Hoh Han Keyet v. Artimax Investment Ltd and Others

HCA 1163/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1163 of 2013

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J U D G M E N T

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A.  INTRODUCTION

1.These proceedings arise out of a dispute over the beneficial ownership of one share in a private Hong Kong company, Artimax Investment Limited (“Artimax”), the 1^st defendant by Original Action and the 2^nd defendant by Counterclaim. 

B.  THE RELEVANT FACTUAL BACKGROUND

B1.  The Hoh Family

2.The late Hoh Ying Chye (“Hoh Senior”) and his wife, Madam Yow Yow Mui (“Madam Yow”), had seven children:

(1) Robert Hoh Kiang Chan (“Robert”), who passed away on 24 December 2007;

(2) Linda Hoh Yuet Ngo (“Linda”), who passed away in 1959;

(3) Maureen Yuet Ming Oborn (nee Hoh) (“Maureen”);

(4) Derek Hoh Kiang Howe (“Derek”);

(5) George Hoh Kiang Po (“George”), the 3^rd defendant by Counterclaim;

(6) Frank Hoh Kiang Ngan (“Frank”), the 2^nd defendant by Counterclaim;

(7) Richard Hoh Kiang Seong (“Richard”).

3.Hoh Senior passed away on 21 April 1988.

4.Robert was married to Daisy Sui Keng Hoh (“Daisy”).  Their son is Han Keyet Hoh (“Han”), the plaintiff by Original Action and the 1^st defendant by Counterclaim.

B2.  Sharikat Ying Mui Sendirian Berhad (“SYM”) and its Principal Activities

5.SYM is a private limited company incorporated in Malaysia on 26 September 1968.  The original subscribers of SYM’s shares were Hoh Senior and Madam Yow, each holding one share.  SYM is the 3rd defendant by Original Action and the plaintiff by Counterclaim in these proceedings.

6.SYM is currently controlled exclusively by the six children and the various grandchildren of Hoh Senior.

7.According to the Directors’ Report in the Annual Report/Financial Statements of SYM from 1998 to 2013, the principal activities of SYM were investment holding, the letting of properties, pawnshop business, trading of gold and jewellery, and general trading.

8.At the material times, SYM also owned shares in the following pawnshop companies incorporated and operating in Malaysia (collectively “the Pawnshops”):

(1) Choong Teck Pawnshop Sdn Bhd (incorporated on 8 May 1998);

(2) Cheong Fatt Pawnshop Sdn Bhd (incorporated on 9 May 1998);

(3) Choong Thye Pawnshop Sdn Bhd (incorporated on 28 January 2004); and

(4) Choong Yee Pawnshop Sdn Bhd (incorporated on 11 June 1997).

B3.  Opesco Investment Limited (“Opesco”) and Artimax Investment Limited

9.Opesco was incorporated in Hong Kong as a limited company on 26 January 1988.  At all material times, the only registered shareholders of Opesco were Derek and George, and the only directors were Derek, George and Robert.  Opesco was wound up by the Hong Kong court on 16 March 2005.

10.It is common ground that Opesco had been used on various occasions by SYM and certain Hoh family members as a corporate vehicle to make loans to the Pawnshops.  The use of Opesco to make loans to the Pawnshops was due to tax reasons.

11.Artimax was incorporated in Hong Kong as a limited company on 22 October 1999.  At the time of incorporation, the only registered shareholders and directors were Robert, George and Frank.  Upon Robert’s death on 24 December 2007, George and Frank became the only directors of Artimax.

B4.  Robert’s Death in 2007 and the Subsequent Attempted Transfer Robert’s Share to Han

12.As mentioned earlier, Robert passed away on 24 December 2007.  By his will dated November 1964, Daisy was appointed to be the sole executrix of Robert’s estate (“the Estate”), and was bequeathed and devised all of Robert’s property absolutely.

13.On 12 October 2012, probate in respect of the Estate was granted to Daisy in Hong Kong (“Probate”).  Robert’s one share in Artimax (“Robert Share”) was included in the Schedule of Assets and Liabilities attached to the Probate.

14.As the sole executrix and beneficiary of the Estate, Daisy elected to register Han as the holder of Robert’s Share.  By an instrument of transfer dated 13 December 2012, Daisy transferred Robert’s Share to Han as a gift (“the Transfer”).

15.By a letter dated 17 December 2012, Daisy requested Artimax’s Board of Directors to effect the Transfer.

16.On 20 December 2012, George, in his capacity as a director of Artimax, issued a Notice of Board of Directors Meeting to convene a meeting on 28 December 2012 to (1) approve the Transfer from Daisy to Han, and (2) Han’s name be entered in Artimax’s register of members as the holder of Robert’s Share.

17.On 28 December 2012, Frank’s solicitors wrote to George stating that Frank would not attend the meeting as he needed to see evidence of Daisy’s right to administer the Estate in Hong Kong and the instrument of transfer before considering the proposed transfer.

18.The board meeting of Artimax did not take place on 28 December 2012 as Frank was absent and no quorum was formed.

19.On 3 January 2013, Chartac Secretaries Limited (the Company Secretary of Artimax) provided Frank’s solicitors with (1) the Probate, (2) the Request for Registration of Share Transfer dated 17 December 2012 signed by Daisy seeking the Transfer and (3) an instrument of transfer dated 13 December 2012 signed by Daisy and Han.

20.On 3 January 2013, George issued another Notice of Board of Directors Meeting to convene a board meeting of Artimax on 11 January 2013 to consider and vote on the two proposed resolutions set out in the Notice of 20 December 2012.

21.On 10 January 2013, Frank’s solicitors wrote to George and Daisy stating that (1) the 3 shares in Artimax have always been held on trust for SYM, (2) SYM would direct the shareholders of Artimax to transfer their shares to SYM within 28 days and (3) the proposed transfer of Robert’s Share to Han would be inappropriate since it was held on trust for SYM.

22.Accordingly, the proposed board meeting of Artimax did not take place on 11 January 2013 as Frank did not attend the meeting and no quorum was formed.

B5. These Proceedings

23.On 28 June 2013, Han issued the Writ in these proceedings for (1) a declaration that he is the legal and beneficial owner of Robert’s Share, and (2) an order that his name be entered in Artimax’s register of members as the holder of Robert’s Share.

24.By counterclaim, SYM seeks (1) a declaration that Robert’s Share and the one share in Artimax registered in George’s name are held on trust for SYM and (2) consequential orders for the issuance of new share certificates in SYM’s name and rectification of Artimax register of members.

C.  THE ISSUE FOR DETERMINATION

25.Both parties accept that there is only one core issue for my determination in these proceedings, namely, whether the shares in Artimax were held by the registered shareholders on trust for SYM.

26.In particular, Mr Douglas Lam SC (leading Mr Justin Ho) accepts on behalf of Frank and SYM that if there was no trust in relation to the shares in Artimax, his clients would accept the validity of the transfer of Robert’s Share to Han and that Han would be entitled to have his name entered in Artimax’s register of members.

27.Frank and SYM’s case is that the shares in Artimax were held by the three registered shareholders on (1) an express trust, or (2) alternatively a common intention constructive trust, for SYM (“the Alleged Trust”).

28.As it is Frank and SYM who assert the existence of the Alleged Trust, the burden must fall on them to prove that such a trust existed.

D. EXPRESS TRUST

D1. The Relevant Principles

29.There are two ways of completely constituting an inter vivos (or a lifetime) trust: (1) either by the settlor declaring that he himself will hold certain of his property as trustee upon certain trusts, or (2) by the settlor transferring the property intending to be the subject matter of the trust to persons as trustees upon certain trusts declared by him.  See Milroy v Lord (1862) 4 De GF & J 264 at 274 (Turner LJ).

30.Further, an express trust will not be validly created unless the “three certainties” are present.  A trust would only come into existence if there was certainty of words, certainty of subject matter and certainty of objects: Knight v Knight (1840) 3 Beav 148 at 173 (Lord Langdale MR).

D2.  Frank and SYM’s Case of Express Trust

31.Although the phrase “express or implied trust” was used in their pleading, Frank and SYM clarified in their written Opening Submissions that the phrase is intended to mean an express trust which arises from the intention of the relevant persons to create a trust declared either (1) directly (ie by way of express declaration) or (2) indirectly (ie to be inferred by expressions of wish or desire which on their true construction amount to declarations of trust).

32.As far as their case of express trust is concerned, Frank and SYM submitted in their written Opening Submissions that:

(1) the settlors of the express trust were Robert, Frank and George;

(2) there was an express lifetime declaration of trust (ie a self‑declaration) by Robert, Frank and George as trustees of their respective share in Artimax; and

(3) the correct approach is to consider whether Robert, Frank and George had the requisite intention to declare trusts in favour of SYM at the time of (or just prior to) the incorporation of Artimax.

33.Further, in their written Opening Submissions, Frank and SYM relied on the following matters pleaded in their Defence and Amended Counterclaim (“D&AC”) to support their case of express trust:

“At all material times since its incorporation, Artimax has been used by SYM, and continues to be used by SYM, as an offshore vehicle to advance funds by way of loan to the Pawnshops.” [§39.2 of D&AC]

“Artimax has undertaken the role of providing finance to the Pawnshops that had previously been undertaken by Opesco.” [§39.4 of D&AC]

“The existence of the Trust was:

40.1  anticipated and discussed at a meeting held on 19 September 1999 shortly prior to the incorporation of Artimax on 22 October 1999, which was held at George’s house and attended by George, Robert and Frank ...

40.2  confirmed at a meeting attended by Robert, George and Frank and their sister Maureen, which was held at George’s house on 9 January 2000, wherein Robert, George and Frank agreed that they each hold their shares in Artimax on trust for SYM ...

40.3  confirmed at a further meeting attended by Robert, George, Frank and Maureen which was held at George’s house on 9 July 2000, wherein Robert, George and Frank agreed (again) that they each hold their shares in Artimax on trust for SYM ...” [§40 of D&AC]

34.Nonetheless, Frank and SYM have not pleaded when the Alleged Trust was created.  When requests for further and better particulars were sought on the Alleged Trust, they were objected to by Frank and SYM on the purported basis that the requests were “for evidence and not particulars”.

35.At the end of his oral closing address, the court asked Mr Lam when the Alleged Trust was said to be created.  Mr Lam, for the first time, advanced two alternative cases as to when the Alleged Trust came into existence:

(1) on 9 July 2000 at the family meeting at George’s house, or alternatively

(2) on 27 January 2000 (in the case of Robert and George) and 28 January 2000 (in the case of Frank) when each of them was allotted one share in Artimax.

D3. The Evidence and Findings of Fact

D3a. My approach in assessing credibility and finding facts

36.In making my findings of fact in this case, I adopt the following general principles as to fact finding and assessment of credibility I set out in Hui Cheung Fai v Daiwa Development Ltd (unreported, HCA 1734/2009, 8 April 2014) at §§77‑80:

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ...

78. In deciding whether to accept a witness’s account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5^th May 2011) §39 (Chu J).

79. In determining a witness’s credibility, I have also attached importance to the consistency of the witness’s evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36‑37 (Bokhary PJ).

81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:

“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities.  It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination...”

D3b.  The evidential cogency of the Meeting Minutes

37.As mentioned earlier, contemporaneous documents are generally of the greatest importance in assessing credibility.  However, where some evidence indicates that part of a contemporaneous document might not be completely accurate, the court may need to accordingly adjust the evidential weight to be put on the document in question.

38.On 19 September 1999, a family meeting (“the September 1999 Meeting”) was held amongst George, Frank and Robert at George’s house in Kuala Lumpur in Malaysia (“George’s Residence”).

39.A document headed “Notes of Meeting on 19 September 1999” (“the September 1999 Meeting Minutes”) was prepared after the September 1999 Meeting.  There is a dispute between George and Frank as to who prepared the document:

(1) George’s evidence was that the September 1999 Meeting Minutes (as well as the minutes of all the other family meetings) were prepared by Robert and that it was Robert’s practice to prepare minutes of meetings after the event.

(2) Frank’s evidence was that only the minutes of meeting which contain a footer were prepared by Robert and that the minutes which do not contain a footer were prepared by George.  Because the September 1999 Meeting Minutes do not contain a footer, Frank believed that they were prepared by George and not Robert.

(3) It seems to me that Frank’s evidence of the authorship of the September 1999 Meeting Minutes is based on a hypothesis and not on personal knowledge.  I have not been shown sufficient material to come to a view that Frank’s hypothesis is correct. 

(4) Further, George was cross‑examined on the authorship of the minutes and I accept his evidence that he did not prepare the September 1999 Meeting Minutes (or any other meeting minutes relied upon by the parties in these proceedings). 

(5) On a balance of probabilities, I find that Robert was the one who prepared all the family meeting minutes.

40.The following relevant matters were recorded in the September 1999 Meeting Minutes:

“1. OPESCO:

ASSETS: All the assets are in cash comprising +/- RM 13 million. All the assets are invested in SYM by way of loans which on lent to the pawnshops.

OPESCO SHARES: There are only two shares in Opesco. One share each held by George and Howe.

DIRECTORS: There are three directors of the company.

DECISION: A new offshore company to be incorporated to take over all the assets of Opesco. (New Opesco) K.K. San and Liew are looking into the affairs of Opesco and SYM to advise how this is to be implemented, especially, as to the accounting implications.

The new company will issue 5 shares to be held by [Robert], [Maureen], [Derek], [George], [Frank] and [Richard] — one share each. These shares are to be held in trust by every one of them in trust for SYM.

This decision should be implemented as soon as possible.  The next AGM will also decide who the directors of the current Opesco should be.”

41.There was no direct evidence as to when the September 1999 Meeting Minutes were prepared by Robert.  Nonetheless, the parties accepted that the minutes were available at the next meeting in January 2000. I therefore treat the September 1999 Meeting Minutes (as well as the other relevant subsequent minutes) to be a fairly contemporaneous document. 

42.There is evidence to suggest that the September 1999 Meeting Minutes do not accurately reflect what happened at the September 1999 Meeting.

(1) There are two obvious typographical mistakes in these minutes.  The first is that the phrase “invested in SYM” in the sentence “All the assets are invested in SYM by way of loans which on lent to the pawnshops” should read “invested by SYM”.    The other mistake is that the number of shares in the phrase “new company will issue 5 shares” should be six because six individuals were identified.  Both George and Frank accepted that these were mistakes.  However, the two typographical errors on their own do not cause me to doubt the accuracy of the minutes’ contents.

(2) In addition to the two typographical errors, Frank gave evidence to contend that the reference in the minutes to Maureen as an intended shareholder of the new company was an “error”.  In his witness statement, he stated that he did not believe Maureen was ever intended to be a shareholder of Artimax.

(3) In his closing submissions, Mr Lam sought to downplay Frank’s evidence referred to in the previous sub‑paragraph by describing the error to be “minor in nature”.  I cannot agree with this description.  It seems to me that the effect of Frank’s evidence is that the 1999 Meeting Minutes have recorded an event which did not happen.  No explanation was proffered as to why the minutes would record a discussion when none was, according to Frank, supposed to have taken place.

43.I am therefore not prepared to proceed on the basis that the September 1999 Meeting Minutes fully record what happened at the time.

44.The next family meeting took place at George’s Residence on 9 January 2000 (“the January 2000 Meeting”).  Robert, George, Frank and Maureen were recorded to be present at this meeting.

45.A document headed “Minutes of Meeting on 9 January 2000” and marked “Restricted” (“the January 2000 Meeting Minutes”) was prepared after the January 2000 Meeting.  The following relevant matters were recorded in the January 2000 Meeting Minutes:

“1. OPESCO:

NEW COMPANY: New company already incorporated in Hongkong Artimax Investments Ltd. There will be three shareholders [Robert], [George] and [Frank] who hold their shares in trust for SYM. They will also be the three directors of the company

LOAN TO ARTIMAX: Presently Artimax is financed by loans from SYM. Also annual dividends by SYM are paid out of the accounts of Artimax (Opesco). In Artimax’s (Opesco) books this is treated as a repayment of part of the loan to SYM. Therefore, the loan by SYM to Artimax (Opesco) will be reduced. However, in practice, SYM makes new loans to Artimax through its earning in the pawnshops

DECISION: The dividends paid by SYM and the new loans/investments by SYM to Artimax should be made on irregular dates so as not to create a pattern

The money from the unredeemed pledges (gold money) due to YYM or SYM should also be booked directly into Artimax’s account

Binky will be entitled to a share of any dividends paid out of the funds of Artimax (Opesco)

These decisions should be implemented as soon as possible”

46.In the January 2000 Meeting Minutes, the operations of Artimax were described as follows: (1) Artimax was financed by loans from SYM, (2) the annual dividends made by SYM would be paid out of Artimax’s accounts, (3) such dividends would be treated in Artimax’s books as Artimax’s repayments of loans.

47.In his first witness statement, Frank disagreed with the description of Artimax’s operations in the 2000 January Meeting Minutes.  He said:

“I do not understand why the minutes refer to Artimax being financed by “loans” from SYM or payment of dividends by SYM.  To my understanding, and from a review of SYM’s books and records, Artimax has not received loans from SYM; rather, Artimax places funds on behalf of SYM’s shareholders, third parties and SYM in the Pawnshops....”

48.In his cross‑examination, Frank stated that the advances from SYM to Artimax were in fact “deposits” and not loans.  If that were so, there would not have been any repayment of loans by Artimax to SYM in any form, and the references to repayment and reduction of loans in the January 2000 Meeting Minutes would therefore not be accurate.

49.Accordingly, on Frank’s case, there would be doubts about the precision of the language used in the January 2000 Meeting Minutes.  It seems to me that one cannot take the document entirely at face value to determine whether it fully records what happened at the time.

50.After the January 2000 Meeting, the next family meeting took place at George’s Residence on 9 July 2000 (“the July 2000 Meeting”). Robert, George, Frank and Maureen were recorded to be present at this meeting.

51.A document headed “Minutes of Meeting on 9 July 2000” and marked “Restricted” (“the July 2000 Meeting Minutes”) was prepared after the July 2000 Meeting.  The following relevant matters were recorded in the July 2000 Meeting Minutes:

“1. ARTIMAX New company already incorporated in Hongkong Artimax Investments Ltd. has been registered. There will be three shareholders [Robert], [George] and [Frank] who hold their shares in trust for SYM. They will also be the three directors of the company

Artimax will have one income. This is the interest earned from its deposits with the pawnshops. These earnings should be booked into Artimax books as income and reinvested into the pawnshop by way of deposits

The income earned by SYM, that is, profits from rentals, interest from deposits and dividends as a shareholder of the pawnshops should be lent to Artimax in accordance with current practice

DECISION: The dividends paid by SYM should be paid out of SYM’s accounts in the usual company practice and should be made on irregular dates so as not to create a pattern

The money from the unredeemed pledges (gold money) due to SYM should also be booked directly into Artimax’s account. This is to be done twice yearly

From now, in June/July 50% of the money from half year’s takings will be remitted off‑shore. The balance of 50% should be divided as per current practice. To date approx: A$103,000 was sent to Australia. This will be re‑banked in Singapore in due course

In December/January the total proceeds of unredeemed pledges will be divided as current practice

Binky will be entitled to a share of any dividends paid out of the funds of Artimax.

Decision:  Frank is to open an account in the name of a new company in a bank in Singapore.  The objective is that the account will attract no tax, not subject to any foreign exchange controls and any funds can be easily paid into and out of the account.  The shareholders of this company will be [Frank]; [George]; [Maureen] and [Robert].  These share will not be held in trust.  To be implemented as soon as possible”

52.There are the following matters which suggest that the July 2000 Meeting Minutes do not appear to fully record what happened at the time:

(1) First, Robert, George and Frank had already become directors and shareholders of Artimax by the time when the July 2000 Meeting took place.  Yet, the minutes refer to their position as director and shareholder in the future tense suggesting that they had not yet become a director and shareholder of Artimax.

(2) Indeed, the exact references to Robert, George and Frank becoming a director and shareholder of Artimax in the July 2000 Meeting Minutes can be also found in the January 2000 Meeting Minutes.  This suggests that the author of the July 2000 Meeting Minutes simply took such references from the previous meeting minutes.  In George’s cross‑examination, he suggested that this was a “copy and paste kind of thing”.

(3) Further, Frank in his cross‑examination stated it was always the case that SYM would pay dividends using Artimax’s account. If that were the case, the phrase in the July 2000 Meeting Minutes (“dividends paid by SYM should be paid out of SYM’s accounts”) would not be accurate.

53.For the above reasons, I am unable to take the three sets of minutes (namely the September 1999 Meeting Minutes, the January 2000 Meeting Minutes and the July 2000 Meeting Minutes) as having fully and accurately recorded what happened at the particular meeting.  In order for me to determine whether there was any discussion at the three meetings amongst Robert, George and Frank in relation to the holding of Artimax shares on trust for SYM, I need to examine the other available evidence in addition to the three sets of minutes.

D3c.  The evidence from George and Frank

54.George’s evidence from his first witness statement in relation to the September 1999 Meeting was as follows:

(1) There was no particular proposed agenda for the meeting.

(2) At this meeting, there were discussions about the tax benefits in providing loans to the Pawnshops from Malaysia through an offshore company. 

(3) George had become distant with Derek.  As Derek and George were the only two shareholders of Opesco and there was a concern of a deadlock, Robert, Frank and George decided at this meeting to start a new company that might be used to act as an alternative nominee vehicle to Opesco for those who wished to deposit or lend funds to the Pawnshops to earn income.

(4) At the time of the meeting, there was no definitive plan as to the use of the new company in the lending arrangements. 

The above was not unchallenged in cross‑examination and I find them as facts.

55.Frank’s evidence on what happened at the three meetings was simple. In his first witness statement, Frank stated that he did not have a clear memory of the relevant events leading to the incorporation of Artimax and that, to the best of his recollection, it was George or Robert who came up with the idea to incorporate or acquire another offshore entity to replace Opesco. Indeed, in his cross‑examination, Frank acknowledged that he had no independent recollection of what happened at the various meetings and that the meeting minutes were all he could go by.

56.Significantly, Frank in his cross‑examination gave positive evidence that there was no discussion about the shares in Artimax being held on trust for SYM at the January 2000 Meeting or the July 2000 Meeting.

“Q. And my question is: do you have any recollection as to the discussion of trusts in this particular meeting [namely the January 2000 Meeting]?

A. My Lord, these minutes reflect the fact that the company has already been incorporated. There’s no further discussion. Discussions were done prior to this. These minutes only confirm that the company, Artimax, had been incorporated in Hong Kong and it’s re‑emphasised that it’s held in trust for SYM. That’s all. There’s no discussion. It’s telling members — you know, it’s just like my job in Australia. I bought a property; I report I bought a property. There’s no discussion. The discussion was the prior meeting, ‘Frank, you are to invest in properties in Australia’; that’s a discussion. The next following meeting I report, I said, ‘I have done this’. This is exactly what these minutes tell us. I hope I answered the question correctly.

...

Q. Was there any discussions about say, for example, the use of trust deed in that particular‑

A. Not at this meeting, because it’s already done ...

...

HIS LORDSHIP: So let me see if I understand your evidence. You’re saying that all the discussions about trusts took place before this meeting on 9 January 2000?

A. Some of the — yes, some of the discussions, yeah, when the company was to be operated as it will, you know, it’s going to be held in trust. Because it’s part of SYM. It’s not my company. I am in Australia. Really, I mean if it’s for three of our own benefit why are he — why aren’t you here? I’ve got my own business in Australia, my Lord.

HIS LORDSHIP: Yes, and what we see recorded in this document, these minutes, on 9 January you say it simply confirms what was discussed previously? Is that your evidence?

A. Yes, it’s already done, you know?”

57.In the written closing submissions of Frank and SYM, it was acknowledged that Frank gave evidence that there were no discussions regarding the trust arrangement in the Artimax shares during the January 2000 Meeting and the July 2000 Meeting.  However, Mr Lam submitted that because Frank later said in his oral testimony that the minutes reflected what was discussed, the evidential weight to be given to the meeting minutes should not be altered.  I do not accept this submission.

(1) In my view, Frank’s subsequent evidence was consistent with his earlier evidence as quoted in the previous paragraph:

“HIS LORDSHIP: Yes. My understanding — correct me if I am wrong — is that this [i.e. the September 1999 Meeting] was the first meeting that this issue of trusts was discussed and then in the meetings afterwards, in the following, in January, you said it was‑

A. It was done.

HIS LORDSHIP: It was done‑

A. Yeah.

HIS LORDSHIP::‑ so that there was no longer any discussion. That is what you said this morning.

A. Yeah, yeah.

HIS LORDSHIP: That is my understanding, so I just wanted to see whether my understanding is correct.

A. Correct, my Lord, because my understanding is also because I read the minutes and the minutes reflect what was discussed, and if it says a new company has already incorporated in Hong Kong, I take it that that’s it, because ... 2000, you know?  It’s 16 years and I’m 70 (?) years old.”

(2) In the above exchanges, Frank was confirming to the Court that there was no discussion about trust over the Artimax shares at the meetings in 2000.  He was reaffirming his earlier evidence as summarised in the previous paragraph.

(3) When Frank stated that the minutes reflected what was discussed, I did not understand him to be referring to the issue of trust.  This is because such a reference would be directly inconsistent with his earlier evidence and his confirmation of the court’s understanding that no issue of trust was discussed at the meetings in 2000. 

(4) In any event, there was no re‑examination of Frank.

58.George’s evidence was that:

(1) the shares of the new company (which later became Artimax) were not intended to be held on trust for SYM, and that there was no discussion at any of the three meetings on whether the shares of the new company (or Artimax) should be held on trust by the shareholders for SYM;

(2) he believed that Robert made a mistake in the minutes because they discussed in the meeting that monies would be deposited to the Pawnshops through Antimax by the lenders and that Robert might have confused that with whether the Artimax shares should be held on trust for SYM;

(3) he raised the mistake with Robert on a few occasions but Robert did not amend the minutes.

59.On the whole, I accept George’s evidence that there was no discussion at the September 1999 Meeting, the January 2000 Meeting or the July 2000 Meeting that the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM. 

(1) In his written closing submissions, Mr Lam gave some examples and submitted that George’s evidence was inherently improbable. 

(a) First, it was said that the court should be cautious not to place too much reliance on George’s evidence of what happened over 16 years ago which is contradicted by the three meeting minutes.  With all things being equal, I accept as a matter of general principle that contemporaneous documents are more reliable than a witness’s recollection of something which happened a long time ago.  However, for the reasons given above, I am unable to take the three meeting minutes on their face value.  Further, George was the only witness in these proceedings who was in a position to give evidence about what happened (and what did not happen) at the three meetings. His evidence is that what was recorded in the three meeting minutes did not happen. In these circumstances, I cannot simply prefer what the minutes record to George’s evidence.

(b) Second, Mr Lam submitted that Robert was a senior partner of a well‑known law firm in Malaysia and that it is inherently unlikely that he would make repeated mistakes in the meeting minutes.  No one is infallible.  In any event, for the reasons given above, the meeting minutes do not appear to fully record what happened at the time.  I am unable to say that it is inherently unlikely for Robert, as experienced as he was as a lawyer, to make mistakes in the three meeting minutes.

(c) Third, as far as George’s complaints to Robert regarding the mistake in the meeting minutes were concerned, Mr Lam submitted that such complaints did not happen because they were not subsequently recorded in writing.  I do not accept this submission.

(i) In cross‑examination, George said that the meetings were informal family meetings and it was not the case that everything had to be minuted.  He said:

“... you know, this is a family meeting.  It’s not formal, everything must be minuted.  It’s just for us to recall certain things.  It’s not a company meeting, it’s a family meeting.  It’s a very informal family meeting.  And we don’t come and say, “Look, it must be amended here, it must be amended there.”  We make sure that, you know, it must be corrected at some time.”

I accept his evidence.

(i) Mr Lam sought to rely on the minutes of the meeting held on 27 December 1998 recording, amongst other things, that the minutes of the previous meeting were read and amended to reflect certain matter.  It appears that the practice of reading and amending the minutes of the previous meeting was no longer in place at the time when September 1999 Meeting, the January 2000 Meeting and the July 2000 Meeting took place.  Therefore, I am not satisfied that Robert, George and Frank’s practice of conducting such meetings suggests that there should have been some record of George’s complaints appearing in the meeting minutes.

(2) In my view, George was an honest witness.  He gave evidence in a straight‑forward and spontaneous manner.  Having seen and heard him giving evidence in the witness box, I accept his evidence that there was no discussion at the September 1999 Meeting, the January 2000 Meeting or the July 2000 Meeting that the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM.

D3d.  Other evidence

60.The Annual Reports/Financial Statements of SYM have been put into evidence in these proceedings.  These include 15 sets of Annual Reports/Financial Statements from 1999 to 2013.  Each document comprise (1) an annual Directors’ Report signed by Robert (from 1999 to 2006), George (from 1999 to 2010), Han (from 2007 to 2010), Richard (from 2011 to 2013), Cordeilia Maria Hoh Yook Chui (Derek’s daughter) (from 2011 to 2013) and (2) an annual Report from a firm of independent auditors.

61.There is no dispute that SYM’s Annual Reports/Financial Statements never mentioned Artimax as a subsidiary or associated company of SYM, or that SYM has any beneficial interest in Artimax.

62.In my view, SYM’s Annual Reports/Financial Statements are cogent evidence to suggest that the shares in Artimax are not subject to any trust for SYM.

(1) SYM’s Annual Reports were approved by Robert at the material times before his death in 2007.  If he considered that he was holding his one share in Artimax on trust for SYM, I believe he would have told SYM’s auditors about this and such an interest would have been mentioned in the Annual Reports.

(2) Mr Lam submitted that the “gold money” (consisting of surplus funds arising from the sale of proceeds of the unredeemed pledges with the Pawnshops) was also not recorded in SYM’s Annual Reports Annual Reports/Financial Statements, and therefore suggested that such documents do not present a complete picture of the finances and affairs of SYM.  I am unable to accept this submission.  In George’s cross‑examination, he said that the gold money was “family money”.  It has not been satisfactorily demonstrated that SYM has any legal or beneficial interest in the gold money.  Accordingly, I am unable to find that SYM’s Annual Reports/Financial Statements do not present a complete picture of SYM’s financial affairs.

(3) Mr Lam further suggested that Artimax was not referred to in SYM’s Annual Reports/Financial Statements because Artimax had no assets or liabilities of its own and was of insignificant value.  I am also unable to accept this suggestion.  No evidence has been proffered to indicate that this was SYM’s directors’ thinking at the material time.

63.Further, there was another family meeting at George’s Residence on 9 April 2004 (“the April 2004 Meeting”).  Robert, George, Frank, Maureen, Han and Lynn Hoh (Frank’s daughter) were recorded to be present at this meeting.  A document headed “Minutes of Meeting on 9 April 2004” (“the April 2004 Meeting Minutes”) was prepared after the April 2004 Meeting.  Under the heading of “Artimax” in the minutes, the following, amongst other things, was recorded:

“It was discussed that Artimax (SYM) account should eventually be wound up. Artimax by then will have nothing to do with SYM. It will be used exclusively by [George], [Frank] and [Maureen] for their respective deposits with the pawnshops.”

64.George gave evidence that such discussions took place at the April 2004 Meeting and his evidence was not challenged in cross‑examination.

65.On its face, the discussion as recorded in the April 2004 Meeting Minutes suggests that the author (namely Robert) and those who were present at the April 2004 Meeting did not consider Artimax to be subject to any trust for SYM.  Mr Lam suggested that the author was only concerned with the function or operation, as opposed to ownership, of Artimax in these minutes.  However, it seems to me that if the Artimax shares were held on trust for SYM, Robert would not have written in the April 2004 Meeting Minutes that Artimax would have “nothing to do with SYM” when the Artimax account was wound up.

D3e.  My findings

66.I find that there was no discussion at the September 1999 Meeting, the January 2000 Meeting or the July 2000 Meeting that the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM.

D4.  Two Alternative Cases on Express Trust

67.As mentioned in Section D2 above, Mr Lam on behalf of Frank and SYM advanced two alternative cases as to when the alleged express trust came into existence:

(1) on 9 July 2000 at the family meeting at George’s Residence, or alternatively

(2) on 27 January 2000 (in the case of Robert and George) and 28 January 2000 (in the case of Frank) when each of them was allotted one share in Artimax.

68.It is right to point out that neither of these cases is pleaded by SYM, or suggested to Han or George in their cross‑examination.

D4a.  Express trust allegedly created on 9 July 2000

69.As a result of my findings in Section D3 above that there was no discussion at the July 2000 Meeting that the shares of Artimax would be held on trust by the shareholders for SYM, it follows that Frank and SYM’s primary case of express trust (that it was created at the July 2000 Meeting) must be rejected.

70.In any event, this primary case is directly contradicted by Frank’s evidence that there was no discussion of trust in relation to the Artimax shares at the July 2000 Meeting (see Section D3c above). 

D4b.  Express trust allegedly created on 27 and 28 January 2000

71.As far as Frank and SYM’s alternative case of express case is concerned, Mr Lam submitted that (1) there was some discussion and/or agreement amongst Robert, George and Frank at the September 1999 Meeting and the January 2000 Meeting and (2) upon being allotted the share in Artimax at the end of January 2000, each of Robert, George and Frank immediately held the same on trust for SYM.

72.Again, in view of my findings that there was no discussion at the September 1999 Meeting and the January 2000 Meeting that the shares of Artimax would be held on trust by the shareholders for SYM, Frank and SYM’s alternative case of express trust must likewise be rejected.

73.In any event, it seems to me that Frank and SYM’s alternative case of express trust would fail as a matter of law.

(1) It is impossible for a settlor to create a presently existing trust of future property.  “Future property” means property which a person does not presently own, but which he hopes or expects will come into his ownership sometimes in the future.  It is immaterial whether the settlor makes a purported voluntary assignment of future property to trustees on declared trusts, or whether he purports to declare that he himself is holding future property on certain trusts.  If the future property subsequently materialises into existing property, the intended beneficiaries have no enforceable claim to it.  See Halsbury’s Laws of England (5^th ed, 2013) vol 98, §69.

(2) Accordingly, even if Robert, George and Frank purported to declare that they would hold one share in Artimax for SYM at the September 1999 Meeting or at the January 2000 Meeting (which according to my findings did not happen), they would be seeking to create a trust of future property (because each of them had not yet become a shareholder of Artimax) and such a trust would fail as a matter of law.

D4c.  Conclusion on Frank and SYM’s case on express trust

74.For the above reasons, I find that the shares in Artimax are not held by its registered shareholders on an express trust for SYM.

E.  COMMON INTENTION CONSTRUCTIVE TRUST

75.Where a property is vested only in one person’s name (A), the other party (B), in order to establish a beneficial interest, may be able to establish a what is commonly known as a common intention constructive trust by showing that it would be inequitable or unconscionable for A to claim the entirety of the beneficial ownership.  This requires two matters to be proved:

(1) that there was a common intention that both should have a beneficial interest; and

(2) that B has acted to his/her detriment on the basis of that common intention.

See Grant v Edwards [1986] Ch 638 at 654D‑E (Sir Nicolas Browne‑Wilkinson VC); Luo Xing Juan Angela v Estate of Hui Shui See Willy (2009) 12 HKCFAR 1 at §38 (Ribeiro PJ).

76.The party alleging the common intention constructive trust must first prove that there was, at any time prior to acquisition or exceptionally at some later date, an agreement, arrangement or understanding reached between the parties that the property is to be shared beneficially: see Lloyds Bank Plc v Rosset [1991] 1 AC 107 at 132E‑F (Lord Bridge).

77.In Frank and SYM’s closing submissions, it was conceded that a common intention constructive trust would not arise if the court finds that there was no discussion concerning a trust arrangement amongst Robert, George and Frank at the family meetings in 1999 and 2000.  In view of my findings that there was no discussion at the September 1999 Meeting, the January 2000 Meeting or the July 2000 Meeting that the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM, it follows that Frank and SYM’s case of common intention constructive trust would fail.

F.  CONCLUSION

78.In the light of my conclusions above, I give judgment in favour of Han and dismiss SYM’s counterclaim. 

79.I also make the following orders:

(1) A declaration that Han is the legal and beneficial owner of Robert’s Share.

(2) An order that the Transfer be approved and Han’s name be entered in the register of members of Artimax as the holder of Robert’s Share.

(3) An order nisi that the costs of Han, George and Daisy in these proceedings (including any reserved costs) be paid by SYM, to be taxed if not agreed. 

(4) The above costs order nisi shall be made absolute 14 days from the date of this judgment.

Mr Jeffrey Tam, instructed by Ribeiro Hui, for the plaintiff (by original action) and the 1^st, 3^rd and 4^th defendants (by counterclaim)

Mr Douglas Lam, SC and Mr Justin Ho, instructed by Lipman Karas, for the 2^nd and 3^rd defendants (by original action) and  the plaintiff (by counterclaim)

The 1^st defendant (by original action) and the 2^nd defendant (by counterclaim) appeared in person, being absent