Yan Yuen Ching and Another v. Yan Tsz Kin and Others
Read the full judgment text of HCMP 1815/2021 on BabelCite. This High Court CFI judgment was delivered on 1 August 2023.
1. The 1 st defendant ( “the Bankrupt” ) was declared bankrupt on 24 November 2020.
Cites 2 cases
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HCMP 1815/2021 [2023] HKCFI 1986 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 1815 OF 2021 ________________________ BETWEEN
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________________________ J U D G M E N T ________________________ INTRODUCTION 1.The 1st defendant (“the Bankrupt”) was declared bankrupt on 24 November 2020. 2.The 3rd defendant (“Wong”) together with the 2nd defendant have been appointed as the joint and several trustees-in-bankruptcy of the Bankrupt’s estate (the 2nd and 3rd defendants, collectively, “the Trustees”). 3.The 1st plaintiff is the Bankrupt’s sister (“Sister”), whereas the 2nd plaintiff (“Chan”) has been Sister’s boyfriend since around 2013. 4.Sister and the Bankrupt have rented a safe deposit box (“the Deposit Box”) at the Tung Chung Branch of The Bank of East Asia Limited (“the Bank”) in joint names since 2008. Upon the Trustees’ opening of the same in August 2021, it was found that there were 62 items (“the Items”) kept therein (see Annex). 5.By commencing the present action, the plaintiffs sought the following declarations:
6.By virtue of his Acknowledgment of Service, the Bankrupt has indicated that he does not intend to contest these proceedings. However, he has given evidence at the trial in support of the plaintiffs’ case. THE LEGAL PRINCIPLES 7.Both parties have referred this Court to the legal principles set out by Sakhrani J in Angel Lee Oi Sheung v Queenie Leung Wai Ling & Others (HCMP 2668/2006, unreported, 4 May 2007). Those principles may be summarised as follows:
THE PLAINTIFFS’ CASE 8.The late husband of Sister passed away in 2005. 9.Sister moved into a village house in Tung Chung in 2008. 10.As there were no security facilities at the said village house, Sister intended to rent a safe deposit box for the purpose of keeping her valuables, jewelleries and important documents therein. 11.At that time, both her children were still young (aged 11 and 13 respectively). To cater for any unexpected event whereby she would pass away suddenly or lose her mental capacity, she asked the Bankrupt to become one of the holders of the Deposit Box, so that he would be in a position to retrieve the items stored therein if necessary and return them to her children. 12.It was only under the said circumstances that the Bankrupt was named as a joint holder of the Deposit Box. As a matter of fact, nothing in the Deposit Box belonged to the Bankrupt. Apart from item 1 of the Annex which belonged to Chan, everything else therein belonged to Sister (“the Trust Arrangement”). THE TRUSTEES’ CASE 13.The Trustees stated that they have a statutory duty to manage the Bankrupt’s estate. As they took the view that the plaintiffs have failed to provide sufficient proof to show that the contents of the Deposit Box belong to them absolutely, they have to participate in these proceedings and to present an objective analysis of the plaintiffs’ case so that the Court would be able to make a considered decision of the matter. 14.To avoid duplication, I propose not to refer to the Trustees’ observations in relation to the Items individually at this point. They will be dealt with further below. CREDIBILITY OF WITNESSES 15.The consideration of the issues in the present case would involve the Court’s assessment of the credibility of various witnesses who have given evidence at the trial. In this regard, this Court had held in Hu Lan v David Golden [2023] HKCFI 873 that:
16.I will bear the above matters in mind when I consider the evidence of the plaintiffs’ witnesses. DISCUSSION The alleged Trust Arrangement 17.It is the evidence of Sister that:
18.Before I consider the aforesaid evidence, it should be pointed out right away that the matters set out in sub-paragraphs (3)[1], (4) and (5) above are supported by a letter issued by the Bank of East Asia dated 20 January 2021 (“the Bank’s Letter”), in which it was stated that:
Credibility of the Trust Arrangement 19.The Trustees have questioned the credibility of the Trust Arrangement. 20.Firstly, the Trustees submitted that it is unclear as to why Sister, in 2008, suddenly worried about passing her valuables to her children, especially when she should have known by experience (her late husband passed away just a few years before the opening of the Deposit Box in 2008) that a deceased’s estate could be passed on without much difficulty. It was further said that, in any event, the Trust Arrangement was unnecessary, as Sister could have:
21.In my view, these submissions were made without regard to the followings:
22.In any event, it should be borne in mind that while the Court would consider the reasonableness of Sister’s conduct, this assessment is done purely for the purpose of deciding whether what she did and what her thinking was at the material time were so unreasonable that the Court should not accept the same as credible. The fact that there were other better ways which she could have adopted for achieving the same purpose does not necessarily mean that her case must be rejected. In the process, it should also be noted that it is the unchallenged evidence of Sister that she had made her decision as she did in 2008 without legal advice. 23.With the above in mind, as far as the rationale of the Trust Arrangement is concerned, I find that Sister’s evidence is credible. 24.Secondly, according to the evidence of Sister and the Bankrupt, Sister had only told the Bankrupt that the keys to the Deposit Box could be found in a drawer in Sister’s home, without specifying where exactly they were put. The Trustees said that this is inherently improbable. I do not agree. While I accept that the plan devised by Sister was not perfect, it only means that it would take longer for the Bankrupt to look for the keys in Sister’s home. The evidence that she did not tell the Bankrupt the exact whereabouts of the keys does not make Sister’s case incredible. 25.Thirdly, the Trustees also drew the Court’s attention to the fact that while the two children of Sister had reached the age of majority in 2013 and 2015 respectively, Sister did not seek to remove the Bankrupt as a signatory until 2019. 26.I do not think the above objective facts would render Sister’s case incredible. It should be borne in mind that it was Sister’s evidence (which I accept) that the Bankrupt (i.e. her brother) was a person she trusted. Hence, there was simply no urgency for her to remove him as a signatory of the Deposit Box. 27.Further, I accept that the Bankrupt did not hold the keys to the Deposit Box at all (see further below). This reinforces the point that there was no urgency in removing him, as he could not have opened the Deposit Box without getting the keys to the Deposit Box from Sister’s home first anyway. 28.Moreover, it is evident that at the end of the day, Sister did add Son’s name as a signatory of the Deposit Box (see further below). Access to the Deposit Box 29.It was Sister’s evidence that she was the only person who had accessed the Deposit Box and that the Bankrupt had never had such access. 30.As aforesaid, Sister’s evidence is supported, at least partly, by the Bank’s Letter. 31.Unfortunately, only the access record as from 14 February 2018 was confirmed in the Bank’s Letter. 32.Sister explained that upon her written request, the Bank only replied by the Bank’s Letter, and on top of that she had been confirmed by the Bank verbally that it did not have any entry records for the period prior to 14 February 2018. 33.The Trustees submitted that such evidence was bizarre. In a gist, it was stated that:
34.I do not accept the Trustees’ speculations:
35.I therefore accept the evidence of Sister and the Bankrupt that no one else apart from Sister herself had ever had access to the Deposit Box at all material times. Payment of rental of the Deposit Box 36.It is undisputed that Sister has been paying the rental of the Deposit Box by autopay from her bank account, which is confirmed by the Bank’s Letter. 37.It is not suggested that the Bankrupt has ever reimbursed Sister for such rental. Additional signatory 38.As stated in the Bank’s Letter, Son was added as a signatory to the Deposit Box in May 2019. 39.Sister explained that she initially wanted her son to replace the Bankrupt as a signatory of the Deposit Box in 2019 when his son reached the age of 22. However, she had been told by the Bank that a signatory could not be removed as such, and she would need to return the use of the Deposit Box to the Bank (and open a new deposit box) to achieve her purpose. Since she was also told that once she had returned the Deposit Box to the Bank, she would have to wait for an uncertain period of time before another safe deposit box would be assigned to her use (all deposit boxes had been rented out at the time and there was a waiting list of customers who had applied for rental of deposit box), she decided not to surrender the Deposit Box, but added her son as an additional signatory thereof instead. 40.Sister’s evidence on the Bank’s policy mentioned above was not challenged by the Trustees at all. 41.The Trustees queried why Sister did not make enquiries with another bank so that she could rent another deposit box right away. It was suggested to her in Court that she did not do so because the Bankrupt was also using the Deposit Box at the material time. However, this inference cannot be drawn if the Bankrupt did not even have the keys to the Deposit Box, nor had he ever gained access to the Deposit Box (I accept these aspects of Sister’s evidence). On the other hand, the addition of Son as a signatory is consistent with the plaintiffs’ case. 42.Further, there is nothing suspicious for Sister not to make enquiries with and open a deposit box in another bank upon being told by the Bank that she could not remove the Bankrupt as a signatory to the Deposit Box, because there was simply no urgency for her to do so. It must be remembered that Sister wanted to add Son as a signatory not because she did not trust the Bankrupt anymore, but simply because she thought Son should be able to handle the Deposit Box himself if necessary. 43.Sister’s case is supported by the fact that she had also replaced the Bankrupt as a nominal director of her company by Son in 2015. 44.In this regard, the Trustees questioned why, if Sister bothered to change her company’s directorship in 2015 for the reason that her son had reached the age of majority and that she did not need the Bankrupt to act as a nominal director of her company any further, why didn’t she take a similar step as far as the Deposit Box is concerned at the same time. Sister explained that she had replaced the Bankrupt as a nominal director by her son only because this matter was raised for her consideration by her company accountant. However, the matter concerning the Deposit Box did not come up to her mind at that time at all. I find this explanation credible. This is consistent with Sister’s evidence that she all along trusted the Bankrupt. There was no urgency in replacing him. Proof of ownership of the Items Lack of documentary proof 45.Out of the Items (a total of 60 of them if we exclude the cash), the plaintiffs have only been able to produce documentary proof of ownership in respect of 10 of them. 46.The Trustees referred this Court to a letter issued by Sister’s solicitors dated 22 April 2021, in which Sister was only able to compile a list of 22 items. It was therefore stated that it is doubtful whether all the 62 items found in the Deposit Box belong to the plaintiffs as alleged. 47.With respect, this is not a fair criticism, because it has been made clear in the said letter that those 22 items were the only items which Sister could recall. This was what her solicitors stated:
48.Indeed, it was her solicitors’ request which was made in the same letter that:
49.I accept Sister’s explanation that she had never imagined that she would have to prove her ownership of the Items at all. It is therefore not unreasonable for her not being able to give a full list of items kept in the Deposit Box nor to produce documentary proof in support of her ownership. 50.After these proceedings were commenced, Sister had in her supporting affirmation given further details of the Items, for example, the approximate time when those items were acquired and where they were bought. The Trustees then queried how come Sister could have such a good memory of those details and whether those details were invented for the purposes of these proceedings. 51.Despite the Trustees’ submissions, I do not find Sister suspicious at all. It can be seen from her evidence that much of the information given was not precise at all, for example, for many of the items, she could only give a rough estimate of the time of purchase such as “over 10 years ago” or “over 20 years ago”. As far as the name of the shop from which she had bought those items, she had explained in Court that she was able to put down the name of the shop because, for those items which were more expensive, it was more likely that she had bought them from Chow Tai Fook or Chow Sang Sang; and for earrings, it was likely that she had bought from Ma Belle. In my view, her explanations were credible. Indeed, she had given me an impression that she had tried her best to assist the Court. I do not accept the allegation that she had made up her evidence. 52.Before I leave this topic, I should also mention that the Trustees were not satisfied with Sister’s evidence also because she had failed to produce credit card statements in support of her purchase of Item 3 which took place less than 7 years ago. It was said that while this matter has been brought to her attention in Wong’s affirmation filed in opposition, she still did not bother to ask the relevant bank for the statements. 53.While I agree that Sister could have done more to prove her case on Item 3, I do not think I should reject her claim in respect thereof merely for this reason, because Sister was able to produce a receipt and a certificate of original and international warranty for the item. Further, as accepted by Ms Wong for the Trustees, apart from the documentary proof in relation to each of the items, the Court is also entitled to take into account the overall circumstantial evidence. Sister’s credibility 54.As far as Sister’s credibility is concerned, the Trustees relied heavily on her confession that she had signed on the invoice of Item 4 issued by a shop known as “Unique Timepieces” very recently (shortly before the commencement of these proceedings). It was submitted that this casts serious doubt on the reliability of her documentary evidence and her credibility. 55.Sister explained that she just signed the invoice randomly without thinking much when she prepared the documents for the commencement of this case. She also said that she did not know that it was inappropriate to do so, and once she had been advised on the matter, she apologised to the Court immediately. 56.On my part, I do not accept her allegation that she did not think much when she signed the invoice in relation to Item 4. In my view, it is more probable than not that, out of stupidity, she signed the invoice so as to bolster her case. 57.Be that as it may, I do not think that means that the Court is bound to reject the entirety of her case. But of course, the Court has to bear this conduct of hers in mind when her overall evidence is assessed. 58.As far as Item 4 is concerned, it is supported by Madam Wu Wing Mei (“Wu”)’s evidence. She told the Court that:
59.I accept Wu’s evidence. 60.Although Wu had no knowledge as to the owner of those watches, the purchase price thereof or the source of purchase fund, I am of the view that, in the circumstances of the case, there is nothing to suggest that the ultimate buyer of those watches was anyone other than Sister. In any event, it simply cannot be suggested that Sister was purchasing the valuables for the Bankrupt. 61.The significance of Wu’s evidence, apart from proving Sister’s purchase of Item 4, is to support Sister’s case that she has always been a keen collector of jewelleries and valuable watches. This is important because this explains why there are so many items of such nature in the Deposit Box. 62.This aspect of Sister’s case is also supported by an invoice issued by Chow Tai Fook dated 29 March 2008 which shows that Sister was already a VIP of that shop back then. Inconsistency between invoices and actual credit card transactions 63.In respect of Item 2 and Item 4, the price stated in the invoice (or cash memo) was different from the corresponding credit card transaction slip. The Trustees therefore questioned whether those items were really bought by Sister. 64.Sister explained that while she had been given discounts when she bought those items, the shop still put down the original price on the invoice (or cash memo). 65.This explanation was not accepted by the Trustees who described it as “implausible”, especially in the case of Item 4, in respect of which the alleged discount given was 80%. 66.I am not in a position to find that the alleged discount given was unreasonable in the trade of jewelleries and valuable watches, particularly when it is a known fact that the retail market in mid-2020 was seriously hit by COVID-19. 67.As the purchases as shown by the relevant invoice (or cash memo, as the case may be) were supported by transaction slips of Sister’s credit card account, I accept that she had indeed purchased those items. US Dollars and HK Dollars Bank Notes 68.There were ninety-four US$100 notes and ninety-seven HK$1,000 notes (Items 58 and 59 respectively) found in the Deposit Box. 69.The Trustees submitted that it was weird for Sister to keep those bank notes in the Deposit Box, and that the keeping of money in the Deposit Box seems to be more consistent with an act of the Bankrupt hiding his assets from the Trustees. 70.However, as accepted by Wong in Court, if the Bankrupt was minded to hide cash from the Trustees, it would be much better for him to hide such cash at home rather than keeping it in the Deposit Box. 71.Furthermore, it can be seen below that the Bankrupt has been withdrawing a lot of cash from his bank account and from his credit card for repayment of debts and financing his gambling habit. In my view, if the cash found in the Deposit Box really belonged to the Bankrupt, he would have taken such cash away therefrom long time ago. 72.I therefore find that it is more likely than not that the banknotes found in the Deposit Box belong to Sister rather than the Bankrupt. Chan’s credibility 73.In respect of Item 1 (which was purchased in January 2015), even though the relevant sales invoice does not state that Chan was the purchaser, he was adamant that he purchased it (together with the other watch as stated on the sales invoice, which he gave Sister). 74.The Trustees raised doubt on Chan’s evidence because, while the item was purchased less than 7 years before the commencement of these proceedings, he did not produce the relevant credit card statement in support. 75.When he was cross-examined on the same, Chan explained that:
76.While Chan’s explanation was not entirely satisfactory particularly when he was legally represented, I accept Mr Chan’s submissions that if it was the plaintiffs’ intention to conceal assets belonging to the Bankrupt, there is no reason why Chan should be joined as a party which would expose him to possible costs consequence. It would have been much more straightforward for Sister to simply assert that the entirety of the Items belong to her. 77.Having considered all the circumstances of the case, I accept Chan’s evidence. The Bankrupt’s spending patterns Bankrupt’s spending in jewellery shops 78.The Bankrupt’s credit card statements show that he used to have frequent spending in different jewelleries shops, including “Leader Jewellery Company Hong Kong HK” and “Kowloon Jewellery Hong Kong HK”. 79.The Trustees submitted that these transactions suggest that the Bankrupt had purchased jewelleries and valuable watches which might well be those found in the Deposit Box. 80.However, it was the Bankrupt’s evidence that the credit card transactions at Leader Jewellery Company and Kowloon Jewellery were in fact not actual purchases, but “cash withdrawal” arrangements done through the staff of mahjong parlours. He stated that whenever he needed cash while playing mahjong in the mahjong parlours, he would inform the staff there, who could then take his credit card to a related jewellery shop nearby and get cash by entering into transactions. He said that he had lost all those withdrawals subsequently. 81.The Trustees stated that it is doubtful whether the Bankrupt really had a gambling habit as such because he did not inform the Official Receiver of the same when he was asked the reason of his bankruptcy and whether he had any gambling habit within 2 years before he filed his bankruptcy petition. 82.The Trustees further submitted that such explanations may well be recent fabrications because he only gave them for the first time in Court. 83.Despite the Trustees’ challenge, I accept the Bankrupt’s evidence:
84.The Trustees further criticised the Bankrupt for failing to call any witness from the mahjong parlours. With greatest respect, it is unrealistic to expect that the staff from mahjong parlours would be willing to give evidence in Court in the circumstances of the present case:
85.I have not lost sight of the Bankrupt’s admission that he did buy jewelleries and watches in the past. However, according to him, because of his own financial difficulties, he started to sell his collection around 2 to 3 years before his petition for self-bankruptcy. 86.It should also be borne in mind that, according to the Bankrupt’s unchallenged evidence, he had to borrow from finance companies in 2017/2018. He had also re-mortgaged one of his properties in 2017. These matters support his evidence that he had to sell his collection of jewelleries and watches from around 2017/2018 (2 – 3 years before he petitioned for his own bankruptcy). Although the Bankrupt did receive a sum close to $1 million from his insurer in February 2017, in my view, it is clear that his financial problems were not solved as a result, because he had to further mortgage his property in 2019, and eventually petitioned for bankruptcy in 2020. 87.In such circumstances, it is more likely than not that he did not keep his collection of jewelleries and watches, and that those jewelleries and watches found in the Deposit Box do not belong to him. Cash withdrawals 88.It is evident that Bankrupt had withdrawn a lot of money from his bank account. 89.He stated that he had withdrawn cash for repayment of his debts and to finance his gambling habit. 90.As far as this case is concerned, the relevance of such cash withdrawal is that it may be suspected that the Bankrupt had made use of the cash withdrawn to buy jewelleries and watches and that some (if not all) of the Items were purchased by the Bankrupt. 91.However, in my view, if any valuables in the Deposit Box belonged to the Bankrupt, he would have taken them out for sale long time ago. Even if he did not sell them, and if he was minded to hide them from the Trustees, he would have kept them at home rather than in the Deposit Box. As accepted by the Trustees, it is less likely for a trustee to discover them if the valuables are kept at home rather than in the deposit box. Conclusion 92.Having taken into consideration all the matters mentioned above, I hold that the plaintiffs have discharged their burden to rebut the presumption that 50% of the contents in the Deposit Box are owned by the Bankrupt. DISPOSITION 93.For reasons of the aforesaid, I grant the declarations sought by the plaintiffs. COSTS 94.Both the plaintiffs and the Trustees asked for costs of these proceedings, although they have both suggested “no order as to costs” as an alternative. 95.I do not agree that the plaintiffs should be liable for costs, as they have done nothing wrong in the Trust Arrangement. Indeed, I find that it was rather unfortunate that they had to incur legal costs for the purpose of claiming back the Items. 96.The Trustees seem to be suggesting that these proceedings were of the plaintiffs’ own making, because of their inability to produce documentary proof of ownership in respect of most of the Items. 97.However, to be fair, there was simply no reason why the plaintiffs (Sister in particular) should anticipate that they would be involved in court proceedings like this dealing with the ownership of the contents of the Deposit Box. 98.The Trustees also drew this Court’s attention to the fact that the plaintiffs only provided further explanation and documents for the first time upon the commencement of this action. With respect, this is neither here nor there. This is because those additional matters did not sway the Trustees’ stance anyway. In other words, it cannot be said that costs could have been saved if such additional evidence had been provided to the Trustees earlier. 99.The Trustees asked this Court to consider Sister’s conduct in signing on the invoice of Item 4, which I did. However, I do not think the plaintiffs (or Sister) should be punished by way of a costs order for that reason. 100.Lastly, Trustees relied on the evidence of the Bankrupt, and submitted that he had only provided certain information for the first time when he was in the witness box. 101.First of all, while the Bankrupt is Sister’s brother and has adopted the same stance as Sister, I do not think I should take his conduct into account. In any event, even if I should, no costs have been wasted anyway, because I do not think (and I have not been told that) the Trustees’ stance adopted in this action would have been different in the event the Bankrupt’s explanation was given, say, before the commencement of this action. 102.On the other hand, I do not think the Trustees should be liable for costs. It is their duty to administer the Bankrupt’s estate, and in discharge of such a duty, they are obliged to consider the plaintiffs’ case carefully. In a case where there is not much documentary proof like the present one, it cannot be said that they have acted unreasonably in refusing to consent to the declarations sought by the plaintiffs. Having taken into account the way that the present case was conducted, I do not agree that the Trustees have gone beyond the neutral position which they said they had taken. 103.I therefore take the view that this Court should make no order as to the costs of the action.
Mr Ted Chan, instructed by Edmund W. H. Chow & Co., for the plaintiffs Ms Sally S. Y. Wong, instructed by Jimmie K. S. Wong & Partners, for the 2nd and 3rd defendants Annex
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