CHEUNG CHI SHING v. WONG YING HUNG AND OTHERS

HCA 10396/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10396 OF 1998

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J U D G M E N T

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1. This is a claim by the Plaintiff for the sum of $175,000.00 due under an agreement dated 7 February 1998.

2. The Plaintiff and the Defendants were partners of a partnership called Yan Wing Chinese Restaurant. The 1st, 2nd and 3rd Defendants are siblings. The partnership commenced business on 21 August 1997. In accordance with the requirement of the law, the partners filed with the business registration office the necessary particulars of the partnership. It is notable that for some reason the 4th Defendant's name did not appear as a partner in the business registration record. It would appear that every partner would be prepared to put up with this inaccuracy in the business registration.

3. The Restaurant was operated at Shop No. 1 and Shop No. 2A of Great Wall Building under 2 tenancy agreements on virtually identical terms save and except the rent. I believe that 2 tenancy agreements were required because the landlords were different. The tenancy agreements were prepared by Messrs Leo K W Lok & Co., solicitors, and I accept the Plaintiff's evidence that this firm was nominated by the Wongs of the Defendants. The tenancy was for a period of 3 years from 1 September 1997. The tenant was Yan Wing Chinese Restaurant with the Plaintiff and the 1st Defendant signing for and on behalf of the partnership on the tenancy agreements. Apart from the Shops, the restaurant also had the use of Shop 102 on the first floor of the same building for storage purpose. This premises was the subject matter of a one year tenancy from 1 November 1997 and the tenant was the Plaintiff. It was a simple tenancy agreement on standard form available at stationery shops in Hong Kong. There is no restriction on alienation.

4. Each of the partners contributed the sum of $200,000.00 for the business. Unfortunately the business was not good and the partnership was loosing money. By February 1998, there were already differences amongst the partners. In particular, for reasons which I do not think are relevant to this action, the Plaintiff would like to withdraw from the partnership. So the partners met on 7 February 1998 to discuss about the Plaintiff's withdrawal from the partnership. It was agreed that the Plaintiff should withdraw and be paid a sum of $175,000.00. At the end of the meeting, all the partners signed an agreement in Chinese recording their agreement to the Plaintiff's withdrawal. There is no translation for this agreement and the parties agreed that I should construe this document using my knowledge of Chinese. The material part of this document provides as follows :

"...I Cheung Chi Shing am willing to accept $175,000.00 for withdrawing from Yan Wing Chinese Restaurant, and after I had obtained back the sum of $175,000.00, I, Cheung Chi Shing would not be holding any share in Yan Wing Chinese Restaurant. (That is I am no longer one of the partners of Yan Wing). And thereafter any monetary transaction and loss of Yan Wing, any business of Yan Wing has nothing to do with me. Further set out below the procedure for the settlement:

(1) I, myself, Cheung Chi Shing, would have to remove my name from the tenancy agreement (i.e. my own name from the tenancy agreement).

(2) I, Cheung Chi Shing agreed that I would be able to collect the cash of $175,000.00, being what I can get on 7 April 1998, and also on this day, I would perform the removal of name procedure.

(3) To remove my name from the tenancy agreement would require attending solicitor's firm to handle the matter. As for the solicitor's charges I, Cheung Chi Shing and Yan Wing Chinese Restaurant will be responsible.

(4) As from 7 February 1998, all business and activities of Yan Wing Chinese Restaurant will have nothing to do with me, and I cannot participate in the operation of any of the business and activities of Yan Wing Chinese Restaurant. And I also agree that for the business registration, Liquor Licence, Food Licence, the tenancy agreement of shop 102 of Great Wall Shopping Arcade, Hang Seng Bank cheque account 230-130411-001, concerning Yan Wing Chinese Restaurant, belonging to Yan Wing Chinese Restaurant, and in so far as they contain my name, my name should be removed from them."

This agreement was signed by all 5 partners and each also put his finger print on the document.

5. I accept the evidence of the Plaintiff and the 1st Defendant that the reason for paying the Plaintiff 2 months after the agreement was that the Defendants would require time to raise the money.

6. It is common ground that immediately after the agreement, the Plaintiff had packed up all his belongings and left the business. He never took part in the business again. Before 8 April 1998, he only went back to the Restaurant again in March to ask for the payment of his salary for the few days he had worked in February.

7. According to the Plaintiff, after the agreement, the Plaintiff approached the landlord or its agent for the purpose of transferring the tenancy of Shop 102 to the first Defendant. He was told that it would be necessary to have the first Defendant to participate in the transfer. He therefore contacted the first Defendant both by phone and also personally. The first Defendant merely told him that he would deal with the matter later.

8. The first Defendant however did not agree that the Plaintiff had contacted him personally on this matter. However, he agreed that sometime in March, the Plaintiff did ring him up asking him to attend to some transfer of name matters. At the time he was very busy and he told the Plaintiff that he would call the Plaintiff back. He did so afterwards. However he was unable to reach the Plaintiff by phone. He left messages with the Plaintiff's pager asking the Plaintiff to return call. The Plaintiff never did. It did not appear from his evidence that he had left any message to the Plaintiff that he wanted to contact the Plaintiff in order to attend to the removal of name procedures.

9. The Plaintiff on the other hand denied that he had ever received any phone call or message from the 1st Defendant or any other defendants after he contacted the 1st Defendant for the change of name of the tenancy agreement in respect of shop 102 until the incidents on 7 April 1998 which I will deal with later. The Plaintiff's evidence also suggested that he had taken the opportunity to raise the matter of removal of his name with the 1st Defendant when he returned in March to ask for his February salary, but there was no positive response from the 1st Defendant.

10. Having heard the evidence, I find that the Plaintiff did ring up the first Defendant asking him to go to attend to the change of name of the tenancy agreement for shop 102. However as the first defendant was too busy at the time, he told the Plaintiff that he would attend to it later. Subsequently the Plaintiff also raised with the 1st Defendant on at least one occasion about the removal of his name but again receiving no positive response from the 1st Defendant. The first Defendant had tried to contact the Plaintiff later but failed. He never left any messages informing the Plaintiff that he would like to contact the Plaintiff in relation to matters concerning the change of names. I find that had he done so, and had such message been received, then there is no reason for the Plaintiff not to follow up the matter with him. After all, the Plaintiff had taken the initiative to contact the landlord for the transfer of the tenancy. Also the removal of the name would not have caused any harm to the Plaintiff. I see no reason for the Plaintiff to be difficult or dilatory in this kind of matter.

11. According to the Plaintiff, after the agreement of 7 February 1998 was signed, the 2nd Defendant informed him that the Defendants would arrange to instruct solicitors to have the name on the 2 Shops 1 and 2A tenancy agreements changed on 7 April 1998 and the payment of the $175,000.00 would be made then. I accept his evidence. In any event, the 2nd Defendant did not give any evidence to contradict this piece of evidence.

12. On 7 April 1998, the 2nd Defendant paged the Plaintiff through his pager. The Plaintiff returned her call. In the telephone conversation, the 2nd Defendant told him that because of the holidays in the last few days, she was very busy and could not spare the time to go to the solicitors firm to attend to the change of names of the tenancy agreement. She suggested that the Plaintiff should come to the Restaurant when the business was closed at the early hours of 8 April to settle the matter. The Plaintiff agreed to do so.

13. In pursuance of the arrangement, the Plaintiff did turn up at about 2:00 a.m. on 8 April 1998 to collect his money. He had a meeting with the 2nd, 3rd and 4th Defendants at the Restaurant when it was closed for business for the day. One Mr. Chris Wong, an accountant invited by the Defendants, was also present. It is common ground that although the 1st Defendant would appear to be in charge of the running of the business, he did not attend the meeting because he had to attend to the business at 10:00 a.m. on the next day. However the rest of the Defendants had his authority to deal with the Plaintiff.

14. During the meeting the Plaintiff was not given his $175,000.00. Instead, the Defendants offered the Plaintiff the sum of $91,250.00 only and the Plaintiff was told that the change of name procedure could be done at the solicitors' office on another day. The accountant Mr. Chris Wong showed the Plaintiff a certain profit and loss account of the partnership for the period between August 97 to February 1998 showing that each of the partners had suffered a loss in excess of $100,000.00. This document had not been produced by either party in the trial although there is no dispute that such document was shown in the meeting. The Plaintiff refused to accept the offer.

15. The 2nd Defendant also gave evidence. However her evidence was extreme vague on what exactly happened and what was said in the meeting at the early hours of 8 April 1998. Her evidence was that by the time of the meeting, the Defendants had already had the consensus that the Plaintiff had repudiated the agreement of 7 February 1998, and they had accepted his repudiation by offering him the new sum of $91,250.00. No where from her evidence was there any suggestion that any of the Defendants had expressed any concern during the meeting that the procedure for the change of names had not been completed by the Plaintiff yet. While she would repeatedly say that the change or removal of names were important, there was certainly no explanation as to why although this procedure had not been completed the Defendants felt it right to offer the Plaintiff this sum of $91,250.00 without at the same time securing any solid agreement or arrangement as to how the outstanding change or removal of names procedures should be completed.

16. On 25 June 1998, the Plaintiff commenced this action for the recovery of the $175,000.00.

17. The issues I have to decide are:

(a) What is the Plaintiff's obligation in relation to the change or removal of names in the 2 tenancy agreements, the business registration, the liquor licence, and the tenancy agreement of shop 102, and also to the bank account mandate and

(b) Whether the Plaintiff was in breach of this obligation and

(c) What is the consequence of the non-performance of the change or removal of names.

Nature and extent of obligation

18. It is plain from paragraphs (1), (2) & (3) of the agreement of 7 February 1998 that the change of name or the removal of the Plaintiff's name from the tenancy agreements of Shops 1 and 2A should be handled by solicitors and this should be done on 7 April 1998. In the light of what the 2nd Defendant had told the Plaintiff that the Defendants would instruct solicitors to attend to this matter, it is plain that unless and until the 2nd Defendant had informed the Plaintiff of which solicitors they had instructed, the Plaintiff could not be expected to do anything on this matter. In any event, since the solicitors who initially drew up the tenancy agreements were instructed by the Wongs, it would be natural to expect that the Wongs would also take the initiative to contact the solicitors to handle this change of name matter.

19. In relation to the agreement for the removal of names in relation to documents set out in paragraph (4) of the Agreement, it is plain from the clause itself that there is nothing in the clause to say that the Plaintiff must take the initiative to cause the removal of his names from those documents. What the clause said is that the Plaintiff would agree to the removal of his names. In any event, even if the Plaintiff were to take the initiative, what he could do must be dictated by the nature of the document. It is plain that to succeed in removing his names, he must have the co-operation of the defendants. For instance, in the case of the Food License, it is plain that the Plaintiff could do nothing in relation to the Food Licence because he was not the Licensee. Likewise for the Liquor Licence, he was only named as an employee in the Licence, and the 1st Defendant was the Licence holder. Plainly, any removal of name could and should be done by the 1st Defendant alone. In relation to the business registration, it would appear that all that was required was a letter signed by the Plaintiff and the Defendants and likewise for the bank mandate with the Hang Seng Bank. As for the tenancy for shop 102, plainly the Plaintiff could only remove his name as tenant if someone is prepared to take up the tenancy.

20. It was suggested by the Defendant that because this was a business contract, there was an implied term that time is of essence to the Agreement. Looking at the obligations provided in the Agreement, it is apparent that the Agreement only made provisions for 2 dates. First the date of 7 April 1998, being the date for the payment of the money and the removal of the name as provided for in clause (2). Secondly the date of 7 February 1998, being the date on which the Plaintiff was to cease to be involved in the affairs of the partnership as provided in clause (4). No doubt the provision for the consent to the removal of his name in various documents were also set out in clause (4), but it is difficult to see how the parties could have intended that the removal of his name from all these documents could be accomplished on 7 February 1998, the very day when the agreement was made. From the fact that there appeared to be no great urgency for the removal of the name on these documents and from the fact that there appeared to be no material or adverse effect to the business of the partnership even though the removal of names from these documents were not accomplished by any particular date, I am of the view that it cannot be the parties intention that there was any definite date whereby the removal of name from the documents listed in clause (4) must be accomplished.

Any Breach

21. On the evidence, the Plaintiff was the only person who had taken the initiative to transfer the tenancy to the 1st Defendant but the 1st Defendant was then too busy to deal with the matter. Plainly the Plaintiff was more than willing to discharge his obligation to remove his name from the tenancy. As for other matters, it is plain that they could be dealt with very quickly, and in fact on the evidence of the 1st defendant, they could be dealt with all within one day. However it would appear that the parties had just forgotten about them and did not pay much attention to them. As I have pointed out above, the removal of names would require the co-operation from the Defendants. There was no co-operation from the Defendants and accordingly, I do not think that the Plaintiff is in breach.

Consequence of non-performance

22. It is also important to note that the removal of the Plaintiff's name from the various documents listed in paragraph (4) of the agreement would only work to the benefit of the Plaintiff. I cannot see how this requirement for the removal of the Plaintiff'' name could be treated as a condition for this agreement such that the non-performance of this term would enable the Defendants to determine this agreement. If anything, I am of the view that as this term is for the benefit of the Plaintiff, the Plaintiff may waive the benefit of this term and may demand performance by the Defendant of the other term in the agreement viz. the payment of the sum of $175,000.00. Indeed, it was never alleged by the Defendant that the Defendants have suffered any loss or damage arising out of the non performance of the removal of the Plaintiff's name from the documents set out in paragraph (4).

23. The Defendants however argued that whether the term was a condition or not, since the Plaintiff refused to respond to the telephone calls to the Defendants, the Plaintiff had evinced an intention not to be bound by this agreement, as by so doing, the Plaintiff must have shown the intention not to do anything to remove his name.

24. I have already held that on the evidence I do not find that the Defendants had left the Plaintiff any messages informing the Plaintiff they would like to contact the Plaintiff over matters concerning the change or removal of names. Hence the Plaintiff's non response could not be taken as an indication that the Plaintiff would refuse to deal with the change or removal of name matter. More importantly, in my view, the main consideration moving from the Plaintiff for this agreement is his agreement to withdraw from the partnership and to cease to participate in its affairs. This, the Plaintiff undoubted did. Even if the Plaintiff's conduct should amount to a refusal to co-operate in the change or removal of name procedure, having regard to his overall conduct, I do not think that the Plaintiff's breach would amount to a repudiation of the contract.

25. Furthermore, from the Defendants' conduct in the meeting of 8 April, 1998, it is obvious that the reason for the Defendant's not paying the Plaintiff was not that the Defendant would consider that the Plaintiffs should not be entitled to be paid the full sum of $175,000.00 because of the Plaintiff's name had not been removed from the various documents. There is nothing to indicate that the sum they offered viz. $91,250.00 had anything to do with the loss they suffered by reason of the fact that the change or removal of names had not been completed. On the contrary, I take the view that after the Defendants had ascertained with the assistance of an accountant the financial position of the partnership as in February 1998, they found that they were over generous in agreeing to pay back the sum of $175,000.00 to the Plaintiff for his withdrawing from the partnership and hence they offered the Plaintiff the lesser sum of $91,250.00, being the amount they considered to be actual worth of the Plaintiff's share. The non performance of the change or removal of names from the various documents was merely an excuse made up later when the Plaintiff threatened litigation.

Conclusion

26. There will be judgment for the Plaintiff in the sum of $175,000.00. Under section 48 of the High Court Ordinance, I will also award interest on the sum of $175,000.00 at the rate of 1% above the prime rate of the Hong Kong & Shanghai Banking Corporation from 7 April 1998 to today. There will also be an order that the Plaintiff is to have the cost of this action to be paid by the Defendant.