Lam Leong Fai v Chan Tak Choi

HCA 1395/2019 · [2026] HKCFI 4178 · Court of First Instance · 2026-07-27 · published 29 July 2026

Background

This trial concerns a partnership dispute between Mr Lam Leong Fai (90% partner) and Mr Chan Tak Choi (10% partner, sole mahjong licence holder), who have run 百樂麻雀娛樂公司 together since 2004. Mr Lam sued in 2019 alleging Mr Chan breached the partnership by removing him as management agent and appointing his son (the 2nd Defendant). Mr Lam has since abandoned most reliefs; only a damages claim remained. Mr Chan counterclaimed for dissolution and accounts. Three issues were tried: (i) the partnership's true profits from August 2013 to December 2020; (ii) whether payments to Mr Chan under four "labels" (salary, 牌租/枱租, 下欄, 特別津貼) were in fact a sham disguising his 10% profit share; and (iii) the validity of Mr Lam's damages claim.

Key findings

1. The Partnership was dissolved under section 37 of the Partnership Ordinance (Cap 38), given substantial irregularities in Mr Lam's account-keeping (§13), including agreed double-counting of expenses and incomplete books. 2. Partnership profits for the examined period were assessed at HK$57,073,639, adopting the methodology of Mr Yeo (the expert who attended for cross-examination) rather than Mr Yuen (whose report was ruled inadmissible for non-attendance under the 18 September 2025 order) (§20-23). 3. Mr Lam's "Sham Label Arrangement" case failed. The court applied the two-limb test from Artech Development Ltd v Posismo Ltd [2018] HKCFI 344 and Chen Yung Ngai Kenneth v Ho Yuk Wah David [2020] HKCFI 2518 (§40) and found no subjective common intention to mislead, and crucially no identifiable third party the sham was directed at (§48). 4. Mr Lam was found to be a wholly incredible witness (§29) who repeatedly resiled from his pleadings (§30), gave implausible evidence on the Condition 7 Accounts and the transfer of his property to his son (§32), and whose own witness Madam Cheng disavowed knowledge of the alleged sham (§33). 5. Mr Chan's four disputed entitlements (salary, owner's remuneration, tips, special subsidy) all constituted "原有福利" preserved under the Supplemental Agreement (§39); the bonus was also upheld (§49). 6. Limitation does not bar taking accounts of Mr Chan's undrawn 10% profits, following the principle in Manning v English [2010] Bus LR Digest D89 and Chow Kam Hung v Wong Kiu [2023] 1 HKLRD 108 (§58), because a claim for net balance only becomes a debt once ascertained on dissolution accounting. 7. Mr Lam's damages claim was dismissed because he could not plead or prove any quantifiable loss (§60), and there was no breach in Mr Chan's removal of him as management agent given nothing in the Partnership Agreement restricted Mr Chan's right to terminate that appointment (§61). 8. A costs order nisi was made against Mr Lam with a two-counsel certificate, given the complexity, the late narrowing of issues, and Mr Lam's prior representation by Senior Counsel before becoming self-represented only shortly before trial (§66-67).

Why it matters

Practitioners will note the court's robust treatment of sham allegations in a partnership context: the threshold articulated in Artech and applied here (§40, §42) requires both subjective common intention to create different rights and an intent to mislead a third party. Without identifying who that third party was, the allegation fails in limine (§48). The judgment also restates the Hong Kong position on limitation for partnership accounts (§57-58): a partner's claim to undrawn profits does not become a "debt" until ascertained on dissolution, so time does not run during the subsistence of the partnership. On the evidential front, the ruling that an expert report is inadmissible where the expert fails to attend for cross-examination under a peremptory order (§20) is a useful reminder of the cost of non-compliance. Finally, the costs reasoning (§67-68) sends a clear signal about late tactical shifts and unexplained changes in position.