TSUI SHU FONG v. CHAN YUEN TENG AND OTHERS

CACV 165/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 165 OF 2002

(ON APPEAL FROM HCA NO. 18260 OF 1998)

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J U D G M E N T

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Hon Woo VP:

Background

1. This matter arose out of a dispute between the plaintiff and the defendants in respect of the investments in Eagle Plastic Manufacturing Company Inc ("Eagle Plastic"), which was incorporated in the USA on 29 May 1997. The plaintiff alleged that the investments in Eagle Plastic were made by the partnership Tung Shing Plastic Factory ("the partnership") that had been set up by the plaintiff and Chan Yuen Teng, the 1st defendant ("D1") in 1985 in equal shares. On the other hand, the defendants alleged that the investments in Eagle Plastic were made by the plaintiff and other individuals but not by the partnership.

2. D1 is one of the sons of Chan Yu Tim, the 3rd defendant ("D3"). The 2nd defendant ("D2") was a family business under the control of D3. It was common ground that for all intents and purposes, the defendants were one and the same family ("the Chan family" or "the Chans"). D1 was apparently nominated by D3 to start the partnership with the plaintiff.

3. In or about 1989, D1 emigrated to USA and he authorised D3 to handle the partnership affairs on his behalf. There was no dispute that in connection with the partnership business, D3 was at all material times fully authorised to represent D1.

4. In October 1998, the plaintiff commenced proceedings against D1 and D2 for the dissolution of the partnership and the appointment of a receiver. D3 was subsequently joined as a defendant. The reasons for the dissolution of the partnership have little relevance to the present proceedings; to put it briefly, distrust had developed amongst the parties. In December 1998, by a consent order made by Deputy Judge Muttrie, the affairs of the partnership were ordered to be wound up and receivers were appointed.

5. By an Order made by Ribeiro J (as he then was) on 4 August 1999, the following issue was framed and ordered to be tried:

"whether the investments in the Eagle Plastic Company in the USA are investments made by the Dissolved Partnership or are personal investments of the Plaintiff".

6. The issue was tried before Yeung J (as he then was) which took eight days between July and November 2001. On 8 November 2001, the judge gave judgment and made the following declarations:

(1)	Eagle Plastic was meant to be an extension of the partnership in USA;
(2)	The investment in Eagle Plastic, limited to the investment of the HK$1 million and the sum of US$100,000 as well as the machineries only, were investments made by the partnership and not the personal investment of the plaintiff;
(3)	The partnership investment in Eagle Plastic did not include the sum of HK$1,060,000 and the factory premises at Minnehaha Grove Tract, Los Angeles, USA ("the Premises") registered in the name of Buttons & Trims Products Corp ("Buttons & Trims"), a company owned by the Chans;
(4)	The HK$1,060,000 was the plaintiff's personal investment in the Premises and the plaintiff must account to the partnership for it; and
(5)	The ownership of the Premises is a matter to be sorted out if necessary between the plaintiff and Buttons & Trims.

7. The judge made no order as to costs.

8. Against the Order the plaintiff appeals, seeking to have declarations (3), (4) and (5) set aside and to be substituted by a declaration that the partnership investment in Eagle Plastic included the sum of HK$1,060,000 and the Premises and for an order that the defendants pay the plaintiff's costs of the trial to be taxed.

The basic facts and findings

9. Four grounds of appeal are raised against the judge's findings which were in effect contained in declarations (3) and (4) of his Order. Para (5) of the judge's Order was based on his findings in respect of declarations (3) and (4).

10. It is necessary to set out the basic evidence of the parties before the judge and the relevant findings made by the judge for the examination of the grounds of appeal.

11. To put it in a simple way, the plaintiff alleged that monies belonging to the partnership had been remitted and machineries had been transferred to the USA for the use of Eagle Plastic, and the investments in Eagle Plastic were investments made by the partnership. The defendants' case was that the monies remitted and machineries transferred to the USA for the use of Eagle Plastic were drawings by the plaintiff from the partnership and they were the plaintiff's personal investments in Eagle Plastic. Remittances by other persons to the USA were investments of those other persons, and not the partnership.

12. In respect of the transfer of monies and machineries to the US, Mr Daniel Fung SC, for the plaintiff, has provided us with a very useful chronology. The most relevant dates and events are set out below:

13. Before the judge, the plaintiff and D1 gave the main evidence on behalf of the opposing parties. Before he could give evidence, D3 passed away in the course of the trial. However a detailed statement of his was admitted as hearsay evidence. The judge was not too satisfied with the evidence of these protagonists. Regarding the statement of D3, the judge had the following to say:

"59. The difficulty with the statement of D3 is that it was only completed after the plaintiff had given his evidence. It had not been tested by cross-examination. D3's statement also contradicted the evidence of D1 on the nature of the original agreement with the plaintiff [concerning the investment in Eagle Plastic] and the existence or otherwise of the revised agreement."

14. In respect of D1, the judge's reservation over his evidence can be seen in the following paragraph:

"73. Despite his effort, D1 was unable to give direct evidence on the arrangement reached between the plaintiff and D3. When he gave evidence in chief, he was hardly able to account for the relevant events that took place in Hong Kong. This was not surprising as D1 was at all material times in USA."

15. The judge was also critical of the evidence given by the plaintiff. He said:

"63. I am also not impressed by the evidence of the plaintiff, particularly his evidence relating to the sum of $1,060,000.

64. The sum was paid to the plaintiff's personal account in September 1996. It was however entered into the partnership account as an expense for raw materials. The plaintiff himself signed on the payment voucher as purported verification of such expense. The plaintiff claimed to have been acting on the instruction of D3. He said D3 told him to put the money into his personal fixed deposit account for future use in USA as the fiscal year was coming to an end. He also said the false voucher was prepared on the instruction of D3 and when he raised the matter with him, D3 got angry and said he was responsible for the accounts and filing of tax return and what he did was for the benefit of the partnership.

65. There was in my view no conceivable or logical reason for D3 to do what was alleged against him.

66. In the various affirmations filed by the plaintiff, he had never described in details the circumstances in which the sum of $1,060,000 was deposited into his account. In his affirmation dated 24 December 1999, he said "Around April 1997 an amount of approximately HK$1,080,000 was transferred from the account of the partnership into my personal account." In a subsequent affirmation dated 28 July 2000, the plaintiff said, "The 3rd Defendant told me to deposit HK$1.06 million in my account and then to transfer in the manner which I have deposed in my earlier affirmation."

67. The payment voucher is dated 11 September 1996 and was authorized by the plaintiff himself. In the payment voucher, the plaintiff described it as payment for the purchase of raw materials.

68. Eagle Plastic was only set up in April 1997 and on the plaintiff's own case, the discussion about setting up Eagle Plastic only took place the earliest at the end of 1996 or early 1997. Why then would the partnership pay the amount to the plaintiff as early as September 1996 so that he could pay into the joint account with D1 in April 1997 as the partnership's investment in Eagle Plastic? Why should D3 make up a false excuse for transmitting the sum to Eagle Plastic?

69. If it was intended that the partnership would transfer this sum to be used in USA, it could have directly remitted the sums to the joint account shortly before the establishment of Eagle Plastic in May of 1997. There was no need for the circuitous manner as suggested by the plaintiff.

70. As for the alleged reimbursement of the loan of US$100,000 from each of plaintiff and D2, the partnership records did not demonstrate such reimbursement. The plaintiff suggested that on 22 August 1997, the partnership paid a sum of $600,000 to the plaintiff's wife and then on 23 September 1997, a sum of $700,000 was paid to D1's mother. The plaintiff further suggested that on 23 September 1997, he paid the sum of $301,895.05 to D1 and on 27 November 1997, D1 paid him $354,536.20. Such evidence shows that the two of them had in fact shared equally the two sums of $700,000 and $600,000 plus interest. The total sum of $650,000 was meant to be the reimbursement by the partnership in respect of the loans of US$100,000 from each of them.

71. There was no explanation as to why HK$650,000 could be reimbursement for a loan of US$100,000 although the plaintiff did say that in or around May 1998, he and D1's wife each withdrew US$20,000 from the joint USA account.

72. In my view, both the plaintiff and D3 were crafty businessmen who had tried their best to safeguard their own interests at the expense of the other's interest. When they found out what they perceived to be improper conduct on the part of the other, they felt betrayed and seek to put the blame on the other."

16. The judge also dealt with the fax dated 13 June 1997 which was written by D1 on the letterhead of Buttons & Trims. A fair translation of the fax reads as follows:

"Mr Tam, To: Mr Chan, Senior [D3]

Re: Tung Shing's investment group 'Eagle Plastic' Fei Ying Plastic Bag Factory

(1) The first T/T of Tung Shing: US$130,000 or thereabout.

(2) The second T/T: HK$1 million about US$130,000.

(3) Invest in factory premises US$585,000, pay 50% and including procedural charges about 300,000, prepare the factory's working capital $160,000, totalling US$460,000.

(4) Need further investment of $200,000. Boss Tsui [the plaintiff] already has cash $100,000 in hand. Please T/T to the joint account of Mr Tsui and me $100,000 next Monday or Tuesday.

From now on, the accounts of the USA plastic bag company should temporarily be the responsibility of Mr Sunny Lam; if he has any problem he will look for you.

Thank you.

13/6/97."

17. This fax appeared to have been signed by D1 and the plaintiff.

18. On this fax, the judge said that he accepted D1's evidence that when he prepared the fax on 13 June 1997, he was acting on the instructions of the plaintiff. The judge commented:

"77. I also feel unable to rely heavily on the fax message dated 13 June 1997 when it was prepared by D1 on the instruction of the plaintiff. But the document itself clearly indicated that Eagle Plastic was to be an investment of the partnership in USA. If D1 found it objectionable to have the partnership investing in Eagle Plastic, he could not have agreed to write out the document in the form as he did."

19. The judge also found that the HK$1,000,000 originating from the partnership "represented by the cheque drawn by the partnership in favour of WKN on 31 May 1997" was the investment of the partnership in Eagle Plastic. He also found the sum of US$100,000 as well as the machineries were investments by the partnership in Eagle Plastic. However, for the reasons he gave in paras 63 to 72 of his judgment cited above, he held that:

"87. ... the partnership investment in Eagle Plastic did not include the sum of $1,060,000 and the factory premises at Minnehaha Grove Tract, Los Angeles USA registered in the name of Buttons and Trims, which was a separate and independent entity under the control of D1's brother.

88. Clearly it was the intention of the parties to separate the land assets and the factory business and hence the said premises were acquired in the name of Buttons and Trims instead of Eagle Plastic.

89. The $1,060,000 was remitted by the plaintiff in connection with the acquisition of the said premises, which was a separate investment from the partnership business. In the circumstances, the $1,060,000 must be treated as the plaintiff's personal investment in the said premises and he must account to the partnership for it. As for the ownership of the said premises, it is a matter to be sorted out if necessary between the plaintiff and Buttons and Trims. It is not a matter concerning this court."

The applicable law

20. Mr Fung does not shy from the fact that the appeal seeks to challenge findings of fact made by the judge. However, I do not have to dwell on the law in any great detail as Mr Fung accepts the authorities cited by Mr Clifford Smith SC (for the respondents) as to the burden that he has to discharge in such a challenge. In A Solicitor v The Law Society of Hong Kong, CACV 302/2002 (18 Feb 2004, unreported), this Court summarised the applicable principles:

"19. The principles laid down in the above authorities can be summarised as follows:

(a) If the Court of Appeal is to reverse the trial judge's decision on the facts, it "must not merely entertain doubt whether the decision below is right, but be convinced it is wrong".

(b) The Court of Appeal will certainly not disturb the judge's findings of primary fact where they are based on the credibility of the witnesses or the preference of the evidence of one witness for that of another because he enjoyed the advantages of receiving the evidence in its living state at first-hand.

(c) In order to disturb a finding of primary fact, the Court of Appeal has to be satisfied that the judge's conclusion is plainly wrong in the sense that either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence that the judge overlooked. It is not enough to show there is little evidence to support the judge's finding, or that it was "contrary to the weight of the evidence". The weight of the evidence is a matter for the trial judge. It does not matter how many witnesses say one thing, and how few say the contrary. The judge is perfectly entitled to prefer the evidence of the few to that of the many."

21. Mr Fung expressly relies on para 19(c)(2) of the cited passage and submits that the judge's findings that he challenges are contrary to documentary evidence that the judge had overlooked.

Ground 1

22. The first ground of appeal states that the judge relied on the mistaken assumption that the Premises were registered in the name of Buttons & Trims whereas in fact the plaintiff and Buttons & Trims were tenants in common. Secondly, the judge also relied on the mistaken assumption that Buttons & Trims was a separate and independent entity from the defendants. While the judge did make a mistake that the Premises were registered in the sole name of Buttons & Trims while it was registered actually in the names of the plaintiff and Buttons & Trims, his findings that the plaintiff personally invested $1,060,000 in the Premises cannot be said to be merely based on the fact that Buttons & Trims was a separate and independent entity from the defendants. What the judge said in para 87 of his judgment, cited above, was that Buttons & Trims was a separate and independent entity from the partnership. In my view, the mistaken assumption of the Premises being registered in the sole name of Buttons & Trims instead of in the names of the plaintiff and Buttons & Trims would not affect the judge's finding that the sum of $1.06 million was the plaintiff's personal investment. Ground 1 has little substance.

23. Moreover, it has to be noted that by the same token, the fact that Eagle Plastic was a wholly-owned subsidiary of American Buttons did not cause the judge to refrain from making the finding that the partnership invested in the business of Eagle Plastic.

Ground 2

24. Ground 2 alleges that the judge's finding of the said sum of $1.06 million being the personal investment of the plaintiff is contradicted by (a) the fax of 13 June 1997 since the contents of the fax clearly related to both the business and the Premises of Eagle Plastic and by (b) the judge's finding that Eagle Plastic was an extension of the partnership in the USA. It follows that the judge's finding of the $1.06 million being a personal investment of the plaintiff is asserted to be perverse.

25. Looking at the contents of the fax alone, I am not at all satisfied that this ground has been made out. While it is true that the fax mentioned the first telegraphic transfer from the partnership was in the sum of about US$130,000 (which may be said to be equivalent to HK$1,080,000 that originated from the HK$1,060,000), that does not necessarily indicate that the sum was for the partnership's investment in the Premises. The judge had given sufficient reason for his having reservations in simply relying on the contents of the fax, because he found as a fact that D1 wrote it on the instructions of the plaintiff (paras 74 and 77 of his judgment) and that D1 did not know the arrangements made between the plaintiff and D3 in Hong Kong (para 73 of his judgment). Nor am I persuaded that in the light of his finding that Eagle Plastic was an extension of the partnership in USA that his finding that the plaintiff invested this sum personally in purchasing the Premises is necessarily perverse.

Grounds 3 and 4

26. The third ground of appeal asserts that the judge erred in taking into account the timing (para 68 of his judgment) and route (para 69 of his judgment) of the transfer of the said sum of HK$1.06 million, when neither matter, properly understood in the light of the evidence, lent any weight to the conclusion that the money was not intended to be a partnership investment.

27. This ground can conveniently be dealt with together with the fourth ground. The fourth ground asserts that the judge's finding that the investment in the Premises as a separate investment from the partnership business (paras 88 and 89 of the judgment) is logically inconsistent with his finding that the HK$1 million and the sum of US$100,000 were partnership investments (para 86 of his judgment) since:

(1)	the undisputed evidence was that the acquisition of the Premises required a cash payment of at least US$295,000. In other words, at least another US$156,171.69 would have been needed in addition to the plaintiff's HK$1,060,000 (or US$138,828.31) in question;
(2)	there was no evidence of any other source of such additional funds save for the sums which the judge accepted were partnership investments; and
(3)	it follows that the acquisition must have been funded, at least in part, by partnership investments and that the Premises were, to that extent, a partnership investment as well.

28. To see the logic and consistency or otherwise of the finding of the judge that the sum of HK$1,060,000 was but a personal investment of the plaintiff in the Premises instead of a partnership investment, it is necessary to enter into an arithmetical exercise.

29. For the purchase of the Premises, a sum of US$295,000 (or US$300,000 inclusive of charges, according to the fax) was required as down payment, and the balance of the purchase money of US$290,000 would be raised by mortgage. At the material time, when the down payment was required to be made on 19 June 1997, the Joint Account had the following sums, namely, US$138,828.31, US$130,000 (derived from the partnership's cheque for HK$1 million payable to WKN, being part of the US$229,115.56), US$99,985 (treated as US$100,000 for easy calculation) remitted by D2 to the Joint Account on 18 June 1997, and an equivalent amount of US$100,000 (the remaining part of the US$229,115.56) from the plaintiff. The total amount available in the Joint Account would have been US$468,813.31. After the down payment of US$300,000 had been paid, there would still be a sum of $168,813.31 remaining, which would be quite close to the sum said in the fax to be required for the operation of Eagle Plastic. However, it is important to note that if a sum of US$160,000 were to be reserved for Eagle Plastic's working capital, without taking into account the US$138,828.31, the remaining sum of about US$169,985 would be insufficient to cover the down payment of US$300,000. It is therefore clear that if the US$138,828.31 remitted to the Joint Account on 21 April 1997 were to be taken away, there would have been insufficient funds to cover both the down payment for the Premises and the working capital of Eagle Plastic. However, this still does not resolve the issue whether the Premises were to be acquired by the plaintiff and the Chans (or Buttons & Trims) on the one hand or by the partnership on the other because there are two possible scenarios:

(a)	that all the monies totalling US$468,813.31 were for purchasing the Premises and for Eagle Plastic's working capital; but alternatively
(b)	the US$130,000 (ie the HK$1 million) was part of the US$160,000 required for Eagle Plastic's working capital and the balance of US$30,000 (ie, US$160,000 less US$130,000) was to be taken out of the loans from D2 (or the Chan family) and the plaintiff; and the balance of such loans that would remain in the sum of US$170,000 from them (ie, US$100,000 from each party less the US$30,000) together with the plaintiff's further sum of US$138,828.31 was for the down payment for the Premises.

30. Although the possible scenario (a) above is more likely, the judge did not believe the plaintiff and he found that the fax was written on the plaintiff's instructions by D1 who did not know the arrangements between the plaintiff and D3 in Hong Kong. Scenario (b) above, however, faces a logical difficulty in view of the finding of the judge that both the plaintiff and D3 were crafty businessmen who had tried their best to safeguard their own interests at the expense of the other's interest (para 72 of the judgment). The logical difficulty is that while there was a matching loan of US$100,000 from each of P and D1, there was no loan or contribution from D1 or the Chan family matching the plaintiff's remittance of US$138,828.31 (derived from the HK$1,060,000). Scenario (b) is therefore most unlikely, regardless of whether the plaintiff had originally taken away the HK$1,060,000 rightly or wrongly or even wrongfully. The plaintiff apparently used that sum for the benefit of Eagle Plastic, which demonstrates that the sum was clearly intended to be for the account of the partnership.

31. The judge's reservation about the plaintiff's evidence of why the sum of HK$1,060,000 was withdrawn in the first place in September 1996 cannot logically be linked to the fact that the money "must" be treated as the plaintiff's own personal investment in the Premises because

(i)	that would be inconsistent with the lack of a matching sum from D1 or the Chan family; and
(ii)	that there could be no logical reason for the plaintiff to have wrongfully taken away the money and treated that as his own and then invested the same for his own share in the Premises while creating the fax of 13 June 1997 to contradict such a case or such supposed fraudulent intention of his.

32. The judge's reliance on the partnership's practice in Hong Kong that the premises of the partnership were owned by D1 and the plaintiff should not be sufficient, in the circumstances of the arithmetic and the fax, to justify a finding that the Premises of Eagle Plastic were to be the personal investment of D1 (or Buttons & Trims) and the plaintiff rather than an investment of the partnership. The very powerful reasons against this finding are that there was no payment or remittance from D1 or the Chan family of a sum matching the HK$1,060,000 (US$138,828.31) and that the down payment for the Premises or at least a very substantial part of it was derived from the payments or remittances from the partnership and the equal loan of US$100,000 each from D2 and the plaintiff.

The respondents' notice

33. The respondents' notice raises factual arguments to support and justify the judge's placing limited weight on the fax dated 13 June 1997 and not accepting the contents of the fax as representing the whole truth of the matters stated in it. The main facts relied upon by the defendants is that while the fax states that there were two payments each of about US$130,000 remitted into the Joint Account, the fact was that there was only a single payment made by the plaintiff of about US$229,000 into the Joint Account on 19 June 1997. However, this is contrary to the fact that on 21 April 1997, a sum of US$138,828.31 was paid into the Joint Account and the fact that on 19 June the plaintiff transferred into the Joint Account US$229,115.56 that included the sum of HK$1 million (equalling about US$130,000), being the sum of the cheque issued by the partnership to WKN on 31 May 1997, and about US$100,000 of the plaintiff's own money that matched D2's equal remittance of US$99,985 to the Joint Account.

34. In my analysis, the matters raised in the respondents' notice are of no consequence. It is a matter that is covered by the arithmetic, the fax and the express finding of the judge that both the plaintiff and D3 were crafty businessmen who would safeguard their interests at the expense of the other's interest. The monies originating from the partnership (together with the loans from D2 and the plaintiff totalling US$200,000) had in fact been invested to purchase the Premises as well as for Eagle Plastic's working capital. This is an inescapable fact, unless it could be said that the plaintiff was generous enough to lend a substantial sum to D1 or to the Chan family at his own expense without a matching payment from D1 or the Chans. This, in view of the judge's finding that both D3 and the plaintiff were crafty businessmen, can simply not be the case.

35. Mr Smith attempts to persuade us by referring us to the evidence to show that the payments made by the plaintiff were matched by payments by the Chans. The evidence from D1 seemed to indicate that the plaintiff had paid US$130,000 (ie, from the HK$1,000,000, which was part of the US$229,115.56) and US$100,000 (ie, the rest of the US$229,115.56) of his own money, whereas D2 had paid the US$99,985 (ie, about US$100,000) and the amount of US$138,828.31 was treated as money paid by the plaintiff for the Chans' account as security for the mortgage loan on the Premises since only Buttons & Trims (and not the plaintiff) was the mortgagor. In other words, by this way or argument, while the plaintiff had contributed US$230,000, the Chans had also contributed a similar amount of US$230,000.

36. I must say that this is a valiant attempt. However, it is not supported by any of the judge's findings. Indeed, the argument is contrary to the finding of the judge that the US$130,000 that came from the HK$1,000,000 was partnership investment in Eagle Plastic. This sum cannot therefore be treated as the plaintiff's own money. Moreover, if the partnership only invested in the business of Eagle Plastic and not in the Premises, there would have been no necessity for the parties each to lend US$100,000 to the partnership, because the working capital for Eagle Plastic was only US$160,000. The total loan of US$200,000 would exceed the required working capital by US$40,000. On the other hand, looking at the investment in the Premises, the down payment required was about US$300,000. If the Chans and the plaintiff were each to contribute US$130,000, the total of US$260,000 would be US$40,000 short of the required sum. The funds available for making the down payment would be further reduced if the sum of US$138,828.31 was to be held by the Chans as security for the plaintiff's share in the liability towards repayment of the mortgage loan. I have no hesitation to reject the argument.

Conclusion

37. For the reasons given above, I have come to the view that the judge was plainly wrong in his finding that the sum of HK$1,060,000 was not an investment by the partnership in Eagle Plastic and that such sum was not an investment by the partnership in the Premises of Eagle Plastic. I consider this a proper case for this court to intervene. The erroneous finding of the judge was not a finding of a primary fact but based on reasoning which was illogical, inconsistent with his other findings that are unchallenged and against the contemporaneous documentary evidence of the fax and the various payments into and out of the Joint Account. I would therefore allow the appeal and set aside para (3), (4) and (5) of the Order made by the judge on 8 November 2001.

38. The parties have addressed us on costs. I would make an order that the plaintiff has the costs of the trial of the issue before the judge and the costs of this appeal.

Hon Cheung JA:

39. I agree.

Hon Yuen JA:

40. I agree that the appeal should be allowed. With respect to the trial judge, I consider that he could not have arrived at the decision he did in the face of the fax of 13 June 1997. This was a contemporaneous document signed by both the Plaintiff and D1, received by D3 and acted upon without demur. There was no dispute about the authenticity of this document, nor was there any allegation of duress or undue influence in respect of its creation. I shall deal with the judge's reasons for accepting only half of the contents of this document, and ignoring the other half, later in this judgment.

Heading of the fax

41. The subject-matter of the fax was specifically stated to be "in respect of Tung Shing's investment in the group Eagle Plastic plastic bag factory". In the absence of anything in the body of the fax that contradicted this heading (and there was none), the court must construe this fax objectively, and the only objective construction is that what followed set out the partnership's investment in Eagle Plastic.

Paragraphs (1) and (2)

42. Paragraphs (1) and (2) of the fax referred specifically to Tung Shing's 1st and 2nd T/Ts, totalling US$260,000.

(1)	The judge accepted the 2nd T/T funds had been deposited into the Joint Account for the benefit of Eagle Plastic, so I need say no more about it.
(2)	As for the 1st T/T sum, the bank statement dated 15 May 1997 (p.251) shows that US$138,828.31 (equivalent to HK$1,080,000) had been transferred by wire and deposited into the Joint Account on 29 April 1997. The next day, part (US$100,000) of these funds was placed in an interest-bearing time deposit, and on maturity on 17 June 1997 it was deposited into the Joint Account by credit memo (pp.251, 256, 257, 258).

43. It is difficult to see how in the face of these bank documents, the judge could reject the Plaintiff's case that the HK$1,080,000 was a partnership investment. The bank documents are consistent with and support paragraphs (1) and (2) of the fax, which as noted above, specifically referred to these funds being the partnership's investment in Eagle Plastic.

Paragraph (3)

44. Paragraph (3) referred to the need for a total sum of US$460,000 (being US$300,000 down payment for the factory and US$160,000 for working capital).

45. In my view, this makes it clear that the factory premises (or at least, the down payment for it) were part of the partnership's investment in Eagle Plastic. Why else would the factory premises be referred to under the heading of 'Tung Shing's investment in Eagle Plastic'? And why else would the purchase price of the factory premises come from the two sums T/T'd by the partnership?

46. Notwithstanding paragraph (3), the judge found that the factory premises were not a partnership investment. With respect to the judge, his mistaken assumption that the factory premises were registered only in the name of 'Buttons and Trims' may have played a part in his finding, contrary to paragraph (3) of the fax, that the factory premises were separate from the partnership investment in Eagle Plastic. At paragraphs 87-88 of his judgment, the judge noted:

"87. For the avoidance of doubt, it is also my finding that the partnership investment in Eagle Plastic did not include the sum of $1,060,000 and the factory premises at Minnehaha Grove Tract, Los Angeles, USA registered in the name of Buttons and Trims, which was a separate and independent entity under the control of D1's brother.

88. Clearly it was the intention of the parties to separate the land assets and the factory business and hence the said premises were acquired in the name of Buttons and Trims instead of Eagle Plastic".

47. Given that the judge accepted that 'Buttons and Trims' was holding its interest in the factory premises for D1 as beneficial owner (paragraph 26 Judgment), had the judge realized that the factory premises were registered in the names of both 'Buttons and Trims' and the Plaintiff as tenants in common, the likely conclusion is that the judge would have understood and accepted the fact stated in paragraph (3) of the fax - i.e. that the purchase price of the factory was an expense to be paid for from the partnership's funds, and hence concluded that the factory premises were part of the partnership's investment in Eagle Plastic.

Paragraph (4)

48. The difference between the total sum needed (as stated in paragraph (3), i.e. US$460,000) and the two sums T/T'd (as stated in paragraphs (1) and (2), i.e. US$260,000) was US$200,000, the sum referred to in paragraph (4). The Plaintiff was said to have US$100,000 cash in hand. That left a balance of US$100,000 required, and by this fax, D1 was asking his father D3 and Mr Tam, the accountant, to T/T this sum. This was subsequently done, and was entirely consistent with the Plaintiff's evidence that each partner lent US$100,000 to the partnership. This was accepted by the judge.

Proof provided by the fax

49. It is difficult to understand how out of four items referred to in the fax, the judge could have accepted as true only two - paragraph (2) referring to the 2nd T/T and paragraph (4) referring to the loan of US$100,000 - and rejected the other two - paragraph (1) referring to the 1st T/T and paragraph (3) referring to the factory, when all four paragraphs were part of one account. It was not only one account of events, but also one financial account, as the paragraph (4) request for the balance of funds was the end result of deducting the funds referred to in paragraphs (1) and (2) from the overall funding requirements referred to in paragraph (3).

50. In light of the above, it could not be clearer that the fax was contemporaneous documentary evidence proving exactly the parties' intentions and the partnership's position in respect of investments in Eagle Plastic. As such, its probity should not be questioned unless there was clear evidence to the contrary, particularly when the judge had reservations about the parties' integrity subsequently.

D1' s attempt to undermine the fax

51. As noted above, there was no dispute as to the authenticity of the document. It was not suggested that it was written under duress or undue influence. The only attempt D1 made to undermine the veracity of the contents of the fax was by saying that he had no personal knowledge of what had been agreed between his father D3 and the Plaintiff.

52. However the fax shows on its face that although it was addressed to Mr Tam the accountant, a copy was sent to D3. If the fax misrepresented the partnership's investment in Eagle Plastic, D3 would have been the first to object.

53. There was no objection from D3 at all. On the contrary, he proceeded to transfer US$100,000, being the balance required in the account set out in the fax.

D3's 1st affirmation

54. There was no explanation for D3's lack of objection in his first affirmation made on 11 March 2000. There was only a reference to hearsay evidence from D1 that, according to D1's recollection, that was how the Plaintiff instructed D1 to write the document. But that does not explain D3's lack of objection when he received the fax.

55. In the same affirmation, D3 also speculated that the Plaintiff may have instructed D1 to write the document in that way to avoid tax investigations (although that explanation is hardly credible when the fax was not an official document but an internal memorandum for the eyes of D3 and the accountant only). In any event, that was no more than an ex post facto attempt to offer an alternative explanation for the Plaintiff's and D1's actions. It did not explain D3's own inaction at the time. The sums involved were by no means small and the information in the fax was clearly set out.

D3's posthumous statement

56. In the statement adduced posthumously, it was said that D3 did not have his glasses with him when the accountant showed him the fax and he approved the transfer as he was leaving the office on Saturday morning (paragraph 16). However, as noted above, the fax was not just sent to the accountant. A copy was sent to D3 personally. There was no explanation, even in the posthumous statement, as to why he did not object when he would have seen from his own copy what the partnership was said to have invested in. This was a person who, as observed by the judge, was "prepared to say what was necessary in order to achieve what he wanted" (paragraph 62, Judgment).

Funds not directly sent

57. From the reasons for decision, it would appear that the judge was concerned with the fact that the 1st T/T sum had been withdrawn from the partnership in September 1996 and had gone through a circuitous route before ending up (in the form of US$138,828) in the Joint Account in April 1997. Further, the voucher for the withdrawal, signed for by the Plaintiff, had stated that it was for raw materials.

58. The sum of HK$1,060,000 was indeed withdrawn from the partnership in that way in September 1996. The judge did not believe the Plaintiff's version that he was told by D3 to do what he did. The judge was entitled to disbelieve the Plaintiff. The sum of HK$1,060,000 may well have been withdrawn by the Plaintiff for a different purpose in September 1996, but what was important for the issue before the judge was that that sum, together with accrued interest of $20,000, was T/T'd to the Joint Account in April 1997, just before the start-up of Eagle Plastic and was acknowledged in the fax to have been Tung Shing's investment in Eagle Plastic. By the fact of D1's writing of the fax and D3's lack of objection to and indeed acting on it, they must at least have acquiesced in the funds from the Plaintiff being treated as the partnership's for investment in Eagle Plastic.

Conclusion

59. Accordingly, I would also allow the appeal and agree with the Vice-President's proposed order as to costs.