Lily Cheung and Another v. The Standard Chartered Bank Hong Kong Trustee Ltd and Others
Read the full judgment text of HCA 5464/1987 on BabelCite. This High Court CFI judgment was delivered on 28 February 1990.
1. Jimmy Chao Ming Pan ('the deceased') was an able and successful businessman. He died on 26 February 1984. The first defendant ('the trustee') is his executor and trustee. The second defendant is his son by a marriage to Mrs Marian Pan. Marian Pan died on 26 May 1977.
Cited by 2 cases · Cites 1 case
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HCA005464/1987
IN THE SUPREME COURT OF HONG KONG HIGH COURT BETWEEN
Coram: Deputy High Court Judge J.K. Findlay, Q.C. Dates of hearing: 27 to 30 November, l, 5 to 8, 11 to 14, 18 to 20 December 1989, 5, 8 to 12, 15 to 19, 22 to 24 January 1990, 2, 5 to 9, 12 to 16 February 1990 Date of handing down of judgment: 28 February 1990 ----------------- JUDGMENT ----------------- The Parties. 1. Jimmy Chao Ming Pan ('the deceased') was an able and successful businessman. He died on 26 February 1984. The first defendant ('the trustee') is his executor and trustee. The second defendant is his son by a marriage to Mrs Marian Pan. Marian Pan died on 26 May 1977. 2. The first plaintiff alleges that she was, at the time of his death, the deceased's wife, and the second plaintiff is their son. The second plaintiff's status as the deceased's son was not seriously disputed at the trial, but the defendants contest that the first plaintiff was the lawful wife of the deceased. 3. There was a dispute regarding the entitlement of the plaintiffs to share in the deceased's estate, but this was settled under a consent order made by this court, dated 22 June 1987, in terms of which the plaintiffs were, together, to receive 40% of the assets of the estate, except certain immovable property, which was to be dealt with differently. The Central Dispute. 4. Paragraph 6 of the Statement of Claim says that -
5. I will call the first mentioned account 'the Mok 1 account' (because a Mok 2 account comes into the picture later), and the second, 'the HSBC account'. The central dispute in this action, as between the plaintiffs and the second defendant, concerns the assets in these accounts. Broadly, the plaintiffs say that these assets form part of the estate o￡ the deceased, whereas the second defendant says they belong to him. The trustee allowed the second defendant to have the assets because, it maintains, he was entitled to them. The plaintiffs say that the trustee should have recovered the assets for the estate, and that it committed other acts of maladministration. The Plaintiffs' Allegations against the Second Defendant. 6. I will deal firstly with the plaintiffs' case against the second defendant because, to some extent, at least, and entirely according to the trustee, the plaintiffs' case against the trustee depends on my findings as to the second defendant's entitlement to the assets. 7. I have already set out the plaintiffs' allegations regarding the description of the Mok and HSBC accounts. 8. Paragraph 7 of the Statement of Claim goes on to say -
9. Paragraphs 8 of the Statement of Claim alleges that 'Upon the death of the deceased, the entirety or a substantial part of the stocks and shares thereby fell to become part of the estate.'. 10. Paragraphs 9 and 10 allege that, after the death, the second defendant 'wrongfully and in breach of the said trust' dealt with the stocks and shares and converted them to his own use. 11. Paragraph 15 alleges that 'By reason of the matters pleaded in paragraphs 9, 10 ... herein, the estate has suffered loss and damage.'. 12. That is the substance of the plaintiffs' case against the second defendant. The Second Defendant's Answer. 13. In answer to these allegations, the second defendant says that, up to May 1977, the deceased and Mr Marian Pan maintained a joint share trading account with Messrs Mok Ying Kie, share brokers, in the name of 'Mr Jimmy C.M. Pan and Mrs Marian Lee Pan'. In about May 1977, he says, the deceased, with the consent and approval of Mrs Marian Pan and the second defendant, instructed Mok to convert the account into a joint account with the second defendant in the name of 'Mr Jimmy C.M. Pan and/or Mr Gordon V. Ming Pan, Hong Kong'. Mok did so, and thereafter, until the death of the deceased, the deceased and the second defendant maintained the Mok I account jointly. 14. After the conversion of the Mok 1 account in this way, the second defendant says that he had control and enjoyment of the account and was entitled to draw freely from and operate it. Between the date of the conversion and the death, he says he made substantial cash contributions to the Mok 1 account. 15. On or about 5 March 1982, the deceased established a personal account with Mok through which the deceased traded shares personally. This is the account I will refer to as 'the Mok 2 account'. 16. The defendant says 'Further or alternatively, insofar as may be necessary, the 2nd Defendant will [rely] on the presumption of advancement.'. 17. He also says 'Further or in the further alternative, by reason of the matters aforesaid, upon the death of the Deceased, all credit balances and/or shares and/or other valuable securities and/or properties of whatever nature or kind standing to the credit of (the Mok 1 account] accrued beneficially to the 2nd Defendant and did not form part of the estate.'. In fact, at the date of the death of the deceased, there was no money credit balance in the Mok 1 account, but Mok was, at that time, holding a considerable quantity of valuable shares. 18. The second defendant says that, in March 1980, he and the deceased jointly opened three accounts with the Hong Kong and Shanghai Banking Corporation, all in the name of 'Jimmy Fan Chao Ming and/or Gordon Pan V. Ming'. One was a current account, one a safe custody account and the third a joint securities account. It has emerged that the safe custody account and the joint securities are one and the same account, which I have referred to as the HSBC account. 19. With regard to these accounts, the second defendant pleads a bank mandate signed by himself and the deceased that establishes that either of them could control the accounts and provides that the bank was to hold the assets in the accounts to the order of the survivor of them. 20. The second defendant makes much the same allegations regarding control and enjoyment, entitlement to draw and operate these accounts, the making of substantial cash contributions, the presumption of advancement and beneficial accrual as he does with regard to the Mok 1 account. 21. The second defendant denies any breach of trust, but, in essence, admits that he has taken the assets for his own use. 22. He gives details of the contributions that he alleges he made to the two accounts. 23. As to the enjoyment of the Mok 1 account, the second defendant pleads that certain shares were withdrawn from this account with his knowledge and consent, but none under his signature. He says he did not, by his signature, draw any cash from this account. 24. He also says that he did not, by his signature, withdrawn any shares or cash from the HSBC account. 25. The securities in the HSBC account were, he says, pledged as collateral in support of banking facilities granted to a company called Pacific Wood Products in which he had a substantial interest. The Evidence. 26. There was a great deal of evidence in this case. I cannot set it all out in this judgment. I will, however, deal with it as comprehensively as I think is necessary to understand the issues and my conclusions. Unfortunately, this will make this judgment rather longer than I would have liked. I have re-read my notes of the evidence in the course of preparing this judgment. The fact that I may not mention a piece of evidence specifically in this judgment does not mean that I have not had it in mind in reaching my conclusions. 27. Generally, I let the, evidence speak for itself, but, on occasions, I comment on it, where I think this necessary. 28. The plaintiffs called no evidence. Mr Gordon Ma -the second defendant. 29. The second defendant gave evidence himself. He testified in English; a language in which he is obviously fluent. For convenience, and without any disrespect, I will refer to him hereafter as 'Gordon'. Most of the story emerges from his testimony. 30. Gordon told me that his parents were married in Shanghai on 3 September 1943 and that there are three surviving, children of the marriage: his twin sisters, May and Lynn, born on 8 June 1944, and himself, born on 5 June 1948. During the 'Chinese revolution', the family came to Hong Kong, where the deceased dealt in gold. This was unsuccessful and the deceased moved to North Borneo in about 1952. There he set up a business that operated a quarry in Sabah and supplied stone ballast to the North Borneo railways. His mother assisted in the business on the administrative side. After some difficult early years, this business was successful. 31. Although his parents were educated in the western style, they were, in many ways, typically Chinese. This manifested itself in favouritism towards him. Although his sisters were academically better than he, they were not as close to his parents' heart. 32. He went to Australia in early 1955 to complete his education. There he studied economics and business, majoring in accountancy. At this time, his mother was putting aside money for the education of the children, and for their old age. 33. He returned from Australia in 1973. After a few months freedom, he joined the family business in June 1974. At that time the business was growing rapidly and his assistance was necessary. He was appointed a director of the company operating the family business - Pan Chau Ming Sdn. Bhd. ('Sdn. Bhd.' is, I understand, the equivalent of 'Ltd.'). He carried on the main operational side of the business under somewhat spartan conditions in the Sandakan district of Sabah. After he joined the business, his father's duties were considerably reduced; his main tasks being contract bidding and liaison with contractors and bankers, while his mother kept the books. At this time, his sisters were already pursuing their own careers in Europe. 34. Early in 1977, his mother was diagnosed to have a terminal illness; a malfunction of the bone marrow. His parents were very loving to each other and this news came as a shattering blow. After this, his father took his mother around the world on an unsuccessful odyssey to find a cure for the illness, while Gordon operated the family business alone. 35. The family business was incorporated in 1974, before which it had been operated by the deceased as sole proprietor. He, his father and his mother were the sole shareholders. There was a paid-up capital of Malaysian $200,000, of which his father and mother held 70,000 shares each and he held the remaining 60,000. 36. Philosophizing on one occasion, his father gave Gordon some guiding principles for his life. His father's beliefs were summed up in a credo involving words beginning with the letter 'W'. 'W', his father said, stood for Wealth, but there were three other 'Ws' that one should remember: One was Windfall inheritance or winnings; another was Work - meaning diligence, foresight and willingness to strive, and the last was Wrongdoing, which should be shunned. Work, his father said, was the most important. He said that Gordon had been blessed with a Windfall, because his father and mother had already paved the way for him, and it was up to Gordon to use Work 'to further accumulate Wealth in order to understand the true value of money'. 37. Shortly after Gordon joined the business, it branched out into road construction, and this resulted in considerably greater turn-over and profitability. 38. He came to learn that his parents had made wills, each making the other sole beneficiary. 39. In 1976, the deceased invested in another company called Pacific Wood Products. This venture was not part of the family business and was not successful initially. 40. His mother died in London on 26 May 1977. Before that, his father wrote to him the letter dated 21 March 1977. He understood from this letter that he was to continue running the family business virtually on his own. In this letter, after explaining that his place was at his wife's side, his father said: 'This is the situation. I trust you will now understand the implication. So, as from now on, you may have to [the deceased's underlining] alter your orientation in taking decisions, to the best of your ability.'. 41. Gordon went to London himself in April 1977 when his mother's condition worsened. While there, a letter was sent by his father to Mok Ying Kie, instructing Mok to change the account in the names of the deceased and Mrs Pan to an account in the names of the deceased and Gordon Pan. His father signed this letter and Gordon signed it as authorised signatory. 42. This letter was dated 16 May 1977. It is very important in this case, so I set it out in full here -
Trading Joint Account Jimmy C.M. Pan &/or Marian Pan
43. Gordon was asked what led to the writing of this letter. He said that, when he and the deceased were visiting his mother on one occasion when she was a patient in the Hammersmith Hospital in London, his mother said to his father that her condition was worsening. She said to the deceased that if anything happened to her, he was to promise to look after the children, and that he should make arrangements for himself in the event of his death. His mother cited the case - apparently as a warning - of when the deceased's father had died and his stepmother had taken control of the estate. She said that it was her wish that the Mok account, all real property and the company - Pan Chao Ming - should come to Gordon, and that his future wife should have her jewellery. His father replied that his intentions were mutual anyway, and that she need not worry. This conversation was about two days before the writing of the letter of 16 May 1977. 44. Gordon said, as far as he knew, his parents understood the meaning of a 40 joint account. His father had always made known to his mother that she would eventually inherit the Mok 1 account; as his father always believed that he would pre-decease his mother. 45. Gordon identified an instrument of transfer, dated 23 May 1977, by which his mother transferred her 70,000 shares in Pan Chao Ming to him. This made him a two-thirds owner of the company, compared with his father's one-third ownership. 46. After the Mok account was changed to the joint names of himself and his father, he participated in its operation. In particular, he was concerned about the operation of the account by Mok. He regarded the account as a growth account, with the minimum of risk-taking. So he wrote to Mok a letter dated 28 October 1978, expressing this concern. He discussed the matter with his father, and his father agreed that they should take a more conservative approach. As a result, the shares in the Mok account were traded much less frequently and his father opened his own account with Mok Ying Kie (the Mok 2 account). He also identified two instructions to Mok that he signed. 47. His father made the arrangements for himself that his mother had suggested in the conversation at the Hammersmith Hospital. After his mother's cremation, his father made a will in Singapore dated 20 June 1977. At this time, his father had developed a bad case of ulcers which he believed was due to anxiety during his mother's illness. Gordon was sole beneficiary under this will. This did not surprise him, because of the affection his parents had for him, because he had returned to the family business and because of the well-accepted Chinese tradition of favouring the son. 48. His father made another will on 18 August 1977. This left eighty per cent of the father's estate to hire, and ten per cent to each of his sisters. His father was apologetic about this change, explaining to him that lie had done it as a protection against disputes. 49. On 16 September 1977, he signed a joint bank account mandate in respect of an account at the National Commercial Bank in Hong Kong. This was not a business account. His father did not have any business interests in Hong Kong. He says that the Mok 1 account was not a business account either. 50. He identified the signatures of himself and his father on various pledging and lending agreements with Mok concerning the operation of the Mok 1 account. These documents are of importance, and I will deal with them in more detail later in this judgment. 51. About the middle of 1978, his father transferred his shares in Pan Chao Ming; eighty per cent to Gordon and ten per cent to each of his sisters. The deceased remained managing director of the company, but was an adviser, rather than involved in the day-to-day operations. He drew about M$3,000 per month from the company as a salary. His father had no other source of income, other than drawings from the Mok account and fees of M$10-15,000 per annum from two other companies. 52. In 1978, Gordon took over two thirds of the shares in Pacific Wood Products. In 1983, Pan Chao Ming Sdn. Bhd. assumed control of Pacific Wood Products. 53. Gordon has no knowledge of the deceased meeting the first plaintiff. He pointed out that, in his father's passports for the period 1977 to his death, he was named as the person to contact in case of accident. His father came to Hong Kong regularly, but Gordon came very seldom. 54. Gordon explained that the figure of $154,889.05 appearing in the statement from Mok dated 25 August 1977 addressed to 'Jimmy C.M. Pan & Mr Gordon V-Ming Pan', which was the first statement rendered after the conversion of the account into the names of his father and himself, was the cash balance owing to Mok at that time. The statement also indicated, under the heading 'Position: Long', that Mok held in the account a considerable number of shares in well-known Hong Kong companies. These shares are described by the quantity. and the name of the company; no identifying numbers of the certificates are quoted, and, as far as I can see, that situation applies to all the other statements. On statements rendered thereafter, the name of the account is given as 'Jimmy C.M. Pan &,/or Mr Gordon V-Ming Pan'. 55. Gordon, asked about the deposit shown on this statement of $100,000 on 24 June 1977, said that, 'on recollection'; he made this contribution. When asked how he could remember this after 12 years, he said: 'When the account was converted into our names, I was very enthusiastic about this account, having considered myself now being in the major league, on a par with my father, and 1 have used my savings and whatever money my parents had given me over the years to be deposited into this account.' The money was actually paid into the account by his father, but he had given the money to him when he came to Hong Kong from Sabah. 56. There was a deposit of $150,000 to the Mok 1 account on 25 July 1977. Gordon said that it was his intention to make payments into the account 'virtually monthly', but this ambition withered quickly because 'there was not sufficient funds for me to advance from the company'. This sum was, 'from my recollection', he says, money he advanced from the company. I should say here that Gordon uses the verb 'advance' as meaning 'borrow'. 57. The next deposit was $150,000 on 15 August 1977. This, Gordon says, was an advance by him from the family company, which was also physically brought to Hong Kong by his father. 58. Distinguishing between 'fresh injections' of capital and income from dividends and interest; particularly the sum of $16,856.30 received as interest on a deposit with the National Commercial Bank, Gordon says that there were no other further fresh injections until 12 November 1980 when the sum of $249,112.66 was paid into the account. This deposit was made because the deceased required about $250,000 to fund a Hutchinson Whampoa rights issue and Jardine loan stock, and Gordon collected this sum by chasing up customers of the family company. He sent an employee with this money to his father, who sent it to Mok. The money, says Gordon, therefore came from him out of the company. 59. Gordon says that he never drew money from this account. 60. I should say here that, although Gordon alleges in his defence that he had enjoyment of, and was entitled 'to freely draw from and operate' the Mok 1 account, the HSBC account and the HSBC current account, he admits that he never, in fact, drew anything from these accounts. On the other hand, the evidence is that the deceased used the Mok 1 account and the HSBC current account extensively for his own purposes, without consulting Gordon, and with Gordon knowing little, if anything, about this. On occasions, the deceased withdrew very large amounts. 61. The joint HSBC securities account was opened in March 1980 when Pacific Wood Products looked as if it might be productive and funds were required. To secure banking facilities for Pacific Wood, some of the blue-chip shares were withdrawn from Mok and pledged with the Hong Kong bank. At this time, Gordon says he owned about two-thirds of Pacific Wood. Gordon says there was no document prohibiting him or his father from selling these shares, or buying new ones. At the same time, a joint current account was opened with the bank to receive dividends and other income from the shares in the securities account. 62. There were two deposits into this current account on 27 May 1980, $40,000 and $125,000. The $40,000 came from the Mok Account. Of the $125,000, he had handed $105,000 to his father. 63. Gordon says that his sisters knew about the Mok account, but not the HSBC account. They did not protest that the arrangement was unfair. 'I think it was quite clear,' he says, 'that the Mck 1 account would come to me eventually', and they never disputed that he was entitled to this. The sisters later confirmed this attitude in writing. 64. Gordon says that he cannot recall ever signing any cheques drawn on the Hong Kong Bank current account. There was only one cheque book, which was kept by his father. 65. Gordon says that he has no knowledge of the alleged marriage of the deceased to the first plaintiff and points out that, after the date of the alleged marriage, the deceased described himself in documents as a widower. There was also no mention of the marriage in the deceased's diary for the relevant period and the first plaintiff was not mentioned by the deceased or introduced into the family, which is what one would have expected with a Chinese family. 66. There came a time in 1982 when tie told his father of his intention to marry. His father was very pleased, and there was a discussion regarding the Mok I account. Gordon's evidence at this stage is as follows -
67. During the period of the administration of his father's estate by the trustee, a letter dated 19 July 1984 was written by the Estate Duty Office 'EDO') to the trustee. It appears from the evidence of the trust officer of the trustee dealing with the estate - Mr Billy Ma - that this letter was written because, on 26 June 1984, Mr Ma wrote to the EDO saying that: 'Upon making further inquiries, it is now established that there is no joint account mandate governing the operation of [the Mok 1 account]. As such, this account should be treated as an account held by Mr. Gordon Pan and the deceased as tenants-in-common in equal shares'. Under cover of this letter, Mr Ma filed a corrective affidavit seeking to place only half the value of the Mok in the estate of the deceased. 68. The EDO's letter of 19 July 1984 says: 'It seems you are claiming that Gordon V-Ming Pan had made equal contributions towards the purchase of the securities comprised in those accounts [the Mok 1 account and the HSBC account] since only one-half share thereof has been disclosed for estate duty purposes; if so, please forward evidence in support of such claim'. 69. The trustee had not, expressly, claimed anything of the kind, and it is clear that the EDO was saying only: 'If you do so claim, produce the evidence.'. 70. Gordon says that, prior to this letter, as far as he knew, the matter of contributions was never raised by anyone, including, presumably, himself. He says he did not understand what 'equal contributions' meant. He sought guidance on the matter from Mr Billy Ma. Mr Ma told him only that the EDO was concerned only with the collection of revenue, and that the best he could strive for was to have only fifty per cent of the joint accounts taxable. He did not tell Gordon how to achieve this. 71. There was then a long interval before Gordon signed a letter dated 22 January 1985 to the trustee, alleging that he had made an equal contributions to the acquisition of the shares in both accounts. The letter was, he says, prepared by the trustee. He says that Mr Ma may have explained to him what equal contributions meant, but he could not remember if he understood it 'because I think my mind at the time was so strong of my father's intentions to let me have these accounts.' By this, he 'meant, if these two accounts were meant for me, what relevance was there regarding contributions? I was having difficulties, I think, at the time, in drawing the line.' 72. A letter dated 6 February 1985 was written by the EDO saying that, before it could be accepted that Gordon had made equal contributions, it required factual evidence that half the purchase monies were advanced by him. In response to this, Gordon wrote a letter dated 11 March 1985 to Billy Ma that was, Gordon maintains now, tittle short of a pack of lies. He says he did so to check with Ma whether this line of argument would be acceptable to the EDO. This 'line' was deliberately to create a false impression that he had made equal contributions to the acquisition of the shares. 73. In this letter, Gordon says, he sought to show that the arrangement regarding the accounts was 'a business arrangement, rather than a father and son situation'. The letter itself tells a story of the deceased wishing to reduce his business activities, of an invitation by the deceased to Gordon to join him in investing the Hong Kong share market, of a decision by the deceased to sell to Gordon fifty per cent of his interests, of a desire by the deceased for Gordon to build up his own capital rather than inheriting it, of a valuation of the deceased's half interest at Malaysian $1,000,000, which was to be Gordon's debt, of the fact that the HSBC account had never been traded and of Gordon's equal contributions to the Mok 1 account being a verbal agreement between him and the deceased 'in that we were to contra personal accounts'. In the letter, he also used the phrase 'viewed upon as an "imperfect" gift from father to son'. He told me that he did not know where he learnt about 'imperfect' gifts. 74. Gordon says that when he wrote this letter, he had not carried out a detailed analysis of the statements of account issued regarding the two securities accounts as to contributions. 'It has taken me over two years from the beginning of this action to actually determine my monetary contributions'. Cross-examination by Mr Lee. 75. Gordon says that in a conversation with his father at the time the letter was sent to Mok instructing that the account be converted to one in the names of his father and himself, his father said to him, 'I have now made you a millionaire before you are thirty.'. 76. He did not pay the consideration stated for the transfer of his mother's shares in Pan Chao Ming Sdn. Bhd.. 77. He says that he did not discuss his letter of 28 October 1978 (expressing his concern about the Mok 1 account) to Mok with his father before sending it. 78. If his father died, he understood that the account would come to him. His father did not tell him not to withdraw shares or money from this account, or not to give instructions to Mok. He could have asked Mok to sell everything and hand money to him; that was within his power. He could also have required Mok to hand over profits to him. The same situation applied generally to the HSBC account. 79. He did not think of attending meetings of companies in which shares were held. He did not expect. Mok to keep, for the joint account, the particular share certificates purchased; only that he kept for them the particular number of shares acquired. He looked on the account as representing money's worth. The account was essentially a fluctuating one. At any point in time, he or his father could have terminated the account by requesting Mok to hand over the shares and cash to him or his father, and he would not care if the exact certificates bought were not handed over; indeed he would not know the certificates numbers of the shares purchased. Mok could hand over shares bought for another client. Likewise, he was not concerned about the actual banknotes. The whole object of the account was that Mok would have custody of the shares, not them. 80. Mr Lee asked him about the opening of the Mok 2 account: ‘There was to be a split up so that father would like Mok to operate No 2 account aggressively, but keep the other conservative?' Gordon answered: 'Not a split up. No 2 account was opened by father for his own purposes, whereas No I account to be eventually passed onto me.' His father agreed that Mok be asked to operate the joint account conservatively. 81. Billy Ma was looking after the estate and helping him on the two securities accounts. He did not tell Ma about the plaintiffs until November 1984. Ma told him that, in his view, he was entitled to the shares in both securities accounts. He did not tell Ma that any statements in the letters to the EDO were untrue. Cross-examination by Mr Chang. 82. Gordon explained that he did not sign any of the cheques drawn on the HSBC current account, nor did he pay any attention to his father's withdrawals from this account. 'I had no reason to check his activities relating to the cash in the accounts - both accounts - the National Commercial Bank and Hong Kong Bank. In other words, he had complete freedom to do whatever he liked, and, if I were to travel to Hong Kong as often as he did, he would not have checked on me either.' It appears that, after the early days of setting up the Mok 1 account, Gordon did not take much interest in checking the statements relating to any of the accounts; he was busy and he trusted his father. 83. Gordon kept a current account with Pan Chao Ming Sdn. Bhd., as did his father, going back to the date of the incorporation of the company. On his father's death, he and his father were owing money to the company. He said that the documents were kept in a store at Sabah and he had attempted to retrieve them, but he had not been successful in retrieving most of them due to infestation of rodents and cockroaches in the store. He was asked if he was willing to bring these documents to court. He said he would try. This request was made on 20 December 1989. 84. When the court resumed sitting on 5 January 1990, Gordon said that he had instructed his people to search the company's store, but they had not found anything so far. He did not remember that he had been asked to find his own current account in company records. He agreed that advances to him by the company would appear in his current account with the company. 85. At the time of his death, his father was in debit on his current account with the company; to the tune of some ten of thousands, he thought. 86. Most of the contributions he made to the Mok 1 account were by way of advances from the company. 87. By July 1984, the EDO was inquiring about contributions by him to the Mok 1 account. At that time, he thought 'equal contributions' meant 'efforts and, perhaps, some injection of funds'. When the EDO asked for evidence of his contributions, he thought this meant evidence of what he could state to the EDO. By this, I understood Gordon to mean that he thought they were asking him what he could remember, without referring to any documents. This evidence, he thought, would rot include documentary evidence. He said he could not answer why he thought this was so. He admitted that, as an accountant, if he was looking for evidence of the injection of funds, he would think of invoices, vouchers and other documents. By February 1985, he understood that the EDO wanted factual evidence; that is, documents reflecting the actual contributions, including vouchers, remittance slips and current accounts with the company. Gordon says that he could relate his contributions to the Mok 1 account to advances recorded in his current account with the company. He says he never bothered to check his current account with the company to trace his alleged contributions. He did not do this because of his fear of rodents, because it was too time consuming, because he did not think that the current account ledger sheets would be that important and because 'I had taken the generalisation that my father had never made advances for himself from' the company. This could also have been established from the current account, but he tried to find these ledger sheets only once, to answer the EDO, but he 'shortly gave up'. This was in 1989. He could not find it because he could not go through all the boxes - and because of his phobia of rats. 88. He was unable to remember who supplied to him the phrase 'imperfect gift' that he used in his letter of 11 March 1985, but he has a very vague recollection that it was Billy Ma. 89. When it was pointed out to him that his letter of 22 January 1985 clearly referred to funds and not efforts, Gordon sought to evade responsibility for the wording of the letter by suggesting that perhaps he did mention efforts in his draft, but this was cut out by Billy Ma. 90. When the Mok I account was transferred to his name and that of his father, he was enthusiastic about it and he paid in money from his savings and money given by his parents. The savings were kept in a joint current account with his mother with a bank in Singapore. He thinks he withdrew the money from this account at the bank in cash and gave it to his father in Singapore, who took it to Hong Kong. His father returned to Sabah from Singapore only after visiting Hong Kong, going to Japan and returning to Hong Kong. 91. The payment by him into the Mok 1 account of $100,000 on 24 June 1977 was from this joint current account in Singapore. His savings amounted to very little. He thinks the money given to hint by his parents came to a few tens of thousands. If one looked at the Singapore account, one could find the relevant withdrawal, but he does not think the details of the account are still available. 92. He accepts that in chief he said that his father brought the money from Sabah, but now says that this was not correct.He agrees that he explained in chief that his father brought it in cash from Sabah because of exchange control restrictions. He was not able to give an explanation understandable to me as to why he has changed his evidence. He suggested the possibility of him giving the money to an intermediary in Sabah, who may have received preferential treat ment at the immigration and security airport checks in Sabah, and who carried it to his father in Singapore, who may have wanted it for payment of his treatment for ulcers, but, when this proved unnecessary, he paid it into the Mok 1 account after returning from Japan. In spite of all this, he said he did not want to change the evidence he gave in chief. 93. He agreed that in chief he said that the two payments of $150,000 by him into the Mok 1 account on 25 July 1977 and 15 August 1977 were advances by the company to him and brought to Hong Kong in cash by his father. In crossexamination, he seemed to be saying that he has no clear memory of the actual instances, but relies on what he calls 'generalisations' from the practice adopted by his father at that time. What he means by this, I do not know, because he does not say that his father was doing the same thing at the time. When he recounted his evidence of these payments earlier, he says he was 'generalising rather than recollecting'. He is quite unclear about whether he is suggesting that these two sums were also required for treatment for his father's ulcers, carried by a messenger, and deposited in the Mok 1 account when it proved that they were not needed. 94. Gordon was taken to the Mok No.1 account. The opening entry here was in August 1975. He was taken through credits to this account of $1.188 million, $210,000 and $500,000. He had no idea where these came from. He had said in chief that the money for this account had come basically from his mother, but by that he meant that it had been jointly earned by both his mother and his father. 95. Gordon repeated that, after his mother's death, his father had no other sources of income outer than salary and directors fees amounting in all to about M$10-15,000 per year. 96. He was taken through the Mok No.2 account and, in relation to deposits by his father into this account of $262,000, $80,000, $200,000, $500,000, he could not identify their source. He said he did not realise that the periodic closing balances on the No. 1 account were transferred to the No. 2 account. 97. His father purchased a property in Singapore for around 5$300,000. He could not remember where his father got the down payment; he thinks he mentioned that he intended to take a loan. He was not sure how the balance was paid, but, subsequently, the money was brought from Malaysia to Singapore. 98. The price from the sale of the Fontana Gardens property, $900,000, on vague recollection, he thinks was placed in an Asian currency deposit and, on maturity, remitted to an account in the United States of America called the Swift account. He does not remember what year this was. 99. The deceased, he said, never transferred any of the real properties to him. 100. Before writing what has been referred to as the 'stay-put' letter of 28 October 1978 to Mok, he did not discuss the matter with his father, and his use of the words 'us' and 'we' in the letter was because of his respect for Mok. He wrote the letter independently. It is possible that he had discussed the share market with his father. He says that the letter demonstrates his ignorance of the discretionary account. He was not able to say what he would have done if his father had disagreed. He has no recollection of discussing Mok's reply with his father, although he had said in chief that he had so discussed it, and his father had agreed with his attitude. 101. When asked if he would expect his father to have regard to his - Gordon's - contributions when tapping, the 1 account, he said: 'I have always known that the account would eventually come to me, and how my father made use of the money from the 1 account was purely up to him.' Later in his evidence, he said that his father said something to the effect that he would 'source' or fund the 2 account mainly from the 1 account, and he probably said yes. This was a clear understanding. Although he said in chief that his father had said that he would fund the 2 account 'slowly', later, he did not think his father said 'slowly'. The amount that would be tapped from the I account was not discussed; this was simply left to his father. If his father had tapped more than half the assets of the 1 account, he would not have said anything to him. 102. Gordon was asked if it was his case that his father knew of his alleged contributions to the 1 account. He said it was difficult for him to answer questions as to how his father viewed his contributions. The savings he contributed from Singapore came to only a few thousand dollars and he doubted if this would have stuck in his father's mind. He was unclear on the point of his father's knowledge of his contributions. His father did ask him to make contributions by way of advances from the company, When asked if his father expected him, and him alone, to be responsible for repaying the company, he said his father expected him to make the company profitable so as to sustain his advances from the company. Advances not related to Pacific Wood, he thinks, were always booked to his current account; he assumed they were booked to his current account, even when his father was in Kota Kinabalu, he was in Sandakan and a remittance was made to Hong Kong. He said he could not remember such an instance, although, of course, he had already described one. 103. It was put to him that his story about the first contribution of $100,000 was untrue. He replied, that as far as his memory goes, that was the case. When asked if he doubted his memory in this instance, he paused and then said that he would not say he doubted his memory. Asked about the alleged second contribution, he said that he had already said he was not sure about this sum and had cited examples of practice. He was still not sure. As to the third alleged contribution, when asked if he was sure of that, he said that he had said that he was generalising as to the practice during that time. He was asked if this meant he was not sure, and he replied that he was sure up to the point of advances from the company. As to the fourth alleged contribution of $16,000, he said he was taking the generalisation that whenever money went into the Mok 1 account had to come from Sabah and, therefore, was an advance from trim from the company. It was pointed out to him that this money was not from Sabah, but from the joint account, and he conceded that there was no particular reason why it should have come from him when it was drawn by his father. 104. The payment of $105,000 into the HSBC current account on 27 May 1980 was money he brought to Hong Kong from Malaysia in cash and gave it to his father. When he did so, he did not ask his father to pay it into any particular account. He thinks he left it to his father to put it into any account. He did not ask his father what he had done with the money. The payment of $31,041.98 into this account on 11 April 1981 was a telegraphic remittance from Kota Kinabalu. He cannot remember if his father asked him to make this remittance. He had forgotten about it until he examined the accounts. Regarding a payment of $92,090 on 22 April 1981, he says this money was sent to his sister. His father had requested her to make out two cheques; one to the Hong Kong Bank and one to the Mok 1 account. After this payment, there were no further purchases of shares at all. It seems he cannot remember further details of this matter. There was a payment into this account of $168,000 on 4 August 1981. He has no independent recollection of this., but extracted the figure from the statements. He said it most probable that his father asked for this money, but he cannot recall exactly. The next payment in was of $28,000 on 24 November 1982. This was money given by his father-in-law as his share of the cost of the wedding feast. An item of $59,000 was for the Canadian log cabin. 105. The uplifting of the shares from the Mok 1 account to provide security for the facilities granted to Pacific Wood was discussed with him by his father. There was no discussion as to which shares should be uplifted. 106. When it was put to him that rte had not told Billy Ma that the Mok 1 account was originally in the names of his father and his mother, he said, after some hesitation, that he did not think he had. Later, he said that it had never escaped his memory that the account had originally been in the names of his mother and father. He did not tell Billy Ma of this. He agreed that it had never been reported to the EDO that his mother had any securities account in the joint names with his father. When giving evidence about his letters to the EDO, he said that he had deliberately net mentioned his mother's name on the Mok 1 account because he feared that the EDO would open up the matter of estate duty on his mother's estate.. He did not tell Ma of this, he thinks, for the same reason. Later in his evidence, he again confirmed that the problem of estate duty on his mother's estate was in his mind when he deliberately withheld the information that his mother's name had beer, on the Mok 1 account from Billy Ma. He had the problem in mind as early as March 1984 and just after his father's death. He said, in fact, he knew of the problem even before his father's death. His father had told him that he had not disclosed to Ma the change from his mother's to his name on the Mok 1 account when Ma was attending to his mother's estate. It was put to Gordon that both he and his father were very alive to the problem of estate duty when his father instructed the change of name of the Mok 1 account. He said that he was not aware of it, and he could not say that his father was. He agreed that the Mok 1 account statements showed that it was a continuing one, and if anyone had looked at the statements prior to 25 August 1977, they would have seen his mother's name. As far as he knew, no one did so. 107. A document dated 10 .November 1977 was, he accepted, the only instruction, apart from his 'stay-put' letter, that he had signed regarding the Mok 1 account. I believe the evidence discloses that there were one or two others. On the HSBC securities account, the only instruction he presumed he had signed was one dated 28 May 1981, when his father was not in Sabah. He did not seem to think that his father had discussed with him instructions signed by his father. 108. He agreed that he understood his mother's conversation with his father in London - 'You have to make arrangements' - as relating to estate planning by his father. However, he did not think his father was planning his estate when he vacated his mother's name from the Mok 1 account. He thought he was carrying out his mother's wishes; to leave the Mok 1 account to him, although he conceded that the matter of estate planning was alive to his father. He had a general understanding of the need to make out-and-out gifts before death as part of estate planning. 109. His father had some doubt about his decision-making ability and whether he had an enterprising spirit. His father felt too 'insecure of him. His father had a tendency to look over his shoulder. Sometimes they had fights. 110. Regarding the EDO letters, he said his attitude was something like going through green route of Customs with extra carton of cigarettes. He thought the letter could successfully 'pull the wool over their eyes'. 111. Gordon spoke again of advances by the company to his father. He said sometime in 1977, his father's debt to the company in his current account was cleared by transferring it to his current account. He cannot remember what the amount was, but he thinks it was roughly M$100-150,000. His father gave him nothing in return, although the price of the shares in the company transferred to him - M$56,000-was taken into account somehow. He agreed he had personally assumed responsibility for his father's debt. Thereafter, intermittently over a few years, his father's debt at the end of each year for personal advances was transferred to his current account. 112. When his father said that he would vacate the Mok 1 account, he understood him to mean that he would eventually leave the account to him beneficially and in his name, with the inclusion of his wife as joint owner. He guessed he would decide whether his wife's name would be included; his father could only suggest this. He was asked if it was his father's intention to build up a sizeable portfolio in the Mok 2 account before he vacated the Mok 1 account, Gordon said that he thought his father's attitude was that he could do it once, and he could do it again. It was in response to his wanting his father to take a more conservative approach, in the context of his intended marriage, that his father said he would separately open an account with Mok, and it was left entirely to his father when he would vacate the Mok. 1 account. 113. His father died 'in good health', by which, I take it, Gordon means that it was unexpected, although some evidence indicates that his father had anticipated it from his readings of a Chinese almanac. 114. When asked if he thought it reasonable that his father could make whatever drawings he wanted from the Mok 1 account for his own personal purposes, and that he, Gordon, would assume personal liability for his father's drawings from the company, he indicated that he bad not thought about that. 115. He denied that there was a heated, or any, discussion with his father over Pacific 'Wood at the time the Mok 2 account was started. It was started at his father's own initiative. 116. Gordon said that he understood that the arrangements his mother spoke of in the Hammersmith Hospital were arrangements in the event of his father's death. During the lifetime of his lather, no real property was transferred to hint. He agreed that what his mother was expressing was the wish that his father would leave by will all the real property to him; that he would inherit it. It was his understanding of the general effect of the conversation between his father and his mother that his mother would leave everything to his father, and his father would leave everything by will to the three children. He saw his father's will as putting into effect the conversation. In re-examination, Gordon said that he did not get that impression from anything, said, but he leaves in the air the question of from whence he did get these ideas if not from what his mother had said and his father's reaction. 117. I quote Gordon's evidence regarding his mother's knowledge of the letter of 16 May 1977 to Mok instructing the change in the Mok 1 account -
118. Gordon was again questioned about the records of the current accounts of himself and his father with the company -
Miss Lynn Pan, 119. Miss Lynn Pan, Gordon's sister, gave evidence. In essence, her evidence is that it was always understood in the family that Gordon would eventually get the bulk of the family fortune as compensation for joining and assisting in the family business in Sabah. She and her sister were content to accept this as fair because they were able to live their own lives. They signed letters recording their understanding that they had no interest in the joint securities accounts. She grew closer to her father towards the end of his life, when he seemed pre occupied with death. In Canada, on a holiday, he told her that her mother had asked him, just before her death, to leave all the family money to Gordon. She did this because she wanted to be reassured that she had not worked all those years in Sabah in the family business in vain. She did not live to enjoy the fruits of her labour, but she wanted to be reassured that her own children, her own son, would enjoy them, and nobody else's. Her father told her that her mother need not have worried - nor need she, meaning, she understood, that some provision had been made for her. 120. She says that the deceased had a weakness for young women, and her mother knew this. If her father had remarried, she would have expected him to tell her; to ask her, indeed, for her approval. Madame Poon Man Fong. 121. Madame Poon Man Fong, the sister of the deceased, also gave evidence before me. She told me that the deceased told her that, when his wife was dying, Mrs Marian Pan told him to give 'everything' to Gordon; the authority of the family was to be passed to the son, to the extent that, if he wanted to have money to spend, he had to ask Gordon for it. This authority had already been passed to Gordon when she saw the deceased in London in 1978. The deceased was then in semi-retirement, although he continued to take an interest in the family business. She accompanied the family to Macao for a family celebration of Chinese New Year in 1979. Her brother did not tell her then that he had got married three days before, and never did so. Mr Mok Ying Kie. 122. Mr Mok was a friend of long-standing of the deceased, having first met him in 1935. Without disrespect, I refer both to Mr Mok and his business simply as 'Mok'. 123. A securities account was opened with his firm by the deceased in 1975, when the deceased told him he had some money and wanted to invest in Hong Kong. He wanted Mok to invest the money for him. Although this was contrary to his usual practice, Mok agreed to operate the account on a discretionary basis; that is, that Mok would decide on the buying and selling of the investments. The deceased told him that it was his wish to open the account in the name of 'Jimmy Pan and/or Marian Pan'. His understanding was that Jimmy Pan was the principal account holder, and, in case he died, Marian Pan could use the account to trade or do business. There were no written mandates signed, although there was a letter of instruction, dated 12 August 1975, addressed to Mok Ying Kie, signed by the deceased 'for the Joint Account of Jimmy C.M. Pan and Marion (sic) Lee Pan', which says:
124. Mok says he received the letter of 16 May 1977 from the deceased, bearing the specimen signature of Gordon Pan, and he acted in accordance with the instructions contained therein. His understanding of the position then was that if either the deceased or Gordon should die, the account would be taken over by the survivor. 125. When funds were received for the Mok 1 account, these were paid into Mok's bank account, and the client's account in his books was credited. In this way, the deceased's money was mixed with that of the firm so that shares could be purchased on his behalf. 126. When shares were purchased oil behalf of a client, they were not kept separately, but pooled with other shares held by the firm. Clearly, Mok did not regard the actual share certificates as of any importance in so far as ownership of this evidence of title was concerned. If 100 Hong Kong Land shares were purchased on behalf of a client, tie said, that client 'owned' those shares, but it did not matter which particular share certificate was eventually delivered to the client, or handed over if his shares were sold. 127. The share certificate numbers were not recorded in the clients account. A share certificate number was recorded in a share register kept by the firm. 128. The share register had a last column, in which was written the name of the person to whom they were to be delivered. As with the entries relating to those shares Mok purchased on his own behalf, the entries relating to the shares purchased on behalf of the Mok 1 account, being a discretionary account, would have no name entered in the last column, or it would be the name of Mok Ying Kie. There was no distinction in the entries in the share register between those in respect of shares purchased for the firm and those purchased for the Mok 1 account. 129. When shares were purchased on the market, they were in 'street' names; that is, the name of the last registered holder. When the time came for the payment of dividends on the shares bought, Mok would arrange for the shares to be registered in the name of his firm, or that of the bank nominee. None was registered in the names of the Pans. Mok appeared to think that the serial numbers of the share certificates sent to the bank would be recorded, but he was unsure of this. The bank would collect the dividends on Mok's behalf, and would keep the shares in safe custody. If those shares were required for sale, a delivery order would be sent to the bank. This delivery order would specify only the quantity and type of shares, not the certificate serial numbers. The shares retained by the bank were held under the name of Mok Ying Kie, even if they had been purchased on behalf of the Mok 1 account. These shares held by the bank were a security for any loan facilities taken up by Mok. 130. Mok received the 'stay-put' letter from Gordon Pan . He was upset by it because he had been instructed by Jimmy Pan to conduct the account as a trading account, and the letter contained implied criticism of his handling of it. He accepted that Gordon had a right to write the letter because he was one of his clients -'one of the owners of the account'. He continued to manage the account, but not so actively as before. He saw Jimmy Pan a few years later and mentioned Gordon's letter as a reason for not trading the account so actively. Jimmy Pan then said he would open a Number 2 account so that Mok could trade. He did not respond unequivocally to Mok's statement about Gordon's letter; 'he just smiled it away.' The Mok 2 account was opened in 1982. Mok says no amounts were transferred from the Mok 1 account to the Mok 2 account other than share dividends. This is not so. 131. The deceased and Gordon signed documents, called pledging and lending agreements, relating to the operation of the account by Mok. These documents are dated 1978 and 1979, but Mok believed there were agreements covering other relevant periods as well. The important clauses in them are as follows -
132. The impression Mok had from conversations and discussions with the deceased was, in case the deceased passed away, the interest and benefit of the Mok 1 account would be given to Gordon Pan, in view of the fact that the account was a joint account. As to the earlier account in the names of Jimmy Part and his wife, he had the impression that, if Gordon died, he would leave the account to his wife to 'play about - to trade in the shares'. Cross-examination by Mr Chang. 133. Mok confirmed that if a client instructed him to buy shares, he would actually have to acquire those shares, not simply credit, the client with a notional purchase. 134. It would be possible, said Mok, by looking at the instrument of transfer, the share certificates and the contract notes, to identify every transaction concerning those share certificates. This applied to whether or not the shares were bought or sold under a discretionary account. In a contract note; Mok would record that he was trading the shares for a particular account. 135. Mok could link, a share transaction in a contract note with a transaction recorded in his share register. The share certificate numbers are recorded in the share register, and Mok's interest; that is, dealing on his own behalf or on behalf of a client, and any charges in that interest would be recorded. Particulars of the share certificates did not appear on the daily trading sheets, only in the share register. If it became necessary to know to which transaction a particular share certificate or instrument of transfer related, because, perhaps, it had been stolen or forged, Mok could do so by reference to his share register. It would not be necessary to look at the daily trading sheet or the contract note. He could also tell if the certificate or instrument was acquired on his own behalf or for a client. 136. When he lodged share certificates with the bank, the bank would cause the blank instrument to be filled in, in the name of the bank nominee company. The bank gave a receipt for the shares before causing them to be transferred. The receipt stated the share certificate serial numbers. Where there were lending agreements, the client's shares were kept in the firm's account, and were 'effectively my shares'. In this case, he would not be able to know, from a bundle of shares taken to the bank to pledge, which were purchased for the Mok 1 account and which for his own account; he would know only that he held on behalf of the Mok 1 account a particular number of shares of a particular type. 137. Mok said that if he purchased a number of shares, some of which were for a client who received delivery, some of which were for a client's discretionary account and the remainder were for his own account, the client's discretionary account would be credited with the shares purchased for this account, but it would not be possible to distinguish these, by serial number of the share certificates, from the certificates representing the shares purchased for Mok's own account. He pooled them together because he believed he was entitled to do this. In essence, he believed that the shares had been lent to him as soon as he received the certificates. He indicated that, in his mind, he did not receive the share certificates on behalf of a client if the client had signed a lending agreement in his favour. On the other hand, he said that, if he purchased shares for the Mok 1 account, without making, a purchase of the same type of shares for his own account, there would be absolutely no difficulty in tracing those shares, and the deceased would have the right to demand those very shares. Mok indicated that he did not frequently purchase shares on his own behalf. 138. Later in his evidence, after a blank share register was produced, he said that, if on a particular day, he purchased shares both for himself and for the Mok 1 account, the share register would distinguish those purchased for Mok and those purchased for the Mok 1 account. 139. In the case of money received on behalf of the Mok 1 account, this was mixed with his own money because, like the shares, it was lent to him. 140. Mok agreed that a client was entitled to demand that shares purchased on his behalf be kept separate from those purchased for Mok, so that the client could have the very shares purchased for him, although Mok said that no client at ever made such a demand. 141. Under re-examination, Mok said that before Gordon Pan became a joint owner of the account, the deceased signed the lending agreements solely. 142. I should say here that, frequently in his evidence, Mok was vague in his evidence about the procedures and administration of his firm. This is understandable because Mok was the 'floor' man of the firm, and his son, Derek Mok, who has since died, was responsible for matters of administration. 143. The contract notes did not contain share certificate numbers, nor did the daily trading sheets. Mr Rui Da Silva. 144. Mr Rui Da Silva, of the Securities Department of the Hong Kong and Shanghai Bank, gave evidence. 145. He explained that when shares were deposited with the bank, the share certificates would be handed over, together with the relevant instrument of transfer signed by the registered holder, with the name of the transferee blank. If the registered holder was the depositor, the share certificates would be left as they were. If, however, the certificates were in 'street' names, the shares would be transferred to the name of the depositor, or, if the depositor wished, into the name of the bank nominee. A form completed at the time the shares were deposited would give the appropriate instructions as to the transfer. 146. If the instruction was to transfer the shares to the bank nominee, the share certificates would be sent to the registrar of the company concerned, with a request for the issue of new share certificates. The old certificates would be destroyed and the new certificates would bear different serial numbers. The shares are credited to the depositor in the ledger. While the shares are with the registrar, usually about three weeks, the shares cannot be sold or delivered to the depositor. If the depositor required re-delivery of the shares, the actual share certificates in his own name would be handed to him, but, if the shares had been registered in the name of the bank nominee, the appropriate number of shares would be withdrawn from the bank 'pool' of the shares of that type, and handed to him, regardless of whether these represented the original share certificates handed in by the depositor. The records are kept on a computer, and only in respect of the share certificates in the depositor's own name are the share certificate numbers recorded. 147. If the shares are registered in the depositor's name, the dividends will go directly to him. If they are registered in the name of the bank nominee, the registrar will send one cheque to the bank nominee for the dividends due in respect of the total holding the bank nominee's name. The bank then credits the depositor's account with the dividend due in respect of his holding of shares. 148. In cross-examination by Mr Chang, Mr Da Silva accepted that share certificates are evidence of title, and, if held with a blank instrument of transfer, would be evidence of the title of the holder of the instrument and the certificate. He also accepted that the interest the depositor would have would be interest in the stock. The reason for the registration, or re-registration, of the certificates in the name of the bank nominee was to rid of the problem of prior rights; to keep the pool 'clean'. This assumes, of course, that the prior rights would attach to the paper certificates and not to the shares. The new share certificates were issued in respect of the 'same' shares as were mentioned in the old certificates, if the concept of 'sameness' has any meaning when dealing with indistinguishable bundles of incoporeal rights. 149. Mr da Silva said that the registrar of the company concerned would be able, despite the issue of new certificates, to trace the serial numbers of the original certificates handed over. In re-examination, he said that he did not know this directly. Mr Richard Orgill. 150. Mr Richard Orgill, of the Hong Kong and Shanghai Bank, gave evidence. 151. He met the deceased and arranged the pledge of the shares to the bank as security for credit facilities extended to Pacific Wood Products. As was normal, the shares were transferred to the name of the bank nominee. Once held as security, he would have permitted some movement of the shares, but trade on a regular basis would not be encouraged. 152. The share deposit account for the shares pledged, and the accompanying current account - to collect dividends - were in the joint names of Jimmy and Gordon Pan, but this was not necessary; he would have been content with accounts in the sole name of the deceased. 153. In cross-examination, Mr Orgill said that, if the credit was being extended to a company, it would be common, and the bank's preferred course, for the accounts to be opened, and a guarantee given, by both directors. He thought the bank knew that the shares were uplifted from an account in the names of both Jimmy and Gordon Pan. In this circumstance, it was perfectly natural for the bank to open the securities and current accounts in the names of the two directors. His understanding was that the shares concerned were in a joint account, so it followed that the security pledged should be in the joint names, but if a director was prepared pledge his own shares, and this was the preferred route of the client, the bank would be happy. The bank was offered two guarantors, so they took two. He did not suggest that the bank insisted on having both directors guarantee the facility. 154. Mr Orgill said that, according to their mandate, the bank would comply with an instruction from any one of the holders to close the account and hand over all the shares, but would not open another account in the sole name of one of the holders and transfer all the assets to that account. He also did not think the bank would comply with an instruction from one holder to vacate the name of the other holder, and he would be concerned about an. instruction from one holder to vacate the name of the other and substitute the name of someone else. The practice of the bank would be to require that, if a change of name was required, for the account to be closed and 'what you do with the funds thereafter is up to you'. 155. In re-examination, Mr Orgill seemed to change his position here. He said that there was nothing to stop a joint account holder opening an account in his sole name and instructing the, transfer of the assets to that account. What the mandate prohibited was for one joint account holder to instruct the opening of another joint account and instructing the transfer of the assets to that account. There was nothing to stop ore joint account holder taking out all the assets from the joint account, opening another account in his sole name and putting the assets into that account. Mr Kenneth Vincent Thompson. 156. Mr Kenneth Vincent Thompson was called on behalf of Gordon. He is a retired chartered accountant. He knew the deceased and his wife, meeting them about 1952 or 1953. Initially, he knew them only socially, but had some professional contact with the deceased later. He said that the deceased and his wife seemed very attached to each other and very much in love. He discussed the deceased's affairs with him in 1977. The deceased said he was worried about his health, fearing he had cancer. He told Mr Thompson that he wished to divest himself of much of his property to avoid the incidence of Malaysian estate duty. Mr Thompson directed him to a tax adviser. Following this a company called Yarborough Investments Limited was incorporated. Certain assets of the deceased were transferred to this company and a trust deed was entered into, appointing the trustee as trustee of a settlement for the benefit of the deceased's children, their heirs and successors. The deceased told him that Gordon was to benefit to the extent of eighty per cent, and his sisters ten per cent each, but he does not know that the deceased signed an instrument providing for this. Mr Thompson witnessed the will by the deceased providing for the same proportions to the children. At that time, Mr Thompson asked the deceased 'pointedly' if there were any other relatives he wished to benefit, and he said that there were not. He also asked the deceased if there was any contingency he wished to make in case he married again, and again the deceased said there was not. He saw the deceased during the first half of 1979 and in August 1980. The deceased said nothing about a marriage to the first plaintiff. Mr Ma Wah Yan, Billy. 157. The only other witness called was Mr Billy Ma. Since his evidence is mainly relevant to the plaintiffs' claim against the trustee, I will deal with in that context. The Nature of the 'accounts'. 158. It may be useful, at this stage, to say something about the language used in this case, and the concepts with which I have to deal. 159. The legal title to the shares concerned in this case, if by that one means a holding by virtue of share certificates being registered in the name of a person in the records of the company concerned, was not vested in anyone concerned in this litigation. Some were registered in the name of the Hong Kong Bank Trustee company and other were in the names of people remote from this action; people who might well be surprised to hear that the legal title to shares they sold, perhaps a long time ago, and to someone unconnected with this case, still vests in them. I am not concerned with this technicality. For the purposes of this case, the reality is that the title to the shares in the Mok 1 account were vested in Mok. He had the control over them sufficient to make him a fiduciary if others were entitled to enjoy beneficial rights in those shares. 160. Although, as a form of shorthand, reference has been made to 'accounts' when talking of the rights concerned in this case, and who is entitled to them, it is important to bear in mind that an 'account', in the context of this case, is the matrix of the contractual relationship between the parties to the contract; the account-keeper and the account-holder or holders. The concept of the rights and obligations of each of the parties to the contract is one thing, and the rights concerned may be said to be property in the form of choses in action (rights in personam), but any 'ownership' of assets 'contained' in the account - the beneficial interests in those assets (rights in rem) - is a different thing altogether. And it has been clear since the majority decision of the House of Lords in Baker v. Archer-Shee [1927] A.C. 844 that, to the, judicial mind, whatever the academics have to say, where there is a fiduciary of assets and a beneficiary of those assets, the beneficiary is the beneficial owner of the assets, with real rights in them; the beneficiary has more than a personal claim against the fiduciary to do his duty. 161. That 'ownership' of these assets, and whether or not such ownership exists, might be said to be the main subject matter of the dispute in this case. 162. The distinction I have mentioned is of particular importance in this case because the assets 'contained' in the Mok 1 account were not 'certain and unchanging' (In re Figgis; see below); shares were purchased and sold, more so at some periods of the history of the account than others, and the cash situation changed from time to time. In particular, the assets in the Mok 1 account were not the same at the different times of significant events with which I am concerned; for example, a glance shows one that, at the date of the change of name of the account, there was a debt due to Mok of $154,889.95 and there were certain shares held by Mok, whereas at the date of death of the deceased, there was a nil balance of cash and the quantity of shares had been built up considerably. 163. In In re Figgis[(1969] 1 Ch. 123: Megarry J. considered joint money accounts opened by a husband in the joint names of himself and his wife, either being empowered to draw on them. The accounts were largely operated by the husband. He said this at page 144 -
164. When dealing with the question of whether the balances at the death of the deceased were gifts made by him in his lifetime, Megarry J. had this to say at page 146 -
165. Megarry J. then discusses some authorities on the point: Young v. Sealey [1949] Ch. 278, Russell v. Scott 55 C.L.R. 440, Owens v. Greene [1932] I.R. 225 and In re Reid 64 D.L.R. 598. He then goes on to say this, at page 149 -
166. In Young v. Sealey [1949] 1 Ch 278, Romer J. had similar intellectual difficulties with. the concept of an immediate gift of fluctuating assets, which might, at the whim of the donor, disappear completely. And no doubt the man in the street might have some problem in understanding the sense of an immediate gift of something that, at the end of the day, if the donor so chooses, might have no value at all. In that case, an aunt paid money into joint banking accounts in the names of herself and her nephew. The evidence was that the deceased aunt intended the beneficial, as well as the legal, interest to pass on her death to the nephew. Romer J. reviewed the authorities, including Owens v. Greene and In re Reid, and said, at page 294 -
167. The reasoning in Owens v. Greene 1932 IR 225; that of Kennedy C.J., appears at page 237-
168. The position we have, then, is that both Romer J. and Megarry J., albeit reluctantly, accepted that an immediate gift of, effectively, whatever might be left of the funds in a joint bank account on the death of the donor is valid in law. But it is clear to me that this situation applies only where the gift can be said to be of a single asset; that is, the debt - the chose is action - vested in the creditor against the debtor, this being the only asset concerned, on the reasoning that this debt is constant, although its value may change or disappear. If what is seen to be given is an interest in a joint tenancy in rights in rem to a number of different assets, especially where it was contemplated that those assets would not be 'certain and unchanging' in that the donor could cause any of those assets, and the joint tenancy in them, to disappear, there are considerable difficulties in finding an immediate gift. 169. It is for this reason that a great deal of effort has been expended by the defendants, to persuade me that the relationship between Mok and the deceased, at the time of the alleged gift to the second defendant, was nothing more than that of debtor and creditor, and by the plaintiffs, in an endeavour to show that the deceased had recognisable beneficial interests, in the nature of rights in rem, in the assets contained in the Mok 1 account, beyond a single chose in action. 170. This is one issue that I must determine. 171. It is also important, to my mind, not to confuse the contractual relationship between the account-keeper and the account-holders with the relationship between the account-holders inter se regarding the assets being kept by the account-keeper. Where a sole account-holder causes another to become a joint account-holder so that the account-keeper is contractually bound, and entitled, to regard that new account-holder as a joint account-holder front whom. The account-keeper should take instructions as to the operation of the account, that creates the new contractual relationship between the account-keeper and the joint account-holders, replacing the old one between the account-keeper and the sole account-holder, but it does not say anything, definitively, regarding the relationship between the joint account-holders as to their respective rights in respect of the assets in the account. That relationship depends on what the law allows and what joint account-holders intend the relationship should be. Nor does the new contractual relationship between the account-keeper and the account-holders determine what, if anything, has, in law, been transferred by the old account-holder to the new account-holder. 172. That is why, in cases such as Marshal v. Crutwell (1875) L.R. 20 Eq. 328, a finding that the intention was that the joint account-holder's power to manage the account was 'a mere arrangement for convenience' Jed to a decision that the joint account-holder had no beneficial rights to the assets in the account. 173. The intention may, of course, be other than the creation of 'a mere arrangement of convenience'; whatever it is, it is the duty of the court to give effect to that intention, if that intention has been carried into effect in a manner allowed by law. 174. This is also why one finds the following statements in the authorities – 175. Niles v. Lake [1947]2 D.L.R. 2.48 (Supreme Court of Canada): by Rand J., at page 261, speaking of bank mandates containing mutual assignments and a right of survivorship -
176. Lily Cheung v. Standard Chartered Bank [1988] 1 HKLR. 613, per Kempster J.A., at page 618 -
177. Gail Stevenson v. The Chartered Bank [1977] HKLR 566, per Leonard J., at page 579 -
178. There was no joint mandate for the operation of the Mok 1 account, but, I believe, I should look at any documents that bear on the relationship between Mok and the account-holders in the same light. The Mok 1 Account. 179. The next logical stage seems to be to examine the nature of the Mok 1 account and determine whether it reflects only a debtor and creditor relationship, or something more. A decision here will, I hope, make it easier to determine the nature of the HSBC account, because that account sprang forth from the Mok 1 account just as, as Mr Lee put it so graphically, Eve came from Adam. 180. The Mok 1 account was originally an account in the names of the deceased and Marian Fan until May 1977, when the deceased instructed that the names should be changed to those of the deceased 'and/or' Gordon. 181. The account was a discretionary share-trading arrangement in which the stock-broker - Mok Ying Kie - was placed in funds and authorised to buy and sell shares on behalf of his clients according to his own discretion. The shares acquired were not registered in the names of the clients or in the name of Mok. The share certificates were held by Mok, with blank instruments of transfer signed by the registered holder, so that, at any given time, the holder of the certificates and the instrument of transfer could have the shares registered in his name. From time to time, some of these shares were registered in the name of the Hong Kong Bank Trustee company. 182. I will deal with the situation, firstly, without reference to the pledging and lending arrangements entered into between Mok, the deceased and Gordon. I will then consider whether these arrangements made any difference to the relationship between the broker and his clients. 183. It is accepted on all sides, and this must be right, that, ordinarily, a stockbroker, although not a trustee strictly so called, is an agent for his client and stands in a fiduciary relationship with him. Normally, a broker would hold the share documents, and the rights which they evidenced, as fiduciary for his clients, and he has no beneficial rights in them; these are vested in the person who was entitled exercise those rights, and to have the documents delivered to him; that is, the client. 184. But, it is said by Mr Lee and Mr Tong, the situation with which 1 have to deal is not the ordinary broker/ client relationship. What we have here, it is submitted, is what was referred to in Re Goode [1974] 24 F.L.R. 61 by Judge White of the Court of Insolvency of South Australia as a 'running account within the meaning of King v. Hutton', and which gives rise to a mere debtor and creditor relationship between the broker and the client. 185. The case relied upon by Judge White - King v. Hutton [1900] 2 QB 504 - proceeds on the facts found by Phillimore J. in King v. Hutton [1899] 2 QB 5.55:
186. In Re Goode, Judge White arrived at his conclusion on the basis that the broker treated all scrip in his office as his own stock-in-trade, buying from clients for stock and selling to them from stock,, 'as between principal and principal'. He says, at page 68 -
187. On the facts of the case before him, Judge White might well have been right, but my own view is that, at times, he painted the scene with rather too broad a brush: some of his remarks go way beyond what was intended by King v. Hutton. At times, he seems to suggest that, if the client does not seek to have the shares registered in his own name, this might lead to a finding that he is conducting a 'running account' with his broker. If this were the case, I venture to suggest that a large number of people buying shares on the Hong Kong market would find, to their surprise, that they have no rights in the shares purchased on their behalf, but only a right to look to the broker for a payment of a sum of money. Of course people who buy shares are not, ultimately, the slightest bit interested in the scrip as such. After all, they did not buy them for the attraction of their design, or to use to paper a sitting-room. They are interested, in the final analysis, in money; the value that the shares represent, by way of capital, or income from dividends. And I refuse to find that this sensible attitude of looking primarily to the money value of shares leads to the conclusion that any fiduciary relationship with brokers is destroyed, and the purchaser of shares may look only to recover from a broker, possibly in competition with ordinary creditors, a sum of money. In my view, the law should be anxious to uphold the fiduciary relationship between principal and agent, and should not lightly conclude that this relationship has been destroyed by finding that a broker's client has dealt in the share market, in the main, to make money. 188. In spite of some of the evidence of Gordon, I am perfectly satisfied that there was nothing extraordinary in the relationship between Mok, as the broker, and the deceased, as the client, that would destroy any fiduciary relationship between them. Mok understood Isis position well enough. He was fully conscious of the fact that he was holding shares on behalf of his client. The lending agreements themselves recognise this; they rest on the basis that the shares were his client's property. Documents habitually issued to clients by Mok, asking for instructions, say: 'According to our records, you are the beneficial owner of X shares of Y company ... '. He does say that he thought the shares were effectively his, but this belief was founded on the pledging and lending agreements with which I will deal later. Without those agreements, he recognised, rightly in my view, that he had no right to deal with the shares except on behalf of his client. 189. Apart from the fact that there was nothing unusual about the operation of the Mok I account, there is much evidence telling against a 'running account' in this case. The intention was to build up a portfolio for the Pans' old-age and, thereafter, for the family. Blue-chips were favoured. The acquisition of further shares was favoured to taking cash. The statements of account showed details of the shares purchased, without any current values. There is, in my view, no doubt here, unlike in King v. Hutton, 'that in respect of each security the value of it when sold came to [the client]'. The statements of account show the workings of the account clearly: Shares, when bought, came to the account, and, when sold, the price obtained carne to the account. There is no specific reflection at all of profits or losses as concerning the relationship between Mok and his client. Mr Tong, in his written submission, says that the strategy demonstrated was to build up a fund, and I agree with that. 190. It has been suggested that Mok was under no obligation to keep the specific share certificates and blank instruments of transfer in respect of shares purchased on behalf of one client separate from those purchased on behalf of another client, or, indeed, separate from any purchased on his own behalf. It has also been said that, further, Mok was not obliged to purchase any shares at all with the funds placed at his disposal. His only duty, as I understand the argument, was to deliver share certificates - any share certificates of the right kind and quantity - and the appropriate signed instruments of transfer when called upon to do so. 191. The aim of these submissions is also, of course, to demonstrate that a securities account of this nature with a broker is no different, in essence, to that of a current account with a banker; that is, that the client has no rights to any specific asset in the hands of 'debtor'; only a chose in action in respect of a sum of money, or, possibly, in respect of a bundle of fungible shares. 192. I accept, of course, that the client does not, until the shares are registered in his name, have any rights as a registered share-holder as against the company, but, as against the seller of the shares, the broker and the world, subject to the equities, the client is undoubtedly the beneficial owner of the shares purchased on his behalf. 193. Obviously, if the broker does not, in fact, purchase any shares, the client cannot have any rights of ownership in shares not purchased, but that does not lead to the conclusion that the broker is in the position of a book-maker, taking losses and profits according to his clients 'bets'. A broker is bound to do what he has undertaken to do, and he is in breach of his duties if he reports to his client that he has purchased shares, debits the client's account with the cost of this purchase, but does not, in fact, acquire those shares. Mok himself had no misunderstanding on this point. Where the broker does purchase shares on his client's behalf, the client is the beneficial owner of those shares, and has a claim to them against all-comers, subject to the equities. 194. Whether or not the client is content to accept delivery of share certificates other than those received by the broker under the transaction in which he purchased the shares for his client, and whether or not there may be some difficulty in identifying the specific shares certificates received, because of the broker's laxity, or otherwise, is neither here nor there, and I can quite understand why a client would not be the slightest bit interested in this. But if a situation arose in which it was important to establish who had beneficial ownership in respect of particular share certificates - although it is difficult to see why anyone would be interested in establishing, his ownership to pieces' of paper if he was able to show his ownership of the shares otherwise - then the law would seek to establish that fact, and if, at the end of the day, sufficient evidence as to that beneficial ownership was not available, that would not alter the legal position as to the ownership of the shares: There would be only a problem of fact. 195. Another way of looking at this situation is to consider the nature of particular share certificates issued in respect of shares in a company. They are nothing more than documents that evidence the legal title of the person whose name appears on them. If the authorised and issued share capital of a company is one hundred $1 shares, and it issues one hundred certificates in respect of these shares, the fact that all the certificates are destroyed in a fire does not make the slightest difference to the relationship between the holders of those shares as between themselves, or as between each individual shareholder and the company. Again, the fact that the company has kept no record of the share certificate numbers issued to each shareholder, or that, in fact, the certificates were not numbered at all, can make no difference. If a person owns a share in a company, he owns a share in the company, and whether one can identify which particular share certificate evidences the share that he owns, whether such identification is possible, or has any practical purpose, is irrelevant as far as far as the. rights of the beneficial owner of the shares are concerned. In Re International Contract Co. (Ind's Case) {1872) 7 Ch. App. 485, at 487, Mellish L.J. said: 'One share, an incorporeal right to a certain portion of the profits of the company, is the same as another, and share No. 1 is not distinguishable from share No. 2, in the same way as a grey horse is distinguishable from a black horse.' And I cannot see that this situation is altered by the fact that one is talking, not of shares registered in the name of the beneficial owner, but shares purchased by, or on behalf of that beneficial owner, not yet registered in his name. 196. If all the share certificates being held by Mok disappeared in some calamity, this cannot mean that the shares mentioned on those certificates would cease to exist. And if they still exist, someone must have rights to them. There may be practical difficulties of proof, but the fact is that whoever had the rights in the shares, legal and equitable, before the disaster would still retain those same rights afterwards. 197. Even if the position is that it is impossible to identify the particular shares certificates acquired when shares were purchased on behalf of the client - and 1 do not think that is the position in this case - the lava does not shrug its shoulders and tell the client that he way look only to a claim against the broker sounding in money. I think the position is well stated in Bardy v. Stapleton 1952 88 C.L.R. 322, a decision of the High Court of Australia. At page 336, Dixon C.J. and Fullagar J, said this –
198. In this case, as a matter of practicality, there would have been, of course, no difficulty at all in meeting a request by the deceased for the delivery to him of 'his' shares. Mok makes that perfectly clear, and it is not necessary to go beyond this. 199. The simple point of this complex discussion is to demonstrate that the relationship between Mok and the deceased was quite different to that between debtor and creditor. If Mok purchased 100 Hong Kong Land shares on behalf of the deceased, those shares would be impressed with a trust in favour of the deceased. If it happened that Mok was holding more than 100 Hong Kong Land share certificates, and it was physically impossible to distinguish the share certificates in respect of the shares purchased on behalf of the deceased, all those Hong Land share certificates, and all those Hong Kong Land shares, would be impressed with a trust in favour of the deceased to the extent of 100 shares, and the deceased would be entitled to delivery of 100 share certificates from the 'indistinguishable mass'. The same applies to money held by Mok on behalf of the deceased. The deceased's right to recover his 'property' is based, not on any personal chose in action, but on a real right to recover what the law and equity deem to be his 'property'. 200. It is interesting that, whatever difficulties the lawyers have with the concepts involved, the practical men of business involved in this case, Mr Mok and Mr da Silva, understand, it is clear from their evidence, the distinction between owning shares in a company and owning the pieces of paper that may evidence the holding of those shares. The Lending Agreements. 201. Does the existence of the pledging and lending agreements make a difference to the analysis of the situation as set out above? Do they convert the fiduciary relationship between Mok and the deceased into a simple debtor and creditor relationship? We are talking, of course, of the situation before the name of the Mok I account was changed, because it is the nature of the account at that time within which I am concerned, and, although no such agreements have been produced governing the position at that time and although Mok seems to have only a vague understanding of how his son, Derek Mok ran this side of Mok's business, I shall assume they existed. 202. The agreements that Mok may hold the shares as security for any indebtedness to him does not mean that the deceased ceased to have any rights in rem to them. If the deceased was indebted to Mok at any particular time, Mok was entitled to hold the deceased's shares as security for that indebtedness. That, of course. does not destroy the deceased's special property in those shares; that special property was simply subject to any rights that Mok was entitled to exercise over them. The deceased could have called for delivery of the shares at any time, and, if at that time, he was indebted to Mok, he could obtain that delivery by paying the debt. Mok does not suggest anything to the contrary. He makes it clear that the deceased could have had his shares any time he wanted there. 203. The agreements entitled Mok to lend the shares to himself. That also, in my view, does not destroy the fiduciary relationship between Mok and his client, or deprive the client of his special property in the shares. It cannot be suggested that this agreement disentitled the client from requiring delivery of the shares to him. Can it be contemplated that, if the deceased asked for his shares, Mok would say: 'You can't have them. I have lent them to myself.'? 204. The agreements gave Mok the right to lend his client's money. There is no evidence that, in fact, Mok ever did this, and, in any event, I cannot read this agreement as over-riding Mok's primary duty to use his client's money to invest in shares on his behalf. A covering letter to this agreement makes it clear that its purpose was to avoid the necessity of Mok having to pay the money into trust account. Indeed, it is clear, on the evidence I have heard, that all these agreements were mere devices to avoid the provisions of the Securities Ordinance, Chapter 333, that imposed safeguards in respect of the property of clients in the hands of brokers. It is not necessary to decide if they succeeded in doing that; what is clear is that they do not, and were not intended to, interfere with the basic fiduciary relationship between Mok and his clients. 205. In Meth v. C.B.C. [1977] ACLC 29,204, there was an agreement between the client and the broker that entitled the broker to hold the securities as security and as a lien against amounts due by the client to the broker and to pledge or lend the securities to the extent of the client's debt to the broker. In that case, as in this, there were pooling arrangements, and the records of the broker did not reveal the identity of the share certificates held for clients; only the quantity of shares. The agreement contained a provision requiring the shares to be registered in the name of a nominee company of the broker. Sheppard J. held that, far from. destroying the fiduciary relationship, the agreement was intended to establish a relationship of trustee and cestui que trust. He said, at page 29,225 –
Finding on Fiduciary Relationship. 206. My finding is that a fiduciary relationship existed between Mok and the deceased such as to give the deceased rights in rem in the shares that, from time to time, had been purchased on his behalf, and to the money that was, from time to time, due to him on the account, and not only a chose in action that could be said to be a certain and unchanging asset. The Questions that Arise. 207. At this stage, two questions seem to arise:
208. I use the word 'conveyance' to mean a transfer or disposition of rights in property. What was Conveyed? 209. This question arises because, as Megarry J. said in In re Vandervell's Trusts (No. 2) [1974] 1 Ch. 269, at 294, 'If a transaction fails to matte any effective disposition of any interest it does nothing.'. 210. The law is concerned with the conveyance of things; res to the. Romans - whatever the law recognises as 'properly', real or personal, corporeal or incorporeal, legal or equitable. We are not here strictly concerned with benefit, although, of course, a conveyance may, in its terms - by a conveyance on trust to hold for a named beneficiary, for example - define the beneficial interest in the property following the conveyance. On the other hand, the conveyance of an equitable interest in property does not mean, necessarily, that the person to whom that interest is conveyed is entitled to enjoy the beneficial interest in it. Equity defines who is to enjoy that beneficial interest, having regard to the intention of the person who makes the conveyance. 211. In this case, I am concerned with the conveyance of rights in rem in a large number of different company shares. I am concerned with the conveyance of an interest in a joint tenancy in those rights in rem: it is not suggested on behalf of Gordon that what the deceased transferred to him could be anything other than an interest in a joint tenancy. Technically, I suppose, there is not just one joint tenancy., but multiple joint tenancies; one in respect of each sharp, because each share is a separate definable piece of property. 212. When considering this, the first problem one runs into is understanding how it is possible to convey an interest in an existing joint tenancy at all. That, I would have thought, was a legal impossibility. One can create a new joint tenancy by a conveyance, but not retain an existing one, with a swopping of tenants. If this is what Gordon's defence means to plead, as looks to be the case; that, with his consent and approval and that of Mrs Pan, he was substituted for Mrs Pan in the existing joint tenancy, I do not think that is possible. Whether or not Mrs Pan consented and approved in fact is mother matter. Ignoring that problem, the only effective conveyance that the deceased could carry out to give Gordon an interest in a joint tenancy, having regard to the subject-matter of the joint tenancy, would be either a conveyance to Mok to hold in trust for both jointly, a conveyance to himself to hold in trust for himself and Gordon jointly or a straight conveyance to himself and Gordon to hold jointly, all creating a new joint tenancy. 213. These conveyances are, at least to the non-lawyer, difficult legal concepts, and, the more difficult they are, the more unlikely it is that a person, acting without legal guidance, had them in mind when taking an action. 214. Did the deceased execute any of these conveyances? 215. The only act by which it can be said, on the pleadings or the evidence, that the deceased conveyed anything to Gordon in connection with the Mok 1 account was the writing of his letter to Mok of 16 May 1977. It has not been submitted to me that I should look to any other act that may be construed as a conveyance in this connection. 216. The letter does not, of course, purport expressly to make a conveyance. It is an instruction by a principal to his agent telling him, by implication, that henceforth he is to recognise Gordon as another principal and to act on his instructions on the basis of his specimen signature. By the letter, in the context of the contractual relationship between the deceased and Mok, Mok is told that Gordon is to have the power, alone, to deal with the 'assets' in the account; that is the rights in rem to the shares and the money. The grant of a general power to deal with property is not the same thing as a conveyance of that property, unless the one must follow the other. If this were not so, every appointment of an agent with power to handle and dispose of property would be a conveyance of that property to the agent. In this case, clearly there is no room for any necessary implication of a grant of rights to the assets following the grant of a power to give instructions regarding those assets. This is demonstrated by the consideration that, although a power, acting alone, to deal with the assets is given to Gordon, this was clearly not a conveyance of those rights in rem to Gordon as his sole property, and no one has contended that it was: This would be to construe the letter as a conveyance by the deceased had his entire beneficial interest in those rights, and the letter is clearly not open to this construction. It follows that the identification of the extent of the power granted is no indication of the fact that rights to the assets are also granted. 217. What the letter did do was to put the assets 'so far under [Gordon's] control that he has nothing to do but require that, perhaps by one process, perhaps by another, [the assets] should be vested in hint' (Kekewich J. in Re Barney [1892]2 Ch. 265, at 273) so that he bad such a 'title' that, if he had no beneficial rights to the assets, he would be holding them on trust for those who had those beneficial rights. In this sense, one might also say that the letter was a conveyance to Gordon of the chose in action against Mok. The rights in rem are, of course, not the same thing as, and are independent of, this chose in action. The contractual relationship between Mok and the deceased could disappear, without affecting the deceased's rights to the assets held by Mok. 218. I point out that this case is quite different from the cases involving the acquisition of shares in joint names, cases involving express instructions to fiduciaries to hold shares in joint names and cases opening bank accounts in joint names, where the only asset is the chose in action in a debtor and creditor relationship. In those cases, it seems to me, there are no conveyancing difficulties such as there are here. 219. In this context, section 6(1)(c) of the Law Amendment and Reform (Consolidation) Ordinance, Chapter 23 does not arise. The rights in rem with which I am concerned were equitable interests, but, if the letter did not convey these, the section does not bite; if it did convey them, the section is met. 220. Even if it were possible to construe the letter as a conveyance to create a new joint tenancy vested in the deceased and Gordon in the rights in rem to the assets in the Mok 1 account at the time of the change of name - and from I have said I think it is clear that I do not think that is possible - Gordon's difficulties in this area would not be over. As I have said there has been no suggestion that there was any conveyance at any other time. 221. There are problems, whatever the intention of the deceased, in seeing the letter as conveying any rights to shares and money that were not in existence at the time the letter was written. At that time, there was no money in the account. On what argument could it be said that Gordon acquired any rights to shares purchased after it is said that the deceased gave him a joint interest in the 'account'? 222. There could not a valid and effective gift of any rights in rem in the shares and the money, whether solely, jointly or in common, unless the deceased conveyed those rights out-and-out so that the gift was binding on him. 223. In Milroy v. Lord 45 E.R. 1185, Lord justice Turner said, at page 1189 –
224. The deceased did not do any of the acts necessary to transfer the property and render the settlement binding on him. If it was his intention to give to Gordon an interest in a joint tenancy in the shares and the money existing at the time, which is the most that it can be said he intended to give, he did not do it effectively. He did not transfer the property to himself and Gordon jointly. He did not tell Mok, expressly. or by implication, to hold the property as fiduciary for himself and Gordon jointly. He. did not declare himself trustee irrevocably for himself and Gordon jointly, as was suggested might be done in Owen v. Greene. Clearly, he retained to himself the right to deal with the assets in the Mok 1 account as he saw fit, and Gordon made no attempt to dispute this. 225. I have already quoted the authorities on the lack of effect of joint bank mandates to create a joint tenancy. The letter of 16 May 1977 is, of course, a great deal weaker in its terms than bank mandates that expressly provide for a joint holding and survivorship, and, of course, those authorities were concerned with facts involving the opening of new accounts, so there was no difficulty about existing joint tenancies. 226. Accordingly, in my view, whatever the deceased's intention, the letter to Mok dated 16 May 1977 cannot be construed as an effective conveyance creating a joint tenancy in the assets held by Mok in favour the deceased and Gordon. 227. Assuming the deceased intended to confer a benefit on Gordon, 1 think we have the situation here described by Lord Upjohn in Vandervell v. Inland Revenue Commissioners [1967] A.C. 291, at 313 -
The Onus and the ‘Competing’ Presumptions. 228. I have little doubt that this matter will proceed further so I should deal the matter of the deceased's intention and other issues that arise. Before doing so, however, I should say a word or two about onus and the so-called competing presumptions. 229. There has been some argument before me regarding the presumption of advancement, the presumption of resulting trust and the relationship between them; Godfrey J. in Lily Cheung v. Commissioner of Estate Duty [1988] 1 HKLR 517 refers to 'a battle of competing presumptions'. 230. As I see my function in this erase, I should examine the evidence to see whether it establishes one thing or another. If I find that the evidence does establish a particular fact, I must accept that fact, and dispose of the matter accordingly. If I find that the evidence does not establish a fact, I must then dispose of the matter on the basis that this fact is not established. In the context of one of the major factual issues in this case - the intention of the deceased - I must decide whether the evidence establishes that intention; whether it establishes an intention to give or an intention not to give. If this intention is established, one way or another, I must decide the matter on that basis. If the evidence does not establish the deceased's intention, one way or another, I must fall back on the onus. In this case, if I am unable to find the deceased's intention on the evidence, and there was a legal 'giving' to Gordon by the deceased, and a relationship of father and son existing between them, this will give rise to a presumption that the deceased did intent a gift to Gordon. That will be the end of the matter on this issue. Accordingly, as I see the situation; the presumption of resulting trust does not get onto the field to enter any competition. 231. As Lord Wilberforce said in V andervell v. Inland Revenue Commissioner [1967]2 A.C. 291, at 329: 'The transaction has been investigated on the evidence of the settlor and his agent and the facts have been found. There is no need, or room, as I see it, to invoke a presumption.' It should, therefore, come as no surprise that a judge does not mention presumptions, conflicting or otherwise, or deal with them, where he has come to conclusions on the evidence. 232. In this case, as in others, the burden of proof and presumptions are tools of the law that ensure that a judge must reach a conclusion; he is not able to say: 'I'm sorry; I don't know what the answer is to this problem of fact, so I can't give a decision.' If he cannot decide on the evidence what the facts are, and only in this situation, the onus and any presumptions come into play, and decide the matter for him. 233. It follows from this, to my mind, that it is wrong for party to plead his case on the basis of a presumption. A presumption nay lead to a conclusion of fact by default, but it is not a fact itself. The pleader should plead the facts - in this case, the alleged gift - and, if he has nothing else, hope to rely on the presumption at trial to prove his case. Equally, it would have been wrung, in my view, as has been suggested should have been done in this case, for the plaintiffs to plead the presumption of advancement and then proceed to plead facts to rebut it, just as it would have been wrong for them to plead a presumption of resulting trust. The Deceased's Intention. 234. Assuming that the letter of 16 May 1977 was an effective conveyance of an interest in a joint tenancy of the rights in rem to Gordon, I must now determine the deceased's intention when he did this. I must do this because, although a disposition of a joint tenancy may be effective, there may be no intention to give a beneficial interest, and, therefore, there may be, in this kind of case, within the fiduciary relationships between the broker and his clients, a further fiduciary relationship between his clients inter se. 235. What the deceased intended when wrote the letter of 16 May 1977 is to be construed from what he did and said, including how he reacted to events and statements made to him. The evidence of what he did and said comes from the written documents and the witnesses 1 have heard. The evidence of the witnesses of what the deceased did and said is, of course, admissible. In seeking to interpret the deceased's conduct. I can take into the account what has been called in another context 'the factual matrix' against which the deceased acted and spoke. Although the proper construction of what the deceased did and said is a matter for me, I believe I can give weight to how those who saw what the deceased did, and heard what he had to say, construed those actions and statements, consciously or unconsciously. I say this because, clearly, the witnesses cannot have a perfect recollection of the precise words used by the deceased, or the words to which he reacted, or the exact nature of his actions, but, because they experienced the deceased's conduct first hand, in the context in which that conduct was undertaken, their impression and reaction to that conduct is some guide to me of the deceased's intention. 236. In particular, I can take into account evidence and statements by the Gordon that indicate his understanding of the deceased's intention, including statements by hire that contradict any intention by the deceased to make an immediate gift to him. If for no other reason, his extra-curial statements are admissible as evidence of admissions against his interest. They are evidence of the truth of what he said: Otherwise, why would he say them? Gordon says, of course, that his statements in his EDO letters are not the truth, and he has sought to explain to me why he made those statements. 237. I have already set out the evidence in this regard in some detail, and I do not intend to repeat it here. What is interesting is the way this evidence has been seen by counsel. Mr Lee and Mr Tong say that the evidence is 'overwhelming' that the deceased intended to make an immediate gift to Gordon. Mr Chang agrees that it is overwhelming, but submits that it is so in completely the other direction; that is, it establishes clearly that the deceased did not intend to make an immediate gift. 238. Firstly, I should say that I discount from consideration, other than to reject it, the evidence by Gordon that his father told him that he had made him a millionaire before he was thirty. I simply do not believe him on this point. The hearsay notices filed by Gordon demonstrate effectively how painstaking were Gordon's advisers in seeking out assiduously every scrap of evidence of statements by the deceased that would point to his intention. There is no mention there of this alleged statement, which, if made, would be telling. Indeed, I believe it is the only reported statement by the deceased that speaks anywhere near unequivocally as to an intention to give immediately. Gordon was examined in chief very competently and carefully regarding his father's statements that might show light on his intention; particularly, there was a concentration on statements made by, or to, his father when Mrs Pan was dying. Gordon made no mention at all of the millionaire conversation, which, Gordon says, took place about the time the letter of 16 May 1977 was written to Mok. This emerges only in answer to a question in a non-hostile cross-examination by Mr Lee. At the very least, I would be very uncomfortable in relying on this evidence at all in making an assessment of the evidence of the deceased's intention; and I find that I should not do so, especially in the light of the fact that I am not convinced that Gordon has always been truthful in his evidence in other respects. 239. Secondly, as part of the factual matrix, I take into account the deceased's unhappiness with Gordon's acumen as a businessman in deciding the likelihood of an intention of transferring to Gordon out-and-out ownership of an interest in assets of considerable value which he and his wife had built up over the years by the sweat of their brows. 240. Thirdly, I weigh in the balance the deceased's concern that Gordon should not have things handed to him on a plate. It is clear to me that the 3 deceased believed that children do not greatly appreciate what they have not earned for themselves. 241. I also take into account the improbability that Mrs Marian Fan expected the deceased to proceed immediately, and during his life-time, to de-nude himself of all the assets he and she had built up since establishing the business in Sabah, and leave himself as a pauper entirely dependent on his own son's charity, or that the deceased understood this to be her expectation and agreed to meet it. I can understand a plan to transfer assets slowly, control being retained by the deceased, but I du not believe an immediate beneficial gift of substantially the whole of the deceased's assets to be likely. 242. It is quite clear to me, as it was obviously clear to Gordon, that what the deceased and Mrs Pan were talking about, in the conversation in the Hammersmith Hospital, was the disposition of the 'family' assets on the deceased's death. It is particularly clear, from the reference to the jewellery going to Gordon's wife, when no such creature was in sight, that the vision was to the future, not the immediate present. 243. I mention here that I am not convinced by the evidence of Madame Poon so far as it suggests that the deceased had said to her that he had transferred everything to Gordon, and he was left depending on the goodwill of his son to maintain himself. That is inherently improbable, especially in the context of the relationships in this Chinese family. Certainly, the deceased's own. behaviour is not consistent with this picture: He did not put out a supplicating hand to Godron when he wanted money. He took it, as he pleased, for his own purposes, without consulting Gordon, and, mostly, without even telling him. Mr Tong might argue that this evidence of the deceased's conduct is inadmissible as evidence of the deceased's intention. That may well be so, but I use it as evidence telling against the improbability of a witness's evidence of what the deceased said he had done. It would be nonsense if evidence of what an alleged donor is alleged to have said after it was alleged he had made a gift was admissible, but evidence of what he did, inconsistent with what he is alleged to have said is inadmissible to show that it is unlikely that he said what he is alleged to have said. 244. Lynn's evidence of her conversation with her father at the Canadian log cabin was also concerned with what was to happen on his death, and not what had happened in the past. It is clear that the deceased had a premonition of his own death, and he was talking to her on that occasion about his own will. The fact that he told her that he had matte provision for her makes this quite obvious, because it was in his will, and not elsewhere, that he had made such provision for her. 245. I have no doubt that it was well known in the family that Gordon was the favoured beneficiary, but the anticipation of him being favoured by the will of his father is not at all the same thing as finding that his father intended him to have a beneficial interest in very valuable assets immediately. 246. To me, at least the preponderance of the evidence of the deceased's utterances and actions, and the evidence of those who heard those utterances and saw those actions, point towards a firm intention to ensure that Gordon inherited the major portion of the family assets 'eventually', to use the word that Gordon himself used frequently in evidence; the event being the death of his father. It may be that when the deceased spoke of vacating his name from the Mok 1 account when he learnt of Gordon's intended marriage, he was thinking of allowing Gordon to have the assets in this account before his death, but clearly, on Gordon's own evidence, he did not act on this thought. On the other hand, apart from the millionaire statement, there is nothing, in my view, that indicates that the deceased had an intention to make an immediate gift to Gordon when he wrote the letter of 16 May 1977. To my mind, the evidence is that he did not intend to make such an immediate gift. 247. In my judgment, this would be the position if we had nothing more. But we do have, of course, a very detailed account from Gordon of what the deceased did intend by his actions, and this paints a very different scene from that now put forward by him. I refer, of course, to the arrangements described very carefully in Gordon's letters that found their way to the EDO. I know, of course, that Gordon now says that these. letters are a package of lie; that he now describes this serious attempt to mislead the revenue as a mere fibbing peccadillo, like going through the 'green' route with an extra carton of ciga-rettes, but this explanation does not make much sense, and I do not believe it. I will explain why. 248. When Gordon wrote these letters, on 22 January 1985 and l1 March 1985, the plaintiffs were making demands on the estate. Indeed, shortly before, on 8 December 1984, the first plaintiff had issued a writ against the trustee, Gordon and his two sisters, claiming revocation of the probate, that the deceased's will was invalid and that letters of administration be granted to her. So the picture was, when Gordon wrote the EDO letters, no longer that of a cosy family estate, with no nosey strangers likely to poke their noses into inconvenient corners. Any reasonable person would, in that situation, be careful what he said, wrote and did in connection with the estate, knowing that there was a court case looming in which, sooner or later, doings over the estate would be examined. 249. Gordon expresses unhappiness with Billy Ma's decision to send his letter of 11 March to the EDO without discussing it with him. I do not understand this attitude. I do not know what Gordon expected Mr Ma to say in any such discussion. Did he expect Billy Ma to advise him on how best to defraud the revenue? Did he expect Ma to say: 'No; that story won't wash. Try another one."? Was he going to confess to Ma, in some event, that the story was false and perhaps they should try telling the truth - that his father had made a gift of assets to him in 1977? I do not believe that, in his situation, especially with the possibility of the trustee losing its position of trustee as a result of the first plaintiff's action, and the estate papers being open to full scrutiny, that he would commit to writing a story that he knew was quite untrue. 250. Both Gordon and Billy Ma say that Mr Ma did not tell Gordon what to say in these letters, although Mr Ma drafted the one of 22 January, and I believe that this is so. Billy Ma says that Gordon had told him that he had certain arrangements with his father. Ma was asked in evidence if these discussions were in between Gordon's two EDO letters, or before the first letter. Ma said they should have taken place at a very early stage. 251. Gordon paints a picture of vast ignorance of the nature of the queries of the EDO and the concern that it was expressing; he did not even know, he says, what the phrase 'equal contributions' meant. He had a very sketchy idea of estate duty, but he did have, he says, some general idea in his mind of the importance of out-and-out gifts being made some time before death as a way of avoiding duty. He conveyed to me that he was confused in his mind as to what the EDO was getting at. He says: '... my mind at the time was so strong of my father's intentions to let me have these accounts. ... if these two accounts were meant for me, what relevance was there regarding contributions? I was having difficulties, I think, at the time, in drawing the line.' This evidence, and other evidence by Gordon, must be taken as coming from a man who studied economics and business, majoring in accountancy, and, at the time concerned, had had considerable business experience. In answer to his thought as to what relevance there was regarding contributions, one is driven to say: 'Indeed, what relevance? Why did you not ask them that, and put them right as to what you were claiming.'. 252. The EDO was very patient in waiting for replies to its queries. Gordon took plenty of time to think about what he should say; there was no question here of him being panicked and pressed into saying something he did not mean. 253. So, says Gordon, he was convinced that his father meant him to have the accounts. He did not understand the relevance of the EDO's concern with contributions. It is said that he was committed to replying to the EDO on the basis on having made equal contributions. Mr Tong says he 'was sucked in by the mention of equal contributions and thus committed'. But why? It is abundantly clear from the EDO's first letter that it was not saying: 'You must say you have made equal contributions.' It said, in essence, to Billy Ma: 'You seem to be saying that Gordon made equal contributions; if so; prove it.' The natural reaction to that was for Gordon to say to Billy Ma: 'What on earth are they talking about? I do not say I made equal contributions. I do not even know what they mean by equal contributions. I say my father gave these accounts to me a long time ago.' But, instead, he says., without having any clear idea, not only of which was the right door, but even of the fact that through one door was the princess and through the other was the tiger, he forsakes the path of truth and follows the line of lies. In my view, it is much more probable that, faced with this situation, when there, is no obvious incentive to lie and obvious dangers in doing so, Gordon told the truth. 254. And there is another factor that, to my mind, tells against Gordon on this point. 255. Faced with a situation in which he has to explain to the court that a story he has told was not true, one would expect him to do all he could to show that there is nothing in any relevant papers that reflect the implementation of the arrangements he described and which he now says did not exist. He could have done this by producing the relevant company papers for the period concerned, including the ledgers relating to the current accounts of himself and his father. It is clear from Gordon's evidence that the financial dealings between himself and his father were conducted through the company. These papers might well have revealed the nature of those dealings. 256. Gordon gave a deal of evidence of his contributions to the Mok account, most of which, he says, came from advances to him from the company. The obvious place, then, for him to look for evidence of those contributions, both for the purposes of his own research and to produce to the court, was in the company's books and papers. In fact, he painted a picture of going to a lot of trouble over a long period of time to check on those contributions. But nothing in this respect was produced to me. Quite apart from his continuing obligation to discover all relevant documents, and no one could doubt that the books and vouchers of the company, if only in respect of the alleged contributions, were highly relevant, Gordon was given, immediately before the Christmas break, another opportunity to produce the relevant documents when he returned to the witness box. He did not do so. Instead, what he produced was a series of feeble excuses that I find quite impossible to accept as anywhere near credible. I conclude that Gordon has decided that it would be better for him if I do not see those papers. Well, I believe I have no choice but to conclude that those documents, if produced, would not support his evidence that his story to the EDO was untrue, and that they might have shown that something along the lines of the arrangement with his father of which he tells in his EDO letters was in fact the case. 257. Such an arrangement is also consistent with what we know about the deceased's character and beliefs; that Gordon should not receive gifts, but work, save and build, and learn to appreciate that it is better to earn one's worldly wealth. 258. Support for the belief that what Gordon said in his EDO letters is the truth comes also, indirectly, from Gordon himself. Gordon's evidence of his contributions to the Mok I account is unsatisfactory in the extreme. He, himself, in evidence, pretty well abandoned all attempt to suggest that what he told me was credible. Or. the other hand, if it is right that the true arrangement between himself and his father is chronicled in his EDO letters, I can understand his inability to convey the truth of the matter. I believe that his problem was that he was trying to tell me what happened as to payments into the Mok 1 account, but because he had to force his story into the straight-jacket of a false context, he was unable to put it across well. If one assumes another context: That there was the business arrangement as Gordon describes, and the understanding was that the funding of the Mok 1 account would come from the company, founded and built up by the deceased and Mrs Pan, and fuelled by the efforts of Gordon, what Gordon was saying starts to make sense. His difficulty was in trying artificially to attribute the source of the funds solely to himself, whereas the true position was that it did not matter to the deceased and Gordon from which of them individually ii could be said the money emanated; they regarded the contributions as coming from the efforts, both present and past, of the family. Gordon came very close to actually saying this in evidence: Several times, he indicated that it was very difficult to identify the source of funding as himself, the deceased, or neither of them solely. 259. The business arrangement is also not inconsistent with the deceased opening the Mok 2 account. The deceased wants to speculate on the market, but his 'partner' is more conservative, and feels that it is better to 'stay-put'. So, the answer is to allow the Mok I account to be operated carefully, and create a new account that Mok can use for trading more frequently. The deceased's reaction to Mok's raising of the 'stay-put' letter from Gordon is also consistent with this. 260. I conclude, accordingly, that the deceased's intention when lie changed the name of the Mok 1 account is truthfully reflected in Gordon's EDO letters, 261. This being so, the arrangement is quite inconsistent with any intention to make a gift to Gordon at that time. As Gordon says, it was a business arrangement, not one of advancement by father to son. Consequence of Finding on Intention. 262. If, then, the deceased's intention was that the Mok I account would be used as the object of a business arrangement with Gordon so that Gordon could, by using the resources of Pan Chao Ming Sdn. Bhd., build up an investment portfolio, what is the consequence of this? 263. It may be that the deceased intended that Gordon would take ever the beneficial interests in the Mok 1 account when the deceased judged the time to be right, or, failing that, that Gordon would inherit those interests on the deceased's death. Before that, assuming there was an effective conveyance of an interest in joint tenancies to Gordon, the deceased and Gordon would hold the assets as joint tenants in law, but as tenants in common in equity: (Lake v. Craddock: White and Tudor, Leading Cases in Equity, Vol. 2, 876-880). There is no evidence that, although this was a business arrangement, there was an agreement that the survivor would take the whole of the joint interest solely, apart from by way of inheritance. 264. As to the interests of the deceased and Gordon in the equitable tenancy in common, these would depend of their respective contributions. 265. I have already said enough, I think, to indicate that I do not accept Gordon's evidence regarding his own contributions. If the matter were to be decided on this basis, I would order an inquiry into the matter of respective contributions. In this inquiry, Gordon should, or should be compelled to, produce the books and papers of Pan Chau Ming Sdn. Bhd. so that the source of funds can be thoroughly checked. An Effective Conveyance? 266. This still leaves the problem of deciding whether or not there was an effective conveyance of Gordon's interest in the joint tenancy in law and equitable tenancy in common by the deceased to Gordon. 267. I have already held that the letter to Mok of 16 May 1977 is ineffective as a transfer or creation of an interest in a joint tenancy for the purposes of a voluntary settlement. Is it any more effective for the purposes of transferring or creating an interest in a joint tenancy, and the dependent equitable tenancy in common, pursuant to the agreement to purchase that interest? 268. I think not. The difficulties I mentioned in the context of an alleged gift were not problems associated solely with the purpose of the conveyance. As I see them, they arise from a failure of an owner to do what the law requires to vest a property in another person.. 269. Accordingly, I must find that, although it may be that the deceased intended to convey to Gordon an interest in a joint tenancy, or joint tenancies, in the present and future rights in rem to the assets in the Mok account to himself and Gordon under the business arrangement I have mentioned, this intention was not perfected by an effective conveyance. 270. It may be, of course, that Gordon has a claim against the estate to perfect the intended transfer in implementation of his agreement with his father, or some right against the estate to account for whatever he is able to prove that he contributed to the acquisition of assets, but that is not something I can consider in this action. The Deceased's Right to Convey. 271. There is another stumbling block in Gordon's path. 272. The trustee pleads, and the evidence discloses, that the Mok 1 account was opened in the names of the deceased and Mrs Pan, and continued as such until Mok acted on the letter from the deceased dated 16 May 1977, instructing that the account be changed to the names of himself and Gordon. The trustee pleads that this transfer was with the approval and consent of Mrs Pan. The Plaintiffs deny this. Mrs Pan was not a signatory to the account. 273. Gordon told me that he came to learn of the joint account with Mok Ying Kie in 1975. He was present when his mother said to his father that, 'now that our son has come back and joined the family business it would be timely to invest some money with our friend Mr Mok, so that we can have money put aside for our old age'. As a result of this the Mok account was opened, the initial money coming basically from his mother, from savings put aside from the profits of the family business since the family migrated to Sabah. He believes that the amount invested initially was about M$500,000. 274. Because the account was freshly opened in the names of the deceased and Mrs Pan, there are no technical conveyancing difficulties here. Indeed, there was no troublesome conveyance at all. Both the deceased and Mrs Pan started off on the same footing, and neither needed to convey anything to the other. 275. Gordon says that his parents discussed the Mok account often in his presence; in particular, he remembers a conversation in the latter part of 1975 in which his father said, while watching a television programme called 'The Six Million Dollar Man', that his mother was a six million dollar woman. On this occasion, his mother said that she hoped it would not be long before they could retire and enjoy the hard-earned money. 276. Lynn's evidence discloses that she had a high regard for her mother, and, in her estimation, contributed a great deal to the success of the family business. Gordon's evidence indicates that he shared this view. There is no doubt that Mrs Pan was a hard-working, diligent and resourceful woman whose efforts in the family business were well recognised by the family. It is clear to me that both the deceased and Mrs Pan contributed to the funds that went into the account. It is also clear, in any event, that the deceased intended that Mrs Pan should benefit from the assets in the account. I do not consider that the fact that Mrs Pan was not a signatory on the account to be significant. The power to give instructions regarding the account to the account-keeper goes to control, not to the right to beneficial enjoyment. 277. As I have said, Gordon pleads that Mrs Pan gave her consent and approval to the transfer of the Mok 1 account to the names of the deceased and himself. There is certainly no evidence at all that she gave such consent and approval expressly, or, indeed, that she even knew of the deceased's action, before or after he wrote the letter of 16 May 1977. Nor can I find in the evidence any statement by Mrs Pan by which she gave that consent or approval by implication. The construction I place upon her statements is the expression of a wish that the deceased should arrange his affairs so that, on his death, his assets should go to Gordon. It is true that Gordon says that Mrs Pan expressed the wish that the Mok 1 account should go to him. She said this is the same breath as saying that her jewellery should go to his future wife. Clearly, she was talking about the future disposition of the assets by the deceased. She had made a will leaving all her assets to the deceased and, in my judgment, she was expressing her wishes as to what the deceased should do with the assets on his death. That is the way Gordon, who was in the best position to construe what his mother was saying, saw the situation, and I see her statement in the same light. 278. In his written submission, Mr Tong does not attempt to argue that Mrs Pan had given her consent and approval to the transfer of the Mok 1 account into the names of the deceased and Gordon. He contents himself with saying that –
279. For the surprising proposition in paragraph iii., Mr Tong cites Re Bishop [1965] 1 Ch. 450 as support. I say the proposition is surprising because, leaving aside other legal difficulties, I do not understand how A, who owns no part of an asset severally and the whole of it jointly with B, could have the right to dispose of the whole of that asset to C to hold the whole of it jointly with him, to the exclusion of B. It is true, of course, that, if the relationship between the joint account-holders and the account-keeper is such that the account-keeper must honour an instruction from one account-holder alone, one account-holder has the power to draw some, or all the assets, from the account, but this is not to say that, vis-a-vis, his fellow account-holder, he is entitled to do so, or to exclude the other account-holder from the benefit of the account entirely. All Stamp J. said in Re Bishop was: '.I conclude that this was a joint account, properly so called, kept in the fullest sense and kept in order that the Money could be used for investments purchased by either party without any distinction as to the source from which it arose and that investments purchased from it were intended to be belonging beneficially to the person in whose name the investments were purchased.'. No one would quarrel with that, but the case is not authority for the submission made by Mr Tong. The clear evidence in this case is that Mr and Mrs Pan launched the account as a 'true' joint account to provide for their old age, and this gave the deceased no right, however worthy his motives and even if he contemplated that his wife would die shortly, to deprive Mrs Pan of her beneficial rights to the assets in the account by replacing her with Gordon, even if, otherwise, such a transfer were effective. 280. If it is the case that, before her death, Mrs Pan had a beneficial interest in the Mok 1 account to the extent that the account was vested in her jointly with the deceased, with the legal right vested in the survivor of them to take the beneficial interest in the assets in the account solely, then, until Mrs Pan's death, the deceased had no right, or power, to dispose of her beneficial interest. 281. Mrs Pan's beneficial interest was an equitable interest, but no one suggests that she made any kind of disposition of this equitable interest, so section 6 of Chapter 23 does not enter the picture. 282. Accordingly, Mrs Pan's beneficial interest remained with her, in spite of the deceased's letter of 16 May 1977, until her death, when it passed to the deceased by survivorship. On this hypothesis, the deceased could have conferred, by an effective conveyance, a beneficial interest on Gordon after Mrs Pan's death, but there is no evidence that he did so, or manifested any intention to do so. Indeed, there seems to be no reason why the matter should have entered his head. 283. Mr Tong says that the plaintiffs are not entitled to rely on this point because the deceased's inability to give was not pleaded. I do not accept this. Gordon himself raises the matter of the history of the Mok 1 account and says, by implication, that the deceased had the right to deal with it as he did because Mrs Pan consented and approved. The plaintiffs clearly put this in issue. There can be no question of surprise here. 284. As to the argument that Gordon's legal title to the Mok 1 account is not in issue, it is true, and I have so held in an interlocutory judgment, that the plaintiffs must be held to have pleaded that Gordon 'held the assets concerned, or some of them, not necessarily under a direct legal title, but in such a way that he controlled them to the extent that he could require that they be vested in him', but this is not the same thing as saying that the plaintiffs are debarred from arguing that, although the deceased did place Gordon in this position of control, the deceased had no right to confer any joint beneficial interest on him. 285. In fact, the plaintiffs are careful not to allege that the accounts were 'true' joint accounts. They say the deceased 'maintained' the accounts, and the point was not lost in the trustee's defence where it says that it is denied that the accounts were maintained by the deceased solely. 286. In my view, the point regarding Mrs Pan's position in relation to the Mok 1 account was raised in the pleadings and has been fully canvassed in evidence and argument. There is nothing at all unfair involved in taking this into account in this judgment. The HSBC Account. 287. I am, I trope, able to deal with the HSBC account fairly shortly, in the lights of my findings in relation to the Mok 1 account. 288. It is abundantly clear that the HSBC account was established for a single specific purpose; to provide security for the loan facilities made available to Pacific Wood Products. There is no evidence whatsoever that the setting up of this account was intended to convey anything to Gordon, or to give him any benefits at all; Gordon himself does not attempt to suggest that it did. All the evidence is that the purpose of the setting up of this account in the names of the deceased and Gordon was to enable Pacific Wood Products to raise money, and not to give, convey or transfer anything to Gordon. 289. It follows, to my mind, as surely as night follows day, that if Gordon had no beneficial rights to the shares lodged with the bank under the arrangements for the granting of the facility, he acquired no rights by the act of opening this account and the holding of the shares by the bank under it, if for no other reason, then because the deceased, who owned those rights, intended to give the bank certain rights, but had no thought of giving any rights to Gordon at that time. 290. If I am wrong in holding that Gordon had no rights in rem in the assets in the Mok 1 account, then, of course, he did have rights to the shares lodged with the bank, but they were the rights he had before that lodgement, and they were not increased, diminished, or in any way changed, by the arrangements made with the bank. Finding against Gordon. 291. Having no beneficial rights to the shares in the Mok 1 account; it must be that Gordon's control over them, which would have entitled him to instruct Mok to transfer or hand them over to him, placed him in a position of being a resulting or constructive trustee for the deceased and his estate. By taking them for his own use, he acted in breach of that trust and the plaintiffs are entitled to relief. The Plaintiff's Claim against the Trustee. 292. As against the trustee, as a professional executor and trustee, the plaintiffs allege a general duty to act independently and fairly to all the beneficiaries. Further, they allege that the trustee owes the following duties, in summary, to the beneficiaries –
293. The plaintiffs go on to allege breaches of those duties, which I summarise as follows -
294. The plaintiffs allege further that the trustee was in a position of conflict of duties owed to the plaintiffs and Gordon, and, despite that -
295. The plaintiffs say that the trustee wasted the estate by its neglect or default in recovering and realising the assets in the two accounts and, as a result, failed in its duties. The Trustee's Answer. 296. In answer to these allegations, the trustee, it, essence, admits the duties alleged by the plaintiffs, with the qualification that its duties related to assets belonging to the estate. 297. In reply to the alleged breaches of duty, the trustee says, in summary -
298. The trustee denies personal liability for devastavit, but, if it is, it acted honestly and reasonably and ought fairly to be excused from personal liability under section 60 of the Trustee Ordinance, Chapter 2.9. The Evidence regarding the Allegations against the Trustee. 299. Mr Billy Ma, called by the trustee, gave evidence. No incumbent officer of the trustee was called to testify. 300. Mr Ma is a solicitor. He started his career in the law as a junior clerk with Deacons. He left Deacons, on this occasion, in December 1972. He was a trust officer with the Hong Kong Bank for about three months before he moved to a similar position with the trustee. He joined them an 1 April 1973. He was a assistant trust officer and dealt mainly with probate and related matters. In 1978, he was able to become an articled clerk. He served articles for five years and qualified as a solicitor on 15 July 1983. While employed by the trustee, he was also employed as an assistant solicitor by Deacons. As I understood Mr Ma, he said that his physical office was in Deacons. 301. During the trial, I expressed some unhappiness with a situation in which an officer of this court was in practice as an independent solicitor and, at the same time, employed full-time by a commercial organisation. I thought this was strange, but I decided to take my nose out of this matter of professional practice, except in so far as it might be relevant to the trustee, through Billy Ma, putting itself in a position of a conflict of duties. 302. Mr Ma left the employ of the trustee about the middle of July 1987. He was then manager of its Probate and Trust Department. 303. Mr Ma first met the deceased when the trustee was dealing with Mrs Pan's estate. In relation to this estate, they were instructed by the deceased, who was executor and sole beneficiary. 304. Mr Ma knew about the deceased's will during his life-time. He knew that the trustee was appointed executor and trustee and that Gordon Pan was an eighty per cent beneficiary, with his sisters entitled to ten per cent each. 305. Following the death of the deceased, of which he was informed by the then manager of the trustee's probate business, Mr Edmund Lee, he had meetings with Gordon Pan and his two sitters, and made attendance notes dated 5 March and 8 March 1984. He said that the note dated 5 March 1984 should have been dated 15 March 1984. 306. The note of 8 March 1984 records an attendance on May and Lynn. It was noted 'that Mr. Pan had ... held an account with HSBC, and an investment account with Messrs. Mok Ying Kie. Both accounts were in the name of the deceased and his son., Gordon.'. 307. The note that should have been dated 15 March 1984 records an attendance on Mok and Gordon and says: 'Mr. Mok confirmed that the late Mr. Pan held two securities accounts with Messrs. Mok Ying Kie. Mr. Mok stresses that although it was always the idea of the late Mr. Pan that upon his demise, these accounts would pass to Gordon, at no time did Mr. Mok have instructions from the late Mr. Pan to change the title of these accounts to Gordon. Accordingly, a conclusion was arrived to the effect that these Accounts would be subject to Hong Kong Estate Duty. Gordon appreciated the position. Mr. Mok would let us have details of these Accounts shortly.'. 308. There is no mention in this note of Gordon expressing his case that he had beneficial rights it the assets in this account. He merely 'appreciated the position'. 309. He says he made inquiries and ascertained the details of the accounts with Mok and with the Hong Kong Bank, He learned that the bank accounts were governed by joint mandates, but there were no such mandates in connection with the Mok 1 account. 310. Having collected the relevant information, he proceeded to apply for a grant of probate. AM this connection, he filed affidavits regarding the assets with the EDO. He was experienced in these matters. Frequently, corrective affidavits are filed, and there are standard forms for this purpose. The practice is to report whatever information is available, before one is sure of the position, and then correct this, if necessary, later. 311. In the affidavit for the Commissioner dated 24 May 1984, Mr Ma reported the assets in all joint accounts as being half subject to duty by the estate, and the other half not. He treated alt these accounts as being inherited entirely by Gordon Pan, the survivor. He did this, as far as the Mok 1 account was concerned because of the father and son relationship, secondly because Mr Mok told him that it was the deceased's intention that the account would be given to the son and because of his understanding of the law regarding parental advances. The Mok 2 account tic treated as subject to duty in its entirety. He swore the affidavit in his capacity as trust officer of the trustee. 312. Following this, Mr Ma received a provisional schedule of property from the EDO, and a certificate, which entitled him to obtain probate. The EDO lumped into one schedule the assets of the free estate with those in the joint accounts. Mr Ma was net happy with this approach. He thought there should be separate schedules for the free estate and the assets in the joint accounts, because, otherwise, the estate would be liable for court and other fees on the amount of the total value. 313. He did not then proceed to obtain probate because a meeting with Gordon Pan was scheduled for the end of June 1984. He advised Gordon and the sisters about his treatment of the Mok 1 account. He explained to the children that if the Mok 1 account were treated as being inherited entirety by Gordon, the sisters would not share in this, or, the other hand, if it was treated as being owned by father and son as tenants in common, half of it would go into the estate, and the sisters would get five percent of the assets in the account. At that stage, as far as Mr Ma was concerned, the three children were the only beneficiaries. 314. He told the children that he was ready to apply for probate, but he had some reservations about the EDO's treatment of the assets by lumping them into one schedule. He also explained that although he had treated the Mok 1 account as being inherited entirely by Gordon, the trust company would feel more comfortable if they had counsel's opinion that, Notwithstanding that there was no joint account mandate governing this account, it would, by reason of its description, vest in Gordon by right of survivorship. He told them that it. was his view was that it would so vest but, for record purposes, he would appreciate an opinion to support his view. If the opinion was contrary to his view, he would file a corrective affidavit. In discussing these matters with the children, he was acting in the capacity as trust officer. If an opinion was obtained, it would be at the expense of Gordon. Gordon decided not to get an opinion. He said he would give the trust company a free hand to decide how to place the Mok 1 account because he did not want to waste money on counsel's opinion. The conclusion was that it was agreed that the Mok 1 account would be treated as if owned by father and son as tenants in common, half going to the estate and half to Gordon. He did not change his original view, but his attitude was that there was no reason to risk adhering to his view without counsel's opinion to support him. There was no suggestion of any dispute between the children. 315. Several times in his evidence, Billy Ma spoke about treating the Mok 1 account as if owned by the deceased and Gordon as tenants in common. He was not, as far as I can see from my note of his evidence, asked specifically on what basis this treatment could be justified. As I understand his evidence, he believed, although not too confidently, that there was an advancement by father to son of an interest in the joint tenancy, and Gordon had acquired the sole interest in the assets by survivorship. If advancement and survivorship did not apply, I do not understand how one then assumes that the assets were held by the deceased and Gordon as tenants in common, unless there was something more. In this case, that something more might have been Billy Ma's knowledge of the specific arrangement between Gordon and his father. 316. Following this, Mr Ma approached the EDO with the intention of splitting the assets into two schedules and to put half the Mok 1 account into the estate; and this was achieved. The corrective affidavits were dated 26 June 1984 and 4 July 1984. 317. After this, Mr Ma received a letter dated 20 July 1984 from the EDO, questioning Gordon Fan's equal contributions to the joint accounts. He sent a copy of this to Gordon on 19 July 1984. 1 have already commented on this letter and Gordon's response. 318. He then received a Law Society circular dated 12 November 1984, from which the existence of the plaintiffs, as claimants in the estate., first came to the his knowledge. He raised the matter with the children around that time, asking why they had not mentioned the plaintiffs to him. He was rather angry about it. He raised the matter with them before the date - 8 December 1984 - of the writ issued by the First Plaintiff in the probate action. At that stage, he thinks, probate had already been obtained. The children said that they had not mentioned matter to him because they wanted to protect and maintain father's reputation. Gordon said that, after the emergence of the plaintiffs, they had been negotiating with the plaintiffs with a view to coming to a settlement. That was why they did not want to involve the bank. 319. After the issue of the writ, Mr Ma delivered up the probate to the Probate Registry as required by the law. 320. He received the letter from Gordon dated 22 January 1985, giving information regarding his alleged equal contributions to the Mok 1 account, and he forwarded this to the EDO. The EDO replied, saying it was not satisfied, and asking for further evidence. He sent a copy of this letter to Gordon under cover of his letter of 6 February 1985, and Gordon replied by letter dated 11 March 1985. He thinks there were discussions with Gordon before the reply, but he did not teach Gordon how to write his letter of 11 March 1985. 321. A letter dated 2 May )985 was received from the EDO, proposing to impose duty on the whole of the securities accounts. The contents were conveyed to Gordon, either by sending him a copy or by an oral communication. There was then a delay before Mr Ma told the EDO that counsel's opinion was being obtained. 322. Mr Ma said he was the solicitor acting for the trustee in the probate action as a solicitor of Deacons. Later in his evidence, Mr Ma explained that shortly before the case was to come to trial, the case was put into the hands of another solicitor in Deacons. 323. From the date of the writ in the probate action until June 1987, when the action was settled, Mr Ma knew that the children intended to settle the matter. 324. In June 1986, it was decided to obtain counsel's opinion on the proper treatment of the Mok 1 account. This was because Gordon's position had changed since somebody might be able to claim against the estate and he wanted to consider his position as to his earlier concession. This was so he could use this to negotiate a settlement of the probate action. Gordon mentioned obtaining counsel's opinion constantly after the plaintiffs claim was raised, but he did not initially pursue it because he thought he could settle the action. Mr Ma advised Gordon that it was a 'must' to obtain counsel's opinion. 325. Mr Ma instructed counsel as solicitor for Gordon, wearing his Deacons' 'hat'. The counsel he instructed was, in his view, a junior of long standing and with expertise in probate matters. The opinion was sought solely in relation to the Mok 1 account. 326. He received a letter dated 26 June 1984 from Messrs Gallant Y.Y. Ho & Co., solicitors, saying they had instructions to act for Gordon. 327. Mr Ma left Deacons in March 1987. 328. He received a letter dated 24 June 1984 signed by Gordon and addressed to the trustee. This letter referred to the consent order made two days before. It went on to say –
329. As a result of that letter, a number of things were done. Mr Ma was still with the bank at that time. 330. Under cover of a letter dated 29 June 1984, three files were sent by the trustee to Gordon's solicitors. 331. Another letter dated 29 June 1984 was sent by the trustee to Gordon's solicitors. This referred to Gordon as 'our mutual client' and asked for the return of a Letter of Indemnity. This indemnity was drafted by Mr Ma and it was signed by Gordon ore 29 June 1984. This indemnifies the trustee against all claims brought against it 'in respect of the deceased's share and interest in the joint account', and this is given by Gordon in consideration for –
332. Mr Ma said it was not rare to require a letter of indemnity from beneficiaries. A letter of indemnity was required whenever assets were released or distributed to beneficiaries. 333. The corrective affidavit required by the indemnity was filed. This was to move half the Mok 1 account front the free estate on the basis that it was entirely Gordon's property. In this connection, Mr Lee acted as executor in relation to the affidavit and as Gordon's agent in relation to the account, So the situation was back to square one as set out in the first affidavits filed. This could not be done before the probate action was settled because the grant of probate was in the probate registry and the schedule could not be amended because it was attached to the probate. Cross-examination by Mr Chang: 334. Mr Ma said that the letter dated 6 July 1987 (by which the trustee informed the plaintiffs' solicitors that 'the above estate's share portfolio' was to be sold) was probably prepared on 29 June 1987; at about the time the corrective affidavits were sent to the EDO. The delay in finalising it may have been caused by corrections, and the date was amended to the later date. This was the last of the documents front the trustee bearing his initials. 335. Deacons acted regularly for the trustee. Up to March 1987, Mr Ma was employed by Deacons as an assistant solicitor, and, at the same time, he was an employee of the trustee. When Deacons acted for the trustee, Mr Ma would, on occasions, be involved, and he would also be involved as a responsible officer for the trustee. Deacons acted for Gordon in obtaining the counsel's opinion, and Mr Ma personally handled the matter. Counsel's opinion was concerned with the beneficial entitlement to the assets in the Mok 1 account. Following the opinion, there might be a need to file a correceive affidavit, but that did not mean that it had to be submitted immediately. One purpose of the opinion would be to persuade the trustee to correct the affidavit, and, to do so, Gordon would have to supply a copy of the opinion to the trustee. T his opinion would then go with the documents of the estate in the trustee's files. 336. The date of the consent order settling the probate action was 22 Tune 1987. As at that date, the probate, as evidence of title, showed that the Mok 1 account, as to one half share, was part of the estate. The Pan family knew of this; by implication, Mr Ma conceded, at this stage of his evidence, that the plaintiffs did not know of the existence of this asset. 337. Mr Ma accepted the obvious high and strict duties of a trustee towards the plaintiffs in administering the estate. He accepted that it was the trustee's duty to maintain a stance that would hold the balance between the competing beneficiaries. He accepted that he should not place the trustee in a position where there was an actual or potential conflict in its duties towards the beneficiaries, or any one of them. 338. At the date of the consent order, he says he did not regard the assets in the Mok 1 account as part of the estate because he had already excluded them. 339. The affidavit exhibiting and verifying the assets in the estate required by the consent paper was not filed within the time he was employed by the trustee. The consent order of 22 June 1987 required that it be filed within 21 days. It was, in fact, filed on about 27 October 1987. 340. He was referred to the letter dated 6 July 1987 to the plaintiffs' solicitors that referred to the 'above estate's share portfolio', without more. Mr Ma drafted this letter on 29 June 1987. If the letter had been more specific as to a reference to Mok 2 account, he agreed the reader would have been aware that there was a Mok 1 account. He did not agree that he could not send out this letter on 29 June 1987 because, at that date, the probate still showed a half share of the Mok 1 account as belonging to the estate. He did not agree because at that time, he had already resigned and was not allowed to sign letters. Although he drafted the letter, it was submitted to management for approval, and they may have held it up, or had to make amendments to it. He did not think that sending this letter out on 29 June would have created a problem because they had already taken a position; that is, which portion belonged to the free estate. 341. This position was taken without telling the plaintiffs., because he was of the view that they should not know this. He did not tell them of the existence of the Mok 1 account. My note of his evidence on this point reads as follows –
342. The decision was reached after consultation with Edmund Lee and the legal director, Mr Peter Hodson, who is still with the trustee.
343. Mr Ma did not have a meeting with the plaintiffs or their solicitors before he left the trustee. 344. Mr Ma agreed that he discussed the treatment of the Mok I account with Gordon and his sisters. If they had not already been aware of this account, he would have disclosed it to them. He discussed it with them because they were entitled to know. If he had decided to treat the account as belonging wholly to Gordon, he would give the sisters the opportunity to contest his decision and seek independent advice. He would do that because it would his duty as trustee. 345. The entry of the plaintiffs into the arena immediately raised the possibility of a dispute. At the time of the consent order, he had already made up his mind to treat the Mok 1 account as belonging wholly to Gordon. He did not agree that this meant that he had decided to amend the estate affidavits in a way that would be adverse to the new beneficiaries. He said this because they were not entitled to the joint account and 'when they were working out the figures in connection with the share of forty per cent [as set out in the consent order] they did not take into account the value of the joint account'. Asked how the plaintiffs could take into account something they did not know about, Mr Ma said 'they had certain figures as a basis on which forty per cent arrived at'. Mr Ma seems to accept that he took into account his view of the settlement negotiations - that Gordon excluded the Mok 1 account from his calculations when negotiating - in administering and distributing the estate. He did not regard his decision to treat the Mok 1 account as belonging wholly to Gordon as a decision to the detriment of plaintiffs as beneficiaries under the consent order. At the same time, he accepts that a decision to treat half of the Mok 1 account as belonging to the estate would have been adverse to Gordon's interests. The fact that the decision to treat the Mok 1 account as belonging wholly to Gordon had already been taken at the time of the consent order is the reason why it was unnecessary to inform anyone not interested it) the joint account. He agreed that if the plaintiffs had known of the existence of the Mok 1 account, they would want to investigate further. 346. Mr Ma was asked about the counsel's opinion as a trust document:
347. When he gave instructions to counsel, Mr Ma says that he should have already known that the account was originally in the names of Jimmy Fan and his wife. He thinks this detail was not passed to counsel. His instructions at the time were that the Hong Kong Bank account was opened for investing and trading in stock. He says this although he had already received and read Gordon Pan's letters that made it clear that this was not the case. He says that at the time it was his mistake that he forgot there were these letters; he forgot the additional facts. He could not explain why there was in the opinion the positive assertion of the purpose of the account That was contrary to Gordon's statements; 'I have made a mistake', he said. 348. It is very difficult to understand how Mr Ma could have forgotten about Gordon's EDO letters when instructing counsel. It is suggested that this was because the letters were about avoiding estate duty and the opinion was obtained for the purpose of determining Gordon's beneficial interest: Billy Ma, in re-examination, says that the object in getting counsel's opinion was 'to ascertain whether it was still a joint account in the absence of a joint account mandate'. Whether this is so or not, the fact is that the opinion was obtained at the same time as, and in the context of, the discussions with the EDO in which Gordon's letters had been written. Mr Ma actually tells the EDO, in essence, to hold their horses because he is obtaining the opinion. I cannot believe that Gordon's story as told in his EDO letters was not clear in Mr Ma's mind when he instructed counsel. 349. He realised counsel's statement that Gordon was personal representative was wrong. He knew when he received the opinion that it was necessary to look into the question of intention. He was aware that counsel was saying that the presumption of advancement was rebuttable. He accepted that counsel linked the Mok 1 account and the HSBC account, and proceeded on the basis that both accounts were for the purposes of trading and purchasing shares. He realised that counsel was saying that he failed in see rebutting evidence. He accepted that he had not sought any rebutting evidence from the plaintiffs. 350. When asked whether, on 29 June 1987, he was faced with a possible claim by the new beneficiaries to the Mok 1 account, and was alive to that, Mr Ma said they were not alert to that because they had already taken a position that this was a joint account. Then he said, when pressed further -
351. The letter of 24 June 1987 by Gordon to the trustee was signed two days after consent order. He approved this, but he cannot remember if he actually drafted it. Whether he drafted it or approved it, he did so, presumably as Gordon's legal adviser. He could hardly have been acting for the estate in settling the terms of a request of this nature to the trustee. This letter referred to a conflict of interest in relation to the Mok 1 account, and the conflict was in relation to the interests of the plaintiffs. It follows that Mr Ma agreed that there was a conflict. The requests in this letter, he accepted, meant that the trustee would have to take a position that would make it practically impossible or very difficult to change its position. If, after this, the trustee had come across evidence relevant to rebuttal of the presumption, the trustee would have to chase after Gordon on the basis of the indemnity; that is, not on the basis of a claim by the estate to recover assets belonging to it. 352. If it became necessary to challenge the opinion of counsel, or if the trustee failed to direct all inquiries regarding to the joint accounts to Gordon, the trustee would run the risk of losing the benefit of the indemnity. 353. Although Mr Ma fought the obvious conclusion, he had to accept that the indemnity, in the form in which it was drafted, tied the trustee's hands to an unacceptable extent. He agreed that an indemnity in the usual form would not disentitle a trustee from pursuing assets wrongfully distributed; the right of recovery would be preserved. He agreed that a trustee should retain the ability to exercise independent judgment as to whether a claim should be pursued or entertained. He agreed it was quite wrong for a trustee to 'pass the buck' to someone else to investigate a claim or pursue a particular line of inquiry. He agreed that if a beneficiary, came to a trustee for relevant information that could affect his claim, or possible claim, to the estate, the trustee would have to make an independent judgment as to whether the information properly belonged to the estate. 354. He was asked about the agreement to direct inquiries to Gordon's solicitors -
355. Also on 24 June 1987, he sent three files to Gordon's solicitors. These were estate files containing information obtained by the trustee in his capacity as such. 356. Mr Ma knew at some unknown stage that Gordon had withheld from him that, originally, the Mok 1 account had been in the names of Jimmy Pan and Mrs Pan, although Gordon did not actually tell him that. Later in his evidence, he contradicted this, and said that Gordon did tell him that he had withheld this information from him. He conceded that he never asked Mok for any documents relating to the operation of the Mok 1 account during Jimmy Pan's lifetime. 357. He was asked about his letter dated 26 June 1984, in which he said 'it has now established that there is no joint account mandate' regarding the Mok I account. Although this letter says clearly that he became recently aware that there was no joint mandate for the operation of the Mok 1 account, Mr Ma insists that he knew this in May when he put in the first affidavit for the Commissioner. He explains the form of the letter by saying it was 'just a style of English'. He accepts that, on the face of it, the letter is inconsistent with the fact that in May 1984, before he filed the first affidavit, he was already aware that there was no joint account mandate for this account. 358. Mr Ma was referred to a hand-written note of his in the agreed documents. He said this came into existence in June 1984. This note seems to indicate his view in June 1984 - 'in absence of account mandate'. Mr Ma conceded that there is no document prior to June 1984 that records that he had reached the view that in the absence of a mandate, the Mok 1 account should be treated as the others. 359. Mr Ma accepted that, in some circumstances, the question of contributions can affect, not only the incidence of estate duty, but also beneficial interest. There were some circumstances in which it would become highly relevant to look into the question of contributions. 360. He explained to Gordon Pan what 'equal contributions' meant. This was in terms of financial contributions towards purchase; that is, that both of them had put in money, or other consideration. 361. Mr Ma says that the first EDO letter of 22 January 1985 by Gordon Pan on contributions 'should have' been drafted by him. He did so after taking instructions from Gordon, and the contents accurately reflected those instructions. It was the common intention of Mr Ma and Gordon that a copy of the letter would be sent to the EDO. He thought it very unlikely that Gordon had drafted the letter, which he corrected, and that it was not intended he should send a copy of the letter to the EDO, although he cannot remember the incident very clearly. 362. He had no idea where Gordon had got the term 'imperfect gift' used in the EDO letter of 11 March 1985. 363. He did not obtain a statement from Gordon, other than the letters, or record any notes of his couversations with him, The EDO letters were only intended to argue the matter of estate duty. He believed what Gordon told him about the arrangement with the deceased. 364. If Gordon had told him that his mother's name was vacated from the account within three years of her death, and his name was substituted, and he also told him that his mother had made substantial contributions, he would treat the account as if his mother had passed a half share to Gordon. This would be on the basis that his mother had agreed to this, He would take this as a gift by the mother within three years of her death, and the estate duty incidence in the mother's estate should be corrected. If it was so that the mother did not consent to this, the matter should be looked into further. At no stage did Gordon tell him that the, business arrangements with his father described in his letters were not true. Asked whether the arrangements between father and son were relevant to whether there ever was a gift from one to the other, Mr Ma said he did not think so because according to the arrangements described by Gordon, there was just a back-to-back arrangement, one responsible for investments in Hong Kong and the other responsible for dealing with accounts in other places. A little later, however, he conceded that these arrangements would be, at least, a relevant factor to be considered by a legal adviser considering whether there was a gift from one to the other. Business arrangements of this nature between father and son would be something unusual, and he would immediately be put on notice that the account had an unusual feature; a feature that could effect whether there was a gift. If he had not forgotten the, letters from Gordon, they should have been placed before counsel. He had also forgotten, not only the letters, but also Gordon's oral description of the arrangements mentioned in the letters. He did not read his trust file before instructing counsel because the file with him was the Deacons' file. 365. Mr Ma was asked about a trustee counsel's opinion. He conceded that this was a common feature of proceedings to court for directions. 366. If he had realised later that the two EDO letters from Gordon had been overlooked, he would have considered placing them before counsel; he would probably have done so. If he had discovered the factual errors in counsel's opinion, he would probably have gone back to counsel. 367. Gordon told me in evidence that, prior to his father's death, the trustee acted for his father in dealing with the estate of his mother and also acted as trustee under his settlement. It acted as a director of Yarborough, a trustee company set up by the deceased. The trustee also acted for him in connection with estate duty and as his nominee. He said that the description of himself by the trustee in the letter of 29 June 1987 to Gordon's solicitors as 'our mutual client' was accurate. 368. The form of the letter of indemnity was decided at a conference between the trustee., himself and his solicitors. This letter of indemnity was in return for the trustee accepting his instructions in relation to both Mok accounts. He also asked the trustee not to release any information without his approval, and the trustee agreed that it would not do so. The Documents. 369. Mr Ma's knowledge of events ends about the middle of July 1987. The agreed documents fill in some of the story of events after this, but I have not had the advantage of hearing oral evidence regarding them. 370. A letter dated 9 July 1987 by the plaintiffs' solicitors ( Fred Kan & Co.) to the trustee started fishing about the 'joint' accounts, but obviously with imperfect knowledge of them A letter dated 14 July 1987 from the trustee's solicitors (Deacons) does not refer to the letter of 9 July; but asks for further time to file an affidavit of assets required by the consent order. The plaintiffs' solicitors pressed their request of 9 July by a letter dated 21 July 1987. Deacons wrote on Fred Kan on 27 July 1987, but made no attempt to deal with the queries in the letter of 9 July 1987. Fred Kan applied more pressure by a letter dated 29 July 1987. Deacons replied on 1 August 1987, saying they were communicating with their client, and on 13 August, wrote again offering a meeting with their client and inspection of documents (other than privileged documents). By letter dated 14 August 1987, the trustee sent to Fred Kan a copy of the documents filed with the EDO dated 24 May 1984 and 26 June 1984. These documents, of course, disclosed, albeit indirectly, to the plaintiffs for the first time some details of the joint accounts. Fred Kan wrote on 17 August 1987 asking about any inquiries made into the beneficial ownership, and, 20 August 1987, wrote to Gordon's solicitors challenging his beneficial ownership. 371. On 20 August, Fred Kan wrote to Deacons, querying the claim that some estate documents might be privileged. Deacons replied on 21 August, saying, without explanation as to why, that they had no instructions to deal with the privilege point. 372. It appears that there was a meeting on 27 August 1987 between Fred Kan and officers of the trustee. Following this, Fred Kan wrote a letter dated 2 September 1987. It appears from this that Fred Kan was told about counsel's opinion and that the matter concerning the joint accounts had been passed to Gordon's solicitors. Fred Kan suggested that there had been no proper inquiries regarding the accounts and asked for a copy of counsel's opinion. 373. The trustee wrote to Fred Kan on 4 September 1987. That letter claimed privilege from disclosure of certain documents, particularly documents relating to assets in which the plaintiffs have no beneficial interest and papers relating to the joint accounts., including counsel's opinion. Fred Kan tried to obtain copies of the documents elsewhere without success. On 10 September 1987, the plaintiffs obtained a Mareva injunction regarding the assets in dispute. 374. Fred Kan persisted in its attempts to obtain disclosure. Failure to disclose. 375. I will deal with the plaintiffs' allegations regarding the failure to disclose, failure to investigate, failure to account and explain and failure to supply documents together because they are obviously related: The plaintiffs' basic complaint being that the trustee did not do its duty to them by keeping them properly in the picture regarding its administration of the estate. 376. I have only Mr Ma's evidence on this point, and I am not sure what he was trying to say was the trustee's position regarding information in its possession relating to the accounts. On analysis, I believe he seems to be saying that the plaintiffs were not entitled to know about the accounts, or see any documents relating to them, because they did not have an interest in those assets, and it was a fact that they did not have an interest in those assets because the trustee had decided that they dart not have an interest in those assets. 377. Mr Ma says he formed a view that both accounts were the property of Gordon, but he was not sufficiently confident about that view to take the risk of relying on it without counsel's opinion to back him up. So he acts contrary to his view after consulting the known beneficiaries. New potential beneficiaries then come into the picture. Counsel's opinion. is obtained on the basis of incorrect facts, although, as far as he believes, Mr Ma is in possession of facts that must have led counsel, if he had known of them, to say: 'Well, if this was a business arrangement, I do not think, certainly without great deal more investigation, we can say there was a gift to Gordon, with a right of survivor ship.' As it was, counsel said that, in the end result, it is a matter of intention. Even if Gordon had come back to say that, in fact, his story about a business arrangement was a lot of rubbish any legal adviser would have counselled caution in those circumstances. After receiving counsel's opinion, which was obtained on the instructions from a beneficiary through a solicitor acting simultaneously for the estate.; with a duty to all beneficiaries, and as legal adviser for only one of the beneficiaries, the trustee consults only some of the beneficiaries before deciding; to act on that opinion in the interests of Gordon, but contrary to the interests of the other beneficiaries. I am aware, of course, that the plaintiffs were not beneficiaries under the will at that time, but when they became accepted beneficiaries on 22 June 1487, there was no reason why Mr Ma should not have consulted them then, as he consulted Lynn and May earlier. His only reason for not doing so appears to be based on the fact that, by that time, the trustee had already made its decision, which; of course, the decision not being irrevocable., is a woefully inadequate excuse. Not only does the trustee not tell the plaintiffs about the accounts - when, the trustee knew, they would be interested and would want to investigate the matter - as, so to speak, an act of omission, it fails to tell them as a deliberate act of policy by senior officers. Clearly, on Mr Ma's evidence, the matter was raised, discussed and a conscious decision made to conceal the facts from beneficiaries who would, it was known, be concerned about the decision and who may want to challenge it. 378. I have had a number of authorities cited to me about this aspect of the matter, but I do not need any authority to tell me that where a trustee decides to abandon an asset, which the trustee knows, or should know, might be, on some view of the facts or the law, an asset of the estate, he should, as the least of his duties, inform all the beneficiaries of the facts and his reasons for his decision, so that they may, if they wish, challenge that decision. Without consulting all the beneficiaries, the trustee should certainly not act, in this situation, on the opinion of a trust officer, even if he is a solicitor, especially where that officer himself has some doubt about the matter, and more especially where that officer is also acting as solicitor for the beneficiary who is to benefit from the decision- Without consulting all the beneficiaries, it should not act on the opinion of counsel instructed by one of the beneficiaries, through a solicitor acting for that beneficiary, but also acting as a full-time employee of the trustee, especially where the trustee knows, or should know, that counsel has not been given the full facts, and has been given distorted facts. It should not act on counsel's advice, where that advice indicates that, ultimately, the answer depends on facts, without fully investigating those facts. It should not act on counsel's advice when the facts presumed by the law, or assumed by counsel, that would lead to an answer in favour of the beneficiary briefing counsel are, the trustee knows, or should know, thrown into doubt by statements as to the facts by that beneficiary himself. This, I think, is elementary. 379. Correctly, what the trustee should do is more than just tell all the beneficiaries of its proposed course of action and its reasons, and leave it them to challenge or not: It should obtain an independent opinion from counsel briefed by the trustee with the full, correct facts, follow up investigations, if counsel indicates that these are necessary, and, if there remains any doubt at all, or the beneficiaries are reasonably not satisfied, to seek directions from the court, furnishing the court with the opinion and the result of the investigations. 380. And I believe this to be the position even if, after a lengthy trial like this one, it is, at the end of the day, after an extensive investigation into the matter, shown that the assets indeed are not part of the estate. On this aspect of the matter, the important thing is not whether the trustee is right, perhaps by accident, but whether it has fulfilled its duties to the estate, and the beneficiaries in the process of making its decision. it is not, in my view, right for a trustee to seek to avoid a dispute by actively concealing from some of the beneficiaries information that would enable them to pursue the dispute. The law provides a trustee with adequate remedies when it is placed in this situation, but the law expects the trustee always to act with umberrimae fides. 381. In this connection, I do not accept Mr Lee's submission that the plaintiffs' case against his client is based on the assumption that the assets are part of the estate. Certainly, the allegations ore based on the two accounts, but they do not fall because it might have turned out that The trustee made the correct decision, albeit for the wrong reasons. The plaintiffs base their allegations clearly on breaches of duties that are largely admitted, and, if the trustee has breached those duties, it cues not matter if, had it complied with its duties, the plaintiffs would have had nothing else to complain about. The issue is clearly raised on the pleadings: The plaintiffs talk about assets 'that might properly constitute part of the, estate' and 'which part of such assets fell within or outside the estate', whereas the trustee, obviously quite deliberately, seeks to limit its duties to assets 'belonging' to the estate. 382. There is no doubt in my mind that, in this situation, the trustee should not have retreated into a shell of deliberate secrecy, but have said, openly and honestly, to the plaintiffs, without any pressure or promoting: 'Now that you are beneficiaries, you should know that there are these assets. We have treated them in the affidavits filed with the commissioner this way and that, at different times, but we do think they belong to Gordon. Here is counsel's opinion obtained by Gordon on the point, although you should know that counsel was briefed with the wrong facts; in particular, he was not told that Gordon maintains that the assets were part of a business arrangement with his father. What is your attitude? We will take what you have to say into account, together with an legal opinions and facts that you wish to adduce. If we are still of the view that the assets are Gordon's property after considering your submissions, we may take an independent opinion, seek directions from the court, or leave you to take such action as you see fit.'. 383. Accordingly, I find that the trustee was in clear breach of its duties in this regard. Conflict of Duties. 384. From the only evidence I have before me, that of Billy Ma, I am firmly convinced that the trustee, acting through Mr Ma, paced itself in a position in which it regarded Gordon as a client; not surprisingly, because he was such in fact. There can be no stronger evidence of this than the mind of the trustee itself, as reflected in the letter of 24 June 1984, approved or drafted by Mr Ma, which recognises the conflict, and the trustee's letter of 29 June 1987, which actually refers to Gordon as 'our mutual client'. It was, of course, before 24 June 1987 - that is before Gordon's solicitors commenced to look after his interests - that the trustee, as trustee, made the decision to abandon the assets in favour of their own client. 385. If that is not enough, we have the extraordinary terms of the indemnity approved by the trustee, which, in effect, make it impossible for the trustee to do its duty. The trustee could have been induced to agree to these unusual terms only because it was treating Gordon with favour. 386. The effect of this conflict was undoubtedly a leaning in favour of Gordon. I am quite unable to understand Mr Ma's evidence as to why he consulted Gordon and his sisters on his treatment of the assets in dispute, but not the plaintiffs, on any other basis. His reasoning on this is circular: 'We did not consult them on this decision to treat the assets as not part of the estate because the assets were not part of the estate because we had decided that they were not part of the estate'. And, of course, it is clear that this was not a casual decision made by inadvertence, but a considered act of policy by senior officers of the trustee. 387. In my view, Billy Ma revealed some reasoning, apart from the relationship with a client, as to why it was decided that the plaintiffs should be treated this way. The trustee was convinced in its own mind tat Gordon has settled the probate action with the plaintiffs on the basis that the disputed assets belonged to him. On that basis, the trustee seems to have concluded that they should help Gordon to ensure that the plaintiffs did not share in the assets as part of the estate by concealing the existence of those assets. The propriety and fairness of this attitude does not seem to have entered its mind. 388. Accordingly, I am satisfied that, not only did the trustee allow itself to placed in a position where it might have be influenced in the discharge of its duties by its relationship with Gordon, but, it fact, it was so influenced. If it had not been so influenced, it would not have released the assets to Gordon without, at least, giving the plaintiffs an opportunity to have their say. In any event, once the plaintiffs became beneficiaries, it should have realised its vulnerable position, disclosed its relationship with Gordon to the plaintiffs and, at least, sought refuge in a direction from the court. I find for the plaintiffs on this ground. Devastavit. 389. It follows from my finding that Gordon had no rights in rem to the shares in the Mok 1 account that, by failing to recover those shares and realise them for the benefit of the estate, the trustee committed devastavit for which it must be liable. Relief under Section 60 of the Trustee Ordinance. 390. The trustee prays for relief under this provision of the law. This section provides that if it appears to me that the trustee 'has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach' I may relieve him either wholly or partly from personal liability for the breach. 391. I need say no more in this connection, and this will surprise no one in the light of my findings, than it does riot appear to me that the trustee acted reasonably and ought fairly to be excused. In any event, a measure of contrition might have helped towards forgiveness: To the very end, the trustee has contended that it did nothing wrong. It is very hard to accept that it genuinely feels this way knowing of the evidence I have heard in this case. Relief as against Trustee. 392. On my findings, the plaintiffs are entitled, as against the trustee, to the relief claimed in paragraphs (1) to (5) of the prayer and I grant this. 393. In paragraph (6), the plaintiffs claim removal of the trustee and the appointment of a judicial trustee. On the face of it, the plaintiffs have a legitimate claim to this relief. They have reason to apprehend that, because they have been treated unfairly in the past, the trustee may treat them in the same way in the future. I appreciate that the other beneficiaries are content that the trustee should remain in office, but they, of course, have no reason to complain about the trustee's conduct. 394. On the other hand, I know, as everybody in Hong Kong does, that the trustee has a long and honourable history in the territory and a good reputation. Its misdeeds in this case have been committed, of course, by individuals in its employ. I am reluctant to damage the reputation of the company, and, possibly and consequently, the pockets of its shareholders, of which, I hasten to add, I am not one, by attributing to it, for the purpose of this relief, acts of its servants for which it is legally, but not necessarily morally, responsible. 395. I am also influenced by the fact that I am anxious to avoid an further expense to the estate. A new trustee will have to incur considerable expense by familiarising itself with the estate and all that has gone on. 396. What I propose to do is to postpone consideration of this relief. I will consider any representations by the trustee and the beneficiaries. What I am looking for are suitable undertakings by the trustee as to what it would propose to do to ensure that this estate is administered properly in future; in particular, that the individuals responsible for the acts and decisions that I have criticised will not take any further pact in the administration. If I am satisfied with these undertakings after taking into account what all the beneficiaries have to say, I may not, as a matter of discretion, remove the trustee. Relief as against Gordon. 397. The plaintiffs ask for the relief set out in paragraphs (7) to (14) of the prayer. 398. On my findings, the plaintiffs are entitled to this relief, including an inquiry into loss or damage suffered, and I grant this. I have not been addressed on the rate and period of interest. In the absence of agreement on this, I will hear the parties. Costs. 399. I do not see any reason why the defendants should not pay the plaintiffs' costs of suit. Obviously, what Gordon has to pay by way of costs to the plaintiffs cannot come out of the estate. As to the trustee, it has been defending its own interests, not those of the estate, and the estate should not bear its costs of the litigation; or the costs it has to pay to the plaintiffs. I make an order nisi accordingly.
Representation: Mr Dennis Chang, Q.C., Mr Y.C. Mok (until 20 December 1989), and Mr Johnny Mok, instructed by Messrs Fred Kan & Co, for the Plaintiffs. Mr Martin Lee, Q.C. and Miss Maria Yuen, instructed by Messrs Deacons, for the First Defendant. Mr Richard Mills-Owen, Q.C.( from 5 to 22 January 1990), Mr Ronny Tong (except 15 to 22 January 1990) and Mr Freddy Lim, instructed by Messrs Gallant Y. T. Ho & Co, for the Second Defendant. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment