DR. KOH. KEE SUAN ANDREW v. DR. IP KAY LO VINCENT

HCA 699 of 1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 699 OF 1992

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J U D G M E N T

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In this action, the Plaintiff claims damages against the Defendant for misrepresentation and deceit. Judgment was reserved pending written final submissions after counsel have had the opportunity to study the transcripts of trial evidence. The last of the submissions were filed on 6th December 1999. This is my judgment.

2. The Plaintiff ("Dr. Koh") is a Malaysian Chinese. In the late 1950's, following the footsteps of his elder sister ("Dr. Chan"), Dr. Koh studied at the Royal College of Surgeons in Ireland. Whereas Dr. Chan came to practise in Hong Kong, Dr. Koh returned to Malaysia after he qualified. Eventually, Dr. Koh became a senior general surgeon with specialist qualifications. In the late 1980's, after his first wife succumbed to cancer, Dr. Koh decided that he ought to spend more time with his children. He took his younger son to join his daughter who was studying in Perth, Australia and remarried there. Before leaving Malaysia, he was the head of the Surgical Unit and chairman of the board of a large private hospital. In Perth, Dr. Koh practised on effectively half time basis. According to him, surgeons in Perth could only charge low scale fees and the tax on income was high. So there was little incentive for him to practise full time. There is no doubt that Dr. Koh is respected as a good senior general surgeon in Malaysia and Australia.

3. Some time in late 1989 or early 1990, Dr. Chan visited Dr. Koh. In fact Dr. Chan had retired in 1986 after 25 years service in various government and public health establishments in Hong Kong. The occasion of the visit was simply family re-union Somehow they talked about Dr. Koh's professional prospects. Dr. Chan suggested that Dr. Koh should consider coming to Hong Kong to earn more. Dr. Koh asked her to look out for opportunities in Hong Kong for him. Some time in May 1990, Dr. Chan received a circular from the Defendant ("Dr. Ip") about a new clinic to be opened in Tsim Sha Tsui area ("PDG"). From then on the paths of Dr. Koh and Dr. Ip started to cross and eventually clashed.

4. Dr. Ip studied medicine in Canada. He is I believe a general practitioner. In 1981, he started a private practice solo in Admiralty Centre. The practice grew over the years. By 1989, Dr. Ip had a sizeable clinic in Admiralty Centre with 4 full time medical practitioners and 3 doctors who attended on part-time basis. This clinic became known as ADG. In 1989, there were discussions about take over of ADG by the Sing Tao group and discussions about starting the PDG. The Sing Tao approach came to nothing. The PDG project did materialize.

5. According to Dr. Chan, after receiving the circular about PDG from Dr. Ip, she made an appointment to meet, for the first time, Dr. Ip. On 4th June 1990, Dr. Chan met Dr. Ip at ADG in Admiralty Centre. After being briefed by Dr. Ip on details regarding PDG, Dr. Chan expressed doubts about its suitability for Dr. Koh as a senior general surgeon and a newcomer to Hong Kong. Dr. Ip then mentioned that a general surgeon at ADG would be leaving soon and suggested Dr. Koh could replace him. Allegedly, Dr. Ip further made a number of representations as the meeting continued.

6. After the meeting, Dr. Chan related the substance of the discussion during the meeting with Dr. Ip to Dr. Koh who was then still in Perth. Meanwhile, Dr. Ip called Dr. Chan and asked her to ask Dr. Koh to write to Dr. Ip. Dr. Koh did write a letter, dated 11th June 1990, introducing himself to Dr. Ip. On 23rd June 1990, Dr. Koh and his second wife flew into Hong Kong for an arranged meeting with Dr. Ip. On 25th June 1990, Dr. Koh, Mrs. Koh and Dr. Chan went to the ADG clinic to meet Dr. Ip. At the meeting, allegedly Dr. Ip repeated the same representations he had made to Dr. Chan. A further meeting was then scheduled for 27th June 1990.

7. On 27th June 1990, Dr. Koh and Dr. Chan were introduced to Dr. Edwin C.L. Yu ("Dr. Yu") and Dr. K.S. Lai ("Dr. Lai"). What transpired during this meeting is also a subject of controversy. Dr. Koh and Mrs. Koh then flew back to Perth. Thereafter, Dr. Ip chased Dr. Chan a few times if Dr. Koh had made any decision yet about joining ADG and PDG. Dr. Chan therefore called Dr. Koh and asked if he would join. Dr. Koh decided to join. This decision was relayed by word of mouth to Dr. Ip through Dr. Chan.

8. On 29th July 1990, Dr. Koh (still in Australia) received a parcel of documents from Dr. Ip. Apparently, these documents include (1) a covering letter dated 20 July 1990 asking Dr. Koh to remit to Dr. Ip $300,001 for 1000 shares in Health Resource Limited ("HRL") and 1000 shares in Masterform Limited ("Masterform") and $70,000 to HRL for entrance to practise at PDG, (2) an application form to join PDG and (3) documents for buying the HRL shares at $300,000 and Masterform shares at $1. After a long distance telephone discussion with Dr. Ip, Dr. Koh sent to solicitors for Dr. Ip the documents duly signed together with one cheque payable to Dr. Ip for $300,000 (note not $300,001) and one cheque payable to HRL for $70,000. On 15th August 1990, Dr. Chan rang up Dr. Koh to relay Dr. Ip's request for Dr. Koh's commencement date. Dr. Ip said he wanted Dr. Koh to commence soonest as he had circulated Dr. Koh's name to the clinic's contacts and Dr. Ip had surgical cases to refer to Dr. Koh. Dr. Koh agreed to start on 15th October 1990.

9. Dr. Koh arrived in Hong Kong on 13th October 1990 and within a few days started practising at ADG. PDG was not yet fully operational but Dr. Koh spent some time there attending to decoration and preparatory work. On 25th October 1990, at the request of Dr. Ip, Dr. Koh signed a licence agreement (for joining ADG) which was supposed to be standard with all doctors at ADG. Allegedly as a gesture of goodwill, Dr. Ip waived the management expenses payable under the licence agreement by Dr. Koh for November 1990 to January 1991. Thereafter, Dr. Koh found that the management expenses always exceeded $28,000 per month, sometimes to over $40,000. Dr. Koh complained. In August 1991, Dr. Ip agreed to limit Dr. Koh's contribution to the management expenses to $28,000 per month. Nevertheless the relationship between the parties became more and more tense. In February 1992, Dr. Koh transferred his membership in PDG to another doctor and hence left that practice. In March 1992, Dr. Koh left the ADG practice as well and resigned all directorships in the management companies concerned. He has since returned to Australia.

10. The chronology given is not disputed. It is the matters allegedly discussed or represented by Dr. Ip during the meetings of 4th, 25th and 27th June 1990 that are the bones of contention. Although the meeting on the 4th June 1990 was not attended by Dr. Koh, it is accepted that whatever Dr. Chan heard from Dr. Ip had been faithfully conveyed to Dr. Koh. Also, there can be no denial that Dr. Ip knew that Dr. Chan was only a messenger so that any representation made by Dr. Ip to Dr. Chan may be treated as representation to Dr. Koh. Dr. Koh complains that as a result of a number of misrepresentations made by Dr. Ip, he uprooted himself from Australia incurring special damages, in addition paid $300,000 to join ADG, and suffered loss of earnings or extra expenses during the period he practised at ADG. Dr. Ip denied having made most of the alleged damning misrepresentations.

11. In a case of this nature, where two senior members of a highly respectable profession are pitched against each other on a battle of truth, it is my unenviable task to determine which of the two related the facts. For this purpose, I realize it is very unsatisfactory to rely solely on demeanour. It is also dangerous to take into account evidence which have no direct bearing on the factual issues. The approach I will take is first to examine the rationale of the scheme of things canvassed by each side for general credibility. Then I will also consider evidence relating to some specific allegations to verify or check against the general credibility of the schemes. However, before I proceed to the main issues, it is important to understand in more detail the management set up of ADG and PDG. These details, I believe, are not disputed.

The ADG

12. At all material times, the ADG was a sole proprietorship in rented premises. Dr. Ip owned the practice. The clinic can be divided into two parts - the clinical practice and the laboratory service. For a considerable period of time up to the middle of 1990, the clinical practice had four full time doctors and three to four part-time doctors. The doctors had different specializations. Over the years, doctors came and went. At the last count, there was a dermatologist, a gynaecologist, a plastic surgeon and general practitioners like Dr. Ip. There was only one general surgeon, Dr. Fung, who was a part-timer. The laboratory service consisted of equipment like X-ray machines and operating technicians.

13. Since very early days, ADG had a management company called Gaylaw Investment Company Limited ("Gaylaw"). It is perhaps more appropriate to treat Gaylaw as a service company for Dr. Ip. Gaylaw owned two shop premises, unrelated to ADG, and collected rent from those premises. Gaylaw owned all the equipment of the laboratory service of ADG and hired the operating technicians. All charges of the laboratory service of ADG went to Gaylaw as Gaylaw's income. All the overheads of the clinical practice of ADG were also met by Gaylaw. In fact, Gaylaw is the lessee of the ADG premises and paid the rent. ADG paid Gaylaw management expenses. Dr. Ip has confirmed that the management expenses paid by ADG to Gaylaw merely re-imbursed the operating expenses of the clinical practice, Gaylaw did not make profits on the clinical practice. The fees charged by doctors for consultations at ADG collected by the clinic, after deducting an appropriate amount for management expenses, were paid over to the doctors.

14. Each doctor at ADG had a separate licence agreement with Gaylaw for regulation of the doctor's relationship with the clinical practice and the share of management expenses. In general, doctors practised on cost sharing basis; although one or two had an arrangement for guaranteed income which means that the doctor concerned needed not pay the normal full share of management expenses if the real earnings were less than the minimum contractual take home amount.

15. Following events involving Dr. Koh, by an agreement dated 13th August 1990, Dr. Ip assigned all "the chattels, goodwill and the equipment, furniture and fittings" of ADG to another corporate vehicle called Masterform. By another agreement executed in 1990, Gaylaw appointed Masterform as manager of ADG. According to Dr. Ip, he intended to use Masterform as the proprietary and management company of ADG. However, also according to Dr. Ip, the bulk of the expensive equipment of ADG used by the laboratory service and owned by Gaylaw could not be transferred to Masterform at a nominal value of $1. Hence those equipment remain the property of Gaylaw.

The PDG

16. The PDG was a new set up in premises within the Tsim Sha Tsui Kai Fong Association ("the Association"). The location as part of a neighbourhood activity centre renders PDG a community clinic. It is not clear how Dr. Ip got the connection but evidently he had been the only person negotiating with the Association for two years. By the middle of 1990, the Association was willing to set aside space within its premises for accommodation up to 20 doctors and dentists in a multi-discipline clinic.

17. Obviously, PDG was not a proprietary practice. In fact, the Association entered into an Operators' Agreement dated 13th June 1990 ("the Operators' Agreement") with Drs. Ip, Yu and Lai ("the operators"). My reading of the Operators' Agreement is that Drs. Ip, Yu and Lai jointly had powers to manage the clinic and they had joint and several liability towards the Association for the management of the clinic. Indeed, Dr. Ip in giving evidence said that after signing the Operators' Agreement he alone could not make decisions for PDG. It is safe to say that the three doctors were equals under the Operators' Agreement which authorized the three of them to decorate and manage the clinic and to engage other doctors to practise at the clinic. The Operators' Agreement permits the use of a corporate vehicle to manage PDG provided that the three doctors or all the operators for the time being are shareholders and directors of the management company.

18. According to Dr. Ip, he intended to use one corporate vehicle to manage both ADG and PDG. Quite apart from the question of whether Dr. Ip's intention was compatible with the Operators' Agreement, Drs. Yu and Lai opposed. Eventually, Drs. Ip, Yu and Lai agreed that separate corporate vehicles should be used to manage ADG and PDG. On 13th August 1990, the three doctors signed an agreement with HRL vesting management of PDG in that company.

19. At or around the time the 13th August 1990 agreement with HRL was signed, a set of club rules ("the Club Rules") was produced by HRL. The Club Rules regulated the rights and obligations of each and every doctor who were to practise at PDG. According to the Club Rules, each doctor upon joining PDG must submit a signed application to join and pay an entrance fee of $70,000 (a discounted rate of $60,000 for those who were parties to the Operators' Agreement) to HRL for each consultation room to be occupied by that doctor. This entrance fee was meant to cover the decoration and fitting out expenses of PDG. Whilst practising at PDG, each doctor must pay to HRL a monthly amount being 110% of the total operating expenses of PDG divided by the number of doctors currently in practice at PDG; the 10% surcharge represents the profits of HRL.

20. Moreover, upon joining PDG, each of Drs. Yu, Lai and Koh was required by Dr. Ip to purchase from Dr. Ip one thousand shares in HRL at $300,000. There is no dispute that Drs. Yu, Lai and Koh each paid $300,000 to Dr. Ip personally and each had one thousand shares in HRL transferred from Dr. Ip to his name. Upon such transfers, Dr. Ip remained the majority shareholder in HRL. All four doctors Ip, Yu, Lai and Koh also became directors of HRL.

Dr. Koh's Case

21. Both Dr. Chan and Dr. Koh stated that Dr. Ip initially tried to "sell" PDG to Dr. Koh. Because they did not believe PDG was suitable for Dr. Koh, Dr. Ip then brought up ADG. According to Dr. Chan and Dr. Koh, at the meetings on 4th and 23rd June 1990, Dr. Ip told them that ADG had 4 full time and 3 part-time doctors. One of the doctors was a general surgeon and he was leaving, so there was an opening for Dr. Koh to fill. Dr. Koh subsequently understood that the one he was replacing was Dr. Fung, a part-timer who did not have a significant caseload at ADG.

22. During the first two meetings in June 1990, both Dr. Chan and Dr. Koh were told that ADG turned in annual profits of approximately $1 million for the preceding year. They were shown the draft annual accounts of Gaylaw and ADG for 1989. The Gaylaw accounts posted profits of about $1.2 million. Neither Dr. Chan nor Dr. Koh paid attention to the heading of the accounts. They did not notice the accounts were those of Gaylaw. During the two meetings held at ADG, Dr. Ip also demonstrated, by reference to some computer print-outs, the monthly earnings of two full time doctors of ADG; these two doctors grossed about $90,000 and, after deducting $28,000 for the monthly contribution for management expenses, took home about $60,000 each. None of these representations by Dr. Ip are denied by him.

23. According to both Dr. Chan and Dr. Koh, since it was rather important for Dr. Koh to know his liabilities, they asked Dr. Ip if the monthly contribution was likely to increase. Allegedly, Dr. Ip assured them that the monthly contribution would remain more or less the same. Although ADG was in rented premises, since the practice had been there for many years, he said he did not anticipate increase in rent that would significantly affect the monthly contribution of the doctors.

24. Both Dr. Chan and Dr. Koh understood in June 1990 that $300,000 would have to be paid to Dr. Ip personally for shares in HRL and $70,000 for entry into the PDG practice. They knew that these monies were not for purchase of goodwill but apparently the amount of $300,000 was justified by reference to the value of goodwill of ADG which Dr. Ip put at $5 million. They were told at that time that HRL was the corporate vehicle for ADG. In June, and in August 1990 upon receipt of the share purchase documentation, Dr. Koh did try to ask Dr. Ip to reduce the shares he had to buy for entry into ADG. Dr. Ip repeated that every doctor had to buy the same number of shares for the same amount. Dr. Koh reckoned that if doctors at ADG took home $60,000 a month, it should not take long for him to recover the $300,000 initial outlay. So, Dr. Koh accepted, signed the paperwork and sent off cheques. Dr. Koh did not concern himself with what he was paying for as long as it enabled him to join ADG and the amount paid represents value that may be realized. He believed Dr. Ip that ADG was an established and successful practice with a vacancy left by a general surgeon for him to fill.

25. When Dr. Koh arrived in Hong Kong in October 1990 to start with ADG, he was immediately surprised to learn that there was to be substantial rent increase for ADG. A little later, he discovered that Dr. Fung whom he believed he was replacing had only a part time practice with ADG and had not made serious money there. Cases for a general surgeon at ADG were far and few in between. In fact, over the 16 months he stayed with ADG, he took home an average of about $6,000 per month after deductions. PDG brought him no joy either. Even working part-time in Perth, Australia where the fees were quite low, Dr. Koh used to make approximately $25,000 per month. As to the $300,000 paid, it is locked in as HRL shares which are now practically of no value because PDG management has changed hands. Dr. Koh was very disappointed.

Dr. Ip's Case

26. Dr. Ip's case is that although ADG was making profits and had substantial goodwill, he anticipated rise in rent. Both as a means to extend personally and to beat possible prohibitive increase in rent for ADG, he sought to set up PDG. Notably, the rent for PDG was considerably cheaper. His intention was that should ADG faces steep rise in rent, he would close ADG and concentrate on PDG. That is his way "to beat the landlord".

27. Hence, Dr. Ip was sure that, when Dr. Chan and Dr. Koh made enquiries, he made it quite clear to them that the rent for ADG may well increase. Whilst he showed Dr. Chan and Dr. Koh documents and figures indicating that the average monthly contribution by each doctor towards management expenses of ADG was $28,000 per month, Dr. Ip did not suggest in any way that this level of contribution would remain stable in the foreseeable future. He could not and did not make any guarantee in that regard.

28. Dr. Ip admittedly knew that Dr. Koh was looking for a general surgeon position. He was willing to take him on as a general surgeon. However, since the only general surgeon ADG had, Dr. Fung, was a part-timer, ADG had no surgical goodwill. Dr. Ip is adamant that he made no representation to Dr. Chan and Dr. Koh that ADG had surgical goodwill. He did say, however, that there were surgical cases.

29. Whereas Dr. Ip did state to Dr. Chan and Dr. Koh that ADG had substantial general goodwill, he made it clear to them that Dr. Koh was not required to purchase any goodwill. However, he did impose a condition - this is Dr. Ip's own evidence - that Dr. Koh must pay $300,000 to purchase HRL shares from him for joining the existing practice of ADG and another $70,000 to join the new practice of PDG.

30. According to Dr. Ip, at the meeting on 27th June 1990, when Drs. Ip, Yu, Lai, Koh and Chan were all present, Drs. Ip, Yu, Lai and Koh agreed that HRL should be the management company of PDG and that Drs. Yu, Lai and Koh would each purchase 1000 shares in HRL from Dr. Ip at $300,000. In August 1990, Dr. Koh was sent papers to effect the purchase of HRL shares.

31. Meanwhile, Dr. Ip negotiated with the landlord of ADG for renewal of the lease that was due to expire in February 1991. However, the rent was increased and this resulted in Dr. Koh having to pay monthly contribution of some $40,000 when the new rent took effect. When Dr. Koh arrived in October 1990 to start practising in Hong Kong, Dr. Ip told him the bad news and, as a gesture of goodwill, waived the contribution of management expenses required from Dr. Koh for the first two months. Still, when the contribution of management expenses soared, Dr. Koh bleated and repeatedly pestered Dr. Ip. At a still later stage, Dr. Ip agreed to limit Dr. Koh's contribution to $28,000 per month. But Dr. Koh refused to pay this amount and Dr. Ip had to set off the amount due against surgical fees payable to Dr. Koh through ADG.

32. It is true that Dr. Koh did not have many surgical cases. Dr. Ip did try to help by referring cases to him and by writing to hospitals about the availability of Dr. Koh's services. In Dr. Ip's opinion, Dr. Koh could have promoted himself by giving talks and mingling in professional circles. But there is no evidence that Dr. Koh did so.

33. In sum, according to Dr. Ip, Dr. Koh knew the risks of joining ADG which was liable to face rent increase and which had no surgical goodwill. Dr. Koh also knew what he had to pay for. Nonetheless, Dr. Koh agreed, paid and joined. The fact that Dr. Koh did not find practice in Hong Kong as lucrative as he expected was due to, in part, his own failure to develop himself and he should not blame Dr. Ip.

General Credibility

34. In view of the substance of their respective case, Dr. Koh and Dr. Ip cannot be both telling the truth. I should start with looking at which of their versions is generally more credible.

35. Dr. Koh already had a steady income in Australia. He was looking for better prospects in Hong Kong. It was natural that before he decided to leave his secure position in Australia to came to join a private practice in Hong Kong, Dr. Koh would seek information indicating the likely earnings and expenses to satisfy himself that he would probably do better joining Dr. Ip. On the other hand, if Dr. Ip is to be believed, Dr. Koh took a giant leap into the dark despite all the uncertainties Dr. Ip had warned him of. Of course, it is not inherently improbable that someone may decide to take huge risks. But doctors like lawyers are generally cautious professionals. It is difficult to believe that Dr. Koh took more than calculated risks.

36. There is no doubt that Dr. Chan first got in touch with Dr. Ip after she received a circular promoting PDG. If Dr. Chan and Dr. Koh were content with a brand new practice with unknown potential, there would have been no need for Dr. Ip to bring up ADG for consideration and it would be unnecessary for Dr. Ip to go into a lot of details about the profits of ADG and the earnings of doctors at ADG as Dr. Ip himself admitted he did. Obviously, Dr. Ip knew that Dr. Koh was more interested in a readily rewarding clinical practice as a general surgeon. It is highly unlikely that Dr. Koh would have joined ADG if Dr. Ip had not made the representations he now denies.

37. Moreover, as I have mentioned during the course of the trial, Dr. Ip's scheme of things seem rather extraordinary. According to him, ADG was an established successful practice with substantial goodwill. It would be normal for him to demand a premium from Dr. Koh for entry into the practice. Instead, the $300,000 demanded by Dr. Ip is credited as purchase price of shares in HRL the management company of HRL. It may be said that Dr. Ip was free to do with this $300,000 as he wished. But, not only Dr. Koh, Drs. Yu and Lai were also made to pay $300,000 for shares in HRL. Under the Operators Agreement, Drs. Yu and Lai had inherent right to be shareholders and directors of HRL. These two doctors were not seeking to join ADG. Why should they have to pay the same as Dr. Koh? One must also remember that the nominal value of the sharers in HRL Drs. Yu, Lai and Koh got was $1 per share only. So each of them had to pay a premium of $299 per share to Dr. Ip. These arrangements do not make sense and Dr. Ip has given no meaningful explanation. It seems that either Drs. Yu and Lai were fooled or that the application of the payment of $300,000 by Dr. Koh towards HRL shares was a ploy to render the sum arguably irrecoverable even if ADG turns out to be not as attractive to Dr. Koh as Dr. Ip held out. In these circumstances, Dr. Ip's case is not convincing.

Specific Credibility

38. There are specific instances of incredible evidence from Dr. Ip.

39. For example, Dr. Koh stated that he was led to believe that he would be replacing a general surgeon who was leaving ADG. Dr. Ip countered this by saying no, he intended Dr. Koh to replace one Dr. Cheung also a general surgeon but not associated with ADG who considered joining PDG but had backed out well before Dr. Koh appeared. When he was confronted with evidence of an advertisement around the material time in the journal of the Hong Kong Medical Association which he admitted was for a general surgeon's vacancy in ADG, Dr. Ip changed tack and stated that there was standing recruitment for expansion of ADG. Now, Dr. Fung the general surgeon with ADG was indeed leaving and at the time Dr. Koh was the only general surgeon who did join ADG. What kind of logic is it to regard Dr. Koh a new recruit to expand the establishment of ADG when the vacancy left by Dr. Fung was unfilled? It may be argued that Dr. Koh was joining as a full timer but the vacancy left by Dr. Fung was a part time one. However, Dr. Ip originally pleaded that of necessity Dr. Fung as a surgeon had to divide his time between the ADG clinic and hospital so he could not spend all his time at the ADG clinic. See paragraph 12(1) of the Defence. In other words, Dr. Ip did not regard Dr. Fung as a part-timer. Clearly, Dr. Ip shifted grounds in vain to meet enveloping adversity. In fact, when one studies the evidence of Dr. Ip closely, more evasive trails can be found.

40. For another example, Dr. Ip stated in evidence that at the meeting on 27th June 1990, at the Kowloon Tong Club, he and Drs. Yu, Lai and Koh agreed in principle that PDG should be managed by HRL. Dr. Koh's evidence is that he did not participate in any serious discussion at that meeting because Drs. Ip, Yu and Lai only talked about fitting out of PDG. Dr. Koh's evidence is supported by Dr. Chan who was also present. Although Dr. Chan is the sister of Dr. Koh, her integrity or memory has not been challenged. Furthermore, Drs. Yu and Lai called on behalf of Dr. Koh to give evidence denied any discussion over the management structure of PDG during the Kowloon Tong Club meeting. Even if one discount the evidence of Dr. Koh, the evidence of three witnesses of honourable standing were against that of Dr. Ip.

41. Take the third instance. Dr. Ip admitted that some time in June 1990 he handed a copy of a draft of the Club Rules to Dr. Chan. On this draft, there is Dr. Ip's handwriting stating that HRL was "now trading as ADG". In fact, Dr. Ip intended to use HRL as the management company of both ADG and PDG. But this never materialized. At no time did HRL become the management company of ADG. Even if HRL at one time managed ADG, it is still far from true to say that company traded as ADG. There was an obvious attempt to mislead in handing out that draft.

42. Lastly, Dr. Ip admitted he told Drs. Chan and Koh that ADG made profits of about $1 million in 1989. The basis of such assertion is the Gaylaw accounts for the 1989 financial year. During the course of the trial, he changed tack to say he only represented that Gaylaw made $1 million profits and he had also shown to Dr. Chan and Dr. Koh accounts of ADG which posted profits of $300,000 for the same period. I find that this certainly was not the impression given to Dr. Chan. Dr. Ip confirmed that Dr. Chan made notes during their meeting on 4 June 1990 and her notes, produced as evidence, is a fairly accurate record of what she was told. The notes merely recorded profits of $1 million. Dr. Chan must have been told that $1 million was the profits of the ADG practice.

43. There are other materials on which, perhaps, one may find generally that Dr. Ip is not a reliable witness. For example, Dr. Ip was questioned about his standing in the medical profession. He had to admit that he had been given one warning letter by the Hong Kong Medical Council. He had also been suspended from practice for six months by a disciplinary tribunal of the medical profession but the order for suspension was quashed by the Court of Appeal for reasons not ventilated before me. There is also evidence that Dr. Ip included the salary of an employee in both the expenditure accounts of ADG and PDG when this employee could not have been working for both ADG and PDG. There is further evidence that Dr. Ip produced the transcript of only selected parts of a tape recording of a meeting he had with Drs. Yu, Lai and Koh as if it was the full transcript. Dr. Ip may well have an innocent explanation for each of these mishaps. In any event, the prejudicial effect of these by the way revelations outweighs their probative value. For the record, I wholly disregard these materials.

44. Mr. Wong, counsel for the Plaintiff, has categorized in his written finial submission a number of weaknesses and inconsistencies in Dr. Ip's evidence. Even excluding the materials referred to in the preceding paragraph, I am driven to the irresistable conclusion that Dr. Ip cannot be believed.

45. I have observed that the evidence of Drs. Chan, Yu and Lai called on behalf of Dr. Koh were not challenged. Dr. Koh himself, however, was attacked by Dr. Ip as being a cheat. The only accusation of any punch runs like this. In August 1990, Dr. Koh was required to pay $1 for 1000 shares in Masterform. Dr. Koh did not pay this sum. So the shares were not transferred to Dr. Koh. But Dr. Koh did not inform Dr. Ip and subsequently assumed directorship in Masterform. Hence, Dr. Ip contends, Dr. Koh falsely represented himself as a shareholder of Masterform and dishonestly accepted appointment of director of Masterform. I have to say such contention reflects poorly on Dr. Ip rather than Dr. Koh. The 1000 Masterform shares for $1 was a give-away. At the time, Dr. Koh was asked to send one cheque for $70,000 to solicitors for Dr. Ip and another cheque for $300,001.00 to Dr. Ip direct. Dr. Koh said he simply overlooked the $1 when writing out the $300,000 cheque. There was absolutely no reason and no need for Dr. Koh to obtain a pecuniary advantage of one dollar. In any event, there was no deception. Dr. Ip received the cheque for $300,000. He should know he had not yet got the $1 and yet he treated Dr. Koh as a shareholder and arranged for him to become a director of Masterform. The credibility and reliability of Dr. Koh as a witness is unassailable.

46. In the premises, I have no doubt that the evidence of Dr. Koh exposed the truth and I reject such of the evidence of Dr. Ip in so far as they are inconsistent with the evidence of Dr. Koh.

The Findings

47. For the reasons given and on the accepted evidence before me, I find proven beyond reasonable doubt that:-

(a) Dr. Ip represented to Dr. Koh that ADG made profits of about $1 million for the year 1989 when in fact the profits were those of Gaylaw. This representation gave the impression to Dr. Koh and to any objective bystander that the clinical practice of ADG was so profitable. At all material times, Dr. Ip knew that the profits of Gaylaw comprised of income from rental of properties owned by himself and from the takings of the laboratory service of ADG. The profits of Gaylaw therefore did not reflect and could not reflect the profitability of the ADG clinical practice. In this respect, there was wilful deceit on the part of Dr. Ip.

(b) Dr. Ip represented to Dr. Koh that the latter was being recruited to fill an opening to be left by a general surgeon without disclosing the meagre income of the departing general surgeon from ADG. Knowing that Dr. Koh was looking for a full time general surgeon position in an established practice, Dr. Ip should have made such disclosure. In the circumstances, the failure amounted to a representation to Dr. Koh that he was to stand in the shoes of a full time general surgeon making $60,000 per month net. In this respect, there was wilful deceit too.

(c) Dr. Ip represented to Dr. Koh that there were surgical cases. In the context of Dr. Koh's application to join ADG, Dr. Ip knew or ought to have known that Dr. Koh was not looking for just any number of surgical cases, but a reasonable number for a full time practice general surgeon. In fact, ADG had few surgical cases. The indication of surgical cases was plainly calculated to mislead. In this respect, there was reckless misrepresentation or wilful deceit.

(d) Dr. Ip represented to Dr. Koh that the take home earnings of two of the doctors at ADG were about $60,000 each. These two doctors were not general surgeons and Dr. Ip did not make this clear to Dr. Koh. Knowing that Dr. Koh was applying to join ADG as a general surgeon, Dr. Ip should have shown Dr. Koh the earnings of a general surgeon or made it clear to Dr. Koh that the figures shown were not representative of the earnings of a general surgeon. In this respect, there was at least negligent misrepresentation.

(e) Dr. Ip represented to Dr. Koh that the contribution of each doctor to the management expenses of ADG was about $28,000 per month and that this was likely to remain the same for he did not expect significant increase in rent for ADG. In fact, not every doctor at ADG had to pay the full share of management expenses. Also, by his own evidence, Dr. Ip did anticipate increase in rent for he was planning to concentrate his practice in PDG should the rent for ADG become unacceptable. In this respect, there was wilful deceit.

(f) Dr. Ip represented to Dr. Koh that every doctor had to pay $300,000 to join ADG. In fact, no doctor joining ADG before or after Dr. Koh had to pay any entry fee. In this respect, there was wilful deceit too.

48. Mr. Thomson, counsel for the Defendant, contended that the Plaintiff has not made out his case. Counsel suggested that all the representations complained of by the Plaintiff are truthful. For instance, the Defendant stated to the Plaintiff that PDG was intended to house 20 doctors. In fact PDG had that capacity. The example relied upon by counsel is of course irrelevant. I do not say for a moment that counsel was inapt. Mr. Thomson had an uphill battle due to inherent weaknesses in the Defendant's case.

49. The Plaintiff's case as pleaded in the Amended Statement of Claim is as follows:-

"4. In the course of the negotiation between the Plaintiff and the Defendant for the filing of the said opening at the ADG, the Defendant on a number of occasions represented to the Plaintiff that:-

(1) The Plaintiff would be replacing a General Surgeon at the ADG who was leaving the same and that the said General Surgeon and ADG had a goodwill in the area of surgical practice;

(2) The Plaintiff must buy shares in relation to the medical practice at the ADG at the price of HK$300,000.00 and that the Plaintiff could not subscribe to a lesser amount because all other doctors subscribed fully to HK$300,000.00 at the ADG;

(3) The Plaintiff need not worry about his investment of the said HK$300,000.00 since the Company whose shares the Plaintiff would subscribe to was profitable and such profitability was supported by a statement of account which was shown to the Plaintiff by the Defendant;

(4) The Plaintiff would only have to pay an average monthly expenditure of about HK$28,000.00; and

(5) All the doctors at the ADG had signed the same agreement as that which the Plaintiff would be asked to sign.

......

6. The said representations were untrue in that:-

(1) The said surgeon which the Plaintiff replaced, one Dr. Fung Wing Pong ("Dr. Fung"), practised only on a part-time basis at the ADG. Dr. Fung had very few surgical cases at and derived a meagre income from the ADG.

Particulars

(a) Dr. Fung's gross annual income from the ADG for the years between April 1987 and February 1991 was as follows:-

April 1987 - March 1988	HK$98,579.09
April 1988 - March 1989	HK$61,228.70
April 1989 - March 1990	HK$52,668.73
April 1990 - February 1991	HK$7,624.20

(b) The number of surgical cases Dr. Fung performed for the years between August 1987 and February 1991 was as follows:-

April 1987 - March 1988	5
April 1988 - March 1989	3
April 1989 - March 1990	3
April 1990 - February 1991	nil

Further, the ADG had no goodwill in the area of surgical practice with the result that very few surgical cases went to the Plaintiff and the Plaintiff was forced to carry on the practice of a general medical practitioner at the ADG.

(2) None of the doctors practising at the ADG (with the exception of the Defendant, and the Plaintiff) in fact bought or subscribed to the shares of Masterform nor were they required to do so. The other shareholders were one Dr. Yu Chau Leung and one Dr. Lai Kam Sun but who were not practising at ADG.

(3) (a) Masterform was not profitable and in fact made a loss on a consistent basis and it would be extremely difficult, if not impossible, for the Plaintiff to re-sell his shares for any or any valuable consideration.

Particulars

Masterform made a loss before taxation of HK$216,892.00 for the period between April 1988 and March 1989 and HK$85,465.40 for the period between April 1989 and March 1990. The latest unaudited figures available to the Plaintiff was that Masterform made a loss of around HK$148,494.03 for the period between September 1990 and June 1991.

(b) The company which in fact profited in relation to the ADG was not Masterform but one. Gaylaw Investment Co. Ltd. ("Gaylaw") which is and was at all material times wholly owned and controlled by the Defendant and his wife, Ip Chiang Sun Ching, both of whom stood to gain from fees which they received as directors of Gaylaw as well as from its profits.

Particulars

Gaylaw made a profit before taxation of HK$680,277.94 for the period between April 1988 and March 1989 and HK$1,276,954.12 for the period between April 1989 and March 1990. The Defendant and/or his wife received as directors' remuneration the sums of HK$52,680.00 and HK$59,240.00 for the said two time periods respectively.

(4) The Defendant had to pay substantially more than the monthly sum of HK$28,000.00 to Masterform pursuant to the Licence Agreement which sum was wholly disproportionate to the income which he derived from the ADG.

Particulars

Month Gross	Fee Received	Management Fee
Feb 1991	HK$17,638.61	HK$40,944.93
Mar 1991	HK$15,697.28	HK$35,972.72
Apr 1991	HK$21,279.45	HK$42,621.48
May 1991	HK$36,246.89	HK$38,171.67
Jun 1991	HK$31,631.78	HK$28,467.84
Jul 1991	HK$34,172.50	HK$30,453.64
Aug 1991	HK$37,844.62	HK$28,000.00
Sept 1991	HK$51,429.86	HK$28,000.00
Jan 1992	HK$43,769.00	HK$35,713.19
Feb 1992	HK$39,486.47	HK$36,577.81
Mar 1992	Never Supplied	HK$34,900.00

(5) The doctors practising at the ADG have signed different forms of agreements with the effect that all or almost all the other doctors at the ADG had been paying less or substantially less management fees than the Plaintiff notwithstanding that the fees received by the Plaintiff was little compared with those of the other doctors.

7. The said misrepresentations were fraudulent or negligent in that the Defendant knew or ought to have known that:-

(1) Dr. Fung was practising at the ADG on a part-time basis and had very few surgical cases.

(2) Masterform had only four shareholders and no other doctors at the ADG have been required to purchase or subscribe to any shares in Masterform.

(3) The statements of accounts of Masterform showed that Masterform was in fact making a loss and not a profit.

(4) The various forms of agreements signed by the doctors practising at the ADG were different and some substantially different from the Licence Agreement.

Particulars

Full time doctors practising at ADG are only responsible for paying 1/3 of the consultation fees as contribution towards the management expenses of ADG. In addition, they are entitled to a guaranteed monthly income.

(5) The rental for the said premises would be substantially increased from the monthly figure of HK$28,000.00 to HK$77,000.00 as from 1st February 1991, which day coincided with the commencement date of the Licence Agreement, wherefore it would be unrealistic in any event to represent that the average monthly expenses payable by the Plaintiff would be HK$28,000.00.

8. Further or alternatively, the Defendant owed to the Plaintiff a duty to take care that any representations made to the Plaintiff with the view to inducing him to join the ADG or to sign the Licence Agreement with Masterform were true. Wrongfully and in breach of such duty of care, the Defendant was negligent in making the said misrepresentations to the Plaintiff.

Particulars

The Plaintiff repeats Paragraphs 4, 6 and 7 above.

I find that all the figures pleaded are supported by documentary evidence. Clearly, the Plaintiff has proved his case as pleaded.

50. I have no doubt that Dr. Ip made all the misrepresentations before Dr. Koh bound himself by contract to join ADG and PDG. Although Dr. Koh did not sign the licence agreement for practice at ADG until he arrived in Hong Kong in October 1990, he had already executed other documents and paid the entry fee of $300,000 and subscription fee of $70,000 in August 1990. I do not believe Dr. Ip's evidence that Dr. Koh was given a trial period of three weeks in October wherein Dr. Koh could have backed out. Even if that is true, Dr. Koh arriving in Hong Kong in October 1990 was already committed.

51. I have no doubt too that when he was making all the misrepresentations I have found, Dr. Ip intended Dr. Koh to act and rely upon each and every one of them and Dr. Koh did. As a result of such reliance, Dr. Koh suffered loss and damage which Dr. Ip should have foreseen.

52. Mr. Thomson further contended that there was contributory negligence on the part of the Plaintiff for he should have checked and exercised caution before relying on representations of the Defendant. Mr. Wong replied that Gran Gelato Ltd. v. Richcliff (Groups) Ltd. [1992] Ch 560 held that if a defendant made a representation intending the plaintiff to act on it and the plaintiff did so act, the defendant could not normally claim that any carelessness on the Plaintiff's part should reduce the damages payable and it would not be just and or equitable to do so. Gran Gelato in fact applied Redgrave v. Hurd (1881) 20 Ch. D. 1. Redgrave v. Hurd bears the hallmarks and resemblance of the facts of the present case and it is no defence or insufficient for the Defendant to say that the Plaintiff had the opportunity of investigating the real state of affairs but did not avail himself of that opportunity. The accounts and corporate structures controlled by Dr. Ip were complex as demonstrated in the trial. There was no real opportunity to investigate. In any event, contributory negligence has no place or application in a case of fraudulent misrepresentation and the Plaintiff is entitled to damages both at common law and under Section 3(1) of the Misrepresentation Ordinance Cap. 284. I am convinced by Mr. Wong. Since I have found fraudulent misrepresentation, the question of contributory negligence is irrelevant.

Damages

53. On damages, Mr. Wong had this to say. Fraudulent misrepresentation gives the Plaintiff a right to damages at common law. Damages can be claimed whether not rescission is claimed. The measure of damages is governed by tort principles. The Plaintiff should be put in the position as if the representation had not been made but not as if the representation were true. See McGregor on Damages para 1718-1721. Misrepresentations were made fraudulently by Dr. Ip either knowingly or with no grounds to believe those representations were true. In the premises, apart from common law, Dr. Ip is liable to damages under Section 3(1) of the Misrepresentation Ordinance Cap. 284.

54. On the question of remoteness of damages, the House of Lords in Houldsworth v. City of Glasglow Bank [1880] 5 AC 317 (at 330 and 333) held that there is no limitation on damages in the case of fraudulent mis representation:

"On principle the distinction seems to be this: in contract, the defendant has made a promise and broken it. The object of damages is to put the Plaintiff in as good a position, as far as money can do it, as if the promise had been performed. In fraud, the defendant has been guilty of a deliberate wrong by inducing the Plaintiff to act to his detriment. The object of damages is to compensate the Plaintiff for all the loss he has suffered, so far, again, as money can do it. In contract, the damages are limited to what may reasonably be supposed to have been in the contemplation of the parties. In fraud, they are not so limited. The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement ... It does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen."

55. Mr. Thomson's attempt to reduce the quantum of damages is based essentially on the assumed fact that the Plaintiff had decided to relocate to Hong Kong in any event. The assumption is unjustified. I find that the Plaintiff uprooted himself with his family on account of the Defendant's offer of practice position. There is no real ground to oppose assessment of damages to make reparation for all actual losses directly flowing from the fraudulent misrepresentations as I have found.

56. Dr. Koh has verified by evidence, mostly documentary, his losses and damages. There is no real challenge to the calculation of special damages which are:-

		$
(a)	personal expenses for relocation to Hong Kong $24,000 + $69,066 = $93,066	93,066.00
(b)	loss due to forced sale of car	150,300.00
(c)	extra management expenses paid	279,228.29
(d)	payment for entry into ADG	300,000.00
	=	822,594.29
		=========

57. Mr. Wong has not suggested any figure for general damages for deceit. Nor has Mr. Thomson submitted that general damages is not payable. I am prepared to consider further arguments from both counsel in writing on this. However, if I do not hear further in this respect within the next 14 days, I will award such amount of general damages for deceit as would bring the aggregate of special and general damages to a round figure of $1 million with interest. I will also order costs to the Plaintiff to be taxed if not agreed.