CHEUNG YAU BOR AND OTHERS v. WONG FOOK AND OTHERS

1987 No. M.P. 263

IN THE HIGH COURT OF JUSTICE

HONG KONG

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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I.    INTRODUCTION

1. The Transport Department issues two different types of licence for public light buses. Firstly, there is the licence to run what is popularly known as a "redline" public light bus. That gets its name from the red stripe which has to be painted around that type of vehicle. The licence for a "redline" public light bus imposes relatively few restrictions: the vehicle is not limited to any particular route, there are no time-tables, the driver can pick up passengers and set them down where he pleases, and there is no control over fares.

2. Then there are the "greenline" public light buses, which, needless to say, get their name from having a green stripe painted around them. By the terms of the licence under which they operate, they are limited to fixed routes, and must run according to a time-table approved by the Transport Department. Passengers may only be picked up or set down at designated stopping places and fares are fixed.

3. Although "greenline" public light buses suffer the restrictions which I have just described, they do, however, enjoy one considerable advantage - they are free from the competition of "redline" public light buses which are not allowed to operate on the "greenline" routes.

4. "Redline" public light buses operate on a freelance basis, with each individual owner deciding when and where he will send his vehicle to ply for passengers. By contrast, "greenline" public light buses operate on a "fleet" basis. The Transport Department requires that a certain group of "greenline" public light buses is committed exclusively to a particular route or "package" of routes. It is only in that way that the public can be assured of a regular service on the "greenline" routes.

5. The Lok Wah Public Light Bus Association ("the Association") is a partnership made up of fourteen people, each of whom owns one "greenline" public light bus. Those fourteen "greenline" public light buses comprise the fleet which operates the package of routes being Nos.14, 22M and 26 on Kowloon side. Those fourteen partners are the fourteen parties to the present action.

6. The way in which the Transport Department grants a franchise to a fleet of "greenline" public light buses to operate a particular package of routes is by issuing what is known as a Passenger Service Licence (a "Licence") to the owner of just one of the vehicles in a fleet. By the terms of a Licence, the sole licensee is made responsible to the Transport Department for the whole fleet of "greenline" public light buses maintaining a proper and efficient service for the public on the package of routes over which it enjoys a monopoly.

7. Through this particular licensing system, the Transport Department deals only with the licensee to ensure that the conditions of the Licence are observed. Besides imposing responsibility generally on the licensee for ensuring that there is proper and efficient service on the "greenline" package of routes to which his Licence relates, the Licence subjects the licensee to a variety of specific conditions. To quote from part of those conditions, the licensee has to ensure that the service offered the public by the fleet to which his Licence relates is "in accordance with specified Schedules of Service which define the routes, time-tables, faretables and vehicle allocation ......" . Every month, the licensee has to make detailed returns to the Transport Department about the number of public light buses in service, the kilometers driven by each vehicle, the number of passengers carried, and the revenue received. Also, the licensee has to make annual returns to the Transport Department, as well as ensuring generally that the public gets a proper and efficient service. Further, the licensee has to ensure that the vehicles in the fleet are kept in a clean and tidy condition and are regularly maintained.

8. Various other obligations are imposed on the licensee, but it is unnecessary for present purposes to go into details of those. Suffice it to say generally that the Licence imposes heavy burdens on the licensee, and in practice requires him to devote a substantial amount of his time liaising with the Transport Department to ensure that the terms of the Licence are being properly observed, and that the public is getting a decent service on the package of routes to which it relates.

9. Amongst the fourteen partners of the Association, the first defendant, Wong Fook, is the individual to whom the Licence has been issued in respect of the fourteen "greenline" public light buses owned by the Association's partners.

10. Wong Fook has always been the Licence holder for the Association ever since it first got the franchise to operate "greenline" public light buses way back in March 1983. When the Licence was first issued to Wong Fook, the Licence fee of $150 was paid from the Association's funds, and the fee for the annual renewal (now $650) has always been paid from the Association's funds.

11. There can be no doubt whatsoever that Wong Fook holds, and has always held the Licence as trustee for the Association. In his pleadings in the present action, he denied that he was trustee, but, in the end, bowing to the inevitable, during the course of the trial before me he conceded that he does hold the Licence as trustee.

12. The eleven of his partners who are plaintiffs in the present proceedings no longer want Wong Fook to be the Licence holder on behalf of the Association. They want him to transfer the Licence to one of their number, but he refuses. The third defendant supports Wong Fook in that refusal. The second defendant adopts a neutral position, but had to be joined in as a defendant for procedural reasons since all the partners were necessary parties to the action.

13. The main issue in the proceedings is whether the court should direct Wong Fook to take steps to have the Licence transferred to one of the eleven plaintiffs with a view to that partner, instead of Wong Fook, holding the Licence as trustee for the Association.

14. A brochure issued by the Transport Department to give guidance to those applying for a Licence (see Agreed Bundle p.61) does state that "A Passenger Service Licence shall not be transferable". All that means, in my view, is that Wong Fook is not free to transfer the Licence without the approval of the Transport Department. Provided the Transport Department approves any prospective holder of the Licence, I can see no reason in principle why the Licence could not be transferred to another partner in the Association.

15. Beside the main issue of whether Wong Fook should be ordered to take steps to have the Licence transferred to one of his partners to hold as trustee, there are also some subsidiary questions of account which the court has been asked to rule upon.

16. I will now proceed to set out my findings of fact.

II.    FINDINGS OF FACT

A.    Main Findings of Fact

17. The Association was founded in 1982. The three defendants and the first nine plaintiffs are all founding partners. Originally, there were fifteen founding partners. One dropped out completely, and two others transferred their share in the partnership to P10 and P11 in 1986. Nothing turns on the changes in the partnership composition.

18. Originally, all the founding partners were "redline" public light bus drivers operating in the Ping Shek area of Kowloon.

19. In 1982, the Transport Department invited tenders for various "packages" of "greenline" routes. These were all new routes. Whether the particular "package" of routes won by a tenderer would prove profitable or not, time alone would tell. Because there was likely to be a lean period financially when "greenline" public light buses first started plying on the new routes, the Transport Department required tenderers to show they had sufficient capital to tide themselves over the early stages of operating these routes.

20. Wong Fook and a Mr Yip Hing-chuen ("Mr Yip") took the initiative in getting the Association organised. They arranged for each of the fifteen founding partners to deposit $30,000 with the Ping Shek Branch of the State Bank of China, so that the Association could prove to the Transport Department that it had HK$450,000 capital behind it. That alone was a considerable feat of organisation.

21. To ensure that everything was done properly, Wong Fook and Mr Yip entrusted the documentation for the new enterprise to a firm of solicitors. The solicitors first of with the all had the Association registered as a partnership Business Registration Office. That was done on the 23rd September 1982. Next, a formal Deed Of Partnership was executed by the founding partners on 1st October 1982. That partnership deed explicitly recognised that each partner would continue to own his own public light bus which would not be regarded as partnership property. In practice, each partner has always looked after his own public light bus and collected the income from it for his own purposes.

22. The object of the Deed Of Partnership was to make provision for the holding of the Licence on behalf of the Association and to make provision for the administration of the franchise which the Licence conferred.

23. Clause 7, which is as follows, made provision for the Licence to be held by Wong Fook :-

24. Further reference to the licence was made in Clause 31:-

"

31.         This partnership deed is made in contemplation of the grant of a licence by The Transport Department of Hong Kong to Wong Fook to operate a maxicab service along any one of the following packages of routes (these packages having been laid down by the Transport Department and Notice of Tender for which having been issued in accordance with Regulation 4 of The Road Traffic (Public Omnibus Light Bus and Public Car) Regulations) :-

 

 

If for any reason whatsoever the application by the said Wong Fook for the said licence is refused this Deed shall automatically determine and all foregoing clauses shall he null and void and completely without effect."

After that, the Association's solicitors typed up the form for Wong Fook to apply for the Licence. That form, duly signed by Wong Fook on the 15th October 1982, was submitted to the Transport Department as part and parcel of the Association's bid for the tender.

25. At this point, it needs to be said that, although the Association's solicitors prepared all the formal documents associated with the tender, it was, however, Wong Fook and Mr Yip who did the actual work of gathering information from the prospective partners and co-ordinatina the whole effort.

26. One item of work done by Wong Fook and Air Yip was to collect $1,020 from each of the partners to pay the solicitors' expenses for the registration of the partnership, the drafting and execution of the Deed Of Partnership and the Licence application.

27. From the outset, Wong Fook was the de facto treasurer for the Association. He entered up each partners' contribution of $1,020 for legal fees into the Association's ledgers which he kept (see Agreed Bundle p.28). He saw to it that the solicitors got paid.

28. As already foreshadowed, the Association was successful in its tender, being granted the franchise to operate Routes 14, 22M and 26 by the Transport Department.

29. The partners' vehicles started plying their new "greenline" routes on 8th March 1983.

30. Like his co-partners, Wong Fook had capital tied up in his own public light bus. Unlike his partners, each of whom could devote all his time to running his own public light bus, Wong Fook devoted a lot of his time to ensuring that the obligations of the Licence were met. He spent at least an hour every day collecting the necessary particulars from his partners for the monthly returns to the Transport Department. Whether for the purpose of compiling his monthly returns or for attending meetings with Transport Department Officials to liaise on one thing or another, Wong Fook spent something like five or six days a month on the Association's business arising from his obligations as Licence holder.

31. At the beginning, long Fook had Air Yip to help him on these administrative matters. Mr Yip's employment by the Association was contemplated by Clause 9 of the Deed of Partnership which provided as follows"-

"9.    The partnership shall employ YIP HING CHUEN of Room 423 Kai Fai House, Choi Wan Estate, Kowloon or such other person as the partners may from time to time agree to manage the partnership business and in particular to organise the scheduling of the public light buses in accordance with the requirements of the Transport Department."

Mr Yip, who was paid $1,500 per month, did not last very long on the job. Because he did not own a public light bus, the Transport Department objected to his continuing in a managerial position with the Association, and his services were terminated by the Association in June 1983. That left Wong Fook as sole manager.

32. I am satisfied that from the outset, beside agreeing to pay Mr Yip $1,500 per month for his services, Wong Fook's partners had also agreed to pay Wong Fook $2,000 per month for his services in administering and managing the Association's business.

33. The source of Mr Yip's and Wong Fook's salaries was two-fold. As I have already described, each partner had deposited $30,000 with the Ping Shek Branch of the State Bank of China to help satisfy the Transport Department that the Association was sufficiently capitalised. As soon as the partners' vehicles started plying the "greenline" routes in March 1983, each partner took back $25,000 of his capital, leaving $5,000 with the Association towards what was described as a "Foundation Fund". By that stage, one of the original fifteen partners had dropped out, so that the total collected from the remaining fourteen partners as Foundation Fund was $70,000. That was one source of the Association's funds to pay salaries. The other source was a contribution of $200 per month paid by each partner, commencing in March 1983 when the vehicles first went on the "greenline" routes. The monthly contribution from each partner remained at that figure until June 1984 when it was increased to $300, and it has remained at that level ever since.

34. By June 1984, when each partner's monthly contribution was increased to $300, business on the Association's package of routes had become reasonably good. At that point, Wong Fook's co-partners agreed to increase his salary to $3,500 per month, and it remained at that level until September 1986 when his co-partners dispensed with his services as manager of the Association.

35. On the topic of the Association's expenditure generally during the time that Wong Fook managed the Association's affairs, the largest out-going by far was his salary. In the first few months of the Association's vehicles operating on the "greenline" routes, a few thousand dollars were spent on roadsigns, indicating designated stopping places, but that was not a recurring head of expenditure. From 1985 onwards, a few hundred dollars were spent each month on subsidising the partners whose turn had come a round to operate their vehicles on Route No. 14 which turned out to be the unprofitable route in the package.

36. A perusal of the income and expenditure accounts for the financial years up to 31st March 1985 and 31st March 1986, respectively, (see Defendant's Bundle pp.6 and 10) reveals how Wong Fook's salary was always far and away the greatest item of expenditure from the Association's funds. A similar conclusion arises from perusing the ledgers for the earlier stages of the Association's operations (see Agreed Bundle pp.32 - 59).

37. Various clauses in the partnership deed made provision as to how the Association's moneys should be handled. Clause 6(a) dealt with the Association's hank account:-

"The bankers of the partnership shall be THE HANG SENG BANK LTD. or such other bankers as the partners may from to time agree."

Clause 10 amplifies that :-

"

10.        The partners are bound to render true accounts and full information of all things affecting the partnership to any partner and in particular each of the partners shall as soon as reasonably practicable pay in to the partnership bank account through the treasurer who the partners may from time to time appoint all monies received in connection with the operation of the partnership business."

Other provisions which have an indirect bearing on how any partner should treat the Association's funds are Clause 12(a) which is as follows :-

"12.         Each partner shall at all times:-

 

38. Wong Fook, who, along with his other managerial functions, was the Association's treasurer from the time the Association was founded until September 1986, disregarded the provision about paying the Association's funds into the partnership bank account. The bank account agreed to by the Association's members was the Ping Shek Branch of the State Bank of China. Instead of paying partnership moneys into that account, Won Fook invariably paid such moneys into a deposit account in his own name. Although that account was in his own name, he used it solely for partnership monies. At no stage did he ever misapply partnership funds.

39. The plaintiffs pleaded several instances where they alleged Wong Fook misused partnership moneys. Their principal allegation in this regard was concerning his salary. They contended that was unauthorised. I have rejected their contention with regard to his salary for reasons I will elaborate later. The other instances of alleged misapplication of funds are trivial indeed. I will deal with those trivial items under my next major heading which will he "Subsidiary Facts".

40. All the plaintiffs' allegations concerning alleged misapplication of funds are rejected by me.

41. There is provision in Clause 11 about keeping accounts. I now set that clause out :-

42. I am satisfied that Wong Fook kept proper books of account. The ledgers I have already referred to were wholly adequate to give a true and fair view of a business such as that run by the Association.

43. The three plaintiffs who were called as witnesses complained that before the first set of annual accounts were made available to them in about April or May 1984, they had never been allowed by Wong Fook to see the ledgers, despite their asking, him for that. I do not believe for one moment that any of those witnesses ever asked to see those ledgers during the time they alleged. In my view, that was a trumped-up allegation of theirs to try to make out that Wong Fook had infringed Clause 11(a) of the Deed of Partnership.

44. Whether Wong Fook produced a profit and loss account for the first full business year of the Association's operation up to 31st March 1984 was not clear from the evidence. He left those matters in the hands of the Association's professional accountants. Certainly, profit and loss accounts were produced for the business years 1984/85 and 1985/86. (See Defendant's Bundle pp.3 - 11). Probably there was also a profit and loss account for the year 1983/84 because the profit and loss account for the year 1984/5 brings forward balances from the previous year. As no one is making an issue about whether there was a profit and loss account for that first business year, it is not important to make a determination.

45. The three plaintiffs who pave evidence made a big song and dance about Wong Fook being very late with the accounts for the business year 1983/4, complaining that they did not get them till about six months after the end of that business year. I reject their evidence on that, and am satisfied that Wong Fook gave each and everyone of his co-partners a full set of copy ledgers in about April or Hay 1984. That set covered each of the months from the commencement of business in March 1983 until 31st March 1984.

46. The accounts and balance sheets were not signed by the partners as required by Clause 11(c). Wong Fook alone signed the accounts and balance sheets. However, the plaintiffs have not made an issue of that.

47. Apart from one matter which I will touch upon in a moment, I am satisfied that, throughout the time Wong Fook managed the Association, namely, up till September 1986, he did all that could be expected of him to ensure that the public got a proper and efficient public light bus service on the package of routes for which he was responsible. Subject to the one matter of which I have yet to speak, any deficiency in the service available to the public on the routes was not his fault, but rather, the fault of some of his partners who did not always obey Wong Fook's reasonable directions.

48. I do not think there was generally much wrong, with the way in which he handled the internal affairs of the partnership, either. The plaintiffs complained that Wong Fook was dictatorial in his attitude towards them. He admits he was in some respects. I think he had to be. He was responsible for seeing that partners observed the conditions of the Licence, and towards that objective, he had to impose some discipline on them. Anyone who saw the plaintiffs in Court would be left in no doubt that, like those in the public light bus business generally, they are rugged individualists. Each of them naturally wanted to make as much money for himself as possible from his public light bus, and sometimes, this resulted in clashes with Wong Fook who had to take a broader view, on behalf of the Association as a whole, to ensure that the Licence conditions were obeyed.

49. A particular source of headache for Wong Fook was the No. 14 route which served Kai Tak Airport. That was the least profitable of the three routes in the package. In fact, it was a money-loser. Naturally, none of the partners wanted to ply that route, but Wong Fook had to see to it that every partner took his turn. It frequently happened that a vehicle which was scheduled to operate on the No. 14 route would instead turn up on Route 22M which was the most profitable of the three routes in the package. Such shortsighted behaviour on the part of an individual partner imperilled the existence of the Licence for the package of routes. Every partner was supposed to take his share of the rood and the bad routes, but some of them did not play fairly about this. Wong Fook was correct in taking a tough line with any partner who disregarded the schedules.

50. I now come to the point on which Wong Fook is to be seriously faulted. I have already mentioned how Wong Fook was at first not prepared to admit in the present proceedings that he held the Licence on behalf of the Association. Originally, the Association was called the "Choi Wan Chiu fling Public Light Bus Association". It changed to its present name of Lok Wah Public Light Bus Association in August 1983.

51. I am satisfied that Wong Fook took advantage of that change of name to try to make out to some of his partners that he no longer held the Licence on their behalf as well as his own, but, instead, made out he held it for his benefit alone. Any lawyer would, of course, laugh at the idea of a change of name by a partnership making any difference to what it owned. But it is just the sort of bluff that one layman might try on another, and I am satisfied that is what in fact Wong Fook did.

52. The reason why Wong Fook tried this piece of bluff stemmed from the fact that from about 1985 at the latest, it was becoming apparent that the fourteen public light buses available to the Association were insufficient to meet the transport needs of the public on its package of routes. Whilst vehicles on Route 14 might have been under-employed, those on Route 22M, which served Lok Wah Housing Estate, could not always meet the demand. This was because the population of Lok Wah Housing Estate has increased considerably since the Association began its business.

53. Since at least 1985, Wong Fook has been doing his level best to get the right to run an additional public light bus for his own benefit on the routes now operated on behalf of the Association. He has also been trying to get an additional vehicle which he wanted to have allocated to Mr Yip. The plaintiffs bitterly oppose Wong Fook's efforts to get these additional vehicles for himself and hr Yip. The plaintiffs contend that any additional vehicles brought on to the Association's package of routes should either he run for the benefit of the Association as a whole, or otherwise each and every partner in the Association should have an equal right to ballot for the right to run any additional vehicle.

54. The tussle over who should have the benefit of additional vehicles is what this case is really all about. Generally speaking, I do not think that the plaintiffs are, in fact, all that worried about the supposed breaches of the partnership agreement which they are alleging against Wong Fook. I have yet to come to the counter-allegations of breaches of the partnership agreement which Hong Fook alleges against the plaintiffs, but, in anticipation, I can at this point say that I do not think he is really any too worried about their alleged breaches, either. Each side is merely raising allegations against the other of breaches of the partnership as ammunition for the real war which is about who is going to get the benefit of the additional public light buses.

55. This deadlock between Wong Fook and the plaintiffs is not a matter which affects them alone. Meanwhile, the public at Lok Wah is not getting as full a "greenline" public light bus service as it needs.

56. In September 1986, the plaintiffs took drastic action against Wong Fook. They called a meeting of the partnership and stripped Wong Fook of his office as manager (including treasurer) of the Association. That was on 9th September 1986. From that day onwards, they stopped paying him any salary. He attempted to counter that by refusing to pay his $300 per month contribution to the Association's fund. Tie has paid nothing since then, claiming that he is entitled to set off $300 per month from $3,500 per month salary he contends is still accruing to him.

57. The plaintiffs voted in ten of their number to be what they called "a Control Squad". That group has taken over the management of the Association since then. They handle the Association's funds, Wong Fook having given them the full balance he was holding on behalf of the Association, and they also arrange the scheduling of the routes and the collection of statistics for forwarding to the Transport Department.

58. The new arrangements are far from ideal. Such matters as the scheduling of routes are alright : the Control Squad simply follows the system that Wong Fook set up. However, Wong Fook's still being the only one responsible for compliance with the conditions of the Licence creates practical problems in the situation which has developed since he ceased to be manager. Rather than communicate directly, the Control Squad gets its solicitor to send the monthly statistics to Wong Fook's solicitor for forwarding to the Transport Department. Those statistics should arrive at the Transport Department seven days after the end of the month to which they relate. Wong Fook's solicitors have not been receiving them from the plaintiffs' solicitors till something like two months late. That is causing the Transport Department to complain to Wong Fook that he is not observing the terms of the Licence.

59. Another practical difficulty is that because Wong Fook is not on speaking terms with the plaintiffs, it mattes it virtually impossible for him to supervise them as he is supposed to do by virtue of the conditions of the Licence. For example, by Condition (xii), he is suppose to ensure that the vehicles are kept in a clean and tidy condition, and regularly maintained. I am satisfied he cannot effectively carry out obligations like that in the light of the present state of hostilities between himself and the plaintiffs.

60. After the Control Squad was set up, the plaintiffs attempted to expel Wong Fook from the partnership. Clause 21 of the Deed Of Partnership makes provision for the expulsion of a partner. That clause is as follows:-

"21.         If any partner :-

 

 

The other partners or partner shall be entitled by notice in writing giving to him to expel him from the partnership."

61. The plaintiffs waited until he was 25 days in arrears with his subscription of $300 to the Association for the month of October 1986. He was thereupon handed a notice signed by one of the plaintiffs, requiring him to pay up those arrears immediately. Wong Fook disregarded that notice, and, as already stated, he has refused to pay his monthly contribution to the Association since September 1986. That notice was followed up by a letter dated the 2nd December 1986 from the plaintiffs' solicitors to Wong Fook, purporting to expel him from the partnership at the expiration of seven days from that letter on the grounds, inter alia, of failure to pay the monthly management fee for October 1986, and failing "to meet the increased demands of passengers at the profitable Route 22M by increasing the number of maxicabs serving the said route".

62. Wong Fook simply disregarded that letter, and carried on in the same way as any other partner in the Association, employing his public light bus on the Association's scheduled routes.

63. Counsel for the plaintiffs did not contend that their solicitors' letter of the 2nd December 1986, or any other event for that matter, had brought about the expulsion of Wong Fook from the partnership. Thus, the plaintiffs conceded that Wong Fook is still a member of the partnership. Be that as it may, I am satisfied that Wong Fook, by his conduct, had rendered himself liable to expulsion from the partnership, although his partners no longer say that he should be expelled for what happened in the past.

64. Technically, lie rendered himself liable to expulsion under Clause 21(c) of the Deed of Partnership by failing to pay the management fee for October 1936 within 21 days of being requested in writing to do so by a partner.

65. More importantly, I consider that from 1985 onwards, he has been in breach of Clause 12(a) of the Deed of Partnership which requires that each partner shall at all times show the utmost good faith to the other partners in all matters relating to the partnership. The duty of utmost good faith required him to use his best endeavours to get additional public light buses for the benefit for the partnership as a whole; instead of that, he sought to take advantage of his position as licensee by trying to get an additional vehicle for himself and another for Mr Yip who was not a partner. Such behaviour on Wong Fook's part amounts to "grave and persistent breaches" within the meaning of Clause 21(a) of the Deed Of Partnership, in my opinion.

66. By behaving in that way, he had thus rendered himself liable to expulsion from the partnership. The significance of this for the purposes of the present case is that Wong Fook's Counsel has conceded that, if his client has conducted himself in such a way as to render him liable to expulsion from the partnership, that would mean he was no longer suitable to be trustee of the Licence for the Association, the result of that being that he should be ordered to take steps to have the Licence transferred to one of his partners.

67. Attention can now be turned to Wong Fook's allegations against the plaintiffs.

68. As already mentioned, Wong Fook has not received any salary since his management functions were taken away from him in September 1986 by the plaintiffs, who make up a majority of the partners. Wong Fook will not accept that his partners are entitled to refuse to go on paying him a salary. He objects to the very existence of the Control Squad. Whilst the Control Squad should listen to Wong Fook's view on how the Association should be run since all partners are entitled to have a voice in the management of a partnership, Wong Fook, as one partner among fourteen, cannot, however, insist that his view should prevail on how the partnership should be managed.

69. Wong Fook does have some justified complaints about the way the Association's affairs have been handled since he was ousted as manager. Firstly, there is the matter of the Control Squad being late in letting Wong Fook, as licensee, have the monthly statistical returns for the Transport Department. Such laxness by the Control Squad forces Wong Fook into a position where he is in breach of the Licence. That could have the effect of the Association losing the franchise. That would be catastrophic for Wong Fook in common with his partners. A similar result could ensue from the failure by the Control Squad to supervise Route 14 properly. In November 1986, inspectors from the Transport Department found that the Association's public light buses were failing to turn up at Kai Tak Airport for 35% of the trips scheduled on this route. That led to a letter dated 28th January 1987 from the Transport Department to Wong Fook, as licensee, threatening to cancel the Licence for the whole package of routes.

70. Unlike Wong Fook, who, as I have already explained, never spent the Association's funds for unauthorised purposes during, the time he was manager, the Control Squad did charge some items to the Association which fell outside the scope of proper partnership expenditure. The Control Squad drew $2,254.90 from partnership funds to pay for the costs of refreshment enjoyed by Control Squad members at their meetings in November and December 1986 Such expenditure could not, in my view, be regarded as for the benefit of the partnership. Similarly, $200 debited to the partnership accounts by members of the Control Squad for the purpose of sending a flower basket to the plaintiffs' solicitor on the occasion of his opening a new office could hardly he said to be for the beneift of the partnership as a whole.

B.     Subsidiary Points of Fact

71. Various points of fact did not fit conveniently into the general outline just given, so I will now deal with them separately.

Violent Threats

72. The plaintiffs claimed that Wong Fook had threatened them in various ways. He was supposed to have threatened to destroy the licence discs on their public light buses unless he got his way about additional vehicles being assigned to him, and he was also alleged to have used intimidatory tactics to get some of his partners to sign documents (Defendant's Bundle p.2 and Agreed Bundle p.222), acknowledging that he and Mr Yip were entitled to additional vehicles. He was also alleged to have behaved in a threatening way when attending with Mr Yip at a meeting of the Control Squad on the 12th November 1986. Counter accusations were made by Wong Fook, alleging that some of the plaintiffs had made triad threats against him, and he contended that some of the plaintiffs had caused his public light bus to be damaged.

73. I was neither prepared to accept the plaintiffs' accusations, nor Wong Fook's counter accusations that any threats or acts of damage had occurred.

Alleged Misrepresentation by Wong Fook Concerning Passenger Service Licence Certificate

74. Paragraph 11 of the Amended Statement of Claim alleges as follows :-

From 1984 onwards, each "greenline" public light bus was required by the Transport Department to have its own "Passenger Service Licence Certificate". The fact was that if any of the partners applied through Wong Fook, the holder of the Licence, the cost was only $15. On the other hand, if a partner chose to apply for his certificate independently, without going through Wong Fook, the Transport Department charged that partner $150. Perhaps there was some misunderstanding by the plaintiffs as to how it could be that the certificate cost ten times more when applied for independently than when applied for through Wong Fook, but there is nothing to suggest that Wong Fook misrepresented the position in any way.

Fees for Advertising

75. One of the conditions of the Licence held in trust by Wong Fook for the Association was that there was to be no advertising in or on any public light bus save with the written approval of the Commissioner for Transport.

76. In or about 1986, the Commissioner for Transport caused an announcement to be published in the newspapers to the effect that, henceforth, public light bus owners were free to advertise on their vehicles.

77. Wong Fook made his own private arrangement for his public light bus to carry advertisements. He has refused to account to the partnership for the fees earned by his public light bus for carrying such advertisements. The plaintiffs contend that those fees should belong to the Association. They contend, too, that for him to arrange advertising for his own vehicle, but not for his partners' vehicles as well, was in breach of the Deed Of Partnership. In effect, the plaintiffs are contending that Wong Fook did not act with the utmost good faith towards his partners on this matter.

78. The evidence led me to the conclusion that whether or not to carry advertisements was a decision for each public light bus owner to make for himself. If a particular partner wanted his vehicle to carry advertisements, it was up to him to make his own arrangements. Any fee earned from such advertising belonged to the individual partner in the same way that any other income, such as fares, from his public light bus belonged to him. In my opinion Wong Fook was not in breach of the Deed Of Partnership by acting as he did, and he was under no obligation to account to the partnership for the fees he earned.

Roadsigns

79. The plaintiffs sought to make out that Wong Fook had shown himself to be unworthy of holding the Licence on behalf of the partnership because he had been inefficient about providing roadsigns on the scheduled routes. Such roadsigns were to assist the public in knowing where to catch the Association's buses, and the implication of the allegation is that without adequate roadsigns, the Association's members might lose some business. The plaintiffs' allegations about this matter were, in my view, vague and unsubstantiated. The Transport Department were generally satisfied with how Wong Fook  was licensee, discharged his duties, and had no complaints about the system of roadsigns for which Wong Fook was responsible. That the Transport Department did not regard Wong Fook as blameworthy in relation to roadsigns can be discerned from the Agreed Bundle at pp.137 and 138.

Miscellaneous Items Charged to the Partnership Accounts by Wong Fook

 

(i)     Fixed Penalty Ticket

(ii)     Red Packets

(iii)     The $1,000 mirror for Universal Sports Club

III.     REASONS FOR FINDINGS OF FACT

80. Four witnesses were called in the case - three of the plaintiff partners and Wong Fook. None of those witnesses was reliable. Each of them was only prepared to tell the truth when it suited his case, and was also willing to lie when it suited his case. In such circumstances, the Court had to resolve any conflicts in the evidence on the basis of inherent probability.

81. There are three areas of factual dispute which call for detailed comment.

82. Firstly, there is the issue of whether Wong Fook's partners agreed to pay him salary.

83. I find it inconceivable that Wong Fook's partners would have gone on making their monthly contributions of management fee at the rate they did unless they had agreed to pay Wong Fook a salary. Up till June 1984, each partner paid management fee at the rate of $200 per month; thereafter, the rate was $300 per month. A perusal of the Association's income and expenditure account for the year ending 31st March 1985 reveals total income of $42,000, and total expenditure of $45,473. $39,000 of that expenditure was for Wong Fook's salary. A similar picture emerges if one looks at the income and expenditure account for the year ending 31st March 1986. That year, management fees brought the Association a total of $50,400. Total expenditure was $53,876, of which $42,000 was for Wong Fook's salary.

84. The plaintiffs would not have gone on making their contributions of management fee at the rate they did unless they had all along agreed to Wong Fook withdrawing salary for himself. From the copies of the ledgers which the partners received as early as 1984, they had been able to see that Wong Fook was drawing salary. If the plaintiffs had disapproved of what Wong Fook was doing, they would, no doubt, have, in effect, exercised the remedy of self-help by simply refusing to pay sufficient management fee to cover Wong Fook's salary. That they did not see fit to pursue such a line of self-help is clear evidence, to my mind, that they had agreed to pay him the salary he was drawing.

85. The second area of factual controversy is whether Wong Fook tried to make out to the plaintiffs that he held the Licence for his own benefit instead of for the Association, with the result that he was entitled to allocate additional vehicles for himself and Mr Yip.

86. By the manner of his pleadings and by the way in which his case was put to the the plaintiffs' witnesses, Wong Fook sought to make out that he held the Licence for his own benefit instead of in trust for the Association. It was only because such a stance emerged as patently unsustainable as the case proceeded, that Wong Fook did the decent thing and admitted that, yes, after all, he did hold the Licence for the beneift of the Associaton, not just for himself.

87. It was clear from Wong Fook's evidence that he regarded the holding of the Licence as a source of perks. From some of the answers he gave in court, it was clear that he thought his claim to an additional vehicle rested on the fact that he was the Licence holder. He thought, too, that if the Licence were transferred to another, then that transferee would be entitled to an additional vehicle for himself. From one of his answers, it emerged that he even thought that whoever held the Licence was entitled to receive a salary from the Association. Perhaps such an answer is not so surprising in the light of along Fook's own claim that salary is still accruing to him from the Association, despite the terminatin of his services as manager in September 1986. As he has not been manager since then, he must think that as licensee he is entitled to a salary.

88. The inference I drew in the light of all the evidence was that Wong Fook, instead of using the Licence solely for the advantage of the Association, tried to use it to promote his own personal benefit and the benefit of Mr Yip.

89. I now come to the third area of factual controversy. Although I finished up with no faith in Wong Fook's credibility generally, the state of the accounts was such and his explanations concerning them so convincing, that I did accept all he said concerning the disbursements he had made from the Association's monies. It was, again, inherent probability that disposed me to accept his explanations about the accounts. Not only did his explanations sound inherently probable, but it was also inherently improbable that he would make unauthorised payments of one or two trivial items when the overall picture presented by the accounts disclosed that Wong Fook had a keen appreciation that the Association's funds were only to be applied for authorised purposes.

IV.     THE LAW

(i)     Removal of a Trustee

90. Counsel for Wong Fook was prepared to concede that the plaintiffs were entitled to have Wong Fook removed as trustee of the Licence if he had behaved in such a way as to render himself liable to expulsion from the partnership. According to that concession, Wong Fook should be regarded as "ineligible" within the meaning of Clause 7(a) of the Deed of Partnership in the event of his having rendered himself liable to expulsion from the partnership.

91. Without that concession, there is always section 42(1) of the Trustee Ordinance, Cap.29, to empower the removal of a trustee in appropriate circumstances. That sub-section is as follows :-

"The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee. In particular and without prejudice to the generality of the foregoing provision, the court may make an order appointing a new trustee in substitution for a trustee who is sentenced to a term of imprisonment or is a lunatic or a person of unsound mind or is a bankrupt or is a corporation which is in liquidation or has been dissolved."

92. The question which falls for determination by virtue of that sub-section is whether it is expedient for the court to order the appointment of a new trustee of the Licence in substitution for Wong Fook.

93. One case was cited to me on the principles to be applied in relation to the removal of a trustee, that is the case of Letterstedt v. Broers⁽¹⁾. That, basically, is to the effect that the court can remove a trustee where his continuance in office would prevent the trust being properly executed. Whether the continuance of a trustee prevents a trust being properly executed depends of course on the particular circumstances of the case.

(ii)     Partnership Property

94. The Licence is partnership property. Wong Fook concedes that now. Any property rights arising by virtue of the Licence will accrue to the Association unless there is some agreement to the contrary. For the purposes of the present case, there is nothing which might incline me to the view that any agreement exists which might deprive the Association of the right to vehicles which would otherwise accrue to it by virtue of the Licence. That the partnership is entitled to new property rights coming into existence by virtue of partnership property (in the absence of agreement to the contrary) is a self-evident proposition. If chapter and verse are required for that proposition, it can be found in Section 22(1) and section 31(l) of the Partnership Ordinance, Cap. 38 which are as follows :-

(iii)     Partner's Remuneration

95. Subject to any agreement to the contrary, a partner is not entitled to remuneration for acting in the partnership business. Section 26(f) of the Partnership Ordinance is authority for that.

96. I have already indicated that I am satisfied that Wong Fook's partners did agree to remunerate him for his managerial and administrative services until September 1986, when they let him know in no uncertain fashion that they no longer required his services.

97. A partner cannot he an employee of his partnership. Ellis v. Joseph Ellis & Co.(2) is authority for that. Because he is not an employee, a partner cannot insist on notice when his co-partners inform him that they are no longer willing to remunerate him for services to the partnership. A partner in that position can insist on being paid for services rendered up to the point where his co-partners indicated they were no longer willing to pay him, but he has no claim for loss of future remuneration.

V.     CONCLUSION

98. If one applies the concession made by Wong Fook's Counsel to the effect that his client can be removed as trustee provided the Court is satisfied he has rendered himself liable to expulsion from the partnership by his conduct, the result then follows from my findings of fact that he should be removed as trustee on two grounds. They are, firstly, that he has committed a grave breach of the Deed of Partnership in that he has failed to show the utmost good faith to his partners by denying that he is trustee of the Licence and seeking to get an additional vehicle for himself by virtue of his position as Licence holder. Secondly, he has failed to pay his monthly management fee since September 1986, despite written requests for payment in both November and December 1986. The latter is a rather technical ground for removing him as a trustee, and I would have been loth to remove him on that ground, had it stood alone. His failure to pay management fee has been only because of his mistaken view that he was entitled to go on receiving salary after September 1986.

99. Even without the concession made on Wong Fook's behalf, I would still have reached the same conclusion that there should be a change of trustee, my decision to this effect stemming from the application of section 42(1) of the Trustee Ordinance to the facts of the present case.

100. The facts I have found lead me to the conclusion that Wong Fook has a fundamental misconception about the duties a trustee owes to the beneficiary of a trust, that is to say in the present case, the Association. To go around denying that one is a trustee is completely unacceptable conduct on the part of a trustee. Moreover, no trustee should try to benefit himself at the expense of the trust property, for then there arises a conflict of duty and interest on the part of the trustee. Wong Fook's effort to get himself an additional vehicle by virtue of his holding the Licence shows his unsuitability as a trustee.

101. It is well settled that the Court will not interfere between partners merely because they do not agree, it being no part of the Court's duty to settle petty partnership squabbles. The facts of the present case, however, reveal that the partners have gone well beyond the stage of petty squabbling. Wong Fook is revealed as being seriously in breach of trust towards the plaintiffs. For the sake of the plaintiffs, he should be removed as trustee.

102. There is a further element, though, which reinforces my view that there should he a new trustee. Besides the interest of the partners, there is also the public interest to consider in the present case. The public using the "greenline" buses on Routes 14, 22M and 26 cannot get the service which would he available to them by a properly run association. Because of the attitude Wong Fook has adopted, additional buses cannot be brought onto the route to serve expanding public demand. This deadlock must be broken not only in the interest of the plaintiffs, but also in the interest of the public. The way to break the deadlock is to have the Licence transferred to a member of the Association who is suitable to hold it.

103. The order I make, therefore, is that Wong Fook shall transfer the Licence to whichever partner in the Association is approved by the Transport Department as fit to hold it. In the event of Wong Fook withholding any necessary consents for such a transfer, the Registrar of the Supreme Court is empowered to sign documents on Wong Fook's behalf signifying consent to such a transfer.

104. A few words need to be said about an equitable defence which was advanced as a reason for not ordering Wong Fook to transfer the Licence. Before deciding to launch the present action, the plaintiffs held a meeting. That was on 30th November 1986. At that stage, they selected six of their number to be plaintiffs in the litigation. Those present went on to resolve that "The legal fees of the plaintiffs in the litigation shall be borne equally by the following partners. The result and benefit that the plaintiffs receive in future will be shared equally by all those contributing to the legal fees".

105. As events turned out, all partners have been joined in the litigation. According to the defence, the resolution passed by the plaintiffs demonstrates that they want the partnership to be run for just their own benefit rather than for the benefit of the Association as a whole. I do not regard it as reasonable to imply that meaning into the plaintiffs' resolution. I discern no indication from that resolution that the plaintiffs have any intention of depriving the defendants of their full entitlement as partners. In my view, all partners (except perhaps Wong Fook), stand to benefit from the plaintiffs' action; the public benefits too.

106. I will now state my conclusions on the various matters of account.

VI.     EPILOGUE

107. This is by no means the first partnership dispute involving a "greenline" public light bus franchise to come to court. As with the present case, the other litigation has arisen from the circumstance that the Licence for a fleet of "greenline" buses has been granted to one member of a partnership. This system of granting the Licence to one partner has helped foster the delusion in that partner that he alone owns the Licence and should reap the benefit of additional vehicles. A system which allows that type of delusion to arise is not conducive to the public good for a whole host of reasons, including the potential for dishonesty, breaches of the peace, and unnecessary litigation.

108. It should not be beyond the wit of man to devise a system for granting "greenline" public light bus franchises which avoids the evils of the present system. One solution might be for the Transport Department to grant a Licence only to a member of a partnership which is governed by a Deed of Partnership which states explicitly that the Licence is held in trust for the partnership, and that any additional vehicles granted by virtue of the Licence shall belong to the partnership as a whole. Another possible solution could be for owners of public light buses to associate together under the umbrella of a limited company structure, rather than a partnership. Then the Licence could be granted to the limited company, rather than a partner. With a limited company as holder of the Licence, there could be no possible scope for argument about who was entitled to the benefit of additional vehicles.

109. This idea of employing a limited company structure has, to a certain extent been explored already between the parties to the present action and the Transport Department, but, as far as I am aware, nothing concrete has materialised yet. I venture to suggest that further effort should be expended on trying to devise a suitable form of limited company structure. To minds more imaginative than mine, other ideas will probably suggest themselves as solutions to this licencing problem. The abuses inherent in the present system are plain for all to see; a little ingenuity could, I am sure, lead to their rapid elimination.

(1)    (1884) 9 App. Cas. 371

(2)    [1905] 1 K.B. 324