ERIC EDWARD HOTUNG AND ANOTHER v. HO YUEN KI AND OTHERS

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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J U D G M E N T

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INTRODUCTION

1. The 1^st plaintiff (“Eric”) and the 1^st defendant (“Winnie”) were secret lovers. In 1961, Eric gave HK$2,000,000 (“the Fund”) to Winnie for the purpose of (according to Eric) investing in certain gaming and related business in Macau on his behalf.  It is Eric’s case that the investment is now represented by:-

(1)   6,251 shares of and in a company called Sociedade De Turismo E Diversoes De Macau SA (“STDM”) held in the name of the 1^st defendant; and

(2)   40,050 shares of and in another company called Shun Tak Shipping Company Limited (“STS”) held in the name of the 2^nd defendant (“MVI”) (collectively the “Trust Property”).

2. Winnie admits having received the Fund from Eric in 1961, but denies the case of trust advanced by Eric.  She previously said that the Fund was provided to her as a “loan” which had been repaid to, and/or waived by, Eric.  Her current case, as I understand it from her counsel, Mr Edward Chan SC, is that the Fund was given to her as a “gift”.

3. Eric and Winnie’s son (“Michael”) has been joined as the 3^rd defendant in this action on the ground that since around 2005, he has been assisting Winnie in managing the Trust Property and has thereby assumed the duties of a trustee.

4. By a Deed of Settlement dated 20 November 2010 (“the Deed of Settlement”) made between Eric as the “Assignor” and the 2^nd plaintiff (“Lare Sare”), then known as Assure Capital Global Limited, as the “Assignee”, Eric purportedly assigned all rights and benefits of and in relation to (inter alia) the Trust Property to Lare Sare to be held on trust in favour of the “Beneficiary”, ie Sir Robert Ho Tung Charitable Fund, a fund managed by HSBC Trustee (HK) Ltd.

5. This action was commenced by Eric and Lare Sare by way of a writ of summons on 20 May 2011.  In their Amended Statement of Claim dated 25 May 2016, they seek, inter alia, an order for the transfer by Winnie and MVI of the Trust Property to Lare Sare to be held on trust pursuant to the Deed of Settlement, and an account of all income and profits derived from the Fund and/or the Trust Property.

6. In their respective defences filed in this action, Winnie, MVI and Michael deny the existence of any trust as alleged by Eric.  They also rely on the defence of laches.

7. The primary issue which falls for determination in this action is whether the Fund was provided by Eric to Winnie upon trust for her to invest in the gaming and related business in Macau on his behalf.  There is no contemporaneous documentary evidence which directly supports or contradicts Eric’s case.  At the trial, only Eric gave evidence.  Although Winnie made a number of witness statements in this action, she did not give oral evidence at the trial because she was, apparently, too ill to do so and was confined to a hospital. Accordingly, the validity of the plaintiffs’ claim rests essentially on Eric’s oral evidence.

ERIC’S EVIDENCE

8. Eric made two witness statements dated 16 February 2014 and 17 February 2016 respectively, the contents of which he adopted as his evidence in chief.  The following narrative is taken largely from Eric’s witness statements or from the “Agreed Chronology” dated 19 May 2016, unless otherwise expressly stated.

(i)  Background

9. Eric was born in Hong Kong in 1926.  His grandfather was Sir Robert Ho Tung and his father was Edward Hotung.  Eric’s family moved to Shanghai in 1927, and returned to Hong Kong in November 1940.

10. Eric first met Winnie in Hong Kong on 2 December 1941 at Sir Robert Ho Tung and Lady Ho Tung’s diamond wedding anniversary celebration.  Winnie was there because her grandfather and Sir Robert Ho Tung were brothers.  Eric was 15½ years old at that time and Winnie was a few years older than Eric.  In the words of Eric, as soon as he met Winnie, he found her very attractive and it was “love at first sight”.  Thereafter, Eric visited Winnie at her home at Conduit Road almost every day, even after the Japanese invasion of Hong Kong on 8 December 1941, until Eric and his family left Hong Kong for Shanghai in May 1942.  Apparently, Winnie also left Hong Kong and went to Vietnam in about 1942 after Eric had left for Shanghai. They did not then keep in contact with each other.

11. In 1947, Eric moved to the United States and studied at Georgetown University. After graduation from university in around 1951, Eric started working in the United States.  He worked as a runner in the commodities trade in New York for some time and later worked for General Motors.

12. In April 1956, Sir Robert Ho Tung passed away in Hong Kong.  In July 1957, Edward Hotung also passed away.  At about that time, General Motors decided to send Eric to work in their office in Asia, which was then in Singapore.  Before he started working in Singapore, Eric took an extended leave of about 2 months so that he could return to Hong Kong to attend his father’s funeral and deal with other family matters.  It was during that period of time that he met Winnie again in Hong Kong.  By that time, Winnie had already been married to one Mr Mak, and given birth to a daughter (Anita) and a son (Winston).  According to Eric, they “nevertheless resumed [their] relationship, though secretly, some 15 years after [they] first met”.

13. Eric then went to Singapore to work for General Motors.  After a few months of being in Singapore, Winnie came to visit him and stayed with him for about 6 months. Upon Winnie’s persuasion, Eric decided to come back to Hong Kong to secure his inheritance from his grandfather’s estate and his father’s estate, which he had not yet received.  Eventually, Eric returned to Hong Kong in the late 1950s, and began investing in stocks using funds advanced to him by the trustee of Sir Robert Ho Tung’s will.  He also continued his secret “romantic” relationship with Winnie in Hong Kong.  Arising out of that relationship, Winnie gave birth to the 3^rd defendant (ie Michael) in May 1959, and a daughter (“Barbara”) in April 1960.

14. Over the years, Eric purchased a number of properties and gifted them to Winnie, including:-

(1)   a flat of about 700 square feet at 31F, Robinson Road, Hong Kong, at the price of about HK$30,000 in around 1959;

(2)   a larger flat at 30 Kennedy Road, Hong Kong, at the price of about HK$200,000 in around mid-1960s; and

(3)   265 Atherton Avenue, Atherton, California, at the price of about US$300,000 in the 1970s.

15. Eric married his wife (Patricia Anne Shea) on 17 January 1959.

16. In 1960, Eric received some shares and dividends from the estate of Sir Robert Ho Tung, and started to diversify his business interests from stock investment into property and cinema projects.  In about October 1960, Eric obtained a loan of HK$1 million from HSBC which he invested in the stock market and was able to double the money within a period of about 3 months.  At that stage, although he had not yet received his full inheritance, he had about HK$3 million worth of cash and stocks and a couple of properties held on his behalf.

(ii)  Winnie’s assistance

17. In addition to their personal relationship, Winnie also worked as Eric’s assistant in relation to his investments and business shortly after his return to Hong Kong in the late 1950s.  Winnie looked after Eric’s assets and properties, acted as his Cantonese interpreter, helped him negotiate with tenants and obtain vacant possession of properties for the purpose of redevelopment, and took care of his business interests, including property management, construction and cinema projects.  Eric said that he paid her well, as much as HK$8,000 per month at one point.

18. In view of his disputes in relation to his grandfather’s will, ongoing and potential litigations, as well as liabilities for overdraft facilities made available to him on the credit of his entitlement under his grandfather’s will, and in order to avoid adverse and unmeritorious claims against his properties, Eric held investments and properties using aliases and trusts.  In particular, he purchased a number of properties using Winnie’s name or alias, including:-

(1)   115 and 117, Tung Choi Street, purchased in the name of Winnie’s alias, “Shing Tsui”;

(2)   Flats I and J, 8^th Floor, Edward Mansion, 141 Prince Edward Road West, held in the name of “Wong Man Lay” (a name which I shall come back to later in this judgment).

19. According to Eric, these properties were not gifts to Winnie, but were managed by her on his behalf.

(iii)  Investment in the Casino Business

20. In 1961, tendering for Macau’s casino gaming licence began.  The gaming licence was eventually awarded to STDM, a Macanese company set up by, amongst others, Stanley Ho (Winnie’s elder brother), Yip Hon, Teddy Yip and Henry Fok.  The casino gaming licence brought with it other business opportunities, including hotels and sea transportation (collectively the “Casino Business”).  However, Stanley Ho did not at that time have enough capital to initiate the Casino Business and was looking for investors.

21. In around late 1961, Winnie told Eric about the licence obtained by STDM.  She said that she obtained the details of the Casino Business from her brother-in-law, Teddy Yip, and suggested to Eric to invest HK$2 million in the Casino Business which she said would be a good business opportunity. Winnie told Eric that that total capital intended to be raised was HK$10 million, and thus Eric’s proposed investment would come to about 20% to 30% of the Casino Business.  At that time, Eric only had a little over HK$3 million available to him.  Nevertheless, considering the opportunity, he agreed to invest HK$2 million in the Casino Business.

22. Eric and Winnie then agreed to find a way to front the proposed investment, for essentially three reasons:-

(1)   Stanley Ho and Eric were not on good terms at that time, and he would not accept the investment if he knew that the money originated from Eric.

(2)   Eric’s wife, being a strict Catholic, had made known to him of her strong disapproval of gambling when they got married, and thus the investment had to be concealed from her.

(3)   In Sir Robert Ho Tung’s will, it was expressly stated that he wished all his children to refrain from gambling. Since Eric still had to obtain his full inheritance under his grandfather’s will and his father’s will, and he was involved in a number of disputes in relation to his inheritance, he did not want to give the trustees of their estates any excuse or reason to withhold his inheritance.

23. Eventually, Winnie and Eric came up with the pseudonym of “黃萬里” (Wong Man Lay) to hold the investment in the Casino Business on Eric’s behalf.  The underlying reason of this pseudonym was their joke that Stanley Ho would have to walk ten thousand miles before he could discover that the money for the investment originated from Eric.  Winnie also told Eric that she would represent to Stanley Ho that Wong Man Lay was a rich tycoon in South East Asia who was willing to make the investment through her.

24. In around late 1961, Eric gave Winnie a cheque for HK$2 million (ie the Fund) for her to invest in the Casino Business on his behalf.  Soon after Eric had provided the Fund to Winnie, she told him that Wong Man Lay’s interest in the Casino Business would be represented as a joint interest with Teddy Yip and managed wholly by her.  She also told him that Teddy Yip knew that the Fund originated from him and that he would keep up the cover story of Wong Man Lay.  At around this time, Eric also learned from Winnie that Stanley Ho and other investors were not able to raise the proposed capital of HK$10 million, and Teddy Yip was able to secure for him (through Wong Man Lay) a 62% interest in the Casino Business because his investment of HK$2 million constituted the majority of the capital raised for the Casino Business.

25. Soon afterwards, Winnie brought to Eric’s office the share certificates representing his interests in the Casino Business.  They were printed in red ink on green coloured paper.  Eric told Winnie to lock up the share certificates and keep them safe.  Other than on that occasion, Eric does not recall seeing those certificates again.

26. Winnie also told Eric that the Casino Business was divided into three sections, namely, (i) STDM which operated the casino, (ii) STS which carried on sea transport and hotel business, and (iii) Wing Hing Lottery Limited (a Macanese company) which operated a lottery business under the name of “Wing Hing Lottery”.

(iv)  Dilution of Eric’s interests in the Casino Business

27. Although Stanley Ho and his fellow investors were initially unable to raise the capital of HK$10 million for the Casino Business, it appears that at a later stage the proposed capital of HK$10 million was fully paid up.  As a result, Eric’s interest in the Casino Business was reduced to about 20%.  It is not entirely clear, on Eric’s evidence, as to when it was that he was informed about the dilution of his interests in the Casino Business.

(1)   At paragraph 46 of his first statement, Eric said that during the first few years of the Casino Business, Henry Fok presented a number of bills to STDM and other companies in the Casino Business for them to pay for the construction of various infrastructures relating to the hotel and shipping business.  It was at that time that more investors joined in the Casino Business and Eric’s interests dropped from 62% to twenty odd percent.  Eric was not, however, told about this reduction until later when Stanley Ho further diluted his interests.  At paragraph 48 of his first statement, Eric said that sometime after he gave Winnie the HK$2 million (in around late 1961), Stanley Ho discovered that (part of) the funds represented by Teddy Yip and Winnie Ho came from him and forced a re-organisation of the shareholdings in the Casino Business, and Eric’s interests were eventually diluted to about 7% in STDM and 8% in STS.  From these two paragraphs, it would seem that Eric was not informed about the dilution of his interests in the Casino Business until at least a few years after the commencement of the business in 1961.

(2)   On the other hand, at paragraph 47 of his first statement, Eric said that he was informed by Winnie of the dilution of his interests about 6 to 8 months after his payment of HK$2 million. That would be in around 1962.

28. The exact date on which Eric was informed about the dilution of his interests in the Casino Business does not matter much.  Whatever the position, according to Eric, when Winnie told him about the further dilution of his interests in the Casino Business, Eric was very angry and frustrated and protested how Stanley Ho could do that.  Winnie told Eric that Stanley Ho had found out about their relationship and that Michael was their son.  She also told Eric that Stanley Ho had told her to accept the restructuring of the shareholdings in STDM and STS otherwise he would tell everyone that Michael was their illegitimate son. 

29. Eric then went to seek legal advice from a lawyer called Peter Griffiths of Wilkinson & Grist, but was told that there was nothing that he could do because the relevant corporate entities were in Macau and there was no recourse that he could seek in Hong Kong.  Further, Eric was told that even if he were to seek help from a Macanese lawyer, in view of the fact that Stanley Ho and the other founders of the Casino Business were very well connected in Macau he would not be able to do anything there either.

30. When Eric found out that his interests in Casino Business had been diluted by Stanley Ho, he also inquired with Winnie whether there was anyone who might be interested to buy his shares.  However, Winnie told him that there would not be anyone with sufficient capital to purchase his shares, and suggested that he should keep the shares because, in a matter of a few years, they were already worth many times of what he had originally paid for them, the Casino Business would continue to be lucrative, and his shares would yield very handsome dividends.  Hence, Eric decided to keep the investment in the Casino Business.

31. At this juncture, I should mention that there is in evidence before the court the following facts and matters.

32. First, on 13 August 1965, Teddy Yip commenced an action in the High Court, O J No 1875/1965 (“the 1965 Action”), against Eric as the 1^st defendant, Winnie as the 2^nd defendant and Consolidated Holdings Ltd as the 3^rd defendant. The court file in respect of that action is no longer available.  However, from the Court’s Case Book for 1965 (which is still available), it would appear that:-

(1)   Teddy Yip’s claim was for (i) an injunction to restrain the defendants from alienating any interest in (inter alia) “Sociedade”, “Shun Tak” and “Macau Lottery”, and (ii) damages;

(2)   Wilkinson & Grist appeared on the record as solicitors acting for Eric, Winnie and Consolidated Holdings Ltd; and

(3)   the action was settled on 8 October 1965.

33. Second, on 25 September 1965, Winnie and Teddy Yip entered into a Memorandum of Settlement (“the 1965 Settlement”) in settlement of the 1965 Action whereby it was agreed (inter alia) that:-

“1. HO YUEN KI alias WINNIE HO alias MAK HO YUEN KI alias WONG MAN LAY (hereinafter called ‘Winnie Ho’) hereby declares that Winnie Ho is the sole beneficial owner of SIXTY (60) per cent of the undermentioned shareholdings.

2. TEDDY YIP hereby declares that Teddy Yip is solely beneficially entitled to FORTY (40) per cent of the undermentioned shareholdings presently registered in the name of Teddy Yip, namely:-

SHUN TAK SHIPPING CO. LTD.	126,000 shares
SOCIEDADE DE TURISMO E
DI VERSOES DE MACAU, S.A.R.L.	630 shares
WING HING LOTTERY CO. LTD.	2,100 shares

5. Teddy Yip will execute transfers of portions of the sixty percent shareholdings belonging to Winnie Ho, to Yip Ho, to Stanley Ho and to Henry Fok and will transfer such number of shares in each of the above named Companies to the said parties as Winnie Ho shall direct and Teddy Yip shall have no claim to the proceeds thereof.

6. Teddy Yip will forthwith execute transfers and take all steps necessary to register the remaining portion of Winnie Ho’s sixty percent shareholdings in the said Companies into her own name.

18.  Winnie Ho guarantees that no third party has anything to do with the shareholdings referred to in this Agreement and that she has sole and complete right to deal with them and to enter into the provisions herein contained…”

34. I shall return to the 1965 Action and the 1965 Settlement when I come to assess Eric’s evidence below.

(v)  Dividends

35. Subsequently, while Winnie was still under Eric’s employ, he would from time to time ask Winnie whether or not any dividends had been paid from the Casino Business. Throughout the 1960s, Winnie’s answer to Eric’s inquiry was that the profits generated from the business were required to cover the expansion of the Casino Business and its related expenses, and thus no dividends were paid.

36. Winnie’s left Eric’s employ and migrated to California with her family in 1973. According to Eric, he purchased a property for Winnie and her family at 265 Atherton Avenue, Atherton, California, for about US$300,000 as her long service payment.  Thereafter, whenever Eric visited Winnie in the United States, which he did occasionally, he would continue to ask her about the status of the Casino Business and whether or not dividends from the business had been paid. Winnie would give him an update on how the Casino Business was doing, but she always said that no dividends had yet been paid because the profits were going back to the casino for its expansion and to defray the expenses for more infrastructural developments.

37. In around the mid-1970s, Winnie returned to Hong Kong and worked for Stanley Ho in the Casino Business in Macau.  In the mid to late 1970s, Eric heard from sources that Stanley Ho was paying dividends from the Casino Business.  On his next meeting with Winnie in his office at 10 Stanley Street, Eric asked Winnie whether Stanley Ho was paying dividends from the Casino Business. On that occasion, Winnie told Eric that Stanley Ho had started paying out dividends, and that she was helping Eric reinvest the dividends in the Casino Business.  She told Eric that she was not being paid enough by Stanley Ho to maintain her family so she was using part of the dividends for that purpose.  She asked Eric whether that was fine with him, and Eric told her that he had no problem with it.  Winnie also told Eric that if there were excess funds available, she would like to have Eric’s permission to donate some of the dividends to charities because the dividends were after all profits from the gambling business in Macau.  Again, Eric told her that it was fine with him for Winnie to donate some of the dividends to charities.

38. After this occasion, Eric had on a few more occasions asked Winnie about the dividends received from the Casino Business.  On those occasions, Winnie gave essentially the same answer to Eric, who raised no objection to Winnie’s use of the dividends as represented by her.

(vi)  Transfer or attempted transfer by Winnie of shares in STS and STDM to MVI and MVF respectively

39. In about early 1980s, at one of their meetings at Eric’s office at 10 Stanley Street, Winnie told Eric that it would be better for his interests in the Casino Business to be held by a foreign registered company so that they would not be so obvious to outsiders.  Winnie also told Eric that everyone whom she worked with in the Casino Business already knew that she was holding her shares in the Casino Business on his behalf.  At that time, Eric also did not want too many people to know that he was involved in the gambling business because he was very much involved in international politics and trade relations between China and the United States, and considered that his involvement in the Macau gambling business could have a stigma on his credibility.  He therefore told Winnie that he was fine with her suggestion of transferring his interests in the Casino Business to a foreign registered company.  He also told her to keep the relevant documentation safe.

40. Winnie later told Eric, in around early 2000s, that she was unable to transfer his interests in the Casino Business to an offshore company because her other children (Winston and Anita) has applied for an injunction from the Macau court to restrain her from so doing.  Winnie nevertheless assured Eric that his interests in the Casino Business would not be affected.

41. It is not in dispute that Winnie has transferred the STS shares that she held to MVI, a company incorporated in the Republic of Panama.  The relevant instrument or deed of transfer has not, however, been adduced as evidence at the trial. There is also no evidence on the date of the transfer, or the number of STS shares transferred to MVI.

42. On 27 June 2005, Winnie executed a deed purporting to transfer 6,000 shares in STDM by way of an absolute gift to Moon Valley Foundation Limited (“MVF”).  It is not clear whether this transfer has been effected or recognised by STDM.  In any event, according to Eric, he had no knowledge about this attempted transfer of 6,000 shares in STDM to MVF, until he learnt about this matter from his legal advisors when Michael joined him and Lare Sare as parties to the matrimonial proceedings between Michael and his ex-wife (on grounds which are not relevant for the present purpose).

(vii)  Michael’s management of Eric’s interests in the Casino Business

43. In around 2005, in a meeting at the 7^th Floor of The China Club Building, Winnie told Eric that she was tired of everything that had to do with the Casino Business and asked him whether she could let Michael take over the management of his interests in the Casino Business.  Winnie said that she would oversee what Michael did.  She also asked Eric whether she could use the dividends from the Casino Business for charitable purposes.  Eric agreed with both proposals made by Winnie.  At that time, Eric had a liking for Michael as a son, and his relationship with Michael was close.  In fact, in his will dated 4 September 2007, Eric specifically bequeathed to Michael, inter alia, all his interests in the Casino Business.

44. However, relationship between Eric and Michael turned sour towards the late 2000s, leading to (other other things) defamation proceedings commenced by Michael against Eric in the United States.  For the purpose of this judgment, it is not necessary for me to set out the details of their disputes, save to mention that Eric alleged that Michael took steps to obstruct his access to Winnie.  The last time that Eric met Winnie was in around the fourth quarter of 2009, at the Police Club in Causeway Bay.

(viii)Winnie’s denial of Eric’s interests in the Casino Business

45. In about January 2011, Eric wrote to Winnie.  In that letter, Eric stated (inter alia) the following:-

“… Things are also sad on another front. The shares which I entrusted to you for safe keeping many years ago that is the subject of transference to the company called Moon Valley. I understand at one time this was a trust fund created by Michael to various charitable acts under his care and that I am the beneficiary.

I feel that all the proceed from STDM shares of which I am the beneficiary appears to have disappeared … I didn’t want to query too much but the situation has arisen that I find all my wealth that I deposited with you appears to have been placed under Michael control without regard to my other children.

…

As you know all my children’s future was placed in your care my true intention was the STDM shares in your custody to be a gift to them. It was not my intention to have Michael’s usurp control and denying my wish. I therefore ask you to please put things right by returning my shares to a trustee company which will administer it.

I request a full accounting of the sums you have received and request a full accounting with interest.”

46. Winnie replied by letter dated 29 January 2011.  In her letter, she stated (inter alia) the following:-

“ I do not at all understand your motive in asserting a claim of beneficial interest in my STDM shares. You know very well that those shares belong to me absolutely and that they are not held in trust for you. Everybody in Hong Kong and Macau knows that I have been a shareholder of STDM in my own right for the past half a century and you have never before claimed that the shares held in my name are yours…

You know there is no truth in the allegation that I hold the STDM shares in trust for you. Although I have asked for and received 2 million dollars from you half a century ago which enabled me to make the initial investment in STDM, that was a loan which you agreed to give me because you said you loved me and because I am the mother of Michael. I have already repaid to you most of that money within a few years after the establishment of STDM when I sold some of the STDM shares allotted to me and you told me to forget about the balance. Do you not remember any of this? I have since been working hard to make my investment grow and the STDM shares now held by Moon Valley Foundation have nothing to do with you. Moon Valley Foundation was set up by me, Michael and other persons to carry out charitable work. You were never a part of it. In fact, throughout the years you have openly and proudly proclaimed yourself not to be associated with the gambling business in any way…

  Whatever may be your quarrels with Michael, there is no justification for your making a claim on my STDM shares.  You know it is dishonest and you should stop it at once.”

47. Eric wrote back to Winnie on 8 March 2011, reiterating his claim that she held the shares in the gambling business in Macau on trust for him.  The matter was not resolved.  Eventually, Eric and Lare Sare commenced the present action against Winnie, MVI and Michael on 20 May 2011.

Applicable principles for assessent of Eric’s evidence

48. The court’s approach in assessing the oral evidence of a witness is well settled. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at 481, Stock JA (as he then was) stated as follows:-

“ …… I do not say that an assessment of the character of a witness plays no part in the fact-finding process, but it is a task that may sometimes be elusive even to the best trained eye and ear, and I would venture to suggest that the truth, in so for as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one could expect it to have been created, as well as to inherent improbabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known … This is not to say that the documentation should have been treated as if it stood on its own, not to be explained, contradicted or supported by oral testimony. It is however to say that in this case the approach adopted to assessment of the facts placed far too much emphasis on character impression and too little upon what was suggested by the documentation and by the inherent improbabilities in their historical context. That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts …”

49. In other words, when assessing a witness’s evidence, one should pay particular attention to:-

(1)   the inherent probabilities, or improbabilities, of the events put forward by the witness;

(2)   the consistency, or inconsistency, of the witness’s evidence with undisputed background facts or documents; and

(3)   the consistency, or inconsistency, of the witness’s evidence with his/her previous statements and pleadings.

ERIC’S CASE OF TRUST IS NOT ACCEPTED

50. Eric was in the witness box, giving evidence in English, for a total of a little over 3 days. He was well educated, having graduated from a well known university in the United States.  He had been involved in different business fields in Hong Kong for many years.  I have no doubt that he was, in his prime, a shrewd, intelligent and highly successful businessman.  Nevertheless, he was about 90 years old at the time of the trial, and age had obviously caught up with him. It was clear that he was not in good health and required constant nursing care and attention.  He had difficulty hearing, and often had difficulty in expressly himself clearly.  At times, he appeared to be confused by questions put to him by counsel.  I bear all these in mind when assessing his evidence. For the reasons mentioned hereinafter, I am unable to accept his evidence that the Fund was provided by him to Winnie upon trust for her to invest in the Casino Business in Macau on his behalf.

51. First, in paragraph 1(6) of the Amended Statement of Claim, it is alleged that:-

“[Eric] and [Winnie] accordingly agreed that [Winnie] would hold and invest in the [Casino Business] the sum ofHK$2,000,000 on behalf of [Eric] and thereafter hold the interest in the [Casino Business] on his behalf”.

52. Read in the context of the five preceding sub-paragraphs of paragraph 1 of the Amended Statement of Claim, it is clear that Eric’s pleaded case is that there was an express oral agreement between him and Winnie to the effect as set out in paragraph 1(6) of the Amended Statement of Claim.  However, in his cross examination (on 25 May 2016, Day 3), Eric accepted that he never expressly said anything to Winnie when he parted with the HK$2 million back in 1960 or 1961, and that there was in fact no express oral agreement as alleged. He accepted the proposition put by to him Mr Chan that “[t]here was nothing actually said”.

53. Second, in Eric’s cross examination (on 27 May 2016, Day 5), he was asked why, when Winnie sold some shares in STDM pursuant to the 1965 Settlement leading to the dilution of his shareholding in STDM to 7%, he did not ask Winnie for the proceeds of sale.  He accepted Mr Chan’s proposition that he did not do so “because at that time [he] never dreamt that the shares were in fact [his]” and “[he] simply allowed her to have the shares”. To make sure that Eric in fact understood the questions he had been asked and the answers he had given, I specifically clarified the questions and answers with Eric.  His answers to me confirmed the above evidence.

54. Third, in his re-examination (on 30 May 2016, Day 6), Eric was again asked, this time by his counsel (Mr Alex Lok) why, when Winnie sold some of the shares in the Casino Business and pocketed the proceeds, he did not further enquire about the sale of the shares or the proceeds of sale.  He said, “I had plenty of money.  I was not short of a buck.  And I let her keep the shares and keep the money.”  A few questions and answers later, he explained that, by allowing Winnie to keep the shares, he meant “[b]y right, the shares were mine and so were the proceeds, but in my generosity, I just let her have them.  She was not that well off.”  When Mr Lok further asked him what he had in mind when Winnie sold the shares and got the proceeds, his answer was “[w]e are getting richer, that’s all.”  These answers suggest to me that Eric had decided, at some point in time, to let Winnie have the shares in the Casino Business as well as any proceeds of sale of those shares.

55. Fourth, according to Eric, he saw the share certificates in respect of the Casino Business only once, when Winnie brought them to his office soon after he had paid the HK$2 million.  Eric said that he told Winnie to lock up the share certificates and keep them safe.  While his failure to take possession of the share certificates at that time might be explicable on the basis that Winnie was then employed as his personal assistant, it seems to me to be inherently improbable that, if he truly thought that Winnie held the shares on trust for him, he did not get back the share certificates from Winnie when she and her family emigrated to the United States in 1973.

56. Fifth, Eric accepted that, over the years, he never received any dividends from the Casino Business even though he knew that dividends had in fact been declared and paid.  On his evidence, he did not, it would seem, even ask Winnie what were the amounts of the dividends, and he simply let Winnie keep and use them as she wished.  In my view, if he truly thought or believed that the dividends (and the shares) belonged to him, he would have shown a lot more interest in the dividends which plainly were substantial in amount.  His apparent disinterest in the dividends is, in my view, indicative that he did not consider that Winnie held the STDM and STS shares on trust for him.

57. Sixth, in his witness statement, Eric said that the name “黃萬里” (Wong Man Lay) used for the purpose of holding the investment in the Casino Business on his behalf was coined by him and Winnie based on their joke that Stanley Ho would have to walk ten thousand miles before he could discover that the money for the investment originated from him.  However, in his re-examination (on 30 May 2016, Day 6), he said that this name was not used until Stanley Ho “had ripped us off”, that being a reference to the dilution of his interests in the Casino Business from 62% to eventually 7% or 8% (which took place in or after 1965).

58. Seventh, in relation to the 1965 Action and 1965 Settlement, Eric says, in paragraph 98 of his first witness statement and paragraph 24 of his supplemental witness statement, that:-

(1)   he was not aware that there was any dispute between Winnie and Teddy Yip about his shares in the Casino Business;

(2)   Winnie had never informed him of any dispute that she had with Teddy Yip or the 1965 Action;

(3)   all he knew was that Teddy Yip was related to Winnie and was working with Winnie to front his interests in the Casino Business; and

(4)   he was not aware of the 1965 Settlement.

59. However, in his cross examination, Eric admitted that he was aware of 1965 Action at the time when he was sued, and that the visit he made to Wilkinson & Grist for legal advice in 1965 was in relation to the proceedings taken out by Teddy Yip (see his evidence on 26 May 2016, Day 4).  Having regard to the fact that Wilkinson & Grist appeared on the record as acting for him in that action, his original evidence that he did not know about the action would have been difficult to accept in any event.  It is, in my view, also inherently improbable that Eric had no knowledge of the 1965 Settlement.  In the ordinary course of events, it is to be expected that Wilkinson & Grist would have informed their client (Eric) about the settlement of the 1965 Action and the terms of the settlement.

60. In passing, I should mention that it is Eric’s contention that Teddy Yip must have been aware of the fact that the monies for investing in the Casino Business by Winnie came from him, in view of the fact that he was named as the 1^st defendant, and Winnie the 2^nd defendant, in the 1965 Action in which an injunction was sought by Teddy Yip to restrain the defendants from alienating any interests in (inter alia) STDM and STS.  This contention is, in my view, speculative because there could be many different reasons why Eric was sued and named as the 1^st defendant in the 1965 Action.  In this regard, it may be noted that Teddy Yip also claimed damages against the defendants in that action.  In the absence of further evidence regarding the nature and basis of Teddy Yip’s claim against Eric in the 1965 Action, I do not consider it right to draw any inference from the mere fact that Eric was named as the 1^st defendant in the 1965 Action.

61. Eighth, in around early June 2001 when he was interviewed by a reporter of a local magazine, Eric publicly denied that he had any interests in the Casino Business.  He said, in the interview, that he gave HK$2 million to Winnie when she asked him for a loan, it was none of his business as to how she used the money, and the shares (in the Casino Business) belonged to Winnie.  In his witness statement, Eric explained that he denied having any interests in the Casino Business because (i) he did not want to disappoint his wife, who had a great dislike of gambling, and (ii) he did not wish his children, with whom he was then engaged in litigation, to “bite into that part of his assets”.  I am not entirely satisfied with either explanation.  In respect of the former, there is no evidence from Eric’s wife on her knowledge of Eric’s alleged interests in the Casino Business (although it may be said that Eric would be reluctant to call his wife to give evidence in this action).  Further, it is Eric’s own evidence that he had been told by Winnie in about early 1980s that everyone whom she worked with in the Casino Business already knew that she was holding her shares in STDM/STS on his behalf.  If the fact of his interests in the Casino Business was so widely known, he could hardly have believed it to be a well kept secret (although he may argue that his wife remained ignorant of his interests in the Casino Business).  In respect of the latter, it was a simple matter for him to make either an inter vivos disposition of his interests in the Casino Business to whomsoever he wishes, or a specific legacy of those interests in his will.  In fact, in his cross examination (on 27 May 2016, Day 5), he accepted the proposition put to him by Mr Chan that the second reason was made up by him “retrospectively” as there was, at the time of the interview, simply no litigation with his children at all.  Overall, I would give weight to his public statement against interest, but not the explanations of his statement given subsequently in this litigation.

62. Ninth, in his will dated 3 October 2001, Eric made a specific legacy of US$50 million to his wife, a specific legacy of US$1 million to each of his 3 named daughters and a legacy in respect of his collection of books.  Save and except those legacies, he gave the whole of his residuary estate (after payment of his debts and testamentary expenses) to two solicitors, Mr Peter Alan Lee Vine and Mr Billy Ma Wah Yan, being the executors and trustees named in his will, jointly and absolutely.  If he believed that the shares in the Casino Business held by Winnie belonged to him beneficially, he would be making a huge gift to each of the two professional executors/trustees, which he said originally would be worth US$100 million, and later US$20 million, each.  When it was pointed out to him in cross examination that such gifts to the two gentlemen would be too generous to be true, his explanation was that they were to be rewarded for their “loyalty”.  In his words, “Their loyalty cannot be rewarded exactly in cash” (27 May 2016, Day 5).  In my view, this explanation is simply incredible.  I pause to observe that it is not his explanation that he had somehow forgotten or overlooked his interests in the Casino Business when he made his will in 2001.

63. Tenth, it is Eric’s case that he had adequately rewarded Winnie for her services by paying her a generous salary as well as making other valuable gifts to her, including the properties mentioned in paragraph 14 above, and thus there was no reason for him to make a gift of HK$2 million to her in 1961.  The various properties which Eric allegedly gifted to Winnie include:-

(1)   a flat of about 700 square feet at 31F, Robinson Road, Hong Kong, purchased at the price of about HK$30,000 in around 1959 (“Property (1)”); and

(2)   a larger flat at 30 Kennedy Road, Hong Kong, purchased at the price of about HK$200,000 in around mid-1960s (“Property (2)”).

64. The land search in respect of Property (1) shows that the relevant assignment of the property to Winnie was dated 15 May 1957.  That was before Eric and Winnie met again in Hong Kong after Eric’s father passed away in July 1957.  It seems to me to be clear that his evidence that Property (1) was a gift made by him to Winnie cannot be correct.  Indeed, in his cross examination (on 27 May 2016, Day 5), he admitted that his allegation that the money for the purchase of this property came from him was not true.  In his re-examination (on 30 May 2016, Day 6), he changed his evidence to say that he reimbursed Winnie for the purchase price of this property in 1959.  I am unable to accept this late change of evidence by Eric given in re-examination.

65. In respect of Property (2), Eric’s evidence was also inconsistent.  In paragraph 56 of his first witness statement, he said that he purchased the property for about HK$200,000 and it was a gift to Winnie to thank her for all her help in dealing with his businesses and assets.  However, in his cross examination (on 30 May 2016, Day 6), he said that it was an “investment” for him and also a gift to Winnie, and that it was “a place to meet for [them]”.  Eric also said that he did not know whether Winnie in fact paid for the property herself.

66. Although the above inconsistencies in Eric’s evidence regarding Property (1) and Property (2) do not directly go to the critical issue of whether he provided the Fund to Winnie upon trust for her to invest in the Casino Business on his behalf, they undermine his credibility generally as a witness.

67. In all, I do not accept Eric’s evidence regarding the basis on which he paid the sum of HK$2 million to Winnie in around 1961, or the nature of the transaction between them in respect of this payment.  I reject his case of express trust.  The facts and matters mentioned in paragraphs 51 to 62 above also negate or rebut the allegation of resulting trust raised in paragraph 8 of the Amended Statement of Claim.

68. On the evidence before me, I am unable to determine whether the payment of HK$2 million by Eric to Winnie in 1961 was a loan or a gift or something else.  I do not consider that I am required to make a definitive finding on the true nature of the payment when the evidence does not permit such finding to be properly made.  All that I would conclude is that I am not satisfied, on the balance of probabilities, that Winnie held the interests in the Casino Business which she acquired using the HK$2 million provided by Eric upon trust for him, whether on the basis of an express, implied or resulting trust.

69. In coming to the above conclusion, I have not lost sight of a number of matters urged upon me on behalf of Eric.  In particular:-

(1)   It is said that HK$2 million was a huge sum of money in 1961 and Eric could not possibly have made such a generous gift to Winnie, or lent such a huge amount to Winnie on an informal basis.  I readily accept that HK$2 million was a huge sum of money in 1961.  However, Eric was from a very rich family in Hong Kong.  In 1961, Eric had reasons to believe that he would eventually receive a huge inheritance from the estates of his grandfather and his father respectively.  Although he said he only had ready or liquid assets of about HK$3 million available to him at that time, on his own evidence he was able to make money easily from the stock market (he said he made a profit of about HK$1 million within a period of about 3 months using a loan of HK$1 million advanced to him by HSBC in the late 1960s).  Also, Eric and Winnie had a special, personal, relationship.  I do not consider it beyond the realm of possibility that he could lend HK$2 million to Winnie on an informal basis, or make a gift of HK$2 million to her, in 1961.

(2)   The plaintiff also relies on what is stated in the biography of Henry Fok Ying Tung published in 2005.  I do not propose to recite the relevant passages in that biography.  It is obvious that they contain many inaccuracies (eg, it was stated, mistakenly, that Sir Robert Ho Tung was the largest shareholder in the Casino Business, that he made his investment in the Casino Business through his granddaughter (Winnie), and that Winnie appeared to be Sir Robert Ho Tung’s secretary).  I am not prepared to give any weight to the contents of the biography.

70. Lastly, I should refer to Eric’s will dated 4 September 2007, in which he made a specific bequest of “all [his] beneficial interests in Macau casinos” in favour of Michael absolutely. This document may be said to provide some support for Eric’s case that he was the beneficial owner of the shares in STDM/STS held in the name of Winnie.  Mr Chan submits that there could be another explanation as to why Eric would make such a provision in his will.  That explanation is quite convoluted – it is, I understand, to be effect that Eric made such a provision in his will in order to pre-empt any (unfounded) claim which his children might, after his death, raise that Winnie held her interests in the Casino Business upon trust for him.  I do not propose to speculate on this matter.  I am not prepare to find the plaintiffs’ case of an express or resulting trust proved merely on the basis of what, on any view of the matter, is a “self serving” statement contained in a former will of Eric which has since been revoked and replaced by a further will made on 13 May 2011. I do not consider that the contents of Eric’s 2007 will are sufficient to override the matters referred to in paragraphs 51 to 66 above which lead me to reject the plaintiffs’ case of an express or resulting trust.

DISPOSTION

71. For the foregoing reasons, I dismiss the plaintiffs’ action against the defendants. I also order the plaintiffs to pay the costs of the 1^st defendant (including the expenses incurred in relation to live note for the hearing on 26, 27, 30 and 31 May 2016), to be taxed if not agreed.

72. The costs incurred in the preparation of the trial bundles are expressly excluded from the above costs order for the following reason.  A total of 18 trial bundles (including 1 bundle of pleadings, 1 bundle of witness statements, and 16 bundles of documents) were placed before the court at the trial.  In respect of the 16 bundles of documents, only a limited number of documents (of no more than 2 bundles in total) were actually used or referred to in the course of the trial. Paragraph 1 of Practice Directions 5.6 (Documents for Use at Trial) states that “[b]undles must not include documents which are unlikely to be referred to at the trial.”  At the pre-trial review on 4 March 2016, the court expressly reminded the parties to comply with Practice Directions 5.6. Regrettably, that reminder did not appear to have been taken heed of by the parties.  There was, in my view, a breach of Practice Directions 5.6 in relation to the preparation of the trial bundles.  This matter was raised by the court briefly in the course of final submissions, but the information provide by counsel was insufficient to enable the court to form a clear view on the question of responsibility for the breach of Practice Directions 5.6.  As indicated by the court at the end of the trial, the costs order to be made by the court would not include the costs of preparation of the trial bundles, but the court would give liberty to the parties to apply for those costs separately (if so advised).

73. The 2^nd and 3^rd defendants filed a joint defence but were represented by two different teams of counsel and solicitors at the trial.  While I accept that each defendant is entitled to be separately represented, it is a different matter whether the plaintiffs should be responsible for 3 sets of costs incurred by the 3 defendants when the principal grounds of defence run by the 2^nd and 3^rd defendants are the same as those run by the 1^st defendant.  The issue of whether the plaintiff should be responsible for 3 sets of costs was mentioned by Mr Barlow SC in his submissions in opposition to the defendants’ applications for security for costs (see below) and also by counsel briefly in the course of final submissions.  My provisional view is that the 2^nd and 3^rd defendants’ defence could easily have been conducted by the same team of lawyers acting for the 1^st defendant, and it is not reasonable for the plaintiffs to have to bear 3 sets of costs.  However, I have not been referred to the relevant authorities or heard full arguments on this matter.  I would therefore make an order nisi that there be no order as to costs as between the plaintiffs and the 2^nd and 3^rd defendants.

74. In respect of the three summonses taken out by the 1^st, 2^nd and 3^rd defendants all dated 24 May 2016 relating to security for costs (disposed of by my earlier decision given on 25 May 2016), the applications were prompted by the late disclosure of the Deed of Settlement by the plaintiffs on the first day of the trial (23 May 2016), but the 1^st, 2^nd and 3^rd defendants were unsuccessful in their applications.  In all the circumstances, I consider that a fair order to make would be no order as to the costs of and incidental to those summonses.

75. Lastly, it remains for me to thank counsel for the assistance that they have rendered to the court.