LEE KAI HUNG KENNETH v. LO SUI LIN AND ANOTHER

HCMP 979/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 979 OF 2016

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JUDGMENT

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Background

1.  The present disputes relate to the Estate of Mr Lee Kam Hoi (“the Deceased”).  The applicant is the Deceased’s son.  The 1^st and 2^nd respondents are respectively the wife and daughter of the Deceased.  The Deceased and the 1^st respondent have two other children, namely Lee Fung Yee Sara and Lee Fung Ting Debbie.

2.  It is common ground that the Deceased was a self-made man.  He accumulated his wealth by operating successfully various manufactories in Hong Kong and China.  He was also a responsible and traditional Chinese man. Financially, he took care of his family and he did not want to be a financial burden to them. 

3.  There was no dispute that the Deceased had been sick at least from 2008.  He had a kidney transplant in October 2009.  He had to consult medical doctors regularly.  He was admitted to hospital a number of times.  On 20 Sept 2011, he slipped and hit his head.  He was sent to the hospital.  Within a couple of days, he went into a coma.  He was unconscious since then until he passed away on 23 November 2011.  This event and the timing of which are important in assessing the evidence of the witnesses in this case.

4.  The Deceased died intestate.  On 2 March 2012, letter of administration was issued to the 1^st respondent.  On the evidence before the court, the Deceased’s Estate consisted of some cash and a property known as Ground Floor, No 34, Wing Kwong Street, Kowloon (“No 34”).  It is mainly the liabilities of the Estate that are in dispute. 

5.  The applicant claimed that he was owed a total sum of HK$5,340,000 being the amounts transferred by him to the respondents between 14 October 2011 to 25 November 2011 for the purpose of settling the medical and funeral expenses of the Deceased, as well as the costs of two niches.    

6.  The applicant disputed that the Estate owed any money to the respondents for the settlement of the Deceased’s medical expenses as the latter had alleged.  The applicant complained that the respondents had taken and spent a large part of the proceeds of sale of No 34.  As a result, the applicant claimed against the respondents for the return of the money they had taken from the Estate. 

7.  The applicant commenced the present proceedings on 20 April 2016. Since then and until the trial, the applicant had obtained a number of interlocutory orders against the 1^st and /or the 2^nd respondents including the following orders against the 1^st respondent: an order compelling her to render a complete and accurate account of the Estate, an injunction and disclosure order and an order to pay a sum of HK$2,578,564 into court as money belonging to the Estate.  The 1^st respondent had failed to comply with a few of the orders made against her. 

8.  The applicant also applied by separate proceedings in HCMP 566 of 2017 for an order against Bank of China (Hong Kong) Limited for the production of certain bank records of the 1^st respondent’s account with the bank.  A production order was made on 6 April 2017. Statements and transaction records were provided to the applicant.  It was through this exercise that the applicant found out that a sum of HK$6,722,414 from the proceeds of sale of No 34 was transferred by the 1^st respondent to the accounts of the 2^nd respondent or the company owned by her.  This resulted in the applicant amending his claims herein to claim against the 2^nd respondent for the return of the money. 

The issues

9.  The following are the issues to be determined by the court:

(1)   Whether the Estate owes the respondents the sum of HK$7,348,547 as stated in the account for the Estate (Bundle D/p4) or any other sums;

(2)   Whether the respondents are liable to repay the Estate the said sum of HK$6,722,414;

(3)   Whether the Estate owes the applicant the said sum of HK$5,340,000; and

(4)   Whether the 1^st respondent is liable to compensate the Estate for the sale of No 34 at an undervalue;

10.  Depending on the findings of this court, the applicant’s Counsel, Mr Chan, invited the court to consider making certain reliefs.  I shall deal with this after my decision on the above issues.

Witnesses

11.  There were 4 witnesses at trial: the parties themselves and the Deceased’s personal assistant Huang JiYong (“Huang”).  All of them had previously filed affirmations in these proceedings and they all confirmed the accuracy of their affirmations and adopted them as their evidence.

12.  I summarise below the relevant evidence of the witnesses.

The applicant

13.  The applicant started working in the Deceased’s company/manufactories after his graduation in 1997.  His annual compensation from work was about HK$1,300,000 each year between 2005 to 2010.  In addition, the Deceased had given the applicant a flat (fully paid).  According to the applicant, his father had also given each of his three sisters a flat.

14.  At least since around 2008, when the Deceased’s health was very poor and had to consult doctors and received medical care regularly, he had been telling the applicant and the respondents and the other two children that he had prepared the money necessary to pay for his medical expenses and he would not be a financial burden on his family.  The Deceased said that he had kept a substantial amount of cash in a safe (the “Flat C Safe”) in the master bedroom of Flat C, 6/F, Block 5, Whampoa Garden, Kowloon (“Flat C”), where he lived. The applicant said the Deceased paid for his own medical expenses using the cash in the Flat C Safe.  He heavily disputed that the respondents had paid for any of the medical expenses of his father.  He drew support from the evidence of the Deceased’s personal assistant, Huang who accompanied the Deceased during visits to the doctors and described how the Deceased paid for the medical bills himself. 

15.  The applicant denied the allegations by the respondents that the money he lent was taken from the safe (the “Office Safe”) in the office of Success Leader Development Company Limited (“Success Leader”).  He said that the money came from his saving.

16.  The applicant said that he did not have key to Flat C or the Flat C Safe.  He also did not have the key to the Office Safe.  The first time he opened the Office Safe was after the Deceased had passed away.  At that time, he and the 1^st respondent opened the Office Safe with a key brought by the 1^st respondent.  There was no cash in the Office Safe.  Only some old bank passbooks, cheques and records were found there. 

17.  Shortly after the Deceased had been admitted to the hospital after his slip on 20 September 2011, he went into a coma.  The 1^st respondent told him around 14 October 2011 that there was no more cash in the Deceased’s safe and asked him for money to pay the hospital and other expenses.  By four bank transfers, the applicant sent a total of HK$5,340,000 to the respondents between 14 October 2011 and 25 November 2011.  There was no dispute that the applicant had transferred the money to the respondents.  The 2^nd respondent also accepted that the money from the applicant was used by her to issue 15 cheques to pay for the Hospital and doctor bills of the Deceased as well as a cash transfer of HK$300,000 to pay for the funeral expenses of the Deceased.

18.  The relationship between him and his mother deteriorated rapidly after the sale of No 34 and when disputes arose regarding the 1^st respondent’s complaint that the applicant and his Uncle (the Deceased’s brother) sought to cheat her to transfer part of her shares in Success Leader to his Uncle.  I would not need to go into the details of those disputes, which are the subject matters of two other high court proceedings. 

19.  In relation to the sale of No 34, the applicant said that it was purchased by the Deceased in 1985 and since then used as shop and office of the manufactories.  The Deceased also bought the adjourning ground floor shops at Nos 26, 30, 32 and 36.  In about August 2011, Midland Realty had sought to get a buyer to purchase Nos 26, 30 to 36 from them en bloc.  At that time the Deceased had asked for the sum of HK$18 million for each of the shops.  In about August 2013, Midland Realty contacted the applicant and his Uncle again for the purchase of the shops and the sale price of HK$18 million was offered to the agent.  The sale did not materalise as the buyer was unable to secure interest from 80% or more of the owners of the building to sell their units. 

20.  The applicant relied on a preliminary valuation report of No 34 which stated that the market value of it as at the date of sale in July 2015 was HK$10,300,000.  It was based on this valuation that the applicant made his claim.  It should be noted that the valuation and the claim did not seek to rely on the property’s redevelopment potential and the sale of it with the other shops en bloc.  In final submission, Mr Chan pointed out that although the amount of undervalue was HK$1,000,000, his client’s share of it as a beneficiary would be only HK$71,428.

21.  There was dispute on the circumstances of the sale of No 34.  The respondents said the applicant was consulted before the sale and that was the reason why the applicant was willing to pass the title deeds of No 34 to the 1^st respondent.  The applicant’s version was that he only discovered the sale after the 1^st respondent had signed the preliminary sale and purchase agreement on 2 June 2015.  He was surprised at that time and wondered why his mother was so desperate in selling No 34 without informing or consulting him.  The applicant said since an agreement for sale had been signed, he had no choice but to deliver the title deeds.  According to the applicant, upon his Uncle’s request, the 1^st respondent agreed, as a condition to the applicant’s agreement to the sale of No 34, to transfer part of her shares in Success Leader to his Uncle so that after the sale, the 1^st respondent, the applicant and his Uncle would own the company in equal shares.  Whilst I noted this background, this was not directly relevant to the determination of the undervalue claim.

Mr Huang JiYong

22.  Huang is a mainland resident.  He was the Deceased’s personal assistant and care helper for about 15 years.  He said the Deceased resided in Dongguan, China and Thailand most of the time.  Since about 2007, the Deceased began to suffer from various diseases, including renal disease.  The Deceased would come back to Hong Kong to consult medical doctors. 

23.  According to Huang, the Deceased resided in Flat C when he returned to Hong Kong and he would stay to take care of the Deceased.  The gist of Huang’s evidence was that every time the Deceased went to visit doctors, he would get cash from the Flat C Safe and gave it to him.  Huang would then use the cash to pay doctor’s fees and medical expenses.  Huang said the respondents did not pay for any of the doctors and medical expenses. 

24.  In relation to the kidney transplant performed in Guangzhou in October 2009, he remembered the Deceased took cash in the amounts of HK$300,000 and HK$600,000 from the Flat C Safe on two occasions and the cash was passed to the Deceased’s doctor, Dr Ho Kai Leung Kelvin (“Dr Kelvin Ho”), directly or via the 2^nd respondent.

25.  Huang said he was with the Deceased during the whole of the few days at Zhu Jiang Hospital in Guangzhou after the Deceased’s kidney transplant.  The Deceased was not required to pay and had not paid any fee to that hospital. 

26.  Huang’s evidence was not challenged by the respondents who did not ask him any questions. 

The 1^st respondent

27.  The 1^st respondent is 70-year-old and has been a housewife. She was educated only up to primary school and she relied on her daughters such as the 2^nd respondent in dealing with English documents and some of her business affairs.  She admitted that she had transferred HK$6,722, 414 to the 2^nd respondent in 2015, with details as specified below:

No	Date	Transactions	Amount (HK$)
	3-Aug	Current balance	$1,118.79
1	3-Aug	Deposit by cheques of balance of proceeds received on completion of the sale of No 34	$8,367,042.85
2	4-Aug	Transfer deposit to A/C No 012-890-0-010224-8 in the name of V' Sweetie	$1,380,000.00
3	4-Aug	Transfer deposit to A/C No 012-890-1-016992-5 in the name of the 2nd respondent	$1,000,000.00
4	4-Aug	Transfer deposit to A/C No  012-890-0-010224-8 in the name of V' Sweetie	$1,680,000.00
5	4-Aug	Transfer deposit to A/C No 012-890-1-016992-5 in the name of the 2nd respondent	$1,000,000.00
6	5-Sep	Transfer deposit to A/C No 012-890-0-010224-8 in the name of V' Sweetie	$338,000.00
7	16-Sep	Transfer deposit to A/C No 012-890-0-010224-8 in the name of V' Sweetie	$338,000.00
8	21-Sep	Transfer deposit to A/C No 012-890-1-016992-5 in the name of the 2nd respondent	$200,000.00
9	29-Sep	Transfer deposit to A/C No 012-890-0-010224-8 in the name of V' Sweetie	$368,800.00
10	7-Oct	Transfer deposit to A/C No 012-890-0-010224-8 in the name of V' Sweetie	$100,000.00
11	19-Oct	Transfer deposit to A/C No 012-890-1-039396-0 in the name of V' Sweetie	$182,614.00
12	22-Oct	ATM transfer to A/C No 012-890-1-039396-0	$45,000.00
13	24-Oct	ATM transfer to A/C No 012-890-1-016992-5	$30,000.00
14	29-Oct	Transfer deposit to A/C No 012-890-1-039396-0 in the name of V' Sweetie	$60,000.00
		Total payment to 2nd respondent	$6,722,414.00
	29-Oct	Balance	$12,648.00

28.  The 1^st respondent said that the 2^nd respondent had helped her in arranging part of the above transfers at the bank.  The 1^st respondent had to settle the indebtedness owed to other people but she did not have a current account.  She therefore transferred money to the 2^nd respondent so that her daughter could issue cheques to repay her creditors.  Since the 2^nd respondent was divorced and had children under her care, the 1^st respondent gave the 2^nd respondent permission to use some of the money transferred for the 2^nd respondent’s own expenses.

29.  In relation to the payment of medical expenses of the Deceased, the 1^st respondent did not accompany the Deceased to visit doctors and she did not handle the payment of hospital and medical bills.  She said she only started paying for the medical bills when the Deceased had lost his consciousness shortly after 20 September 2011. 

30.  The 1^st respondent said the Deceased had kept a large amount of cash in Flat C Safe, the Office Safe and in China.  The gist of her evidence was that during the casual talks over dining table at Flat C, the Deceased told her that he had kept a lot of cash in the safe.  If she would spend modestly, those cash would be enough for her for three generations (錢夠用三世). 

31.  The 1^st respondent admitted during cross examination that during his lifetime, the Deceased had, since 1985 to 2003, purchased two flats (including Flat C) and a car parking space and put them under her name.  The Deceased also purchased four other properties and put them under Success Leader (which was at the relevant time owned as to 83.33%, 11.11% and 5.55% by the 1^st respondent, the applicant and his Uncle respectively). 

32.  According to the evidence, including the evidence of the 1^st respondent, she was heavily in debt.  As a result, she sold all the three properties under her name. She also sold her shares in Success Leader for HK$14,000,000.  

33.  In selling No 34, the 1^st respondent said she had obtained a valuation from the bank.  The bank had given her a figure between HK$8,000,000 to HK$9,000,000.  She had also sought to sell No 34 through Midland Realty but the response from that agent was that the price she would get would be very low, which was under HK$9,000,000.  That was the reason she went to a smaller agency to sell the property.

The 2^nd respondent

34.  About the alleged indebtedness owed to her in respect of the medical bill expenses of her father, the 2^nd respondent’s accepted that:

(1) Before the Deceased went into a coma in September 2011, the medical expenses would be paid by him or if he did not bring any cash, by the 2^nd respondent.  In the latter case, the Deceased had reimbursed her, including the five cheques issued by her in September 2010 in the total sum of HK$415,957 for the payment of hospital and doctors’ bills;

(2) The other fifteen cheques she had issued totaling HK$3,698,826 and the cash transfer of HK$300,000 were made using the money from the applicant after the Deceased had gone into a coma;

(3) She had received HK$6,722,414 from the 1^st respondent and she was aware that the money came from the proceeds of sale of No 34; and

(4) Regarding the health care expenses set out in the Estate account, namely the sum of HK$10,000 for 27 months, the 2^nd respondent said they were not health care expenses.  Rather, they were 利是 (tips) given to nurses at the clinic pursuant to the Deceased’s practice.  Having said that she did not explain why the amount was the same each month in the sum of HK$10,000. 

35.  In relation to the two niches, the paper work was done by the 2^nd respondent.  She said the demand for the niches was high and the purchase was from the 2^nd hand market rather than from Po Fook Hill. They had to pay HK$980,000 for the niches which was more than the listed price.  I should mention here that according to the relevant contracts, the total consideration and expenses for the two niches were only HK$607,880 and the respondents failed to provide any documents showing the payment of the extra sum as alleged.

Analysis and decision

36.  In relation to the alleged debt owed to the 1^st respondent, I find that she has failed to prove on a balance of probability that she had paid for the Deceased’s medical expenses.  She was not involved in dealing with the Deceased’s medical expenses.  When the Deceased was in coma, she went to the applicant and told him that the Deceased had no more money left and thus asked her son for money to pay for the medical expenses.    

37.  She admitted having the key to the Flat C Safe and had taken money from it a number of times to pay for the expenses of the Deceased.  When pressed by Mr Chan to account for her share of the Estate’s indebtedness to the respondents, she said she had used about $6,000,000 and that she took the money from the Flat C Safe whilst the Deceased was unconscious.  Despite what the Deceased had told her casually over the dining table about the money in the safe, she accepted that the money in the Flat C Safe was the Deceased’s and he was free to use it for his medical expenses.  After all, the Deceased had adequately provided for her by putting properties and shares under her name.

38.  According to the Estate account filed by the 1^st respondent, the alleged expenses owed to the respondents were in the sum of HK$7,348,547 (Bundle D/p4).  However, despite court order (Bundle A/p59), the respondents were not able to give a breakdown of the amount owed to each of them by the Estate and the amount and timing of repayment of such indebtedness.  This is not surprising because one can see from the breakdown set out by the 1^st respondent in Bundle D/p18 that the said indebtedness of HK$7,348,547 was no more than an amount that was worked backwards after setting out the assets and the expenses incurred and the amount provided by the Deceased (a mere sum of HK$600,000) and the applicant (the undisputed sum of HK$5,340,0000). The alleged indebtedness of HK$7,348,547 was unparticularized and unsupported by any documentary evidence.

39.  In the letter dated 2 February 2016 from the 1^st respondent’s former solicitors, Simon C W Yung & Co (Bundle C1/p55), it was alleged that the respondents had paid out of their own pockets for the Deceased’s medical and funeral expenses, a sum of over HK$10,000,000.  Without any proper explanation or details given, the sum was reduced to HK$7,348,547.

40.  The 1^st respondent was unable to give answers to a number of important questions.  For example, out of the amount of the alleged debt owed by the Estate to the respondents, how much was owed to each of them.  Whilst maintaining that she had paid part of the Deceased’s medical bills out of her own funds, she could not show where from her own saving or account the money came from.  In fact, she repeatedly said that she had no money and had to borrow from others.  

41.  In relation to the medical expenses of the Deceased before he went into a coma, the evidence of the applicant and Huang was much more credible.  It is also consistent with the Deceased’s character and the undisputed evidence in this case.  I find that before the Deceased lost his consciousness in September 2011, the medical expenses of the Deceased was paid for by himself out of his own funds.

42.  As to the expenses incurred from 20 September 2011 when the Deceased was hospitalized for the last time, there was no dispute that the applicant’s money was used to pay for the medical bills and the funeral expenses.  Those expenses were not paid for by the respondents.    

43.  During that period, the 2^nd respondent had issued fifteen cheques and made a cash transfer of HK$300,000. However, she accepted that they were made using the amount from the applicant. 

44.  The 2^nd respondent alleged, for the first time during the trial, that she had paid under-table money to Dr Kelvin Ho during the time when the Deceased was unconscious until he passed away.  She said it was on top of the doctor’s usual expenses that he accounted for in a statement issued.  She said that was a usual practice of that doctor.  Whatever amount the doctor had asked for in cash, she would put the money in a brown envelope and then give it to the doctor.  That was on top of the sum of HK$498,000 charged by Dr Kelvin Ho during the last two months of the Deceased’s life and paid for using cheques issued by the 2^nd respondent.

45.  Mr Chan argued that this involved a serious allegation of impropriety on the part of Dr Kelvin Ho and evidence of a commensurate cogency as the allegation is required (see Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387, at 440). 

46.  I do not think that the 2^nd respondent has even satisfied the usual burden of proof, let alone the higher threshold.  This allegation of under-table money was never mentioned in the earlier affirmations of the respondents.  It was not even included in the Estate account as the amount owed to the respondents.  Though being pressed in cross examination, the 2^nd respondent was unable to tell how many times she had made under-table money.  Also, after 20 September 2011, the medical expenses were paid out of the applicant’s money and since the 2^nd respondent said she was not well off financially, there was no good reason why she would have paid the under-table money out of her own pocket rather than using the applicant’s money. 

47.  Furthermore, when challenged in relation to where the 2^nd respondent got the money to pay for the under-table money, she said she had paid about HK$2,000,000 and she had to borrow it from her former husband’s sister in Canada.  As to reason for the lack of proof of the loan from her sister in law, she said it was because the money was carried by hand in cash from Canada to Hong Kong.    

48.  I find the 2^nd respondent’s story on the under-table money incredible and unsupported by any documentary evidence.  I have no hesitation rejecting her claim that the Estate owed her any money. 

The claim against the respondents

49.  It was undisputed that the sum of HK$6,722,414 was from the proceeds of sale of No 34 and that they were transferred by the 1^st respondent to the 2^nd respondent.  The 1^st respondent considered the proceeds to be hers entirely and she could spend it in whatever way she wanted.  She relied on a lunch meeting in around September 2015 whereas the 2^nd respondent relied on a teleconference in late June or early July 2015 amongst the siblings where the applicant had allegedly agreed to let the 1^st respondent keep the whole of the proceeds of sale as a reimbursement for her contribution to the medical expenses and as a provision for her living.

50.  However, the 1^st and 2^nd respondents were unable to explain why in the letter written by the 1^st respondent’s lawyer to the applicant’s lawyer on 2 February 2016, it was only stated that the applicant had made statements in about December 2011 that the entirety of the Estate should be left to the 1^st respondent only. There was no mention at all about the alleged lunch or teleconference even though it was supposed to have happened some six months earlier.

51.  Considering the documentary evidence, the surrounding and objective circumstances and my assessment on the credibility of witnesses, I prefer the applicant’s evidence that he objected to the sale, let alone agreeing to let his mother keep the proceeds of sale of No 34.  He was surprised about the sale which had sentimental value and why it was sold so quickly.  The applicant was clearly very concerned about the apparent deterioration of her mother’s financial position. In view of this concern, he would not have agreed to put more money into the hands of his mother. I also prefer the applicant’s evidence that he reluctantly agreed to release the title deeds the day before completion because by the time he found out about the sale, his mother had already signed a contract. 

52.  Based on my finding, the 1^st respondent is no doubt liable to return the sum of HK$6,722,414 to the Estate.  The remaining question is whether the 2^nd respondent is also liable.

53.  The respondents had failed to give a proper account of what happened to the money transferred to the 2^nd respondent.  No documentary proof or particulars were given in respect of the alleged debt that the 2^nd respondent was asked to settle for the 1^st respondent.  Whilst the 2^nd respondent said the debt was settled by cheques and/or cashier order, she could not provide any records of those payments. 

54.  Also, this story, which emerged only at trial, was contrary to the 1^st respondent’s evidence by her first affirmation dated 5 July 2016 at paragraph 10 that the money was used to repay the amount owed to the respondents by the Estate and that 2^nd respondent intended to use the money to invest in her then new bakery business.

55.  In the premises, the 2^nd respondent had no right to use or keep any part of the proceeds of sale.  The transfer to her was at the expense of the Estate and she had had the use of the money.  I find that the 2^nd respondent is also liable to the Estate for the sum of HK$6,722,414, whether for money had and received and/or under the principle of unjust enrichment.    

Undervalue claim

56.  The applicant’s case was that the 1^st respondent was under a duty to get a proper price that represented the true market value of No 34. The duty is not an absolute one but is one to use due diligence and reasonable care in the management of the trust property that an ordinary prudent man of business would exercise.  The test is an objective one.  Merely acting in good faith with sincerity is not enough (see Man Fong Hang v Man Ping Nam & Others HCA 7935/1998, Lam J (as he then was), unreported, paras 167 – 172 which was approved in CACV 104/2004).

57.  I refer to the 1^st respondent’s evidence on what she had done.  She did not know the purchaser and she was advised by the estate agent that the price offered was the highest available in the market.  Her evidence that she did go to a bank to get a valuation and had consulted Midland Realty was not challenged by the applicant during cross examination.  I am prepared to accept the 1^st respondent’s evidence in this regard.  The evidence showed that No 34 was a very old piece of property.  In the past, attempts had been made in vain to sell the property with the other shops.  Together with the evidence by the 1^st respondent that the property market at that time was poor and that the applicant’s valuation showed a difference of about 10%, which is not a very big variation, I find that the 1^st respondent was not in breach of her duty to get a proper price for No 34.

The applicant’s claim of HK$5,340,000

58.  There was no dispute that the applicant had made transfers totaling this amount to the respondents to pay for the medical and funeral expenses of the Deceased after he went into a coma in September 2011.  The applicant’s analysis shows that the sum was used to pay for the two niches, whether or not they cost HK$980,000 or not as alleged by the 2^nd respondent.  If I were required to make a finding, I would find that based on the documentary evidence, the niches only cost HK$607,880 for the reasons set out in paragraph 35 above and my assessment of the demeanour and credibility of the 2^nd respondent.

59.  The 1^st respondent’s case was that the money the applicant gave was from the Deceased’s cash kept in the Office Safe.  At the trial, the 1^st respondent changed her stance and raised question as to whether the money was a loan or a gift to the 1^st respondent to pay for the Deceased’s expenses.

60.  The applicant’s evidence was that only the Deceased and the 1^st respondent had the key to the Office Safe.  It was the 1^st respondent who brought along the key to the Office Safe after the Deceased passed away.  When the safe was opened, no money was found inside.  Having considered the totality of the evidence including the objective circumstances, I prefer the version of events by the applicant.  This is supported by the evidence of the respondents and Huang who all said that the Deceased had kept and taken money from the Flat C Safe (and not the Office Safe) to pay for his medical expenses. 

61.  Although the applicant said it did not cross his mind at the time when he made the transfers of money whether the nature of money was a loan or gift, Mr Chan argued that there was no evidence of any intention to make a gift and there was a resulting trust in favour of the applicant.  As between money advanced by a son to his parent, there is no presumption of advancement.  Although the applicant did not chase for the repayment of the sum until the relationship with his mother turned sour, that was neither here nor there.  It is because it would be up to him whether to seek to recover the money.  Having considered the evidence, I find that the applicant had no intention to make a gift and there was a resulting trust in favour of the applicant. 

62.  In the circumstances, the applicant can recover from the Estate the amount of HK$5,340,0000.

Account for the Estate

63.  The only other item in the account for the Estate that had not been dealt with was the salary tax paid to the Inland Revenue Department in the sum of HK24,840.  The 2^nd respondent recalled that the Deceased had been paying salary tax. However, she was not able to produce any document in support.  It should be a straight forward exercise to obtain record of payment of salary tax and to provide details of such tax.  The respondents were able to provide supporting evidence for some expenses but not this item.  Having considered the matter and in the absence of any documentary evidence, I am not prepared to accept the 2^nd respondent’s story that salary tax had been paid.    

Summary of findings and reliefs sought

64.  My findings are as follows:

(1) The Estate does not owe the respondents the sum of HK$7,348,547 or any sum at all;

(2) The 1^st respondent and the 2^nd respondent are liable to return the sum of HK$6,722,414 to the Estate;

(3) The 1^st respondent was not in breach of her duty in getting a proper price for the sale of No 34; and

(4) The Estate is liable to the applicant in the sum of HK$5,340,000.

65.  Based on the Estate account by the 1^st respondent and as amended pursuant to my findings, the Estate account would be as follows:

Assets
Cash at bank	HK$747,909.12
Proceeds of sale of No 34 HK$9,300,000
less commission HK$93,000 & costs HK$2,957.15	HK$9,204,042.85 _______________ HK$9,951,951.97
Debt and expenses
Owed to the applicant	(HK$5,340,000) _______________
Net worth of the Estate	HK$4,611,951.97
The applicant’s share:
HK$500,000 to be paid to 1st respondent	(HK500,000) _______________ HK$4,111,951.97
The applicant’s 1/14 share thereof	HK$293,710.86

66.  At the beginning of the trial, the applicant asked for ¹/₈ share of the residual Estate instead of ¹/₁₄ share.  That was on the basis that the Deceased had four children with his wife, the 1^st respondent.  However, during the course of the applicant’s evidence, he mentioned that the Deceased had a second wife and they had three children, two of them has some kind of disabilities. 

67.  When I put this matter to Mr Chan, he helpfully took instructions and confirmed that in view of the entitlement of the other three children to claim in the Estate, the share of the applicant would be reduced from ¹/₈ to ¹/₁₄.  I will come back to this below when I discussed the reliefs sought by the applicant.

68.  Mr Chan asked the court to make an order directing the respondents to pay the applicant’s entitlements (according to the above table, are in the sums of HK$5,340,000 and HK$293,710.86) and that the respondents’ liability should be joint and several.  The applicant submitted that it was clear from the repeated flouting of court orders by the 1^st respondent and the blatant disregard of her duty as administratrix that it would be most unlikely that the 1^st respondent would take step to recover the money due to the Estate and to complete the administration so that the applicant would receive the money owed to him as a creditor and a beneficiary of the Estate.  As the applicant had expressed in his previous interlocutory applications, he was most reluctant to apply to hold his mother in contempt of Court order.  Also, as far as his three sisters are concerned, they did not seem to take any objection on how the Estate affairs were run by their mother.  Accordingly, Mr Chan submitted that the best way would be for the court to make an order directly in favour of the applicant against the respondents. 

69.  Mr Chan sought an order that the amount of HK$2,578,564 that had been paid into court as Estate asset be paid out to the applicant. As to the remaining sum of the debt owed in the sum of HK$2,761,436 (HK$5,340,000 − HK$2,578,564 = HK2,761,436), there should be an order making the respondents jointly and severally liable to pay the applicant the said amount.  He also asked for an order against the respondents jointly and severally for the payment by them to the applicant of his share of the estate in the sum of HK$293,710.86.    

70.  I would deal with the applicant’s claims as a creditor and a beneficiary separately. 

71.  In view of my findings, I see no difficulty in making an order for the money belong to the estate to be paid out of court to the applicant because as a creditor of the Estate (and the only creditor at the time of trial), the applicant had a right to receive payment.

72.  In relation to the remaining debt of HK$2,761,436, I am satisfied that the applicant has a direct claim against the 1^st respondent as the administratrix, see paragraphs 34-010 and 34-011 of Snell’s Equity 33^rd edition which talked about the liability of personal representative:

“ (a) Assets in his hands. In general, the liability of a personal representative is limited to the assets which have come to his hands or to the hands of another on his behalf. He can discharge himself from liability for these assets only by showing that he has duly administered them, or by proving that they have been accidentally lost without his fault …….

(b) Devastavit.  It is otherwise if the loss is attributable to some neglect or mistake of law on the part of the personal representative. Where this happens he is said to have committed a devastavit. Thus he will be answerable if he distributes the residuary estate on a wrong principle of law or if he pays legacies without retaining enough assets to meet debts, or if by his neglect he causes or facilitates a depreciation of the assets.”

and at paragraph 34-017:

“ (a) Creditors. Creditors may recover their debts by an action at law against the personal representative without commencing an administration action. Such an action may be brought even if no grant of probate or administration has been made…….”

73.  In the present case, the 1^st respondent, as administratrix, had used part of the proceeds of sale of No 34 in the sum of HK$6,722,414 as if they were her own. Based on my finding, she is liable to return or compensate the Estate for that amount and that the applicant had a direct claim against her in respect of the sum of HK$2,761,436, being debt owed to him as a creditor. 

74.  Regarding the claim against the 2^nd respondent, Mr Chan relied on paragraphs 34-021 of Snell’s Equity 33^rd edition:

“ 5. LIABILITY OF RECIPIENTS OF ASSETS

(a) The claim.  An unpaid or underpaid creditor, legatee or next-of-kin has a direct claim against those who have received assets of the Deceased to the extent to which the latter have been paid or overpaid in excess of their right. It matters not that they have spent the assets, or that they were paid or overpaid through a mistake of law on the part of the personal representatives……. The claim does not require proof of any knowledge or fault on the part of the recipient. It differs in this respect from the claim to recover money received by a person in breach of trust or some other fiduciary duty. There the beneficiary is required to prove that the recipient’s knowledge of the facts was sufficient to make it unconscionable for him to retain the money.  The claim for unconscionable receipt would not be available to an unsecured creditor of the trust since he would have no equitable interest in the trust fund to found his title to sue…….”

75.  Mr Chan said the 2^nd respondent had been overpaid in excess of her right.  He relied on the case of the case of Ministry of Health v Simpson[1951] AC 251.  In that case, the personal representative of a testator distributed the residuary estate under a mistake of law to various charitable institutions which received the payments in good faith. It was held by the House of Lords that, subject to the qualification that they must have first exhausted their remedy against the personal representatives, the next of kin had a direct claim in equity against those to whom the residuary estate had been wrongly distributed.  Lord Simonds said at page 267-8:

“ But I should in passing mention Orr v. Kaines in which it was clearly established that the right of an underpaid legatee to claim directly against the overpaid legatee is subject to this qualification, that he must first exhaust his remedy against the executor who has made the wrongful payment. It was for this reason that I mentioned at an earlier stage of this opinion that the next of kin must be deemed to have recovered from the executors all that they could recover. They had then no other way to recover the balance that was due to them than by proceeding directly against the appellant and other institutions amongst which the executors had distributed the estate.”

76.  I do not think that the authorities relied on by Mr Chan advanced his case.  First, this is not a simple case where the 2^nd respondent was overpaid in excess of her right.  In essence, the applicant’s case was that it would be unconscionable for the 2^nd respondent to receive and keep the money. As stated in Snell’s Equity, the claim for unconscionable receipt would not be available to an unsecured creditor like the applicant since he would have no equitable interest in the estate asset to found his title to sue the 2^nd respondent.

77.  Even if the 2^nd respondent could be considered as a person overpaid in excess of her right to support a direct claim, the applicant had not satisfied the condition specified in Ministry of Health v Simpson that he must have first exhausted his remedy against the 1^st respondent before he could raise a claim against the 2^nd respondent. The debt owed to the applicant and the liabilities of the respondents were only decided at this trial by this court.  Not only the applicant had not exhausted his remedy against the 1^st respondent, he had not even begun his action to recover the debt from her.

78.  Accordingly, I decline to make an order in favour of the applicant against the 2^nd respondent for the payment of the remaining sum of HK$2,761,436.

79.  I also refuse to accede to the applicant’s request for an order against the 1^st and 2^nd respondents jointly and severally to pay his share of the Estate in the sum of HK$293,710.86.   

80.  It was apparent from the papers filed and the evidence at trial that for reasons unknown to this Court, the parties had ignored the interest of the 2^nd family of the Deceased in relation to the administration of the Estate.  Although Mr Chan conceded that, by reason of the presence of the children of the 2^nd family, the applicant’s share should be reduced from ¹/₈ to ¹/₁₄, he accepted that the 2^nd wife of the Deceased had a potential claim under Inheritance (Provision for Family and Dependents) Ordinance.

81.  I consider that, if this has not already been done, the children of the 2^nd family should at least be informed of their entitlement to the Estate of the Deceased and then depending on whether there was any further claim, the 1^st respondent should complete the administration of the Estate without further delay. 

82.  For the reasons I set out above, there was no proper basis to make an order directing the 2^nd respondent to make a payment to the applicant for his share as a beneficiary. 

The Order

83.  I make the following order:

(1)   It is adjudged that the Estate does not owe the 1^st or the 2^nd respondent any money;

(2)   It is adjudged that the Estate owes the applicant the sum of HK$5,340,000;

(3)   The said sum of HK$5,340,000 be satisfied partly by the amount of HK$2,578,564 which has been paid into court by the 1^st respondent on 19 December 2016 and there be leave to pay the said sum of HK$2,578,564, together with all interest accrued (if any), out to the applicant forthwith;

(4)   The 1^st respondents do pay the applicant the sum of HK$2,761,436, being the balance of the said sum of HK$5,340,000 net the said part payment of HK$2,578,564; and

(5)   The 1^st respondent shall duly and properly complete the administration of the Estate.

Costs

84.  Apart from the undervalue claim, the applicant has succeeded on most of the claims and reliefs sought.  I consider it appropriate to make an order nisi that the 1^st and 2^nd respondents shall pay 80% of the applicant’s costs of this action, including all costs previously reserved, with certificate for counsel, to be taxed if not agreed.  The parties have 14 days in which to make an application to alter the costs order nisi, failing which the costs order will become final.