Loong San Investment Company Ltd and Another v. Chen Ting San Daniel also known as Chen Ting San and Daniel Chen
Read the full judgment text of HCA 2568/2013 on BabelCite. This High Court CFI judgment was delivered on 30 October 2025.
1. It seems to me that, in this case, after many years of pent-up frustration, the long-prevailed upon, but perhaps under-appreciated, eldest son of an overbearing and controlling father finally erupted like – to use his own word – a volcano. The resultant lava flow was reflected in the disputes amongst the family.
Cites 4 cases
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[2025] HKCFI 5099 HCA 2568/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2568 OF 2013 ____________________
____________________ AND HCA 570/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 570 OF 2014 ____________________
____________________ (Heard together)
_______________ J U D G M E N T _______________ A. Introduction A.1 Broad Overview 1.It seems to me that, in this case, after many years of pent-up frustration, the long-prevailed upon, but perhaps under-appreciated, eldest son of an overbearing and controlling father finally erupted like – to use his own word – a volcano. The resultant lava flow was reflected in the disputes amongst the family. 2.There were 6 members in the Chen family. The father, Chen Tsing Kwan, (“Father”), the mother, Fung Siu King, (“Mother”), and four children (“Children”) in the following order of seniority: Chen Ting San Daniel (“Daniel”), Chen Hepburn (“Hepburn”), Chen Ting Hoi (“Hoi”), and Chen Ting Nam (“Nam”). Daniel, Hoi and Nam are the three sons and Hepburn is the only daughter. 3.There was a fall-out within the family in 2010 and the family members have since spilt into two opposing camps. The disputes first started between Father and Daniel, but other family members soon sided with one of them. 4.The Father’s camp is supported by Hepburn and Hoi. After the Father passed away in 2015, Hepburn was appointed as his executrix and continued the actions on behalf of the Father’s estate. Incidentally, I reject the suggestion put to Hepburn (which she also denied) that she chose to team up with the Father in the hope that she could get a share of the estate if the Father were to succeed in the disputes with Daniel. The other camp was led by Daniel, with the support of the Mother and Nam. The Father’s camp are the Plaintiffs in both actions and Daniel’s camp are the Defendants. Notwithstanding that the Father has passed away, below I may use reference to the Father as a shorthand for the Plaintiffs, and to Daniel for the Defendants. 5.The three companies appearing in the titles of the actions are corporate vehicles used by the Chen family: Leeloong Investment Co. Limited, Loong San Investment Company Limited, and Loong Wan Investments Limited (respectively “Leeloong”, “Loong San”, “Loong Wan” and collectively “Family Companies”). As it now stands, the registered shareholders of Leeloong are Daniel, Hepburn, Hoi and Nam. Daniel has 40% of the shareholding and the other three Children each hold 20%. The registered shareholders of Loong San and Loong Wan are the four Children each holding 25%. 6.Each of the three Family Companies holds a commercial building on the Hong Kong Island. Leeloong holds Leeloong Building; Loong San holds Parkview Centre; and Loong Wan holds Loong Wan Building. A.2 Summary of Claims 7.HCA 570/2014 (“HCA 570”) and HCA 2568/2013 (“HCA 2568”) are connected and were ordered to be tried together. 8.In HCA 570, broadly speaking, there are two claims relating to beneficial ownership:
9.The Loans arose from the acquisitions of Parkview Centre and Loong Wan Building. Loong San purchased the Loong San Building in 2001 at the price of HK$58.5 million. Loong Wan purchased Parkview Centre in 2002 at the price of HK$60.5 million. Daniel’s pleaded case is that he provided the funds for the two companies to meet the down payments and the mortgage payments of the two buildings. Thus the two companies owed him loans as recorded in the accounting books. The Loan booked in Loong San’s records stands at HK$53,066,000 (“HK$53m Loan”). The Loan booked in Loong Wan’s records stands at HK$54,249,000 (“HK$54m Loan”). 10.The Father’s pleaded case is that he was the beneficial owner of the sums used to fund the purchase of Parkview and the Loong Wan Building. Daniel was merely the Father’s trustee for the relevant funds. 11.I shall refer below to the Father’s claimed funds sitting in Daniel’s bank accounts and the Loans booked as owed to Daniel in the two companies’ records as “Disputed Funds”. 12.By way of an amendment in 2018, the Father also added alternative claims in the event that the Court does not find that the Father is the beneficial owner of the Disputed Funds. As an alternative, the Plaintiffs claim that Leeloong is the beneficial owner of the Disputed Funds instead. Thus, Leeloong was added as a plaintiff in 2018. 13.Originally, there was also a third claim in HCA 570: the Father claimed that all the shareholders of Leeloong (i.e. the four Children) hold their shares on trust for the Father. Thus, Hepburn and Hoi were made plaintiffs and Nam was also made a defendant. At the door of the trial, the Plaintiffs agreed to drop this claim and thus Nam was released from the trial since that was the only claim concerning him. He did, however, testify as Daniel’s witness in the trial. Sadly, since the trial, Nam has passed away. 14.HCA 2568 is a derivative action instituted by the Father’s side on behalf of Loong San and Loong Wan against Daniel with leave granted by Poon J in 2013. It is about alleged misappropriation. The Father’s side only held 50% of the shareholding in Loong San and Loong Wan, and did not have control in the two companies. Loong San claims against Daniel HK$3,908,081 (“HK$3.9m”) being the net withdrawal by Daniel from the company. Loong Wan claims HK$7,467,027 (“HK$7.5m”) being Daniel’s net withdrawal. 15.The trial took place across 11 days. At the trial, the Plaintiffs in HCA 570 and HCA 2568 (i.e. the Father’s side) were represented by Mr Ambrose Ho SC, leading Mr Alan Kwong. On the defendants’ side in both actions, Daniel was represented by Mr Paul Shieh SC, leading Mr Harrison Miao and Mr Daneel Heung. Nam was represented by Counsel Ms Pauline Leung on the first day of the trial, to tie up the loose end regarding Nam’s release from the trial after the only claim against him was dropped. 16.In addition to their written opening submissions, and for the continuing benefit of the Court, the parties provided what might be described as “full”, i.e. rather copious, written closing submissions (well over 100 pages for each party), also spoken to orally. A.3 The Issues 17.For HCA 570, the agreed list of issues for the original action are:
18.For HCA 2568, there is only a single agreed issue for the original action, namely whether Daniel is liable to repay the HK$3.9 million to Loong San and the HK$7.4 million to Loong Wan. 19.Daniel also raised counterclaims in HCA 570 and HCA 2568:
A.4 The Witnesses 20.I do not think it necessary or helpful to set out a detailed pen portrait or even a broad summary of each individual witness, and their apparent honesty, reliability or credibility. It suffices for me briefly to introduce the witnesses, and to identify the approach which I have taken to assessing their evidence, against the other evidence overall. 21.At the trial, Hepburn and Hoi testified for the Plaintiffs’ side. Since the Father had already passed away in January 2015, Hepburn effectively acted as the Father’s spokesperson to recount the Father’s narrative, and she carried the bulk of the Plaintiffs’ evidence. But before the Father passed away, a discovery application was commenced to seek production and inspection of documents of the Family Companies in 2011 (“Discovery Application”) and a derivative action on behalf of Loong San and Loong Wan against Daniel in 2013 (“Derivative Action”). The Father did make affirmations in these interlocutory applications, and those affirmations are also in the evidence. 22.Daniel testified for himself. Nam, no longer a party to the actions, also testified for Daniel. Daniel also had in evidence a deposition (“Deposition”) made by the Mother in August 2021 and her witness statements for HCA 570 and HCA 2568. The Mother also made affidavits to support Daniel in the interlocutory applications. I acknowledge the point that, in respect of the earliest of material events, the Mother was the only living witness with direct involvement and knowledge – and it might be said that she had no economic interest in the disputes to be resolved in these proceedings. On the other hand, though I think it is fair to say that some of her evidence was either confused or confusing, there were also plenty of admissions made against Daniel’s interests. 23.Daniel originally planned to produce Ms Shirley Chan, the accounting clerk of the Family Companies, as his witness. Ms Chan did not give oral evidence in the end, on the basis of health concerns (though no medical evidence was produced to show unfitness to testify in Court), but Mr Ho did not object for her witness statements to be admitted into the evidence subject to questions of weight. 24.In my approach to the fact-finding – and with the benefit of a full note of the witness evidence, and the transcript of the Mother’s Deposition – I have adopted the well-established approach which focuses less on aspects of demeanour, and considerably more upon (1) the consistency of a witness’s evidence with contemporaneous written documents and documents which came into existence before the problems or disputes in question emerged, (2) consistency with undisputed or indisputable evidence, (3) the internal consistency of a witness’s evidence, and (4) comparative testing between a witness’s oral testimony and his or her witness statement(s). Here, I think it fair to say that the main witness on each side at least added to (and at times contradicted) what had been previously said in witness statements, which fact I have kept in mind. 25.I have also kept firmly in mind the degree or otherwise of any active role or interest in the relevant business and property affairs at the time of the material events, and whether the evidence advanced by any witness was based on first-hand or contemporaneous knowledge, or only upon information obtained from discussions or documents later. 26.As importantly, much of the evidence was traversing events and documents from many years beforehand, and I have taken into account that it would be unrealistic to expect clear memories of all that happened, or a verbatim recollection of conversations. On occasion, I do not think it unfair or necessarily a sign of unreliability for a witness to speak of what impression was left as a result of conversations or dealings. On the other hand, I have taken note of the way in which witnesses did or did not in fact answer the questions put, and/or whether there seemed to be evasiveness. 27.I can put down a marker here that, though not the only one, Daniel was the witness more often guilty of such a non-answering or evasive approach. Further, his evidence was frequently changing, at times somewhat unreal or absurd, and when caught out he sometimes resorted to blaming his lawyers. 28.I have, of course, also tested matters overall against what seem to me to be the inherent likelihoods and probabilities. 29.Further, I keep in mind that there is, or there may be, a distinction between a witness’s reliability and his or her credibility. Further, when assessing credibility, I acknowledge that the finding that a witness has been untruthful in one regard does not necessarily lead to finding the entirety of that witness’s evidence to be untruthful. Instead, that is simply a factor to be brought into account when assessing the reliability or credibility of other parts of the evidence. 30.Both sides also had the benefit of the expert opinion of an accounting expert. Daniel’s side was supported by Mr Alan Tang. The Father’s side was supported by Mr Frankie Yuen. Each of them had produced two individual expert reports, pursuant to two sets of expert directions, one set ordered by Master Au Yeung in June 2016 and one by myself in December 2019. The two experts also produced a joint report. Both gave evidence and were subjected to cross-examination. 31.At the end of the day, I think it became common ground that any dispute between the experts was narrower than may have first appeared, and the expert evidence would have somewhat more limited significance on the issues to be resolved. But, I can say that in general I have preferred the evidence of Mr Yuen. 32.There was also a handwriting expert opinion from Mr Leung Sze Chung, to comment on the narrow issue of authorship of the handwriting on one of the 26 Notes (as defined below), dated 12 October 2001. This expert was not cross-examined, and I can state now that I accept his evidence that the date and figures on the note were in the Father’s handwriting. B. Further Background 33.It is necessary to set out some further background. The facts in this section are common ground between the parties, and/or are as found by me. I shall point out, when necessary, where the parties differed. B.1 The Chen family’s source of wealth 34.Whilst the disputes concern the beneficial ownership of the Disputed Funds, the parties spent much time contesting the beneficial ownership of a substantial amount of land (“Family Lands”) which was no longer in the hands of the family by the time the disputes arose in 2010. This is because the Chen family’s source of wealth came from the Family Lands, which had been owned or were purchased by the Father’s own father (“Grandfather”) in the 1950s or 1960s. 35.The Family Lands were substantial. They included eight plots of urban lands in Kowloon and on Hong Kong Island (“Urban Lands”) and 21 lots of rural farmlands in the New Territories (“Farmlands”). 36.The Family Lands (and some other land, to which I will come below) had generated substantial rental income and sales proceeds over the decades. 37.The Father’s case was that:
38.Daniel’s case was that:
B.2 The Chen family 39.The Chen family is a traditional Hakka family. 40.The Grandfather was a successful businessman in the construction industry. He passed away in September 1964. 41.The Father was born in 1921 and passed away in 2015. He was the eldest and only surviving biological son of the Grandfather in Hong Kong. He was a university graduate in civil engineering and a structural engineer by profession. He worked as a Senior Building Surveyor in the then Department of Public Works until he left in about 1971. After he left the government, he founded his own architecture firm, TK Chen & Associate (“TK’s Firm”), and became a property developer. 42.In 1970, in addition to the Father founding TK’s Firm, the Father had also founded Leeloong which was the main corporate vehicle used to hold the Family Lands. Mostly during the period from the 1970s to the 1990s, the Father, via TK’s Firm, had developed the Urban Lands by constructing blocks of buildings on those lands which were then sold off for profit. 43.When it comes to the position and character of Father in the Chen Family, all family members spoke with one voice. The Father was the head of the Chen family. He held high, if not absolute, authority in the family. He was a dominating and controlling person who would rarely listen to other family members. The Mother and the Children were expected to do as they were told with no questions asked, and with no explanations given. The Mother said the Father was bad-tempered and barbaric. Daniel said the Father was a dictator. He recalled how the Father controlled their diets when they were young, and declined to let him have his own choice of girlfriends even in adulthood. Hepburn said the Father was strict, but also a loving father and husband. Nam said the Father was strong-willed and would not be easily persuaded. 44.Whilst not every member saw the Father as a loving husband and parent, it is undisputed that the Father had provided for the family over the decades. The Father took great interest in the Children’s education and would take care to arrange the children’s extra-curricular activities, and they travelled widely. Even after the Children had come of age, the Father continued to shower them with substantial gifts such as buying them properties. 45.The Mother was born in about 1920 and made her Deposition when about 91 years old. She was only educated up to Form One of secondary school. She had never worked. She married the Father in 1955. Since then, she had remained as a housewife throughout her life. 46.The Mother gave birth to the four Children in the four years following her wedding. Daniel, Hepburn, Hoi and Nam were born in 1956, 1957, 1958 and 1959 respectively. 47.All four Children had gone abroad in their teenage years to receive education overseas. They are all university graduates. In assessing the evidence, I have kept in mind their level of education generally, and financial knowledge and experience in particular. 48.Daniel graduated from the University of Southern California with a bachelor degree in architecture. He was set on the path to take after the Father’s career as an architect. However, he failed to pass the professional exam and did not obtain the professional qualification as an architect. He then started working as the Father’s personal assistant in about 1982. Daniel, from the evidence of both sides, was the obedient or subservient son who had loyally served the Father for almost 30 years, until the parties fell out in June 2010. 49.Hepburn had a Master of Business Administration in Finance from the College of Notre Dame in California. She worked as a financial analyst before she retired in about 1998, when she was about 40 years old. 50.Hoi went to study in Canada since 1975/76 (when he was about 17 years old) and stayed in Canada until he returned to Hong Kong in 1997. He is married with a son who is now in his 30s. His wife is a qualified lawyer in Canada. 51.Nam lived in the United States for a long time and did not return to Hong Kong until 2007. Nam had just started a young family of his own around the time the family fell out. His daughter was born around 2010. 52.All family members have been shareholders and/or directors of the Family Companies at some point. But only the Father and Daniel were involved in running the Family Companies and managing the family business before the disputes erupted in 2010. It is incontrovertible that the Father was the person in control of the Family Companies, and Daniel only acted as the Father’s assistant. To use Daniel’s words, the Father “single-handedly” controlled the running of Leeloong which was the main corporate vehicle among the three. The other family members had little, if any, involvement in the Family Companies, even though they would sign documents from time to time under the Father’s instructions. 53.Except Daniel, the other three Children all had their own careers outside the family. 54.Daniel and Hepburn are unmarried and they continued to reside with the Father and the Mother in the same residential apartment even after the disputes arose in 2010. Hoi and Nam got married in the 2000s and afterwards moved out of the family residence. B.3 Transfer or acquisition of the Family Lands in the 1950s and 1960s 55.After the Father and the Mother married in 1955, and in the following decade up until the Grandfather’s death in 1964, the Grandfather caused a substantial amount of land (i.e. the Family Lands) to be registered under the Mother’s name. However, in a fact which I think significant, the name registered was Chan Fung Si (陳馮氏), rather than the Mother’s maiden name Fung Siu King, although the latter would sometimes also be put as an alias. It was undisputed that the Mother did not pay for any of the Family Lands registered under her name. 56.Among the Family Lands, the Urban Lands were mostly located on Hong Kong Island: at Queens Road Central, Li Yuen Street East, Connaught Road Central, Des Voeux Road Central, Seymour Road, and Wing Lok Street. The one on the Kowloon side was in Boundary Street. The 18 plots of Farmlands were in the New Territories. 57.The Father’s case is that the Grandfather had intended to gift the Family Lands to him. The Mother was used as a nominee/trustee to hold the lands for the Father pursuant to a trust. This is because it was not convenient for the Father, as a senior civil servant, to hold a large amount of land under his name in the 1950s/60s. Daniel’s case is that the Grandfather intended to gift the Family Lands to the Mother to enable her to raise the Grandfather’s grandchildren. 58.Though some reliance has been placed by Daniel on the absence of documents evidencing the Grandfather’s and the Mother’s alleged trust arrangement, it seems to me that the overall material identifies precisely why no such documentation would have been kept. The point was to keep at least the Father’s name largely out of the documentation. Further, it is clear that the Mother did not need any document to know that she should simply do as she was told, as she did. 59.Besides the Family Lands held under the Mother’s name as mentioned above, I should also mention some other land. 60.Shortly before the Grandfather passed away in September 1964, he also gifted to the Father, by a deed of gift, another piece of land in Queen Victoria Street. In 1968, the Father had also purchased in the Mother’s name another piece of land located in Queen Victoria Street. These two pieces of land are where the Leeloong Building was later built. I shall refer to the two pieces of land as “Leeloong Land A” and “Leeloong Land B”, and, collectively, as “Leeloong Lands”. 61.Under the Grandfather’s will – under which the Father was, in an apparent sign of trust and favour, appointed the sole executor and trustee – the Father also inherited five lots of Farmlands in the New Territories (“Adjacent Farmlands”). 62.I would not include the Leeloong Lands and the Adjacent Farmlands in the shorthand of “Family Lands” below. The Father’s claims on them are different. They were either purchased by the Father himself or registered under the Father’s name directly. But I take into account their existence as relevant to the consideration of other matters. B.4 Development of the Urban Lands from 70s to 90s 63.By about 1992, the Urban Lands and Leeloong Land B were no longer held by the Mother. Some of them were directly sold to third parties outside the family, for profit. Most of them were injected into Leeloong for development or re-development. One piece of land was injected into another corporate vehicle known as “Tindee”. 64.It is not disputed that the Mother disposed of the Urban Lands and Leeloong Land B under the arrangement and instruction of the Father. The Mother was only asked to sign the necessary documents without being given the details. In the Mother’s own evidence, she said even if she had asked, the Father would not have told her. The Mother never received any payment from Leeloong. For those sold to third parties, the Mother would immediately have to transfer all the purchase money to the Father even if the Mother did first receive the purchase price. Contrary to the submission made by Mr Shieh, I think those facts do give an indication – a strong one – that the Mother was holding the properties on trust for the Father. 65.Using services provided in the name of TK’s Firm, the Father developed or re-developed most of the Urban Lands and sold them for profit. The usual mode was that the Father would construct multi-storey buildings on these lands and then sell them, either as an entire block, or as individual units. Sometimes, the Father would also cooperate with other developers. Most of these development projects were carried out from the 1970s to the early 1990s. As can be imagined, substantial profits were made in the process. 66.Daniel started to work in TK’s Firm in 1982. At points during the trial, he sought to emphasise his role in completing these development projects, but under cross-examination by Mr Ho, he admitted that he could not claim to be the driving force of those projects. Indeed, in view of Daniel’s unequivocal confirmation of the Father’s controlling role – given by Daniel in his pleadings, affidavits and witness statements – any attempt to retract from that position at trial would have been difficult, if not counter-productive. 67.In the Father’s affirmations for the 2011 Discovery Application and the 2013 Derivative Action, he said that whilst the development projects were carried out via TK’s Firm, and the Urban Lands were injected into Leeloong, all the development projects were indeed his own projects and all the sales proceeds generated were also his. 68.By around 1992, the only lands retained by Leeloong were the land at Nos. 20 & 21 Li Yuen Street East (“Li Yuen Street Property”) and the Leeloong Lands. 69.Unlike the other land, the Leeloong Lands were not meant to be sold off for profit. The Leeloong Building was meant to continue to generate rental income for the Chen family and had been doing so since the 1970s. The Father also said in his affirmations that all the rental income generated from the Leeloong Building was indeed his own money. 70.The Leeloong Building is 11 storeys tall. One unit in the building has been used as the office of TK’s Firm, as well as the registered offices of the Family Companies. That was the place where the Father and Daniel went to work every day before the parties fell out in 2010. The Father continued to work there until he passed away in 2015. 71.The Li Yuen Street Property was the last of the Urban Lands to be sold off by the Chen family. There was already a multi-storey building erected upon this piece of land when the family acquired it. It was said that the Father also intended to re-develop it for profit, but he was not able to reach an agreement with his business partners. The building had been leased for rental income for decades until it was sold in January 2005. I will come back to the Li Yuen Street Property later. 72.It is undisputed that the Mother had never received any actual payment coming from the rental of the Leeloong Building or of the Li Yuen Street Property, or any sale proceeds from the development projects. B.5 Wealth generated from the Urban Lands and Leeloong Lands 73.The Father’s pleaded case is that before 1996, most of the rental income and the sales proceeds from the development projects of the Urban Lands were kept in his personal bank accounts. But in 1996, as I understand it, the Father transferred cash in his personal bank accounts to Daniel’s bank accounts and also allowed further rental income and sales proceeds to be deposited into Daniel’s accounts from that point onwards. 74.The Father said the transfer was done as part of his estate planning. In 1996, the Father was about 75 years old. He became concerned that heavy estate duty would eat into the estate he wanted to leave to his Children. The Father then entrusted the relevant funds to Daniel to be kept in his bank account under a trust. Daniel understood that he had to use the funds according to Father’s instructions. 75.There is in the evidence a set of notes handwritten by the Father to record the cash and the stocks he held in various bank accounts and securities account from 1984 to 1996 (“Father’s Summaries”). The total value of the last summary dated 30 May 1996 stood at HK$125 million. The Father stopped making these handwritten notes after 1996 because, on the Plaintiffs’ case, this task was then given to Daniel after the Father transferred his funds to Daniel. 76.There is also another set of notes handwritten by Daniel which also set out the cash and the stocks he held in various bank accounts and securities accounts under his name. There are 26 of such notes in total, running from 1999 to 2010 (“26 Notes”). The first one is dated 2 August 1999 and recorded a total balance of HK$113 million odd. 77.Mr Ho suggested that the 26 Notes are a continuation of the Father’s Summaries, just as the HK$113 million in Daniel’s accounts in 1999 came from the HK$125 million in Father’s bank accounts in 1996. Mr Ho suggested the 26 Notes were prepared by Daniel as trustee, to report the balance of trust funds to the Father, the beneficial owner of the funds. 78.Daniel denied that there was such a transfer of funds from the Father to him in 1996. He offered other explanations as to where the HK$113 million in his bank accounts came from, and why he prepared the 26 Notes. But irrespective of the existence of the transfer in 1996, on his own case, the funds in his bank accounts were also traceable to the Family Lands, Adjacent Farmlands and Leeloong Lands. 79.The question arises as to whether and how funds coming from these lands have become Daniel’s. Simply put, he claims money coming from the Farmlands and Adjacent Farmlands on the basis that the Grandfather, the Mother, and/or the Father gifted them to him. For the money from the Urban Lands and the Leeloong Lands, it only transpired at a rather late stage of the proceedings that his claim was based on treating his withdrawals from Leeloong as loans. 80.On the Father’s case, also as part of the estate planning, was the change of shareholding in Leeloong in 1998. The Father had used the Mother and other people outside the Chen family to hold shares in Leeloong when the company was founded. The three boys were added as shareholders in the 1980s. In 1998, Hepburn was also added. The four Children’s current shareholdings only became as it is, in 1998. 81.Since the Father’s case is that assets held under Leeloong’s name (the lands, their rental income or sales proceeds) were beneficially his, the change in Leeloong’s shareholding would have no impact on the Father’s beneficial claim on the assets. His claim subsisted while he was still alive. But he also claimed beneficial ownership in Leeloong’s shares, which also subsisted while he was alive. He only used the registered shareholding to express his wish or intention as to how the rental income from Leeloong should be distributed upon his death. In other words, there was also a trust for the Children to hold Leeloong’s shares for the Father’s benefit. But, as said, the Plaintiffs no longer pursue this claim. B.6 Sales of the Farmlands and Adjacent Farmlands from 1999 to 2005 82.The Farmlands and the Adjacent Farmlands were disposed of from 1999 to 2005. 83.Daniel claims that the Grandfather had instructed the Mother to pass the Farmlands to Daniel, as the eldest male grandchild of the Chen family. Although not pleaded as such, it appears that Daniel’s case is not that the Grandfather had gifted the Farmlands to the Mother absolutely, but she was a mere trustee holding the Farmlands for Daniel. The distinction may not matter, because as will be seen below, I reject either formulation. 84.Unlike the Urban Lands, the Farmlands and Adjacent Farmlands were not developed. Before 1999, these Farmlands had been leased for rental income. The family entrusted a Chan Foon to collect the rental from the Farmlands on their behalf until the Farmlands were sold. Chan Foon was a foster son ‘adopted’ by the Grandfather. 85.At some point in the late 1990s, it appears that the Father must have understood that the Government may resume rural lands in the New Territories for development. In about 1997, another corporate vehicle known as “Gold Wealth” was established and the Farmlands and the Adjacent Farmlands were injected into this vehicle. 86.Daniel kept a diary in respect of his involvement with Gold Wealth’s affairs. There is certainly no dispute that Daniel was extensively involved in those affairs, and the dispute is essentially as to why or in what capacity he was so involved. Daniel says that that flowed from being the beneficial owner of the Farmlands later injected into Gold Wealth. On the Father’s side, it was said that Daniel’s involvement was as the Father’s assistant, the Father having arranged to inject the Farmlands into Gold Wealth. 87.Soon after the incorporation of Gold Wealth and the injection of the Farmlands, the Farmlands were either resumed by the Government or sold to private entities, from 1999 to 2005. The Farmlands and the Adjacent Farmlands were sold in four batches. The first batch was resumed by the Government in June 1999 for about H$28.67 million. The remaining three batches were sold to private entities from February to April 2005 for HK$18.45 million, HK$51.58 million, and HK$88.66 million respectively. The sales proceeds of all four batches total HK$187.36 million (the “Farmlands Moneys”). 88.Daniel held 99% of the shareholding in Gold Wealth and Hepburn held the remaining 1% in Gold Wealth. Hepburn also executed a Declaration of Trust (“DoT”) stating that she held her 1% shareholding as trustee of Daniel. The DoT was heavily relied upon by Mr Shieh as evidence to show that Daniel was the beneficial owner of the Farmlands. B.7 Acquisitions of Parkview Centre and Loong Wan in the early 2000s 89.Parkview Centre and the Loong Wan Building were purchased in 2001 and 2002. Loong San and Loong Wan were set up as the corporate vehicles to hold the two buildings respectively for the family. It is Daniel’s own evidence that it was the Father who made the decision to purchase the two buildings and to use two corporate vehicles to hold them. 90.The Father said this was also part of his estate planning. In his affirmation evidence, he said he did not wish for his four Children to spilt the money he had accumulated in fear that they would then become strangers after his death. He decided to invest in the property market and let the Children share the properties. This way, the Children would not part ways and could benefit from the appreciation in the property value. 91.Since incorporation, the shareholding in Loong San and Loong Wan has remained the same. The four Children each held 25% of the shares in the companies. The Father said that this was to reflect his wish or intention that his Children should benefit from his estate equally. Daniel was given a bigger portion in Leeloong (and thus Leeloong’s future rental income) to reward his loyal services to the Father for decades. But as long as the Father was alive, he held the beneficial ownership of Parkview Centre and Loong Wan Building, the acquisition of which came from funds beneficially owned by the Father. 92.It may be thought that the Father would claim the beneficial ownership of the two buildings or the shares in Loong San and Loong Wan too, along the same line as he has claimed the beneficial ownership of other assets in the Chen family. But the Father has never made such a claim in these proceedings. Since the Plaintiffs have now also dropped their claim for beneficial ownership of Leeloong’s shares, it seems that the Plaintiffs are now happy to let the shareholdings of the Family Companies to stay as they are on paper. Nor are the shares of the three Family Companies or the three buildings listed as Father’s assets in the probate documents. The four Children will thus be indirectly entitled to the three buildings and their future rental income in proportion to their respective shareholdings in the Family Companies. 93.The Purchase Price of Parkview Centre was HK$58.5 million. It was paid with a down payment of HK$28.5 million and the remaining HK$30 million was financed with a mortgage loan. The down payment was paid in 2001. The mortgage loan was fully repaid by 12 February 2005. 94.The Purchase Price of the Loong Wan Building was HK$60.2 million. It was paid with a down payment of HK$30.1 million and the other half was financed by a mortgage loan. The down payment was paid in 2002. The mortgage had been fully repaid by 20 January 2005. 95.At the time of purchase, Loong San and Loong Wan were but shell companies. The down payments clearly must have been provided by external entities. The two buildings were leased out for rental income after the purchase, but it was not the parties’ case that the rental income generated in the span of about three to four years were sufficient to repay all the mortgage loans in 2005. 96.The external source of money funding the acquisitions gave rise to the HK$53m Loan and the HK$54m Loan recorded in the books of the two companies. As said, Daniel was the one to whom the Loans were owed in the books. But it will be appreciated that the ultimate question the Court has to answer is not what was said in the accounting books, but who was the beneficial owner of the HK$53m Loan and the HK$54m Loan. 97.Daniel said he funded the acquisitions by lending money to Loong San and Loong Wan to cover the down payments and mortgage payments from 2001 to 2005. The sums were transferred by him to the companies through “13 transactions” (“13 Transactions”) as pleaded in his Defence. Transactions 1 to 7 made up the HK$53 million recorded as owed to Daniel in Loong San’s books. Transactions 8 to 13 made up the HK$54 million recorded in Loong Wan’s books. Daniel’s pleaded case is that payments for the 13 Transactions were either made from his bank accounts or from withdrawals he took or caused to be taken from Leeloong. 98.The Father said the acquisitions of Parkview Centre and Loong Wan Building were funded by him instead. His pleaded case is that he instructed Daniel to use the funds kept in Daniel’s accounts or withdrawals from Leeloong, both of which were beneficially the Father’s, to fund the acquisitions. Thus, he also beneficially owns the Loans. 99.Looking at the pleadings alone, it will be appreciated that there was not much dispute about how Loong San and Loong Wan obtained the funding for acquiring the buildings. It appears to be common ground that the funds came from Daniel’s personal bank accounts and withdrawals from Leeloong. What is at issue is who is the beneficial owners of those funds. B.8 Other major outflow of funds from the Chen family after 2000 100.From 2000 to 2005, Daniel had also, pursuant to the Father’s instruction, applied funds in his bank accounts to purchase various things for the Children, including stocks worth HK$25 million for himself and stocks of equal value for Hepburn. In 2008, under the Father’s instruction, Daniel also donated about HK$108 million in total to the Peking University (“PKU”) and Tsinghua University (“THU”) using funds from his bank accounts. 101.I note Mr Shieh’s submission that, even if Daniel used the funds in his bank accounts to defray various expenses and meet other outgoings at the Father’s directions, that does not mean that he was holding the funds on trust for the Father or Leelong. However, it seems to me that those facts certainly make it more likely that Daniel was holding the funds on trust. 102.According to the last of the 26 Notes handwritten by Daniel dated 29 March 2010, the total balance in Daniel’s bank accounts then stood at HK$180 million. B.9 Family disputes from June 2010 103.The disputes came about in June 2010 when the Father asked Daniel to distribute the rental income from Parkview Centre and Loong Wan Building to his siblings. Daniel refused. Hepburn was brought in by Father for assistance. Hepburn and Daniel quickly engaged in rather spiteful email correspondence from late June to July 2010 – and (despite the point being ventilated in evidence) it may not matter whether either side was attempting to strike a peace deal. I accept that what was written probably came from the heart. 104.Daniel relied on the accounting records to show that Loong San and Loong Wan owed him the Loans. This was instantly rejected by Hepburn, suggesting that Daniel, who had been working for the Father earning a modest monthly salary all his life, would not have accumulated money in the magnitude of HK$110 million to lend to Loong San and Loong Wan. 105.It can be seen that, right from the very beginning, the Father’s side was skeptical of what was recorded in the accounting books of Loong San and Loong Wan and did not believe that Daniel was able to accumulate as much money as he claimed. Daniel replied by saying that everything within the Family Companies were controlled or overseen by the Father and that he was the one who devised the accounting system of the three companies. Daniel also sought to explain the source of his personal wealth from a very early stage. These shall provide the backdrop against which parties’ evidence in the 2011 Discovery Application and the 2013 Derivative Application could be understood. The evidence in those interlocutory proceedings was closely scrutinized at trial. 106.Soon after the disputes ensued, the Father and Hepburn then attempted to retrieve the accounting books of the three family companies but Daniel declined and removed them from their shared registered office in early August 2010. This resulted in the Discovery Application in HCMP 2059/2011, HCMP 2060/2011. Poon J (as he then was) ruled in favour of the Father’s side on 16 May 2012. Based on the affidavits deposed by Daniel, Poon J commented that putting Daniel’s case at the highest he had about HK$28.7 million at the time when Parkview and Loong Wan Building were purchased. That HK$28.7 million was a reference to the compensation received from the Government in 1999 for the resumption of part of the Farmlands. 107.After obtaining the documents of the Family Companies, the Father instructed a forensic accountant (i.e. Mr Yuen) to look into the companies’ books. It was discovered that besides the Loans which were booked as owed to Daniel (“Loan Issue”), there were net withdrawals by Daniel from Loong San and Loong Wan in the sum of HK$7.4 million and HK$3.9 million respectively (“Misappropriation Issue”); and dividends declared by the three Family Companies in the total sum of HK$34 million were booked as debts owed to Daniel (“Dividends Issue”). This led to the Derivative Application, seeking leave to sue Daniel on behalf of the three Family Companies. 108.Judgement was given by Anthony Chan J (as he then was) in 2014. On the Misappropriation Issue, it was held that Daniel was unable to raise any defence and leave was given for Hepburn and Hoi to commence a derivative action against Daniel on behalf of Loong San and Loong Wan. This became HCA 2568. 109.On the Loan Issue, Anthony Chan J observed that the beneficial ownership of the Loans was a dispute between the Father and Daniel, and does not involve Loong San and Loong Wan. The Loan Issue (together with the beneficial ownership of funds in Daniel’s bank accounts) became HCA 570. 110.The Dividends Issue did not have to be decided by the Court in the end. Daniel eventually gave an undertaking to the Court that the declarations of dividends of the three companies would be reversed and the HK$34 million would no longer be booked as debts owed to him. The dividends were subsequently reversed in all three Family Companies. C. Beneficial Ownership of the Family Lands C.1 Source of Funds 111.The HK$125 million in the Father’s bank accounts in 1996, the HK$113 million in Daniel’s bank accounts in 1999, or the Disputed Funds in June 2010 must have come from somewhere. 112.On the Father’s case, all of them could be traced back to the sales proceeds or the rental income which had been generated from the Family Lands, as well as the Leeloong Lands and the Adjacent Farmlands. Those funds coming from the Urban Lands and the Leeloong Lands would be routed or passed through Leeloong before they were withdrawn and deposited into either the Father’s bank accounts and/or Daniel’s bank accounts. Those coming from the Farmlands or Adjacent Farmlands would be passed through some other corporate vehicles. The Father claims beneficial ownership of all lands and also the money generated by them. 113.Daniel only resorted to the Farmlands and/or the Adjacent Farmlands to explain his source of wealth in his early email exchange with Hepburn in 2010 and later in his evidence in the 2011 Discovery Application and the 2013 Derivative Application. But, by the time he filed his defence for HCA 507 in September 2014, he had also claimed withdrawals from Leeloong in the total sum of HK$106 million from 1983 to 2010 as funds beneficially owned by him. By that stage, it became clear that the personal wealth claimed by both the Father and Daniel has to be traced to the Urban Lands, Leeloong Lands, Farmlands and Adjacent Farmlands. C.2 Urban Lands 114.It may be convenient to discuss the Urban Lands and the Farmlands separately but I do bear in mind that there is substantial overlap between them, especially when the Father runs the same case concerning both types of land. 115.The Father said that Grandfather intended to gift the Family Lands to him. But, in order to avoid the impression of the Father, a senior civil servant, holding various parcels of land under his name, there was an agreement, consensus or common understanding amongst the Grandfather, the Father and the Mother that the Family Lands would be held or acquired under the Mother’s name for the benefit of the Father. 116.Daniel’s case is that the Grandfather did not have a harmonious relationship with the Father and intended to gift the Family Lands to the Mother, his daughter-in-law, so that she could raise his four grandchildren (and it can be noted here that that suggestion differs from the idea that the land was intended for Daniel alone). Daniel specifically relied on an incident in 1961 where the Father allegedly hit the Mother which he said caused the Grandfather to become more caring towards the Mother and to purchase properties for her. 117.To digress slightly here, it may be noted that for the Urban Lands, even if they had been gifted to the Mother, it was insufficient to justify Daniel’s beneficial claim to the withdrawals from Leeloong. Daniel’s case is not that the Mother intended to gift the lands to him when she injected them into Leeloong. Rather, Daniel relies on a debtor-creditor relationship with Leelong to justify his beneficial claim made on those withdrawals. I will come back to this in due course. 118.It boils down to the person to whom the Grandfather intended to gift the Family Lands. The Father and the Mother had testified to their own understanding when the Family Lands were registered under the latter’s name. But it was the intention of Grandfather, the donor or settlor of the trust, which is crucial. 119.Both sides, conveniently, gave evidence of a narrative which would advance their case. Hepburn said she recalled that the Grandfather had a good relationship with Father. The Grandfather came to their home almost every day to visit the Children, which could not be done without the Father’s blessing. She also recalled how the Father missed the Grandfather immensely after the latter’s death. She also remembered the Father as a loving husband and father. He and the Mother had a harmonious relationship until the disputes arose in 2010. 120.Decades after the Grandfather’s death, the Father still insisted on hanging a picture of the Grandfather in their home. The family would have to go to visit the Grandfather’s grave at least three times a year on Ching Ming, Chung Yeung and the third day of the Chinese New Year. In 2008, the Father donated HK$108 million to PKU and THU in the name of “the descendants of Chen Ming and Lau Ming” to honour the Grandfather and the Grandmother – Chen Ming and Lau Ming being the names of the Grandparents. Using the donation monies, PKU and THU had also named their buildings after the Grandparents. The Father also told Hepburn that he made the donation to follow the example of the Grandfather who had always been keen to contribute to education in Mainland China. Hepburn said these facts are strong evidence of the harmonious relationship between the Grandfather and the Father. 121.Of course, Hepburn’s recollection of the relationship between the Father and Grandfather is inevitably restricted by her own age. But the Father’s conduct relied upon by Hepburn as evidence of the Father’s affection and respect for the Grandfather after his death was not subject to real dispute. The Father’s conduct suggests at least that the Father had immense respect (and, if not anachronistic to a relationship at the time, love) for the Grandfather. In the Father’s subjective belief, it is unlikely that the Grandfather had – to use Mr Ho’s words – disinherited him by passing the Family Lands to the Mother. 122.Daniel and the Mother said the Grandfather and the Father did not have a good relationship. But most of what they said actually pertains to the relationship between the Grandfather and his first wife, Lau Hing. They said that by the time the Mother was married to the Father, the Grandfather had already separated from the Grandmother and lived elsewhere with a second wife. The Father and the Mother lived with the Grandmother after the couple got married. The Grandmother had a psychiatric problem and once dropped an axe onto the street. But I do not see how that would suggest that the Grandfather was not on good terms with the Father to the extent of disinheriting his eldest living son. The Grandfather could still love and respect his son even though he had separated from the son’s biological mother. 123.The Mother said the Grandfather was very fond of her as a daughter-in-law. The Mother did not recall a happy marriage with the Father. She said the Father was barbaric and controlling. She recalled the Father hit her on three occasions. But only the one time in 1961 was known to the Grandfather. She said one evening the Father hit her shoulder with such strength that she should still feel the pains years afterwards. She wanted to have a separation from the Father and the Grandfather asked her to stay for the children. 124.Nam was no more than a toddler around the time of that incident. He said the Mother was unhappy. He recalled episodes of the Mother hugging him crying after his elder siblings had gone to school. He said that, even as a toddler, he was able to absorb something. 125.Hepburn, on the other hand, recalled that that the Father and Mother were a happy couple until the family fell out in 2010. She had never heard of or witnessed the Father hitting the Mother. 126.For Daniel, the purpose of proving an unhappy marriage and that the Father assaulted the Mother was to explain why the Grandfather would choose to disinherit his own eldest son and to pass the Family Lands to a daughter-in-law instead. 127.The couple was married for 60 years by the time the Father passed away. It is hard to form any firm view on the couple’s six-decade long marriage from the bits and pieces of evidence recalled from everyone’s memory. More importantly, the existence or non-existence of the trust arrangement does not hinge on whether the Father had assaulted the Mother, or whether the Mother was happy in the marriage. Even if the facts were as Daniel and Mother had recounted, what matters is whether such facts had caused the Grandfather to disinherit his eldest son. 128.I am not persuaded that the causal connection has been made out. As pointed out by Mr Ho, on Daniel’s and the Mother’s evidence the first and only assault incident apparently known to the Grandfather occurred in 1961. But the Grandfather had started transferring or acquiring the Family Lands under the Mother’s name before 1961. From 1956 to 1960, four plots of Urban Lands (located in Boundary Street, Queens Road Central, Li Yuen Street East and Connaught Road Central) were registered under the Mother’s name. Four more plots of Urban Lands were registered under the Mother’s name from 1962 to 1964. From the pattern of transfer/acquisition, the 1961 assault, even if it did occur, did not seem to have made the impact which Daniel’s side have suggested. In fact, the transfer or acquisition occurred as soon as the Mother married into the Chen family. This is also consistent with the fact that the Family Lands were registered under the name “Chen Fung Si” (“陳馮氏”) rather than Fung Siu King. 129.Mr Shieh submitted that by the time the Grandfather passed away, Daniel, Hepburn, Hoi and Nam were only about 5 to 8 years old, and the Mother was the only living witness who could have any meaningful recollection of the relevant events. But even the Mother herself did not positively testify to the existence of the causal connection. In the 2021 Deposition, even under the increasingly leading questioning by Mr Shieh, the Mother was not able to proffer the much hoped-for answer that the Grandfather became more caring to her after the assault in 1961 and thus gifted her more lands. 130.Indeed, in the 2021 Deposition, the Mother also admitted that the Father’s position in the Government was the reason why the parties preferred not to register properties under the Father’s name. In answering why the Father purchased Leeloong Land B in 1968 with his own funds but registered that land under her name, the Mother said “at that time [the Father] was still working for the Government.” This same reasoning could easily apply for the lands purchased by or transferred by the Grandfather to her name. I accept that. 131.This inconvenience brought by the Father’s then position in the Government was also supported by documentary evidence. By then, apparently a civil servant occupying the Father’s position would have to report and seek approval from the Government for holding landed properties. The Father produced (some of) his written correspondence with the Director of Public Works, either in the form of memo or letters, in 1969. The Director found that the Father had become the registered owner of some land without reporting to the Government and invited the Father to explain. The Father in his reply apologized for the omission. There was another letter where the Father reported to the Director of Public Works that he had inherited the Adjacent Farmlands and he sought permission to retain the properties. 132.The Father also produced another set of written correspondence between the Inland Revenue Department and the Mother from 1972 to 1974. The Inland Revenue Department enquired about the circumstances under which some of the Urban Lands were transferred to the Mother. The letters were in English and the Mother said she was not the one preparing the reply letters. It appears that the replies were prepared by the Father. In those reply letters, various different men were put forward as the Mother’s husband. The Plaintiffs said that was to conceal the Father’s connection with those lands. That seems to me to be the obvious likely reason. 133.Hepburn gave evidence that the inconvenience brought by holding a lot of land under the Father’s name included causing suspicion from the Government, potential conflict of interests with the Father’s position, and arousing jealousy from the Father’s bosses. When she was under cross-examination, she frankly admitted that the Father did not tell her in those exact words, but those inconveniences were the impression she gathered from the various discussions she had with the Father in the five years from 2010 to 2015. She remarked that these worries had to be seen in the context of the 1960s and 1970s, where corruption and bribery were rampant. She also said that the Father was occupying a top position among the local Chinese in the Government, which could make him an easy target. 134.Mr Shieh submitted that the Father’s alleged inconvenience arising from his position in the Government was vague and general. He said the correspondence with the Director of Public Works showed that the Father was able to obtain the approvals he needed smoothly. He also criticized that Hepburn had no personal knowledge as to the correspondence between the Mother and the Inland Revenue Department and that by the time of that correspondence, the Father had also already left his civil servant position and any accompanying inconvenience would have fallen away. 135.Nevertheless, I agree with the Plaintiffs that the correspondence with the Director of Public Works is strong evidence showing why the Father (or the Grandfather) would prefer not to hold lots of land under the Father’s name. Whilst the Father was able to obtain approval in the examples shown in relevant transactions, the fact that approval from the Government was needed for the Father to hold land on its own would understandably be seen as an inconvenience. The inconvenience seen by the Father (as relayed by Hepburn) is also readily conceivable in the context of the 1960s and 1970s. On the other hand, I agree that, as suggested by Mr Shieh, perhaps the Court should place a little less weight on the correspondence between the Mother and the Inland Revenue Department, for the reasons he had suggested. But that would not dilute the inconvenience which I have already found. 136.As to the actual words said by the Grandfather showing his intention, both sides had very little to say. The Father’s case, which could only relayed by Hepburn, is that there was a conversation between the Grandfather and the Mother embodying the trust arrangement as the Plaintiffs suggested. The Father was present when the conversation took place. Mr Shieh said such a case is barren of detail, since no specific details about the circumstances of the conversation were given. 137.But the Mother’s evidence on this score is equally brief. In her affidavit for the 2011 Discovery Application and the witness statements made for the trial, she said when the Grandfather purchased or transferred the Urban Lands to her name, he said “daughter-in-law, this (the properties) is for you, you have to help me raise my grandchildren”. The Urban Lands were purchased or transferred over the span of almost a decade, from 1956 to 1968. Therefore, criticism of the Mother’s quoting of the Grandfather’s words as devoid of detail of the circumstances is also valid. 138.Of course, it is not easy to recall verbal conversations which took place decades ago. It is unsurprising that memory of them would be reduced into the gist of someone’s understanding about what was said or be stripped of the context or circumstances of words said. This makes it all the more important to evaluate the witness’ memory against the objective circumstances. Here, I agree with Mr Ho that the objective circumstances point to the existence of the trust arrangement. I have already found in the Father’s favour that it was inconvenient for a civil servant in his position to hold lots of land under his name. I have also highlighted the Mother’s failure in her own evidence to attribute the Grandfather’s decision to put land in her name to a decision to disinherit (or for the purpose of disinheriting) his eldest son as a result of the alleged assault in 1961. 139.The existence of the trust is also consistent with the Father and the Mother’s subsequent conduct. It is Daniel’s pleaded case that Father had all along “single-handedly” controlled and dictated the management and affairs of Leeloong. He was the one who instructed the Mother to dispose of the Urban Lands or to transfer them into Leeloong. He was also the one who developed the lands by constructing multi-storey buildings on them and who sold them for profit. He controlled the rental income and sales profits generated from the Urban Lands. The Mother said she was “ordered” by the Father to sign documents and she would not be given any details about the transactions. The Mother had no participation or even knowledge of Leeloong’s development projects. She had received no actual payment of or from the consideration. If she received any payment from any transaction, she had immediately to deposit “every cent” into the Father’s bank accounts. 140.Mr Shieh said that the Mother’s conduct points to her submitting to the Father’s dictatorial demands rather than her subjective belief that Father was the real owner of the land. Whilst the Mother was clearly of the view that the Father was dominating, I do not think the way the Mother saw herself was quite as submissive as Mr Shieh has portrayed her. The Mother’s own evidence was that she wanted a divorce after the Father hit her in 1961, which was only prevented by her own Catholic religion. She then wanted a separation but she eventually stayed for the Children. When the Father later threatened to hit her again, she opened the front door and threatened to call the Police if he dared, which eventually stopped Father from hitting her. 141.Mr Shieh also reminded this Court that the starting point in law is that the burden falls on those who seek to prove the beneficial ownership differs from the legal ownership, citing Mo Ying v Brillex Development Ltd[2015] 2 HKLRD 985 at §5.5. I have indeed borne that in mind, and I am persuaded that the Father has proved that there was an express trust in his favour over the Urban Lands. I accept that was the Grandfather’s intention. 142.For Leeloong Land A, it was gifted by the Grandfather to the Father in 1964. Daniel did not deny that it was beneficially owned by Father. 143.For Leeloong Land B which purchased by the Father albeit registered under Mother’s name in 1968, Daniel denied in his pleadings that it was held on trust by the Mother for the Father. Indeed, Daniel went as far as suggesting that it was the Mother who purchased Leeloong Land B with rental income coming from the Farmlands or other lands gifted by the Grandfather to her. I reject that. That was inconsistent with the Mother’s own evidence in the 2021 Deposition. She expressly referred to the Father’s position in the Government to explain why Leeloong Land B was registered under her name. To say the Mother “purchased” the land also does not sit comfortably with the overwhelming evidence that the transaction was driven by the Father and the Mother had little, if any, knowledge about the transaction and her involvement was limited to signing the documents as she was told. Obviously, she did not provide the funds. 144.I am also satisfied that Father was the beneficial owner of the Leeloong Lands. C.3 The Farmlands 145.The Father’s case makes no distinction between the Urban Lands and the Farmlands. What was said about the Urban Lands is equally applicable here. 146.Daniel’s case on the Farmlands is simpler than his case on the Urban Lands (and the funds withdrawn from Leeloong). It seems Mr Shieh saw the Farmlands as Daniel’s better case, and perhaps rightly so. However, ultimately that case fails. 147.The Farmlands were transferred into the Mother’s name in 1957 and 1959. Daniel was only about 1 or 3 years old at that time. 148.The Mother explained that the Grandfather was very fond of Daniel, who was the eldest son of the Grandfather’s eldest son. Such emphasis seeks to profit from the traditional Chinese belief on the importance of furthering the family line by a male heir. But this is of course in tension with Daniel’s own argument that the Grandfather would disinherit the Father, who was the former’s direct male heir. 149.Other reasons proffered to justify the Grandfather’s affection for Daniel are feeble, including Daniel’s temperament or how he was good at school. In all likelihood, Daniel was far too young for the Grandfather to tell any of these when the transfers were made. 150.The Mother said that the Grandfather instructed her that the Farmlands were to be given to Daniel in the future. In both her 2021 Deposition and the 2011 affidavit made for the Discovery Application, the Mother did not say when such instructions were given. At the trial, Daniel was cross-examined on why his own version of the event, which could only have come from the Mother, contained more detail than the Mother’s. The extra detail was that the instructions were given “at the time” when the transfers were made. Daniel admitted that that detail was not given by the Mother but sought to explain that as a result of his lawyer’s translating the Cantonese information given by him into English. 151.In the 2021 Deposition, the Mother’s evidence was that she had kept the Grandfather’s instructions for decades without telling any of the Children. This is in conflict with Daniel’s evidence that he had learned about the instructions from the Mother. Daniel explained under cross-examination that the Mother had also said that she had told Hepburn over the phone after the disputes arose that the Farmlands had been given to Daniel decades ago. That did not seem to resolve the conflict, since the Mother herself did not refer to the Grandfather’s instruction in that telephone conversation. 152.Mr Shieh also sought to resolve that inconsistency by resorting to the Mother’s confusion. He said the Mother might have mistaken the question as referring to the other three Children rather than to Daniel. I presided over the hearing for the 2021 Deposition. This is not how I understood Mother’s evidence. Mr Shieh was the Counsel representing Mother in the 2021 Deposition. Given that he did not seek to clarify that point with Mother back then, I do not think it fair to all parties that he should now be allowed to offer another interpretation of the Mother’s own evidence ex post facto. 153.The Mother’s evidence in the 2021 Deposition was that the rental matters of the Farmlands were managed by Chan Foon, who would give all the rental income to the Father. The Mother had never received a penny, and the Father would not even allow her to ask anything about the matters. 154.Mr Ho observed that Daniel’s case over the rental matters of the Farmlands shifted from his 2011 affidavit to his 2020 witness statements. In his early evidence, he said Chan Foon collected the rental and the matter was taken charge of by the Father. But in his 2020 witness statement, he sought to better the Mother’s beneficial claim by saying that she relied on Chan Foon to manage the rental. In 2020, Daniel also said that the Father would give the rest of the rental collected by Chan Foon to the Mother, after giving a portion to Chan Foon. Mr Ho submitted that showed that Daniel attempted to better his own case as time went by, with which submission I agree. 155.Daniel’s more recent evidence that the Father would give the rental income to the Mother was also inconsistent with the Mother’s evidence. Under cross-examination, Daniel said that the Mother was sometimes muddled and did not know the source of the money given to her by the Father. Even if what Daniel said was true, that would not cast his case in a favourable light. 156.Daniel also said in his 2020 witness statement that on one occasion around 1997/1998, the Father took him to map out the Farmlands with Chan Foon and he heard the Father telling Chan Foon that the Farmlands were to be given to Daniel. Mr Ho suggested that that was a late concoction which was not mentioned in his earlier statements. In any event, little weight could be given to this piece of evidence. The Father had already passed away by 2020 and the Plaintiffs did not have a proper chance to reply. Nor was Chan Foon called to corroborate what Daniel said. 157.I also give little weight to Daniel’s evidence that he had been involved in the management of the Farmlands by travelling with Chan Foon to resolve disputes among the tenants of the Farmlands, participating in the negotiation of resumption of the Farmlands, or negotiating tax fund connected with the Farmlands Moneys. These could be equally explained by his role as Father’s personal assistant, and I think that is why he was involved. 158.Mr Shieh apparently saw in the DoT the strongest evidence in support of Daniel’s beneficial claim to the Farmlands (and the Adjacent Farmlands). He submitted that Daniel was the 100% beneficial owner of Gold Wealth. He also submitted that regardless of who had the beneficial ownership of the Farmlands before their injection into Gold Wealth in 1997 and 1998, the Father and/or the Mother must have intended to gift the Farmlands to Gold Wealth or Daniel at the time of injection. 159.Hepburn was heavily cross-examined on the DoT. The DoT was signed by Hepburn and witnessed by the Father, stating Hepburn held her 1% in Gold Wealth on trust for Daniel. Mr Shieh said that, had the beneficial ownership of the Farmlands and Adjacent Farmlands been with the Father, Hepburn would have held her shareholding on trust for the Father, rather than Daniel. Daniel had claimed ownership of the Farmlands in his email correspondence with Hepburn as soon as disputes arose in mid-2010. Mr Shieh said Hepburn had not offered any explanation in the various affidavits and witness statements filed in the decade that followed. He suggested that that was because Hepburn had no good explanation and wished to avoid having to commit to a story until the last minute at the trial. 160.The explanation offered by Hepburn in the witness box was that she had to travel frequently to the Mainland for work from 1996 to 1999. Making Daniel the 100% owner of Gold Wealth on paper might be convenient if shares of Gold Wealth had to be sold. The Father did not tell her that in exact words, but that was the impression she gathered from the discussions with the Father from 2010 to 2015. She could not pinpoint the exact time such idea came to her. She agreed that she would have had ample opportunity to state this reason in her affidavits or witness statements, but she did not do so. Mr Shieh also made the point that, in law, her signing the DoT would not avoid needing her physical presence in Hong Kong should it be that the shares of Gold Wealth were to be sold. 161.Hepburn said that, before the disputes arose, she had “zero” involvement in Gold Wealth. She said she was probably asked by Daniel to sign the DoT and Daniel did not explain to her what the document was for. She accepted she signed it, of course, but had not focused on the details of it. This is consistent with her overall stand that she (and other family members) would sign documents from time to time as requested by the Father and Daniel (as the former’s personal assistant) without asking questions. 162.Before the Father passed away, she did explore the matter with him. The Father told her that the shares distribution in Gold Wealth did not matter because the company or the assets held by the company would be sold sooner or later. Hepburn understood that the Father was comforting her and explaining that he did not favour Daniel over her. The Father did not explain further why she had to sign the DoT, and the matter was dropped. 163.Of course, the DoT lends significant support to Daniel’s case. It is of note that it was witnessed by the Father, though that is also consistent with the fact that the Father controlled everything. But there are also merits in Hepburn’s explanation. Gold Wealth was set up at a time when a company required at least two shareholders and two directors. Hepburn was also made a director alongside Daniel despite it being incontrovertible that she was not expected to be, and did not become, involved in managing Gold Wealth. She could have been made a shareholder to meet the then legal requirement. Gold Wealth was only set up when the family saw in sight some prospect of selling the Farmlands and Adjacent Farmlands for profit. It was not meant to be passed on to future generations, unlike the three Family Companies. Hepburn’s late explanation given in the witness box, indeed, would make sense from a layman’s perspective as to why it might be convenient for Daniel to be the 100% shareholder, regardless of its legal effect. But I have given it relatively little weight since it was only offered at the last minute. 164.I do not think the Plaintiffs are in effect saying, or need to say, that the DoT was a ‘sham’. I think it is possible for Hepburn to have held her share on trust for Daniel, without necessarily disturbing the idea that Daniel nevertheless held the company shares on trust for the Father. It was also clearly the general aim of the Father to keep his ownership/name out of things. More importantly, I consider the parties’ treatment of the sales proceeds of the Farmlands persuasive evidence in support of the Father’s case. 165.Daniel admitted at trial that compensation of the first batch of the Farmlands received in 1999 (HK$28.67 million) was used to pay the initial deposit for acquiring the Bonham Building in the same year (HK$28.8 million). It was the Father who decided that the holding vehicle of the Bonham Building, a company known as “Goldfund”, should be co-owned by Hepburn and Daniel on a 50/50 basis. When Goldfund was sold in 2005, they each received half of the profit on that investment, in the sum of HK$6,876,144.9. 166.Daniel was evasive when he was cross-examined on why Hepburn, who had not paid a penny to acquire the Bonham Building, should be allowed to share half of the profit. He initially said that it was the solicitors who simply issued the cheques according to the company’s information as provided to them, which was a reference to the 50/50 shareholding between him and Hepburn. When he was asked why he did not tell the solicitors or Hepburn that Hepburn did not provide a cent and all profit should be his, he said it would be very bad if he did that. Eventually, he was forced to admit that the transaction and the profit-sharing ratio between him and Hepburn was all decided by or approved by Father. 167.I agree with Mr Ho that Daniel accepted the Father’s distribution of the profits because the Father was the beneficial owner of the Farmlands (and also the Adjacent Farmlands). The Father’s dictating or controlling the use of sales proceeds from selling Goldfund was but a continuation of his controlling the rental matters of the Farmlands and the Adjacent Farmlands all along. C.4 The Autobiography and the Sequel 168.Mr Shieh also relied heavily on the “Autobiography of Chen Tsing San” (“Autobiography”) and its “Sequel” both of which were signed by the Father, but typed up by Hepburn. But it can be noted that Daniel initially placed no reliance upon the Autobiography or the Sequel in his pleadings or witness statements, so as to rebut the Plaintiffs’ case. 169.The Autobiography was dated 2 April 2011. The original was in Chinese, but the parties had agreed on an English translation. The Autobiography and the Sequel were written from the first person perspective of Daniel. It is fair to say that the language is vivid, emotional and sarcastic. The Father and Hepburn said that they would send them to everyone Daniel knew. It was a threat to expose Daniel’s greediness for the world to see, as a way to embarrass Daniel. 170.Mr Shieh and Mr Ho have placed emphasis on different paragraphs of the Autobiography. It is perhaps only fair to read the particular paragraphs in the context of the Autobiography as a whole. I have numbered the paragraphs for easy reference:
171.Hepburn said the question marks after the family members are meant to ask if Daniel would still recognize or treat his own Father, Grandfather, and siblings as family. 172.Mr Shieh’s focus was on the reference to the Farmlands and Adjacent Farmlands in §7. He said the Father meant all that was said in the Autobiography to be the ugly truth, which would show Daniel in a poor light, including the reference to the Father’s giving him the Adjacent Farmlands and the Mother’s giving him the Farmlands. They were examples showing that Daniel had obtained everything he had through the bounty of his parents, and nothing by himself. The Father’s own belief at the time of writing was consistent with Daniel’s case that the Farmlands and the Adjacent Farmlands had already been gifted to Daniel. 173.The Sequel is much shorter. Mr Shieh relied on the following paragraph:
174.His focus is on “unlike mother (???) who gave all properties to me solely”. He said it was a reference to the Farmlands. 175.Mr Shieh also relied on a letter dated 16 April 2011 to suggest that the Father believed what was said in the Autobiography are all true. The letter was also signed by the Father and sent to Daniel. It is stated in the letter:
176.Mr Shieh further relied on another note dated 24 May 2011, which was signed by Hepburn herself and issued to Daniel. She said in the letter that she believed all that was said in the Autobiography and the Sequel was true. 177.Hepburn said the Autobiography and the Sequel were written from Daniel’s perspective, setting out what he believed without suggesting that the Father endorsed Daniel’s claim. It was meant to expose Daniel’s greedy mentality – and ridiculous and betraying ideas – in claiming family assets as his own. Hepburn admitted that the Father did not tell her that in his own words, but this was what she understood as she talked with the Father in the process of typing up the document for him. 178.There is also documentary evidence suggesting that Hepburn herself did not believe that Daniel could claim beneficial ownership of the Farmlands from the very beginning. The ownership of the Farmlands had been the subject of the intense email exchange between Daniel and Hepburn in late June 2010. Hepburn rejected Daniel’s claim that he owned the Farmlands and the sales proceeds deriving from them. In an email dated 29 June 2010, she said “I am sure it never was the intention of the grandfather and the father to let you take up the whole of $100,000,000 + alone.” By another email of the same day, she also said “Grandfather was alive when all 4 of us grandchildren were born. He would not have will it to just one. Your mother and you are Rebecca and Jacob, getting the portion that should be ours with deceit and malice”. 179.I suppose, in this regard, it is of note that the document is a purported autobiography (in the voice of Daniel), not a biography – and so was written essentially as a presentation of Daniel’s apparent own views. This lends support to Hepburn’s evidence that the Autobiography and the Sequel only meant to set out Daniel’s claim on the Farmlands, without her agreeing his claim to be true. On the Father’s part, the evidence that the Father was only setting out Daniel’s claim on the Farmlands without endorsing the same is also consistent with the Father’s factual control of the distribution of the sales proceeds coming from Bonham Building (and thus the Farmlands). 180.I also take note that the rest of the Autobiography is actually evidence showing that the Father’s case has remained unchanged in the last 10 odd years, from 2010 to trial: that Daniel had no other source of wealth other than the monthly income of HK$30,000 he earned from working for Father (§7); that the Father was the one who funded the acquisitions of Parkview Centre and Loong Wan Building (§8), that the Father deposited all the money he made from the investment projects and rental income into Daniel’s personal bank accounts to evade estate duty and in truth all money in Daniel’s personal bank accounts was owned by the Father and Daniel must follow the Father’s instructions in applying the money (§9); and that Daniel had manipulated the books of Loong San and Loong Wan in respect of the Dividends Issue (§10). 181.I do not think that the Autobiography is any strong evidence showing that the Farmlands or Adjacent Farmlands had been given to Daniel as an absolute gift. Far from it. 182.Having considered all the evidence, I have come to the view that the trust also existed for the Farmlands, for the Father’s benefit. The Father’s beneficial interests subsisted even after he transferred the Farmlands (and the Adjacent Farmlands) into Gold Wealth. D. Beneficial ownership of shares and assets of the Family Companies D.1 How it might matter 183.The Father does not claim (or no longer claims) in these proceedings beneficial interest in the shares of the three Family Companies or the three buildings held by them. This does not prevent the Father from claiming beneficial interest in the Disputed Funds. His claim is that he owned the rental and sale proceeds from the Family Lands (and other lands) which eventually went into the Disputed Funds. 184.But Mr Shieh submitted that it is nonetheless relevant to examine whether Father had beneficial interests in the shares and assets of the Family Companies. He said the Father did intend to pass onto the Children the beneficial interest of the assets of the Family Companies alongside the shares of the companies. He might have seen a stronger case for Daniel in claiming beneficial ownership of the shares. Bundling Leeloong’s shares with Leeloong’s funds might better Daniel’s position in respect of the funds. D.2 The Autobiography, Sequel, and the Father’s estate planning 185.There are two strands to Mr Shieh’s argument that the Father had already given the shares and assets of the Family Companies to the Children. 186.The first strand of Mr Shieh’s argument relies on the Autobiography, the Sequel and an earlier note signed by Father. 187.That is a note dated 16 November 2010 (“Nov 2010 Note”) signed by Father and circulated to all the Children. The Nov 2010 Note is in English. It was typed up by Hepburn according to the Father’s instructions. I have numbered the paragraphs for easy reference:
188.Mr Shieh’s focus is on §3, where the Father said he “gave” shares in the companies to the children, using the past tense of the word. The Father did not say he “would give”. There was no mention of any condition that the beneficial ownership should only pass upon Father’s death. He submitted that the plain meaning of the Nov 2010 Note was that at least by the time when all of Leeloong’s shares were transferred to the Children in 1998, so had the interests in Leeloong Building. Along the same line, he submitted that the interests in Parkview Centre and Loong Wan Building were also given to the Children when they were given shares in the two companies after their incorporation in 2001. 189.Hepburn said that the main purpose of the Nov 2010 Note, which was circulated to all children, was to call out Daniel and to alert the other children to protect themselves. As she talked with the Father and translated his meaning into English, she understood that what the Father meant was that the family assets would pass to the Children after his death or at a time he would so choose. As long as he was alive and there was no official announcement, all properties still belonged to him. The Father did not put in such exact words when she typed up the note, but that was what she and everyone in the family would understand. 190.The Father talked to her in Cantonese. She could not remember what were the exact words from which “I gave the above properties” was translated. She believed that she used the past tense “gave” because in her mind she was referring to the past action of transferring or the allocation of shares in the companies. It can be recalled that the current shareholding in Leeloong was fixed in 1998 and the shareholding in the other two companies was fixed when they were incorporated in the early 2000s. 191.Mr Ho’s focus was on §§4-6, which are broadly consistent with the Father’s now pleaded case. §5 suggests that the money in Daniel’s personal accounts does not belong to Daniel, but to the family. It can also be seen from the other paragraphs that the Father saw himself as the one in rightful control of the funds and Daniel was merely authorized – by the Father – to operate those funds by signing cheques. 192.Mr Shieh also relied on the following paragraphs of the Autobiography and the Sequel. They are reproduced below for easy reference. In the Autobiography:
In the Sequel:
193.Mr Shieh submitted that these also indicated that the Father’s division and passing down of the properties had already taken place. 194.Hepburn’s stance remains that the Father was writing from Daniel’s perspective in the Autobiography and the Sequel. Mr Ho said this is reflected by the ending remarks of “how hateful!” in the same paragraph. 195.As said, Mr Shieh has bundled the shares of the Family Companies with the assets owned by the companies. But, regardless of the position of the shares which are not at issue in the trial, the Father clearly indicated in the Autobiography that he was the owner and remained in control of the family assets. That was made clearly at §9 of the Autobiography (quoted above) when the Father said all funds in Daniel’s bank accounts still belonged to him and Daniel should obey him in using those funds. To the same effect is the reference in §12 that the Father solely funded the acquisitions of Parkview Centre and Loong Wan Building and staff of the companies knew that Father was the real boss. The fact that the Father intended to remain in control of the Family Companies and to remain the real owner of the assets would also suggest that the Children were only intended to be the paper, rather than the beneficial, owners of the shares of the companies. 196.The reference to evasion of estate duty in the Autobiography was another unmistakable remark that the Father only intended the transfer to take real effect after his death. I do not think that the documents relied upon by Mr Shieh are evidence showing that the Father intended to pass his assets along with the shares of the three companies to the Children whilst he was still alive. 197.There is also a second strand to Mr Shieh’s argument, riding on the Father’s estate planning. He submitted that if the Father had intended that the Children should be able to obtain an interest in Leeloong Building by becoming shareholders of Leelong, it must follow that the beneficial ownership over the properties were vested in Leeloong all along. Otherwise, the passing of Leeloong shares to the Children would have been completely ineffectual. 198.I do not agree. The Father’s case on estate planning is, although the Plaintiffs do use not these exact words, that there was an understanding among the family that the Children would only benefit from the Father’s estate after his death in proportion to their respective shares in the companies’ shareholding. Whilst shares were allocated in 1998 and 2001, the Children would only become the real owners of the Family Companies and the assets held by them after the Father’s death. Whilst the Father was still alive, he would remain in control of everything. The Children would obey the Father’s wish on how his estate should be divided without going through a legally enforceable will. The absence of a legally enforceable will is the key to evading the then applicable estate duty tax. The plan could have worked if the Children were willing to follow it. D.3 Children were only expected to be paper owners of Leeloong 199.It is clear that the Father had only intended for the Children to be paper owners of Leeloong whilst he was still alive. The Children must have understood that accordingly. 200.It is common ground between the parties that Father single-handedly controlled and dictated Leeloong’s management throughout the years, and all the major decisions had to be approved by him. Even though Daniel had assisted the Father, his role was clearly the subordinate rather than the boss. Hepburn, Hoi and Nam had no involvement in managing Leeloong and had very little knowledge about the company matters before the disputes arose. 201.The shareholdings in Leeloong went through several changes since its incorporation in 1971 until its current composition was set in 1998. The three sons were only added as shareholders in 1985 and Hepburn was added in 1998. The Children (perhaps except Daniel) knew very little about their shareholding in Leelong, although they were asked to sign the relevant documents. Hoi said he did not even know that he had become a shareholder at the material time. Hepburn said she was not told that she became a shareholder in 1998. Nam said the Father might have told him that he had become a shareholder, but he admitted that he was not told about the proportion and any detail. 202.It has now become clear that the Children have never received any actual payment of dividends from the Family Companies although they had all signed dividends receipts as instructed by the Father. Standing out from the documentary evidence is a blank receipt signed by Hoi. He did not return to Hong Kong until 2007 and he would sign blank dividends receipts and let Father fill in whatever detail he saw fit. 203.No shareholders’ meeting ever took place. The Children were content to leave the management entirely in the Father’s hands. 204.The Children had never exercised their powers nor enjoyed their rights as shareholders of Leeloong. Nor had they ever attempted to do so before 2010. I agree with Mr Ho that they must have understood their roles as the Father’s nominees. 205.A similar pattern could also be observed in Loong San and Loong Wan. I would think that the Children had also understood that they were only the Father’s nominees before he died. But that is not important in these proceedings. 206.I agree with Mr Ho that the Father was the beneficial owner of assets and funds held by Leeloong and, if necessary, also of the shares of Leeloong. E. Beneficial ownership of withdrawals from Leeloong 207.This is crucial to the Father’s beneficial claim over funds sitting in Daniel’s accounts and the Loans in the books of Loong San and Loong Wan, since both could be traced to withdrawals from Leeloong. 208.The bulk of Leeloong’s funds, derived from the sales proceeds and rental income from the Urban Lands and Leeloong Building, were either withdrawn by the Father or Daniel. This is not disputed between the parties. 209.The Father’s pleaded case and affirmation evidence is that he had been withdrawing funds from Leeloong and keeping the same in his personal bank accounts until 1996. Daniel’s pleaded case is that he had been making withdrawals from the Family Companies under the Father’s instructions. 210.In Master Au-Yeung’s directions in 2016, the experts were directed to opine on five issues. Among them are the accounting practices of the Family Companies and the withdrawals from and deposits into the Family Companies by the Father and Daniel. 211.It may appear that there were fierce disputes between Mr Tang and Mr Yuen. But upon closer scrutiny, on matters where their evidence is of value to the Court, there is much common ground between them. 212.In Mr Tang’s 2016 Report, he observed the following in respect of Leeloong’s accounting practice and fund flows:
213.Mr Yuen disagreed with Mr Tang on the precise figures and some other aspects of his observations. But I do not believe Mr Tang would (nor would the Father) dispute that the rental income and sales proceeds received by Leeloong were withdrawn by either the Father or Daniel over the years. 214.What is disputed is, as between the Father and Daniel, who could claim the beneficial ownership of withdrawals from Leeloong. The Father’s case is that he beneficially owned all withdrawals from Leeloong, regardless of who the drawer was. I shall not repeat the basis of the Father’s claim. 215.Daniel claims that he was beneficial owner of the withdrawals from Leeloong made by him, totalling HK$106 million from 1983 to 2010. The basis of his claim is a debtor-creditor relationship. Simply put, when he withdrew a sum from Leeloong’s bank accounts and put it into his own personal accounts, the sum withdrawn became a loan Leeloong lent to him. But this was not how he has always been putting his case in the past decade or so. It is fair to say that his claim only “evolved” to what it is now by 2018 or 2019. 216.His ability to lend to Loong San and Loong Wan to the tune of HK$110 million was challenged by Hepburn in the email exchange in mid-2010. At that time, Daniel only sought to justify his claimed personal wealth by making reference to the Farmlands. He did not mention his withdrawals from Leeloong. By two notes handwritten by Daniel dated 23 and 25 July 2010 (“July Notes”), he attempted a calculation exercise to show the Father how much of the funds sitting in his personal bank account were his own personal funds. He did not include the HK$106 million withdrawals from Leeloong in the July Notes. I will revisit the July Notes below. 217.Even after Daniel became legally represented in the 2011 Discovery Application, he did not include the HK$106 million withdrawals as his personal funds in his affidavit. He included the proceeds of Farmlands of around HK$187 million, the sale proceeds of Kennedy Road Flat of around HK$10.6 million, and the sales proceeds of some properties in the United States of around HK$7 million to reach a total of HK$205 million. 218.He did mention withdrawals from Leeloong in the affidavit. But that was not for inclusion in his personal wealth. Rather, that was for showing that his withdrawals from the Family Companies were proper, in the context of rebutting the Plaintiffs’ arguments that the accounts of the Family Companies were irregular. At §114, he said
219.Exhibit TS-61 was the last of the 26 Notes. I will return to that below. 220.From the paragraph quoted above, clearly Daniel did not see the withdrawals from Leeloong as his money. He withdrew money under the Father’s instruction, and he provided a summary to keep the Father informed about how much money Daniel had withdrawn under the Father’s instructions. The language is consistent with his acting under some sort of stewardship or trusteeship. 221.As mentioned above, Poon J (as he then was) ruled against Daniel and allowed discovery and inspection of documents by a Judgment dated 4 June 2012. Poon J observed in the judgment that by early 2005, Daniel did not have sufficient money to lend Loong San and Loong Wan in the order of HK$110 million. Parkview Centre’s mortgage payments were fully paid in February 2005, and Loong Wan’s in January 2005. By then, Daniel had only received the sales proceeds from the first batch of the Farmlands, in the sum of HK$28.67 million. 222.Mr Ho submitted that Daniel was prompted to search for other sources of funds by Poon J’s judicial observation in 2012. Daniel did admit at the trial that he would have to look for other sources of funds in light of Poon J’s observation. 223.Then, when Daniel filed his Defence and Counterclaim for HCA 570 in September 2014, withdrawals from Leeloong were included for the first time as funds which could be used in connection with the acquisition of Parkview Centre and Loong Wan Building. But even so, the basis for his beneficial claim – the debtor-creditor relationship – was only added by further amendments made in September 2019. 224.Daniel’s pleadings went through a few iterations. The relevant part is to be found at §§50-52, 112 and 165 of the latest version amended in September 2019. §§50 and 50A provide as follows:
225.§51 sets out Daniel’s withdrawals from Leeloong year by year from April 1983 to March 2010. From April 1983 to March 2001, the net withdrawals amounted to HK$54 million. From April 2001 to March 2005, the net withdrawals amounted to HK$29.5 million. 226.§52 provides as follows:
227.The drafting of §112 is not entirely clear to me, but it also seems to suggest that the HK$106 million withdrawal from Leeloong was part of Daniel’s personal funds. §165 then explains how Daniel, relying on the sales proceeds of the first two batches of the Farmlands and his withdrawals from Leeloong up to March 2005 would be sufficient to cover the 13 Transactions by which he lent substantial sums to Loong San and Loong Wan. 228.The bones of §§50, 51, 52, 112 and 165 were already there in the first version of Daniel’s Defence and Counterclaim, filed in September 2014. They were not substantially amended in October 2018 or in September 2019. §§50 and 52 clearly indicate that Daniel made all the withdrawals under the Father’s instruction and all withdrawals were indeed the Father’s. §50(5) pleads that the Father deliberately concealed his involvement in withdrawing funds from Leeloong in its accounting books, and made the Mother or Daniel be the accountable director to those withdrawals for different periods on Leeloong’s audited financial statements. 229.In contrast, the entire §50A was only added in September 2019. §50A is the paragraph which sets out for the first time the basis for Daniel’s beneficial claim on the withdrawals, i.e. the debtor-creditor relationship. 230.Even on the pleadings alone, the tension can be spotted between the debtor-creditor relationship added in 2019 through §50A(f) and the earlier plea in §50(5) that the withdrawals made by Daniel were indeed the Father’s. 231.Daniel’s affidavits and witness statements deposed up to 2016 were consistent with the earlier plea that the withdrawals, executed by Daniel, were indeed the Father’s. This further adds strength to the suggestion that Daniel’s ownership claim on Leeloong’s withdrawals and the debtor-creditor relationship were but a desperate last minute invention to plug the holes in his case. 232.I have already quoted §114 of Daniel’s 2011 affidavit above. In Daniel’s first witness statement filed in 2016 for HCA 570, he also reiterated that the withdrawals he made from Leeloong were indeed the Father’s withdrawals. At §153, he said:
233.His 2011 affidavit and the 2016 witness statement are contradictory to his current case that he was the beneficial owner of the withdrawals. Daniel could not at the same time claim that his withdrawals from Leeloong were both his and the Father’s. 234.Daniel had no good answers to explain the inconsistency under cross-examination. He said there were more than 10,000 documents e.g. cheque stubs, deposit slips, etc., and it took professional accountants months to sort through the documents for him. If what Daniel meant was that he did not know that his withdrawals from Leeloong could be treated as loans until his accountant told him so, this is hardly helpful to his case. 235.His accounting expert could only give evidence on the accounting treatment of funds withdrawn by him in Leeloong’s books. That could well be one piece of evidence reflecting the true legal nature of the underlying transaction and parties’ intention. But it does not necessarily follow that a loan between the company and the director as recorded in the company’s internal ledgers or even audited financial statements must reflect the true nature of the underlying transaction. 236.Indeed, it appears that Daniel’s own accounting expert, Mr Tang, would not recommend taking at face value the internal ledgers and audited financial statements of Leeloong (as well as Loong San and Loong Wan). In sections 12 to 13 of his 2016 Report, Mr Tang observed that:
237.The quotation marks are Mr Tang’s. His views are that for Leeloong (and Loong San and Loong Wan), its accounting books and audited financial statements would record what the Father wanted to be recorded, if written documents such as dividend receipts and audit confirmation signifying the agreements of the relevant directors could be provided. An example supporting Mr Tang’s view is the transfer of balance in the Directors’ Account from the Mother to Daniel in 2001 (when the Mother had no real involvement in Leeloong’s business and Daniel disavowed ownership of the debts in his 2011 affidavit). 238.It is hard to see how Daniel could rely on the Leeloong’s accounting records or the opinion of his own accounting expert to claim his withdrawals from Leeloong as a debt between him and the company. 239.Nor was Daniel able to explain how the debtor-creditor relationship came about in his own words at trial. When he was asked if he ever discussed with the Father or tell him that the withdrawals from Leeloong were Daniel’s, he first said that there was an understanding that when the Father asked the Children to withdraw money from Leeloong and put it into their personal accounts, the money would belong to the account holder. In answering clarification from the Court, he said that if money was put into his personal account, either the money was his money or would become his money. He also recalled that at the time of making the donation to PKU and THU in 2008, the Father once said to Daniel that the Father had given him so much money and asked him what he wanted to do with the money. What he said is more akin to a gift from the Father rather than a loan from Leeloong. It is also implicit in his oral evidence that the Leeloong’s funds actually belonged to the Father such that the Father was able to gift those funds to his Children. 240.The debtor-creditor relationship appears to be a construct come up with by those representing him. The opening of §50A is very telling. It says that the various things, including the debtor-creditor relationship is to be “inferred” from §50. §50A is in tension with, rather than a logical flow from, §50. But the point is that the choice of words may suggest that Daniel’s case is not that he had taken a loan from Leeloong as a matter of primary fact. The alleged debtor-creditor relationship is only to be “inferred”. Indeed, Daniel did not plead any loan agreements or express discussion about them. The only thing said to be capable of making the inference is that Daniel’s withdrawal was consented to by all directors and shareholders and authorized by Leeloong. With respect, I do not see how that could lead to an inference that the withdrawals are true loans in the circumstances. 241.Under cross-examination, Daniel kept repeating that he withdrew money from the bank accounts of Leeloong (and other companies) and deposited money back day in and day out as a matter of practice. He confirmed, in answering questions from the Court, that every withdrawal from and every deposit back into the accounts of the Family Companies was done in accordance with a long-term practice which was instructed by the Father. 242.I agree with Mr Ho that Daniel could not have harboured the genuine belief that he beneficially owned the withdrawals from Leeloong. Nor did he become a debtor of Leeloong for the amount he withdrew. I find that all withdrawals he made were made pursuant to the Father’s instruction. The Father remained the beneficial owner of the funds withdrawn from Leeloong by Daniel. 243.For completeness, I also mention that Daniel was cross-examined on how he could claim the entire HK$106 million withdrawals as his personal funds in view of (1) that figure did not give credit to the deposit back into Leeloong which in Daniel’s case should have reduced the withdrawals to the net sum of about HK$82 million, (2) the figure also did not give credit to dividends declared which in Daniel’s case also should have reduced the withdrawals; and (3) that figure was inconsistent with the audited financial statements of Leeloong which shows that by 31 March 2010, Leeloong had only owed Daniel HK$2.1 million. I have also taken those into account in reaching my conclusion. F. Beneficial Ownership of Funds in Daniel’s Accounts F.1 Evolving Case 244.Daniel’s own understanding about the beneficial ownership of funds in his accounts evolved as the litigation progressed from the 2011 Discovery Application to the trial, as will be seen below. In any event, by the time he filed his first witness statement in 2016 for HCA 570, he had come to claim beneficial ownership of all funds sitting in his bank accounts from 1999 to 2010, as summarized by the 26 Notes handwritten by him. How he came to amass such wealth has always been at the forefront of the dispute. It has become crystal clear that he could not explain the source of his wealth without also claiming beneficial ownership over the substantial withdrawals he had taken from Leeloong over the decades. 245.I keep in mind throughout my analysis that it has not been suggested that the Father actually used any words of gift in relation to the funds held by Daniel. 246.I have already found that the Father was the beneficial owner of all withdrawals executed by Daniel under a long-term practice as instructed by the Father. This was not just a question of the Father’s knowledge and assent; it was all done on the Father’s instructions. This is weighty evidence pointing towards a trust in the Father’s favour over funds sitting in Daniels’ accounts. 247.Mr Ho also relied on the following evidence. F.2 The 26 Notes 248.The only contemporaneous documents recording funds in Daniel’s Accounts are the 26 Notes handwritten by Daniel. The first note of the series is dated 2 August 1999 with a total balance standing at HK$113 million. The last of the series is dated 29 March 2010, with a total balance of HK$180 million-odd. On average, two to three notes were produced every year. 249.These are short documents, a half- or one-page long. The balance in each bank account was set out. If the balance was in foreign currency, it would be converted into HK Dollars by multiplying by an exchange rate. Stocks held in securities accounts would also be converted into a cash value. Then all assets would be summed up to give a grand total in Hong Kong Dollars. It appears that sometimes major expenses would also be recorded. For example, in the note dated 25 July 2000, there were references to an expense of HK$3.5 million marked as “Gold Wealth” and an expense of HK$2 million marked as “LL Goldfund”. These two items were deducted from the other assets to make the grand total of HK$102 million-odd in that note. 250.Daniel has given his own evidence on the nature of the 26 Notes. That last note of the series was exhibited and referred to in §114 of his 2011 affidavit quoted above. Daniel described how he had been withdrawing funds from the three Family Companies into his personal bank accounts with the Wing Lung Bank under the Father’s instructions. The 26 Notes were prepared by him to let the Father know the amount of money in his bank accounts. 251.Whilst only the last of the series was exhibited, it would be assumed the entire series was produced for the same purpose. In any event, Daniel did not deny that the other 25 Notes were of the same series with the one exhibited to his 2011 affidavit. Although only Wing Lung Bank was named, the 26 Notes list balances with different banks at different times, including the Credit Suisse Group, the Bank of New York, Po Sang Bank Ltd, Coutts & Co., Bank of China (Hong Kong) Limited, and UBS AG. These would cover all the banks listed at §13 of the Amended Statement of Claim. 252.The 26 Notes, read in the context of Daniel’s own words in the 2011 affidavit, are strong evidence that he had been withdrawing funds from the Family Companies, starting with Leeloong in 1996, on the Father’s behalf. I also accept that the 26 Notes were – in Mr Ho’s words – “trust reporting notes” produced by Daniel in his capacity as trustee to report to Father about his money kept in Daniel’s bank accounts. 253.At the trial, Daniel tried to wriggle out of his own 2011 evidence by proffering another explanation as to why the 26 Notes were provided. He said he prepared them to facilitate the Father’s advising on his foreign exchange trading. Daniel presented a picture of him and the Father collaborating in investment and foreign exchange trading. The notes were prepared so that “they” could know about their investments. Sometimes, the Father would look at the notes prepared by him and remind him of the mistakes he made and he would then correct them. Their relationship was good before 2010 and they were helping each other. 254.However, I agree with Mr Ho that the 26 Notes were not produced to facilitate his foreign exchange trading:
F.3 The July Notes 255.There is another set of contemporaneous documents, i.e. the July Notes, handwritten by Daniel in July 2010. There is a note dated 23 July 2010 and another dated 25 July 2010. The latter note is an amended version of the earlier one. It is not disputed that the July Notes were produced for the purpose of sorting out how much money was owned by Daniel, after disputes had arisen. 256.The notes were one-page long documents. In the upper part of the page, Daniel set out the money in bank accounts under his name. In the lower part, Daniel set out money which he said belonged to him. The total in the lower part exceeded the total in the upper part, and he said the Father owed him the difference. 257.Taking the note dated 25 July 2010 as an example: in the upper part, Daniel set out the balance in his bank accounts with Coutts, UBS, Bank of China and Wing Lung, to give a total of HK$164.65 million. Then, in the lower part of the note, he set out the sales proceeds from the Kennedy Road Flat, a sum which is apparently a reference to sales proceeds of the properties at 2635 and 3535 Fillmore Street San Francisco, the sales proceeds from the four batches of farmlands held by Gold Wealth, to give a total of HK$205.77 million. On top of this figure, he further added his one-third entitlement from the sales proceeds of what he called the “Hilltop” property in the United States in the sum of HK$13.04 million. The Hilltop property was purchased under the name of the three sons but Daniel said he did not receive a cent when the property was sold. Apparently there was also a sum of HK$3.2 million, the description of which was not legible. Then, at the bottom right margin of the note, Daniel subtracted from what was in his bank accounts (HK$164.65 million) the sums which were said to be owned by him (HK$205.77 million, HK$13.04 million and HK$3.2 million) to arrive at the total deficit which is the amount Father owed him. 258.Mr Ho asked the hypothetical question that if the total in the upper part (money sitting in accounts under his name) actually exceeded the total in the lower part (money he should have owned), the excess in his accounts would belong to other people, he agreed. This is an admission that Daniel understood that his bank accounts could hold money beneficially belonging to others. This also contradicts his other oral evidence that he understood if money was transferred to his bank accounts, the money either was his or would become his. 259.Indeed, I accept the submission that the whole point of the calculation exercise performed in the July Notes was to ascertain the difference between (1) the total amount of funds sitting in the bank accounts under his name, and (2) the obviously smaller amount of funds that were said to be owned by himself, as having derived from his alleged personal assets. The recognition that funds in the account belonged to or were held for another person can only be pointing to the Father. The July Notes themselves contain the recognition that funds sitting in Daniel’s bank accounts did not belong to himself alone, and he was trustee or nominee or agent accountable to the Father. F.4 Donation to PKU and THU 260.It is not disputed that Daniel transferred funds from his bank accounts in the total sum of HK$108 million to PKU and THU in four tranches in 2008. 261.At §§50-55 of Daniel’s 2011 affidavit, Daniel recounted how he made the July Notes to show the Father that he owed Daniel the deficit. Then in §56:
262.This is unequivocal evidence from Daniel that it was the Father’s money which was donated to PKU and THU, albeit the money was transferred from Daniel’s bank accounts. 263.At that time, Daniel was apparently operating under the premise that funds sitting in his personal bank accounts were partly his and partly the Father’s. Treating the money donated as the Father’s would mean more money would be left for him in his bank accounts. 264.In §115 of the 2011 affidavit, Daniel stated again that the money donated was the Father’s:
265.Daniel has been unambiguous in his evidence that he detested the Father’s decision to donate a total of HK$108 million to PKU and THU in 2008. He said expressly that he was not himself willing to make the donations. He criticized the decision to do so as absurd and irrational. But nonetheless, having failed to dissuade the Father, he had faithfully followed the Father’s instruction and effected payment of the donations. Whilst he now claims that the money donated was his, that being in contradiction to his earlier evidence in 2011, he did not seek contribution from his siblings until more than a decade after the donation was paid. 266.I reject the submission that Daniel made the donations at the Father’s directions because, among other things, he knew that there would be a big argument between them if he rejected that request, and that it would be very difficult to mend the relationship. Further, whilst I make no assumption that Daniel was willing to use the funds in his bank accounts to meet the various outgoings because he knew they were funds held on trust for the Father, that seems to me to be the clear and only obvious inference from the totality of the evidence. 267.Nam’s evidence was also not helpful to Daniel. Nam said he would accept it, should Daniel seek contribution from him in the future. But his evidence soon failed to hold together when he was pressed about whose money was donated to PKU and THU. He first sought to suggest that the money donated was Daniel’s because the cheques paid to the universities came from Daniel’s bank accounts. But he was soon betrayed by his repeated concerns about the magnitude of the money donated. He said at that time he had about HK$18 million in cash, HK$4 million in the value of his property and he had no idea how much his shares in the Family Companies were worth. He had also just started a young family about that time. He did not have the luxury to donate money of that order. This shows that Nam must have understood that he did not have to contribute to the donation money. Eventually, Nam admitted that he considered the money donated to have been the family’s assets, rather than Daniel’s. 268.I accept Mr Ho’s submissions that what happened was Daniel used the Father’s funds (albeit sitting in Daniel’s bank accounts) to make the donation. F.5 Gift stocks to Hepburn and Daniel himself 269.In Daniel’s affidavit evidence quoted above, Daniel had used money in his bank accounts to purchase stocks for Hepburn and for himself. Stocks worth HK$25 million were purchased for Hepburn as gifts from 2005 to 2010. Mr Ho said that that means the money in Daniel’s account was the Father’s. It was the Father using his own money to direct and buy gifts for his Children. 270.Daniel later sought to describe or categorize the HK$25 million stocks not as gifts but a form of dividend distribution from Leeloong. This argument cannot hold water. The value of shares purchased every year from 2005 to 2010 did not tally with the children’s shareholding in Leeloong. For example, amongst the years where stocks were purchased, dividends were only declared in 2005, at the total sum of HK$15 million. Hoi and Nam did not get any gifts of stocks despite the fact that they had equal shareholding with Hepburn. 271.Daniel sought to answer that point by saying that Nam was in the United States at the time and Hoi had already asked the family to remit a lot of money to him already. This answer is not helpful to Daniel. His answer would explain why the Father did not see the need to make more gifts to Hoi and Nam, but it would not explain why they should not get their dividends shares as a shareholder of Leeloong. 272.Daniel also suggested that there should not be a comparison between the dividends declared and the stock purchased on a year by year basis. But still he would have to explain why the stocks purchased are referable to the dividends declared. There is no evidence except his say so. 273.Of course, the most fatal evidence to him is his own 2011 affidavit which expressly stated that the stock purchases for Hepburn and himself were the Father’s gifts. Indeed, it would make no sense for him to use his own money to buy gifts for himself (or for Hepburn). He had no good answer to that point, but resorted to blaming his lawyers in misinterpreting what he said when the lawyer drafted the affidavit. I reject that. 274.Last but not least, I accept Mr Ho’s submission that Daniel’s dividends argument is self-contradictory. Implicit in the dividends argument is that money in his bank accounts are Leeloong’s. This could not sit together with his current contention that money in his bank accounts was beneficially his. F.6 Acquisitions of Parkview Centre and Loong Wan Building 275.Daniel claims the HK$54m Loan and HK$53m Loan in the books of Loong San and Loong Wan on the basis that he had lent the two companies money for the acquisitions of the two buildings. 276.It is undisputed that the substantial part of the purchase price came from his bank accounts. 277.At the trial, Daniel admitted that the purpose of acquiring Parkview Centre and Loong Wan Building was to make money. The question therefore arises why he would use his own money to help his siblings to make money. Hepburn, Hoi and Nam together would pocket 75% of the profit from any rise in property price when they had not invested a single cent. Daniel had no good answer but to say that “it was a real bargain for them”. 278.He also admitted that he had never discussed with the Father or his siblings why his siblings should be able to profit from Daniel’s money, but he said he saw no problem in it. The impression left was that Daniel was driven to concoct more and more untruths to cover the inconvenient truth that the funds used to fund the acquisitions did not belong to him. F.7 Authorizing Father as signatory to some of Daniel’s accounts 279.Simply for completeness, I would also mention that the Father also relies on the fact that he was authorized as signatory for some of Daniel’s accounts. This has minimal weight in my consideration, since I agree with Mr Shieh that generally among the Chen family there was a widespread practice of family members being made authorized signatories for other family members’ bank accounts. The arrangement does not shed much light on who was the real owner of the funds in the accounts. F.8 Daniel’s alternative explanations 280.Mr Shieh said that Daniel’s using funds in his personal bank accounts to meet the various outgoings (including the HK$108 million donation to universities, the purchase of Parkview Centre and Loong Wan Building, the purchase of stocks for Hepburn, etc) as directed by the Father is not necessarily evidence of the Father’s beneficial ownership of the relevant funds. 281.He said Daniel’s conduct could be explained by filial piety in a traditional Chinese family, and there is nothing implausible that an obedient son would use his personal funds to make payments in accordance with the Father’s wish. This submission flies in the face of Daniel’s own evidence in the 2011 affidavit in respect of the donation to PKU and THU and the purchase of stocks for himself and Hepburn. I do not accept that Daniel used more than HK$200 million of his own personal funds to meet his duty of filial piety towards the Father. 282.Besides filial piety, Mr Shieh also submitted that since the pools of funds in Daniel’s bank accounts also include substantial withdrawals from Leeloong over the years, as a matter of economic reality, as long as the payments he made pursuant to the Father’s demands did not exceed Daniel’s withdrawals from Leeloong, he would be required to do no more than to act as a “conduit” (like a banker) by channelling the funds derived from Leeloong for these various outgoings. He would not be required to ‘eat’ into his other personal funds. 283.Whilst Mr Shieh still maintained the case that Daniel’s withdrawals from Leeloong became Daniel’s money by way a debtor-creditor relationship, the “conduit” argument is in tension with the argument that money withdrawn from Leelong would became beneficially Daniel’s. Seeing himself as the Father or Leeloong’s conduit is more a recognition that the money did not belong to himself but to those for whom he had been acting as a conduit. F.9 1996 transfer 284.It is now beyond question that a substantial part of funds in Daniel’s accounts came from withdrawals from Leeloong. 285.The remaining question is whether the Father had transferred cash from his accounts to Daniel’s in 1996. The last of the Father’s Notes dated 3 May 1996 showed a balance of HK$125 million. The first of the 26 Notes dated 2 August 1999 shows a balance of HK$113 million. 286.By letter of his legal representative dated 19 July 2013, the Father said he had transferred to Daniel at least HK$110 million from 1996 to 1999. Mr Shieh said the Father did not provide any documents proving the transfer. The Father did not even reply to Daniel’s request for particulars of the transfer as stated in a letter issued by his lawyers dated 1 August 2013. 287.By the time the disputes erupted in June 2010, there was a lapse of more than a decade from the time of the transfer. I think it is not surprising that the Father might not have retained banking documents evidencing the transfer. Daniel also did not produce bank statements or other documents of his bank accounts around the time, which could (if correct) have easily supported his case that the transfer alleged by the Father did not occur, and that the funds came from elsewhere. 288.As shown in the Father’s probate document, by the time of his death in January 2015, he only had about HK$700,000 sitting his bank accounts. There are no other assets listed in the schedule of assets and liabilities except TK Chen & Associates, the household goods at his matrimonial home and his claim in HCA 570. It may be asked where the HK$125 million he had in 1996 had gone, if not to Daniel’s accounts. 289.Daniel said the HK$113 million in his accounts in 1999 was made up of (1) the HK$28.7 million being the first batch of Farmlands Moneys he received in June 1999; (2) the HK$50 million odd being the net drawings from Leeloong from April 1983 to March 1999; (3) the HK$28 million odd being the estimated interest payment which would have accrued on his withdrawals from Leeloong from 1983 to 1999, using an annual interest rate of 5% per year compounded yearly. 290.However, since I have found that the Father beneficially owned the Farmland Moneys and withdrawals from Leeloong (and thus the interest payments which accrued on such withdrawals), attributing the HK$113 million in his accounts to those items would not help Daniel to claim the HK$113 million as his. 291.I have come to the view that around 1996, Father did make a substantial transfer of funds from his bank accounts to those of Daniel’s. F.10 What type of trust was it? 292.In Mr Ho’s opening submissions, he said Daniel held the Father’s money under an express trust or trusteeship de son tort. In the pleadings, the Father referred to an “express agreement, a common intention and/or understanding with Daniel” that the latter would kept the Father’s money on trust for him. 293.Mr Shieh criticized the Plaintiffs for failing to point to any evidence of contemporaneous communications between the Father and Daniel which show that Daniel had agreed to hold the funds on trust for the Father. He said the Father’s claim could only be based on an inference drawn from the parties’ conduct. 294.It is a fair criticism that there is nothing in the Plaintiff’s evidence to provide the particulars or circumstances by which such an express agreement was reached. But I do not think that the Plaintiffs’ case of express trust could only be inferred from conduct. Whilst not put so clearly, it appears to me that the Father’s case is that there was communication sufficient to manifest the Father’s intention, and that had been understood by Daniel, to the effect of a trust. But they also said that the such intention could also be inferred from parties’ conduct. 295.The Father had already passed away when these proceedings reached the stage of witness statement or evidence filing, but no doubt the amended Statement of Claim filed in 2014 was agreed to by all Plaintiffs, including the Father. In one of Hepburn’s witness statements, she said that around 1996 the Father decided not to hold substantial amounts of cash in his own bank accounts and entrusted Daniel to keep and maintain his cash. Hepburn said that was what the Father told her. In the Father’s affidavit made in 2011 for the Discovery Application, he also said that he entrusted Daniel with his money and Daniel understood that at all times he must use the money according to the Father’s instruction. The Father only expressly referred to the rental income from Leeloong in that affidavit. But I bear in mind that that affidavit was only made for the purpose of obtaining discovery of the Family Companies’ documents rather than supporting his claims in the current proceedings. 296.Reading all the evidence together, the Plaintiff’s evidence is, in line with their case pleaded in the amended Statement of Claim, that there was communication between the Father and Daniel which was a sufficient manifestation of a trust arrangement. 297.Mr Ho did not see the lack of formal declaration or technical words as an obstacle for the creation of an express trust. He quoted the following excerpt from ‘Hudson, The Law of Trusts’ 2nd Ed, at §2.04, stating:
298.He also cited Lee Sai Nam v Li Shu Chung, (HCA 1711/2009, 9 December 2015), in which DHCJ Leung endorsed the proposition that technical or formal words are not required for the creation of an express trust. What was required was a sufficiently clear manifestation of an intention to create such a trust. 299.Viewing the evidence in light of the contemporaneous documents and the Daniel’s conduct in applying funds in his accounts under the Father’s instructions over such a long period of time, I am satisfied that the Father had expressly manifested his intention to Daniel to an effect sufficient to create an express trust over funds he instructed Daniel to keep in his personal bank accounts. 300.There is no need to explore the case of trusteeship de son tort. 301.In view of my findings above, there is also no need to rule on the Plaintiffs’ alternative case that Leeloong was the beneficial owner of funds in Daniel’s accounts. G. The Loans owed by Loong San and Loong Wan G.1 Introduction 302.The Father’s case is that he instructed Daniel to use the Father’s money to purchase Parkview Centre and Loong Wan Building. Daniel’s pleaded case is that the funds he provided were beneficially his instead. The bulk of the expert evidence was on the 13 Transactions by which Daniel said he had provided the down payments and mortgage payments of the two buildings. 303.But, before turning to those, it is telling that Daniel admitted there was never any discussion at all about his supposedly lending such huge sums of the HK$54 million and the HK$53 million. Even on its own, that is strong evidence that Daniel knew perfectly well that the acquisition funds came from the Father, and he (Daniel) was merely a conduit. 304.Indeed, that is also consistent with what Daniel said in his witness statement that in 2011 when the Discovery Proceedings were contested, he was not aware of the extent of withdrawals that he had over many years since 1983/1984 from Leeloong, and the evidence he filed in November 2011 alleged that his drawing from Leeloong from 1996 to 2010 was at most HK$25.875 million (based on the dividend amount is purportedly declared). As Mr Ho submitted, it is entirely unconvincing for Daniel to allege a loan relationship, under a series of alleged loan agreements, when Daniel did not even know about the existence of the alleged loans or how much was borrowed. G.2 Fund flows of the 13 Transactions 305.Transactions 1 to 7 are said to be the seven loans lent by Daniel to Loong San for acquiring Parkview Centre, giving rise to the HK$53m Loan recorded as owing to Daniel in Loong San’s books:
306.Transactions 8 to 13 are said to be the funds lent by Daniel to Loong Wan giving rise to the HK$54m Loan recorded as owing to Daniel in Loong Wan’s books.
307.The experts were not asked to determine the beneficial ownership of the funds used in the 13 Transactions. That is a question for the Court. Insofar as they sought to do so in their reports, I shall disregard their opinions. 308.What the accounting experts can do is to opine on (1) the underlying fund flows of the transactions, and (2) explain the accounting treatment of the 13 Transactions in the internal accounting records as well as the audited financial statements of the 13 Transactions. Both items could be evidence to assist the Court in determining the ultimate beneficial ownership of the funds for acquiring the two buildings. 309.Insofar as accounting treatment of these transactions in the Family Companies’ accounting records are concerned, they are of very little value in shedding light on the beneficial ownership of the funds. I refer to Mr Tang’s observations set out above. 310.The fund flows of the 13 Transactions are a subject of dispute between the two experts. Except Transactions 12 and 13, which even on Daniel’s own pleaded case did not come from his bank accounts, the quarrel between the experts is whether the funds used in the transactions came from Daniel’s bank accounts. 311.From Transactions 1 to 11, except Transactions 2, 3, and 8, the experts were able to agree that the funds were injected from Daniel’s bank accounts. Despite Mr Yuen’s disagreements, as said, the Father actually would have no quarrel with Daniel’s case that the funds came from Daniel’s accounts. Perhaps this is why Mr Ho did not focus on these transactions at all in his closing submissions. 312.I do not propose to cover Transactions 2, 3 and 8 in any great length. If necessary, I am prepared to find that funds involved in these three transactions came from Daniel’s accounts:
313.But the fund flows evidence could prove no further than that before the funds landed in the bank account of Loong San, Loong Wan or parties representing them (i.e. Solicitor), their previous stop was the bank accounts of Daniel or Leeloong. 314.In the premises, it may be queried if the resources spent on the fund flows of the 13 Transactions was well justified. 315.The Father’s pleaded case and evidence is that he directed or entrusted Daniel, as his trustee, to apply the Father’s money kept in bank accounts under the name of Daniel or of Leeloong to pay the purchase price of Parkview Centre and Loong Wan Building. Putting aside Daniel’s claimed beneficial ownership of the funds, the fact that the funds of the 13 Transactions came from the bank accounts of Daniel or Leeloong was indeed consistent with the Father’s case. 316.The real issue is as to who was the beneficial owner of funds from Daniel’s accounts and of the relevant withdrawals from Leeloong. G.3 Beneficial ownership of funds in Transactions 12 & 13 317.I have already found that the Father was the beneficial owner of funds withdrawn by Daniel from Leeloong. That would cover Transactions 12 and 13. 318.Mr Ho relied on Transactions 12 and 13 to show that the acquisition funds did not come from Daniel despite the internal accounting records and audited financial statements. Mr Yuen opined that the Transactions 12 and 13 came from the sales proceeds received by Leeloong from the sales of the Li Yuen Street Property. 319.Mr Yuen’s evidence is indeed consistent with or even corroborated by the evidence of Ms Shirley Chan, the accounting clerk who made a witness statement for Daniel. The purpose of Ms Chan’s evidence in respect of the two sums in Transactions 12 and 13 was to show how Daniel did not benefit from channelling funds, the two sums from Leeloong to Loong Wan, because the debts owed to him as recorded in Loong Wan’s books were cancelled by loans of the exact same amounts recorded as due from him in Leeloong’s books. I accept that less weight should be given to her witness statement, in light of the fact that she was not produced for cross-examination (where there was no medical evidence showing any unfitness to testify in Court). But, in any event, her evidence would also serve Mr Ho’s purpose in showing that the funds in Transactions 12 and 13 came from sales proceeds of the Li Yuen Street Property. 320.Ms Chan also explained why funds were not transferred directly from Leeloong to Loong Wan but were, effectively, routed through Daniel. The Father did not prefer the Family Companies to have connected transactions in the books. That was also corroborated by Daniel’s oral evidence at the trial. The Father was the beneficial owner of the Li Yuen Street Property, its sales proceeds, and the withdrawals from Leeloong representing such sales proceeds. 321.I have already rejected the suggestion that Daniel could claim withdrawals from Leeloong as his own by a debtor-creditor relationship. G.4 Beneficial ownership of funds in Transactions 1 to 11 322.These are funds from Daniel’s Accounts. 323.Funds in Daniel’s Accounts were a mixture of his own money and the Father’s money. But it appears that the sum used in Transactions 1 to 11 must all have come from the Father. 324.Daniel pleaded the source of funds he used to fund the acquisitions of Parkview Centre and Loong Wan Building at §112 of his latest pleadings:
325.The last of the Transactions 1 to 11 was Transaction 7, which was paid on 12 February 2005. The other transactions occurred before 2005. 326.Putting aside withdrawals from Leeloong, by February 2005, Daniel would have only received the first two batches of the Farmland Moneys, totalling about HK$48 million. If the second batch which came from the Adjacent Farmlands inherited by Father from Grandfather is excluded, Daniel would have only had about HK$28.67 million at best. 327.As mentioned above, at the trial, it was revealed that the HK$28.67 from the first batch was used to pay the initial deposit of HK$28.8 million for the Bonham Building, which was not sold (via selling Goldfund) until June 2005. 328.By the time payments were made for Transactions 1 to 11, excluding withdrawals from Leeloong, Daniel at best had HK$18.5 million being the sales proceeds from the Adjacent Farmlands. I have already found that the Father remained the beneficial owner of the Adjacent Farmlands after their transfer into Gold Wealth and that he also beneficially owned the sales proceeds. 329.Transactions 1 to 11 total about HK$92 million. Excluding the HK$18.5 million from Adjacent Farmlands, Daniel would still have about HK$73.5million to account for. He would have no choice but to resort to his withdrawals from Leeloong. 330.These withdrawals were beneficially the Father’s. Contrary to Mr Shieh’s submissions, Daniel was not absolutely entitled to the funds on the basis the withdrawals were loans for which he had assumed liability to repay Leeloong. 331.I accept Mr Yuen’s evidence that, having studied the accounting and financial affairs of Leeloong relating to a period of more than 10 years, there is no piece of accounting evidence to show that Daniel had entered into some oral loan agreement or loan relationship with Leeloong. 332.The funds in acquiring Parkview Centre and Loong Wan Building were beneficially the Father’s. G.5 Other circumstances of the acquisition 333.There is also overwhelming evidence, coming from Daniel, that he only channelled the Father’s money to Loong San and Loong Wan for the purpose of acquiring the two buildings under the Father’s instructions. 334.In Daniel’s affidavit made in 2013 for the Derivative Application, Daniel said that:
335.It was also Daniel’s evidence that the holding structure and the share distribution amongst the Children in Loong San and Loong Wan were decided by the Father. 336.As already said above, the fact that the money to be made by investing in Parkview Centre and Loong Wan Building would be equally shared among the four Children also casts at a minimum very significant doubt on Daniel’s claim that the acquisitions were funded by him. I agree with Mr Ho that Daniel could not have harboured a genuine belief that the monies used to acquire Parkview Centre and Loong Wan Building were beneficially his. 337.For all the above reasons, I have come to the view that Daniel had, acting as the Father’s trustee, arranged to use the Father’s money (either from the bank accounts of Leeloong or of Daniel) to fund the acquisitions of Parkview Centre and Loong Wan Building. The Father was the beneficial owner of the HK$53m Loan and HK$54m Loan booked in the accounting records and financial statements of Loong San and Loong Wan respectively. 338.In view of this finding, there is also no need for the Court to rule on the Plaintiff’s alternative case that the Loans were beneficially Leeloong’s. H. HCA 3568: misappropriation of funds from Loong San and Loong Wan 339.Loong San and Loong Wan claim against Daniel for breach of his fiduciary duties (as a director) by misappropriating HK$3.9 million and HK$7.4 million from the two companies respectively. These sums represented the net withdrawals the Plaintiffs say Daniel had taken from the companies. 340.There is no serious dispute about the sums Daniel had withdrawn from the bank accounts of Loong San and Loong Wan. Mr Tang and Mr Yuen agreed that Daniel had at least withdrawn HK$27,027,358 from Loong San. They agreed that Daniel had withdrawn HK$25,257,300 from Loong Wan. 341.It is more contentious when it comes to the amount Daniel deposited into the two companies. But the difference between the experts lies in whether the sums related to the 13 Transactions should be taken into account in the exercise. 342.Mr Yuen did not take into account the deposits relating to the 13 Transactions, and he reached a total deposit from Daniel to Loong San from 9 July 2001 to 31 March 2009 in HK$21,959,277. For Loong Wan, he reached a total deposit of HK$17,271,883. 343.Mr Tang reached much higher figures for both Loong San and Loong Wan since he included other sums. For Loong San, he included the funds involved in Transactions 3, 5, 6 and 7, thus resulting in HK$45,249,764.22 more than Mr Yuen’s figure. For Loong Wan, he included the funds involved in Transactions 8 to 13, thus resulting in HK$53,770,485.78 more than Mr Yuen. 344.I have already found that the funds for the 13 Transactions were the Father’s money which was merely channelled through or arranged by Daniel as his trustee. I agree with Mr Ho that there is no basis for Daniel to take those funds as his own and count them as part of his deposits into the companies. There is no basis for Daniel to raise a defence of set-off based on the sums relating to the 13 Transactions. 345.After excluding the 13 Transactions, Daniel is liable to account for the difference between his total withdrawals and his total deposits into the companies. The difference for Loong San is HK$5,068,081 and that for Loong Wan is HK$7,985,467. The figures have been revised from the amended Statement of Claim in view of the updated expert evidence. I. ;Daniel’s Defence of Acquiescence 346.This is Daniel’s defence against (1) the Plaintiff’s alternative claim in HCA 570 that Daniel breached his fiduciary duties owed to Leeloong as its director by misappropriating Leeloong’s assets (i.e. the withdrawals) and (2) the claim in HCA 2568 that he breached his fiduciary duties owed to Loong San and Loong Wan as their director by misappropriating their assets. 347.I have decided above that there is no need to rule on the Plaintiff’s alternative case in HCA 570, since I have ruled that the Disputed Funds were beneficially the Father’s. That said, I shall discuss Daniel’s acquiescence defence for both HCA 570 and HCA 2568 below. 348.The defence of acquiescence arises if (1) there is an assent or lying by of one person in relation to the acts of another person; and (2) in view of the assent or lying by and consequent acts, it is unjust in all the circumstances to grant the specific relief, see ‘Spry, Equitable Remedies’ 9th ed, at p 456; and Freder Center (IO) v Gringo Ltd [2016] HKLRD 190, at §26. The paramount question in acquiescence relates to the justice or injustice of granting the particular relief sought. 349.The gist of Mr Shieh’s submission is that the shareholders of the three Family Companies have acquiesced to Daniel’s withdrawals of funds from the Family Companies and the accounting treatment of the fund flows in the companies as loans. Hence, it is unjust for them now to turn around and complain about Daniel’s withdrawals from the companies and the accounting treatment. All of that had all along taken place with the Father’s knowledge and approval, and the Children were content to leave the management and operation of the Family Companies to the Father’s control. 350.In addition to the fact that the submission seems based upon an illogical leap, the argument was quickly rebutted by Mr Ho in his oral closing submissions. Mr Ho said the breach of fiduciary duties committed by Daniel was not his withdrawing funds from the Family Companies. That was instructed by the Father who was in control of the companies. The breach was in Daniel’s refusing to account to the Family Companies for the funds which the Father had asked him to withdraw from the Family Companies and put into his personal bank accounts. The Family Companies did not acquiesce to Daniel’s keeping the money withdrawn as his own money. 351.Nor was Daniel charged with manipulating the Family Companies’ accounting treatments of his withdrawals. That was a complaint raised at an earlier point by the Plaintiffs. Whilst Mr Yuen at some point seems to have described some of the internal accounting records of the Family Companies as being false accounting, this is not the Plaintiffs’ claim against Daniel in these proceedings. Regardless of whether the shareholders had acquiesced to the accounting treatment of Daniel’s withdrawals, part of the Plaintiffs’ argument in these proceedings is that the accounting records of the Family Companies do not reflect the true nature of the underlying transactions. Consenting for a transaction to be booked in a certain manner in the accounting records is not necessarily the equivalent of consenting for the accounting records to be taken as reflecting the true nature of the underlying transactions. 352.Daniel cannot rely on the defence of acquiescence. J. ;Daniel’s Counterclaim: Contribution 353.Daniel claims contribution from Hepburn and Hoi for the donation he had paid out of his personal bank accounts to PKU and THU in 2008. 354.Mr Shieh submitted that in making a claim for contribution, the claimant is required to show that he discharged the defendant’s liability to a third party and that (1) the claimant and the defendant were both liable to the third party, (2) who was forbidden to accumulate full recoveries from both of them, but (3) who could choose to recover in full from either of them, and that (4) some or all of the burden of paying the third party should ultimately be borne by the defendant, citing Goff & Jones, at §20-01. 355.At the opening submissions stage, there were contentions between the parties as to whether the claim for contribution is now required to be examined within the law of unjust enrichment, but it is not necessary for the Court to resolve this for current purposes. 356.Daniel’s counterclaim is premised on the factual assertion that it was his own money that had been used to pay the HK$108 million odd to PKU and THU. His counterclaim will fall away if the money donated was not his. 357.As identified above, there is no dispute that Daniel had in 2008 transferred from his personal bank accounts to the two universities the total sum of HK$108 million-odd by four tranches. But I have already found that the monies kept in Daniel’s Accounts were held on trust for the Father. It was also Daniel’s own evidence in his 2011 affidavit that he was instructed by the Father to apply the Father’s money in Daniel’s Accounts to make the donation. I shall not repeat the evidence again. Daniel had indeed applied the Father’s money, rather than his own money, in making the donation. Further, insofar as it matters, there was no prior liability of Hepburn or the others to the universities. 358.There is no basis for Daniel to claim contribution from Hoi or Hepburn, and that claim is dismissed. K. Daniel’s Counterclaim: Conspiracy 359.Soon after the disputes arose in June 2010, the Father transferred from one of Daniel’s accounts the sum of HK$4 million to Hepburn. Daniel’s original plea was that the Father had conspired with Hepburn and Hoi to misappropriate money beneficially belonging to him (Daniel). At trial, Daniel unequivocally confirmed that that Hoi was not involved in that matter. Thus, the conspiracy claim only remains as against the Father and Hepburn. 360.The Plaintiffs’ defence, as is expected, is that the Father was the beneficial owner of that HK$4 million in Daniel’s bank account and was thus entitled to dispose of it at his liberty. I have already found that the Daniel held money in his bank accounts was held under an express trust for the Father. Daniels’ counterclaim falls away or fails. L. Result 361.Ultimately, I accept that Daniel was merely the Father’s trustee or nominee, and the various properties and funds in question did not belong to him beneficially. Though Daniel plainly was involved in the various developments and transactions, and in the way that the assets were treated, the evidence as a whole demonstrates that was because he was the Father’s assistant – trusted and relied upon by the Father, but entirely controlled by the Father as to how to deal with the various assets. 362.Though it may be possible to have some sympathy for the way in which Daniel feels he has been treated by the Father, rather less sympathy can be shown towards him once the volcano erupts. What caused the eventual eruption was probably in large measure the donations to the Mainland universities, which Daniel vociferously opposed but was required to put into effect. Having finally erupted, Daniel acted in breach of trust of a serious and unfortunate kind, attacking both his deceased Father and some of his siblings. 363.Problematic for Daniel throughout these proceedings, and particularly at the trial, was the fact that he had originally for all intents and purposes actually admitted that he was not the owner of the relevant funds. Though to some extent able to place reliance on the informal and irregular book-keeping practice of the companies, itself apparently directed by the Father and performed by Daniel on his instructions, Daniel is not able to rely on those matters to demonstrate true beneficial ownership over the assets which he has asserted in these proceedings. Indeed, his evidence was ever-changing, full of inconsistencies and absurdities, often resorting to blaming his lawyers, opportunistic and – at bottom – dishonest. 364.The Plaintiffs succeed in both HCA 570 and HCA 2568. 365.For HCA 570, I make the following orders:
366.For HCA 2568, I make the following orders:
M. ;Costs 367.I see no reason why costs should not follow the event. Therefore, I order the Plaintiffs’ costs of both sets of proceedings to be paid by Daniel, with certificate for two Counsel, to be taxed if not agreed. 368.Mr Ho invited me to consider making a global assessment, or at least an indication, that the costs incurred in respect of HCA 570 constitute 70% of the total costs, whereas the costs incurred in HCA 2568 constitute 30% of the total costs. The basis for the invitation was that such an assessment or indication would facilitate taxation, and that parties’ costs, and as well judicial resources, could be saved. Whilst I am not prepared to make any global assessment, I think that such an indication as to that division of percentages between the two actions is broadly appropriate.
Mr Ambrose Ho, SC and Mr Alan Kwong, instructed by Lau, Kwong & Hung, for the 1st and 2nd plaintiffs in HCA 2568/2013 and the 1st, 3rd and 4th plaintiffs in HCA 570/2014 The 2nd plaintiff in HCA 570/2014 was not represented and did not appear Mr Paul Shieh, SC, Mr Harrison Miao and Mr Daneel Heung, instructed by Leonard K.L. Heung & Co., for the defendant in HCA 2568/2013 and the 1st defendant in HCA 570/2014 Ms Pauline Leung, instructed by Patrick Chu, Conti Wong Lawyers LLP, for the 4th defendant in HCA 570/2014 |
Cases cited in this judgment
Further hearings and rulings under HCA 2568/2013