HUI YAU PING v. SZE LOONG YAU AND OTHERS

HCA 1923/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1923 OF 2011

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J U D G M E N T

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Background

1.  This is a dispute among family members.

2.  The Plaintiff (“Mr Hui”) is the father of the 2^nd, 3^rd and 4^th Defendants (“Linda”, “Lily” and “Michael” respectively).  The 1^st Defendant (“Mr Sze”) is the younger brother of Mr Hui’s first wife Madam See (“the Mother”), who passed away intestate on 19 March 2008. 

3.  The 5^th Defendant (“GV”) is a company owned by the Mr Sze, Linda, Lily and Michael.  It holds an industrial property[1] (“the Workshop”) situate in Kwai Chung which is a subject matter of dispute. 

4.  The 2^nd Defendant (“Madam Lam”) in the counterclaim is the second wife of Mr Hui.  They got married on 8^th April 2009, about one year after the Mother’s death.

5.  Mr Hui and the Mother were married in Hong Kong in 1967.  They have 4 children.  Linda is the eldest child, Lily is the second, Mr Hui Man Sing (“Henry”) is the third and Michael is the youngest one.

6.  Mr Hui is the founder of the Grand Yick group of companies (“GY”) which has been carrying on the business of paper manufacturing since 1985.  It has been a very successful business and at the time of the trial it has an annual turnover of over HK$130 million.  Before the transfer of his shares to Linda, Lily and Michael (“the 3 children”), Mr Hui held 11,860,000 shares of GY representing 59.3% of the whole company.  Mr Sze was holding 6,140,000 shares of GY and one Mr Hui Suen Leung, who is not relevant to the present proceedings, was holding the remaining 2,000,000 shares.

7.  GY is a family business.  Mr Hui, Mr Sze, Linda, Lily and Michael were all working in GY. Henry was once the general manager of GY before he left the company and established his own business in or about 2002.  The mother had also taken a pivotal role in the financial matters of the family before her death.

8.  As appeared on Mr Hui’s Identity Card, the year of birth of Mr Hui is 1944.  But according to Mr Hui, he is actually 5 years older and at the time of the Mother’s death he was already 69. 

9.  Letter of Administration of the Mother’s estate was granted to Mr Hui on 18^th September 2008.  At that point of time, Mr Hui was apparently planning on his retirement and, in parallel with his distribution of the Mother’s estate to the children, he also started transferring his own assets to them.

10.  In the period between 8^th January 2009 and 28^th June 2010, Mr Hui transferred all his shares in GY to the 3 children by 3 different transfers (5,000,000, 4,860,000 and 200,000 shares respectively).  He has also assigned his share of the ownership[2] of the Workshop to GV by way of a purported sale.

11.  Regarding the administration of the Mother’s estate, Mr Hui and his children executed a Deed of Family Arrangement and Release (“the Family Deed”) dated 23 January 2009 thereby releasing Mr Hui’s further duty in the administration of the Mother’s estate.  Under the Family Deed, the children also renounced all their rights in a property[3] in North Point (“the Property”) where Mr Hui was then residing.  By way of a Deed of Assent dated the same date, all rights in the Property was vested to Mr Hui. 

12.  In or about July 2011, the relationship between the parties turned bad.  Mr Hui was removed as a director of GY and GY stopped paying him any salary. 

13.  On 26^th July 2011, Mr Hui caused the beneficiaries[4] named in an insurance policy (“the 1^st AIA fund”) replaced by the name of Madam Lam.  A few days later on 2^nd August 2011, he also caused Madam Lam to become the owner of another 2 insurance policies (“the 2^nd and 3^rd AIA funds).

14.  The premiums of the 3 AIA funds, amounting to totally over HK$4 million, was allegedly provided by Linda. It is also Linda’s case that there was an agreement between Mr Hui and Linda that Mr Hui shall hold the AIA funds on trust for Linda and he has no authority to deal with the funds without her prior consent.

The present action

15.  Mr Hui took out this action on 9^th November 2011, alleging that the transfers of the GY shares to the 3 children were subject to various conditions.  By way of 3 different agreements in respect of the second and third transfers, Mr Sze and the 3 children agreed firstly, to redeem the mortgage of the Property which was in favour of the Nanyang Commercial Bank as security for the credit facilities of GY; secondly, to continue paying his salary by GY and thirdly, to hold the 2,000,000 shares transferred to Lily on trust for Henry’s son Hui King Pui (“King Pui”).  In his statement of claims, Mr Hui asks for specific performance of the said agreements.

16.  Besides, Mr Hui also alleged that Mr Sze and Michael have fraudulently misrepresented to him that the Deed of Assignment assigning his share of ownership of the Workshop to GV was mortgage documents and he signed on the Deed of Assignment in reliance on their misrepresentations.  Mr Hui seeks an order that GV is to transfer his share in the Workshop back to him.  Further, Mr Hui claims against all Defendants for his share of the rental income of the Workshop since August 2011.

17.  Mr Sze and the 3 children denied existence of the aforesaid agreements and misrepresentation alleged by Mr Hui.  They said the shares were transferred without condition and Mr Hui was clear about the nature of the assignment of the Workshop to GV.

18.  On the other hand, Linda counterclaims against Mr Hui and Madam Lam for breach of trust in causing to change the names of the beneficiaries under the 1^st AIA fund and transfer the ownerships of the 2^nd and 3^rd AIA funds to Madam Lam. 

19.  Besides, the 3 children alleged that Mr Hui, being the administrator of the Mother’s estate, has failed to account for and distribute to them the jewelry items stored in the Mother’s safe deposit box which Mr Hui took into his possession on 20^th April 2009.

20.  Furthermore, Mr Sze alleged that the Mother owed him a loan of HK$3 million which has been acknowledged by Mr Hui on the liability list attached to his affirmation filed in applying for the grant of administration of the Mother’s estate.  He claims against Mr Hui as the Administrator of the Mother’s estate for the debt.

21.  At the time of the trial, the mortgage of the Property has already been redeemed (in early 2012) by GY and the Property was subsequently sold by Mr Hui.  It is common ground that as the Property was wholly owned by Mr Hui pursuant to the Family Deed, GY was obliged to redeem the mortgage of it with or without the agreements as alleged by Mr Hui upon his request.

Evidence

22.  As noted from the above outline of this matter, the issues before this court are basically factual. The parties had given different versions of facts before the court.

23.  Regarding the alleged agreements underlying the transfers of the GY shares and also the assignment of the Workshop to GV, Mr Hui relied mainly on his own evidence to prove his case. 

24.  Henry gave evidence for Mr Hui but his evidence is more relevant to the area concerning the administration of the Mother’s estate, particularly on the whereabouts of the Mother’s jewelry items.  Peripherally, he also gave his comments on the general operations of GY and the roles and characteristics of each family member.  At trial, he produced an audio recording of telephone conversations between him and Lily in which the whereabouts of the jewelry items was allegedly mentioned.

25.  The relevance of Madam Lam’s evidence is more limited.  She only told us the approximate time frame of the development of her relationship with Mr Hui and the circumstances under which she issued a cheque for part payment of the premium of the AIA funds. Her evidence is in my view not particularly important.

26.  Mr Sze and the 3 children gave evidence.  They also called Mr Chung Lim Tung (“Mr Chung”), the family’s solicitor, to testify.  Mr Chung was the solicitor handling all legal matters in respect of the Family Deed, the transfers of the GY shares and the assignment of the Workshop. 

General observations on the witnesses

27.  Witnesses from both sides were subject to vigorous cross-examinations by counsel as one would expect to happen in this kind of disputes.

28.  Having heard the witnesses giving evidence in court, I should say none of the parties in the present case impressed me as honest witness. 

29.  Many aspects of Mr Hui’s evidence were imprecise and vague.  At times he was being evasive in answering questions.  There are certain parts of his evidence which are inherently improbable.  This will be referred to further in my analysis below.

30.  Mr Sze was obviously giving false evidence in relation to the “warning letters” allegedly issued to Mr Hui at the time when the parties’ relationship started to deteriorate.  In cross-examination it was shown to him that the date he written down on the said letter was actually a year later than the date he said he issued the said letter.  The answers he gave to this court in this part of his evidence were a pack of lies.  The idea of issuing warning letters to Mr Hui was ridiculous as Mr Hui was all along the boss and he has already faded out from the operation of GY at that time.

31.  There are other aspects in Mr Sze and the 3 children’s evidence showing their willingness to give whatever evidence that suits their purpose.  This will be further discussed in my analysis below.

32.  On the other hand, I find both Henry and Mr Chung honest witness.  Henry might have his personal feelings in this matter particularly his disapproval to Michael’s conducts.  However, he was straight forward in answering questions and the evidence he gave was on the whole consistent and reasonable.  Although it can be said that he has some interest in this case in that the 2,000,000 shares of GY transferred to Lily by Mr Hui were allegedly beneficially owned by his son, I do not think it would be significant enough to cause Henry to give false evidence against his siblings in the circumstances.

33.  Mr Chung is an independent witness having no personal interest in this matter.  From the audio recording of the telephone conversations between him and Mr Hui produced by Mr Hui, I noticed that Mr Chung concerned very much on the interest and well beings of Mr Hui and I do not think Mr Chung would give false evidence against Mr Hui without cause.

Agreements in relation to the transfers of the GY shares

34.  There were altogether 3 transfers of the GY shares from Mr Hui to the 3 children.  In relation to the first transfer, the pleaded case of Mr Hui is that it was a gift.  On 8^th January 2009, upon the request of Mr Sze, Mr Hui transferred 5,000,000 shares (amount to 25% of the whole GY) of GY as gifts to the 3 children.  This first transfer has nothing to do with the alleged agreements Mr Hui relied on in claiming against Mr Sze and the 3 children.

35.  Subsequent to the first transfer and upon the request of Mr Sze, Mr Hui agreed to transfer another 4,860,000 shares in GY to the 3 children on the conditions that Mr Sze and the 3 children would pay and/or cause GY to continue paying him his monthly salary of $100,000 and to redeem the mortgage of the Property.  It is pleaded in the Re-Amended Statement of Claim that the said conditions were verbally agreed by Mr Sze in his own capacity and/or on behalf of the 3 children and/or accepted by the 3 children by conduct that they raised no objections when Mr Sze verbally agreed the said conditions in their presence[5]. This is referred to as the 1^st Agreement.

36.  As pleaded by Mr Hui, Mr Sze and the 3 children were still not content with the second transfer. After the transfer of the 4,860,000 shares to the 3 children, Mr Sze in his own capacity and/or on behalf of the 3 children administered coercions upon Mr Hui compelling him to transfer his remaining 2,000,000 shares in GY to the family such that no shares of GY could be transferred to or vested in Madam Lam in the future.  Mr Sze coerced Mr Hui by saying that if Mr Hui did not transfer his remaining shares in GY to the family, Mr Hui would not be paid with his salary[6]. Mr Hui then reluctantly acceded to their request and agreed to transfer his remaining shares to King Pui on the same conditions as agreed by Mr Sze and the 3 children in the 1^st Agreement.  This is referred to as the 2^nd Agreement.

37.  It is Mr Hui’s case that, pursuant to the 1^st and 2^nd Agreements, Mr Hui was paid the $100,000 salary monthly up to May 2011, although the mortgage of the Property had not yet been redeemed then.  In or about June or July 2011, Mr Sze and Michael informed Mr Hui that there would be a reduction of his salary.  Mr Hui objected to the reduction but in the end he agreed to reduce his salary to $60,000 per month on the condition that the mortgage will be redeemed forthwith.  This is referred to as the 3^rd Agreement and it is pleaded that the agreement was agreed verbally by Mr Sze acting in his own capacity and/or acting on behalf of the 3 children[7].

38.  Mr Hui’s case is that, despite him pressing on with the promised redemption of the mortgage, Mr Sze and the 3 children did not carry out their obligation under the agreements to do so.  Instead, Mr Sze and Lily requested Mr Hui to transfer the ownerships of the 3 AIA funds to the 3 children. Upon the refusal of Mr Hui to their request, Mr Sze threatened Mr Hui that he would sue him for an alleged $3 million loan owed to him by the Mother.  Mr Hui did not succumb to that as he knew well that the Mother did not owe any money to Mr Sze.  On the contrary, Mr Hui assigned the ownerships of the AIA funds to Madam Lam.

39.  On or about 24 August 2011, Mr Chung informed Mr Hui that Mr Sze and the 3 children refused to proceed with the redemption.  No salary was paid to Mr Hui since August 2011.  It is pleaded that the Defendants were therefore in breach of the 1^st, 2^nd and/or 3^rd Agreements as they failed to redeem the mortgage of the Property and failed to pay $60,000 monthly or any salary or remuneration to Mr Hui, and Mr Hui is entitled to claim for specific performance of the 3^rd Agreement and a declaration that Lily holds 10% of the shares in GY on trust for King Pui (or alternatively specific performance of the 2^nd or 1^st Agreement in case the 3^rd and/or the 2^nd Agreement failed for the said coercion or for no consideration or for whatever reason as upheld by this Honourable Court) and/or claim damages in lieu of or in addition to specific performance against the Defendants[8].

40.  As can be seen from the above pleaded case of Mr Hui, 3 different agreements has been pleaded in respect of Mr Hui’s transfer of his shares to the 3 children.  The 3 agreements involve similar considerations given from Mr Sze and the 3 children but it is not clearly pleaded whether Mr Hui treated them as 3 isolated agreements or one superseding the other.  Coercion is pleaded for the last 2 agreements but Mr Hui is not seeking to rescind the same. 

41.  As submitted by Mr Wong, counsel for the Defendants, the case of Mr Hui is in a confused state. 

42.  The primary case of Mr Hui is to enforce the 3^rd Agreement but it seems that the so called 3^rd Agreement is but a concession made on the part of Mr Hui in return for Mr Sze and the 3 children to perform their obligation already existed under the 1^st and 2^nd Agreements. 

43.  As his alternative case, Mr Hui seeks to enforce the 1^st or 2^nd Agreement in case the court finds the 3^rd and/or 2^nd Agreement failed for coercion or no consideration or any other reasons. However, as mentioned above Mr Hui did not seek to rescind the agreements or even particularize in what way the agreements will be found by the court to “fail”. This “cover all” approach is obviously an attempt by Mr Hui to avoid pinning down his case which is by no means helpful and usurping the very purpose of pleadings. 

44.  Mr Wong also criticized Mr Hui’s case as imprecise, vague and lack of particulars.  The criticism is not without force. 

45.  In Mr Hui’s evidence, the factual basis of the 1^st Agreement built around an alleged meeting at the office of Mr Sze in March 2009 where Mr Sze, Linda, Lily and Michael were all present.  According to Mr Hui, Mr Sze was the only person speaking to him in the meeting but he could not remember what exactly he said apart from saying “you must transfer, the children are filial”.  However, he maintained that Mr Sze orally promised him that GY would continue pay him his salary.  The children were all silent throughout the meeting.

46.  With such limited factual basis, in my view, it would be too vague and general to infer any concluded contract with sufficiently certain terms binding all parties in the meeting. 

47.  The 2^nd Agreement was even more lacking in particulars.  According to Mr Hui, there was a threat given by Mr Sze not to pay him the salary and then Mr Hui subsequently agreed to the transfer.  Afterwards, in a meeting of unspecified date, Mr Hui picked Lily to be the trustee holding the 3^rd transfer of 2,000,000 shares for King Pui.  Again, this can hardly be sufficient to infer a contract with definite term.

48.  The 3^rd Agreement, as mentioned above, was but a mere concession on the part of Mr Hui for a past consideration given by Mr Sze and the 3 children.

49.  In my view, the case of Mr Hui in relation to the 3 alleged agreements has been so poorly framed that it would be difficult for him to rely on those to sue Mr Sze and the 3 children.

50.  But more importantly, the case of Mr Hui is inherently improbable. 

51.  Firstly, the 1^st transfer was a gift by Mr Hui to the 3 children.  The purpose behind the transfer was obviously a move to let the children to succeed his shares in GY.  At that point of time the relationship among family members was amicable.  It would be most unusual that Mr Hui would only be willing to continue transferring other shares to the children upon the promise of Mr Sze and the 3 children to pay him his salary.  Besides, GY was legally obliged to redeem the mortgage of the Property upon request of Mr Hui.  It would be totally unnecessary for Mr Hui to make it a condition for his further transfer of shares. 

52.  Secondly, Mr Hui was all along the major shareholder and founder of GY.  He was the person in charge.  However, Mr Hui’s case was pleaded in such a way that the whole transferring exercise, including the 1^st, 2^nd and 3^rd transfer, was initiated and requested by Mr Sze, as if he was a party under manipulation.  This is unconvincing.

53.  Thirdly, Mr Hui did not specify how long GY or Mr Sze or the 3 children were obliged to pay him his salary under the agreement.  If there was a serious agreement between the parties as to any payment to Mr Hui, it would be improbable that no definite terms of such payment were mentioned.

54.  Fourthly, Mr Chung was the solicitor help doing the formalities of the transfers and he was never aware of any of the alleged agreements and he was not informed of the fact that Lily only holds the shares as trustee for King Pui.

55.  Last but not least, if it was agreed that someone has to hold the shares as trustee for King Pui, there would be no reason why Lily was chosen but not Henry, who is the father of King Pui.

56.  The case of Mr Sze and the 3 children is that the payment of salary to Mr Hui was unrelated to the transfer of the shares.  I find this a more probable version of facts.  I believe that at the time of the transfers Mr Hui was planning to retire from the operation of GY and the payment to Mr Hui, be it $100,000 or $60,000, was a form of gratuity given by the family to Mr Hui in support of his livings, which is not a term of any agreement as alleged by Mr Hui.

57.  I would not rule out the fact that Mr Hui has an expectation that he would be provided with a reasonable amount of money continuously to support his livings for the rest of his life after his transfer of all his assets to the children.  However, Mr Hui’s case was not framed along this line and the other form of causes of action like proprietary estoppel was not relied on by Mr Hui.  Having failed to prove the agreements as pleaded the claim of Mr Hui under this head must also fail.

Assignment of the Workshop

58.  The Workshop was originally owned by Mr Hui and Mr Sze together with Mr Hui holding 80% of the ownership and Mr Sze the remaining 20%.  By a Deed of Assignment dated 7 December 2009, all the interest of the Workshop was assigned to GV in a consideration of $3.5 million.  It is common ground that there was no actual money transfer from GV to Mr Hui or Mr Sze.

59.  At all material times, the Workshop has been occupied by GY for use.  Mr Hui used to receiving a rent from GY of $16,000 per month before the transfer and the same amount has been paid to Mr Hui even after the transfer of ownership of the Workshop to GV until August 2011.

60.  Mr Hui’s case is that he has no knowledge about the transfer of ownership until after August 2011. He was misrepresented by Mr Sze and Michael that the Deed of Assignment was a Mortgage of the Workshop. 

61.  In his witness statement, Mr Hui said Mr Sze told him in about November or December 2009 that GV needed financing and hence the Workshops were required to be mortgaged to the bank as security for banking facilities and such security is necessary for GV to apply for a licence in Mainland China.  Several days later Mr Hui went together with Mr Sze and Michael to Mr Chung’s solicitors firm[9] to execute the mortgage documents.  At the solicitors’ office Mr Hui was brought into a room by someone he has never met before and there he was asked to sign on some English documents.  Mr Hui was illiterate in English but nobody explained to him the contents of the documents before he was asked to sign.

62.  On the other hand, Mr. Sze denied having made such representations. His evidence was that the sale of the Workshop was just another step in the passing on of the assets to the next generation.

63.  In my view, Mr Sze’s version is obviously a more probable one. 

64.  At the time of the assignment of the Workshop, the relationship among the family members was still good.  The value of the Workshop was not particularly considerable when compared to the wealth of the family.  There was no sufficient reason to cause Mr Sze and Michael to design a scheme to deceive Mr Hui for the Workshop.

65.  Besides, Mr Chung testified that he was present when the Deed of Assignment of the Workshop was explained to Mr Hui by a law clerk of his firm.  The signatures of Mr Chung and the said law clerk appeared on all the legal documents.  Mr Hui’s evidence that Mr Chung was not there and nobody explained to him the contents of the legal documents is utterly unconvincing.

66.  Moreover, Mr Hui has been an experienced businessman and should be very familiar with the family business.  A lie that GV needs a security for its credit facilities to obtain a licence would be too unsophisticated to deceive Mr Hui.

67.  Although GY continued to pay Mr Hui the monthly $16,000, I find it more likely that the money was just another form of the gratuities paid by the family to Mr Hui for his livings rather than rent generated by the Workshop.

68.  On this point, I do not accept Mr Sze and the 3 children’s evidence that the $16,000 was salary received by Mr Hui as GV has at that time no business activities apart from holding the Workshops.  Although the tax return filed by GV showed that Mr Hui was an employee of GV earning similar income, I am of the view that the information on the tax return was false only with a view to misleading the Inland Revenue Department. 

69.  Having said that however, I find as a fact that Mr Sze or Michael did not make any misrepresentation to Mr Hui as alleged.  I find also that Mr Hui knew full well that the transaction was actually an assignment of the legal title of the Workshop to GV.

70.  Regarding the alleged undervalue of the purported sale of the Workshop, I find the consideration of $3.5 million within the then market value of the Workshop.  In any event, whether the purchase price was sold at an under value is in my view irrelevant as the parties’ real intention at that time was just to pass the Workshop to the children.  The purchase price of the transaction would not affect Mr Hui’s mind to effect the transfer of his interest in the Workshop.

The jewelry items

71.  It is provided under the Family Deed, inter alia, the followings:

(1) The said Hui Lai Ngar, Hui Lai Lai, Hui Man Sing and Hui Man Lung hereby jointly and severally renounce and release all their respective right, title, interest and claim of and in the Property to the intent that the estate right title and interest of and in the Property shall be vested in the said Hui Yau Ping absolutely.

(2) The said Hui Lai Ngar, Hui Lai Lai, Hui Man Sing and Hui Man Lung hereby jointly and severally discharge and release the Administrator from the further administration of the estate of the deceased and each of them also release the Administrator from all claims actions suits proceedings costs and expenses arising out of the administration of the estate of the deceased.

(3) The parties hereto hereby agree to execute all and any acts assurances assignment or other deeds or instruments necessary to carry into effect of the provisions of this Deed.

72.  Apart from saying that the jewellery items had already been given to Lily and Michael, Mr Hui also relied on the Family Deed as a defence to the 3 children’s claim for the jewelry items.  It is Mr Hui’s case that the 3 children are estopped from asserting any rights upon any un-distributed estate of the mother upon execution of the Family Deed.

73.  In respect of the jewelry items, Mr Hui is sued for breach of duty as Administrator of the Mother’s estate and an order is sought by the 3 children to compel Mr Hui to account and distribute the assets of the Mother’s estate as Administrator.  In my view, as Mr Hui is sued only in his capacity as Administrator, the Family Deed is sufficient to release Mr Hui’s liability vis-a-vis the 3 children.

74.  The 3 children contended that the intention of the Family Deed was only to cover the Property and Mr Hui agreed before execution of the Family Deed that he would distribute the jewellery items after 3 years from the Mother’s death.

75.  Although the Property was specifically mentioned in paragraph 1 of the Family deed, the effect of which is not to release Mr Hui’s liability to administer the Property but to renounce the 3 children’s rights in the Property.  What was stated under paragraph 2 of the Family Deed was unambiguously a general release of Mr Hui’s duty as Administrator and in no way can it be understood as referring to the distribution of the Property alone.  The Family Deed was executed with the advice of Mr Chung as solicitor.  Any suggestion that the content in it does not represent the real intention of the parties must fail. 

76.  Even if Mr Hui did agree to distribute the jewelry items before the execution of the Family Deed and did not do so, the 3 children would no longer be entitled to compel Mr Hui to fulfill his duty as Administrator upon the execution of the Family Deed.

77.  In any event, as a matter of fact I find that Mr Hui has already given the subject jewelry items to Lily and Michael.

78.  It is common ground that the jewelry items had been taken out from the Mother’s safe deposit box on 20^th April 2009.  Mr Hui’s evidence is that he handed the jewelry items to Lily and Michael upon cancelling the Mother’s safe deposit box.  They went back to the bank the next day and Lily and Michael opened another safe box in their names where they put in the jewelry items.

79.  Henry gave evidence in support of Mr Hui’s version that the jewelry items had been given to Michael.  His evidence was that it was at that time a common knowledge among the family and relatives that Michael was in possession of the jewelry items. In the telephone conversation between Henry and Lily on about 9^th July 2012， Henry asked Lily the whereabouts of the jewellery items.  Lily appeared to be surprised as to why Henry asked about that as it should be common knowledge that they were kept in the safe deposit box she opened with Michael.  Lily confirmed over the phone that Michael was in possession of the key of the safe deposit box containing the jewelry items and Mr Sze was made known to it by Lily.  Although both Henry and Lily did not expressly mention the word “jewellery” in their telephone conversation, they used the description of “no-name” which was understood to represent the jewelry items the owners of which were not designated by the Mother.  Besides, if the jewelry items were not kept by Lily and Michael but Mr Hui, Lily would have simply made clear to Henry that those jewelry items had never been handed to them. 

The debt of the Mother to Mr Sze

80.  In Mr Hui’s affirmation[10] in support of his application for the grant of administration of the Mother’s estate, a loan of HK$3 million owed to Mr Sze by the Mother’s estate appeared on the assets and liabilities list in the schedule thereof.  However, in his written witness statement, Mr Hui said that he came to know about the $3 million loan only when the dispute between the parties arose.

81.  Mr Chung testified that he was the solicitor for Mr Hui in the application for grant and his firm prepared the schedule with instructions given from Linda.  He also testified that a staff member of his firm, a Mr Wu, had explained and interpreted the schedule to Mr Hui before he signed the affirmation before a solicitor of another firm.

82.  It is common ground that this $3 million has never been paid out from the Mother’s estate to Mr Sze.  Mr Wong submitted that Mr Hui, as the administrator of the Mother’s estate, has the duty in law to pay a creditor, or any creditor, from the estate.

83.  I have no hesitation in rejecting Mr Hui’s evidence that he learnt about the loan only when the dispute between the parties arose.  The liabilities and assets of the estate were essential information for Mr Hui to discharge his duty as Administrator of the Mother’s estate.  It is incredible that a $3 million loan on the list can escape the notice of Mr Hui when he made the affirmation.

84.  At the time of his application for the grant of administration of the Mother’s estate, the family was still in a harmonious situation and nobody would contemplate any litigation on the Mother’s estate.  There was no reason why Linda would give false information to Mr Chung when preparing the list of liabilities and assets of the Mother’s estate. 

85.  The pleaded case of Mr Sze is that the $3 million was a loan he lent to the Mother and in his witness statement he said he lent money to the Mother for various reasons without interest or security over the years.  However, in his oral testimony in court, Mr Sze gave a totally different version as to how the debt of $3 million has come about.  He explained that the money was in fact “waste material fees” that he and the Mother received in cash from their business in Mainland China over the years.  He said since 2007 the tax policy in Mainland China changed and they could no longer receive the said waste material fees but the balance in 2007 was about $7 million and the same was kept in the Mother’s safe at home.  Throughout the years they would take cash from the said balance of waste material fees and each time they would record down how much they withdrew from the safe in a book and the remaining balance in respect of which each party should be entitled to share in equal basis.  On a day before the Mother’s admission to the hospital，Mr Sze had a look at that book and the balance stated therein was HK$7.08 million and therefore each of them should be entitled to HK$3,540,000.  After deducting the $540,000 received from the Mother on the same day the Mother still owed him $3 million.

86.  Although there was no good reason given by Mr Sze as to why he gave two factual versions before the court, on balance I tend to believe that the $3 million was in fact “waste material fees” kept by the Mother. 

87.  As submitted by Mr Chiu, counsel for the Defendants, this is a claim against the estate of a deceased person and the Court should approach such claim with some suspicion[11]. However, there is no other reason to explain why Mr Hui would allow the $3 million loan to be on the list apart from a debt of equal amount really exists between the Mother and Mr Sze.  The evidence from Mr Sze is the only reasonable explanation to this debt.

88.  I would conclude that the Mother did owe Mr Sze the amount of $3 million before her death and Mr Sze is entitled to ask Mr Hui as the Administrator of the Mother’s estate to account for such debt.

The AIA funds

89.  The 3 AIA funds were subscribed respectively in May 2008, June 2008 and November 2009.  At the time of the subscriptions, the 3 children and Henry were named as the beneficiaries of the 1^st and 2^nd AIA funds with the following proportion of interest:  Linda 50%, Lily 10%, Michael and Henry each 20%.  As for the 3^rd AIA fund, Lily was named as the sole beneficiary.  Mr Hui was named as the Owner and Life Insured for all the 3 AIA funds.

90.  It is the Defendant’s pleaded case that Linda provided directly or indirectly all the premiums of the 3 AIA funds during the period between May 2008 and November 2010, with a total amount of HK$2,614,448 for the 1^st AIA fund, HK$41,844.03 for the 2^nd AIA fund and HK$2,019,238 for the 3^rd AIA fund.

91.  On the other hand, Mr Hui’s case is that the premiums were paid with GY’s money.  However, Mr Hui did not give any particulars of the payment in his evidence.

92.  As pleaded under paragraphs 22 to 25 of the Re-Amended Defence and Counterclaim, Linda alleged that there was an agreement between Mr Hui and her that:

(i) Mr Hui be named as the Owner and Life Insured;

(ii) The 3 children and Henry be named as the beneficiaries in the said proportions;

(iii) Linda shall provide directly or indirectly all the premiums;

(iv) Mr Hui shall hold the AIA funds on trust for Linda;

(v) Mr Hui shall have no beneficial interest in the AIA funds; and

(vi) Mr Hui shall have no authority to deal with the AIA funds without prior consent of Linda.

93.  It is pleaded that Mr Hui was named as the Life Insured as this arrangement would have obtained a favourable rate of premium because of his age and occupation.

94.  The mode of payment of the premiums for the AIA funds was rather unusual.  In Linda’s evidence, the payments were made by cheques and cashier orders in various amounts to AIA.  On a number of occasions Linda took cash to different relatives and asked them to issue a cheque or procure a cashier order from a bank in equal sums for payment.  The explanation given by Linda for not paying the amount in one lump sum is that that would attract a handling charge.  There is no explanation given by Linda as to why it is necessary to take cash to her relatives in return for a cheque or cashier order.

95.  It was stated in Linda’s witness statement that, in May 2008, Mr Sze’s daughter (“Maggie”) became an insurance broker.  As it was her first job after she returned to Hong Kong, Linda and her siblings would like to subscribe to investment insurance in order to help Maggie.  Together with Mr Sze, they subscribed the 1^st and 2^nd AIA funds through Maggie in May and June 2008.  In November 2009, as she gained some profits from the insurance investments, Linda subscribed to the 3^rd AIA funds through Maggie.

96.  As oppose to her pleaded case that the AIA funds were invested by her alone, it was stated in Linda’s witness statement that Mr Sze has provided over $2 million, Lily $660,000, Michael over $1 million and she herself over $690,000 for payment of the premiums of the 3 AIA funds.  It was also stated that the children were all beneficiaries of the funds and Linda and Lily were nominated beneficiaries holding the interest of Mr Sze in the funds.  

97.  In the course of paying the premiums of the funds to AIA, Linda had arranged her relatives and friends including her husband, the elder brother of Mr Sze’s wife, Madam Lam, Maggie, Maggie’s boyfriend, one Mr Leung and one Ms Chan to either issue cheques or procure cashier orders to pay for the premiums in the manner as mentioned under paragraph 89 above.

98.  I find Linda’s version unconvincing.  If the AIA funds were genuine joint investments by Mr Sze and the children, there should be no reason why Mr Sze was not named as a beneficiary in all the AIA funds and only Lily was named as the beneficiary in the 3^rd AIA fund.  In addition, Henry did not contribute to the premiums and should be not entitled to be named as a beneficiary.  

99.  Although Mr Sze said in cross-examination that he had paid for Henry’s share as Henry was impecunious, this has never been pleaded in the Defendant’s case and has not been put to Henry in his evidence.  I reject it as a recent fabrication by Mr Sze.

100.  As I mentioned before GY is a family business and Mr Sze and the 3 children all worked for GY. GY provided the major income to the family members and most of the daily expenses of the family members were paid through the account of GY, for example, the purchase of motor vehicles and horses.  This arrangement is understandable as there may be tax considerations.  It would not be surprising that the family would use GY’s money to subscribe for insurance investments for the benefit of the family.

101.  The premiums of the 3 AIA funds were paid by cash the source of which was in my view questionable. Although Mr Sze and the 3 children tried to explain the sources of their cash allegedly kept at home, I do not find their explanations reasonable.

102.  On the contrary, I find it is more likely than not that the cash from Linda for payment of the premiums was in fact GY’s money kept in the hands of Linda and/or different family members.  In my view, it is possible that a substantial part of the profits of GY which should be taxable was somehow transformed to cash in hands of Mr Sze and the 3 children for avoidance of tax.  It also explains why Linda needed to ask people to issue cheques and procure cashier orders in order to prevent AIA from being cautious about possible money laundering exercise if a large amount of cash were to be deposited to the AIA account at the same time.

103.  I am not satisfied that Mr Hui was holding the AIA funds on trust for Linda.

Conclusion

104.  For the above reasons, Mr Hui’s claims against the Defendants should be dismissed.

105.  The 3 children’s counterclaim against Mr Hui to compel him to account and distribute the assets of the Mother’s estate should be dismissed.

106.  Linda’s claim against Mr Hui and Madam Lam in respect of the AIA funds should be dismissed.

107.  Mr Sze should succeed in his claim against Mr Hui as Administrator of the Mother’s estate.

108.  I order that Mr Hui as Administrator of the Mother’s estate do pay Mr Sze the amount of HK$3,000,000 and interest thereon at 4% per annum from the date of the Counterclaim until the date of this judgment and at 8% per annum thereafter until full payment.

109.  I make costs order nisi that all parties are to bear their own costs except that half the costs of Mr Sze in the counterclaim shall be borne by Mr Hui.

110.  Unless otherwise directed, this costs order nisi shall become absolute after 14 days from the date of this judgment.

111.  It remains for me to thank counsel for their assistance.