Ma Mee Kiu and Others v. Chau Chun Yuen

HCA 495/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 495 OF 2003

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BETWEEN

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Before: Hon A Cheung J in Court

Dates of Hearing: 5-9, 12-14 March 2007

Date of Judgment: 4 May 2007

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J U D G M E N T

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Facts and disputes

1.This is a dispute between family members.  The 1^st plaintiff is the widow of the late Chau Chi (“the deceased”).  In descending order of seniority, the defendant, Chau Yam Ka (deceased), the 2^nd plaintiff and the 3^rd plaintiff are the sons of Chau Chi. The 1^st plaintiff is their step-mother.  Chau Yam Ka (“Yam Ka”) passed away in 1999 and the administratrices of his estate – namely his widow and daughter, are the 4^th plaintiffs in this action.  Zhou Xin Jiao is the eldest child of Chau Chi and the eldest sister of the four brothers just described.  She is not a party to the present action but has given evidence at trial for the defendant.  She will be referred to as “the sister” in this judgment.

2.The deceased passed away on 26 November 1977.  Before his death, he had made a will dated 4 February 1977.  In his will, he appointed his eldest son (the defendant) and a nephew (Chow Pak Leung – “Pak Leung”) to be his executors and trustees.  In his will, he gave his shop premises situated at No 81, Sai Yee Street, Ground Floor, Kowloon (“the shop premises”) to his trustees upon trust to receive the income from the property, to pay a fixed amount ($500) per month to the 1^st plaintiff during her life and to apply the remaining portion of the income as they should think fit for the maintenance of the 1^st plaintiff and the deceased’s children.  After the death of the 1^st plaintiff, the trustees shall hold the shop premises and the accumulated surplus income upon the same trust declared in the will concerning the residuary estate.

3.The will gave the residuary estate of the deceased to the trustees upon trust to sell and to hold the sale proceeds upon trust for the deceased’s four sons in equal shares.  The trustees were also given the power to make advancement in favour of the children out of their presumptive or expectant shares of the residuary estate for their maintenance and education.

4.Probate of the will was granted in favour of the defendant and Pak Leung as executors in 1981.

5.Apart from making the will, the deceased had, prior to his death, transferred his one-third share in a live pig trading business known as Wing Fung Laan to the defendant.  Furthermore, he had also assigned the matrimonial home situated at Pak Po Street to his wife, the 1^st plaintiff.  There is no dispute that the assignment of the matrimonial home was a gift.  The defendant maintains that the transfer of the deceased’s share in Wing Fung Laan to him was also a gift.  This is disputed by the plaintiffs.

6.The deceased had also owned two taxis registered in the name of his nephew, Pak Leung, who was very close to and greatly trusted by the deceased and his family.  Pak Leung was younger than the sister and the defendant, but older than the other children of the deceased.  One taxi was sold to raise medical expenses for the deceased’s treatment after the onset of his illness in late 1976.  The other taxi, although not mentioned in the schedule of property annexed to the grant, comprised part of the residuary estate, as all parties accept.

7.The deceased was also a partner in a motor spare parts business known as Wah Sing Battery and Auto Supply (“Wah Sing”).  His share formed part of the residuary estate.  Originally, Pak Leung worked in Wah Sing as a representative of the deceased.  He continued to do so after his death until 1979 when Yam Ka, the deceased’s second son, immigrated from the Mainland to Hong Kong.  Under the arrangement of the defendant (Yam Ka’s eldest brother), Yam Ka replaced Pak Leung in Wah Sing.

8.Since then, Wah Sing had been run by Yam Ka together with other partners until Yam Ka’s death in 1999.

9.In June 1978, the defendant purchased a property situated at 4^th Floor, 73 Sai Yee Street, Kowloon in his own name as residence.  In October 1980, he purchased in his own name another property situated at 4^th Floor, Block B, 112 and 112A Argyle Street for investment.  In April 1984, he sold the Sai Yee Street property and moved to reside at the Argyle Street property.  The defendant maintains that the properties were purchased with his own monies – including the profits and salaries he had obtained from Wing Fung Laan, which he says was beneficially transferred to him by his father.  The plaintiffs, however, maintain that the properties were purchased with monies belonging to the estate (including monies from Wing Fung Laan which they say belonged to the estate).

10.In October 1979, shortly after Yam Ka and his family immigrated to Hong Kong, the defendant purchased in Yam Ka’s name a flat immediately above the matrimonial home that his father had assigned to the 1^st plaintiff prior to his death – Flat 3, 15^th Floor, Ngai Hing Mansion, 2-24 Pak Po Street, Kowloon (“the Pak Po Street property”).  However, Yam Ka executed a declaration of trust of the property in favour of the defendant.  Again the defendant says that the property was purchased with his own money and therefore the declaration of trust in his favour.  It was purchased in the name of Yam Ka because the purpose of the purchase was to house Yam Ka and his family.  The plaintiffs, including Yam Ka’s estate, argue that the property was also purchased with money belonging to the estate.

11.The 2^nd plaintiff, the third son of the deceased, was sent by the deceased to UK to continue his education there in 1976.  He completed his studies in UK and returned to Hong Kong in 1985.  There is no dispute that his studies and living in UK were heavily subsidised by monies remitted to him by the defendant from Hong Kong.  The defendant maintains that the remittances came from the income of the estate as well as his own income.  He is the eldest son of the family and after his father’s death, he had, he maintains, taken up the dual role as father and eldest brother of his younger siblings, in accordance with traditional Chinese family concept.  However, the plaintiffs maintain that the remittances came from the estate’s income only.

12.Likewise, the 3^rd plaintiff, the youngest son of the deceased, went to UK to further his studies in 1980.  Again he was essentially maintained by monies remitted from Hong Kong, until he completed his studies in 1989.  He has since settled in UK.  A similar dispute arose as to whether the monies came from the estate’s income alone or also comprised income of the defendant.

13.The defendant maintained at trial that after the death of his father, he had a big (extended) family to maintain.  Apart from supporting the studies and living of the 2^nd and 3^rd plaintiffs in UK, which were expensive, he had to maintain the 1^st plaintiff (the deceased’s widow) as well as his grandmother (the deceased’s mother) until 1983 when the latter passed away.  The income of the estate was mainly derived from the rent of the shop premises, which was let to Wing Fung Laan.  However, the rental income was insufficient to maintain everybody.  On the other hand, the defendant says, he worked hard in Wing Fung Laan as a partner and the business was at one stage very substantial.  He used his profits and monthly salaries drawn from the business to supplement the outgoings and expenditures of the other members of the family, which the income of the estate alone was insufficient to support.  He said in evidence that he was trying his best to maintain everybody as an extended family, of which he had become the head as eldest son.

14.It should be added at this juncture that the Wah Sing business apparently did not bring in much income.  In any event, it would appear that after Yam Ka’s joining Wah Sing in 1979, it had become Yam Ka’s business and his own source of income for his and his family’s use.  The other remaining taxi of the deceased was sold by the defendant after the death of the deceased to supplement the estate’s income.

15.In 1987, there were disputes amongst the partners of Wing Fung Laan and the business was dissolved in the same year.  The defendant and a new partner (Mr Chung) started a new live pig trading business known as Shun Cheong Laan.  The defendant’s share of capital contribution in the new business came from money obtained from the dissolved Wing Fung Laan as well as income of the estate.  He maintains that since he had supplemented the expenditures of the estate substantially in previous years, the contribution from the estate towards his share of capital contribution in the new business was simply a partial repayment of those previous contributions of his.  He maintains that the new business (Shun Cheong Laan) belonged to him beneficially, just like the previous Wing Fung Laan.  The plaintiffs say otherwise.

16.Things took a wrong turn in the mid-1980s when the defendant became addicted to gambling, which soon affected seriously the financial situation of the defendant.  Urged by former business associates and friends of the deceased and other family members as well as Pak Leung, the defendant asked Yam Ka to take up some responsibilities for managing the estate’s affairs and monies, as well as the accounts of Shun Cheong Laan.  This was done to protect the monies of the estate and the Wing Fung Laan business.  Things did not improve and by the late 1980s, the defendant was heavily in debt and a compulsive gambler.

17.By letter dated 23 August 1989, the defendant proposed to his brothers to divide up the family/estate (分家).  The idea was to divide everything belonging to the estate into five shares – one for each brother and the fifth one for their stepmother.  The purpose of the exercise was to enable the defendant to use his share of the estate to repay his indebtedness, which was totaling over $800,000.  That letter, according to the evidence, started a series of discussions amongst the brothers.  Former business associates and close friends of the deceased as well as Pak Leung were also involved.  It appears from the contemporaneous letters and documents as well as the evidence of the parties, and I so find, that the original intention of the defendant was simply to get his share in the shop premises, which was then valued at $6 million, for the purpose of repaying his indebtedness (and maybe as funds for further gambling).  However, his brothers as well as those close business/family friends insisted that in dividing up the estate, account should be taken of the Shun Cheong Laan business, the Argyle Street property as well as the Pak Po Street property.  Besides, Wah Sing, run by Yam Ka, was also to be taken into account.  The combined value of all properties and businesses was estimated at $7.56 million.  Taking into account the indebtedness of the defendant to the estate calculated in the sum of $164,300, and on the basis that the defendant would keep Shun Cheong Laan which he had been running as a partner as well as the Argyle Street property in which he had been residing, the net amount payable to the defendant for his share was only $650,000.  It was accepted reluctantly by the defendant in the light of his financial pressures and needs.  He maintains that in fact Shun Cheong Laan and the Argyle Street property belonged to him beneficially from day one and ought never to have been taken into account as estate assets.  However, he had no choice in the circumstances but to agree to the method of calculation.

18.The sum of $650,000 was to be paid to the defendant by instalments.  In total, a sum of $610,000 was paid, leaving a balance of $40,000 outstanding.  The money paid was essentially raised by the 2^nd plaintiff from his own resources as well as loans from others.  He was also the main contact point with the defendant.  However, by mid-1990, things had become so bad for the defendant that he had disappeared.  In fact by October, he had fled to the Mainland to dodge his creditors.  It is the plaintiffs’ case and the 2^nd plaintiff’s evidence that the defendant could not be contacted whether directly or through Pak Leung.  As a result, the balance payment could not be paid to the defendant.

19.In late 1990, whilst in the Mainland, the defendant began to regret the agreement reached earlier out of which he would only get a net sum of $650,000 – as for Shun Cheong Laan and the Argyle Street property, they had throughout been “his” in practice, leaving aside the true legal position for the time being.  Moreover, under the 1990 agreement, he had to give up the Pak Po Street property, regarding which he held a declaration of trust made by Yam Ka in his favour.  The sum of $650,000 was not even sufficient to meet his then indebtedness of over $800,000.  Through lawyers, he therefore asked for more.  The defendant also complained bitterly against the way the so-called family assets were reckoned, namely the 1^st Plaintiff’s matrimonial flat was not counted as asset of the family, nor were the respective study expenses of the 2^nd and 3^rd plaintiffs in UK.  Furthermore, he said initially Yam Ka had agreed to pay him $850,000 for the “buy-out”.  Several days after the meeting, Yam Ka only offered to pay $200,000, which was raised by the 2^nd plaintiff to $400,000.  Subsequently, through the help of Pak Leung, the final figure for the “buy-out” was increased to $650,000.  (Although strictly speaking, what had been agreed was more than a buy-out of the defendant’s share in the estate but was really a family arrangement to distribute assets belonging to the estate (or regarded as belonging to the estate), the parties have throughout been referring to what had been agreed in 1990 as an agreement to buy out the defendant’s share in the estate.)

20.According to the defendant, and this is highly controversial, then there came a telephone call from the 2^nd plaintiff to him in the Mainland.  The 2^nd plaintiff told the defendant over the phone that as the defendant was no longer willing to “sell” his interest in the estate (“sell” used in the sense described above), the 2^nd plaintiff would require the defendant to repay the money received ($610,000) by deduction from the defendant’s share of the estate’s income.  After some brief discussion, the period of deduction was agreed at 10 years, counting from 4 April 1990 – the date when the first instalment was paid to the defendant.  This became, according to the defendant’s case, the genesis of the so-called 10-year agreement.  

21.According to the defendant’s evidence, the 10-year agreement was finalised or confirmed in a face-to-face meeting between the 2^nd plaintiff, the defendant and Pak Leung in Hong Kong on 7 November 1991.  On that occasion, the parties confirmed the cancellation of the 1990 agreement for the “buying out” of the defendant’s share in the estate for $650,000, and the repayment of the monies received by the defendant by deduction from the defendant’s share of the estate’s income for 10 years.  Furthermore, the parties agreed that a loan of $42,000 originally made by Pak Leung to the defendant and subsequently assumed by the 2^nd plaintiff as borrower in place of the defendant and thus regarded as a further instalment payment by the 2^nd plaintiff to the defendant pursuant to the 1990 agreement be reverted to the defendant as borrower.  As a result, the total instalment payments received was $568,000 and the defendant became responsible for repaying Pak Leung the loan of $42,000.  Indeed, a part payment of $7,000 was made to Pak Leung by the defendant through his wife.  According to the defendant’s evidence, he was then still trying to persuade the 2^nd plaintiff to change the period of deduction of 10 years.  He wanted repayment by actual deductions, ie by reference to the actual amounts of his due share of the estate’s income until such time when the instalment payments received were fully repaid.  He said that was why in a document dated 8 November 1991 that he drew up to record what had been agreed the day before he did not mention the 10-year period but simply deduction from his share of the estate’s income.  That document was signed by him and Pak Leung.  But when Pak Leung took the document to the 2^nd plaintiff for him to sign, he refused on the ground that the deduction period should remain 10 years as agreed.  The reason was that both sides realised that the total amount of the instalment payments received by the defendant would be substantially less than the defendant’s estimated share of the income of the estate for 10 years, according to the then rental market.  The defendant explained in evidence that he was in no position to disagree with the 2^nd plaintiff.

22.In evidence is also a document dated 13 November 1991 signed by both the defendant and Pak Leung recording the agreement that had been reached to convert the loan of $40,000 back to one between Pak Leung and the defendant and the part repayment of $7,000 by the defendant through his wife to Pak Leung.  The document also mentioned the meeting on 7 November and the cancellation of the “buy-out” agreement of the defendant’s share in the estate.

23.In the meantime, the 2^nd plaintiff had taken over from Yam Ka the responsibility of managing the affairs and monies of the estate, in conjunction with Pak Leung.  The plaintiffs’ case is that the defendant had fled to the Mainland to evade his creditors and become essentially not contactable, and he had abandoned his responsibilities as executor and trustee regarding the affairs of the estate.  On the other hand, the defendant maintains that after the making of the 10-year agreement, and acting on the advice of Pak Leung and the sister, he had refrained from participating in the management of the affairs of the estate during that 10-year period.  This was so with the exceptions of two occasions in 1992 and 1996 when he contacted the tenants of the shop premises and asserted his status as executor of the deceased and the authority to let the shop premises and to receive the rentals.

24.On the other hand, the plaintiffs’ side has been denying the existence of the so-called 10-year agreement.  In evidence, the 2^nd plaintiff said that what happened was that in 1992 when he was in UK, he heard that the defendant had returned to Hong Kong to harass the then tenant of the shop premises.  He called the defendant and subsequently met him in Hong Kong and promised the defendant that if the defendant would refrain from interfering with the tenancy affairs of the estate for 10 years, then after the lapse of 10 years, he would consider giving the defendant something out of the estate’s income.  He emphasized that the promise was conditional on the defendant refraining from interfering with the tenants for 10 years.  He stressed that even so, he did not bind himself to giving the defendant anything after the lapse of 10 years.  Moreover, how much, if any, he was to give the defendant was in his sole discretion.  According to him, the defendant agreed, and that led to a period of quiet time of 4 years, until 1996 when the defendant again contacted the then tenant and created confusions.  The 2^nd plaintiff was so upset by what the defendant did that he told Pak Leung (who became the only contact point with the defendant who was living and working in the Mainland) that the 10-year agreement (as per the 2^nd plaintiff) was cancelled.

25.In the meantime, the relationship between the defendant and Yam Ka had become tense over the Pak Po Street property.  Under the 1990 agreement, the Pak Po Street property was regarded as an asset of the estate which the defendant would give up.  Furthermore, Yam Ka was to get that property by way of his share of the estate (his share was to be “bought out” at the price of $650,000), which however did not materialise.  Nonetheless, the declaration of trust was surrendered by the defendant to the solicitors.  And later on in the same year (1990), Yam Ka caused the property (which was registered in his name) to be transferred to his wife and daughter.  This apparently upset the defendant very much, and at one stage litigation was contemplated.  In any event, Yam Ka passed away in 1999.

26.The period of 10 years lapsed in April 2000, according to the defendant’s version.  In early 2002, the tenancy of the shop premises was expiring, and a new tenancy agreement had to be executed soon.  Pak Leung, who was then seriously ill and hospitalized, insisted that the defendant should co-sign the tenancy agreement with him as executor and trustee, the defendant having been excluded from execution of the previous tenancy agreements (since 1992).  According to the defendant, Pak Leung did this because the 10 years had expired and the defendant was entitled to resume his share in the estate’s income, which consisted mainly of the rental income from the shop premises.  The 2^nd plaintiff refused.  By then, according to the defendant’s case, the 2^nd plaintiff had refused to allow the defendant any share in the rental income of the estate despite the lapse of the 10-year period, having put forward one excuse after another.  The sister had tried to intervene on behalf of the defendant but to no avail.  Seeing that he was getting nowhere with Pak Leung and the defendant, the 2^nd plaintiff then caused a new tenancy agreement to be signed by the 1^st plaintiff with the tenant.  The defendant, as the sole surviving executor of the deceased, Pak Leung having died in February 2002, therefore commenced proceedings against the tenant.  The tenant did not defend the action and judgment was obtained.  Subsequently, a new tenancy agreement was signed between the same tenant and the defendant as executor.  In the meantime, the plaintiffs found the situation intolerable and commenced the present action in February 2003 against the defendant.

Plaintiffs’ action

27.The plaintiffs’ case, in short, is that by the 1990 agreement, the defendant has agreed to “sell” his share in the estate to the plaintiffs (with the 2^nd plaintiff as the representative) for $650,000.  They hold the defendant to this agreement.  They ask for specific performance.  Furthermore, they ask for the removal of the defendant as executor and trustee, claiming that he has neglected his duties since the mid 1980s as a result of his gambling addiction.  They say he has abandoned the office by fleeing to the Mainland since early 1990 and has interfered with the tenancy matters of the estate to the detriment of the estate and its beneficiaries.  The plaintiffs have put forward originally the 1^st plaintiff and subsequently the 2^nd plaintiff to be a candidate for appointment as administrator and trustee to replace the defendant.  At trial, Mr Chan SC, Mr Sham with him, informed the Court that the plaintiffs are agreeable to the appointment of an independent third party/professional trustee to act as the new administrator and trustee of the estate if the Court should be minded to remove the defendant from his office.

28.The plaintiffs also ask for the repayment of the sum of $164,300 being money owed by the defendant to the estate (as per the calculations made in 1990), to the estate.

Defendant’s counterclaim

29.On the other hand, the defendant maintains that the 1990 agreement has been discharged by the subsequent 10-year agreement.  The 10-year period has expired in April 2000, and since then, he is entitled to his share of the rental income of the estate, which has been handled by the 2^nd plaintiff.  He claims payment of his share accordingly.  The defendant has through counsel confirmed with the Court during final submission that he is prepared to step down as executor and trustee in favour of the appointment of an independent third party/professional trustee as administrator and trustee to manage the estate and trust, so as to avoid any future dispute with the plaintiffs.

30.The defendant has also counterclaimed for an account of monies received since April 1989 when the affairs of the estate were managed by Yam Ka/the 2^nd plaintiff (together with Pak Leung).  Various accounts have since been supplied and no further relief is sought apart from payment of the defendant’s due share since April 2000.

31.Originally, the defendant also maintained that Yam Ka’s estate is not entitled to a share in the trust of the residuary estate created under the will, as he has predeceased the 1^st plaintiff.  That claim has been dropped by the defendant through Ms Jennifer Tsui, his counsel, at trial.  Ms Tsui has also on behalf of her client confirmed with the Court that the defendant, as a gesture of goodwill and out of brotherly love towards Yam Ka, has decided to waive his claim to beneficial ownership or interest in the Pak Po Street property against Yam Ka’s estate.

The trial

32.This case essentially turns on facts.  At one stage during the trial, the defendant through counsel sought to raise an argument based on the formality requirements in sections 3 and 5 of the Conveyancing and Property Ordinance (Cap 219) regarding the 1990 agreement.  For reasons given in an ex tempore judgment, I refused the defendant’s late application to amend his pleadings so as to run the point.

33.The Court has heard evidence from the 2^nd plaintiff, the 3^rd plaintiff, the defendant as well as the sister.  Originally, the 1^st plaintiff intended to give evidence at trial, but because of ill health, she was unable to do so.  Apart from oral evidence, much documentary evidence, including many contemporaneous documents and letters, have been put in evidence.  It is a fair summary of the issues between the parties that essentially the making of the 1990 agreement is not in dispute, and the crux of the matter lies in whether the so-called 10-year agreement has been made in 1991 as per the defendant’s story.  A less important issue relates to the ownership of the disputed assets.

34.Although the parties disagree on many other matters, they are only peripheral issues.

Sister’s evidence

35.Of the oral evidence given by the witnesses, I find the sister’s evidence to be most impressive.  She is the eldest child of the deceased and the eldest sister of the brothers.  As such, she enjoys a degree of respect from all of them.  She is resident in the Mainland.  She used to teach at Jinan University in Guangzhou.  She retired in 1992.  She was confident and straightforward in the box.  No doubt she is highly intelligent and possesses a very good memory – some occasional lapses in her evidence notwithstanding.  She has no financial stake in the dispute.  She said in the box that she is unbiased, loves all her siblings and they all love her.  She had tried but failed to persuade the brothers to settle the case.  She agreed to give evidence for the defendant so as to tell the truth.  An additional reason was that she had promised Pak Leung in his dying bed in February 2002 to help the defendant claim back his rightful share in the estate pursuant to the 10-year agreement.

36.The sister heard of the division of the estate in 1989/1990 mainly through Yam Ka as well as the defendant.  She also heard from the 2^nd plaintiff that he had been told by the lawyers that the latter did not want to do the formal agreement for them and therefore the deal could not be completed.  She speculated that it was due to the fact that the parties were seeking to sell the future interest in the estate which (she thought) had not yet accrued.

37.As to the all important 10-year agreement (as per the defendant’s version), the sister was very firm in her evidence that she had heard about it and confirmed it with the 2^nd plaintiff face-to-face on several occasions.  Despite vigorous cross-examination including suggestions of fabrication, the sister stood her ground.  Essentially, she said she had first learned of the 10-year agreement when the defendant and Pak Leung mentioned it to her in October 1991.  On that occasion, the defendant was worried about the 2^nd plaintiff reneging on his promise after the lapse of 10 years as there was nothing in writing to evidence it.  Pak Leung orally assured the defendant that if the 2^nd plaintiff should in the unlikely event of seeking to deny the agreement after the expiry of 10 years, he would help him to claim back his rightful share.  The sister also shared that view.

38.The sister testified that after learning of the 10-year agreement from Pak Leung and the defendant, she wanted to verify it with the 2^nd plaintiff.  Thus in March 1992, she visited Hong Kong specifically for that purpose.  On that occasion, she met the 2^nd plaintiff who confirmed with her that if the defendant should refrain from interfering with the tenants, he would return the defendant’s share to him after 10 years.  The sister considered that the 10-year deduction period was too long given the estimated rental income of the estate.  She reckoned that the instalment payments received by the defendant would have been repaid in full together with interest in 5 years’ time.  She therefore raised it with the 2^nd plaintiff and asked him whether he was agreeable to reduce the period.  The 2^nd plaintiff refused.  During that visit to Hong Kong, she also met Yam Ka.  Yam Ka was disinterested, saying that the cancellation of the 1990 agreement and the making of the 10-year agreement was not his concern.

39.The sister also testified that the 10-year agreement was mentioned almost on every occasion when she met Pak Leung and the defendant during the annual ancestral worships in the Mainland.  The defendant was from time to time sceptical about the 2^nd plaintiff’s willingness to keep the promise, and she and Pak Leung always told the defendant to wait patiently and trust the 2^nd plaintiff on his word.

40.During cross-examination, the sister also confirmed that she had heard of the face-to-face meeting between the 2^nd plaintiff, the defendant and Pak Leung about the 10-year agreement and the treating of the $42,000 loan as money borrowed by the defendant.  She said she did not know that a document had been signed until February 2002, when she visited Hong Kong again.  She visited Pak Leung in hospital, who was seriously ill.  She heard from Pak Leung’s mouth that a document had been signed, and at her request, the defendant brought the document dated 8 November 1991 to hospital to show her.

41.She also said that Pak Leung told her in hospital that although the 10-year period had expired, the 2^nd plaintiff had not yet honoured his promise under the 10-year agreement; Pak Leung was worried that he was not willing to do so.  He wanted the defendant to join in signing the tenancy agreement as a co-executor.  He asked the sister to help the defendant claim back his rightful share.  She agreed.

42.The sister testified in Court that she met the plaintiff on 7 or 8 February 2002.  She asked the 2^nd plaintiff to honour the 10-year agreement.  The 2^nd plaintiff said that he would not trust the defendant because he was a gambler.  The sister suggested the 2^nd plaintiff pay the defendant’s share to his wife.  The 2^nd plaintiff replied that he would not pay the money to a woman, but was willing to pay it to the defendant’s eldest son – the eldest grandson of his father.  The sister said she agreed with the suggestion, but then the 2^nd plaintiff added that he would only pay over the defendant’s share to his son after the death of the 1^st plaintiff.  Thereupon the sister scolded the 2^nd plaintiff for being insincere and warned him not to think that he was bound to win in case of litigation.

43.Pak Leung died on Chinese New Year day in February 2002.  Shortly thereafter – 18 February 2002, the sister brought along the defendant to see the 2^nd plaintiff.  Amongst other things, she asked the 2^nd plaintiff to honour the 10-year agreement.  The 2^nd plaintiff replied that he would only give $3,000 per month to the defendant’s son, which was not acceptable to the defendant.  That same night, the 2^nd plaintiff invited the sister and her family for dinner.  On the way to the restaurant, the 2^nd plaintiff told the sister that $3,000 was still a share, which could be big or small.  Furthermore, the so-called 10-year agreement was merely “a business ploy to gain 10-years quiet time”.  The sister retorted that that was cheating and felt very upset by what the 2^nd plaintiff had said.

44.In September the same year, the sister called the 2^nd plaintiff from the Mainland, requiring the 2^nd plaintiff to honour the 10-year agreement.  He replied that as the defendant was still interfering with the then tenant in 1992, the matter should not be raised until 2003.

45.In December 2006, the 2^nd plaintiff told the sister that the 10-year agreement had already been cancelled and he had told Pak Leung about it.  The 2^nd plaintiff said Pak Leung was a good man and he did not want to tell her about it.  The sister said in evidence that she had heard of the purported cancellation from Pak Leung directly in February 2002.  Pak Leung told her on that occasion that the 2^nd plaintiff was angry with Pak Leung over his insistence that the defendant should join in to sign the tenancy agreement as a step towards implementing the 10-year agreement.  He told Pak Leung that the 10-year agreement had been cancelled.  It is plain from the sister’s evidence that neither she nor Pak Leung considered that the 2^nd plaintiff had any ground for so cancelling the 10-year agreement after the expiry of the 10-year period in April 2000.

46.In evidence, the sister also confirmed that from what she knew generally and what she learnt from her father and brothers, the Wing Fung Laan business was transferred by the father to the defendant as a gift – the defendant was his eldest son, he had been helping out in the business diligently after his immigration to Hong Kong in 1976, and the father wanted to give him the business as an incentive for his developing his own business in Hong Kong.  She also confirmed that the expenditure of the extended family was very substantial, particularly with both the 2^nd and 3^rd plaintiffs studying abroad, and the defendant had been using his own personal income from the Wing Fung Laan business to subsidise the expenditure of the extended family.  She also said that the defendant had quitted gambling since returning to live in the Mainland in the early 1990s.

47.During cross-examination, the 2^nd plaintiff’s version of the 10-year agreement was put to the sister.  She denied it emphatically.  She emphasized that the promise of payment of the defendant’s share in the estate’s income after the lapse of 10 years was not discretionary but unconditional.  She stressed that on all the occasions when she mentioned the 10-year agreement to the 2^nd plaintiff, he never denied the making of the agreement.

48.As I said, despite vigorous cross-examination, the sister has stood her ground.

49.It is plain that the 2^nd plaintiff’s case and evidence on the 10-year agreement are quite incompatible with the sister’s evidence, which essentially backs the case and evidence of the defendant.

Other oral evidence

50.In terms of demeanour, I also prefer the performance of the defendant in the witness box to that of the 2^nd plaintiff’s.  Comparatively speaking, the defendant was straightforward and open, whereas the 2^nd plaintiff’s evidence was much more reserved and guarded, and at times hesitant.

51.As for the 3^rd plaintiff’s evidence, he was (and still is) residing in UK at all material times and was not privy to many of the matters in dispute.  Whilst the 3^rd defendant also gave his evidence in a straightforward manner, what he said, which was relatively brief, was essentially based on what he had heard from the 2^nd plaintiff at different times, and was not particularly helpful to the resolution of the factual disputes between the parties.

Discussion

52.Much has been said about the defendant’s addiction to gambling and how that led to all the difficulties, pain and suffering that not only he personally or his own family, but all other members of the extended family also, had experienced.  No doubt, all this is important factual background to the dispute in issue.  But the case cannot be decided on prejudices and moral judgment, but rather on facts and evidence.

53.I must of course consider not only the demeanour of the witnesses and the contents of their oral evidence, but also the documentary evidence and surrounding circumstances, based on the civil burden and standard of proof.

54.Turning to the documentary evidence and surrounding circumstances, a number of points can be made.  But before I do so, I should say a word or two on the contemporaneous letters written.  It must be remembered that apart from several solicitors’ letters, the contemporaneous correspondence was written by laymen.  The letters must not be read as if they were statutes, court judgments, pleadings or other documents written by lawyers.  Furthermore, very often, they simply represent a snapshot of what went through the writer’s mind at the time.  This applies to the letters as well as the so-called “diary” of Yam Ka.

55.As I said, the making of the 1990 agreement is not really in dispute.  Whether the estate included assets which the defendant maintains belonged to him is really not important because even he accepted that under the 1990 agreement, those assets were to be treated as if they were assets of the estate for the purposes of the family division.

56.On the evidence, I find it quite plain that the lawyers found it rather difficult to draw up the legal documents to effect the parties’ agreement.  This was touched upon to varying extents by the 2^nd plaintiff, the defendant and the sister in evidence.  Although Mr Chan SC maintains by way of submission that legally speaking, it is possible for the defendant to sell his interest in the estate even though the 1^st plaintiff is still enjoying a life interest in the income of the shop premises, it does not mean that the lawyers could not have found it slightly difficult to grasp the concept when they were approached by the parties to prepare the legal documentation.  In fact, the plaintiffs’ own lawyers have had difficulties in correctly describing the true nature of the 1990 agreement in the pleadings.  Up until the last day of the trial, the agreement had been pleaded as an agreement for the buying and selling of the defendant’s share in the estate for $650,000.  However, on analysis, this was incorrect on the plaintiffs’ own case.  This was because according to their case, both Wing Fung Laan and the Argyle Street property were assets of the estate.  Pursuant to the 1990 agreement, the defendant was to be distributed with Wing Fung Laan as well as the Argyle Street property.  On top, he was to get $650,000.  In short, the 1990 agreement was much more than an agreement whereby the defendant agreed to sell his interest in the estate to the other beneficiaries under it.  It was more in the nature of a family arrangement whereby specific properties in the estate were to be distributed to individual beneficiaries by agreement.

57.I go into all this not because I want to be technical, but simply to illustrate my point that I do not find it incredible that the solicitors that the parties approached in 1990 to prepare the formal legal documents to effect the 1990 agreement should find it difficult to do so.

58.In any event, the hard fact remains that from April 1990 up to late 1990 when the defendant started to make demands through lawyers for a higher price, the solicitors approached by the 2^nd plaintiff and Pak Leung to prepare the legal documents failed to come up with any draft documents for the parties’ comment or execution.

59.The defendant also mentioned that in fact the lawyers were unwilling to prepare even the receipts for the instalment payments for the parties and Pak Leung ended up having to write out the receipts himself for the parties’ signature.

60.There was also mentioned in evidence that the solicitors felt that the parties should be separately represented.  That may well have been so, but it does not detract from the fact that the lawyers had found it difficult to prepare the formal agreements.  There is a line in a letter dated 12 November 1990 written by the defendant to another solicitor to the effect that the former lawyers had advised him that his share could be sold independently.  That may well have been so.  Without knowing precisely what difficulties the former lawyers had found themselves to be facing, I do not see that line as contradicting the general impression that I have got from the evidence.

61.All this is relevant as background to the alleged 10-year deduction, which was first discussed over the telephone in April 2002.

62.As I said, regardless of why the 1990 agreement was not completed, the hard fact remains that the parties realised that formal documents were required to be executed to carry out the parties’ agreement, and they were not prepared.  Furthermore, the defendant had since late 1990 gone into hiding in the Mainland and he had been making demands for a high price.  All this happened whilst the 2^nd plaintiff had already paid $610,000 to the defendant as part payment (including the sum of $42,000 originally borrowed by the defendant from Pak Leung).  The 2^nd plaintiff has said in evidence that he had to borrow hard in order to make the part payments and his finance was tight.

63.All this is relevant in considering whether there was any reason for the 2^nd plaintiff to suddenly call the defendant in the Mainland to suggest repayment of the monies paid by deduction from the defendant’s share in the estate’s income, implying thereby the cancellation of the 1990 agreement.  In my view, there were indeed circumstances that would provide a reason for the 2^nd plaintiff wanting to cancel the 1990 agreement and get the instalment payments paid back from the defendant.  It must be remembered that at that time he was dealing with a hopelessly addicted gambler who was demanding more money to complete the deal.  The plaintiffs’ side simply lacked the means and willingness to agree to the demands for more and the best alternative, it would appear, in the circumstances of the case, was to cancel the original agreement and get back the money already paid.  After all, the original distribution of assets of the estate was not their idea, but that of the defendant in order to meet his own needs.  As regards the method of repayment, ie deduction from the defendant’s share in the future income (after cancellation of the family division), that would seem to be the only viable means of repayment, given that the defendant was seriously in debt at the time and had fled to the Mainland to dodge his creditors.

64.Another possible consideration, and I put it no higher than that, was that despite all that had happened, and even if the 1990 agreement were to be completed, the defendant would still remain a co-executor of the estate.  He was, for example, then thought to be indispensable as a signatory to any tenancy agreement that the estate might want to enter into with a tenant in respect of the shop premises.  He thus had some bargaining power as an executor.  Indeed, there are documents in evidence suggesting that at one stage the 2^nd plaintiff had thought of negotiating with the defendant for his giving up the executorship in exchange for a higher amount of payment ($280,000) instead of the outstanding balance of $40,000.  But nothing came out of it.  The alleged telephone call that first mentioned the 10-year deduction came at a time (April 1991) when the tenancy agreement of the shop premises was due to be renewed.  As a matter of fact, the defendant did return to Hong Kong to execute the new tenancy agreement together with Pak Leung.

65.In the letters written shortly after the alleged April telephone conversation, the defendant wrote in less hostile terms when compared with before (he had complained about the unfair treatment that he had received during the family meeting whereby the 1990 agreement was reached).  In his letter dated 25 April 1991, he returned the safe deposit box key of the estate to Yam Ka.  And in his letter dated 29 April 1991 to the 2^nd plaintiff, he mentioned his plan to sell the Argyle Street property to raise money to repay part of his debts and asked the 2^nd plaintiff to help him to do so.  Significantly, in that letter, he mentioned that he owed the 2^nd plaintiff about $600,000 (he having received in total $610,000 from the 2^nd plaintiff as part payment pursuant to the 1990 agreement).

66.It is true that, as Mr Chan has pointed out during final submission, those two letters did not mention any 10-year deduction or agreement allegedly made in the same month between the 2^nd plaintiff and the defendant over the telephone.  On the other hand, the treating of the instalments paid previously pursuant to the 1990 agreement as a debt to the 2^nd plaintiff (who had borrowed from others to pay the defendant pursuant to the 1990 agreement) goes a long way towards meeting Mr Chan’s argument.  Moreover, one must not, as I said, read the letters as if they were pleadings.  As the defendant said in evidence, which I accept, he just wrote what was immediately on his mind in his letters.

67.In the subsequent letters written in April and May that year, the defendant no longer bargained for a higher price for the “sale” of his share in the estate, unlike the previous letters.  Rather he was focusing on asking the 2^nd plaintiff to help him sell the Argyle Street property for repayment of debts.

68.Then there was a letter written by the plaintiff to everybody including Pak Leung dated 3 November 1991.  Significantly, the letter referred to the 2^nd plaintiff having agreed with him to give him back his share in the rental income of the shop premises if he was willing to quit gambling and that the money that he had received from the 2^nd plaintiff would be deducted from the future rental income of the shop premises.  The defendant went on, in the letter, to make harsh complaints against Yam Ka’s transfer of the Pak Po Street property to the names of his wife and daughter.

69.Mr Chan argues that the letter recorded a quite different agreement from what is now alleged.  He points out, quite correctly, that the letter referred to the defendant quitting gambling as a sort of condition for the 2^nd plaintiff’s promise.  Moreover, the agreement recorded in the letter did not mention deduction for 10 years but suggested actual deduction as a means for repayment.

70.All this is correct.  However, it seems to me that the mentioning of quitting gambling, on a fair reading of the paragraph in the letter, was merely reflective of the defendant’s understanding of the 2^nd plaintiff’s reason for agreeing to give him back a share in the rental income – the good intention was to encourage him to quite gambling, for which he expressed his appreciation in the letter.  I will return to the question of whether that constitutes a condition to the 10-year agreement.  However, I would reiterate my initial observation here: these letters cannot be read as if they were statutes or pleadings.  They were letters written by a layman under rather difficult or peculiar situations.

71.As regards the failure to mention the 10-year deduction period, I have already described the defendant’s case and evidence that throughout he had been seeking to persuade the 2^nd plaintiff to agree to a lesser period or to use actual deduction instead of a fixed period for calculating repayment.  But from first to last, the 2^nd plaintiff insisted on the 10-year deduction period, with which the defendant was in no position to disagree.

72.I have already mentioned the two documents written by the defendant dated 8 November 1991 and 13 November 1991, both signed by Pak Leung, although the 2^nd plaintiff, who, it was hoped, would also sign the 8 November 1991 document, never signed it.  I have already described the defendant’s explanation for leaving out the 10-year deduction period from that document and how the 2^nd plaintiff refused to sign it for that reason.  In short, he held the defendant to the 10-year deduction period.  This is a convenient juncture for me to say that I do find Pak Leung, on all the available evidence (oral as well as documentary), to be an extremely trustworthy and faithful, close relative of the extended Chau family.  He had helped the Chau family a lot, particularly during the very difficult times that it had gone through.  I do find his signatures on these two documents, the authenticity of which is not challenged, to be highly significant.  They both mentioned the cancellation of the 1990 agreement, the repayment of the instalment payments received by deduction from the defendant’s share of the future rental income of the estate from the shop premises and the treating of the loan of $42,000 as being a debt of the defendant to Pak Leung.

73.There were letters written by the defendant to the 1^st plaintiff in late November and early December 1991.  The main purpose of the letters was to air the defendant’s grievances against Yam Ka about the Pak Po Street property.  Mr Chan says that there was no mentioning of the 10-year agreement in the letters.  All one finds was a recounting of the making of the 1990 agreement in one of the letters.  Counsel submits that this is inconsistent with there having been a face-to-face meeting on 7 November 1991 or the making of the two documents just described.  On the other hand, all this could be explained by the context of the two letters – they were focused on making complaints against Yam Ka.

74.Pausing here, it is convenient to deal with a major point made by Mr Chan during final submission.  Counsel submits that there is a big “loophole” in the alleged 10-year agreement.  It failed to deal with the Argyle Street property, Shun Cheong Laan as well as the Pak Po Street property, which the plaintiffs maintained at the family meeting held in 1990 were or had to be regarded as assets of the family or estate.  Any cancellation of the agreement reached in 1990 could not have left these important matters undealt47%.

75.Counsel’s argument, it should be noted, would lose some of its force if those disputed assets were actually assets belonging to the defendant in the first place, which the plaintiffs, by reason of their superior bargaining power in the 1989/1990 discussions, managed to make the defendant agree to treat as if they were assets of the estate in calculating the total value of the estate for division purposes.  On that basis, with the cancellation of the 1990 agreement, it goes without saying that everything would revert to the pre-1990 position and thus the Argyle Street property would be kept by the defendant as before.  The same would apply to the Shun Cheong Laan business.

76.As regards the Pak Po Street property, the position would also be reverted to the pre-1990 one: ie it was a property occupied by Yam Ka’s family and registered in his name, with a secret declaration of trust in favour of the defendant.  As to whether the property actually belonged to Yam Ka or to the defendant, whatever consensus or disagreement between the two brothers that there might have been prior to the 1990 agreement would continue to be there after the cancellation.  No doubt, the matter was complicated by the fact that prior to the cancellation, Yam Ka had already treated the property as his own and transferred it into the names of his wife and daughter.  That, in my view, explains why the tension between Yam Ka and the defendant continued to escalate even after the first mention of the 10-year deduction in April 1991.  To the defendant, the Pak Po Street property belonged to him and Yam Ka had no reason to transfer it to his wife and daughter.  To Yam Ka, the property belonged to him beneficially and, according to the evidence of his sister, he probably never realised he had executed a declaration of trust in the defendant’s favour and he would never have accepted that the property belonged beneficially to the defendant from day one.

77.In any event, it is not entirely true that the April 1991 conversation left out the Pak Po Street property altogether.  According to the defendant’s evidence, the 2^nd plaintiff did ask him during the telephone conversation, after agreeing on the 10-year deduction, to return to Hong Kong to sign the tenancy agreement and not to raise any issue with the declaration of trust anymore.  In this regard, it should be noted that the plaintiffs’ pleaded case is not that there had been purportedly made the 10-year agreement but somehow it was not complete or effective to wholly discharge the 1990 agreement because it failed to deal with the Pak Po Street property.  The relevance of why the Pak Po Street property was not dealt with in the 10-year agreement really relates to whether the agreement had ever been made as a matter of fact at all.  In other words, it is a question of credibility/evidence rather than law.

78.All this sounds very complicated.  It was indeed so.  Moreover, one must bear in mind that one is talking about laymen rather than lawyers dealing with each other.  One cannot assume that their thinking and reasoning must be as sophisticated and logical as trained lawyers.  Whilst I certainly bear in mind Mr Chan’s submission about the so-called loophole, this is only one of the many considerations to bear in mind before making any findings of fact based on the balance of probabilities.

79.Mr Chan says the defendant’s interference with the tenants in 1992 and 1996 was inconsistent with there having been made the 10-year agreement as alleged by the defendant.  The defendant was cross-examined on these matters and essentially his answers were to the effect that he was still an executor of the estate and it was within his right and responsibility to do what he did.  He was concerned that the 2^nd plaintiff would not honour the 10-year agreement, which was not evidenced by anything signed by the 2^nd plaintiff.  His being left out of the tenancy matters during that 10-year period meant that he had no control of the rental income, which otherwise should have been paid to him and Pak Leung as executors. 

80.Mr Chan says that the defendant’s evidence on what ought to have happened – ie that after receipt of the rental income from the tenant, he would distribute it in favour of the brothers – as meaningless.  Why not let the 2^nd plaintiff receive the rentals directly from the tenant, if there had been made the 10-year agreement, counsel asks rhetorically?  A possible explanation which is a natural one is that by requiring the tenant to pay the rental income to him as executor first, the defendant could indirectly ensure that after the lapse of the 10-year period, he would be paid his due share of the rental income.  I put it at no higher than a possible explanation.  I fully bear in mind Mr Chan’s point in my deliberation.

81.Then there are the “diary” entries of Yam Ka, which seem to suggest that the parties were still negotiating about completing the “sale” of the defendant’s share.  Moreover, there was no mention of the making of the 10-year agreement.

82.I think the sister’s educated guess that the “diary” is an edited version given to her by Yam Ka when he was ill is correct.  It is quite plain from the original “diary” that has been exhibited that it was not a contemporaneous diary.  Rather the entries contained in it were copied by Yam Ka from his original diary or diaries on a selected basis.  Not all dates were included and essentially the entries focused on certain selected topics only.  It is a fact that Yam Ka has passed away and thus is no longer available to give evidence to explain what his entries meant.  Furthermore, the entries, being extracts, did not disclose much about the contexts in which they were written.

83.As regards the particular entries relied on by Mr Chan, according to the evidence, the defendant was not particularly happy with the deduction period of 10 years and was sceptical about the 2^nd plaintiff’s honouring the 10-year agreement after the lapse of the 10-year period.  According to the 2^nd plaintiff’s own evidence, he was at one stage willing to pay the defendant $280,000 in exchange for the defendant’s giving up his executorship.  There were draft documents to that effect.  That should well explain the entry in Yam Ka’s diary for 19 March 1992 which mentioned the figure of $280,000.  On the other hand, the defendant has said in evidence that on one occasion his daughter had sought to persuade him to honour the original 1990 agreement by accepting the balance payment of $40,000 from the 2^nd plaintiff to finish off the matter there and then.  He said he was at one stage, given his poor financial situation, willing to do precisely that.  That again may well explain the same entry in the diary to the effect that the defendant was willing to take $40,000.  That matter was picked up in the diary in the entry for 30 April 1992.  Again, in the entry for 16 September 1992, there was a mention of further discussion between the parties regarding completing the sale and purchase of the defendant’s share.  There are other entries as well which have been referred to during the trial.

84.I fully recognise that these entries could, depending on how they should be read, serve as evidence against the making of the 10-year agreement as alleged by the defendant.  Indeed they would also be inconsistent with the 2^nd plaintiff’s version of the 10-year agreement which was not cancelled (per his evidence) until 1996.  In any event, the entries are not conclusive, and are only part of the entire evidence that the Court must weigh in the balancing scales before making any findings.  I wish to say that I have borne those entries and Mr Chan’s submission seriously in mind in my deliberation.

85.Likewise, I give serious consideration to the several solicitors’ letters written in 2002 between the parties, prior to the commencement of action in 2003.  Significantly, the letters written on behalf of the defendant did not mention at all the existence of the 10-year agreement or the defendant’s entitlement to a share in the rental income of the estate after the lapse of the 10-year period.  This is particularly so even after the plaintiffs had through solicitors mentioned specifically the 1990 agreement in their letter.  All that the solicitors acting on behalf of the defendant did when they wrote in reply to the plaintiffs’ solicitors was to say that the 1990 agreement had not “effectively transferred or sold his interest and/or entitlement in the estate to [the 2^nd plaintiff]”.

86.On the other hand, as Ms Tsui has pointed out in final submission, the context of the solicitors’ correspondence was in relation to the unauthorized letting of the shop premises by the plaintiffs (in the name of the 1^st plaintiff) in total disregard of the legal title of the defendant as the sole surviving executor appointed under the will of the deceased.  The 1990 agreement, or for that matter, the 10-year agreement, counsel submits, are peripheral matters.  Nonetheless, she points out that in the letter dated 1 November 2002 written by the defendant’s solicitors, paragraph 8 specifically complained about the 2^nd plaintiff’s collection of rent from the tenant “from April 2000” onward without the defendant’s authority.  She submits that the reference to April 2000 was clearly based on the 10-year agreement under which the 10-year period expired in April 2000.

87.The defendant, who grew up and received his education in the Mainland and cannot speak English, was unable to explain why the 10-year agreement was not mentioned in his solicitors’ letters (written in English).

88.Whilst miscommunications between lawyers and clients are not wholly unheard of, Mr Chan’s points are of course valid and deserve serious consideration.  I fully bear them in mind but I take into account Ms Tsui’s submission as well.

89.Ms Tsui has also argued during final submission that the undeniable fact is that between 1990 and 2002, nothing was done by the plaintiffs’ side to complete the 1990 agreement or to demand completion from the defendant.  Mr Chan’s argument is that the defendant has effectively disappeared from the scene after 1990 when he fled to the Mainland to evade his creditors.  Ms Tsui counters that according to some photographs and other evidence, the defendant’s contact in the Mainland was well known to the plaintiffs and he kept in contact with them.  Moreover, he was contactable through Pak Leung.

90.I have borne all these in mind although I do not think they are really significant.  From the plaintiffs’ standpoint, the defendant had lost all credibility, and since he resided in the Mainland, there was really nothing they could effectively do to enforce completion of the 1990 agreement.

91.The treatment of the loan of $42,000 already mentioned above is indeed a point in the defendant’s favour.  That it has since been treated as the debt of the defendant, instead of the 2^nd plaintiff’s, is evidenced by Pak Leung’s signature on the two documents written by the defendant in November 1991.  The defendant’s evidence is that he has since repaid in full the debt.  On the other hand, the 2^nd plaintiff also claimed in the box that he had fully repaid Pak Leung the sum of $42,000 together with other indebtedness owed by the estate to him.  He relied on some cheque stubs as evidence of payment.  However, the cheque stubs evidenced payment of various amounts of money and it is difficult to make out which payments were referable to the supposed repayment of $42,000 to Pak Leung.  On the evidence available, I am much more inclined to accept the defendant’s version about the $42,000 loan.  The repayment of the loan by the defendant, instead of by the 2^nd plaintiff, to Pak Leung suggests that the original 1990 agreement had been, put at the lowest, varied, if not discharged.

92.The undeniable fact that Pak Leung, in his dying bed, insisted on the defendant co-signing the new tenancy agreement could also be interpreted as an attempt by Pak Leung to enforce, albeit indirectly, the 10-year agreement, against the 2^nd plaintiff, after the lapse of the 10-year period in April 2000.  On the other hand, Mr Chan has submitted that what Pak Leung did could be understood as an attempt to force the 2^nd plaintiff to honour the 10-year agreement as per his (the 2^nd plaintiff’s) version, ie to give the defendant something as a matter of discretion.

93.Mr Chan has also submitted that if there really had been made the 10-year agreement as per the defendant’s story, and the 10-year period had elapsed in April 2000, there ought to have been demands for payment of the defendant’s share since April 2000.  On the other hand, the defendant as well as the sister said in evidence that indeed demands had been made orally by them and by Pak Leung, but the 2^nd plaintiff simply dragged his feet when it came to honouring the agreement.

94.I have not lost sight of Mr Chan’s point that the 10-year agreement was never mentioned in any of the pre-action documents.  Moreover, the allegation about the April 1991 telephone conversation which first discussed the 10-year deduction only surfaced in the defendant’s supplemental witness statement filed in February 2005.

95.I also bear in mind that what has been asserted in the letters written by the defendant only represented, taken at the highest, his understanding of the situation.  The plaintiffs seldom, if ever, wrote back.  Indeed the 2^nd plaintiff said in evidence that the defendant kept on writing all sorts of things to them according to his own thinking and ideas.  The plaintiffs did not even bother to reply to the black sheep of the family in the Mainland.

96.There have been made many other points by counsel on both sides in their oral as well as written submissions.  I will not recite them here one by one, but I wish to say specifically that I have considered them.

Findings of fact – 10-year agreement

97.As I said, findings of fact in the present case must be based on the entire evidence that has been placed before the Court.  They include the oral evidence (including the demeanour of the witnesses), the documentary evidence and the entire surrounding circumstances.  The Court must base its findings on the civil burden and standard of proof.  The Court has to bear in mind the inherent probabilities and improbabilities of the matters asserted.

98.Having borne all this in mind and having evaluated the evidence in its entirety, I have no difficulty in finding that there has been made the 10-year agreement as contended for by the defendant.  This is substantially backed by the evidence of the sister, who I find to be an honest, credible and reliable witness.  I reject all suggestions that she has fabricated her evidence.  Although part of her evidence is based on hearsay – a matter which I have firmly borne in mind, what she has heard has been substantially verified by her in her direct dealings with the 2^nd plaintiff.  I very much prefer her evidence to that of the 2^nd plaintiff’s.  In particular, I reject the 2^nd plaintiff’s version of the 10-year agreement.  Timing-wise, it is quite inconsistent with the sister’s evidence.  According to her, she first learned of the 10-year agreement during the Chung Yeung Festival in 1991 (October 1991).  As I said, the 3^rd plaintiff’s evidence is only of peripheral significance and does not significantly advance the plaintiffs’ case on the 10-year agreement.

99.As regards Mr Chan’s point that the defendant’s pleaded case is that the 10-year agreement was made in the face-to-face meeting on 7 November 1991, rather than over the telephone in April 1991, I think it is plain from the evidence that the 10-year agreement, in its present form, was only finalised in November 1991 in the sense that the treatment of the loan of $42,000 was only agreed upon in that tri-parte meeting on 7 November 1991.

100.It is true that there had been attempts both before and after that meeting, to persuade the 2^nd plaintiff to agree to a shorter period of deduction or to use actual deduction as the basis for calculating repayment, but he refused.  That does not mean that there was no agreement reached on deduction for 10 years.  The two are not mutually inconsistent with each other.

101.It is also true that at one stage during cross-examination, the defendant gave confusing answers regarding whether he had in fact agreed to deduction for 10 years given his repeated attempts to persuade the 2^nd plaintiff to agree to a shorter period.  In my view, he was confused by the questions that were put to him.  I find as a fact that he had actually agreed with the 2^nd plaintiff to the 10-year deduction period, but had repeatedly sought to have that varied thereafter.  That the 10-year period had been agreed is well evidenced by not only his evidence but also that of the sister’s, which I wholly accept.

102.Based on my acceptance of the sister’s evidence, I have no difficulty in finding that in fact Pak Leung also knew of and understood the 10-year agreement in the same way as the defendant does.  If he had not died, I am quite sure he would have given evidence for the defendant in the same way as the sister has done.  As I said, on the entirety of the evidence, I find Pak Leung to be an extremely respectable person, and I attach significance to his signatures on the two documents written by the defendant in November 1991.  Mr Chan has submitted that they were not accurate records of what had been discussed in the face-to-face meeting but were only proposals made by the defendant.  That submission, in my view, overlooks the significance of the documents.  They were not put forward as 100%-accurate records of what had been discussed.  But their contents clearly evidenced what had been discussed, apart from setting out what the defendant had wanted the 2^nd plaintiff to agree to (i.e. using actual deduction as a basis for calculating repayment).  I have already discussed the significance of the document dated 13 November 1991 regarding the treatment of the loan of $42,000.  I will not repeat myself here.

103.As I said, on the question of the 10-year agreement, I find in favour of the defendant’s version.

Terms of the 10-year agreement

104.As regards the terms of that 10-year agreement, I do not accept the suggestion that the agreement was conditional upon the defendant not interfering with the tenants or quitting gambling.  Non-interference with the tenants was no doubt mentioned by the 2^nd plaintiff when the sister verified the making of the 10-year agreement with him in March 1992.  But leaving aside the 2^nd plaintiff’s version of the 10-year agreement (which I reject), the evidence did not go so far as to suggest that that constituted a pre-condition to the 2^nd plaintiff’s honouring the 10-year agreement.  It is also true that the 2^nd plaintiff has used the defendant’s interference with the tenant in 1992 as an excuse for not considering the 10-year agreement until 2003, in his telephone conversion with the sister in September 2002.  However, I do not think that these bits and pieces, when viewed in the light of the entire evidence that I have outlined, were sufficient to render non-interference with tenants a condition to the 10-year agreement.  That suggestion is directly contradicted by the evidence of the defendant and sister, as well as the understanding of Pak Leung as related to the Court by the sister.  I recognise that non-interference is a term of the 10-year agreement as per the 2^nd plaintiff’s version.  However, on the entire evidence, I am unable to accept the 2^nd plaintiff’s version of the agreement.

105.As regards quitting gambling, it was only mentioned in the defendant’s letter dated 3 November 1991.  I have already set out my reading of that letter.  I do not read quitting gambling as a pre-condition to the 2^nd plaintiff’s honouring the 10-year agreement.  In any event, I accept the evidence of both the defendant and the sister that the defendant has long quitted gambling.

106.There was a dispute at trial as to whether the original 1990 agreement was made between the defendant and the 1^st to 3^rd plaintiffs together with Yam Ka or was just made between the defendant and the 2^nd plaintiff personally.  I do not find this a material issue. Whether the 2^nd plaintiff had agreed with the defendant for the so-called purchase of his share in the estate in his own personal capacity or in a representative capacity, in that same capacity he had agreed, so I find, with the defendant for the cancellation of the same under the 10-year agreement as per the defendant’s version.  But for the sake of completeness, I would make the following findings: originally it was subjectively intended to be a “sale” to all other beneficiaries of the estate.  However, it later became a purchase by the 2^nd plaintiff of the defendant’s share (with the 3^rd plaintiff buying Yam Ka’s share).  So when the 10-year agreement was made, it was really an agreement between the 2^nd plaintiff (personally) and the defendant.  However, as I said, I say all this for the sake of completeness.  It is not material to the real issues between the parties.  Likewise, whether the 1990 agreement could be made simply between one beneficiary of the estate with another beneficiary, and whether that agreement could be cancelled by just the two of them, as a matter of law and fine legal analysis, are neither here nor there.  One is concerned with laymen dealing with each other, and my immediate focus is on making findings on what has actually happened and agreed.

107.Indeed, neither counsel made any submission on law regarding what had happened and were content to treat (in my view rightly so) the matter as a purely factual one.

108.There had been mentioned during the 1991 discussion, according to the defendant, the payment of a monthly sum of $3,000 by the 2^nd plaintiff to the defendant’s wife and son to subsidise their living given their tight financial condition.  The money was meant to be repaid by deduction from the defendant’s due share of the rental income of the estate after the lapse of the 10-year period.  The 2^nd plaintiff never made the payment, and the defendant did not find himself to be in any position to press the 2^nd plaintiff for payment.  The payment would seem to be, in any event, linked to the defendant’s selling the Argyle Street property and his wife and children moving out to live in rented premises.  That never happened.  Likewise, the document dated 8 November 1991 prepared by the defendant and signed by Pak Leung referred to letting the mezzanine floor of the shop premises to the defendant’s wife to live there; apparently that did not materialise either.

109.However, the important point here is that in my view, none of all this formed a term of or otherwise affected the 10-year agreement.

Disputed assets

110.Regarding the disputed assets of the estate, I also accept the evidence of the defendant and the sister that the Wing Fung Laan business was transferred to the defendant by the deceased as a gift.  And as described, he used the income derived from the business of Wing Fung Laan to supplement the income of the estate to maintain the living of the extended Chau family, particularly during the time when both the 2^nd and 3^rd  plaintiffs were studying in UK.

111.As for the Argyle Street property, I accept the defendant’s evidence in relation to the property and the earlier Sai Yee Street property that had been sold, as well as the two Macau properties that he also mentioned in his evidence.  As regards the Pak Po Street property, I also accept the defendant’s version, although I also find on the evidence, particularly the evidence of the sister, that Yam Ka did not really agree to the defendant’s view on the beneficial ownership of the Pak Po Street property.  Indeed, as the sister put it, probably Yam Ka did not know until a later stage that amongst the title documents that he was asked to execute, there was the declaration of trust in favour of the defendant or the true effect of it.  That led eventually to the dispute amongst the two brothers over the property.  But the important point here, in my view, is that the property did not belong to the estate.

112.In my view, and I so find, what happened in the 1989/1990 family discussion was that all other family members as well as the close friends and relatives of the deceased insisted that these properties/business should be taken into account in calculating the total assets of the family for division purposes.  In a sense, this approach was understandable because from one perspective, everything that the defendant then “owned” came from his father, the defendant having only immigrated to Hong Kong in 1976.  Thus, for instance, the Wing Fung Laan business was given to him by his father.  Although it was an inter vivos gift, in substance, it was no different from a bequest made under a will.  As for the properties, they were ultimately traceable to income earned by the defendant from the business of Wing Fung Laan, and thus the father.  Moreover, the family members, relatives and friends were all concerned that the more properties and assets the defendant were distributed with or allowed to keep, the more he would gamble away. Indeed, the defendant said so in terms during his evidence. And coupled with the dire financial condition of the defendant which left him with little bargaining power, he had to agree reluctantly to the inclusion of the business and properties in the calculations as if they were family assets.

113.It is true that in some very early letters written by the defendants to his brothers in UK, he had mentioned that everything belonged to the four brothers together and he had also written words that could be read to mean that the properties purchased belonged to everybody pending a future division of family assets.  The defendant was cross-examined on these letters and gave his explanations.  The defendant explained that as the eldest brother, he was simply willing to share the income and profit of the business of Wing Fung Laan with his younger brothers.  I have borne all this in mind.  In my view, the more important point here is whether at that time, the estate had surplus money to pay for all these purchases.  On the evidence, I am quite satisfied that the estate’s income was substantially supplemented by what the defendant earned from the business of Wing Fung Laan.  As I have already found, the Wing Fung Laan business was gifted by the father to the defendant before his death.  In those circumstances, the estate simply did not have sufficient income of its own to acquire the disputed assets in question, particularly bearing in mind the expenditure relating to the studies of the 2^nd and 3^rd plaintiffs in UK.  In my view, these disputed assets could only be regarded as purchased not by monies derived from the rental income of the estate, but rather from the income of the business of Wing Fung Laan.  In those circumstances, as a matter of law, they belonged not to the estate but the defendant.  That the defendant, as the eldest son, was prepared to treat them as belonging to the whole family in his letters was, in my view, insufficient to change the true legal status of those assets as a matter of strict law.

114.It is also true that Pak Leung had signed various documents addressed to the solicitors, confirming that the business and the properties in question belonged to the estate.  That is not surprising.  According to the defendant, he had heard about it afterwards from Pak Leung.  Pak Leung told him that he had been eager to dissociate the business and properties from the defendant so as to protect them from the defendant’s creditors.  Moreover, those documents were signed on 11 March 1991, in all probabilities before the telephone conversation in which for the first time repayment by deduction was discussed.  In other words, at that time, at least from the standpoint of the plaintiffs and Pak Leung, the 1990 agreement was still valid and subsisting, and under that agreement, the business and properties were to be regarded as the assets of the estate.

115.It seems to me that the documents written to the solicitors were more for the purposes of enabling the solicitors to prepare the formal documents to effect the 1990 agreement, rather than anything else.

116.In any event, I have borne all the other possible inferences that could be drawn from the documents in mind, and on the totality of the evidence, as I said, I have come to my above conclusion on the assets and business.

Indebtedness of $164,000

117.The cancellation of the 1990 agreement and the making of the 10-year agreement do not affect the indebtedness of the defendant to the estate agreed in the sum of $164,000.  Under the 1990 agreement, the defendant promised to repay the indebtedness within 3 years.  With the cancellation of the 1990 agreement, that promise must be gone.  However, it does not mean that the defendant does not owe the estate the money or that he need not repay it to the estate.  It is true that in evidence the defendant has said that throughout the years he has used his own income to supplement the estate’s outgoings.  I have already said that in general I accept what he says.  But he has, on his own evidence, also used some of the estate’s money to pay for his share of the capital contribution to the Shun Cheong Laan business.  Moreover, there is, on the pleadings, no defence of set off.  In those circumstances, I do not think the defendant has any defence to the claim for repayment of the sum of $164,000 to the estate.

Replacement of defendant as executor and trustee

118.As for the replacement of the defendant as executor and trustee with an independent third party/professional trustee as administrator and trustee of the estate, as mentioned, both sides are agreeable that such an appointment be made and the defendant is willing to step down from his office.  As to the candidates for appointment, it is only fair to give the parties an opportunity to make submission, in the absence of any agreement amongst them.

Outcome

119.In the circumstances, I would order as follows:

(1)     judgment be entered for the plaintiffs against the defendant for the repayment to the estate of the sum of $164,000 together with interest thereon at the rate of 1% over HSBC’s prime rate from 6 February 2003 (date of writ) to the date of judgment and thereafter at the judgment rate until full payment;

(2)     save as aforesaid and upon the defendant by counsel undertaking to retire from his office as executor and trustee under the will of the deceased upon the appointment of an independent third party/professional trustee as new administrator and trustee of the estate of the deceased, the plaintiffs’ remaining claim be dismissed;

(3)     judgment be entered for the defendant against the plaintiffs for the payment of the defendant’s due share of the income of the estate of the deceased as from 4 April 2000, at an amount to be determined if not agreed, with liberty to apply for directions for such determination, together with interest thereon at the rate of 1% over HSBC’s prime rate from 10 April 2003 (date of counterclaim) or the date on which the income became payable, whichever is later, until the date of judgment and thereafter at the judgment rate until full payment, such payment shall be made by the estate or in case there has been over-payment by the estate to the plaintiffs in the past, by the plaintiffs to the defendant to the extent of such over-payment, with liberty to apply for directions in case of disagreement in relation thereto;

(4)     save as aforesaid and without prejudice to the previous orders made regarding the provision of accounts, the defendant’s remaining counterclaim be dismissed; and

(5)     liberty to the parties to apply for the appointment of the new administrator and trustee in replacement of the defendant and all necessary directions in relation thereto.

120.So far as costs are concerned, the plaintiffs are not wholly unsuccessful in their claim.  They have successfully obtained judgment for the repayment of $164,000 by the defendant to the estate.  They have managed to extract an undertaking from the defendant regarding the appointment of a new administrator and trustee in replacement of him.  Of course, the Court has not formally adjudicated on this aspect of the dispute between the parties, but it is entitled to take into account its view on the matter in determining costs.  On the other hand, it is plain that the defendant has been wholly successful in relation to the 10-year agreement and the counterclaim for payment of his due share of the income of the estate starting from April 2000.  All this must be reflected in the costs order. I say all this provisionally, not having heard submissions from the parties.

121.In the circumstances, I make an order nisi as follows: the plaintiffs pay to the defendant 50% of the costs of the action (including the counterclaim), to be taxed if not agreed; the defendant’s own costs be taxed in accordance with the Legal Aid Regulations (Cap 91).

122.I thank counsel for their assistance.

Mr Chan Chi Hung SC and Mr Walker Sham, instructed by Messrs Shaw & Ng, for the plaintiffs

Ms Jennifer Tsui, instructed by Messrs Kenneth C C Man & Co, assigned by the Director of Legal Aid, for the defendant

Appeal by 2nd and 3rd Plaintiffs to Court of Appeal dismissed. Please refer to CACV173/2007 dated 10 December 2008