CHEUNG YAU BOR AND OTHERS v. WONG FOOK AND OTHERS

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J U D G M E N T

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Cons, V.-P. delivered the judgment of the Court:

1. The Lok Wah Public Light Bus Association was formed in 1982, although it passed then under a different name. The membership too at that time was slightly different from the present, but for all material purposes it may now be taken as the 14 persons who are parties to the proceedings from which this appeal derives.

2. Each is the owner of a public light bus and the Association was formed to tender for the franchise to operate, with their combined buses, a package of 3 routes in the northeastern part of the Kowloon Peninsula. The tender was accepted by the Transport Department and actual business commenced in Match 1983.

3. The effective grant of the franchise was achieved by the issue of a Passenger Service Licence, apparently sometimes known as a Green Mini Bus Licence. In 1983 it was the policy of the Transport Department to issue such licences only to named individuals. The Department would not accept partnerships or limited companies. The individual who received the licence in the present instance was a Wong Fook. It was he who, together with a Mr. Yip Hing Chuen, had taken the initiative to organise the Association and had carried out the donkey work necessary to set up on a solid and legal foundation. Wong Fook became the Treasurer of the Association. The management was initially entrusted to Mr. Yip, but as he was not himself the owner of any of the public light buses involved in the operation the Transport Department took objection and within 3 months Wong Fook had to assume the duties of Manager as well.

4. Financially speaking the partnership appears to have been a great success. Unfortunately however differences arose between Wong Fook and the other partners. It is not necessary at this stage to go into the details. They have been clearly recounted by Rhind J. in his judgment dated the 11th February. It is sufficient to note here that in 1986 Wong Fook was replaced as Manager and Treasurer by some 10 of the other partners who together formed what they called a "Control Squad". Legal proceedings were commenced the following year. Eleven of the partners were Plaintiffs. Wong Fook was made the first defendant; others were one partner who took his side in the dispute, and a third who apparently had no strong feelings either way.

5. Many matters were raised in the action and dealt with by the judge in the judgment to which we have just referred. Only one concerns us now, that is, who should hold the Passenger Service Licence. By the prayer to the Statement of Claim the Plaintiffs had requested an order that Wong Fook should transfer the licence either to the Association or to such person as the Plaintiffs should nominate. Wong Foot had at first denied that the other partners had any interest in the licence, but during the course of the hearing conceded that he held the benefit thereof in trust for the partnership as a whole and also that, for reasons which need not detain us he was no longer suitable to fill the office of trustee.

6. The relevant part of the judgment - no formal order has ever been drawn up and entered - reads -

" The order I make, therefore, is that Wong Fook shall transfer the Licence to whichever partner in the Association is approved by the Transport Department as fit to hold it. In the event of Wong Fook withholding any necessary consents for such a transfer, the Registrar Of the Supreme Court is empowered to sign documents on Wong Fook behalf signifying consent to such a transfer."

7. Two or three days later a meeting of the partnership was held at which 7 members voted for Lam Muk Chiu, the 6th Plaintiff, to take over the licence while six voted for another partner, Wong Fook was not- present at the meeting. His main complaint now is that he was thereby deprived of the opportunity to put his case against Lam Muk Chiu, whom he considers unsuitable as the licence holder, to the other partners. Whether he was given notice of the meeting is a matter of dispute to which we must return later.

8. Strictly speaking, a licence of this kind cannot be transferred. What the Transport Department does, in circumstances like the present, is to accept the surrender of the old licence and grant a fresh licence, if it approves, in the new name put forward. However before the Department will even begin to consider whether a new application should be approved, it requires a Letter of Surrender from the actual holder of the licence, together with certain other documents, and also the individual consents of each member of the partnership.

9. Accordingly, the Plaintiffs wrote through their solicitors asking Wong Fook to do what was necessary. He, also through his solicitors, was obstructive, and as by the 11th April he had still not complied with the Plaintiffs' requests they made application to the Court. The summons came on before Rhind J. on the 9th May when he made an order which, apart from paragraph 4 which is not material, has been entered as follows -

"IT IS ORDERED that : -

(1) The Registrar of the Supreme Court is empowered to sign on the 1st Defendant's behalf a letter in the attached form signifying his consent to a transfer of the Passenger Service Licence to the 6th Plaintiff and the signature shall be of like legal force and effect as if given by the hand of Wong Fook, the 1st Defendant.

(2) The 1st Defendant do complete and sign the attached Application for Passenger Service Licence Certificate and forward the same to the Plaintiffs' solicitors within 7 days from the date of Order.

(3) The 1st Defendant do deliver to the Plaintiffs' solicitors within 7 days from the date of Order the certified true copies of the following documents for the submission to the Transport Department :-

(a) Hong Kong Identity Card of the 1st Defendant;

(b) Vehicle registration book of the public light bus used in the operation of the route by the 1st Defendant;

(c) documentary evidence to show that maintenance and service facilities of the 1st Defendant's public light bus are provided by appointed garage;

(d) records of any mortgages, loans or hire purchase commitments of the 1st Defendant during the past 12 months and statement of any outstanding liability certified by concerned finance company or bank;

(e) business registration certificate of 1st Defendant.

(4) ......................................

(5) There be no order as to costs."

It is against that order that Wong Fook now appeals. There have been other proceedings, since which are not material to the appeal. We need only add that the order of the 9th May was eventually complied with on the 31st May and that on the 15th July the licence to Wong Fook was cancelled by the Transport Department, which at the same time issued a fresh licence to Lam Huk Chiu.

10. We turn now from the facts to the law. What is commonly called a partnership is no more than a contractual arrangement made between the members thereto and is generally reduced to writing in a formal document. That was carried out in the present instance by solicitors instructed by Wong Fook and took the form of a deed executed by all the partners on the 1st October 1982. Statute however also takes a hand in the arrangement. Section 26 of the Partnership Ordinance Cap. 38 provides -

"26    The interests of partners in the partnership property, and their rights and duties in relation to the partnership, shall be determined, subject to any agreement, express or implied; between the partners, by tire following rules -

........................................

(h) any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners, but no change may be made in the nature of the partnership business without the consent of all existing patners; and ..."

11. The partnership deed in the present instance contains no provision with regard to "any difference arising as to ordinary matters connected with the partnership business", save perhaps for Clause 30, which provides for partnership determined to be determined in accordance with the provisions of the Arbitration Ordinance. But in any event this has not been invoked. It was correct therefore for the question of who should take over the licence from Wong Fook to be decided by way of a vote.

12. The matter does not end there however. The next point is most conveniently set out in Lindley on Partnership 15th Edition at p.477 -

"    A very important rule respecting the powers and votes of majorities is, that a majority; to have any weight, must act and be constituted with perfect good faith; for every partner has a right to be consulted, to express his own views, and to have those views considered by his co-partners. In the language of Lord Eldon, that is the act of all, which is the act of the majority, provided all are consulted, and the majority are acting bona fide, meeting, not for the purpose of negativing, what any one may have to offer but for the purpose of negativing, what, when they are met together, they may, after due consideration, think proper to negative: For a majority of partners to say: We do not care what one partner may say, we, being the majority, will do what we please, is, I apprehend, what a court of equity will not allow'."

13. The authority from which the quotation is taken, Const v. Harris (1824) Turn. & R. 525, was concerned with the Theatre Royal, Convent Garden, and the appropriation of profits made from entertainments presented there. These had been regulated by a deed to which all the proprietors of the theatre were party. By an agreement some 10 years later the majority of the proprietors, holding 7/8th of the shares in the theatre, purported to deal with the property and the profits in a manner inconsistent with the earlier deed, appointing a fresh treasurer in substitution for one who had been obliged by way of security to carry out the earlier provisions. The holder of the remaining 1/8th share was not consulted on these matters. It was held by Lord Eldon that the actions of the majority were invalid and he appointed a Receiver.

14. It follows that whether Wong Fook was given notice of the meeting on the 13th February and of what was to be discussed is a matter of crucial importance. By his own affidavit he alleged that -

"(i) I was never notified of any meeting at Lok Wah Palace Restaurant held on 13th February, 1903 wherein the said Mr. Lam was purportedly elected to be the licence holder in place of myself, isle to draw to the attention of this Honourable Court that at the trial of this action; it was clearly put to the Plaintiffs that they never served me with notices of meetings. Their answer was that they always had given me notice but they never bothered to keep a register of any such service nor sent it by registered post. I respectfully say that they are repeating the same injustice on are in not notifying me to attend any meeting; thereby depriving me of any opportunity to speak and vote."

15. In reply the Plaintiffs' solicitor affirmed -

"8.    I was informed by the 6th Plaintiff and verily believe that : -

(a) notice of meeting on 13th February; 1988 was orally related to the 1st Defendant by the 11th Plaintiff on or about, the 11th February, 1988 at the minibus stop at Lok Wah Estate;"

16. The judge resolved the issue in these words, so far as we have them from a note agreed by counsel and which we understand the judge has approved -

"    There is conflicting affidavit evidence before me whether or not the 1st Defendant was given notice of the 13th February meeting in which the 6th Plaintiff was elected. Some criticism can be made of the fact that the Plaintiffs were not more careful about giving written notice to the 1st Defendant after the disputes voiced in the trial. However the court cannot assume that the Plaintiffs had failed to give notice; the court should assume that normally partnerships are properly run."

17. With respect to the judge below, we see no reason why the court should make that assumption; especially when the same judge had earlier spent 6 days listening to suggestions that this particular partnership had indeed not been properly run. Mr. Thomas Lai, who appears for the Plaintiffs, has drawn our attention to several matters which he suggests indicate clearly that notice had in fact been given. We find ourselves unable to agree. The only thing that we think clear is that there was a direct contradiction in the affidavits which could only have been properly resolved by the calling and cross-examination of witnesses. A conclusion reached in any other way cannot be maintained and any order made thereon must be set aside.

18. However the contradiction still remains unresolved and this court is in no better position than was the judge. We therefore think that the best course, even though neither party has so suggested, is to refer the matter back to the judge to come to a proper conclusion on the issue in the light of the comments we have made.

19. If he finds that Wong Fook was given proper notice, that will be an end of the matter, for there is no merit in the ether ground of appeal, which we have to say was only faintly argued. No further order will be necessary, except perhaps as to costs, for the issue of the new licence correctly represents the wishes of the majority of those in the partnership who chose to express a view.

20. If the judge finds that Wong Fook was not given proper notice then he will have carefully to consider what order he should make in the circumstances as they now stand, bearing in mind, in addition to whatever evidence the pasties choose to put before him, that the issue of a licence is a mater within the sole discretion of the Transport Department. No doubt the judge will appreciate the assistance of counsel in this regard.

21. For the reasons we have just given we allow the appeal to the extent of setting aside the order made on the 9th May, except with regard to the fourth paragraph and remit the matter to the judge below. We would be pleased to hear counsel as to costs.