Leung Chiu Kwong and Others v. Wong Hin Woon and Others

HCMP001748A/1982

(Not for Circalation)

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS NO. 1748 OF 1982

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BETWEEN

Coram: Deputy Judge Nazareth, Q.C. in Court.

Dates of hearing: 3rd-7th, 10th-14th, 18-21st, 25th-28th June, 1st-5th, 8th-11th July, 1985.

Date of delivery of Judgment: 17th July, 1985.

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JUDGMENT

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1. This is an unfortunate case. The parties who are partners in a relatively small public light bus operation, have split into two factions which have engaged in an internecine fued that has culminated in these proceedings. The Plaintiffs claim that the partnership has been terminated by a notice of dissolution served by them in April 1982; alternatively that the partnership should be dissolved because of the wrongful conduct of the Defendants, or alternatively because that would be just and equitable.

2. The Defendants say that the disputes were caused by the Plaintiff's wrongful conduct and dissolution should not be ordered. They counterclaim first for a declaration that the exclusive rights under which the partnership operates on 2 routes (the franchise) is held upon trust for the partnership; second a declaration that the Plaintiffs' notice of dissolution is invalid and of no effect; third, for an injunction to restrict the Plaintiffs from various acts that they claim deny or hinder exercise of their partnership rights and fourth, against the 1st Plaintiff, repayment of certain moneys, and also damages for breach of the partnership agreement, of fiduciary duty as trustee and of his employment contract with the partnership.

3. The hearing, incredibly estimated by the solicitors concerned to take two weeks, has stretched to more than 6 weeks and could have gone beyond. During its progress, bitterly contested every inch of the way, the Mass Transit Railway Island Line has come into operation. It provides an alternative service for the larger part of the partnership routes and has dealt a devastating financial blow to the profitability of the partnership. Yet the proceedings have continued with unabated zeal. Soaring costs are likely to ensure only a pyhrric victory, if victory there can be, to one or other of the parties, both of which comprise people of relatively modest means.

4. Perhaps the wisest of them may yet prove to be the 8th Defendant who, at the commencement of the hearing, withdrew by consent with no order as to costs in consideration of the partnership paying her $10,000 for her share.

Background

5. In January 1980, the Transport Department notified its intention to grant exclusive rights to operate certain maxicab routes.

6. Where a number of owners of maxicabs wished to jointly operate a route, only one was to be permitted to apply and he only would be responsible for the satisfactory operation of the route. This policy has provided the occasion of more than one dispute.

7. An application was put in by the 1st Plaintiff to operate two routes with his own vehicles and the vehicles of the other Plaintiffs and of the Defendants. Who actually initiated the venture and what precisely was at that stave envisaged, is disputed. The application was successful, and business commenced oh 18th May 1980. A formal partnership agreement was entered into on the 6th August 1980. The partnership soon bean to make a profit and equally soon dissention set in. As indicated, the partners split into two factions, one led by the 1st Plaintiff and the other by the 1st defendant. The 8th and 9th Defendants originally sided with the 1st plaintiff but later switched sides.

8. On 14th April 1982, the Plaintiffs served upon the Defendants notice of intention to dissolve the partnership. The first issue I have to consider is whether that notice had the legal effect of determining the partnership.

Notice of dissolution

9. It is common ground that a notice of dissolution signed by the 4 plaintiffs and the 8th and 9th defendants (who at that time were still in the plaintiff's camp) was on 14th April 1982 given to the other defendants. The question is whether that notice had the legal effect of terminating the partnership. Section 28(1) of the Partnership Ordinance (Cap. 38) provides that:

"Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of his intention to do so to all the other partners."

10. It is not disputed that the partnership agreement does not expressly provide for a fixed term. It is, however, contended for the Defendants that it was a term of an oral agreement which was subsequently reduced to writing and is now the partnership agreement, that the partnership was for the duration of the franchise for the two routes the partnership was formed to operate. I am not satisfied that that was a term of the original oral agreement. In any case the franchise itself has not been granted for any specified period but is indefinite. More to the point, no duration provision appears in the partnership agreement and accordingly parol evidence cannot be permitted to vary the terms of the agreement in that respect. I conclude therefore that no fixed term was agreed for the partnership. Accordingly, under section 28(1) any partner is able to dissolve the partnership by notice. However, the matter does not end with section 28(1) for a conflicting provision appears in section 34(1) which is framed in the following terms:

11. Paragraph (a) of section 34 (1) is disposed of by my finding that the partnership agreement was not for a fixed term.

12. So far as para. (b) is concerned, some arguments were directed to the question of whether the partnership was entered into for a single adventure or undertaking. I consider the point academic since there is no question of the adventure or undertaking, if such the franchise operation be, having terminated, nor of partnerships for a single adventure or undertaking being excluded from the scope of paragraph (c) unless they be for a defined time which this partnership is not in my finding.

13. It is paragraph (c) that has to be considered, as the partnership, in my judgment is for an undefined time. It is here that the conflict between sections 28(1) and 34 arises, for the partnership agreement is both "for no fixed term" (enabling determination by notice) and for an "undefined time" (enabling dissolution by notice 'subject to any agreement'). The conflict between the identical sources of these provisions in the English legislation was resolved by the decision of the English Court of Appeal in Moss v. Elphick 1910 K.B.D. 846. The effect of that decision, which I adopt, is that the result of a contract of partnership is a partnership at will unless some agreement to the contrary can be proved.

14. The question then is whether any provision to the contrary appears in the partnership agreement in this case. There is no express provision. But the following provisions bear upon the point:

15. Before proceeding to construe these provisions, it is instructive to see how a not dissimilar situation was approached in Abbott v. Abbott (1936) 3 ALL E.R. 23. In that case a farmer formed a partnership with his five sons to carry on the business of his farm. Clauses 2 and 10 of the partnership deed was as follows:

One of the sons gave notice of dissolution. It was contended that he was not entitled to do so. The following passages from the Judgment of Clauson, J. at p. 826 are in point:

"I am told that I am entitled to know the circumstances in which the deed was executed, and I have already stated them. The materiality of those circumstances is that prima facie it is not very businesslike for a man to throw assets, which belonged to himself entirely, into a partnership, with the result that he becomes the owner of the property as to three eighths only, and one eighth goes to each of his five sons, and that at a moment's notice one son can bring the business to an end and take away one eighth of the assets. The circumstances are as I have stated. What oh the true construction of this deed is the fair meaning to be attributed to it? I must read it with great attention and see from the deed as a whole whether the parties have agreed that any one of the sons, or the father, can bring the business to an end at any any moment or whether there is some agreement inconsistent with that being done."

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This being an agreement for a partnership, it is an agreement which each partner has a right to bring to an end at any moment if he so desires, unless I am satisfied that there is some other agreement. The first point is that on reading cl. 2 it is clear that a partner who says "I want to go out of the partnership" does hot determine the partnership by doing that. If this were a partnership at will and one partner said, "I am determined to go out of this partnership," the effect would be that the partnership would come to an end as between all the partners, although the others might form some new partnership amongst themselves if they so desired. So there is some limitation upon this character of the partnership; it is subject to the express agreement that a single partner cannot determine the partnership although he can determine it as between himself and the others. This involves the fact that if one intimates his desire to go out, the partnership shall continue among the remaining partners. The next question that I have to decide is how long and until when is the partnership to continue, and is there any light thrown upon that by the document? Prima facie, if two partners agree that they will continue indefinitely in partnership until by agreement they alter that position, that is not a partnership at will. It is a partnership for their joint lives unless they agree to terminate the relationship. That was decided in Moss v. Elphick (1). Accordingly, I get this from cl. 2. The partners have agreed that the partnership shall continue, notwithstanding that one partner goes out, and they have also agreed that notwithstanding that one partner dies, the partnership shall continue. That does hot mean that the partnership shall continue when all but one of the partners has either died or retired, because there cannot be a partnership with one partner. But the clause seems consistent with the view that so long as there are two partners the partnership is to continue. C1. 10 seems to contemplate that there nay be circumstances in which the partnership might have to be dissolved by the court. That is quite alien from the conception of a partnership at will to which a partner can put an end of his own volition. It is difficult to see in what circumstances the court could decree a dissolution of such a partnership. The court could, of course, determine that the partnership had been duly dissolved. But it never discusses the grounds which justify a dissolution except in the case of a partnership otherwise than at will. That clause seems to indicate that this is a partnership which is hot determinable at the will of one partner as between all the partners, but it is a partnership which is to continue until there is a dissolution of it by the court or by some other event, save as against a partner who retires. In these circumstances, it seems clear that sense cannot be made of the document unless it is that this partnership shall not be brought to an end so long as two of the partners are still living and have not retired. In these circumstances, the claim of the plaintiff to dissolve the partnership as between all the partners is one which must fail, and accordingly the action must fail, and it only remains to dismiss it with costs."

16. Reverting to the partnership agreement in this case, it is clear from clause 4 that it was envisaged that the agreement would itself provide for determination, i.e. "as hereinafter provided". Within the agreement the only provision for determination is that in clause 15 (apart from the incidental reference to termination in clause 24).   True the former could be said to be a reference to termination rather than provision for it. Nonetheless it is clear reference to determination by decision of all the partners to cease operation of the routes. In that light, and in the circumstances in which the venture originated and the partnership agreement was entered into I think clause 15 must be regarded as the only provision in the partnership agreement for dissolution. Such a view is strengthened by continuation of the partnership notwithstanding the retirement of the Plaintiff or indeed of any other partner, clearly envisaged in clauses 15(C) and 17. Furthermore, it is not disputed that any partner is at liberty to retire. The foregoing is, I think, hot as strong as the considerations that weighed in Abbott v. Abbott. Nonetheless, against the background of no less than a dozen partners and of an enterprise that must provide the livelihood of most of them, it leads me to the conclusion that this is not a partnership at will, and that a right of partner to dissolve the partnership by notice is inconsistent with the partnership agreement.

17. It was also contended on behalf of the Plaintiffs, that the Defendants were estopped from denying the dissolution of partnership, because in reply to the notice of dissolution, the Defendants accepted that the notice had had that effect. Although such acceptance was clearly stated to be the legal effect of the notice, it is not necessary to consider whether such an estoppel would have the impermissible effect of overriding the relevant law i.e. section 34(1) of the Ordinance, since it is clear that the Plaintiffs omitted to plead the estoppel. They are, therefore, precluded from relying upon it.

18. The Plaintiffs' claim that the partnership was dissolved by the notice of 14th April 1982 must therefore fail.

19. I proceed then to the plaintiffs' alternative case that the partnership should be dissolved upon the following three grounds:

20. Before proceeding to the specific acts of wrongful conduct alleged by the Plaintiff it is helpful to touch upon the nature of the evidence adduced.

Nature of Evidence

21. The factual issues turn essentially upon the oral evidence adduced. Of the 11 witnesses who gave evidence for the plaintiffs, 3 maybe regarded as independent, i.e. Mrs. Chung, the Transport Department official (P.W. 1), Mr. Lee, the bank manager and brother-in-law of the 1st Plaintiff's wife (P.W. 5) and Mr. Michael Chan, the plaintiff 's solicitor, who produced certain documents. Unfortunately, their evidence is peripheral. Essentially the same is true of the two solicitors witnesses (D.W. 2 and D.W. 3) who gave evidence for the Defendants. The only other witness for the Defendants, the 1st Defendant, like the remaining 8 witnesses who gave evidence for the Plaintiffs, was an ill concealed partisan. The evidence of all these witnesses is obviously to be regarded with caution, in particular that of the 1st Plaintiff and the 1st Defendant, both of whom I do not believe in particular respects. Their mutual animosity on occasions outweighed any concern for the truth.

22. The considerable volume of documentary evidence submitted, has, in the end not proved to be of very great assistance. Much of that portion directly concerned with the issues of fact, emanates from the parties and cannot be much less suspect than their oral evidence.

23. It is against that background that the factual issues in this case have to be resolved.

Prejudicial conduct alleged by the Plaintiff

24. Under paragraph 4 of the statement of claim and section 37(c) the Plaintiffs alleged the following matters:

(i)   Incitement of TONG Wing-kwong.

25. The allegation that the 1st Defendant incited Tong, an employee, to initiate proceedings in the Labour Tribunal against the partnership rests entirely upon the evidence of the 1st Plaintiff. In the statement of claim it is only the 1st Defendant in respect of whom the allegation is made. I find the 1st Plaintiff's entire evidence of the episode improbable and reject it out of hand notwithstanding Mr.Chong's ingenious and eloquent submissions.

(ii)    Attempted dismissal of MAK Shui-tong

26. The evidence does not convince me, even upon bare probabilities, that any of the present Defendants tried to dismiss Mak. It was in my view one Yuen, the husband of the 8th Defendant who, as it were, attempted to buy him out. It may well be that the 1st Defendant was aware of Yuen's actions, but that is far from constituting an attempt to dismiss Mak or being party to it. I should add that having regard to Mak's correction of his earlier testimony as to when money was offered to him by Yuen, and his general demeanour, I do not place much reliance upon his evidence. In this regard, I reject the Defendant's plea that the Plaintiffs are estopped from pleading that it was the 1st Defendant who dismissed Mak; but that of course does not mean the Plaintiffs' allegation succeeds.

(iii)    Failure to comply with the Transport Department's request.

(iv) Preventing the Plaintiffs from complying with the Transport Department's request.

27. It is not disputed that on 25th August 1982, the Transport Department requested an increase of 4 additional light buses, nor that the 1st Plaintiff hired two from a non-partner on 6th September without consulting the Defendants. Nor is it disputed that the Defendants did put up a notice seeking to prevent the introduction of the two public light buses, and that the 1st Defendant declined for a time to sign hire payment cheques for the two public light buses. In my finding the 1st Plaintiff did not inform the Defendants promptly of the Transport Department's request. Instead he hired two public light buses and only when they went into service on 6th September did he inform the Defendant's of the Transport Department's request. On his own admission, he would have put a 3rd bus into service but for the owner having sold it. He denied having been informed by the Defendants that they were prepared to put in two buses. He ultimately admitted that he received a letter from the Defendant's solicitor containing the details of two buses they were prepared to put into service. However, he denied that he ever ascertained the English contents of that letter or even that his solicitors explained the contents to him. This is one of the several respects in which the 1st Plaintiff in my view has clearly lied. In my view the 1st Plaintiff's conduct, which was not uncharacteristic of his conduct throughout, fell far short of what one would expect from a partner and what the partnership agreement required. In the circumstances, the Defendant's reactions were not unnatural. I do not think the Defendant's intended any prejudicial effect, but in my view the question is rather whether the conduct would or did in the ordinary course of events prejudicially affect the carrying out of the business, having regard to its nature. Remarkably enough the evidence does not disclose such effect apart probably from some exacerbation of animosity between the two factions. Nevertheless, the very nature of the Defendants conduct in my view is such that it would in the ordinary way have prejudicially affected the carrying out of the business.

28. This head of wrongful conduct can be dealt with quite shortly. It is not disputed that such a notice was given. In the ordinary way, it was calculated to prejudicially affect the carrying on of the business, and I so find. On the other hand, it was a not unnatural response to the notice of dissolution and to the belief of the Defendants first that the Plaintiffs were manoeuvring to secure the franchise for themselves, and second that the notice would effectively dissolve the partnership. As to the latter, it is ray finding that the Defendants originally received legal advice that notice was effective, which advice was later revised.

(vi)    Interruption and interference by the Defendants.

29. Finally, it is alleged that the Defendants constantly interrupted and interfered with the proper running of the business which deprived the Plaintiffs of their right of participation in the management and affairs of the business of the partnership. I do not propose to detail the several respects in which it was alleged in evidence and by Mr. Chong that the Defendants did this. What I will say is that at the end of the day, far from the Plaintiffs being deprived of their right of participation in the management and affairs of the business of the partnership, it seems to me that the 1st Plaintiff used his strategic position as the managing partner who liaised with the Transport Department to deny the Defendants participation in a number of important matters. Since there were two factions it was not unreasonable on the part of the Defendants to ask for their side to be represented in the counting of the takings. I do not accept that their proposals would cause undue if any additional expenditure. Furthermore, their proposals although termed decisions cannot in my view rightly be regarded as decisions since members were invited to convene a meeting if they were of different opinions. Nevertheless it is not disputed that the "decisions" were implemented without a meeting being convened. I should at this stage advert to the 1st Defendant's claim that the 1st Plaintiff refused to convene meetings although he had been appointed to convenor of meetings. I find that the 1st Plaintiff and the other Plaintiffs after the initial meetings mentioned in the evidence ceased to convene or to attend meetings called by the Defendants. I am not satisfied that the 1st Plaintiff was actually appointed convenor of meetings. However, he was appointed to be chairman and by virtue of that and his senior - most position, he was looked to, to convene meetings. On their own evidence, more than one of the Plaintiffs ceased to attend meetings because of quarrels. I believe they also ceased to attend because they would quite clearly be outvoted. In this regard the provision for a quorum of 11 partners, whether or not inserted into the partnership agreement at the instance of the 1st Plaintiff as alleged, was clearly abused to prevent the majority making decisions that I do not think were generally oppressive. On the contrary it seems to me that it was the majority that were oppressed in being denied their rights.

30. The plaintiffs also claim that the 1st Defendant dismissed an employee, one DIU Sai-wan, on 1st January 1983 and attempted to dismiss another MAK Shui-tong, in breach of the partnership agreement which clearly provides that no individual partner shall dismiss an employee except for gross misconduct. The Defendants make serious allegations against Diu, i.e. that he was a triad member who did no work but merely accompanied the 1st Plaintiff as a bodyguard to intimidate the Defendants. It was not established that Diu had any triad connections but it did not become too clear to me what his duties were and his generous treatment by the 1st Plaintiff must in the circumstances be cause for considerable suspicion. I am in any case not satisfied that it was the 1st Defendant who dismissed Diu, although there is no doubt he wanted Diu to be dismissed. Likewise, as I have already said, I am not satisfied that it was the 1st Defendant who attempted to dismiss MAK Shui-tong.

31. The attempt to by-pass the 1st Plaintiff as a necessary signatory to partnership cheques and the proposal to open a new bank account I think was unreasonable for it would have meant that the Plaintiffs could have been deprived of due participation in the same manner that the 1st Plaintiff denied the Defendants participation in communication with the Transport Department.

32. I do not think it necessary to record fruther my consideration of this multiple ground of the Plaintiffs' allegations.

Conduct making business impractical

33. Proceeding to paragraph 5 of the statement of claim, it relies upon the same grounds as does paragraph 4. I need, therefore, not repeat them. The question however, is whether they constitute wilful and persistent breach of the partnership agreement or whether the Defendants so conducted themselves that it is not practical for the Plaintiffs to carry on the business in partnership with the Defendants. I do not consider the conduct relied upon under paragraph 4 as constituting wilful and persistent breach of the partnership agreement. Nor do I dconsider that it is the result of the Defendants' conduct that it is not reasonably practical for the Plaintiffs to carry on the business in partnership with the Defendants. I should add that in this respect I hold myself limited to the grounds pleaded.

Circumstances rendering dissolution just and equitable

34. The final ground relied upon by the Plaintiffs is that circumstances have arisen which render it just and equitable that the partnership be dissolved. It rests upon the same matters as paragraphs 4 and 5, but in addition the Plaintiffs rely on two additional matters, i.e. that there is and was complete deadlock between Plaintiffs and Defendants and that there is and was complete and fundamental loss of mutual trust and confidence between the Plaintiffs and the Defendants. I think the Plaintiffs are right in claiming that there is and was complete and fundamental deadlock between the Plaintiffs and Defendants, even if that is not the same as deadlock between all the partners in the sense that the partnership business could not be continued by a majority. Also I am satisfied there was a fundamental loss of mutual trust and confidence between the Plaintiffs and the Defendants. I accept upon the ample authority cited that paragraph (f) of Section 37 (the just and equitable ground) is not to be construed ejusdem generis the earlier grounds in that section. Paragraph (f) provides what is manifestly equitable relief and therefore entitles the defendants to rely upon equitable defences. They have not been slow to do so, claiming that the plainitff has not come to court clean hands and has acted in breach of the partnership agreement and of his duty as trustee. In support of their claim they detail 11 matters.

35. Before proceedings to those I should mention Mr. Chong's submission that paragraphs (c) and (d) of section 37 provides statutory grounds for dissolution and are therefore not subject to the equitable defences applicable to paragraph (f). On the other hand, he does not dispute that the court has an overall discretion to decree dissolution, implicit in the opening words of section 37:-

36. Mr. Chong rightly submits that such discretion must be exercised judicially, but I have not been referred to any authority which provides guidance.

37. I proceed then to the 11 grounds relied upon by the Defendants in opposing equitable relief under paragraph (f) of section 37 and detailed in paragraph 8 of their re-amended defences:

Although the agreement clearly provided that no employee was to be engaged by an individual partner on his own, it appears that engagement by the 1st Plaintiff was tolerated. However, his statement that the partnership could not be operated without his having such power, is characteristic of his general arrogance. As to the salaries paid, this may have been incompetence rather than improper conduct. There is also no evidence of personal friendship at that time between the two employees and the 1st Plaintiff.

(c)    As to dereliction by the 1st Plaintiff of his duty as a partner, I accept that he was on occasions late for work. It is not clear to me why he should have delegated his duties as a regulator to one LAM Cheong-king or in any case what other duties he had to attend to. However, the interim manager sanctioned the arrangement and therefore I do not think that the Plaintiff can be regarded as being in breach of the partnership agreement or his duty as trustee, particularly in the light of the consent order ratifying the interim manager's actions.

(d)    Repeated obstruction or refusal to carry out the policy of the partnership. No less than 10 respects were specified in the further particulars supplied by the Defendants. I do not propose to detail my examination of each. Suffice it to say that the allegation was substantiated in several of the respects specified.

(e)    I am satisfied that the two additional public light buses (CT3417 and AV6219) were added without the prior knowledge or consent of the Defendants.

(f)    I am not satisfied that the 1st Plaintiff was in breach in respect of the re-possession of his public light bus AV6214.

(g)    I am not sure it was necessary for the 1st Plaintiff to have a paging machine. Perhaps it catered to his sense of importance, but I do not think he could be accused of having misappropriated the $1,000 it cost. This ground was in any event abandoned by Mr. Cheung during the hearing.

(h)    Since the increase of his monthly salary from $3,000 to $3,300 was effected by the interim manager, I do not think the 1st plaintiff could be held responsible; moreover it was therefore validated by the consent order.

(i)     I do hot consider that the 1st plaintiff was responsible for any breach in respect of the renewal of the licence or permit of the 7th Defendant's public light bus.

(j)     I find that the 1st Plaintiff did fail, neglect and delay in informing the Defendants of some requests and directions of the Transport Department.

(k)    I am satisfied the 1st Plaintiff fell short of the standard of conduct required by the partnership agreement in failing and neglecting to convene and attend partnership meetings. Indeed it will be seen that in my view he effectively prevented such meetings by ensuring that there was ho quorum.

38. Clearly, therefore, there has been wrongful conduct oh the part of the 1st Plaintiff that may warrant refusal of his application for dissolution. However, I think the matter should be decided in the context of the general situation in the partnership. This should also meet Mr. Chong's point that if there was any misconduct on the part of the 1st plaintiff it does not bar the claim of the other Plaintiffs, oh whose part he said there was none.

39. Before I proceed to the question of whether I should exercise my discretion in favour of the Plaintiffs, I should record that in my finding the Plaintiffs have established grounds under section 37, which entitle me to order dissolution. Proceeding then to that question, it will be seen in the context of the counterclaim that my finding is that the Plaintiffs did not acquire the franchise for himself. However, he clearly played the major role in obtaining it and considers himself as having some extra or exclusive entitlement to it. He saw and still sees himself as the leader of the venture. In a way, his major role is acknowledged in the special treatment accorded to him in the partnership agreement.

40. In my finding, for the first 6 to 7 months of the operation of the partnership business, the 1st plaintiff continued with his full time job at the China Motor Bus Company. Meanwhile the business was effectively managed by the 1st and 2nd Defendants and the other partners, and began to show a profit by December 1980. On the 1st Plaintiff's resignation from the China Motor Bus Company in that month and taking up full time employment as one of the managing partners, apart from his duty of liaison with the Traffic Department, his area of authority was hot clearly defined. It was said to include also schedules and planning. One of the Plaintiffs' witnesses testified that the 1st Plaintiff's area was external administration as opposed to internal administration which was that of the 1st Defendant. Because of the ill-defined apportionment of management authority and the fact that the 1st and 2nd Defendants had been effectively managing the business prior to the 1st Plaintiff's arrival oh a full time basis, in my view it was hot the 1st Defendant who tried to seize control, to use the expression repeated in suspiciously precise terms by so many of the Plaintiffs witnesses, but rather the 1st Plaintiff. In my view this must have originated or at least contributed to the breakdown of partners' relationships. With the franchise held in his name and responsibility for liaison with the Transport Department, the 1st Plaintiff occupied a strategic position that he used against the Defendants, refraining from notifying them of relations with the Transport Department, introducing additional vehicles as he pleased, and employing new staff without consulting them. In a normal situation matters of this sort would have been sensibly resolved at partnership meetings. But partnership meetings, I accept, tended to degenerate into quarrels, with the Defendants demanding to be consulted upon the foregoing and another matters. The fact that they would have outvcted the Plaintiffs, I think, had as much if not more to do with the Plaintiffs' absence, effectively preventing further meetings after the initial few, by ensuring the absence of a quorum. At the stage they commenced that tactic, there was nothing in my view that suggested oppression by the majority; rather it was the majority who were denied a legitmate degree of participation.

41. The situation that ensued between the Defendants and the 1st plaintiff, and since the other Plaintiffs associated themselves with the 1st plaintiff as their leader, between them and the Defendants resulted in an interim manager being appointed by this Court upon the application of the Plaintiffs. Nonetheless, I doubt whether it would be right to term that situation a deadlock, for if meetings were to be held, the obstacles to the carrying on of the business would have been resolved in accordance with the partnership agreement, even if not in accord with the preferences of the minority. Moreover a majority of partners were in agreement. However that may be, in my view the present situation was caused more by the 1st plaintiff's conduct, with which the other plaintiffs fully associated themselves, than that of the Defendants.

42. In reaching that conclusion I have carefully considered all the evidence, particularly the forceful, even aggressive personality of the 1st Defendant, which clearly emerged in during his six and a half days cross-examination. In that regard I should mention that I do not believe that he was as timid as he tried to make out, nor do I believe that he was attacked by the 1st plaintiff on the occasion of the fight, of which so much was sought to be made. But in general, having regard to the evidence of the two and their demeanour in the witness box, I preferred the evidence of the 1st Defendant to that of the 1st Plaintiff. In serving the notice of dissoultion, I am satisfied the 1st plaintiff had, and in seeking dissolution still has, the intention of, terminating the partnership so that he can Proceed himself, in association with the other Plaintiffs, to operate the franchise for the two routes. Mr. Chong has sought to refute that by claiming that retirement from the partnership would not provide the plaintiffs with compensation for the full value of their shares, in particular regard to the goodwill of the business. How the goodwill could be worth anything is difficult to see. The accounts for the year ended 31st March, 1985 prepared by the interim manager show a less of $61,716.00 for the year, and net current assets of only $147,541.00. In any case the 1st plaintiff say's that since the Mass Transit Railway Island Line has commenced on 1st June, losses are of the order of $4,000 a day; at that rate the entire current assets should already have disappeared. In addition Mr. Chong put it to the 1st Defendant that the decline from profitability into loss is irreversible. The 1st Defendant conceded that the business is losing money but believes it could be turned round. It seems to me that the Plaintiffs led by the 1st plaintiff are concerned more with destruction of the partnership so as to Pick up the franchise than with extricating themselves with their full shares.

43. Mr. Chong has sought to persuade me that on the several authorities he cited I ought to order dissolution if there is any conduct on the part of the Defendants or any circumstances that fall within paragraphs (c), (d) and (f) of section 37, regardless of whether the plaintiffs are relatively more to blame. Those authorities relate to cases where there were only two partners or only two substantial shareholders, so that where mutual confidence and trust had broken noun, the partnership or private company could hot continue business, whatever the degree of relative culpability of the parties, leaving dissolution as the only option. That is far from being the position here. Eight out of the twelve remaining partners wish to continue. Those who apparently wish to terminate the partnership, in my view aim only to resuscitate the business on their own through the 1st Plaintiff retaining the franchise. It was alleged on the Plaintiff's behalf that a franchise was not transferable. But the Defendants have shown that the Transport Department policy is to be sympathetic to transfer of a franchise to remaining partners where the partner named as the holder has retired or died.

44. The partnership Agreement provides for the 1st plaintiff to have the franchise if the other partners do not wish to continue, and in effect for the franchise to be held on their behalf by the 1st Plaintiff if he wishes to retire. What we have here is an attempt by the 1st plaintiff abetted by the three other Plaintiffs to flout the spirit of the Partnership Agreement if not the Agreement itself, and secure the franchise for himself despite the wish of the majority to continue to operate. I do not see that any of the authorities cited require this court to allow itself to be used in that manner, particularly as it is not disputed that the plaintiffs can retire from the partnership if they so wish.

45. In the result, although there is conduct and there are circum-stances upon which section 37 entitles me to order dissolution, I have come to the conclusion that it would be wrong to do so principally because of the ulterior objective of the Plaintiffs which is directed to circumventing clause 15 of the Partnership Agreement and the trusts upon which the 1st plaintiff holds the franchise, but also because the majority of the partners wish to continue, the Plaintiff's can retire if they wish upon terms that could no doubt procure payment of their due shares, and their leader is primarily responsible for the cause of the difficulties that have arisen in operating the partnership business.

46. Since the Plaintiffs have also prayed for alternative relief, I would be disposed to make any appropriate order to ensure that they are able, if they so wish, to retire speedily having regard to their claim of continuing, irreversible losses, and also to secure to them the full value of their individual shares.

47. I proceed now to the counterclaim.

Defendants' counterclaim

48. First, the Defendants ask for a declaration that the franchise to operate routes 24 and 25 is held by the 1st Plaintiff on trust for all the Plaintiffs and Defendants.

49. The 1st plaintiff says it was his intention at the outset to acquire the franchise for himself, the others were only to hire their vehicles to him. That may well have been his ambition, but the evidence shows that without a total of 13 or 14 vehicles to operate the routes, his application would not be considered. He and the 1st Defendant could not procure such a number of vehicles on their own. They had to attract others to join the venture. It is my finding that at the very least, many of those who did join would not have done so on the basis that the 1st Plaintiff says he had in mind. Certainly the 1st Defendant would not and he recruited about double the number that the 1st plaintiff did. Prospective partners or their representatives met at the Pei Kar Restaurant on 23rd January, 1980 to discuss the matter and on the 1st plaintiff's own admission, partnership was discussed, although he says he did not agree to a partnership. What would have been the point of the meeting, and what the other partners would have gained by simply offering to hire their vehicles to the 1st plaintiff and allowing him to stipulate their vehicles as participating, is difficult to see.  From his subsequent conduct I have no reason to doubt that the 1st plaintiff would have liked to have created his own public light bus transport operation, but he must have seen that such a proposition would not be acceptable. In my finding he permitted the other intending participants to believe that the venture was to be a partnership.

50. I do not accept that the special treatment accorded to the 1st Plaintiff in the partnership agreement subsequently entered into, or the leading role he played in the preparation and submission of the application for the franchise rebuts the evidence and the clear implication that he acted on behalf of all the participants and not just himself. It is accordingly my finding that he acted also on their behalf and prior to executing the formal written Partnership Agreement, held the franchise in trust for all the participants or partners. The execution of the Partnership Agreement did hot, in my view, change that.

51. Mr. Chong submits that no evidence of pre-contractual negotiations can be given, and no parole evidence can be permitted to vary, contradict or add to so comprehensive an agreement as the written Partnership Agreement. I do hot accept that the trust varies, contradicts or adds to the Partnership Agreement. Is is true that the trusts upon which the franchise is held by the Plaintiff are now partly recorded in the Partnership Agreement, i.e. as to disposition of the franchise upon termination of the partnership. But I do not think that adds to varies or contradicts the Partnership Agreement (unlike certain other oral terms alleged by the 1st Defendant, which never found their way into the partnership Agreement, and which I have therefore disregarded).

52. Furthermore in my view the Partnership Agreement, if anything, supports the Defendants' claim that the franchise is held upon trust for all the partners.

53. If I am wrong and the effect of the trust or the oral agreement or pre contractual negotiations which created the trust do add to, vary or contradict the written Partnership Agreement, the 1st Plaintiff would nevertheless still continue to hold the franchise in trust for the partnership for then it could, in my finding, only have come into the partnership as partnership property. In my finding there is no room for the 1st Plaintiff to say the franchise was acquired for himself. In accordance with the Partnership Agreement and the Partnership Ordinance, the franchise would be partnership property, held by the 1st plaintiff in trust for the partners.

54. It is accordingly my finding that the 1st plaintiff holds the franchise upon trust for the Plaintiffs and the Defendants. On the basis of that trust, the terms of the Partnership Agreement and my finding that an additional franchise to operate route 25M was granted by the Transport Department as an accretion to the earlier franchise, it is my view that this subsequent franchise is also held upon the like trusts.

55. Second the Defendants claim a declaration that the notice of dissolution dated 14th April, 1982 is invalid and of no effect. I have already so found.

56. Third the Defendants claim an injunction restraining the plaintiffs from:

57. I do not think any of these matters is now threatened and consider that such injunction is now neither needed nor appropriate.

58. Fourth the Defendants' claim repayment of $8,402.60 from the 1st Plaintiff to the partnership. This sum is said to be comprised partly by the amount the 1st plaintiff diverted from the partnership takings to pay Wong Wah for wages denied by the 1st Defendant in refusing to sign relevant cheques. I do not accept that the 1st plaintiff is liable in respect of such amount, which Wong Wah would in any case have been able to legally recover from the partnership. As to the other part of the total, i.e. some $1,500 alleged not to have been paid to or to be owed by Yip Ping as claimed by the 1st plaintiff, I am not satisfied that that was so on the relevant partnership accounts. The unexplained balance of the total of $8,402.60 and the Defendants ambivalent reliance upon the partnership accounts convinces me that this is not a sum that I should in any case require the 1st plaintiff to pay.

59. Fifth the Defendants further claim against the 1st Plaintiff damages for -

60. This claim in my view was not seriously pursued and no credible attempt was made to establish any loss or damage. Several of the specific allegations upon which the claim is founded, I have already dismissed; I do not propose to return to them.

61. In respect of the claim that the Defendants were denied the opportunity to put additional vehicles into service, in my finding it was not a term of the partnership Agreement that priority would be given to partners. That such priority would be reasonable and fair does not in my view provide the basis of a claim for damages. So far as the related breach of the ratio of plaintiffs' and Defendants' vehicles agreed in the interim oral agreement is concerned, the owners of the vehicles who allegedly suffered loss were not called. Instead the 1st Defendant gave somewhat indirect evidence. The relevant dates and hire rates he testified to, did not accord with those disclosed in the further and better particulars furnished by his solicitors.

62. The 1st Defendant's evidence of loss of interest on moneys allegedly kept by the 1st Plaintiff in a current instead of a deposit account was wholly unsatisfactory.

63. What loss or damage could have been sustained by the plaintiff being late to for work was not explained to me. The delegation of his duties as regulator was adopted by the interim manager and so validated by the consent order.

64. Altogether I formed the impression that this claim was simply thrown in for good measure. At the end of the Defendants case it became necessary for me to seek clarification of what was being claimed. I was not much enlightened. I do not feel called upon to devise bases of liability upon which a master might be able to assess loss or damages. I accordingly reject the claim in its entirety.

65. It remains for me to record my decision to adroit for limited purposes evidence of the interim oral agreement of the 18th May, 1982 which was made "pending the outcome of this action without prejudice to the contentions of the plaintiffs and Defendants in this action". I admitted such evidence in case I subsequently found, which I did, that the agreement had in fact been made, notwithstanding that it was disputed by the Plaintiffs; also because it formed the Defendants defence against one of the plaintiffs' allegations, and finally because it was the basis of one of the Defendants' claims for damages. In the event I have not allowed that claim for damages. Accordingly I have not found it necessary to take into account the interim agreement, nor would I dean it safe or proper to do so, that agreement having clearly been made with the help of legal advisers to overcome the problem of operating the business pending the outcome of these proceedings, and expressly stated to be without prejudice.

66. I will now hear counsel as to the orders I should make including that as to costs.

Representation:

Mr. K.M. Chong instructed by Messrs. Chan, Yung & Chung for all Plaintiffs.

Mr. K- John Cheung instructed by Messrs. Peter W.K. Lo & Co. for all Defendants.