JIANGMEN CHAO CHENG THREAD CO. LTD. v. NG SIU LUN AND ANOTHER

HCA000219A/2000

HCA219/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 219 OF 2000

----------------------

-----------------------

------------------------

         J U D G M E N T

------------------------

PARTIES

1. The plaintiff is a state owned enterprise. The 1st named defendant, Mr Ng Siu Lun ("Mr Ng") had been doing business in Hong Kong since 1973. He was at all material times the registered sole proprietor of Hip Hing Thread Factory ("the Factory"). The 2nd named defendant, Ms Lau Fook Hing ("Ms Lau") was Mr Ng's wife but they were divorced in April 2000.

PROCEEDINGS

2. The events giving rise to these proceedings may be summarised as follows.

3. The plaintiff started doing business with the Factory in 1997. Since about November 1998, it began to supply goods to the Factory. By the end of 1999, the outstanding price of goods supplied stood at $3,054,116.34.

4. Upon the Factory's default, the plaintiff commenced proceedings on 7 January 2000 against the Ngs, claiming that despite the business registration, Mr Ng and Ms Lau had held out or represented to the plaintiff that they owned the Factory and that they were partners of the business. According to the further and better particularsfiled on 5 July 2000, the plaintiff alleged, in essence, that the representation of holding out was made : (1) orally by Mr Ng and Ms Lau in a meeting in April 1997 with the plaintiff's factory head, Mr Lam Shu ("Mr Lam") and the supervisor of its sales department, Mr Wu Jian Hui ("Mr Wu"); (2) orally by Ms Lau to Mr Wu on a certain day in November or December 1997 when Mr Wu visited the Factory's office; (3) orally by Ms Lau to Mr Wu and the plaintiff's sale persons in the course of dealings; and (4) in writing by Ms Lau by signing on a note confirming that as at 27 September 1999 ("the Confirmation Note") the Factory owed the plaintiff $2,050,141.14.

5. Mr Ng's defence in gist is that the Factory was his sole proprietorship business. Ms Lau had nothing to do with it. The plaintiff's goods were not supplied to the Factory. They were all supplied to Hip Hing Thread Trading Co. Ltd ("the Company") formed by Ms Lau and their son, Mr Ng Ming Yui ("Mr M.Y. Ng"). He was therefore not liable. On 26 April 2000, Mr Ng issued a third party notice against Ms Lau, Mr M.Y. Ng and the Company, claiming, inter alia, for an indemnity of all loss and damage suffered as a result of these proceedings.

6. Ms Lau alleged in her defence that she had never been or held out to be a partner of the Factory. The plaintiff's goods were all supplied to the Factory. She was not liable at all.

7. Mr Ng died on 5 September 2000. On 3 March 2002, the plaintiff obtained leave to proceed in the absence of a person representing Mr Ng's estate under Order 15 rule 15, Rules of the High Court.

MR NG'S LIABILITY

8. The trial before me proceeded in the absence of any person representing Mr Ng's estate. The plaintiff is nevertheless obliged to prove its claim against him. In this connection, the plaintiff relies the oral evidence of Mr Lam and Mr Wu, the documents evidencing the supply of goods to the Factory including purchase orders and invoices. The evidence demonstrates clearly that the plaintiff had supplied goods to the Factory and the Factory was liable for the outstanding amount as claimed. Further, contrary to his defence, Mr Ng admitted in correspondence with the plaintiff and the Company in November 1999 that certain goods supplied by the plaintiff in fact belonged to the Factory and not the Company. In the circumstances, I am satisfied that the Factory is liable to the plaintiff as claimed. Mr Ng as the registered sole proprietorship is therefore liable.

MS LAU'S LIABILITY

9. What remains is Ms Lau's liability. This is essentially a question of credibility of the witnesses, that is, Ms Lau herself and Mr M.Y. Ng for the defence and on the other, Mr Lam and Mr Wu for the plaintiff. I will summarise their evidence in turn.

(1) Ms Lau's evidence

10. According to Ms Lau's evidence, she was never a partner of the Factory. She did not share the profit. Since 1973, she had assisted Mr Ng in managing the business of which she was given a modest sum of $10,000 per month as her and the family's living expenses. The Factory was a small business. Other than Mr Ng and herself, it only employed a shipping clerk. Mr M.Y. Ng assisted as a manager for about two years since mid-1997. Ms Lau's role in the Factory was limited. She was mainly responsible for accounting matters and handling documents. She was not an authorised signatory of the Factory's bank accounts, which were all held under Ms Ng's name or the name of the Factory. She was not authorised to sign any cheque. She did not have any name card of her own. From time to time, she did place orders with the plaintiff for and on behalf of the Factory. Mr Ng was aware of that and had no objection. She also followed up on the orders, discussed matters relating to price with Mr Wu or the plaintiff's sale persons, prepared shipping documents and attended to relating matters.

11. Under cross-examination, she was asked why given the poor relationship she had with Mr Ng in the late 1990s, she still assisted in the Factory's affairs. She said she had to earn a living. She denied that she had ever told any of the plaintiff's representative that she was a partner or owner of the Factory as alleged.

(2) Mr M.Y. Ng's evidence

12. Mr M.Y. Ng corroborated her mother's evidence. He was all along assisting his father in clerical works. He himself worked in the Factory between 1996 and 1999. He had never heard his parents telling any person that Ms Lau was a partner of the Factory.

(3) Mr Lam's evidence

13. Mr Lam said he first met Mr Ng in Hong Kong in 1996 through the introduction of a fellow trader. They discussed about the general matters relating to the trade. Mr Ng told him that the Factory was an unlimited company and that when he was not around, his wife would be responsible. Then later in 1996 or 1997, Mr Ng came to visit Mr Lam at the plaintiff's office. Mr Lam did not have any particular recollection if Mr Ng came with Mr M.Y. Ng.

14. In about April 1997, Mr Lam came to Hong Kong alone to visit the Factory office. Mr Ng introduced him to Ms Lau, who was then working in the office. Mr Ng told him in the presence of Ms Lau, among other things, that his wife also had a share or interest in the Factory. Hearing that, Ms Lau who was sitting about two meters away, turned round and nodded at Mr Lam and smiled at him out of courtesy. Mr Ng also told Mr Lam that if he was not around, Ms Lau would be responsible for the Factory. After that visit, Mr Lam did not see Ms Lau again until sometime in January 1999 when he attended the wedding banquet of Mr M.Y. Ng on invitation. Shortly before Mr Lam came to Hong Kong, Mr Ng had written to him and suggested selling 50% of the share in the Factory to the plaintiff to enhance cooperation. Mr Lam rejected the proposal after having a brief discussion with Mr Ng in January 1999.

(4) Mr Wu's evidence

15. Mr Wu first met Ms Lau at the Factory's office in the beginning of 1997. Mr Ng was also present at that meeting. Mr Ng told him that both of them had a share in the Factory. Ms Lau said she was Mr Ng's wife and she was his partner. The plaintiff then started to do business with the Factory, though on a very small scale. At the end of 1998, Mr Wu came to the Factory's office again. On this occasion, he did not see Mr Ng. He only saw Mr Ng's jacket hanging on his chair. He asked Ms Lau if Mr Ng was in Hong Kong. Ms Lau replied that he was not, Mr Wu then asked who was responsible for the Factory. Ms Lau said she was a partner and would be responsible for the Factory's affairs. Then she introduced Mr M.Y. Ng to him.

16. Since about November 1998, the plaintiff started to supply goods to the Factory. Mr Wu followed up some of the orders and discussed matters relating to price with Ms Lau. On some of the orders, Ms Lau signed as "Mrs Ng". Mr Wu asked her why over the phone. She explained that she was a partner, therefore she wrote "Mrs Ng". When later the Factory began to default, Mr Wu pressed Ms Lau for payment. She said after the resumption of the office and some other premises by the government , the Factory would be able to make payment.

17. Under cross-examination, Mr Wu confirmed that he did not come to the Factory's office with Mr Lam in April 1997.

HOLDING OUT

18. In my view, the mere fact that Ms Lau had been carrying out duties for the Factory as described in her witness statement and expanded in her oral testimony is not sufficient to raise an inference that she was a partner of the Factory. For it is entirely consistent with her case that she was just assisting her husband at the time. Ms Fung, counsel for the plaintiff, queried why she would continue to work for Mr Ng if their relationship was poor in the late 1990s. In this regard, I accept Ms Lau's explanation and do not find that it would affect her credibility as a whole.

19. Ms Lau did sign some of the purchase orders in the name of Mrs Ng. But that alone is not sufficient to raise any inference against her. This, I accept, is just for convenience. And I reject Mr Wu's evidence on Ms Lau's explanation why she signed as Mrs Ng. That explanation was odd to say the least. More importantly, it is not consistent with the fact that Ms Lau signed other purchase orders and invoices as a manager of the Factory. Obviously, for such documents, she did not seek to represent herself as a partner. Why would she behave differently during the course of dealings? The reason is not apparent from the materials before me.

20. The evidence of Mr Lam and Mr Wu is not satisfactory in some material aspects. The plaintiff's case as disclosed by the further and better particulars is that there was a joint meeting with Mr Lam, Mr Wu and the Ngs in April 1997 where both of them said that Ms Lau was a partner, having a share in the Factory. However, according to Mr Lam's oral testimony, only he attended the meeting. And Ms Lau did not expressly say that she was a partner. She just nodded and smiled when hearing what Mr Ng had said so. Under cross-examination, Mr Lam simply said that the particulars were not correct. Mr Wu's evidence is also inconsistent with the particulars in two respects, namely, that he did not attend the April 1997 meeting and that the meeting when the Ngs told him that Ms Lau was a partner took place in November or December 1997, and not 1998 as alleged. Like Mr Lam, Mr Wu said the particulars were incorrect. Ms Fung submitted that the inconsistence between the pleadings and evidence should be disregarded. With respect, I disagree. Pleadings prepared with instructions state a party's case. If there is any material inconsistency arising from the evidence adduced to support the case, a credible explanation must be given. Here, there is simply none.

21. Further, in paragraph 5(i) of his affirmationfiled on 6 September 2000, Mr Wu said that in a meeting in April 1997 he had with Ms Lau and Mr Ng here in Hong Kong, "the two said to us that they were partners of the [Factory]". This paragraph gave an impression that other than Mr Wu, somebody else from the plaintiff was also present. When confronted, Mr Wu said this paragraph was wrong. Later, he said "us" meant the plaintiff. In my view, Mr Wu was making up as he went alone, attempting to justify the apparent inconsistency.

22. Mr Wu' evidence on what Ms Lau told him in the meeting in November or December 1997 is also difficult to accept. If his evidence were true, back in the beginning of 1997 he had already known that Ms Lau was a partner, being responsible for the operation of the Factory. I saw no reason why in November or December 1997 he would ask Ms Lau again the obvious question who would run the Factory when Mr Ng was not around or why Ms Lau would need to repeat what was said before. It is simply superfluous to do so.

23. Given its poor quality, I do not accept the evidence of Mr Lam and Mr Wu on the holding out issue. I prefer and accept the evidence of Ms Lau and Mr M.Y. Ng whom I find to be truthful and credible.

24. As noted, the plaintiff also sought to rely on the Confirmation Note. But I do not think it adds any weight to its case. For Ms Lau signed on it and indeed another confirmation note in May 1999 as manager of the Factory. These documents alone do not support any case of holding out.

OTHER GROUNDS OF LIABILITY

25. In her final submission, Ms Fung sought to argue that Ms Lau is liable even she was only an agent of Factory. With respect, the plaintiff is not so entitled in the absence of any amendment to its statement of claim. In any event, I do not find that the materials before me justify such a claim. Ms Fung further argued that for some $149,000, Ms Lau was liable as an agent for the undisclosed principle, namely, the Company. Again, it is not the plaintiff's pleaded case. In fact, it is always the plaintiff's case that all the goods were supplied to the Factory and not the Company. In any event, the relevant purchase orders clearly showed Ms Lau signed them for and on behalf of the Company, negating any suggestion that the Company was an undisclosed principle. (Ms Lau had her explanation on why she signed those orders for the Company. As it is not relevant to the central issue before me, I do not propose to deal with it.)

CONCLUSION

26. For the foregoing reason, I will enter judgment for the plaintiff against Mr Ng as claimed with interest but dismiss the plaintiff's claim against Ms Lau.

27. I will also make an order nisi that the plaintiff do have its costs against Mr Ng, to be taxed if not agreed; and that Ms Lau do have her costs against the plaintiff to be taxed if not agreed. The order nisi is to be made absolute within 14 days after handing down.

28. Finally, I am told that there is a pending application for security for costs taken out by Ms Lau against the plaintiff, which has been adjourned by Waung J with costs reserved. After hearing counsel, I am of the view that the parties should go back before Waung J for a determination of the reserved costs. For avoidance of doubt, the costs ordernisi above is made without prejudice to any determination that Waung J may have on the reserved costs.

Representation: