CHIA LAI HING v. SHUM KWOK CHUNG AND ANOTHER

DCCJ 1679/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1679 OF 2003

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J U D G M E N T

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1. In this claim the Plaintiff claims against the Defendants for repayment of loans made by the Plaintiff to the Defendants totalling $438,572.80 made at various times and in different sums in connection to the restaurant business named Hoi Sing Restaurant ("the Restaurant").

The Plaintiff's Case

2. The Plaintiff's witnesses were the Mr. Wong Chi Lok, a staff in the Restaurant, the Plaintiff's husband Mr. Wong Chi Ming, and the Plaintiff. The Plaintiff's version of facts is contained mainly in the Plaintiff's evidence.

The Plaintiff's Evidence

3. The Plaintiff and her husband Mr. Wong Chi Ming (hereinafter referred to as "Mr. Wong") were close friends of the Defendants. The 1st Defendant had been a close friend of the Plaintiff's brother-in-law for 20 years and the 1st and 2nd Defendants were friends and neighbours of the Plaintiff and her family. The 2nd Defendant had been working as a part-time employee of the Plaintiff's husband at his cold meat shop in about 1996 for half a year. The Plaintiff, and the 2nd Defendant were in regular contact and were very close.

4. The Plaintiff's husband operated and still operates a Hong Kong-Mainland transportation business, which required frequent travel to the mainland. The 1st Defendant operated the Restaurant situated at Shop 2H, Ground Floor, Fanling Centre, New Territories, which was in the vicinity of where the Plaintiff was and still is living. The 2nd Defendant worked as a waitress and helped with the management in the Restaurant.

5. In about November 2001, the 2nd Defendant approached the Plaintiff's husband to ask him to lend money to herself and the 1st Defendant. The Plaintiff's husband asked the 2nd Defendant to approach the Plaintiff. Subsequently a few meetings ensued between the Plaintiff and the Defendants in a Café near the Plaintiff's home. The Defendants informed her that the 1st Defendant opened the Restaurant in partnership with a partner. He stated that because the economy was poor, business was not good. His relationship with his partner was not harmonious. He did not have the money to buy his partner's share. He suggested to her whether she would be interested in buying the share of his partner in the business. She stated that she had never worked in a restaurant. She had not participated in business. As the economy was not good she would not buy the share in the business.

6. She learnt that the restaurant only had a temporary licence. An actual food licence had not been issued. She thought that as the partners could not get along so soon after commencement of the business. It would be troublesome to purchase the share. She therefore declined the proposal.

7. She stated that the 1st Defendant had not introduced his partner to her and she had never met him. Later the Defendants requested that she lent them $330,000.00 so that they could buy the partner's share.

8. After discussion of the details of the loan and repayment on 8th December, the Plaintiff issued a cheque dated 8th December 2001 for $100,000.00. A second cheque was issued dated 10th December 2001 in the sum of $170,000.00. Both cheques were blank and had no payee. The Defendants informed her that $300,000.00 was required to buy the share of his partner whom she subsequently knew to be Kwong Tong Tsan.

9. The Defendants suggested the Plaintiff to work in the Restaurant as a cashier as she was then unemployed. She commenced working in the Restaurant as a cashier from 15th December 2001.

10. Soon after, the Defendants requested that she lent them the balance of the loan of $330,000.00. She issued two cheques in the sums of $40,000 and $20,000.00. Both cheques were dated 18th December 2001.

11. On 19th December 2001, the 1st Defendant took her to his bank, the Bank of China and opened a joint account in names of herself and the 1st Defendant. This was to be the bank account wherein the Restaurant's income was deposited. The 1st Defendant stated that this would be convenient and it would provide her with some security so that she would know what the state of the business was and when there would be sufficient money to repay her. The 1st Defendant kept the ATM card issued to this account. He would be able to make withdrawals from the account by means of this card. She did not know the PIN of the ATM card. The 1st Defendant kept the savings passbook. Cheques drawn on the account required two signatories, namely the 1st Defendant and herself.

12. On a date in January 2002, the 1st Defendant called her to go with him to the Management Office of the landlord of the Restaurant premises to apply for reduction of rent. The 1st Defendant requested her to go to hear what transpired. When she got there, she found that a man was there. The 1st Defendant went to talk with him. The two men then spoke to the staff from the Management Office. At the time, she felt that it had little to do with her. She was not too attentive to the conversation. Subsequently she left and the 1st Defendant and the other man remained.

13. On 8th February 2002, at about 10 a.m., the 2nd Defendant telephoned her and asked her to return to the Restaurant immediately as she had urgent matters to discuss with her. Immediately when the 2nd Defendant saw her, she took her aside. She came to know that bailiffs had come to the Restaurant to execute a distress warrant for rent in arrears from 1st December 2001 to 31st January 2002. The 2nd Defendant requested her for help to pay the arrears of rent. The 2nd Defendant stated that they had no money to pay the arrears of rent. She thought that the whole family of the Defendants depended on the business of the Restaurant for their livelihood. If the Restaurant had to be closed, the money she lent could not be repaid. Whereas if she lent the money for the arrears of rent, at least there is a thread of hope the money would be repaid. In the pressure of the moment she issued a cheque in the sum of $108,572.80 to pay the money due.

14. On a certain day in February, when she returned to the Restaurant, the 1st Defendant informed her that the Management Office telephoned him to inform him that they would not reduce the rent. He stated that he wished to transfer the tenancy of the Restaurant into the joint names of herself and himself. When she heard this, she immediately objected. The 1st Defendant stated that he had already used her name to apply for transfer of the tenancy. She immediately telephoned the Management Office to inform them that she objected to having the tenancy of the Restaurant transferred to her name. The staff of the Management Office stated that if she did not agree, no one would force her to transfer the tenancy to her name. She again reiterated to the 1st Defendant that she did not agree to have the tenancy of the Restaurant transferred to her name, as the Restaurant business had nothing to do with her. The 1st Defendant apologised to her.

15. After this the staff of the kitchen and the bar requested for order of supplies of food. The 1st Defendant kept deferring the orders. This caused a lot of dissatisfaction on the part staff of the kitchen and the bar. Subsequently she received a lot of telephone calls from creditors chasing for payment of invoices. Others related to demands for repayment of personal loans.

16. On about 14th March 2002, during her working hours, the Defendants asked her for a further loan. They told her that their family would return to the Mainland for 5 - 7 days. As all their money was invested in the business, they did not have money and they asked her to lend them money for their expenses. The Defendants stated that during the period when they are in their native village, the Plaintiff could take the income from the Restaurant to repay her for this loan. Hence, she agreed to lend them this further sum. The 1st Defendant asked her to issue three cheques, the first one to the Sham Ka Lok, the Defendants' son who worked in the bar. As he would not return to work, wages had to be paid to him. The other two cheques were in the sum of $20,000.00 and $4000.00 both without payee. The Plaintiff took the income from the Restaurant during this period to repay her for this sum. Hence this loan has been repaid.

17. The Defendants left behind a booklet, the keys of the drawer where documentation related to the business are kept and the keys to the shop. During the time when the Defendants were away, the Restaurant was operating normally.

18. Whilst the Defendants were away, creditors telephoned to chase up payment. They sat in the Restaurant waiting for the 1st Defendant's return and left after they did not see him.

19. After a while, the 1st and 2nd Defendants had not returned. The chef Man Ko and herself telephoned them asking them to return. The 1st and 2nd Defendants returned. They stated that they are not going to run the Restaurant anymore. They stated that they gave the business to the Plaintiff. After she heard this she got very agitated. She stated that she lent them money, she did not want the Restaurant. During the quarrel, Man Ko the chef was there. He asked for the salary to be paid to the staff, as a lot of money was owed to the staff. They separated in anger without resolution. The Defendants thereafter did not return.

20. After this quarrel, the Plaintiff told Man Ko, the chef that she would not return to the Restaurant. She did not have money to pay the salary. She told Man Ko that there were supplies in the Restaurant. Sell these. Use the money from the income to pay the salary of the staff. She was leaving and was not returning.

21. In relation to the hand written statement of account at page 49a of the Bundle of Documents, the Plaintiff stated that she wrote that because the 1st Defendant asked her how much the Restaurant owed. At the bottom she wrote "各董事平均分債務115,051.50", which means, each Director bear the debt in equal shares $115,051.50. She wrote that because the 1st Defendant said, "let the other Director see this". The account was written on the 9th March 2002.

Evidence of Wong Chi Ming

22. He is the Plaintiff's husband. He is a trans border lorry driver. He and his partner own the business, which operate trans border transportation. Prior to that he owned a cold meat store in the wet market. He stated that he got to know the 2nd Defendant when she purchased cold meat from his store. Subsequently she worked in his cold meat store in the mornings for about half a year in 1996. The 1st Defendant was a close friend of his brother-in-law. They have known each other for 10 years. The 2nd Defendant was a close friend of the Plaintiff. The Plaintiff and himself and the Defendants had afternoon tea from time to time. He stated that the 2nd Defendant spoke to him about entering the business of the Restaurant. As he had his own business, he did not have time to look after anything else. Further he needed money for his own business and he did not have much money. So he refused. He told the 2nd Defendant to go to talk to the Plaintiff to see how much money she would lend the 2nd Defendant, as they are such close friends. He stated that his finances and his wife's are independent. He did not ask her how much money she had.

23. Subsequently, his wife told him that the 2nd Defendant asked her to lend her money. He knew that his wife lent money to the 2nd Defendant. His wife did not tell him how much she lent. Then she worked in the Restaurant as a cashier. Now and then he would go to the Restaurant to take his daughter to eat there as it was close to his home. Each time he ate there he paid for the food. He got to know Kwong for the first time in April 2002. That was when Kwong sued him, the Plaintiff, and the Defendants. He asked his wife what happened. She told him that she lent about $400,000.00 to the Defendants. When he was cross-examined as to why in his Defence to Action DCCJ2183 of 2002, before its amendment it was pleaded at page 4(a) thereof that the 2nd Defendant would lend HK$300,000.00 to the 3rd Defendant, he stated that he did not understand English and did not know the contents of the Defence until his friend explained it to him and he learnt that his then solicitors had not followed his instructions in drafting his Defence. Hence he changed his solicitors and filed an Amended Defence wherein it was stated that the loan was $330,000.00. He denied the allegation of the Defendants that in about the end of March, beginning of April 2002 he had requested the assistance of the 1st Defendant to contact Kwong to ask him to sign a document to authorize the Plaintiff to re-decorate the Restaurant.

Evidence of Wong Chi Lok

24. From 5th November 2001, the 2nd Defendant asked him to work for her to look after the bar in the Restaurant. He worked there until close to about mid March or thereabouts after the Defendants left the Restaurant.

25. During the period of his employment, the 2nd Defendant paid his salary in cash. When he started to work for the Restaurant, the 1st Defendant and Kwong owned it. Kwong's wife Ying Tse also worked there as a waitress. The son of the Defendants, Shum Ka Lok worked with him as his partner in the bar. In mid December 2001, Kwong and his wife left the Restaurant. At that time, the Plaintiff came to work there as a cashier. The 2nd Defendant introduced the Plaintiff as someone "who has come to do the work of a cashier."

26. The Plaintiff's working hours were 11 a.m. to 4 p.m., 7 p.m. to 11 p.m. His working hours were from 6 a.m. to 4 or 5 p.m. During the time he worked there, the Plaintiff worked every day of the week. She had rest days. She did not come and go at her own will. She only went out to make purchases.

27. It was the 2nd Defendant who paid all the staff their salary. In about March, the attitude of the1st Defendant was not good. Suppliers did not deliver food when ordered. An owner of a vegetable stall and a meat stall stated that it was because the 1st Defendant had not paid him. The 1st Defendant told the customers that the business of the Restaurant was not good, that he could not sustain it much longer. He saw that the 1st Defendant was not interested in continuing the business. He told the 2nd Defendant in mid March that he was not interested in working there. He gave 7 days notice to resign. After about 2 days, the 1st, 2nd Defendants and Shum Ka Lok did not come back to work anymore. The Restaurant was operating as usual because the chef Man Ko had the keys to open the Restaurant. Before they left, they did not inform them that they would not come back to work. Man Ko was concerned about his salary. The supplies were getting short. Man Ko asked him to telephone suppliers to place some orders. Where it was not possible to obtain deliveries they sent staff to the market to buy food.

28. After the Defendants failed to come back, he worked another 5-6 days because Man Ko told him to help out. After the Defendants left, they came back about once 3 to 4 days thereafter in an evening at about 6 p.m. He heard they made a big noise at the cashier's counter. They spoke about the business of the Restaurant. Man Ko told him that the Plaintiff had lent money to the 2nd Defendant and they argued about repayment. Further Man Ko wanted the 1st Defendant to account for his actions.

29. If there were issues to be dealt with in the Restaurant, they would ask the 1st Defendant. After the 1st Defendant left, they asked Man Ko. Man Ko asked him to help because Man Ko said that they will continue to open for business to use up the supplies to obtain income to pay off salaries owed.

30. He stated that according to his impression, he did not find the Plaintiff to be a boss.

The Defendants' Case

31. The Defendants themselves gave evidence and they also called Tse Kin Chun, a former staff, Sung Pui Ngan, an insurance agent, and Siu Kwai Bun, a former staff to give evidence.

The Evidence of the 1st Defendant

32. The 1st Defendant's evidence was that the Defendants were not close friends with the Plaintiff and her husband. The 1st Defendant stated that he did not know the Plaintiff's relative as stated by her.

33. In September 2001, he entered into a partnership with Mr. Kwong Tung Tsan (hereinafter referred to as "Kwong") to operate the Restaurant. During the decoration of the Restaurant, the Plaintiff and her husband came to the shop. The 2nd Defendant introduced him to the Plaintiff and her husband. He got to know the Plaintiff. Business in the Restaurant was not good. The 1st Defendant and his partner had differences. So they discussed that they should sell the business. Both of them looked for a buyer.

34. At the end of November 2001, he looked for the Plaintiff and her husband to discuss the sale of the Restaurant. The Defendants went to meet with the Plaintiff and her husband at a Café near their home. Four of them discussed this. At first the Defendants wanted to sell the whole restaurant business to the Plaintiff. The Plaintiff stated that she was not familiar with the restaurant business. The Plaintiff suggested that she purchased Kwong.'s share. She did so and issued cheques to purchase the share.

35. He telephoned the Plaintiff when Kwong stated he was willing to sell his share. He then telephoned the Plaintiff and told her that Kwong wanted to collect a deposit. The Plaintiff then issued first cheque dated 5th December 2001 for $100,000.00. At first, he asked the Plaintiff to hand this to Kwong. She stated she was busy. No payee was written on the cheque. He went to the ground floor of the Plaintiff's residence to collect this cheque. This sum was used to pay off the debts of the Restaurant incurred prior to this date.

36. The second cheque in the sum of $170,000.00 was issued when Kwong was sure he wanted to sell his share to the Plaintiff. After he received this cheque he took it back to the Restaurant to give it to Kwong. The cheque was a blank cheque with no payee. After he took it to Kwong, Ng Siu Ying, who was the wife of Kwong, was written as payee. Kwong's share was to be sold for $300,000.00. The Plaintiff paid $270,000. The balance of $30,000.00 was not paid as the Plaintiff stated that she had not as yet collected her share. On the 15th December 2001, the Plaintiff and her husband came to the Restaurant to take over Kwong's share of the Restaurant. Kwong met the Plaintiff and her husband then.

37. On the 18th December 2001, the Plaintiff issued cheques for $40,000.00 and $20,000 as a loan to him. The cheque for $40,000.00 was to pay staff salary. The cheque for $20,000.00 was to pay for the balance of decoration expenses of the Restaurant. These two sums were deducted from the value of his share on the 9th March 2002, referred to hereafter.

38. At the end of December 2001, himself, the Plaintiff and Kwong, went to the Management Office of the landlord of the Restaurant where a Mr. Chan of that office attended to them in relation to the transfer of the tenancy of the Restaurant premises to the Plaintiff. Subsequently owing to a disagreement related to the fee for the transfer of tenancy, the tenancy was not transferred to the Plaintiff. Subsequently, the Plaintiff telephoned the Management Office and spoke to a Miss Kwong in relation to the transfer of the tenancy. In the meantime, the Plaintiff and himself were clear what the financial situation of the business was like. On a daily basis, the Plaintiff would calculate the income from the business of the Restaurant and they would mark it on a book, which they would both sign to verify. The amount would be given to the Plaintiff to be deposited into the bank account the following day into the joint account opened in the names of the Plaintiff and himself. The joint account had a current account, a savings account and an ATM card.

39. On the 8th February 2002, the bailiffs came to the Restaurant to levy execution on the two months rent in arrears. The 2nd Defendant telephoned the Plaintiff to return to the Restaurant. The Plaintiff issued a cheque in the sum of $108,537.80 to him and informed him to deliver it to Shatin Court in payment of the arrears of rent and other charges.

40. On the 7th March 2002, the Plaintiff, her husband and the Defendants had a discussion related to the decoration of the Restaurant to start a snack bar. This entailed a further injection of capital for that. He realized that he could not take out so much money to invest in the Restaurant. He requested two days to consider whether to sell his share to her.

41. As a result there was a subsequent meeting on the 9th March 2002. On that day, the Plaintiff took out an account to see how much has to be paid to the creditors if he decided to retire from the Restaurant business. That is the account at page 49a of the Bundle of Documents. He decided to sell his share of the partnership.

42. He decided to use the value of the Restaurant at $400,000.00 to $450,000.00. At the end he decided to value the Restaurant at $400,000.00. His share was valued at $200,000.00. From this sum was deducted half the amount of the debts owed by the Restaurant as stated in the account at page 49a of the Bundle of Documents. This is $115,051.50. After he deducted this sum he deducted a further sum of $20,000.00 and $40,000.00 lent to him by the Plaintiff as referred to earlier. He asked to be paid $50,000.00 for his share. The Plaintiff agreed to this. However she paid him $20,000.00. The item in the account referred to as average daily expenses at $7,000, related to the amount required to maintain the running of the Restaurant each day. As he was to leave on 9th March, there would be 9 days running expenses that he had to pay. Each Director had to pay half of the outstanding amount. Subsequently, the Plaintiff gave to him the typed copies of this statement of account at page 48 and 49 of the Bundle of Documents.

43. The Plaintiff gave him three cheques. The $20,000.00 was given to him for his share. $7,500.00 was to pay half month's salary and 7 days salary in lieu of notice for his son Sham Ka Lok who worked in the bar Shum Ka Lok was to resign that day. $4,000.00 was half month's wages for the 2nd Defendant. These cheques were given to him on the 14th March 2002 when he resigned from the partnership.

44. Subsequently, he went back to the Restaurant on about the 20th odd day of March because the Plaintiff wanted to decorate the premises to create a snack bar. The Plaintiff needed the floor plan of the Restaurant. He took the floor plan of the Restaurant to her. She required the consent of the landlord of the Restaurant premises. The Plaintiff's husband requested him to telephone Kwong because the application required his signature. He made the telephone call in the presence of the Plaintiff and her husband. Kwong refused because the Plaintiff had refused to have the Tenancy transferred to the Plaintiff's name.

45. He stated that about ten days after the Plaintiff purchased Kwong's share, himself, the Plaintiff and Kwong went to the Management Office of the landlord of the Restaurant premises to discuss transfer of tenancy and reduction of rent. They went to see Mr. Chan Kui who was responsible for rental. The Plaintiff needed to show her ID card. The document at page 244 of the Bundle of Document was the application written by Mr. Chan Kui on behalf of Kwong. The application was unsuccessful.

46. Since 15 March 2002, he did not return to the Restaurant. He left the keys to the Plaintiff and the current account, the savings account passbook were left behind in the hands of the Plaintiff. He stated that the Defendants did not borrow money from the Plaintiff.

Evidence of the 2nd Defendant

47. She worked at the cold meat shop of the Plaintiff's husband for 4 months in 1996. During that time she did not know the Plaintiff She did not see her. Other aspects of her evidence were mainly in support of that of the 1st Defendant. She stated that she had never asked the Plaintiff to lend money to her. Whilst working for Mr. Wong, she had never had meals on holidays at the back of the shop as he stated by Mr. Wong nor went for outings to BBQ at a village house of another staff.

48. She supported the evidence of the 1st Defendant that the Plaintiff installed her own altar in the Restaurant after Mr. Kwong took away the Kwan Kung altar.

49. In relation to the incident when she went with the Plaintiff and Lok Chai (PW1) to look for Man Ko, she stated that before that the Plaintiff had dismissed the chef, Keung Ko because his cooking was not good. That was why she accompanied the Plaintiff to meet with Man Ko to invite him to work for the Restaurant. The Plaintiff was the boss so she had to go.

Evidence of Tse Kin Chun

50. She worked in the Restaurant as a waitress in Sept 2001 at the start of its business until about Dec. 2001. She ceased working in the Restaurant about 8 to 10 days after the Plaintiff came. The sum of her evidence is that when the Plaintiff came to work at the Restaurant, the 1st Defendant introduced her and said, "this is the new boss". Other colleagues said, "this is the new boss who took over from Mr. Kwong". When she resigned, it was the Plaintiff who gave her the salary.

51. Before she resigned, the 2nd Defendant spoke to her informing her that as business was not good, they did not require her to work full time. Her working hours would be reduced. She decided that the reduced working hours would not provide her sufficient income and she resigned. It was then the 2nd Defendant asked the Plaintiff to issue to her the salary. In the whole process the Plaintiff did not say a word.

52. She stated under cross-examination and re-examination that after the Plaintiff had come, Kwong and his wife Ying Tse came to the Restaurant. Kwong and his wife wanted to change the telephone registration of the Restaurant to the new boss' name. The Plaintiff, and the Defendants ignored them. She did not notice the Plaintiff speak when they came. Kwong and his wife left after a short while.

Evidence of Sung Pui Ngan

53. She worked as an insurance agent. The Restaurant was her client. On 27th December 2001, she received a call that there was a fire in the Restaurant. She assisted the 1st Defendant to file a claim form to be submitted to the insurance company. In the course of that there was a cashier who spoke to her as well. She was attentive to what was said and asked about the claim. She seemed to have overstepped her role as a cashier. She said that she was surnamed Tse and was a partner of Mr. Sham. She emphasized that the claim cheque should be issued in the joint names of herself and the 1st Defendant to be paid into the joint account.

54. There was also a claim for employee's compensation, which this witness had to attend to. When she got to the Restaurant, the Plaintiff told her about the accident. The Plaintiff told her the salary of the staff was $13,000 and this had to be put in the claim form. She felt that the salary was too high for the staff that was very young. He asked the 1st Defendant what to do. The 1st Defendant stated, "just do what she says". She sent the claim form to the Insurance Company. Subsequently she contacted the 1st Defendant in about the middle of March 2002 to ask for further information about the claim. The 1st Defendant informed him that he had resigned from the partnership and asked her to contact Madam Tse.

Evidence of Siu Kwai Bun

55. He is the brother of the husband of one of the younger sister of the 1st Defendant. He worked as a waiter in the Restaurant.

56. When the Plaintiff came to work at the Restaurant, after Kwong left. The 1st Defendant said that Kwong had sold his share in the Restaurant to the Plaintiff. The Plaintiff worked as a cashier.

57. Throughout the period when he worked at the Restaurant, after the Plaintiff came, it was the 1st Defendant who gave him his salary. The Plaintiff held the keys and also discussed with kitchen staff what food to cook.

58. During his last day of work, he received a notice from the chef Man Ko asking him to go back to the Restaurant to receive his pay. When he got to the Restaurant, Man Ko said that he represented the Plaintiff to give him salary. After he took his salary, he spoke to the Plaintiff on the telephone. The Plaintiff told him that she would not run the Restaurant any more. She would issue to him his salary and give him a few extra hundred dollars. She said that when there is a chance, they would co-operate again.

59. He confirmed under cross-examination that the Plaintiff did not tell him that she was the boss. It was the 1st and 2nd Defendants who told him that.

The Issue

60. The only issue is whether the Plaintiff had purchased the share of Kwong in the Restaurant as stated by the 1st and 2nd Defendants and the monies claimed herein and paid by her were for the purpose stated by the Defendants or whether the Plaintiff lent money to the Defendant as stated by the Plaintiff.

61. The case hinges on the credibility of the parties and my finding of facts from the evidence.

Credibility of the 1st and 2nd Defendants

62. There are areas in their evidence, which in my view are not credible. These relate to: -

1. Whether the Plaintiff and her husband were good friends with the Defendants. In my view it is highly likely that the Plaintiff and her husband were good friends of the 1st and 2nd Defendants. Whether the Plaintiff's version of the purpose of the transfer of monies is true or that of the Defendants is true, it is unlikely that the money would have transferred in the way it had unless they were good friends. Firstly, were the monies transferred, loans as stated by the Plaintiff, the Plaintiff would not have lent so much money without written documentary proof were there not a relationship of trust between them. Were the Defendants' version of facts true, the Plaintiff would not have purchased into the share of Mr. Kwong in the Restaurant without written documentary proof of the agreement and or asked the 1st Defendant to remain as a partner to help the Plaintiff who had no experience of restaurant business. Where the relationship is not a close relationship, the Plaintiff would not have trusted that the 1st Defendant would be able to guide her in the running of the business or that the Plaintiff and the Defendants would get on in the operation of the business. Further, the Plaintiff handed blank cheques to the 1st Defendant with no payee. This showed complete trust in the 1st and 2nd Defendants. For these reasons, I am of the view that the Plaintiff and her husband were good friends of the 1st and 2nd Defendants. I find that the evidence of the Defendants on this issue was not true.

2. In relation to the terms of the sale of Kwong's share of the partnership, there was no dispute that Kwong did not meet the Plaintiff nor her husband to discuss terms. All along, the 1st Defendant when giving evidence related to the terms of the transfer of the share stated that the Plaintiff was to pay $300,000.00 as purchase price and the transfer of the partnership share was to take place on the 15th December 2001. There was no mention of other terms. The 1st Defendant had not mentioned other terms as having agreed between himself and the Plaintiff until when cross-examined; he was asked whether there were other terms. Then the 1st Defendant referred to the other terms. These included the transfer of the Tenancy of the Restaurant premises into the joint names of the Plaintiff and the 1st Defendant, the parties would change the business registration particulars and change the registration related to the telephone of the Restaurant. Again when asked there was any discussion about the former debts of the partnership prior to transfer of Kwong's share, he then stated that Kwong and himself would be responsible for such debts and the Plaintiff would not be responsible. The 1st Defendant had it seems not fully disclosed all the terms of the sale of Kwong's share at the outset of his evidence. It was only upon cross-examination that he referred to important terms.

3. There was obvious dishonesty in the dealings of the 1st Defendant in the alleged sale of Kwong's share of the partnership to the Plaintiff even according to the 1st Defendant's version of facts. The 1st Defendant stated that he wanted to sell the whole business at the price of $600,000.00. However as the Plaintiff stated that she did not have experience in running the Restaurant Kwong would sell his share being half the value of the business. He stated that the Plaintiff had to pay Kwong $300,000.00 as the purchase price. Kwong would receive a net sum of $200,000.00 and a sum of $100.000.00 would be used to pay debts of the partnership. Under cross-examination, he was referred to the Statement of Claim of DCCJ2183 of 2002 in Kwong's action against the Plaintiff and her husband and the 1st Defendant (see page 254 of the Bundle of Documents), wherein Kwong pleaded that the 1st and 2nd Defendants, (the Plaintiff and her husband in this case), would purchase Kwong's share in the partnership for $200,000.00. The 1st Defendant stated that Kwong may have referred to the net sum of $200,000.00 that he should have received. When he was questioned on para 4 (b) of the Statement of Claim wherein Kwong pleaded that the Plaintiff and her husband would pay $200,000.00 into the partnership business account for discharge of the debts of the partnership, he replied that Kwong wrote it, he did not understand its meaning. He was referred to paragraph 5 (a) of his Defence to that action at page 290 of the Bundle of Documents. Therein he stated that the Plaintiff and her husband agreed to buy the Plaintiff's shares in the sum of HK$200,000.00. The 1st Defendant replied that he told his solicitors that the sale price was $300,000.00 but that $100,000.00 was for payment for discharging the debts of the old partnership business account. He stated that out of $100,000.00 paid by the Plaintiff $30,000.00 was used to pay off the kitchen hands the balance was used to pay invoices for vegetables, meat and canned food. The total partnership debt at the time of the sale of Kwong's share was $200,000.00. Under cross-examination he admitted that he had not paid his share of the partnership debts incurred before the Plaintiff came into the partnership. That meant that when the Plaintiff purchased into the share of Kwong, the business was still encumbered with the 1st Defendant's share of the debts of the partnership of the 1st Defendant and Kwong. Under cross-examination he stated that he had agreed with the Plaintiff that Kwong and himself would discharge all the debts of their partnership so that the Plaintiff would enter as a partner into a debt free business. He had failed to honour this.

4. In the evidence of the 1st and 2nd Defendants related to the sale of the 1st Defendant's share of the partnership to the Plaintiff, there were obvious inconsistency or dishonesty in their evidence. They stated they set the sum of $450,000.00 or $400,000.00 as the value of the business. Hence they agreed that the 1st Defendant's share of the partnership should be valued at $200,000.00. From this was deducted the sum of $115,051.50, being half of the total amount of the debts owing by the Restaurant as shown in the statement of account at page 49a of the Bundle of Documents. The repayment of the loans of $40,000.00 and $20,000.00 from the Plaintiff, being half of the total amount of the debts owing by the Restaurant as shown in the statement of account at page 49a of the Bundle of Documents. They further deducted the sum of $60,000.00 for the repayment of the loans of $40,000.00 and $20,000.00 from the Plaintiff. They stated that the Plaintiff agreed to pay the 1st Defendant $50,000.00 for the 1st Defendant's share of the partnership. However, after deducting the sums of $115,051.50, $60,000.00 from $200,000.00, the balance should have been $24,948.50. When the 1st Defendant was challenged with this, he stated, with words to the effect, "We were negotiating. I said, 'do not calculate with precision. You pay me $50,000.00. In fact, I have not been paid the salary of the half month.'" He stated that the Plaintiff was willing to pay him the $50,000.00. When it was asked why there was no reference to the loan of the Plaintiff to pay arrears of rent and costs to discharge the distress warrant in the sum of $108,537.80. The arrears of rent executed were two months rent from 1st December 2001 to 31st January 2002. The Plaintiff should not have been liable to pay rent from 1st December to 14th December, as this was a debt of the former partnership whilst the Plaintiff's liability to pay rent as a partner in the new partnership started from 15th December 2001. Both the 1st Defendant replied that the Plaintiff stated she was willing to bear the rent for the first half of the month of December 2001. When asked whether he had said that, during the partnership discussions it was stated that the Plaintiff would not have to bear the debts of the former partnership. He stated "yes". When asked why the Plaintiff was willing to accept the debt of the former partnership in relation to rent for the first half of December, he stated "I do not understand. She was perhaps wanting to be our partner and accepted it." The 1st Defendant stated that as regards the balance of the sum of $108,537.80 he was responsible to pay half of it. When asked whether he had repaid his half to the Plaintiff, he stated "No". He stated, "when we parted, we reckoned everything was clear between us". When asked why he had not mentioned this sum when going through the calculations as to how much should be paid for his share of the partnership, he agreed that he had not mentioned this sum. He was not able to explain why this sum was simply left out in the calculations as to how much the Plaintiff should pay him for his share of the partnership. The 2nd Defendant stated in relation to the sums to be deducted from $200,000.00, apart deductions of $115,051.50 and $60,000.00 she did not know what other deductions were made. She stated with the words to the effect that, "the 1st Defendant said the sums could not be calculated because there are supplies in stock. Just use $50,000.00 as the price and disregard all else". In relation to the sum of $108,537.80, she stated that "the Plaintiff was a partner, she had to be responsible for this . . ." In all this evidence, it seems that the narrative of both the 1st and 2nd Defendants are unbelievable.

5. There was a discrepancy in the evidence of the 1st Defendant. He at first stated that between Kwong and him they paid up $350,000.00 each to start the business in the Restaurant. At the time when Kwong retired from the partnership $30,000.00 to $40,000.00 of the capital remained unspent. However, this evidence is immediately proved wrong for he stated that the Plaintiff was required to lend $40,000.00 and $20,000.00 to the Restaurant soon after she became partner. The sum of $20,000.00 was to pay for the balance of decoration expenses, which was left unpaid at the time Kwong retired from the partnership. $40,000.00 was to pay unpaid salary for the kitchen staff. Subsequently under cross-examination as regards the use of the $100,000.00 paid by the Plaintiff to Kwong, he stated that the sum was used to pay off Kwong's share of partnership debts and his share of partnership debt in the same amount had been left unpaid at the time when the Plaintiff came into the partnership. No doubt the sum of $40,000.00 used to pay the salary of the kitchen staff was also debt, which was unpaid from the former partnership of the 1st Defendant and Kwong. This points to the unreliability of the 1st Defendant as a witness.

63. From the aforesaid, I find that the 1st and 2nd Defendants who supported each other's evidence, were both lying at various points of their evidence.

Credibility of the Plaintiff and the Plaintiff's husband

64. The thrust of the evidence of the Plaintiff and her husband is that the Plaintiff lent money to the Defendants and did not purchase the share of the partnership of Kwong in the Restaurant. In relation to whether this evidence is believable, I have the following reservations: -

1. The Plaintiff's husband was in the transportation business. His money was tied up in his business and he did not have spare cash. The Plaintiff stated that she had savings and investments in the value of $1.3 million. The Plaintiff's husband stated that he did not know how much money the Plaintiff had but knew she had money. When the 2nd Defendant approached him to borrow money from him, he asked her to approach his wife, as he had no spare cash. He further told his wife to lend money to the 2nd Defendant, as they were good friends. He stated that he did not enter into any of the discussions related to the loan of money from the Plaintiff to the Defendants. He did not know how much his wife had lent the Defendants until service of the Writ in Kwong's action. I find it not too believable that a wife who was about to lend a large sum of money to friends for their business would not first consult her husband and seek his views even though they managed their money separately. I find it not believable that the husband would not ask or offer help to his wife in relation to this decision of whether to lend money to the Defendants for their business, particularly when he knows that his wife knew nothing about business and he himself had been doing business.

2. Although there were no direct discussions between Kwong and the Plaintiff and her husband related to the purchase of the share of Kwong by the Plaintiff, Kwong subsequently applied for the reduction of rent and the transfer of the tenancy from his name to that of the Plaintiff and the 1st Defendant. The letter to apply for this to the Management Office of the landlord of the Restaurant premises is at page 244 of the Bundle of Documents. In this letter the ID Card No. of the Plaintiff is stated. According to the 1st Defendant Mr. Chan Kui of the Management Office on behalf of Kwong wrote this letter. The Plaintiff, and the 1st Defendant had attended at the Management Office of the landlord to make this application. The Plaintiff's evidence distanced herself from this application. She stated that she did not know throughout the meeting with Mr. Chan Kui what the content of the discussions were at the meeting. She stated that she regarded this as not being her business. In my view, she must have heard that the meeting was for the reduction of rent and for the transfer of the tenancy to herself and the 1st Defendant. The 1st Defendant would not have invited the Plaintiff to attend the meeting unless he wanted her to know of the purpose and content of the meeting and required her participation. I therefore do not believe the Plaintiff's evidence in this. She stated that her ID Card No. was known to the 1st Defendant as she gave this to the 1st Defendant on the first day when she worked for the Restaurant. I find this not to be entirely believable.

3. Kwong subsequently filed an action against the Plaintiff and her husband in DCCJ2183 of 2002. In this action, Kwong's pleaded case referred to an agreement between the Plaintiff and her husband and himself whereby Kwong sold his share of the partnership business to the Plaintiff and her husband for the sums of money stated therein, referred to above. Kwong's pleaded case was that the parties to the Agreement would take reasonable steps to apply to the landlord of the Restaurant premises for transfer of the lease of the Restaurant premises to the Plaintiff and the 1st Defendant herein and furnish the Business Registration Office, information regarding the change in the Partnership. Kwong sought the transfer of the tenancy to the joint names of the 1st Defendant and the Plaintiff but failed in his attempt. According to the evidence of Tse Kin Chun, Kwong and his wife came to the Restaurant after the transfer of the share to seek to arrange for the transfer of the registration of the telephone to the name of the Plaintiff and the 1st Defendant but the Plaintiff and the 1st Defendant ignored him. It would seem that the Plaintiff could not have been unaware of Kwong's contention related to his understanding of the terms of the sale of his share in the Restaurant soon she entered to work in the Restaurant.

4. The evidence of Tse Kin Chun and Siu Kwai Bun could not be wholly discounted. Both stated that the 1st Defendant introduced the Plaintiff as the new boss to replace Kwong. The Plaintiff did not dispute this in their presence. I also find that the evidence of Sung Pui An could not be discounted on the basis of fabricating her evidence because of her association with the Defendants.

5. The joint account was opened in the names of the Plaintiff and the 1st Defendant. The Plaintiff's explanation was that the 1st Defendant informed him that the joint account was to provide security for her as she had lent such a large sum of money. However, were she purely a cashier, there would have been no reason to open a joint account in her name and that of the 1st Defendant. It was the former practice of the partnership business that a joint account was opened in the name of the two partners, namely, Kwong and the 1st Defendant. It was significant that after Kwong resigned from the partnership the 1st Defendant opened a joint account in the name of himself and the Plaintiff. It is true that in the account opening form, the Plaintiff put her occupation simply as food industry and the 1st Defendant put his name as proprietor of a food business. Yet the reason given by the Plaintiff as to why the joint bank account was opened is not believable since it was not the Plaintiff that requested to have the account in joint names but the 1st Defendant that offered it. Further, all cheques in payment of invoices had to be signed by two signatories namely the Plaintiff and the 1st Defendant. Would the 1st Defendant have voluntarily restricted his freedom to issue cheques to provide the Plaintiff with security for her loan to the Defendants?

6. The Plaintiff's explanation of the statement of account at page 49a. wherein the debts of the Restaurant were listed out and totalled at $230,103.00 and there were the words to the effect, "each Director share the debts equally $115,051.50", is not credible. She stated that she did not know what the words meant but just wrote the words as directed by the 1st Defendant. I do not believe she was so na?ve as to just write meaningless words at the direction of the 1st Defendant. She appeared to be a woman who was quite capable having worked as a bookkeeper of a dried seafood business for 10 years. She had also been able to invest her money and had unit trusts and other investments to the value of $1.3 million according to her evidence. Further, there is an item in the statement of account of $63,000.00, being the average daily expenditure of the business at $7,000 per day from 1st March to 9th March. It seemed that this account was to clearly state the debts of the business up to the 9th March 2002 and the apportionment of the share of the debts of each of two Directors. Pages 48 and 49 of the Bundle of Documents are typed statement of accounts with further particulars of the hand written account. The 1st Defendant stated that the Plaintiff typed this after page 49a was prepared. The Plaintiff denied this. It is unlikely that anyone else would have typed these pages which contained detailed items of account apart from the Plaintiff who was the bookkeeper of the Restaurant and she kept the accounts of the Restaurant. She also had the capability to do that. Her denial that she typed would appear to be her attempt to distance herself from the significance of having done that.

7. The evidence of the Plaintiff as regards why she went to the restaurant named Mei Sik Goon to look for Man Ko is not wholly credible. She again distanced herself from any responsibility in this by saying that she purely accompanied the 2nd Defendant.

65. Having considered the evidence, I come to the conclusion that neither the Plaintiff and her husband nor the 1st and 2nd Defendants were truthful witnesses. It seems to me that the Plaintiff and her husband did not state the truth. Further the two Defendants were not entirely truthful. Even if their evidence of the purchase of the share of Kwong by the Plaintiff is correct, the 1st Defendant had admitted that he cheated the Plaintiff in that at the time when the Plaintiff entered the partnership, there were debts due to the business by him to the sum of $100,000.00. He had stated in evidence that the agreement between himself and the Plaintiff was that he and Kwong should discharge all partnership debts before the Plaintiff took over as partner from Kwong. However the 1st Defendant had failed to discharge his share of the partnership. The 1st Defendant's calculation of the amount that the Plaintiff would pay to buy the 1st Defendant's share of the partnership is again wholly unreasonable and incredible and his evidence on that could not be accepted. I find that the evidence of the Plaintiff supported by her husband that the sum of $270,000.00 was a loan to the Defendants could not be sustained. I find that in all probability that Plaintiff purchased the share of Kwong through the 1st Defendant in the sum of $300,000.00. Other terms like the transfer of the tenancy from Kwong to the Plaintiff and the 1st Defendant were in all probability not discussed between the 1st Defendant and the Plaintiff. The basis for this finding is that the 1st Defendant had not stated that these terms were agreed between the Plaintiff and himself acting for Kwong in his evidence in chief. It was only when cross-examined on the terms of the sale of the shares that the 1st Defendant stated that there were other terms agreed between him and Kwong. These included the transfer of the tenancy from Kwong to the names of the Plaintiff and the 1st Defendant as tenants, the transfer of the registration of the telephone to the Plaintiff and the 1st Defendant and the rectification of the business registration particulars. In all probability, the Plaintiff was not alerted to the term related to the transfer of the tenancy until after the transfer of the share of Kwong. It is highly likely that after the transfer of his share of the business, Kwong sought the transfer of the tenancy and change the registration of the telephone to the Plaintiff and the 1st Defendant. Hence there was the meeting at the Management Office of the landlord of the Restaurant premises. The evidence of the Defendants was that the Plaintiff refused to agree to the transfer of the Tenancy because of the refusal of the landlord to reduce the rent and the refusal of Kwong to pay the legal fees. It may have been that the Plaintiff agreed to the transfer of the tenancy to herself and the 1st Defendant but only on the condition that the landlord would agree to a reduction of the rent. That was why she attended the interview at the Management Office of the landlord of the premises. In my view, the Plaintiff was well aware of the reason for the interview at the Management Office of the landlord of the premises of the Restaurant. In my view the evidence points to the fact that she had supported the application for the reduction of rent and the transfer of the tenancy. When the landlord would not agree to a reduction of the rent, the Plaintiff would not agree to the transfer of the tenancy into her name.

66. I find that the evidence of the Plaintiff that the sum of $31,500.00 comprised of cheques in the sum of $7,500.00, $4,000.00 and $20,000.00 was a loan to the 1st and 2nd Defendants could not be sustained. The accounts at page 49a, 48 and 49 suggested there was more than just a loan. The evidence of the 1st and 2nd Defendants related to sale of the 1st Defendant's share and the reason for the issue of the cheques in the sum of $7,500.00, $4,000.00 and $20,000.00 could not be sustained. In all probability there was some resolution between the Plaintiff and the 1st and 2nd Defendants related to the 1st Defendant's share of the business. However, evidence of the Plaintiff and the 1st and 2nd Defendants on this was not truthful.

67. I could safely find that there was no resolution related to the sum of $108,572.80. It was clear that the evidence of the 1st and 2nd Defendants related to the fact that the Plaintiff had waived repayment of this sum of money could not be believed nor accepted. It was clear that there has been no repayment of this sum of money and the Defendants are liable to repay half of this sum to the Plaintiff. The sum of $60,000.00 was a loan from the Plaintiff to the business of the Restaurant. This fact is agreed between the parties. According to the Defendants, this had been repaid when the Plaintiff and themselves discussed about the sale of the 1st Defendant's share of the business to the Plaintiff. In relation to this sum, I am not able to safely make any finding on whether this was part of the agreement to bring resolution to the partnership.

68. In view of the aforesaid, I order as follows: -

Judgment for the Plaintiff against the 1st and 2nd Defendants in the sum of $54,286.40 together with interest thereon from date of writ to date of judgment at judgment rate and thereafter until payment at judgment rate together with an order nisi for costs of the action to the Plaintiff to be taxed if not agreed with Certificate for Counsel.