LAM LAI YI v. HO WING SZE AND ANOTHER

CACV 233/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 233 OF 2009

(ON APPEAL FROM DCCJ NO. 2221 OF 2006)

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BETWEEN

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J U D G M E N T

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Hon Rogers VP:

1.  This is an appeal from a judgment of Deputy District Court Judge Yip, as he then was, which was given on 27 May 2009. The matter before the judge was a fairly simple claim by the Plaintiff for what she said was due to her for the purchase of shares in a comparatively small restaurant which she had run with her friend and her friend’s boyfriend. The friend and boyfriend are the 1^st and 2^nd Defendants respectively.

2.  The Plaintiff’s case is quite simple. What is said is that there were negotiations between the parties because the Plaintiff wanted to drop out of the company. She was not happy with the way things were going for one reason or another - and it does not matter - but eventually, there was an extraordinary general meeting of the company on 30 August 2005. At that meeting, there were the three shareholders who were the three directors, namely, the Plaintiff and the 1^st and 2^nd Defendants. Three resolutions were passed and I shall set them out:

“  (1)  The resolution was passed by all presents and it was resolved that Ms Lam Lai Yi will resign from the Board of Directors of Yummi Yummi Food Products Company Limited effective from 1^st September 2005.  Ms Lam Lai Yi will continue to work at the said company until 20^th September 2005.  “Century Company Services Limited”, will be duly appointed to prepare the documents for the transfer of company shares.

(2)  The resolution was passed by all presents and it was resolved that Ms Lam Lai Yi will sell the whole portion of her shares within the said company, (i.e. 30%) to the remaining shareholders, Ms Ho Wing Sze and Mr Poon Chung Wai.

(3)  The resolution was passed by all presents and it was resolved that a certified accountant will be appointed to evaluate the value of the said company in order to determine the price for the transfer of the shares of the said company.  All expenses in due course will be responsible by Ms Lam Lai Yi.”

3.  The Plaintiff left the company as provided. The Defendants picked the accountant and they have provided a letter which has been shown to the court. It is instructive to refer to it because it says:

“We are writing to elaborate our letter dated 30 November 2006.  Mr Poon approached us in August 2005 and ask us to prepare a management accounts up to 31 August 2005 for the share transfer stamp duty purpose.  We send him a quotation and received a signed quotation by the end of August 2005.  We carry out our work on 9 September and received a settlement from Ms Lam Lai Yi on that date.

When we carry out the bookkeeping work in the restaurant of the Company, we ask Mr Poon to provide us the bank statements, sales day book, cashbook and stock list as at 31 August 2005.  In addition, we also ask Mr Poon to provide us the invoice for the air conditioning system and the length of the lease to compute the depreciation.  We also confirm with Mr Poon that the Company will run continuously so that the going concern assumption is applied in preparing the bookkeeping.  We then send out our first draft to Mr Poon and Ms Lam on 13 September 2005.

On 24 November, we received a fax from Ms Lam that certain figures need to amend, we then amend as per her instruction as she is also a director of the Company at that time.  We send out the revised management account on 28 November 2005.  Thereafter, our staff received a call from Ms Lam and ask for further amendment.  The final amendment was send out to Miss Lam on 2 December 2005.

The above are all the facts that we know and should be also know by the other shareholders or directors.  Should you have any questions, please feel free to contact us.”

4.  So there we have it in a small compass. The judge below held that the three resolutions did not constitute an enforceable contract because he said that the figure arrived at by the accountants might have been astronomical or might have been minimal and, therefore, the parties could not be said to have agreed to accept the valuation that the accountants would come up with.

5.  In my view, I cannot see that that is right at all. It seems to me that this was a very clear and sensible arrangement which the parties arrived at. The Plaintiff agreed to leave the company, she would cease to be a director, she would cease to work there and that she did. It was agreed that she would sell her shares to the other two shareholders and directors. Because they could not agree on the price, they would get an accountant to do the valuation and, very sensibly, it was the Defendants who would pick the accountant and it was going to be the Plaintiff who was going to pay for it. We are told she did pay for it. There has been no offer, so far as we are aware, that the Defendants have offered her her money back for that.

6.  So as far as can be seen, the Plaintiff has fulfilled all her side of the contract and she is entitled to the proportion of the valuation of the company in accordance with the agreement which was come to.

7.  In my view, this matter was a very simple matter. Why it took three days in the court below, I can only assume, was because there was a great deal of highly irrelevant and inadmissible evidence which must have been given and extracted from the various witnesses as to what was their understanding of the meaning of a written contract.

8.  I would, therefore, allow this appeal and order that the Plaintiff is entitled to the sum claimed, namely, $102,824.40, together with interest.

Hon Le Pichon JA:

9.  I agree.

Hon Kwan JA:

10.  I also agree.