Shen Dong Sung v. Thomas Tak Suen Shuen Alias Shum Chuk Suen Thomas and Others

Case No.HCA 1612/1986

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCA001612/1986

1986, No. A1612

IN THE HIGH COURT OF JUSTICE

HONG KONG

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BETWEEN

	SHEN DONG SUNG	Plaintiff
	and
	THOMAS TAK SUEN SHUEN alias SHUM CHUK SUEN THOMAS	1st Defendant
	TSANG KAI SUM	2nd Defendant
	TSANG KAI TONG	3rd Defendant

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Coram: Hon. Jones, J. in Court

Date of hearing: 11th March 1987

Date of delivery of ruling: 11th March 1987

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RULING

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1. The plaintiff in this action claims to be an equal partner with the three defendants in a firm that traded under the name of Oriental Industrial Company. The defendants dispute that the plaintiff was a partner and was only employed as a manager.

2. The plaintiff claims that the 1st defendant has misappropriated funds of the partnership for the benefit of himself and his family. Details of substantial sums that have been diverted by the 1st defendant for his own use are set out in the amended statement of claim. The plaintiff therefore contends that the 1st defendant has been in breach of his fiduciary duty to account to the partnership for such sums as have been misappropriated and claims damages for such breach.

3. By paragraph A of the prayer, the plaintiff claims against the 1st defendant:-

"(1)	Damages for breach of fiduciary duties;
(2)	Accounts and inquiries; and
(3)	Payment to the Plaintiff, or to such Receiver as the Court may appoint, of the sums particularised in the statement of claim together with compound interest thereon as trustee for the four partners. "

In paragraph B the Plaintiff claims against all the defendants:-

"(1)	An order that a partnership between the parties be wound up;
(2)	All necessary accounts and inquiries;
(3)	The appointment of a Receiver;
(4)	Costs; and
(5)	Such further and/or other reliefs."

4. Mr Swaine on behalf of the plaintiff began his opening submission on Monday which continued yesterday. His submission was to have continued this morning, but Mr Ching who appears on behalf of the defendants, with Mr Swaine's agreement interposed with a submission upon which I am requested to make a ruling that when a partner is alleged to be indebted to the other partners for a debt or damages, it is not open to another partner to sue on that basis or on his own behalf for the other members of the partnership but that the proper course is for an account to be taken and for payment to be made over for all amounts that are found to be due. Mr Ching cited Meyer And Company v. Faber (No. 2) ⁽¹⁾ where it was held that monies held or owed to a partner cannot be recovered in an action in the name of the firm nor by an action by the other partners except after an account had been taken. Mr Ching also referred me to Green v. Hertzog & Others ⁽²⁾ where the headnote reads:-

"	After a partnership business had been wound up, one of the partners brought an action at common law to recover from two of her former partners and the personal representative of a third deceased partner the total, or alternatively three-fourths of sums advanced by her to the partnership, which she claimed as money lent by her to the partners or the partnership:-
	Held, dismissing the appeal, that the action to recover money lent was misconceived. No action could lie against the partners individually since the liability of partners was joint; and money lent to a partnership of which the person advancing the money was a partner could be recovered only in proceedings for taking accounts in accordance with the provisions of the Partnership Act, 1890, s.44."

5. Mr Ching contends that the claim against the 1st defendant does not reside in the plaintiff for he is, in effect, purporting to act as a representative of all the other partners. He therefore submits that the issues of misappropriation do not properly fall to be decided at this stage but that the action should proceed by establishing whether or not the plaintiff was a partner. If the plaintiff succeeds an order for an account to be taken would then be made at which time the liability of the let defendant for any monies that may have been misappropriated can be determined.

6. In his reply Mr Swaine agreed with Mr Ching that the plaintiff will not, at the end of these proceedings, in any event, be entitled to a monetary judgment for a specific sum which he claims is due to him as a consequence of the dissolution of the partnership, so that it will be necessary for an account to be taken. However, he says that although the court is not required to do a detailed account, it is vital to decide upon evidence now whether the 1st defendant has appropriated partnership monies in order that proper directions can be given for the account to be taken.

7. Mr Swaine also referred to the petition presented by the plaintiff to wind up Hop Kee Woo Enterprises Limited on the just and equitable ground in which the same allegations of misappropriation are made against the 1st defendant. This petition is due to be heard immediately following the present action. However, I do not consider that the issues relating to the petition are relevant to the present submission. This action and the petition must, in my judgment, be considered separately. Mr Swaine also drew my attention to the 15th edition of Lindley on Partnership at page 680 as authority for a partner to clam damages against another partner, but this passage is clearly not referable to a dispute that involves the taking of an account.

8. Having carefully considered the submissions of counsel, I am quite satisfied that the appropriate course for the further conduct of this action is to decide whether or not the plaintiff was a partner in Oriental Industrial Company, for that is the essential issue. If the evidence supports the plaintiff, an account will then have to be taken to ascertain what monies, if any, are due. If, of course, the plaintiff fails, the action will be dismissed.

9. As a result, I rule that evidence relating to allegations of misappropriation by the 1st defendant is irrelevant and inadmissible.

	(B.L. Jones)
	Judge of the High Court

(1) [1923] 2 Ch. 421

(2) [1954] 1 W.L.R. 1309

Representation:

Mr J. Swaine, Q.C. and Mr R. Whitehead (Vivien Chan & Co.) for Plaintiff

Mr. C. Ching, Q.C. and Mr C. Smith (K.M. Lai & Li) for Defendants