Li Sin Man Seline and Another v. Li Shu Chung and Another

CACV 2/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 2 OF 2016

(ON APPEAL FROM HCA NO. 1711 OF 2009)

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BETWEEN

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(By Original Action)

BETWEEN

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J U D G M E N T

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Hon Cheung JA:

I. The appeal

1.This case is about the contest between a father (‘the Father’) and his first born son (‘Ken’) over the beneficial ownership of company shares in a family business established by the Father –– a tale that is sadly played out far too often in our Courts in recent years.  After a 21‑day trial, Deputy High Court Judge Simon Leung found for the Father.  Ken now appeals.

II.   Background

1)    The companies

2.1The Father, Mr Lee Sai Nam, deceased was the patriarch of a traditional Chinese family. He was described by the Judge as an ‘old-fashioned businessman who commanded’. In the mid-1950s he founded a family business of manufacturing watchband products and accessories.  In 1972, the Father set up in Hong Kong a company called Luen Tat Watch Band Manufacturer Ltd (‘Luen Tat’), which became the marketing arm of the business.  In 1981, the Father set up Pak Tat Trading Company (‘PTTC’), which became the manufacturing arm of the business.  The Father and his wife, Madam Lee Kui Mui (‘the Mother’) were then the sole shareholders and directors of Luen Tat, while the Father was the sole proprietor of PTTC.  In 1992, a Mainland manufacturing base, namely, Lianda Metal Watchband (Shenzhen) Co Ltd (‘Shenzhen Lianda’), was set up in Shenzhen.  Shenzhen Lianda owned the land and the factoy erected there.  All the shares in Shenzhen Lianda were registered under the name of PTTC, which, was the sole proprietorship of the Father.  The Father said he decided to establish, and invested in the manufacturing base in the Mainland in 1992.  He handled all the matters relating to the acquisition of land in Shenzhen and the dealings with the Mainland authorities. 

2)  The children

2.2The Father had four children, three of whom were involved in the family business.  Ken, whose full name is Li Shu Chung, also known as Ken Li (the 1^st defendant by original action and the plaintiff by counterclaim) is the eldest son.  The other two are Li Sin Man Seline (‘Seline’) (the 3^rd defendant by counterclaim) who is the younger sister of Ken and Li Shu Hang Richard (‘Richard’) who is the younger brother of Ken and Seline.  Also named as a party to the present action is Li Joseph See Sun (‘Joseph’) (the 2^nd defendant by original action), who is the son of Ken.

2.3Ken was educated and married in England.  The Father said Ken ran his own decoration business venture in England in the 1980s with funds in the sum of HK$500,000 provided by the Father.  When this business failed, Ken, who was then in his 20s returned to Hong Kong in 1985-1986 to work for the Father at Luen Tat.  His position was sales director. 

3)  Luen Tat

2.4In April 1986, the Father and the Mother assigned all the shareholdings in Luen Tat to Ken and his wife at no consideration.  According to the Father, the reason is that, in 1986, the manufacturer of ‘Charles Jourdan’ threatened legal proceedings against Luen Tat for alleged copyright infringement.  The dispute was eventually settled on terms including undertakings by the Father and the Mother, as the shareholders and directors of Luen Tat.  Concerned about the personal undertakings, the Father decided to remove themselves from the record of shareholders and directors of Luen Tat.  Hence the assignment of the shares of Luen Tat to Ken and his wife.  However, it was made clear to Ken and his wife that the shares were so held by them for the Father, and they agreed.  The Father remained in control of the business.  In 1993, Ken and his wife transferred 49% shareholdings in Luen Tat, then in their hands, to Richard who having received his education from Canada returned to Hong Kong to join the family business.  It was on the Father’s instruction that Ken and his wife transferred 49% of the shareholdings in Luen Tat to Richard.  The understanding remained that the shares in Luen Tat were held by Ken and Richard for the Father.

2.5Due to the change of sovereignty of Hong Kong in 1997, the Father and Richard decided to emigrate to Canada.  In 1995, for tax planning purposes incidental to their emigration plan, professional advice was sought.  This led to the restructuring of the shareholdings in Luen Tat to be held by the respective family trusts of Ken and Richard.  The authorised capital of Luen Tat was increased.  The existing 15,000 ordinary shares were converted to become 5% non‑voting deferred shares.  100 new shares were created with voting rights (‘New Shares’).  51 New Shares were allotted to the corporate vehicle of Ken, namely, Joesh Overseas Ltd (‘Joesh’) while 49 New Shares were allotted to Richard’s corporate vehicle, namely, Full Moon Investments Holdings Inc (‘Full Moon’).  This restructuring proceeded with the approval of the Father.  The understanding remained unchanged that the shares in Luen Tat were held by the sons, through their trust vehicles, for the Father instead of themselves beneficially.  

4)  Pak Tat

2.6Following professional advice, Pak Tat Trading Co (‘Pak Tat’), a Mauritius company, was registered in Hong Kong in 2002 as the vehicle to take the place of PTTC to hold the shares in Shenzhen Lianda.  All the shares in PTTC were transferred to Pak Tat, and the transfer of shareholdings in Shenzhen Lianda from PTTC to Pak Tat eventually also received the approval of the Mainland authority.  The consideration on record was HK$53 million.  No actual payment was made by Pak Tat to the Father for the transfer, and the sum was entered as the Father’s shareholder’s loan to Pak Tat.  The Father was the authorised representative of Pak Tat, while he, Ken and Richard were its directors. 

2.7The Father said he decided to incorporate Pak Tat, after considering the advice of accountants to vest the interest in Shenzhen Lianda in a corporate vehicle so that it would be easier to pass the interest to his children upon his death. At the time, the Father was 72 years old.

2.8In September 2006, the Father caused shares in Pak Tat to be allotted to Ken, and thus making him on record 50% shareholder of the company.  The Father held the other 50% shares in Pak Tat.

2.9The Father explained the allotment to Ken.  He was injured in a fall in the Shenzhen factory in 2005.  After that, the Father did not wish to travel there regularly.  He requested Ken to take up more actual responsibilities.  Until then the Father was in control of the Shenzhen operation.  At that time, unlike Seline and Richard, Ken was never stationed there, as he was mainly involved in sales and marketing of the group through Luen Tat.  Ken spent less than half of his time in Hong Kong, having to travel between here and England for his family visits.  The Father caused the allotment of shares to Ken for no consideration, with a view to clothing him with more apparent authority as the one in charge of the manufacturing base.  Nevertheless the Father made clear to Ken that Ken held the shares as his nominee.

5)  The discord

2.10The Father said since 2006, Ken had gradually ousted his siblings from the business and usurped the Father’s control of the group.  First, Ken marginalised the involvement of Richard in Shenzhen Lianda.  Ken also insisted that Seline had to leave as well.

2.11In about mid-2006, Richard decided to leave the family business.  He resigned and ceased to be involved in its business.  He formally resigned as a director of Luen Tat in December 2007.

6)  Meeting of 31 October 2008

2.12On 31 October 2008, a meeting was held.  It was attended by the Father, Ken, Seline and Richard.  Draft minutes of the meeting were prepared by a Lai Yuk Wah (‘Lai’) who attended the meeting at the invitation of Ken.  The draft minutes purported to show that it was resolved that Ken should be wholly responsible for all the operation and decisions of Luen Tat and Shenzhen Lianda.  The minutes further stated that :

‘ 5. [Father] confirms that all shares that were transferred from him to [Ken] and all shares held by his company in [Luen Tat] and [Shenzhen Lianda], all belong to [Ken]. [Father] has no interest.’

2.13Seline had, at the Father’s request, worked for the family business since the early 1990s.  She had handled the financial and accounting affairs of the group.  Following the departure of Richard, Seline also made clear during the meeting that she would leave the group.  It was decided at the 31 October 2008 meeting that Seline would leave the group.  However, she was re-engaged shortly afterwards as a consultant to handle the accounting matters of the group.  

2.14According to the Father, Seline was re-engaged mainly because Ken had no way of understanding and mastering the internal accounting system and practice of the group, of which the ledgers kept by the Father (as explained below) were the key.  Nor could he secure an immediate replacement.  But in June 2009, Seline again left the group.

7)  Further developments

2.15Since the end of October 2008, Ken had made repeated attempts to get the family members to sign a draft of what was said to be the resolution of the 31 October 2008 meeting.  The Father, Seline and Richard refused to sign and had never signed it.

2.16In December 2008, Ken, in his capacity as the sole director of Luen Tat, cancelled the authorisation to the Father, and made himself the authorised bank signatory of Luen Tat together with Lai and others. 

2.17In the same month, Ken secretly taped a conversation with the Father, during which Ken attempted to obtain the Father’s admission to his i.e. Ken’s assertion of control of and entitlement to all of the group.  The Father said Ken was taking advantage of his known bilateral hearing problems and advanced age. 

2.18The Father had received meagre formal education.  He oversaw the operation and management of his business in the old fashioned way.  Central to that was his keeping of own informal ledgers on the financial situation of the business without professional accountant’s assistance throughout the years.  By early 2009, at the instruction of Ken, Mazars CPA Limited (‘Mazars’) met with the Father more than once to verify the calculations in the Father’s ledgers.

2.19The Father was still minded to resolve the situation by negotiation with Ken.  He therefore engaged the Mother to talk to Ken.  He proposed to let Ken manage the group on condition that Ken had to distribute 30% profits to him.  Ken disagreed.  The Father then revised his earlier proposal for distribution of profits to 10%, which he was minded to give to Seline.

2.20In April 2009, Richard returned the 49 New Shares in Luen Tat to the corporate nominee of the Father, Allied Ever Holdings Limited (‘Allied Ever’), as they had all along been held for the Father.

2.21In May 2009, Ken repeated his attempt, through a family friend, Ms Kitty So, to secure the Father’s signature on a draft resolution of the 31 October 2008 meeting.  The Father again refused and made his counter-proposal.

2.22By May 2009, Ken had caused a total sum of HK$28 million to be paid by another group company Yuen Hing in settlement of Luen Tat’s invoices (upon the re‑invoicing) into his personal account.  The background to the setting up of Yuen Hing with the approval of the Father is as follows.  For tax saving purpose, Luen Tat put in place a re‑invoicing operation.  In 2002, the re-invoicing operation was moved to a new company incorporated in Macao, namely, Yuen Hing.  Seline was put in charge as the administrator of Yuen Hing.  Luen Tat would place orders with Yuen Hing for the goods required in its business, and Yuen Hing would place corresponding orders for the goods with Shenzhen Lianda.  As such, Yuen Hing would invoice and receive payment from Luen Tat for the goods.  Yuen Hing is therefore said to be the keeper of income of the group, and for his counterclaim Ken joined it as a defendant.

2.23On 11 June 2009, the Father, accompanied by Seline, attended the office of Luen Tat, seeking to inspect and to copy accounting documents.  This eventually met with the resistance of Ken and his associates.  On that occasion, Seline was allegedly assaulted by Ken, and was hospitalised.  The Father had had no access to the company documents since then. 

2.24In July 2009, Ken and his family moved out of the family residence in Kowloon Tong the Father had built and where Ken and his family had lived since Ken joined the family business.

8)  The proceedings

2.25In August 2009, the Father commenced the present action.  In the same month, the Father  caused Allied Ever to commence proceedings to wind up Luen Tat on the just and equitable ground (‘HCCW 497/2009’).  In July 2010, Luen Tat was wound up with costs of the proceedings ordered against Ken.  Ken eventually caused a resolution to be passed to wind up the company pursuant to section 177(1)(a) of the Companies Ordinance, Cap 32.

2.26In July 2011, the Father commenced proceedings to wind up Pak Tat (‘HCCW 236/2011’) on the ground that the company failed to pay him the sum of HK$53 million in connection with his transfer of shares in PTTC as mentioned above.  On 1 December 2011, Harris J gave judgment rejecting Ken’s dispute of the debt owed by the company to the Father, and ordered the winding up of Pak Tat (‘the HCCW 236/2011 Judgment’).  Ken filed his appeal (CACV 284/2011), but he did not proceed with it.  Instead, in October2012, Ken commenced a fresh action (‘HCA 1890/2012’) against the Father, Seline and Richard for alleged conspiracy with their lawyers to deceive Harris J into granting the order winding up Pak Tat.  That action has since December 2013 been stayed pending the outcome of the present action.

2.27There are other actions beween members of the family which are not relevant to this appeal. 

2.28The trial below was heard over a six‑month period.  The Father unfortunately passed away within a fortnight of the last hearing in August 2014.  The action has been carried on by the executors of the estate of the Father. 

9)  Ken’s case

2.29The judge summarised Ken’s case as follows :

(1) It was at the request of his parents that he returned to work for the Father in 1985.  He had since been entitled to 10% share of the annual business profits.

(2) The shares in Luen Tat were transferred to Ken and his wife in 1986 without the intention or valid establishment of a trust.

(3) The establishment of Shenzhen Lianda in 1992 was a joint decision of the Father and Ken.  It was a co-investment of their respective shares in Luen Tat’s retained earnings, and each of them owned 50% interest in the project.  The Father held 50% interest in PTTC, and subsequently Pak Tat, on trust for Ken.

(4) In 1992/1993, the Father had health problems and intended to retire, and decided to distribute the family assets to his children.  Hence the gift of 51% and 49% of the shares in Luen Tat to Ken and Richard respectively and the incidental transfer of the shares to Richard.

(5) Since then, Ken became the majority shareholder and person in control of Luen Tat whereas the Father became a mere figure head of the group.  Out of respect, Ken allowed the Father to use the office and to help in determining the group’s profits sharing.

(6) The restructure of the shareholdings in Luen Tat in 1995 was carried out without the consultation or approval of the Father. Ken obtained the 51 New Shares in Luen Tat for consideration.

(7) It was the joint decision of Ken and the Father to hold their interest in Shenzhen Lianda through a company other than PTTC.  Hence the setting up of Pak Tat and transfer of shares in Shenzhen Lianda to Pak Tat in 2002.

(8) In 2002, the re-invoicing operation was moved to Macau and conducted through Yuen Hing.

(9) Since 2004, the relationship between Ken and the Father turned sour.

(10) It was upon Ken’s request that the Father, as his trustee of 50% interest in Pak Tat, caused Pak Tat to issue 50 shares to Ken in 2006 to reflect their 50/50 interest.

(11) In 2006, Richard decided to leave the group to pursue his own business interest.  Richard was also concerned about potential personal liability for severance payment for the workers in case of closure of the Shenzhen manufacturing company.

(12) Richard formally resigned from the board of Luen Tat in December 2007, when a resolution was also passed to alter the articles of association so as to allow Ken to be the sole director.

(13) In June 2008, Ken decided to dismiss Seline to maintain staff morale, after she had interfered with management and sought to undermine Ken’s leadership.

(14) During the meeting on 31 October 2008 convened by Ken, it was resolved that :

(i) Ken was the beneficial owner of 51% in Luen Tat and 50% in Pak Tat;

(ii) Ken would be solely responsible for running Luen Tat and Shenzhen Lianda;

(iii) all the income from the group belonged to Ken;

(iv) Seline would leave the group in January 2009; and

(v) the Father would enjoy the existing privileges.

(15) In response to the draft minutes of the meeting on 31 October 2008 sent by Lai, the Father sent his proposal to Lai regarding Seline’s profits share.  Upon Lai relaying to Ken what he learned from Richard about the Father’s concern about Seline being a divorcee, Ken agreed to retain Seline as a contractor.

(16) In December 2008, Ken cancelled the Father’s status as authorised bank signatory of Luen Tat.

(17) During their conversation in the same month, the Father admitted that he and Richard had received their final profits sharing, and that Ken would since be entitled to all the money of the group. The conversation was tape-recorded by Ken.  During the subsequent meetings between Mazars and the Father, the Father again confirmed Ken’s entitlement.

(18) The total sum of HK$28 million paid by Luen Tat in settlement of Yuen Hing’s invoices, pursuant to the re‑invoicing, that was transferred into Ken’s personal account from Luen Tat in 2009 represented partial distribution of his profits share entitlement.

(19) The Father had been requesting for profits share, and this was repeated in early 2009 through the Mother to Ken.  The Father requested 30% whereas Ken counter proposed 10% plus pocket money of HK$100,000 per month and living expenses.

(20) When Ken, through Kitty So, asked the Father to sign a draft resolution in line with what was agreed during the meeting on 31 October 2008, the Father indeed left a note requesting Ken to maintain the status quo and to give the Father 10% profits share.

(21) In June 2009, Ken dismissed Seline.

(22) In the same month, the confrontation at the office of Luen Tat took place.  The Father and Seline were stopped from sending by fax the company’s records to an unknown destination.  In the heat of the moment, Ken as a reflex pushed Seline aside.  The Father slapped Ken and threatened to stab him to death.

(23) After the confrontation, Ken moved out of the family residence.

10)  The Decision

2.30The Judge gave judgment in favour of the Father and made declarations that :

‘ 1. Each of the “5% non-voting deferred shares” and “new ordinary shares” in Luen Tat (and/or each of the shares in Luen Tat) is held by Ken and Joseph on trust for and on behalf of the Father.

2. Ken holds the 50 shares in Pak Tat on trust for and on behalf of the Father.’

2.31The Judge further ordered Ken and Joseph to return the shares in Luen Tat to the Father and Ken to return the shares in Pak Tat to the Father. 

2.32The Judge also dismissed Ken’s counterclaim.  By his counterclaim, Ken sought a declaration that the old shares and new shares in Luen Tat beneficially owned by him and also the 50 shares held by him in Pak Tat is beneficially held by him. 

2.33Before the Judge there was an issue concerning the profits from the business which is no longer pursued by Ken.  But it has an important bearing on the overall assessment of the case.  The Judge summarised the position as follows :

‘ 33. When Ken started to work for the Father, he received 10% of the business profits distributed. This remained the case, notwithstanding the assignment of all the shareholdings in Luen Tat to Ken and his wife in 1986. This lasted until 1988.

34. For the period between 1988 and 1992, the Father and Ken received 50% each of the profits distributed.

35. Richard joined and worked for the family business in 1992.  Of the profits distributed, Richard was given 25% while the Father and Ken received 37.5% each.  This was the ratio, notwithstanding the fact that all the shares in Luen Tat were held by Ken and Richard in the 51:49 ratio.

36. The distribution of profits changed in 1994, when Seline started to receive 10% of profits distributed before the Father, Ken and Richard shared the remaining 90% in their respective percentage ratios mentioned above.  In other words, the Father and Ken received 33.75% each while Richard received 22.5%.

37. In 2002, the Father decided not to take his percentage share of the profits.

38. Profits were last distributed in 2006.

39. The dispute essentially is whether the distribution of the profits was a matter of the Father’s sole discretion or a matter of legal entitlement pursuant to specific agreements.’

2.34The Judge found in favour of the Father that the distribution of profits was a matter of the Father’s sole discretion and not a matter of legal entitlement of the parties pursuant to any specific agreement. 

III.  Grounds of appeal

3.1Although Ken lodged an appeal against the judgment on the Father’s claim and his counterclaim, shortly before the hearing of this appeal, Ken amended his notice of appeal to abandon his appeal on counterclaim.  A consent summons dismissing the counterclaim was presented and made an order of the Court.  The Court now deals with the appeal against the judgment in favour of the Father.

1)  Luen Tat

3.2In respect of Luen Tat the theme of Ken’s appeal is that the Judge misunderstood the 1995 restructuring of Luen Tat. He mistakenly thought that the New Shares were held by the nominees of Ken when, in fact, a discretionary trust was set up in which Ken had no beneficial interest and accordingly there could not be a trust in favour of the Father since he never had any proprietary interest in the 51 New Shares.  The error committed by the Judge in respect of the 1995 restructuring also affected his finding of the 1993 transfer of shares by Ken to Richard.  In 1993, Ken transferred 49% of the Luen Tat shares to Richard at the Father’s request.  Ken’s case was that the Father gifted the shares to Ken and Richard while the Father’s case was that the shares were to be held by Ken and Richard on trust for him.  The Judge had wrongly accepted the Father’s case. 

2)  Pak Tat

3.3In respect of Pak Tat, Ken complained that the Judge was in error in holding that Pak Tat, which was the owner of the shares in Shenzhen Lianda, was beneficially as well as legally owned by the Father. In respect to the winding up proceedings for Pak Tat before Harris J, the Father asserted that he personally contributed HK$53 million as the registered capital for the establishment of Shenzhen Lianda.  The Judge wrongly adopted Harris J’s judgment when at the hearing below, the evidence showed that the money came from Luen Tat rather than from the Father.  Further, the evidence also showed that the money used for the establishment of Pak Tat came from another person called Wong Shun Chiu (aka Wong Fai).  Further, in respect of the 2006 allotment of 50 New Shares to Ken, the Judge erred in holding that Ken held the shares for the Father when the Judge failed to identify any conversation or other agreement in 2006 which evidenced the creation of the trust.

3)  Other palpable errors

3.4The third ground of appeal is that in view of these errors and other palpable errors, the judge’s finding on credibility was vitiated.  This requires a retrial.  Apart from the errors concerning the Luen Tat shares and the Pak Tat shares, it was contended that the Judge had also erred about the discussion of the 31 October 2008 meeting.  The errors are particularly significant when the judgment was only given 16 months after the end of the trial and where the Judge had to assess events that began as early as in 1993.  

IV.  Overview

1) Finding on credibility

4.1In deciding in favour of the Father and against Ken, the Judge was making a finding of fact by reference to the credibility of the party’s case.  The Judge held that :

‘ 216. It comes to where a view could be formed as to which side’s version was true. I do so, after considering the extensive analysis of the evidence and submissions by counsel....’

2)  Finding of the Father’s case

4.2In respect of the Father, the Judge held that :

‘ 118. ....., I am impressed that the Father was indeed the kind of old-fashioned businessman who commanded. The Father did not hide that. In denying the alleged 50/50 share of Luen Tat’s profits and thus the alleged 50/50 share of investment in the Shenzhen project between him and Ken, the Father literally said that he was both the boss and the father; and as the head of the family, he had the right to do things and nobody ever went against his decision. ….’ (emphasis added)

4.3The Judge found that the Father continued with an active involvement in the business even after 1992/1993.  The control exercised by the Father over the family business is supported by the Judge’s finding on the distribution of the group’s profits.  The Judge held that it is obvious that the distribution of the group’s profits had no correlation with the shareholdings on record as one may expect in the normal corporate practice of declaration and payment of dividends.

4.4That the Judge was impressed by the evidence of the Father is particularly significant when it is borne in mind that when the Father gave evidence in March 2014, he was already 81 years of age and he was subject to intense cross-examination by Ken’s counsel. 

4.5The Judge was also impressed by the Father’s keeping of the ledger.  At paragraph 153 of the judgment, the Judge held that the ledgers contained detailed record of the ‘ins’ and ‘outs’ of the business, condescending on the smallest items such as purchase of raw materials and machinery, the very precise calculations, the balancing and comparison between his own notions of current assets and liabilities‘比’, the distribution of monies and the tracking of the drawings and completion of the distributions‘分齊’, all the way to the end of 2008.  The Judge held that :

‘ 153. .....These were real and intensive labour over the details of business.’

3)  Finding of Ken’s case

4.6In relation to Ken, the Judge found that he had made significant changes to his pleaded case in respect of the three important areas of the Luen Tat shares, Pak Tat shares and the distribution of profits.  The Judge described this change as ‘sea change’.  Ken attributed the change to his former legal team misunderstanding his case.  This was described by the Judge as incredible.  All this has a bearing on the issue of credibility.

(1) Luen Tat

4.7In respect of the Luen Tat shares, the Judge pointed to the following change of case by Ken.

‘ 80. Ken used to admit by pleading that the shares of Luen Tat transferred to him and his wife in 1986 were held on behalf of the Father (until 1992/1993). The admission was however removed by subsequent amendment to his pleading. Ken attributed that as a mistake on the part of his former legal representatives. His current pleaded case is that first, there was no properly created trust of the shares as alleged by the Father, and second, the purpose of the trust alleged by the Father was illegitimate.’ (emphasis added)

4.8The Judge further stated at paragraph 84 that, whilst Ken’s admission by pleading was removed by subsequent amendment, his original case that he and his wife held the shares in Luen Tat in 1986 for the Father, remained his evidence according to his statement.

(2) Pak Tat

4.9Again, in respect of Pak Tat, Ken’s case had undergone substantial changes.  The Judge pointed out at paragraph 134 of the judgment that Ken’s then pleaded case in 2009 was that the Father gave him as gift 100% of Pak Tat and 50% of which had since 2006 been held by the Father on trust for him.  The Judge observed that had that been true, Ken would have effectively acknowledged the Father’s 100% ownership of Pak Tat until 2006, or else the Father would not have been in a position to make the alleged gift then.  It was only after amendment of his pleading that Ken changed to asserting that he and the Father co-invested in and at all times owned Shenzhen Lianda in a 50:50 ratio since its establishment.

4.10The Judge further noted another change of case on the part of Ken :

‘ 139. As mentioned, Ken commenced HCA 1890/2012 seeking to overturn Harris J’s judgment in HCCW 236/2011. According to the statement of claim filed in that action in October 2012, Ken contended that when the Father caused the interest in Shenzhen Lianda under PTTC to be transferred to Pak Tat in September 2002, the Father remained the sole shareholder but allegedly continued to hold half of the shareholding in Pak Tat on trust for him. Such contention was dropped and replaced by amendment a year later. It became that it was Ken who orally requested the Father to transfer the shareholding in Shenzhen Lianda from PTTC to a holding company so that their respective stakes in Shenzhen Lianda could be reflected if required. Only that unbeknownst to him, the Father caused PTTC and Pak Tat to enter into a share transfer agreement whereby PTTC sold and Pak Tat purchased 100% shareholding in Shenzhen Lianda for HK$53,000,000. Ken did not admit the share transfer agreement or the sale, and averred that between 2002 and 2006, his 50% stake in Shenzhen Lianda remained held on trust for him.’

(3) Distribution of profits

4.11Ken again changed his case on the distribution of profits.  What Ken originally pleaded was that the Father simply ceased declaring or distributing dividends out of the group since about July 2006.  It was only in 2006 (or early 2007) that the Father gave all the moneys of Luen Tat, Yuen Hing and Shenzhen Lianda to him.  This account was retracted in the first amendment exercise some nine months later, with the emergence of the new case based on the specific agreements on profit sharing.

V. Luen Tat shares

1)  The Judge’s finding

5.1The following are the Judge’s findings:

(1) Before the 1995 restructuring, the Father was the beneficial owner of 100% of the Luen Tat shares, 51% held by Ken and 49% held by Richard as the Father’s trustees.  There was no gift in1992/1993 as Ken contended.

(2) The 1995 restructuring was merely a device to save tax incidental to emigration.

(3) Ken and Richard proceeded with the 1995 restructuring with the Father’s approval when the Father expressly stated that no matter how the shareholding was restructured, the shares remained his.  This was the Father’s express intention when giving the approval.

(4) The 100 new voting Luen Tat shares were allotted with the insignificant payment of HK$100, while the old shares became practically valueless as non-voting deferred shares.

(5) Joesh and Full Moon were holding the new Luen Tat shares for Ken and Richard as their respective nominees.

(6) Ken and Richard in restructuring the Luen Tat shares were doing so as trustees for the Father.

2)  Ken’s arguments

5.2Mr Hollander and Mr M C Law (both of whom did not appear below) for Ken referred to the undisputed facts relating to the 1995 restructuring :

(1) Prior to the restructuring, Ken and Richard respectively held 7,650 (i.e. 51%) and 7,350 (i.e. 49%) shares in Luen Tat.

(2) On 31 March 1995, Luen Tat increased its nominal capital from HK$2 million to $2.1 million.  The new $100,000 was divided into 1,000 ordinary shares of $100 each.  Ken and Richard signed a members’ written resolution of Luen Tat resolving that (a) 49 New Shares be allotted to BNP Jersey Trust Corpn and (b) 51 New Shares be allotted to BNP Jersey Nominee Co Ltd.  The 15,000 old shares became 5% deferred non-voting shares.

(3) On the same day, 49 New Shares were allotted to BNP Jersey Trust Corpn and 51 New Shares were allotted to BNP Jersey Nominee Co Ltd.

(4) On 11 May 1995, 49 New Shares were transferred from BNP Jersey Trust Corp to Full Moon (Richard’s discretionary trust).

(5) On 6 June 1995, 51 New Shares were transferred from BNP Jersey Nominee Co Ltd (‘BNP Trust Corp’) to Joesh.

(6) The Joesh trust was formed on 29 March 1995.  Ken was the sole settlor of this discretionary trust.  BNP Trust Corp acted as trustee.

5.3Mr Hollander argued that the old shares continued in existence, albeit as non‑voting shares, and there was no change in their ownership after the 1995 reorganisation.  The Father never had any proprietary interest in the New Shares.  The 51 New Shares were allotted to a discretionary trust settled by Ken and the whole arrangement was advised and checked by lawyers.  Accordingly, he submitted that it follows from the above that the New Shares could not have been held on trust for the Father.  

3)  Principles

5.4The relevant principles of law, which are not disputed, are as follows:

(1) The burden is on the Father to show that, in the absence of legal ownership, he has beneficial interest: Stack v. Dowden [2007] 2 AC 432 paragraphs 4, 55, Lewin on Trusts (19^th ed), paragraphs 9-062;

(2) No express trust can be validly declared in respect of shares in which the declarant has no proprietary interest: Dye v. Dye & Another (1884) 13 QBD 147, 157;

(3) For the creation of an express trust, the transfer of the property to the trustee is an indispensable element: Lewin paragraphs 3-021, 3-025.

(4) A ‘beneficiary’ of a discretionary trust only has a mere expectation or hope but no beneficial interest in the subject matter of the trust.  The Court of Final Appeal in KEWS v NCHC (2013) 16 HKCFAR 1, [49] and in Kan Lai Kwan v Poon Lok To Otto (2014) 17 HKCFAR 414 at [28] and [29] affirmed that a discretionary beneficiary has no proprietary interest in the fund.  A beneficiary is an eligible object of benefaction under the discretionary power conferred upon the trustee but it is incorrect to use the term ‘beneficiaries’ insofar as it suggested the existence of any vested beneficial interest in the assets held on trust.  See also Lewin paragraph 1–061.

4)  My view

5.5I agree with the submission of Mr Wong Yan Lung SC (together with Mr William Wong SC and Mr Alan Kwong) for the Father that the argument on the lack of proprietary interest by Ken is not now open to him because the nature of his interest under the trust in the 1995 restructuring was not raised as an issue in the Court below.  While Ken in his pleadings and submissions had referred to the trust, the term ‘discretionary trust’ was not mentioned.  It was never his case that he, in fact, had no beneficial interest in the trust because it was a discretionary trust. 

5.6Although Ken in his witness statement had referred to the Joesh trust as discretionary in nature, the true nature of the trust was never discussed.  On the contrary, Ken said that in exercising their discretionary powers, the trustees answered to him and only to him for guidance and considered only his request.  In my view, this new point does not affect the primary finding by the Judge. 

5.7Further, the trust documents were not produced.  The trustee was not a party to the proceedings.  Had this point been properly raised there ought to be evidence on the terms of the trust instrument which was lacking before the Court below and on appeal.  In fact, the Court of Final Appeal in Kan Lai Kwan went into the terms of the trust instrument in discussing the nature of the discretionary trust in that case.

5.8It is true that counsel for Ken in the Court below had referred to the new class of shares under the trust but the argument below was plainly not centred on the lack of proprietary interest of Ken in the trust.  The Court of Final Appeal judgment in Kan Lai Kwan was delivered on 17 July 2014.  Former counsel for Ken at the trial was also one of the counsel in Kan Lai Kwan.  He had chosen not to rely on the Court of Final Appeal judgment for the purpose of establishing Ken’s lack of proprietary interest in the New Shares.  The approach of Ken below highlighted the unsatisfactory nature of this topic being raised for the first time in this Court. 

5.9Further, as Mr Wong submitted, in Kan Lai Kwan Ribeiro PJ at [36] pointed out that a purported discretionary trust may be considered as a sham if the settlor was able to control the purported trustee, and a purported discretionary trust may not be validly constituted if the settlor retains a power to revoke it (citing Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank & Trust Co (Cayman) Ltd [2012] 1 WLR 1721 (PC)). 

5.10It is not necessary to decide conclusively that the trust here was a sham but the evidence certainly did not point towards the existence of a true discretionary trust.  It was Ken’s own case, as appeared in his own witness statement, that the Luen Tat shares after the restructuring belonged to him and were held by Joesh as his nominee and that was his position at the October 2008 meeting when he asserted that the shares in the Luen Tat belonged to him.  What is more telling is that on 25 May 2009 at Ken’s request, the 51 New Shares were transferred to his son Joseph and Ken expressly asserted Joseph merely held the shares for him as a nominee.  On 24 July 2009 the Joesh trust was terminated and replaced by new Joesh trust.  Eventually, on 16 July 2010 the trustees transferred the shares to Ken.  Furthermore, Richard’s return of his 49 new Luen Tat shares to the Father with nil consideration, despite the trust arrangement involving the Full Moon trust, indicated that the restructuring did not change the true nature of Ken’s new Luen Tat shares.

5.11I also disagree that this point has any bearing on the Judge’s finding concerning the 1992/1993 arrangement.  Ken’s claim for the 51% Luen Tat shares was based on a gift to him by the Father in 1993, together with a gift to Richard when Ken transferred 49% of the Luen Tat shares to Richard at the Father’s request.  This happened because according to Ken, the Father decided to retire due to deteriorating health and to distribute his assets to his children.

5.12The Father’s case was that Ken and Richard were holding the shares on trust for him.  The Father’s explanation that he wished shares to be held by his two sons was that on his death the shares would already be in the names of the two sons to whom he wanted to gift the shares and thus there would be no need to pay estate duty. 

5.13Mr Hollander submitted that on both parties’ case, the change in the arrangements in 1993 arose because the Father was focusing on succession of the business given his old age thus a detailed analysis of the Father’s continued role in management was peripheral and was no substitute for an analysis of the inferences which did or did not support one version of events and giving substantive reasons for preferring one version to another.

5.14I disagree with Mr Hollander’s submission that the Judge had wrongly referred to the management aspect other than the ownership of the shares in resolving the conflict between Ken and the Father.  In order to meet Ken’s case, the Father called evidence to show that he was still actively running the business of Luen Tat after 1993.  Retirement was far from his mind.  The Father’s management of the company by, for example, keeping detailed financial records in his ledgers and also by his own decision on how profits were to be distributed clearly pointed towards the Father being in control of Luen Tat notwithstanding that Ken and Richard were holding the respective 51/49 shares of Luen Tat as registered owners. The Judge’s finding on the 1992/1993 arrangement is a finding of fact which he is entitled to make and has correctly made.

VI. Pak Tat shares

1)  Ken’s case based on 50% interest in Luen Tat

6.1Ken’s case on his interest in Pak Tat can be summarised as follows.  Between 1986 and 1988 he received a 10% share of profit from Luen Tat.  Between 1988 and 1992 he received a 50% share of profit.  He claimed that the Father had in 1987 promised to give him a 50% share of profit in Luen Tat.  Then, in order to build the Shenzhen factory, Ken said that he orally agreed with his father in early 1992 to apply their respective shares (50/50) of Luen Tat’s retained earnings into the project.  He claimed that since they would each be providing 50% of the funding, they agreed that they would each own 50% equity in the Shenzhen factory, which was to be held in the name of Shenzhen Lianda.

6.2In 2002, Ken said that he and the Father decided to hold their interest in Shenzhen Lianda and in the factory through a private company rather than in the Father’s sole proprietorship of PTTC.  As a result, Pak Tat was acquired.  

6.3Ken said that the relationship with the Father turned sour in 2004.  By 2006 the Father was 76 years old and Ken requested the Father to transfer his interest in Shenzhen Lianda back to him.  As a result, 50 New Shares in Shenzhen Lianda were allotted to Ken.  This was a reflection of his 50% beneficial ownership of Shenzhen Lianda and the Shenzhen factory since 1992.

6.4Ken’s case on his 50% interest in Pak Tat was built on the premise that he was entitled to a 50% share of the Luen Tat profits.  The Judge had clearly rejected Ken’s assertion of his entitlement to a 50% share of profits in Luen Tat.  The Judge had also noted Ken’s change of position on the question of sharing of profits where initially he had never pleaded there was any agreement on sharing.  In relation to the 50% share of profits in Luen Tat, the Judge held that :

‘ 154. The pleaded case of Ken was that it was the Father who decided to share future profits with him on 50:50 basis. No profit sharing agreement was pleaded. In court, Ken seemed to suggest (for the first time) that the Father was bound by a promise to let him have 50% of the profits and thus Method 1. The Father denied that.As discussed, the Father was still in control of the group at least during this period. Even on Ken’s own case, the Father decided to retire only in 1992. I find it hard to believe that just when the Father decided to give Ken 10% profit as bonus in 1986, he would change his mind to commit to give Ken half of the profits after Ken had served the family business for just 2 years.’

6.5The Judge held that the profits were distributed at the Father’s discretion and not by agreement between the parties.  This finding effectively removed the basis upon which Ken asserted his 50% interest in Pak Tat.  The Judge held that :

‘ 137. That Ken was allegedly the beneficial owner of 50% of PTTC since 1992 as a result of his alleged co‑investment was in fact not manifested. That was so, even when opportunity to manifest that arose when Pak Tat was incorporated to take over the sole proprietorship of PTTC in 2002. The Father had remained the sole shareholder of Pak Tat until 2006. Even after 2006, the Father remained on record 50% shareholder of Pak Tat. ......’

2)  Arguments on source of fund

6.6Mr Hollander now raises a point that the Judge was wrong to rely on the findings of Harris J in HCCW 236/2011 in that he failed to appreciate that the evidence adduced for the Father before Harris J was different from and inconsistent with that before the Judge, in that there was additional evidence from the Father at the trial below indicating that, contrary to the Father’s evidence in HCCW 236/2011, the HK$53 million was paid by Luen Tat and by Mr Wong Shun Chiu, and not by the Father.

6.7I should point out that, although in paragraph 136 of the judgment the Judge said that his view aligned with the observation of Harris J, what actually happened was that the Judge had considered the issue of the Pak Tat shares afresh.  He held :

‘ 133. As discussed below, I say that even putting aside the res judicata argument and considering the contentions and evidence as now made, all one has about Ken’s case in respect of his alleged beneficial interest in Pak Tat is skepticism.’

6.8He further held :

‘ 135. Ken referred to the capital verification reports and the Father’s ledgers said to be in support of their co-investment through Luen Tat the total sums of RMB 4,800,668 and HK$62,998,913 respectively in Shenzhen Lianda. Yet neither document actually mentioned anything in that regard with reference to Ken’s involvement. The ledgers did not really tell how the money was injected from Luen Tat to the Mainland.

136. In any event, it does not assist Ken by asserting that the investment was made by Luen Tat. As discussed, the shares in Luen Tat had been held by Ken and his wife until 1992, and by Ken and Richard since 1992.  At no time was Ken the beneficial owner of the shares in Luen Tat, and there was no factual basis for Ken to assert any entitlement to share the profits of Luen Tat by reference to beneficial ownership of the company.  Unless Ken was somehow otherwise entitled to share the profits of Luen Tat, that Luen Tat made the investment into establishing the Shenzhen base did not in real sense differ from the Father’s investment, albeit sourced from Luen Tat.  It should be noted that, and it was un-contradicted evidence of the Father, that in 1990s and before any re-invoicing operation was put in place, all the moneys of Luen Tat were kept in the personal account of the Father, and he would take the money to the Mainland for the Shenzhen project.  This also aligns with the observation of Harris J in his judgment cited above.’  (emphasis added)

6.9The Judge’s view really addressed Ken’s argument on the money coming from Luen Tat and not from the Father personally. 

6.10Mr Hollander submitted that the Father had acknowledged receipt of monies from Wong Shun Chiu in the establishment of Pak Tat by referring to the Father’s handwritten notes dated 16 January 1994, 6 January 1995 and 24 May 2000 which acknowledged receipt of sums from Mr Wong as part of the investment in Pak Tat and this was verified by the Father’s ledgers on 30 June 1992 and 31 August 1994.

6.11As pointed out by Mr Wong (who was also the counsel below for the Father), the Father was never cross‑examined on those documents or on his dealings with Mr Wong Shun Chiu.  The documents were produced by Ken, not by the Father.  In his witness statement at paragraph 36, the Father referred to financial dealings with Mr Wong Shun Chiu with regard to operation of the Polishing Department which in fact operated independently of Shenzhen Lianda. 

6.12Further, the assertion that Mr Wong Shun Chiu had contributed to the capital is contrary to Ken’s own witness statement in which he never alleged Mr Wong Shun Chiu had paid any money towards the equity of Shenzhen Lianda.  Instead, his case was built on the basis that all the investments towards Shenzhen Lianda (adding up to the paid up capital of HK$53 million) was funded by him and the Father but not Mr Wong Shun Chiu.  His present argument that part of the money for setting up the Shenzhen operation came from Mr Wong Shun Chiu is another hopeless attempt to salvage a bad situation. 

6.13Although the Father had filed a respondent’s notice contending that, by reason of issues estoppel and res judicata arising from Harris J’s judgment, it was not open to Ken to argue that he was the absolute beneficial owner of the 50% shareholding in Pak Tat, Mr Wong did not pursue this point on appeal. 

3)  The 2006 allotment

6.14The Father explained the circumstances in which he decided to transfer 50% shareholdings in Pak Tat to Ken.  As he could not personally attend Shenzhen Lianda as often as before his injury in 2005, he asked Ken to attend more often.  In order to elevate Ken’s apparent status in dealing with affairs of Shenzhen Lianda, the shares were allotted to him but to be held on trust for the Father.

6.15Two points were raised by Mr Hollander regarding the Father’s case.  First, the Father had under cross-examination agreed with counsel that Pak Tat belongs to the Father and Ken in equal 50/50 shares :

‘ Q. And I suggest to you, that Hong Kong Pak Tat which has held Shenzhen Lianda since 2002 belongs to you and Ken in equal 50/50 shares?

A. Yes.’

6.16In my view this answer does not assist Ken because under re‑examination the Father had clearly maintained the position that he was the owner of the 50% shares in Pak Tat allotted to Ken in 2006.  He repeated his explanation that the allotment is to enhance Ken’s authority so that people in the Mainland would treat Ken as the boss. 

6.17Mr Hollander argued that the 2006 allotment of 99 New Shares by the Father of which 50 were allotted to Ken and 49 to the Father is difficult to reconcile with a contention that Ken’s shares were allotted in order to be held on trust for the Father.  He asked rhetorically why not keep all 99 shares to himself.

6.18In my view, the Judge was clearly entitled to make a finding by accepting the Father’s explanation as to why the 50 shares was allotted to Ken. 

6.19Mr Hollander then argued that the burden was on the Father to prove that the shares held by Ken after the 2006 allotment were held on trust.  In order to reach the conclusion that Ken held his 50 shares on trust, it was necessary for the Judge to identify a conversation or other agreement in 2006 evidencing the creation of the trust.  In fact, although the Father insisted in his witness statements that the shares were allotted to Ken to be held on trust for him, he did not identify any conversation or arrangement.  Mr Hollander argued that although the Judge had referred to the Father’s witness statements, he entirely failed to engage with why or how it was that the trust was created, whether during a conversation, by agreement or otherwise.  The Judge failed to find an agreement between the Father and Ken to the effect that the shares were held on trust.

6.20I agree with the submission of Mr Wong that as the Father was never challenged or cross-examined on the paragraphs in the witness statements dealing with the circumstances of the trust agreement in 2006, it is unfair now forensically to criticize the Father for not condescending on the details as to where and when the agreement was made.

6.21Further, the Judge had accepted the evidence of the Father who always maintained the view that he owned the business that he had set up and he had the right to do things and nobody ever went against his decisions.   This is the context in which the Judge came to the view that the 2006 allotment of 50 shares to Ken was held by Ken on trust for the Father.  I cannot see how this can be seriously contested. 

6.22Mr Wong also relied on resulting trust in respect of the 2006 Pak Tat allotment of shares.  In my view, it is not necessary to rely on resulting trust.  In any event, the Judge did not decide on resulting trust and the Father had not issued a respondent’s notice on resulting trust.  Accordingly, this matter cannot be raised now.

VII. Credibility

7.1The Judge gave a detailed and well analysed 80‑page judgment after a 21‑day trial.  The only criticism is that he gave judgment 16 months after the conclusion of the hearing.  Delay in giving judgment is, of course, not by itself a ground of appeal. While the Court has to examine the judgment with a high degree of scrutiny because of the delay, ultimately the test is still whether the Judge is plainly wrong or had committed palpable errors (which are the same thing) before an appellate court would overturn a finding of fact. 

7.2Apart from the errors that Mr Hollander said the Judge had committed in relation to the Luen Tat shares and the Pak Tat shares, he also referred to the Judge’s finding of the 31 October 2008 meeting. The evidence is that Lai took notes of the discussion.  After the discussion, Lai read out his notes and after the meeting he prepared the draft minutes in Chinese.  The Chinese minutes were circulated to Seline and Richard.  Shortly thereafter, on 14 November 2008 Seline did not provide an e-mail response but in Richard’s e-mail dated 1 December 2008 there was never any complaint at all as to the accuracy of the draft minutes.

7.3Mr Hollander submitted that this was the only account before the Judge as to what occurred at the meeting backed by contemporaneous documentary evidence.  It is therefore to be expected that in resolving the conflicts of evidence as to what occurred, the Judge would consider whether he accepted Lai’s evidence, and if not, why not.  From the judgment, the Judge did not expressly state whether he accepted or rejected Lai’s evidence.  The Judge recorded the Father’s challenge on Lai’s independence.  The Judge did not indicate if he accepted or rejected the submissions and simply said that he ‘can see why’.  It seems that he rejected Lai’s evidence.  The Judge gave the following reasons for the challenge to Lai’s independence :

‘ 192 ... The evidence shows that his company was engaged by Ken on behalf of Luen Tat for the provision of computer repairing services. Just after this family meeting, Lai or his company received almost HK$1 million from Luen Tat between April 2009 and Jan 2010, and according to the Father’s side, for no apparent reason...’

7.4Mr Hollander submitted that these reasons are wrong because it was wrong to say that Lai’s company was engaged by Ken on behalf of Luen Tat for the provision of computer repairing service when it was Seline who approached Lai for the computer service.  Second, it is not clear how the Judge came to the view that Lai received from Luen Tat almost $1 million between April 2009 and January 2010.  Further, it was wrong for the Judge to say that it was not disclosed that Lai had become one of the authorised signatories for Luen Tat after the cancellation of that of the Father.  The evidence showed that Lai could only sign with two other authorised signatories.  Ken had disclosed in his list of documents a customer account form showing Lai had become a signatory.

7.5In my view, these are peripheral matters which do not undermine the soundness of the finding, because what is more crucial is that the Judge had found that the notes of draft minutes taken by Lai allegedly contemporaneously with the meeting were inconsistent with the draft resolution and were totally unreliable.  This is the Judge’s finding on this aspect of the case :

‘ 188. According to Ken, the Father agreed during the meeting that all the profits of the group belonged to him. The agreement was said to be recorded in the minutes of the meeting, which was prepared by Lai Yuk Wa. It read:

“所有股東確認，現在及日後聯達金屬錶帶有限公司及工廠一切收益（扣除一切支出）均屬於李樹忠先生所有，李樹忠先生有所有權運用及使用”

Essentially, it suggested that all shareholders confirmed all the present and future income (net of expenses) of Luen Tat and the Shenzhen factory belonged to Ken, and Ken had all rights to apply and use them.

189.  The Father, Seline and Richard denied the alleged agreement or resolution, and maintained their stance in court.  The fact was that they never signed the draft resolution, despite repeated requests from Ken.

190.  The above draft resolution was said to have followed from a handwritten draft minutes taken by Lai, which simply read:

“所有股東確認，聯達及工廠一切收益（扣除一切支出）均屬於李樹忠先生”

Essentially, it read that all the shareholders confirmed that all the income (after deducting expenses) of Luen Tat and the factory belong to Ken.

191. The notes allegedly taken by Lai contemporaneously during the meeting were referred to. There was in fact no reference to discussion amongst the family members on Ken’s entitlement to the group’s present or future profits.  The last bullet point of the notes suggested that the Father was still entitled to all the existing benefit and entitlement without any change.’

7.6As indicated by Lai’s own notes and draft minutes, the matters that were allegedly discussed were evolving.  The hand-written English notes made no mention of profits/moneys of the Group and yet this issue suddenly appeared as point (6) of the hand-written Chinese minutes.  Similarly, neither the hand-written English notes nor the hand-written Chinese notes made any mention of Shenzhen Lianda’s shareholding but Lai just added this matter in the typed-up Chinese minutes.

7.7In respect of the Father’s complaint of the non‑disclosure of Lai becoming one of the new signatories, this was said in the context of the non-disclosure by Ken or Lai in their witness statements or in their testimonies in Court. 

7.8The matter regarding who approached Lai to provide computer repairing service is really a peripheral matter.  As to the amount and period of payment, the Judge may have got them wrong.  But these matters have to be considered in the light of the overall assessment by the Judge of Ken’s case of all the other contentious issues in this case.   

7.9In my view, Ken simply has failed to show that there is any palpable error or that the judge had made findings that were plainly wrong which would vitiate the overall finding by the Judge and which would require a retrial.

VIII. Conclusion

8Accordingly, the appeal is dismissed.

IX. Costs

9There will be an order nisi that Ken is to pay the Father’s costs of the appeal together with certificate for two counsel.

Hon Yuen JA :

10I agree with Cheung JA’s judgment.

Hon Poon JA :

11.I agree.

Mr Wong Yan Lung SC, Mr William Wong SC and Mr Alan Kwong, instructed by D.S. Cheung & Co., for the plaintiff (by original action) and the 1^st and 3^rd defendants (by counterclaim)

Mr Charles Hollander and Mr M C Law, instructed by K & L Gates, for the 1^st and 2^nd defendants (by original action) and the plaintiff (by counterclaim)

Ms Frances Lok, instructed by Christine M. Koo & Ip, for the 4^th defendant (by counterclaim)