TANG CHAI ON AND ANOTHER v. TANG SING KI AND ANOTHER

HCA 207/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 207 OF 2013

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J U D G M E N T

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Introduction

1.  The plaintiffs commenced this action in February 2013, alleging that the defendants wrongfully refused to acknowledge certain lots of land were partnership properties (of a partnership involving the plaintiffs and the defendants), and treated the same as their own. Further, the defendants wrongfully failed to account for the income they collected from letting the same to tenants.

2.  The defendants deny the allegation, they also counterclaim that the plaintiffs wrongfully:

(a) forged the defendants’ names for registering various lots of land, and added the plaintiffs’ names without authority for registering other land lots;

(b) failed to account for the income they collected from letting the same to tenants,

in breach of their duties as the respective defendants’ rental agents.

Background

3.  The plaintiffs (collectively “the elder brothers”) and the defendants (collectively “the younger brothers”) are blood brothers.  They are also indigenous villagers of the New Territories, and members of the “鄧維新堂” (“the Tong”) and the “鄧輯伍祖” (“the Tso”).

4.  The relevant time period began in about 1998, and lasted till about the end of 2011.

5.  The brothers all have under their names various lots of land in the Yuen Long area, which they rented from either the Tong or the Tso for subletting purposes.  They have been receiving rental income therefrom as a result.

6.  Various sums were earlier paid by the elder brothers to the younger brothers during the aforesaid period; there is however dispute as to their nature (whether they were dividends of the partnership, or only rents paid over by the elder brothers, acting as rental agents, to their principals (the younger brothers)).

7.  Similarly, the younger brothers accept they have paid over various sums to the elder brothers, but they claim these were ex gratia payments for the elder brothers’ help for preparing rental documentation and finding tenants.

Witnesses’ credibility and reliability

8.  The above issue depends almost entirely on the assessment of the testimony of the parties’ respective witnesses; their testimony is so drastically different it leaves no room for misunderstanding or mistake.  Thus, reliability is not in issue (reliability here refers to a witness’s ability to observe, recall and recount the relevant factual events accurately).

9.  Because the issue to be resolved is essentially one pertaining to credibility, an assessment of the witnesses’ credibility is thus crucial.  The approach I adopted in earlier decisions when assessing the credibility is repeated:

“The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’.

(See, for example, the decisions in Chiu Chi Tong v. Lau Chong Sai & Another, HCA 765/2002 (para. 28) and Yu Ming Investment Ltd. v. Peng Ru Chuan, Richard, HCA 814/2002 (para. 13))”

(Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA 3523/2002 (13 August 2005), para 12)). The same approach will be adopted in this action.

10.  I have also borne in mind the approach disapproved by the decision in The Popi M [1985] 1 WLR 948 (see also Ide v ATB Sales Ltd [2008] EWCA Civ 424 (28 April 2008)), para 1 to 6; Datec Electronic Holdings Ltd and Others v UPS Ltd [2007] 1 WLR 1325, para 46 to 50).  The impermissible approach was described in the ATB Sales judgment as follows:

“ … a trial judge was not compelled to choose between two theories, where the evidence was unsatisfactory … it was not possible to proceed on the basis of eliminating the impossible and deciding that the remaining explanation, however improbable, must be the cause … the concept of proof on a balance of probabilities had to be applied with common sense … ” (para 3 thereof).

11.  The following witnesses testified for the elder brothers:

(1) Ms Lau Wai Bing Win, a tenant (“Ms Lau”);

(2) the 1^st plaintiff (“On”).

12.  The following witnesses testified for the younger brothers:

(a) the 1^st defendant (“Ki”);

(b) the 2^nd defendant (“Mo”).

13.  In short, for the reasons set out below, I do not believe the witnesses called by the younger brothers, and prefer the testimony of those who testified for the elder brothers.  Further, as will be discussed below, insofar as there are differences in the testimony of Ms Lau and On (both testified for the elder brothers), I find Ms Lau’s testimony to be more reliable.

14.  There is an important letter dated 16 January 2013 (that is, a letter written about a month before this action commenced) from the solicitors acting for the younger brothers (“the Jan 2013 letter”).  I propose to quote from it because of its importance to the assessment of credibility:

“本律師行代表 [the younger brothers]。

本律師行客户和 [the elder brothers] 由1998年開始為合伙人，處理從 [the Tso] 租回來的土地。過去， [the elder brothers] 以上述合伙人身份代表本律師行客户或本律師行客戶以合伙人身份代表 [the elder brothers] , 與 [the Tso] 訂立租約承租土地。 …

本律師行客户謹要求 [the Tso] 及閣下，於訂立任何有關上述清單內土地的新租約或續租合約或任何交件前，必須通知所有合伙人。”

15.  Such a document, which at least on its face has a critical importance to a major issue herein, ought to have been discovered (by both parties) much earlier on, and should have been included in the trial bundles.  Surprisingly it was only produced by the elder brothers on the third day of trial (and in the course of On’s cross-examination).  The younger brothers, quite understandably, objected to its production.  I gave leave to the elder brothers to adduce the same.  Reasons for the decision are given in para 46 to 48 below.

16.  The genuineness of the Jan 2013 letter was not disputed by the younger brothers.  In fact, as will be discussed further below, Ki’s testimony is to the effect that he remembers how it came to be written.

17.  The reference made by the younger brothers’ own lawyers in the Jan 2013 letter to a partnership between them and the elder brothers goes a long way to establish the elder brothers’ claim, and is detrimental to the younger brothers’ case.

18.  Ki sought to add a gloss to the Jan 2013 letter: the partnership referred to therein was not the one contended for by the elder brothers.  Instead, it was a reference to another partnership concerning the younger brothers, the elder brothers and two other brothers (total 6 brothers).  The Jan 2013 letter did not mention the other two brothers only because they were not present when the younger brothers gave instructions for the Jan 2013 letter to be prepared.

19.  I agree with the elder brothers that the above explanation is not credible.  First, the absence of the other two brothers cannot be a valid reason for the lawyers not to refer to them, or for the lawyers not to refer to a partnership involving all 6 brothers (the lawyers actually did so in another letter (in English) also dated 16 January 2013 (“the Jan 2013 English letter”)); it should be noted both letters bear the same date.

20.  Secondly, in an earlier letter dated 17 December 2012 (apparently written by the same solicitor) (“the Dec 2012 letter”), a partnership was referred to (Ki’s testimony confirms it was the 6-brother partnership even though Ming was not expressly mentioned).  The Dec 2012 letter then proceeded to give notice to terminate that partnership, and informed On he was no longer authorized to execute any contract or lease, or to collect rent (a similar notice was given to Ming by the Jan 2013 English letter).

21.  Further, the Dec 2012 letter did not state when the partnership was formed, but the Jan 2013 letter did (since 1998).  Ki also testified that the 6-brother partnership was formed “since the 1980s or even the 1970s”. 

22.  In view of para 18 to 21 above:

(i) the partnership respectively referred to in the Dec 2012 letter and the Jan 2013 letter (which were written about a month apart) could not have been the same partnership (a partnership formed in 1998 must be different from the one formed much earlier);

(ii) the partnership mentioned in the Dec 2012 letter was already put to an end by the time of the Jan 2013 letter (see para 20 above).

23.  I am therefore satisfied that the partnership mentioned in the Jan 2013 letter indeed referred to in the partnership contended for by the elder brothers.

24.  Another factual dispute concerns an account book produced by the elder brothers (“the said accounts”).  The younger brothers claim in their testimony they were never shown the said accounts. When their attention was drawn to the signatures therein which purport to be theirs:

(a) Ki testified that he cannot remember if he signed it;

(b) Mo testified that he signed on it, but never perused the said accounts whether before, at the time of, or after he did so.

25.  I also find this part of the younger brothers’ testimony to be incredible.  Besides his signature, Mo has written the following words in the said accounts:

“2011/9/6 動數要開會

否則，一律自付。

除交租打稅外。”

26.  In the context of this action, the above very probably was intended to mean that:

(1) any withdrawal could only be made after a meeting had been held;

(2) if not, sum(s) withdrawn would be regarded as self-incurred (alternatively, would have to be paid for by the responsible person);

(3) the only exceptions to the above were sum(s) for paying rent (probably referring to rents payable to the Tong or Tso), or for paying taxes.

“2011/9/6” probably was a date, and was intended to show either the date the above words were written, or the date when the above became effective.

27.  Mo admits that he wrote the Chinese characters in the above quote after a quarrel broke out between the brothers regarding their father’s estate, and On’s failure to pay the younger brothers’ money. Because of this admission, Mo’s testimony summarized in para 24(b) above is incredible.  The fact that, in the said quote:

(a) there was a specific reference in the said quote to future withdrawal of funds;

(b) he imposed a limit on the purposes for which “withdrawals” could be effected in future,

shows that:

(1) the “quarrel” must have (at least partly) been related to earlier instances of the withdrawal of these funds;

(2) Mo must have been dissatisfied with the way in which the elder brothers have been dealing with the said funds.

More importantly, it can be inferred from the above sub-paragraphs Mo could not have been totally ignorant of the contents of the said accounts.

28.  Having so concluded, I find Ki’s simple denial of any knowledge of the said accounts, and allegedly he cannot remember if he had signed them, to be also incredible.  The overall circumstance (which can be gathered from the totality of the testimony) must have been that the younger brothers have adopted a “united front” in their dealings with the elder brothers (and have been communicating closely for this purpose).  It is thus inherently implausible the matters set out in para 25 to 27 above were unknown to Ki.

29.  The younger brothers also challenge the accuracy of the entries in the said account.  In view of the state of the pleadings (the gist of which has been summarized in para 1 and 2 above (a dispute of whether there was a partnership, and whether the suit properties were partnership properties)), I do not consider the challenge to constitute an independent issue, but is merely another matter relied on to discredit the plaintiffs’ witnesses.

30.  There are entries in the said account which may not be entirely accurate (especially as regards their dates); for instance, there are entries purporting to be of the same date, but which cover matters which probably have taken place on different dates.  This kind of inaccuracies has been taken into account in the assessment of the credibility of the plaintiffs’ witnesses.  I do not consider that the inaccuracies to materially affect their credibility in the context of this action.

31.  There are other matters relied on by the younger brothers as showing the lack of credibility of On’s testimony (see below).  For the reasons set out below, I do not agree that they (whether singly or cumulatively) can materially affect credibility.  The principal reasons are briefly:

(a) the alleged discrepancies are minor and/or a result of defective recollection;

(b) the matters themselves can only be of peripheral significance in relation to the main dispute in this action.

32.  First, the elder brothers admit that the younger brothers’ names were subsequently added to some of the relevant tenancy agreements (from which rental income was received).  These included tenancy agreements which were already expired.  The elder brothers’ explanation is that this was done following the late father’s earlier advice that lots jointly owned should be properly documented to avoid dispute.  The younger brothers contend that this is untrue and the additions were made for the purpose of:

(1) misleading the elders and/or managers of the Tong/Tso;

(2) misleading the tenants;

(3) avoiding the discovery of their earlier fraud (to cheat the elders and/or managers of the Tong/Tso).

33.  As the elder brothers correctly pointed out during cross-examination, the purpose summarized in para 32(3) above is chronologically impossible because:

(a) it is common ground the said accounts were given to Ki in January 2012;

(b) the younger brothers’ allegations were made to the police only since September 2012 (it should also be noted the fraud allegation did not appear even in those statements).

(It is also difficult to understand how para 32(1) and (2) above can be achieved in relation to already expired tenancies)

34.  Finally, I have also taken into account the following matters put forth by the younger brothers regarding the elder brothers’ credibility:

(a) On’s testimony regarding when the disputed partnership was set up was changed from 1999 to 1998;

(b) the elder brothers failed to produce bank records for the period before December 1999;

(c) On’s testimony regarding when $220,000 was transferred has been shown to be inaccurate by contemporaneous documents.  The inaccuracy is of particular importance when the transfer date is considered together with when the related land lots were leased;

(d) On has signed a tax account the correctness (or accuracy) of which he failed to satisfactorily explain, especially with regard to the number of properties (or rental income) reported to the tax authorities.

35.  The alleged failure to disclose specific documents (para 34(b) above) is not a matter to which much weight should be attached.  After all, the younger brothers should have more than adequate opportunities to seek discovery (whether specific, or further and better, discovery) of documents, but they did not do so.  While para 34(c) above (when viewed in isolation) may have an impact on On’s reliability, I do not consider it to materially affect his credibility when considered in the context of the whole case.  In view of On’s level of education and sophistication, the cross-examination on accounting matters (para 34(d) above) is not a subject which he was competent to properly deal with; consequently, I will not attach weight to his answers in this regard.

36.  Ms Lau testified that she witnessed the brothers signing the tenancy agreement of Lot 2055 in DD 120 in November 2011.  In fact, this has been accepted in the younger brothers’ supplemental witness statements but they explained that they were lured by the elder brothers to do so to “help collecting rent … if [they] were not in Hong Kong”.  The last-mentioned explanation is unbelievable because:

(1) Ki was then admittedly in Hong Kong most of the time;

(2) rent was payable only once annually;

(3) Ki was already suspicious of On’s honesty since March or April 2011 (Ki’s further attempts to explain away this is unconvincing), and Mo was already dissatisfied with the manner in which On has been handling parts of the late father’s estate. 

37.  Ms Lau also testified that she met the brothers at the end of 2009.  The younger brothers criticized her credibility:

(a) her company would benefit from the validity of the tenancies by which it continues to use and occupy the rented properties; hence she cannot properly be regarded as an independent witness;

(b) there are discrepancies between her testimony and that of On.

38.  While para 37(a) above should be taken into account, I do not consider this by itself to materially affect Ms Lau’s credibility.  As regards para 37(b) above, the discrepancies pertain to matters like:

(1) whether Ms Lau was present at a meeting in a Yuen Long restaurant in 2005: Ms Lau testified she was, but On testified she was not;

(2) who else (other than the younger brothers) were present then: Ms Lau testified she met Mo there (together with a male called “Ah Wai”), but On testified Mo brought him there (where he met “Ah Wai” and another male).

39.  Another dispute relates to the reason for the tenancy dated sometime in 2011 having been signed by both the elder brothers and younger brothers:

(a) Ms Lau did not explain why; she only testified that at the meeting in the Yuen Long restaurant, Mo told her On could sign the tenancy for all 4 brothers;

(b) On testified that Ms Lau asked for the tenancy to be signed by all 4 brothers;

(c) the younger brothers’ case is On suggested to use all 4 brothers for the tenancy to enable the elder brothers to help the younger brothers to collect rent when the latter were not in Hong Kong.

I do not find sub-paragraphs (a) and (b) above to be mutually exclusive or self-contradictory.

40.  Para 39(c) above has been discredited because of the matters set out in para 36 above.  Further, no reason has been given as to why a rent-collecting agent also has to be named as a landlord in the tenancy (the tenancy could have provided for the rent to be collected by the elder brothers on the landlords’ behalf).

41.  The younger brothers are also critical of various other matters, such as:

(1) Ms Lau denied she rented Lot 2187 in DD 120 since October 2006, but later changed this part of her testimony when the record was shown to her;

(2)Ms Lau’s testimony and her witness statement differ over exactly who told her On could represent all 4 brothers to sign the tenancy agreement (her testimony only mentioned the younger brothers did so, but her witness statement mentioned it was Ming together with the younger brothers);

(3) Ms Lau’s witness statement says that the tenancy was handled by a solicitor firm called Au and Associates, but her testimony is different: Au and Associates were only later introduced by another firm.

I regard these to be differences caused by faulty memories rather than indications of untruthfulness.

42.  Despite the criticisms levied against Ms Lau above, I am satisfied that Ms Lau has given truthful and reliable testimony as regards the most important matter of whether she had heard from the younger brothers that they also authorized (or consented to) the tenancies being granted.

43.  Further to the matters set out in para 14 to 30, 32(1) to 32(3) and 33 above which show the younger brothers’ testimony to be incredible, the following matter also casts doubt on their credibility.  They told the police (in their statements) that they leased some land lots to Ms Lau’s company.  This is inconsistent with their case in this action.  Their explanation that they did so only because of Ms Lau’s threat to report the elder brothers for forgeries is a lame excuse:

(i) by September 2012 (the time of the police statements), their relationship with the elder brothers was already not good (in fact, suspicion already arose supposedly as early as March or April 2011 (para 36(3) above));

(ii) the said explanation has not been given in the younger brothers’ witness statements.  Instead, the younger brothers adopted their police statements in their supplemental witness statement.

Findings of fact

44.  Based on the matters set out above, the following findings of fact are made:

(a) the undisputed facts set out under the heading “Background”;

(b) in about 1998, the elder brothers and the younger brothers agreed to, and did, set up a partnership for renting land lots (from the Tong and the Tso) and subletting them to tenants (for profits);

(c) the elder brothers have been authorized to let and sublet land lots in accordance with the said partnership agreement, and they did so from time to time;

(d) the partners were to share equally the partnership expenses and the partnership profits;

(e) the younger brothers failed to act in accordance with the said partnership agreement since about January 2013.

Conclusion

45.  There will be an order for the elder brothers to enter judgment in terms of the prayer for relief herein (with the appropriate amendments indicated during trial).  The younger brothers’ counterclaim is dismissed.

Other matters

46.  As stated in para 15 above, leave was given to the elder brothers to adduce the Jan 2013 letter.  The reasons for doing so are summarized below.

47.  Evidence in civil proceedings is admissible if it has adequate probative value.  In relation to hearsay evidence, it is likewise not to be excluded unless objected to and its exclusion is not prejudicial to interest of justice: s 47(1), Evidence Ordinance (Cap 8), especially s 47(1)(b).

48.  In view of the above, and in the present context, the only valid reason for the younger brothers to seek the exclusion of the Jan 2013 letter is, for example, that its late production would irreparably prejudice them (and thereby would also prejudice the trial).  They were unable to put forth such a reason for the simple reason that the Jan 2013 letter emanated from their own former solicitors.  Further, there was no need for a general or substantial adjournment of the trial (for instructions to be taken, or to adduce other evidence (no such application has been made)).  As can be inferred from para 16 above, the younger brothers were ready to respond to the contents of the document.

49.  In their written final submissions, the younger brothers ask that no or little weight be given to the Jan 2013 letter, relying on ss 47A(4)(b) and 49(1) and (2), Cap 8 (especially s 49(2)(e)).

50.  For the reasons given in para 16 to 23 and 48 above, and in this paragraph, I disagree with para 49 above.  As regards s 49(2)(e), Cap 8, reference is here made to a list of properties attached to the Jan 2013 letter not having been adduced as well.  However, the reason why that happened has to be considered in the relevant factual context.  When the elder brother sought to adduce the Jan 2013 letter during trial, the younger brothers objected to it.  The elder brothers then indicated that they only intended to rely on the quoted passage (para 14 above) and thus they would not need to adduce the said property list.  The younger brothers themselves did not raise objection to that indication at the time, nor did they seek to adduce the said property list (whether for cross-examination purpose, or as part of their own case).  In such circumstances, it is inappropriate to make use of the absence of the said property list as a factor for estimating the weight to be given to the Jan 2013 letter.

51.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs order

52.  The parties agree that the costs of this action should follow the event.  There will accordingly be a costs order that those costs (including any reserved costs) be paid by the younger brothers to the elder brothers to be taxed if not agreed.