LAI KIT BICK JOANA v. TO YUI HUNG

HCA248/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.248 OF 2003

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 J U D G M E N T

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Introduction

1. This action was originally commenced by To Sum (“the Father”) against his son To Yui Hung (“the defendant”) for damages for breach of fiduciary duties and for an account.  The Father passed away on 23 May this year.

2. The Father made his last will on 28 November 2003.  In that will, he appointed his widow, Madam Lai Kit Bick, and another one of his sons, To Yui Kuen, as executors and trustees.  There was no specific legacy under this will, and all the residuary estate was to be divided into six equal shares, one to Madam Lai, one to each of his three surviving sons (including the defendant and To Yui Kuen), one share to the children of his deceased son To Yui Keung, and one to his grandson by To Yui Kuen.

3. Since the granting of an order in June, this action has been carried on by Madam Lai and To Yui Kuen as personal representatives of the Father’s estate.

The facts

4. Unless otherwise indicated, the matters I narrate in this section are not in dispute and I find them proved.

5. The Father was born in 1922.  He received primary education in mainland China and came to Hong Kong in the thirties.  His first wife was Madam Leung Lin.  They had seven children (four sons and three daughters).  In order of seniority, they are :

(1)     To Yui Ying (son);

(2)     the defendant (son);

(3)     To Yin King (daughter);

(4)     To Yui Keung (son, deceased);

(5)     To Yui Kuen (son);

(6)     To Yin Wah (daughter); and

(7)     To Yin Yee (daughter).

6. Madam Leung died in the 1960s.  In June 1969, the Father married Madam Lai.  There were no children from this marriage.  It is common ground that the relationship between Madam Lai and the children was bad.

7. During his lifetime, the Father ran a successful business manufacturing rubber shoes.  The business was run initially as a sole proprietorship under the name of Wah Shing and later incorporated in the name of To’s Wah Shing Rubber Factory Limited (“To’s Wah Shing”).  He also invested in real estate.  He had a half share in a property investment company called Sun Shing Property Limited.  Before the events complained of, the Father held over 13 pieces of landed properties including shops, residential flats and industrial units registered under his name.  These are set out below.  In the course of this judgment, I shall refer to these properties by their respective number :

(1)     Flat 24B, Tien Mansion, Horizon Gardens, No.18C Taikoo Shing Road, Hong Kong.

(2)     Ground Floor, No.270 Tai Nam Street, Hong Kong.

(3)     Ground Floor, No.392 Castle Peak Road, Kowloon, Hong Kong.

(4)     Ground Floor and Cockloft, No.110 Bedford Road, Kowloon, Hong Kong.

(5)     Flat J, Ground Floor, Hoi Kwok Building, Nos.44-54 Li Tak Street, No.20 Kok Cheung Street, Kowloon, Hong Kong.

(6)     Flat F, Ground Floor, Hoi Kwok Building, Nos.44-54 Li Tak Street, No.20 Kok Cheung Street, Kowloon, Hong Kong.

(7)     Flat C, Ground Floor, Hoi Kwok Building, Nos.44-54 Li Tak Street, No.20 Kok Cheung Street, Kowloon, Hong Kong.

(8)     Flat B, 20^th Floor, Sun Ming Building, No.488 Shanghai Street, Kowloon, Hong Kong.

(9)     Unit 3, 4^th Floor including corresponding part of Flat Roof, Sun Fung Industrial Building, Nos.8-12 Ma Kok Street, Tsuen Wan, New Territories, Hong Kong.

(10)    Flat B, 9^th Floor, No.25 Broadway, Mei Foo Sun Chuen, Kowloon, Hong Kong.

(11)    Car Park No.204, Mei Foo Sun Chuen, Stage II, Kowloon.

(12)    Flat B, 15^th Floor, Kam Ming Yuen, No.11 Kam Ping Street, North Point Hong Kong (in the name of the Father and Madam Lai as joint tenants).

(13)    Flat 11A, Block 9, Hong Kong Gold Coast Phase 2A, No.1 Castle Peak Road, Tuen Mun, New Territories, Hong Kong.

8. Property no.13 was used as the Father’s residence for a period of time.  The other properties were let out for rental income.  He held 2,900 out of a total of 5,000 issued shares in To’s Wah Shing.

9. Each of the four sons had assisted in the business.  The eldest, To Yui Ying, worked for a few years but later joined, and remained in, the civil service.  The defendant joined some time in the late 1960s and, apart from a spell of two to three years, had all along been involved in the business.  To Yui Keung and To Yui Kuen started working about the same time.  To Yui Kuen continued working in the business for some 35 years until he emigrated to the United States of America in 1996.

10. The Father did not know English.  During his lifetime, he had always instructed the firm Messrs W.I. Cheung to handle his legal affairs.

11. The Father had a stroke in 1996 and a much more serious one in April 1997.  Before his stroke in 1996, he was living with Madam Lai in Property no.13.  It was a flat with over 1,000 sq. ft in a pleasant setting.  It is not in dispute that after his stroke in 1996, the Father asked the defendant to collect rent on his behalf.  The defendant did so and deposited all the rental received into the Father’s bank account.

12. It is also common ground that when the Father was hospitalised after his stroke in April 1997, he authorised the defendant not only to collect rent as before, but to retain the rent received for the purpose of paying his medical and living expenses.  According to Madam Lai, this came about because of a quarrel between her and the Father.  On the day of admission to the hospital, the Father told Madam Lai to pay a deposit of $5,000 out of the money he had previously given to her to cover his medical expenses.  She had, however, used the money to pay the domestic helper and other expenses.  The Father was annoyed because she did not heed his words.  Madam Lai’s evidence on this aspect is not challenged and is corroborated by the witness statement of the Father.  I accept this evidence.

13. In September 1997, when the Father was discharged from hospital, the defendant moved him to a rented apartment in Belvedere Garden in Tsuen Wan, at one floor above his own residence.  The defendant employed two care attendants to look after the Father.  It is not in dispute that Madam Lai remained at Property no.13 and that it was during this time that the defendant and one of his sisters, To Yui King, went to Property no.13 and took away a safe which belonged to the Father.  The safe contained, amongst other things, the title deeds of the various landed properties held under the Father’s name.  There is some dispute over certain events in this period, but there is no dispute that the Father gave the combination number of the safe to the defendant to enable him to retrieve the contents of the safe.

14. The Father suffered another stroke in mid December 1997.  He was admitted to hospital on 15 December 1997 and was only discharged from hospital on 26 January 1998.  After his discharge, he was again put in the Belvedere Garden flat, but in September 1998, the Father moved to a rented apartment in Mei Foo Sun Chuen together with Madam Lai.  This was a 500 sq. ft apartment with two bedrooms.  In May 2003, the couple moved to a flat of similar size in a more modern development in Tseung Kwan O where they stayed until October 2003.  They moved to a flat of only 300 sq. ft in Sham Shui Po.  It was originally claimed by the plaintiffs that the flat was a rented one, but it transpired during cross-examination of Madam Lai that in fact the flat was owned by her niece and they only had to pay outgoings.  The Father passed away on 23 May 2004.  The Provisional Schedule of Property listed a net provisional principal value of estate to be $23,294.37 (other than the claim for damages in the present action).

15. The evidence shows that the defendant did, over a period of time, pay for various expenses on behalf of the Father.  The defendant claimed to have spent a total sum of $12,703,817.22 as itemised in a table with supporting documents filling eight lever-arch files.  The plaintiffs accepted that some of these expenses were legitimately incurred on behalf of the Father, but disputed others.  For reasons which will become apparent, it is unnecessary to go into details.  What should be mentioned is that the evidence shows, and it is not disputed, that in the last year or so before his death, the Father had been drawing a monthly allowance from the defendant, and had been periodically producing receipts to the defendant to obtain reimbursement of expenses.  The defendant suspended payment of the monthly allowance in about September 2003 (although Madam Lai accepted in cross-examination that there was some further payments made in January to March 2004).  On one occasion in October 2003, the defendant asked the Father to meet with him.  It is not in dispute that at that meeting, the defendant asked the Father to sign on a document to signify his agreement to withdraw the action.  The Father refused to sign.  On the same occasion, the Father had asked the nurse who accompanied him to present some bills to the defendant for reimbursement, but the defendant declined.  Prior to his death, the Father was drawing on disability allowances of $2,200.00 per month.

Property dispositions

16. Documentary evidence shows that significant dispositions of the Father’s assets were made after he suffered his stroke in April 1997.  These include the following :

(1)     By instruments of transfer, bought and sold notes and purchase and sale agreements all dated 21 May 1997, 2,900 shares in To’s Wah Shing registered in the name of Father were transferred as follows : 500 shares to To Yui Keung, 1,450 shares to To Yui Ying and 950 shares to the defendant, each at a stated consideration of $100 per share.  There is no evidence that the Father received the proceeds.

(2)     In August 1997, the defendant executed as attorney on behalf of the Father (purportedly under a general Power of Attorney dated 1 May 1997) four legal charges over Property nos.1, 3, 10, 13 in favour of a finance company called Cityline Finance Limited for a loan of HK$12 million; the proceeds of the loan in two sums of about HK$6 million each were first deposited into the Father’s bank account, but were almost immediately remitted by telegraphic transfer to a company called MBIFC(J) Limited with an address in Channel Island.

(3)     In October 1997, agreements of sale and purchase in respect of Properties nos.6, 7, 8 and 9 were apparently entered into by the Father as vendor and four companies as purchasers of each of these properties.  These four companies are Southern Cheers Far East Ltd, Goldart Far East Ltd, Wally International Industrial Ltd and Honour Keen Ltd (I shall refer to these four companies as “the four companies”).  The shareholding of each of these four companies is identical : namely, the defendant holding 1,800 shares, To Yui Ying holding 1,800 shares, To Yui Keung holding 500 shares and each of the three daughters (To Yin King, To Yin Wah and To Yin Yee) holding 300 shares, out of a total of 5,000 shares.  To Yui Kuen had no share.

(4)     The deposit paid in respect of the sale of these four properties amounted to HK$860,000.00.  On 27 October 1997, this sum was deposited into the Father’s bank account with Hongkong and Shanghai Banking Corporation (“HSBC”) but the same amount was withdrawn on the same day for a telegraphic transfer to MBIFC(J) Limited.  The transactions appear to be financed by four mortgages in favour of Cityline Finance Limited, all dated 20 December 1997.  The assignments of these properties to the four companies were also dated 20 December 1997 and the balance of the purchase price less charges amounting to $7,706,900.00 was deposited into the Father’s HSBC account on 22 December 1997 but a sum of $7,700,000.00 was transferred out of that account on the next day and remitted by telegraphic transfer to MBIFC(J) Limited.

(5)     Eight other properties (nos.1-5 and 10, 11 and 13) were the subject of separate sale and purchase agreements and assignments, all dated the same date, viz. 31 December 1997 and purportedly sold to the four companies at considerations amounting to HK$49,200,000.00.  The defendant signed and issued eight cheques on behalf of the four companies for the stated consideration for these purported purchases and assignments less the costs and disbursements for the transactions.  The court was provided with copies of the cheques with an endorsement signed by the Father, stating that he acknowledged receipt of the same.  I should note that the defendant claimed when giving evidence that he had arranged for finance to satisfy the payment for these eight properties but this assertion is contradicted by the statements of the bank accounts of the four companies which the defendant produced to the court after he finished giving his evidence.  In short, the documentary evidence shows that the purchase money for the disposal of these eight properties was not paid to the Father.  There was in fact no or insufficient funds in each of the accounts of the four companies to support the eight cheques drawn respectively on those accounts.

17. Properties nos.1, 2, 3, 4, 8, 10 and 11 had since been further assigned by each of the four companies to third parties at considerations substantially below those which the four companies purportedly acquired the same.  Properties nos.5, 6, 7 and 9 were the subject of legal charges.  All these assignments and legal charges were arranged for by the defendant.

MBIFC(J) Limited

18. As noted above, various sums had been transferred out of the Father’s bank account by telegraphic transfer to a company called MBIFC(J) Limited.  The address of this “beneficiary” was stated as “PO Box 615, 28/34 Hill Street St Helier, Jersey JE4, 5YD, Channel Islands”.  The documents show there were a total of seven remittances totalling HK$20,887,328.00 as follows :

Date	Amount
	$
27 September 1997	130,000.00
27 September 1997	130,000.00
7 October 1997	6,000,000.00
9 October 1997	6,000,000.00
27 October 1997	8,600,000.00
23 December 1997	7,700,000.00
20 January 1998	67,328.00

19. The remittance instructions appear to be signed by the Father.  They were given to HSBC with instructions to remit to an account no.567-896964-001.  The plaintiffs issued a subpoena on the HSBC to find out who opened this account and information about the state of this account.  A Mr Choi Gin attended on behalf of the bank in answer to this subpoena.  It appears from his evidence that the account was opened in the name of Midland Bank Trust Corp. (Jersey) Ltd which later changed its name to Midland Bank Offshore Limited and yet again to HSBC Bank International Limited.  This was only an intermediary bank to whom the funds were remitted.  The remittance instruction named MBIFC(J) Limited as the beneficiary with a customer number of 020-759965-360.  Mr Choi was unable to assist as to who was behind this account or the company.  What is noteworthy is that the customer name was stated in all except one of the remittance instructions as “SUM TO”, but was stated in the first of the series dated 27 September 1997 as “WING ON WONG &/or SUM TO”.  Wong Wing On is the husband of To Yin Wah.  Furthermore, each of these remittance instructions gave an address and telephone number for the applicant for the bank to contact in case of need.  The address given was that of the Father when he was residing at Belvedere Garden, but the telephone number was that of the defendant.

The issue

20. In the Statement of Claim, the plaintiffs claimed :

(1)     damages for breach of fiduciary duties pleaded in paragraphs 7 and 8 of the Re-amended Statement of Claim; and

(2)     an account of “all acts done by the defendant in respect of all the assets and documents belonging to the (Father) and an order to deliver the same to the plaintiffs upon the taking of such account”.

21. When this trial began, the plaintiffs claimed for relief in respect of the following assets :

(1)     the disposition and mortgages of 12 of the 13 properties (namely all the properties except Property no.12);

(2)     the rental proceeds the defendant collected on behalf of the Father;

(3)     the funds in two bank accounts of the Father with Shanghai Commercial Bank and in one bank account with the HSBC allegedly misappropriated by the defendant;

(4)     2,900 shares registered in the name of the Father in To’s Wah Shing.

22. However, during the course of the final speeches, Mr Shum for the plaintiffs informed the court that the plaintiffs would limit their claim to damages in respect of the alleged wrongful disposal of the properties in the sum of $57,800,000.00, i.e. the total of the stated consideration in the 12 purported purchases.  The plaintiffs no longer ask for an account or make any claim in respect of the transfer of shares in To’s Wah Shing, or the withdrawal of funds.  In these circumstances, since the defendant is not making any counterclaim against the Father’s estate and does not raise any defence of set-off, it is unnecessary for this court to determine the precise amount the defendant spent on behalf of the Father or according to his instructions.

23. In the event, the main issue which remains for this court to resolve is that joined in paragraph 8 of the Re-amended Statement of Claim and paragraph 16 of the Amended Defence.

24. Paragraph 8 pleads that in breach of his fiduciary duty, the defendant as trustee and/or agent of the Father has fraudulently arranged, caused or permitted various transactions to be carried out in respect of the Father’s assets and/or rights without any authorisation by the Father and without informing the Father, whenever he was asked to sign, the true nature of the documents.  What is being relied on is the Father’s entrustment of the title deeds to the defendant and the defendant’s use of the same to facilitate the disposition of the 12 properties.

25. Paragraph 16 of the Amended Defence pleads :

“Pursuant to the (Father’s) instructions, the Properties were successively sold and the Deceased signed and executed all conveyances himself and received all proceeds thereof through separate legal representation.”

The evidence relied on by the plaintiffs

26. The Father made two witness statements before he passed away, and also made an affirmation declaring that the contents of those statements were correct.  The plaintiffs called four witnesses at the trial : Madam Lai, To Yui Kuen (a solicitor), Miss Lee Mei Ling and the officer from HSBC, Mr Choi.

27. None of these witnesses has any first hand knowledge relevant to the main issue.  Madam Lai was able to testify only on peripheral matters.  I find her to be an unsophisticated witness.  She was obviously being less than frank when she told the court that she had paid for two assignments of a half interest in two properties (Property no.12 and another one not listed in the Re-amended Statement of Claim).  I have also made reference to the fact that her initial claim that the Sham Shui Po flat was rented was admitted to be incorrect.  Nevertheless, I believe that she was asked by the defendant to leave Property no.12 with a threat that if she did not do so, her belongings would be thrown away.

28. To Yui Kuen emigrated to the States in 1996.  He returned to Hong Kong in about June 1997 after he came to know that the Father had a stroke and was in hospital.  He said that he went to the hospital every day and never heard the Father mention anything about how his assets should be dealt with.  He heard once from the defendant that he (i.e. the defendant) would transfer all properties to corporate vehicles in order to avoid the payment of estate duty.  I find him to be a truthful and reliable witness.

29. Miss Lee testified as to the taking of instructions from the Father.  I accept her evidence without hesitation.  I have already summarised Mr Choi’s evidence.  His evidence is not disputed.

30. The Father’s statement amounts to a serious indictment of the defendant.  He claimed that during his stay in Belvedere Garden, the defendant brought some papers in English for his signature once or twice.  He claimed that the defendant did not explain the nature of the papers he was asked to sign and he simply trusted the defendant and thought he was just signing to settle all medical bills and expenses.  He also claimed to recall an occasion when the defendant visited him in St. Teresa’s Hospital in the afternoon.  The defendant introduced a solicitor to him, saying that the solicitor was present to attest the signing of certain papers.  The defendant then picked up some papers for his signature.  He said he signed on several sheets, one on each sheet, on the left or right bottom edge.  He said he was not told the nature or effect of the papers and the solicitor only pointed out to him where he should sign.  He did not query why he should sign since he trusted the defendant to pay the medical bills and even deal with funeral services.  According to the witness statement, this was repeated some 10 days later.  Again, he signed the papers presented to him, without knowing the true nature of the same.

31. According to the witness statement of the Father, he had asked the defendant to arrange a glorious and honourable funeral ceremony for him.  He also told him that in case of insufficient cash, the defendant might even sell off some of his properties.  He told him that important documents such as title deeds, tenancy agreements and share certificates were kept in his safe at home which was then in Gold Coast, Tuen Mun.  The Father passed the key of the safe to the defendant.  The defendant caused the safe to be removed from the Gold Coast flat and has kept it ever since.

32. The Father alleged in his statement that he only discovered some time in 1998 from Mr Kwan of the Shanghai Commercial Bank that all the money in his bank accounts were withdrawn and later learnt only after his solicitors did land searches that all the properties under his name had been assigned to the four companies.  He denied that he ever gave instructions to any one to sell or mortgage the properties.  He said he never executed any document or Power of Attorney to facilitate such property transactions.

33. The plaintiffs also say that the defendant failed to account for the rent he received on the Father’s behalf.  The complaint goes further.  In his second statement, the Father said this :

“I am unable to come to terms with my present situation.  I worked hard for my whole life for the benefit of myself and my family.  But now I cannot even lead a decent life of my own accord.  Instead, I have to look up to the defendant and ask him for my own money.  The more I think of my own predicament, the more I become unsettled and frustrated.  For several times, I was so frustrated that I panted and ran short of breadth.”

The evidence called by the defendant

34. The defendant gave evidence himself.  He called three other witnesses : To Yin King, To Yin Wah and a solicitor, Li Chi Man of Messrs Li, Chow, Pang & Chan.

35. The defendant gave evidence in support of his own defence.  His case in a nutshell is that everything he did was in accordance with the Father’s instructions.  More particularly, the defendant says the Father gave him a number of instructions after the stroke in April 1997 :

(1)     The Father asked the defendant to contact one Mr Kwan of the Shanghai Commercial Bank with whom the Father had an account, to inform Mr Kwan that it was his wish to transfer the money in his account to the defendant, and that this was duly done.  A total sum of HK$6,533,929.39 was so transferred.

(2)     The Father also asked the defendant to contact the Mei Foo Sun Chuen branch of HSBC where the Father also had an account with the view to arranging for the transfer of all the money in that account to the defendant.  The bank allegedly sent a female staff to visit the Father in the hospital to confirm his instructions.  A sum of HK$203,695.00 was eventually transferred.

(3)     The defendant was to continue to collect rent but the money collected and the sums transferred from the Father’s accounts were to be used for the payment of the Father’s medical and living expenses.  The Father also instructed him to pay the mortgage instalments due on various properties in the mainland in the name of the Father and To Yui Ying and to assist some of the siblings in the purchase of properties.

(4)     On one occasion, the Father said he needed money urgently and suggested mortgaging some properties to obtain a loan.  The Father instructed the defendant to contact Mr Wong Ping Fai (“Mr Wong”) and take the title deeds to him.  (According to the Father’s statement, Mr Wong was a former clerk of Messrs W.I. Cheung.)

(5)     The Father said he did not want his belongings any more and wanted to transfer all his assets to the children :

(a)      he wanted the shares in To’s Wah Shing to be redistributed, so that apart from the three daughters retaining each of their 300 shares, To Yui Keung and To Yui Keung were each to have 500 shares, whilst the remainder would be divided equally between the defendant and To Yui Ying; and

(b)     the landed properties in his name were to be transferred to four companies to be formed by the children, but only by way of sale and purchase at the market value of these properties; those companies to be owned by the children in the same ratio as their holding of To’s Wah Shing save that To Yui Kuen would not have any share.  The reason the Father allegedly gave was that To Yui Kuen had already emigrated and it would be too cumbersome to have things sent back and forth.

(6)     The Father asked the defendant to go to Property no.13 to move the safe, gave him the key and provided him with the combination.  He also said he would execute a power of attorney in the defendant’s favour.

36. The defendant produced a table setting out the expenses he had allegedly incurred for or behalf of the Father over the period from 1997 to 2004.  These include expenses for letting out the properties, household expenses, medical expenses, expenses for private nurse, funeral expenses, expenses in mortgaging the properties, mortgage payments for mainland properties, payments to siblings (To Yui Keung, To Yui Ying and To Yin Yee) for purchase or properties and payment to To Yui Kuen for repayment of loan.  As I indicated above, the plaintiffs disputed some of these items, but it is not necessary to resolve the dispute.  It should nevertheless be pointed out that according to this table and on the defendant’s case, the money that he received by way of rental collection and sums transferred from the Father’s account should have been used up some time in 1998.  The defendant’s evidence is that he continued to pay for the Father’s expenses up to the time of his death, and even had to raise loans from others for the purpose.

37. As for the disposition of the properties, the defendant admitted that he obtained the title deeds of the Father’s properties from the safe.  (At that time, the title deeds for Property no.1 were with a bank.  According to the land office records of this property, there was a mortgage in favour of Hang Seng Finance Limited, but that was discharged in August 1997.)  The defendant said he handed all the title deeds to the solicitor, Mr Raymond Ng, all at one go before the mortgages of the four properties to Cityline Finance Ltd.  Mr Ng was then a solicitor in the firm Messrs Lo & Yip, who acted as the solicitors for the purchasers.  He has since joined Messrs Thomas Li & Yu, the solicitors on record acting for the defendant in these proceedings.

38. The defendant claimed that it was the Father’s idea and his instructions that the properties were to be sold to four companies to be formed by the children, other than To Yui Kuen, and also his idea that the sales should be at current market prices.  He further claimed that the Father asked him to get Mr Wong to look for a lawyer.  It was also his evidence that the Father pressed him to hurry up with the transactions in December 1997.

39. His case is that all the properties were sold by the Father who signed and executed all the conveyancing documents himself and received all the proceeds through separate legal representation.  He relies on the various documents and acknowledgement of receipt signed by the Father.  He also contends that as he was not the authorised signatory on the Father’s bank accounts, he could not be held responsible for what happened to any money which went out of those accounts.

40. There is no doubt in my mind that the defendant lied on various matters.  When he gave evidence, he led the court to believe that he arranged for finance for the payment of the purchase price for the eight properties transacted on 31 December 1997.  He said he did not mortgage the properties to raise finance but claimed to have used “bills lines” from the bank, because, so he claimed, the interest rate was lower.  That was evidently a deliberate lie.  The bank statements of the four companies showed not only that no payment was made to the Father on these purchases, they reveal that the respective bank accounts of the four companies did not even have the necessary funds to back the cheques that the defendant signed.  It is quite apparent that the defendant had had the bank statements all along, but not only did he fail to disclose them, he tried to avoid answering questions relating to the state of the bank accounts of the four companies on the pretext of confidentiality.  It was only after the court reminded counsel of the continuing duty on the part not only of the defendant but the solicitors in making full discovery that the bank statements were produced after the defendant concluded his oral testimony.

41. The defendant’s evidence and indeed his whole case suffered from a fundamental illogicality.  On the one hand, the defendant claimed that the Father’s instruction was that he did not need the properties and that these should be transferred to the children to benefit them.  On the other hand, he alleged that the Father insisted on there being a genuine sale and purchase at full market price.  It is difficult to see how compliance with the latter could possibly be said to “benefit” the children.  Nor is it easy to see how the Father could properly insist on there being a genuine sale and purchase when he never consulted the children and it would have been obvious to him that none of his children had the means of paying for the properties at their true market value.  It is impossible to believe the defendant’s evidence that he never checked the bank statements of the four companies to find out whether the Father had cashed the eight cheques.  This is another lie.  The truth is that the defendant knew all along that the eight properties were not paid for, and that the cheques were never meant to be cashed.

42. I also find the defendant’s evidence that he incurred various expenses on behalf of the Father to be unreliable.  Mr Shum demonstrated during cross-examination of the defendant that a number of the expense items could not have been incurred by the Father.  The defendant responded by asserting that the Father approved these items to be placed on his account.  I do not believe these assertions.  Nor do I believe the defendant’s evidence that he had exhausted all the funds from the Father and yet continued to incur substantial expenses on his behalf of the Father without demur in the belief that the Father was keeping the proceeds of the mortgage loans and the proceeds of the sale of the properties.

43. His excuse for suspending payment of the monthly allowance in about September 2003, and his excuse for refusing to reimburse the Father in respect of the bills presented to him on the occasion in October 2003 were equally unconvincing.  It is obvious that he arranged the meeting in October, in the hope of getting the Father to sign a document to discontinue the action.  His refusal to pay the monthly allowance was calculated to put pressure on the Father.  It did not work.

44. I would reject the defendant’s evidence save where the same constitutes admissions or where it is supported by documentary proof.

45. To Yin King claimed that during one of her visits to the Father in hospital, the Father cried in front of her and asked the defendant to arrange for the sale of his properties and to remove the safe at his home which contained a lot of title deeds.  To Yin King’s evidence has precisely the same contradiction as that which infects the defendant’s case, with the result that she was unable to explain how the transfer could be of benefit to the children when they were supposed to find the money to purchase the properties at market value.  Again, her evidence does not make sense.  It is apparent that during her oral evidence, To Yin King expanded upon her witness statement in an effort to support the defendant down to the last detail.  Her trust on the defendant and her loyalty towards him is plain from her own evidence as to how little she enquired about the defendant’s dealings in respect of the properties.  I do not accept her evidence.

46. Mr Li Chi Man was the next witness.  His firm acted as solicitors on behalf of the Father in the conveyancing transactions.  He said he took instructions from Mr Wong, who was an old friend of his in the days when both worked in the same firm of solicitors.  Mr Wong allegedly gave all the instructions on behalf of the Father.  He testified that he saw the Father on three occasions; viz. on 24 October 1997 when the agreements for the sale of Properties nos.6-9 were signed, on 20 December 1997 when the assignments for those properties were signed and finally on 31 December 1997 when the agreements and assignments for the eight properties (nos.1-5,10, 11 & 13) were executed.  He said that apart from the first occasion when the Father was with a maid, he was unaccompanied.  He claimed that before he asked the Father to sign on the documents, he explained each and every clause of the agreement to him.  If his evidence is to be believed, the Father was fully aware of what he was doing and agreed to the disposal of the twelve properties to the four companies.  Mr Li said in evidence that he was aware of the unusual nature of the transactions and had specifically asked the Father if he wanted him to deposit the cheques for him.  According to him, the Father declined the offer, saying he had made arrangements.  Since the cheques could not have been and were never cleared, the inference from such evidence is that the Father realised that he was not going to be paid in respect of the eight properties.

47. There are aspects of his evidence which appear to me difficult to believe.  He claimed to have explained each and every clause of the agreement to the Father, notwithstanding that many of those clauses could not apply in the circumstances.  He said he made that clear after explaining the purport of each clause.  He would have the court believe that he went through that exercise painstakingly, no doubt in an effort to impress upon the court how careful he was in making sure that the Father knew what he was signing.  If he was indeed so careful, it is entirely inexplicable that he would send over the executed assignments to the purchasers’ solicitors on the very next working day without even checking with the Father whether the cheques had been honoured.

48. Mr Li claimed to have seen the Father on three occasions.  It is odd that Mr Wong, who was supposed to be passing the Father’s instructions to him, was not present on any one of those occasions.  This witness had no notice that he was going to be called until a few days before he gave evidence.  He had no attendance note of the meetings other than a brief file note that he attended the execution.  Yet he claimed to be able to recall specific conversations with the Father.  I do not feel able to place reliance on his evidence.

49. To Yin Wah gave evidence last.  In her witness statement, she said she recalled one occasion when the Father indicated to “(her) brothers and sisters that due to his bad health and old age, he no longer needed his properties and shares and he wanted to transfer his shares in Wah Shing and all his properties to his sons and daughters”.  He also allegedly asked the defendant to make arrangement for his approval.  She said she was under the impression that the Father wanted to gift his properties to the children.  She said that on a later occasion the defendant read out the details of the transfer of Wah Shing’s shares in the presence of the Father, and that the Father had confirmed the same.  She claimed, however, to have paid little or no attention to what happened to the properties.  She explained the lack of interest to be due to the fact that the Father left it to the defendant to handle.  Although she obviously knew about the litigation and had even sought to persuade the Father to drop the action during the meeting in October 2003, she did not appear to have taken any interest in finding out what happened to the properties.

50. She said she had seen one or two documents relating to an overseas account in the joint names of her husband (Wong Wing On) and the Father.  She said she heard this from her husband.  When asked whether her husband had mentioned whether the setting up of this joint account involved the defendant, she first answered in the affirmative, but almost immediately changed her evidence to say that this was only her guess.  She was nevertheless able to say that she guessed that the request for opening the joint account came from the defendant, and also that the purpose of the account had something to do with receiving the proceeds of the properties to be transferred out from the Father.  It is significant in this connection to note that when the defendant gave evidence he disclaimed any knowledge about this account.

51. Having listened to her evidence, I have the impression that she knew much more than she was prepared to divulge to the court.  It is also clear where her loyalty lies.  Her professed lack of interest in the properties and what happened to them is unconvincing.  I would treat her evidence with reservation.

Defendant’s case rejected

52. I have no hesitation in rejecting the defendant’s case that the transactions regarding the twelve properties were genuine sales and purchases.  The case that the Father wanted the children to incorporate four companies to buy his properties at market price is inherently improbable and contrary to the evidence proffered by the defendant and his own witnesses that the Father wanted to benefit the children from such transfers.  It is now accepted that the second tranche of eight properties were not even paid for.

Have the plaintiffs proved their case?

53. Rejecting the positive case of the defendant does not mean that the plaintiffs have proved their case.  The plaintiffs are alleging fraud against the defendant and the standard of proof must be commensurate with the gravity of the charge.

54. The question which falls for consideration is whether I am satisfied on the requisite standard that the Father’s statements are true and in particular, whether it is true that (a) he had never agreed to the sale, mortgages or transfer of his properties, and (b) he was asked by the defendant on a number of occasions to sign documents without knowing either the true nature or their contents, and if so, whether the documents purporting to relate to the sale and assignment or receipt of payment or cheques bearing his name were signed under those circumstances.  This last matter is not stated in his witness statements and the question becomes whether such an inference should be drawn from all the evidence.

55. The unfortunate fact that the Father is no longer alive means that, without the fault of any party, the Father cannot be cross-examined and his evidence tested.  However, since these statements are being relied on to mount a case of fraud against the defendant, it is only right and proper that the contents of the statements be subject to anxious scrutiny by the court, bearing in mind the evidence which this court has seen or heard.  Having done so, I would accept his evidence.  It is fair to say that Mr Ng has not been able to point to any part of those statements which can be shown to be materially inaccurate or wrong.  On the contrary, the indisputable fact that the Father did not receive the proceeds of sale of the eight properties would tend to support his version of events.  There is the further fact that it was the defendant who applied in August 1997 for a loan of $12 million from Cityline Finance Limited on the security of Properties nos.1, 3, 10 and 13.  He executed the mortgage documents on behalf of the Father with a general Power of Attorney prepared by the same solicitor who acts on his behalf in this present litigation.  I reject his evidence that the loan was obtained at the request of the Father.  It is significant that this $12 million found its way to the Channel Islands company immediately after the loan proceeds were credited to the Father’s account.  I agree with Mr Shum that in all probability it was the defendant who wanted to obtain the loans, and it was also the defendant who got the proceeds of the loans.  The proceeds from the purported sale of the four properties (nos.6-9) again ended up in this company.  I do not believe the defendant when he said he knew nothing about this account.  To Yin Wah’s evidence contradicted that although, as observed earlier, she was reluctant to tell this court the whole truth.  It is also inherently improbable that the Father would have made arrangements for this account to be established and all the proceeds remitted to this account without the defendant’s knowledge.  Nor is there any explanation why the defendant’s own telephone number appeared in the remittance instructions as the contact telephone.  It is equally improbable that the Father all along had substantial monies stashed away in this overseas account and yet led a meagre living in the months before his death.  All these point to one conclusion, namely that the defendant was involved in the setting up of this account, and further, that this account was set up for the purpose of receiving substantial sums of money transferred away from the Father’s account.  During the final submissions, there was a hint from Mr Ng that this could have been a device employed by the Father to avoid his estate duty liability.  That is, however, not the case run by the defendant all along; and other than some very oblique reference in a couple of witness statements to the effect of some such mention, there was no evidence to support that theory.  In the circumstances, the only reasonable inference which can be drawn from the evidence that the court accepts is that the Father was induced by the defendant to sign the agreements for sale and purchase and the assignments in respect of the properties in circumstances where the Father was, to the knowledge of the defendant, unaware of the contents or nature of the documents.

56. There is also this fact : it is plain that between mid 1997 and September 1998, the Father placed a great deal of trust on the defendant.  Yet, by January 2003, he issued a writ against this trusted son and accused the son of causing the various transactions to be put through without his authorisation.  He was basically accusing him of fraud.  On the defendant’s case, the amount he spent on medical and other expenses on behalf of the Father far exceeded the amount he received on his behalf either in rental income or the transfer of the deposits in his bank account.  There is no apparent explanation why a trusting father would undergo an 180^o change unless his accusations are true.  The suggestion that the Father was coaxed or pressured into taking action against the defendant has absolutely no foundation.

Conclusion

57. I am satisfied on the evidence that the defendant did make use of the title deeds entrusted to him to effect the dispositions of the properties, when he knew that the Father did not consent to the same.  The title deeds were entrusted to him for the purpose of disposition only if that should become necessary to give the Father a glorious burial.  He abused the trust reposed on him by the Father and used them for his own purposes.  As a result of his conduct, the estate lost the value of the properties.  The defendant has not alleged that there has been any failure on the part of the plaintiffs to mitigate such loss.  Nor does the defendant dispute that the market value of the properties at the relevant time was reflected in the consideration stated in the agreements and assignments.

58. I would accordingly enter judgment for the plaintiffs against the defendant for damages in the sum of HK$57,800,000.00 with interest from 31 December 1997 until judgment at the rate of prime + 1%.

59. In the light of my findings, I am prima facie of the view, subject to any contrary argument, that this as a proper case for an order that the costs be on an indemnity basis.  I would make an order nisi that the defendant do pay the plaintiffs’ costs of this action, to be taxed, if not agreed, on an indemnity basis.