HERMAN BUDIHARDJO (ALIAS SIM HOK TJIONG)(SINCE DECEASED) AND OTHERS v. DI GUNAWAN (ALIAS SIM HOK KHUN) AND OTHERS

HCA 441/2012

[2018] HKCFI 1450

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 441 OF 2012

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JUDGMENT

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1.  This is a dispute between two camps of brothers arising from the family distribution agreement made in 1980.  After the making of such agreement between the eldest brother on the one part and the 6 other younger brothers and their father on the other, they agreed to distribute the family assets amongst themselves.  The present dispute involves the younger brothers.  Some of them complain that the others have misappropriated the fund of a family trust between them which consisted of, inter alia, assets distributed to them under the 1980 distribution agreement.

2.  These brothers used to enjoy harmonious relationship in the past, and there were mutual trust and respect between them.  It is with great sadness that their dispute finally ended up in the court.

3.  This case poses a great challenge to the court. In adjudicating the dispute, the court needs to find out what happened many years ago.  Some of the potential key witnesses have already passed away.  The Plaintiffs require the court to conduct a microscopic examination of the documents prepared by some of the family members decades ago.  Coupled with the difficulties faced by elderly witnesses in recalling past events after a long lapse of time, the fact finding exercise faced by the court is not an easy one.

A.    BACKGROUND

4.  I would first give a bird-eye view about the facts of the present case.

A.1   The parties

5.  The parties to these proceedings are members of the Sim family (“the Sim Family”), which is a traditional Chinese male-dominated family with ties in Hong Kong and originally in Indonesia.

6.  The original Plaintiffs and the 1^st Defendant are brothers amongst a total of 7 brothers and 3 sisters. Their father was Sim Tjhing Kang (沈清江) (“the Father”) who passed away in 1982, and their mother was Lam Yuet King (“the Mother”) who passed away in 1988.

7.  In order of seniority, the brothers (“Brothers”) are:

(i)   Soetikno Boedihardjo (沈福才) (“Soetikno”, also known as Sim Hok Tjay or Shum Man Tin), who was born in around 1928.  Soetikno passed away in 2003.

(ii)   Shum Fuk Sing (沈福星) (“SFS”, also known as Sim Hok Seng or Sim Hok Sing), who was born in around 1934.  SFS passed away on 19 April 2003.

(iii)   The 1st Defendant, Hadi Gunawan (沈福崑) (“Hadi”, also known as Sim Hok Khun), born in around 1936.

(iv)   The original 1st Plaintiff, Herman Budihardjo (沈福璋) (“Herman”, also known as Sim Hok Tjiong), born in around 1937 and died on 19 September 2014.  Herman’s estate is now represented in these proceedings by his son, Wilhelm Budihardjo.

(v)   Harry Sudirman (沈福源) (“Harry”, also known as Sim Hok Gwan), born in around 1939.

(vi)   The 2nd Plaintiff, Rudy Sudirman (沈福貴) (“Rudy”, also known as Sim Hok Kwee), who was born in 1943.

(vii)   The 3rd Plaintiff, Henry Budi Harsono (沈福強) (“Henry”, also known as Sim Hok Kiong), who was born in around 1946.

8.  There are also daughters in the Sim Family.^[1]  Since the Sim Family is a male-dominated family, the daughters were not expected to receive any family assets.  For that reason, they are not involved in the present dispute which may be a blessing in disguise.

9.  Soetikno and the other Brothers stood as counterparties in a separation in 1980.  The Brothers, excluding Soetikno, are referred to herein as “the 6 Brothers”.

10.  The original Plaintiffs, Herman, Rudy and Henry, are referred together as “HRH”.

11.  SFS’s estate (“SFS’s Estate”) is represented in these proceedings by the 2^nd Defendant, his widow, Lam Kam Chu (林金珠) (“Madam Lam”).  Madam Lam is also sued as the 6^th Defendant in her personal capacity. Their children (“SFS’s Children”) are the 3^rd to 5^th Defendants, namely Shum Chun Ning Peter (沈振寧); Shum Wei Wah Angela (沈慧華); Shum Wai Lai Vickie (沈慧麗).  The 3^rd to 6^th Defendants, and SFS where the context permits, are referred to herein as “SFS’s Family”.

12.  These proceedings concern what happened to various assets of the Sim Family after the distribution exercise in August 1980, when Soetikno, on the one hand, and the Father and the 6 Brothers, on the other, agreed to divide the Sim Family’s assets between them (“the 1980 Separation”).

13.  HRH’s case is that both Hadi and SFS were co-trustees or fiduciaries of an alleged Sim Family’s trust (“the Sim Family Trust”), and Hadi had taken over the fund of the Sim Family Trust (“the Sim Family Trust Fund”) upon SFS’s illness in 2001.  HRH now ask for an account of the Sim Family Trust Fund by Hadi.  They also have an alternative claim against SFS’s Family, which is one made on the basis that SFS was in fraudulent breach of the trust and he had made various dispositions of properties to SFS’s Family with the intent to defraud the creditors.

14.  On the 18th day of the trial and after Madam Lam had testified in court, HRH, SFS’s Estate and Family reached a settlement under which HRH would no longer pursue the claims against SFS’s Estate and his Family. Although I do not need to adjudicate the merits of these claims, the court would still have to investigate the role of SFS in the administration of the family assets.

15.  Hadi has also brought a counterclaim against HRH on the basis that they had made an alleged misrepresentation to him about the ownership of 2 Indonesian companies during the 1980 Separation exercise.  Hadi also asks Henry to account to him for the shares held by Henry in Singapore on his behalf. 

A.2   The family history prior to the 1980 Separation

16.  In around 1920, the Father emigrated from Mainland China to Indonesia, where Soetikno and the 6 Brothers were brought up.

17.  Due to the anti-Chinese movements and political instability in the 1960’s, the Father and Mother, and then later Soetikno, migrated to Hong Kong.  Herman, Rudy and Henry remained in Indonesia.  Later, SFS, Hadi and Harry joined their parents in Hong Kong.  Harry was not involved in any family businesses because he decided to pursue his own medical practice.

18.  With the wealth built up in Indonesia, the Sim Family started to build up the portfolio of businesses and investments in Hong Kong.  The companies or businesses run by the Sim Family in Hong Kong, or which they had shareholdings in, included:

(i)   Simsons Enterprises (HK) Limited (新盛) (“Simsons”), Hock Hong Trading Company (福豐)(“Hock Hong”) which was an unincorporated business founded by the Father, and New China Products Emporium (Hong Kong) Limited (新中華) (“New China”), which were wholly owned by members of the Sim Family by the time of the 1980 Separation.

(ii)   Heng Gwan Enterprises Limited (福豐)(“Heng Gwan”), in which the Sim Family were shareholders.

19.  Simsons has all along been the major family-owned business in Hong Kong which up to the present date owns Simsons Commercial Building (“the New Simsons Building”) in Wanchai.  Hock Hong ceased to operate in the early 1980’s.

20.  There were also 2 relevant companies in Indonesia, namely PT Kalimurni Company Limited (“KMC”) which was a company specialising in agricultural products, and PT Bank Dharma Usaha (“BDU”) which ran a banking business in Indonesia.

21.  The Sim Family also had investments in listed shares in Hong Kong (“the Family’s Listed Shares”).

22.  It is common ground that, being a traditional Chinese family, all the family members paid a lot of respect to the Father and Soetikno who was the eldest son.

23.  Prior to 1980, the Father had distributed some of his assets amongst the Brothers.  For example, in Hong Kong and in 1963, SFS, Hadi, Rudy and Henry were each given 100 shares in Heng Gwan (being 400 out of 750 shares in total), and in 1977 the Father distributed 1,800 out of 3,000 shares in Simsons to SFS (400 shares), Hadi (400 shares), Harry (250 shares), Herman (250 shares), Rudy (250 shares) and Henry (250 shares).

24.  The Sim Family, including HRH, Hadi and SFS, all regularly traded and invested in the stock market.  Simsons also had a substantial volume of stock investments.  Soetikno and the Father also invested too.

25.  HRH and Hadi had at the time a trusting relationship. In particular, Hadi assisted HRH in dealing with their finances and investments in Hong Kong, including their bank accounts, investments in shares and properties.  This would involve placing assets belonging to HRH under Hadi’s name.  Likewise, HRH helped Hadi with his overseas investments.

A.3   The 1980 Separation

26.  It came to a point that there was much confusion within the family as to what belonged to whom between the Father and Soetikno.  By 1980, Soetikno had become particularly interested in the shares in New China and negotiated with the Father for additional New China shares in exchange for Soetikno’s interests in other family-run businesses and investments.  This resulted in the division of the Sim Family’s assets between Soetikno on the one hand and the Father and the 6 Brothers on the other, i.e. the 1980 Separation.

27.  The 1980 Separation was negotiated and concluded in Hong Kong.  Rudy and Henry travelled from Indonesia to Hong Kong for the purpose of negotiating with Soetikno, whilst Herman remained in Indonesia.

28.  The negotiations resulted in a Chinese agreement dated 27 August 1980 made by the Father and the 6 Brothers on the one part and Soetikno on the other (“the 1980 Chinese Agreement”).  The 1980 Chinese Agreement was a handwritten agreement in manuscript and plain Chinese.

29.  Under the 1980 Chinese Agreement, inter alia:

(i)   By Clause III, the Father and the 6 Brothers (Party A) agreed to transfer their 260 shares in New China, a car parking space and a vehicle to Soetikno (Party B).

(ii)   By the first Clause IV, Soetikno agreed to transfer his 250 shares in Heng Gwan, 800 Shares in Simsons and a landed property to the Father and the 6 Brothers.

(iii)   By the second Clause IV, Soetikno agreed that he shall not participate in and shall withdraw from Hock Hong, KMC and BDU.  For KMC and BDU, Soetikno agreed to go to Indonesia to execute any transfer procedures.

(iv)   By Clause V, the Father and the 6 Brothers agreed, inter alia, that the shares purchased in West Germany and a property in London would belong to Soetikno.

(v)   By Clause VII, Soetikno agreed to pay $15 million (“the 15 Million”) to the Father and the 6 Brothers, which would be paid in 3 instalments: $4 million by 31 December 1980; $5 million by 30 April 1981; and $6 million by 31 December 1981.

30.  Clause VIII deserves special mention.  The original text reads as follows:

“乙方在香港購買之香港股票其中有用甲之名者應立即過戶交乙方。存在甲方手中之乙方股票也立即交還乙方。

甲方之股票如有存於乙方者也應立即交還甲方。”

31.  In other words, Clause VIII provided that: (i) shares in Hong Kong purchased by Soetikno in the name of the Father and the 6 Brothers had to be transferred back to Soetikno; (ii) Soetikno’s shares kept by the Father and the 6 Brothers had to be handed back to Soetikno; and (iii) the shares of the Father and the 6 Brothers kept by Soetikno, if any, had to be handed back to the Father and the 6 Brothers.

32.  The content of the Family’s Listed Shares, and how they were distributed under the 1980 Separation, in particular under Clause VIII of the 1980 Chinese Agreement, are one of the key issues in present dispute.

33.  Shortly pre-dating the 1980 Chinese Agreement was an English agreement dated 22 August 1980 concerning the 1980 Separation between Soetikno and the Father (“the 1980 English Agreement”).  None of the 6 Brothers was a party to this agreement. The terms of the 1980 English Agreement are similar in nature to the terms of the 1980 Chinese Agreement.  However, Clause 3 of the 1980 English Agreement provides for an undertaking by Soetikno to assign and transfer Soetikno’s 25% shareholding in BDU and 75% shareholding in KMC to the Father or his nominee.  Further, Clause 8 of the 1980 English Agreement provides for a specific date that all the Hong Kong shares purchased by Soetikno prior to 21 February 1973 (“the 1973 Cut-off Date”) shall belong to Soetikno, whereas all the Hong Kong shares purchased after the 1973 Cut-off Date shall belong to the Father.

34.  The 1980 English Agreement was professionally drafted.  According to Hadi, the 1980 English Agreement was only uncovered by him in 2011 when he searched through the old files at Simsons’ office after a chat with Harry in Stanley.  He was not aware of such document before that.

A.4   The Chinese assets allocation agreement

35.  At around the same time, the 6 Brothers also decided to allocate their share of the Sim Family’s assets amongst themselves.  There is no dispute that the Father agreed for his share to be divided amongst the 6 Brothers.

36.  The allocations were negotiated amongst the 6 Brothers. Various drafts made in the course of the negotiations have been disclosed by HRH and Hadi.  On HRH’s case, the finally agreed allocation was contained in a written Chinese assets allocation agreement (“CAAA”).  The CAAA contains a table of various assets (“the CAAA Table”).  Each brother was allocated a percentage in the overall assets (“the Overall Proportions”). 

37.  The CAAA also contains a calculation of what amount of cash that had to be changed hands (“the Equalisation Money”) in order for the Overall Proportions to be achieved.  That is set out under the second-right-most column under the heading “差額” (difference). 

38.  The right-most column of the CAAA under the heading “备注” (remarks) contains further re-allocations of the Equalization Money to account for additional payments made to Harry.  At the end lists the balance of the ultimate payments to be made.  Hadi was allocated the largest share of $3,110,000.

39.  Under the CAAA, the 6 Brothers also agreed on how to use the $15 Million to be received from Soetikno under the 1980 Chinese Agreement.  The 6 Brothers agreed that $7 million of the $15 Million should be used to re-construct the then Simsons Building.  However, it is common ground that the construction of the New Simsons Building was eventually financed by a bank loan and not by the money received from Soetikno.  The parties dispute the whereabouts of the $7 million (“the $7 Million”).  HRH claim that it was used for investment on listed shares and it formed part of the alleged Sim Family Trust Fund.

A.5   Events after the 1980 Separation

40.  After the making of the 1980 Chinese Agreement and the CAAA, Rudy and Henry returned to Indonesia.  SFS, Hadi and Harry continued to live in Hong Kong.

41.  HRH’s case is that Rudy asked Hadi and SFS to take care of the matters left behind by Soetikno.  He used words along the lines of “接下去哥哥的事您們安排” (the consequential matters relating to the elder brother are left for you to arrange).  According to HRH, they entrusted Hadi and SFS to deal with the assets received from Soetikno and the other assets of the Sim Family belonging to the 6 Brothers including the $4 million shares (“the 4 Million Shares”) and the “接管” shares (received for custody shares)(“the Custody Shares”).

42.  HRH claim that the Sim Family Trust Fund comprised the said listed shares and $7 Million.  According to them, the Sim Family Trust Fund is what was previously referred to by various members of the Sim Family as “后賬” or “後賬” (back account)(“Hou Zhang”).  The same fund was also referred to as “特賬” (special account) or “S.S.”  This will be discussed in more details in the latter part of this Judgment.

43.  Soetikno’s shares in BDU were transferred to Rudy and Henry in 1981.  It is Hadi’s case that he did not know the fact that Soetikno owned 25% of the shares in BDU before the 1980 Separation and HRH made a misrepresentation to him about such matter.  This is one of the main complaints in the counterclaim.

44.  In 1987, Henry and Rudy moved to Singapore and Herman moved to Hong Kong.  BDU was sold for US$5.78 million.  In the 1990’s, KMC was left to a long-serving employee.

45.  Since the 1980 Separation, Hadi and SFS continued to work in Simsons.  When Herman moved to Hong Kong in 1987, he went to work in Simsons as well.

A.6   SFS’s illness and death

46.  In 1999, SFS was diagnosed as suffering from liver cancer.  Prior to his illness, SFS and Madam Lam had considered moving to Canada and stayed there from time to time.

47.  On 17 March 2000 and 27 June 2001, SFS transferred his shareholding of 850 shares in Simsons to his 3 children.  By an assignment dated 29 May 2001, SFS assigned his flat in Comfort Garden at North Point (“the Comfort Garden Property”) for a stated consideration of $1.5 million to himself and Madam Lam as joint tenants.  Originally, HRH sought to set aside these dispositions made by SFS.  Following the discontinuance of the claims against SFS’s Family, this is no longer an issue before the court.

48.  In May 2001, SFS became seriously ill and he ceased working in Simsons.  On 15 June 2001, SFS resigned from his position in Simsons. He passed away on 19 April 2003.

A.7   Events leading up to these proceedings

49.  According to HRH, Rudy did ask Hadi to account for the Hou Zhang back in 2001.  However, the breakdown in the relationship between the parties only started to occur in around 2010.

50.  On 29 December 2010, Simsons held the annual general meeting which also served as a family meeting for the Sim Family (“the 2010 AGM Meeting”).  Herman, Hadi, Madam Lam and Rudy’s son Roy Sudirman (“Roy”) attended such meeting.

51.  On 2 April 2011, there was another family meeting (“the 2011 Meeting”) attended by Hadi, Herman, Harry, Rudy, Henry, Madam Lam and Angela.

52.  During these two meetings, there were some heated discussions relating to the whereabouts of the assets allocated to the 6 Brothers under the 1980 Separation.

53.  It is HRH’s case that Hadi had made a number of admissions during these meetings including the existence of the Hou Zhang and that the Hou Zhang came from Soetikno.  However, there is considerable difference between the parties about the exact meaning of the term “Hou Zhang”.

54.  After the 2011 Meeting, on 25 April 2011, Rudy sent Hadi a letter regarding the transparency of Simsons’ affairs and seeking details of Simsons’ financial position and shareholdings.

55.  On 10 May 2011, Hadi sent HRH a letter claiming that the Hong Kong brothers (SFS, Hadi and Harry) did not know about Soetikno’s 25% interest in BDU.  Hadi requested an explanation and threatened to withhold dividends from Simsons until the issue was resolved.

56.  In Simsons’ book, there were 110,000 shares in Cheung Kong Holding Limited (“the Disputed CK Shares”) which were booked in a special account in the name of Hadi.  In around May 2011, HRH learnt that Hadi had sold the remaining 10,000 shares of the Disputed CK Shares.  It is HRH’s case that the Disputed CK Shares formed part of the alleged Sim Family Trust Fund.  After the sale of the Disputed CK Shares, Hadi only distributed part of the proceeds to Harry and Madam Lam.

57.  On 25 May 2011, HRH sent Hadi a letter demanding an explanation for why HRH were excluded from the payment of the sale proceeds of the Disputed CK Shares.

58.  On 26 May 2011, Hadi said in the reply that until the matter relating to Soetikno’s 25% interest in BDU was resolved, Simsons would not pay HRH any distributions.

59.  On 4 January 2012, Hadi commenced proceedings in Singapore against Henry, claiming recovery of some Jardine shares (“the Singapore Jardine Shares”) that Henry held on his behalf. HRH successfully applied to stay these proceedings in favour of the Hong Kong court, claiming that the Singapore Jardine shares were acquired by Hadi using the money from the alleged Sim Family Trust Fund.

60.  On 20 March 2012, HRH commenced the present proceedings against Hadi.  

B.   HRH’S CASE ON THE SIM FAMILY TRUST FUND

61.  In the main claim, HRH allege that both SFS and Hadi are and were co-trustees of the Sim Family Trust Fund.  It is their primary case that an express or common intention constructive trust was created when Rudy asked SFS and Hadi to take care of the matters relating to Soetikno after the making of the 1980 Chinese Agreement and the CAAA.  Alternatively, HRH contend that SFS and Hadi owed a duty as fiduciary to account to them for the handling of the assets that should belong to the 6 Brothers.

62.  As history speaks for itself, the assets, if they existed, would have been entrusted with Hadi and SFS many years ago.  About 30 years after the establishment of the alleged Sim Family Trust, HRH are now asking Hadi to account for the whereabouts of the assets.  Obviously, SFS would not be able to provide the account after his death.

B.1   Alleged assets as forming the Sim Family Trust Fund in the beginning

63.  As part of their case, HRH have to establish what had gone into the Sim Family Trust Fund at the outset.  They claim that, in the beginning, the following assets formed part of the alleged Sim Family Trust Fund:

(i)   The $4 Million Shares and the Custody Shares.  I would refer them collectively as “the Original Listed Shares”.

(ii)   $7 Million (of the $15 Million received from Soetikno), which HRH say was used to invest in Hong Kong listed shares.

64.  In respect of the Original Listed Shares, it is HRH’s case that:

(i)   Prior to the 1980 Separation, the shares owned by the Sim Family included the $4 Million Shares and another $5 million shares (“the 5 Million Shares”).

(ii)   The understanding of the relevant brothers conducting the negotiations for the 1980 Separation was that the $4 Million Shares went with Simsons under the 1980 Separation, namely to the Father and the 6 Brothers.

(iii)   Of the $5 Million Shares, listed shares worth about $1.2 million went from Soetikno to the Father and the 6 Brothers pursuant to the transfer required by Clause VIII of the Chinese Agreement.[2]  These were the Custody Shares.

65.  HRH contend that under Clause VIII of the 1980 Chinese Agreement:

(i)   The $4 Million Shares would not need to be transferred under Clause VIII because they were already under the control of the 6 Brothers’ side.

(ii)   The $5 Million Shares were still to be sorted out.  The shares that Soetikno agreed to transfer to the 6 Brothers’ side were the Custody Shares.

B.1.1    The $4 Million Shares

66.  I first start with the $4 Million Shares.

67.  According to Rudy, he was the main representative of HRH who came to Hong Kong for the negotiations with Soetikno.  Rudy did not know much about the Hong Kong assets, so he relied on Hadi and SFS to inform him of what the Hong Kong assets consisted of.  Thereafter, he also discussed those assets with Soetikno.

68.  In the course of Rudy’s discussions, Rudy obtained or drew up various notes, which he says show the existence of one batch of shares worth around $4 million (i.e. the $4 Million Shares) and another separate batch of shares worth around $5 million (i.e. the $5 Million Shares).

69.  In the course of the trial, the parties refer me to different documents in support of their respective cases and they are mainly contained in Core Bundle 1 of the trial bundles.  For easy reference, I would describe the various documents by reference to their page numbers in Core Bundle 1.  If the document appears in page 21 of Core Bundle 1, I would refer the document as “CB-21”.

70.  One of the first notes Hadi gave Rudy when Rudy came to Hong Kong was a note written by Hadi on the notepaper of Captain’s Club, i.e. CB-21.[3] Apparently, this was a document written in the course of the negotiations for the 1980 Separation.

71.  It was written in CB-21 that the combined valuation of “新盛連股票” (Simsons plus stock) was $20 million. According to Rudy, Hadi told him that of the $20 million, $16 million was the value of the then Simsons Building and there was a separate group of shares worth $4 million (i.e. the $4 Million Shares).  The $4 Million Shares belonged to the Sim Family.  Rudy “understood” that those shares were not part of Simsons, but assets held by Simsons for the benefit of the Sim Family which were controlled by the same people controlling Simsons.

72.  There was another note written by Rudy recording “Simsons plus stock”, i.e. CB-28.  Rudy first wrote about $20 million but he claimed that Hadi crossed this out and wrote $18 million.

73.  Rudy testified that, after speaking with Hadi and SFS, he then discussed the valuations with Soetikno.  In the course of such discussion with Soetikno, Rudy drew up the document under the letterhead of “Sim Tjhing Kang” (the Father), i.e. CB-18[4].  On CB-18, Rudy separated out the $4 Million Shares (described as “新盛”(Simsons)) from the $16 million valuation of Simsons (described as “旧楼”(old building)).  Rudy also separately listed a group of shares (described as “股票”(stock)) valued at $5 million.

74.  Another note, CB-29, which is similar to CB-18 and written by Rudy, shows the “share” worth $5 million, in addition to “新盛”(Simsons) worth $4.5 million and “Old building” worth $18 million.

75.  What were the $4 Million Shares?  According to Rudy, after Hadi told him about the $4 Million Shares, SFS gave him further details about the composition and individual valuations of the $4 Million Shares.  Rudy wrote these down on CB-16[5], which listed 16 different listed shares worth a total of $4,228,178.

76.  HRH also rely on another note, CB-26, allegedly showing the $4 Million Shares.  It contains a list of 10 shares which add up to “362.5”, and an arrow indicating that this was “400”.  HRH claim that the list of 10 shares was probably an early list of the $4 Million Shares.

77.  HRH also rely on another note, CB-19[6], which they say was the final note combining Simsons with the $4 Million Shares in addition to the $5 Million Shares, written by Rudy on Hock Hong stationary. It listed “新盛” (Simsons) with the value “2000”, and the “股票” (stock) with the value “500”.  Given the foregoing valuations of “新盛” (Simsons), HRH claim that this valuation of “新盛” (Simsons) included the $4 Million Shares.  It is also their case that CB-19 reflects the agreement of Rudy, Hadi, SFS and Soetikno that the final valuation of Simsons (which would go to the 6 Brothers) would be $20 million, including both the Simsons company worth $16 million and the $4 Million Shares.

B.1.2    The CustodyShares and the $5 Million Shares

78.  It is HRH’s case that the Sim Family Trust Fund also consisted of a separate batch of the Custody Shares or the $5 Million Shares.

79.  Rudy claimed that, after the 1980 Separation, SFS gave him various notes which evidence the receipt of the Custody Shares by SFS and Hadi.  Apparently, the Custody Shares were the shares that need to be transferred by Soetikno to the 6 Brothers under Clause VIII of the 1980 Chinese Agreement.

80.  In the end of June or early July 1984, SFS gave Rudy CB-71[7] written by SFS.  CB-71 is a list of 8 listed shares together with their quantities and valuations as at 27 August 1980.  HRH claim that the words “接管” (receive and keep) there show that the shares were received and held as a custodian.  The total value of the shares on that list is $1,259,454.60.

81.  CB-71 has a “製單日期” (date for producing the document) of 11 April 1984 with an indorsement from SFS.  Though the date for production of the document was 11 April 1984, HRH claim that it contains the Custody Shares as at 27 August 1980.

82.  Rudy claimed that, in around December 1980, SFS gave him CB-72[8] and CB-74[9].  It is HRH’s case that CB-74 contains a more updated list of the Custody Shares.

83.  CB-74 contains a list of the same shares as CB-71 drawn up by SFS, but there are some changes from the CB-71 to CB-74:

(i)   Increase in “匯豐” (HSBC) shares from 10,527 to 10,560.

(ii)   Reduction of 9,000 “電話” (HK Telecom) shares from 14,168 to 5,168.

(iii)   Reduction of 8,000 “新昌” (Hsin Chong) shares from 51,000 to 43,000.

(iv)   Reduction in “怡和” (Jardine) shares from 9,017 to 8,740.

(v)   Addition of a further batch of 35,000 “怡和” (Jardine) shares.

84.  CB-72 contains mostly Hadi’s handwriting (at the first half) and some of SFS’s.  It refers to ‘S.S. 股票’ (S.S. shares) and records some of the above changes from CB-71 to CB-74.

85.  Pausing here, I must say that the relationship between the $5 Million Shares and the Custody Shares is by no means clear.  Apparently, CB-71, CB-72 and CB-74 only show that there were some shares (HRH say the Custody Shares) worth about $1.2 million in 1980.  HRH claim that these were shares required to be transferred by Soetikno to the 6 Brothers under Clause VIII of the 1980 Chinese Agreement.  Were these part of the $5 Million Shares?  HRH rely on CB-18 and CB-29 to support that there were a separate batch of the $5 Million Shares when the parties negotiated in the 1980 Separation.  Were all the $5 Million Shares transferred to the 6 Brothers?  Up to now, HRH cannot provide the court with an answer, and so the relationship between these two batches of shares, i.e. the $5 Million Shares and the $1.2 million shares, is not clear.

B.1.3    $7 Million

86.  In the CAAA, it was recorded that Soetikno would hand over a sum of $15 Million to the Father and the 6 Brothers as part of the arrangement under the 1980 Separation.  The Father and the 6 Brothers then agreed as to how to apply the said sum of money, out of which a sum of $7 million would be used to build the New Simsons Building. However, it is common ground that Simsons subsequently raised a bank loan to pay for the building costs, and so there is an issue as to the whereabouts of the $7 Million received from Soetikno.

87.  It is HRH’s case that $7 Million formed part of the Sim Family Trust Fund which was used by SFS and Hadi for investment purposes.

88.  The $7 Million was recorded in a document titled “S S特試算表” for July 1983 (the July 1983 Trial Balance), i.e. CB-166[10], under the entry ‘沈特’ (Sim Special) on the right-hand “貸方” (credit) column.  This was drawn up by SFS.  CB-166 also recorded an entry for “股票” (shares) in the amount of $4,209,098.96 on the left-hand “借方” (debit) column.

89.  It is HRH’s case that CB-166 shows that: (i) $7 Million was attributed to specific account called the “沈特” (Sim Special); (ii) the “沈特” account was maintained at least up through to July 1983; (iii) the $7 Million was a credit in the “沈特” account; and (iv) SFS was involved in managing the $7 Million.

90.  According to Rudy, Hadi told him in September 1982 that SFS suggested investing the $7 Million for the benefit of the 6 Brothers and Rudy agreed.

91.  Rudy also believed that the list of shares as at 29 February 1984, drawn up by SFS in the document CB-168[11], represents part of the investments from the $7 Million.  SFS gave CB-166 to Rudy together with various other documents, namely: (i) CB-71; (ii) CB-168; (iii) CB-169 which was a handwritten trial balance as at 29 February 1984 titled (in English) “Simsons Enterprises (HK) Ltd Trial Balance”; and (iv) CB-171 which was a type-written list of shares as at 31 March 1984.

92.  According to HRH, CB-168 is to be contrasted with the said type-written CB-171, which is probably a list of the investments on Simsons’ official share portfolio.  Rudy also claimed that it was SFS’s practice to handwrite records himself when the matter concerned the Sim Family Trust Fund.  Rudy therefore believed that SFS gave him CB-71, CB-166 and CB-168 for the purpose of reporting on the status of the Sim Family Trust Fund.  The sums of the 1984 list of shares stated in CB-168 (worth $2,773,330.90) and the entry in the 1983 trial balance in CB-166 for “股票” (shares) in the amount of $4,209,098.96 on the ‘借方’ (debit) column add up to approximately $7 million.

B.2   Alleged assets originating from or included in the Sim Family Trust Fund

93.  What then happened to the $4 Million Shares, the Custody Shares (or the $5 Million Shares) and the $7 Million?  It is HRH’s case that these assets were thereafter kept, managed and invested by Hadi and SFS.

94.  HRH had not asked SFS or Hadi to account for the alleged Sim Family Trust Fund for many years.  They claim that, since the Sim Family is a traditional Chinese family, the younger brothers would have to respect the elder brothers and it was not appropriate for them to question the integrity of the elder brothers or to ask them to account on financial matters.

95.  It is Rudy’s evidence that the practice of the Sim Family was to adopt a “full investment” strategy in investing in listed shares.  Dividends were to be used for further investments.  It was also their practice to invest in blue chip shares.

96.  HRH try to conduct a forensic exercise to find out what happened to the assets of the alleged Sim Family Trust Fund.  After the exercise, HRH claim that the following assets originated from, or came to be included in, the Sim Family Trust Fund:

(i)   $9 million which was recorded in Simsons’ accounts as a shareholders’ loan to Simsons (“the $9 Million”).

(ii)   The 110,000 Disputed CK Shares which were recorded in Simsons’ accounts as belonging to Hadi.

(iii)   Herman’s emoluments from Simsons (“Herman’s Emoluments”) and directors’ fees and expenses of Rudy and Henry from Simsons (“the Directors’ Fees”).

(iv)   The Singapore Jardine Shares which Hadi transferred to Henry to hold for him in Singapore.

97.  I will deal with each of them in turn.

B.2.1   $9 Million

98.  On around 24 September 2001, a sum of $9 million (i.e. the 9 Million) was withdrawn from a Hadi-Herman joint account and deposited into one of Simsons’ bank accounts to repay an overdraft of $8,924,745.61.  This deposit was recorded in Simsons’ records as a loan by the 5 Brothers and SFS’s Children^[12] in the proportions of their shareholdings in Simsons.

99.  Bank records show that in September 2001, there was around $9.7 million in the said Hadi-Herman joint account before the making of the transfer.

100.  Simsons’ BOC bank statements for August and November 2001 show an overdraft in the amount of $8,924,745.91 at the end of August 2001 and a positive balance of $72,871.81 rolled over into the beginning of November 2001.[13]

101.  There is no serious dispute that:

(i)   the $9 Million was used to cover the $8,924,745.61 overdraft loan; and

(ii)   the $9 Million came from a Hadi-Herman joint account, which was originally under the names of Hadi and SFS.

102.  The $9 Million was repaid by Simsons on 5 occasions, namely: 16 September 2002; 23 December 2002; 8 October 2007; 27 February 2008; and 10 July 2008.

103.  HRH confirm that the money did not come from them.  It is their case that the $9 Million must have come from the alleged Sim Family Trust Fund.  There was no other fund large enough to be the source.  Further, the $9 Million was a subject for discussion in the 2010 AGM Meeting.  According to HRH, Hadi in that meeting admitted that the $9 Million, together with the Disputed CK Shares, came from the Hou Zhang, which in turn originated from Soetikno.

B.2.2   The Disputed CK Shares

104.  HRH also contend that the Disputed CK Shares did originate from or were included in the alleged Sim Family Trust Fund.

105.  HRH claim that the earliest document available recording the Disputed CK Shares is SFS’s note dated 28 May 1993, CB-179, recording dividends from the Disputed CK Shares.

106.  Apparently, the Disputed CK Shares were held in Simsons’ own securities account but did not form part of Simsons’ official investments.[14] Notably, they exceeded Simsons’ own holding of Cheung Kong shares.

107.  According to the books of Simsons (including CB-179), the Disputed CK Shares were held by Simsons in the name of Hadi.

108.  On 5 occasions from 24 January 2007, the 110,000 Disputed CK Shares were sold.

109.  The first batch of 40,000 Disputed CK Shares were sold on 24 January 2007 for $4,331,751.63.  On 24 January 2007, after Simsons received the proceeds, they were withdrawn by Hadi in the amount of $4,320,000 and then deposited by Hadi into a Herman-Hadi joint account.  On 27 June 2013, the said sum together with interest was deposited into another joint Herman-Hadi account to repay the overdraft there.

110.  The second batch of 15,000 Disputed CK Shares were sold on 4 October 2007 for $1,985,344.05.  After Simsons received the proceeds, they were withdrawn by Hadi in the amount of $2,000,000.  Hadi claimed that he had distributed $1.7 million of this to each of the Simsons’ shareholders as a gift in proportions similar to the 6 Brothers’ shareholdings in Simsons, which are different from the Overall Proportions under the CAAA.

111.  The third batch of 25,000 Disputed CK Shares were sold on 10 January 2011 for $3,264,056.39.  Hadi then withdrew the sum of $3,250,000 from the Simsons’ account on 13 January 2011.

112.  The fourth batch and last batch of 20,000 and 10,000 Disputed CK Shares were sold on 18 to 19 January 2011 and April 2011 respectively. In his Answers to Interrogatories dated 22 June 2015[15], Hadi stated that on 20 April 2011, he distributed part of the sale proceeds, mixed with a distribution of Herman’s Emoluments, to Madam Lam and Harry but not HRH.  The amounts distributed were $3,957,826 to Madam Lam and $1,164,067 to Harry.  The ratio of Madam Lam’s share to Harry is exactly the same as the ratio of their shareholdings in Simsons, viz. 3.4 to 1.

113.  In support of their claim that the Disputed CK Shares were part of the alleged Sim Family Trust Fund, HRH rely on, inter alia, the following:

(i)   Notes made by Rudy dated 7 September 2001 and 19 December 2002, CB-212 and CB-231 respectively, showing that the ‘新盛特賬’ (Simsons’ special account) also included the 110,000 Disputed CK Shares which belonged to all the shareholders of Simsons.

(ii)   The discussions of the parties in the 2010 AGM Meeting and the 2011 Meetings.

B.2.3   Herman’s Emoluments and the Directors’ Fees

114.  Herman’s Emoluments and the Directors’ Fees deserve separate consideration, because Hadi has all along admitted that these formed part of the Hou Zhang.  According to Hadi’s understanding, the term “Hou Zhang” was used loosely and it should only include Herman’s Emoluments and the Directors’ Fees.

115.  Herman took salaries and bonuses from Simsons since 1987. The total of Herman’s Emoluments were $3,494,500 in salaries and $415,000 in bonuses from 1987 to 2011.  According to HRH, although it was booked in Simsons’ account as Herman Emoluments, they were not meant to be distributed to Herman personally and should be regarded as part of the alleged Sim Family Trust Fund.

116.  According to Hadi, while SFS was still working in Simsons, Herman’s Emoluments would be paid to SFS.  After SFS left Simsons, SFS transferred the remaining portion of Herman’s Emoluments and the Directors’ Fees to Hadi.  Thereafter, Herman’s Emoluments were paid to Hadi.

117.  Bank records show that a Herman-Hadi joint account received various deposits of Herman’s Emoluments as early as from between July and October 2001 in the amount of $14,250 (which was Herman’s monthly salary of $15,000 less MPF payment of 5%).

118.  I then turn to the Directors’ Fees.  According to Simsons’ records, a total of $2,126,000 of directors’ fees were paid out from the years 1996/1997 to 2010/2011.  Hadi admits that the Directors’ Fees are part of the Hou Zhang.  When SFS left Simsons, he transferred the remaining portion of the Directors’ Fees to Hadi.

119.  There is a slight difference between Hadi and HRH as to whether the total accumulation of the Directors’ Fees in Hadi’s bank account was $960,000 ($120,000 for 8 years) or $1,080,000 ($120,000 for 9 years).

120.  HRH claim that both Herman’s Emoluments and the Directors’ Fees are part of the alleged Sim Family Trust Fund, and that Hadi has not properly accounted for these payments.

B.2.4 The Singapore Jardine Shares

121.  The background to the Singapore Jardine Shares is as follows:

(i)   In around 1994 and 1995, Hadi transferred 62,000 Jardine Matheson shares and 47,369 Jardine Strategic shares to Henry.

(ii)   Of the Singapore Jardine Shares transferred by Hadi, 12,000 Jardine Matheson shares and 30,000 Jardine Strategic shares were held by Hadi on Henry’s behalf.

(iii)   At Hadi’s request, Henry sold part of the shares in May 2008 and then all of the remaining shares on 8 and 13 July 2011.  Henry transferred the proceeds of the May 2008 sale to his bank account in Hong Kong, which Hadi could withdraw for himself since Hadi had authority to operate that account.

(iv)   However, in respect of the proceeds of the July 2011 sale, Henry deposited those into his bank account at Coutts & Co Ltd (“Coutts”).  Rudy told Henry that the Singapore Jardine Shares could have originated from the Sim Family Trust Fund, so Henry refused to transfer such sale proceeds to Hadi.  Henry retains the proceeds in his Coutts account.

122.  HRH’s position is that Hadi has failed to provide a satisfactory explanation for the origins of the Singapore Jardine Shares.  Hadi has failed to render any proper account of the alleged Sim Family Trust Fund.  Further, Rudy recalled that in the early 1990’s, SFS gave him a list of shares in the alleged Sim Family Trust Fund which contained shares in Jardine Matheson and Jardine Strategic.  There is also a note showing that Hadi bought 10,000 Jardine shares with Rudy on 21 December 1987.  This is the same date as Hadi’s bought note at CB-175, though the prices are slightly different.  For all these reasons, HRH submit that it is for Hadi to show that the Singapore Jardine Shares were not acquired using the fund of the alleged Sim Family Trust.

B.3   Hadi’s involvement in handling the assets of the alleged Sim Family Trust Fund

123.  In order to establish their case that Hadi was one of the co-trustees or fiduciaries of the alleged Sim Family Trust Fund, HRH claim that Hadi played an important role in the 1980 Separation exercise and that he was deeply involved in handling or managing the Sim Family Trust Fund, which are denied by Hadi.

124.  First, HRH contend that Hadi was the person who drove the 1980 Separation from Soetikno.  They claim that Hadi’s disagreement with Soetikno was the cause of the separation.  HRH say that it was Hadi who took the Father and Mother to a law firm to execute the deed of revocation dated 16 July 1980 revoking their authority from Soetikno. Hadi wrote similar letters dated 2 August 1980 from the 6 Brothers to Soetikno revoking their authority to him.  Hadi sought information from Soetikno regarding the valuation of New China in a letter dated 9 August 1980. Hadi also prepared the powers of attorney for Rudy and Herman, through Iu & Lai, to authorise Hadi to exercise their voting power in Simsons against Soetikno.

125.  According to HRH, Hadi would not have taken a back seat to SFS during the 1980 Separation when Hadi himself claimed that he was the brother who built up Simsons from the start.  Hadi also had a greater percentage of the assets of the alleged Sim Family Trust Fund than SFS under the Overall Proportions – he was entitled to 24% while SFS was only entitled to 12%.  Hadi would have been personally very keen on making sure that he (and hence the 6 Brothers) got their fair share of the Sim Family’s assets from Soetikno.

126.  Second, HRH argue that the characters of Hadi and SFS and their relationship support that Hadi was involved in the management of the assets.

127.  Hadi has a more dominant personality than SFS.  Hadi is stubborn and aggressive.  He is highly educated, with a Master’s Degree, and had studied in England for 8-9 years.  On the other hand, SFS was educated in Mainland China and did not know English.  SFS was cautious, careful, responsible and organised.  Madam Lam explained at trial that SFS made sure to arrange for the repayment of his debts to his family members in the period leading up to his death.

128.  SFS was more introverted than Hadi, and he rarely spoke.  Indeed, SFS had a more passive character than Hadi, who had a more dominating character. SFS would defer to Hadi on important decisions. Further, Hadi’s company car was a Mercedes Benz whilst SFS’s company car was only a Lexus.

129.  In addition, Hadi and SFS shared the same room in Simsons, talking to each other daily.  Hadi should have known what was going on in Simsons.  Hadi and SFS had the best relationship amongst the Brothers. They would talk to each other about everything concerning the family and the affairs of the company. When SFS became ill, SFS transferred the management of Simsons to Hadi.

130.  HRH allege that although SFS was responsible for the daily administration of Simsons, Hadi always treated Simsons as his own company.  SFS would consult Hadi on investment matters.

131.  In relation to the $15 Million and $7 Million, Hadi had a greater interest in the money than SFS.  He must have known that the $7 Million was left unused (and not for reconstructing the Simsons’ Building), because he was Simsons’ chairman and only permanent director. He signed most of the audited financial statements as chairman.  Given their relationship and Hadi’s admission that SFS would consult him regarding Simsons’ investment decisions, HRH argue that SFS must have consulted Hadi about how to deal with the $7 Million.

132.  There is no serious dispute that, since SFS became ill in the middle of June 2001, he passed the management of the books and accounts of Simsons to Hadi.  It is HRH’s contention that SFS had also passed all the books and accounts of the alleged Sim Family Trust Fund (as opposed to Simsons’ books and accounts) to Hadi prior to his death.

133.  Based on the aforesaid, HRH invite the court to find that:

(i)   The Sim Family Trust Fund existed and is represented in part by the assets mentioned above.

(ii)   Hadi had directly handled the assets in the Sim Family Trust Fund.

(iii)   Prior to his death, SFS did pass on all the assets and books of the Sim Family Trust Fund that he was involved with to Hadi.

(iv)   Thereafter Hadi did take over the entirety of the Sim Family Trust Fund and had made distributions therefrom.

B.4   Relief sought against Hadi

134.  In the pleaded claim, HRH ask for an order requiring Hadi to provide an account of what happened to the alleged Sim Family Trust Fund because he is a trustee or fiduciary thereof.

135.  At the trial, HRH ask the court to award them equitable compensation in lieu of account.  They contend that, in face of Hadi’s denial of the existence of the alleged Sim Family Trust Fund in toto (save for Herman’s Emoluments and the Directors’ Fees), it appears that the process of taking an account may not be fruitful.  It is not expected that after the court rules against him on the existence of the alleged Sim Family Trust Fund, Hadi will then confess and produce a full and accurate account.  Hence, they invite the court to make an award for an appropriate amount of equitable compensation which would represent HRH’s share of the alleged Sim Family Trust Fund.

136.  For the purpose of this Judgment, I do not propose to set out in details the approach suggested by HRH in assessing the quantum of equitable compensation.  Put it simply, HRH are inviting the court to take into account the past and present values of the shares in the alleged Sim Family Trust Fund in assessing the compensation.  For the sum of $7 Million, it is assumed that the same would have been used for investment in listed shares and the court should therefore adopt the present values of the notional shares in assessing compensation.

137.  HRH only put forward their calculation for equitable compensation shortly before the trial.  There are serious disputes between the parties as to:

(i)   Whether HRH should be allowed to put forward their case on equitable compensation, together with the supporting documents, at such a late stage of the proceedings.

(ii)   Whether the court should conduct the assessment of equitable compensation at this trial or on some other occasion.

138.  It is fair to say that the parties have focused on the issue of liability at the trial without spending a lot of time arguing these matters.  In view of my judgment below, it is not necessary for me to resolve these particular disputes on quantum.  If this case goes elsewhere and a contrary view is taken about the liability of Hadi, I prefer to resolve these matters on future occasion when I have the opportunity to consider the full arguments of the parties.

C.    HADI’S CASE

139.  I then turn to Hadi’s case.  He claims that the alleged Sim Family Trust cannot be upheld as a matter of law or fact.

C.1  Attacks on the alleged trust as a matter of law

140.  First, Hadi argues that the alleged general Sim Family Trust lacks the three certainties as an express trust: certainty of words, certainty of subject matter and certainty of object.

141.  HRH’s case on the express trust is based solely on Rudy’s alleged utterance to SFS and Hadi to the effect that the follow-up matters relating to Soetikno would be left over to SFS and Hadi to arrange.  However, Rudy uttered those words in an informal and casual atmosphere.  After uttering those words, Rudy did not explain any further what he meant to SFS and Hadi.  Neither was he clear about Hadi’s attitude towards the words.  Under such circumstances, Hadi claims that there was no certainty of words evincing an intention on his part to act as trustee.  For himself, he does not remember Rudy uttering those words.  The evidence also shows that matters relating to the subsequent division of assets to the 6 Brothers were always handled by SFS.  Hence, it was SFS who assumed the responsibility of dealing with the follow-up matters arising from the 1980 Separation.

142.  Hadi also claims that there is no certainty of subject matter or object.  Would the trust cover only properties left behind by Soetikno or assets already owned by the 6 Brothers prior to the 1980 Separation?  It is HRH’s own case that the 4 Million Shares were already owned by the 6 Brothers at the time when Rudy uttered those words.  Apparently, the words did not cover such property.  Indeed, the words should also not cover any future properties of the 6 Brothers which have nothing to do with the 1980 Separation.  Further, what was the relationship between the alleged Sim Family Trust Fund and the fund of Simsons?  Did the words cover both kinds of funds?

143.  Hadi points that there is another uncertainty with the alleged trust: would the “beneficiaries” be entitled to their shares in accordance with their relative shareholdings in Simsons or the Overall Proportions each of the 6 Brothers was entitled to which was not finalised until later in October 1980?  HRH’s position seems to be that the 6 Brothers’ entitlement to the $4 Million Shares and the Custody Shares should be in accordance with the Overall Proportions stated in the CAAA Table, whereas for the remaining items should be in accordance with the 6 Brothers’ shareholdings in Simsons.  Hadi submits that such distinction is artificial and not supported by any evidence in the present case.

144.  Second, Hadi contends that the alleged express trust was never properly constituted because there was no vesting of the trust properties in him.  According to Hadi, the evidence shows that none of the purported Sim Family Trust Fund constituting assets (i.e. the $7 Million, the $4 Million Shares or the Custody Shares) had ever come into his possession. It was SFS and Rudy (and not him) who were responsible for receiving and applying the $15 Million cash from Soetikno. Further, the $4 Million Shares and the Custody Shares (or the $5 Million Shares), if they existed, were handled by SFS, and there is nothing to suggest that they were transferred into Hadi’s name or that Hadi controlled or managed them at any time.  Hence on the evidence, there was never any proper constitution of the alleged Sim Family Trust insofar as Hadi being its trustee is concerned.

145.  Hadi, quite surprisingly, has not pleaded the defence of laches.  However, he is relying on the defence of limitation on the ground that HRH’s pleaded claim for render of account, without any allegation of wrongdoing or misappropriation of trust assets, is now time-barred under s 4(2) of the Limitation Ordinance, Cap 347 (“LO”).

146.  Insofar as HRH are going to rely on the principle of common intention constructive trust, Mr Jat, SC, counsel for Hadi, argues that there are two fundamental deficiencies in HRH’s pleaded claim. First, HRH have not pleaded, nor demonstrated in evidence, any sufficient “detrimental reliance” as set out in Mo Ying v Brillex Development Ltd[16].  Second, HRH have not pleaded nor shown: (a) what specific and identified properties or assets were “acquired in [Hadi’s] name” that are now allegedly subject to the constructive trust; or (b) when or how has Hadi “assert[ed] ownership” in those specific and identified properties or assets “in reliance on his legal title to the property”, which are necessary conditions for the imposition of a common intention constructive trust as observed by G Lam J in Liu Wai Keung v Liu Wai Man[17].

C.2   Hadi’s case on the facts

147.  Hadi also disputes the existence of the Sim Family Trust Fund as a matter of fact.  Even if such fund were to exist, he was not a trustee of the fund nor had he managed the assets of the fund.

148.  Hadi was about 81 years old at the time of the trial.  According to him, he had undergone 3 heart surgeries in recent years: the first one was an open-heart operation; the second one was the installation of a pace maker; and the third one in June 2016 which was a 4-hours’ operation on 3 of his blood vessels.  According to him, his memory has deteriorated after these operations in particular the third one.

149.  Hadi gave an account about the building up of the wealth of the family business.  According to him, it was Soetikno who wished to break away from the family business which eventually led to the 1980 Separation.

150.  Hadi maintains that he is not aware of the existence of the alleged Sim Family Trust Fund.  He helped the Indonesian brothers to take care of their personal investments in Hong Kong, and he had provided detailed accounts to the brothers for these investments.

151.  According to Hadi, SFS was the managing director and was responsible for the daily management (including its finances and accounts) of Simsons prior to his death.  After Herman moved to live in Hong Kong in 1987, he assisted SFS in looking after Simsons’ finances.  Prior to his resignation in June 2001, SFS was responsible for keeping all the 6 Brothers informed of the affairs of Simsons and sought their instructions or consent on major decisions of Simsons.

152.  In his witness statements, Hadi made the following allegations:

(i)   Rudy (for the Indonesian brothers) and SFS (for the Hong Kong brothers) were the main representatives in the negotiations against Soetikno and they oversaw the asset division and distribution process in the 1980 Separation exercise.

(ii)   Hadi denied any actual knowledge about the so-called Family’s Listed Shares before the 1980 Separation, save to say that after looking at Rudy’s and Herman’s witness statements and the discovery, he believed that there was only one batch of shares worth about $4 to 5 million.  He specifically denied any actual involvement or knowledge of the Custody Shares or the $4 Million Shares.

(iii)   Hadi also denied any actual knowledge of how the $15 Million, or the $7 Million, were received and dealt with.

153.  It has all along been Hadi’s case that it was SFS who handled the assets that are alleged by HRH to form part of the alleged Sim Family Trust Fund.  Since he was not directly responsible for handling those assets, he can only provide the court with his own personal belief as to how these assets came about and how they were handled by SFS.

C.2.1   The 4 Million Shares and the Custody Shares

154.  Having seen the 1980 English Agreement, Hadi believed that:

(i)   The shares written in some of the documents produced by HRH were shares that need to be transferred to Soetikno under Clause 8(a) of the 1980 English Agreement.

(ii)   There were no shares that need to be transferred by Soetikno to the 6 Brothers under Clause 8(b) of the 1980 English Agreement, and he was not aware of any transfer of such shares.

155.  Clause 8 the 1980 English Agreement reads as follows:

“In respect of the share purchases and investment, the parties hereto hereby agree as follows”

(a)   all the shares purchased by [Soetikno] in West Germany in 1968 and 1969 and all shares purchased by [Soetikno] in Hong Kong prior to 21^st February 1973 including all bonus issue rights issue and other benefits or rights appurtenant thereto (if any) shall belong to [Soetikno] absolutely regardless of whether such shares have been registered in the name of [Soetikno] or [the Father] and if any share certificates belonging to this category are now in the possession of [the Father], [the Father] shall immediately deliver the same to [Soetikno] together with signed Instruments of Transfer relating thereto without requesting for payment of consideration compensation damages or interest howsoever.

(b)   all shares purchased in Hong Kong after 21^st February 1973 all such shares including all bonus issue rights issue and other benefits or rights appurtenant thereto (if any) shall belong to [the Father] absolutely whether or not such shares are presently registered in the name of [Soetikno] or [the Father] and if any share certificates belonging to this categories are now in the possession of [Soetikno], [Soetikno] shall immediately after the signing of this agreement deliver the same to [the Father] free of all consideration compensation damages or interest howsoever.

… … …”

156.  The terms of Clause 8 of the 1980 English Agreement are slightly different from those in Clause VIII of the 1980 Chinese Agreement, in particular there is the 1973 Cut-off Date in the 1980 English Agreement.

157.  In opposing HRH’s claim, Hadi disclosed some documents such as CB-6 to CB-9, which, he says, recorded shares purchased by Soetikno using funds of Simsons in July 1978.  These documents appear to relate to the shares which were listed in CB-71.

158.  I will deal with the evidence of Hadi in more details in the latter part of this Judgment relating to the specific findings on the $4 Million Shares and the Custody Shares.

C.2.2    $7 Million

159.  Hadi throughout maintains that he does not know where did the $7 Million go and how it was applied.  On the other hand, it was SFS and Rudy who were responsible for handling the receipt of the $15 Million from Soetikno.  In distributing the Equalisation Money under the CAAA, it was SFS and Rudy who acted as the 6 Brothers’ “agent” (代理人).  Hence, Hadi argues that the evidence points to SFS, rather than Hadi, being the person who received the $15 Million (including the $7 Million) from Soetikno, with SFS and Rudy, not Hadi, being the distributing agents.

160.  After reviewing the documents, he suspects that: (i) part of the $7 Million might have been used for additional payments to Harry after he made a complaint to the Father and Mother about the unfairness of the distribution made to him under the 1980 Separation exercise; (ii) some other part might be set aside for the additional living expenses of the Father and Mother.

C.2.3   $9 Million

161.  Neither does Hadi know very much how the $9 Million in the Herman-Hadi joint account came about.  It was SFS who was responsible for the management of such sum of money.  Further, as admitted by Herman in the 2010 AGM Meeting, he was the one who suggested that such money should be injected into Simsons as a shareholders’ loan, which shows that he had more knowledge about such sum of money.

162.  The $9 Million was already repaid by Simsons to the individual shareholders[18], and so whatever was the source of the $9 Million, such sum of money has already been accounted for.  Again, the money was repaid based on the respective shareholdings of the various shareholders of Simsons and not in accordance with the Overall Proportions under the CAAA.

C.2.4   The Disputed CK Shares

163.  Hadi gave the following evidence about the Disputed CK Shares. In early 1990’s, he wanted to buy a car and SFS suggested that the car should be purchased under Simsons’ name as a company car for his personal use as a director of Simsons.  Out of goodwill, Hadi transferred around $1.3 million, being the cost of such car, into the account of Simsons.  As SFS did not require him to pay for the car, SFS placed the fund into Simsons’ brokerage account and used the same to purchase shares in Cheung Kong (i.e. the Disputed CK Shares) on Hadi’s behalf.  Hence, Hadi claimed that the Disputed CK Shares belonged to him.

164.  According to Simsons’ book, the Disputed CK Shares were recorded as assets under directors’ personal account in the name of Hadi.  Hadi has all along been the person who received the dividends from the Disputed CK Shares.

165.  The Disputed CK Shares were subsequently sold.  Out of goodwill, Hadi distributed parts of the sale proceeds to Simsons’ shareholders.  He also set aside about $300,000 of the sale proceeds in a joint account held with Harry to pay for the sisters’ medical expenses.  He paid $4.3 million into a joint account with Herman with a view to be given out as gift to Simsons’ shareholders.  For the remainder of the sale proceeds, he was also considering gifting a portion of them to Simsons’ shareholders, but that was put to a halt after the commencement of the present proceedings.

C.2.5   Herman’s Emoluments and the Directors’ Fees

166.  Hadi took over the management of Simsons from SFS after the latter’s resignation in June 2001.

167.  Hadi admits the existence of the Hou Zhang. However, it was a concept created by SFS concerning arrangements relating to Simsons’ assets which were not reflected in Simsons’ books and accounts, and were held for or to be re-distributed to all of Simsons’ shareholders.  Such arrangements are to be contrasted with the meaning of “Qian Zhang” (前賬), i.e. Simsons’ front or official books and accounts.

168.  For Herman Emoluments, they were not meant to be paid to Herman. Instead such payments were booked in Simsons as salaries to Herman which would facilitate his visa application to stay in Hong Kong.  The payments were meant to be paid into SFS’s personal bank account for the benefit of the shareholders of Simsons.  After the resignation of SFS and until the termination of Herman’s employment contract on 1 April 2011, Herman’s Emoluments were paid into Hadi’s personal bank account.

169.  According to Hadi, Rudy and Henry were paid directors’ fees as reimbursement for their travelling expenses from Singapore to Hong Kong to attend Simsons’ meetings.  In around 1990 or 1991, an agreement was reached between Rudy, Henry, SFS and Simsons whereby Simsons’ account would continue to book Rudy and Henry as being paid directors’ fees and Rudy and Henry would consent for such fees to be redistributed to all Simsons’ shareholders.

170.  On 16 June 2003 and shortly after SFS’s death, Hadi distributed $1 million to Simsons’ shareholders, which funds Hadi believed were left over by SFS and represented the remaining portion of Herman’s Emoluments and the Directors’ Fees which were not yet distributed by SFS.

171.  As for the period after SFS’s death, Hadi received and accumulated a total of $960,000 representing the Directors’ Fees for the years 2003 to 2011.  This sum is now placed in a joint account in the names of Harry and Madam Lam.  In around 2011, Hadi, through his son Sim Pin John (“John”), proposed that the $960,000 be distributed to Simsons’ shareholders as per the agreed arrangement set down by SFS, but such payment was rejected by HRH.

172.  Herman’s Emoluments from May 2001 to March 2011, which Hadi had received, amounted to $953,000.  Of that amount, Hadi has already distributed to Harry and Madam Lam their respective entitlements, and HRH’s respective distributions are yet to be made pending the resolution of this action.

173.  Throughout these proceedings, Hadi has acknowledged that Herman’s Emoluments and the Directors’ Fees form part of the "Hou Zhang", as he understands it, and is willing to account for them.

C.3   Hadi’s defence to HRH’s claim for relief of account and equitable compensation

174.  Hadi further contends that, even if there was a Sim Family Trust as alleged by HRH, there is no basis for them to ask for an order of general account or equitable compensation against him.  He is not the proper trustee or fiduciary.  The evidence reveals that SFS was responsible for dealing with the trust properties alleged by HRH, and so it should be SFS who should provide an account for the alleged Sim Family Trust Fund.

175.  Furthermore, even assuming that SFS and Hadi were co-trustees of the alleged Sim Family Trust Fund, Hadi would not be automatically liable for SFS’s default in absence of any wrongdoing on his part.

176.  Finally, HRH have to prove causation before Hadi is to be made liable for equitable compensation.  Hadi cannot be held liable for “loss” of any alleged trust property under the custody or control of SFS, unless that particular trust asset made its way to Hadi or there was any breach of duty on the part of Hadi himself which breach was causative of and resulted in loss.  Hadi says that HRH have failed to prove such causation.

177.  Ultimately, Hadi argues, it would be inequitable to order him to provide an account or to pay compensation after so many years, when it is not clear from the evidence that Hadi had agreed to take up the responsibility of a trustee or fiduciary, and it was SFS who was responsible for dealing with the assets of the alleged trust.  In the absence of any allegation of wrongful misconduct or misappropriation of the alleged trust assets in HRH’s pleaded case, it would not be equitable to order any relief against him.

C.4   Hadi’s counterclaim

178.  There are two aspects to Hadi’s counterclaim against HRH.

179.  First, at all material times since 1995, Henry had been holding the Singapore Jardine Shares upon bare trust for Hadi.  Henry had throughout acknowledged his role as trustee for Hadi until June 2011, when the relationship between the brothers deteriorated.  Henry suspected that the Singapore Jardine Shares were purchased by Hadi using the fund of the alleged Sim Family Trust, and so he refused to return the sale proceeds which were still sitting in Henry’s bank account in Coutts.  This part of the counterclaim is less contentious, as the result depends on the merits of the main claim itself.

180.  The second part of the counterclaim is a misrepresentation claim (“the Misrepresentation Claim”).

181.  Hadi says that during the 1980 Separation exercise, HRH had misrepresented to Hadi that BDU and KMC were already given by the Father to HRH and constituted HRH’s personal assets.  They also concealed from Hadi that Soetikno held and the Father beneficially owned 25% in BDU and 75% in KMC.  Under such circumstances, these assets were not available for further distribution and therefore not available to be shared with Hadi in the 1980 Separation exercise, and the 6 Brothers proceeded with the discussions on the basis that the pool of assets to be divided amongst them did not include any interests in BDU and KMC.

182.  At around Chinese New Year in 2011, it was during a walk in Stanley that Harry told Hadi about him being deceived about the true ownership of BDU and KMC.  As a result of the conversation, Hadi searched through the old files in Simsons’ office and uncovered the 1980 English Agreement and the letter written by the Father and Mother dated 9 June 1981 (“the Parents’ Letter”).

183.  Clause 3 of the 1980 English Agreement provides that Soetikno had undertaken to transfer 25% shareholding in BDU and 75% shareholding in KMC to the Father.

184.  According to Hadi, it was only upon discovering the 1980 English Agreement that he was able to consider and understand the 1980 Chinese Agreement in light thereof.  Because of the transfer provision, Hadi together with the Father and the other 5 Brothers had specific rights and beneficial interests in BDU and KMC, which Hadi did not agree to give up nor has ‘lost’.  If not for the alleged misrepresentation, the Father’s interest in BDU and KMC ought to have been included in the 1980 asset division in which Hadi was to have his share.

185.  The agreement of the 6 Brothers in distributing the assets under the CAAA was therefore procured by the said misrepresentation and should be set aside.  Further, Hadi remains entitled to a share of Soetikno’s or the Father’s said interests in BDU and KMC.  Hadi claims that he is entitled to an account for the said interests or alternatively damages.

186.  The second document uncovered was the Parents’ Letter, in which the Father and Mother expressed their view that the asset division was not fair because the brothers in Indonesia would be able to get a share of the assets in Hong Kong, whereas the brothers in Hong Kong would not be able to get a share of the assets in Indonesia.  According to Hadi, this supports that HRH had concealed Soetikno’s and the Father’s interests in BDU and KMC, and as a result the Hong Kong brothers could not obtain any benefit from the Indonesian assets when they discussed their distribution under the CAAA.

187.  Having outlined the respective cases of the parties in some details, I then proceed to assess the evidence presented in this case.

D   ASSESSMENT OF EVIDENCE

D.1   Overview

188.  At the trial, Rudy, Henry, Roy testified on behalf of HRH’s case; Hadi, Madam Yuen Wai Lan (“Madam Yuen”) and John on behalf of Hadi’s case; Madam Lam on behalf of the 2^nd to 6^th Defendants’ case.

189.  The main witnesses are Rudy and Hadi.

190.  The matters relied upon by HRH in support of their claim relate to events which occurred many years ago.  Some of the key potential witnesses such as Soetikno vand SFS were not available to testify at the trial.  The evidence shows that SFS was the person who was mainly responsible for the daily management of the assets alleged by HRH to form part of the Sim Family Trust Fund.

191.  Since HRH did not stay in Hong Kong (save that Herman who came to Hong Kong in 1987), they did not have a complete picture as to what assets that were allegedly entrusted to SFS and Hadi decades ago, and what happened to these assets throughout the years.  It is fair to say that HRH’s case is based, to a great extent, on the information provided by SFS and Hadi to Rudy years ago.  Rudy then made some notes of what was his understanding about the information provided by them.  HRH also tried to make some sense from the documents mainly prepared by SFS with a view to support their case.

192.  As I see it, a lot of the documents relied on by HRH are equivocal in nature.  Apart from SFS, no one had a complete picture about what actually happened.  The parties are just guessing and attempting to reconstruct what might have happened based on some sketchy and equivocal documents. Their contents are open to different interpretations, and so it would be difficult for the court to rely on these documents to speculate what happened about 30 years ago.  Neither can the oral testimony of Rudy add very much to HRH’s case, as there might be misunderstanding in respect of the communications between SFS, Hadi and Rudy.  Some of Rudy’s beliefs are definitely speculations.

193.  It is also clear that, whatever arrangements made by the parties, these arrangements were casual and informal in nature, and I do have serious doubt as to whether there was indeed a Sim Family Trust and that such trust consisted of the assets alleged by HRH.

194.  At the trial, HRH’s counsel, Mr Yu, SC, in his usual meticulous approach, goes through with me the oral and written testimony of Hadi and argues that Hadi is a liar.  His accounts of the events are inconsistent and cannot be true.  Mr Yu also relies on the various “admissions” made by Hadi in the 2010 AGM Meeting and the 2011 Meeting.

195.  There is no doubt that Hadi is a bad witness. He was confused when testifying in court.  He openly disavowed some of his evidence contained in his previous witness statements.  Some of his explanations about the source of the funds or assets of the alleged “trust” and their subsequent whereabouts may not be correct.  I accept that he is an unreliable witness.  As one of his counterclaims is a fact-sensitive Misrepresentation Claim, the court has no difficulty in dismissing his claim in that regard.

196.  However, another important question I have to decide is whether Hadi is a dishonest witness.  Hadi had all along provided proper accounts to HRH for their own personal investments.  If HRH’s case is correct, Hadi, who is a brother that they have trusted and respected for so many years, suddenly decided to misappropriate and conceal all the family assets that should belong to the other brothers, whilst these assets were under the daily management of SFS for so many years.  He also made up and fabricated all sorts of “excuses” and “explanations” with a view to cover up his dishonest conducts.  Strange enough, he even discredited his own case by disavowing his past evidence.  Was he a confused and stubborn old man, or was he a calculated person with a view to dishonestly misappropriate the family assets?  After listening to his evidence for so many days, I prefer to accept the former on the balance of probabilities.

197.  I also have some reservations as to whether the court should attach much weight to the so-called “admissions” made in the 2010 AGM Meeting and the 2011 Meeting.  From the transcripts, it is clear that a lot of people were talking at the same time.  It might be that they were talking at cross-purposes and so it is unsafe for the court to attach too weight to these “admissions”. Further, the parties had different understandings about the term “Hou Zhang”, and one cannot overlook the confusions that might arise from these misunderstandings.

198.  Hadi was an old man when these discussions took place.  The transcripts show that the Hadi was at times confused because he did not know all the matters handled by SFS during his lifetime.  In fact, Hadi had emphasised in these meetings that it was SFS who took care of the relevant matters of which he only had limited knowledge.  Yet he was repeatedly pressed by his brothers for answers.  Apparently, Herman, who assisted SFS in handling various matters relating to Simsons, had more knowledge about the family financial matters.  It was he who suggested to put the $9 Million in the “front” or official account of Simsons, apparently with a view to pay off the loan owed by Simsons under the overdraft.

199.  It is clear that the arrangements between the brothers were quite informal in nature.  I accept that, after the 1980 Separation exercise, there might be some assets that were transferred to the 6 Brothers for their benefit which had not been accounted for.  However, apart from perhaps the $7 Million, I am not sure whether there were other such assets.

200.  Another problem facing HRH is that, even if there were such assets, it is very difficult for the court to ascertain what happened to these assets throughout the years.  It is clear from the evidence that SFS was the person responsible for the daily management of these assets. He was also the person responsible for the daily management of Simsons.  The beneficiaries of the alleged Sim Family Trust Fund and the shareholders of Simsons after the 1980 Separation exercise were the same.  Was it possible that SFS treated these assets as assets of Simsons and dealt with them accordingly? In my judgment, this was a very real possibility.  It is also extremely strange that HRH had not made any enquires, not even friendly ones, with SFS or Hadi as to what happened to the alleged assets throughout the years.  In particular, no such enquires was made before the death of SFS.  This creates great difficulty for the court in trying to find out what happened to the assets.

201.  It was also possible that whatever assets SFS might have held for the 6 Brothers were probably exhausted by the time of his death.  HRH try to rely on the evidence in this case to show that SFS was a responsible and organised person.  Yet it is also their pleaded case that SFS, fraudulently and in breach of trust, transferred his shares in Simsons and the Comfort Garden Property to his family members to defraud the creditors.  The evidence also indicates that SFS was the person who made huge and perhaps irresponsible investments in stocks resulting in substantial losses on some occasions.  If SFS was responsible for the management of the assets and he was the one who caused the loss of such assets, it would not be equitable to hold Hadi responsible for the loss.

202.  This is my overview of the evidence in this case.  I will give further explanations as to why I make these observations.  I first start with the oral and written testimony of the witnesses.

D.2   The evidence of the witnesses

D.2.1    Rudy’s evidence

203.  Rudy is the main witness in support of HRH’s case.  He told the court what he learnt about the $4 Million and the Custody Shares in the 1980’s.  He also told the court the reason why HRH had not asked SFS or Hadi to account for the assets of the alleged Sim Family Trust Fund throughout the years.

204.  Rudy demonstrated no difficulty in understanding the questions put to him.

205.  It is fair to say that there is no serious challenge to Rudy’s honesty.  However, Mr Jat complains that his evidence on some of the key issues is based on purported reconstructions and reinterpretations, rather than personal knowledge of what was actually said or happened at the material time.

206.  This is a fair criticism.  In his evidence, Rudy always referred to his “understanding” and “belief”, which are quite different from personal knowledge or fact.

207.  HRH are putting forward a case that the shares listed in CB-71 and CB-74 represent the shares received by the 6 Brothers from Soetikno in the 1980 Separation exercise.  As to why that was the case, Rudy said that “[there] was no other reason for [SFS] to pass [CB-74] to me”[19].  In other words, the main if not the only basis for Rudy to believe that CB-74 represented what the 6 Brothers got from Soetikno was because “there was no other reason for SFS to pass” the said document to him.  It would be dangerous for the court to act on such belief as there could be a wide array of reasons for SFS to pass the same note to Rudy.  For example, the shares might have been received on behalf of Simsons, and that was why the word “S.S.” was written on the top part of CB-74.

208.  Further, one of the key issues in the present case is whether the $4 Million Shares were treated as shares of Simsons in the 1980 Separation arrangement.  If the $4 Million Shares were treated as Simsons’ assets, such assets should have been dealt with accordingly and not separately as assets of a trust fund.  According to Rudy, he heard that $4 million worth of shares were to belong to the Sim Family.  However, without any factual basis, Rudy claimed that he “understood” that the shares “were not part of the Simsons company”.  During cross-examination, Rudy was unable to provide any convincing explanation for such understanding.  In fact, he admitted in cross-examination that his testimony in this regard was merely an ex post facto explanation trying to put his interpretation of what Hadi had said at the time.

209.  Throughout the trial, there was considerable confusion about the meaning of “S.S.” as appearing in documents such as CB-74.  This is again important as to whether the parties treated the shares in the documents as assets belonging to Simsons or a separate family trust.  Rudy himself acknowledged that “S.S.” was in fact an abbreviated reference to “Simsons”.  However, he also believed that “Simsons” could at the same time be a “by-word” for assets held for the family which was separate from Simsons, a belief which is quite unsubstantiated by evidence.  On the other hand, “S.S.” may also mean “Simsons Special Account” which suggests that the shares were treated as assets belonging to Simsons. These confusions only highlight the fact that the documents are open to different interpretations and the word “S.S.” may carry various possible meanings.  In a way, it shows that Rudy’s subjective belief as to the meanings of the documents may not be true.

210.  Insofar as CB-166 (the 1983 Trial Balance) is concerned, Rudy said he “believes” that it listed shares for the 6 Brothers instead of for Simsons.  The main reason he gave was that allegedly for Simsons’ own shares, SFS would ask a staff to type up the documents.  On the other hand, SFS would personally write out records relating to the Hou Zhang.  However, without an opportunity to study the Simsons’ accounts in some details, there is simply no basis to support such “belief” which to me is quite a reckless assertion or speculation.  This again highlights the danger of reconstructing events which happened many years ago without the input from the key persons who should have more complete knowledge about the matter.

211.  There is also insufficient basis to support Rudy’s belief that the 1984 list of shares at CB-168 shows the shares invested with the use of the $7 Million.  The fact that CB-168 was stapled together with the trial balance at CB-166 is neither here or there.  It remains a speculation on the part of Rudy.

212.  Similarly, it was only Rudy’s “understanding” that $4 million worth of shares were under the direct control or management of SFS and Hadi, when such “understanding” was merely premised on the fact that SFS readily listed out the $4 million shares.  It is hard to understand why the listing of the shares would necessarily lead to such conclusion, in particular people have different ways of doing things and the events occurred many years ago.

213.  There is also no sufficient basis to support Rudy’s belief that there were another batch of $5 Million Shares in addition to the $4 Million Shares.  Just by looking at CB-18 may not lead to such conclusion.  In fact, there is great confusion in the HRH’s case as to whether a separate batch of $5 Million Shares existed for the benefit of the 6 Brothers and whether they were the same as the $1.2 million shares.

214.  There is another aspect of Rudy’s evidence that I cannot quite understand.  He emphasised many times that, in a traditional Chinese family, it would not be right for the younger brothers to confront the elders on financial matters.  Yet in his evidence, he acknowledged that it was SFS who asked him to sign some documents confirming the receipt of dividends relating to the Hou Zhang.  However, Hadi only permitted him to have a receipt for the official Simsons’ dividends and not those from the Hou Zhang.  He questioned why Hadi was so concerned about the secrecy of the Hou Zhang.[20]

215.  Assuming that Rudy knew about the Hou Zhang which consisted of a considerable amount of shares (as alleged by HRH), and that Hadi was secretive about the contents of the Hou Zhang, I wonder why he had not asked Hadi or SFS to give an account much earlier.  At least, he should have asked for SFS or Hadi to provide such account before SFS’s death.  Respect for the elder brothers or reluctance to confront them would not be a reasonable explanation under such circumstances.

216.  Mr Yu argues that HRH’s inaction was reasonable in the circumstances.  They did not need to rely on the trust assets to support their livings.  They had not asked for an account in respect of Herman’s Emoluments, the Directors’ Fees and the $7 Million throughout the years, and so there was nothing unusual for them not to have asked about the other assets of the Hou Zhang.  Even Hadi himself was not keen to ask for an account of the assets that he entrusted to HRH.  Furthermore, since Hadi was the trustee in the eyes of HRH, they considered it unnecessary to ask for an account from SFS prior to his death.  Finally, Hadi would be easily agitated by any challenge to his authority on financial matters, and so HRH did not want to confront him in the past years.

217.  I cannot accept these arguments.  Unlike other assets which had some certainties, the evidence shows that even HRH were not sure about what assets were in the alleged Sim Family Trust Fund in the beginning.  Further, apart from the $4 Million Shares and the Custody Shares, it is HRH’s case that the $7 Million was used to invest in the stock market.  Shares are liquid assets which can be traded in the market.  The track records of Simsons show that SFS had caused substantial losses at times through stock investment.  More importantly, there had been a few great fluctuations in the stock market in the period from 1980 to 2001.  It would be quite difficult for me to accept that Rudy, being a businessman who had considerable investment experience, had not even asked SFS or Hadi what happened to the shares throughout the years, perhaps in a less confrontational manner.  In fact, Hadi had given detailed account to his Indonesian brothers for their own personal investments in Hong Kong, and so HRH should not have felt intimidated about discussing financial matters with Hadi.  Hence in my judgment, HRH’s inaction only shows that they were not sure whether there was indeed a Hou Zhang and what were in the Hou Zhang throughout the years.

218.  Furthermore, it is clear that SFS was the one who managed the assets throughout the years.  He was the person who reported to HRH about various financial matters relating to the family including Simsons. It was very possible that Hadi might not know about the details of the investment.  If they had asked for clarifications from SFS prior to his death, the present litigation might have been avoided.

219.  In fact, Rudy is asking the court to conduct a trial based on the character of Hadi.  According to him, Hadi must have been involved in handling the assets under SFS’s care as: (i) Hadi had a more stubborn and aggressive character; (ii) Hadi was educated in the West when SFS was educated in the Mainland; (iii) Hadi was more sociable; and (iv) Hadi’s company car was a Mercedes Benz whereas SFS’s company car was a Lexus.

220.  In my judgment, it would be dangerous for the court to hold against Hadi based on his character.  Though Hadi and SFS were sitting in the same room, it is clear from the evidence that SFS was the one who was responsible for dealing with the assets allegedly forming the Hou Zhang. Further, according to what Herman told the others in the 2010 AGM Meeting, SFS, whilst he was managing Simsons on behalf of the 6 Brothers, had invested heavily in the stock market which resulted in substantial losses at times. There is no evidence that Hadi was involved in these activities.  Further, such aggressive trading pattern stopped after Hadi took over the management of Simsons’ accounts prior to SFS’s death.

221.  It may be the case that Hadi played a more significant role in the 1980 Separation exercise.  However, the court knows very little about the exact cause for the separation in 1980.  Furthermore, Hadi’s role in the 1980 Separation does not alter the fact that SFS was the one who followed up on the matters resulting from the 1980 Separation, and it was he who was responsible for managing Simsons and the family assets after the separation exercise.

222.  On the other hand, the evidence suggests that Hadi is a man of integrity.  He had made proper accounts to his Indonesian brothers for handling their investments in Hong Kong.  Further, on their own case, HRH did not see it fit to ask Hadi to account for the assets of the alleged Sim Family Trust after so many years.  It was as if the trust assets did not exist. Hence, unless such assets did not exist or they really trusted Hadi as a man of integrity, it is difficult to explain their inaction throughout the years.

223.  For the above reasons, I have great reservation about the reliability of Rudy’s evidence.  His belief is based on sketchy past information provided by SFS or even Hadi.  In my judgment, the court should not attach too much weight to his evidence which may be based on his inaccurate “belief” and “understanding” about events which happened a long time ago.

D.2.2    Henry’s evidence

224.  On the other hand, Henry is only a secondary witness.  His involvement in the 1980 Separation was relatively small as compared with Rudy.  It is common ground that Rudy represented the Indonesian brothers in the 1980 Separation, and Henry played a much lesser role in dealing with Hadi or SFS in the whole exercise.  Henry admitted that his knowledge of the asset division with Soetikno actually came from Rudy.  When cross-examined on his knowledge of the “Hou Zhang” arrangement, Henry also confirmed that he knew very little about such arrangement.

225.  Henry was quiet and soft-spoken.  He demonstrated some difficulty in understanding the questions put to him.  Being the kind of person who would like to stay in the backseat, I do not accept that he knows much about what happened in the 1980 Separation.  His evidence is therefore of limited value.

D.2.3    Roy’s evidence

226.  Roy is the son of Rudy.  He works in the finance industry in Singapore.

227.  Roy did not have any personal knowledge about the dispute between his father and his uncles.  He gave evidence about the distribution of dividends relating to Simsons after SFS’s death.  He also recalled an incident in around 2007 where Hadi mentioned the Cheung Kong shares and Sun Hung Ki Properties shares when he made enquiry with Hadi about the Hou Zhang.  Hadi also refused the request to wind-up the Hou Zhang.

228.  Roy was also responsible for taking the audio recording of the 2010 AGM Meeting.

D.2.4    Herman’s written evidence given prior to his death

229.  Herman made a witness statement to the court. Unfortunately, he passed away before the trial and so the court can only consider the contents of his witness statement as a piece of hearsay evidence.

230.  Herman came to work in Hong Kong in 1987.  Hadi claimed that Herman was directly involved in the handling of the $9 Million and had knowledge of the Hou Zhang.  On the other hand, Herman insisted that he was alienated by Hadi and SFS.  He sat in a desk outside the room shared by Hadi and SFS.  He was not even permitted to use the executive room when it was left empty, which Hadi saved it for the use of his son Raymond.  In the end, Herman did not want to argue with his brothers and so he kept to himself.  Herman’s role in Simsons was reduced to signing documents.  He was not given explanations about the documents and did not bother to ask.

231.  Without an opportunity of cross-examining Herman, I do have some doubt about the reliability of his evidence.  Herman came to Hong Kong in 1987 and worked in Simsons for a long time.  Prior to the 2010 AGM Meeting, Herman had raised no queries about the Hou Zhang at all.  Even at that particular meeting, there was never any mention by Herman of the assets (in particular the shares) that the 6 Brothers had received from Soetikno which allegedly formed part of the Sim Family Trust Fund.  I do not quite understand why Herman had not made any complaints throughout the years.  Furthermore, if he had been alienated by SFS and Hadi, this should have alerted him about the possible mishandling of the alleged Sim Family Trust Fund, and yet he had kept silent without raising any complaints, whether to the brothers in Hong Kong or those in Indonesia or Singapore.

232.  In fact, the transcripts of the 2010 AGM Meeting show that Herman did have considerable knowledge about the alleged Hou Zhang.  First, he revealed that SFS had a lot of Hou Zhangs.  It was also Herman who suggested to use the $9 Million to pay off the overdraft loan owed by Simsons.  Herman claimed that he only learnt about the $9 Million from Madam Yuen.  However, as Madam Yuen could not recall such incident and Herman was not available for cross-examination, I prefer to accept Madam Yuen’s evidence in this regard.

233.  Further, according to Herman, SFS had invested in stocks in an irresponsible manner thereby incurring substantial losses.  Even worse, SFS relied on heavy bank loans to finance the investments.  Under such circumstances, there was a real possibility that, if there were assets in the alleged Sim Family Trust Fund, it was SFS who mishandled the assets that were entrusted to him.  In fact, Herman, in the 2010 AGM Meeting, mentioned that he had confronted SFS (but not Hadi) on such matter, but SFS simply ignored him.

234.  It is also not disputed that Herman was independently wealthy with his own investments in shares and properties.  He was definitely doing well in managing his own personal finances, which does not sit well with his evidence that he would just bear with whatever unfair or unreasonable treatments by his elder brothers without raising any complaints.

D.2.5    Hadi’s evidence

235.  I then turn to Hadi’s evidence.  It is certainly a challenging task for the court to assess whether he was a truthful witness who was confused most of the time in view of his age and health condition, or that he was a calculated person who had fabricated various lies with a view to conceal the whereabouts of the assets of the alleged Sim Family Trust.

236.  Mr Yu strongly argues that Hadi was a bad and unreliable witness.  He told the court a pack of lies.  He was evasive all the time, using a question to deflect the question put to him or shifting the blame to his poor memory.  Hadi blamed his memory loss on his heart condition including strokes, and yet he was able to give detailed factual accounts in his first and supplemental witness statements before his major heart surgeries.  During his cross-examination, he strenuously denied any knowledge that the $7 Million was originally supposed to be used for the construction of the New Simsons Building, and yet he was able to confirm such fact easily during re-examination.  Hadi had no hesitation in making up stories whenever he was caught in a difficult situation.  Hadi also abandoned things that he said in his witness statements whenever he felt that they were going against him, for examples, there were confusions in his evidence about the following matters: (i) whether the Hou Zhang was for the benefit of the 6 Brothers or SFS and Hadi only; (ii) whether there were funds transferred from Indonesia to Hong Kong which Hadi invested in the stock market; and (iii) whether Soetikno had used Sim Family’s funds to buy shares in Hong Kong.

237.  In a way, HRH have to pitch their case so high. Without establishing Hadi as a liar or a dishonest person, it would be quite difficult for the court to order any equitable relief against Hadi after so many years, in particular it was SFS who was responsible for managing the assets of the alleged Sim Family Trust Fund.

238.  There is some weight in Mr Yu’s observations and Hadi shows some of the hallmarks of a bad witness.  But despite the able submissions of Mr Yu, I am not convinced that Hadi is the kind of person who would fabricate all the lies with the intention of misappropriating the assets of the alleged Sim Family Trust Fund.  He had been subjected to vigorous and meticulous cross-examination by Mr Yu for many days in the witness box.  Though his evidence is not free from difficulties, I finally have to conclude that Hadi was not lying in the witness box.

239.  In my judgment, the incoherence in his evidence can be explained by a number of factors.

240.  First, he was 81 years old when he testified in court.  He was also approaching 80 when he made the various witness statements.  Mr Jat seems to suggest that Hadi’s memory was affected by his poor health and mental condition after the 3 heart surgeries.  However, there is no proper medical evidence before the court to substantiate these allegations, and so it would not be right for the court to make any speculation about the actual effect of these operations on his memory. Despite that, it is beyond dispute that Hadi was aged about 81 when he testified at the trial.  The court is entitled to take into account generally the effect of aging and the long lapse of time in considering the credibility of his evidence, in particular HRH waited for a long time before commencing the present proceedings against him.  The fact that Hadi kept on repeating evidence which he told the court a few moments ago clearly show the effect of aging on the quality of his evidence.

241.  Though he might appear to be energetic at times, Hadi was confused most of the time at trial.  He kept on reminding the court that there was an important thing he had to tell for the first time, i.e. the walk with Harry at Stanley, which he only told the court a few minutes before. On a number of occasions, he insisted that he was giving testimony on a “new” topic which was simply a repetition of his previous evidence a few moments ago.

242.  Another obvious instance of confusion is about the time when he was in Indonesia.  In the overall scheme of events, this is a matter which obviously has little relevance to present proceedings.  Yet he kept on telling the court that he was in Indonesia but the evidence clearly suggests that he was not.  There is simply no point for Hadi to fabricate the evidence in this regard, and I find that he was simply confused about the sequence of events which happened long time ago.

243.  Second, one has to take into account Hadi’s character in assessing the quality of his evidence.  He is definitely a stubborn person who jumps into conclusions easily, an observation which also applies to Rudy.  He only said what he wanted to say.  Hadi, rightly or wrongly, was obsessed with the idea that he had been unfairly treated in the distribution of assets between the 6 Brothers during the 1980 Separation.  He made no attempt to hide his feelings.  This clouded his judgment and perception of events which happened many years ago.  Affected by his own sense of righteousness, he always voiced out suggestions and beliefs which might not be true.  Unfortunately, these became facts to him and he was living in a fantasy of his own.  He simply wanted to vent his grievances against HRH, which resulted in Hadi making many rambling thoughts which sometimes do not make much sense.

244.  I accept that Hadi only had limited knowledge about the various assets handled by SFS.  As indicated by him in the 2010 AGM Meeting, he did not have much knowledge about the Hou Zhang until SFS passed the account to him before his death.  The problem with Hadi is that, with that limited knowledge, he tried to, perhaps recklessly, reconstruct events which occurred long time ago.

245.  It is true that Hadi made some positive assertions in his witness statements prepared before the major surgeries.  However, taking into account his stubbornness, his reckless attempts to reconstruct events in the past, the long lapse of time and the state of confusion he demonstrated in the witness box, I doubt whether the court can attach much weight even to these earlier assertions reconstructed and provided by Hadi before his surgeries.  In fact, the transcripts of the 2010 AGM Meeting show that Hadi was at times confused in that particular meeting.

246.  After all, I do not find Hadi to be the kind of person portrayed by Mr Yu.  Hadi had helped HRH to take care of their stock and property investments in Hong Kong throughout the years and Hadi had provided them with proper account of their investments.  Though he may be mean and stubborn, I do not find him to be the type of person who would take unfair advantage of others.  If he is indeed such kind of person, I find it extremely surprising that, based on HRH’s own case, they had not asked Hadi or SFS to account for the family assets throughout the years.  Respect for the authority of the elder brothers in a traditional Chinese family is not a sufficient reason for them not to ask for accounts unless they also believed that SFS and Hadi were trustworthy persons. Further, HRH’s attack on the integrity of Hadi does not sit well with the fact that Hadi was prepared to distribute at least part of the sale proceeds of the Disputed CK Shares to some of the family members.

247.  Mr Yu submits that since Hadi took the view that he was unfairly treated in the 1980 Separation, that was the motive for him to conceal the assets of the alleged Sim Family Trust Fund.  Again I do not accept such observation.  It still cannot explain why HRH trusted Hadi so long before the deterioration of the relationship.  As mentioned above, there is evidence to support that Hadi is a man of integrity.  Further, the books of Simsons show that it had on some occasions incurred substantial losses on the trading of stocks and there were many crises in the stock markets throughout the years.  As mentioned in the latter part of this Judgment, it was unlikely that there was anything left in the alleged Sim Family Trust Fund, which I do not find it existed, when SFS passed the Simsons’ account to him prior to his death, except perhaps Herman’s Emoluments and the Directors’ Fees.

248.  Hadi had demonstrated certain frankness in his evidence.  He readily agreed to make admissions which might not always be favourable to his case.  The following are some of the examples:

(i)   Hadi enjoyed a good relationship with SFS. Though SFS was responsible for running Simsons, he would have helped him to run the company when SFS was not there.

(ii)   Hadi agreed that if SFS would have handed documents to some other person for safe custody, he would be that person. 

249.  Another example of his genuineness and confusion is that Hadi repeatedly said he did not agree with what was written in his witness statements, even when those parts were clearly in his favour.  For instance, he denied his witness statement on the first day of his cross-examination concerning whether the arrangements of Simsons’ “front accounts” and “back accounts” were well known to Sim Family’s members.  It is obvious that he was not able to recall the details of his statement, but did not attempt to hide it.

250.  In his evidence, Hadi claimed that he did not know much about the assets allegedly forming part of the Sim Family Trust Fund. He alleged that it was SFS who was responsible for taking care of those assets.

251.  Mr Yu argues that this could not have been the case.  Hadi is a more sophisticated and dominant person.  He was the brother who built up Simsons and it was he who arranged SFS to get a job in Simsons. He was also the person who drove the 1980 Separation from Soetikno and he played a significant role in the Separation process.  He had a significant share in the arrangement under the 1980 Separation, and so it is quite unbelievable that he did nothing to find out what happened to some of the assets such as the $7 Million which was clearly not used for the construction of the New Simsons Building.

252.  Again there is some weight in these observations.  However, these challenges mainly relate to the role played by Hadi in the management of the alleged Sim family Trust Fund and the whereabouts of the $7 Million, and I will deal with these issues in the relevant parts in the following Judgment.[21]

253.  Further, Mr Yu asks the court to draw adverse inferences against Hadi from his failure to comply with his discovery obligations.  He submits that there were numerous documents relevant to the alleged Sim Family Trust that must have existed.  They would have been kept in Simsons’ office and must have been passed to Hadi by SFS.  As Hadi failed to produce these documents, the court should draw adverse inferences against him that he must have something to hide.

254.  In my judgment, it would be unsafe for the court to draw such adverse inferences as there could be a number of reasons to explain the absence of those records from Simsons’ office.

255.  One possibility was that SFS had disposed of the records he had kept before he passed away.  It is the HRH’s pleaded case that SFS was the person who was in breach of trust or fiduciary duties.  Knowing that the beneficiaries of the alleged Sim Family Trust would ask him to account for the trust assets, SFS transferred his shares in Simsons to his children and the Comfort Garden Property to his wife with the intent to defraud the creditors.  So far as the claim against Hadi is concerned, there is no express claim for breach of trust or fiduciary duties.

256.  HRH allege that the Sim Family Trust Fund was originally managed by Hadi and SFS.[22] Alternatively, the fund was managed by SFS initially but it was passed to Hadi upon SFS’s death.[23]  In either case, Hadi would have to provide an account to HRH about the assets of the Sim Family Trust Fund.

257.  From the pleading, it seems that HRH accept the possibility that the Sim Family Trust Fund was managed by SFS before his death, and he acted fraudulently in breach of trust and fiduciary duties by transferring his own or the trust properties to his family.  If that was indeed the case, what is the basis for HRH in saying that SFS must have kept proper records of the Sim Family Trust Fund and that he would have passed the documents to Hadi?  If someone acted fraudulently with a view to defraud the creditors, would he have kept a proper record of the trust properties under his management?  If HRH’s case against SFS is correct, Hadi would also be a beneficiary of the alleged Sim Family Trust, what makes HRH think that SFS would not have hidden such documents from Hadi as well?  One must not forget that Herman had made some allegations against SFS for mishandling the $9 Million and the various Hou Zhangs in the 2010 AGM Meeting.

258.  There may also be other more innocent reasons to explain the absence of the documents.  Some possibilities were:

(i)   Since there was no Sim Family Trust existed in the first case, SFS did not see the need to keep the documents.

(ii)   The assets had all along been treated as the assets of Simsons, and so there were no separate records for those assets.

(iii)   SFS might have simply misplaced or disposed the documents by mistake.

259.  A further possibility was that those records, whilst kept at the Simsons’ office, were destroyed by water or fire damage in 1999.

260.  Mr Yu complains that such an excuse was an afterthought.  HRH had pressed for discovery of documents as early as February 2012, but Hadi did not mention the fire until March 2017.  Madam Yuen did testify about the fire but her evidence as to what might have been damaged is vague and unclear.  Further, Hadi failed to call the relevant staff to testify at the trial.

261.  I do find it necessary to address these observations in great details, except to say that this was a possibility which cannot simply be ignored.  There is no serious dispute that a fire broke out in Simsons’ office in about 1999.  The most relevant person who can testify about such matter was SFS himself, but he was not available as a witness at the trial.  In my judgment, Hadi does not have to prove positively that the documents had been destroyed at the fire.  The issue here is whether the court should draw adverse inferences against Hadi for his failure to produce certain documents.  As SFS bore the main responsibility for the preparation and safe-keeping of these documents, and there may be numerous possibilities as to why the documents cannot be located by Hadi now, it would not be appropriate for the court to hold against Hadi for the unavailability of these documents after so many years.

262.  Furthermore, Herman was at the Simsons’ office most of time until 2009 or 2010, but he never suggested that Hadi had hidden any relevant documents.

263.  In the cross-examination of Hadi, there was some confusion as to the actual effort that had been made by Hadi to locate the “missing documents”.[24] In my judgment, such kind of argument cannot take HRH’s case any further.  As the documents relate to events which occurred many years ago and efforts had been made by the family members of Hadi to locate the relevant documents, I do not accept that Hadi had deliberately ignored his duty to locate the relevant documents for the purpose of this case.

264.  It also appears that HRH are placing particular reliance on the personal ledgers which Hadi prepared for Henry.  HRH suggest that given Hadi had prepared such comprehensive ledgers for Henry, Hadi must also have prepared similar ledgers for Rudy and Herman.

265.  Again I cannot accept such argument.  The evidence of the case shows that there were mutual dealings between Henry and Hadi relating to, for example, the management of a property at Victoria Court and some Jardine shares, and that explains why there were records relating to these matters.  For Rudy, there were detailed records of list of shares held by Hadi on Rudy’s behalf.  There was therefore no need to prepare any ledger since the lists of shares already make it clear the extent of the assets held by Hadi for Rudy.  Similarly, Hadi helped Herman to hold shares when Herman was still in Indonesia.  However, after Herman came to Hong Kong in 1987, Herman stopped asking Hadi to hold shares on his behalf. There was therefore no need for Hadi to prepare any ledgers for Herman.  In fact, the provision of such comprehensive ledgers supports that Hadi is and was a man of integrity and he had no intention to misappropriate the assets belonging to his brothers.

266.  Mr Yu submits that Hadi had told the court a pack of lies in respect of various matters including, inter alia, his explanations about $4 Million Shares.  Further, Hadi could not give a satisfactory account about the various sums of monies and assets handled by SFS or him.  Mr Yu therefore invites the court to draw adverse inferences against Hadi by reason of the making of these lies or the absence of convincing explanations.  I would address these allegations later in this Judgment when I deal with the various specific findings about the alleged assets of the Sim Family Trust Fund.[25]

267.  Heavy reliance is also made on the “admissions” made by Hadi during the 2010 AGM Meeting and the 2011 Meeting.

268.  In my judgment, one should be cautious about the accuracy or reliability of these so-called “admissions”.  They were made in heated and confused exchanges between the brothers when they were talking about somethings which occurred many years ago.  There is no serious dispute that the terms of “Hou Zhang” and “Simsons’ Special Account” were first used by SFS. Without the testimony of SFS, the court would not be in a position to know their exact meanings.  These terms were used loosely, and it is therefore not surprising that the brothers might have different understandings about their meanings.  Further, the transcripts show that Hadi did not have a clear picture about the financial matters handled by SFS.  In fact, Madam Yuen confirmed that SFS did, prior to his death, ask her to brief Hadi about the details and the operation of Simsons’ financial accounts.[26] Yet he was repeatedly pressed by his brothers to account for something that he had only limited knowledge.  In such circumstances, it would be dangerous for the court to rely on these “admissions” against Hadi.  After all, if Hadi is the kind of person portrayed by Mr Yu, I find it extremely strange that HRH had not made any attempt to find out more about the contents of the Hou Zhang throughout the years.

269.  I agree with Mr Yu that Hadi is a bad witness. There are difficulties with his evidence, some of which I agree are quite difficult to reconcile.  Nevertheless, taking into account his age, his general failing health condition, his stubborn and opinionated character and the long lapse of time, I do not accept that Hadi had lied deliberately with a view to cover up his misconducts.

270.  One must not lose sight of the fact that the Hou Zhang, including whatever were the assets, had all along been handled by SFS prior to his death.  Given such fact, there could only be two possibilities if Hadi was dishonest.  One was that Hadi conspired with SFS to misappropriate the family assets.  That might be unlikely as no one has questioned the integrity of SFS at the trial.  The alternative was that Hadi wanted to misappropriate the assets after the account was passed to him by SFS.  If that was case, it would mean that SFS, prior to his death, would have known about his interests in the substantial assets of the alleged Sim Family Trust Fund.  It would also mean that SFS did not try to use his share of assets to ease his financial difficulties before his death.  More importantly, I cannot understand why SFS would not have informed his family members about his interests in the alleged Sim Family Trust Fund.  As further discussed in the latter part of this Judgment, SFS had made detailed arrangement in relation to his assets prior to his death, and it is very difficult for me to accept that, if there was indeed the Sim Family Trust Fund, he would simply have left it to Hadi to operate the fund without informing his family members his interests in and the details of such fund.

271.  Hence, even with the difficulties of his evidence, I do not accept that Hadi is or was a dishonest person.

272.  In summary, I make the following findings about Hadi’s evidence:

(i)   I accept his evidence that it was SFS who managed the family assets after the 1980 Separation and he knew very little about what happened to these assets.

(ii)   I attach very little weight to his reconstructions or explanations about events which happened many years ago.

(iii)   I find that Hadi was confused most of the time in the witness box.

(iv)   I do not accept that Hadi had deliberately lied in the witness box or in his witness statements or in his Answers to Interrogatories.

(v)   I do not find that Hadi had the dishonest intention to misappropriate any family assets belonging to the other brothers.

D.2.6    Madam Yuen’s evidence

273.  At the trial, Madam Yuen, who was the accounting clerk of Simsons, gave evidence in support of Hadi’s case.

274.  She was employed by SFS to join Simsons to work as an accounting clerk in 1995.  She was aged about 56 at the trial.

275.  She confirmed that when she joined Simsons in 1995, Hadi and SFS shared a room in Simsons’ office, while Herman’s working desk was in the central common office area.

276.  Madam Yuen reported to SFS before his resignation in 2001.

277.  Hadi had not taken part in the management of Simsons’ books and accounts before 2001.  When SFS was ill in 2001, he asked Madam Yuen to brief Hadi about various matters relating to the financial accounts and practice of Simsons.

278.  Madam Yuen gave evidence about Herman’s Emoluments and the Directors’ Fees handled by her after she joined Simsons in 1995.

279.  She knew nothing about the $15 Million received from Soetikno in 1980.  Neither did she know anything relating to the $9 Million loan provided by Simsons’ shareholders to Simsons.

280.  In respect of the Disputed CK Shares, SFS instructed her to treat those shares separately.  Though the shares were held in the name of Simsons, SFS told her to put them in the personal account in favour of Hadi.

281.  Madam Yuen does not have any direct knowledge about the dispute between HRH and Hadi.  However, as she had been working under SFS for such a long period of time, her evidence does shed some light as to the respective roles played by SFS and Hadi relating to the management of Simsons’ account and the Hou Zhang.  Madam Yuen appears to be an unsophisticated person, and I do not accept that she had fabricated her evidence with a view to benefit Hadi’s case.

D.2.7   John’s evidence

282.  John is the eldest son of Hadi.

283.  John made an affirmation in the middle of the trial in response to HRH’s allegation that Hadi had failed to comply with his discovery obligation.

284.  According to John, his family had made serious attempts to locate the documents requested by HRH in respect of the alleged Sim Family Trust Fund and the Hou Zhang.  He confirmed that apart from the documents disclosed, they could not find any other relevant documents.

285.  I have no reason to doubt the credibility of John’s evidence.  As I have mentioned above[27], Mr Yu, in the course of cross-examining Hadi, made a suggestion that Hadi had failed to take the necessary steps to locate the documents relevant to this case.  As I see it, Hadi was only confused when he said he made no such attempt to locate the relevant documents.  Having heard John’s evidence, I am satisfied that Hadi and his family had made all efforts to find the documents requested by HRH.

D.2.8    Madam Lam’s evidence

286.  Madam Lam also testified at the trial before HRH finally decided not to pursue the claims against her and SFS’s Family.  Like Madam Yuen, Madam Lam is an unsophisticated person.  She had great difficulty in understanding the questions put to her, and she also had problems in expressing herself.  Not surprisingly, she felt very aggrieved for being dragged into this litigation after so many years and after the death of SFS.

287.  Being in a traditional Chinese family, SFS told her very little about what happened in Simsons and the financial matters concerning the 6 Brothers.  Suffering from depression, she also forgot a lot of things in the past.  She could confirm that SFS was a responsible person. Before his death, SFS asked Madam Lam to repay the debts he owed to Rudy and the Mother.

288.  In my judgment, one should not attach too much weight to Madam Lam’s evidence.  Though there is no serious challenge to her honesty, she forgot a lot of things in the past and she knew very little about the financial affairs in the family.  Hence, her evidence is of limited value.

D.3   Specific findings on certain assets allegedly forming parts of the Sim Family Trust Fund

289.  Having addressed the credibility of the witnesses, I then proceed to deal with the various factual issues identified by the parties which are crucial for the court in determining the merits of this case.  As mentioned above, the exercise is a challenging one.  The court has to try to find out what happened many years ago without the assistance of some potential important witnesses.

D.3.1   Whether there were separate $4 Million Shares after the 1980 Separation which were for the benefit of the 6 Brothers?

290.  It is HRH’s case that the 4 Million Shares would not need to be transferred under Clause VIII of the 1980 Chinese Agreement because they were already under the control of the 6 Brothers’ side before the 1980 Separation.

291.  According to Rudy, it was Hadi who prepared CB-21.  Apparently, this document listed out the assets to be negotiated under the 1980 Separation.  It referred to ‘新盛連股票’ (Simsons plus stocks) in the sum of $20 million.  Rudy did not know what were those $4 million shares and he therefore asked SFS about the same.  Rudy then drew up CB-16, and his understanding was that the $4 million shares described therein belonged to the Sim Family and not Simsons.

292.  As mentioned above, the problem with Rudy’s evidence is that there is much room for error in his understanding.  Rudy accepted in cross-examination that the aforesaid understanding was his ex post facto explanation trying to put his interpretation of what Hadi and SFS said at the time.  Rudy had never asserted any positive knowledge that anyone had told him that the $4 Million Shares were to form part of the Hou Zhang or were to belong to the 6 Brothers after the assets division exercise.

293.  Rudy relied heavily on the list prepared by him about the $4 Million Shares, i.e. CB-16.  However, CB-16 is more or less identical to the list written down by SFS at CB-12.  According to Hadi’s remarks written at the bottom of CB-12 (the original produced as Defence Exhibit 1 (“DE-1”)), those were shares to be handed over to Soetikno under the 1980 Separation.  Even though Hadi thought that some of the shares did not belong to Soetikno, he nevertheless handed those shares over to SFS presumably for SFS’s further transfer to Soetikno.  He therefore wrote down the following on that note:

“這份單是星兄所列交哥哥的，但已有∆符號提示不是他的。

雖為此我已照單交足36000股之九巴。”

(English translation: “This list is prepared by SFS to be handed over to the elder brother, but stocks with ∆ do not belong to Soetikno.  Nevertheless, I had complied with the list and handed over 36,000 shares of China Motor Bus”)

294.  Mr Yu attacks the authenticity of DE-1 which contains the remarks written by Hadi.  But in my judgment, there is insufficient basis to suggest that Hadi’s handwritten remarks as shown in DE-1 were not made contemporaneously or did not otherwise reflect the truth.  First, the paper is itself aged with rusted staple marks, which supports that it is a genuine “old” document.  Second, DE-1 is a (third) photocopy of another (second) photocopy of the original (first) list of shares.  Hadi’s handwritten remarks were made on the “second photocopy” which was then photocopied.  Third, HRH have never suggested in Hadi’s cross-examination that Hadi had deliberately put forward a false version of events in respect of DE-1.

295.  In fact, there was a note produced by Hadi, i.e. CB-13, which seems to suggest that that the list of shares written down by Rudy were the shares to be handed over to Soetikno under the 1980 Separation exercise.

296.  Rudy accepted that such document was a preliminary draft written by SFS in relation to the division of assets with Soetikno.  The upper part of the document refers to assets to go to the 6 Brothers, whereas the lower part of the document refers to assets to be given to or kept by Soetikno.  According to the upper part, Simsons and Hock Hong were both to be kept by the 6 Brothers without distributing any interest thereof to Soetikno.  On the other hand, item 2 of the lower part indicates that all Hong Kong shares “(SS HH 除外)” (SS HH excepted) were to be given to Soetikno.  On a plain reading of this clause, it shows that all Hong Kong listed shares would be given to Soetikno, apart from those held by Simsons or Hock Hong (since Soetikno would get no share in these two companies as part of the 1980 asset division exercise).

297.  This arrangement would be consistent with the handwritten remarks of Hadi on the right hand side, which read:

“已明白指出新盛及福豐之股票不包括在內中巴是福豐買的股票是父親經手的，福豐付款，父親可作證人，一向是福豐之股票”

(English translation: understood that it did not include the shares in Simsons and Hock Hong; the China bus shares purchased by Hock Hong was handled by the Father, it was paid by Hock Hong, the Father can be a witness, and they have all along been regarded as shares of Hock Hong)

298.  Hadi’s handwritten remarks suggest that there were some stocks which, although might not be registered under the companies names, were bought using the funds of Hock Hong or Simsons, and accordingly should not be given to Soetikno.

299.  In fact, Rudy confirmed that, as the basis of the negotiations with Soetikno, the shares of Simsons and Hock Hong were to be retained by the respective companies and were not to go to Soetikno.

300.  For these reasons, documents such as DE-1 and CB-13 do support that the shares written by Rudy in CB-16 and CB-26 were shares that had to be transferred to Soetikno in the 1980 Separation exercise.  Since Rudy himself had only limited knowledge about the source of the $4 Million Shares and how they were treated in the 1980 Separation exercise, I do not accept that there were separate $4 Million Shares for the benefit of the 6 Brothers.

301.  At the very least, these documents are equivocal and may support either party’s case.  The problem is that after so many years, it would be dangerous for the court to rely on these equivocal documents to conclude that there were a separate batch of the $4 Million Shares for the benefit of the 6 Brothers.

302.  There was another possibility.  The $4 Million Shares, if they existed, might be treated as shares owned by Simsons in the 1980 Separation exercise and dealt with as such after the separation.

303.  During the negotiations for the separation, there is some evidence to show that the valuation of Simsons included the listed shares it held, that was why the phrase “新盛連股票” (Simsons plus stocks) appeared in CB-21, a document relied on heavily by HRH.  Even Rudy in his cross-examination could not deny that.

304.  According to the CAAA Table, the valuation of Simsons by that time was $16 million.  There was a professional valuation of the then Simsons Building as at 1 April 1980 done by A G Wilkinson in the sum of $12 million.  In such case, it was possible that the valuation of Simsons of $16 million already included the $4 Million Shares, i.e. $12 million for the then Simsons Building plus the $4 Million Shares, a conclusion which seems to be supported by Rudy himself in his own witness statement^[28]. In fact, Rudy, in his own cross-examination, admitted that at the time of the negotiations, there was some suggestion by his brothers that the value of the then Simsons Building was $12 million.  If that was the case, there were no separate $4 Million Shares for the benefit of the 6 Brothers as such shares had already been booked under the account of Simsons.

305.  Mr Yu submits that this would be inconsistent with the information provided in the other notes such as CB-18, CB-19 and CB-29, which suggest that the final valuation of the 1980 Separation put Simsons and the $4 Million Shares at $20 million.  There is also no evidence that the AG Wilkinson’s valuation was available and used during the 1980 Separation.  Even if it was, the remaining $4 million could not have included both the alleged batch of the $4 Million Shares in Simsons’ official books and Simsons’ other real properties.  The evidence shows that Simsons owned other valuable properties by that time.  Further, if the term “新盛連股票” (Simsons plus stocks) represented shares owned by Simsons, there was no reason for Hadi to record them separately in the relevant separation notes.

306.  This may be true.  The problem I want to highlight is that there may be many possibilities by looking at the documents. Without someone who can provide the court with the details of the negotiations for the 1980 Separation, it would be unsafe for the court to speculate on the contents of these documents.

307.  Further, if there were a separate batch of the $4 Million Shares for the benefit of the 6 Brothers in 1980, I cannot understand why the 6 Brothers had not included these shares in the CAAA Table.  According to HRH, these shares were already under the control of the 6 Brothers prior to the separation and so it was not necessary for Soetikno to transfer such shares to them.  With the shares already under their control, I find it hard to accept that the 6 Brothers just ignored these shares in their own division exercise.[29]

308.  Mr Yu submits that Hadi had made at least 5 lies in respect of the $4 Million Shares and the court should therefore draw adverse inferences against him:

(i)   DE-1 does not show that the $4 Million Shares were returned to Soetikno as claimed by Hadi, rather it only shows that the list itself was given to Soetikno.

(ii)   There is inconsistency in Hadi’s evidence as to how the China Motor Bus and Hong Kong Land shares as referred to in DE-1 had been handled.  Whatever accounts given by Hadi are lies because Hadi failed to mention those in his Answers to Interrogatories.

(iii)   Hadi positively claimed that the $4 Million Shares had been returned to Soetikno, whereas in his cross-examination he was not certain whether it was indeed the case.

(iv)   There is confusion in Hadi’s evidence as to whether he in fact handled any of the $4 Million Shares.

(v)   There is confusion in Hadi’s evidence as to whether the $4 Million Shares were already registered in Soetikno’s name.

309.  Mr Yu submits that Hadi had made up these lies in order to evade responsibility for the $4 Million Shares.  According to him, it is impossible that Hadi had not done anything to find out what happened to the $4 Million Shares.

310.  I do not accept that these are deliberate lies. I have already analysed the credibility of Hadi’s evidence above, and I do not accept that Hadi is a dishonest person who has fabricated his evidence with a view to cover up his past misconducts.

311.  In fact, Hadi has been asked to recount events many years ago. The evidence shows that SFS was the person who was responsible for handling the transfer of assets under the 1980 Separation. The problem with Hadi is that, despite his limited knowledge of the details, he tried to make his own reconstructions as to what really happened many years ago.  Not surprisingly, there would be confusion in his evidence as his reconstructions may not be the truth.  Hence I do not accept that these are deliberate lies.

312.  Further, Hadi can only be accused for failing to find out what happened to the $4 Million Shares if such shares really existed for the benefit of the 6 Brothers.  If those shares did not exist, or were booked and treated as Simsons’ assets, or had been transferred to Soetikno under the 1980 Separation exercise, it would be too much to require an old man like Hadi to recall all the details after 30 years.

313.  For the above reasons, HRH have failed to discharge the burden to prove, on the balance of probabilities, that there were a separate batch of the $4 Million Shares for the benefit of the 6 Brothers.

D.3.2    Whether there were a separate batch of the Custody Shares or the $5 Million Shares after the 1980 Separation which were for the benefit of the 6 Brothers?

314.  HRH claim that there were a separate batch of the Custody Shares for the benefit of the 6 Brothers after the 1980 Separation.  According to their case, the Custody Shares were worth about $5 million and so both the Custody Shares and the 5 Million Shares refer to the same thing.

315.  HRH’s case on the Custody Shares is even weaker. Apart from being given a few notes, even Rudy cannot supply the court with any first hand or even hearsay evidence about these shares.  HRH cannot tell the court whom received these shares and from whom.  The circumstances giving rise to the “transfer” and the “receipt” of those shares are also unknown.  HRH, and even Hadi, can only make reconstructions based on some documents which are open to different interpretations.

316.  Where did the Custody Shares come from?  Without first-hand or even hearsay knowledge, HRH seem to suggest that the Custody Shares were shares that were required by Soetikno to transfer to the 6 Brothers under Clause VIII of the 1980 Chinese Agreement.

317.  Clause VIII provides for the transfer of shares between the Father and the 6 Brothers on the one part and Soetikno on the other.  One may say that if there were no shares to be transferred by Soetikno to the 6 Brothers, there would be no need to provide for that in Clause VIII.  On the other hand, the way in which such clause was drafted seems to suggest that there must be shares which the 6 Brothers would have to transfer to Soetikno, whilst it remains uncertain as to whether Soetikno had held any shares which had to be transferred to the 6 Brothers.

318.  Without the benefit of hearing the evidence from Soetikno and SFS, the court would not be in a position to know precisely the arrangement between Soetikno and the 6 Brothers under Clause VIII of the 1980 Chinese Agreement.

319.  In fact, the arrangement of the 6 Brothers under the CAAA Table seems to suggest that no shares had been transferred by Soetikno to the 6 Brothers.

320.  First, the CAAA Table makes reference to the total assets (“總資產”) as being worth $69 million, and yet no reference whatsoever was made to any shares to be received from Soetikno, or the $4 Million Shares that were already in the control of the 6 Brothers by that time.  It follows that the word “total” (總) shows the entirety of the assets which were to be divided amongst the 6 Brothers.

321.  Second, contrary to Rudy’s assertion in his witness statement, if the 6 Brothers were indeed to receive any listed shares from Soetikno (and particularly if the shares were not distributed to each of the 6 Brothers directly according to their entitled percentages), there was no reason for the 6 Brothers not to have included those shares in the CAAA Table. At the very least, there should be some references to the Custody Shares (and the $4 Million Shares).

322.  Mr Yu submits that the purpose of the CAAA Table was to calculate the Equalization Money.  This would not have been affected by the inclusion of the $4 Million Shares.  For the $5 Million Shares, they still need to be sorted out, and so they were not included in the CAAA Table.  This might be the case. However, if the 6 Brothers were able and saw the need to set out the detailed calculation of the Equalization Money in the CAAA Table, I find it hard to accept that they had not made some records about the $4 Million Shares or the Custody Shares amongst themselves.  In particular, the $4 Million Shares were already under the control of the 6 Brothers by that time.

323.  Third, it is common ground that Harry was complaining about his share in the 1980 Separation exercise, working on the basis that the total assets to be divided was $69 million^[30]. If there were indeed further shares coming in from Soetikno, there was no reason for the other brothers not to inform Harry of this fact, or to “equalise” the position by giving Harry a greater share in the shares.  Nevertheless, as Rudy confirmed under cross-examination, Harry had no idea that the 6 Brothers were to receive any shares from Soetikno.  It is wholly incredible that if Soetikno were to give any shares to the 6 Brothers, the brothers would not have informed Harry of the same.  Hence, the fact that Harry had no idea strongly indicates that there were no shares forthcoming from Soetikno to the 6 Brothers.

324.  Mr Jat suggests that the Custody Shares were most likely shares received, and hence the use of the word “接管”, on behalf of Simsons since they were bought using Simsons’ monies.  That was certainly a likely possibility.

325.  Hadi is able to produce some documents which support that as at May 1978, there were certain shares, registered in Soetikno’s name, which were purchased using Simsons’ funds.  At CB-4, it appears that SFS made a record of Soetikno transferring $2,000 to Simsons, which represented the dividends obtained from 1000 shares in Green Island Cement Company Ltd and 2500 shares in China Motor Bus.  On the other hand, CB-5 shows that the Green Island Cement shares were registered in the name of Soetikno (i.e. Shum Man Tin).

326.  The statement dated 15 December 1978 at CB-8 (CB-9 included) apparently also lists out shares which Soetikno bought using Simsons’ monies. The term “新盛來款” (money from Simsons) was used.

327.  In another document also dated 15 December 1978, i.e. CB-6, it shows that as at December 1978, Soetikno transferred (via the securities brokerage at Macquarie Bank) $6,839.85 to Simsons.  This corresponds to the last entry at CB-9, which shows such money being paid into Simsons, thus the use of the term “調回新盛” (transferred back to Simsons).  The sum of $6,839.85 seems to represent the excess money which remained after Soetikno purchased the shares and paid the necessary administrative expenses as shown in another document made in 1978, i.e. CB-7.

328.  CB-7 appears to show the total listed shares which Soetikno bought using Simsons’ funds as between 4 and 21 July 1978.  During this period, Soetikno apparently purchased shares in Hsin Cheong, Paul Y, San Miguel and Hong Kong Telecom.  I agree with the observation made by Mr Jat that there is a striking resemblance between the lists of shares in both CB-7 and CB-71.  The difference in the number of Hsin Cheong shares may be explained by the transaction record as shown in the bottom left corner of CB-74, which is consistent with the record at CB-7.

329.  Based on these observations, there is ground to believe that CB-7, CB-71 and CB-74 in fact refer to the same batch of shares, which support Mr Jat’s contention that these were shares bought by Soetikno using Simsons’ funds.  In such case, in accordance with SFS’s draft asset division table in CB-13, the shares in CB-71 ought to be retained by Simsons.  They beneficially belonged to Simsons, and were already “received” by Simsons or by SFS on behalf by Simsons.

330.  This may potentially explain three things. First, the words “接管” (receive and keep) in CB-71 refer to those shares being “received” on behalf of Simsons, as per the agreement between Soetikno and the 6 Brothers.   Second, the word “S.S.” written on top of CB-74 refers to Simsons, rather than a reference to the alleged Sim Family Trust Fund.  Third, CB-72, which HRH submit show records of some of the changes from CB-71 to CB-74, refers to transactions done on behalf of Simsons.  The words “賣SS股票” (sell SS stocks) show that it was Simsons’ shares that were sold.  The scribbles on top refer to customers of Simsons (i.e. “繼丁” and Echo), which show that CB-72 concerns the business of Simsons (rather than the alleged Sim Family Trust Fund).

331.  These suggestions made by Mr Jat may not reflect the truth.  However, this was certainly a possible scenario based on the interpretation of the available documents.  The problem is that most of these documents were prepared by persons who were not available to give evidence at the trial, and even Rudy was not able to discredit or refute Mr Jat’s suggestions apart from barely asserting that the documents given to him by SFS support his own speculation to the contrary.

332.  In my judgment, the documents relied on by HRH in supporting their case for the Custody Shares are open to different interpretations.  Their interpretations are no better than those put forward by Mr Jat.  As mentioned above, if HRH were to believe that the Custody Shares were shares transferred by Soetikno for the benefit of the 6 Brothers, it defies common sense that HRH had not even asked SFS or Hadi what happened to those shares throughout the years.  More importantly, as the evidence reveals, they had little idea about the details and the values of the Custody Shares even back in 1980.  Making some reasonable and perhaps friendly enquires can hardly be regarded be as a challenge to the authority of the elder brothers, in particular the brother who was mainly responsible for taking care of these shares, i.e. SFS, might not have many days to live and the knowledge about what happened to these shares might simply be buried with his death.

333.  Further, even if there were indeed a separate batch of the Custody Shares, how were those shares dealt with by SFS?  Were they put in Simsons’ book after the transfer, and as a result they were treated as assets of Simsons?  Mr Yu in his submissions argues that this was unlikely.  But given the lapse of time and Simsons had carried on extensive trading of shares on its own throughout the years, this was a possibility that the court cannot simply ignore.

334.  For the above reasons, HRH have failed to discharge the burden of proving that there were a separate batch of the Custody Shares (or $5 Million Shares) which had been transferred to or kept by SFS or Hadi after the 1980 Separation which were for the benefit of the 6 Brothers.

335.  There is perhaps a side issue.  Herman in his witness statement mentioned about a fight in 1980 between Soetikno and Hadi over some China Motor Bus shares.  Without knowing the details of the dispute, it would not be safe for the court to make anything out of this “fight”.

D.3.3   What happened to the $7 Million that had been allotted by the 6 Brothers to pay for the construction costs of the New Simsons Building?  What was the relationship between the $7 Million and the $9 Million?

336.  It is common ground that:

(i)   Soetikno had to pay a sum of $15 Million to the Father and the 6 Brothers under the 1980 Separation exercise.

(ii)   SFS and Rudy signed the receipt for the said payment of $15 Million.

(iii)   Under the CAAA, the 6 Brothers agreed that, out of the said sum of $15 Million, $7 Million would be used for the construction of the New Simsons Building.

(iv)   Instead of using the $7 Million, the construction of the New Simsons Building was financed by a bank loan applied for by Hadi.

337.  So where was the $7 Million?  Hadi throughout maintained that he did not know where did the $7 Million go and how it was applied. Mr Yu submits that this was a blatant lie.

338.  After the trial for so many days, even Hadi now accepts that it was possible the $9 Million came from the $7 Million that had not been used to pay for the construction costs of the New Simsons Building. Without the evidence from SFS, the court does not know the source of the $9 Million which apparently was owned by the shareholders of Simsons, which may not be the same as the 6 Brothers because the shareholdings of the different shareholders were not the same as their entitlements under the Overall Proportions.  The logical deduction is that it came from the $7 Million because there is no other better explanation for the source of such substantial sum of money.

339.  The $9 Million was originally sitting in the joint account of SFS and Hadi and then the joint account of Herman and Hadi. Herman suggested to use the money to repay the overdraft loan of Simsons.  The money was therefore injected into Simsons as a shareholders’ loan, which was subsequently repaid to all the individual shareholders.  Since no issue is taken about the difference between the shareholdings’ percentage and the Overall Proportions, this should be the end of the matter for the account of the $9 Million and the $7 Million.

340.  However, Mr Yu does not stop here.  He submits that Hadi owes HRH an account.  Rudy’s notes at CB-212 and 213 and CB-231 and 232 and the transcripts of the 2010 AGM Meeting show that $9 Million came from the “特帳” (special account) or the Hou Zhang which originated from Soetikno.  Rudy confirmed that it was Hadi who told him that the $9 Million was part of “新盛特帳” (Simsons’ special account).  Hadi was lying when he denied knowledge of the source of the $9 Million as he wanted to cover up the Hou Zhang.  As the Hou Zhang did exist which included such substantial assets, Hadi owes a duty to provide an account of the Hou Zhang to HRH.

341.  Mr Yu also submits that it would be extremely strange that, given: (i) Hadi’s position in the family and Simsons; (ii) Hadi’s share in the alleged Sim Family Trust; and (iii) Hadi’s role in applying for the bank loan to finance the reconstruction of the then Simsons Building, SFS would not have discussed the alternative use of the $7 Million with Hadi or that Hadi had not made any attempt to find out what happened to the $7 Million which was not used for the construction of the New Simson Building.  At one stage, Hadi thought that the money was given to Harry and the Father and Mother, and it was only after repeated cross-examination that Hadi finally accepted the possibility that the $9 Million might come from the $7 Million.

342.  I agree it is odd that Hadi knew little about the $7 Million or the $9 Million.  Despite such observation, I do not accept that Hadi had deliberately lied in the witness box.

343.  It would be easy to accuse an elderly man of lying when there was confusion in his evidence and he was asked about something which occurred 20 or 30 years ago.  However, the fact remains that, according to the documentary evidence, it was SFS and Rudy who handled the $7 Million. They issued the receipt for the $15 Million.  In distributing the Equalisation Money, it was SFS and Rudy who acted as the 6 Brothers’ “agent” (代理人).^[31] The evidence points to at least SFS if not Rudy, rather than Hadi, who handled the $7 Million.

344.  There may be a piece of evidence who may shed light as to the whereabouts of the $7 Million, i.e. the July 1983 Trial Balance headed “SS特試算表” at CB-166, which had an item on the debit side called “沈特” (Sim Special) consisting of $7 million.  It was very possible that item referred to the $7 Million received by SFS.

345.  However, this sheet of paper was written by SFS and given to Rudy by SFS.  Naturally it would be for SFS to explain what this “trial balance” consisted of.  Further, there are references to page numbers written against individual items in CB-166.  One would expect that there should be underlying supporting documents which may explain what these items meant, and yet HRH, in particular Herman, had never asked for a copy nor for an explanation from SFS in this regard.

346.  These documents therefore show that it was SFS who handled the $7 Million, and so it is not surprising that Hadi does not know about the details of the $7 Million or the $9 Million.  Further, I would not attach a lot of weight to the evidence of Rudy about what he was told by Hadi about the $9 Million.  As the conversation occurred many years ago and there were other dealings between Rudy and Hadi, it may be possible for Rudy to have confused the transactions.  Furthermore, even if Hadi told Rudy that SFS suggested to invest the $7 Million in the stock market, the evidence shows that it was SFS who had handled the stock investments throughout the years.  Hadi had his own investment and business interests to attend to, and he left the management of Simsons and its shares investment portfolio to SFS to handle.  It is therefore not surprising that Hadi, like HRH, had not followed up on the matter and he may not have a very clear picture about what happened to the $7 Million.  For the alleged admissions made in the 2010 AGM Meetings, I have already dealt with the weight that should be attached to the so-called “admissions” in the earlier part of this Judgment, and I do not want to repeat the same here.  In fact, the transcripts of such meeting show that Herman by then knew more about $9 Million than Hadi himself.

347.  Mr Yu also points out that Hadi, in his cross-examination, was not willing to admit the obvious fact that the $7 Million was originally intended for the rebuilding of the Simsons Building even though he later admitted it in re-examination.  However, instead of finding Hadi evasive, such episode, in my judgment, only shows that Hadi was very much confused at the trial and he is now not a man who can think clearly about events in the past.  If he deliberately made up all these lies with a view to misappropriate and conceal the family assets, there was simply no point for Hadi to make such denial, when this is an obvious fact that he has accepted throughout the proceedings.  This does not make a lot of sense to me, except to say that Hadi, being an old man, was very confused at the trial.   

348.  For the above reasons, I do not find that Hadi, though confused, has deliberately lied about his lack of knowledge relating to the $7 Million or the $9 Million, and it was SFS who had handled these monies throughout the years.

349.  I also do not accept that the $9 Million was handled by Hadi simply because such sum of money was sitting in the joint account of Hadi and Herman.  Just as in the case of Herman, the holder of a bank account may not be the person who is responsible for operating the fund in the account.  The account holder may be keeping the money for someone else, in this case SFS, and that the account holder may not have a clear picture about the source of such sum of money.  In fact, Herman’s Emoluments were paid into a joint account in the names of Herman and Hadi from July to October 2001, but it does not mean that Herman was the one who managed the fund therein.  The same observation can be made about the deposit of $960,000, being the Directors’ Fees, paid into the joint account of Madam Lam and Harry.

350.  Even if the $9 Million might have come from the $7 Million, it is not sufficient to establish that there was a general Sim Family Trust as suggested by HRH.  The evidence only shows that SFS took care of the $7 Million which had not used to pay for the construction costs of the New Simsons Building.  Under the management of SFS, the $9 Million had already been paid back to all the shareholders of Simsons, and so there is no duty on the part of Hadi to provide an account for the whereabouts of the $7 Million or the $9 Million.

D.3.4   Were the Disputed CK Shares acquired by Hadi using the assets of the alleged Sim Family Trust Fund?

351.  Hadi’s evidence about the Disputed CK Shares has been mentioned above.  In short, Hadi was purchasing a new car in the early 1990’s.  When SFS heard of this, he suggested that the car should be purchased under Simsons’ name as a company car for the use of Hadi as a director of the company. Although Hadi accepted SFS’s suggestion, Hadi nevertheless paid around $1.3 million, being the cost of purchasing the car, to Simsons.  SFS then on his own volition placed the fund into Simsons’ brokerage account and used the same to purchase shares in Cheung Kong on Hadi’s behalf.

352.  The records of Simsons indicate that the Disputed CK Shares belonged to Hadi.  There is no evidence that the purchase money for such shares came from the alleged Sim Family Trust Fund.

353.  As I see it, the problem with HRH’s suggestion is that if the Disputed CK Shares were indeed beneficially belonging to the 6 Brothers (as opposed to Hadi alone), the arrangement of marking the Disputed CK Shares as Hadi’s in Simsons’ books makes no sense.  Simsons was at all material times owned by the 6 Brothers, and so there is no reason for this convoluted “trust upon a trust” arrangement to be imposed on the Disputed CK Shares, i.e. Simsons was holding the Disputed CK Shares for Hadi and Hadi in turn for the 6 Brothers.  Further, if the Disputed CK Shares belonged to the 6 Brothers, it is also strange that Herman had never raised any question as to the distribution of the dividends throughout the years.

354.  On the other hand, why did Hadi pay $1.3 million into Simsons if the purpose for the payment was not to somehow “reimburse” the other shareholders for the money paid by Simsons for the acquisition of the company’s car for Hadi?  That also explains why Hadi was prepared to pay back part of the sale proceeds of the Disputed CK Shares to the 6 Brothers according to their shareholdings in Simsons.

355.  According to Madam Yuen, SFS instructed her to book the Disputed CK Shares separately in the name of Hadi.  It is unfortunate that SFS, who should be the best person to give evidence on the issue, was not available to testify at the trial, and so the court can only try its best to ascertain who actually happened many years ago.  In particular, the court also has to treat Hadi’s evidence with some caution, as his evidence may not be reliable for the reasons given above.

356.  In my judgment, the only logical conclusion is that Hadi’s explanation is more or less true, but he somehow wanted, for moral or familial reasons or otherwise, to reimburse the other shareholders for the money spent on the purchase of his company car.

357.  As the 6 Brothers had all along conducted the family business in a casual manner, I do not think that the SFS or Hadi had seriously talked about the ownership of $1.3 million paid into Simsons.  Hadi, being a stubborn person, does not acknowledge that the Disputed CK Shares were owned by the shareholders of Simsons or the 6 Brothers, and that is why he regards the subsequent distributions of the sale proceeds as gifts.

358.  It is common ground that the Disputed CK Shares were booked in Hadi’s name in Simsons’ account.  There must be a reason for this particular arrangement, and it shows that Hadi had a special interest in such shares.  In any event, I do not consider it necessary to decide whether there is a binding legal obligation for Hadi to account to the shareholders of Simsons for the Disputed CK Shares.  It would be a matter between the shareholders of Simsons and Hadi.  As HRH’s claim is one based on a general Sim Family Trust with the 6 Brothers as beneficiaries as opposed to the shareholders of Simsons, their claim for the return of the sale proceeds of the Disputed CK Shares will have to be adjudicated on some other occasions.

359.  Furthermore, the evidence shows that Hadi had all along been the person who received the dividends from the Disputed CK Shares.  Even assuming that HRH might not have knowledge about the payment of dividends, SFS (and indeed Herman) would certainly have known about this and yet he allowed Hadi to pocket the dividends.  Hence, even in the eyes of SFS, the Disputed CK Shares belonged to Hadi and not the 6 Brothers.

360.  Again, HRH rely on the “admissions” made by Hadi in the 2010 AGM Meeting and the 2011 Meeting that: (i) parts of the sale proceeds of the Disputed CK Shares were put into a joint account with Herman (which was in fact the case); (ii) the Disputed CK Shares were part of the Hou Zhang; and (iii) the Disputed CK Shares did not belong to him.  Roy also mentioned an incident in 2007 when he, on behalf of Rudy, asked Hadi to liquidate the Hou Zhang, and Hadi told him that he was in the process of selling the Cheung Kong shares.

361.  Mr Yu also argues that the car story put forward by Hadi cannot be the truth.  According to the share price of Cheung Kong by that time, $1.3 million, being the alleged cost for purchasing the car, would not be sufficient to buy 110,000 Cheung Kong’s shares.  Further, even if the story were true, it is difficult to understand why Hadi denied knowledge of the source of fund for the purchase of the Disputed CK Shares in the 2010 AGM Meeting and the 2011 Meeting.

362.  As I have mentioned above, it would not be safe for the court to rely on the so-called “admissions” made by Hadi during the confused exchanges between the brothers and when Hadi was repeatedly pressed to account for matters of which he had only limited knowledge.  In any event, there was a long lapse of time and Hadi was asked about what happened to certain things back in 1990’s.  More confusingly, the term “Hou Zhang” was first used by SFS with different understandings by different parties.  It was likely that, as Hadi considered he had a moral or familial obligation to account to the other shareholders for the purchase the company’s car, he would regard the other shareholders would have an interest in the sale proceeds of the Disputed CK Shares, and that also explains why he was prepared to pay part of the sale proceeds into a joint account and distribute some other part to Simsons’ shareholders or members of the Sim Family.

363.  The details of the purchase of the Cheung Kong shares are not available now.  I do not know whether SFS had used some other fund to pay part of the purchase price back in 1993.  I also have no idea whether more shares were purchased after 1993, making it up to 110,000 shares in the end.  The bottom line is that, even if the car story was a fantasy in the mind of Hadi, I do not accept that this was a dishonest lie on the part of Hadi with a view to cover up his past misconduct of misappropriating the family assets.

364.  There is also another thing I do not understand.  If Hadi is not a trustworthy person and had all along intended to misappropriate the family assets that should have belonged to the 6 Brothers, it would have been much simpler for him to take the money out from the trust fund and to invest the money using his own personal account.  He would have no difficulty in doing so because HRH were not asking them the whereabouts of the Sim Family Trust Fund.  The fact that he used Simsons’ account to trade the stocks would leave a trace for his brothers to find out about the alleged trust assets, which does not make much sense if Hadi had been dishonest throughout. It also does not sit well with the fact that Hadi was prepared to pay part of the sale proceeds to his family members.

365.  Hence, no matter what was said by Hadi in the 2010 AGM Meeting or the 2011 Meeting, I do not accept that the Disputed CK Shares were purchased using the fund of the alleged Sim Family Trust.  Even SFS regarded the Disputed CK Shares as belonging to Hadi.  As to whether Hadi has a legally binding obligation to account to Simsons’ shareholders for the sale proceeds, it will be a matter which has to be resolved in the future.

D.3.5   Did SFS transfer the assets of the Hou Zhang to Hadi prior to his death?

366.  There is no serious dispute that SFS transferred the assets representing Herman’s Emoluments and the Directors’ Fees to Hadi. Hadi understood that the Hou Zhang only consisted of these two items, and so he accepts that the Hou Zhang assets were transferred to him to such extent.  It does not mean that the Hou Zhang had other assets and, if there were indeed such other assets, those assets had been transferred to Hadi.

367.  As to whether there were other assets in the Hou Zhang, I have already dealt with such issue in some details above.  Assuming that I am wrong on such findings, there is no reason to infer that SFS must have transferred such other assets together with the associated documents to Hadi.  In the next section, I will address the question as to what might have happened to the other assets of the Hou Zhang if any.

368.  Rudy claimed that he had witnessed Hadi and Raymond coming out of SFS’s room in the hospital with a bag of what appeared to be documents.  However, such observation is neither here or there.  It does not mean that SFS had passed the alleged Hou Zhang documents to Hadi.  In the earlier part of this Judgment, I have also dealt with the question as to what might have happened to the documents of the Hou Zhang.[32]

369.  Mr Yu has also tried to make an issue that Hadi had been evasive in the witness box by attempting to shift the responsibility even for Herman’s Emoluments to Madam Yuen.  However, as Hadi’s case on Herman’s Emoluments and the Directors’ Fees has been clear from the outset, I find that Hadi was very much confused in the witness box in answering the relevant questions, rather than trying to shift the responsibility for Herman’s Emoluments to someone else.

D.3.6    What might have happened to the assets allegedly forming part of the Sim Family Trust Fund?

370.  Assuming that there were other assets apart from Herman’s Emoluments and the Directors’ Fees, which I do not accept it to be the case, what might have happened to these assets?  The honest answer is that the court does not know.  As mentioned above, it is very unlikely that Hadi has misappropriated these assets.  If there were other assets, I can only make some deductions as to their whereabouts based on the circumstantial evidence in the present case.

371.  As I see it, the only asset that the court can say with some certainty that should belong to the shareholders of Simsons (as opposed to the 6 Brothers) was the $9 Million.  It is beyond dispute that the $7 Million set aside for paying the construction costs of the New Simsons Building had remained unaccounted for.  As it was SFS who was responsible for taking care of such sum of money, the court would not be able to know exactly what happened to the $7 Million without his testimony.  As no one knows exactly the source of the $9 Million which was used to pay off the overdraft loan of Simsons, it is very likely that the $9 Million originated from the $7 Million received by SFS from Soetikno during the 1980 Separation.

372.  As I have mentioned above, HRH have failed to discharge the burden of proving that there were other assets, for examples the $4 Million Shares and the Custody Shares (or the $5 Million Shares), forming part of the alleged Hou Zhang.  Even assuming that there were indeed such shares, there are reasons for the court to believe that there could not have been any Hou Zhang assets left beyond the $9 Million in the Herman-Hadi joint account, Herman’s Emoluments and the Directors’ Fees.

373.  First, the financial statements of Simsons show that SFS incurred significant losses in his trading activities for Simsons.  He incurred massive aggregate losses when conducting short term securities trading for Simsons’ share portfolio using bank overdraft facilities.  Even if he held any shares on behalf of the 6 Brothers, there is a very real possibility that he also incurred substantial losses for trading on such shares. 

374.  Mr Yu submits that the trading activities of Simsons cannot be equated with those of the Sim Family Trust Fund, while the former involved short-term trading and the latter involved “buy-and-hold” and “fully invested” long-term buying.  However, there is no basis to support such distinction.  Apart from the fact that there is nothing to support Rudy’s contention that the Sim Family adopted a long-term strategy for the investment of family shares (as opposed to shares invested by Simsons), the evidence, on the contrary, shows that SFS did distribute dividends from the invested shares from time to time.  Further, it would be extremely unlikely that SFS, being the same person who was responsible for the trading of these shares, would have adopted completely different strategies for these two kinds of shares.

375.  In fact, the accounts of Simsons show that, throughout the years when SFS was in control of Simsons, Simsons always had an extraordinary amount of bank overdraft.  They also show that Simsons, in some years, incurred considerable losses in its trading of short-term listed investments.  If there was indeed a huge pot of money left in the Hou Zhang, it was inconceivable for SFS to borrow extraordinary amounts of money from banks when he could and should have applied the money in the Hou Zhang towards Simsons, especially according to the evidence of Madam Lam, the main purpose of the Hou Zhang was to support the “Qian Zhang” (前帳) of Simsons, i.e. the front or official account of Simsons.

376.  Further, according to the financial records of Simsons, there had been a significant change in the pattern of trading activities after SFS fell ill and eventually passed away.  After Hadi took over running Simsons, there was a marked decrease in the trading activities thereby reducing the profit earned or loss incurred by Simsons.

377.  It is also incredible that, if there was indeed a huge pot of money in the Hou Zhang, HRH had not raised one single question with SFS since the early 1990’s.  One must also bear in mind that, being involved in signing some of the balance sheets of Simsons, Herman must have known that SFS had caused Simsons to lose substantial sums of money in the trading of listed stocks and yet they had not raised any queries with SFS, particularly when SFS fell ill in the late 1990’s and early 2000’s.  Herman might have confronted or even disagreed with SFS.  However, it is very difficult to understand why Herman and the two other brothers did not take the matter further.  It simply does not make a lot of sense.

378.  In fact, Herman suggested in the 2010 AGM Meeting that SFS might have misapplied or even misappropriated the Hou Zhang assets for his own use.  The misfeasance had nothing to do with Hadi, and that may explain why HRH had not put forward any misappropriation or misfeasance claim against Hadi but only a request for an account.

379.  Second, if there was a significant amount of money in the Hou Zhang as suggested by HRH, there was no reason why SFS would not have suggested the distribution of the remaining assets in the Hou Zhang among the 6 Brothers in order to relieve his financial pressure.

380.  According to Madam Lam’s unchallenged evidence, SFS’s financial position had all along been relatively humble up to the point of his death.  During or as a result of the 1980’s financial crisis, SFS borrowed $1 million from the Mother.  During the 1990’s, likely during or as a result of the Asian financial crisis, SFS had to borrow some $1.5 million from Rudy.  In his final days, SFS had difficulty in paying the medical expenses for his treatments.  The family even had to borrow money from their son-in-law.  It is also common ground that SFS had left minimal assets to his family.

381.  Madam Lam’s evidence bears all the hallmarks of a modest family facing some financial challenges.  If there was a Sim Family Trust Fund as alleged by HRH and there were substantial assets still left in the fund, it would represent a very significant financial resources available to SFS.  SFS and his family would not and could not have had any financial difficulties and would not have needed to borrow any money.  Further, SFS would not and could not have died leaving minimal assets.  In fact, Rudy agreed that the 6 Brothers could liquidate the trust fund at any time.  Under such circumstances, it would be very difficult to explain why SFS did not liquidate, or at least make a request to liquidate, the alleged Sim Family Trust Fund to ease his financial difficulties.

382.  More importantly, it is most unusual that the SFS’s Family knew nothing about the alleged Sim Family Trust Fund.  Before his death, SFS transferred his shares in Simsons to his children and the Comfort Garden Property to Madam Lam.  He even sold his shares portfolio in order to repay some of his loans.  Having made detailed and careful estate planning before his death, why would SFS not have informed his family about the alleged Sim Family Trust Fund if it were to exist?  In particular, he was the person responsible for managing the fund.  It makes no sense for SFS to have kept his family in the dark leaving his personal representative trying to figure out this alleged trust fund and his entitlements or share to the fund.  Just hoping that Hadi would do good is not a reasonable explanation for not doing so.  Even considering the factor of a traditional male-dominated Chinese family, SFS could have told his son about his interests in the alleged trust fund.

383.  The only logical conclusion is that there was nothing left in the Hou Zhang apart from Herman’s Emoluments and the Directors’ Fees.  Apart from the $9 Million, I do not find that there were other assets (such as the $4 Million Shares or the Custody Shares) that were held by SFS for the benefit of the 6 Brothers.  Even if there were indeed such shares, it was very probable that SFS had lost those shares throughout the years whether through trading activities or otherwise.

384.  There was another real possibility.  As the beneficiaries and the shareholders of Simsons were the same 6 Brothers, could it be possible that SFS simply put the alleged Hou Zhang assets into Simsons’ accounts and treated them as Simsons’ assets?  This may be a speculation. However, as I do not accept that Hadi has deliberately lied in the witness box, there are simply many serious possibilities to explain the absence of the assets.

385.  For the above reasons, I do not accept that Hadi had concealed or misappropriated any assets that should properly belong to the 6 Brothers.

D.3.7   Did SFS and Hadi co-manage the assets of the Hou Zhang or the alleged Sim Family Trust Fund?

386.  I think I have already given the answer to this particular question.

387.  Throughout this Judgment, I have emphasised many times that it was SFS who managed the assets of the Hou Zhang.  This finding is much supported by the evidence:

(i)   It was SFS who first used the term “Hou Zhang”.

(ii)   A lot of the documents produced by HRH, for examples CB-12, CB-13 and CB-71, were written by SFS and given to Rudy by SFS.

(iii)   The CAAA Table was prepared by SFS.

(iv)   The receipts for the payment of the $15 Million from Soetikno were written by SFS.  Rudy accepted that it was SFS who represented the Hong Kong brothers in receiving the monies from Soetikno.

(v)   The distribution of the monies under the CAAA Table was handled by SFS.

(vi)   Herman’s Emoluments were handled by SFS prior to his death.

(vii)   It was SFS who liaised and informed Rudy about the Directors’ Fees arrangement.

(viii)   It was SFS who handled the distribution of the “dividends” for both the Qian Zhang and the Hou Zhang.

(ix)   SFS was responsible to handle the accounts of Simsons and to make the report to the other brothers.

(x)   SFS was responsible for the investment of shares for Simsons.

(xi)   SFS was the person who decided to raise substantial bank loans to, inter alia, finance the trading of shares for Simsons.

388.  What was then the role of Hadi?  Mr Yu submits that, considering the character of Hadi, his close relationship with SFS and his share of interest under the Overall Proportions pursuant to the CAAA, Hadi could not have stayed in the backseat and left SFS to handle all the matters relating to the Hou Zhang.

389.  There is some force in such argument.  In particular, it is strange that Hadi had not done anything to find out what happened to the $7 Million and where did the $9 Million came from.  However, as I have explained above, I do not find Hadi to be a dishonest person.  The evidence also shows that Hadi knew very little about the Hou Zhang and the accounts of Simsons, as SFS had to ask Madam Yuen to brief Hadi about the details and the operation of Simsons’ accounts prior to his death.  Further in the 2010 AGM Meeting, Herman claimed that: (i) SFS had caused Simsons to incur substantial losses in the trading of shares; and (ii) SFS, against the interest of the other shareholders, raised substantial bank loans to finance such stock investments.  No such allegation was made against Hadi.  The fact that there were different trading patterns in Simsons’ stock portfolio both before and after Hadi took over the management of Simsons also supports that Hadi had not taken part in the stock investment operation of Simsons prior to SFS’s death.

390.  The evidence shows that Hadi had his own business interests and investments to attend to.  Hence, it could well be the case that Hadi, like HRH as they say, just left SFS to handle the assets of the Hou Zhang without asking any questions.

391.  For the above reasons, I find that, prior to his resignation, SFS alone was responsible for the management of the Hou Zhang.  He was the only person who had a complete picture about the operation and the assets of the Hou Zhang.

E.   THE QUESTIONS ABOUT EXPRESS TRUST AND COMMON INTENTION CONSTRUCTIVE TRUST

392.  I agree with Mr Yu that this case mainly turns on issues of fact.  Having made the factual findings above, I do not consider it necessary to address the legal issues relating to express trust or common intention constructive trust in any details.

393.  In any event, I do not find that there was a general Sim Family Trust as alleged by HRH.

394.  Before Rudy left Hong Kong after the negotiations for the 1980 Separation, Rudy asked Hadi and SFS to take care of the rest of the matters that were left behind by Soetikno in Hong Kong, using words along the lines of “接下去哥哥的事您們安排”.  Rudy himself could not remember the actual words used.  On the other hand, Hadi could not remember whether there was indeed such conversation.

395.  By reason of such simple conversation, HRH claim that there was an express oral trust, or alternatively, a common intention construction trust over the assets of the alleged Sim Family Trust Fund.  Under such kind of trust arrangement, both SFS and Hadi were co-trustees.

396.  Since Hadi cannot dispute Rudy’s evidence in this regard, I accept that something similar was said by Rudy as mentioned above.

397.  What can one make out of such statement?  As I understand it, it was a very loose arrangement for SFS and Hadi to follow up on Soetikno’s matters arising from the 1980 Separation.

398.  First, the words were uttered in an informal and casual atmosphere.

399.  Second, after he uttered those words, Rudy did not explain where he meant to SFS and Hadi.  Did he mean that both SFS and Hadi would have to assume the duty jointly?  Did the arrangement only cover the assets that were required to be transferred by Soetikno to the 6 Brothers under the 1980 Separation?  It should be the case just by looking at the words themselves.  How would the shares of the beneficiaries be calculated?  By that time, the 6 Brothers had yet finalised their shares under the Overall Proportions.

400.  Third, the evidence in the present case clearly indicates that the subsequent division of assets, including money and shares, was handled by SFS, and on at least one occasion by SFS and Rudy, but never by Hadi.  In such circumstances, I have serious doubt whether Hadi had evinced an intention to assume legally enforceable trustee duty, as opposed to duty of a familial or moral nature, to the Indonesian brothers.

401.  It is a central theme of HRH’s case that “新盛特帳” (Simsons’ special account), which was a term used by Rudy in CB-212 and CB-231, is the same as “Hou Zhang”, which is also the same as the general Sim Family Trust.  According to HRH, they are all the same things.

402.  In the earlier part of this Judgment, I have already mentioned that the term “Hou Zhang”, and probably “新盛特帳” (Simsons’ special account), were first used by SFS.  These terms were used loosely and different parties might have different understandings about their meanings.

403.  As I see it, the terms “Hou Zhang” and “新盛特帳” (Simsons’ special account) seem to suggest that items in these accounts somehow relate to Simsons.  That certainly applies to items such as Herman Emoluments and the Directors’ Fees, which were Hou Zhang expenditures on the face of Simsons’ official books and accounts but in fact monies to be distributed to its shareholders. One can easily understand why the term “Hou Zhang” was used in such circumstances, as opposed to “Qian Zhang” which relates to Simsons’ front or official books and accounts.  However, the $4 Million Shares and the Custody Shares, according to HRH’s case, have nothing to do with Simsons.  They were separate from Simsons but were beneficially owned by the 6 Brothers.  In such case, the terms “Hou Zhang” and “新盛特帳” (Simsons’ special account) may not be accurate descriptions of the nature of these assets.  In a way, this supports Hadi’s case that the “Hou Zhang” only consisted of Herman’s Emoluments and the Directors’ Fees, because they are items which have some relation with Simsons.

404.  For the above reasons, insofar as HRH are claiming that there was a general Sim Family Trust created in 1980 covering all the assets belonging to the 6 Brothers, including assets that were required to be transferred by Soetikno to the 6 Brothers in the 1980 Separation and any future assets that were for the benefit of the 6 Brothers, and that SFS and Hadi were co-trustees, I find that such kind of trust did not exist.  The words uttered by Rudy were not sufficiently clear to establish such kind of trust, and the subject matters of the trust were also by no means clear.

405.  I agree that if Hadi had obtained possession of assets that should belong to the 6 Brothers, he then owed a fiduciary duty to the 6 Brothers to take care of those assets and to provide an account for them.  However, if it was SFS who handled the follow-up matters and Hadi did not take possession of the assets or get involved in the management of those assets, it would not be fair to impose a duty on Hadi to account for those assets when there was no express understanding or acknowledgement by Hadi that he had to be responsible for matters actually handled by SFS himself.  In addition, I do not accept that there was any wrongdoing or fraudulent conduct on the part of Hadi, and hence there is no basis for the court to impose any fiduciary duty on Hadi in respect of assets managed by SFS.

406.  Mr Yu tries to make a point that Hadi had made an admission during his cross-examination that SFS and he were both responsible for managing those assets left behind as a result of the 1980 Separation. Apart from the doubt as to whether Hadi was confused when he answered the relevant questions in the lengthy cross-examination, it is clear that Hadi had never acknowledged that there was a Sim Family Trust Fund as suggested by HRH.  In fact, Hadi, very frankly, admitted that he had a role to play if there were any assets left behind in the 1980 Separation.  However, it does not disturb the fact that there were no such assets left behind apart from the $7 Million, and it was SFS who was responsible for the management of the family assets, including the $7 Million, Herman’s Emoluments and the Directors’ Fees, and Hadi only stepped in when SFS fell ill.

407.  In his submissions, Mr Yu seeks to rely on the principle in Armory v Delamirie and argues that, where evidential difficulties are created by a person’s breach of duty, such evidential difficulties may be resolved against that wrongdoer.  After all, the trustee or fiduciary should not benefit from his own wrongdoing.  Mr Yu submits that Hadi was one of the co-trustees of the alleged Sim Family Trust Fund.  HRH have no idea as to what happened to the assets of the trust fund throughout the years. The absence of evidence in this regard is a consequence of the fiduciary’s own breach of duty, and so the court can make the necessary adverse inferences against Hadi by reason of the lack of evidence on the whereabouts of those assets.

408.  In my judgment, such principle should only apply if it can be established, in the first place, that there was a trust and the defendant was a trustee or a fiduciary.  As mentioned above, except to account for Herman’s Emoluments and the Directors’ Fees, Hadi is neither a trustee nor a fiduciary in respect of any other assets allegedly forming the Hou Zhang.  In the absence of: (i) any dishonest or fraudulent conduct on the part of Hadi; (ii) any evidence to show that Hadi managed the assets of the alleged Hou Zhang (except Hadi took over the accounts relating to Herman’s Emoluments and the Directors’ Fees shortly before the death of SFS); and (iii) any evidence to show that Hadi had agreed or assumed the responsibility as a trustee or fiduciary under a general Sim Family Trust, the court should not ask Hadi to account for the assets managed by SFS prior to his death.  One cannot simply say that because Hadi cannot explain the whereabouts of some family assets, then it can be inferred that there was a general Sim Family Trust in the first place and Hadi was one of the co-trustees.  Any such attempt would amount to a reversal of the burden of proof which simply cannot be right.

F.   DEFENCE OF LIMITATION

409.  As I do not find that Hadi has a duty to account apart from the funds representing Herman’s Emoluments and the Directors’ Fees^[33], the defence of limitation is now an academic issue.  However, since the parties have devoted considerable time in addressing this particular question, I feel obliged to give my views on the merits of such defence.

410.  In his submissions, Mr Jat has repeatedly emphasised the oppressiveness of HRH’s delay in making the request for account or commencing the present proceedings against Hadi.  However, in the absence of an express plea, laches is not an issue in this case.

411.  Hadi nevertheless relies on the defence of limitation under s 4(2) of the LO.  It is Hadi’s contention that HRH’s claim is one for an account simpliciter, and so the limitation period in s 4(2) applies.

412.  S 4(2) of the LO reads as follows:

“An action for an account shall not be brought in respect of any matter which arose more than 6 years before the commencement of the action.”

413.  S 4(7) further provides that:

“This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment contained in the Limitation Act 1980.”

414.  There is a proviso in s 20(1):

“(1) No period of limitation prescribed by this Ordinance shall apply to an action by a beneficiary under a trust, being an action—

(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or

(b)   to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.”

415.  Relying on the dicta of Chow J in Liu Hsiao Cheng v Wong Shiu Wai[34], Mr Jat argues that HRH’s pleaded case is simply predicated on “general duty of a fiduciary to account” as explained by the Court of Final Appeal in Libertarian Investments Ltd v Thomas Alexej Hall[35], and so the 6-years limitation period should apply.  He further submits that both the provisos in s 20(1)(a) and s 20(1)(b) are not applicable here, because: (i) there is no averment of wrongdoing being advanced against Hadi in the pleading, let alone that of a fraudulent breach of trust; and (ii) HRH cannot establish that Hadi had received the trust property or had converted such property to his own use.

416.  Despite Mr Jat’s able submissions, I do not accept that s 4(2) is applicable in the present case.

417.  It has always been the case that over the duration of a long-term fiduciary relationship, such as a trust or continuing partnership, the fiduciary is liable to account for the property under his control as and when demanded, and no limitation periods apply.[36] Equity has never applied the limitation period to an action for an account simpliciter against a fiduciary in respect of property under the fiduciary’s control, so long as the fiduciary relationship continues to exist.[37]

418.  Here, HRH are not seeking an action for an account in respect of any matter which arose more than 6 years before the commencement of the action.  If the Sim Family Trust were to exist, which I do not find it to be the case, HRH are only seeking an account of a trust which Hadi currently has stewardship over.  Under such circumstances, the obligation to account is continuing.

419.  In any event, the decision of Chow J in Liu Hsiao Cheng v Wong Shiu Wai has been overturned on appeal in the Court of Appeal’s judgment dated 7 February 2018[38]. The judgment was only handed down after the final submissions of the parties. However, since I have already accepted Mr Yu’s submissions on the limitation issue, there is no point in inviting parties to make further submissions on the Court of Appeal’s judgment.

420.  For these reasons, insofar as HRH are able to establish a Sim Family Trust or a fiduciary relationship, which I do not accept it to be the case, Hadi cannot rely on the limitation defence. 

G.   EFFECT OF DELAY ON THE EQUITABLE RELIEF SOUGHT BY HRH

421.  Different considerations apply as to whether any equitable relief should be granted in the present case.  Despite the lack of an express plea of laches and the non-availability of the limitation defence, there is nothing to prevent the court from taking into account the effect of delay in asking for an account or prosecuting the claim in determining whether to grant any equitable relief against Hadi.  After all, the court should take into account broad equitable principles in deciding whether to grant equitable relief in a particular claim.

422.  This is certainly an academic issue now given my findings above.  But if I am wrong on my findings and there was either a general Sim Family Trust or a fiduciary duty on the part of Hadi to account for the assets other than Herman’s Emoluments and the Directors’ Fees as contended for by HRH, should the court take into account the effect of delay in deciding whether to order any equitable relief against Hadi?

423.  In my judgment, the answer must be yes.  The starting premise must be that there was no fraudulent conduct on the part of Hadi, which I find it to be the case.  If Hadi was just negligent in overseeing the management of the assets by SFS, there is no good reason to order any equitable relief against him given the circumstances of this case.

424.  For the purpose of argument, I assume that there were other assets forming the Sim Family Trust Fund in the beginning, i.e. the $4 Million Shares, the Custody Shares and the $7 Million.  It cannot be seriously disputed that SFS was mainly involved in the distribution of assets in the 1980 Separation exercise and the management of the assets of the alleged Hou Zhang, which are much supported by evidence in this case.  Under such circumstances, it is reasonable and should have known to HRH that Hadi might not have a complete picture about what happened to the assets of the Hou Zhang.  Yet, HRH did not ask SFS for an account before his death.  HRH also waited for Hadi to become an old man before asking for an account or bringing the claim against him.  With the death of Soetikno and SFS who knew much more about what happened in the 1980 Separation, HRH now ask Hadi to provide an account of something which happened 30 to 40 years ago.  In my judgment, in the absence of any fraudulent conduct on the part of Hadi, it would be inequitable for the court to order any equitable relief, either in the form of an account or equitable compensation, against him.

425.  This case highlights the difficulties that may be faced by a trustee or fiduciary to provide an account after so many years. The three key witnesses who should have been able to provide important information about the administration of the alleged trust and its assets have all passed away.

426.  First, SFS passed away in 2003.  As mentioned above[39], all the brothers entrusted SFS with the handling of the assets to be received from Soetikno and the other assets of the Hou Zhang.  Most of the relevant documentary records produced by HRH were made by SFS who would be the only person who could give the court reliable explanations about these documents. Without his evidence, the court cannot have an accurate picture as to what actually happened many years ago.

427.  Even worse, since the early 1980’s, HRH had never asked SFS about the Hou Zhang or the alleged Sim Family Trust Fund.  This is even more extraordinary when none of them bothered to ask SFS the whereabouts of the assets received from Soetikno when HRH knew that SFS fell ill in the late 1990’s and before he passed away in 2003.  Had they genuinely believed that there was a substantial trust fund in existence, it is extremely strange that they never asked SFS, or even Hadi, about it.

428.  Secondly, another important witness, Soetikno, passed away in 2003.  This is particularly so since a significant part of the trial was spent on ascertaining what exactly were the assets handed over by Soetikno to the 6 Brothers, and whether those assets included any shares.  Had HRH bothered to enquire with Soetikno before he passed away, this litigation might probably have been avoided.

429.  Thirdly, Herman passed away before the trial of this action.  Though his evidence may be less important than the other two possible witnesses, Herman is the person (apart from SFS) who might have the most personal knowledge of the $9 Million in the Herman-Hadi joint account.  He also assisted SFS in managing the accounts of Simsons.

430.  HRH are trying hard to attack the credibility of Hadi’s evidence.  Once there were confusions in his evidence, they accuse Hadi of lying.  Given the delay and the circumstances of this case, Hadi would be put in a disadvantageous position in defending the claim because of his age, the long lapse of time and the absence of evidence from the relevant key persons.  The quality of his evidence must have been affected by these factors of which delay is the main culprit.  In my judgment, in the absence of any fraudulent conduct, it would not be just to order any equitable relief against Hadi even if he was one of co-trustees or fiduciaries of the alleged Hou Zhang assets, which I do not accept it to be the case.

H.    COUNTERCLAIM

431.  As compared with the main claim, the counterclaim can be disposed of fairly easily.

432.  The Misrepresentation Claim is a fact-sensitive one.  As mentioned above, though I do not find Hadi to be a dishonest person, he is certainly a bad and unreliable witness.  As I see it, he was very much confused as to what really happened many years ago.  He was stubborn and had no hesitation in turning his perceptions into “facts”.  Rightly or wrongly, he felt that he had been unfairly treated in the 1980 Separation.  His complaint was really that he did not get a share of BDU and KMC, and yet he was not able to point to any specific things said by HRH which amounted to a misrepresentation.  In my judgment, it would be dangerous for the court to rely on his evidence to establish the Misrepresentation Claim against HRH.

433.  Mr Yu submits that Hadi had made up the Misrepresentation Claim as an excuse to attack HRH when they were pursuing him about Simsons and the Hou Zhang.  However, by looking at the 1980 English Agreement and the Parents’ Letter, I can perhaps understand why Hadi, given his stubbornness and opinionated character, felt that he had been unfairly treated in the 1980 Separation.  I am not saying that his perception or feeling is right, but I do not accept that he had misappropriated or concealed the family assets and then made an excuse to cover up his misconduct.

434.  I also agree with Mr Yu that Hadi’s Misrepresentation Claim is a convoluted one.  There are some confusions as to whether Hadi should have known about Soetikno’s interests in BDU and KMC back in 1980’s, and whether Hadi had raised such complaint before his chat with Harry in the Chinese New Year of 2011.  Despite these confusions, the letter written by Hadi on 10 May 2011 does support that Hadi only by then recently learnt about Soetikno’s interests in BDU and KMC.  As I have mentioned above, Hadi is not a man who can think clearly now and so I am not surprised that he was confused about the sequence of events in the past.  He just said what he wanted to say and that is why the court should not attach any weight to his evidence on the Misrepresentation Claim.

435.  Before leaving this topic, I must say that I also have some difficulty with Rudy’s evidence on the Misrepresentation Claim. For the first time at trial, he mentioned that there was an agreement between the Father and Soetikno before the 1980 Chinese Agreement that BDU and KMC would go to HRH.  If there was in fact such agreement, it would be a good answer to Hadi’s complaint.  Yet Rudy did not mention this agreement before his oral testimony at trial.  This certainly undermines the credibility of Rudy’s evidence.

436.  For the Singapore Jardine Shares, I understand that Henry is willing to account to Hadi for the sale proceeds of those shares subject to the HRH’s claim on the alleged Sim Family Trust Fund.  As HRH’s claim fails (apart from an account relating to Herman’s Emoluments and the Directors’ Fees), Henry has to account to Hadi for the Singapore Jardine Shares.  In fact, there is no claim, whether in these proceedings or otherwise, that the Singapore Jardine Shares form part of the Hou Zhang.  Any allegation to this effect is no more than a suspicion on the part of HRH.   

I.   FINAL ORDER, COSTS, AND OTHER CONSEQUENTIAL MATTERS

437.  My main findings can therefore be summarised as follows:

(i)   The general Sim Family Trust alleged by HRH did not exist.

(ii)   There were no separate batch of the $4 Million Shares or the Custody Shares (or the $5 Million Shares) for the benefit of the 6 Brothers after the 1980 Separation.

(iii)   The $9 Million probably came from the $7 Million which was not used by the 6 Brothers for the construction of the New Simsons Building.

(iv)   The Disputed CK Shares were not acquired by Hadi using the assets of the alleged Sim Family Trust Fund.

(v)   The Hou Zhang consisted of Herman’s Emoluments and the Directors’ Fees.

(vi)   It was SFS who managed the Hou Zhang, the $7 Million (or the $9 Million) and the stock investments of Simsons.

(vii)   The management of the Hou Zhang was passed to Hadi prior to SFS’s death.

(viii)   No misrepresentation was made by HRH during the 1980 Separation exercise.

438.  For the reasons given above, I dismiss HRH’s claim for an account of the general Sim Family Trust Fund and equitable compensation against Hadi.  For the Hou Zhang consisting of Herman’s Emoluments and the Directors’ Fees, since the assets are for the benefit of the 6 Brothers and the Hou Zhang had already been passed to Hadi, Hadi owes a fiduciary duty to account for the Hou Zhang.  There is some uncertainty as to whether the Hou Zhang was held for the benefit of the shareholders of Simsons or the 6 Brothers.  Despite that, since Hadi is not contesting the account for Herman’s Emoluments and the Directors’ Fees, an order for account should be made for these items.  However, as the parties have not addressed the court on this particular uncertainty, I would give liberty to parties to revisit such matter.

439.  In case of any disagreement on the exact amounts of Herman’s Emoluments and the Directors’ Fees due on the accounts and the issue of interest, the parties are also at liberty to restore the case for further argument on these matters.

440.  For the counterclaim, I dismiss the Misrepresentation Claim.  In respect of the claim for an account for the remaining sale proceeds of the Singapore Jardine Shares, I grant judgment in favour of Hadi.

441.  There is an outstanding summons by Hadi to join SFS’s Estate as a third party in the present proceedings, which was taken out by Hadi after HRH decided not to pursue the claim against SFS’s Family.  The summons is now superseded by this Judgment.

442.  The parties are directed to submit the draft order for approval by the court within 21 days.  In case of any disagreement, the parties will be at liberty to restore this case for further argument.

443.  As the parties anticipate that there will be serious argument on costs no matter what is outcome of the proceedings, I do not see it fit to make a costs order nisi at this stage.  The parties are directed to submit the proposed agreed directions for argument on costs within 21 days from the date of the handing down of this Judgment.

444.  Any other applications to restore the case for further argument will also have to be made within 21 days from the date of the handing down of this Judgment.

445.  With the able handling of this litigation by counsel, no stone has left unturned.  The adjudication of the present case requires the court to conduct a microscopic analysis of some old documents and to assess the evidence by some senior witnesses.  The task is by no means an easy one.  Nevertheless, I would like to express my gratitude to counsel for all the assistance they have provided to this court, in particular for their effort in assisting the court in navigating through the complicated evidence in this case.