Lek Bong Hua v Lek Boon Chye

CourtHigh Court (Singapore)
JudgeLai Kew Chai J
Judgment Date24 November 1998
Neutral Citation[1998] SGHC 386
Citation[1998] SGHC 386
Defendant CounselJason Lim Chen Thor and Serene Wong Mei Ling (Winston Chen & Partners)
Plaintiff CounselHee Theng Fong, Doris Lee Cheow Ming and Justina Soon (Hee Theng Fong & Co)
Published date19 September 2003
Docket NumberSuit No 1880 of 1997
Date24 November 1998
Subject Matterss 1 & 2 Partnership Act (Cap 391, 1994 Ed),Partnership,Mistake of fact,Tests of partnership,Whether parties have common intention to carry on business with a view to profit,Contract,Money paid according to terms of compromise settlement,Repayment of money paid under mistake of fact,Mistake,Whether plaintiff has proven that he has paid the money under a mistake of fact


This is a dispute between two brothers over the ownership of a business. The plaintiff, the elder brother, claims that it was agreed between him and the defendant `sometime in 1975` at the inception of the business that he would be a partner of the firm known as `L & C Enterprise`. The firm manufactures and deals in baby products. For year of assessment 1976 the turnover was only $121,824.95. By Y/A 1995 it had risen to $4,352,120.32, hitting a high of $5,479,845.92. These figures were garnered from the tax returns produced by the defendant who declared his assessable income as the sole-proprietor in all the years in question. It was common ground that the plaintiff was never registered as a partner in the registry of business.

2.The business in fact started in 1975 as a partnership and was duly registered on 16 July 1975 in the registry of business names between the defendant and one Mr Chua Liang Huat (`Mr Chua`), a friend of the defendant. Mr Chua`s two roles were first to allow the defendant to share his shop at Golden Mile Complex and secondly to assist the defendant in procuring letter of credit facilities from his own bank to finance the modest imports of the defendant. When the defendant was able to manage on his own, Mr Chua, as he confirmed to me, withdrew from the partnership in 1976. Since then, the firm has been registered as a sole-proprietorship. But that prima facie sole-proprietorship, according to the plaintiff, did not reflect the true partnership relationship between him and the defendant.

3.A closely related issue is whether the written agreement between them and dated 20 November 1993, under which the plaintiff agreed to pay and the defendant agreed to accept the sum of $300,000, was entered into pursuant to a mistake of fact. I should briefly explain at this stage in neutral terms how the agreement came about. Over the years, the plaintiff took delivery of goods from the firm and sold them to a network of small retailers in HDB and rural areas. In those sales, the plaintiff did use the invoices of the firm. So as between him on the one hand and the buyers of the baby products from him on the other, the sellers were in all cases the firm. However, as between the plaintiff and the firm (leaving aside the question whether it was a sole-proprietorship or partnership), the accounting records, though not comprehensive, principally in the form two similar `black books`, one kept by each party, recorded the prices of those goods and the credits received by the firm via the plaintiff. These credits entered in favour of the plaintiff came into the coffers of the firm by cash or cheques drawn in favour of or payable to the firm `L & C Enterprise`.

4.A part of the raging controversies between the brothers was their conflicting versions on the nature or the true nature of those transactions. The plaintiff says that he was selling the partnership`s goods to those smaller outlets on behalf of the partnership and the running accounts were a record of the transactions between him, in his own right, and the partnership. It was a partner`s running account in the partnership. On the other hand, the defendant`s contention is that all along as between themselves the plaintiff had bought his goods and sold them for his own account and benefit. Therefore, the plaintiff was a buyer of the baby products from him. According to the accounting documents produced in court, including the invoices, the delivery orders and in part the black book entries, I gathered the overall picture that the plaintiff`s contribution to the annual turnover of the firm hovered between 20% and 30% between 1982 and 1991. I set out a few examples to provide the overview. In figures, the plaintiff`s transactions with the firm totalled $354,568.80 in 1982. In the year 1990, out of the firm`s turnover of $3,283,992.27 the sales recorded as done by the plaintiff was $981,902.24 or 29.9% of the firm`s turnover.

5. The plaintiff`s case

Between 1970 and 1976 the plaintiff was a bus driver. The defendant worked in a company and sold certain goods as a sideline. The plaintiff pointed out that he ran foul of the law in 1971 but nothing turned on this. As stated in the introduction, the plaintiff claims that he orally agreed with the defendant sometime before or at the inception of L & C Enterprise in July 1975 that they would share the profits and assets of the business equally. Mr Chua merely lent his name and did not have any proprietary interest in the business. He was registered as a partner because the defendant had told him that Mr Chua had lent the firm $50,000 to start the business. They first started selling `Gerber` milk bottles and textiles.

6.Both parties did not have any money to speak off. According to the plaintiff the capital came from three sources. Mr Chua extended a loan of $50,000 in the form of goods and textiles in the shop premises. Most importantly, the second source was their late father`s fixed deposit of $10,000. Thirdly, he sold his car ST 8308 and the proceeds were used partly as a deposit to purchase a van for the firm and partly for the purchase of stocks.

7.The second brother of both parties, Mr Lek Boon How, gave evidence on the fixed deposit. He said that his late father had told him that both the plaintiff and the defendant had approached him for the use of the $10,000 fixed deposit `for the business`, that the father was reluctant because this was set aside by the father to meet his funeral expenses and that the father finally agreed. He said: `My father did not say who he lent it to`. The eldest brother of the parties, Mr Lek Boon Heng, also gave evidence. He too told the court that his late father had told him that he (the father) had let the defendants use the $10,000 fixed deposit as guarantee for their business. He clarified to the court that the father `did not mention` whether it was for the plaintiff or for the defendant.

8.In the first three years of the business, the plaintiff negotiated with the manufacturer and supplier of `Babylove` gift sets to sell them to the firm. He conducted the sales and the defendant was responsible for the accounts and administration of the business. In 1978 the business had sufficiently expanded and they moved to Block 34A, 1st floor, 342 Margaret Drive which had a larger space. Unfortunately, there was a fire which destroyed all the stocks except for the baby products which were kept in the van. However, the firm secured the distributorship of a popular line of Japanese baby products known as `Pigeon` products. In 1978 the defendant`s wife joined the business and took care of the accounts of the business.

9.According to the plaintiff, in 1978/1979 the defendant proposed to him a new arrangement. The object was to ensure profits to the firm. The firm would record a `sale` of the products to the plaintiff at a marked up price. The plaintiff under these new arrangements would continue to sell under the name of L & C Enterprise. The plaintiff would use part of the sale proceeds to pay for the salary for the employees of L & C Enterprise. Of course, the plaintiff could sell to his buyers in the network of about 500 small retailers at a higher price. The plaintiff could retain the profits for his own account entirely.

10.In 1979 Pigeon (Japan) Ltd opened a branch in Singapore and appointed L & C Enterprise as their sole distributor. In their dealings, the defendant was described as the sole-proprietor. In the same year, the firm started to manufacture for sale baby gift sets in their own brand name `Chu Chu`. These products became household names. By 1983 the firm was making good profits. The firm operated from four industrial units known as 12 Lorong Bakar Batu, [num ]04-05, [num ]04-06, [num ]04-07 and [num ]04-08 Kolam Ayer Industrial Park. It also had two other warehouses at Brighton Crescent and Lorong Bakar Batu.

11.The plaintiff told the court that in 1984 the defendant raised with him the question of his wife`s position in the firm. He agreed that she had been working hard and contributing to the firm. He then agreed that he would from then on hold 30%, the defendant 40% and the defendant`s wife 30% interest in the firm.

12.The principals of the firm, Pigeon (S) Pte Ltd, were unhappy with the firm selling `Pepe` baby products which were competing with `Pigeon` products. The plaintiff said in evidence that it was the defendant`s idea that he register `Pepe Baby Products`. He did that on 22 December 1990. When registering, he encountered difficulties with the registry staff who mentioned that the defendant was the trademark proprietor of `Pepe` but, on the prompting of the defendant, he told the officer that he was a partner and brother of the defendant. This was accepted and he registered `Pepe Baby Products`.

13.In 1993 disagreement broke out for the first time between the brothers. The plaintiff said that for the first time the defendant alleged that he was owing the firm more than half a million dollars. The defendant told him that he would register him as a partner of L & C Enterprise if he would pay up $584,324.36. Another incident happened later in the year. The defendant raised the price of pacifiers for babies, by the brand known as 888(S2), saying that the purchase price had increased. The plaintiff found out from the suppliers that the price was not increased. He confronted the defendant and asked for his partnership share for all the years. The defendant had previously given excuses to postpone the registration of his name but had never denied the existence of the partnership. This was the first denial.

14.The differences led to a family meeting in late 1993....

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