Moon Kee Chaan (A Firm) v. Ho Shu Tong and Another

DCCJ001996/2001

DCCJ1996/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1996 OF 2001

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Coram: H.H. Judge Muttrie in Court

Date of Trial: 23 - 25 June 2004

Date of Judgment: 6 July 2004

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Judgment

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1.The plaintiff is a fruit wholesaler. The 1st and 2nd defendants were partners in the operation of a retail fruit stall called Tin Yick. The 1st defendant was a silent partner; the 2nd defendant actually ran the fruit stall. That business closed down at the Chinese New Year, i.e. 27 January 1998 and the partners signed a formal document recording the dissolution of their partnership on 8 June 1998.

2.The plaintiff's claim is against both defendants for $321,958.60 being the price of goods sold and delivered between 3 January and 26 January 1998, i.e. in the final month of Tin Yick's trading. The 2nd defendant never filed any notice of intention to defend, and the plaintiff obtained judgment against him on 13 March 2001. Now the action proceeds against the 1st defendant only. He denies that any goods were sold or delivered between the relevant dates. It is not in dispute that the plaintiff sold fruit to Tin Yick up to the end of December 1997.

3.Evidence for the plaintiff comes from Mr Li Yan, his son Mr Li Chi Kei, Andy, both of whom are partners in the plaintiff firm, and an employee Mr Lam Kam Sing. The plaintiff's case as it appears from their evidence and the documents is as follows.

4.When Mr Li Yan knew that the plaintiff was to receive a consignment of fruit he would allocate it beforehand to his various customers, according to their previous orders, and fill in a printed allotment table to show how many cartons of each kind of fruit each customer was to get. Then his delivery worker, Mr Lam Kam Sing would contact the coolies who worked for the customers, and tell them to come and collect the cartons. Usually the goods were delivered at about 1 a.m. and the plaintiff's accountant, Mr Chiang Cho Shing would set the prices at about 7 a.m. The accountant would send out the invoices to the customers at about 9 a.m.

5.According to Mr Lam the coolies who collected fruit for Tin Yick were called Luk Chai and Ah Bee. He remembered that goods were delivered to them in January 1998, though obviously he could not say what those goods were except by reference to the allotment tables which had been passed to and used by him. He could remember this period because at some point he had been told that Tin Yick was closing down, and he was not to deliver any more fruit to Tin Yick's coolies after the end of January.

6.There were no records of deliveries; the coolies would not sign any kind of delivery note, nor would the customer. If there was any problem with delivery the customer would contact the plaintiff on the same day. At the end of the month, the plaintiff would send out to the customer a monthly statement showing the invoices for the month; and payment would be made in the course of the following month.

7.The plaintiff produces receipt counterparts showing payments made by Tin Yick from March to January 1997. Mr Li says that in any month the payments made were for the invoices of the previous month. Copy invoices for the months of October, November and December 1997 are produced and the totals of these tally with the payments which Tin Yick made in the subsequent months.

8.It is Mr Li's evidence that for August 1997 Tin Yick owed a total of $544,537.20. The 2nd defendant, Mr Chan claimed to have cash flow problems so Mr Li agreed to let him hold over payment. However the sales for the subsequent months went on and payments were made as before. The invoices for January 1998, not including a final one dated 26 January, came to $318,298.60. Tin Yick sent over a cheque for that figure and a receipt was issued. Mr Li reminded Mr Chan that he had not yet paid for August and suggested that the figure for August be paid forthwith, and that the sum due for January be left over until after the Chinese New Year; and this was agreed. So Tin Yick issued another cheque for $544,537.20, signed, as were all its cheques by the two defendants; a receipt was issued showing that this was for invoices for August 1997 and the original receipt for $318,298.60 was cancelled.

9.Thereafter according to Mr Li he gave Mr Chan the 2nd defendant more time to pay and continued to supply fruit to Mr Chan when he set up his own fruit stall, Chan Chai Kee about half a year later. It appears that Chan Chai Kee is now also owing some money to the plaintiff.

10.When Mr Li Chi Kei came home from Canada in August 1998 he took up the management of the plaintiff's accounts. He says that his father told him that he had allowed Mr Chan, who was his good friend, time to pay. However, no payment was received so in April 1999 the younger Mr Li sent out a monthly statement to Tin Yick for the outstanding January 1998 invoices. These were sent to Tin Yick's old address, where Mr Chan now operated Chan Chai Kee. A further monthly statement was issued in September 1999. Nothing was paid, and solicitor's demand letters were sent in March 2000 to Tin Yick and then in January 2001 to the two defendants individually. Proceedings were issued in February 2001.

11.In support of the January 1998 sales, the plaintiff produces the allocation tables and the invoice counterparts. One counterpart, on white paper, would be delivered to the customer and the other, on pink paper, kept by the plaintiff. I have been shown all but five of the pink counterpart invoices for January 1998; Mr Li says that the others were probably destroyed by a dog in his business premises. In any event those pink counterparts which are produced tally with the allotment tables. Mr Li Chi Kei introduced a system whereby a third copy on yellow paper, with a different format (in particular the company's name was in English as well as Chinese) was kept as a record while the pink copies went to the accountant to prepare the tax returns.

12.I have also been shown the defendant's white counterpart invoices for the August 1997 sales. The total of these is $544,607.20 rather than the cheque figure of $544,537.20. Indeed it appears that the total of the other (yellow) copies for August is $544,267.20. No one has explained these minor discrepancies, but they are minor and I do not see that they cast any doubt on the plaintiff's evidence overall.

13.Evidence from the 1st defendant comes from Mr Ho himself and from Miss Chan Yuk Lin, Conny, who is the daughter of the 2nd defendant. Mr Ho was, as I have indicated a silent partner. He did not know much of what went on at the fruit stall. He had to sign the cheques, but according to him, he would be given the invoices later for checking.

14.Miss Chan was the bookkeeper and cashier of Tin Yick at the relevant time. Among other duties, she had to pay the coolies and record what the payments to them in a record book. She says that there were no deliveries from the plaintiff in January 1998; instructions were given, though she cannot remember by whom, to stop buying fruit from the plaintiff and some other suppliers then, because of the imminent closure of Tin Yick, though fruit was bought from other suppliers throughout the month. She says that the coolies Luk Chai and Ah Bee could not have collected fruit from the plaintiff in that month; Luk Chai was old and had stopped doing night-time collections for the plaintiff in 1992. She had told Ah Bee to stop collecting from the plaintiff in January.

15.Miss Chan sought to rely on a bundle of computer print-outs which she said were coolies' delivery records and which show entries relating to other suppliers in January but none relating to the plaintiff. She said that these print-outs were made by a Mr Rick Ho, the son of the 1st defendant, from her own coolie record book, and that she had, at his request, checked and verified them against the contents of her book. This exercise, it appears, was done when the litigation had already started, in order to give a clean copy to the court. Miss Chan could not say what had happened to her coolie record book; she said it had been given back to Mr Rick Ho, and he would know where it was. Mr Rick Ho has not given evidence, and discovery of the coolie record book was never given.

16.So far as the cheques paid at the end of January are concerned Miss Chan's evidence is that originally she made that out for $318,298.60 in final settlement of all outstanding invoices, up to the end of the lunar year and the cessation of Tin Yick's business. However she was then told by the plaintiff's accountant, Mr Chiang that some invoices had been missed out and the correct figure was $544,537.20 and so she had made out the cheque for that figure and had it signed by the partners. It did not represent payment of the invoices for August. Although the plaintiff's counterpart receipt shows that it was in payment of the August invoices, that was not written on the top copy or counterpart which she received from the plaintiff's employee when she handed over the cheque. She could not, however, explain either what the original figure of $318,298.60 was for, in terms of invoices. Nor could she say what the invoices were which would bring the figure up to $544,537.20.

17.Unfortunately for the 1st defendant, Miss Chan was a very poor witness. Although she purported to adopt her statement as evidence, when cross-examined she claimed that her solicitor had not put down what she originally told him in Chinese, nor had he translated the English statement to her before she signed it. There were in her evidence various inconsistencies, recent inventions and obviously incredible matters which flew in the face of common sense. I do not need to set them out. The can be seen, if need be, from the transcript of evidence. Further her demeanour was such that she would not give an inch; she would stick to her story even if it was exposed as nonsensical.

18.Unfortunately also for the 1st defendant, and as I indicated to counsel, the computer print-out coolie records are completely unreliable. Of course if they had been made contemporaneously it would be a different matter. But they were made for the purpose of litigation, and the primary evidence in the shape of the coolie record book has been caused simply to disappear. I can place no reliance on these print-outs.

19.I found the plaintiff's witnesses straightforward and their evidence credible. It was suggested that they were selective but I did not find that. Given the system, which does not seem to be in dispute, there is no surprise that there are no delivery notes or other records emanating from Tin Yick or the coolies to show receipt of the goods. That was not how the fruit trade operated. The documentary evidence which we have is all consistent, in that the invoices and the allotment tables tally. Further it is consistent with the previous dealings between the parties.

20.There is also one large unanswered question, which is why, if there were no sales in January 1998, the 2nd defendant never defended the action against him? Unfortunately we do not have his evidence. A subpoena was issued at the last minute, but the 1st defendant's solicitors were unable to serve it. I have heard no good reason why it was not issued earlier. In any event, we have not heard from him. He is the person in Tin Yick who was most closely involved in the actual operation of the business, even more than his daughter; and it is rather difficult to see, if the active partner does not contest a partnership debt, what sort of a defence there can be. It is of no help to say that the 2nd defendant could not afford a lawyer; he could have represented himself as many people do in the District Court and indeed the High Court. $320,000 is not a small sum; most people would not accept a judgment against them for such a sum, without making some effort to contest it, if there were any defence available at all.

21.It has been suggested - and denied by Mr Li Yan - that there was some sort of conspiracy whereby the 1st defendant was to be pursued rather than the 2nd defendant but there is no evidence to support that. In any event it is far-fetched given that even if there were such a conspiracy it would not affect the liability of the 1st defendant as one of the partners when the goods were sold and delivered, and that under the terms of the dissolution agreement the 2nd defendant would be liable, in a question between them for all outstanding debts.

22.At the end of the day, it comes down to this. Having heard the evidence and seen the documents I believe the plaintiff's witnesses that the goods were sold and delivered and I do not believe the defendant's witnesses when they deny it. I have no doubt that the goods were sold and delivered, as claimed, and have not been paid for.

23.There will accordingly be judgment in favour of the plaintiff against the 1st defendant for $321,958.60 with interest thereon at the prime rate plus 1% from the date of the Writ to the date of judgment, and thereafter at the judgment rate, and costs to be taxed if not agreed.

24.I indicated that the costs order would be final, though the judgment would be handed down. There was no dispute that costs should follow the event. Counsel for the defendant argued that there should be no certificate for counsel if the plaintiff succeeded. Schedule 1 to Order 62 of the Rules of the District Court provides at Part II, paragraph 2 (3):

No costs shall be allowed in respect of counsel appearing before the Court unless-

(a) the Court has certified the attendance as being proper in the circumstances of the case; or

(b) the amount recovered exceeds $150,000.

25.The amount recovered exceeds $150,000. Costs may be allowed without a certificate. But for the avoidance of doubt I take the view that although the trial was on fact alone (an ultimately, in my view, there was simply no good defence) the facts were strongly contested, and considerable forensic effort and skill was exercised on both sides. I therefore certify that attendance of counsel was proper in the circumstances of the case.

Representation:

Mr Kenneth Wong instructed by Messrs. S.K. Wong & Lee for Plaintiff.

Ms. Annie Lai instructed by Messrs. Lau, Wong & Chan for 1st Defendant.