Ho Lai Ko Lego and Another v. Cheung Kit Wah

DCCJ 1200/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1200 OF 2006

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BETWEEN

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Coram: Deputy District Judge M. Chow

Date of Hearing:  8^th September, 2006

Date of Handing Down Judgment:  13^th September, 2006

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DECISION

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1.The Plaintiffs took out a summons to apply for:

i) an order that the Defence be struck out under Order 18 rule 19 of the Rule of the District Court Cap.336.  Mainly on the ground that it discloses no reasonable defence.

ii) A declaration that the partnership formed by the Plaintiffs & Defendant was dissolved on 30^th September, 2005.

iii) That the 2^nd Plaintiff be appointed as Receiver to wind up the affairs of the partnership.

2.The Plaintiffs filed an affirmation, in support of this application, dated 22^nd June 2006.  The Defendant also filed an affirmation dated 6^th September, 2006 to oppose the Plaintiffs’ application.

Background

3.In or about January, 2003, the Plaintiffs and the Defendant agreed to form a partnership for the sole purpose of running a trading company for selling scientific instrument.

4.On 28^th January, the Plaintiffs and the Defendant applied for registration of the business under the trading name of “SCIPLUS SCIENTIFIC SUPPLIES COMPANY” to commence the business and opened a current account no. 223-146184-001 with Hang Seng Bank.

5.The Plaintiffs each contributed HK$100,000 making a total of HK$200,000 to the partnership fund.

6.The 1^st Plaintiff was responsible for the daily running of the partnership business.  The 2^nd Plaintiff was responsible for the book-keeping accounts and finances of the partnership.  The Defendant was responsible for the sales & purchases.

7.Profits of partnership to be distributed in equal share between the Plaintiffs and the Defendant.

8.On or about 12^th September, 2005, the Defendant instructed Hang Seng Bank to freeze the said account.

9.In consequence, the company was unable to issue cheques to the suppliers in settlement of their invoices and the total sum due was HK$6,184.59.

10.The company has a credit balance of HK$152,689.24.

Argument

11.Ms Auyang, Counsel of the Plaintiffs, submitted that the Defendant admitted the partnership cease business on 30th September, 2005 and the fact that there has been a breakdown in the relationship between the Plaintiffs and the Defendant, thereby justifying a dissolution of the Partnership under the just and equitable ground under Section 37 (F) of the Partnership Ordinance, Cap.38.  Further, the Defence discloses no reasonable defence.

12.The Plaintiffs in its statement of claim at paragraph 5 and 6 state that:

5.  “In or about August 2005, the Plaintiffs and the Defendant verbally agreed to terminate the Partnership on 30th September 2005.  On 30th September 2005, the Company ceased its business.  After the Company had ceased its business, it has never been the intention of the parties to recommence the business of the Company at the same address or anywhere else.

6.  In the premises, the Plaintiffs aver that the Partnership was dissolved upon the Company ceasing its business on 30th September 2005 for the reason aforesaid.”

The Plaintiffs’ affirmation at paragraph 7:-

7.  In August 2005, 3 of us verbally agreed to terminate the Partnership on 30th September, 2005.  Subsequently, the Company ceased its business on 30th September, 2005 and it has never been the intention of 3 of us to recommence the business of the Company.

13.The Defendant in his Defence:-

2.  “Save the Partnership ceased its business on the 30th September 2005, Paragraphs 5 and 6 of the Statement of Claim are denied.”

14.The Defendant in his affirmation at paragraph.6:-

6.  “I deny the allegations contained in paragraph 7 of the said Affirmation.  In fact, the verbal agreement reached in August 2005 was to sell the partnership business, assets and goodwill for the price of HK$ 190,000.00 but not further or otherwise, which has been pleaded in paragraph 3 of my Defence.”

15.The Defendant in his Defence pleaded that the Plaintiffs asked the Defendant to look for prospective buyer to purchase the business, asset & goodwill for the price of HK$190,000.   As a result of which the Defendant had procured a prospective buyer, Madam GAO RONG to purchase the partnership business at the price of HK$190,000 of which the 1^st Plaintiff verbally agreed to sell.

16.Messrs So & Ho, Certified Public Accountant was instructed to prepare the Sales & Purchase Agreement (S&P Agreement) on 1st September, 2005, the 1st Plaintiff on behalf of the Partners, signed the S&P Agreement, at the office of Messrs So & Ho and took a cheque of deposit of HK$ 40,000 & deposited into his personal account.

17.For reason unknown to the Defendant, the 1^st Plaintiff on or about 1^st November, 2005 had refunded by way of his personal cheque to Messrs So & Ho, for cancellation of the S&P Agreement and took away the signed S&P Agreement.

Conclusion

18.The Plaintiffs said that there was a verbal agreement to terminate the Partnership.  While the Defendant said that the agreement was to sell the Partnership at a price of HK$190,000.

19.The Defence raised a triable issue in this action.

20.Further, it is not the normal practice of the court to make a declaration without trial bearing in mind that there is a triable issue.

21.“If the applicant partner(s) have an extraneous motive for seeking a dissolution, e.g. a personal benefit to be delivered therefrom, this will be taken into account and may militate against an order being made.”  Lindley and Banks on Partnership at p.711, eighteenth edition.

22.In his Defence, the Defendant pleaded it was the 1^st Plaintiff signed the S&P Agreement on 1^st September, 2005 and took the HK$40,000 deposit from Madam GUO and deposited the HK$40,000 into his personal account, not the partnership account. 

23.The Defendant instructed the Bank to freeze the partnership account on 12^th September, 2005.

24.In November, 2005, the 1^st Plaintiff refunded the deposit to Madam GUO and rescinded the S&P Agreement.  The Defendant did not know the reason why the 1^st Plaintiff took this cause of action.

25.It is the Plaintiffs’ case pleaded in paragraph 2 that “profits should distribute in equal share”.  The selling of the partnership at HK$190,000 is a “profit” to the partnership in view of the fact that the Plaintiffs are seeking a dissolution of the partnership.  But the 1^st Plaintiff chose not to sell.  His motive seems rather dubious.

Order

26.In the premise, the Defence does raise triable issue.

27.I therefore refuse the Plaintiffs’ application.  The summons be dismissed with costs to the Defendant, to be taxed if not agree.  Costs order nisi and becomes absolute in 14 days.

Ms Joan M.C Auyang  instructed by Messrs Chong, Fu & Co., for the 1^st & 2^nd Plaintiffs.

The Defendant appearing in person, present.