Wong Chi Ho Jimmy v. Wong Oi Lun, By Stephen Liu Yiu Keung, Koo Chi Sum and Andrew Koo Chi Ho, Her Guardians Ad Litem Wong Tai Wai David Jasper

HCMP 1672/2016

[2020] HKCFI 1073

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1672 OF 2016

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J U D G M E N T

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A. INTRODUCTION

1.By Originating Summons dated 29 June 2016, the plaintiff (“Jimmy”) seeks four relief against the 2^nd defendant (“David”) in relation to a written document in Chinese entitled “持久授權書” dated 10 December 2012 (“EPOA”) executed by the 1^st defendant (“WOL”).

2.On 25 August 2017, in HCMH 80/2015 (the mental health proceedings of WOL), this court appointed Mr Stephen Liu, Mr Sammy Koo and Mr Andrew Koo of Ernst & Young Transaction Limited as committee of WOL’s estate (“Committee”), and ordered that the EPOA be revoked pursuant to section 13(1)(e) of the Enduring Powers of Attorney Ordinance, Cap. 501 (“Ordinance”).

3.In the light of that development, it is unnecessary for Jimmy to pursue Relief (1), (2) and (3).  In the circumstances, only Relief (4) requires determination, namely, that David shall produce records/accounts of all assets belonging to WOL which David had dealt with under the EPOA, pursuant to section 11(1) of the Ordinance.

4.In short, Jimmy contends that this case cries out for an account by David of his dealings with WOL’s assets purportedly pursuant to the EPOA.

5.The Committee has indicated that it would welcome an outcome in these proceedings which brings possible financial benefits to WOL’s estate, and supports Jimmy’s application under Relief (4) of the Originating Summons.

6.David’s position can be summarised as follows: –

(1)     First, as a matter of law, Jimmy simply has no locus standi to seek an account in relation to WOL’s affairs under section 11(1) of the Ordinance. This is particularly so since there is a Committee appointed in respect of WOL’s estate.

(2)     Second, as a matter of discretion, David should not be ordered to render the account. 

B.      BACKGROUND

B1.    Family background

7.WOL, Jimmy and David are descendants of the late Wong Chung Ming (“Father”), who was head of the Tung Chun group of companies (“TC Group”), best-known for manufacturing soy sauce under the brand name “同珍”.

(1)     WOL was born in 1936 and is now 83 years old.  She is the daughter of Father and his first wife.

(2)     Jimmy and Monica were born to Father and his third wife.  Jimmy is WOL’s step-brother.

(3)     David is Father’s grandson; WOL’s and Jimmy’s nephew. David’s father is Eddie, who was born to Father and his second wife.

8.Before her admission to St. Teresa’s Hospital (“Hospital”) on 12 September 2015, WOL resided at 6^th Floor, No 3 & 3A, Sau Chuk Yuen Road (“SCY Building”, developed by Father) together with her grandnephew, Kobe Wong.  David and his mother Madam Chan Siu Ping also resided in the SCY Building but they lived on the 7^th Floor and the 4^th Floor respectively.

9.Jimmy and Monica are WOL’s closest relatives as her parents and Eddie have passed away, she has never married and has no issue of her own.

B2.    WOL’s income and assets

10.Father passed away on 10 December 2010.  Jimmy is the sole executor of Father’s estate (“Estate”) and probate was granted on 16 September 2011.  Under Father’s will, the residuary estate is to be divided between Jimmy (73.33%), Eddie (16.67%), David (5%), Monica (3.33%) and WOL (1.67%).

11.The 5 beneficiaries under Father’s will are shareholders in Wong Chung Ming Development Fund Company Limited (“WCMDF”), the holding company of the TC Group, to the following extent: Jimmy (75%), Eddie (16.67%), David (5%), Monica (1.7%) and WOL (1.63%).

12.From August 2009 until WOL’s admission to the Hospital in September 2015, Jimmy made monthly payments of $25,000 from his personal account to WOL’s account at Chong Hing Bank out of sibling love.  Further, from January 2010 to September 2015 the family companies made monthly payments of $6,930-8,100 to WOL’s account at Bank of China as salaries.  The total sum received by WOL during the aforesaid period was $2,150,636.

14.To the best of Jimmy’s knowledge, WOL holds the following assets: –

(1)     cash in her personal bank accounts with Bank of China and Chong Hing Bank respectively (totalling $720,431.30 as of August 2015);

(2)     securities at an account opened with Wocom Securities Limited (“Wocom”) (totalling $1,265,560 as of May 2015);

(3)     interests in a number of private companies; and

(4)     interest in Father’s Estate and WCMDF.

15.The total value of WOL’s estate is estimated to be over $40 million.

B3.    The legal proceedings purportedly commenced by WOL

16.Since September 2013, various legal proceedings were purportedly commenced by WOL together with David and Eddie against Jimmy (amongst others), including HCMP 2391/2013, HCMP 1779/2015 (transferred from HCCW 298/2013) and HCA 1560/2015 (collectively “Proceedings”).

17.It should be noted that:

(1)     In HCMP 1779/2015, David signed a Statement of Truth dated 24 February 2014 to verify the Points of Claim and also a Statement of Truth to verify the Points of Reply for and on behalf of himself, Eddie and purportedly WOL.

(2)     In HCA 1560/2015, David signed a Statement of Truth dated 9 July 2015 to verify the Statement of Claim for and on behalf of himself, Eddie and purportedly WOL.

B4.    Discovery of WOL’s mental incapacity by Jimmy and the appointment of the Committee

18.On 9 September 2015, Jimmy arranged for 2 medical practitioners (Dr Robyn Ho and Dr Henry Kwok) to examine WOL, following a series of disturbing events, including: –

(1)     WOL did not appear to know or understand that she was on the opposite side of Jimmy in HCMP 2391/2013;

(2)     at the family gathering on 25 December 2014, WOL was in a rough physical state, looking as if she had not bathed for a long time and smell of incontinence;

(3)     Jimmy’s assistant paid a visit to WOL’s flat shortly after the family gathering on 25 December 2014 and found that WOL’s flat was in a very derelict and poor state;

(4)     WOL’ absence from the CMC in HCMP 1779/2015 on 23 July 2015 despite order of the court to attend personally;

(5)     the maids of WOL reported that WOL was being maltreated: –

(a)     in August 2014 when one of the maids first started working for WOL there was excreta all over the place in WOL’s bathroom and bedroom;

(b)     WOL had to pay excessively to Madam Chan (David’s mother) for food and most of the time she was only given canned food, soup ingredients or vegetables as dinner and leftover food for breakfast and lunch;

(c)     WOL had to pay excessively to Madam Chan for repairing work of her flat;

(d)     David would go to WOL’s flat from time to time and took money from her. On one occasion David made WOL to give HK$500,000 to him.

19.The two doctors opined that WOL had been under mental incapacity for “at least 9 months” and “at least 9 months or one year” respectively, i.e. since at least January 2015 or September 2014.

20.On 19 October 2015, a joint medical examination of WOL was conducted by Dr CK Wong (instructed by David) and Dr Kwok and Professor Lieh Mak (instructed by Jimmy), and it was confirmed that WOL had been suffering from mental incapacity.

21.On 27 October 2015, Messrs CK Mok & Co (“CK Mok”) acting for David applied to register the EPOA at the High Court Registry.  It was registered on 28 October 2015.

22.On 25 August 2017, this court in HCMH 80/2015 appointed the Committee, and ordered that the EPOA be revoked pursuant to section 13(1)(e) of the Ordinance.

23.WOL has remained in the Hospital up to now.  She received and still needs inpatient treatments from time to time.  Jimmy has been paying the medical expenses of WOL to date, amounting to over $18 million.

B5.    The EPOA

24.Jimmy only knew of the EPOA in October 2015.

25.The EPOA was dated 10 December 2012, to take effect on the date of execution: Part A, §5, and purported to appoint David as WOL’s attorney.  It was prepared by CK Mok, who acted for David and purportedly WOL in the legal proceedings referred to above.

C.      THE LAW

C1.   The Statutory Regime

26.A power of attorney which satisfies the formal requirements under section 3 of the Ordinance is an enduring power for the purpose of the Ordinance.

27.Section 11(1)(a) of the Ordinance provides that the court, may on the application of an interested party, require the attorney under an EPOA to produce records and accounts and make an order for their auditing.

28.Section 12(1) of the Ordinance provides that the attorney owes fiduciary duty to the donor, and he has a duty:

(1)     to exercise his powers honestly and with due diligence: section 12(2)(a);

(2)     to keep proper accounts and records: section 12(2)(b);

(3)     not to enter into any transaction where a conflict of interest would arise with the donor: section 12(2)(c); and

(4)     not to mix the property of the donor with other property: section 12(2)(d).

C2.    Applicable Legal Principles

29.An attorney is a fiduciary of the donor.  It is well settled that one of the most important duties of a fiduciary is to account for his dealing with the donor’s assets: Snell’s Equity (34^th edn, 2019), §29-024; Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 [167].  This duty is reinforced by section 12 of the Ordinance.

30.As submitted by Jimmy, the court should order an enduring attorney to produce accounts and records when it is satisfied that there is prima facie evidence of wrongdoing by the attorney, or matters that call for investigation.  The court is not required to make definite factual findings on affidavit before ordering an account.

31.First, under the regime of lasting power of attorney in England (which is comparable to the EPOA regime in Hong Kong): –

(1)     The attorney may be asked to produce accounts to the Public Guardian or the court.  The Public Guardian may require, and the court may order, the production of accounts where it appears that there are circumstances suggesting that the donee has behaved in a way that contravenes his authority or is not acting in the best interest of the donor, or where it is considered that there are matters that require investigation.

(2)     In appropriate cases, the court may consider ordering that the accounts be disclosed to the family members who have expressed concern, as they are often in a better position to identify false entries.

See: Heywood & Massey on Court of Protection Practice, §10-017.

32.Second, Cretney and Lush on Lasting and Enduring Powers of Attorney (8^th edn, 2017) at §19.11 suggests that the court would call for accounts if it has reasons to believe that there was something wrong with the attorneyship.  The court would not call for accounts as a matter of routine as it would be a burden to the attorney and an expensive charge on the donor's estate.

33.Third, in Kwok Chi Yin v Kwok Yau Ki Jesse [2019] HKCFI 428, in dealing with the question of costs, B Chu J was satisfied that the attorney should produce accounts and records when there was prima facie evidence of breaches of fiduciary duties: §§16-17.

D.     WHETHER JIMMY HAS LOCUS STANDI

34.David submits that Jimmy does not have any locus standi to seek an account relating to WOL’s affairs.

35.Section 11(1) of the Ordinance provides that: –

“(1) The court may on the application of an interested party—

(a) require the attorney under an enduring power to produce records and accounts and make an order for their auditing;

(b) revoke an enduring power or vary an enduring power; or

(c)  if satisfied that the interests of the donor of an enduring power so require it, remove the attorney.”

36.The phrase “interested party” is not defined in the Ordinance.  David submits that in order to qualify as an “interested party”, the applicant must be a party to whom the defendant owes a duty to account.  Such obligation on the part of the donee owed to the applicant would confer an “interest” on the applicant to seek, inter alia, an order to account.  David relies on the Court of Appeal’s decision in Chen Cheryl Deanna v Chen Pak Yin Stella, HCMP 1890/2016 (unrep, 11/11/2016).  In that case, the plaintiffs, who were beneficiaries of the estate of the donor (who had then passed away), sought, inter alia, declaratory relief in relation to purported defects in an enduring power of attorney and accounting relief pursuant to section 11 of the Ordinance.  In holding that the plaintiffs did not have locus standi to commence the action, Lam VP made the following observation on the proper party to bring such proceedings (§§15-16): –

“15. Thus, even if the power of attorney is invalid, the proper person to pursue any claims on behalf of the estate is the administrator and the party to whom the Defendant needs to account for her conducts under the power of attorney is the administrator. This would include the claims in respect of the withdrawal of the cash value. The Plaintiffs, though named as beneficiaries in the policy, cannot by that fact alone, acquire any proprietary interest in the properties of the father. Based on the materials placed before us, we are not satisfied that they have any locus to advance claims on behalf of the father or his estate regarding the insurance proceeds.

16. Whether the Defendant is willing to account to the administrator in respect of acts she did under the power of attorney and whether the administrator found such account satisfactory are matters between the Defendant and the administrator. As a beneficiary to the estate of the father, the administrator may owe a duty to the 1^st Plaintiff in properly administering the estate. But such duty does not give the 1^st Plaintiff any legal right to pursue the present action against the Defendant.” (emphasis supplied)

37.However, I agree with Jimmy that the Court of Appeal’s decision in Chen Cheryl Deanna, Ibid, is plainly distinguishable.

(1)     The plaintiffs in that case sought leave to amend to add claims for damages in relation to the defendant’s handling of insurance proceeds belonging to the father under an EPOA. It is notable that the father’s estate or the administrator were not parties to the action.

(2)     The Court of Appeal held that the damages claims were misconceived, as the cause of action belonged to the father’s estate and the administrator should be the proper party to pursue the claims.

(3)     Importantly, the Court of Appeal did not discuss whether the plaintiffs were “interested parties” under section 11 of the Ordinance.  No question under the Ordinance arose in that decision.

(4)     In contrast, in the present case, the court is asked to exercise its power under section 11 to order the attorney to produce accounts/records on the application of an interested party. 

(5)     Moreover, unlike the Chen case, all the necessary parties are before the court and indeed the Committee supports an order for David to produce accounts/records.

38.In the premises, David’s contention that Jimmy has no locus standi to seek an account is misconceived.  The objection is, in any case, nothing but a technical point given that the Committee is seeking the same relief against David.  Further still, as pointed out by leading counsel for Jimmy, section 11 of the Ordinance does not say that the accounts have to be ordered to be produced to the plaintiff.  In the context of the present case, the accounts can be ordered to be given to the Committee or the court.

E.     CLEAR CASE FOR ACCOUNT

39.As submitted by Jimmy, there is clear evidence that David relied on the EPOA in instituting and prosecuting the Proceedings, and abused WOL financially, prior to the appointment of the Committee.  I agree there are plainly serious matters to be investigated.

40.For convenience, the matter can be considered under the following headings:

(1)     Instituting and conducting the Proceedings;

(2)     Purported payment of legal costs;

(3)     Selling securities & withdrawals from bank accounts; and

(4)     Dubious documents signed by WOL after January 2015.

E1.    Proceedings purportedly commenced by WOL

41.It is clear that instructions to commence and prosecute the Proceedings were given by David purportedly on behalf of WOL pursuant to the EPOA.

(1)     The EPOA envisaged commencement of legal proceedings relating to the Estate.

(2)     WOL apparently had no idea that she was suing Jimmy.

(3)     The medical evidence points to WOL being mentally incapacitated since at least January 2015 or September 2014.

(4)     HCA 1560/2015 was only commenced on 10 July 2015 when WOL was undoubtedly a MIP.

(5)     David purportedly signed Statements of Truth on behalf of WOL in the Proceedings.  Under Order 41A, rule 3(1)(b) of the Rules of the High Court, this is not permissible.  Indeed, the evidence suggests that WOL has never signed any of the court documents.

(6)     On 10 September 2015, Jimmy received a letter from CK Mok purportedly acting for WOL to “put on record” that their “client”, i.e. WOL, “had never agreed to be examined and “does not agree to the dissemination of any medical results arising from yesterday”.  However, WOL did not resist the examination at all.  David later admitted that he, as opposed to WOL, instructed CK Mok to write this letter.  This is good illustration that David habitually gave instructions to CK Mok purportedly on behalf of WOL (despite knowing full well that WOL was suffering from dementia).

42.The compelling inference is that David had all along been giving instructions to CK Mok purportedly on behalf of WOL to commence and conduct the Proceedings by relying on the EPOA.  

43.The obvious reason for David making WOL a co-plaintiff in the Proceedings is that he could use WOL’s money to fund the litigations against Jimmy (as to which see Section E2 below): as found by this court in its Decision dated 2 September 2016, WOL would benefit from HCA 1560/2015 and HCMP 1779/2015 without being joined as plaintiff: §§22-37.

E2.    Purported payments to David as legal costs

44.David alleged that WOL has paid about $1.2 million as legal costs.  Clearly, the court cannot accept that this assertion is correct, without ordering an account.

45.Curiously, the sum was not paid from WOL to CK Mok, but to David.

(1)     On 9 February 2015, WOL paid $600,000 to David allegedly as her contribution and shares of legal costs in HCMP 2391/2013 and HCMP 1779/2015 that David had already paid.  But CK Mok has not confirmed how much had been paid and how much was attributable to WOL.

(3)     The circumstances in which the other $100,000 was paid to and handled by David has never been explained.

46.The following observations can be made: –

(1)     Both sums were paid after January 2015, by which time WOL was indisputably mentally incapacitated, as accepted by David.

(2)     Insofar as the $600,000 is concerned, it is wholly unclear how WOL’s share of legal costs in HCMP 2391/2013 and HCMP 1779/2015 was determined when she had minimal participation in the legal actions.

(3)     As regards the $500,000, the alleged “earmarking” of the same as WOL’s share of future legal costs (which proceedings had not even been commenced at the time of payment) is extraordinary and incredible. The amount is entirely arbitrary and excessive.

47.The Committee, in the 2^nd Affirmation of Koo Chi Ho Andrew, further pointed out the following: –

(1)     With respect to the sum of $600,000: –

(a)     It is initially specified in David’s letter dated 10 July 2018 that the said sum consisted of legal costs incurred in HCMP 2391/2013 and HCMP 1779/2013. 

(b)     At paragraph 21 of David’s 2^nd Affirmation, it is then stated that this was WOL’s “share of legal costs in the legal actions against the Plaintiff”.

(c)     In David’s latest letter to the Committee dated 7 May 2020, the description is narrowed down to WOL’s share of legal costs in HCMP 2391/2013.

(2)     With respect to the sum of $500,000 (now returned): –

(a)     It is initially stated broadly in David’s letter dated 10 July 2018 that the sum is held on account by David for expected legal costs.

(b)     Subsequently, the said sum is specified to be WOL’s share of legal costs of HCA 1560/2015 at paragraph 21 of David’s 2^nd Affirmation.

(c)     In David’s latest letter to the Committee dated 7 May 2020, this was broadened to cover both HCMP 1779/2015 and HCA 1560/2015.

(3)     It is therefore unclear how the said sums of $600,000 and $500,000 were apportioned between HCMP 1779/2013, HCMP 2391/2013 and HCA 1560/2015, as well as how the overall legal costs were apportioned between WOL and her co-plaintiffs in those cases.  Unfortunately, David did not provide any explanation on the split of the legal fees among the involved parties of the proceedings.  The Committee does not currently have a full set of the detailed breakdown and the relevant supporting documents, save for some invoices in relation to HCMP 2391/2013.

48.In the circumstances, this court has no difficulty in accepting that these payments were likely to involve misappropriations of WOL’s assets by David pursuant to the EPOA, and should investigate into the circumstances by ordering an account.

49.Further, the Committee may have a cause of action to recover from David the $600,000 and any benefit derived therefrom. David should account for the use of the sum.

50.Similarly, David should also account for his dealing of the $500,000 as WOL’s attorney.

51.It is also possible that WOL might have transferred other sums to David, who then dealt with the same as WOL’s attorney.  The $100,000 referred to in paragraph 45 above is a good example.

E3.    Handling of securities and regular withdrawals from WOL’s bank accounts

52.David asserted that he handled the securities in WOL’s account (distributed to her in September 2014 by the Estate and with a total market price of some $3 million) with Wocom according to her “specific instructions” and WOL “instructed” him to deposit the money into her savings account after selling part of the shares.

53.David has produced no documentary evidence at all in relation to his handling of the securities and sales proceeds.  The court notes that these transactions took place after September 2014, when WOL would not be able to give instructions for such complicated financial matters.

54.Further, from the available extracts of WOL’s passbooks, there were monthly withdrawals of $30,000 from WOL’s Chong Hing Bank account and regular withdrawals of thousands of dollars from WOL’s Bank of China account.  However, according to Madam Chan (David’s mother), WOL’s monthly expense should be less than $20,000.  Although there is no direct evidence that David handled these withdrawals, the circumstances as a whole call for the production of accounts and records by David to explain what had been happening with the money withdrawn from WOL’s accounts.

E4.    Documents signed in suspicious circumstances

55.Alarmingly, CK Mok produced documents apparently signed by WOL after she had become incapacitated: see the Chinese letter dated 29 April 2015 and the proxy dated 11 September 2015 appointing a barrister to attend WCMDF’s AGM.  Both are complicated documents.

56.David alleged that he made sure that WOL understood the documents before she signed.  His assertion cannot be accepted given WOL’s mental state at the time.

F.     CONCLUSION AND DISPOSITION

57.David asserts that he had not received any funds from WOL apart from the $600,000 and $500,000.  However, given the matters set out in Section E above, such bare assertion cannot be accepted at face value.

58.The evidence supports a strong prima facie case of wrongdoing by David.  There is a clear case for investigation of all his dealings with WOL’s assets pursuant to the EPOA.

59.Accordingly, I order as follows: –

(1)     There be leave to the 1^st defendant to file and serve the 2^nd Affirmation of Koo Chi Ho Andrew as per the draft annexed to the Summons dated 14 May 2020 within 14 days from the date hereof.

(2)     The 2^nd defendant do produce to the plaintiff and the Committee records/accounts of all assets belonging to the 1^st defendant which had been dealt with by the 2^nd defendant purportedly pursuant to the EPOA.

60.I see no reason why costs should not follow the event.  Accordingly, I order that the costs of these proceedings be paid by the 2^nd defendant to the plaintiff and the 1^st defendant (with certificate for 2 counsel).

61.The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

62.Lastly, I express my gratitude to counsel for their helpful assistance in this matter.

Mr Jat Sew-Tong, SC leading Mr James Man, instructed by Messrs Mayer Brown, for the plaintiff

Mr Jose Maurellet, SC leading Ms Jasmine Cheung, instructed by Messrs H.T. Ngan & Co., for the 1^st defendant

Mr Patrick Chong and Mr Martin Ho, instructed by Messrs Dundons, for the 2^nd defendant