CHENG HON CHOR DAVID v. YIM SOU YEE

1992, No.MP3173

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. The plaintiff and the defendant were old friends and their families were close. It is alleged that in 1982 the plaintiff came to the rescue of the unemployed defendant, a good friend in distress. The plaintiff claims to have set up a partnership business at his own cost and expense to be run by the defendant as his partner. In addition, a ground floor shop in Castle Peak Road, Tuen Mun claimed to have been acquired by the plaintiff alone in mid 1981 was put in the joint names of the plaintiff and the defendant so as to allegedly facilitate the partnership to procure a shop lease in the Hong Kong Hotel and/or obtain bank loans. It is therefore the plaintiff's case that he in fact made the defendant a ce-owner of the property without any consideration moving from the defendant. If that had been so, a resulting trust would have arisen in favour of the plaintiff.

2. The defendant's case is that he was a co-owner for good consideration in the form of a mutual agreement to wipe out debts allegedly owed by the plaintiff to the defendant.

3. The assertions and the evidence in support are not wholly satisfactory on either side. It is quite unnecessary for me to recount the various approaches I have attempted for testing the inherent and other credibility of their respective versions. I have come to the conclusion that it would be best for me to stand back and take a look at the whole scenario in determining which version is more probable.

4. Counsel have both very kindly reduced their final submissions into writing. Except for a very small area of disputes on interpretation of evidence and as to the proper inferences to be drawn, the diametrically opposed stories as told by both sides have been concisely presented to me with workable details.

5. According to the plaintiff, in 1985 during the subsistence of the partnership he discovered two cheques that had gone into the personal account of the defendant, one was dated 2 July 1985 for $12,000 and another dated 11 July 1985 for $15,000. The plaintiff could not understand why the partnership had not been making any profit, and such a discovery led to suspicion. The plaintiff also suspected some unauthorised and secretive negotiation on the part of the defendant with the Master Tailor Wong for the disposition of the partnership business for a price of $35,000. The plaintiff indirectly intervened resulting in, so the plaintiff believed, the defendant depositing an equal amount of $35,000 into the partnership account for repayment to one Wong Shun Choi, possibly the Master Tailor. The partnership was finally dissolved. It is common ground that division of the partnership assets was made without open conflict after some interim hostility.

6. It is the assertion of the plaintiff that before he immigrated to Canada in 1989, he had gingerly approached the defendant twice in 1985 for the return of the half share of the Tuen Mun Ground Floor shop premises. In 1991, during his absence in Canada, he sent his nephew to seek a re-transfer from the defendant in Hong Kong. After his return to Hong Kong in September 1991, the plaintiff arranged to meet the defendant again on two occasions. When the nephew spoke to the defendant in 1991, it is not disputed that he was sent away by the defendant with the message that the plaintiff should come himself. The first time when the plaintiff again approached the defendant after September 1991, on his return from Canada, it is claimed that the defendant agreed to effect a retransfer. Solicitors were retained but at the second meeting, the defendant allegedly declined to honour his words.

7. The plaintiff's version is that the defendant demanded 1/3rd of the difference between the property's current price of $1.1 million and its price in 1985 of $310,000. The reason given was, so the plaintiff testified, that the delay had brought the plaintiff an unexpected windfall. In the two meetings in 1985 before the plaintiff's immigration to Canada, the defendant had allegedly acknowledged his obligation to effect a re-transfer but from the plaintiff's observation of the lame excuses put up, the defendant then seemed to be playing for time.

8. Mr Liang, counsel for the defendant was highly critical of the principal reasons advanced by the plaintiff for including the defendant as half owner of a newly acquired Tuen Mun Ground Floor shop. Counsel refers to the concession made by the plaintiff under cross-examination that as sole owner of the Tuen Mun property, even without his other resources, he was able himself to apply for a bank loan or a shop space for the use of the partnership business. Mr Liang directs my attention to the business registration giving a commencement date for the partnership as at 23 June 1983 and the formal assignment at a later date making the defendant co-owner on 18 July 1983.

Also, from beginning to end, the partnership found no necessity for a bank loan and there was no plan for other trading activities in the partnership.

9. Counsel for the defendant also provides a meticulous analysis of the financial position of the plaintiff, and it is suggested that the plaintiff could not have paid for the Tuen Mun Ground Floor premises except with the help of some loans.

10. Mr Liang further attacks the subsequent conduct of the plaintiff as being not quite consistent with his own allegation that the defendant was gratuitously made a part-owner of the Tuen Mun Ground Floor premises. The demands for the re-transfer made of the defendant were intermittent, few and far between as well as unenthusiastic.

11. On behalf of the defendant it is also submitted that the said cheques and the statement of Chinese accounts said to have been rendered by the defendant to the plaintiff were peripheral and inconclusive. Moreover, the defendant said of the cheque of $12,000 dated 2 July 1985 as possibly two months' salary owed to him. It is true that the defendant subsequently retracted this explanation and claimed that he had no clear recollection. The defendant could not remember the purpose for the cheque of $15,000 dated 11 July 1985. As for the $35,000 cheque and whatever the related transactions, the defendant claimed that he was unable to recall the nature of the business involved. At one time the defendant explained that after the end of June 1985, the cheques and bank account were no longer the partnership's concern. Later the defendant seemed somewhat confused as to the cutting-off date of end of June for the partnership business. It must be appreciated that these matters would have little direct bearing on the material assertions of the parties. They relate more to credibility and the plaintiff's alleged suspicion of the defendant's impropriety.

12. Broadly speaking, counsel for the defendant leans heavily on the plaintiff's lack of financial resources for the acquisition of the Tuen Mun Ground Floor premises, his nonsensical reasons given for including the defendant's name as a co-owner of those premises, his inconsistent subsequent conduct of making half-hearted demands for a re-transfer and the despatch of rent receipts at one time by the defendant.

13. The plaintiff was then owner of a Hung Hom flat for investment and a Canton Road flat as residence. The plaintiff had stock and foreign currencies. From time to time, he was financially assisted by his wife and his mother-in-law. His personal income was steady. The plaintiff would unlikely have had to resort to loans for the acquisition of the Tuen Mun Ground Floor shop premises in August 1981. Conversely, if, as the defendant claimed, by July 1981 the plaintiff had run up a debt to the defendant by way of personal loans of some $50,000, the plaintiff would have been expected to repay such loans before he embarked on a purchase of the new shop premises in Tuen Mun. It would seem improbable that the plaintiff was financially incapable of purchasing the Tuen Mun Ground Floor shop premises without private loans.

14. The plaintiff explained that at the inception of the partnership business, the possibility of requiring a bank loan for more activities was contemplated. As for the Hong Kong Hotel shop premises, the plaintiff further explained that from his experience the Hong Kong Hotel landlord would prefer men of means and that financial standing would likely form part of the landlord's enquiry made of a potential tenant. In fact, it had been decided to include the defendant as a co-owner-since the end of 1982, long before the acquisition of the Hong Kong Hotel shop tenancy in mid 1983. Whilst the actions allegedly taken for seeking a re-transfer seemed to be subdued and far apart, they were consistent with the plaintiff's intention to help a down-trodden old friend and his quiet mannerism displayed in the witness stand. The plaintiff is soft spoken, almost to the point of scholarly. The despatch of the rent receipt at one time by the defendant cannot be crucial. It would seem therefore that these criticisms levelled at the plaintiff on these grounds cannot be telling.

15. On the other hand, the defendant himself made no effort at all to demand separately payment of his share of the rental or a transfer of the half ownership from the plaintiff. From time to time, so the defendant claimed, he would mention his share of the rental on the occasions when the plaintiff approached him. The defendant did not even refute the accusations made by the plaintiff's solicitors in their letter, which set out the plaintiff's case against him. The defendant also maintained to have worked continuously right up to the commencement of the partnership. He was in a managerial position with his last employer and he allegedly continued to run his own business in the same line. However, he never paid income tax during the relevant period and he made a preposterous suggestion that his manager's income tax might have been paid by his former employer. That is a somewhat startling suggestion from a man of the rank of a company manager. His loans to the plaintiff were evidenced allegedly by eight IOUs, but in a supplementary list of document, nine IOUs were given. These eight IOUs were never referred to in the pleadings or the affirmation of the defendant. It was left unexplained as to why there was no demand for interests under these eight IOUs. The IOUs were raised late in the litigation. The defendant's case is that these eight IOUs were returned to the plaintiff after the execution of the Tuen Mun assignment in the lift of a building which accommodated the firm of the conveyancing solicitors. The subject-matters which gave rise to these alleged loans are equally questionable. Silk garments were allegedly given to the plaintiff but the defendant left the source of these silk garments unidentified. The court is also left in doubt by the evidence of the defendant as to whether in fact he had carried on any real business on his own so as to be in a likely position to supply these silk garments. Another subject-matter for the IOUs is gold - five tales in all said to have been handed over to the plaintiff. The defendant had then a paper gold account with the Hang Seng Bank. It is inconceivable why he should have chosen to hand five tales solid gold to the plaintiff rather than liquidate his paper gold with the bank for cash. Some of the IOUs were said to be supported by personal loans to the plaintiff by the defendant. One of the alleged loans was in the sum of $60,000. There was no IOU for this sum. It is the case of the defendant that in late 1982 when the partnership business was being discussed, a tailor shop in Hong Kong Hotel, the estimated cost was $120,000. This alleged estimated cost was well before even the acquisition of the lease in Hong Kong Hotel. There is much to be said for Mr Hung's submission that there were then too many imponderables for the parties to be able to fix the start-up cost at $120,000. It is also fairly difficult to accept that the defendant granted "a loan of $60,000" to the plaintiff long before actual expenditure of any of the start-up cost for the partnership. Turning to the cheque of US$2,500 claimed by the defendant to be his share of the disbursement and legal costs for the purchase of the Tuen Mun Ground Floor Shop premises. It is hard to appreciate why such alleged disbursements and legal costs should have been repaid by the defendant in US dollars. Furthermore, US$2,500 would represent close to 7.4% of the purchase price. Such excessive percentage by way of professional charges is highly improbable for a $264,000 conveyance.

16. The defendant was unimpressive as a witness. He had to be pressed to concede that he knew the plaintiff way back in 1964. In his statement, he stated : "I first really knew the plaintiff in or around 1972 when we became friends". In giving evidence, there were obvious attempts to bring in a late date. In fact, he had his photograph taken with the plaintiff in 1964. He attended the plaintiff's wedding in 1970. The defendant also denied any expertise in accounting. According to the nephew of the plaintiff, whose evidence I accept, the defendant took charge of his factory accounts for sometime. The defendant disclaimed any knowledge of and responsibility for the entries in the statement of Chinese accounts. He maintained that he only took down what he was told. Since the defendant claimed to have had no knowledge of those entries and that he did not understand them, he could not possibly claim that these were records of his contributions. If these are genuine entries duly made by the defendant for rendering accounts to the plaintiff, they must be evidence of the plaintiff's payments into the partnership. These entries do not all relate to the preparation at the commencement of the partnership business, and I can derive really little assistance from them.

17. Generally, the defendant seemed to have wantonly raised many allegations of substance Against the plaintiff, which had not even been put by his counsel. There were also these improbable assertions that I have endeavoured to recount above. The defendant is not a good witness. For the reasons I have given, his version is not free from suspicion. As compared with that of the plaintiff, I have no hesitation in preferring the plaintiff's evidence.

18. The case of the plaintiff and the case of the defendant are such that only one side could be telling the true on the core issue. I accept the evidence of the plaintiff which is decidedly less tortuous and more convincing. On balance of probabilities, I find that the plaintiff included the defendant as half owner of the Tuen Mun Ground Floor Shop premises without any consideration. I grant the declarations as prayed for and make an order vesting the half share of the Tuen Mun Shop premises in the plaintiff. I make an order nisi for costs against the defendant.