the Kincheng Bank (No.03057000003478) in January 1987 of which Cheung was an authorised signatory.

39. However, that account was opened in the name of the Plaintiff trading expressly as a sole proprietorship. When asked why he was content that the account was opened as the account of a sole proprietorship, Cheung's explanation was unconvincing. He said that that was because the Plaintiff was in charge of accounts.

40. Further, that account was only opened in January 1987, when according to Cheung, the partnership had already been in business for some 14 months. I find it difficult to believe that a businessman (however unsophisticated) would permit funds in which he had a 50% interest (which he badly needed) to be deposited in accounts controlled exclusively by other people for a period as lengthy as 14 months.

41. More significantly, the cheques of $5,000 p.m. paid to Cheung continued to be drawn upon the Nanyang Commercial Bank account of the Ng partnership, and not the Kincheng Bank account opened in January 1987; a strange arrangement if this Kincheng Bank account was meant to be the Cheung partnership account.

42. Another fact which militated against the partnership allegation was this. According to Cheung, the mortgage instalments for the Property were to be paid out of the partnership funds. However, the account from which payments were made by autopay to the mortgage loan account was in the Plaintiff's sole name, and not from the 1987 account.

43. The absence of the usual indicia of partnership listed above drives me to the conclusion that no partnership was actually ever created.

44. Since Cheung had both actual and potential liabilities to Hong Kong Bank at the time, one would have expected him to have a keen interest on available funds if he had formed a partnership, and not to have adopted such a casual attitude towards finances.

45. One would also have expected him to ask for more cash distributions to stave off demands from the Hong Kong Bank, instead of agreeing to invest cash in an unusually substantial down payment (more than 40%) for the Property.

46. However if I am wrong, and there was a partnership between the Plaintiff and Cheung, I have no doubt that the Property was not purchased with partnership funds.

47. The documentary evidence was clear. The 10% initial deposit was paid from the Nanyang Commercial Bank account belonging to the Plaintiff's partnership with Ng.

48. The more substantial part payment of $110,000 was paid from the Plaintiff's personal savings account with the Hang Seng Bank.

49. Commission to the estate agent was also paid from the Nanyang Commercial Bank account belonging to the Plaintiff's partnership with Ng.

50. Legal costs were also paid from the Nanyang Commercial Bank account belonging to the Plaintiff's partnership with Ng.

51. Mortgage loan repayments were paid by autopay from the Kincheng Bank account in the Plaintiff's sole name.

52. Although Cheung had alleged that the partnership funds had been deposited into (a) the Nanyang Commercial Bank account opened by the partnership between the Plaintiff and Ng, and (b) the Plaintiff's Hang Seng Bank savings account, he was unable to identify or recognise the entries of deposits or withdrawals. And he had to admit eventually that he did not know how much of the money in those accounts belonged to the Plaintiff personally or even to third parties.

53. As I have said above, there was a new current account opened in January 1987 with both the Plaintiff and Cheung as authorised signatories. If a partnership had been formed, and the purchase price of the Property (or any part thereof) had been paid out of that account, the Defendant's case that the Property had been paid for with partnership funds would have been much more persuasive.

54. On the evidence before me, however, I do not find that the Property had been bought with partnership funds.

55. Although this issue was open on the pleadings, there was little if anything in the evidence or the submissions on this alternative argument. It may well be that Cheung had helped the Plaintiff to make a profit in his business, but that does not per se give Cheung any beneficial interest in the Property. Accordingly, the Defendant's alternative case also fails.

Orders

56. Accordingly, I make an order in terms of Paragraphs 1, 2 and 3 of the Statement of Claim. I also make an order nisi that the Defendant pay the Plaintiff's costs to be taxed if not agreed.

Dated 26th February 1996

Representation:

Miss Carol Fung (instr'd by Messrs. S.C. Chan & Co.) for the Plaintiff

Mr. Ernest Koo (instr'd by Messrs. Kharbari & Cham) for the Defendant