LEE CHEUNG CHING v. LOK HSIAO PEI, JOHN

Dates of Hearing: 3-7, 10-14 March 2008

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J U D G M E N T

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1.  The plaintiff claims the defendant for an account of all sums due to him from a joint venture that he had with the defendant. 

THE PLAINTIFF’S CASE

2.  The plaintiff claims that he had a very good connection with an influential figure of the New World Development Company Limited (“the developer”).  With this connection he could procure from the developer some real properties for his purchase.  He and the defendant then agreed to set up a joint venture to acquire these properties.  The alleged terms of the joint venture agreement (“jv agreement”)were that the plaintiff and the defendant would set up a joint venture company (“the jv co”) with the two of them as equal shareholders and the only directors.  The plaintiff would procure the properties from the developer for purchase by the jv co.  The defendant would be responsible to finance the acquisition of the properties as procured by the plaintiff.  The defendant would also be responsible for the management of the properties purchased.  The plaintiff and the defendant would then share half of the profits/loss of the joint venture. 

3.  Pursuant to the joint venture, the plaintiff, in late 1991 or early 1992, procured 20 residential units in the Convention Plaza (“the CP units”) and 20 residential units in Illumination Terrace (“the IT units”) for purchase.  In this action, he could only provide the particulars of 17 CP units. 

4.  He further alleged that the defendant, in breach of the jv agreement, failed to procure the jv co to purchase 10 of the 20 CP units which were all on the 21st floor of the Convention Plaza.  These 10 CP units were then purchased by one Win Plaza Services Limited (“Win Plaza”).  The defendant later purchased the same 10 CP units from Win Plaza.  The plaintiff regarded this as the defendant’s purge of his breach of the jv agreement. 

5.  However, the defendant committed another breach because he purchased these 10 CP units in his own name rather than in the name of the jv co.  The defendant also purchased CP unit 4004 (one of the 20 CP units) by a company controlled by him instead of by the jv co.  Nevertheless, the defendant treated all these CP units as assets of the joint venture. 

6.  Regarding the 20 IT units, the statement of claim pleaded that they had been resold and the profits distributed.  The plaintiff was prepared to accept that there was no dispute in relation to the IT units. 

7.  Regarding the CP units, the defendant had, in breach of the jv agreement, failed to provide the plaintiff with details of their purchases or disposals or how they had been dealt with.  The defendant had failed to render the plaintiff a true and full account of the joint venture in relation to the CP units.  The defendant had also wrongfully and without the plaintiff’s consent sold five CP units and transferred three other CP units to himself, his wife, his son and his daughter.  In fact, the evidence showed that 12 CP units had been disposed of.

8.  The plaintiff also alleged that on 20 July 1993 the defendant transferred to the plaintiff CP units 2108 and 2109 as distribution of part of the profits of the joint venture.  The total market value of these two units then was at about $7.4 million.  The defendant then failed and refused to distribute further profits to the plaintiff until October 1997. 

9.  From 17 October 1997 to 13 October 2003, the defendant further distributed to the plaintiff a total of $17.5 million.  The plaintiff also admitted in the reply that he had received from the defendant $2.1 million on 8 April 1993 for which credit should be given. 

10.  The plaintiff said that the defendant’s breaches of the joint venture amounted to a repudiation of the same.  He had accepted the repudiation.  He therefore claims half of the rental from the seven unsold CP units, which he put at $30,000 per month for 12 years.  He also claims half of the undistributed profits of the 12 CP units which had been sold.  As an alternative to his half share of the undistributed profits, he asked for a half share of the further profits earned by the defendant’s investment of the further profits.  In addition, he also claims a half share of the equity of the seven unsold CP units. 

THE PROPER PARTIES AND RELIEF

11.  Since the plaintiff only allegedly accepted the defendant’s repudiation of agreement by the service of the writ on 26 April 2004, the joint venture on the plaintiff’s case must have continued until 26 April 2004.  If the plaintiff were right, he should be entitled to 50% of the shares of the jv co and the jv co should be entitled to all the seven leased units.  The rental and proceeds of disposal should also be held by the jv co. 

12.  The plaintiff should in his own name, as well as in the name of the jv co, sue the defendant for assignment to the jv co all the unsold CP units that are held in the defendant’s name and for an account of all the rental and proceeds of sale and profits.  The plaintiff should also sue the defendant for transfer of 50% of the shares of the jv co.  Though he has allegedly accepted the defendant’s repudiation of the jv agreement, his acceptance did not and could not have put an end to the jv co.  The acceptance of the repudiation only relieved him from further performance of its obligations under the jv agreement.  If the CP units should be held in the name of the jv co, the acceptance of the repudiation would not have released them from the jv co. 

13.  If there are the unsold units and money, they should be transferred to the jv co.  The acceptance of the repudiation could not have taken away the rights of the jv co over them and directly conferred half of them upon the plaintiff.  So the plaintiff has no direct right against the defendant for the relief as claimed.  Even if the defendant should have previously distributed profits to him from the defendant’s own resources, that did not vary the jv agreement.  If there should be any distribution properly made, it should be made by the jv co.  By the jv agreement, the defendant’s breach would have made him liable to the plaintiff to transfer the unsold CP units and money to the jv co, not to transfer half of the equity of the units and half of the money to the plaintiff. 

14.  I have raised the above question of whether the plaintiff has sued the right party or for the correct relief in the course of the trial, but the plaintiff, after having considered the matter, decided not to do anything about it.  On this point alone the plaintiff does not appear to be entitled to any relief.  Even if his case on the facts should be believed, there has not been any plea of variation of the jv agreement so as to entitle him to the benefit personally, instead of through the jv co. 

THE DEFENDANT’S CASE

15.  The defendant, in his defence, admitted that there was a joint venture with the plaintiff in late March 1992 to acquire units in the Convention Plaza (“CP”) and in the Illumination Terrace (“IT”).  Both developments were built by the developer.  The jv agreement was made a few days before 24 March 1992 when it was not yet known how many units could be procured from the developer.  The exact number of shares of the joint venture to be given to the plaintiff had also not been agreed.

16.  The plaintiff and the defendant attended the developer’s office on 24 March and selected seven CP units and 6 IT units.  It was then agreed that the plaintiff would have 30% (and not 50%) interest in the joint venture.  The defendant, before choosing the units, had already arranged Multi-Action Company Limited to be the jv co.  The plaintiff also made use of his company Fortune Circle Investment Limited (“Fortune Circle”) to hold his 30% shares in the jv co.  The remaining 70% shares were held by The Sun Company Limited (“the Sun Co”), a company owned and controlled by the defendant and his family. 

17.  The plaintiff, the defendant and the defendant’s son were also appointed directors of the jv co.  Of the seven CP units, No. 4004 was then agreed to be taken up by David & Co Limited for use as the defendant’s residence.  The six remaining CP units and six IT units were then purchased by the jv co with loans provided by the Sun Co at a reasonable interest rate.

18.  Also on 24 March 1992 the defendant had successfully negotiated with Win Plaza through its agent Sheraton Valuers Limited (“Sheraton”) to purchase from Win Plaza the 10 CP units on the 21st floor of CP.  The defendant pleaded that these units were not procured by the plaintiff, and he purchased them not in the name of the jv co but in his own name. 

19.  The defendant, through another company of his, had also purchased CP unit 2610 in May 1992.  His son had also procured the jv co to purchase CP unit 3509 in August 1994.  These two units had been subjects of the plaintiff’s claim.  However, they were dropped by the plaintiff in the course of the trial, and I say no more about them. 

20.  Regarding the six IT units, the defendant pleaded that they had been sold by the jv co for a profit shortly after their purchase, and the profits had been reflected in the value of the plaintiff’s shares.  On the evidence, only five IT units were sold for a profit before completion, because one of them was reserved for the plaintiff at cost.  The plaintiff later nominated his adopted daughter, one Ms Chu, to purchase it at cost. 

21.  The defendant further pleaded that in about March 1993 the plaintiff indicated his desire to liquidate his interest in the jv co.  It was then agreed that the plaintiff would sell his 30% shares in the jv co to the Sun Co for $2.1 million.  The sale of the 30% shares was completed on 8 April 1993.  The $2.1 million reflected 30% of the value of the jv co.  Such value included the estimated market value of CP unit 4004 and a premium of $254,161.  In consideration of the $2.1 million, the plaintiff procured Fortune Circle to transfer the 30% shares of the jv co to the Sun Co and the defendant and he resigned from the board.  The defendant therefore denied any breach of the jv agreement.

22.  Regarding the defendant’s transfer of CP units 2108 and 2109 to the plaintiff, the defendant has another story to tell.  It started in about April 1993 when the plaintiff introduced one Madam Tse to the defendant.  Madam Tse was said to have good connections in the Mainland so that she could secure a good site in Beijing for redevelopment.  The plaintiff suggested that he, the defendant, and Madam Tse could form a company to explore business opportunity in the Mainland.  The defendant agreed.  In July 1993 the plaintiff acquired a company called Wise Universal Investment Limited (“Wise Universal”) for this purpose.  The plaintiff, the defendant and Madam Tse were each allotted 1,000 shares of this company.  The defendant, however, wanted to withdraw from this venture shortly afterwards.  The plaintiff then complained of loss of costs and expenses and other losses.  The defendant then compensated him by transferring these two CP units to him.  The defendant then transferred his shares in Wise Universal to the plaintiff and Madam Tse and assigned the two units to the plaintiff and his daughter on 20 July 1993.  These two units were therefore not part of the distribution of the profits of the joint venture. 

23.  Thus the joint venture was over by 8 April 1993 and the Wise Universal venture also came to an end on 20 July 1993.  There was therefore no basis for any account to be rendered to the plaintiff from then onwards.

24.  Regarding the alleged distribution of profit between October 1997 and 12 November 2003 in the total sum of $17.5 million, the defendant’s case is that these were all loans advanced by the defendant to the plaintiff at the plaintiff’s request.  These loans were all evidenced by loan receipts written and signed by the plaintiff, save a loan of $1 million lent on 23 November 1999, which was evidenced by a post-dated cheque issued by the plaintiff in favour of the defendant for the same sum.  The defendant counterclaims repayment of these loans.

THE ISSUES

25.  The issues between the parties are therefore:

(1)	the number of CP units and IT units that had been bought through the plaintiff’s connection and hence are subject to the jv agreement;
(2)	whether the plaintiff was entitled to 50% or just 30% of the shares of the jv co;
(3)	whether the joint venture had been terminated on 8 April 1993 when the plaintiff procured the transfer of the 30% shares of the jv co from Fortune Circle to the Sun Co and the defendant and was paid $2.1 million;
(4)	whether the CP units 2108 and 2109 were transferred to the plaintiff as partial distribution of the profits of the joint venture or as compensation for the plaintiff’s loss resulted from the defendant’s withdrawal from the Wise Universal venture; and
(5)	whether the $17.5 million was the total sum of some partial distributions of profit of the joint venture or of a number of loans advanced by the defendant to the plaintiff.

THE PLAINTIFF’S EVIDENCE

26.  The plaintiff elaborated his story in his witness statements.  He made a short witness statement in Chinese followed by a much longer supplemental witness statement in English.  He used to run a Luen Yick Water & Drainage Works Limited (“Luen Yick”).  Luen Yick specialised in drainage and plumbing.  It had been involved in many building projects including those of the developer.  Through such involvement, the plaintiff became familiar with the said influential figure of the developer. 

27.  The defendant was a well-known builder.  The plaintiff and the defendant came to know each other in the 1980s.  They were good friends and often played cards together. 

28.  In about 1991 the defendant had about $200 million cash in hand and $800 million worth of realisable properties.  He wanted to invest the money in the Mainland.  He knew that the plaintiff’s friend, Madam Tse, had good connections in the Mainland’s property market and wanted the plaintiff to contact her for business opportunity. 

29.  In about 1991, the plaintiff worked as a consultant for the defendant.  He analysed the investment recommendations from Madam Tse.  He said in his supplemental witness statement that he worked full time in the defendant’s office for six months in 1991.  At the trial he revised it to about two hours every day from about 11 am to about 1 pm for six months.  Owing to his cautious approach, no project proposed by Madam Tse was selected and no investment was made in the Mainland.  (However, despite having spent so many hours at the defendant’s office, he gave no particulars of the investment proposals from Madam Tse.) 

30.  He then heard that the developer had decided to sell some of the units in CP to those who were familiar with the developer.  He was confident that he could procure the developer to sell him some of those units.  He thus suggested to the defendant to invest his $200 million cash in those units.  The defendant agreed.  That was in about February 1992.  The plaintiff and the defendant also agreed to set up a company with equal shareholding.  They would be the only directors.  Whilst the plaintiff would be responsible for procuring the units, the defendant agreed to provide the finance.

31.  Also in February 1992, the developer agreed to let the plaintiff purchase 20 CP units as he might select.  He then went to the developer’s office on the next day and selected 10 units which were all on the 21st floor.  He consider “21” a lucky number. 

32.  On the next day he and the defendant attended the developer’s office again.  He chatted around, and the defendant chose another 10 CP units.  He did not know what units the defendant had chosen.  (In his Chinese statement, he said it was a few days later that the defendant himself went to the developer’s office to choose 10 other CP units.)  They then went to the defendant’s office, and the defendant told him that he would form the jv co, and the plaintiff should provide a company to hold half of the shares of the jv co.  (He said at the trial that the selections of units took place in late 1991 to early 1992 and was before the Chinese New Year of 1992.)

33.  Pursuant to the joint venture, the jv co should purchase 20 CP units, and the plaintiff, through his corporate vehicle Fortune Circle, would be entitled to half of the profits of these investments.  He later signed at the defendant’s office some documents in English which were for the formation of the jv co.  (In his Chinese statement, he said he had signed these documents at a solicitors’ firm.)  Nobody explained the documents to him, and he did not read English.  He only found that he was given 30% and not 50% of the shares of the jv co after the commencement of this action.  He was also surprised that the defendant’s son, Hardy Lok, was also appointed a director of the jv co.  All these were contrary to the jv agreement.

34.  After selecting the CP units, he left the purchasing procedure to the defendant.  He had, however, from time to time enquired the defendant about the progress of the letting of these 20 CP units.  He was assured that there would be distribution of profit after the account was finalised.  About two weeks after purchasing the CP units, the plaintiff again procured and selected 20 IT units for purchase by the jv co.  The buildings on IT were also put up by the developer.  The plaintiff should again be entitled to 50% of the profit to be derived from the IT units.  The IT units were sold shortly thereafter, before completion, at a 5% profit, save one which was to be transferred to the plaintiff as his share of the profit.  The plaintiff said at the trial that this unit was later purchased at cost by his adopted daughter, Ms Chu, from the jv co, and the defendant then paid him the purchase price which was at $3 million-odd. 

35.  In early 1993 he learnt from the defendant that the defendant was suffering from cancer.  The defendant suggested to him to have the joint venture tentatively dissolved  (“暫時解散).  The defendant’s reason was that in case he should die, his son Hardy Lok would be the administrator of his estate.  He did not want the plaintiff to deal with his son on the joint venture.  The profits of the joint venture as at the time of dissolution could be distributed, and the plaintiff’s shares in the jv co would be transferred to the defendant’s company. 

36.  It was, however, their understanding that if the defendant should survive the illness, the joint venture would continue and he would continue to share the profits.  He then went to the defendant’s home and the defendant made a rough calculation of the profits of the joint venture in front of him and told him that his share was $2 million.  He later signed some documents for transferring his shares in the jv co to the defendant, and was paid $2.1 million.  However, nobody explained the documents to him. 

37.  After the defendant’s recovery from illness, he chased the defendant for distribution of profit.  The defendant said the account had not been finalised and gave him CP units 2108 and 2109 as partial distribution.  After the defendant’s recovery, the defendant also thought about investing in the Mainland.  He then instructed the plaintiff to enquire with Madam Tse for business opportunity.  Wise Universal was then acquired by the plaintiff for the purpose of the plaintiff, the defendant and Madam Tse.

38.  However, shortly afterwards, the plaintiff and the defendant found that there was no real investment for them and no business was done with Madam Tse.  The plaintiff denied that the transfer to him of CP units 2108 and 2109 had anything to do with the Wise Universal venture. 

39.  Since 1994 he had been pressing the defendant for distribution for profits, but the defendant put up excuses.  The defendant later agreed to give him loans to be set off against his half share of the profit once that was ascertained.  The first loan was at $6.5 million and was advanced to him on 17 October 1997.  He wrote an acknowledgement of the loan for the defendant in terms as dictated by the defendant.  He said this loan, like those to be advanced later, was in fact a distribution of the profits.  There was thus no repayment time or provision of interest.  Further loans were made until November 2003 and the total sum was $17.5 million.  Since the defendant refused to distribute more money to the plaintiff, the plaintiff then put the matter in the hands of his solicitors. 

40.  The searches and investigations by his solicitors revealed that the defendant had breached the jv agreement and had been cheating him all along by using the defendant’s own name and not the jv co to purchase the 10 CP units on the 21st floor of CP and by reducing his share of profit from 50% to 30%.  The defendant had thus abused his trust reposed in the defendant.  He was also shocked to learn that the defendant’s son was a director of the jv co as the defendant had told him at the start that the defendant did not want his wife and son to know about the joint venture.  He also said that the defendant’s son had never participated in the jv.  He also commented on the correspondence between the parties, which I will deal with later. 

THE DEFENDANT’S EVIDENCE

41.  The defendant called five witnesses, but he himself has not given evidence.  His witnesses are his son, his personal assistant, the accountant of the Sun Co and two doctors.  The two doctors have provided medical reports and given oral testimony to justify the defendant’s absence from the witness-box.

           The defendant’s personal assistant

42.  The defendant’s personal assistant, Mr Sun, joined the Sun Co in 1987.  His evidence covered several matters.  He had worked for the defendant in various capacities for almost four decades.  He had never seen the defendant entering into informal joint ventures.  Whenever the defendant entered into a joint venture with others, he would use a corporate vehicle to hold the venture, and the respective interest of the venture partners would be reflected in their shareholdings of the corporate vehicle. 

43.  He also said something about the relationship between the plaintiff and John Lok & Partners Limited, a subsidiary of the Sun Co.  That has become irrelevant because the plaintiff has dropped his claim for CP unit 2610.  He then described the relationship between the plaintiff and the defendant’s son, Hardy Lok.  They had a cordial relationship.  That contradicted the plaintiff’s evidence that the plaintiff was not acquainted with Hardy Lok.  Mr Sun also refuted the plaintiff’s claim of having worked full-time or for about two hours every day in the defendant’s office for six months.  He also referred to the visit by Madam Tse to the defendant in April 1993 and described why that was the first occasion that the defendant had come to know Madam Tse.

           The accountant of The Sun Company Limited

44.  The accountant of the Sun Co., Ms Choi, testified that the funds for purchasing the properties of the jv co were advanced by the Sun Co to the jv co.  There was also a written loan agreement made between the two companies dated 15 May 1992, with the plaintiff signing for the jv co and the defendant signing for the Sun Co.  She also testified that she had prepared three sheets of calculations for valuing the plaintiff’s 30% interest in the jv co, which was held through Fortune Circle.  The cut-off day was projected forward to 31 May 1993. 

45.  The calculations were done on the basis of the profits already made by the disposal of some of the units and the profits to be made by disposing all unsold units on 31 May 1993.  The profits to be made were assessed on the basis of the market values of the unsold units as projected to 31 May 1993, less their costs of acquisition and estimated costs of sale.  The entire rental received and to be received up to 31 May 1993 were also included.  The costs of acquisition included the purchase cost, expenses and interest payable to the Sun Co.  She obtained the market price of the unsold units from Hardy Lok.  The calculations covered seven CP units and five IT units, as the remaining IT unit would be sold to the plaintiff at cost. 

46.  Her calculations showed that there would be a total profit of $6,152,798 on the assumption of the liquidation of the jv co on 31 May 1993.  30% of that was at $1,845,839.  The defendant added a premium of $254,161 to that, and increased it to $2.1 million or $700 per share for 3,000 shares of the jv co.  Since one IT unit had been reserved for the plaintiff and the jv co had already paid $946,460 for it, this sum had to be set off against the $2.1 million.  The net amount payable to the plaintiff was $1,153,540. 

47.  There was also $304,563 potential profits tax for the plaintiff’s 30% profit, but that sum had not been deducted from the $2.1 million payable to the plaintiff.  In her oral evidence, she added that the defendant later instructed her not to deduct the $946,460 in respect of the remaining IT unit in the meantime.  The plaintiff was thus paid $2.1 million on 8 April 1993, subject to the deduction of a $300,000 shareholder’s loan advanced to him on 23 March 1993.

48.  She was adamant that despite a copy of her calculations had already been given to the parties beforehand, she had on 8 April 1993 personally explained to the plaintiff and the defendant her calculations leading to the $2.1 million.  It was also her habit to explain documents to the parties before the parties would sign them.  After the explanation, both the plaintiff and the defendant signed on the first page of the calculations, which showed how the $2.1 million was arrived at.  On 13 April 1993, the plaintiff procured the transfer of the 30% shares of the jv co to the Sun Co and the defendant.

           The defendant’s son

49.  The defendant’s son, Hardy Lok, gave two lengthy witness statements.  His evidence more or less followed the case as pleaded in the amended defence and counterclaim and tallied with the contemporaneous documents.  Contrary to the plaintiff’s case, Hardy Lok said he knew the plaintiff and had dealt with him directly in the project undertaken by John Lok & Partners Limited at the end of the 1980s at the University of Hong Kong.  Hardy Lok also said that he was involved with the joint venture and the purchasing of properties from the developer right from the start.  He was a director of the Sun Co, which was a partner of the joint venture.  However, a substantial part of his evidence was by way of hearsay from the defendant.

50.  The defendant was not called, and two doctors were called to justify his absence.  The defendant is now aged 87 to 89.  The uncertainty results from his own inconsistent claims made at different times. 

           Dr Tsai

51.  The first doctor, Dr David Tsai, is a psychiatrist.  He has given two reports dated 15 January 2005 and 14 August 2007.  He has been treating the defendant for bipolar mood disorder since 1979.  In his first report he opined that the defendant had suffered from this disorder for about 30 years.  Owing to this disorder, the defendant had suffered from mood swings.  He was at times in depression.  The features were depressed mood, insomnia, poor appetite, weight loss, loss of enthusiasm and motivation and lethargy. 

52.  However, when his mood swung the other way to hypomania, he was euphoric, unusually good and cheerful.  His speech was rapid and sometimes incessant, his mood was elevated, and he felt that he was full of ideas.  He also had an increase in goal-directed activities, with excessive planning and participation in multiple activities.  He also had embarked on new business ventures which were obviously unsound.  His inflated self-esteem, grandiosity and poor judgment would often lead to imprudent involvement in decision making.  In 2005 he was enjoying a stable mood and was on maintenance dose of medication.

53.  In his second report Dr Tsai said that from 1997 onwards the defendant’s condition turned quiescent and was limited to mild mood variation without the accompanying disruptive mental changes.  The improvement was attributed to the natural course of the illness which had a tendency to decrease in severity with advancement in age and more regular taking of medicine.  His mood also began to settle since late 2004 and became stable since mid-2005. 

54.  In 2006 his family members suspected that he had a poor memory recollection.  Dr Tsai’s examination showed that he had a mild degree of aphasia (deterioration of language function) and difficulty to find the right word from his memory bank despite prompting.  The application of the memory test on him showed impairment of registration and recall.  He failed the “serial 7” subtraction test.  In 2005 he could give a precise and concise account of his case on this litigation.  However, in 2007 he could not coherently relate the matter despite prompting.  His account was disorganised with gaps and discrepancies in sequence.  These demonstrated memory disturbance.  He also became agitated and furious when this litigation was mentioned.  Such emotional outburst, according to Dr Chung, had been absent for a few years.

55.  Dr Tsai opined that his memory impairment, which had been there for 1½ years, was probably due to concomitant effect of age-related cerebral atrophy and the side-effect of over 25 years of administration of major tranquilisers. 

56.  In view of the defendant’s poor memory and tendency to become emotional over this litigation, Dr Tsai opined that he would not perform satisfactorily as a witness in court.  The cross-examination may also revive his bipolar mood disorder.

57.  In oral examination, Dr Tsai added that in 2007 the defendant failed badly in all memory tests.  He could register things in his memory but could not recall them.  Dr Tsai also confirmed that in 2005, he could have recalled his case in this action clearly and in detail.  However, in 2007, he could not recall the time and place of many matters.  In short, he could not repeat what he had told Dr Tsai in 2005.  Dr Tsai also said that the defendant’s outburst as invoked by the mention of this litigation was such that Dr Tsai had not seen in him after treating him for the last 30 years. 

58.  In cross-examination Dr Tsai agreed that the defendant could communicate with others in a normal way in ordinary social life, but he would have problems in getting into specific issues.  Except his memory, however, all his other mental faculties were in order.  Dr Tsai further explained that his agitation as invoked by the mention of this litigation was a symptom of stress and untoward reaction.

           Dr Chen

59.  The second doctor was Dr Walter Chen.  He said in his report of 10 November 2007 that he had treated the defendant for heart block by implanting a permanent pacemaker in him.  He concluded in the report that the physical and mental state of the defendant made it likely that the defendant could not withstand the vigour of a court trial. 

60.  In oral examination Dr Chen confirmed that the heart block had been taken care of by the pacemaker.  The defendant had the heart block because of the underlying coronary disease which Dr Chen had not mentioned in his first report.  In fact apart from implanting the pacemaker, Dr Chen had also given the defendant some blood thinning medicine to treat the underlying coronary disease.  It was this underlying illness that drove Dr Chen to the conclusion that the defendant might not withstand a court trial.

61.  Dr Chen also referred to a CT coronary angiography and calcium score report of the defendant dated 6 March 2008.  The report showed that the ejection function of the defendant’s left ventricle was normal.  However, the calcium score was high with extensive fibro-calcified plaque burden and very high risk of cardiovascular disease.  The defendant was within the top 10% of calcium score for males of 71 and above.

62.  The report also showed different degrees of stenosis (narrowing) in different parts of the defendant’s coronary arteries.  Dr Chen, after considering the report, concluded that the significant narrowing in all the coronary arteries would strongly suggest that stress was likely to precipitate angina, heart attack or even sudden death. 

ANALYSIS OF AND CONCLUSION ON MEDICAL EVIDENCE

63.  I now deal with the medical evidence and hence the question of whether the defendant should have given evidence in this case.  I do not think the impairment of memory should excuse the defendant.  So long as there is medical evidence showing the memory impairment of the witness, the court would be able to assess the extent to which the evidence of the witness is affected by the impairment.  It is, however, important to adduce medical evidence showing the extent of the impairment.  Nevertheless, the presence of a real risk of revival of the bipolar mood disorder and a real risk that stress produced by cross-examination may result in angina, heart attack or even death should be considered differently.

64.  According to Dr Tsai, the psychiatrist, the stress was of a scale that he had not witnessed in the defendant for the last 30 years.  Although the stenosis is not very serious, it is still significant enough to warrant Dr Chen’s concern.  I must also bear in mind the age of the defendant who is between 87 to 89 years old. 

65.  Mr Shum, counsel for the plaintiff, submitted that the court can control the cross-examination and every allowance would be given to the defendant by the court and by the cross-examiner.  Given the nature of this case which depends on the credibility of the protagonist, the defendant being a protagonist, and the plaintiff’s case that the defendant had cheated him right from the start of the joint venture, it is virtually impossible to make the cross-examination of the defendant stress-free.  There would also be little worth in the defendant’s evidence if his cross-examination should be ensured to be stress-free.

66.  Given his old age and the real risk to his health as may be brought about by two independent causes, I do not think it advisable to call the defendant to give evidence in this case.  I hold that it was justifiable not to call the defendant to give evidence in this trial on medical grounds, and no adverse inference should be drawn against him by virtue of his not giving evidence. 

ANALYSES OF ISSUES ON THE MERITS

67.  I now deal with the issues of this case.  The defendant was born in the Mainland.  He had a civil engineering degree from St John’s University in Shanghai.  He came here in about 1951.  He was then employed in the building industry for about 10 years.  He then started his own building business in the name of John Lok & Partners.  He incorporated this business in 1964.  He nurtured this business into one of the biggest local builders in the 1970s and 1980s.  He built, among other things, the Hong Kong Office of the Hongkong Bank.  In the words of his son, he was a good salesman of his building business.  He acquired a listed company, the Sun Co, before 1976, and injected his building business into it.  He later privatised the Sun Co.  The plaintiff also acknowledged that the defendant was an accomplished businessman. 

68.  The plaintiff also has an admirable background.  He came from the Mainland to Hong Kong in 1956 at the age of 15.  He only had a primary education.  He had been in different jobs like odd jobs worker, restaurant worker and construction worker.  He started the business of Luen Yick in 1974 with a share capital of $50,000, which was increased to $1 million in 1984.  He appreciated that a limited company was an independent legal person, and its shareholders and directors were not liable for its debts except where they had given guarantees.  He also nurtured Luen Yick into a reputable drainage and plumbing company.  Luen Yick was the drainage and plumbing contractor for some major developers in Hong Kong.  It was the contractor for CP.  It was also the contractor for the last job of John Lok & Partners at the University of Hong Kong.  After this job was finished, Hardy Lok introduced Luen Yick to the project for building the Hong Kong Stadium.  Hence both the plaintiff and the defendant have stories of success to tell. 

           Ratio of sharing of profits

69.  The first issue in this action is on the ratio of sharing of profits between the parties.  Although there is a dispute on the ratio of sharing, there is no dispute that the sharing is on the profit/loss of the investment only.  There is no sharing of the capital for purchasing the investment.  The capital was to be procured by the defendant.  The plaintiff would not be required to contribute to it, nor would he be given any part of it as a gift.  Indeed, the jv co had only allotted 10,000 shares of $1 each. 

70.  The plaintiff said that he and the defendant had agreed to a 50/50 sharing of the profit/loss before he went to choose the 10 CP units on the 21st floor.  He initially said in his statement of claim, reply and supplemental witness statement that the time was in late February to late March 1992.  At the trial, he pushed it back to late 1991 to early 1992.  The defence said that this was to facilitate his argument for including the 10 CP units on the 21st floor into the joint venture, as February to March 1992 was too late for the plaintiff to choose these units because they had already been sold to Win Plaza by a provisional sale and purchase agreement dated 6 January 1992.  I will deal with this matter later. 

71.  Coming back to the ratio for sharing, the plaintiff’s only evidence of the 50/50 ratio is his words.  He has no documentary support on this.  In fact all the documents produced, including those available from the Companies Registry, are against him.  They all show a ratio of 30/70 between him, through his company Fortune Circle, and the Sun Co as controlled by the defendant. 

72.  These documents include the minutes of the first directors’ meeting of the jv co, wherein 3,000 shares were allotted to Fortune Circle and 7,000 shares were transferred and allotted to the Sun Co.  The plaintiff had signed the minutes.  The secretarial service for the jv co was provided by Messrs Deacons, as Hardy Lok said that it was the defendant’s idea to do so for reason that such arrangement was preferable when outside interest was involved.

73.  The next document was a return of allotment dated 28 March 1992 and filed by Deacons with the Companies Registry on 9 April 1992.  This document was available for public inspection shortly after it was filed. 

74.  The next documents were the calculation sheets prepared by the accountant of the Sun Co, Ms Choi.  She said that she had explained the contents in particular of the first page to the plaintiff before the plaintiff and the defendant signed on it.  The defendant was then paid the $2.1 million as stated on the first page of the calculations, and the plaintiff then procured Fortune Circle to transfer the 3,000 shares of the jv co to the Sun Co and the defendant. 

75.  The transfers were recorded in another return dated 2 August 1993 and filed by a secretarial company of Deacons with the Companies Registry on 16 August 1993.  It was available for public perusal shortly thereafter. 

76.  All these documents show that the ratio was 30/70.  The plaintiff’s answer is that he was ignorant as to the contents of these documents.  He said his ignorance was caused by his immense faith in the defendant.  He reposed such immense trust in the defendant because the defendant had once been a chairman of a listed company, he was a successful businessman and he always abided by his words.  Therefore, whatever documents as might have been presented by the defendant to him for signature, he would just sign them right away without enquiring what they were.  Therefore he had been cheated by the defendant right from the start.

77.  However, the plaintiff was not so careless when he signed documents presented to him by other persons.  It was his evidence that when his secretary, who had served him for many years, asked him to sign documents, he would require the documents to be explained to him before signing them.  If he had any doubt, he would require the doubt to be disposed of before he would put his name on it. 

78.  Nevertheless, even if the plaintiff did not ask the defendant the nature of the documents, it would be strange for the defendant simply to ask him to sign the documents without telling him what they were.  This was particularly so for the calculation sheets prepared by Ms Choi, which made it abundantly clear that the plaintiff was selling 30% of the jv co shares for $2.1 million, which was with a premium of more than half a million dollars.  The plaintiff said this $2.1 million was for a tentative dissolution of the joint venture because the defendant was seriously ill with cancer.  If the defendant did not survive the illness, this would be his last payment. 

79.  Ms Choi was of course adamant that she had explained it clearly to the defendant as it was always her habit of explaining documents to the signers.  These calculations show how much the 30% shares were worth and how much was the premium added to it.  It would also have been strange for the plaintiff to have agreed to sign it without knowing how the figures were arrived at. 

80.  Even if he had immense trust in the defendant and/or wanted to give face to the defendant by not seeking an explanation from Ms Choi, he would also like to have a copy of the calculations, if he had not already had it, so that he could have the same explained to him by others.  He would not be so disinterested in not wanting to know how the $2.1 million had come about, particularly when, even on his case, this sum could be the final payment from the joint venture if the defendant did not survive the illness. 

81.  I also disagree with the submission of Mr Shum that the calculations by Ms Choi were complicated and misleading.  I find that the calculations were logical and straightforward.  The explanations typed in English were also clear, though the plaintiff could not read English by himself.  Furthermore on the plaintiff’s case, the joint venture would only continue and he would continue to receive profits from the joint venture if the defendant should recover from his illness. 

82.  The defendant recovered from his illness by 1 May 1993 (if his diarrhoea caused by a meal of raw fish should also be included).  The plaintiff should have asked for restoration of his shares of the jv co to Fortune Circle.  Even if the assignments to him and his daughter of CP units 2108 and 2109 on 20 July 1993 would have made it embarrassing for him to so demand right at that time, there was no reason for him not to have made any written demand up to October 1993 when he was given $6.5 million (the defendant said that it was a loan).  There was a lapse of over four years since the transfer of the two flats. 

83.  He said he had only made oral demands for further distribution and the defendant just procrastinated.  If he indeed had a genuine case, he would have asked for the restoration of his shares.  Once the shares were restored he would be entitled to a share of the profits perpetually.  Therefore he should have made written demands either by himself or through lawyers for the return of the shares.  In that event, he or his lawyer would also have searched the records of the jv co in the Companies Registry to check if there was any significant changes of the shareholders or the board.  Once the search was made, he would have found out that he only had 30% and not 50% of the jv co shares and he had been cheated by the defendant right from the start.  But nothing of the sort happened.  He made no demand for the shares and was not aware of the defendant’s cheating “until the commencement of this action”.  That does not sound entirely reasonable. 

84.  Furthermore, even if the defendant should have thought that his charisma was strong enough to make the plaintiff sign whatever documents that he wanted the plaintiff to sign without the plaintiff seeking a clarification from him, he had no control over the plaintiff’s access to the Companies Registry.  If he should have cheated the plaintiff by giving him only 30% of his shares of the jv co, then his “bad faith” could have been exposed at any time.  It does not sound reasonable for such an intelligent businessman to have behaved in such a manner.

85.  Mr Shum submitted that the ratio of the shareholding did not reflect the indirect ownership of the assets (which were the profits) of the jv co.  Whilst the ratio of 50/50 sharing was in the minds of the plaintiff and the defendant, the defendant made a ratio of 30/70 in the shareholding of the jv co so that he could have control over the jv co.  However, if the defendant were desirous of having control despite their equal sharing of the profit/loss, a minute percentage over 50% would do.  There was no reason to give the plaintiff as little as 30%, particularly when there was no other document to record the 50/50 ratio.  If Mr Shum were right, the defendant was putting the plaintiff’s interest to great prejudice from the start.  But why did the defendant do so and in a way that could be easily exposed by the plaintiff by a search at the Companies Registry?  If control was the purpose, as Mr Shum has submitted, then there was also no reason for the buying out in April 1993 to cover only 30% of the joint venture and not 50%.  All parties agree that on paper, once the buying out of the 30% was done per Ms Choi’s calculation sheets, that was the end of the plaintiff’s interest in the joint venture. 

           What units were included in the jv?

86.  Regarding the next question of whether the joint venture included 10 CP units on the 21st floor, 10 other CP units and 20 IT units, it should be considered from the moment when the units were being chosen. 

87.  The plaintiff said he and the defendant together had chosen 20 CP units and 20 IT units.  However, the documents show that the jv co had only purchased seven CP units and six IT units.  Why did the defendant fail to take up any one of the 10 CP units on the 21st floor, another 3 CP units and another 14 IT units despite they had been procured by the plaintiff?  If he should have so failed, he should also have to tell the plaintiff about it and the reason for it.  But he did not, and hence the plaintiff was not aware of it.  If the value of those flats should have increased, he would have to be responsible to the plaintiff for half of the increase.

88.  Mr Shum said that the plaintiff behaved so because of his bipolar mood disorder.  However, that disorder would only cause the patient to be more optimistic/aggressive or more pessimistic in his goals.  It would not change his personality or turn him into a liar.  The disorder does not turn Dr Jekyll into Mr Hyde.  I reject this argument in its entirety.

89.  The plaintiff’s allegation does not seem reasonable as there was no apparent reason for the defendant to have concealed from him the failure to purchase these other units.  Furthermore, the defendant did purchase 10 CP units on the 21st floor.  The plaintiff said that it was the defendant’s purge of his breach for not purchasing these units directly from the developer.  But this allegation did not make commercial sense as the plaintiff would have saved more than five million by purchasing these units directly from the developer.  Furthermore, it was not a purge of the breach of the defendant as the defendant did not procure the jv co to acquire these units, he instead acquired them in his own name. 

90.  If the defendant should have failed to take up these units by using the jv co and this initial failure was a breach, why did he not buy them subsequently in the name of the jv co?  Mr Shum submitted that he did not want his son Hardy Lok to know about the purchase of these units.  But I think he could have told Hardy Lok that these units had been chosen by the plaintiff.  Mr Shum also suggested that to keep these units in the defendant’s name would preserve flexibility for the defendant.  However, the defendant already had 70% control of the jv co.  There was no reason or need to keep these units in his own name.  Furthermore, in the event of the market going down, he would have difficulty in getting the plaintiff to contribute 30% or 50% of the loss.  If the plaintiff were right, the plaintiff could also have discovered at any time from the Land Registry that the 10 CP units on the 21st floor were not in the name of the jv co.  The plaintiff’s case is thus open to doubt.

91.  There is also the defendant’s criticism of the plaintiff’s change of timing for choosing the CP units on the 21st floor.  His case as stated in writing was always late February to late March 1992.  However, the 21st floor CP units had already been snapped up by Win Plaza on 6 January 1992.  That was why when the plaintiff changed the timing to late 1991 to early 1992 in his oral evidence, the defendant submitted that the change was just to change his story from being impossible to feasible as the 21st floor CP units were still available in late 1991.  Mr Wong, SC for the defendant, thus submitted that the plaintiff’s story about choosing the 10 units on the 21st floor was just a lie.  This criticism certainly appears to have merit. 

92.  The plaintiff also relies on a fax dated 8 May 1992 from the leasing manager of CP to the jv co for the attention of the plaintiff’s secretary.  It referred to a discussion between the staff of the leasing manager and the secretary.  It then set out proposed rentals for some of the 21st floor CP units which were in the defendant’s own name and some other CP units which were in the name of the jv co.  Mr Shum submitted that if the 21st floor CP units were not part of the jv, they would not have appeared in the letter or being discussed between the secretary and the staff of the leasing manager.  However, one does not know the details that have been discussed, save that they probably related to the leasing of the units listed in the letter.  The defendant was in a way interested in all these units.  He was the owner of the units on the 21st floor and a director of the jv co which owned the rest of the units.  It might also be that he had asked the plaintiff to assist him in handling the leasing of the joint venture units as well as his own units on the 21st floor.  I, however, do not want to speculate too much when there is just this letter and nothing else. 

93.  I also note that there were separate management agreements entered into between the leasing manager and the defendant in respect of the CP units on the 21st floor and between the leasing manager and the jv co in respect of the other CP units.  I also note that when the defendant transferred CP units 2108 and 2109 to the plaintiff and his daughter (a matter that I will deal with below), the plaintiff already knew that these two units on the 21st floor were in the name of the defendant and not in the name of the jv co.  I do not accept the defendant’s evidence of ignorance despite the explanation by his own solicitor of the sale and purchase documents to him.

           Was the dissolution in 1993 just a tentative one?

94.  I have already dealt with the calculation sheets prepared by Ms Choi above.  I would further discuss the plaintiff’s so-called tentative dissolution in April 1993.  The plaintiff denied that he had initiated the dissolution.  Mr Shum submitted that it would have been heartless for the plaintiff to have sought the dissolution at the defendant’s deathbed as the defendant was seriously ill at that time.  But why should the plaintiff be heartless?  His request would not put an end to the defendant’s business empire.  The defendant’s empire had a worth of no less than $1 billion.  His liquidity before committing to this joint venture and to the units on the 21st floor was no less than $200 million.  To take over the plaintiff’s 30% or 50% interest in the joint venture would not have been a major event for the defendant.  It certainly would not have been a setback which would have harmed the defendant.  The work entailed by the takeover of the plaintiff’s interest would be taken care of by Hardy Lok and the staff of the Sun Co.  I just cannot see why it could be said that the plaintiff would have been heartless in seeking a buyout of his interest in the joint venture by the defendant or the Sun Co.

95.  The plaintiff further suggested that it was the defendant who initiated a tentative dissolution because the defendant had a life-threatening illness which he might not recover from.  He wanted the tentative dissolution as he did not want the plaintiff to deal with his son Hardy Lok on the joint venture.  The plaintiff also alleged that the defendant had promised him that the joint venture would continue if the defendant should recover.  However, if that were the case, the need for the alleged tentative dissolution was over when the buying out took place on 8 April 1993, because the defendant had already come out of hospital on 24 March 1993, i.e. two weeks before the taking over of the plaintiff’s shares. 

96.  Mr Shum suggested that the defendant went ahead with the dissolution as he was still worrying about his health.  But what was it that worried him?  He was not required to go through chemotherapy or radiotherapy after the operation.  The serious post-operation complication had also been over for two weeks.  There was nothing for him to worry about. 

97.  Furthermore, the calculation sheet which had been signed by the plaintiff showed that the 30% interest that his Fortune Circle had in the jv co had been bought at more than its full value.  The papers did not leave the plaintiff with any entitlement to continue to share the profits of the joint venture.  If he should continue to share, he should buyback or have the shares restored to Fortune Circle.  I have already addressed this issue above and will not repeat myself.

98.  In suggesting that there would be further sharing of profit, the plaintiff was suggesting that he had not been paid his full share on 8 April 1993.  If that were the case, why was he prepared to accept anything less than his proper entitlement?  It was not a case of the defendant not having the money to pay him.  Certainly when the defendant paid him on 8 April, the defendant had already recovered from his illness.  If he indeed had 50% and the defendant still wanted to buy out his interest, there was no reason for the defendant to just pay him for 30% and not his full 50%.  In fact, the defendant did not just pay him for 30% which, after deducting the potential profits tax, was at only $1,541,276.  The defendant paid him an additional sum of $558,724, including the potential profits tax, or 36% more than the worth of the shares.  That $2.1 million as paid in fact represented 40% worth of the joint venture. 

           Transfer of CP units 2108 and 2109

99.  The plaintiff also relied on the transfer to him of the 2 CP units 2108 and 2109 as another distribution.  He denied that the transfers had anything to do with the Wise Universal venture on the ground that that venture had come to an end without anyone incurring anything. 

100.  I think the parties to this project were thinking about substantial investments and profits.  The plaintiff, in his witness statement, referred to the defendant’s suggestion of investing $1 billion into it, although that was allegedly in 1991.  I do not accept that the plaintiff had spent about two hours every working day in the defendant’s office for half a year as the plaintiff has not given any particulars of what he had done over this long period.  I also accept Mr Sun’s straightforward evidence that the plaintiff had not worked in the defendant’s office as alleged or at all.  However, I would not discount the plaintiff’s evidence about the amount of money the defendant would be prepared to inject into the project.  The defendant might have been affected by the bipolar mood disorder and was thinking big.  Once the defendant pulled out from the venture, he also put an end to the plaintiff’s hope of making any profit out of it. 

101.  Judging from the generous way that the defendant had purchased the 30% interest of Fortune Circle in the jv co, I would not be surprised if the defendant should assign the two units of a total worth of over $7.4 million to compensate the plaintiff’s loss of expectation/disappointment or expenses incurred or opportunity to profit.  Mr Shum attacks the defendant’s case on the inconsistency of whether the compensation was for loss of disappointment or expenses incurred, I do not think it matters as the event happened in July 1993.  I also refer to the date of the defendant’s withdrawal from the Wise Universal venture which tied in neatly with the transfer of the two flats.  The board resolution of Wise Universal approving the transfer of the defendant shares to the plaintiff and Madam Tse was made on 19 July 1993.  The defendant also resigned from the board of Wise Universal on the same day.  It was on this very day that Deacons produced draft formal agreements for sale and purchase and assignments in favour of the plaintiff and his daughter in respect of these two units.  These documents were executed by the plaintiff and his daughter on 20 July.  The defendant also transferred his shares in Wise Universal to the plaintiff and Madam Tse on 27 July.  I do not think all these events, which happened so closely to one another, happened by way of coincidence.  I think they were all related to one another. 

             Was the $17.5 million total of loans or of distributions of profit?

102.  On the further payments made by the defendant to the plaintiff from October 1997 to November 2003, the plaintiff said that these were not loans but distributions of profit.  Mr Shum said that the plaintiff was just one of the many poker friends of the defendant and a one time subcontractor of the defendant’s company.  The defendant had many such friends.  He therefore submitted that there was no reason for the defendant to have been so kind to the plaintiff. 

103.  However, the fact is that all payments in question, totalling $17.5 million, were evidenced by loan receipts, except in one case where there was the security of a post-dated cheque issued by the plaintiff for $1 million.  The defendant’s case is that for the first lending in October 1997, the plaintiff was in dire need of money.  Another poker friend had accompanied him to implore the defendant for the loan. 

104.  Regarding the loan receipts which were all written by the plaintiff in Chinese, the plaintiff said the content was dictated by the defendant to him.  According to him, the defendant said that the so-called loans were subject to be set off against further distributions of profit of the joint venture.  However, the loan receipts only referred to the defendant having made profits in investing in the CP units.  They did not refer to the plaintiff’s share or that it was a joint venture between the plaintiff and the defendant.  The wording of the receipt was thus contrary to what the defendant had allegedly said to the plaintiff.  I also do not think the plaintiff would have written the receipts in such manner if he was after all getting an advance payment of what he was entitled to.

105.  I think these loans were just like the transfer of the two flats and the premium for the sale of the 30% shares in the jv co.  They all demonstrate the defendant’s generosity to the plaintiff.  I do not think the plaintiff’s story is convincing. 

             The defendant’s response to the plaintiff’s demand letters

106.  Mr Shum also submitted that when the defendant responded to the plaintiff’s case as stated in the demand letters, the defendant only made a bare denial and did not provide any positive case.  Such gave rise to a presumption that there was no defence. 

107.  It is no doubt unsatisfactory not to state one’s positive case in reply to a demand letter.  Such can affect the credibility of the positive defence story to be revealed later.  The defendant’s story in this case is also not very complicated.  It could be set forth neatly without providing too much particulars.  The fact that there was a joint venture at a 30/70 ratio and it covered only 7 CP units and 6 IT units, and that it had come to an end by the Sun Co buying out the interest of Fortune Circle at $2.1 million are matters that could have been set forth very neatly and easily.  But for the many documents, in particular those available in a public registries, the unsatisfactory replies of the defendant to the demand letters could have provided the defendant with some difficulty in defending this action.  However, the defendant is well assisted by the documents.

108.  As the plaintiff has said, he respected the defendant as someone who honoured his words.  I see no reason why the defendant should have failed to uphold his reputation and, if the plaintiff were right, had failed so clumsily.  In gist, the defendant’s case is in line with all the contemporaneous documents, including those obtainable at public registries.  His witnesses are also straightforward.

             Oral evidence

109.  Mr Shum has levied criticism against Hardy Lok by saying that he only concocted a story in line with the documents as he was not involved in these matters and the matters had happened so long ago.  Hardy Lok refuted this.  The records, however, show that Hardy Lok was appointed a director of the jv co right from the start.  He had also signed the first board minutes for allotment of shares.  He was also a director of the Sun Co, which was on record a 70% shareholder of the jv co and the lender of all the funds required by the jv co.  Having heard Hardy Lok for a day, I find that his evidence was straightforward and reasonable and was in line with the contemporaneous documents.  I accept his evidence. 

110.  I also accept the evidence of the other witnesses of the defence.  They were also straightforward and reasonable. 

111.  Regarding the plaintiff’s story, I find it unreasonable on the whole.  I also refer to my comments and analysis above.  His story is also contradicted by the contemporaneous documents, including those in the public registries.  I reject the plaintiff’s evidence insofar as it was different from the contemporaneous documents, and in particular those that he had signed.  I also reject the plaintiff’s evidence insofar as it differed from those of the defence witnesses.

FINDINGS AND ORDER

112.  I find that the CP units and IT units were chosen on or about 24 March 1992 and not in late 1991, as the developer would not have waited for over two months before signing the confirmations of purchase in respect of the IT units and the CP units that were not on the 21st floor.  I also hold that the ratio for sharing of profit/loss was agreed after the 7 CP units and 6 IT units were chosen, and the agreed ratio was 30% for the plaintiff and 70% for the defendant or his company.  I also find that apart from these 7 CP units and 6 IT units, there was no other property included in the joint venture.  I also find that the joint venture was put to an end when the Sun Co purchased the 30% shares of the jv co from Fortune Circle on 8 April 1993.  I also find that CP units 2108 and 2109 were transferred to the plaintiff and his daughter by the defendant for the purpose of compensating the plaintiff’s loss of expectation/disappointment or for expenses incurred or lost opportunity.  They were not for distribution of profit of the joint venture, which had already come to an end on 8 April 1993. 

113.  I also hold against the plaintiff on the counterclaim.  Despite the submissions by Mr Shum over the wording of the loan receipts, I find that these were all loans and evidenced by the receipts and the post-dated cheque for $1 million as referred to above.  I order the plaintiff to repay the defendant $17.5 million with interest at the judgment rate from the service of the counterclaim to today. 

114.  I also order the plaintiff to pay the defendant the costs of this action and of the counterclaim.