Smeloan Hong Kong Ltd v. Wong Wing Cheung t/a Hung Wan Trading Co
Read the full judgment text of HCA 882/2003 on BabelCite. This High Court CFI judgment was delivered on 13 November 2006.
1. The Plaintiff is a finance company and, by a credit facilities agreement dated 16 May 2000, made certain credit facilities available to Henry Trading Limited trading as Ho Yeung Textiles Company (“Ho Yeung”).
Cited by 4 cases · Cites 3 cases
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HCA 882/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 882 OF 2003 ______________________ BETWEEN
______________________ Before : Mr Recorder J Fok, SC in Court Dates of Hearing : 24, 25 and 26 October 2006 Date of Handing Down Judgment : 13 November 2006 ______________________ J U D G M E N T ______________________ Introduction 1.The Plaintiff is a finance company and, by a credit facilities agreement dated 16 May 2000, made certain credit facilities available to Henry Trading Limited trading as Ho Yeung Textiles Company (“Ho Yeung”). 2.Ho Yeung carried on business as a trader in textiles. According to the application for its business registration certificate, it commenced trading on 3 May 2000 at G/F, 19B Yu Chau Street, Sham Shui Po. In February 2001, Ho Yeung’s business address moved to G/F, 20 Ap Liu Street, Sham Shui Po and in June 2001 it again moved to G/F, 15 Wong Chuk Street, Sham Shui Po. 3.Madam Ho Kit Hing (“Madam Ho”) and Madam Yeung Lan Fong (“Madam Yeung”) were the two directors of Henry Trading Limited and each owned 50% of its shares. 4.It would appear that Ho Yeung’s business did not flourish since, on 17 May 2002, the Plaintiff terminated the credit facilities agreement and demanded repayment of the amount outstanding. Shortly thereafter, on 27 June 2002, the Plaintiff sued under the credit facilities agreement and also sued Madam Ho and Madam Yeung under a guarantee they had given in respect of Ho Yeung’s obligations under that agreement. 5.In default of acknowledgment of service, judgment was entered against Ho Yeung, Madam Ho and Madam Yeung for the sum of HK$731,114.25 plus interest on the sum of HK$726,652.28 at 5% over HSBC’s prime rate per annum from 15 June 2002 to the date of judgment (29 July 2002) and thereafter at judgment rate (“the judgment debt”). 6.The judgment debt has not been satisfied and remains outstanding. 7.The Plaintiff sues the Defendant, Mr Wong Wing Cheung trading as Hung Wan Trading Company on the basis that the Defendant is the transferee of Ho Yeung’s business within the meaning of s.3(1) of the Transfer of Businesses (Protection of Creditors) Ordinance, Cap.49 (“the Ordinance”). No notice of transfer having been given to the Plaintiff under s.4 of the Ordinance, the Plaintiff contends that the Defendant is liable to it for the debts incurred by Ho Yeung, specifically the judgment debt. 8.For his part, the Defendant denies there was a transfer of Ho Yeung’s business to him within the meaning of the Ordinance and contends that the business he is now operating is a new business. 9.None of the statutory defences under the Ordinance is relied upon, so the sole issue in this trial is whether there has been a transfer of Ho Yeung’s business to the Defendant within the meaning of the Ordinance. Procedural history 10.At an early stage in the action, the Plaintiff applied for summary judgment under Order 14 of the Rules of the High Court, since the original Defence filed simply contained a bare denial of the Plaintiff’s claim. 11.On the hearing of the summary judgment application, the Master gave leave to defend, conditional on the Defendant paying the sum claimed by the Plaintiff into court within 28 days. The Master refused to stay the execution of the order requiring payment into court as a condition of leave to defend. On appeal against this refusal, Chu J reduced the amount of the sum required to be paid into court but required the reduced sum to be paid into court within 28 days. On further appeal to a single judge of the Court of Appeal, Rogers VP suspended the Judge’s order pending the hearing of the Defendant’s substantive appeal against the Master’s grant of conditional leave to defend. 12.On the Defendant’s substantive appeal against the Master’s grant of conditional leave to defend, Deputy Judge Gill allowed the appeal and dismissed the summary judgment application on the basis there were significant issues to be resolved which could only properly be dealt with at trial. 13.I have recited the history of the earlier summary judgment application simply by way of background and because it provides the context in which the various affirmations of the Defendant referred to below came to be made and filed. It has not been suggested that the outcome of the summary judgment application is in any way determinative of the issue now before me on the trial of this action. The correct approach to determining the issue of whether there has been a transfer of a business within the meaning of the Transfer of Businesses (Protection of Creditors) Ordinance, Cap.49 14.The Ordinance provides, by s.3(1), that:-
15.In BNP Paribas v. GC Luckmate Trading Ltd. [2002] HKLRD 156, Deputy Judge Reyes SC (as he then was) reviewed the relevant cases on the Ordinance and on the Fraudulent Transfers of Businesses Ordinance, which the Ordinance replaced, and said at p.165B-I (§21):-
16.In Liu Hon Ying v. Hua Xin State Enterprise (Hong Kong) Ltd. & Anor. [2003] 3 HKLRD 347 at 364H-365A, Yam J held (§75):-
17.I do not perceive there to be any material difference between the above passages as regards the approach in deciding whether there has been a transfer of a business under the Ordinance. 18.Mr Mumford SC, counsel for the Defendant, submitted that it is important, however, when seeking to determine whether there has been a transfer of a business within the Ordinance to keep in mind the mischief at which the Ordinance was aimed. He referred to the judgment of McMullin J in Howard William Burdett v. Emsworth Ltd., HCA 3546/1977, unrep., 29.4.78 where he said (at §17 on pp.14-15):-
19.Thus, he submitted, there must be a divesting of assets to the detriment of creditors in order for there to be a transfer of a business within the meaning of the Ordinance. 20.Subject to the qualification that the assets of a business may take many different forms and may include its goodwill, I think Mr Mumford is right in this submission. However, I do not perceive Deputy Judge Reyes SC or Yam J as suggesting anything to the contrary in the passages cited above and I therefore propose to apply the approach identified in those two passages in determining the issue in this case of whether there was a transfer of Ho Yeung’s business to the Defendant. The Plaintiff’s case 21.In summary, the Plaintiff relies on the following matters as indicating that the business of Ho Yeung was transferred to the Defendant, namely:-
22.The Plaintiff called a Mr Ko Wai On, Eric to give oral evidence on its behalf. Mr Ko was employed by the Plaintiff as its assistant credit control manager from around June 2003 until March 2005. Accordingly, he was not able to give direct evidence of any facts relating to the alleged transfer of Ho Yeung’s business to the Defendant. In cross-examination, Mr Ko agreed that in his witness statement he was simply expressing an opinion that Hung Wan was carrying on the business of Ho Yeung based on various matters including the tenancy agreement entered into by the Defendant, part of Madam Ho’s cross-examination, the Defendant’s former solicitors’ letter and the blister cards. 23.The oral evidence of Mr Ko does not therefore assist in resolving the issue of whether Ho Yeung’s business was transferred to the Defendant. Instead, the Plaintiff relies on the matters identified above as demonstrating objectively that such a transfer took place. The Defendant’s evidence 24.The Defendant, Mr Wong Wing Cheung, gave oral evidence. In the course of the summary judgment proceedings that had been taken by the Plaintiff in this action, Mr Wong made four affirmations and these were adopted by him in his oral evidence. 25.In his first affirmation, Mr Wong claimed that he had no business connection or transactions with Ho Yeung and did not have any involvement or knowledge of its operation or its date of cessation. He admitted that he knew Madam Ho and said “suffice it to say … she has been a friend of mine for years”. He denied having ever lent any money to Ho Yeung and contended that Ho Yeung did not owe him any money. He denied having entered into any agreement with Ho Yeung for the acquisition or transfer of its business. He claimed that in about mid-May 2002, he set up his own textile business in the name of Hung Wan. He says he submitted his application for a business registration certificate on 14 May 2002 and, on being told a certificate could not be issued unless he had already formed his business, he inserted the date of 1 May 2002 as the date of commencement of the business. Thereafter, he rented the premises at G/F, 15 Wong Chuk Street from Over Harvest Limited, who own the premises. When he took possession of the premises, he said some miscellaneous items were left there, amongst which were a few blank swatch cards of Ho Yeung. Not wanting to waste them, he attached labels with the details of Hung Wan. 26.In his second affirmation, Mr Wong addressed the Solicitors’ letter which the Plaintiff had exhibited in response to his first affirmation. Mr Wong acknowledged that Madam Ho and he have lived together as man and wife for over 10 years since about 1989. He claimed he gave her money whenever she asked for it but did not ask what she was doing with it. He said that Madam Ho “did sometimes volunteer that she was going to lend more money to [Madam Yeung]”. He contended that the money he gave Madam Ho was a gift and that he did not regard himself as lending the money to her or to Madam Yeung. He claimed his former solicitors had made a “false assumption” in their letter of 25 February 2003. He claimed Madam Ho told him Madam Yeung last visited Ho Yeung’s premises at the end of April 2002, that she then disappeared and the business collapsed, that creditors appeared with cheques that had allegedly been dishonoured and took everything of value at the end of April and beginning of May. He claimed Madam Ho told him Ho Yeung’s business was wholesale but he might succeed if he tried a retail business. Hence, he took a lease of the premises on 21 May 2002 and started operation on 22 May 2002. He said he did not know who Ho Yeung’s customers were but that Madam Ho told him “almost none have come to the Premises since I started there”. When he took possession of the premises there were about 200/300 blank swatch cards, one table, 4 stools, a cloth-cutting machine and some scraps of cloth of no value. He used Ho Yeung’s blank swatch cards with Hung Wan’s labels affixed on them because he thought they were no use to Ho Yeung as it had ceased business. 27.Mr Wong’s third affirmation was made in support of an application to stay execution of the order (later set aside) requiring him to pay the sum claimed in the action into court as a condition of leave to defend. In that affirmation, Mr Wong claimed that his business was a small business in its initial stages from which he was “just able to earn [his] living” and had no more savings. 28.Mr Wong’s fourth affirmation was made to respond to evidence from the Plaintiff which showed that Mr Wong had sold his property at Flat D, 8/F, Kam Lai Court, 127 Lai Chi Kok Road for $500,000. Mr Wong claimed that he had to sell his property to defray the operating expenses of his business and to repay his suppliers as well as to meet his legal expenses in this action. He had leased the property back from the purchaser. 29.In his oral evidence, Mr Wong confirmed he still lived at Flat D, 8/F, Kam Lai Court, 127 Lai Chi Kok Road with Madam Ho, whom he described as his wife. He described his occupation as being the proprietor of a transportation business, called Yau Luen Fat Transportation Company, which he started over 20 years ago and owned with a partner. He said he gave Madam Ho on average $10,000 per month and that Madam Ho did not have any other source of income. He denied Madam Ho told him she advanced a sum of $200,000 to Madam Yeung. He denied knowledge of Ho Yeung’s business and claimed that Madam Ho told him its proprietor had run away leaving a vacant shop so she suggested he run a retail business there. He made no further inquiries before setting up Hung Wan and allowed Madam Ho to handle everything, although he put in all the investment to set up the business. He said Madam Ho told him about 1 or 2 out of 10 of Hung Wan’s customers were customers of Ho Yeung: he could name Chin Ngai and Chun Yip and was aware of others but could not name them. He claimed the reason old customers had not come back was because of the change of name or “[p]erhpas they did not trust my wife”. He did not decorate the premises but simply took whatever was left by Ho Yeung. In relation to the Solicitors’ letter, he said both he and Madam Ho attended at the solicitors’ office to give instructions but Madam Ho did all the talking and he did not hear anything she said. He claimed his customers were retail and those of Ho Yeung were wholesale. He denied having had any contact with Madam Yeung. In answer to the question, in re-examination, whether he regarded himself as having paid $200,000 for the things left behind by Ho Yeung, he said “I regard it that Madam Ho paid $200,000 in return for these things”. 30.The Defendant also called Mr Kwok Ka Hung to give oral evidence. He was an employee of the Defendant and had worked in Hung Wan’s premises as a shop assistant since about mid-June 2002. He confirmed his witness statement in which he said he could not remember the occasions when investigators came to Hung Wan’s premises and spoke to him. He claimed that if he had said Hung Wan was previously known as Ho Yeung, he would have meant that the shop address was previously occupied by Ho Yeung and Hung Wan referred to the same company. He claimed if he had really said Madam Ho was the boss of the Defendant, he would not have meant she was the legal owner but rather the one who was in the management of the business. 31.In his oral evidence, Mr Kwok admitted Hung Wan was using some of the same blister cards as Ho Yeung to show customers because they dealt in some of the same material. He said Hung Wan would not turn away wholesale customers of Ho Yeung and acknowledged that customers of Ho Yeung would come and do business with Hung Wan, although in re-examination he said he would not know who were the old customers of Ho Yeung because he had not worked for Ho Yeung. He denied that Hung Wan had a warehouse but said it was possible Madam Ho might have claimed this was the case because sometimes if customers asked for goods or samples which they did not have they would prevaricate by telling a lie that these were in their warehouse and they would need a day or two to get them. He said he would not differentiate between whether customers were wholesale or retail and Hung Wan had both wholesale and retail customers. He said in the beginning when he worked at Hung Wan 2 or 3 out of 10 customers would ask what had happened to Ho Yeung but later they no longer asked. The examination of Madam Ho under Order 48 32.As noted above, it is necessary to consider in greater detail the content and effect of Madam Ho’s evidence given on her examination under Order 48. 33.Before doing so it is convenient to deal briefly with one aspect of her evidence that featured in the course of closing submissions. That was the fact that there were differences in the two versions of the English translation of Madam Ho’s examination in the bundle of documents for the trial. Mr Mumford relied on certain passages in the version first produced by the Plaintiff in its evidence in support of its summary judgment application. That version was not a certified translation, nor was the Chinese transcript of which the English version was a translation a certified transcript of the audio recording of her examination. Subsequently, the Plaintiff obtained a copy of the certified transcript of the examination and arranged for a certified translation to be obtained. That latter translation differed in parts from the earlier one, in particular in some of the passages relied upon by the Defendant, and Mr Mumford complained, in effect, of being taken by surprise by this. However, Mr Mumford did not ask for an adjournment to consider and, if thought appropriate, to challenge the accuracy of the certified translation. In the circumstances, absent any challenge to the certified translation, it seems to me that the certified version of the translation is clearly the proper version to which I should have regard in considering and evaluating the evidence given by Madam Ho at her examination. 34.In her examination, Madam Ho admitted that she lived with the Defendant, whom she described as her “boyfriend”, at Flat D, 8/F, 127 Lai Chi Kok Road. She claimed to have no knowledge of Henry Trading Limited and that she was cheated into signing for the company by Madam Yeung. She said she did miscellaneous chores for Ho Yeung such as cleaning toilets, pushing carts, cleaning windows, cleaning fabrics and delivering documents. She said Ho Yeung only had one other employee apart from her, namely Yeung Lok Tin who was responsible for the warehouse and related duties, being responsible for delivering fabrics and similar jobs. She denied she liaised with customers or suppliers. She said that Ho Yeung had a warehouse at Mei King Building in Ap Liu Street, from which Mr Yeung would collect fabrics for delivery to customers. She described Madam Yeung as the boss of Ho Yeung and said she did not work. 35.Madam Ho also gave evidence that she regarded Madam Yeung as her boss, that she was paid $5,000 salary each month but that she was owed four months’ salary. She said she returned to work at Hung Wan in July 2002 and, by the time of the examination, was paid a monthly salary of $5,000. She described her duties as having to sew, to give out and cut the samples, and to attend to customers. She claimed the Defendant worked in Hung Wan’s shop every day. She denied Hung Wan had a warehouse and described Hung Wan’s business as trading fabrics. 36.Madam Ho said that Ho Yeung stopped doing business in May 2002. She claimed that its stock in the warehouse was taken by its creditors because Madam Yeung had debts of over $2 million and that was why the shop itself was also transferred “to others under an oral agreement”. She explained that Madam Yeung transferred the business to the Defendant because she owed him money. She said she did not know how Madam Yeung and the Defendant settled the matter between themselves but she knew Ho Yeung’s business was transferred to him. She said the Defendant told her the amount for which he bought the business was $200,000. She said the Defendant had lent this sum to Ho Yeung over a period of time. She confirmed that the Defendant took over the business of Ho Yeung and that in June 2002 the business continued its operations at the original address under Hung Wan’s name. She confirmed that after Madam Yeung and the Defendant had concluded the transfer, the Defendant told other creditors of Ho Yeung that Ho Yeung had closed down, that Madam Yeung owed him money and the business was transferred to him. Madam Ho confirmed that the consideration of $200,000 covered all the piecegoods stored in the shop and all the capital goods inside the shop. She said there were no more than 100 bolts of cloth remaining in the shop, as well as a desk and a cloth-cutting machine. The Defendant’s case 37.In arguing that there was no transfer of Ho Yeung’s business to the Defendant within the Ordinance, the following submissions were advanced on behalf of the Defendant:-
If there was a transfer, was the transferred business that operated by Madam Yeung rather than Henry Trading Limited trading as Ho Yeung Textiles Company? 38.This was an unpleaded argument raised by the Defendant. It arises because of the existence of an application for a business registration certificate suggesting Madam Yeung carried on a separate business called Ho Yeung Textiles Company. This application form is dated 23 September 1996 and amendments to the certificate show that this business operated by Madam Yeung commenced on that date at G/F, 15 Wong Chuk Street. It then moved, first to G/F, 19B Yu Chau Street on 6 July 1998, then to G/F, 20 Ap Liu Street on 12 February 2001 and then back to G/F, 15 Wong Chuk Street on 7 June 2001. It is recorded that the business ceased on 15 May 2002. 39.Henry Trading Limited was incorporated on 2 February 2000 and, as noted above, Henry Trading Limited’s application for a business registration certificate for Ho Yeung dated 3 May 2000 shows that it commenced trading on that date at G/F, 19B Yu Chau Street, then moved on 17 February 2001 to G/F, 20 Ap Liu Street, and then moved again to G/F, 15 Wong Chuk Street on 7 June 2001. 40.Whilst the apparent existence of a parallel business registration certificate for Ho Yeung Textiles Company operated by Madam Yeung might lend some support to the contention that this may have been the business transferred to the Defendant, I am quite satisfied that the evidence shows that the business actually being operated at G/F, 15 Wong Chuk Street was the Ho Yeung Textiles Company operated by Henry Trading Limited and I so find.
Was there a business to transfer? 41.It is not necessary, in order to demonstrate a transfer under the Ordinance, to show that the entity being transferred is a going concern: see per McMullin J in Howard William Burdett v. Emsworth Ltd. (supra.) at §18 (p.18). Mr Mumford, whilst reserving the right if this matter goes further to argue that McMullin J was wrong in so holding, did not ask me to take a different view but instead submitted that McMullin J’s comments had to be understood as meaning that a business could be transferred even if it was near bankruptcy but only so long as it had assets to transfer. 42.Mr Mumford submitted that the evidence showed that Madam Yeung fled leaving debts of $2 million, that the creditors of Ho Yeung took all its fabric and that there were no other assets left. Whilst he accepted that the assets of a business could include its goodwill, Mr Mumford submitted that in the present case Ho Yeung had no goodwill given its indebtedness and lack of any property of any material value. Hence, he argued, there was no business to be transferred to the Defendant. 43.In my view, although it may have been on the verge of bankruptcy, the business had not ceased to exist and there was nevertheless a residual business of Ho Yeung to be transferred to the Defendant. There had not been any formal cessation of business by Ho Yeung before the Defendant commenced business as Hung Wan. There was no evidence, for example, of any notices having been given to any customers of Ho Yeung that its business was ceasing operation at any particular point in time or moving elsewhere. Whilst much of its stock may have been taken by creditors, it remains the case that Madam Ho’s evidence (which, in this regard, I am prepared to accept) was that there were about 100 bolts of cloth in the shop, as well as the items of furniture described by the Defendant in his evidence, namely about 200 to 300 blank swatch cards, a table, four stools and a cloth-cutting machine. Also, important, in my opinion, is the fact that evidence of both the Defendant and Mr Kwok discloses that some of the former customers of Ho Yeung continued to purchase fabrics from Hung Wan. This demonstrates reasonably clearly, in my opinion, that there was some residual goodwill for the business of Ho Yeung. Furthermore, Ho Yeung had an established staff in the persons of Madam Ho and Mr Yeung, both of whom continued to be available to work for Hung Wan for at least a month after Hung Wan commenced business. 44.Mr Mumford sought to argue that Ho Yeung was, in effect, a dead company and not merely sick or dying. He maintained that it had entirely ceased to exist and had nothing to transfer. He contrasted the cases of Man Yee (a firm) & Ors. v. Chi Tao Enterprises Co. Ltd. trading as Kam Tao Restaurant [1986] HKLR 171 where the new restaurant business operated from the same premises utilizing the licence of the old restaurant. He also contrasted the case of Howard William Burdett v. Emsworth Ltd. (supra.) where the new yacht building business was using the hull moulds of the old business in the same boat yard in order to construct yachts of the same type as those built by the old business. He pointed to the fact the restaurant licence and hull moulds were clearly substantial assets which the new businesses respectively continued to use, thereby continuing the old businesses. 45.I do not consider that it is necessary, in order for it to be established that there was a transfer of a business under the Ordinance, that the business alleged to have been transferred must be shown to be substantial or of any particular level of value so long as there is at least something left in the way of assets or goodwill. As McMullin J held in Howard William Burdett v. Emsworth Ltd. (supra.) at §18 (on p.18), “It is precisely the case of the sick or dying company that the Ordinance especially purports to deal with. It is precisely the fact of impending bankruptcy which may drive a business concern to the disposal of its assets, the very matter which the Ordinance seeks to control.” And as Deputy Judge Reyes SC put it in BNP Paribas v. GC Luckmate Trading Ltd. (supra.), “One person’s ‘laggard’ may be another’s Cinderella.” In any event, each case must depend on its own facts and the question of whether the evidence demonstrates the existence of a business prior to transfer in any particular case will be a matter of fact and degree. 46.For all these reasons, I am satisfied that, although it was very much on the verge of bankruptcy, Ho Yeung was not yet dead and remained in existence at the time of the alleged transfer, and that there were assets of that business at that time in the form of the bolts of cloth and the various other items of property described, its staff and the residual goodwill that remained. Was there a transfer of Ho Yeung’s business to Hung Wan? 47.The rationale for a transfer of the business of Ho Yeung to the Defendant, on the Plaintiff’s case, was the indebtedness due from Madam Yeung to the Defendant, which she was unable to repay. 48.Mr Mumford submitted there was no evidence, apart from the Solicitors’ letter, that the Defendant had lent the sum of $200,000 to Madam Yeung. 49.I do not accept that the Solicitors’ letter was written as a result of a misunderstanding as the Defendant suggested. It is to be noted that the Solicitors’ letter was written within a week of Madam Ho’s examination during which she gave evidence about the lending of $200,000 by the Defendant to Madam Yeung for Ho Yeung’s business. Furthermore, the Defendant admitted he was present when the instructions were given on which the letter was based. I do not believe the Defendant’s denial of hearing Madam Ho give these instructions. Nor do I believe, if she was mistaken in her instructions, he would not have corrected her. 50.I should add that I did not believe the Defendant’s evidence that the sum of $200,000 was a gift from him to Madam Ho and that he did not ask her what she was going to do with it. It is reasonably clear that $200,000 would represent a significant sum of money to the Defendant and, therefore, I do not believe he would not have asked Madam Ho what she had used the money for. 51.I therefore find, as set out the Solicitors’ letter, that the Defendant “had been advancing money to Madam Yeung Lan-fong, one of the directors of Ho Yeung, for the period from July 1999 to May 2002 for a total sum of HK$200,000 through Madam Ho Kit-hung, another director of Ho Yeung”. 52.The Defendant submits there is no evidence of any agreement between Madam Yeung and the Defendant other than what Madam Ho said on her examination. Mr Mumford pointed out that she was not legally represented and submitted there were many contradictions in her evidence. 53.I have set out above a summary of the evidence she gave on her examination. I am quite satisfied that, notwithstanding some minor contradictions and instances of confusion on her part, the substance of Madam Ho’s evidence was that the Defendant had lent an aggregate sum of $200,000 to Madam Yeung for Ho Yeung’s business over a period of time, that Madam Yeung was unable to repay this sum and that the Defendant and Madam Yeung therefore agreed he should take over the business of Ho Yeung at the premises from which it was operating, together with such assets it then had, in consideration of the forgiveness of the outstanding debt. 54.I see no reason not to accept the evidence of Madam Ho in this regard, even allowing for the fact it was adduced only by way of hearsay. Her evidence on the examination was given under oath and there was no obvious reason for Madam Ho to fabricate this part of her evidence. It follows that I do not believe the Defendant’s denial that he never had any contact with Madam Yeung. 55.Mr Mumford said he had anticipated Madam Ho would be called by the Plaintiff pursuant to a subpoena it had served on her and it was only on the first day of the trial, before it commenced, that the Plaintiff’s counsel indicated he would not call her. He submitted that in those circumstances it would be wholly wrong to draw any inferences against the Defendant as a result of her not being called. 56.I disagree. The Defendant may have anticipated the Plaintiff would call Madam Ho but, when it was indicated she would not be called, there was nothing to prevent the Defendant from calling her himself. After all, she is his common law wife and lives with him. Yet she was not called to say that her evidence on her examination was wrong or that her answers were given under a misapprehension or to qualify in any way the evidence she is recorded as having given. In the circumstances, I think the only reasonable inference I can draw from her not being called to testify is that she would not have been able to say anything materially to contradict the evidence recorded in her examination. 57.Mr Mumford further submitted that it was inconceivable that the Defendant would agree to take over Ho Yeung’s business, given its parlous condition. It is not clear, however, that the Defendant knew the financial condition of Ho Yeung beyond the fact he knew that Madam Yeung owed him $200,000 and was unable to repay this. His evidence was that Madam Ho suggested to him that there was an opportunity to operate a retail business from Ho Yeung’s premises. He went to the trouble to establish Hung Wan and to lease the premises previously occupied by Ho Yeung. I think it is reasonable to infer that he must have thought that there was profit to be made from the business. This would have been a way to recoup the $200,000 he had lent to Madam Yeung for Ho Yeung. I therefore do not accept that there was no rational reason for the Defendant to make the agreement with Madam Yeung for the transfer to him of Ho Yeung’s business. 58.I therefore find as a fact that there was an agreement, probably oral, reached between the Defendant and Madam Yeung at or about the beginning of May 2002 that, in consideration of forgiving her obligation to repay the $200,000 he had lent to Madam Yeung for Ho Yeung’s business, Madam Yeung agreed to transfer what was left of the business of Ho Yeung, including the bolts of cloth and furniture remaining in the premises, to him. 59.I therefore turn to look at the situation as a whole and to consider whether there are other factors to indicate whether or not Ho Yeung’s business was transferred to the Defendant.
60.For all the above reasons, I am satisfied that there was a transfer of the business of Ho Yeung to the Defendant within the meaning of the Ordinance. The cumulative presence of the factors referred to above point clearly, in my opinion, to this conclusion. Conclusion 61.The Plaintiff claims against the Defendant for the judgment debt as defined above. The judgment sum of $731,114.25 is a debt of Ho Yeung’s under s.3(1) of the Ordinance for which the Defendant is liable. Furthermore, liability for interest at the contractual rate applicable as between the Plaintiff and Ho Yeung is similarly an obligation within the meaning of that section for which the Defendant is liable. 62.On the basis of my finding that there was a transfer of Ho Yeung’s business to the Defendant, the Plaintiff’s claim succeeds and it is entitled to judgment against the Defendant for the judgment debt, as defined above. 63.I make an order nisi that the Defendant do pay the Plaintiff the costs of this action, to be taxed if not agreed.
Mr Simon Lui, instructed by Messrs Fairbairn Catley Low & Kong, for the Plaintiff Mr Mumford, SC, instructed by Messrs Pansy Leung, Tang & Chua, for the Defendant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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