PINK TIME LIMITED v. KENJO SHUNJI

1994 No. A 787

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an action brought by the Plaintiff, Pink Time Limited, against the Defendant for monies which they say that the company has expended on his behalf and which he has not repaid.

2. The company already has a substantial judgment against this Defendant in respect of monies which he fraudulently took from them and which the Defendant pleaded guilty to 15 counts of false accounting and has been given a suspended prison sentence.

3. He is apparently bankrupt and this case, which has been set down for four days involves a large number of documents. It appeared to me that it would be fairer for the parties and in particular the Defendant that I should try initially one issue.

4. In the main, in the years between 1990 and 1993, the company paid salaries tax to the Revenue for the Defendant and the repayment of those sums are the bulk of the claim. The Defendant, however, says that there was an agreement whereby the company would pay those sums of money and therefore he is not liable to repay it. The Defendant is a Japanese gentleman who does not speak English, or read it, and this case, as I have said, involving a large amount of accounts and documents was in my judgment complicated and therefore it is far easier to try this issue which can be isolated. I have, therefore, heard evidence solely concerned with whether or not there was an agreement by the Plaintiff company to pay Mr. Kenjo's tax. The burden of proof is on the Plaintiff to prove the terms of the employment of the Defendant and I have approached the case from that point of view.

5. The background is very simple. Mr. Kenjo is an experienced Sushi Chef who has been in Hong Kong since 1981. He was working at the Ginza Restaurant and said that he was being paid $30,000 a month with rent, home leave and the employer paying his tax. He was approached in June 1989 by a Mr. Miyakawa who was a director of Hanwa Kozai (Hong Kong) Limited which is the Hong Kong parent company of the Plaintiff and, he together with two other gentlemen, who have given evidence, Mr. Sasai and Mr. Kuramoto, went to the Ginza Restaurant, where there was this discussion, and they wanted him to come to start this new concept Japanese restaurant and he would become a director and really run the company on their behalf. So instead of being a Sushi Chef employee, he was going to become the manager of a Japanese restaurant.

6. The two gentlemen who gave evidence heard no discussions about anything said about the salary. The Defendant, however, says it was then that he was promised that he would be employed on the same terms as before and the Plaintiff would pay his tax. The only oral evidence, therefore, insofar as this agreement comes from the Defendant himself, Mr. Miyakawa is in Japan but there was a taped telephone conversation between himself and Mr. Ito and a hearsay notice has been served in respect of that and Mr. Miyakawa says that he did not promise anything. However, I am prepared really to ignore that aspect because in my judgment, the position is made clear by documentary evidence which in this type of case I consider the best evidence there is.

7. Mr. Bell, an experienced counsel was cross-examining the Defendant and said :

"Well if these were the terms you were employed by the Ginza Restaurant and you were being employed on the same terms. Have you any documents which show that the Ginza were paying your tax?"

and Mr. Kenjo said that he had some and would get them over lunch,

and low and behold, he did obtain some documents. However, they were documents which really assist only the Plaintiff. There is a contract in writing, an employment contract made between a company called Wayhill and the Defendant which sets out his conditions of employment in detail. His salary is $30,000 a month. He has quarters, an increment and a standard Hong Kong type annual bonus, that is of 13 months' salary, insurance and medical treatment, all these matters were in detail. I can find nothing in these documents to support the proposition that the employer was paying tax. Indeed, in my judgment, the contract which he is produced says precisely the opposite. Also he has produced a salaries tax receipt of assessment which is made out to him in his own name. I have no evidence really who paid the amounts of money, but this certainly does not assist the Defendant.

8. By virtue of becoming an employer rather than an employee he had to make a return of remuneration for employees. In Hong Kong, it is not unusual for employers sometimes to pay the salaries tax of their employees. It happens in certain businesses. I confess, I have come across this in the course of the years I have been here and therefore the Revenue recognising this puts this in a specific box in paragraph 11 and if salaries tax is paid by the employer, the amount is put into the form because it is in itself income on which tax is chargeable. These returns were typed out and the Defendant signed them. He said that he did not know what he was signing. I confess I find some difficulty in accepting that evidence even though he is a Japanese gentleman.

9. The ledger of the company indicates that the company will pay tax on his behalf and that is found at page 6. It seems odd to me that if indeed there was an arrangement whereby the company was going to be completely liable for it, there not some indication.

10. What was happening was that Mr. Kenjo was the signatory on the cheques and he wrote the cheques out himself on behalf of the company payable to the Revenue for his own tax. That is, of course, a personal liability and the books of account which are kept indicate that on the annual balance sheets on the last amount of tax, which is $128,700, that this was a debit. In other words, it was an asset of the company and a debit to Mr. Kenjo of money which he owed and indeed it is treated as such in the books of account as a debit to his account.

11. He was paying sums of money. Supervision of this restaurant appears to me to be in somewhat lax. It may be that they recognized he was a very good Sushi Chef but did not really supervise him at all. I accept from Mr. Ito that from 1991 he was telling him precisely that he was not permitted to get the tax payable by the company. They did not mind him utilising the company's funds to pay his tax as long as, of course, the money was repaid. There is no document produced by the Defendant to indicate that this was a liability of the company and an additional increment to his income.

12. I, of course, do not understand Japanese and I cannot tell anything from the demeanour of the witness. I have also, as best as I can, put out of my mind that he had been systematically stealing from his company over the years and defrauded them and I have tried to look at this in isolation on the evidence.

13. In my judgment, having regard to the documentary evidence and in particular the contract of employment produced by the Defendant, the probabilities in this case are that the Plaintiff was permitting the Defendant to utilise the company account to pay his tax but this was a sum of money that was repayable. The claim by the Plaintiff is a balancing exercise of the various advances and payments. However, I have concentrated solely on the tax advances and this seems to me would save considerable expense to the Plaintiff who may not really recover anything out of this case. In my judgment, on the tax advances, these are sums of money which are repayable by the Defendant to the Plaintiff.