LUEN SHING STEEL IRON ENGINEERING WORKS LTD v. MAN YIP KAU

HCA 2956/2018 and HCA 2258/2019

(Consolidated)

[2026] HKCFI 1259

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2956 and 2258 OF 2019

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BETWEEN

(By original Action)

AND BETWEEN

(By Counterclaim)

(Consolidated by Order of Master Dick Ho dated 25^th February 2020)

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JUDGMENT

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INTRODUCTION

1.  This is the trial of the consolidated actions between Lui Tsz Kau (“Lui”), Man Yip Kau (“Man”), Pang Yu Nung (“Pang Senior”), Pang Chi Kong (“Pang Junior”), collectively, Pangs and Luen Shing Steel Iron Engineering Works Limited (“Luen Shing”) on essentially the factual dispute as to whether a joint venture agreement (“the JV Agreement”) was formed between Lui, Man on the other hand and Pang Senior, Pang Junior and Luen Shing on the other hand to carry out construction projects in all the construction sites of Luen Shing, starting in or about July 2007, and in particular, the 55 construction sites listed in the Schedule of the Consolidated Statement of Claim.

PANGS’ CASE

2.  Pangs’ case is that Mr Pang Senior and Mr Pang Junior were the only shareholders and directors of Luen Shing at the material times. Mr Lui and Mr Man had never been invited or asked to become a director or shareholder of Luen Shing. Had the JV Agreement existed, they would have invited to be shareholders of Luen Shing.

3.  They denied entering into the alleged oral JV Agreement in about June or July 2007 as alleged by Mr Lui and Mr Man.

4.  It is the Pangs’ case that the first discussion of profit-sharing was in relation to a construction project in the Kowloon Bay (the “Kowloon Bay Project”). Mr Pang Senior was invited to submit tender by the main contractor because Luen Shing was on the tender list. It was awarded the Kowloon Bay Contract after successful tendering. The construction works commenced in June 2007.

5.  It was only after commencement of works that Mr Pang Senior invited Mr Man to invest in the project. Upon Mr Man’s introduction, Mr Lui also joined the investment. Mr Lui then prepared a written agreement, which was signed by the parties on 14 July 2007. As recorded in the notebooks, each party paid HK$400,000 as capital contribution in July, September and October 2007.

6.  Due to limited capital injected by the parties, Mr Pang Senior and Mr Pang Junior also contributed over HK$1.5 million more as working capital. The Pangs, somehow, did not ask Mr Lui and Mr Man to contribute to the additional capital contribution.

7.  Upon conclusion of the Kowloon Bay Project, there was a profit of HK$601,471.67, HK$400,000 of which were distributed to Pang Senior and, Pang Junior, Mr Man and Mr Lui equally. The remaining HK$201,471.67 remains undistributed.

8.  It is the Pangs’ case that because the parties did not enter into any oral JV Agreement nor any written agreement for Luen Shing’s other projects in Shau Kei Wan and Kowloon Tong in 2008 and 2009 (Items 2 and 3 of Schedule to Statement of Claim), Mr Lui and Mr Man did not have any information about such projects.

9.  On 10 September 2009, the parties entered into another written profit-sharing agreement for a construction project in Wong Tai Sin (the “Wong Tai Sin Project”). Pang Senior claims that only Mr Lui paid HK$500,000 as capital. Mr Man did not make any capital contribution. Pang Senior explained that he signed on the notebooks which records that Mr Man paid HK$500,000 not because Mr Man did pay the HK$500,000 but because Mr Man promised to pay afterwards. Mr Man subsequently failed to pay up the capital required despite repeated requests. Hence, he took away all of Mr Man’s notebooks and Mr Man was treated as withdrawn from the profit-sharing relationship. The Wong Tai Sin Project was profitable, with an overall HK$461,912.83 profit. Pang Senior confirmed that the profit has not yet been distributed up to the date of the trial.

10.  On 18 February 2010, the parties entered into yet two written profit-sharing agreements for constructions projects in Pak Shek Kok (the “Pak Shek Kok 2010 Project”) and Shek Mun, Shatin (the “Shek Mun Project”.) Pang Senior accepted that the agreements did not specify any capital to be contributed by the parties, nor did Pang Senior requested Mr Lui and Mr Man to contribute any capital at all material times. Pang Senior’s case is that the Pangs paid for the capital required. Nonetheless, they did not ask Mr Lui and Mr Man to make any capital contribution.

11.  Pang Senior’ case is that the profit of Kowloon Bay Project (HK$201,471.67) and Wong Tai Sin Project (HK$461,912.83) were not sufficient to cover for the capital required in Shek Mun Projects and Pak Shek Kok 2010 Project or any subsequent projects. Since Shek Mun Project was at a loss of HK$893,873 and the Pak Shek Kok 2010 Project was only with HK$90,598.70 profit, the overall balance of these four projects would be at a loss of HK$139,889.80 (HK$201,471.67 + HK$461,912.83 - HK$893,873 + HK$90,598.70).

12.  On 5 December 2011, the parties entered into the last written profit-sharing agreement for a construction site in Pak Shek Kok (the “Pak Shek Kok 2011 Project”. It is Pangs’ case that neither Mr Lui nor Mr Man made any capital contribution notwithstanding the contractual stipulation.

13.  On 9 August 2018, Mr Lui entered into a profit-sharing agreement separately for four projects at Yau Tong, A Kung Ngam Village Road, Electric Road and Prince Road West.

14.  Pang Senior does not deny the authenticity, accuracy or the content of the notebooks or tables (save that Mr Man paid the capital on the specified dates). He accepted that the contents of the notebooks kept by Mr Lui, Mr Man and himself should be the same. Pang Senior accepted that Mr Lui went to the Company’s office to check the income and expenses every month and at some stage, Pang Senior’s another son digitalised the record.

15.  Pang Senior also accepted that in 2017 and 2018, his son compiled a list of Luen Shing’s profit and loss table for his internal use. He confirmed he signed on the table to signify he read the tables, and he agreed with the content. He also confirmed that in the 2018 table, Luen Shing’s company’s chop was affixed as requested by Mr Lui. Pang Senior explained that Mr Lui would sign on the notebooks and other documents because Mr Lui sold the scrap metal on Luen Shing’s behalf, after which Pang Senior would countersign to confirm the amount received by Luen Shing. Pang Senior said he let Mr Lui to read and sign on projects which Mr Lui did not enter into written agreement because he did not mind letting him do so. Pang Senior did not request Mr Lui to sign or check the figures, but it was Mr Lui who made the request. Pang Senior said he did not think much when Mr Lui asked to read the documents and sign. Pang Senior said he did not know why Mr Lui would want to read and sign for unrelated projects. Pang Senior also said that for the cheques from the main contractor, he gave a copy of the same to Mr Lui to avoid dispute in the future, because for some sites, Mr Lui had an interest as investor. Pang Senior said because of this litigation, he needed to set the record straight. He denied that Mr Lui had interest in the projects of the Company, other than the ones with written agreement and that Mr Lui (and Mr Man) had paid up the required capital.

16.  For the payment of money to Mr Man in 2015 to 2018, Pang Senior said it was due to mistake of his own that he thought Mr Man did continue to invest. He later realised that he was wrong.

17.  Pang Senior also said he paid Mr Man due to his long service to Luen Shing.

18.  Pang Senior’s current stance is that if Mr Man (or Mr Lui) did not pay up the capital per the written agreements, Mr Man (and/or Mr Lui) had no interest in the profit or loss of that project. However, when Pang Senior made the payment to Mr Man and Mr Lui in 2015 to 2018, he did not realise as such, which led to overpayment.

19.  For payment to Mr Lui between 2015 to 2018, Pang Senor explained that the payments were for distribution of profits. He said because he wanted to settle the dispute with Mr Lui, apart from the Kowloon Bay Project and Wong Tai Sin Project, he also additionally paid Mr Lui for profit of a project which Mr Lui signed the written agreement but had no interest. Pang Senior could not recall which project it was, but this is the reason why it is the Pangs’ case that there was overpayment to Mr Lui. Pang Senior said Mr Lui agreed and was satisfied with the payment amount at that time. Just that when Luen Shing requested Mr Man to return Luen Shing’s documents in October 2018 so that it would pay Mr Man the salary, that Mr Lui reneged.

LUI AND MAN’S CASE

20.  On the other hand, Mr Lui and Mr Man’s case is that in about June 2007, before Luen Shing was awarded the Kowloon Bay Project, Man, Lui, Pangs and Luen Shing became parties to the JV Agreement, and the parties were in the joint venture relationship at all material times.

21.  The material terms of the JV Agreement include, inter alia:-

(a) Mr Lui, Mr Man and the Pangs are to cooperate to carry out and bid for steel bending and fixing works in Hong Kong (the “Works”).

(b) Luen Shing is to be used as a vehicle to carry out the joint venture.

(c) The joint venture includes all the construction sites of Luen Shing starting from June 2007.

(d) Mr Lui, Mr Man and the Pangs are to share the profit and loss of the joint venture in equal shares.

(e) Mr Lui, Mr Man and the Pangs are to inject capital into the joint venture as agreed from time to time. Also, profits are to be distributed or retained as working capitals as agreed from time to time.

22.  Since the formation of the joint venture and until 25 October 2018, Mr Lui, Mr Man and the Pangs and Luen Shing have performed their respective obligations under the JV Agreement.

23.  All the construction sites and construction projects of Luen Shing between June 2007 and 25 October 2018 were sites and projects under the joint venture, including but not limited to the 55 construction sites stated at the Schedule to the Statement of Claim.

24.  On 1 July 2007, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to inject and each of them did inject HK$200,000 into the joint venture.

25.  On 20 September 2007, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to inject and each of them did inject HK$100,000 into the joint venture. This is evidence by the records in the notebooks prepared and signed by Mr Lui, Mr Man and the Pangs (the “Notebooks”) and the accounts prepared by the Pangs.

26.  On 20 October 2007, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to inject and each of them did inject HK$100,000 into the joint venture. This is evidenced by the accounts prepared by the Pangs including the Notebooks.

27.  On 30 September 2009, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to inject and each of them did inject HK$500,000 into the joint venture. This is evidenced by the accounts prepared by the Pangs.

28.  On or around 7 April 2011, in performance of the JV Agreement: -

(a) Mr Lui, Mr Man and the Pangs agreed to distribute, and each of them was distributed profit in the sum of HK$100,000;

(b) Mr Lui, Mr Man and the Pangs agreed to further distribute to each of them the sum of HK$400,000. This is equivalent to their contribution to part of the capital of the joint venture.

29.  On or around 1 November 2011, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to inject and each of them did inject HK$500,000 into the joint venture. This is evidenced by the Notebooks.

30.  In about 2013, in a meeting held in an office in Jordan, Pang Senior orally informed Mr Man that they have made a huge profit in the Pak Shek Kok construction site. It has also become the mutual understanding between Mr Lui, Mr Man and the Pangs that the parties would continue to cooperate under the JV Agreement without the need to further execute written agreement for each construction site.

31.  In or around January 2017, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to distribute, and each of them was distributed profit in the sum of HK$100,000.

32.  In or around February 2018, in performance of the JV Agreement, Mr Lui, Mr Man and the Pangs agreed to distribute, and each of them was distributed profit in the sum of HK$100,000.

APPROACH TO EVALUATION OF EVIDENCE

33.  As can be seen from the narrative of the diametrically opposite account of events, this case turns essentially on the Court’s assessment of the credibility of the parties’ respective case. Central to this exercise is the assessment of the existence of the oral JV Agreement.

34.  Lord Bingham in his book The Business of Judging at pp 5 – 6 insightfully said:

“Let me then turn to the central questions. Faced with a conflict of evidence on an issue substantially effecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties’ lives or fortune, how can and should the judge set about his task of resolving it? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? How, as between competing experts in a field not his own, is a judge to determine where the truth lies? Is our existing way of resolving expert conflicts the best way? I shall begin by considering the resolution of issues of primary fact, the choice between first-hand eye-witnesses. Then I shall turn to expert evidence.

The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not) such facts as shown to be incontrovertible. In many cases, letter or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time ….

The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full:

‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection even subsequently altered by unconscious bias or wishful thinking or by over-much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.

Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue. There are, no doubt, witnesses who follow the guidance of the Good Soldier Sveyk that ‘The main thing is always to say in court what isn’t true,’ as a matter of principle, but more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely from case to case:

(1) the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred;

(2) the internal consistency of the witness’s evidence;

(3) consistency with what the witness has said or deposed on other occasions;

(4) the credit of the witness in relation to matters not germane to the litigation;

(5) the demeanour of the witness.

The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness’s evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.” (Emphasis added).

35.  In Lee Fu Wing v Yan Paul Po Ting [2009] 5 HKLRD 513, Deputy High Court Judge Au (as he then was) at 524 helpfully set out the well-established approach as to assessment of witnesses:

(1) whether the party’s case is inherently plausible or implausible;

(2) whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(3) where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility; and

(4) the demeanour of the witnesses.

36.  In Lam Rogerio Sou Fung v Tan Soon Gin George HCA2576/2005, unreported, 5 May 2011, Chu J at §§40-41 said:

“40. Mr Chain has referred me to what Lord Devlin said extra-judicially in The Judge (Oxford University Press, 1979) at p.63, where he endorsed the words of Mr Justice MacKenna in a paper entitled “Discretion” read at University College, Dublin on 21 January 1973 (printed in the Irish Jurist, vol. IX, new series, p.1) as follows:

‘This is now I go about the business of finding facts. I start from the undisputed facts which both sides accept. I add to them such other facts as seem very likely to be true, as for example, those recorded in contemporary documents or spoken to by independent witness like the policeman giving evidence in a running down case about the marks on the road. I judge a witness to be unreliable if his evidence is, in any serious respect, inconsistent with these undisputed or indisputable facts, or of course if he contradicts himself on important points. I rely as little as possible on such deceptive matters as his demeanour. When I have done my best to separate the true from the false by these more or less objective tests, I say which story seems to me the more probable, the Plaintiff’s or the Defendant’s.’”

I respectfully agree.

37.  I also agree what was said by Peter Smith J in EPI Environment Technologies Inc & Anor v Symphony Plastic Technologies plc & Anor [2005] 1 WLR 3456, 3470-3471 at para.74, that it is essential to have regard to the entirety of a witness’ evidence. As he observed, witnesses can make mistakes, but the mistakes do not necessarily affect other parts of their evidence. Likewise, witnesses can regularly lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie.”

38.  On fact finding, especially in civil cases, the law is binary. In re B [2009] 1 AC 11, Lord Hoffmann at §2 (p.17) said

“If a legal rule requires a fact to be proved (a “fact in issue”), a judge, or jury must decide whether or not it happened. There is no room for a finding that it might have happened. The law operates a binary system in which the only values are zero and one. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened. If he does discharge it, a value of one is returned and the fact is treated as having happened.” (Emphasis added.)

39.  I find the above guidelines helpful and will apply the same in assessing the credibility of the parties’ diametrically different versions of events.

ANALYSIS AND DETERMINATION

40.  I have listened to the oral testimony of Pang Senior, Pang Junior, Mr Lui and Mr Man carefully. I have no hesitation to come to the conclusion that although the JV Agreement was not reduced into writing, the JV Agreement with the essential terms as set out in paragraph 21 above was reached by the parties and are binding on them. I do not find the evidence of Pang Senior credible at all. Pang Junior’s evidence is of no assistance as his evidence is that he had no personal knowledge of the disputed facts in the present case.

41.  On the contrary, I find Mr Lui and Mr Man to be very straightforward and honest witnesses. I accept what they testified in court as the truth of what happened at all material times.

42.  First, it is undisputed that that Pang Senior, Mr Lui and Mr Man each kept a set of 紅黑簿, namely, the Notebooks which contain very detailed financial information, including revenue and costs of most, if not all, of the construction projects carried out by Luen Shing. Pang Senior accepted that each of Mr Lui, Mr Man and himself had to countersign on three identical sets of the Notebooks.

43.  Mr Lui and Mr Man are not some busybodies who were interested to spend time to verify the accounts of projects irrelevant to them. They verified the accounts and signed to its accuracy in triplicate copies because they all have an economic interest in the same.

44.  Pang Senior’s evidence that he did not mind Mr Lui and Mr Man to sign on projects irrelevant to them because he just let them, with respect, does not make any sense to me. Those must be sensitive commercial information for Pang Senior. That is precisely the reason why Pang Senior is applying for an order to deliver up the set of Notebooks kept by Mr Lui.

45.  Throughout the years, Mr Lui was permitted to inspect the financial documents of all the construction sites of Luen Shing on a monthly basis. Pang Senior also requested Mr Lui to sign on his set of Notebooks to confirm the accuracy of the figures.

46.  I am firmly of the view that this arrangement strongly indicates that the JV Agreement exists.

47.  Secondly, the preparation and Pang Senior’s signature on the 2017 and 2018 account tables, respectively, the 2017 Table and the 2018 Table and the appendage of Luen Shing’s company chop, to me, clearly indicate that Mr Lui and Mr Man were in the joint venture business with the Pangs and Luen Shing, for otherwise, there are no credible explanations as to why Mr Lui demanded for such accounts and Pang Senior acceded to the same. I accept Mr Lui’s evidence that he did not accept the accuracy of the figures set out in the 2018 Table.

48.  I also accept Mr Siu’s submission that Pang Senior had admitted under cross-examination that Mr Lui’s versions of event concerning the 2017 Table and 2018 Table are accurate, i.e. when Mr Lui and Mr Man asked Pang Senior to account for profit in 2017, Pang Senior provided the 2017 Table and the 2018 Table which contained income and expenses (accuracy of which is disputed) of all the construction sites of Luen Shing.

49.  I agree that this is powerful evidence that it has all along been the parties’ intention to share the profits and losses of all the construction sites of Luen Shing.

50.  Thirdly, over the years, Mr Lui had received a distribution of profit in the sum of about HK$650,000. This does not sit well with the Pangs’ case that Mr Lui was only entitled to distribution of profits in only 5 projects with written agreements.

51.  Fourthly, it is even more unbelievable that Pang Senior could have overpaid Mr Lui and Mr Man, on his case, over the years without any knowledge until the commencement of these proceedings.

52.  Fifthly, it does not make any sense that if the parties had only reached agreement on five projects, there was a need to retain the profits of the Kowloon Bay Project and the profits from the Wong Tai Sin Project have not distributed up to the date of the trial. In my view, this pattern of conduct sits well with Mr Lui and Mr Man’s case that the relevant retained profits were deployed for other projects of the joint venture.

53.  Sixthly, I find it hard to believe that the Pangs would have contributed to the capital required for the constructions projects unilaterally without requesting Mr Lui and Mr Man to make the same contribution. This does not make common and commercial sense. The only plausible explanation, in my judgment, is that there was no need for new capital contribution as the retained and/or undistributed profits were deployed for the new projects as Mr Lui and Mr Man told this Court. I find their evidence credible.

54.  Seventhly, I find Pang Senior to be a very unreliable and dishonest witness. He gave testimony contrary to his own witness statements and changed his testimony frequently to attempt to fit his case. For example, under cross-examination, he said Mr Man’s receipt of payment was his gratuitous payment. Later, he said that it was Mr Man’s entitlement as his share of profits.

55.  Mr Siu for Mr Lui and Mr Man is correct that Pang Senior obviously knows that at the heart of the disputes in these actions, his copy of the 紅黑簿 (the Notebooks) and the bank statements of Luen Shing are highly material documentary evidence. Nonetheless, he chose not to disclose the same. As I find, the Notebooks were prepared in triplicate – one for Pang Senior, one for Mr Man and one for Mr Lui. When Pang Senior was cross-examined on why Mr Lui would be allowed to review and inspect the financial documents of all the construction sites and was required to sign on the Notebooks, there was a lengthy dead-silence on his part. His only answer is Mr Lui did so in passing (順便簽埋). This makes no sense at all.

56.  Pangs’ case is that there were 55 construction sites, and Mr Lui and Mr Man were only entitled to share ithe profits in at most three construction sites. I do not for one moment believe that although Mr Lui was only entitled to share the profits of only threeconstruction sites, he first requested and then was allowed to inspect the financial documents of more than 50 construction sites in passing, and more importantly Pang Senior himself also requested Mr Lui to sign on the records for more than 50 construction sites in passing.

57.  Pang Senior’s own evidence is that the financial documents of Luen Shing were “trade secrets” and sensitive information that were not supposed to be read by others. Indeed, it was Pangs’ stance that the discovery of the financial documents of Luen Shing should be delayed after the Court finds in favour of Mr Lui and Mr Man for liability because the documents were trade secrets. I agree that it is inherently improbable that Mr Lui would be permitted to inspect the trade secrets of Luen Shing on a monthly basis if the JV Agreement did not exist.

58.  Further, the Notebooks were disclosed at the early stage of these proceedings. Almost the entire supplemental witness statement of Mr Lui was used to explain the contents of the Notebooks. However, nowhere in Pangs’ pleadings or witness statements did they respond to the Notebooks at all.

59.  Additionally, when Pang Senior was cross-examined on the 2017 and the 2018 Tables,

(1) Initially, he claimed that the 2017 Table was not prepared for Mr Man or Mr Lui. He claimed that the 2017 Table was prepared by his son for his own review, and he signed on the 2017 Table to confirm the figures for internal record. The 2017 Table then somehow came into the possession of Mr Lui without his knowledge or consent;

(2) Upon further cross-examination, Pang Senior agreed that the presentation in the 2 Tables was consistent with Mr Man and Mr Lui’s case that they were entitled to the profit-sharing of all the construction sites of Luen Shing. In particular: -

(a) the profit distribution concerning the Kowloon Bay Project was consistent with Man and Lui’s case and

(b) the profit distribution in January 2017 was consistent with Mr Man and Mr Lui’s case.

(3) According to Pangs’ case, neither Mr Man or Mr Lui would be entitled to share the profit of “筲箕灣 SIL 634”. However, Pang Senior, under cross-examination, agreed that the profit distribution in January 2017 came from “筲箕灣 SIL 634”.

(4) Eventually, Pang Senior had to admit that Mr Lui’s versions of event concerning the 2017 Table and 2018 Table are accurate. He admitted that §43 of Mr Lui’s witness statement was accurate (save that he disagreed that the figures in the 2017 Table were incorrect). He also admitted that §47 of Mr Lui’s witness statement was accurate (save that he disagreed that the content in the 2018 Table was incorrect).

(5) I agree that by admitting to Mr Lui’s versions of event concerning the 2017 Table and 2018 Table, Pang Senior has in effect lied to this Court by claiming at the beginning of his evidence that “the 2017 Table somehow came into the possession of Mr Lui without his knowledge or consent”. This cannot be the truth.

60.  In relation to contributions to capital and distributions of profits, it is Pangs’ pleaded case that as Mr Man only made partial capital injection for the Kowloon Bay Project, he was paid (and overpaid) under the Kowloon Bay Project. All payments made to him were made pursuant to the Kowloon Bay Project but not otherwise. Further, as Mr Lui only made capital injection for the Kowloon Bay Project and the Wong Tai Sin Project, he was paid (and overpaid) under the Kowloon Bay Project and Wong Tai Sin Project. All payments made to him were made pursuant to the Kowloon Bay Project and Wong Tai Sin Project but not otherwise.

61.  Regarding capital injection and profit distribution concerning the Kowloon Bay Project, Pang Senior initially claimed that Man only made capital contribution of HK$200,000. However, his evidence is contradicted by indisputable contemporaneous documents prepared by him. As shown in the Notebooks, each shareholder (i.e. Mr Lui, Mr Man Pang Senior and Pang Junior) made capital contribution of HK$200,000 in July 2007, HK$100,000 in September 2007 and HK$100,000 in October 2007. The records in the Notebook are consistent with the accounts prepared by Pang Senior. Pang Senior admitted those records were indeed prepared by him.

62.  As to distribution, Pang Senior admitted that according to the records in the Notebooks, only the sum of HK$400,000 was distributed, and the remaining profit of HK$201,471 was retained. Initially, Pang Senior claimed that the retained profit of HK$201,471 was somehow distributed but not recorded in the Notebooks. However, after being shown the accounts prepared by him, the 2017 Table and the 2018 Table, Pang Senior was forced to agree that the retained profit of HK$201,471 had never been distributed.

63.  Pang Senior persisted with his denial that the profit was retained for other projects under the joint venture. However, he could not give any explanation as to the whereabout of such retained profit.

64.  According to Pang Senior, although the Kowloon Bay Project had been completed as early as in around 2011 with the total profit (before distribution) of HK$601,471.67, he paid Mr Man the aggregate sum of HK$650,000 for the Kowloon Bay Project in 2009, 2011, 2015, 2016, 2017 and 2018. This is simply illogical and inherently improbable. When cross-examined on this, there was another lengthy dead-silence. Pang Senior was unable to give any explanation at all.

65.  Regarding capital injection and profit distribution concerning the Wong Tai Sin Project, Pang Senior claimed that Mr Man did not make any capital contribution at all. Pang Senior admitted that the accounts of the Wong Tai Sin Project were prepared by him / his son. His own record, however, shows that Mr Man had made capital contribution in the sum of HK$500,000. No explanation was offered by Pang Senior. According to Pang Senior, the Wong Tai Sin Project was completed in around May 2012. Subsequently, Luen Shing distributed the aggregate sum of HK$350,000 to Mr Lui for the Wong Tai Sin Project in 2015, 2016, 2017 and 2018.

66.  I agree that this is again inherently improbable. According to Pang Senior’s own calculation, the profit of the Wong Tai Sin Project was only HK$461,912.83. It cannot be true that Pang Senior would distribute HK$350,000 to Mr Lui years after the completion of the project.

67.  Mr Siu also submitted that upon cross-examination, Pang Senior admitted that he had in possession of the bank statements of Luen Shing. He also admitted that during the preparation of the pleadings and the witness statements, he had reviewed the bank records. In the premises, Pang Senior knew perfectly well that Luen Shing’s bank statements were of crucial importance to the disputed issues in these Actions. By producing his bank statements, Pang Senior could have easily established his case and easily refuted Man and Lui’s case.

68.  However, Pang Senior has refused to produce the bank statements to substantiate his case. When he was cross-examined on this point, he was unable to provide any answer at all. I agree with Mr Siu that this Court can and draws adverse inferences against Pang Senior that had he produces his version of the Notebooks and Luen Shing’s bank statements, the same will support Mr Lui and Mr Man’s case.

69.  Pang Junior honestly told this Court that he has no knowledge of the discussions between Pang Senior and Mr Lui and Mr Man. His evidence, thus, carries no probative value.

70.  Eighthly, I am impressed by Mr Lui and Mr Man’s evidence. They are very credible and honest witnesses. I accept their evidence insofar as the same contradicts with Pang Senior’s evidence. Although they were challenged on why they did not put into writing the terms of the JV Agreement when there are written agreements for specific projects, I accept their evidence that they are not sophisticated men. One must bear in mind that they worked on construction sites, and their education level was not high. Mr Lui prepared the written agreements because those were relative substantial projects. I accept their evidence that the Notebooks is most direct evidence of the JV Agreement.

71.  They were extensively cross-examined as to the existence of the JV Agreement. They gave consistent and logical account of the events: -

(1) Both Mr Lui and Mr Man firmly confirmed the existence of the JV Agreement. They agreed that they did not set a particular goal of how much to earn or how long would the joint venture last. They explained at the start of the joint venture, all parties simply devoted themselves and worked hard (用個心去做，文業球用個心去控制成本，未發生嘅無人知，大家用個心做，各有所長).

(2) Mr Lui explained but for the joint venture, he would not have attended the office of Luen Shing to inspect financial documents and verify the accounts of income and expenses of every project under the joint venture monthly for an extended period of around 10 years. Mr Lui frankly accepted that he was not an expert to the steel-bar industry, and he was unable to explain in detail the procedures involved before submitting tenders.

(3) Mr Man explained with examples his involvement in submitting tenders. He recalled vividly how he answered the queries of the main contractors for various projects before Luen Shing was awarded the relevant tenders. He also explained that after being awarded the relevant tenders, Pang Senior would inform him the tender price and asked him to manage the costs accordingly (因住個成本). Mr Man was also able to give examples where Pang Senior and Mr Man came to a consensus not to submit tender for several projects. Mr Man further explained that he did not have in mind the concept of record-keeping and he simply worked hard (我牛佬一個，日頭地盤曬，每逢1號2號3號，夜晚計數).

72.  The elephant in the room is the Notebooks and the contemporaneous documents including the 2017 Table and the 2018 Table. Mr Man was able to produce records of how he had been calculating the salaries of the workers throughout the years. Mr Lui was able to produce contemporaneous records including the Notebooks, the accounts prepared by the Pangs and the 2 Tables.

73.  Mr Lui and Mr Man were also cross-examined on why they did not continue to sign written agreements for each and every projects.

74.  As explained by Mr Lui, the five written agreements were signed at his request initially. At that time, he chose five of the construction projects which he considered to be “larger projects”. As the joint venture was performing well, a consensus was reached that the parties would continue to cooperate under the JV Agreement without the need to further execute written agreements.

75.  Mr Lui also explained that he felt assured because he was able to inspect the financial documents at Luen Shing’s office every month without interruption (無協議，我點會上去對數，佢 [Pang Senior] 寫字樓都唔俾你入喇，每個月我大搖大擺入去，簽晒名作實).

76.  Mr Man also explained that he was informed by Pang Senior in around 2013 that they have made a huge profit in the Pak Shek Kok Project, and it has become the mutual understanding that they would continue to cooperate and to perform their respective roles without the need to further execute written agreements.

77.  Mr Lui and Mr Man’s case is consistent with the contemporaneous documents. As confirmed by Pang Senior, Mr Lui attended Luen Shing’s office, inspected financial documents and made records of the income and expenses of every project of Luen Shing in the Notebooks. There was no need for them to sign a separate agreement for every construction site. Most importantly, Pang Senior admitted that he had prepared the 2017 Table and 2018 Table for Mr Lui.

78.  I accept that under the JV Agreement, the joint venture covers all the construction sites of Luen Shing.

79.  For the sake of completeness, Mr Lam’s evidence confirms Mr Man’s contribution to all the construction projects to which Mr Lam played a role. His evidence is credible and I accept the truth of his testimony.

80.  Mr Chan for the Pangs, first, submitted that Mr Lui and Mr Man’s absence of knowledge about the tender price or the final accounts demonstrate that the JV Agreement did not exist. Mr Chan submitted that central to the JV Agreement is that the parties run the projects together so that the parties would share the profit and loss in equal shares. How much profit to be earned and how much risk to be taken must carry great weight in such joint venture and it would be unthinkable that the parties had no discussion of such matter at all.

81.  However, according to Mr Lui, the seasoned businessman who engaged not only in the transportation business but also other joint ventures, he did not discuss with Pang Senior, Pang Junior or Mr Man about the profit margin of the projects. Mr Lui said he was not involved in the tendering process, so he would not know how profitable the projects could be. Mr Lui also said even after the relevant tenders were submitted, he did not ask for details of the same.

82.  I am of the view that there is nothing unusual for business partners to divide up their respective roles. In this case, it is perfectly reasonable for Mr Man to be the costs controller and for Pang Senior to be responsible for tendering for works. It is obvious that the parties would have informal discussions, but it is too much to expect that there would be detailed documents of such discussions in relation to the tendering process.

83.  Mr Man was very honest in telling this Court that he was only involved in the tendering of 4 projects (out of the 55 projects over the years). Mr Man also said that he did not discuss with Pang Senior about the tender price, as Pang Senior only asked him to control the labour cost. I do not find this unusual at all.

84.  As far as the final account of all the projects are concerned, Mr Lui and Mr Man did ask for the same but was refused by Pang Senior. I accept Mr Man’s evidence that he did chase for the final accounts, but Pang Senior refused to render the same to Mr Lui and Mr Man. Mr Lui went to Luen Shing’s office every month to check the financial records. As Mr Chan pointed out, it takes time for final account of all the projects to be verified and finalised. Pang Senior only gave them the 2017 Table and the 2018 Table. The 2017 and the 2018 Table are, in a way, Pang Senior’s rendering of final accounts to Mr Lui and Mr Man though the accuracy of the figures therein are disputed.

85.  Secondly, Mr Chan submitted that as there was no previous cooperation between Pang Senior, Mr Lui and Mr Man, it is inherently improbable that they would not enter into a written agreement to set out their respective rights and obligations. However, as Mr Man rightly put it, the Notebooks evidencs their agreement. If there is no agreement, there is no plausible explanation for the system of a triplicate copy of the Notebooks which all three needed to sign to confirm the figures therein.

86.  There is more than one way to carry out joint venture between the parties. This also deals with Mr Chan’s point that Mr Lui and Mr Man could and should have been shareholders of Luen Shing. That is a plausible and a more conventional way of carrying out a joint venture. But that does not exclude the parties from entering and carrying out a joint venture through a different mode. The Notebooks and the 2017 and the 2018 Table are inexplicable save for the existence of the JV Agreement.

87.  Thirdly, Mr Chan for the Pangs submitted that it is implausible for the JV Agreement to have been formed in July 2007 as the Kowloon Bay Project commenced work in June 2007. I agree. However, it is fair to say that Mr Lui and Mr Man pleaded that the JV Agreement was orally made in a meeting held in about July 2007. I accept Mr Siu’s submissions that given the lapse of time, June can be qualified as “in about July”. Indeed, the capital injection took place on 1 July 2007. The same must be made pursuant to some agreement reached amongst the parties prior to 1 July 2007.

88.  Fourthly, Mr Chan referred to the lack of information in certain projects. For example, for the Shau Kei Wan project in 2008 (Item 2 of Schedule), Kowloon Tong project in 2009 (Item 3 of Schedule) and Kwu Tung project in 2010 (Item 6 of Schedule), no evidence at all were produced by Mr Man or Mr Lui. Nonetheless, Mr Man and Mr Lui considered that at least for the Kwu Tung project, they should share the profit which they estimated to be of HK$2,000,000.

89.  However, I accept Mr Siu’s submissions that it is Pang Senior’s evidence that all the projects would be recorded in the Notebooks. Pang Senior had admittedly taken possession of Mr Man’s Notebooks. He has also refused to produce his own set of the Notebooks. Mr Lui has explained that he might have lost some of the records. However, the 2017 Table and the 2018 Table do record the Shau Kei Wan project.

90.  Fifthly, Mr Chan submitted that it is implausible that no further capital injection was required in 2010 and 2013. However, the fact is that first there were retained profits which remained undistributed. Secondly, the Pangs did not request for capital contribution in relation to projects which were covered by written agreements. Thirdly, I do not accept Pang Senior’s evidence that the Pangs voluntarily made capital contributions whilst Mr Lui and Mr Man were recognised joint venture partners in the subject projects. The only plausible explanation is that the parties deployed the retained profits for such subsequent projects.

91.  Mr Chan submitted that for the Kowloon Bay Project, considering the costs and income up to 31 March 2010, there was a total loss of HK$428,784.37. Kowloon Bay Project only turned profitable of HK$601,471.67 upon the issue of final account on 23 February 2011.

92.  Similarly, the Wong Tai Sin Project commenced in September 2009. Most expenses were incurred prior to April 2010. The project only turned profitable in July 2010.

93.  In other words, when the parties entered the Pak Shek Kok 2010 dated 18 February 2010, both Kowloon Bay and Wong Tai Sin projects were at a loss. There could not be any discussions or statements that the projects were profitable at the time. I disagree. Pang Senior, being an experienced operator in this field, would know that there were substantial receivables to be collected in the two projects. It does not make sense to say that a project is a loss at a particular point of time. Applying that logic, every project will be a loss at the initial stage.

94.  I also accept Mr Lui and Mr Man’s evidence that in 2013, Pang Senior told them the Pak Shek Kok 2011 was very profitable, so that no further capital was requiredand the parties needed not enter further written agreements.

95.  I agree that under cross-examination, Mr Lui said he was only informed by Mr Man that there was no need to execute further written agreements. Whereas Mr Man said that Pang Senior talked and discussed with Mr Lui, and that he was only informed of the decision afterwards. However, with the lapse of time, an incorrect recollection of who told whom of what is entirely plausible. The fact is that no written agreements were signed thereafter, but the entries in the Notebooks continued and the trio continued to countersign on their respective set of the Notebooks.

96.  Sixthly, whether Mr Man was a boss of Luen Shing is, in my judgment, irrelevant. I accept Mr Lam’s evidence that for all intent and purposes, Mr Man was the one who employed workers, supervised their works on daily basis. He also gave evidence that when there were inconsistency in the drawings, the foreman or workers would seek instruction from Mr Man. Thus, it was naturally that they regarded Mr Man as a boss of Luen Shing. That in fact supports the existence of the oral JV Agreement.

97.  Whilst Mr Chan submitted that at the material time, Mr Man was employed by another company, I accept Mr Man’s evidence that the two construction sites were just a few minutes’ walk apart and he did attend to the works of both construction sites.

98.  Seventhly, Mr Chan submitted the JV Agreement, even if existed, was not enforceable for lack of the fundamental and essential terms. It was a framework agreement which was subject to further agreement to be entered between the parties. I disagree.

99.  The pleaded terms are sufficient certain for the same to be enforceable. Indeed, the parties had no difficulties in performing the agreed essential terms. What is left is just the final accounting exercise. The absence of a fixed and definite period of cooperation is not a reason to render the JV Agreement unenforceable. It is perfectly commercial and legitimate for the parties to agree to use Luen Shing as the vehicle to tender for construction works. There is also no operational uncertainty for the joint venture to include all construction projects undertaken by Luen Shing until the parties agree to terminate their cooperation.

100.  Similarly, I find it perfectly reasonable for the parties to agree to (1) share the profits and loss of the joint venture in equal shares, (2) inject capital in the joint venture as agreed from time to time and (3) profits are to be distributed or retained as working capital as agreed from time to time.

101.  Finally, in relation to the pleaded capital injections after 2009, I agree that it was not Mr Lui and Mr Man’s pleaded case that there was never subsequent capital injection after 2009.

102.  It is correct that Mr Lui did state in §19 his witness statement that there was no capital injection for the Pak Shek Kok 2011, however, Mr Lui corrected this piece of evidence during cross-examination. On balance, I tend to accept Mr Lui’s explanation because (1) the entry concerning the injection of capital in 2011 was recorded in the Notebooks for Pak Shek Kok 2011 Project, (2) in a document prepared by Pang Senior, it was stated that the then capital injected by Mr Lui was HK$1,000,000. This is consistent with Mr Lui’s case that his capital injection for Kowloon Bay Project, the Wong Tai Sin Project and the Pak Shek Kok 2011 Projects were in the sum of HK$400,000, HK$500,000 and HK$500,000 respectively and a distribution of profit in the sum of HK$400,000 was made to him in the Kowloon Bay Project. Thus, loosely, in their terms, the total capital injected by Mr Lui was HK$1,000,000.

103.  Having said that I am of the view that to be fair, this issue of capital contribution could be reopened in the accounting exercise if new documentary evidence were discovered at that stage.

104.  By reason of the above finding of facts, I agree that there was no overpayment to Mr Lui or Mr Man. The action concerning overpayment is thereby dismissed.

105.  As far as the claim on conversion of documents, I am of the view that insofar as Mr Lui and Mr Man’s Notebooks and documents in relation to the joint venture, they are entitled to keep the same. As joint venture partners, they are entitled to keep a copy of the same.

106.  For the avoidance of doubt, I am of the view that Mr Lui and Mr Man are entitled to keep the original of their sets of the Notebooks and the original of the 2017 Table and the 2018 Table. Insofar as the corporate documents of Luen Shing are concerned, the originals of the same, if any, should be returned and delivered to Luen Shing.

DISPOSITION

107.  For all the reasons stated above, I make the following orders: -

(1) Luen Shing’s claims against Mr Lui and Mr Man be dismissed.

(2) A declaration that Luen Shing, Pang Senior, Pang Junior, Mr Lui and Mr Man had entered into a joint venture agreement (the “Joint Venture” and the “Joint Venture Agreement”). The Joint Venture include all the construction sites Luen Shing, starting from June 2007 until 25 October 2018. Pang Senior, Pang Junior, Mr Lui and Mr Man are to share the profits and losses of the Joint Venture in equal shares.

(3) An account of all the sums due from Luen Shing, Pang Senior and Pang Junior to Mr Man in respect of the income, expenses and profits or losses of the Joint Venture.

(4) An account of all the sums due from Luen Shing, Pang Senior and Pang Junior to Mr Lui in respect of the income, expenses and profits or losses of the Joint Venture.

(5) Interest pursuant to sections 48 and 49 of the High Court Ordinance.

(6) Costs of these actions, including all cost reserved, be paid by Luen Shing, Pang Senior and Pang Junior to Mr Lui and Mr Man, to be taxed on party-to-party basis, if not agreed.

108.  I also give the parties a general liberty to apply for directions in relation to the claims on conversion of documents.

109.  Finally, it remains for this Court to thank counsel for their helpful assistance to this Court.