CHAN HIN v. CHEN SEE HUNG CHRISTINE, THE EXECUTRIX OF THE ESTATE OF CHEN BAI DYI, DECEASED AND ANOTHER

CACV 212/2017

[2026] HKCA 1295

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 212 OF 2017

(ON APPEAL FROM HCA NO 680 OF 2014)

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

1.  The dispute between the parties in this case is whether a flat in a building in Hart Avenue, Kowloon (“Property”), which was acquired in 1991 in the names of the plaintiff and the 1^st defendant as tenants in common in equal shares, is beneficially owned entirely by the plaintiff as she claims. In a judgment dated 25 July 2017 (“Judgment”), the trial judge, Anthony Chan J, dismissed the plaintiff’s action and entered judgment in the sum of $342,512.20 against the plaintiff on the defendants’ counterclaim for an account for the rental income on the Property received by her. The plaintiff now appeals to this court against the dismissal of her action and the judgment on the counterclaim.

The facts

2.  The plaintiff is the 1^st defendant’s niece.  The plaintiff’s father, Mr Chan Tsan Man (“TM”), is the younger brother of the 1^st defendant.  The 2^nd defendant is the 1^st defendant’s daughter.

3.  The 1^st defendant, who was born in Mainland China, came to settle in Hong Kong in 1948 and worked as an actress.  She maintained a close relationship with her family in the Mainland.  During the years from 1968 to 1980, she periodically remitted money to TM who was living with his family in the Mainland.  

4.  In about 1980, TM came to live in Hong Kong.  The 1^st defendant found him a job here which he held until his retirement.  In 1983, the plaintiff also came to live in Hong Kong.  The 1^st defendant continued to assist her brother and niece by providing them with a temporary home and assisting the latter to find work as a salesperson in a ladies’ fashion company.  Between 1984 and 1988, the 1^st defendant shared her own flat with the plaintiff.

5.  It is common ground that in around 1988, an unincorporated fashion business was begun in the name of Linotte Fashion Co (“Linotte”). The ownership of that business was however hotly in dispute. 

6.  The plaintiff said it was her own sole proprietorship business.  She admitted having obtained $50,000 from the 1^st defendant to start the business, but said that it was a loan and was fully repaid in about December 1989.  She relied inter alia on a business registration certificate issued in the 1990s which stated the status of the business to be a sole proprietorship.

7.  The defendants in contrast said that Linotte was an equal partnership between the 1^st defendant and the plaintiff. They said that the plaintiff proposed to the 1^st defendant to start a fashion business together, making use of the 1^st defendant’s social network.  The name “Linotte” was coined by the 2^nd defendant, who also procured the design of a logo for the business.  The 1^st defendant had a business card bearing the name of Linotte although it did not state her position.  Importantly, the defendants adduced a handwritten agreement dated 16 September 1990 (“Agreement”)  and apparently signed by the plaintiff and the 1^st defendant as parties and by TM as a witness.  The Agreement was in these terms (in English translation):

“ Linotte Fashion Co. started business in February 1988.

Partners: CHAN Hin (Party A)  and CHEN Bai Dyi (Party B)

The start-up capital totals HKD100,000, with Party A and Party B each holding 50%

Party A shall be responsible for the registration of Linotte Company.

Director and Executive Manager, Party A, is vested with authority over all internal and external purchase and sale matters.

Ex-officio Director and Manager, Party B, has the obligation to contribute ideas for promotion and market research for the company’s business.

Party A shall report the income and expenditure accounts to Party B at the end of every three months. If a report is not made on time, Party B has the authority to inspect the company’s accounts and Party B shall not shirk this responsibility.

Consent from Party B shall be sought before any substantial investment is made or any important equipment is acquired by the company.

Both Party A and Party B shall have the right to use the company’s income-generating equipment. Consent from the other party shall be sought for any private loan of the equipment.

The Partners must be united and be understanding towards each other, refrain from suspicion and resentment, and make their best endeavours to strive for the common cause and a thriving business.

This Agreement is made as a proof of the verbal commitment.

Party A: (Signed by the plaintiff)

Party to Partnership Party B: (Signed by the 1^st defendant)

Agreement

Witness (Signed by TM)

16 September 1990”

8.  There was no dispute that Linotte was run in an informal manner.  The 1^st defendant’s evidence is that apart from introducing clients to the business, she took little part in the running of the business.  She had no interest in the books or accounts.  The plaintiff’s evidence is that she had little expertise in the management of a business.  She never produced any accounts for the business or had any produced with outside help (the 2^nd defendant said that she assisted in the preparation of the accounts of Linotte for the financial year 1988-1989).  The income of the business was dealt with in the manner the plaintiff saw fit, using both her personal account and Linotte’s account, and the money left in the bank accounts was regarded by her as the profits of Linotte, from which she financed, inter alia, her personal expenses.[1]

9.  The judge accepted the defendants’ case and found that Linotte was a partnership.  This finding is the primary target of attack in the plaintiff’s appeal.  The ownership of Linotte is significant because the funds for purchasing the Property, up to 2002, came from it.

10.  The Property was acquired in 1991 at the price of $900,000.  The initial deposit of $20,000 was paid by a cheque drawn on the account of Linotte.  Two further deposits or part payments, in the sums of $70,000 and $270,000 respectively, were paid – the first by a personal cheque of the plaintiff, and the second also by cheque though there is no evidence whose cheque it was.  The receipt issued by the solicitors representing the plaintiff and the 1^st defendant in the transaction acknowledged receipt of the funds from them.  Irrespective of the identity of those cheques, it was common ground that all the funds used to purchase the Property (including the mortgage loan repayments)  were generated from the business until about the end of 2002.[2] It appears that the mortgage loan was completely repaid by May 2012.[3]

11.  The plaintiff’s pleaded case was that an agreement or common intention was formed orally in a conversation with the 1^st defendant after the inspection of the Property in July 1991 that the plaintiff would be the sole owner and the 1^st defendant would have no beneficial interest in the Property.  In the plaintiff’s own evidence, however, she said she did not tell the 1^st defendant that adding her name to the Property was merely for the purpose of monitoring it; it was only something in the plaintiff’s mind.[4]  The defendants denied there was any such conversation.

12.  In the transaction documents, namely, the Sale and Purchase Agreement, the Assignment and the Legal Charge executed in favour of the Bank of East Asia which provided a mortgage loan of $540,000 to finance the acquisition, the plaintiff and the 1^st defendant were named as purchasers as tenants-in-common in equal shares.

13.  The defendants’ case was that subsequently, in around 1996 or 1997, due to the 1^st defendant’s desire to spend more time on charitable work, she decided to “walk away” from Linotte.

14.  The plaintiff’s case was that Linotte’s business was profitable and growing until about July 1997 when there was a global financial crisis.  Eventually the business was terminated in late 2002.

15.  It appears that the Property was used initially for Linotte’s business purposes.  After 2002, it was let by the plaintiff to various tenants from time to time.

16.  In around May 2012, when the mortgage loan was about to be paid off, the plaintiff asked the 1^st defendant to transfer her title in the Property to the plaintiff.  The 1^st defendant refused. 

17.  On 19 June 2012, without informing the plaintiff, the 1^st defendant executed a deed of gift assigning her interest in the Property to her daughter, the 2^nd defendant.

18.  On 3 August 2012, the plaintiff instructed solicitors to issue a letter to the 1^st defendant demanding that she transfer her title in the Property to the plaintiff.  On 23 August 2012, the 1^st defendant’s solicitors replied on her behalf stating that the Property was acquired with funds from the partnership business and that she therefore had a 50% interest in the Property and would not transfer her title to the plaintiff.

The proceedings

19.  In April 2014, the plaintiff instituted the action below against the defendants.  Her pleaded case was that it was agreed between the plaintiff and the 1^st defendant, and it was also their common intention, that the Property would be owned by the plaintiff solely and absolutely and that the 1^st defendant’s name would be added as a tenant-in-common “purely for the sake of convenience”.  The plaintiff also pleaded that she solely contributed the purchase price and all other disbursements incurred for the purchase of the Property and that the 1^st defendant never contributed any money at all in relation to the Property.  On this basis the plaintiff’s case was that the 1^st defendant held the Property on a resulting trust or a common intention constructive trust for the plaintiff.

20.  In the further and better particulars of her statement of claim, the plaintiff pleaded that the agreement or common intention she alleged was formed on 10 July 1991 after the plaintiff and the 1^st defendant (together with an estate agent and a friend of the plaintiff)  inspected the Property, when the plaintiff suggested adding the name of the 1^st defendant “in order to monitor the Property”, to which the 1^st defendant agreed.

21.  On 21 May 2014, the defendants filed their defence and counterclaim, claiming an account of all rent received by the plaintiff for the Property and an order for payment of the sum due with interest.

22.  At the trial the judge heard evidence from the plaintiff and the 2^nd defendant.  The 1^st defendant was by then 90 years of age and unfit to give evidence.  Her witness statement was admitted and the judge relied on her evidence when it was uncontroversial or supported by other evidence or inherently probable.[5] 

23.  As far as the counterclaim was concerned, the quantum (assuming liability)  was agreed at $342,512.20.[6]

24.  A list of agreed issues was submitted by the parties, which set out five issues for determination by the court as follows:

“ 1. Did P and D1 intend that the beneficial ownership in the Property to be different from the legal ownership? If they did, in what way and to what extent?

2. Was the Business Agreement an authentic or forged document?

3. Was the business of Linotte Fashion Co. carried on at the material time as a partnership between P and D1, or as P’s sole proprietorship?

4. Did P solely finance the acquisition of the Property with her own money?

   5.  Is Ds’ Counterclaim in relation to the Property precluded by the Limitation Ordinance, Cap 347 or otherwise?”

25.  As mentioned above, the judge eventually dismissed the plaintiff’s action and gave judgment for the defendants on their counterclaim.

Discussion

26.  The grounds of appeal as set out in the supplementary notice of appeal occupy over 17 pages.  The skeleton argument signed by the plaintiff’s counsel, Mr Erik Shum and Mr Colman Li, helpfully grouped them into five main contentions as follows:

(1)  The judge failed to direct himself that the evidential burden of proof rested on the defendants to prove that Linotte was a partnership (Ground 3).

(2)  The judge erred in holding that Issue 2 relating to the authenticity of the Agreement had been withdrawn by the plaintiff (Grounds 1.4 & 4).

(3)  The judge erred in his approach by first concluding that Linotte was a partnership before considering some powerful evidence pointing the other way (Grounds 5, 1.1, 1.2, 1.3 and 1.5).

(4)  The judge erred in failing to consider the plaintiff’s alternative claim on the basis of resulting trust (Grounds 6 and 7).

(5)  The judge erred in law in granting judgment for the defendants in their counterclaim which is statute-barred (Ground 2).

27.  Mr Martin Lee SC, who appeared at the hearing leading Mr Shum and Mr Li and also Ms Kano Lam, adhered to these contentions.  We shall deal with them in turn below.

Appeal on matters of fact

28.  As is well established, in an appeal against a finding of fact by a trial judge, the appellant must demonstrate the finding is plainly wrong before the appellate court can intervene.  This is a high threshold.  An appellant is required to identify some mistake in the evaluation of the evidence by the tribunal of fact that is sufficiently material to undermine its conclusions, such as where the tribunal ignored crucial evidence, materially misinterpreted evidence, made a finding that is not supported by evidence, or made a finding that no tribunal in its rational judgment could have made.  Mere assertions that a finding is against the weight of the evidence or that the tribunal should have reached some other conclusion because of points advanced below, do not suffice to show such palpable errors. See: Ting Kwok Keung v Tam Dick Yuen & Ors (2002)  5 HKCFAR 336; China Gold Finance Ltd v CIL Holdings Ltd & Ors (CACV 11/2015, 27 November 2015); Yu Man Fung Alice v Chiau Sing Chi Stephen [2021] HKCA 1456 at §§6-8; Cheung Yuk Ying Engracia v Macgregor Isabella [2023] 3 HKLRD 164, §28.

Evidential burden of proof of partnership

29.  On the plaintiff’s first point, namely, that the evidential burden of proof rested on the defendants to prove that Linotte was a partnership, it is submitted that since there was no dispute the funds used to acquire the property came from Linotte, and Linotte’s business registration described it as a sole proprietorship of the plaintiff, it was for the defendants to prove that Linotte was a partnership instead.  Counsel submitted that the judge erred in holding that “the burden of proof in this case rests squarely on the Plaintiff”[7] without directing himself that the evidential burden of proof of the alleged partnership lay on the defendants.

30.  With respect, there is little substance in this point.  The statement in Judgment §26 that “the burden of proof rests squarely on the Plaintiff” is prefaced by the statement that the defendants’ case was that the beneficial entitlement to the Property is the same as the legal ownership.  This is unobjectionable since, as set out by the judge at §21, the beneficial entitlement is normally consistent with the legal ownership and the onus of proof lies on the person seeking to show that the beneficial ownership is different from the legal ownership.  The judge was correct in proceeding on the basis that the overall legal burden lay on the plaintiff.

31.  Although the judge did not use the phrase “evidential burden”, he clearly reasoned on the basis that the partnership was something that needed to be proved.  Thus at §30 he referred to the Agreement as being “powerful proof of the partnership”.  At §34 he expressed the view that the draft agreements “lend credence to the Defendants’ case that Linotte was a partnership”.  In addition there was also the 2^nd defendant’s viva voce evidence and the 1^st defendant’s statement, both of whom spoke of the partnership business.  There were also letters from the 2^nd defendant to the 1^st defendant in September 1991, which tended to show that the 2^nd defendant was selling fashion items in Canada sourced from Linotte and that the 1^st defendant was part of Linotte.

32.  Nor do we think that the judge overlooked that the business registration certificate is by virtue of s 19(2)  of the Business Registration Ordinance (Cap 310)  prima facie evidence as to the facts stated therein.  That evidence is rebuttable and the reference to “sole proprietorship” in the certificate is explicable by the provision in the Agreement (if it is authentic)  that only the plaintiff’s name was used for registration.  In our view this explains why the judge focused on the issue of the authenticity of the Agreement without mentioning the business registration certificate.

33.  We do not think that the judge made any mistake about the burden of proof.  In any event, in the way the trial was conducted and determined, whether Linotte was a partnership or a sole proprietorship did not ultimately turn on who had the burden, legal or evidential, on that issue. The judge, having considered the evidence, positively found – “certainly more likely than not” – that Linotte was a partnership.[8]

Mistake on withdrawal of issue

34.  The second main point raised on behalf of the plaintiff is that the judge erred in thinking that the issue of the authenticity of the Agreement had been withdrawn. 

35.  A party who disputes the authenticity of a document bearing his signature adduced by the other side may (a) simply refuse to admit it, (b) deny he has ever signed it, or (c) aver that it is a forgery.  These are different positions to adopt.  Thus (a)  and (b)  are different: a party who pleads a non-admission is simply putting the other side to proof of the allegation in question, without setting up a positive case that the allegation is false; he has to serve a notice of non-admission of the authenticity of the document to avoid the operation of the deeming admission under Order 27 rule 4: see Hong Kong Civil Procedure 2026, paras 18/13/5 & 27/4/1; Hu Lan v David Golden [2024] 1 HKLRD 1252, §§34-35.  There is again a clear distinction between (a)  and (c): a non-admission of the genuineness of a document is different from a positive allegation of forgery which carries with it an evidential burden of raising a definite case of forgery: see Nina Kung v Wang Din Shin (2005)  8 HKCFAR 387, §188.  But (b)  and (c)  are also distinct, though the difference is more subtle: a party who denies he has ever signed a document apparently bearing his signature does not by such denial alone advance a case of forgery, even though the inference is that the signature was forged: Club Deluxe Ltd v Club Metropolitan Ltd and others [1995] 2 HKLR 69, 72, 80; Hu Lan v David Golden, §60.

36.  In the present case, counsel pointed out that in the pleadings the plaintiff denied authenticity and put the defendants to proof of the Agreement.  In the plaintiff’s closing submissions at trial it was stated: “P has never raised any positive case of forgery; she puts Ds to strict proof of the Business Agreement.”  In the list of agreed issues lodged with the court, however, Issue 2 read: “Was the Business Agreement an authentic or forged document?”  This did not accurately reflect the pleaded issues, which did not raise forgery.  Mr Lee frankly admitted before us that Issue 2 was incorrectly formulated by the parties. 

37.  Accordingly, when it was made clear on behalf of the plaintiff at the trial, after the plaintiff’s evidence, that any allegation of forgery was withdrawn, it was not an indication that she admitted the authenticity of the Agreement.  It remained an issue, and it was for the defendants who had put forward the document to prove it was genuine.  The references in the Judgment (§§2, 12, 36, 41 and 62)  to the withdrawal of the “authenticity issue” or “Issue 2” are therefore strictly speaking inaccurate. 

38.  But it does not appear that after the withdrawal, any party or the judge laboured under the impression that authenticity had been admitted by the plaintiff.  Both sides made extensive closing submissions on whether the Agreement was authentic.[9]  The judge expressly considered the question of the authenticity of the Agreement “[r]egardless of the withdrawal of the issue” and, having considered the facts and evidence, firmly decided that the Agreement was genuine (Judgment, §36).  We do not think his Lordship had been materially misled.

39.  Counsel submitted on behalf of the plaintiff that the mistake about the scope of the withdrawal led to further errors in the judge’s analysis.  We do not agree.  First, the Agreement expressly provided that Linotte was a partnership between the plaintiff and the 1^st defendant.  If authentic, there is nothing wrong for the judge to think that it is “powerful proof” of the partnership (Judgment, §30), contrary to the plaintiff’s argument.  Secondly, the list of issues, which was agreed by the plaintiff and signed by her counsel, did suggest to the judge that forgery was an issue to be determined.  Nevertheless, in her evidence, the plaintiff refused to say whether her aunt had forged the document.  The issue of forgery was subsequently expressly withdrawn.  It is this inconsistency, in our view, which led the judge to comment that the plaintiff’s evidence in this respect lacked conviction and that the withdrawal did not reflect favourably on her case.  We do not think there is any material error in the judge’s reasoning here.

40.  Nor is it to the point for the plaintiff’s counsel to submit that the judge’s criticism of the plaintiff’s evidence about her father’s reaction on being shown the Agreement was harsh,[10] in comparison to his treatment of the defendants’ evidence.  The judge was entitled to think that the signing and attesting of the Agreement was not an ordinary event.  There is nothing plainly wrong for the judge to reject the plaintiff’s evidence about TM’s reaction.

Reaching conclusion before considering all evidence

41.  The third main contention advanced on behalf of the plaintiff is that the judge adopted an erroneous approach whereby he first came to the conclusion that Linotte was a partnership before considering all the other material evidence against that conclusion.  In consequence, the judge ignored the evidence that contradicted the defendants’ case.

42.  If the judge had actually done that, it would have been an error in principle.  A tribunal of fact should consider and evaluate all the relevant evidence before making its findings: see Cleare v AG [2017] UKPC 38, §§4 to 8.  But did the judge actually proceed in the way alleged?  We do not think so.  First, the structure of the Judgment was simply a reflection of the order of the issues as set out in the list of agreed issues.  The places within the Judgment at which various pieces of evidence are dealt with are not necessarily a good indication of the structure of the judge’s reasoning process in this case.  The Judgment should be read as a composite whole, without elevating form over substance, as explained by this court in Ho Yat Wah v Chung Hang Him, the sole executor named in the will of Madam Chan Yuk Mui, deceased [2024] HKCA 378, §§38-40.

43.  The judge did consider the factors raised by the plaintiff against Linotte being a partnership.  The judge considered but rejected the plaintiff’s argument that the Linotte name card was simply to enable the 1^st defendant to introduce customers to the business, and found that it was more consistent with the defendants’ case (Judgment, §§39-40).  He considered the point about the Agreement being made more than two years after the commencement of the business – a matter emphasised by Mr Lee before us – but did not think it detracted from the defendants’ case (Judgment, §37).  He considered the monthly $3,000 payments by the plaintiff to the 1^st defendant and in particular the six payments between 1992 and 1993 to which counsel drew our attention, but ultimately preferred the defendants’ version that this was the 1^st defendant’s remuneration which she later directed to be applied towards the mortgage loan repayment instalments (Judgment, §§53-56).  As to the plaintiff’s point that she never requested the 1^st defendant to contribute to Linotte’s losses, the judge noted that because of the absence of accounts, one does not know whether Linotte’s business was an overall loss or gain, or whether any partner had borne more or less than her fair share of the losses if there were any (Judgment, §60).  In relation to this last point, we do not accept counsel’s argument that the judge’s observation contradicts s 26 of the Partnership Ordinance (Cap 38)  which requires partners to contribute equally towards the losses sustained by the firm.  What the judge meant was that, on an overall view, one simply does not know, in the absence of proper accounts, what profits in the earlier years to which the 1^st defendant was entitled and which were not distributed to her were used in covering the losses in subsequent years.

44.  It was further submitted on behalf of the plaintiff that had the judge applied the correct fact-finding approach, a holistic assessment of all the material evidence would have shown a preponderance of evidence against Linotte being a partnership.  For this argument, counsel referred to the business registration certificate, the time gap (two years and seven months)  between commencement of business and the Agreement, the non-implementation of the term in the Agreement that the plaintiff should report to the 1^st defendant on the accounts every three months, the lack of written record that the $3,000 monthly payment to the 1^st defendant was her remuneration, the fact that the plaintiff never rendered any account to the 1^st defendant, that the plaintiff had repaid the $50,000 loan to the 1^st defendant, and that the 1^st defendant’s Linotte name card was a neutral piece of evidence. We shall not deal with these matters individually.  We are not satisfied that the judge adopted an erroneous fact-finding approach.  The plaintiff has not demonstrated any error that entitles this court to intervene.  That being the case, the evaluation of the evidence on whether Linotte was a partnership, which includes not only the matters referred to by the plaintiff’s counsel but also, crucially, the Agreement, is a matter for the trial judge.  Unless the finding of the trial judge is shown to be vitiated by some material error or otherwise plainly wrong, it is not for this court to weigh up the evidence again and make our own finding.

Failure to consider resulting trust

45.  The fourth main contention is that since it was not the defendants’ case that there was an express discussion and agreement between the parties that the Property was to be beneficially equally owned by the plaintiff and the 1^st defendant, the judge should have gone on to consider the plaintiff’s case of resulting trust after rejecting her case of common intention constructive trust.

46.  The judge noted that the plaintiff’s contention that the acquisition was solely financed by her was premised on the assumption that Linotte was her sole property, which he rejected.[11]  Given it was common ground that the money used to acquire the Property came from Linotte, and since the judge found Linotte to be an equal partnership, the plaintiff’s case of resulting trust simply did not get off the ground because she did not prove that the purchase monies entirely came from or belong to her.  It may also be noted that the mortgage loan was borrowed in joint names.  We fail to see any valid ground for complaint by the plaintiff.

The Property as partnership asset

47.  Fifthly, it was submitted that the defendants’ counterclaim was unsustainable in law.  On the basis that the purchase monies originated from Linotte, given that the defendants’ case that it was a partnership was upheld and in the absence of any contention that the purchase monies represented a notional or actual distribution of profits, the property must, it was argued, be treated as partnership asset.  As such, the 1^st defendant could only ask for an account of the dealings and transactions of the partners, and has no separate right to sue for the recovery of any partnership asset.  Any claim for account in relation to the Property would be time-barred as the partnership had been dissolved by early 2003 at the latest.  It was submitted that the judge erred in failing to address the argument on the ground that neither party took the position that the Property was partnership asset.

48.  The point was raised in submissions at trial. The judge rejected it for two main reasons.  First, it was not the case of either side that the Property was partnership asset.  That was not pleaded or included in the list of agreed issues.  Secondly, whilst it was common ground that until about the end of 2002, all payments towards the acquisition of the Property came from “money generated from” Linotte’s business, there was nothing further to suggest that it was a partnership asset.[12]

49.  In our judgment the judge’s ruling is correct. The factual basis of the defence had not been properly pleaded and raised.  So far as relevant, all that was pleaded in the defence to counterclaim was this:

“ Even if (which is denied)  the business of Linotte Fashion Co constituted a partnership between the 1^st Defendant and the Plaintiff, and in any event, it is averred that it had been dissolved in about late 2002 and by early 2003 at the latest and all the claims of the Defendants in relation to the property were statute-barred by virtue of sections 4(1)(a)  and/or 4(1)(d)  and/or 4(2)  of the Limitation Ordinance, Cap 347 and/or section 41 of the Partnership Ordinance, Cap 38.”[13]

50.  Section 41 of the Partnership Ordinance (Cap 38)  provides:

“ On the dissolution of a partnership, every partner is entitled, as against the other partners in the firm and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively, after deducting what may be due from them as partners to the firm; and for that purpose any partner or his representatives may, on the termination of the partnership, apply to the court to wind up the business and affairs of the firm.”

51.  What the pleader had in mind seems to be that on the basis that Linotte was a partnership, a claim by the defendants for a share of the rent received by the plaintiff could only be made as a claim for an account in the winding up of the partnership.  Quite how this applies in relation to the sum in question, which represents the share of the rent received after six years prior to the date of the writ (to which the counterclaim relates back), i.e. from 2008 onwards, long after the dissolution of the partnership, has not been explained.  But leaving this aside, it is plain that the necessary assumption underlying the plea is that the Property was partnership property.  As defined in s 22(1)  of the Partnership Ordinance, partnership property means “property originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business”.

52.  Contrary to RHC Order 18 rule 7(1), the plaintiff failed to plead this material fact.  Nor did the list of agreed issues raise for determination the question whether the Property was partnership property.  It does not follow from the provision in s 23 of the Partnership Ordinance (“Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm”)  that the alleged fact that the Property was partnership property does not have to be pleaded.  Further, the agreed fact is that the Property was bought with money “generated from” Linotte’s business, not money “belonging to” Linotte.  As the judge recorded, the parties wanted to invest the profits made from Linotte.[14]  Whether the profits used belonged to Linotte or should be treated as having been divided and belonging to the partners individually was never investigated, because the matter was not raised.

53.  In these circumstances the judge was right in holding that the plaintiff was precluded from making this point.

54.  The only defence raised on this appeal to the counterclaim is the above.  There has been no argument, in this court or below, relating to the basis of the defendants’ counterclaim, which seems to be one for an occupation rent as between co-owners.  The outcome in this case should not be taken as detracting from the principles that unity of possession precludes such claims otherwise than in cases of ouster or where an operative agreement renders the co-owner in occupation an agent or bailiff so as to come under a duty to account to the other, and that the receipt of rents and profits by one co-owner does not in itself operate as an ouster of another co-owner: Cheung Lai Mui, the executrix of the estate of Cheung Ping Kau and the administratrix of the estate of Cheung Ping Fuk (alias Cheung Bing Fuk)  v Cheung Wai Shing (2021)  24 HKCFAR 116, §48 & §104.

55.  By respondents’ notice the defendants further contend that the plaintiff could not raise this plea because it was an inconsistent alternative case to the plaintiff’s primary case that Linotte was her own business.  We do not think this is in itself a good objection.  This plea was the plaintiff’s fall-back position.  She had reasonable grounds for raising it even though it was inconsistent with her primary case.

Conclusion

56.  For the above reasons, the plaintiff’s appeal is dismissed. 

57.  We order the plaintiff to pay the defendants’ costs of the appeal.  We make no order on the costs of the respondents’ notice because most of the points there are, in our view, not really additional grounds but matters already covered in the Judgment.  The one point that is additional is rejected by us.