Tsc v. Kwh and Others
Read the full judgment text of FCMC 2755/2014 on BabelCite. This Family Court judgment was delivered on 15 June 2016 before Deputy District Judge Grace Chan.
Matrimonial proceedings – Ancillary relief – Preliminary issue – Beneficial ownership of properties – Trust – Mother’s estate – Source of funds – Shop Agreement – Written Declarations – Administration of estate – Wife holds 50% interest in 4 Properties in trust for Sister – Husband bears costs
Legal issues: Source of funds for Tong Building · Source of funds for Shop B · Authenticity of documents · Administration and distribution of estate
Outcome: Wife holding 50% interest in the 4 Properties in trust for the Sister; Husband bears costs.
Cited by 4 cases · Cites 4 cases
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FCMC 2755 / 2014 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 2755 OF 2014 ----------------------------
--------------------------------- JUDGMENT (preliminary issue on 3rd party’s interest in landed properties) --------------------------------- Introduction 1.This is a trial of the preliminary issue on the beneficial ownership of 4 properties registered in the name of the 1st respondent (“wife”) or companies controlled by her, ie the 2nd and 3rd respondents,[1] before the parties can proceed further in the ancillary relief proceedings to the stage of financial dispute resolution (FDR). The wife claims that she is holding 50% of the interest in these properties in trust for the 4th respondent, ie her elder sister (“Sister”). The said 4 properties (collectively the “4 Properties”), estimated by her to worth about $55.5 million, include:
2.On 1 December 2014, the petitioner (“husband”) took out a summons for joinder of the 2nd and the 3rd respondents and the Sister into this case, and invites this court to try as a preliminary issue the beneficial ownership of the 4 Properties in accordance with the procedural approach set out in the English authorities of TL v ML & Other (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263, which was adopted by the Court of Appeal in Hong Kong in LWYA v KYW & others (unrep) CACV 151/2013, judgment dated 4 December 2014. 3.In TL v ML (supra), Mostyn, QC, sitting as a Deputy High Court Judge, described the task of a judge determining a dispute between a spouse and a third party in ancillary relief and the procedure that should be followed in this way:
4.In this trial, pleadings are settled by senior counsel or counsel (as the case may be). The Sister, the wife and the husband all gave evidence. The wife also called her friend (“Anita”) as her witness. The husband’s witness is an estate agent (Mr Woo), but neither the wife nor the Sister required him to attend the trial for cross examination. Background facts 5.For the purpose of this trial, the parties have agreed on a chronology and a property list for preliminary issue.[2] I do not propose to set out all the facts therein. I would only highlight the salient facts, to be supplemented by those relevant facts which are not disputed or are indisputable upon conclusion of the trial, unless expressly stated the otherwise. (i) The parties 6.The couple of this case was married in 1988. They have a son and a daughter, both now over 18. Marital discord began to take shape in/about early 2000s. They finally separated in January 2014, when the husband moved out of the matrimonial home. He presented his petition 2 months later. By then, the marriage lasted for 26 years. 7.The husband is now 56 years old and has been practising as a medical doctor for about 30 years. He is a very meticulous record-keeper. His list of documents filed for this trial, containing 463 items of documents with many dating back to the early 1980s, can serve to prove how meticulous he can be. He literally recorded in every detail the money he spent every day since 1993 and kept cheque stubs spanning back to the 1990s. 8.Before the 2000s, he was rather active in property investment and usually acquired properties via property-holding companies, including “MF” [3] and “MI”. [4] It is indisputable that he was the dominating party in the marriage who was in control of the finances of the family at all material times. Although the wife was a director of MF, it was he who exercised de facto control over it. Despite his repeated allegation in his affidavit that MF is a family company, it is fair to say that he actually treats it as his own company. All the company records and accounts are kept by him. His dominance can also be shown by the fact that many of the cheque stubs spanning through the 1990s to early 2000 of the wife’s personal bank account were written by him. He has even kept the documents of the estate of the late mother of the wife, eg the IRD questionnaire in respect of Mei King Mansion.[5] Even for the home mailbox, he has not denied that he was the only person with access. 9.The wife is 56 years old now. She was an air hostess before the marriage. Since about the marriage, she has become a housewife. It is a common ground that she is not a good record-keeper. 10.Her maiden family has an unfortunate history. Her late father ran a tailoring business and had another family in Japan, though he continued to provide for the family in Hong Kong financially. Her late mother (“Mother”) was an illiterate and could not speak the Cantonese dialect. The Mother led a very frugal life in order to save up for the future of her only son who, sadly, was mentally retarded at all material times (“Brother”). The wife is the youngest child of her maiden family. She has 2 elder siblings:
11.In such circumstances, it is indisputable that the wife, being the only literate and educated child in the family, had to take up the burden of managing her maiden family matters at a young age. In fact, though disputed in his point of defence, [6] the husband concedes during cross examination that it was the wife who helped managing the Mother’s financial matters before her death, and that the Sister and the Brother both trusted her with their money.[7] It is also accepted by the husband that the wife has been very loyal and supportive to her elder siblings.[8] (ii) Death of the Mother Letters of administration was granted to the wife as the sole administratrix on 19 March 1992. The net principal value of the Mother’s estate as stated in the schedule attached to the Letters of Administration (“Schedule”) was about $1,423,000, comprising of:
13.The actual total worth of the Mother’s estate is in dispute, because the wife alleges that its actual total value is more than what appeared in the Schedule. More will be discussed later in this judgment. (iii) Purchase of Tong Building & Shop B 14.It is indisputable that the source of fund for the purchase of the 4 Properties come from the sale proceeds of the following 2 properties:
15.Tong Building was purchased in the sole name of the wife on 14 February 1992, which pre-dated the Letters of Administration. She claims that it was purchased with the Mother’s money, to which the husband denies and/or puts her to strict proof. But it is a common ground that the purchase price did not come from the husband direct. Since its purchase, Tong Building was solely occupied by the Sister and/or Brother (until his death in 2000) and/or the Nephews at different stages. 16.In 2004, the High Court endorsed the application of the wife, as trustee of the Nephews under the Mental Health Ordinance, to sell Tong Building to the Nephews at $640,000. In support of her application, the wife filed an affidavit dated 27 May 2004 (“2004 Affidavit”), which is in the centre place during the cross-examination of the wife by the husband. More will be said on this later in this judgment. 17.On 16 April 1993, Shop B was purchased by MF at $3.1 million. There is no dispute that at least $1.1 million of the down payment came from the wife, who claims that it was an investment of her maiden family by using the money from the Mother’s estate. She further says that it was registered in the name of MF because the husband advised her that in this way, property tax could be saved. The husband denies the above. 18.Upon its purchase, Shop B, together with Shop A which was already purchased by the husband via MI, became his clinic. (iv) The 1st Written Declaration 19.Subsequent to the purchase of Tong Building and Shop B, the wife made a written declaration in Chinese, which effectually is a Chinese will, on the alleged date of 4 June 1994 (“1st Written Declaration”). It refers, inter alias, to the following:
(v) Death of the Brother in 2000 20.As said, the Brother died in 2000. Upon his death, letters of administration was granted to the wife. In the schedule attached to the letters of administration, the Brother’s estate was said to be “nil” except damages to be awarded in the medical negligence claim. Subsequently, his estate was awarded compensation in the sum of $520,000. The wife says that the Sister and she had decided that a sum of $250,000 should be donated to the church. 21.Pausing here, since the Brother’s estate is not of a very substantial amount after the said donation is deducted, whenever the Mother’s estate is referred to in this judgment, I shall invariably include the Brother’s estate, unless expressly said the otherwise. (vi) The Shop Agreement & the 2nd Written Declaration 22.In/about early 2001, the wife had to receive an operation to remove a tumor at her uterus. She was afraid that she might die in the operation. Therefore, before the operation and on her insistence, the couple signed a Chinese memo on 1 March 2001 in respect of the arrangement of Shop B (“Shop Agreement”) which, in my view, becomes the most important document in this trial. Its content is set out below in full (with emphasis added):
23.It is not disputed by the husband that he did apprehend his signature in the Shop Agreement on or about the date appearing on it. It is neither disputed by him that he had paid the said net sum of $3.2 million mentioned in the Shop Agreement to the wife between 2001 and 2004,[11] which was subsequently utilised by the wife to buy the 4 Properties. [12] 24.Allegedly on the same day of the Shop Agreement, the wife made another Chinese will (“2nd Written Declaration”) in the following content (with emphasis added):
(vii) Purchase & redemption of the 4 Properties 25.Between 2004 and 2011, the wife started to purchase the 4 Properties one after one when she had accumulated sufficient cash from the $3.8 million paid by him to her under the Shop Agreement. The 4 Properties, save and except Hang Fai Building, are rented out yielding good rental income, eg current rental income of Lyndhurst Terrace is $70,000 per month. Hang Fai Building is used as the residence of the Sister and the Nephews (during weekends while they are on holiday leave from care home). 26.In November 2009, the Convention Plaza apartment held by MF (free from mortgage already) was sold at $12 million. It is not in dispute that this sum of $12 million was all given to the wife, who then utilised it to pay off the outstanding mortgages of Lyndhurst Terrace, Hong Kong House and Hang Fai Building. [13] The balance of about $7.88 million was kept by her. She alleges that this was as a result of an oral agreement made between her and the husband on division of the family assets after a heated quarrel in/about 2007, whereby she would take the matrimonial home and Convention Plaza, whereas the husband would take the 2 shops where he has been running his own clinic (“Alleged Settlement Agreement”). The husband denies the existence of such an agreement. He further disagrees that it should be an issue of this trial. 27.With the above background, I shall now turn to the case of each party. The wife’s case 28.Put in very broad terms, the wife claims that the 4 Properties were purchased by the money from the estates of the Mother and/or the Brother, and thus are held by her on constructive and/or resulting trust in equal shares for herself and the Sister. Over the years and as the sole administratrix of the Mother’s estate, she applied the Mother’s monies to purchase Tong Building and Shop B. She later sold Tong Building to the Nephews for $640,000 and Shop B to the husband for $3.8 million (“Seed Monies”). The Seed Monies were applied to pay for the down payment of the 4 Properties. The mortgages of the 4 Properties are serviced by the rental income generated therefrom. 29.She relies on the 1st and 2nd Written Declarations and the Shop Agreement as documentary proof. 30.In or about 2007, due to marital discord, she left the matrimonial home (at Kingsford Heights) but later reached the Alleged Settlement Agreement with the husband. She applied the sale of the Convention Plaza to redeem the mortgages of the 4 Properties, which according to her, represents an injection of the redemption money by her into the Mother’s estate represented merely a substitution of one mortgage by another. The Sister’s case 31.On the whole, the Sister runs a similar case to that of the wife and relies on the same documentary evidence, which I shall not repeat here, save that her pleading does not cover the Alleged Settlement Agreement. In particularly, the Sister claims that since she is totally illiterate, she has been placing especial trust and reliance on the wife to manage her share of the Mother’s and Brother’s estate. She has never been distributed the capital of her share of the inheritance save and except the wife would give her pocket money of $3,000 - $4,000 and pay for her bill when they go out together. 32.Further or in the alternative, in so far as the husband appears in his pleadings to assert that assets were transferred from the Mother’s estate during the administration of the same so that those assets are now the wife’s own assets, the Sister denies the same and further claims that such transfers, if were really made, were not valid, but were done in breach of trust and as such the wife still holds the same on constructive trust for her. [14] In such circumstances, the wife, as her trustee or agent, is liable to account for all the moneys, payment or profits received from the 4 Properties. [15] The husband’s case 33.By his points of defence, the husband repeatedly avers that the Mother’s estate has been wound up and distributed in accordance with intestacy law. He denies the Sister’s alternative allegation that the wife has breached her duty as the sole administrarix. [16] He points out that there are 2 bank accounts with the Bank of China in the sole name of the wife (“BOC Accounts”) allegedly held by her in trust for the Sister and that the balance in the BOC Accounts, comprising of some $344,000 (in RMB) and $645,000 (totalling roughly HKD$1 million), is coincidentally equal to about 50% of the total value in the Schedule. [17] 34.He further denies that Tong Building and Shop B were purchased with the money from the Mother’s estate. He pleads that the wife had savings of about $500,000 that she bought into the marriage. Since marriage, she has been a housewife for the past 26 years and had access to the money which he earned as a medical doctor. The parties had invested into numerous properties during their marriage which achieved capital gains. In particularly, he avers that the legal and beneficial owner of Shop B is MF, a company jointly and beneficially owned by him and the wife and that Shop B was purchased with a loan of $1.1 million from the wife, whose fund “may have included her share of the distribution from the estate”.[18] Its mortgage was discharged by his income. He therefore pleads that, [19]
35.He also challenges the authenticity of the 1st and 2nd Written Declarations as to their dates of making. He argues that the Shop Agreement was signed merely due to the insistence of the wife. He denies that there was the Alleged Settlement Agreement between the couple in 2007 and objects the redemption money (from the sale proceeds of Convention Plaza) constitutes a substitution of one mortgage for another. The husband’s latest stance at witness box 36.I think it is pertinent for me at this stage to point out that the husband’s actual oral evidence does not tally with his pleaded case. It is his oral evidence that:
37.Given such oral evidence, it comes as no surprise that his senior counsel, Mr Sussex, has to divert from his pleaded case in the closing submission. In essence and if I understand him correctly, Mr Sussex SC submits that the husband now does not advance any positive case but would put the wife and the Sister to strict prove their own case, in particularly that the purchase money of Tong Building and Shop B were sourced from the Mother’s estate. Applicable legal principles 38.The applicable principles concerning a dispute involving third party beneficial interest in property such as this have been recently re-stated by the Supreme Court in Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776, and very helpfully summarised by Mostyn J in Bhura v Bhura & Others [2014] EWHC 727 at §8 of his judgement:
39.The burden of proof is on the party who seeks to show that the beneficial title does not follow its legal title (See: Lewin on Trusts (19th ed) at §9-07; Snell’s Equity (33rd ed) at §24-049; TL v ML (supra) at §§38-39; Rossi v Rossi [2007] 1 FLR 790 at §§39-40; Fisher Meredith v JH [2012] 2 FLR 536 §§42-44). Mr Coleman, senior counsel for the wife, thus agrees at the outset that the wife bears the burden of proof. However, there seems to be some disagreement between Mr Sussex SC for the husband, and Mr Todd, counsel for the Sister. Mr Todd suggests that since the wife supports the Sister’s claim, the latter’s case is proved and it thus falls on the husband to challenge this position. Mr Sussex SC vigourously opposes this argument and submits that an admission by a co-plaintiff (ie the wife) to the Sister’s case cannot conceivably shift the burden of proof. He goes on to comment that I am not bound to make a finding one way or the other with regard to the facts averred by the parties. I have the third alternative of saying that the parties on whom the burden of proof lies, namely the wife and the Sister of this case, have failed to discharge that burden and thus their claim must be dismissed (Rhesa Shipping Co SA v Herbert David Edmunds [1985] 2 Lloyd’s Rep 1 at p6). 40.Despite the above argument, for the reasons which will become obvious later in this judgment, I agree with Mr Coleman SC that I need not resolve the issues of this case on the burden of proof. The issues 41.For the purpose of this trial, a joint list of issues was duly signed by all parties and lodged with this court on 1 September 2015. They have been helpfully distilled and set out by Mr Coleman SC in his opening submission.[24] Essentially, the issues for trial boil down to the tracing of the source for fund for the purchase of Tong Building, Shop B and the 4 Properties. 42.However, upon conclusion of the evidence, it has become clear that the parties are no longer in dispute that the deposit/down payment of the 4 Properties came from the Seed Monies.[25] What remains to be determined is hence further trimmed down to the following:
43.There are several other points worth-mentioning at this stage. First of all, despite both the wife and the Sister claim that they rely, inter alia, on constructive trust, their common intention (that the former would hold the Mother’s estate in trust for the latter) seems to be undisputed, because it is not an agreed issue to be tried. Secondly, the husband does not agree that the effect of the Alleged Settlement Agreement is an issue for determination in this preliminary trial, which I would incline to concur. Thirdly, despite the husband’s denial in his pleadings, the wife/Sister’s proposition that there was a subrogation/substitution of mortgage of the 4 Properties is not an issue that requires my determination in this trial.[26] Authenticity of the written documents 44.I shall begin my analysis with the 3 written documents that are heavily relied on by the wife and the Sister in proving that the Seed Monies came from the Mother’s estate. The 3 written documents are the 2 Written Declarations and the Shop Agreement. They are included in their list of documents filed for the purpose of this trial, to which the husband has filed a notice of non-admission under Order 27 rule 4, the Rules of the High Court. Under the said rule, he is entitled to dispute the authenticity of these documents and to require them to be proved in the trial. As a result, the original of the 3 written documents are formally produced in the trial and marked as exhibits. 45.I shall deal with each written document in turn, starting with the more important document, ie Shop Agreement. (i) The Shop Agreement 46.The Shop Agreement is an important document in the sense that the husband accepts in this trial that it is authentic and that he apprehended his signature on it. It thus begs an explanation why a notice of non-admission was still filed. 47.The date and full content of the Shop Agreement is described at §[22] of this judgment. Essentially, it records that:
48.It is the wife’s case that she saw the purchase of Shop B as a good investment opportunity for her maiden family. However, she had to sell Mei King Mansion in order to raise sufficient money to buy Shop B. Therefore, she asked the uncle of the husband (“Uncle”) for a bridging loan in the intervening period. When Mei King Mansion was finally sold, she gave the net sale proceeds to the husband to repay the Uncle. 49.The husband accepts that the wife paid $1.1 million for the down payment of Shop B, but does not agree that this $1.1 million was the Mother’s money or a bridging loan from the Uncle. He says that it was merely a personal loan of the wife. 50.There are 2 issues that require discussion at this stage. They are:
51.On the 1st issue, the husband attempts to explain why he signed in the Shop Agreement. He says that he wanted to purchase Shop B very much, but he did not have the money to do so. His wife then told him that she had money from the sale proceeds of the Mother’s estate, ie Mei King Mansion and gave him $1.1 million for the down payment. [27] After Shop B was purchased, she made demands for repayment from time to time, as a result of which they discussed and finally agreed that taking into account the appreciation in property value, he would repay her $3.8 million within 3 years. Then in early 2001, before she received an operation to remove a tumour in her uterus, she made him sign the Shop Agreement, which he did without attending to the details and in order to buy peace. Here is how he explains the circumstances that he signed in the Shop Agreement:
52.I am not hesitant to say that the husband’s attempted explanation does not persuade me at all. My overall impression of him, gleaned from his answers given during cross examination as well as his demeanour in the witness box, is that he is an astute and very careful, if not over cautious, gentleman. On many occasions when simple questions are put to him, he would not give a reply right away. Rather, he would either ask to be first taken to the relevant documents/affidavits, or proffer to give an explanation without first giving a direct answer to these simple questions. Despite his education/qualification, he asks for interpretation into Chinese of even his own affidavit (written in English and did not have an interpretation clause). It is hard to believe that he would casually apprehend his signature in the Shop Agreement without ascertaining the full content therein. 53.In fact, when further cross examined by Mr Coleman SC for the wife, the husband has to accept that he and the wife “have already talked about the terms sometimes beforehand.”[28] In my judgment, it is not open to him to now say that he was not aware of the terms therein at the material times. I conclude and find that he was fully aware of the terms in the Shop Agreement before/when he signed it. 54.By apprehending his signature in it, he accepted and acknowledged that Shop B was purchased by the Mother’s money and the interest of the Sister in it. He further agreed to pay the “purchase price” of $3.8 million within 3 years. The use of such terms as “purchase price” or “sold to” him is in stark contradiction to his allegation that it was merely a personal loan of the wife to help him out to buy Shop B. It is also in stark contradiction to his own affidavit evidence that “the first time [he] heard the suggestion that [Shop B] was bought by her mother’s estate is in these proceedings”.[29] His overall evidence on this issue is not worth believing. 55.On the 2nd issue, senior counsel for the husband submits that the down payment of $1.1 million cannot have sourced from the sale proceeds of Mei King Mansion of the Mother’s estate. Relying on such documentary evidence as bank records or cashier order, he attempts to show that the sale proceeds of Mei King Mansion was actually directed to pay for the purchase price and/or stamp duty of the matrimonial home of the couple at Kingsford Heights, but not for the purchase of Shop B. [30] 56.However, one must not overlooked the following points:
57.In my judgment, the combined effect of the above sub-paragraphs mean that the couple did not have the requisite money to buy Shop B and it is more likely than not (and thus it is also my finding) that the wife had to rely on a bridging loan of the Uncle to pay for the down payment. Further, I believe that once Mei King Mansion was sold, the wife gave the sale proceeds to the husband to repay the Uncle. However, as explored by Mr Sussex SC in the cross examination of the wife, the husband in fact directed the sale proceeds of Mei King Mansion to the purchase of Kingsford Heights, because the sale proceeds of the Redhill property was not yet forthcoming. Therefore, he “borrowed” the sale proceeds of Mei King Mansion to purchase Kingsford Heights, which was repaid by the sale proceeds of the Redhill property. This must be the case, firstly because the husband has confirmed that the sale proceeds of the Redhill property had been utilised to purchase Kingsford Heights;[32] and secondly, for if not, Mr Coleman SC would be right in pointing out that the husband would have to accept the Sister has beneficial interest in Kingsford Heights. 58.To sum up, the Shop Agreement is an authentic document. The husband was fully aware of its content before he signed. He signed it, as Mr Coleman SC suggests, because “this is an acknowledgement of the truth of the situation”. With respect to Mr Sussex SC, I have to reject his argument that what the Shop Agreement purports to record is untrue. I shall therefore attach full weight to the Shop Agreement in this judgment. (ii) The 1st and 2nd Written Declarations 59.Details of the 1st Written Declaration can be seen in §[19] of this judgment, while those of the 2nd Written Declaration can be found at §[24] of this judgment. In considering these 2 Written Declarations, I do remind myself that they were prepared by the wife singly and have never been shown to the husband until the divorce proceedings. 60.By filing a notice of non-admission, Mr Sussex SC says that the husband is not running a case of forgery of the 1st and 2nd Written Declarations, but he is entitled, upon filing of such non-admission notice, to put the wife/Sister to strict prove these 2 documents in the trial. What senior counsel seeks to argue is that there is sufficient doubt about the dates appearing on the 1st and 2nd Written Declarations, so that the court should not accord probative value to it. The doubts are outlined in his closing submission like this:
61.Both Mr Coleman SC and Mr Todd objects to the above submission of the husband. Mr Coleman SC is of the view that by putting to the wife that the said written declarations were not executed on the date stated therein, the husband is effectually advancing a positive case of forgery without pleading it. That is forbidden by the law (See: Hong Kong Civil Procedure 2016 at note 18/13/14; Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §§21-23; Sinoearn International Limited v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §30). Mr Todd, on the other hand, reminds that in the pre-trial review of 17 August 2015, the Sister put the husband to elect if he would take for forensic analysis, should he wished to assert that the said written declarations were counterfeit documents. Through Mr Clough of Counsel, the husband confirmed that no such step was required and in the absence of a pleaded case on fraud, it is not open for him to make that assertion at trial. 62.In the trial, I have already ruled that the husband is not allowed to run an un-pleaded case on fraud, but is allowed to test the veracity of the wife’s/Sister’s case on the 2 Written Declarations. 63.In her affidavit, the wife explained the circumstances that led to the 1st Written Declaration as follows:
64.I do not read the wife to mean from the above paragraph to say that the 1st Written Declaration was written just before she was going to give birth to the daughter. She merely says that she asked the husband, just before the birth-giving of the daughter, to confirm if he would take care of her siblings. And when he refused, she became alert that she needed to do something to protect the interest of her siblings. Her evidence in chief, in my view, is supplementary, rather than contradictory, evidence, which serves to give details on the time frame of when she actually put into action of her concern described in the above paragraph. 65.More importantly, the husband has not challenged the Sister’s affidavit evidence that the 1st Written Declaration was handed to her by the wife on/about 4 June 1994. nd Written Declaration advanced by Mr Sussex SC, it is pertinent to say that although the wife at first told that she made the donation immediately after she received the compensation, she said in further cross examination that she really could not remember when she gave the donation away to the church. In my judgment, leeway must be given here, as she was asked to recall what had happened some 10 years or so ago. After all, a trial is not meant to be a memory test. 67.The 2nd Written Declaration, according to the wife, was written by her on the same day as the Shop Agreement, namely 1 March 2001. The Shop Agreement is an authentic document. I have the chance of examining the original of the 2nd Written Declaration and the Shop Agreement. Although the wife used different coloured pen to write on these 2 documents, it is very telling that the 2nd Written Declaration and the Shop Agreement were prepared on same kind of papers, ie papers of about half A-4 size with single lines printed thereon and teeth-like marks on one of the sides, denoting that they were likely to be torn out from the same notebook or same pad of papers with binders. 68.Further, the Sister’s affidavit evidence that the 2nd Written Declaration and the Shop Agreement were given by the wife to her on/about 1 March 2001 is not challenged by the husband when the Sister was cross examined. 69.For the above reasons, I accept and find that the 1st and 2nd Written Declarations are authentic documents prepared and signed by the wife on the dates appearing therein respectively. The submission made by Mr Sussex SC on the wife ascribing no value to the Brother’s estate is already considered but does not dissuade me from the above conclusion. I shall place due and great weight on the 1st and 2nd Written Declarations. Tong Building 70.It is the latest case of the wife and the Sister that Tong Building was purchased on 24 May 1991 in the sole name of the wife at $630,000 sourced from:
71.Mr Sussex SC submits that such evidence is the wife’s recent invention to cover the inconvenient fact that the Mother’s estate as stated in the Schedule is insufficient to fund the purchase of Tong Building. He relies on a number of points in his closing submission. [33] I have considered them all, but would discuss below the more salient issues raised by senior counsel under the following subheadings. (i) The Schedule & the HSB account 72.Mr Sussex SC submits that the HSB account was not included in the Schedule of the Mother’s estate, but only surfaces in the wife’s pleadings in which she asserts that there was approximately just over HK$200,000 held by her in the HSB account on behalf of the Mother before her death. She then changes further to allege, for the first time during examination in chief in the trial, that there was an additional sum of $300,000 from this bank account which she had loaned to her friend, Anita, and was later repaid. This latest oral evidence represents a substantial departure from her pleaded case where there is no reference to the additional sum of $300,000 repaid by Anita. Arguably, before obtaining a grant in her favour, the wife must have made an affirmation declaring that the Schedule identified all properties of which the Mother possessed at the time of her death. That affirmation was patently false if the wife is now to be believed. 73.Mr Sussex SC next points out that the wife alleges, for the first time during her oral evidence in the trial, that the description “household goods and personal effects” in the Schedule actually refers to cash of $260,000 found in the Mother’s wooden chests and clothes etc. He argues that it is inconceivable that $260,000 in cash would have been described “household goods and personal effects” in the Schedule. 74.On the administration of the Mother’s estate, Mr Sussex SC argues that pending the grant in her favour of the Letters of Administration, the wife simply had no authority to deal with the Mother’s assets (See: section 10 of the Probate and Administration Ordinance). 75.To begin with and with respect to Mr Sussex SC, I am not allured to the above legal submission on lack of authority to deal with the Mother’s estate. It is abundantly clear to me that the financial arrangement in the wife’s maiden family has all along been taken care of by her since she was young. It is equally clear to me that the financial arrangement between the siblings has always been an informal one. The Sister’s unchallenged affidavit evidence has sufficiently stated such informal arrangement between the siblings: [34]
76.On the discrepancy between the Schedule and her subsequent pleadings or oral evidence, the wife has offered her explanation like this. She confesses that she did not tell her solicitors about the HSB account at the time when she applied for letters of administration of the Mother’s estate, because she thought that only those assets in the name of the Mother were required to be listed out in the Schedule. However, she did tell her solicitors that $260,000 in cash was found among the Mother’s belongings. She has no idea why the solicitors had described it as “household goods and personal effects”. She repeats during cross examination that it was a chaotic time for her. She had to face the death of the Mother and to take care of the new born son at the same time. On the other hand, she admits that she has not mentioned in her pleadings about the said sum of $300,000 in the HSB account which was once loaned to Anita. She explains that she was then taking anti-depressant and was confused at the material times. 77.In considering the above explanation of the wife, I do remind myself of the husband’s submission that way back at the time when the Schedule was prepared, the wife had no discernible reason to conceal the true picture of the Mother’s estate, but she now has every motive to try to reduce the amount of assets available for division with the husband. However, it is also my firm view that her explanation needs to be considered in the light of the following points. 78.Not in dispute at all is that the wife has been a very dutiful daughter at all material times. The Mother passed away when she was in the USA to give birth to the son. Actually, the agreed chronology shows that the son was born just one day before the Mother’s death. Unaware of the tragic death of the Mother, the wife was totally taken aback by the news when she returned to Hong Kong. She says in her oral evidence that she could never excuse herself for being away at the Mother’s death. I have a vivid memory of her breaking down into tears when she came to this part of her oral evidence, so that the trial had to be adjourned for her to compose herself. Yet, despite the great grief and distress, she had to take care of her new born son and the Brother (who was found wandering in the streets after the Mother’s death as no one took care of him) at the same time. As a result, she suffered depression and had to consume anti-depressant. I believe in her that the situation was then very chaotic and stressful to her. Any inadvertent omission in giving instructions on and/or preparing of the Schedule under the circumstances is not inherently implausible, nor is it inexcusable. 79.Importantly, it is unchallenged evidence that the wife had been managing the Mother’s bank account(s) on her behalf since she was Form 4. 80.More importantly in my view is the corroborated evidence given by Anita, the wife’s witness. Anita tells this court that she speculated in foreign exchange and was unable to raise money to answer a margin call of about $300,000 in/about August 1991. She called the wife to voice out her unhappiness and told that if she died, everything could be solved. The wife then offered to loan her $300,000, telling her that this was the Mother’s money and that she had to repay her on request. A few months later, the wife asked for repayment, because she needed the money to buy a flat for the Brother and/or the Sister. Despite his thorough cross-examination, Mr Clough for the husband is unable to shake Anita’s evidence. She impresses me as an honest and truthful witness. Her evidence is clear and unequivocal. There cannot possibly be any ulterior motives on her part in giving her testimony before this court. There is nothing to suggest that she would derive any personal advantage from giving evidence, nor is there any suggestion that she acts out of prejudice against the husband or out of bias in favour of any party in this trial. I cannot find any justification in not accepting her evidence in its entirety. 81.After due thought, I do not agree that the wife’s evidence on the $300,000 repayment of loan to Anita amounts to a radical departure from her pleadings. The HSB is already pleaded in her pleadings and it has become clear to all parties that it is the wife/Sister’s case that the Schedule does not contain all the assets of the Mother’s estate. By the time when the pleadings were closed, the extent of the Mother’s estate is already an issue before this court. The evidence of the wife and Anita is merely a modification or development of the issue (See: Poon Hau Kei v Hsin Chong Construction Co. Ltd, Taylor Woodrow International Ltd (Joint Venture) (2004) 7 HKCFAR 148). 82.Upon weighing all evidence, I come to the conclusion that the evidence of the wife and Anita should be believed and accepted. I cannot find myself coming to a different conclusion even after taking into full account of all the points that Mr Sussex SC has so eloquently put forward in his opening or closing submission. It is my finding that the Mother’s estate consists of, on top of what is stated in the Schedule, a sum of about $500,000 kept in the HSB account held by the wife on behalf of the Mother, of which $300,000 was once loaned to Anita in 1991 but was later repaid. (ii) Mortgage of Tong Building 83.The land search records shows that Tong Building was at first purchased without a mortgage, but about 2 months after its completion, it was mortgaged to Po Sang Bank on 22 April 1992, with the wife as the mortgagor and MF as the borrower. The mortgage was discharged on 2 June 1998. 84.Mr Sussex SC puts to the wife during the trial that she mortgaged Tong Building to raise money to purchase Rowen Court and that this act of the wife does not sit well with her allegation that Tong Building is a trust property. This is categorically denied by the wife who maintains that she does not have any idea that Tong Building was once mortgaged and that the money raised was used to purchase Rowen Court. She further explains that whenever the husband wanted her to sign any document, he would colour-tag and give only the signing pages (but not the whole set of documents) to her for signature. She suspects that the mortgage document was mixed with other documents for her to sign. The title deeds of Tong Building were then kept in a small safe inside their room. It did not occur to her that the title deeds were taken away from the safe to the mortgagee bank; she only knows that when Tong Building was subsequently sold to the Nephews, the titled deeds were there. 85.I believe in the wife’s evidence on this point. Her evidence is spontaneous, consistent and unshaken. On the other hand, the husband’s affidavit evidence does not align with what his senior counsel puts to the wife in the cross examination. In his affidavit, the husband confirms that he had no idea why the wife took out a mortgage in respect of Tong Building. Yet his senior counsel puts to the wife that she mortgaged Tong Building to raise fund to purchase Rowen Court (held by MF which was under the control of the husband at all material times). I would add that the aforesaid affidavit evidence of the husband does not sit well with the agreed chronology, either. The agreed chronology records that apart from the wife, he himself also signed on behalf of MF as the borrower in respect of the mortgage of Tong Building. 86.The picture thus becomes clear to me. What Mr Coleman SC puts to the husband must, in my view, be correct. The husband arranged to mortgage Tong Building behind the back of the wife to raise money to buy Rowen Court. Therefore, he sought to distant himself in his affidavit by deposing that he got no idea why the wife mortgaged Tong Building. As such, his evidence on the mortgage of Tong Building is not believable and should be rejected by this court. 87.In any event, I agree with Mr Coleman SC that the mortgage would have been a loan from the beneficial owners of Tong Building, ie the wife and her siblings, which the husband confirms he repaid. The equity in Tong Building had been made whole again upon such repayment. (iii) The 2004 Affidavit & conveyancing documents 88.When the wife applied for court’s leave to sell Tong Building to herself and the Sister as the guardian and trustee for the Nephews, she deposes, inter alia, in the 2004 Affidavit that (1) Tong Building was her property and beneficially belonged to her; [35] and (2) since its purchase, the Sister and the Nephews were living there, but she never charged them for any rental despite she was entitled to do so. [36] Without doubt, the content of the 2004 Affidavit is diametrically opposite to her case in this trial that Tong Building was held by her in trust for herself and her siblings. 89.The subsequent assignment describes that the wife sold Tong Building to the Nephews as the “beneficial owner”. Perhaps, I can say at this stage that I am not prepared to place much weight on the said assignment, which usually contains very standard terms and clauses fall short of any conclusive value. 90.I must now turn to the wife’s explanation on the 2004 Affidavit. She claims that the affidavit was prepared by a conveyancing solicitor, a friend of the husband, who had not explained in detail of the content therein to her. The solicitor did not ask her questions about who other than herself was a beneficial owner of Tong Building. Mr Coleman SC says that since the focus of those proceedings was to ensure that the wife as the trustee of the Nephews does not profit from the sale of a property registered in her name, the wife can be forgiven for what was deposed in the 2004 Affidavit. 91.In my view, one must bear in mind that the wife is not ignorant of English. She used to be an air hostess before the marriage. I doubt if she would need the assistance of interpretation of the English content of the 2004 Affidavit into Chinese for her, even assuming (just assuming) that her solicitors had not explained the same to her. I am inclined to say that it is more likely than not that she was aware of the content of the 2004 Affidavit when she apprehended her signature in it. However, I am not prepared to jump directly from the above observation to the conclusion that Tong Building was not purchased by the money of the Mother. It is my firm view that the following relevant and material evidence should be taken into account. 92.First, the husband concedes that when he bought matrimonial assets with the wife, he usually did so through corporate vehicles. He confesses during the cross examination by Mr Coleman SC that his approach of not being involved in the acquisition and holding of Tong Building is fundamentally different from the manner he dealt with the family/matrimonial assets. 93.Second, it is the husband’s own evidence that the purchase price of the Tong Building did not come out of his own pocket. This gives rise to the question of where the money for the purchase of Tong Building came from. It cannot have come from the household expenses given by the husband to the wife, or from the wife’s own $500,000. I repeat what I have said in §[56] of this judgment. 94.Third, for the reasons and/or findings which will be further elaborated in the latter part of this judgment, it is my view that the estate of the Mother are still held by the wife at all material times and that the Mother’s estate had sufficient fund to pay for Tong Building. 95.Fourth, I have already found that the 1st Written Declaration is an authentic document and great weight should be placed on it. It is recorded that Tong Building (and Shop B) was purchased by the money from the Mother’s estate. 96.Fifth, the Sister’s evidence, which is largely unchallenged, is that the wife told her that Tong Building was bought by the money of their late Mother and that the wife has given her the 1st Written Declaration on/about 4 June 1994. 97.When the aforesaid relevant and material evidence is considered properly and in totality, there can only be one logical and inevitable conclusion and it is this. This couple did not have the requisite amount of money to buy Tong Building in 1992 and that its source of fund can only have come from the Mother’s estate. That is the reason why the husband has not left his imprint on the purchase or management of Tong Building. 98.One may then ask how can the above conclusion reconcile with the content of the 2004 Affidavit? The answer, in my view, lies in the replies given by the wife to this court towards the end of her evidence. She is asked about when the 4 Properties would be distributed to the Sister. What she effectually tells this court is that she would continue to keep the 4 Properties and decide if and when to sell any of them in order to cater for the possible medical expenses of the Sister. [37] However, no matter how bad the current health condition of the Sister is, it does not occur to me that her medical expenses would be as much as half of the value of the 4 Properties. My overall impression is thus this. While I have no doubt that the wife is dutiful to the Sister and would take care of the Sister, but deep down in her heart and perhaps also with the acquiescence with the Sister, she prefers to be in absolute control of the said estate so that it would only be she who would decide on what, when and how to deal with the assets. Under the circumstances, she does not find it inappropriate to swear in the 2004 Affidavit that Tong Building belonged to her. 99.In any event, I accept Mr Todd’s submission that what the wife purports to say in the 2004 Affidavit on the ownership of Tong Building does not and cannot be binding on the Sister. (iv) The Sister’s divorce 100.It is the submission of Mr Sussex SC that the case now advanced by the wife and the Sister that Tong Building was purchased by the wife using funds from the Mother’s estate is contradicted by the Sister’s case in her divorce proceedings that she had no assets, and the Sister never suggested that she had a beneficial interest in Tong Building. 101.With respect, I refuse to accept the above submission. I fully embrace the reply submission of Mr Todd for the Sister. It is right that the Sister failed to disclose her inheritance entitlement to the Mother’s estate, but then she was found out. As a result of this discovery, she had to agree to an adverse settlement to the extent that she received a mere lump sum of $70,000 from her own husband, which was absorbed totally by the common fund costs under the legal aid scheme. Mr Todd has correctly pointed out that the husband is aware of all these because he himself deposes in his affidavit that the Sister was “forced to settle”. My conclusion on Tong Building 102.To sum up, I find that at the time of the purchase of Tong Building, neither the husband nor the wife had the cash to pay for its purchase price. The only and logical conclusion is that the source of fund for the purchase of Tong Building comes from the money of the Mother’s estate, which comprises of the assets stated in the Schedule and some $500,000 kept and managed by the wife at her HSB account on behalf of the mother since she was in secondary school. I cannot find myself coming to a different conclusion even after taking into account of all the submission made by Mr Sussex SC on Tong Building, in particularly about the 2004 Affidavit. Shop B 103.As a recap, Shop B was purchased in the name of MF in the sum of $3.1 million. The wife signed the agreement for sale and purchase on 20 March 1993. Completion took place on 16 April 1993. There is no dispute that the wife provided at least $1.1 million of the purchase price. It does not seem to be in dispute that the husband contributed $200,000 towards the down payment. The balance of the purchase price was provided by mortgage. 104.Closely related to the purchase of Shop B is the sale of Mei King Mansion, the only landed property in the Mother’s estate. The agreement for sale and purchase of Mei King Mansion is dated 28 April 1993. Completion took place on 1 July 1993. The sale price was $1.48 million. 105.The issues and/or submission surrounding Shop B can be discussed under the following major sub-headings. (i) The Shop Agreement & sale proceeds of Mei King Mansion 106.In my view, the starting point of any discussion about the beneficial ownership of Shop B must be the Shop Agreement. I would refer to my analysis in §§[46] to [58] of this judgment, and do not propose to repeat the details here. 107.I am convicted to say that the Shop Agreement, in its own right, is a very strong piece of documentary evidence with much probative value, because not only does it bear the husband’s own signature, but also its content is highly corroborative to the wife/Sister’s primary case, ie Shop B was purchased with the funds from the Mother’s estate to which both the wife and the Sister are entitled. (ii) Rental & mortgage repayment 108.It is the wife’s case that Shop B was purchased by MF in name only, upon the husband’s advice to her that property tax could be saved. After Shop B was purchased, it (together with Shop A) was used as his clinic. He paid the wife on behalf of her maiden family $20,000 per month for renting Shop B. According to the wife, the rental level was fixed at $20,000 per month because it was the amount of the mortgage repayment to the mortgagee bank. Instead of giving her cash each month to pay for the rent, the husband would pay the monthly mortgage repayment direct. 109.The husband denies that there was such rental arrangement/agreement between them. He insists in his affidavit that the said $20,000 were the wife’s director’s fees. 110.However, it becomes clear during cross examination of the husband that these payments are simply used for tax advantages as the wife’s personal allowances but then funnelled back to him by cheques on a monthly basis as controlled by him. He has to accept this after being referred to the various cheque stubs in his own handwriting completing the circuitous transfer.[38] The sums that were funnelled back were then deployed to pay off the monthly mortgage. As such, the husband’s evidence on this point is simply unbelievable. I accept the wife’s evidence on the rental and mortgage repayment arrangement. 111.I would add that the aforesaid cheque stubs in his handwriting supports the wife’s case that the husband was the person in full control of finances, and that he would prepare documents for the wife to sign, even if it was the wife’s own cheque account. That explains why he was able to arrange for mortgage of Tong Building in 1992 and Shop B in 1996 behind the back of the wife. (iii) Payment of $3.8 million 112.It is indisputable that the husband did make payment of $3.8 million (net to $3.2 million after taking into account a sum of $600,000 advanced by him for the Brother’s funeral and grave site expenses), which is exactly the same amount stated in the Shop Agreement. The husband explains that this is merely a repayment of a personal loan of $1.1 million from the wife, upon taking into account the increase in value of Shop B over the period of the loan. I refuse to accept this explanation in view of my analysis of the Shop Agreement. It also begs an explanation why the Brother’s funeral expenses had to be deducted from the sum of $3.8 million if it was merely a personal loan of the wife. Logic tells that this sum of $3.8 million must be related to the money of the wife’s maiden family. 113.Moreover, as evidenced in the whatsapp messages between the couple in early 2014, in particularly the messages of 29 January 2014, [39] the husband made no denial at the time when the wife stated that Shop B was purchased with the money of her maiden family whose interest he later brought out at the discounted original price of $3.8 million (discounted for over $2 million) under the Shop Agreement. My conclusion on Shop B 114.Due to the matters aforesaid, I am not hesitant to find that Shop B was purchased by the money from the Mother’s estate. Administration & distribution of estate 115.Mr Sussex SC for the husband has spent not an insignificant part of his opening and closing submission on the distribution and administration of the estates of the Mother and/or the Brother, which will be dealt with under the following headings. (i) The wife’s BOC Accounts 116.I shall start with the pleadings. In reply to the points of claims that estate of the Mother and of the Brother has not been distributed and thus being held by the wife in trust for the Sister in equal shares between them, the husband pleads in his points of defence that the Mother’s estate has been fully distributed and wound up. He refers to the BOC Accounts allegedly held by the wife in trust for the Sister, which amounts roughly to half of the value of the Mother’s estate as stated in the Schedule. 117.On the BOC Accounts (of roughly $1 million), the wife says in her oral evidence that about $300,000 therein was actually the sale proceeds of shares (Hong Kong Electric), which is the inheritance of the ex-husband of the Sister. The remaining amount (about $700,000) derived from the Sister’s savings from 3 part-time jobs before her retirement in or about 1991. The BOC Accounts are in her name because she was worried that the Sister’s hard earned money might be cheated by somebody as she is/was totally illiterate. 118.Mr Sussex SC for the husband comments in his closing submission that this explanation of the wife is plainly fanciful and is not corroborated by any documentary evidence. The Sister had already divorced with her ex-husband and so she was plainly not entitled to any of his assets. The lump sum payment she obtained by way of ancillary relief in her divorce proceedings was all used to pay her legal fees. 119.True as it may be that there is no corroborated documentary evidence, I believe in the wife, for she gave very spontaneous and instant response on the same during her oral evidence, that about $300,000 out of the said $1 million in the BOC Accounts is actually the sale proceeds of the shares which belonged to the ex-husband of the Sister and thus the inheritance of the Nephews. One has to remember that she and the Sister are the joint trustees of the Nephews, and thus it is not inherently implausible that they would be able to deal with the said shares, or sale proceeds of such, as trustees of the Nephews. It is, however, unfortunate that the wife has treated this $300,000 as the Sister’s money. It is certainly not; it belongs to the Nephews. What the wife (or the Sister) could and should have done is to keep this $300,000 in a separate bank account holding in trust for the Nephews. The Nephews are persons under disability; their rights and interests should not be jeopardised and should be safeguarded in all respects. 120.The remaining $700,000 in the BOC Accounts is insufficient to make up about 50% of the Mother’s estate as stated in the Schedule, which in turn has weakened the husband’s allegation in his points of defence that the Sister has fully received her distribution of the Mother’s estate. 121.Pertinent to note is that the husband accepts in his oral evidence that the Sister is entitled to a “fair share” of the Mother’s estate, which effectually means that the Sister has not been distributed her share of the Mother’s estate, at least not fully. 122.What then is the status of the remaining $700,000 in the BOC Accounts? The Sister is totally illiterate and cannot write/read Chinese, not to mention English. It is not disputed that she trusts and relies very much on the wife to handle all documentation work and finances for her. [40] It is hence inherently plausible that the wife would manage or keep bank account(s) on behalf of the Sister. It is telling on the part of the wife’s evidence in witness box that although the BOC Accounts are in her name, the bank passbooks are kept by the Sister. Additionally, it is the Sister’s affirmation evidence that she is a very frugal person, as the Mother raised her up to be the same. She started doing manual work, such as cleaner or garment factory worker, shortly after her marriage in 1966 and retired by 1991. Before her retirement, she was doing 3 manual jobs at the same time. She had worked for over 20 years. She confirms in her affirmation, which is not challenged by the husband when she was being cross-examined, that she had saved up from her salaries. Upon her retirement, she could not possibly have much time and chance to spend her money since she dedicated her time in assisting the wife in taking care of the children of the family for years as a free helper. The husband’s evidence even suggests that the Sister lived with them and was financially supported by him during those years when she took care of the children. The Sister has also confirmed that she has not been distributed the capital of the Mother’s estates. Against this backdrop, I cannot say it is inherently implausible that the Sister would be able to save up a significant amount rolling up to the said $700,000 over the decades. 123.Looking at all evidence in its totality and despite the submission of the husband, I conclude that the money in the BOC Accounts consists of a sum of about $300,000 which should have belonged to the Nephews. Further, it is not inherently implausible that the remaining $700,000 is the savings of the Sister rolled over from the salaries earned from her jobs over the years. (ii) Legal submission on administration of estate 124.If I understand him correctly, Mr Sussex SC puts forward a 2-limb argument on the administration of the Mother’s and/or the Brother’s estates like this. 125.He first of all submits that the wife has breached various duties as an administratrix of the said estates. For example, she did not have the authority to deal with the Mother’s estate before a grant was made in her favour; she has failed to wind up the Mother’s and/or the Brother’s estates upon their death. However, with respect to him, I am not persuaded by this line of argument. This submission has totally overlooked the holistically informality nature of the financial arrangement in the maiden family of the wife and the undeniable fact that the wife has been the major person managing the finances of the maiden family since she was young. Further, I agree with Mr Coleman SC for the wife in his closing submission that even if there is any breach of such duty on the part of the wife, any concurrence and/or acquiescence on the part of the beneficiary (ie the Sister) would release the wife from any purported breach of duty. [41] 126.The second limb of Mr Sussex’s argument runs like this. If an estate is still unadministered, the personal representative is not per se constituted a trustee and no beneficiary can assert that she has any legal or equitable interest in any of the assets. The beneficiary has, while the estate is in the course of administration, only a “chose in action” to ensure the due administration of the estate (See: Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at pp707E-G & 713; Re Leigh’s Will Trusts [1970] Ch 277). Applying such legal principles into the facts of this case, senior counsel for the husband submits that if, as suggested in the pleadings of the wife and the Sister, that the estates of the Mother and/or the Brother have not been distributed, the estates are not completely administered. The Sister is yet to have any equitable interest in the said estates; she has only a chose in action for due administration of the estate. If she is not satisfied with the way the wife has administered the said estates, all she can do at this stage is to apply to the court for an order requiring the wife to give an inventory and an account of her dealings with the administration of the estates.[42] He invites me to simply dismiss the Sister’s claim for beneficial interest in the 4 Properties with costs to the husband. I have the following to say to this line of submission. 127.Firstly, by way of backdrop, one must always keep in mind what the husband has accepted in this trial. He has accepted that the Sister did have inheritances of the Mother which were placed with the wife for her safe-keeping. He has accepted that the Sister has acquiesced in the wife’s handling of the administration of the Mother’s estate. He has to accept the informality of the financial arrangements of the wife and her siblings. He has also conceded that the Sister should get her fair share of the estate, but he does not know what that fair share would be. 128.Secondly, Mr Sussex SC has to accept in his closing submission that although the hearing of the preliminary issue of third party interest involves a Chancery issue, the mode of hearing retains the quasi-inquisitorial character of the ancillary relief proceedings generally (See: Prest v Petrodel Resources Ltd [2013] 2 AC 415 at §45). Importantly, this court is tasked at this stage to determine if any third party interest is involved in any assets registered in the name(s) of the husband and/or the wife, so that the size of the matrimonial pot can be ascertained and the couple can then proceed to the stage of the FDR. In this sense, the family court, in exercising its quasi-inquisitorial character of the ancillary relief proceedings generally, is perfectly entitled to make a finding on the beneficial interest, if any, of the Sister in any of the 4 Properties, irrespective of whether there has been distribution of the relevant estate or not. As a matter of fact, the parties have invited the court to make such determination in their joint list of agreed issues. 129.Thirdly, it is the husband’s own application to this court for the determination as a preliminary issue on the beneficial ownership of the 4 Properties. It affords no logic for him to now say that this court should not make any such determination merely due to legal technicalities. 130.Fourthly, something needs to be said on the last pre-trial review of 17 August 2015. For the purpose of that hearing, a joint list of 7 issues was signed by all parties and filed with this court on 13 August 2015. Broadly described, the 4th named issue says this: whereas the Sister reposed her trust and confidence in the wife to hold assets on her behalf, whether the wife failed in her duty as constructive trustee owed to the Sister. The 5th named issue is this: whether the wife made representations which the Sister relied on to her detriment giving rise to a proprietary estoppels and/or whether the wife is liable for damages for breach of trust. It has to be noted that the husband has remarked underneath the 4th and 5th issues that he “does not agree with this issue should be dealt with at this hearing of preliminary issue”. Mr Clough for the husband orally confirmed this again in the said hearing, commenting that,
131.In such circumstances, it would be an affront to fairness to allow the husband to now say that this court should simply dismiss the Sister’s claim for beneficial ownership in the 4 Properties because she should have made an application for the wife to give an account of the administration of the relevant estates. 132.Fifthly, it is my judgment that the husband’s dwelling on all these legal niceties and technicalities in the factual matrix of this case leads us to nowhere. He has to accept that even if (just assuming) the Sister took out an application against the wife for an inventory and an account of her dealings with the administration of the estates, the wife, being not a good record keeper, would not be providing or saying anything substantially more or different than what she has now said or provided to this court in this trial. Mr Sussex SC comments that the husband can then seek to intervene in the Sister’s claim for account of enquiry. If so and in my view, the whole exercise would then be a mere repetition of what the parties have gone through in this trial before me, but leading to the inevitable and unsatisfactory consequences of wasting time and costs. 133.Lastly, Mr Sussex SC advances at the end of his closing submission that in case the wife is truly under an obligation to account for profits made during her administration of the estates, that is something which may have to be taken into account as a “liability” in the ancillary relief proceedings. This line of submission, however, would lead to another unsolved issue of the extent/amount of that liability, without an answer of which the couple cannot possibly participate in a meaningful FDR. Moreover, this submission is in contradiction with the husband’s position way back in the said pre-trial review of 17 August 2015, when he has, through Mr Clough of counsel, objected that the 5th issue concerning whether the wife would be liable for damages for breach of trust should be an issue in this trial. 134.Due to the matters set out above, I would, with the greatest respect to Mr Sussex SC, reject his submission on the administration of the estates. (iii) Distribution of estate 135.In his closing submission, Mr Sussex SC submits adamantly that in case there have only been partial distributions of the said estates, then there is no clear starting point to enable this court to calculate (a) the extent of the Mother’s and/or the Brother’s estates, and (b) the amount that have been paid out to the Sister and/or the Brother by way of partial distribution over the years, so that this court is not standing on a solid ground to ascertain from the evidence what the interest of the Sister is. In the result, the wife and the Sister have failed to discharge the burden of proof and so the latter’s claim should be dismissed. 136.Quite obviously, this line of submission is a material departure from the pleaded case of the husband. 137.In any event, I do not agree that there is no clear starting point on the extent of the estate of the Mother. There are documentary documents, such as the Schedule, as well as oral evidence, such as that of the wife and Anita, subject always to the court’s scrutiny as to whether the same would be accepted and if so the weight to be attached. 138.On the extent of the Brother’s estate, I do not think it is a meaningful exercise to dwell on this topic. It is indisputable that apart from the compensation under the medical negligence claim, the Brother, being a mentally incapacitated person without earning capacity, did not leave any substantial assets. It is true and accepted by the wife that she has not kept detailed records of the partial distribution out of the estate of the Mother to the Brother. But the wife is able to tell that during the Brother’s left time, a sum of about $300,000 was paid out of the Mother’s estate to cover his medical expenses. Apart from that, his living expenses were of insignificant amount. He lived predominately in a care home before his death, which cost about $1,000 per month and was covered by the disability allowances from the government.[43] Upon his death, his funeral and grave site expenses in the sum of $600,000 were covered by the payment in respect of Shop B. 139.As to the distribution to the Sister, the Sister says in her affirmation that the wife paid her pocket money of $3,000 - $4,000 and her bill when they were together. The wife clarifies that such pocket money was not paid regularly each month and that there is not any more in the later stage.[44] The wife was taken by Mr Sussex SC to some of the cheques stubs showing cheques issued in favour of the Sister out of her Hang Seng Bank account. I have gone through all the cheques stubs from 13 April 1993 to about 11 May 1998 [45] and from 4 December 1998 to 13 October 2002. [46] Within this period of about 9 years, only a few cheques were issued to the Sister. Roughly, the total sum is not substantial and is less than $100,000. 140.For the purpose of discussion, even if it is taken that an average sum of $3,000 - $4,000 per month has been distributed to the Sister regularly, such distribution must be considered in the light of the following material points:
141.Upon due consideration, I have to say that any partial distribution to the Sister cannot be regarded as significant in the circumstances, sufficient enough to have a determinative bearing on the outcome of this trial. And with the greatest respect to Mr Sussex SC, I add that it is very unfair of the husband, having himself benefited substantially from the capital discount of over $2 million in respect of Shop B, to argue that the Sister’s claim should be dismissed simply because her share cannot be traced to the dollar. I accept Mr Todd’s submission that although the wife, due to the holistically informality in the financial arrangements between her and the Sister, has not kept a full record of payments to the Sister out of the estate of the Mother, this court is entitled to adopt a fair approach in determining the Sister’s share. It is thus my judgment that full effect to the maxim of “equality is equity” should be given. I conclude that a fair approach of 50%-50% between the wife and the Sister be endorsed. Conclusion 142.For all the reasons set out above, I am satisfied on balance of probability, and thus I so find, that source of fund for the purpose of Tong Building and Shop B is originated from the Mother’s estate, to which the wife is holding 50% in trust for the Sister. The sale proceeds of Tong Building and Shop B were then applied to purchase the 4 Properties. Hence, I find that the wife is holding 50% interest in the 4 Properties in trust for the Sister. 143.There is no reason why costs should not follow the event. Therefore, I shall make a costs order nisi that the husband shall bear the costs of and occasioned by the wife and the Sister of the trial of the preliminary issues, including all costs reserved, to be taxed if not agreed. I will also certify the attendance of 2 counsel, bearing in mind that the husband himself has engaged a senior counsel with a junior counsel in this trial. The costs order nisi will be made absolute within 14 days from the date of this judgment. 144.The first appointment on the ancillary relief matters would be restored. The next hearing is fixed for 11 August 2016 at 10.30 am in Court No 1 (30 minutes reserved). Parties should comply with PD 15.11 in filing and service of the updated first appointment bundle with an updated Form H. 145.The Sister’s legal team should draw up this court order for approval. 146.Lastly, I wish to thank counsel for their valuable assistance rendered to me in this trial.
Mr Charles Sussex SC and Mr Neal Clough instructed by Messrs King & Company for the Petitioner Mr Russell Coleman SC, Mr Keith Hotten and Ms Theresea Chow instructed by Messrs Ho & Ip for the 1st to 3rd Respondents Mr Richard Todd instructed by Johnson, Stokes & Masters for the 4th Respondent [1] Prior to 24/11/2008, the wife and the 4th respondent (her sister) were the registered shareholders of the 2nd respondent (51:49 respectively). On 24/11/2008, the sister’s 49% shares were transferred to the wife. It is their case that the wife, since then, holds the said 49% shares in trust for the sister. It is agreed on Day 1 of the trial that, for the purpose of this trial, the 2nd and 3rd respondents are simply property-holding companies and that there is no need for this court to make a specific ruling on the beneficial ownership of the 2nd respondent. For this reason, I shall invariably refer the 2nd and/or the 3rd respondents as the wife in this judgment. [2] The agreed chronology and property list for preliminary issue have not been put into the trial bundles, but are helpfully attached by Mr Todd, counsel for the Sister, to his opening submission. [3] a company limited which joint directors and shareholders are the husband and the wife. [4] a company limited jointly owned by the husband and his uncle. It was deregistered in 2001 upon all its shares allotted to either the husband or MF. [5] Husband’s list of documents (item 250). [6] Point of defence [I/51/§21(1)]. [7] Transcript [201C-L]. [8] Husband’s affidavit [I/121/§16]. [9] In the 1st Written Declaration, Shop A was said to be purchased by the money of the Mother’s estate. But it is clear that the wife must be referring to Shop B instead of Shop A. The husband has not taken serious issue with this. [10] See footnote 6 above. [11] Husband’s affidavit [I/150/§45]. [12] Husband’s affidavit [I/155/§57] & Transcript [203/H-J]. [13] Total redemption money for all 3 properties is $4,134,293.74. [14] Sister’s points of claim [I/15-16/§16]. [15] Sister’s points of claim [I/27/§82]. [16] Husband’s points of defence eg [I/50/§§15(4) - (5) & 20], [I/52/§31], [I/53/§39], [I/57/§83], [I/59/§96]. [17] The increase in value of Mei King Mansion as reflected in the sale price is included. [18] Husband’s points of defence [I/58/§86]. [19] Husband’s points of defence [I/49/§10]. [20] Transcript [209R]. [21] Transcript [188Q-189B]. [22] Transcript [209I-K]. [23] Transcript [188I-K] & [209I-K]. [24] Wife’s opening submission at §44. [25] Husband’s affidavit [I/155/§57] & transcript [203H-J]. [26] See §[30] of this judgment. [27] Husband’s affidavit [I/145/§38]. [28] Transcript [201C-D]. [29] Husband’s affidavit [I/146/§39]. [30] §§48-54 of the husband’s written closing submission. [31] Transcript [166/G-Q]. [32] Husband’s affidavit [I/172/§109] & transcript [216N-217A]. [33] Closing submission of the husband at §§11-25. [34] [I/86/§9]. [35] See §2 and §18 of the 2004 Affidavit [V/1056.11&1.56.16]. [36] See §13 of the 2004 Affidavit [V/1056.13-14]. [37] Transcript [179O-T]. [38] Eg [II/505-508]; [II/515-516]. [39] [X/2837-2839]. [40] Sister’s affirmation [I/74/§21]. [41] Wife’s closing submission at §§59-70. [42] Husband’s closing submission at§§70-73. [43] Transcript [164A-C]. [44] Transcript [162F-N]. [45] [VII/1507-1603]. [46] [VII/1720-1815]. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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