HCA 3425/2001
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 3425 OF 2001
__________
BETWEEN
YEUNG WEI SUNG
Plaintiff
and
NG CHUNG LING, DAVID
1st Defendant
WING SANG SHIPPING CO. S.A.
2nd Defendant
__________
Before: Deputy High Court Judge To in Court
Dates of Hearing: 21-23 February 2006
Date of Judgment: 7 April 2006
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J U D G M E N T
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Introduction
1. This is an action brought by the Plaintiff for breach of trust in relation to all the shares of and in Wing Sang Shipping Co SA (the “2nd Defendant), a Panamanian company, held by the 1st Defendant. The principal asset of the 2nd Defendant had been a fishing vessel known as Wing Sang 68 , which was re-registered as Golden Taurus and transferred to Tosei Marine Company SA (“Tosei Marine”) in mid 2004 after this litigation had begun.
2. In a nutshell, the Plaintiff’s case is that he paid for the purchase price of Wing Sang 68 . He gave the 1st Defendant two payments in the amount of $300,000 on 19 February 1994 and $1,550,000 on 7 March 1994 for paying the purchase price of that vessel. The 1st Defendant did not dispute his receipt of the two payments but said that those payments were for his outstanding salaries and bonuses owed to him by the Plaintiff. Thus, the reason for those two payments is the sole material issue in dispute between the parties. If I am satisfied that the payments were made for the purpose of purchasing Wing Sang 68 by the Plaintiff, the Plaintiff is entitled to judgment.
The Plaintiff and his group of companies
3. The Plaintiff has been engaged in the fishing industry in Hong Kong for over forty years. He began as a small-scale live fish wholesaler. He carried on his business through Wing Sang Sea Products Company Limited (“Wing Sang Sea Products”), a company own by him and his wife. As his business prospered, he acquired his own fleet for the purpose of transporting live fish from overseas sources to Hong Kong. His fleet includes Nang Yang 1 , Wing Sang ,Wing Sang 3 , Wing Sang 38 and Wing Sang 68 , the ownership of which is now in dispute.
4. At some stage, the Plaintiff was advised to keep the ownership of his vessels separate from his business so that liability arising from the operation of his vessels would not affect his business. Hence, he set up two companies, namely: Cheer Best Investment Limited (“Cheer Best”) and Wing Sang Fisheries Co S.A. (“Wing Sang Fisheries”) for the purpose of holding his vessels. Cheer Best is the registered owner of Wing Sang and Wing Sang 3 . Wing Sang Fisheries is the registered owner of Wing Sang 38 . Nang Yang 1 is registered under the personal name of the Plaintiff. Wing Sang 68 is registered under the name of the 2nd Defendant, which has now been re-registered as Golden Taurus under the name of Tosei Marine Company SA.
5. Cheer Best is a Hong Kong company in which the Plaintiff and his wife respectively held 50% and 20% of its shares while the remaining 30% of the shares were held by the 1st Defendant on behalf of the Plaintiff. The 1st Defendant was allocated these shares for the purpose of giving him a status in the company so as to facilitate his handling of Wing Sang and Wing Sang 3 and the recruitment and management of their crew.
6. Wing Sang Fisheries is a Honduras company set up initially for the purpose of holding the Plaintiff’s live fish vessels. It was incorporated by the Plaintiff with the assistance of the 1st Defendant. The Plaintiff was advised by the 1st Defendant that it was necessary to have three shareholders to form a company. Hence, the company was formed with the Plaintiff holding 50% of its shares, while the 1st Defendant and a Mr Ang each holds 25% on behalf of the Plaintiff. Mr Ang is a Singaporean who used to purchase fish in Indonesia for the Plaintiff. Incidentally, the registration documents of Wing Sang 38 were handled by a Singaporean company.
7. In addition, the Plaintiff also set up two other companies for the purpose of trading in live fish. In 1988, the Plaintiff started purchasing live fish from Indonesia for wholesale in Hong Kong. That line of business was conducted through Fong In Trading Limited (“Fong In”), which was essentially the Plaintiff’s partnership business with a Mr Wong. The Plaintiff, the 1st Defendant and Mr Wong respectively hold 60%, 5% and 35% of the shares in Fong In. The 1st Defendant was the Plaintiff’s agent and representative in Fong In. He holds 5% of its shares on trust for the Plaintiff in order to facilitate him in acting as the Plaintiff’s representative in the management of the company.
8. In 1995, the Plaintiff set up Sanga Development Limited (“Sanga”) with the 1st Defendant and their mutual friend, Mr Edwin Yeung, to develop live fish business in Maldives. The Plaintiff holds 40% of the shares in Sanga while Mr Yeung and the 1st Defendant each holds 30%. Mr Yeung’s wife is an accountant of the Plaintiff’s companies.
The 1st Defendant
9. According to the 1st Defendant, he started working for the Plaintiff in one of his companies as a general manager since early 1980. He produced a letter dated 15 June 1995 signed by the Plaintiff on the letterhead of Wing Sang Fisheries certifying that he has been employed by Wing Sang Fisheries since April 1980 as its general manager and his annual income including bonus was not less than $360,000. However, he admitted under cross-examination that Wing Sang Fisheries had not yet been incorporated in April 1980 and that his annual income was not $360,000 from the beginning of his employment with the Plaintiff or Wing Sang Fisheries. Thus, instead of supporting his case, the falsities in this letter damaged his credibility.
10. The Plaintiff denied ever employing the 1st Defendant as his employee but admitted that the 1st Defendant had worked as his agent from about 1983 until 1992 when the 1st Defendant became his business partner. He admitted his signature on the letter of 15 June 1995 produced by the 1st Defendant. He said that the content of the letter was untrue and that it was prepared by the 1st Defendant and then signed by him for the purpose of facilitating the 1st Defendant in his application for Visa card.
11. According to the Plaintiff, his relationship with the 1st Defendant arose under the following circumstances. In early 1980s, a Mr Chan Tai Sun of Sun Wah Cosmetic Company (“Sun Wah”) helped him to develop his fish fry business with Japan. Mr Chan assigned a staff, Mr Lai who was conversant in English and Japanese, to assist the Plaintiff in entertaining and communicating with his Japanese buyers. The Plaintiff paid Sun Wah a commission as reward. When Mr Lai left the employ of Sun Wah, Mr Chan introduced the 1st Defendant to assist the Plaintiff in place of Mr Lai. The Plaintiff continued to pay commission to Sun Wah. Since 1988, at the request of Mr Chan, the Plaintiff paid commission to the 1st Defendant directly. According to Mrs Yeung, the Plaintiff’s accountant, the 1st Defendant had never been treated as a staff or employee of the Plaintiff and had never been on the pay roll of any of the Plaintiff’s group of companies. Much of the above background is not in serious dispute, except that the 1st Defendant insisted that he was an employee of the Plaintiff and that he had never been paid his salary.
12. In early 1991, when the Plaintiff’s staff who used to handle matters on port clearance of the Plaintiff’s fleet resigned, the 1st Defendant assumed those work and assisted the Plaintiff in handling matters on documentation of vessels, hiring of crew etc in addition to assisting the Plaintiff in his Japanese line of business. In 1992, the Plaintiff ceased his fish fry business with Japan due to keen competition and ceased paying commission to the 1st Defendant. On 2 June 1993, the Plaintiff paid the 1st Defendant a sum of $500,000 as a reward for his services. The 1st Defendant continued to provide his services to the Plaintiff on that basis until 1995, when the nature of their relationship changed to one of business partnership with the formation of Sanga.
13. For reasons as will be explained in paragraphs 24 to 27, I accept the Plaintiff’s evidence that the 1st Defendant had never been his employee.
The 2nd Defendant
14. The 2nd Defendant is a Panamanian company incorporated by the 1st Defendant. Its authorised capital is US$10,000 divided into ten common bearer shares. The 1st Defendant is the president of the company. The Plaintiff is its treasurer and Mr Ang is its secretary. The 2nd Defendant was the owner of Wing Sang 68 .
The Plaintiff’s fleet
15. The Plaintiff saw the need to purchase his own live fish vessel in 1986 for transporting live fish from Singapore to Hong Kong or to Japan. In early 1986, he bought his first wooden vessel, named Nang Yang 1 which was registered in the Plaintiff’s personal name.
16. In mid 1986, the Plaintiff and the 1st Defendant went to Japan together and purchased a second vessel from his Japanese customer Tomiei Fishery Company Limited (“Tomiei”) and named it Wing Sang 1 . The vessel was registered in Honduras under the name of Wing Sang Sea Products. The 1st Defendant acted as the Plaintiff’s interpreter in negotiating for the purchase of the vessel and handled the documentation of the vessel and the hiring of its crew. It was resold later that year to China.
17. Soon after re-selling Wing Sang 1 , the Plaintiff bought his third vessel from Tomiei in early 1987 and re-named it as Wing Sang . That vessel was registered in Honduras under the name of Wing Sang Sea Products. Again, the 1st Defendant assisted the Plaintiff in the purchase and documentation of the vessel and in the hiring of its crew. In order to keep the ownership of his vessels separate from his business, the ownership of Wing Sang was transferred to Cheer Best in early 1989.
18. In 1991, Cheer Best re-purchased Wing Sang 1 from China and re-named as Wing Sang 3 . The 1st Defendant was in charge of the documentation of the purchase of the vessel and hiring of its crew.
19. In early 1992, the Plaintiff bought his fourth live fish vessel from Japan through Nanayo Company Limited (“Nanayo”) and re-named it as Wing Sang 38 . The 1st Defendant acted as his interpreter and negotiated in the purchase. He was also responsible for the documentation and the hiring of the crew for Wing Sang 38 .
The parties’ case on acquisition of Taka-Maru 17
20. It is common ground that in late 1993, the 1st Defendant went to Japan with a view to picking another live fish vessel for the Plaintiff. He identified a Japanese vessel named Taka-Maru 17 and agreed to purchase it for 23,000,000 Yen. He appointed Nanayo as agent for the sale and purchase of the vessel and paid a deposit of 2,300,000 Yen (equivalent to HK$159,425) on or about 10 January 1994. On or about 24 January 1994, Wing Sang Sea Products made a repeated remittance of 3,173,876 Yen (equivalent to HK$220,500) for purchase of spare parts for its fish vessels by mistake. It was then agreed as between Nanayo and the 1st Defendant that the said sum of 3,173,876 Yen overpaid be applied towards payment of the purchase price for Taka-Maru 17 . On 10 March 1994, the 1st Defendant paid Nanayo of 21,000,000 Yen, being the balance of the purchase price. He made a further payment of about 2,000,000 Yen to defray other expenses on or about 10 March 1994. He caused Taka-Maru 17 to be registered in Honduras under the new name of Wing Sang 68 under the ownership of the 2nd Defendant.
21. The Plaintiff’s case on the purchase of Wing Sang 68 is as follows. He ceased his fish fry business with Japan in 1992 but saw room for expansion in the live fish business. He intended to buy his fifth live fish vessel. With the cessation of his fish fry business with Japan, the 1st Defendant ceased earning commission from him after his last payment of $500,000 in June 1993. At that time, the 1st Defendant was still assisting him with the documentation in connection with his four vessels and the hiring of their crew, while Mr Ang was assisting him in exploring the Indonesian market. As an incentive to the 1st Defendant and Mr Ang, the Plaintiff offered the 1st Defendant and Mr Ang a business proposal. Under that proposal, the 1st Defendant was to look for a second hand live fish vessel for the Plaintiff, the Plaintiff would purchase the vessel while the 1st Defendant would handle all relevant documentation and hiring of its crew, the vessel would be hired out and the hiring charges net of all expenses would be shared among the Plaintiff, the 1st Defendant and Mr Ang at the rate of 40%, 40% and 20% respectively. The 1st Defendant disputed about the purpose of the payment of the $500,000, but has no serious dispute about the Plaintiff’s business proposal. His case is that he did not act according to that proposal because it was he who purchased and paid for Wing Sang 68 and was solely entitled to its hiring charges.
22. According to the Plaintiff, towards the end of the year, the 1st Defendant told the Plaintiff that he had identified a Japanese vessel Taka-Maru 17 and showed him pictures of the vessel. The Plaintiff authorised the 1st Defendant to purchase the vessel for him. At the time, it was their mutual understanding that the 1st Defendant would set up a company to hold that vessel. The 1st Defendant’s case is that when he reported to the Plaintiff that he had already orally agreed to purchase Taka-Maru 17 , the Plaintiff was displeased because he had made the agreement without first consulting the Plaintiff and that the vessel was expensive to maintain as it had a steel hull. Though the Plaintiff did not expressly confirm whether he should proceed with the purchase, the Plaintiff criticised him for having made a bad choice. The 1st Defendant tried to discuss the purchase with the Plaintiff on many occasions with a view to seek his confirmation of the purchase, but the Plaintiff only kept on criticising the disadvantages of steel-hull vessels and did not confirm whether to proceed with the purchase. The 1st Defendant hence thought that the Plaintiff was not interested in purchasing Taka-Maru 17 . Therefore the 1st Defendant purchased Taka-Maru 17 for himself and informed the Plaintiff of his decision. As the Plaintiff had failed to pay him his salary or commission, he chased the Plaintiff for payment. After several reminders and discussions, the Plaintiff paid him $300,000 on 19 February 1994 and $1,550,000 on 7 March 1994. As for the double payment of 3,173,876 Yen by Wing Sang Sea Products, the 1st Defendant said that the Plaintiff proposed to apply the overpayment towards payment of the purchase price of Taka-Maru 17 and to set off that payment against the salary and commission due and owing to the 1st Defendant.
23. Before making my finding of fact relating to the acquisition of Taka-Maru 17 and the ownership of Wing Sang 68 , I shall first turn to analyse a number of collateral issues. My finding on these issues will cast light on the ownership of Wing Sang 68 .
Reason for the payment of the three sums of money to the 1st Defendant
24. It is the 1st Defendant’s pleaded case and evidence that since early 1980, he started working for Wing Sang Sea Products as its general manager for a monthly salary of $30,000 plus bonus equivalent to 30% of the net profit earned in the resale of each shipment of live marine fish handled by him for the Plaintiff. He worked abroad most of the time and the Plaintiff failed to make any payments to him either as his salaries or bonus despite his repeated requests, save for the following five sums:
Date
Cheque No
Amount
2 June 1993
412436
$ 500,000
19 February 1994
489358
$ 300,000
7 March 1994
395945
$1,550,000
20 April 1999
336301
$ 300,000
22 July 1999
336570
$ 300,000
_________________
$2,950,000
The Plaintiff never accounted to him the net profits earned from his shipments.
25. The Plaintiff’s case is that since 1980 Mr Chan Tai Sun of Sun Wah instructed his staff Mr Lai to assist the Plaintiff with his Japanese business and that the 1st Defendant replaced Mr Lai since 1983. According to the Plaintiff, until 1988, he had been paying commission for Mr Lai’s and the 1st Defendant’s services to Sun Wah and since 1988 he paid the commission to the 1st Defendant directly. As the Plaintiff ceased his fish fry business with Japan in 1992, the 1st Defendant ceased earning commission from him. However, the 1st Defendant continued to manage the Plaintiff’s vessels and handled port clearance matters in place of the Plaintiff’s staff who had resigned. Hence, as a reward for his services, the Plaintiff paid the 1st Defendant $500,000 on 2 June 1993. As for the two payments of $300,000 in April and July 1999, the Plaintiff said these were hire charges for Wing Sang 68 .
26. I find the Plaintiff’s evidence credible but the 1st Defendant’s evidence inherently incredible. The Plaintiff gave a credible account of the change of the nature of his relationship with the 1st Defendant. However, the effect of the 1st Defendant’s evidence is that for thirteen years up to 2 June 1993, the Plaintiff never paid him anything for his services, despite the promise of a monthly salary of $30,000 plus bonus. Yet, according to the 1st Defendant, without being paid anything, he spent most of his thirteen years abroad for the Plaintiff’s business. The 1st Defendant’s explanation was that he was able to make his living by earning commission through introducing sales of fish farming equipments in Singapore and Indonesia. I do not regard that as credible in the totality of the evidence.
27. Then according to the 1st Defendant, about eight months after the first payment of $500,000, the Plaintiff paid him $300,000 on 19 February 1994 and $1,550,000 on 7 March 1994 as arrears of salaries and bonuses. The Plaintiff’s case is that these sums were paid to the 1st Defendant for paying the balance of the purchase price of Taka-Maru 17 and other incidental expenses. Again, I find the 1st Defendant’s account incredible when tested against the entirety of his case. On the 1st Defendant’s case, it is inexplicable why those amounts were paid to him. Those two payments made over a period of eight months were grossly out of proportion with the $500,000 paid over a period of thirteen years. But incidentally, those two payments tied in neatly with the amount and the timing of the purchase of Taka-Maru 17 . The two sums together the remittance of 3,173,876 Yen made by Wing Sang Sea Products on 22 January 1994 were equivalent to the total of the purchase price and all incidental expenses. In particular, the sum of $1,550,000 paid to the 1st Defendant on 7 March 1994 was equivalent to the balance of the purchase price in the amount of 21,000,000 Yen paid to Nanayo by the 1st Defendant on 10 March 1994. This lends weight to the Plaintiff’s evidence that upon being informed by the 1st Defendant of Taka-Maru 17 , the Plaintiff agreed to the purchase and promptly paid the 1st Defendant a total of $1,850,000 for payment of the purchase price and incidental expenses for sailing the vessel to Hong Kong. The prompt payment also negates the 1st Defendant’s evidence that the Plaintiff was indecisive about the purchase. I have no difficulties in accepting the Plaintiff’s evidence about the purpose for those payments and rejecting the 1st Defendant’s.
Evidence from Nanayo
28. The Plaintiff was able to call Ms Yoshimura Yukari to give evidence in support of his case. She is the current president of Nanayo. Her father, Mr Abe Shichiro, was the former president of Nanayo who handled the Plaintiff’s purchase of Kyowa-Maru and Eisei Maru No 2 in 1987 and 1992 respectively and also the purchase of Taka-Maru 17 by the 1st Defendant. Ms Yoshimura Yukari assisted her father in all the three purchases.
29. According to Ms Yoshimura Yukari, she and her father had known the Plaintiff for about fifteen years. They first met the Plaintiff in 1987 when they sold him Kyowa-Maru . In 1992, they sold Eisei Maru No 2 to the Plaintiff. On both occasions, the Plaintiff was accompanied by the 1st Defendant who was introduced as the Plaintiff’s employee and interpreter. She recalled that the 1st Defendant went to the office of Nanayo alone in December 1993 and requested Nanayo to prepare the documentation for the purchase of Taka-Maru 17. Her father asked the 1st Defendant where did the money for the purchase come from. The 1st Defendant said it was from the Plaintiff. When asked why the Plaintiff did not come with him for the purchase on that occasion, the 1st Defendant replied that the Plaintiff was sick. The 1st Defendant never said that he purchased Taka-Maru 17 for himself. Nanayo subsequently concluded the sale and purchase with the 2nd Defendant as the buyer.
30. It was Ms Yoshimura Yukari’s as well as her father’s belief that the purchaser was the Plaintiff. They sent all documents and invoices to Wing Sang Sea Products. The 1st Defendant did nothing to correct their belief and did nothing to inform them that he was the purchaser and not Wing Sang Sea Products or that the correspondences relating to Taka-Maru 17 should be sent to him personally or to the 2nd Defendant. These suggest that at the time of the purchase, the 1st Defendant was acting as agent of the Plaintiff and not on his own account.
31. When Nanayo discovered the double payment for spare parts by the Plaintiff, the 1st Defendant reached agreement with Nanayo to apply the second remittance by the Plaintiff towards payment of the purchase price of the vessel. That was also consistent with the purchase being made on behalf of the Plaintiff.
32. Ms Chyvette Ip, counsel for the Plaintiff, referred to the documents produced by Nanayo which showed that there was a mark up on the purchase price of Taka-Maru 17 and a payment of commission to an unknown party. Be that as it may, I am quite unable to draw any inference on the mark up or commission. The conclusion I draw from the evidence of Ms Yoshimura Yukari is that her evidence is more consistent with the Plaintiff’s case than with the 1st Defendant’s.
The charter of Wing Sang 68 and the operation of Sanga
33. Since its acquisition, the operationof Wing Sang 68 was in the hands of the 1st Defendant. However, it was the Plaintiff who decided all matters relating to its charter. Until the current dispute arose, except for a few voyages, Wing Sang 68 was chartered to Wing Sang Sea Products or the Plaintiff’s related companies.
34. From 5 May to 30 May 1994, Wing Sang 68 was chartered to Suntat Marine Products Co which was controlled by Mr Edwin Yeung, a common friend of the Plaintiff and the 1st Defendant and business associate of the Plaintiff in Sanga.
35. From June 1994 to March 1995, Wing Sang 68 was chartered to Wing Sang Sea Products or in a trial joint venture between the Plaintiff, the 1st Defendant and Mr Edwin Yeung for trying the market in Maldives. That trial joint venture led to the incorporation of Sanga. Thereafter until 1999, Wing Sang 68 was chartered to Sanga.
36. The 2nd Defendant did not have a bank account. According to the Plaintiff, all hire charges for Wing Sang 68 were received by the 1st Defendant on behalf of the 2nd Defendant and the operational expenses, maintenance costs and wages for its crew were paid by the 1st Defendant from the hire charges received. Since 1995, the Plaintiff had been demanding the 1st Defendant for an inspection of the account of the 2nd Defendant. But the 1st Defendant simply delayed and ignored him. At the end of 1997, the Plaintiff demanded to see the income and expenditure report of the 2nd Defendant and an account of his share of the hire charges. The 1st Defendant delayed and ignored him. Since March 1999, the 1st Defendant even claimed that Wing Sang 68 belonged to him and exclusively chartered or used it as his own.
37. The 1st Defendant’s case is that Wing Sang 68 was his and he was owed $1.9 million by the Plaintiff in respect of hire charges for the charter voyages to and from Maldives between August 1994 and February 1995. He also made similar allegation against the Plaintiff in respect of the Plaintiff’s handling of the accounts of Sanga. He said that his health deteriorated and he had two surgical operations in February and June 1997 and was unable to attend to the business of Sanga until 1998. He said that the Plaintiff and Mr Edwin Yeung had control of Sanga, while the Plaintiff and his daughter had control of the accounts of Sanga. The Plaintiff told him that Sanga had incurred loss of over $4 million but refused to let him have access to the accounts. He said Sanga was in arrears with payment of hire charges in the amount of $4.59 million and hence he terminated the charter arrangement with Sanga. On 29 June 2001, the 1st Defendant commenced action against Sanga in HCA No 2959 of 2001 to recover the outstanding hire charges. It was only after that that the Plaintiff commenced the present action against him claiming to be the beneficial owner of the 2nd Defendant and of Wing Sang 68 . HCA No 2959 of 2001 has now become dormant.
38. It is not possible to resolve all those disputes in the present proceedings. Those disputes unnecessary clouded the issues in this action. It is not necessary for me to make any finding in respect of those disputes, except to mention one point. The 1st Defendant relied on his receipt of hire charges as evidence of his ownership of Wing Sang 68 . However, that is not conclusive as the receipt is consistent with the Plaintiff’s case that there was an agreement for the 1st Defendant to manage Wing Sang 68 and the Plaintiff’s other vessels in exchange for a share in the hire charges. The receipt can also be explained by the fact that the 2nd Defendant did not have a bank account. The agreement is also consistent with the tenor of the 1st Defendant’s case that the Plaintiff provided the capital while he provided the labour. According to the Plaintiff case, the Plaintiff provided the funds for the purchase of Taka-Maru 17 , while the Plaintiff managed the vessel and Mr Ang assisted in sourcing live fish from Indonesia.
The evidence of Mr Ang
39. Mr Ang gave evidence in support of the 1st Defendant. He said he worked as purchaser for the Plaintiff to procure live marine fish from Indonesia. He was offered a monthly salary of US$2,000, a daily allowance of US$200 for his trips to Indonesia and a commission equivalent to 30% of the net profit earned from each shipment of live marine fish to be shared equally between him and the 1st Defendant. He said he was paid his salary and allowance but not his commission. Though he was unhappy, he never complained as the Plaintiff was a very sophisticated businessman and treated him like a business partner rather than an employee and won his trust in the Plaintiff. He said that the Plaintiff even gave him shares in Wing Sang Fisheries but never accounted to him anything from Wing Sang Fisheries. He said that in early 1994 the 1st Defendant told him that he was going to purchase a live fish vessel for his own business and asked if he was willing to act as a director of his company, namely the 2nd Defendant and he agreed. He also said that the Plaintiff had never told him that the Plaintiff or himself had any share in the equity of the 2nd Defendant or had any interest in Wing Sang 68 . He ceased working for the Plaintiff since September 2000.
40. Mr Ang seemed to harbour some discontent against the Plaintiff. However, he impressed me as a credible witness. I accept his evidence. Mr Ang admitted that he was paid his salary and allowance but was aggrieved that the Plaintiff did not pay him the commission he was promised. This evidence has an adverse impact on the Plaintiff’s credibility as it is tempting to jump to the conclusion that since the Plaintiff failed to honour his promise of commission to Mr Ang, it is likely that he likewise failed to pay salary or commission to the 1st Defendant. However, when the evidence is understood in their proper context, I still find the Plaintiff’s evidence as agent the 1st Defendant credible. The Plaintiff had all along paid commission to Sun Wah until 1988 when he paid the commission to the 1st Defendant. There is also incontrovertible evidence that he paid the 1st Defendant $500,000 on 2 June 1993. Furthermore, the 1st Defendant’s evidence that for thirteen years he had not been paid anything is inherently incredible.
41. As for Mr Ang’s complaint about the Plaintiff’s failure to account to him the profits of Wing Sang Fisheries, I think it was Mr Ang’s happy misunderstanding. Wing Sang Fisheries was set up for the purpose of holding Wing Sang 38 . Mr Ang contributed nothing to the purchase price of the vessel. He ought to have understood that he was only a nominal shareholder and his shares were held in trust for the Plaintiff just as in the case of his agreeing to be a shareholder of the 2nd Defendant at the request of the 1st Defendant. Mr Ang was not aware of the proposed fee sharing arrangement in respect of the hiring charges of Wing Sang 68 . If I am to accept the Plaintiff’s evidence, this can be explained on the basis that the 1st Defendant had kept Mr Ang in the dark. In such a scenario, the 1st Defendant must have lied to Mr Ang that the 1st Defendant was the owner of Wing Sang 68 and he would not have related the fee sharing arrangement to Mr Ang.
42. In conclusion, I do not consider Mr Ang’s evidence had any adverse impact on the credibility of the Plaintiff.
Ownership of Wing Sang 68
43. I have rejected the evidence of the 1st Defendant and accepted the evidence of the Plaintiff. It is common ground that the Plaintiff instructed the 1st Defendant to look for a live fish vessel for him in Japan. The 1st Defendant identified Taka-Maru 17 and paid a deposit. He reported his finding to the Plaintiff. The Plaintiff agreed to the purchase and gave the 1st Defendant two sums of $300,000 and $1,550,000. Those two sums together with the remittance of 3,177,052 Yen to Nanayo made up the total of the deposit paid by the 1st Defendant, the balance of the purchase price and incidental expenses for sailing the vessel to Hong Kong. The payment of the sum of $1,550,000 particularly tied in well with the time of payment of the balance of the purchase price for the vessel. In instructing Nanayo to apply the 3,177,052 Yen of overpayment towards payment of the purchase price, the 1st Defendant was using the funds of the Plaintiff in paying for the purchase. It could readily be inferred that he reimbursed himself of the deposit he paid earlier from the $300,000 given to him by the Plaintiff on 19 February 1994. I have no difficulties to conclude that Taka-Maru 17 was purchased with the funds of the Plaintiff pursuant to the instruction of the Plaintiff. I also find on an objective view that the intention of the Plaintiff and the 1st Defendant was that the Plaintiff or his company (i.e. a company over which the Plaintiff has control) to be designated by him shall acquire ownership of Taka-Maru 17 and that the purchase shall be effected by the 1st Defendant as agent for and on behalf of the Plaintiff.
44. The above conclusion is further supported by the following facts. Firstly, the 1st Defendant represented to Nanayo that the Plaintiff was the purchaser of Taka-Maru 17 . As a result, Wing Sang Sea Product was named as the purchaser and all correspondences from Nanayo were addressed to Wing Sang Sea Product.
45. Secondly, the 1st Defendant set up a Panamanian company for the purpose of holding Wing Sang 68 . This was pursuant to the Plaintiff’s instruction, though the 1st Defendant departed from the instruction that 40% of the shares in the company should be issued to the Plaintiff and 30% of the shares should be issued to the 1st Defendant and Mr Ang. It is nevertheless consistent with the Plaintiff’s business proposal to the 1st Defendant. It is also significant that the 2nd Defendant adopted “Wing Sang” as part of its name.
46. Thirdly and most importantly, the 1st Defendant re-named the vessel as Wing Sang 68 . This was fully pursuant to the Plaintiff’s instruction. The fact that both the 2nd Defendant and the vessel adopted the genus name of “Wing Sang” as part of their names suggests that Wing Sang 68 was acquired by the Plaintiff. The 1st Defendant explained that he adopted those names in order to take advantage of the Plaintiff’s goodwill. The 1st Defendant was not carrying on business as a sea product wholesaler, the use of those names would not enhance his business as a live fish carrier. On the other hand, the Plaintiff with his fleet under the genus name of “Wing Sang” was not in the business as a live fish carrier and had no good will as such. There was also no need to take advantage of the Plaintiff’s goodwill as a carrier as the vessel was to be chartered to the Plaintiff’s group of business. Having found that Wing Sang 68 was acquired with the funds of the Plaintiff, I have no difficulties in drawing from the 1st Defendant’s deliberate abstention from issuing the bearer shares of the 2nd Defendant to the Plaintiff and Mr Ang pursuant to the Plaintiff’s instruction the inference that the adoption of the genus names of “Wing Sang” as part of the names of the vessel and of the 2nd Defendant was made for the purpose of covering up appropriation of the vessel by the 1st Defendant.
47. It is trite law that when real or personal property is conveyed to a purchaser, a resulting trust will be presumed in favour of the person who is proved to have paid the purchase money in the character of purchaser as opposed to that of a donor or lender. This presumption may be rebutted by evidence of a contrary intention or by other presumption, such as presumption of advancement, for example, by one spouse in favour of another or by a parent in favour of his children or by a person in the position of a loco parentis in favour of a person to whom he owes fiduciary duty. The learned authors of Underhill and Hayton Law Relating to Trusts and Trustees , 16th ed at 349 summarised the law as follows:
“(1) When real or personal property is conveyed to a purchaser jointly with others, or to one or more persons other than the purchaser, a resulting trust will be presumed in favour of the person who is proved (by parol or other evidence) to have paid the purchase-money in the character of purchaser (as opposed to that of donor or lender).
(2) This presumption may easily be rebutted:
(a) by parol or other evidence that the purchaser intended to benefit the others; or
(b) by the fact that the person in whom the property was vested was the lawful wife or fiancée or child of the purchaser or was some person towards whom he stood in loco parentis, or, it seems nowadays, was the lawful husband or fiancée or child or some other person to whom a female purchaser stood in loco parentis, or was trustee of a settlement by which he previously settled property.”
48. Applying the above principle of law to the facts of the present case, it is clear that Taka-Maru 17 was conveyed to the 2nd Defendant who was not the purchaser and who provided no consideration for the purchase. The presumption is that the 2nd Defendant held Wing Sang 68 under a resulting trust in favour of the Plaintiff. The 1st and 2nd Defendant offered no credible evidence of any contrary intention. In fact, the intention as I have found was that the Plaintiff or his company to be designated by him should be the absolute owner of Wing Sang 68 . The 1st and 2nd Defendant offered no evidence or argument in support of the presumption of advancement. In the circumstances, I find that the 2nd Defendant held Wing Sang 68 under a resulting trust in favour of the Plaintiff. Accordingly, the Plaintiff is entitled to a declaration that Wing Sang 68 was beneficially owned by him.
Conclusion
49. Accepting the Plaintiff’s evidence, I have no doubt that the 2nd Defendant was formed by the 1st Defendant as agent of the Plaintiff for the purpose of holding Wing Sang 68 for the Plaintiff. Hence, the Plaintiff is entitled to a declaration that the 1st Defendant has held and holds all the shares of and in the 2nd Defendant on trust for the Plaintiff and an order that the 1st Defendant shall transfer or cause to be transferred to the Plaintiff any and all of the shares of the 2nd Defendant held by the 1st Defendant and to deliver up to the Plaintiff all the documents, chops, seals, books of account, bank accounts, properties or other articles belonging to the 2nd Defendant to the Plaintiff.
50. For reasons as explained in paragraph 48, the Plaintiff is entitled to a further declaration that Wing Sang 68 was beneficially owned by the Plaintiff upon a resulting trust and the 1st and 2nd Defendants do deliver up control and possession of the vessel, now registered as Golden Taurus to the Plaintiff.
51. The Plaintiff is also entitled to an order for an account of all the dealings by the 1st and 2nd Defendant or by any person on their behalf or by his order with the shares of and in the 2nd Defendant and in Wing Sang 68 and an order that the 1st Defendant do pay the Plaintiff the amount found due upon taking such account.
52. According to the 1st Defendant, none of the bearer shares had been issued. Being the president of the 2nd Defendant, the 1st Defendant is the mind and executive arm of the 2nd Defendant. Alternatively, if he is the holder of all the issued bearer shares of the 2nd Defendant, he represents the 2nd Defendant. In all the circumstances, the 1st Defendant may be compelled to cause Wing Sang 68 to be conveyed and delivered to the Plaintiff or a person or company designated by the Plaintiff and/or the 1st Defendant may be compelled to transfer all the bearer shares of the 2nd Defendant to the Plaintiff. However, the situation has been complicated by subsequent events which emerged at trial. According to the 1st Defendant he sold Wing Sang 68 to Tosei Marine, which is a company held by himself, his wife and Mr Ang for $100,000. Tosei Marine has not been made a party to these proceedings. There was no opportunity for the Plaintiff to verify the 1st Defendant’s allegation. In the circumstances, I grant the Plaintiff liberty to apply for further relief within three months.
53. Accordingly, I enter judgment for the Plaintiff in the above terms. I also make a costs order nisi that the 1st Defendant shall pay the Plaintiff’s costs and that there be no order as to costs as between the Plaintiff and the 2nd Defendant.
( Anthony To )
Ms Chyvette Ip, instructed by Messrs Ng & Partners, for the Plaintiff
1st Defendant, in person
2nd Defendant, in person (absent)