LAU KWONG HING v. LUK CHI KEUNG AND ANOTHER

HCA2231/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2231 OF 1995

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J U D G M E N T

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1. This is the trial of a claim by Mr Lau Kwong Hing ("Mr Lau") against the 1st defendant Mr Luk Chi Keung ("Mr Luk") and 2nd defendant Wan Chun Yi ("Mrs Luk") who are husband and wife, in respect of goods supplied by Mr Lau to the defendants ("the Luks"), which, it is alleged, had not been fully paid.

2. There are altogether seven invoices relied on by Mr Lau. The invoices are numbered 224, 225, 227, 232, 1051, 1052 and 1053. They covered a range of goods by way of leather garments. The total amount of the seven invoices was $821,290. Mr Lau acknowledged that in respect of the sum of $821,290, a total sum of $116,002 had been paid, and the amount therefore claimed by Mr Lau in this action is the sum of $705,288.

3. The history of litigation of this has been long and tortuous. It is not necessary for me to dwell on the details except when it is absolutely necessary. But for an understanding of the final result, it is necessary to recite that earlier on in 1995, there was an application by Mr Lau for summary judgment. By the judgment of Keith J (as he then was), he gave summary judgment to Mr Lau in the sum of $123,487 against Mr Luk but with leave to defend the balance in relation to the Mr Luk and in relation to the whole amount against Mrs Luk.

4. The present position, at the trial of this action which started last week, is that Mr Lau has a claim against Mr Luk in the balance sum of $581,801, this being the difference between the figures of $705,288 and $123,487. Against Mrs Luk, however, since there was no partial summary judgment entered against Mrs Luk, Mr Lau claims the whole of the sum of $705,288 against Mrs Luk.

5. I would now proceed first to say something about Mr Lau and the Luks. Mr Lau trades, and has been trading for some time, under the Chinese name of "樂氏皮褸". The way he came to use that name was described in his evidence and in the evidence of Rodriguez Chan ("Chan"), his brother-in-law. Chan had first started his business under the original Chinese name of "樂氏皮褸" and under the English name of "Rodriguez Enterprise Company". Some time in the early 90's, Chan decided to cease his business and agreed to allow his brother-in-law, Mr Lau, to run a new business under the name of "樂氏皮褸". Mr Lau then registered his business under the Chinese name of "樂氏皮褸" and also with the English name registered as "Rods Leather Company". So far as the present proceeding is concerned, all the transactions of the Luks were with Mr Lau, namely Mr Lau trading as "樂氏皮褸". There was clear evidence that there was no business dealing between Chan trading as Rodriguez Enterprise Company or under his Chinese name of "樂氏皮褸" with Mr and Mrs Luk at all.

6. I now turn to examine the business of the Luks. It is clear, and I do not think there is too much dispute, that an extensive business had been run by Mr Luk with the help of Mrs Luk, and certainly they would have run the business of not only the "威世界" but also previously a business with the name of "新麗都皮褸". The relationship between Mr Lau and the Luks went back to at least 1992, if not earlier.

7. The dispute at the trial had eventually resolved into three issues. The first issue is in relation to the correct identity of the plaintiff seller and of the defendant buyer. The second issue, which is the main issue at the trial, is whether in respect of the seven invoices, the subject of the claim, the Luks had made either full or substantial payments, i.e. substantial payments in addition to the amount that was admitted to have been received by the plaintiff. The third issue, which relates only to Mrs Luk, is whether she had held herself out as a partner of Mr Luk's business, and that therefore she should also be personally liable.

8. Before I go on to deal with the issues, I should first say something about the witnesses and their credibility.

9. Three witnesses gave evidence for the plaintiff and two witnesses gave evidence for the defendants. The principal witness for the plaintiff is of course Mr Lau himself. He is an excellent witness. I am impressed by his evidence and I accept that he is a reliable witness. Two other witnesses also gave evidence for Mr Lau, one is Chan whose evidence is brief, and I accept his evidence. The other witness is Mr Lee, the solicitor for Mr Lau who explained how misunderstanding and mistake had occurred which led to certain documents being issued for Mr Lau, and I also accept his evidence.

10. The evidence of the defendants came principally from Mr Luk. Mr Luk is by any standard an extraordinary person. He is, in my view, an intelligent but not a reliable person. He is an experienced businessman, knowledgeable about the ways of the world and, in my view, he has made use of the laws to his advantage, and to the unfair disadvantage of Mr Lau. This has been going on for the last six years. Time and again, I find that Mr Luk's evidence and his assertions to be so outrageous and incredible that there is no room for doubt that his case could not be accepted. Except when his evidence is agreed to by Mr Lau or powerfully supported by contemporaneous undisputed documents, I reject all the evidence given by Mr Luk.

11. Mrs Luk is a lady who obviously was doing her best to support her husband. It is unfortunate that she had been put too long under the thumb of her husband and she was compelled in a way to tell a version which is not acceptable and not believable. I do not accept her evidence much as I like her as a person.

12. I now turn to consider each of the three issues in turn.

13. The first issue is really for me a non issue. Mr Luk sought to argue that because of the way the name of either Mr Lau's business was expressed or the way the plaintiff's name was expressed, therefore the claim of Mr Lau should fail. So far as the transactions were concerned, it is not in dispute that the business dealings whereby the goods purchased by the Luks from Mr Lau trading as "樂氏皮褸", were all done in Chinese, and there can be no doubt that the person who had supplied the goods to Luks and to whom was owing the money for the goods, was Mr Lau trading as "樂氏皮褸" .

14. It is unfortunate that when the writ was issued, it was issued (with the title of the plaintiff described as "Lau Kwong Hing trading as Rods Leather Company") by the use of the English name "Rods Leather Company" rather than the Chinese name "樂氏皮褸". Mr Luk tried to take advantage of this. I granted leave to amend the title of the plaintiff by deleting the English words "Rods Leather Company" and substituting that with the Chinese words "樂氏皮褸". There can therefore be no doubt that Mr Lau as the correct plaintiff was suing in the action for recovery under these seven invoices. The fact that the older invoices from the stationery left over by Chan was used by Mr Lau provides no justification for the Luks to escape liability. If there was any doubt, that doubt was dispelled by Chan giving evidence to say that he had no dealings with the Luks, had made no claim against the Luks and will make no claim to the Luks.

15. So far as the identity of the defendants is concerned which might provide any basis for defence, again, I can see no basis for any such defence. This was especially so after I gave leave for the heading of the action to be amended by the deletion of the English words "Wai Sai Kai Leather Company" and substituting them with the Chinese words "威世界" and/or "威世界皮褸". So far as the first issue is concerned, I can see no merit in any defence.

16. I turn to the second issue. Most of the time during the trial that had been spent was used in dealing with the two complicated versions raised by the Luks to contend that payments had been made for the seven invoices. The first version was to the effect that the documents LCK-1 to LCK-8 show that very large payments had been made for the seven invoices. This was the stand maintained by the defendants from the very beginning, way back in 1995, and continued all the way throughout the trial. A second version, however, was raised at the trial. Reliance was placed by the Luks on some six cheques said to be given in payment for the seven invoices. Although these cheques were not honoured, nevertheless, cash payments were made to replace these six cheques.

17. The dispute between the parties largely turned on whether cash payments which had been made were in relation to these seven invoices. The way the business had been conducted between the parties was that Mr Lau, when goods were delivered or shortly thereafter, would issue an invoice to cover the particular lot of goods delivered. The book of invoices of Mr Lau consists of a set of three copies for each invoice: a white original, a pink copy and a yellow copy. The white original would normally carry the signature of one of the Luks, acknowledging receipt of the goods and also the value of the goods agreed to be the subject of the sale. That white original would not, however, be given to the Luks by Mr Lau until when full payment had been received for that invoice. The pink copy would be given to the Luks and the yellow copy would be retained by Mr Lau. There is no dispute at the trial that this was the system in operation throughout.

18. On the second issue, it is possible to decide the question immediately in favour of Mr Lau because he, at the trial, produced to the court the white originals of the seven invoices in question (Exhibits P1 to P7). The defence of the Luks is that payments had been made in respect of the seven invoices, and yet Mr Lau has the white originals of all seven invoices which proves, according to the course of dealing between the parties, that they had not been paid. On that ground alone, the court is able to reject the defence of the Luks that payments had been made for the seven invoices.

19. Since the matter had been extensively debated on the two different versions of the Luks, I would go on to consider these two different versions.

20. The first version of the Luks relies on LCK-1 to LCK-8. LCK-1 and LCK-2 which were put before the court, however, are not originals. They bear the handwriting and the signature of Mr Lau, and they show various sums paid on various dates and acknowledged by Mr Lau as having received such sums by putting his signature. The dispute between the Luks and Mr Lau on LCK-1 and LCK-2 turns on a narrow question as to whether they were payments made in 1992 or 1994 (as possibly contended by the Luks) because if they were payments made in 1992 for invoices rendered in 1992, then the payments made under LCK-1 and LCK-2 could not possibly amount to payments made in respect of the seven invoices. The reason is because the seven invoices were all for goods supplied in January 1994.

21. Mr Lau shows a powerful matching or correlation of the payments made under LCK-1 with seven invoices being Nos.97, 98, 99, 100, 101, 103 and 107, and these copy invoices show also contemporaneous notations made by Mr Lau of receipt of cash which correspond with the entries on LCK-1. An example of this can be seen by looking at invoice No.100 (page 64 of the bundle) which shows four entries of receipt of cash :

1) 22 September 1992 - $11,200;

2) 24 September 1992 - $10,000;

3) 25 September 1992 - $10,000; and

4) 29 September 1992 - $10,000.

Each of these amounts on each of those dates with the exception of the last one (with one day difference), all match exactly the entries on LCK-1.

22. The same could also be said for LCK-2. Again, you will find a high degree of matching between LCK-2 and the corresponding invoices, being invoice Nos.67, 68, 70, 76, 77, 78, 86, 87, 88 and 94. The invoice No.78, with four entries of $10,000, $10,000, $10,000 and $5,900, provides another excellent example of perfect matching.

23. The Luks, in their attempt to resist the inevitable inference to be drawn by the records that LCK-1 and LCK-2 were not payments made for the seven invoices in question, tried to cast various doubts on various minor aspects of Mr Lau's case. I find nothing said by the Luks to be convincing, and I have no doubt that the Luks had failed to show that the LCK-1 or LCK-2 payments were in relation to the seven invoices. It is to be noted that nowhere could the Luks pinpoint or suggest whether any particular payment under LCK-1 or LCK-2 relate to any particular one of the seven invoices. There is, therefore, no substance in the defence in relation to LCK-1 and LCK-2.

LCK-3 provides a different story. The original of LCK-3 was produced by the Luks. The rival versions put up by the parties are as follows. Mr Lau admitted that he did write LCK-3 which was a record of orders placed by the Luks with him and that was why it was recorded in that way. There was no question of any money received by him for the seven invoices or connection between LCK-3 and the seven invoices. Mr Luk's version is that LCK-3 evidenced goods, i.e. 106 leather coats of two models, taken away illegally and unlawfully and against the will of the Luks by Mr Lau and/or people engaged by him, and that took place on the morning of 6 January 1995 after an incident described by him on the evening of 5 January 1995. Having regard to my finding of credibility in favour of Mr Lau and against Mr Luk, I have no doubt that Mr Luk's version is not to be believed. It is to be noted that just two days after 6 January, on 8 January 1995, Mr Luk made cash payment of $1,500 to Mr Lau as further payment for settlement of outstanding invoices. The 106 leather coats, according to evidence of Mr Luk, were worth over $300,000 if measured by retail sale value from his shop. It is inconceivable that if Mr Lau had taken away such a lot of valuable goods, having regard to Mr Luk's character, (even if he had allowed such an event to take place, which it is difficult to imagine) that on 8 January he would make payment of $1,500 to Mr Lau. If Mr Luk's defence of having made substantial payments for seven invoices is correct, then, by 8 January, Mr Lau would be in debt to him, having taken the 106 coats, so why should Mr Luk be making a cash payment of $1,500? The excuse given by Mr Luk at the trial of paying $1,500 cannot possibly be accepted. It is also to be noted that this Luk version of the taking away of the coats was nowhere said in any of his previous affidavits, nor is it the subject of, one would expect, a counterclaim if there is any substance in it. So, I reject the defence based on LCK-3.

24. For LCK-4, again, the original is produced. This was said to prove that Mr Lau had taken a sum of $1,680 from the sale of a coat at the shop and that the sum he had kept and had not been given back to the Luks. Mr Lau said this was the incident on 27 January which resulted in police being called, and that he returned the money in the presence of the police. I prefer the evidence of Mr Lau. It is also to be noted that this allegation was nowhere stated in the earlier affidavit of Mr Luk. I think it is also worthwhile to be reminded that if police was called, around the 27 January which was confirmed by the very first affidavit of Mr Luk, it was hardly likely that Mr Lau would refuse to return the money and yet dare to lie in court about having returned the money.

25. Mr Luk said there was another incident involving exactly the same amount. It was on that occasion that Mr Lau returned the money. I think the story of two identical sums, happening about the same time, is typical of the kind of stories that are spun by Mr Luk with the hope that the court might be stupid enough to believe such stories. According to Mr Luk, there are just many many occasions where coincidences happened. I do not accept that in real life things happened in such manner. The defence based on LCK-4 is also rejected.

26. There is no issue on LCK-5. LCK-6 to LCK-8 are really not in dispute, because Mr Lau accepted and, by his own evidence, had agreed that the total sum of $116,002 had been received in relation to the seven invoices. The evidence on this from Mr Lau is set out in, firstly, the evidence of Mr Lau, backed up powerfully by what he wrote on the back of Exhibit P1, namely the white original of invoice No.224 and on Exhibit P8, which is really a continuation of the back of Exhibit P1. These entries were various cash payments, starting from April 1994 to 8 January 1995, amounting to the total sum of $116,002. LCK-6, LCK-7 and LCK-8, totalling the sum of $56,340, are really part of the monies paid as evidenced in Exhibit P8 or part of that total sum of $74,340. So, there is really no dispute between the parties in relation to LCK-6, LCK-7 and LCK-8.

27. The first version of the Luks (with the exception of LCK-5, LCK-6 and LCK-7) that substantial payments had been made in respect of the seven invoices therefore fails.

28. I turn to the second version of the Luks. Their second version is that there were six cheques given by Mrs Luk to settle the seven invoices. The six cheques relied upon were Nos.036528, 036538, 036539, 036540, 036541 and 036550. I think it is true that at the very beginning of the commencement of the action, for reasons which have not been explained (with the possible exception of the lack of professional skill on the part of the solicitors representing Mr Lau), Mr Lau put up a case that those six cheques were given in payment of the seven invoices. But that version, Mr Lau discovered, is quite incorrect. The evidence of Mr Lee, in particular the letter written by him to the Legal Aid Department, clearly shows that there had been a misunderstanding of the true position. At the trial, when the Luks sought to rely on the six cheques, Mr Lau had carefully explained to the court, with the support of all the contemporaneous documentation, that the six cheques in question together with two other cheques, namely Nos.036538 and 036549, were really issued in attempted payment of four earlier invoices. These four earlier invoices are Nos.201, 211, 214 and 238.

29. At the trial, the parties had switched positions in the sense whereas Mr Lau had earlier relied on the six cheques and connected them with the seven invoices in question whereas the Luks, relied on LCK-1 to LCK-8, at the trial the Luks adopted Mr Lau's 1995 position and relied on the cheques as evidence of payment for the seven invoices whereas Mr Lau said that the eight cheques were in fact given in payment for four early invoices. So, the question is : what were the eight cheques given for? There can be no doubt if one just looks at the series of four cheques and at another series of two cheques, they clearly support Mr Lau's present position. The four cheque Nos.036538, 036539, 036540 and 036541 was each in the sum of $93,050. Four times $95,050 amount to the sum of $372,200 which is exactly the sum of invoice No.211. Similarly, if you look at cheque Nos.036549 and 036550, each in the sum of $133,050, the total sum matches invoice No.214 in the sum of $266,100.

30. The contemporaneous documentation, produced by Mr Lau showing the entries made by Mr Lau in these four invoices, and also on the back of the photocopies of the invoices, powerfully support Mr Lau's case that the cash payments made pursuant to each cheque were in respect of these four invoices, namely invoice Nos.201, 211, 214 and 238, and they were not made in relation to the seven invoices which the plaintiff is now suing on in this action.

31. It is also to be noted that the cash payments made in substitution for the eight cheques covered the period starting in late November 1993 to early March 1994. The table provided by Mr Lee in his submissions shows that the chronology of the payments follows this pattern of payments made in various amounts over the period of time from November 1993 to March 1994. The question is whether these payments were made in relation to invoice Nos. 201, 211, 214 and 238 of 1993 or whether they were payments made for invoices only issued in 1994, namely the seven invoices in this action. I have no doubt that these payments, pursuant to the eight cheques, were made for the four invoices of 1993. It should be noted that following the making of these payments, from April 1994 onwards (i.e. for the period from April 1994 to early January 1995) payments totalling $116,002 were made to cover invoice No.224. So, everything fits together.

32. The question that I put to Mr Luk in the course of his evidence is if the cash payments under the eight cheques from late 1993 to March 1994 were made in relation to the seven invoices of 1994, then when and in what way were the four earlier invoices of 1993 settled? I received no satisfactory answer from Mr Luk. The impression I have is that there was an implied admission by him that they might not have been paid. That makes no commercial sense because people, generally and normally by ordinary commercial behaviour, would make settlement of the earlier invoices first before making payment for the later invoices. I have, therefore, no doubt that the defence of the Luks on the second version of cash payments made in relation to the eight cheques in settlement of the seven invoices of 1994 could not be accepted by the court.

33. The true position is that now advanced by Mr Lau, namely the cash payments made as evidenced by the documents relating to the eight cheques were in connection with the four invoices of 1993, and not in connection with the seven invoices of 1994. So, on the main issue, the defence fails.

34. I now turn to the last issue, i.e. the liability of Mrs Luk for the seven invoices. Mrs Luk, by her own admission, worked in the business. The difference between the parties is whether she played, as she said and as said by her husband, a minor role and she was really a housewife who occasionally came into help, or whether, as said by Mr Lau, she was as much of the business as her husband. Of course, I accept that Mr Luk played the dominant part. His personality has seen to that.

35. My observation of Mrs Luk is that she was a capable lady, well adapted to the way of business, had taken an active role in the business, worked there regularly, had dealings not only with Mr Lau but also with other suppliers of goods and ran the employees. She, by her own admission, had direct dealings with Mr Lau in the ordering of the goods and the negotiation of the price. I do not accept that she did it only as instructed by her husband.

36. I accept the evidence of Mr Lau that Mrs Luk had informed Mr Lau on more than occasion that she was a partner in the firm and that was why she was writing cheques and Mr Lau accepted the cheques. The large number of cheques that we have seen went back to 1992 and they were not just restricted to the few transactions under the seven invoices. This speaks powerfully to me that Mrs Luk played an important role in the business and I have no doubt that Mr Lau is correct that representations had been made by Mrs Luk which were accepted. Of course, the acceptance of representations was not based on the mere sayso of Mrs Luk. It was also supported by surrounding circumstances of the active role played by Mrs Luk in the business. Therefore, on the third issue, I also find in favour of Mr Lau against Mrs Luk. It follows therefore that Mr Lau is entitled to judgment against her.

37. Having regard to the fact that the matter has been outstanding for six years since the writ was issued, it seems to me that interest at a reasonable rate above prime should be ordered. There should, therefore, be judgment in favour of Mr Lau against Mr Luk in the sum of $581,801. This sum is reached because there is already a judgment entered in 1995 by Keith J pursuant to Order 14. There should be interest against Mr Luk on the sum of $581,801 at 11% for six years, which amounts to the sum of $383,988.66.

38. The judgment against Mrs Luk is in the full sum of $705,288 together with interest thereon, again, at 11% for six years. That interest therefore runs to $465,490.08 and that is the judgment of this court.

39. Having regard to the history of the matter, I propose that the costs of the action should be awarded to Mr Lau against the Luks, but with the costs of the trial to be summarily assessed by way of gross sum assessment under Order 62, rule 9(4)(b) which I will now hear the parties.

[Submissions from counsel]

40. On the matter of the costs, having heard the parties, I order that the costs of the trial, lasting eight days, which started on Monday last week until today at 6:20 pm, should be assessed in the sum of $220,000, which sum is to be paid forthwith.