Toh Kim Chan v Toh Kim Tian and Others

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 02 August 2004
• Neutral Citation: [2004] SGHC 161
• Court: High Court (Singapore)
• Published date: 06 August 2004
• Year: 2004
• Plaintiff Counsel: Cheong Gay Eng (Cheong and Koh)
• Defendant Counsel: Peter Low (Peter Low, Tang and Belinda Ang)
• Subject Matter: Partnership,Partners inter se,Accounts,Business of partnership transferred to company,Appeal against findings of Assistant Registrar regarding accounts and inquiries made in respect of assets of partnership.
• Citation: [2004] SGHC 161

2 August 2004

Tay Yong Kwang J:

1 This is an appeal by the first defendant against the findings of an assistant registrar made in an inquiry into accounts directed by Woo Bih Li JC (as he then was, henceforth “Woo J”). The following facts are derived substantially from Woo J’s judgment dated 11 November 2002 ([2003] 1 SLR 839).

The factual background

2 The Toh family comprised eight brothers and five sisters. The eldest brother passed away in February 1995. The action arose out of a dispute among some members of the Toh family. The plaintiff and the first defendant are brothers, the plaintiff being the fifth son and the first defendant being the third son in the family. The second defendant (Ang Kiang Hua) is the wife of the first defendant. The third defendant is a company known as Guan Joo Engineering Works & Building Pte Ltd (“the company”) in which the first and second defendants are directors and shareholders.

3 In 1977, five members of the family agreed to start a business together with each of them contributing $5,000 as the initial capital of the partnership. The five consisted of the father, Toh Kim Hwee (eldest son, now deceased), the first defendant, Tock Kim Yock (fourth son) and the plaintiff. On 1 February 1977, the firm was registered. Although the partnership (originally called Guan Joo Hardware Co) was not registered in the names of all the five named members of the family, it was common ground that they were partners with each holding an equal share in the partnership.

4 In July 1984, the name of the partnership was changed to Guan Joo Engineering Works. The first defendant was running the business, at least, from July 1984 onwards. The partners who worked for the business received fringe benefits such as cars, which were paid for by the partnership. They also received payment for their work. There were also advances made to the partners. Those were recorded as loans. The father received monthly sums of money from the business. The first defendant was in charge of all such money matters.

5 On 4 April 1996, the company was incorporated upon the instructions of the first defendant for the purpose of limiting liability. The business of the partnership was transferred to the company and the partnership ceased business on 30 April 1996. The first two shareholders of the company were the first defendant and the widow of the eldest brother, the remaining registered partners of the partnership, with each holding one share. The first defendant’s wife (the second defendant) became a director of the company on 2 May 1996. Sometime in 1999, the first defendant bought over the beneficial interest of the widow of the eldest brother.

6 The plaintiff, who had been working in the partnership and subsequently the company, from 1991, had his services terminated by the first defendant in July 2001. Their relationship had been strained for some time.

7 On 31 January 2002, the plaintiff commenced this action against the three defendants. Among other reliefs, he sought a declaration that the first and second defendants were holding on trust for him a 20% interest in the partnership and the company. He also prayed for an order that accounts be taken and inquiries be made in respect of the assets of the partnership and the company, and that the first and second defendants give him access to the firm’s and the company’s accounting books and documents.

8 Woo J made the following orders at the conclusion of the trial:

(a) a declaration that the first defendant held a 20% share in the partnership on trust for the plaintiff;

(b) an order that the first defendant “give an accounting and there is to be an inquiry as stated in paragraph 57” (I have set out below the said [57] of the judgment in full);

(c) an order that the first defendant give the plaintiff and any accountant appointed by him access to all accounting records and supporting documents and allow them to make copies thereof;

(d) an order that the first defendant transfer to the plaintiff 20% of the issued shares of the company;

(e) liberty to apply.

9 Paragraph 57 of Woo J’s judgment reads (with the plaintiff referred to as “Kim Chan”, the first defendant as “Kim Tian” and the company as “GJEWB”):

57 In the circumstances, I will order Kim Tian to account for all the assets of the Partnership from 31 January 1996. This will be within six years prior to the filing of the Writ on 31 January 2002 and, even if s 6(2) of the Limitation Act does not apply, I am not prepared to order the accounting period to be extended to any period before 31 January 1996 in view of laches on the part of Kim Chan. However, the $200,000 cash balance is to be deemed to be part of the assets of the Partnership as at 31 January 1996. There will also be an inquiry as to what has become of such assets. I will also order Kim Tian to pay Kim Chan 20% of the assets so accounted unless the inquiry concludes that the assets have been transferred to GJEWB or given to any of the partners other than Kim Tian or have been reasonably used to pay Kim Tian in view of the time he spent in managing the Partnership. To the extent that they have been so transferred or given to other partners or have been reasonably used to pay Kim Tian, Kim Tian need not pay Kim Chan 20% thereof, but the burden of establishing any of these qualifications is on Kim Tian. The accounting is to be taken before and the inquiry is to be undertaken by the Registrar of the Supreme Court who shall make such directions and orders as he thinks fit, including orders in respect of interest and costs of the accounting and inquiry.”

The so-called missing $200,000 came about because the judge believed the evidence of a younger brother (not one of the partners), who testified for the plaintiff that he noticed a cash balance of $200,000 from one set of accounts but found that item missing when he reviewed another set of accounts. That was in 1994, 1995 and when the business was to be transferred to the company.

10 Woo J did not make an order for accounts to be taken in respect of the company. As the second defendant was not a named partner of the business, the judge felt it was not appropriate to seek a declaration that she was a trustee of the plaintiff’s share in the partnership (see [22] of the judgment). Accordingly, he dismissed the claims against the second defendant. On the question of costs, he awarded the plaintiff 30% of the costs of the proceedings against the first defendant and ordered the plaintiff to pay the second defendant $4,000 in costs. He made no order, both on the substantive claims and on costs, against the company.

The taking of accounts and the inquiry before the assistant registrar

11 The assistant registrar, in analysing the said [57], set out the parameters of the taking of accounts and the inquiry in the following manner:

(a) the period of accounting was to commence from 31 January 1996;

(b) a cash balance of $200,000 was deemed to be part of the partnership assets as at 31 January 1996;

(c) the first defendant had to account for all the assets of the partnership as of that date and pay the plaintiff 20% of the assets so accounted unless he could prove three qualifications. These were that the assets had been:

(i) transferred to the company; or

(ii) given to partners other than the first defendant; or

(iii) reasonably used to pay the first defendant in view of the time he spent managing the partnership.

12 At the hearing, counsel for both parties informed the assistant registrar that they had agreed that the second and the third qualifications were not in issue. Accordingly, she confined the inquiry to the first qualification on whether the first defendant could show that the assets of the partnership as at 31 January 1996, had been transferred to the company when it took over the business on 1 May 1996. The first defendant filed two affidavits for the purposes of the hearing before the assistant registrar while the plaintiff filed an affidavit by Lee Nyen Fatt, an accountant engaged by the plaintiff to advise him on the accounts to be examined.

13 The assistant registrar acknowledged that many of the documents produced by the first defendant were not substantiated but she considered that the authenticity and reliability of those documents relied upon by the plaintiff would be taken as unchallenged by the plaintiff. As for the rest of the documents, she decided that their reliability would be determined by taking into account all the circumstances of the case, including the fact that the partnership was a small, family-run business with the consequence “that there might not be a rigorously adhered proper standard of documenting transactions or systemizing the accounts”. The plaintiff had complained that there was failure by the first defendant to give access to all accounting records and supporting documents while the first defendant’s explanation was that he had provided whatever was available and that many of the documents had already been destroyed or discarded due to the lapse of time between the accounting period and the commencement of this action. The assistant registrar held that this fact alone did not mean that the burden of proof in relation to the first qualification stated above was an impossible one to discharge.

14 As the partnership closed its accounts on a yearly basis on 31 December, it did not have a list of assets as at 31...