CHE LEUNG KEI v. CHE THI QUYNH HELENE

HCA 1422/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1422 OF 2013

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J U D G M E N T
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1.  Mr Che Leung Kei (“the plaintiff”) is the executor of the estate of his father, Mr Che Hon Chuen (“the deceased”). Madam Che Thi Quynh Helene (“the defendant”) is the executrix of the estate of Madam Chea Yuk Wah (“Madam Chea”). The plaintiff sought recovery of a sum of HK$1,916,737.93 said to be held by Madam Chea on trust for the deceased. After the trial, I dismissed the claim and awarded indemnity costs to the defendant. Here are my reasons.

The plaintiff’s case

2.  In or about 2004, the deceased offered to give $699,260 (“the sum”) to the plaintiff as a gift for his future wedding expenses.  The plaintiff declined because he was not in need of it at that time.

3.  The deceased and Madam Chea then had an oral agreement (“the oral agreement”) whereby the deceased would pool the sum with Madam Chea’s money in her stock trading account for stock investment.

4.  On or about 17 June 2004, the deceased issued a cashier order for the sum to Madam Chea.  She signed on a note dated June 2004 prepared by the deceased to acknowledge receipt of the sum for the purpose of capital for stock investment (“the receipt”).

5.  Madam Chea deposited the sum into her savings account at the Bank of Communications (“the BOC account”).  On or about 24 June 2004, Madam Chea transferred HK$690,000 from the BOC account to her securities account in the same bank (“the securities account”).

6.  There had been trading of securities in and withdrawal of lump sums from the securities account.  As of 24 November 2005, the total market value of the purchased stocks and the available fund in the securities account was in the sum of HK$3,927,741.67.  Mr Yu, counsel for the plaintiff, claims that the deceased was entitled to 38.5% of it, which amounted to HK$1,240,712.11, and that Madam Chea was holding the money on constructive trust for the deceased.

7.  Madam Chea died on 31 January 2006.  The deceased died 3 years later on 22 February 2009.

The defence case

8.  The defendant disputes the existence of the oral agreement, the source of the $699,260, the assertion that Madam Chea had signed the receipt and the quantum of claim.

9.  The defendant relies heavily on HCA 2258/2006 (“the previous action”). In that case, the deceased relied on an alleged oral agreement made in 1987 with Madam Chea (“the 1987 oral agreement”) whereby they would pool their money, assets and earnings for the purpose of investment, such that the deceased was entitled to 1/3 share of the profits. Pursuant to the 1987 oral agreement, Madam Chea had allegedly been holding various properties on trust for herself and the deceased.  The deceased claimed 1/3 share of the estate of Madam Chea.

10.  In the reply filed in the previous action, the deceased admitted having received a sum of HK$860,398.14 out of Madam Chea’s bank account as purported return of capital and profit in stock investment.

11.  The plaintiff carried on the previous action after the death of the deceased.  The plaintiff belatedly sought leave to amend his statement of claim at that trial to claim for the sum, but the trial judge, Recorder Chow (as he then was), refused to grant leave.  The previous action was dismissed after trial.

12.  The issues in this case are therefore:

A. Whether the sum had originated from the deceased;

B. Whether Madam Chea had signed on the receipt;

C. Whether there was a trust agreement;

D. The quantum, if any, that the plaintiff was entitled to recover from Madam Chea’s estate;

E. Whether the plaintiff had received the HK$860,398.14 as return of capital and profit in stock investment.

13.  There were assertions by the plaintiff that the deceased and Madam Chea were cohabitees, but it is not necessary to resolve them.  Suffice to say that the 2 of them have physically lived under one roof for about 18 years before the death of Madam Chea.

Credibility of witnesses

14.  As will be demonstrated below, the plaintiff was inconsistent in his evidence.  His case was inconsistent with his assertions in the previous action.  Unless otherwise specified, I shall not rely on his evidence.

15.  The defendant was not really challenged in evidence.  She was a calm, consistent and logical witness and I accept her evidence.

A.  Whether the sum had originated from the deceased

16.  The original of the receipt (Exhibit P1) was in the possession of the deceased.  Deposit of the cashier order into Madam Chea’s bank account, transfer of $690,000 into her securities account, purchase of HSBC shares on 24 June 2004, all took place in close proximity of time to the date of Exhibit P1.  There was also evidence in the plaintiff’s witness statement as to how the deceased was able to accumulate wealth over the years. 

17.  However, the plaintiff admitted in the witness box that he had no idea whether the sum was derived from the deceased’s savings, or whether the sum was the same sum that the deceased had promised as a gift for his wedding.  The deceased was not working after he had moved in to live with Madam Chea.  In §11 of the statement of claim in the previous action, the deceased’s own plea was that he was a retired person having no income or earning or virtually no capital assets. 

18.  At this trial, the plaintiff testified that the deceased had rental income but the amount was never made clear in the plaintiff’s evidence. 

19.  The plaintiff had produced passbooks of 12 accounts of the deceased.  Ten of them had been closed years before 24 June 2004 and their total bank balances added up to about $80,000.  The other 2 accounts had continued beyond 24 June 2004.  However, even taking the bank balances of all 12 accounts, as at 24 June 2004, the amount was no more than $114,000.  Where was the balance of the $555,000 to make up the cashier order?

20.  Under cross-examination, the plaintiff was unable to state if the deceased had stored cash at home or how much.  It was inconceivable that the deceased had put so much cash at home anyway.  However much distrust he had with banks as alleged by the plaintiff, the deceased had had 12 bank accounts!

21.  In fact, the assertion that the sum came from the deceased’s savings contradicted the plaintiff’s evidence in the previous action.  The plaintiff told Recorder Chow that the sum was part of his mother’s estate which the deceased held for the plaintiff given his tender age: transcript of the previous action, item 56.

22.  In the premises, I am not satisfied on the balance of probabilities that the $699,260 had originated from the deceased.

B.  Whether Madam Chea had signed on the receipt (Exhibit P1)

23.  Exhibit P1 was allegedly discovered by the plaintiff amongst the belongings of the deceased after the latter had passed away.  Neither party was present at the time Exhibit P1 was signed.  The defendant puts the plaintiff to strict proof of its authenticity.

24.  I have examined Exhibit P1.  It was written on a deposit slip of the Bank of Communications.  The contents were written in blue ink.  The signature of Madam Chea was in black ink.  At the back of the slip was another purported signature of Madam Chea.  It was probable that the receipt was not written by Madam Chea, as it was not disputed that she could not read or write Chinese.

25.  Being the party who propounded the receipt, the onus lies on the plaintiff to prove that it was genuine, not on the defendant to prove that it was a sham: Securities and Futures Commission v Wang Jian Hua & Ors, HCMP 745/2013, 29 October 2015, at §89, per G Lam J.

26.  The plaintiff did not have direct knowledge as to when and how the receipt came into being.  There was simply no proof as to whether the signatory was Madam Chea, the circumstances under which she signed the receipt, and whether she understood what she was signing. The close relationship between the deceased and Madam Chea, even if true, could not advance the plaintiff’s case.  The plaintiff fell far short of establishing the authenticity of the receipt. 

C.  Whether there was a trust agreement

27.  Mr Yu relied on common intention constructive trust.  Accordingly, the plaintiff must prove (i) a common intention between the deceased and Madam Chea that the deceased was to be the beneficial owner of the asset; (ii) that the deceased altered his position in detrimental reliance upon such common intention; and (iii) that it was unconscionable for Madam Chea to assert ownership in reliance on her legal title to the asset: Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §46, per G Lam J.

28.  Neither the pleadings nor Mr Yu’s opening submission made clear how the constructive trust could have arisen.  The claim must fail as a matter of law.

29.  As a matter of fact, there were the following difficulties in the plaintiff’s case:

30.  Firstly, in his oral evidence, the plaintiff vacillated between saying that the sum was the deceased’s money and his money.  The former version was the pleaded version.  The latter version was also the plaintiff’s evidence in the previous action, namely, that the deceased held the money on trust for him (托管、寄存).

31.  Insofar as the plaintiff testified that the sum was a gift from the deceased, which was given to Madam Chea to invest on behalf of and account to the plaintiff, it was not pleaded. 

32.  This vacillation in evidence wholly destroyed the plaintiff’s case as to the existence of a “common intention” between the deceased and Madam Chea.  It blurred the identity of the settlor of the trust.

33.  Secondly, what was the subject matter of the trust?  The pleaded case was for the deceased to pool the sum together with the money in Madam Chea’s securities account (§8 of the re-amended soc).  However, the plaintiff purported to pool together also the securities acquired by Madam Chea to the value of over $2,000,000 before the trust came into being.  This was a departure from the pleaded case.

34.  In §16 of the re-amended soc, the pleaded case was that “there was to be inferred a common intention … that Madam Chea should hold the [sum] and all profits earned thereby upon trust for the deceased for the purpose of stock investment.”.  Neither this plea nor the receipt mentioned the pooling of assets and what assets were to be pooled. 

35.  Mr Yu submitted that the pooling of the sum together implies that the “property acquired” was a certain percentage of the total value of shares and cash in Madam Chea’s securities account.  This submission was inconsistent with the pleaded case and there was no plea to justify implying anything.  I reject such submission.

36.  Thirdly, who was the beneficiary?  It was not even stated on the face of the receipt, that Madam Chea was to invest on behalf of the deceased.  In fact, there was no reason for Madam Chea to do so when he had all along been investing in shares himself.  There was thus only the vacillating word of the plaintiff as to the deceased or the plaintiff being the beneficiary.  The plaintiff claimed that the deceased had suffered from senile dementia.  That made the plaintiff’s hearsay evidence of what his father told him even more unreliable.

37.  Fourthly, the present claim was illogical in view of the previous action taken out by the deceased in his lifetime.  He did not make any claim in respect of the sum against Madam Chea.  Lack of Exhibit P1 could not be an excuse because he also lacked documentary proof as regards the 1987 oral agreement. 

38.  The deceased and Madam Chea allegedly agreed to pool their money, assets and earnings for investment and the deceased was entitled to 1/3 share of the profits [§5 of the amended soc in the previous action].

39.  According to the plaintiff’s answer to Recorder Chow’s question at the trial, the investment included investment in stocks through Madam Chea’s securities account: transcript of the previous action, item 149.  This plainly did not sit well with the present oral agreement whereby the deceased set aside the sum for Madam Chea to invest outside the scope of their 1987 oral agreement but through the same securities account.  Should the deceased get a 1/3 share of the proceeds in the securities account (under the 1987 oral agreement) or a share proportionate to the sum (under the present oral agreement)?

40.  Fifthly, in item 10 of the list of inventory of assets and liabilities of the deceased signed and filed by the plaintiff at the Probate Registry, the plaintiff confirmed that there was no debt due by others to the deceased and that there was no claim by the deceased over any interest in the estate of any person.  This was despite the fact that the previous action was ongoing at that time and the plaintiff knew about it.

41.  The evidence was unclear as to the settlor, subject matter and beneficiary of the trust.  The deceased did not claim the sum or rely on this trust in the previous action.  I reject the plaintiff’s case that the deceased and Madam Chea had a common intention or that a trust was formed.

D.  The quantum, if any, that the plaintiff was entitled to recover from Madam Chea’s estate

42.  It was accepted by Mr Yu that the total value of the purchased stocks and funds in Madam Chea’s stock trading account as of 24 November 2005 was not$3,927,741.67 as pleaded but was $3,222,216.67.  The table in his closing submission set out the computation of the quantum claimed.

43.  It was apparent from the statements of Madam Chea’s securities account that immediately before 24 June 2004, Madam Chea held shares with a total value of over $2,000,000.  On 24 June 2004, after $690,000 was deposited into her securities account, the only securities bought by her were 6400 HSBC shares to the value of $737,928.32.  Apparently, the $690,000 was sufficient to buy only 93.5% of the HSBC shares.

44.  The HSBC shares had been sold on 3 August 2004 for $753,220.58.  A sum of $800,000 was withdrawn on 7 October 2004 without purchase of shares in the interval.

45.  I agree with Mr Chang that if the oral agreement to invest did exist, there were 2 alternatives open to the plaintiff:

(a)     Part of the HSBC shares were acquired with the deceased’s money.  They were sold and the money was transferred away. Any tracing would have stopped there.

(b)     Alternatively the plaintiff may choose to say that the investment had gone on with the cash balance of about $12,000 in the securities account.  In which case, the tracing would have started from there. 

However, apparently, neither of these was the plaintiff’s case.

46.  By any stretch of imagination or interpretation of the oral agreement, any trust could only have arisen, earliest, in June 2004 when the cashier order was handed to Madam Chea.  There was nothing in the terms of the oral agreement to show that the deceased would have been entitled to part of the shares acquired by the trustee before June 2004.

E.  Whether the plaintiff had received the sum of HK$860,398.14 as return of capital and profit in stock investment

47.  In §13 of the reply filed in the previous action, the deceased (who was still alive and in charge of the action) pleaded that, “on 26 January 2006, [Madam Chea] returned to [the deceased] the sum of HK$860,398.14 being capital and profit of investment in shares made by [Madam Chea] on behalf of [the deceased].  The said sum of HK$860,398.14 is [the deceased’s] own money.”.

48.  Although Recorder Chow found that there was no evidence as to the nature of the HK$860,398.14, the reply was a clear admission of the deceased.  The plaintiff’s assertion that the HK$860,398.14 was Madam Chea’s reimbursement to the deceased for remitting money to her siblings was not supported by documentary evidence.  I reject the plaintiff’s oral testimony on this aspect.  Accordingly, even if there had been a common intention trust, there could not be any further claim by the estate in this action.

Conclusion

49.  I was not satisfied that there was an oral agreement as alleged between the deceased and Madam Chea, that the sum had originated from the deceased, and that the receipt was authentic.  I am not satisfied that there was a common intention constructive trust.  Even if there was, the deceased’s admission indicated that he had received return of capital and profit from Madam Chea before this action started.  For all these reasons, I have dismissed the claim.

Costs

50.  Mr Chang sought indemnity costs against the plaintiff.  Mr Chang has not pursued the abuse of process point (for re-litigating an issue originally put forth in the previous action) or the limitation point as pleaded in the defence. However, that did not preclude him from seeking indemnity costs on the ground of abuse of process, a kind of conduct that the court was entitled to take into account when determining costs under Order 62, rule 5(1)(e) and (2).

51.  The dismissal of the previous action relying on the 1987 oral agreement would have alerted the plaintiff that this claim was obviously unsustainable.  Paragraphs 37-39 above shows that the plaintiff advanced a case which was not in accordance with the deceased’s own stance.  The defendant was vexed twice with successive litigation.  The court should mark its strongest disapproval of the plaintiff’s conduct.  Hence an order for indemnity cost was made.  The costs are to be summarily assessed on 7 January 2016 without the need for an attendance.

52.  On another note, the plaintiff’s solicitors have failed to comply with a number of procedural matters.  There was late submission of trial bundles, causing late submission of skeleton submission on the part of the plaintiff.  Instead of updating the pre-trial review bundle as directed, the solicitors gave me another Bundle A.  There has been indiscriminate photocopying of documents in Bundle B so that, eg I have at least 4 copies of the receipt, and many documents were not referred to at trial.  The amended statement of claim was in the wrong form even though I have given the plaintiff’s solicitor a chance to correct it on the first day of trial.

53.  Unless the plaintiff’s solicitors can provide a written explanation to me within 14 days from the handing down of this judgment for such conduct, the costs arising from the preceding paragraph should be borne by the plaintiff’s solicitors personally.

54.  I thank counsel for their assistance.