To Pui Kui v. Ng Oi Che and Others

HCA 522/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 522 OF 2008

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BETWEEN

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J U D G M E N T

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Background

1.Mr Ng Po Sum, (“the Deceased”), formerly a chartered accountant by profession, passed away on 29 March 2002 at the age of 86, leaving substantial assets, his wife and eight adult children.  Following a period of over three years of peace, bitter disputes erupted amongst members of the Ng family over the distribution of family assets held through a web of companies.

2.The eight children were split into two camps.  Their mother, Madam To Pui Kui,the plaintiffin this action and the Administratrix of the Deceased, took one of the two sides with her youngest son Andrew and three other siblings, Eleanor, Angela and Jeremy.  Andrew holds a power of attorney to act in his mother’s capacity as Administratrix of the Deceased’s estate.  The other camp consists of the 1^st defendant (“Stephanie”), the seventh daughter, eldest son Philip, daughter Olympia, and Tony, a successful accountant running his own practice under the name Tony KTNg & Co (“TKTNC”). A number of actions were commenced by both parties, initially in Canada and then in Hong Kong.  These proceedings only form part of the disputes amongst members of the family of the Deceased.

3.The 2^nd defendant (“the Bank”) is a bank in which the Deceased maintained a safe deposit box (“the Safe Box”) and two bank accounts, one in his own name (“1^st Account”) and the other in the name of Ng Po Sum & Co (“2^nd Account”).  The Deceased has made Stephanie the only other authorized signatory for both bank accounts and the Safe Box since 6 May 1997, on the eve of his leaving for a major operation in Canada.

4.Ng Po Sum & Co (“NPSC”) was a sole proprietorship established by the Deceased, through which he provided tax representative services as part of his accountant’s practice.  It shared premises and certain office facilities with NPSC.  It does not appear to be in dispute that Andrew continued to sign off the tax accounts of NPSC’s clients until the parties fell out in 2005.  According to the 1^st and 3^rd defendants, there was a transfer of ownership of NPSC to Andrew and Philip in a staggered process between January to March 2002, with Andrew and Philip admitted as partners of NPSC in succession and the Deceased eventually withdrawing as a partner shortly before his death.  This is disputed by the plaintiff, whose case is that the Deceased never parted with ownership of the firm and hence the money in the 2^nd Account.  It is however accepted by the plaintiffin their opening that the dispute over ownership of NPSC does not affect the issues to be determined by the Court.

5.The 3^rd defendant (“HEL”) is one of the many family companies set up by the Deceased to hold assets, which mainly comprise landed properties in Hong Kong.  At the material time the directors of HEL were the plaintiff, Andrew, Philip and Stephanie.  By way of background I have been informed that the restructuring of the family companies that allegedly took place in 1997 purporting to give Stephanie’s camp control of the ultimate holding company, Confederated Assets Group Limited, is hotly disputed in HCA 523/2008.  Further, the dispute over the ownership and directorship of HEL forms the subject matter of HCA 51/2007 and HCA 1087/2011.  There are other actions commenced with regard to various other Ng family companies that I do not need to be concerned with for the purpose of the issues before me, except as part of the general background.

6.One of the family companies set up by the Deceased in the 1980’s was Ng Sheung Ming Association Ltd (“NSMAL”). It is accepted in the course of the opening by plaintiff’s Counsel that both NSMAL and HEL had stipulations either in its articles of association or in the form of a board resolution that the burial expenses of the Deceased and the plaintiffwere to be provided for out of the respective company’s assets.

The Plaintiff’s Claims against the 1^st and 3^rdDefendants

7.This action focuses on the alleged misappropriation of the sum of $516, 936.00 standing in the 1^st Account and the 2^nd Account on the day when the Deceased passed away, and the contents of the Safe Box.  The Safe Box is alleged to have contained title deeds, stock certificates, antique watches, jewellery, gold coins, declarations of trust for properties in Canada, and other documents.  It is common ground that on 2April 2002, the first working day after the Deceased’s passing, the sum of HK$212,900 was transferred out of the 1^st Account, and HK$304,036 out of the 2^nd Account.  Both sums were immediately deposited into an account in the name of HEL.  The contents of the Safe Box were emptied by Stephanie at her first visit that morning.  Within the same hour she made a second visit to the Safe Box when she reported loss of one of the two keys and terminated its rental agreement.

8.The plaintiffalleges that the sum of $516,936 was transferred by Stephanie in breach of trust and fiduciary duty into the account of the HEL, and the contents of the Safe Box were wrongfully removed by Stephanie.  It is alleged that these were done without the knowledge or consent of the plaintiff.  HEL is made the 3^rd defendant in this action on the basis that it is a knowing recipient of the misappropriated funds and is liable to account for the value of the property received.  The plaintiffclaims against Stephanie and HEL for repayment of the sum plus interest and the return of the contents of the Safe Box.  I note that it has never been the case that HEL acted as a trustee to the Deceased’s estate, or that HEL owed the plaintiffas administratrix of the Estate any fiduciary duty.  Therefore no tracing claim arises against HEL here.

9.Stephanie and HEL, on the other hand, defend the action on the basis that the plaintiff’s claim is not bona fide, not supported by evidence, and is in any event against the weight of contemporaneous documentary evidence.  Stephanie and HEL rely on a family meeting that took place on 29 March 2002 shortly after the Deceased’s passing, at which Stephanie was instructed by or with the agreement of the plaintiffto carry out the very transactions under complaint.  She did so accordingly, accompanied and assisted by Andrew.  The contents of the Safe Box were then handed over to the plaintiffand distributed to family members at a family dinner on 2 April 2002 at which both the plaintiffand Andrew were present.  These are denied by the plaintiff.

10.According to Stephanie and HEL, the funds transferred into HEL’s account were used to defray the funeral expenses of the Deceased, and what remained was used to finance the purchase of a new Mercedes Benz car to be used by Andrew, partly for the benefit of the plaintiff, as per the agreement reached at the family meeting of 29 March 2002.

11.As an alternative partial defence advanced by Stephanie and HEL, it is said that the funds standing in the 2^nd Account do not form part of the Estate of the Deceased.  This is based on facts which are disputed, namely, that NPSC was no longer a sole proprietorship owned by the Deceased at the material time by reason of two Notices of Change of Partnership executed by the Deceased, Andrew and Philip on 18 January 2002, resulting in the Deceased parting with ownership of the firm and hence its assets with effect latest from 22 March 2002.  The funds therefore did not form part of the Deceased’s estate and the plaintifftherefore has no locus to sue for the sum drawn from the 2^nd Account.  This is disputed by the plaintiff.

12.The 1^st and 3^rd defendants further allege that there was no loss suffered by the Estate in respect of the alleged unauthorized transactions: the transferred funds were used on the Deceased’s funeral and for purchasing the car to be used for the benefit of the plaintiff.  To this the plaintiffadvances no positive case of denial, but merely maintained that she had not consented or authorized such transactions.  As regards the contents of the Safe Box, the 1^st and 3^rd defendants say there are no particulars given apart from Andrew’s bare and uncorroborated assertion in the form of a “solemn declaration”.  In any event, there is no evidence adduced to prove their value.

The Plaintiff’s Claim against the Bank

13.The plaintiffwill only have a claim against the Bank if it is proved that there was no agreement for the Safe Box to be emptied and the contents were not handed over to the plaintiff. The plaintiff’s case against the Bank is for breach of its contractual or common law duty with the Deceased in respect of the keeping of the Safe Box, and that its breach of duty has caused loss of the contents thereof as well as the loss of the allegedly misappropriated funds.  At the commencement of the trial, the plaintiffattempted to bring in further amendments to the Amended Statement of Claim by adding other allegations on the failure on the part of the Bank to investigate into the transactions under complaint upon certain events which would have brought the Bank’s attention to the Deceased’s death.  That application was refused.

14.As the plaintiff’s pleaded case stood at trial, it was not alleged that the Bank knew of the Deceased’s death at the time of Stephanie’s first visit when she withdrew the funds from the two accounts and emptied the Safe Box.  The authority on the part of Stephanie to access and empty the Safe Box on 2 April 2002 is not in issue.  However, the plaintiffmaintains that the report of the loss of the key to the Safe Box and the termination of the rental agreement following an earlier access to the box should have put the Bank on inquiry of the legitimacy of the transfer of the funds, and the Bank could have stopped the transfer.  The plaintiffargues that while Stephanie had authority to access the Safe Box, she was not the renter and did not have the authority to terminate the rental agreement.  As it was not the renter (the Deceased) who reported the lost key and tried to terminate the rental, the Bank ought to have been put on alert and should have attempted to verify the matter with the father, whereupon the Bank would have found out that he had in fact passed away.

15.The plaintifffurther argues that the Bank had caused the loss suffered by the Estate, because the Bank’s reasonable enquiries and notification to the plaintiff immediately after the alleged misappropriation of the funds and the contents of the Safe Box would have led to the possible reversal of the deposit transactions, and the tracing and recovery of the items in the Safe Box.  The allegation of breach of duty is put on the basis of a contractual, liability that turns upon the construction of the terms of the Safe Box Agreement, alternatively a tortuous liability as a banker/bailee.

16.The Bank’s stance, on the other hand, is that it was perfectly proper under the Safe Box Agreement for Stephanie to report a lost key and to terminate the agreement, and for the Bank to accept such report and request for termination before the Bank had actual notice of the Deceased’s death.

17.The Bank further contends that any alleged loss arising from the withdrawal of the funds from the two accounts was not shown to have been caused by any breachcommitted by the Bank. As regards the alleged loss suffered as a result of removal of the contents of the Safe Box, the Bank takes issue on causation.  It is said that even though the Bank did not alert the plaintiffto Stephanie’s conduct at the two visits made on 2 April 2002, plaintiff’s ability to recover the property has not been affected in any way.  Nothing has stopped the plaintifffrom bringing the present action to attempt to recover the property from Stephanie.

18.On the proof of loss and damage suffered by the Estate, the Bank contends that the Estate would have suffered no loss if :

(a)     the money transferred was expended for the purpose of the Estate;

(b)    that this was agreed by the family; and

(c)     the money was refunded to the account holder NPSC.

Neither will the plaintiff have any recourse against the Bank if the claim against the 1^st and 3^rd defendants are defeated because Stephanie is found to have carried out the acts under the plaintiff’s instructions.

19.The Bank contends that the pursued relief of delivery up of the contents of the Safe Box is misconceived as none of the contents is alleged to be in the possession or control of the Bank and capable of delivery up by it.  Further, it is said that in the absence of any evidence on quantum of damages having been adduced, and there being no direction for a split trial, no damages other than nominal damages is in any event recoverable.

The Issues

20.As the plaintiff’s Counsel puts it, the case against the 1^st and 3^rd defendants turns on one single question of fact: whether the plaintiffinstructed Stephanie during lunch on 29 March 2002 to go to the bank to carry out the transactions that she did on 2 April 2002.  If she did, there is no liability against either the 1^st or 3^rd defendants, and the case against the Bank would also fall away.

21.If the plaintiffproves that she gave no such instructions, nor was there any agreement on the deployment of the funds in the two accounts at the time, it falls to be decided whether the sum of $304,036 transferred from the account of NPSC formed part of the Estate of the Deceased, before any loss to the Estate and the extent thereof is to be ascertained.

22.If loss to the Estate is established, it falls to be decided whether the Bank can be said to be in breach of any duty in tort or contract, and whether the loss suffered by the Estate was caused by any of its breaches.

Nature of the complaint and loss suffered by the Estate

23.There could hardly be any dispute that the plaintiffalone carries the burden of proving loss.  In evaluating the evidence on the hotly disputed facts and circumstances surrounding the disputed transactions, I find it important to bear in mind the nature of the complaint and the extent of the perceived loss to the Estate.

24.In the Reply (paragraphs 6 and 9) filed in this action, the plaintiffneither denies nor admits that the funds from the two accounts transferred into the HEL account were in fact used to defray the Deceased’s funeral expenses and to purchase the car to be used by Andrew for her benefit, but insists that funeral expenses were to be paid out of NSMAL, not from the two accounts, and that she gave no consent to the purchase of the car.  Under cross-examination, the plaintiffaccepted that she had no knowledge of what type of a company NSMAL was nor its financial situation.  When asked about what she said in paragraph 11 of her witness statement, she accepted that it would be correct for her to say that “NSMAL” (as it read in her witness statement) was responsible for funeral expenses if “NSMAL” stood for “厚德堂”, ie HEL.

25.At the trial, the plaintiff gave oral evidence that clearly indicated that she believed at the commencement of the action and through to the trial that Stephanie had pocketed the funds transferred away from the two accounts, and that was the main reason for her suing the defendants.  However, under cross-examination by Counsel for the 1^st and 3^rd defendants, the plaintiffcalled the transferred funds “trivial money”, in fact such “a small sum of money” that she doubted if it would suffice to pay the lawyers’ costs.  When asked whether she knew the money drawn from the two accounts went into HEL’s account either when commencing this action or when preparing her own witness statement, her answer was “I was not clear about that”, and “I don’t know”.

26.The plaintiffthen admitted under cross-examination by Counsel for the 1^st and 3^rd defendants that had she known the money was used to defray the funeral expenses of the Deceased and to purchase the car for Andrew, she would not have sued.  This was the position she confirmed when cross-examined by Counsel for the Bank.

27.As regards the contents of the Safe Box, it was established in oral evidence that the plaintiffwas not clear about what was in it at all, although she said that she knew of the existence of the Safe Box before her husband died, thereby contradicting her own written statement.  In any event, the alleged loss of the contents of the Safe Box was regarded by her as but a “minor issue”, as she stated in her video deposition in the Canadian proceedings.

28.In the light of the above admissions, the plaintiffwas pressed by Counsel for the Bank Ms Sit as to what she was seeking to recover by this action, whereupon the plaintiffsaid she wanted to recover her money.  When asked if she meant the money she thought Stephanie took from the two accounts, she indicated it was not about that small sum.  When pressed on what money she was seeking to recover, she said she did not know how to answer the question, and that felt dizzy or confused by the many questions asked of her.  This episode took place shortly before a lunch adjournment, after which an application for adjournment to suspend the plaintiff’s testimony was made on her behalf on the strength of a medical certificate of a doctor whom the plaintiffwas taken to see over the lunch break.  This application was later withdrawn after much resistence from the defence.  Upon the resumption of her evidence after an afternoon of absence, she was able to pin her complaint down to one of improper procedure.  When Ms Sit asked her to confirm if she would not have sued if she had known the money was used on funeral expenses and for buying Andrew a car, she had her evidence of the previous day repeated to her, whereupon she responded by saying “But is the procedure she engaged correct, proper?”

29.Under re-examination, her evidence was that if the money was not spent on the funeral, she would sue on behalf of the Estate to recover it.  She also maintained that she had sued Stephanie on behalf of the Estate because she “stole” all the contents of the Safe Box.  In giving this evidence she had also in effect affirmed her evidence given in the Canadian proceedings as evidence given when she had much better recollection of the events.  However, it must be noted that in the deposition, she stated that those in the Safe Box were minor items not worth suing for, but she sued because Stephanie had also taken the money in the two accounts, which “wasn’t much, less than a million”. [1]

30.Andrew was the only other witness for the plaintiff.  On the question of whether the money was pocketed by Stephanie as the plaintiffbelieved it was and had therefore brought the action, Andrew readily accepted that she did not, as “it’s evidenced” in the documents. Even assuming that the plaintiffwas laboring under the wrong impression that Stephanie had stolen the money at the time of the commencement of the action and when she made her witness statement, one would have thought that it was something that would have been brought to her attention before the trial.  When pressed on when he first became aware that Stephanie did not pocket the money, Andrew appeared to be evasive, and insisted that it was “very late”, only after he was provided with documents in the action.  When asked whether he still had any complaint regarding the transfer, he maintained it was “illegal”, without stating what loss was suffered by the Estate that was caused by the transfer.  His view echoed that adopted by the plaintiffafter she took leave in the middle of her cross-examination complaining of dizziness after giving answers that were damaging to her case, only to resume the next day shifting her complaint against Stephanie to one of lack of proper procedure.

31.The plaintiffwas 90 years old when she gave evidence at trial, and was understandably slow and easily confused when asked to remember events happening a long time ago.  However, she was not incapable of delivering answers in a tone of certainty when they were general answers on broad propositions that would support the plaintiff’s case, such as whether she was at the lunch meeting of 29 March, whether Andrew went with Stephanie to the Bank on 2 April, and whether there was a dinner that evening when contents of the Safe Box were distributed.  However, when she was asked to give reasoning for what underlay the broad facts, she became self-contradictory.  It would appear that up to the point of time when the plaintiffstarted giving evidence, she was deliberately left to continue to think that Stephanie had pocketed the money, when Andrew should have disabused her of that belief but had obviously chosen not to.  She was unable to give any coherent explanation on what, to her, had justified the action to be launched, beyond a mistaken belief of misappropriation of money, and admitted to her lack of knowledge of what property (let alone its value) she believed had been taken from the Safe Box.  The above observations give support to the submission made on behalf of the 1^st and 3^rd defendants that the action was commenced and prosecuted by the mother under the manipulation of Andrew for his ulterior purpose, and not genuinely for the benefit of the Estate.

32.Andrew’s stance on how the transferred funds were in fact spent varied from the plaintiff’s pleadings, his two witness statements to his oral testimony.  While he accepted that he could see from the documents that the money was not pocketed by Stephanie, he insisted that he had a complaint in that the money was transferred out of the two accounts “by illegal means”.  Other than that, he was unable to say what real loss he believed the Estate has suffered.

33.In respect of funeral expenses, despite having been charged with the duty of organizing the funeral, he was oblivious to where he thought the money for the funeral expenses might have come from, saying in effect that it was not something for him to worry about.  However he insisted it was well known within the family that such expenses should have come from NSMAL, a company without funds nor a bank account.  The fact that NSMAL did not have funds to pay for Father’s funeral is a fact Andrew must be taken to have known, as he co-signed NSMAL’s audited financial statements for the years 2002 and 2003.  Where the parties were all in agreement is that none of the family members was expected to have to dip into their own pockets to share the funeral expenses of the Deceased. 

34.Andrew took issue, in oral testimony but not in his witness statements, on various items of expenses said to be the Deceased’s funeral expenses.  The challenges he made were either with regard to the precise nature of the expense (eg the cost of moving the urns containing Grandparents’ ashes), or on the precise amount used, or otherwise were not supported by any contemporaneous evidence.  Even deducting the items challenged, the total amount under this head would still have been over $200,000.  Andrew’s assertion, raised for the first time in oral evidence, that father’s funeral expenses amounted to no more than $140,000 odd was not supported by any documentary evidence or calculation.  In the absence of any other evidence in support, I reject his evidence that only a little more than $1,000 of the $50,000 of the funds he put himself in as the organizer of the funeral was in fact spent on the funeral.

35.In respect of use of the funds to purchase a Mercedes Benz car, in his first witness statement, Andrew was adamant that the car was not purchased for his use, “whether for the benefit of mother or otherwise”, and he had no idea whether the funds for the purchase had come from the funds allegedly wrongfully transferred.  In other words, Andrew advanced no positive case on behalf of the plaintiffto dispute the proposition that the car was purchased for the benefit of Mother, and was in fact purchased from the funds transferred from the two accounts in issue.  The documentary evidence establishes clearly that the purchase of the Mercedes Benz car in question was financed entirely with the funds in HEL amounting to $325,419.20, including 10 leasing instalments paid up to the end of 2003.  Moreover, Andrew admitted under cross-examination that he was the sole user of the car, although Philip kept one of the two keys “just to play safe [in case he] lost [his key]”.  He accepted that Philip had a van of his own and he did not think he used the Mercedes at all.  His evidence was contrary to the suggestion in his own witness statement that the car was purchased not for his use but only for Philip and his wife who wanted it as a status symbol.  Andrew also accepted that he used the car to transport the plaintiffwhenever necessary.  On the accounting records of HEL, the Volvo car which Andrew had been using frequently for the same purpose for 6 years prior to 2002 was written off as being of no residual value.  It follows that there was no substance in any allegation of loss of this part of the transferred funds used to purchase the car.

36.It was pointed out on behalf of the plaintiffthat on 2 May 2002 a sum of $150,000 was transferred from HEL’s account to NPSC and an equivalent sum paid out at the end of the same month from the latter account to settle part of the expenses due and owing to TKTNC from NPSC, which, according to the 1^st and 3^rd defendants, was a business the Deceased had parted ownership with prior to his death.  Tony considered the consent of Andrew would have been obtained, and in any event it was to repay a debt due and owing to TKTNC.  Leaving aside the question of whether the plaintiffdid instruct the transfers to be made, I do not consider the transactions concerning the $150,000 to be inconsistent with the proposition that the funds transferred out of the 1^st and 2^nd Accounts were in fact used for the Deceased’s funeral expenses and the purchase of the new car.

37.As regards the contents of the Safe Box, even up to the point when the Letter of Administration was obtained on 19 October 2006 (and this was after the family was split into two hostile camps), there was no attempt to include any of the contents of the Safe Box in the Deceased’s schedule of property.  In oral evidence Andrew suggested that these were not set out as he was expecting to amend the schedule while he awaited discovery of more assets.  Whether or not the reason given by Andrew for not including these items in the schedule is to be accepted, there is no evidence tendered by the plaintiff on the value, whether emotional or monetary, of the contents of the Safe Box.  I consider these features supportive of the view that the plaintiff well knew there was nothing of value to be reclaimed.

Motive in Prosecuting this Action and Credibility of Witnesses

38.Another feature in this case that supports such a view is the fact that there was no complaint raised with regard to the allegedly irregular or illegal transfer of the funds from the two accounts and the loss of the contents of the Safe Box until proceedings filed by the opposite camp triggered more legal actions filed by Andrew and the plaintiff’s camp.  After the Bank was notified by Andrew of Father’s death on 19 August 2002, there was no attempt on the part of the plaintiff or Andrew to obtain the balance of the two accounts or the contents of the Safe Box, which tends to suggest the plaintiff and other family members knew there was no longer any money or property held in these accounts and the Safe Box, as they have already been retrieved as per the plaintiff’s instructions.

39.By the time the writ was issued, 6 years had elapsed after the transfers were made and the contents of the Safe Box emptied.  Indeed no letter of administration was taken out in respect of the Estate and no legal action was brought until after the family were divided into two hostile camps pursuant to an acrimonious meeting to discuss ownership and control of family assets.  Despite serious allegations of dishonesty against the 1^st defendant in pleadings and in witness statements, the plaintiff’s complaint was reduced to nothingness in the witness box when she did not seem to appreciate that the allegedly misappropriated funds were in fact used towards funeral expenses and other purposes she had no cause to object to, and not even Andrew who held a power of attorney for the plaintiff was able to pinpoint the wrong perpetuated and any resulting loss to the Estate, on behalf of which the action was brought.  These are features of this case which would have a significant impact on my assessment of the credibility of the witnesses for either side.

40.From the above, and the general background of the disputes between the two camps, I find force in the submission advanced by the 1^st and 3^rd defendants, that the action was far from a true exercise of right to recover any genuine loss suffered by the Estate, but was motivated by revenge against some unarticulated personal grudge, with the aged mother as the plaintiff being manipulated by Andrew on one side, against Stephanie, Philip, Tony and Olympia on the other.  Having said that, my assessment of the credibility of witnesses by no means depend on whether there existed such a motive on the part of the plaintiff or her attorney.

41.Against the above background, with the sharp dispute on whether there existed an agreement to carry out the transactions in dispute, the matter turns largely upon the credibility of the witnesses of both sides.  In this exercise I am guided by principles set out by Au J in Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513 at paragraph 53 –

“In assessing the credibility of a party’s case on a particular issue, … the Court should take into consideration the following:

(1) Whether the party’s case is inherently plausible or implausible;

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests, this is relevant to the assessment of his overall credibility; and

(4) The demeanour of the witness.”

Was there any Agreement on the Transfers of Funds and their Use?

42.For a start it is pertinent to note that the Ng family is a family consisting of several qualified accounting professionals including the Deceased himself, Tony, Angela and Jeremy.  Plaintiff’s Counsel is content to call them a “family of accountants”.  Stephanie, while apparently not a qualified accountant, received education in a well-known university in Canada.  It is not disputed that she has been of great help in Tony’s accounting practice, Tony KT Ng & Co, working for her brother since graduating from university in the late 1970’s, and has grown her own company secretarial business on the side.  Like her father, she is the quiet and hardworking type and no doubt skilled in corporate secretarial, if not also accounting, work.  She had remained single throughout the years, and was very much trusted and relied upon by the Deceased on money matters, as evidenced by the fact that she was the only sibling entrusted by the Deceased to be the alternate signatory of the two bank accounts in question, as well as having access to his safe deposit box.  Stephanie’s unchallenged evidence was that she was particularly close to her father and had spent a lot of time with him prior to his death, including going home to have meals with him several times a week.  At least a number of the working members of the family, including the Deceased, Tony, Philip, Andrew and Stephanie, share premises in Central under the same roof with TKTNC.  Those premises were also the business premises of NPSC.  At the age of 85until shortly prior to his passing, the Deceased continued to go to work every week day.

43.It is not disputed that the Deceased passed away following a period since 2000 during which his health was visibly declining.  His death no doubt marked a very sad moment for the family, but it could not be said that they were shocked or taken by surprise.  As Tony put it in a sentimental tone in his oral evidence, having seen his father losing weight and struggling in poor health, it was in fact a “relief” to see an end to his suffering.  Following the father’s death on 29 March 2002, the family members who were present in Hong Kong did sit down for lunch together at the Chinese restaurant in the Emperor Hotel, not far from their respective homes in Happy Valley.  It is also not in dispute that there were discussions of a number of things on funeral arrangements over lunch which covered logistical matters such as who was to be notified, venue for the funeral, and the issue of obituaries.

44.The evidence of Stephanie, Tony and Philip was that the plaintiff instructed all the funds from the Deceased personal account to be withdrawn and deposited into HEL’s account for funding the funeral.  She also instructed Stephanie to remove all the contents of the safe deposit box and to terminate its rental.  For the said purposes, Andrew was assigned to accompany Stephanie to attend the Wing Lung Bank.  None of the family members present disagreed.  At the same time, Philip suggested that if funds in the Deceased’s personal account were not enough to meet the funeral expenses, the money in the NPSC account should be used.  Andrew agreed.  It was agreed that the funds in both accounts should be applied towards firstly defraying the funeral expenses, and secondly to finance the purchase of a motor vehicle under the name of HEL to be used by Andrew for the plaintiff’s benefit.

45.On the above account set against the undisputed factual background, I find Stephanie, Tony and Philip credible witnesses.  Their evidence was convincing and stood up to challenge despite suggestions that they might have discussed the events amongst themselves before signing their witness statements, which account for some identical passages amongst them.  Cross-examination presented the opportunity to test collaboration.  Having carefully observed the witnesses’ demeanour, I find them truthful witnesses.

46.On the other hand, the plaintiff gave evidence that she did not attend the lunch at the Emperor Hotel.  Andrew’s oral evidence was that his mother was absent from the lunch as she, together with Philip and Wilfred (son of Jeremy), had to attend the police station to give statements about Father’s death.  This was disputed by the 1^st and 3^rd defendants.  The evidence led on behalf of the 1^st and 3^rd defendants was that all family members who were present in Hong Kong were at the lunch on that day, including Mother, Philip, Tony, Andrew, Stephanie and others.  There was no physical attendance to the police station required of any family member on 29 March 2002, though a report to the police was made that morning upon Father having been discovered unconscious in his home.  The doctor agreed that no autopsy was needed in the circumstances, and Philip did speak to a policeman who attended the hospital.

47.While Andrew was adamant that funeral expenses was not a topic of discussion at the lunch gathering, his evidence was that there were several other occasions before the dinner on 2 April 2002 on which family members met and matters pertaining to funeral arrangements were discussed, but not expenses or funding of the funeral.

48.Andrew was further prepared to agree that before 2 April 2002 he was assigned to organize the funeral, with the understanding none of Mother nor any siblings would have to contribute to funeral expenses, and that for that purpose he was put in funds by a cheque in the sum of $50,000 Andrew drew in his own favour dated 3 April 2002.

49.Andrew’s evidence is to be contrasted with the evidence of the plaintiff, who insisted she never attended any lunch with her children on 29 March 2002, and indeed did not have any meeting with her family over the Easter weekend.  When the plaintiff was asked when was the first time she saw her children again after her husband died, she said she could not remember due to the lapse of time.  When it was suggested to her that the contents of the Safe Box were distributed at a family dinner on 2 April 2002, she said “no”.  I find it inherently implausible that the children and their spouses would have permitted their distraught mother to be left mourning on her own over the long weekend and not gathered around her in the days following the death of Father.  I find her evidence totally unreliable in this regard, and appeared to represent an overly fervent attempt to distance herself from the meetings and discussions on funeral arrangements that others including Andrew agreed had taken place over the Easter weekend.

50.On the issue of the plaintiff’s presence or otherwise at the lunch on 29 March 2002, I am unable to accept the evidence of the plaintiff and Andrew, who gave different reasons for the plaintiff’s alleged absence from the lunch.  If indeed the plaintiff had an alibi to explain her absence from the lunch, I would expect it to have been mentioned in the witness statements, but it was not.  In her oral evidence, the reason cited for her own absence was that she would have been too distraught to be expected to be able to down any lunch.  However, that would not have been a reliable line of reasoning to help the plaintiff jog her memory: the lunch was the first gathering opportunity of the family after the sad incident.  It was a time when all children and close relatives present in Hong Kong would be expected to rally around the mother to comfort her and to discuss matters to be handled arising from Father’s demise.  There would have been good reasons to attend the lunch to be with the family whether or not one had an appetite for food at the time.  In the absence of evidence to the contrary, it is also inconceivable that the police would have required the wife and a son to be held up for hours on end at the police station for taking of statements immediately following the discovery of a poor old man found unconscious in his home who then died in unsuspicious circumstances.

51.Further, in view of the highly organized and pragmatic manner in which the Deceased had been accustomed to running the finances of the family and its members, I consider that it is inherently probable that the family would not have considered it inappropriate or impertinent to discuss the funding of the funeral alongside other logistical matters on funeral arrangements at the first family meeting after the Deceased’s passing.  The Deceased had for years set up elaborate schemes to provide for the needs of his wife and their children, and had arranged for them free accommodation, income from landed properties to be received and expenses including income for his wife and other family members to be paid out of designated accounts, the records of which members of his family had regular access.  Unlike other families with adult children, the Deceased had organized the family finances in such a way that even the utility expenses of the individual households of his adult children continued to be paid out of the account of HEL throughout the years and not out of the adult children’s own private funds.  Under the meticulous planning of the Deceased, the aged parents would continue to provide for themselves to the end of their respective lives out of funds the father had accumulated over the years without expecting their children to contribute anything towards their living expenses.

52.It follows that there had been established a strong sense of the availability of a family “kitty” the adult children could expect to draw from whenever the nature of the expense warrants it.  It was a practice not tied to the personal means of the individual members, and they were not expected to have any qualms about it as this was the way their father had chosen to run the family finances throughout the years.  Apart from accommodation and household utility expenses, the Volvo car, replaced by the new Mercedes Benz, both used by Andrew sometimes for shuttling his mother, were further examples.  This modus operandi of the Ng family underlies the circumstances in which the disputed agreements were said to have been reached.  Apart from the arrangement being seen as an act of fatherly love, the practical advantages and the good intentions behind it in a Chinese family with a number of children of different attributes, stages of life and earning power are readily appreciable.

53.It is not disputed that the announced intention known to all of the members of the family that the funeral expenses of him and his wife were to be paid out of family funds through NSMAL and HEL, and not to be shouldered by the children.  The Deceased went as far as having the same principle stated in the Memorandum and Articles of Association or board resolution of two of the companies he set up for providing for his family, defying a common taboo amongst old-fashioned Chinese people not to speak about their own deaths.  This fortifies my view that the source of funds for the funeral was not something that members of the family would have felt embarrassed, let alone ashamed, to discuss, and whether they could afford to contribute to such expense had nothing to do with it.  In the circumstances, I consider it plausible and indeed likely that the plaintiff as the surviving matriarch of the family would have found it necessary and proper to give instructions on funding when the funeral arrangements were discussed, as Andrew accepted they were on 29 March 2002, though it was over dinner according to him.  I also find that the children would not have made any decision or issued any instructions in this regard without deferring to her opinion or seeking her approval.

54.In so far as her evidence and Andrew’s evidence suggested there was no discussion with and no instructions given by her on the deployment of funds in the Deceased’s account towards funeral expenses on 29 March 2002 or the days immediately following, I reject such evidence.  I also reject the argument that it was improbable that such discussion had ensued because members of the family were financially comfortable and could well afford to contribute to the expense if necessary.  In my view, affordability had nothing to do with it.  It was the way in which the Ng family financial affairs were accustomed to be run.

55.I consider it inherently improbable that Andrew would have been assigned to organize the funeral without a decision also having been made by the plaintiff or the family collectively that he should be put in funds to carry out his assignment.  As the amounts standing in the respective accounts was information readily accessible to some if not all of the members of the family, who were working together at the time, I consider it inherently probable that they would have readily ascertained where the necessary funds for the funeral might be found.  I find it plausible that the gathering of funds from accounts where funds were available would have been discussed and approved by and in the presence of the plaintiff at the first family meeting on 29 March 2002, and/or at the family meetings in the days to follow but prior to 2 April 2002.  I reject Andrew’s evidence that everyone had in mind and relied on the clause contained in the Memorandum and Articles of Association of NSMAL that the company would pay for the Deceased’s funeral expenses and therefore there was no need for discussion about transfer of funds from the Deceased’s accounts.

56.Given the availability of cash sitting in the 1^st and 2^nd Accounts, a fact which Stephanie would have been in a position to report by 2 April 2002 if not earlier, I consider it most improbable that the plaintiff and other family members would have found it sensible to even consider taking out any bank loan, or for the board to resolve to utilize any of HEL’s assets other than cash to fund the funeral expenses in the absence of sufficient funds standing in HEL’s account. As it was pointed out by Stephanie, and not otherwise contradicted by any evidence from the plaintiff, there was no existing banking facilities available to HEL at the time, the mortgage to secure such facilities having been discharged years back.

57.Further, the family working together would have intended steps to be taken to gather such funds into an account from which it was believed Father intended his funeral expenses to be paid, ie the account of HEL.  The documentary evidence establishes that NSMAL did not hold any bank account, and HEL did not keep sufficient surplus funds as would cover funeral expenses which they knew would cost a fairly substantial amount of money.  They would have had some idea as to how much it would likely cost too, there having been another death in the family not long before 2002 for which funeral had been arranged.  At best, HEL only had a regular balance of around $100,000 but not more.  The obvious source of funds would have been the 1^st and 2^nd Accounts, the existence of which was known to the plaintiff at the time of or immediately after the death of the Deceased, as was the fact that Stephanie was an authorized signatory to both accounts.  It follows it would be natural for Stephanie to be asked to withdraw the funds from the two accounts and to transfer them into the HEL account.  I find that the plaintiff had indeed agreed and/or instructed her to make those transfers.

58.It was submitted on behalf of the plaintiff that the version of events put forward by the 1^st and 3^rd defendants were inherently improbable for a number of reasons.  I have carefully considered all the other arguments advanced by the plaintiff as to why the plaintiff’s version is to be preferred.  Apart from the arguments dealt with in the foregoing paragraphs, one reason given is that Tony and Jeremy, both being accountants by profession, would have recognized the impropriety of moving money and property from the Deceased’s accounts and Safe Box upon his death, and would not have subscribed to an agreement for Stephanie to carry out the transactions.  Whether Tony and Jeremy knew what should or should not have been done under the law in this regard was neither here nor there, as was the question whether they should have been part of any such agreement.  I am concerned only with whether the plaintiff had agreed or instructed Stephanie to carry out the transactions now under complaint.  As regards the opening of the new bank account for NPSC, the evidence is not clear on what had or would have prompted the step to be taken.  In view of my above analysis on the financial practice of the family, it does not displace my finding that the plaintiff had indeed given instructions for or agreed to the transactions to be carried out by Stephanie.

59.The 1^st and 3^rd defendants rely on the evidence of implementation of the agreement as supporting the fact that agreement was indeed made for funds to be deposited into HEL’s accounts and for funeral expenses to be paid out of such funds.  It was established in evidence that Andrew wrote most of the cheques to discharge those payments.  I have already dealt with the nature of his objections on whether the entire sum of $284,621.40 could be properly categorised as the Deceased funeral expenses, but his arguments take little away from the overwhelming evidence that a substantial proportion of the transferred funds were indeed so used, as instructed and agreed to by the plaintiff.  I find it implausible that Andrew would not have been aware that funds were injected into the HEL account for these expenses.  I find that Andrew knew the money had come from the two accounts, and it was as the plaintiff had instructed and agreed.  In so far as necessary I also find that Andrew took no issue at the time with the use of the funds in the 2^nd Account.

60.On the evidence of Stephanie and Philip, as supported by contemporaneous accounting and financial records, the sums transferred from the 1^st and 2^nd Accounts were in fact insufficient for paying both the funeral expenses and buying the car, because the sum standing in the 2^nd Account in particular ought to have been used to discharge liabilities already incurred by the time of the transfer of ownership of NPSC.  The Income and Expenditure Account of NPSC as at 31 March 2002 showed that the net asset value as of the date 18 January 2002 was $27,976.59, and the available cash net of liabilities was no more than $23,986.05.  Adding all the cash available in the 1^st Account, it only came to $236,886.05, well short of the funeral expenses that were made out. The 1^st and 3^rd defendants argue that HEL therefore holds no fund at all that is liable to be returned to the Estate even if there were no agreement to transfer the funds.  The plaintiff has not produced any convincing evidence to challenge the above, and indeed is hardly in a position to challenge the financial position of NPSC as reflected in its financial records, since Andrew has signed off the accounts of NPSC dated 31 March 2002.

61.For completeness, I do not accept it is open for the plaintiff to postulate that it was NSMAL that had in fact paid for the funeral expenses, and it did so through the use of funds in HEL’s bank account.  This proposition was not specifically pleaded, and even if it were true, it does not justify the taking of recovery action by the plaintiff on behalf of the Estate, when recovery should have been sought by HEL.

62.On the alleged agreement to deploy the transferred funds to purchase a new car, there is some force in the argument that it would be rather strange for the purchase of a new car to be discussed alongside funeral arrangements shortly following the passing of the Deceased.  Having said that I do not regard it as extraordinary or incredulous that in the context of a discussion on how the funds seen as “left behind” by the father should be deployed after funeral expenses, the purchase of a car for Andrew to use for the benefit of Mother could have been raised at the meeting.  The evidence on what was discussed and agreed did not point to any discussion on the make of car to be acquired.  It was merely a broad agreement on buying a car that could be used for the benefit of Mother, and there is credible evidence supported by accounting records that the Volvo car then in use also for the benefit of the plaintiff was due for replacement at the time.  Andrew was unable to give any direct response to questions on the whereabouts of the Volvo car.  His evasiveness was inexplicable except as a sign of untruthfulness.

63.The documentary evidence on the implementation of this alleged agreement in May 2002 and Andrew’s complicity in it provides strong support for the 1^st and 3^rd defendants’ version of what was agreed with regard to the purchase of the car.  Obviously, the car could not have been purchased by HEL and HEL could not have committed to the financing deal without the agreement of Andrew, Philip, Stephanie and the plaintiff as the surviving directors of the HEL.  However, despite being the sole user of the new car, Andrew refused to admit to having any idea as to where the funds for purchasing the car had come from.  His evidence that the car was bought because Tony wanted it as a status symbol was inherently implausible given the car was ultimately only used by Andrew, and Tony in fact never used it.  Tony’s unchallenged evidence was that he had his own car, also a Mercedes Benz, and would not have needed to use Andrew’s car at all.

64.Regardless of who did raise the subject of the purchase of a car shortly after Father’s passing, what was important was that the car was indeed purchased, indisputably from the funds transferred, and indisputably to the knowledge and approval of both the plaintiff and Andrew.  Clearly, the funds for purchasing the car could not have been from HEL without the transfers of funds now sued upon, as HEL simply did not have sufficient surplus in May 2002 to cover the down payment and initial instalments[2], which amounted to $236,579.20.  Yet, it was Andrew who had represented HEL to sign the lease for the hire-purchase agreement to finance the purchase of the car, thereby incurring a liability for a monthly instalment of $8,688 that HEL would expect to pay for a number of years.  I find his evidence in this regard inherently unreliable, and tended to suggest that he was lying to cover up what he knew was a use of the funds agreed within the family, for which the plaintiff could have no legitimate complaint.

65.I also find force in the submission that the existence of the Agreement is fortified by the markings made following 2 April 2002 on the bank account passbook of HEL’s account, some of which were admittedly made by Andrew himself.  These markings show a tracking of the use of the transferred funds, showing the nature of the uses particularly pertaining to the funeral and the new car, with information on the relevant parties responsible for the entries.

66.The parties gave diametrically opposite evidence on what happened on 2 April 2002, except agreeing on the transfer of the funds from the two accounts and the emptying of the Safe Box.  On the one hand the plaintiff and Andrew both deny Andrew had accompanied Stephanie to attend the Bank on 2 April 2002.  On the other hand Stephanie relies on her account of the events as well as contemporaneous documents to demonstrate that she carried out her mother’s instructions faithfully.  Inevitably, my findings above on the agreement reached and instructions given or approved by the plaintiff would directly impact upon my view of the credibility of the evidence of Andrew and the plaintiff on the events that took place on 2 April 2002.

67.Given there was an agreement for the available funds to be withdrawn and transferred into HEL’s account, it follows that Stephanie would have understood it was to be done on the first work day to follow.  It is also inherently plausible that Andrew would have been instructed to and did accompany her to assist her in the process.  It would have been sensible for both the transfers and the retrieval to be done in one trip with Andrew escorting Stephanie.  Contemporaneous documentary evidence corroborates Stephanie’s evidence.  It includes three transfer slips that were used to apply for the transfers from the 1^st and 2^nd Accounts, and they bear handwriting that appears to be Andrew’s handwriting.

68.Andrew denied the handwriting on the three transfer slips were his.  No case of forgery was pleaded however.  With Andrew accepting under cross-examination that the handwriting on the slips does appear to be similar to his own handwriting compared with that in a number of other documents in discovery, the adjudication of the issue cry out for the help of evidence from handwriting experts.  However, it was upon the strenuous resistence on the part of the plaintiff that none came to be adduced.  In the circumstances, and in view of Andrew’s own admission of the objective similarity between his own handwriting and that on the transfer slips, I am compelled to regard the evidential burden as not having been discharged by his bare denial.  Having said that, even without regard to the handwriting on the slips, I prefer the evidence of the 1^st defendant on the events of 2 April 2002 given my findings on the events preceding that day.  The findings relating to his attendance at Wing Lung Bank with Stephanie and the role he played in the three transactions of transfer only go further to prove that the instructions were indeed given and the siblings worked together to carry them out.

69.The rejection of the unpleaded claim of forgery carries further negative impact on the plaintiff’s case: if Stephanie were carrying out the transfer transactions without the plaintiff’s knowledge or consent, it would have been impossible to see why she would have bothered to come up with transfer slips bearing what was objectively recognizable as Andrew’s handwriting and use them for the “illegal” transfers.  It is even more difficult to see what possible advantage she could have gained from fabricating a story of Andrew accompanying her to carry out these transactions when in fact she made no private gain from the transfers at all but had immediately paid the entire sums into the HEL account that was open to the supervision of other siblings.

70.In summary, I find that the plaintiff had instructed and agreed that Stephanie should attend the Bank to transfer the money standing in the 1^st and 2^nd Accounts to the HEL account to be used for the purpose of defraying the Deceased’s funeral expenses and for purchasing a car for the use of Andrew for the benefit of the plaintiff.  I also find that the plaintiff did instruct Stephanie, to be accompanied by Andrew to open the Safe Box of the Deceased that she knew was kept at the Bank, to retrieve all its contents and to terminate the rental agreement.  I also find that the funds transferred were fully spent on the agreed purposes, namely the funeral and acquiring the car.

Safe Deposit Box and Distribution of its Contents

71.Stephanie’s evidence in her witness statement was that the contents of the Safe Box was emptied and put into a bag, which Andrew hanged onto while she closed the Safe Box account, and which he toted all the way back to the office.  Stephanie later took it to the plaintiff’s home at dinner time, when the contents were distributed.

72.My preference for the version of evidence given by Stephanie at trial is rooted from my findings on the pre-existing agreement.  I am also influenced by what the plaintiff said or was unable to say about what her true complaint was in this regard: she had no clear idea what were in the Safe Box, and would not have regarded the items important enough to warrant legal action, but later insisted that Stephanie stole all the items.

73.It was apparent that Stephanie’s evidence was in various aspects inconsistent with her evidence given for pre-action discovery in Canada and at the trial of the Canadian proceedings.  She was cross-examined at length about the inconsistencies by counsel for the plaintiff, during which she accepted that she was confused at the time of giving evidence in Canada.

74.There is a further discrepancy between what was originally pleaded in the Defence in this action and what she said in her witness statement with regard to whether a second visit was made to the Safe Box to close it.

75.I am prepared to accept that the inconsistencies and confusion in the aspects of evidence identified by the plaintiff with regard to the accesses to the Safe Box were probably due to the long lapse of time.  Unlike, for instance, a traffic accident that is expected to become contentious, there would have been no reason back in 2002 up to 2006 for Stephanie to recognize the possible need to recall and remember precisely how things had happened on the days following the death of the Deceased.  The need only arose as late as 2008 when this action was commenced these matters came under the magnifying glass.  The availability of the Bank’s records would also have assisted in the reconstruction of the precise order of events afterwards.

76.After all, whether Stephanie had made one trip or two trips to the Safe Box on 2 April 2002 was not the bone of contention, nor was whether the plaintiff had instructed her to empty the box or only to take out the valuables.  The crux of the matter is whether the plaintiff had instructed her to access the Safe Box to retrieve anything at all for distribution.  The way in which the parties’ versions of evidence are polarized makes the discrepancies in Stephanie’s evidence quite irrelevant in terms of assessing her credibility.

77.I therefore feel able to rely on my findings of the pre-existing agreement in accepting the evidence of Stephanie given at the trial of this action, that the contents of the Safe Box were indeed retrieved in total and handed over to the plaintiff for distribution as she described.  Her evidence was corroborated by that of Philip and Tony, the latter of whom produced in Court what he received that evening from the plaintiff in the distribution of items from the Safe Box, namely a gold coin with a tiger embossed on it that commemorated the year of his birth. I accept their evidence in so far as it conflicts with that of Andrew and the plaintiff.  I reject the plaintiff’s evidence in so far as she suggested that no such dinner took place.  Her evidence is in any event wholly unreliable as she had no recollection of when she gathered for the first time with her family again after the death of the Deceased, although she was surprisingly certain of the whereabouts and movements of Andrew on 2 April 2002 as she denied that her son ever accompanied Stephanie to go to the Bank on that day.  As indicated above, I find those aspects of her evidence contrived and untruthful.

78.In view of the above findings I need go no further to make findings on what might have been removed from the Safe Box by Stephanie that ought to be returned to the Estate.  However, for completeness, I note that the plaintiff has adduced no evidence on what the Safe Box contained before Stephanie emptied it, apart from a bare assertion of a list of items set out in a “solemn declaration”[3] made by Andrew in June 2007.  According to him, the list was based on his recollection of what he saw were in the Safe Box at a visit made with his father on 2 August 2000, a visit he was able to verify from records kept by the Bank.  Yet, some 7 years later he decided it was necessary to make a list of the contents as he had “always” been able to remember them.  I should bear in mind that the making of this list was, on Andrew’s own admission, for the purpose of possible legal action, obviously to be taken against Stephanie.  In the absence of supporting evidence, it is no better than Andrew’s uncorroborated evidence, and must be tested as such.

79.Against Andrew’s bald uncorroborated evidence of what he saw in the Safe Box on 2 August 2000 are a number of points advanced by the 1^st and 3^rd defendants, all tending to support a finding that the list is not to be relied on, and that it was more likely that the contents were in fact distributed on 2 April 2002. I do not find it necessary to go through them one by one, except to say that had I been of the view that the removal of the property from the Safe Box was unauthorized, I would still not have been satisfied that the Estate had succeeded in proving any recoverable loss.

80.I therefore make the finding that Stephanie and Andrew did attend the Bank pursuant to the plaintiff’s instructions with regard to the Safe Box.  I also find that Stephanie did hand over all the contents retrieved from the Safe Box to the plaintiff, which were distributed by her to members of the family at the dinner at home on 2 April 2002.

Whether Father had parted with his Interest in NPSC before his Death

81.This issue relates to the funds in the 2^nd Account.  The plaintiff’s claim is on the basis that the 2^nd Account was used by the Deceased “as his personal [account]”[4], despite it being common ground that Andrew was admitted as a partner on 18 January 2002.  Andrew contends that he considered his admission as a partner was merely a formality to facilitate operation of NPSC, and that Deceased never intended to part with ownership or control of NPSC.  The plaintiff adduced no evidence on how the Deceased had used the NPSC account as his own personal account.  On the contrary, the evidence suggests that this account was maintained separately as a business account, distinct from the 1^st Account, which was a personal account of the Deceased.  The bank balance of the 2^nd Account tallies with the sum appearing in the balance sheet of the business NPSC as of 31.3.2002.

82.The 1^st and 3^rd defendants’ case is that the Deceased had parted with his interest in the sole proprietorship by first admitting Andrew as a partner, and later admitting Philip as a partner in his own place, all within 2 months before he passed away.  The result was that the funds held in the 2^nd Account would not form part of the Estate, and the plaintiff will have no locus to complain about the fund having been transferred away.

83.Andrew said that he was made to sign the Notice of Change of Partnership (dated 22 March 2002) admitting Philip after his father’s death only on 2 April 2002 “under duress”.  It was said that Tony, Stephanie and Philip threatened to stop paying him his monthly allowance from TKTNC on which his livelihood depended.

84.It is argued on behalf of the 1^st and 3^rd defendants that without the plaintiff pleading the point, it is not open to me to consider the evidence adduced by the plaintiff to displace the effect of the executed documents, namely (a) the Notice of Change of Partnership signed by the Deceased on 18 January 2002, and (b) the Notice of Change of Partnership dated 22 March 2002 signed by the father and Andrew.  The 1^st and 3^rd defendants argue that the plaintiff is attempting to displace the legal effect of the Notice signed by the Deceased on the basis of alleged lack of intention.  The plaintiff has not pleaded any point to the effect that the alleged lack of intention or any other matter would make the Notice executed by the father “ineffective or invalid”.  I do not believe I have been invited to make such a finding.  The plaintiff does not dispute that Andrew was indeed made a partner by the Notice dated 18 January 2002, and the alleged purpose of the Deceased in admitting Andrew as a partner could not in the circumstances have vitiated its legal effect, nor would the way Andrew chose to look at it.  It was nothing more than alleged intentions to set the background for the evidence on subsequent events to be weighed.

85.In the absence of proper pleading, I do not accept that the father’s alleged lack of intention could be relied on to have any vitiating effect on the act of execution of the Notices.  I also accept that once the father had executed the Notice dated 22 March 2002, he had already effectively transferred and vested the interest in Philip.  The Notice is to be filed within one month under section 8 of the Business Registration Ordinance (Cap.310), but that is not a requirement for the gift to be complete.

86.What the plaintiff does assert is that the 1^st defendant’s version is not to be believed because it made no sense to have Andrew and Philip admitted sequentially rather than at the same time or at least in close succession if he had intended to transfer the sole proprietorship to them, and it was suspicious that the 22 March 2002 Notice was not filed until after Father died.

87.The starting point is the inherent probability of the father wanting to part with his interest in NPSC to two of his sons in January 2002.  It is common ground that the general health of the father was visibly declining from early 2002.  He was gradually losing weight, and daily life was becoming increasing laborious for the frail old man.  From the various descriptions, it appeared to be a process of gentle and gradual decline, but there was no suggestion from any witness that it was feared he only had days to live.  This was unlike in 1997 when he saw the need to appoint Stephanie, in one stroke, as his alternate signatory of the two accounts and the Safe Box before he left for Canada for a major operation.

88.I am also prepared to accept that as a careful planner, the Deceased would have planned ahead on the steps to be taken to avoid inconveniences in the administration of his business, any tax implications and to achieve apparent compliance with rules and regulations, things that an experienced accountant like him was likely to be concerned with, and would have seen it through.  It must also be remembered that it was at a time when the siblings were still on peaceful terms, and when every member of the family was relatively content with no apparent jealousy or conflict of interest amongst them.  In the month of January when this plan was initiated, Father was still going in to work every day.  There was no screaming urgency for transfer of business interest to be completed in a matter of days.  In any event, the amount of assets held by NPSC, as pointed out above, was in fact very small.  The intended transfer can be seen as more for administrative purpose (to continue the business of NPSC without interruption and not having to notify clients of a change in business registration number) and symbolic (to let the business and its name survive beyond his own life) rather than one with any significant financial implications requiring efficient execution to avoid monetary loss.

89.Plaintiff’s Counsel raised a number of forensic points arising from the documents and the witnesses’ account of the events in support of the plaintiff’s position and in attack of the 1^st and 3^rd defendants’ version.  Having carefully considered all the submissions advanced on behalf of the plaintiff, I do not find any of them goes to the heart of the matter or carry any force.  The main attack is on the Notice of Change in Partnership dated 22 March 2002.  As has been explained by Stephanie, and there was no evidence to contradict hers, it was not possible to add more than one partner to a sole proprietorship at one time to change it into a partnership.  To achieve the smooth transfer intended by the Deceased, the two new partners had to be admitted sequentially, and eventually for the Deceased to withdraw upon both new partners having been admitted.

90.As regards the lapse of time between 18 January 2002 when the forms were executed and 30 January 2002 when the form to admit Andrew was filed, and the further lapse of time before the Notice admitting Philip was dated (22 March 2002) and then filed on 2 April 2002, I do not find them such as to raise any suspicion of impropriety, less still to support the plaintiff’s version of events.  The filing of signed Notices was only required to be done within a month.  The transfer was complete upon the signing of the notices.  There was no urgency for the filing of the notices.  I also accept the evidence of Lydia Chui and find her account on the how the forms came to be signed by the respective parties convincing. 

91.The plaintiff took a number of forensic points on the Notice dated 22 March 2002.  Both Stephanie and Philip recalled a dinner at home one or two days preceding 22 March 2002 at which their father told them to date the remaining Notice 22 March 2002 and have it filed.  While this dinner of around 20 to 21 March was not referred to in witness statements, the focus on the date of 22 March 2002 as the date on one of the Notices did not appear to arise until the start of the trial.  In all the circumstances, I do not find the evidence of Stephanie and Philip implausible in this regard.  The date of 22 March 2002 also happens to be the date of retirement from directorship from NSMAL of the Deceased.  It is consistent with the suggestion that it was when the father decided he should finally step down and retire.

92.On the other hand, on accepting the evidence of Philip, Stephanie, Tony and Lydia Chui on this issue, and taking into account the totality of the evidence on other issues I have made findings on, I have no hesitation in rejecting the evidence of Andrew on how he was forced to execute the Notice to admit Philip as a partner on 2 April 2002 as being both inherently implausible and in conflict with the more convincing evidence of the other witnesses on this issue.

93.I find that by 22 March 2002, the Deceased had transferred his entire interest in NPSC to Andrew and Philip as a gift, and ceased to have any interest in NPSC.  It follows that the funds standing in the 2^nd Account cannot be regarded as part of the Estate at the time of the death of the Deceased.

Conclusion on Liability of the 1^st and 3^rd Defendants

94.It follows that the claim against the 1^st and 3^rd defendants must be dismissed.

Liability of the Bank

95.The claim against the Bank should dissipate following my finding on the existence of the agreement for the transfer and use of the funds from the two accounts, and the termination of the Safe Box.  However, in deference to Counsel’s exhaustive arguments, I shall deal with this claim briefly.

96.The nature of the plaintiff’s complaint is that the cancellation of the Safe Box upon reporting a lost key in the circumstances of 2 April 2002 would put the Bank on inquiry of the allegedly unauthorized transfer of funds and removal of contents from the Safe Box.  It is said that the Bank is liable for the loss of the Estate in the form of the funds withdrawn and the unproved value of the items removed.

Was the Bank in Breach of the Agreement for Renting Safe Deposit Box?

97.This question turns upon the construction of the Agreement for Renting Safe Deposit Box dated 21 September 1991 (“the Agreement”).  Under the Agreement, the Deceased was the “renter”, and Stephanie was the “accessor”.  The plaintiff relies on clause 26 of the Agreement as limiting the accessor’s right to “open the Box, to remove therefrom and to place therein anything and otherwise to use or to operate the Box in any manner whatsoever…”, without granting the right to terminate the rental of the safe deposit box.

98.Clause 20 of the Agreement provides that the authority of the authorized person will remain valid until actual notice is received of the demise of the Deceased.  There is no dispute that Stephanie’s authority as an “accessor” remained valid until 19 August 2002 when the Bank received actual notice of the death of the Deceased.  Ms Sit on behalf of the Bank however contends that on the proper construction of clause 26 of the Agreement, “access to the Box”, as defined in the Agreement, includes the right to terminate the Safe Box.  The rights are expressed in the words “otherwise to use or operate … in any manner whatsoever”, which are couched in wide and inclusive terms that would in their ordinary meaning cover termination of, or cessation to operate, the Safe Box.  The risk (and conversely, advantages) that the renter is perceived to be prepared to undertake by appointing an accessor is in practical terms no different if the rights were interpreted narrowly than if the terms were interpreted widely to include the right to termination of the box.  The appointment of an accessor to the safe deposit box on the one hand puts the renter at the risk of unauthorized appropriation of the contents, which he is prepared to undertake, and on the other affords the renter the convenience which he can enjoy in not having to operate the box personally.  He can delegate whatever he wishes to do about the box to the accessor without having to attend the Bank in person, and that could reasonably include terminating the rental of the box, and the handling of the returned deposit. 

99.The application of the principles of construction in Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 at 296 D-I requires the examination of the factual matrix including the relationship between the relevant parties to the contract and the practical objects to be achieved by the terms of the agreement.  In my view, construction of the Agreement ought not to turn upon the way the Surrender Form is put together. Even if the Bank were to refuse to accept the signature of an accessor in an application for surrender, that does not assist in determining the rights between the parties, nor do the parties’ subjective understanding bind them. In the absence of any rational reason advanced as to what practical object is achieved by specifically excluding termination of the use of the box as one of the operations specifically reserved for the renter, I am inclined to accept the wider interpretation. 

100.I conclude that no breach of Agreement has been made out by the Bank allowing Stephanie to report a lost key and to terminate the Safe Box (Amended Statement of Claim paragraph 9 (3a) & (3b)).  None of the other breaches of agreement pleaded are made out.

Was the Bank put on Inquiry

101.Next the plaintiff alleges that the Bank breached its duty of care as banker or bailee in failing to do certain acts despite having been “put on inquiry” (see paragraphs 9, 9A, 9B, 9C of Amended Statement of Claim).  The plaintiff’s case is that the Bank was put on inquiry by reason of (a) Stephanie, not the Deceased, being the person who terminated the rental of the Safe Box; and (b) Stephanie only returning one key and reported loss of the other in terminating the agreement.  I note that the report of the loss of the rental receipt is not part of the plaintiff’s pleaded case, and there was no application to amend in order to include this point.

102.It is the plaintiff’s case that had the Bank not failed in its duty it would have verified with the renter of the Safe Box (a) whether he intended to terminate the Safe Box; and (b) whether the renter did lose his key as was reported.  Both propositions pre-suppose that Stephanie in her position as accessor did not have the authority to carry out those acts, which I do not agree.  It is said that this would have enabled the Bank to discover the death of the Deceased before the Safe Box could be closed, and the allegedly unauthorized removal of the property from the Safe Box could have been traced and recovered, and the unauthorized transfer of funds could have been reversed, in any event before they were spent.

103.In order to establish that the Bank was put on inquiry, the conduct of the Bank has to be tested against the standard of care of that which bankers may reasonably be expected to take according to the ordinary practice of bankers (see Selangor United Rubber Estates Ltd v Cradock (No.3) [1968]1 WLR 1555, at 1606G-H, 1608A-B, 1608A-B), taking all the circumstances into account (DEX Asia Ltd v DBS Bank (Hong Kong) Ltd [2009]5 HKLRD 160 para.56(a)).

104.Looking at the circumstances as a whole, including the various terms of Agreement, the operational manual applicable to the operation of safe deposit boxes in the Bank, and the evidence of Amy Chan, an experienced bank officer in handling the safe deposit box operation, I am not satisfied that the Bank was put on inquiry by the circumstances relied on.  The evidence shows that there was nothing unusual about an accessor as opposed to a renter surrendering the safe deposit box, and only reporting a lost key when so doing.  The facts of this case are a far cry from the circumstances in the two cases cited above, in which the banks were held to have been put on inquiry.

105.Accordingly, I find that the Bank was not in breach of its duty as a banker /bailee.

Causation and No Loss Suffered by Estate

106.In case I am wrong on the issue of breach of agreement and the issue of breach of duty of care, I would go on to consider the issue of causation.  This is a high hurdle that the plaintiff is seen to be in considerable difficulty of crossing.  I agree with the submissions advanced on behalf of the Bank that the plaintiff has not begun to prove there was any loss, let alone any loss that could be tied to any wrong committed by the Bank.

107.As pleaded, the inquiry would have led to the discovery of the death of the Deceased and the transfer from the accounts earlier than the Bank did.  It is not the plaintiff’s case that permitting the transfers and the retrieval of the contents of the Safe Box itself constituted any breach of agreement or duty.  The alleged direct result of the Bank not having inquired at the time was merely delay in discovery of the transfers and the removal of the property.  However, it has not been demonstrated that the funds and the property in the Safe Box are now unrecoverable by reason of the delay in verification.  The fact that the plaintiff has taken out this action against the 1^st and 3^rd defendants shows that the plaintiff does regard the loss as recoverable from those defendants.

108.Even more importantly, there can be no loss on the part of the Estate to be compensated for by the Bank.  On credible evidence supported by documents and which stood the test of cross-examination, the funds transferred (even taking Andrew’s itemized challenge to the funeral expenses to the highest) had been exhausted  by having been spent either for the Estate’s purposes, or applied towards the purchase of the car pursuant to agreement.  A part of the funds ($150,000) had been returned to the account of NPSC where it had come from for the purpose of discharging the debt of NPSC.  The estate has suffered no loss.

109.As regards the unparticularised loss of the items in the Safe Box, the relief of delivery up is contradictory to the common ground accepted by all that the items were taken out by Stephanie, and could not have  been for the Bank to deliver up.  The value of the items are unparticularised and no attempt has been made to put any monetary value to them for the purpose of claiming damages, let alone to prove such value.  The plaintiff is thus debarred from recovering substantial damages : McGregor on Damages 18^th Edition para.45-001.

110.The plaintiff’s claim against the Bank is dismissed.

Costs

111.I would like to hear the parties on costs before making a costs order.  I give leave for written submissions on costs to be filed by the defendants within 14 days hereof, and leave to the plaintiff to file submissions on costs in answer within 7 days thereafter.  The length of the written submissions shall be limited to 3 pages in A4 size each in substantially the same font size and line spacing in which the parties written closing submissions were prepared.  Any further reply to the plaintiff’s submissions shall be limited to one page, to be filed within 3 days thereafter.  The parties will be notified within 7 days after the close of submissions if a hearing is required, and if not required, the likely time for the handing down of the decision on costs.

112.It remains for me to thank Counsel for the assistance they have given to me in their well-organized and comprehensive written submissions, all of which I found to be of great help.  I also thank Counsel and all parties for their patience and courtesy extended to me at the trial and while awaiting my decision, which had taken considerably longer than intended.  For that I would extend my sincere apology for any anxiety and inconvenience caused.

Mr Nigel Aiken, SC leading Mr Vincent Lung, instructed by Paul K C Chan & Partners, for plaintiff

Ms Teresa Cheng, SC leading  Mr William Wong & Mr Adrian Lai, instructed by S Cheng & Yeung, for the 1st defendant, 3rd defendant

Ms Eva Sit, instructed by Deacons, for the 2nd defendant