Chang Min Tat FJ

(delivering the judgment of the Court): The 1st appellant and the respondent, since deceased, (but for convenience we will continue to treat him as the respondent to the appeal), intended to form a limited company to be known as Kingwood Timber Industries Sdn. Bhd. and commenced trading even before the registration, as in the statement of claim, with the Registrar of Businesses. The monetary contribution made by the respondent was $100,000, which must be a considerable sum for a retired military officer. Later, without the knowledge of the respondent, the 1st appellant and the 2nd appellant formed a partnership. It dealt substantially with the same lines as the company and was given the same name Kingwood Timber Industries. There can be no doubt about the significance of the dual parts played by the appellants. Even to this military officer, the significance was clear when he found out the existence of the partnership business. The statement of claim referred to unhappy differences arising from this discovery. Whatever the real state of the affairs between them, the respondent then desired to withdraw from the business. He accordingly entered into another agreement with the 1st appellant on September 14, 1972. There were other agreements subsequently, but the agreement of September 14, 1972 was the one sued on.

The first recital acknowledged the respondent's contribution of $100,000 to the working capital of the company. The second referred to the registration of the appellants as partners of the company. This recital, though drafted by qualified practitioners, is wrong in law and in fact. The appellants had registered themselves as partners of a partnership business under the Registration of Businesses Ordinance and not under the Companies Act. The third recital referred to the agreement for the assignment of all of the respondent's rights in the company to the 1st appellant in consideration of the return of the capital contribution of $100,000 and a half share of the profits of the company from June 8, 1972 when presumably the company commenced trading to September 30, 1972. The document was to give effect to the agreement in the third recital. The profits anticipated in the agreement were enormous.

Of the several provisions in the agreement, we need concern ourselves strictly with the one relating to the return of the $100,000. A sum of $15,000 was paid on the execution, leaving $85,000 to be paid by future instalments. $35,000 was to be paid on or before October 12, 1972 and the balance of $50,000 was to be paid by monthly instalments of $10,000 on the 12th of each succeeding month. There is not the ordinary provision that in the event of default in the payment of any one instalment, the remaining instalments shall become immediately due and payable (this is yet again another example of the effect of having the same solicitor draft agreements between parties with conflicting interests). The other provisions are concerned with the ascertainment of the profits. For this purpose the respondent was to have access to the company's books.

On October 7, 1972, the respondent took out a writ against the partners of Kingwood Timber Industries. The distinction between the company in which the respondent had invested and the partnership entered into by the appellants was so vague that though the agreement sued on was between the respondent and the 1st appellant, no point was taken on the liability of the 2nd appellant under the agreement. The first statement of claim referred to the facts which have been set out leading to the discovery by the respondent of this partnership business and to the September agreement. It next referred to the refusal of the appellants to give access to the books for the determination of the profits, a half share of which for the period in the agreement was given to the respondent. It then asked for (i) judgment against the 1st appellant for $85,000 with interest, (ii) delivery of the accou