IP FUNG KUEN v. SAM KEE FROZEN MEAT CO LTD AND OTHERS

HCA 1897/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1897 OF 2009

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(by Original Action)

_______________________

(by Counterclaim)

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(Action transferred from the District Court by the Order of Master C Lee dated 18^th August 2009)

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J U D G M E N T
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A. Introduction

1.  This case concerns various disputes between siblings and the plaintiff’s pleaded claim is divided into 3 parts over (i) an alleged debt, (ii) a property in Happy Valley, and (iii) sums allegedly owed to her  arising out of her employment with family companies.

2.  The main protagonists in this action are the plaintiff and her brother the 3^rd defendant.  Their parents are:

Yip Sum葉森 (“Father”), born in about 1927, and passed away on 21 March 2006, aged about 79[1];

Yuen Chan Hing袁襯馨 (“Mother”), born in 1929, and now aged about 86;

3.  Father and Mother have 6 children and they are:

(i) Ip Fung Ying/葉鳳英 (“Ying”), eldest daughter whose ex husband is Lee Kam Hung/李錦洪(“Hung”);

(ii) Ip Fung Kuen/葉鳳娟, the 2^nd daughter, born in September 1955 and the plaintiff herein (“P”) ;

(iii) Yip King Wah/葉景華, the 3^rd defendant herein (“D3”), and the oldest son, born in October 1958, whose wife is Lam Siu Ping/林笑平(“Ping”), and mistress is Tung Man Ha/董文霞(“Bonnie”);

(iv) Yip King Kong/葉景江(“Kong”), 2^nd son, whose wife is Tin Miu Ling/田妙玲(“Ling”);

(v) Yip King Tong/葉景棠 (“Tong”), 3^rd son born in December 1964;

(vi) Yip King Keung, Pony/葉景强 (“Pony”), the youngest son born in 1969, whose wife is Lee Wing Sze/李詠詩 (“Joyce”)[2].

(Father, Mother and their 6 children are collectively referred to herein as “Family Members”).

4.  As set out later, a number of companies were set up under laws of Hong Kong by D3 of which various Family Members were either at commencement or thereafter directors and/or shareholders. These included the 1^st defendant (“D1”) and the 2^nd defendant (“D2”) (all the defendants are collectively referred to herein as “Ds”).

5.  There were two other companies involved in the dispute between the parties over what will be referred to as the Property Claim, namely :

(i) Asia Creative International Ltd, a company incorporated under the laws of Hong Kong (“Asia Creative”), and as at 26 March 2007, D3 and Bonnie were the only equal shareholders and directors[3].

(ii) Colourmax Development Ltd, a company incorporated under the laws of British Virgin Islands on 7 September 2006, with  one share issued to Pony on 8 September 2006 (“Colourmax”)[4].

B.  Brief Background

6.  The Yip family started from a humble background.  Father and Mother came to Hong Kong in about 1951 from Mainland China, and were hawkers in Mongkok.  Later Father rented a market stall at 1048 Canton Road Kowloon and set up a business under the name of 森記肉食公司/Sam Kee Meat Company selling both frozen and fresh meat (for ease of reference, I shall call this “舊森記/ Old Sam Kee”)[5].

7.  Sometime in 1960s, Father bought his first property at 7^th floor Kai Wan Building, 11 Argyle Street, Kowloon/旺角亞皆老街11 號啓運大厦8樓, as the family home (“Family Home”).

8.  It was not really disputed that the two older daughters Ying and P started to help out in Old Sam Kee when they were in their early teens.  The other children started to help in the business as they grew older.

9.  P received only primary education. According to her, she ceased formal schooling after primary 3 in about 1967.  She was then about 12 years old, and she and Ying were helping Father and working in Old Sam Kee during day time, and attending evening school.  P completed primary 5 at an evening school in 1969 when she was about 14[6].

10.  Kong, the 2^nd son, had said he started working full time in Old Sam Kee after completing Form 2, which was in about 1974/1975.

11.  D3, the 1^st and oldest son, had received more formal education than Ying, P, Kong and also the 3^rd son Tong.  D3 completed secondary school at 格致英文書院 and had taken the then Hong Kong Certificate of Education Examination.  Although he said he had helped Father in Old Sam Kee, it was not really disputed that he only started working full time there in 1977 when he was about 19 years old and after graduation from secondary school.  While working there during the day, he attended a book-keeping course at an evening school for one to two years.  He said he later joined the Hong Kong Island Lions Club when he was about 29 years old.  This would be in about 1987.  According to D3, he had attended various courses through the Lions Club when he was appointed secretary/treasurer and he later obtained an honorary doctorate degree in business and personnel administration from檀香山大學through enrolling in a correspondence course.  He said he started another branch of the Lions Club in about 1997.

12.  When D3 started to work for Old Sam Kee, its former manager/掌櫃in charge of accounting and book-keeping had already resigned.  It was again not really disputed that D3, being the oldest son, was asked by Father to take over those duties and gradually the management of the business.

13.  D3 married Ping in 1981, and Kong also got married in the same year to Ling.  After her marriage to D3, Ping had also worked for Old Sam Kee.

14.  At about the time of D3’s marriage, on 16 March 1981, a residential property was purchased at Flat B1, 9 floor, Hang Tung Building, 26 Bute Street, Kowloon in the names of D3 and Kong as joint tenants (“Hang Tung Property”)[7].  D3 and Kong and their wives then moved to reside in Hang Tung Property.

15.  According to D3, in about 1982, with Father’s consent, he ceased the retail business of Old Sam Kee, and with savings of his own and Ping’s, he established a new wholesale business for frozen meat   called森記凍肉公司/Sam Kee Frozen Meat Company (“New Sam Kee”).  It was further D3’s case that with his joint savings with Ping and with a 70% mortgage loan, he bought a property at Cheung Wong Arcade, Cheung Wong Road, Mongkok/旺角長旺道長旺商場 G53號鋪 (“Shop G53”) as warehouse and office for New Sam Kee[8].

16.  P had denied that there was any cessation of the business under the name of Old Sam Kee in 1982 or that there was a new business New Sam Kee which was established by D3 out of his joint savings with Ping, or that D3 had bought Shop G53 out of his joint savings with Ping.  According to P, it was all along the same business built up and owned by Father (and Mother), and there was no change to the structure until a limited company, namely D1, was incorporated to take over the business.

17.  According to the Land Registry record, Shop G53 was purchased on 3 September 1982 in the names of Father, Mother, D3 and Kong as tenants in common.  Later on 5 April 1984, two further shop spaces, namely Shop G61A, and Shop G62A, both on ground floor at Cheung Wang Plaza were purchased, again in the names of Father, Mother, D3 and Kong but this time as joint tenants (respectively “Shop G61A”, and “Shop G62A”).

18.  Thereafter, on 8 March 1985, a residential property was purchased at Flat D3, 2 floor, Block II, Chermain Heights, No 9 Eastbourne Road, Beacon Hill, Kowloon, again in the names of Father, Mother, D3 and Kong as joint tenants (“D32 Chermain Heights”).  D3 and Kong and their respective families then moved out of the Hang Tung Property to take up residence at D32 Chermain Heights.

19.  After D3 and Kong and their families moved to D32 Chermain Heights, Ying had moved to Hang Tung Property until its sale, and I will deal with the issues arising out of Hang Tung Property later in this judgment.

20.  Since 1985, various companies had been set up by D3 to run different restaurant businesses and/or to invest in properties, including the following:

(i) Unitable Investment Limited/財聯有限公司 (“Unitable”), incorporated on 19 March 1985 to run a fast food restaurant in Central called 神秘人快餐廰 (“Mr M’s Restaurant”).  At the commencement of this business, apart from D3 and Father, there were other unrelated shareholders.  Mr M’s Restaurant later ceased business in 1990.  According to the annual return made up to 31 December 1990, by then, apart from D3, Father and unrelated shareholders, Kong, Tong and P had all become shareholders[9].  The 5 Family Members were also 5 out of the 6 directors.  It was not clear when all the unrelated shareholders exited but by 19 March 2000, the shares of Unitable were held by the 6 Family Members, namely Father, D3, Kong, P, Tong and also Pony[10].  The company was eventually wound up in about July 2001.

(ii) Kingstrong/強實業有限公司 (“Kingstrong”), incorporated on 8 August 1986, which bought two properties, and ran a restaurant in Kwai Chung called神秘人美食中心 (“Dragon Man Food Centre”) on one of the properties.  Kingstrong was initially set up with two shareholders only, namely D3, and an unrelated shareholder each holding 1 share of HK1.00 each.  Later, a further 1,299,998 shares of HK$1.00 were allotted on 19 February 1987, and apart from 3 other unrelated shareholders, D3 was allotted 299,999 shares, Father 114,999 shares, and Kong 50,000 shares[11].  The annual return made up to 31 December 1987 indicated that by then, the nominal share capital was 1,300,000 shares of HK$1.00 each, and there was a change of shareholding resulting in D3 holding 380,000 shares, Father holding 115,000 shares, Kong holding 80,000 shares, P holding 50,000 shares, Tong holding 30,000 shares, and D3’s wife Ping 10,000 shares, and there were other unrelated shareholders[12].  There were then 5 directors namely D3, Father, Kong, Tong and P.  Thereafter, there was a further change and all unrelated shareholders had transferred their shares out to various Family Members.  By 31 December 1988, D3 held 680,000 shares, Father 275,000 shares, Kong 180,000 shares, Tong 105,000 shares, P 50,000 shares and Ping 10,000 shares[13].  D3, Father, Kong, Tong, and P were directors.  The Dragon Man Food Centre ceased business eventually in about 2009, but Kingstrong is still in existence, and its principal activities for the year ended 31 March 2013 consisted of providing service of property agency and investment holding.

(iii) D2/神秘人企業有限公司, incorporated on 8 May 1987, and later operated a sushi restaurant business in Kowloon Tong called元福壽司專門店 at about end of 1995 (“Sushi Restaurant”).  The annual return made up to 31 October 1988 indicated that initially D3 and his wife Ping were the only two shareholders each holding 1 shares of HK$1.00 and no directors were appointed.  Later further shares were allotted on 21 December 1994, with D3 ended up holding 228,000 shares, Father 30,000 shares, Kong 62,000 shares, Tong 30,000 shares, P 20,000 shares and Ping 10,000 shares, totalling 380,000 shares[14].  Father, P, Kong, and Tong were also appointed directors.  There had been a number of properties purchased in the name of D2 including the property in Happy Valley which was the main dispute between the parties.  As of the year ended 31 March 2005, its turnover was from revenue of sales of goods and rental income.

(iv) D1/森記凍肉有限公司, incorporated on 10 May 1988 with initially one subscriber share to the Father, and one to D3.   The Return of Allotments filed on 1 July 1988 indicated that a further 299,998 shares of HK$1.00 each had been allotted on 29 June 1988, as a result of which Father and D3 each held 100,000 shares, Kong was allotted 80,000 shares, P and Tong each 10,000 shares, making a total of 300,000 shares.  All 5 of them were appointed directors[15].  D1’s principal business had always been in trading of frozen meat.

(v) Westrong Enterpreise Limited威强企業有限公司 (“Westrong”), incorporated on 4 October 1994 to run a karaoke bar business in Kwai Chung (“YES Karaoke”).  The first directors as at date of 16 November 1994 were Father, P, D3, Ping, Kong and Tong.  Later, on 17 November 1995, 3,799,998 shares of HK$1.00 were further allotted, and apart from unrelated shareholders, D3 was allotted 1,379,999 shares, Father 299,999 shares, Kong 280,000 shares, Tong 120,000 shares, P 80,000 shares and Pony 70,000 shares[16].  Then there was a further change according to the annual return made up to 4 October 1996[17], and apart from unrelated shareholders, the shareholding of D3, Father, Kong, Tong, P and Pony had, in so far I could see, remained unchanged but Ping became a shareholder holding 20,000 shares.  Anyway, this company was eventually wound up at about end of 2006.

(vi) Kenox Limited/國安有限公司 (“Kenox”), incorporated in September 1998 to run a restaurant called Hung Fook鴻福海鮮酒家 in Apleichau (“Hung Fook Restaurant”).  Hung Fook Restaurant ceased business on about 30 May or 30 June in 2005 and Kenox was later wound up in about February 2013.

21.  The above 6 companies were regarded as family companies (collectively “Family Companies”).  D1, D2 and Kingstrong are the only 3 Family Companies which are still in existence.

22.  It would appear that in the late 1980s, at the suggestion of D3 and agreed by Father, Family Members took turns to apply for emigration to Canada although they later all returned to Hong Kong at various times.  D3 and his family were the first to move in 1987 and D3 later returned to Hong Kong in 1988[18]. After D3’s return, Father and Mother moved there with Pony in about 1989 for a period of time, and Kong, Tong and P herself all moved there for a period of time.

23.  According to P, Father had agreed to capital from his business/D1 being transferred to Canada for the purchase of properties there and for emigration purposes.  As a result, the following properties were purchased :

(i) 121, Lansbury Drive Scarborough Ontario, purchased before 1989, in the joint names of D3 and Ping, and later transferred to P 20%, Tong 20%, Kong 50%, and Pony 10%, as tenants in common, on 20 May 1994 ( “121 Lansbury”)[19];

(ii) 40, 1180 Sandhurst Circle, Scarborough, Ontario, purchased on 15 December 1989 in the names of (i) Father and Mother as joint tenants of 50%, and (ii) P and Tong as joint tenants of the remaining 50% (“1180 Sandhurst”)[20], which was later transferred to Pony on 11 December 2006 by P and Mother[21]. 

(iii) LPH 12, 2466 Eglinton Avenue East, Scarborough, Ontario, purchased on 14 January 1994 in the names of P and Tong as joint tenants (“2466 Eglinton”)[22];

(iv) 12 Cortleigh Court, Richmond Hill, Ontario, purchased on 8 July 1994 in the sole name of D3 (“12 Cortleigh”)[23];

(v) 20 Olive Avenue, Suite 2009, Toronto, Ontario, purchased on 28 November 2003 in the sole name of D3 (“20 Olive”)[24].

24.  It was, however, initially, D3’s case that he was a beneficial owner of the above Canadian properties, having provided all or part of the purchase price[25].  D3 had also said having returned to Hong Kong, he cancelled all bank accounts in his name in Canada and thereafter, he had give a power of attorney to Pony to deal with all matters there[26]

25.  Separately in Hong Kong, on 30 April 1993, a property at Flat A, 9 floor, Block 2, Hong Kong Garden (Phase I), No 100, Castle Peak Road, Tsing Lung Tau, New Territories, was purchased on 30 April 1993 in the names of D3 and Tong as joint tenants (“Tsing Lung Tau Property”) as a residence for Tong and where Tong has resided since.  In 1993, Tong was working for Dragon Man Food Centre run by Kingstrong at the time and according to Tong, he was provided with accommodation as he was working for one of the Family Companies.  It was not disputed that the purchase price and mortgage loan repayments of the Tsing Lung Tau Property were paid by one of the Family Companies.  Tong had admitted that both he and D3 were beneficial owners of this property.

26.  On 2 June 1993, another unit at Chermain Heights, namely A1, 12 floor, Block I was purchased in the name of D1 for the residence of D3 and his family (“A112 Chermain Heights”). Since D3 and his family moved there, Kong and his family have continued to reside at D32 Chermain Heights until the present.

27.  Later, Pony returned from Canada, and he started to work for Hung Fook Restaurant in August 1999, and on 28 December 2000, a property at Flat G, 38 floor, Tower 2 (Hoi Fai Court), South Horizons, No 2 South Horizon Drive, Hong Kong, was purchased in the names of P and Pony as joint tenants (“South Horizon Property”)[27].

28.  As can be seen later, the payment and the beneficial ownership of the South Horizon Property was intricately connected with the dispute over the property referred to below as the Happy Valley Property.

29.  Briefly, according to P and Pony, South Horizon Property was purchased and paid for by Pony or paid on his behalf, but D3 said all down payment, monthly mortgage loan repayments and all purchase costs were  paid by D1 not as gifts to P and Pony but were regarded as loans to P and Pony.  Further, according to D3, in about early 2001, he, on behalf of D1 and D2 had reached an oral agreement with P, namely that if P decided not to cash the monthly cheque from D2 for her director’s remuneration, D1 would regard that she had already repaid the monthly mortgage loan repayments for South Horizon Property which D1 had paid on her behalf (“South Horizon Agreement”).

30.  From January 2001 until October 2004 (total 46 months),  there was a total of  19  out  of  36 cheques not cashed by P (“19 Remuneration Cheques”), and therefore according to Ds’ case, in respect of the loans for the monthly mortgage repayments for South Horizon Property, P had only repaid HK$180,500.

31.  P said that D3 had fabricated the South Horizon Agreement. According to P and Pony, Pony was the sole beneficial owner of this property and the property was later transferred to the sole name of Pony by P on 15 August 2006[28].

32.  I will come back to the parties’ dispute over the South Horizon Property later in the judgment.

33.  At this stage, I will also add that it was P’s case that since about 1987 onwards until about 2003, at D3’s request, she had made various loans to D3 and/or Family Companies. This was denied by Ds.

34.  Throughout the years, there had been various properties purchased by D2.  In particular, on 8 November 2004, the property, the main subject of the present action, namely Shop F, M/F, Nam Wing Building, 49-51A, 17 Sing Woo Road, Hong Kong was purchased in the name of D2 (“Happy Valley Property”)[29].

35.  P’s case was that in about August 2004 when she was making demands to D3 for repayment of her loans to him, D3 had made a proposal on behalf of himself, D1 and/or D2 for her to acquire the Happy Valley Property (“Acquisition Proposal”) which she accepted and that pursuant thereto, she had paid for the purchase of the Happy Valley Property.  According to P, D3 and other Family Members had agreed that the property would be P’s and it was only later that she found out it was registered in D2’s name.  In particular, P relied on a Chinese document headed擁有書which was signed by all the directors of D2 on 8 November 2004, expressly stating that the Happy Valley Property was beneficially solely owned by P (“Letter of Ownership”)[30].

36.  Ds denied that there had been the Acquisition Proposal.  Ds’ case was that prior to the signing of the Letter of Ownership, P and D3 had orally reached an agreement with terms including that the Happy Valley Property would be transferred to P only when P transferred 50% of her interest/title in South Horizon Property to D2 (“Happy Valley Agreement”).  P denied there was the Happy Valley Agreement.

37.  Generally, it was P’s case that all the monies generated from Old Sam Kee/New Sam Kee and for setting up of the Family Companies, and the various businesses, and the purchase of properties (Hong Kong of Canada) all came from Father (and Mother), but D3 being the one who was in control of the Family Companies, would allocate the majority of the shares in these Family Companies to himself, and the rest to other Family Members.

38.  Further, according to P, prior to 2006, she, Father, Kong, and Tong were all directors and shareholders of the Family Companies together with D3, but D3 never informed the others as to the financial situation of the companies, and no dividends or profits had ever been distributed to them, and they had not received any benefits therefrom as shareholder.  Moreover, although P was in name a shareholder and/or a director, she was in fact an employee working in Old Sam Kee/New Sam Kee/Family Companies, and was arranged by D3 to work for different businesses run by the Family Companies.  

39.  It was not disputed that it was D3 who would arrange for different Family Members to work in different restaurants/businesses run by the Family Companies.  It was also not disputed that P had worked at Old Sam Kee/New Sam Kee and restaurants owned by various Family Companies from 1978 onwards but Ds’ case was that P was not working there as an employee or under any contract of employment.

40.  Anyway, according to P, it was only in April 2005 that she found out that the Happy Valley Property was registered in the name of D2 instead of her own name, and that thereafter she had repeatedly requested D3, as D2’s controlling director and majority shareholder, to cause D2 to transfer the legal title of the Happy Valley Property to P pursuant to the Letter of Ownership.

41.  At the end of 2005, Father became ill and was hospitalized and later passed away on in March 2006[31].  I understand that there had been a dispute between Family Members over Father’s will/s, but this was not a matter before this court. 

42.  After Father’s death, the business of the Sushi Restaurant was transferred to a former employee on 30 June 2006, and P ceased working there, but she contended that she was then assigned by D3 to work for D1, where she worked until 30 September 2006.  Ds denied that P was assigned to work for D1 after the Sushi Restaurant ceased business.

43.  On 2 July 2006, P, D3 and his wife Ping, Mother and Kong were having dinner at a restaurant in Shenzhen, and there was a discussion regarding the transfer of the Happy Valley Property, and also the South Horizon Property, and subsequent thereto, a memorandum of agreement was drafted by D3’s wife Ping then and there.  P, D3, Kong had signed as parties to the memorandum of agreement, and Mother and Ping signed as witnesses (“1^st Memo”)[32].  It was P’s case that she signed the 1^st Memo involuntarily.

44.  Thereafter, there was no transfer of the Happy Valley Property.  At this time, it seemed that Joyce became involved in trying to help P in asking D3 to effect the transfer.  This later led to D3 making a complaint to the police against Joyce for allegedly making threats against him.

45.  Subsequently, on 10 August 2006, there was a meeting at the Family Home (where Mother and P have continued to reside) attended by D3 (“Family Meeting”).  According to P, apart from her and Mother D3, Ping, Kong, Tong were also present.  P’s case was during the Family Meeting P had said D3 acting on behalf of himself and D2 finally agreed to transfer the Happy Valley Property to P’s name and D3 had asked P to go and deal with the procedures.  Further, according to P, at the Family Meeting, D3 had agreed with her and acknowledged that the then outstanding amount of the loans due to P was HK$350,000 (“Oral Acknowledgment”).  This was denied by D3.

46.  Thereafter, D3 failed to transfer the Happy Valley Property to P after the Family Meeting, nor did he pay P the alleged acknowledged outstanding amount of HK$350,000.

47.  On about 29 September 2006, late that night, there was a further meeting at the Family Home, which resulted in another handwritten memorandum of agreement signed by P, D3 and Kong in relation to a number of issues/assets (“2^nd Memo”)[33].  However, the following morning, P made a report to the police that she had signed the 2^nd Memo involuntarily.  Further, according to P, she ceased working for D1 on 30 September 2006.

48.  The parties were clearly not able to resolve their differences over various assets.  It was also not really disputed that P had since about mid 2006 been suffering from various health problems.  According to a medical certificate dated 9 November 2006, was diagnosed to be suffering from depressive disorder and panic attacks[34].

49.  On 15 November 2006, P sent a letter in Chinese to D3/D2 demanding all outstanding wages from D2 from January 2003[35]. This was followed by P issuing a claim in the Labour Tribunal on 22 November 2006 under LBTC 5956 of 2006 against D1 and D2, for arrears of wages and other payments arising out of her employment with D1 and/or D2, totalling about HK$652,609.77[36].

50.  On 13 December 2006, P and Tong were both removed as directors of D1 and D2, but they remained minority shareholders, P holding 10,000 shares in D1 and 20,000 shares in D2. For the year ended 31 March 2006, D1’s gross turnover was about HK$30m and its primary business was trading of frozen meat[37]. For the year ended 31 March 2005, D2’s gross turnover was about HK$1.89m which consisted of revenue arising from sales of goods and rental income[38].

51.  On 3 October 2007, P instructed her present solicitors to send to D2 a letter before action demanding that D2 to transfer the Happy Valley Property to P pursuant to the Letter of Ownership[39]. The solicitors for D2 Messrs Chung & Kwan (“C&K”) replied on 31 October 2007 and, among other things, had stated that P accepted D3’s offer to the Happy Valley Property be transferred to her subject to the mortgage loan and in consideration of transferring her ½ share in the South Horizon Property to D3/Family Companies and further referred to the 1^st Memo and the 2^nd Memo and stated that D2 was not obliged to transfer the Happy Valley Agreement to P due to P’s breach of the agreement between P and D3[40] (“31.10.07 Letter”).

52.  P’s claim in the Labour Tribunal was subsequently transferred to the District Court on 1 September 2008 upon the application of D1 and D2 (DCCJ 4065 of 2008) and thereafter the other claims were added by P.   D3 was joined as a party on 8 January 2009.  P’s statement of claim was later filed on 15 January 2009 and Ds’ defence and counterclaim was filed on 6 April 2009.  The action was subsequently transferred up to the Court of First Instance on 18 August 2009 upon the joint application of P and Ds and became the present action. 

53.  It transpired during the trial that D3 had since commencement of litigation by P set up a new company called 新森記食品凍肉有限公司in 2010 with registered office at Shop G53.  D3 had admitted during the trial that this had resulted in revenue for D1 in 2010 of some $50.9m being reduced to only about HK$2.8m in 2011[41].

54.  P’s claim in this action consisted of 3 parts as follows:-

(i) Between 1987-2003, P had lent D3 various sums for use of Family Companies of which, after setting off of the initial payments for the purchase of the Happy Valley Property, HK$350,000 remained outstanding which was acknowledged by D3 at the Family Meeting under the Oral Acknowledgment, and P claimed against D1, D2 and/or D3, among other things, the return of the sum of HK$350,000  plus interest (“Debt Claim”);

(ii) P had paid for the purchase of the Happy Valley Property and that she held the sole beneficial interest of this property since date of purchase under the Letter of Ownership, but despite repeated demands, D3 had failed to transfer the legal title of the property into her name; P thus claimed, among other things, a declaration that D2 held the Happy Valley Property on trust for her sole and absolute benefit (“Property Claim”);

(iii) P said she was owed various salaries, reimbursement of medical expenses, and other outstanding amounts arising out of her employment with D1 and/or D2, and she claimed a total sum of about $578,424 against D1 and/or D2 (“Employment Claim”).

55.  D1 counterclaimed against P for, among other things, outstanding director’s loans allegedly due to D1, of an initial amount of HK$1,219,933 but after two rounds of amendments, ended up being an amount of HK$220,903.15 plus interest.

56.  D2 counterclaimed against P for, among other things, damages for breach of contract of the Happy Valley Agreement, breach of fiduciary duties and/or breach of trust, and an account of all sums received by P which were secret profits. 

57.  D2 further counterclaimed against Colourmax for, among other things, an account of all properties received by it in dishonest assistance of breach of fiduciary duties and/or breach of trust on the part of P and in the knowledge of such breaches.

58.  Lastly, D2 claimed against both P and Colourmax, among other things, a declaration that D2 was the full legal and beneficial owner of the Happy Valley Property, and damages for conspiracy.

59.  P was on legal aid and Counsel Mr Benny Lo appeared for her at the trial.  Mr Jeremy Cheung and Ms Candy Tang appeared for Ds. Colourmax was not represented and was absent at the trial.

C.  The witnesses

60.  P’s witnesses statement had been supplemented by 5 supplemental statements.  Mother, P’s former brother-in-law Hung,  Tong, Pony and Joyce all provided witness statements on behalf of P and had attended trial P for cross-examination.

61.  D3 provided 2 witness statements on behalf of Ds and was cross examined.  Kong had also provided 2 witness statements on behalf of Ds, and he attended trial for cross examination. D3 had also called a friend of his, a Mr Lee Cheuk Kwon/李卓群 (“Kwon”), who had provided a witness statement for Ds and attended trial for cross-examination.

62.  Kong’s wife, Ling, had originally provided a witness statement for Ds but she failed to turn up at the trial to be cross examined.  There was no valid explanation given as to why she failed to turn up.  I shall thus give no weight to the evidence in her witness statement.

63.  Mr Lo submitted that the court should also draw an adverse inference against Ds for failing to call Ling, and also Ping who, apart from D3 and Kong, was very much involved with the Family Companies.  I will be dealing with this when considering the various issues.

64.  This case concerned mainly factual disputes and thus largely depended on the credibility of the witnesses and their testimony, which I will go into later.

65.  The relevant principles in assessing a witness’s evidence have been set out by Poon J (as he then was) in Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (unreported) HCA 1957/2005, 28 July 2011; and DHCJ Eugene Fung SC in Hui Cheung Fai v Daiwa Development Ltd (unreported) HCA 1734/2009, 8 April 2014.

66.  In Big Island Construction (HK) Ltd, the then Poon J had explained as follows:

“24. In assessing credibility, the court takes into account, among other things, the inherent probabilities or improbabilities of one’s testimony, the contemporaneous documents or any evidence, which is undisputed or indisputable, tending to support or contradict one account or the other and the overall impression of the characters and motivations of the witnesses: see In re B (Children), supra, per Baroness Hale at para 31 at p.24, applied by this court in Standard Chartered Bank v Li Wai Ping & others, HCA10587/2000 & HCA3575/2003, 17 February 2011, unreported, at para 19. Where there exists a wealth of contemporaneous documents, credibility is to be tested by reference most particularly to them : see Esquire (Electronics) Ltd v Hong Kong & Shanghai Banking Corp. Ltd [2007] 3 HKLRD 439, per Stock JA (as he then was) at para.158 at p.494”

67.  In Hui Cheung Fai, DHCJ Eugene Fung SC has said :-

76. In making my findings of fact in this case, I am guided by a number of general principles which judges apply as to fact finding and the assessment of credibility.

77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in questionemerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce). … 

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).

79. In determining a witness’s credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence.  The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).

81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:

‘Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.’

82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination.  They are particularly apposite in a case like the present where very serious allegations (akin to allegations of fraud) have been made by the Son against the defendants.”

68.  With the above principles in mind, I turn to the present case.

D.  Some General Findings

D.1  New Sam Kee

69.  As a start, as mentioned earlier, it was D3’s case that in about 1982, he ceased the business of Old Sam Kee and started a new frozen meat business of New Sam Kee out of joint savings with Ping.  D3 had produced his personal assessments for profits tax for the years 1982/1983, 1983/1984,1984/1985, and also 1985/1986 and also profits tax computations of a business under the name of New Sam Kee for 1984/1985 and 1985/1986[42].

70.  The profits tax computation for 1984/1985 indicated that the profits from the business known as New Sam Kee were allocated as to 1/3 for Father, 1/3 for Kong and 1/3 for D3[43].  The business registration certificate for the year ended 31 March 1987[44] produced by D3 also indicated that New Sam Kee was in April 1986 a partnership whereas the notice of assessment for the business bearing the name of Old Sam Kee for the year ending 31 March 1972 would seem indicate it was then a sole proprietorship, as it was addressed to “The Proprietor”[45], but I note that D3 and Kong had said Father and Mother were both partners of Old Sam Kee and there was no real issue on this.

71.  Having considered the above tax returns, I accept that there were two businesses, one under the name of Old Sam Kee and one under the name of New Sam Kee.  Notwithstanding what P had said that all along it was the same business started by Father, I accept that at least from 1 April 1984 onwards, the profits tax computations indicated that there was a new business bearing the name of New Sam Kee with 3 equal partners, namely Father, D3 and Kong.

72.  D3 did not produce any profits tax computation for New Sam Kee prior to 1 April 1984.  There were no documents to show that a business under the name of New Sam Kee had already commenced in 1982 as alleged by D3 other than what he and Kong had said.  I note that the personal assessment tax computation produced by D3 for 1982/1983 was in fact a notice of refund of tax issued in March 1986 indicating that an amount of HK$892 of tax was refunded by Inland Revenue Department to D3.  This tax document further indicated that D3 was assessed tax on his profits and income from “properties” of HK$5,944 and from “salaries” of HK$31,200 for the financial year 1982/1983.  It would thus appear that for that financial year, D3 was receiving only salaries, rather than a share of profits from “business”, as seen in his personal assessments for the following years.  There was thus no sufficient evidence that D3 was already a partner in the business or that New Sam Kee had already been set out during the financial year of 1982/1983.

73.  Although no actual profits tax computation for New Sam Kee was produced for 1983/1983, D3’s personal assessment for 1983/1984 however showed that his annual income for that financial year was from “business”.  I am thus prepared to accept that, more likely than not, this would indicate as from 1 April 1983, as D3 was receiving a share of profits from the business, he had become a partner of the business and that New Sam Kee had been set up during that financial year, namely sometime after 1 April 1983, with Father, D3 and Kong as partners. 

D.2   Whether Old Sam Kee was profitable

74.  P had said that the business of Old Sam Kee had already been built up and was successful during 1970-1980 and that all the business connections were made by Father, and further that any success of the frozen meat business or New Sam Kee was built on the success and connections of Father and/or Old Sam Kee’s.  Ds denied this and it was D3’s case that it was he who had built up the business under New Sam Kee which started to do very well during the financial year 1983/1984, although Kong had said it was with the joint effort of both of them that New Sam Kee became profitable.

75.  Anyway, it was both D3’s and Kong’s evidence that Old Sam Kee was not profitable and that when D3 started to manage it, it only had several thousands of dollars of cash and 4 old bicycles and some old tools.  

76.  D3 had referred to the notice of assessment of profits tax for Old Sam Kee for the year ending 31 March 1973 of assessable profits of HK$12,912[46] and had compared it with the assessable profits of New Sam Kee for 1983/1984 of HK$233,667[47] to demonstrate the substantial increase in profits after he started the New Sam Kee. 

77.  There was, however, a gap of some 10 years between 1973 and 1983.  There were no documents produced in relation to the assessable profits of the business of Old Sam Kee during that 10 year period.

78.  In this respect, P had called Hung, the former husband of Ying, to give evidence on P’s behalf.  Hung had maintained an amicable relationship with Ying, with whom he had two children.  Hung was a taxi driver at the time of his marriage to Ying in 1977, and he said he had no money and the wedding banquet held at Ruby Restaurant was paid for entirely by Father and Mother.  Hung said, after the wedding, Father had asked him to go to help out at Old Sam Kee, and he did work there until about end of 1978.  According to Hung, Old Sam Kee was doing well, and in fact Father had bought a 1½ ton lorry for him to help deliver goods for Old Sam Kee.  However, at about end of 1978, he mortgaged the lorry for a loan to repay his own gambling debts, and this had angered Father, who paid off the loan and retrieved the lorry.  It was at that time Hung was told by Father to leave Old Sam Kee.  Hung had also mentioned that Father had bought another small van at the time.

79.  When asked whether he knew that D3 and Kong had to deliver goods on a bicycle, Hung said he did not know this.  Hung was however not really cross examined on his evidence that Father had paid for his wedding banquet and had bought a lorry for him to drive.  Although Hung seemed to have a gambling habit, and had borrowed sums from P, I have had the opportunity to observe him and I find Hung a reliable witness.  I accept what he said in this regard.

80.  D3 had himself said in his witness statement that Father started Old Sam Kee in the 1950s[48] although P seemed to think it was in 1966.  Anyway, it was clear that by the time New Sam Kee was set up, the business of Old Sam Kee had already been in existence for a long time.   Father bought the Family Home in 1960s, and thus he must have made enough money from Old Sam Kee to be able to buy a property at that time.  D3 had said in his witness statement that in 1979, apart from the Family Home, he did not know what assets Father had for his retirement, but he believed that Father had savings.  Any savings Father had would appear to have come from Old Sam Kee as there was no evidence that he had any other source of income.  Further D3 himself had also said he made payments from the business to meet not only his parents’ maintenance expenses, but also to maintain other Family Members[49].  Thus, even on D3’s own evidence, there was sufficient income from the business in 1979 to meet every one’s expenses.

81.  Having considered the above, I do not find there was sufficient evidence to say that Old Sam Kee had not been profitable or had not been not doing well during 1970-1980, although I accept that like most businesses, there would be ups and downs.

D.3    When did Father and Mother retire

82.  There was also disagreement as to when Father (and Mother) actually retired.  D3 had said in his witness statement that Father retired in about 1979 when he was 52 years old, but this was denied by P.

83.  P had said in her witness statement that prior to sometime in 1983 when she and her parents went to Europe for a holiday, all cheques of Old Sam Kee were signed by either Father or Mother notwithstanding D3 had started to manage the business since about 1977, and it was only in about 1983 that Father changed the signatories for all the cheques of the business to be signed by either Father or D3.  P was not really challenged on what she had said on the change of signatories in signing cheques, and what she said also accorded with I have found earlier, namely that the new business was only set up sometime in 1983.  I accept P’s evidence in this respect which would show that Father and Mother were actively involved in running the business until 1983 and as Father remained to be one of two signatories, he had continued to be involved in the business thereafter even if he had ceased working.     

84.  It had been put to Mother during the trial that it was in about 1979 that she and Father started to retire.  In response, she had said when she was 55 years old, she was not well, and it was at that time that she and Father decided to stop working.  

85.  I have had the opportunity of observing Mother’s demeanour when she was giving evidence.  Although Mother is of advanced age, I find her rather alert for her age and her evidence was clear.  She said she was not well when she was 55 years old and this would be in about 1984.  I find Mother a reliable witness and accept what she said, that it was in about 1984 that she and Father were stopping work.  Even though D3 started to manage the business after he started working there in 1977, I do not find that there was sufficient evidence that Father and Mother had retired in 1979 as alleged by D3.

D.4   Capital for setting up New Sam Kee

86.  D3 had said there was a cessation of the business of Old Sam Kee and that he had paid off all the employees of Old Sam Kee, about 4 of them, in accordance with the law, and he had handed over the business accounts to Father before setting up the new business with his joint savings with Ping.  The new partnership or New Sam Kee was formed with 3 equal partners, D3, Kong and Father.  Kong did not mention that any capital was required to set up the new business.  D3 did say that Shop G53 was bought as a warehouse and office for New Sam Kee, but Shop G53 was purchased in 1982, and this was before New Sam Kee was set up, and in any event, from what is set out later in this judgment, it is my finding that the initial funds for the purchase of Shop G53 had come from Father and Mother. 

87.  Further D3’s own witness Kwon had said he met D3 in 1981 when D3 was delivering goods to Golden Restaurant/黄金酒樓 where Kwon was working as a cashier.  Kwon had said he had also met Father, who was very friendly with Mr Ching, a shareholder of the group which owned the Golden Restaurant and with whom Father often played mahjong, and further at that time the meat stall of Yip family was also one of the suppliers for Golden Restaurant.  Kwon said he worked for Golden Restaurant for 2½ years from 1980 to about 1982/1983.  Again, Kwon’s evidence would show Father was still involved with the business at that time.

88.  It was P’s evidence that Father had introduced D3 to all the major clients of the business.  Mother had also mentioned during the trial that Mr Chiu from Ruby Restaurant had introduced a lot of businesses to Father.

89.  Having considered the evidence of the parties and their respective witnesses, I find that notwithstanding what D3 and Kong had said, the business connections built up by Father had helped them in building up the business of New Sam Kee.

90.  Ping was not called as a witness.  She would be a key witness to give evidence from D3 as to whether any capital for the setting up of New Sam Kee had come from their joint savings.  Ping was/is married to D3 at the time of the trial, notwithstanding his relationship with Bonnie.  There was no valid reason given as to why Ping was not called.

91.  I find that there was no sufficient evidence that any substantial capital or injection of funds was required to set up New Sam Kee.  In any event, having considered the evidence and D3’s then income for 1982/1983 as set out below, I find there was no sufficient evidence that D3 had set up the new business/New Sam Kee with his and Ping’s joint savings.  

D.5   Capital for purchase of properties in 1981 - 1985

92.  As mentioned earlier, P’s case was that any monies generated from the business of Old Sam Kee and/or New Sam Kee had belonged to Father (and Mother).  Mother had also said during the trial everything came from her and Father.

93.  Prior to the emigration to Canada, there were 2 residential properties and 3 shop spaces purchased in Hong Kong during the financial years 1980/1981 to 1984/1985 of which D3 was registered as one of the owners and these were:

(i) The Hang Tung Property purchased on 16 March 1981

(ii) Shop G53 purchased on 3 September 1982

(iii) Shop G61A and Shop G62A purchased on 5 April 1984

(iv) D32 Chermain Heights purchased on 8 March 1985

94.  Apart from the Hang Tung Property, Father and Mother were 2 out of the 4 registered owners of all the other 4 properties.

95.  From D3’s personal assessments, his annual income for the financial years 1982 to 1986 was as follows[50]:

1982/1983	HK$37,144 (from properties and salaries)
1983/1984	HK$77,889 (from business)
1984/1985	HK$101,311 (from business)
1985/1986	HK$137,335 (from business and salaries)

96.  The Hang Tung Property was purchased in March 1981. According to the assignment, the purchase price was HK$350,000, and according to D3, the mortgage was under HK$100,000[51].  Although Kong had supported D3’s evidence that the initial funds for the purchase had come from D3 and Ping, there was no evidence produced by D3 that he and Ping had sufficient personal savings in March 1981 to pay for the initial funds required for the purchase of the Hang Tung Property, namely deposit, down payment, and transaction costs of some HK$250,000 in early 1981.

97.  In fact, Ds’ earlier mentioned witness Kwon had said D3 often needed to borrow money due to cash flow problems and one of Kwon’s bosses had made loans in cash to D3[52].  Kwon had also said under cross examination that there were 3 occasions when the loans were made through him to D3, and it was about HK$30,000 or HK$40,000 on each occasion.  This would be between 1981 and 1982/1983.

98.  It was not quite clear whether those loans to D3 were to him personally or whether they were for the use of the business.  Anyway, in about 1981, D3 had only been working for about 4 years for Old Sam Kee.  In light of D3’s then income, it was not clear as to how he and Ping could have built up personal savings of some HK$250,000 in early 1981.

99.  As for D32 Chermain Heights, this was purchased on 8 March 1985, and D3’s personal assessment for 1984/1985 indicated his income for that year to be HK$101,311.  I accept that the profits of the business, by then New Sam Kee, had increased substantially from 1982/1983 years.

100.  According to P, D3 had wanted to buy 2 properties in Beacon Hill in 1985 and in order to use monies from Father’s business, he had to obtain Father’s consent, and he undertook to Father to transfer the Hang Tung Property to P.  Eventually, D3 bought one property namely D32 Chermain Heights but all initial funds and mortgage loan repayments were made by Father (and Mother)/Old Sam Kee/New Sam Kee.

101.  The purchase price for D32 Chermain Heights was HK$580,000 pt and the mortgage loan was for HK$280,000 pt. Thus the initial funds for the purchase would be in the region of over HK$300,000.  D3 had produced a fixed deposit issued by Wing On Bank dated 8 October 1986 for AUD 124,997.85 to show that he had personal savings, but this only showed at most that he had savings in October 1986 which was about 18 months after purchase of D32 Chermain Heights.  In any event, the AUD deposit seemed to later become part of the fixed deposit of HK$659,463.26 as evidenced by the receipt of 23 September 1988[53].  The deposit receipts from 27 July 1987 onwards however bore the chop “pledged” on it.  Further, the land search of D32 Chermain Heights indicated that the property was re-mortgaged to Wing On Bank for a total of HK$1,200,000 to secure general banking facilities in November 1987[54].  

102.  D32 Chermain Heights was acquired in March 1985 with Father, Mother, D3 and Kong as joint tenants.  As to why Father’s and Mother’s names were added, D3’s explanation was that he had intended to move to D32 Chermain Heights with Kong, together with Father and Mother and that was why his parents’ names were added. However, as pointed out by Mr Lo, there was be no need to add his parents’ simply because they were to move to live in D32 Chermain Heights together with D3 and Kong.

103.  In fact, if this was indeed the intention, there would be a total of 8 to 9 people living in a space of 1,100 sq ft in 3 averaged-sized bedrooms, with one bedroom for Father and Mother.  This would not be consistent with D3’s own evidence that he had wanted to purchase D32 Chermain Heights because the Hang Tung property (which also had 2 bedrooms) was not big enough for his family and Kong’s family to live in as the children were growing up.  If Father and Mother also moved to D32 Chermain Heights, D3’s and Kong’s family would still only had 1 bedroom each, the smaller of which was only around 100 sq ft in size.

104.  D3 had said that his parents later refused to move to D32 Chermain Heights.  Again, as pointed out by Mr Lo, it would not have been difficult for D3 to ascertain whether his parents really would be moving to D32 Chermain Heights at the time of the purchase before adding their names as joint tenants to that property.  In fact, according to D3, when he raised the issue with Father and Mother before buying the property, they unanimously (“異口同聲”) told him that they were accustomed to living in Mongkok.  If that was true, there was no basis at all for D3 to include Father’s and Mother’s name as joint tenants.  D3’s evidence was simply inconsistent.

105.  In any event, notwithstanding the fixed deposit receipts and D3’s and Kong’s evidence, I do not find there was sufficient evidence that D3 that he and Ping had sufficient personal savings in March 1985 to pay over HK$300,000 for the initial funds for the purchase of D32 Chermain Heights .

106.  When Mother gave evidence, she was adamant that it was Father and she who paid for all the properties including the Hang Tung Property and D32 Chermain Heights.  She said she bought the Hang Tung Property at the time when D3 was getting married.  She had also said that D3 would not have any means to buy property in those days.

107.  When it was put to Mother that D32 Chermain Heights was bought by D3 himself, her answer was a clear “no” and that it was she and Father who had bought D32 Chermain Heights, and Mother further pointed out that the property was held in 4 names including Father’s and hers.  I accept Mother’s evidence in this respect.

108.  Ping would have been a key witness as to what personal savings she and D3 had at the time or whether she and/her family members had provided financial assistance as alleged by D3, and yet she was not called.  I will draw an adverse inference against Ds for not calling Ping, in that her evidence could be against D3 on the source of funds for the purchase of the two residential properties, namely the Hang Tung Property and D32 Chermain Heights, and also the 3 shop spaces mentioned below,

109.  Anyway, having considered the evidence before this court, I find there was no sufficient evidence that the initial funds for the purchase of these 2 residential properties had come from D3 and Ping personally.  I find that it was more probable than not that the initial funds would have come from Father (and Mother) and/or Old Sam Kee and/or New Sam Kee.

110.  So far as the 3 shop spaces are concerned, first of all, Shop G53 was bought in September 1982. This shop was held in the names of 4 persons, namely Father, Mother, D3 and Kong as tenants in common.  As I have found that New Sam Kee was only set up sometime after 1 April 1983, Shop G53 was bought prior to the setting up of New Sam Kee.  D3 had said that Old Sam Kee would not have funds for the purchase and that he had to seek assistance from Ping’s family.  However, as I have said earlier, Ping was not called.  In light of his then income, there was no sufficient evidence that the initial funds for the purchase of Shop G53 was paid out of D3’s personal joint savings with Ping, as claimed by him.

111.  As for Shop G61A and Shop G62A, these were both bought in early April 1984 and were again held by Father, Mother, D3 and Kong but this time as joint tenants.  Although the profits of the business/New Sam Kee had increased by then, for the same reasons as the other properties, I find there was again no sufficient evidence that the initial funds for the purchase of two shop spaces were paid by D3 out of his personal savings with Ping.

112.  I am thus of the view that the initial funds for the purchase of the 3 shop spaces had come from Father (and Mother) and/or Old Sam Kee and/or New Sam Kee, same as the 2 residential properties.

113.  The above 5 properties, namely Hang Tung Property, D32 Chermain Heights, and the 3 shop spaces were all purchased with a mortgage loan. 

114.  Even though Father ceased working 1984, he, D3 and Kong, were equal partners in New Sam Kee.  In my view, the three of them would be equally responsible for the growth of the business and had contributed equally to any mortgage loan repayments of the 5 properties out of funds generated by New Sam Kee.

D.6   D3’s financial situation

115.  D3 was the one who was in control of the Family Companies.  As mentioned earlier, it was P’s case that she had made loans to D3 at his request for the use of the Family Companies from about 1987 to about 2003.

116.  Notwithstanding D3’s denial, generally speaking, the fact that he had needed to borrow monies can be supported by the evidence of his own witnesses.  Kong had said there were monetary transactions between D3 and other Family Members, in that the Family Members had made payments to D3[55].  As mentioned earlier, Kwon’s evidence was that D3 had borrowed various sums from his boss, although this would be from about 1981 to about 1982/1983.

117.  Mother was also clear under cross examination that it was P who lent money to D3 and not the other way round, as alleged by D3. 

118.  Tong who gave evidence for P, had said under cross examination that D3 had on many occasions borrowed money from P.  On re-examination, he had said D3 had often said D1 had cash flow problems and had asked P for loans, and that Tong had seen D3 giving P a cheque and telling her to credit the same when there was money.

119.  In support of his own finances, D3 had mainly relied on the deposit certificates mentioned earlier from October 1986 to October 1989 and his personal assessments, but as I have said the fixed deposit appeared to have been later pledged. Although the turnover of D1 was high in 2003/2004, the financial statements showed accumulated losses.  As for D2, for 2003/2004, the financial statements also showed net liabilities.  There was no other sufficient evidence as to D3’s personal financial situation from about 1987 to about 2003, to support what he alleged, that it was he who had made loans to P.

D.7   P’s financial situation

120.  Ds had challenged P’s own financial ability in making the alleged loans to D3 or the Family Companies, and in particular they had referred to P’s application to the Housing Authority for a Home Purchase Loan on 12 June 2000 in relation to the purchase of the South Horizon Property.  In that application, P had declared a monthly income of HK$9,800 and assets of HK$463,000, which was updated to HK$480,000 in a declaration on 7 December 2000[56]. P later in a statement to the police of 29 September 2006 had stated that she had assets of HK$4m, taking into account her shares in Family Companies[57].

121.  P herself had explained that the amount of assets she declined in 2000 was the then balance in her bank account/s.  This is a matter which I will deal with later in this judgment.  In any event, P’s evidence was that she was able to lend D3 money out of her own savings because in 1975 she had a boyfriend who owned a wonton noodle shop and who was earning about HK$20,000 per month and was giving her money. Her relationship with her boyfriend lasted until 1986.  According to P, she had also made profits from investing in foreign currencies. Further, P had said she was able to save as she did not have to pay daily expenses at home. This part of P’s evidence was not really challenged by Ds.

122.  Hung had also said he and Ying often needed to borrow from Father and P[58]. Both Tong and Mother had supported Ps’ evidence that she had made loans to D3. Even Kong had said P had lent money to Tong and Hung and further that D3 often needed cash for the various companies due to cash flow problems[59].

123.  Having considered the parties’ and their witnesses’ respective evidence, I accept that P did have the financial ability to make loans to D3 at his request, as alleged by her.

E.  The Debt Claim

E.1  Generally

124.  P’s Debt Claim for an amount of HK$350,000 was based on the Oral Acknowledgement by D3 during the Family Meeting. 

125.  As mentioned earlier, P’s case was that she had advanced various loans to D3 at his request for the use of various Family Companies during the period 1987 to 2003. P’s case was that D3 had told her that when the Family Companies had liquid assets, the loans would be repaid to P.  She said she had trusted D3 and would advance the loans when asked by him, and had not asked for any written agreement regarding interest or repayment, she and D3 being siblings.

126.  P’s case was further that on some occasions, when she made  loans to D3, simultaneously D3 would give her a cheque with the loan amount written thereon issued by one of Family Companies and that when the company had cash, D3 would notify P to credit the cheque as repayment.  In effect, what P was saying was that each of these cheques was issued to her as a security for repayment for the amount of the loan stated thereon.  P would not present the cheque for payment unless notified by D3.  P had retained 8 of these cheques (“8 Loan Cheques”), and that the total amount on the 8 Loan Cheques was HK$1,030,000 in 2003 (“Loans”).

127.  It was further P’s case that pursuant to the Acquisition Proposal made to her by D3, she had paid HK$980,000 towards the initial funds for the purchase of the Happy Valley Property and that D3 ( whether on behalf of himself/D1/D2) had paid the balance of the initial funds for her and that after setting off the amounts paid on her behalf, under the Oral Acknowledgment, D3 (whether on behalf of himself/ D1/D2) had duly acknowledged and agreed to repay P the sum of HK$350,000, being the balance of the Loans after setting off amount paid by D3 .

128.  Further, at the time of the acquisition of the Happy Valley Property, at the request of D3, P had handed to him the last of the 8 Loan Cheques and he had amended the date thereon from 23 September 2003 to 23 September 2006 (“Amended Cheque”) and D3 then instructed P to deposit the Amended Cheque in a few months’ time.  However, when P presented the Amended Cheque to the bank for payment on about 8 February 2007, the Amended Cheque was returned by the bank.

129.  D3 denied that he had requested for the Loans from P.  He further denied that there was the Acquisition Proposal, or that he, (whether on behalf of himself/D1/D2), had given the 8 Loan Cheques to P as security for repayment of the Loans, or that there was the Oral Acknowledgment.

130.  For ease of reference, I will first of all set out the 8 Loan Cheques[60], respectively 1^st Cheque to 8^th Cheque, as follows:-

Cheques	Date	Drawer	Amount (HK$)
1st Cheque	Undated, around 1987	Sam Kee Frozen Meat Co (New Sam Kee)	50,000
2nd Cheque	28.10.88	Sam Kee Frozen Meat Co (New Sam Kee)	280,000
3rd Cheque	3.8.99	D1	200,000
4th Cheque	25.4.00	D1	100,000
5th Cheque	2.7.02	D2	20,000
6th Cheque	21.8.02	D2	20,000
7th Cheque	10.4.03	D2	10,000
8th Cheque	23.9.03	D1	350,000
		Total :	$1,030,000

131.  Ds’ case was that, among other things, :

(i)   The 8 Loan Cheques were issued to P by D3 as receipts for record-keeping purpose and as evidence of the account running between P and D3 and/or other Family Members and/or other Family Companies from time to time, save for the 5^th, 6^th and 7^th Cheques;

(ii)  P and Ds through D3 had agreed orally at the time when each of the 8 Cheques was issued, that pursuant to long-standing practice amongst the Family Members to issue cheques as receipts dating back to the time when Father managed the business, the cheques would not be presented for payment by P;

(iii) The 5^th, 6^th, and 7^th Cheques were conditional gifts, namely that they were given to P as she had repeatedly informed D3 that she was in financial perils, and that the condition was the these 3 Cheques would not be drawn up by P unless D3 had instructed her to do so[61].

132.  I will first consider Ds’ case that generally cheques were issued as receipts for record keeping purpose.

E.2.   Cheques as receipts

133.  D3’s own case was that he had been managing the business of Old Sam Kee since 1979 and thus by 1987, D3 would have already been managing the business, whether under name of Old Sam Kee or New Sam Kee, for some 8 years.  By then 3 of the Family Companies had also been set up and he was in control of these companies.  Thus, D3 would have already acquired considerable knowledge and experience in running a business.

134.  In light of his business experience and education background, in particular his training in book-keeping and business administration, I really do not find D3’s case on using cheques as “receipts” inherently probable.  In coming to this view, I have taken into account in particular the inconsistencies in his evidence as set out hereafter.

135.  According to D3, if there was a money transaction between him and other Family Members, generally he would use a cheque as a receipt, but the cheque was not meant to be credited or cashed, and generally the cheque would not be properly signed or chopped, and it was not a cheque which could be presented to the bank, although occasionally, he could have signed/chopped on the cheque[62].  Thus, on his own admissions, some cheques were proper cheques capable of being cleared by the bank upon presentation.

136.  D3 had pleaded that that using a cheque as a receipt was a long-standing practice which dated back to the time when Father was managing the business (“Practice”)[63].  According to his witness statement, this would have been before 1979[64].

137.  However, under cross-examination, D3 had at first said that it was in about 1982 when he started adopting the Practice, and then later when confronted with what he had said in his witness statement, he then changed his evidence and said it was in 1977 when he first started to work for Father that he started to adopt the Practice. 

138.  What Ds had pleaded was that the Practice was a long-standing practice “amongst the Family Members”, D3, however, admitted under cross-examination that it was only he who would issue cheques as receipts, namely only he had adopted the Practice.  There was in any event no sufficient evidence that any one else of the Family Members had adopted the Practice, if indeed there was such a practice.

139.  D3’s evidence as to the Practice was also rather confusing as at one stage, in answer to the question as to why he needed to issue cheques as “receipts”, he had said words to the effect that if Family Members gave (or lent) him money, he would issue a cheque to them as receipt when he returned the money to them.  What he said was “屋企人俾錢我，我還返錢俾佢，再發一張支票當作收條”. What he was saying was that cheques were issued as receipts to the lender when he repaid the monies to the lender. 

140.  D3’s evidence simply did not seem to make any sense, since a receipt would normally be issued by a recipient of funds, and not a payer.

141.  Unlike D3, P ceased formal education at a young age, and for whatever reason D3 said about why she ceased formal education at a young age, the undisputed fact was that P had received much less formal education than D3.  P also did not receive any book-keeping or business administration training.  From my observation of her, she appeared to be less worldly or sophisticated than D3.

142.  Although the 1^st Cheque was not dated nor signed and the 3^rd Cheque did not appear to have been properly signed by D3, the others of the 8 Loan Cheques did not appear to be defective/invalid on the face of those cheques.  Even if some cheques were invalid cheques, they could have been dated/signed/chopped properly if D3 had authorised/notified P to present them.  I do not find P’s evidence as accepting the 8 Loan Cheques as security for repayment for the Loans inherently improbable.  In fact, it was not denied by D3 that the 8 Loan Cheques were indeed given to P by him, and D3’s case was only that they were given as receipts rather than as security.

143.  Mother had attended the trial to support P.  Mother was asked during cross-examination about the Practice.  Mother simply denied there was such a practice.

144.  As I have said, Mother is rather alert for her age and I have found her a reliable witness.  I accept her evidence that there was no such long standing practice as alleged by D3, namely use of a company’s cheques as receipts.

145.  Kong had attended trial to give evidence on behalf of Ds and to support what D3 had said about the Practice.  He had mentioned said there were monetary transactions between D3 and him and/or other Family Members, and that when the Family Members paid D3 any sums, D3 would use a cheque with the amount and name of payee written thereon as a receipt or record, which the Family Members knew the cheque was not to be presented to the bank for payment. 

146.  Kong had also said in his witness statement that in 1997, he had made a loan of HK$98,000 to D3 for the short term use of YES     Karaoke to cover its running expenses, and that D3 had given an undated cheque to Kong issued in the name of D1 with Kong named as payee and the amount of HK$98,000 was written thereon[65].  Kong’s evidence under cross examination was the D3 subsequently repaid him in cash within a year.  Kong, however, said that he was not able to find the original of the cheque and could only produce a photocopy of the same. 

147.  It was put to Kong that he could not find the original as D3 had already repaid him the HK$98,000 and/or Kong had credited the original into his bank account. Kong denied this was the case, but he was not able to offer any further explanation as to why he had kept a photocopy of the cheque and was not able to find the original.  All Kong could say was that he made a photocopy of the cheque and put it in his drawer. 

148.  In any event, Kong’s evidence was clearly that the cheque was given to him by D3 at time of lending and not at time of repayment. 

149.  I do not find Kong’s evidence would assist D3 in this respect, as the HK$98,000 cheque was given to Kong at the time of his loan to D3, and not at time of repayment as was D3’s case of the alleged Practice, and further, Kong had failed to produce the original of the cheque, whereas P had in her possession all the original 8 Loan Cheques. Also, there was no evidence that Kong himself had adopted the Practice notwithstanding he had started working full time at Old Sam Kee in about 1974/1975.   

150.  Ds had averred in their defence that “at all material times, the debtor-creditor relationship amongst P and Ds were treated by all concerned as one entire account, into which all liabilities and payments were carried in order of date as a course of dealing, the true nature of the debtor’s liability being a single and undivided debt for the amount of the balance due on the account for the time being, without regard to the discrete items which, as a matter of history, contributed to that balance”[66].

151.  When questioned during cross-examination on what he meant by the above, D3 was, however, not able to explain how the 8 Loan Cheques themselves would evidence the running account or the balance of a “single and undivided debt”. The only explanation D3 gave was “大大約約咋，當時大家感情好” which was neither here nor there and he was not really anwering the question. 

152.  Again, bearing in mind D3 had received book-keeping training, I am unable to understand how the 8 Loan Cheques and/or the cheque stubs could show an approximate balance of the “single and undivided debt”.

153.  D3 had also said that he had used cheques as “receipts” because he was careful with money (“吝嗇” or “勤儉持家”), as cheques were issued free of charge by bank/s.  As submitted by Mr Lo, this did not make any sense since only 8 sheets of paper were involved the most.  There was no suggestion that D3 had to issue a huge number of cheques as receipts to P. In fact, D3 confirmed that he did have access to receipt books at the material time and that each of New Sam Kee, D1 and D2 had its own receipt books for “external” use.  Further, according to D3, receipt books would cost only HK$8-10 for 25/50 sheets. 

154.  As pointed by Mr Lo, if D3 was indeed careful with money, he could have used some scrap paper.

155.  D3’s evidence that he was “勤儉持家” was also contradicted by his own evidence in admitting, under cross-examination, to buying a new Mercedes Benz in about late 1980s, and also buying a 2^nd hand Rolls Royce for HK$500,000 and a 2^nd hand Porsche around SARS time.  In fact, the purchase of these cars took place during the period of the 8 Loan Cheques.

156.  Indeed, in my view, if all D3 was intending to do was to use a cheque as a receipt because as he said the cheque was free of charge, there was also no reason why he, being an experienced businessman, could not simply write on the front/back of the cheque words to the effect that the cheque was only a receipt and not to be presented for payment.  

157.  As mentioned earlier, Ds’ case in relation to the 5^th, 6^th and 7^th Cheques was in fact somewhat different from their case on the others of the 8 Loan Cheques, in that those 3 cheques were conditional gifts, and they could be presented for payment when notified by D3.  However, as D3 himself had confirmed, there was nothing on the face of the 8 Loan Cheques that would distinguish the 1^st, 2^nd 3^rd, 4^th and 8^th Cheques (issued to P as “receipts” and not to be presented to the bank for payment) and the 5^th, 6^th and 7^th Cheques.

158.  In any event, the normal function of a cheque, as submitted by Mr Lo, is to effect payment of money. 

159.  P’s case that the 8 Loan Cheques were issued to her as security for repayment at the time she made the loans can be supported by contemporaneous documents.  In particular for the loan for which the 8^th Cheque was given to her as security, P had produced a copy of her bank passbook extract[67] which indicated that she used HK$350,050 to buy a cashier’s order for HK$350,000 on 23 September 2003 for the purpose of advancing the loan to D1 to ease cash flow.  P had also produced a copy of the cashier order for HK$350,000 made payable to D1 and dated 23 September 2003.  All this took place on the same day as the day when the 8^th Cheque for the same amount was issued by D1 and signed by D3 which P said was given to her by D3. 

160.  D3 had however tried to explain that the HK$350,000 cashier order dated 23 September 2003 (“2003 Cashier Order”) was a part repayment by P of P’s then outstanding liabilities to D1/D3 for which he gave P the 8^th Cheque as receipt.  According to Ds, the 2003 Cashier Order was only one of four part repayments by P.  It was Ds’ case that P had made further part repayments of her alleged outstanding liabilities by 3 more cashier’s orders dated respectively 26 August 2004 for HK$100,000, 30 September 2004 for HK$280,000, and 25 October 2004 for HK$600,000 (collectively “2004 Cashier Orders”)[68].  D3 had confirmed during cross examination that all the 2003 Cashier Order and the 2004 Cashier Orders were of the same nature, namely by these 4 Cashier Orders, P was making part payment towards liabilities to D3/D1.

161.  There were, however, no cheques issued as receipts for the three 2004 Cashier Orders.  D3 was not able to provide a valid explanation for this and merely said he did not issue any cheques as receipts for the other three 2004 Cashier Orders as he was busy and he had forgotten.

162.  Although P had received less education than D3, I have had the opportunity to observe her demeanour and find her generally spontaneous in her evidence, although she was confused on some occasions.  In any event, having weighed up her evidence and D3’s evidence, and having considered the contemporaneous supporting documents, I do not find D3’s evidence that cheques were given to P as receipts for record keeping purpose was inherently probable nor supported by sufficient evidence.  By comparison, I find P’s case more probable namely that the 8 Loan Cheques were simply given to her to hold as security for repayment of the Loans and that she would hold each of the 8 Loan Cheques until D3 notified her that she could present the same to the bank for clearance.

163.  Apart from Ds’ case generally that the cheques were issued as receipts, D3 had also given explanations as to why each of the 8 Loan Cheques were given to P, which I will now consider.

E.3. 1^st Cheque

164.  The 1^st Cheque was undated but it was not disputed that this cheque was given to P by D3 in about 1987.  It bore P’s name as payee.  The amount stated thereon was HK$50,000.  It was a cheque issued by New Sam Kee, and although unsigned, bore a chop of “Sam Kee”/森記, which P said was Father’s chop.

165.  D3’s case was that the 1^st Cheque was a receipt or a record for P’s investment in and liability for her 50,000 shares in Kingstrong[69].  What D3 had said in his witness statement was that P had orally agreed with him that he would cause the transfer of 50,000 shares in Kingstrong to P from an unrelated shareholder Wong Sum Chuen at a consideration of HK$50,000.  Pursuant to this agreement, P paid D3 the said HK$50,000 for the transfer of the shares.  The 1^st Cheque was then handed to P by D3 without D3 or any one else from New Sam Kee signing or dating it and, D3 had said this cheque was only used as a receipt for P’s payment for her 50,000 shares.

166.  During cross-examination, D3 had explained the reason why P wanted to invest in Kingstrong was because she held a favourable view on the potential of that business (“睇好”).

167.  P’s case was that the 1^st Cheque (as with the other Cheques) was simply a loan and that this had nothing to do with her shares in Kingstrong.

168.  As for her shares in Kingstrong, P had said in her witness statement that she had lent D3 HK$30,000 in 1988 for increasing his shareholding in Kingstrong when D3 had a dispute with the then unrelated shareholders.  What P had said was not inconsistent with what the annual returns indicated, and was further borne out by D3’s own evidence during the trial and also the annual returns of Kingstrong.

169.  As set out earlier, the annual returns of Kingstrong did show that D3’s shareholding in Kingstrong was increased on 3 occasions, the 1^st time was on 19 February 1987 when he ended up holding 300,000 shares of HK$1.00 each and P was not a shareholder at that time.  Later by 31 December 1987, D3’s shares were increased to 380,000 and P became a shareholder holding 50,000 shares.  Then by December 1988, D3’s shares were increased substantially to 680,000 shares when all unrelated shareholders had exited and transferred out all their shares to various Family Members in Kingstrong.  D3 had admitted during cross-examination that there was a difference of opinion between him and the other unrelated shareholders and they gradually all left the company.

170.  Further, D3 had admitted that it was his sole decision as to how to allocate the quantity of shares of the unrelated shareholders among Family Members.

171.  P’s evidence was that when she demanded for repayment of HK$30,000 D3 had suggested that the loan amount of HK$30,000 be treated as the purchase price for her Kingstrong shares, although D3 did not tell P at the time how many Kingstrong shares would be allocated to her.  P said she agreed to D3’s suggestion at that time.  P said the loan of HK$30,000 had nothing to do with the HK$50,000 loan which was secured by the 1^st Cheque and that her payment for the 50,000 shares in Kingstrong was only $30,000 and $50,000.

172.  What P said was in fact also consistent with the 2^nd Memo on which it was written that Kingstrong would repay P “HK$30,000” when P, Kong and D3 were trying to reach a settlement of all their disputes.  There was no reason why D3 or Ping who drafted the 2^nd Memo could have made a mistake and put down a wrong amount.  They should have known that 50,000 shares were allotted to P.  The writings on the 2^nd Memo, save for the initials of P and Kong, were admitted by D3 to be of him or Ping.  Ping had not been called to explain why it was stated therein that Kingstrong had to pay P $30,000.

173.  In fact, if as D3 said, the amount of HK$50,000 was payment by P for her 50,000 shares in Kingstrong, and the 1^st Cheque was issued as a “receipt” for the amount paid by P, then Kingstrong should be the one to issue 1^st Cheque as receipt, and there was no reason why New Sam Kee should issue the 1^st Cheque, or why, as admitted by D3, he should affix the chop of 森記 on the 1^st Cheque as a receipt.

174.  P had denied that she wanted to acquire Kingstrong shares was because she viewed the business favourably or “睇好”.  The Dragon Man Food Centre in Kwai Chung commenced business sometime after incorporation of Kingstrong and had thus only been going for a short time at that time, namely about a year, and P did not start working there about 3 or 4 years later in 1991.  D3 asserted that P “睇好” the business during cross-examination but did not provide any other explanation as to why P would wish to invest in 50,000 shares in Kingstrong in 1987.  None of the Family Companies had ever distributed dividends and there was no evidence of any incentive for P that she would of her own express a wish to pay for shares in Kingstrong in 1987. 

175.  In any event, whether P “睇好” Kingstrong or not did not really matter, since on her evidence, she had accepted that her loan of HK$30,000 to D3 would be repaid by shares allocated to her in Kingstrong by D3.

176.  Having considered all the evidence, I find on a balance of  probabilities, that P’s version of events concerning the “payment” of her shares in Kingstrong was the more probable version, namely that she had lent D3 HK$30,000 which subsequently at his suggestion was used for her payment for shares in Kingstrong allocated to her by D3, and in any event, this loan of HK$30,000 had nothing to do with the loan of HK$50,000 to D3 at his request, for which the 1^st Cheque was given for her to hold as security for repayment.

E.4. 2^nd Cheque

177.  The 2^nd Cheque was dated 24 October 1988 drawn in P’s favour by New Sam Kee for a sum of HK$280,000.  Ds denied that there was any loan of HK$280,000 from P to D3 or at his request to one of the Family Companies, and according to D3, this sum was the agreed purchase price for the Hang Tung Property which P had orally agreed to buy from him, and that the 2^nd Cheque was issued to P as a receipt for her payment.

178.  According to D3, in about 1985/1986, he and P had come to an oral agreement and that he agreed to transfer the Hang Tung Property to her at a consideration of HK$280,000 for her to collect rent from Ying who had moved in after he and Kong moved out, but there was no formal transfer procedure, as P did not pay the purchase price then and there.  Notwithstanding there being no transfer procedure, P began to collect the rent from Ying for residing at Hang Tung Property after their oral agreement.  D3 then said by August 1987, as P still had not yet paid him the sum of HK$280,000, she was in breach of her oral undertaking.  When D3 asked her to pay, P orally requested him to sell the Hang Tung Property.  D3 agreed and sold it on 23 September 1987 for a price of HK$333,800.  D3 said he was not in Hong Kong at the time, and had authorized Kong to sign all documentations on his behalf, and that the balance of the sale price of about HK$268,000 was paid to D3.

179.  D3 later returned to Hong Kong in October 1988.  According to him, he then paid P about HK$50,000 in cash, which was what she should receive out of the net sale proceeds of Hang Tung Property and at the same time, he gave her the 2^nd Cheque in the sum of HK$280,000 drawn by New Sam Kee in P’s favour, as a “receipt” or “record” of her having paid for the purchase price of the Hang Tung Property[70].

180.  As mentioned earlier, P’s case was that in about 1985, D3 had wanted to buy D32 Chermain Heights and to obtain Father’s consent to the purchase of D32 Chermain Heights, D3 undertook to Father that the Hang Tung Property would be transferred to P on condition that P would be responsible for the balance of the mortgage repayments[71].

181.  I have earlier found that all the initial funds for the purchase of the Hang Tung Property and also D32 Chermain Heights had come from Father (and Mother) and/or Old Sam Kee and/or New Sam Kee.  I have also said that any mortgage loan repayments for the Hang Tung Property if paid out of funds generated by Old Sam Kee would have been paid by Father (and Mother).  Any mortgage loan repayments for the Hang Tung Property and for D32 Chermain Heights, if later paid by New Sam Kee, then they would have been contributed to by Father, D3 and Kong.

182.  Even on Ds’ case that the Hang Tung Property was purchased from his joint savings with Ping and that they were the real beneficial owners, D3 was not able to provide a credible explanation under cross examination as to why Kong was then named as a joint tenant.  In fact, under cross examination, when D3 was asked, he had replied that he (D3) was good to his family members and that he felt that Kong had provided assistance to him, and that was why he had added Kong’s name, so that Kong could become an owner.  D3 had however said during the trial “寫得佢名就係有實質業権”, namely that as he had added Kong’s name, Kong had beneficial ownership.  D3 had also said that if the Hang Tung Property was to be sold, depending on the then circumstances, he would give a share of the sale proceeds to Kong.  D3’s evidence in the trial was clearly contradictory to what he had said in his 1^st witness statement.  It was clear from D3’s evidence at the trial that he admitted that Kong did have beneficial interest in the Hang Tung Property.  Notwithstanding this, there was no evidence that D3 had involved Kong in the alleged oral agreement to sell the property to P.

183.  It was not disputed that after D3 and Kong and their respective families vacated Hang Tung Property, Ying had moved in and occupied the property and Ying had paid rent which was received by P.  P had said although D3 said that the Hang Tung Property would be her property, she had continued to regard it as belonging to Father or the Family Members.  According to P, she had handed over to D3 the monthly rent from Ying for him to pay the mortgage, which D3 denied.  Whether P did or did not, it was not disputed that the monthly rent was not sufficient to pay for the monthly mortgage loan repayments and that D3 was the one who had arranged for the mortgage loan repayments of the Hang Tung Property to be paid, which P said was on behalf of the Family Members.

184.  Later, according to P, in about 1987, there was a problem about burst pipes at the Hang Tung Property and D3 had proposed to her that the Hang Tung Property be sold, and it was sold.  It can be seen from the solicitors’ bill on completion that the net sale proceeds amounted to HK268,989.46.  According to P, there was also the initial deposit of HK$8,000 and that the total was over HK$270,000, which was to be hers or the Family Members’. However, according to P, D3 claimed he needed money for cash flow, and that he asked P to treat the money as a loan to him and that he would later repay her a round sum of HK$280,000.  When later P asked D3 to pay her, he gave her the 2^nd Cheque in October 1988 as security for repayment. 

185.  Anyway, so far as D3’s case of the alleged “sale” of Hang Tung property to P, it was clear that on his own case, P had never paid him the alleged agreed price of HK$280,000 and yet he had allowed P to receive the rent from Ying while continuing to cover the mortgage loan repayments. Thus, not only did D3 not receive the alleged agreed sale price, but he also was out of pocket for the mortgage loan repayments, since according to him P did not pay him the rent either.  If this was the case, then P would have “breached” the alleged oral agreement shortly thereafter.  I thus find it difficult to understand D3’s evidence during cross examination, when he said he was to “reward” P with a “profit” of HK$50,000 in cash after the sale of the Hang Tung Property, and issued the 2^nd Cheque as a receipt for the HK$280,000 from P, after which they owed each other nothing, ie “一筆勾銷”.  What D3 said meant that he did not even ask P to make up the mortgage loan repayments which he said he had been paying for her, notwithstanding her breach.

186.  Anyway, P denied having received the HK$50,000 cash from D3 arising out of the sale of the Hang Tung Property.  I do not find it probably that D3 would fail to keep any written note or receipt of the HK$50,000 which he allegedly gave to P, and yet on the other hand had issued the 2^nd Cheque as a receipt or record for P’s deemed “payment” of HK$280,000 for the Hang Tung property which she never made.

187.  As pointed out by Mr Lo, there was also no reason why the date of the 2^nd Cheque, if it really was to serve as a “record” or “receipt” of P’s payment of HK$280,000, was 28 October 1988 when according to D3 the alleged oral agreement with P was made in about 1985/1986 and the property was sold to outsider on 23 September 1987.  If the 2^nd Cheque was to be a “receipt” or “record” of P’s HK$280,000 payment, there was no reason why it was issued 2-3 years after the oral agreement and 1 year after the disposal to outsider.  There was also no reason as to why the 2^nd Cheque should be issued by New Sam Kee since it was on D3’s case a personal oral agreement between him and P, not even involving Kong.

188.  Mr Cheung had pointed out that since P had not made any payments towards Hang Tung Property there was no reason as to why D3 would agree to pay her HK$280,000.  However, P’s case was that in order to persuade Father to agree to the purchase of D32 Chermain Heights, D3 himself had offered to transfer Hang Tung Property to P provided that she would continue to pay the mortgage loan repayments.  P had said it was D3 who agreed to pay her HK$280,000 and gave her the 2^nd Cheque as security.  Having considered and weighed up the parties’ respective evidence, I find that P’s version was the more probable one.  I find D’s reason as to why he gave P the 2^nd Cheque to be inherently improbable.

E.5. 3^rd and 4^th Cheques

189.  The 3^rd Cheque was dated 3 August 1999 for HK$200,000 issued by D1 in favour of P.  The 4^th Cheque was dated 25 April 2000 for HK$100,000 issued by D1 in favour of P.

190.  D3’s initial case was that the 3^rd and the 4^th Cheques were “receipts” for acknowledging P’s part-payments of her liabilities then owed to D3 in respect of:

(i) 3 Canadian properties, namely 1180 Sandhurst, 2466 Eglinton, and 121 Lansbury (“Canadian Properties”); and

(ii) Payment for the shares allocated to her in Unitable in about 1990 and in Westrong in about 1995.

191.  P denied the above.

192.  First of all, in relation to the alleged liabilities over the Canadian Properties, D3’s case was that in order to assist P and the other Family Members in applying for emigration to Canada, he had orally agreed to assist them to acquire the Canadian properties. D3 said in his 1^st witness statement that[72]:

(i) In December 1989, he had used a cashier order to pay in full the purchase price of CAD 195,000 for 1180 Sandhurst, and that the amount came from financing arranged by him from a bank and also personal savings of his and Ping’s, and the property was registered in the joint names of Father, Mother, P and Tong;

(ii) For the purchase of 2466 Eglinton, D3’s initial case had been that on 29 November 1993, he paid CAD 3,000 as part of initial deposit, and on 18 January 1994, he paid tax of CAD 1.059.92, search fees of CAD 44, and legal fees of CAD1,086.68 and down payment of CAD57,409.40, and that the balance of the purchase price was paid was by way of a mortgage loan, which was about 70% paid for by D3, and 30% paid by Tong/P by way of remittances to Canada, until the mortgage loan of CAD 63,800 was fully paid[73].

(iii) As for 121 Lansbury, this was purchased for D3’s family’s residence when they first moved to Canada for emigration, and that the purchase money came from him and Ping, and that in May 1994, he and Ping decided to purchase another larger property namely 12 Corleigh, and they then orally agreed to transfer 121 Lansbury to P (20%), Tong (20%), Kong (50%) and Pony (10%) at a nominal consideration of CAD 2.00 to assist them in applying for emigration to Canada, and the condition was that they were only trustees holding the property in trust for D3 and Ping.  D3 said P, Tong, Kong and Pony had all agreed, and that at the time of transfer, they arranged for a mortgage loan for CAD 160,800, and after deduction of disbursement, the net mortgage loan amount obtained was CAD159,300, and this amount was to be held by Pony in Canada in trust for D3 and Ping, so that they could use the sum when necessary, but they had also allowed Pony to use the sum to pay for his living expenses in Canada.

193.  D3’s case as to how the payments were made in relation to the purchase of the Canadian Properties was rather confusing and inconsistent.  In fact D3, had said during the trial that he could not remember exactly as to how each amount was transferred to Canada but he said for any amount transferred from D1 or any other Family Companies, it would be recorded as being a loan to D3 under his director’s loan account, and therefore he regarded that these properties were owned by him. 

194.  It was not quite clear under which of the Family Companies D3’s alleged director loans were recorded.

195.  Although D3 had said in his witness statement that 121 Lansbury was held by P, Tong, Kong and Pony as trustees for him and Ping, his oral evidence contradicted this.  What he had said under cross examination was that “寫咗名，佢哋就係實質擁有人”, namely P, Tong, Kong and Pony were all beneficial owners of 121 Lansbury.  In any event, in the re-amended defence, Ds had deleted their original allegation that P had owed D3 CAD 70,000 or about HK$440,000 over the purchase of 121 Lansbury.

196.  In relation to 1180 Sandhurst, Ds had pleaded in the amended defence of 3 January 2014 that P being 25% owner of 1180 Sandhurst, owed D3 CAD 48,700 or about HK$310,000 towards the purchase price of that property which was all paid by D3[74].  This was later deleted in the re-amended defence. Although D3 was no longer claiming that P owed him HK$310,000, what he had said earlier would show that P held 25% beneficial interest in this property.  In D3’s witness statement, he admitted when he transferred 1180 Sandhurst to his parents, P and Tong, he did not state specifically they were trustees for him, but he said it was definitely not a gift.

197.  In May 2007, D3 had given a statement to the Real Estate Council of Ontario in response to a complaint made by P against a real estate agent Mrs Jane Yuen regarding a power of attorney given by D3 in November 2005 in connection with the Canadian Properties (“Canadian Statement”)[75].  In the Canadian Statement, D3 had stated that he had provided all of the purchase money for 1180 Sandhurst, and that he was the beneficial owner thereof, and that P, Tong and his parents were all trustees holding that property on his behalf.  This meant according to D3, P, Tong and parents did not have any beneficial interest.

198.  P’s case was in fact the CAD 195,000 for the purchase of 1180 Sandhurst was part of CAD 200,000 which Father and Mother had brought with them by way of a cashier order when they moved to Canada.  Mother had also said this during the trial and that the funds came from Father and her.  On the other hand, it was D3’s case that the sum of CAD 200,000 was borrowed from the Wing On Bank by him, and he had later also said that the cashier order which Father took to Canada was made out in D3’s favour, and that it was him who instructed Father to purchase the cashier order out of D3’s personal funds.  It would appear that the cashier order was deposited into D3’s account.  Anyway, D3 claimed that the balance of the purchase price for the 1180 Sandhurst of CAD 187,660.40 was paid by a cheque from his joint account with Ping.  D3 had issued a legal action in Canada in March 2007 against Mother, P, Tong and Pony to seek the return of 1180 Sandhurst[76]. 

199.  Anyway, in light of D3’s case that all the funds for the purchase of 1180 Sandhurst had come from him and Ping, then P would not have owed him any money over the purchase thereof.

200.  In relation to 2466 Eglinton, in the re-amended defence, Ds’ case was that P owed D3 a sum of HK$150,970.15[77].  However, it would appear from D3’s witness statements that all he had paid was the net sum of CAD3,000 after taking into account the amount of CAD 59,600 paid by P which was not challenged by D3, plus 70% of the monthly expenses including mortgage repayment and other expenses.  D3 however accepted that part of the monthly expenses of this property was met by the rent generated, but said the rent was not sufficient to cover the entire amount.  However, if there was rent, then credit should be given to the rental payment in calculating P’s liabilities in relation to 2466 Eglinton.  This D3 seemed to have failed to do.  When cross examined on this, D3 then said the amount of P’s liabilities was a “大約數”.  Also, D3 did not seem to have taken into account the mortgage loan amount in calculating the alleged liabilities.

201.  What D3 said in relation to 2466 Eglinton seemed again inconsistent with what he had said in the Canadian Statement in which he stated that he had paid about 80% of the purchase money and was thus a beneficial owner of 2466 Eglinton.  When questioned during the cross-examination, D3 then tried to say it was the estate agent Mrs Yuen who had prepared the Canadian Statement.  Even if the Canadian Statement was prepared by Mrs Yuen as alleged by D3, the information could only have come from D3.

202.  To summarise, Ds’ final case in relation to P’s alleged liabilities to D3 in relation to the Canadian Properties was confined to only HK$150,970.15 for the purchase of 2466 Eglinton.  As I have said, I find D3’s evidence unsatisfactory and inconsistent with the Canadian Statement, and having regard to the fact that there were rental payments, I do not find D3’s evidence that P owed D3 the sum of HK$150,970.15 reliable.  In my view, there was no sufficient evidence that P owed D3 this sum, or any sums, over the purchase of 2466 Eglinton or any of the other two Canadian Properties.

203.  D3’s case was further that in 1990 P was “interested” to acquire shares in Unitable and agreed to pay HK$80,000 for the 80,000 shares transferred to her.  There was no sufficient evidence that P had agreed to pay HK$80,000 for the 80,000 shares in Unitable in 1990.  In fact the 80,000 shares were transferred to P from one unrelated shareholder Leung Siu Ying on 10 July 1990[78] and it was in 1990 that Mr M’s Restaurant held by Unitable ceased business.  There was no incentive or reason why P would be interested to acquire shares in Unitable in 1990, and even if she did the amount would have to be paid to Leung Siu Ying.

204.  There was also no incentive or reason as to why P would be interested to acquire shares in Westrong in 1995.  Westrong’s return of allotments dated 17 November 1995[79] indicated that the 80,000 shares were allotted to P by the company, and not as D3 had suggested, that they were “transferred” from his name to P’s name. 

205.  Again I see no sufficient evidence that P had wanted to pay for the shares allocated to her in Unitable and Westrong. 

206.  Anyway according to D3, P owed him a total of HK$310,970.15 arising out of 2466 Eglinton, Unitable shares and Westrong shares, and had repaid him HK$200,000 in August 1999 and HK$100,000 in April 2000, and in accordance with the Practice, he had given her the 3^rd and the 4^th Cheques as receipts at the time of her part repayment of her liabilities.  The 3^rd and the 4^th Cheques were issued by D1 and had in fact been signed by D3 on behalf of D1, although he said his signature on the 3^rd Cheque was not a complete signature.  

207.  P had said under cross examination that the total amount of HK$300,000 on the 3^rd and 4^th Cheques was part of the loans totaling HK$380,000 Ping had borrowed from her on behalf of D1 although only 2 cheques for HK$300,000 were given to her as security, and she had said the balance of HK$80,000 was only a minor amount.

208.  I accept that P’s evidence in respect of 3^rd and 4^th Cheques was also rather confusing and not really satisfactory.  However, as I find there was no sufficient evidence that there were liabilities outstanding from P over the Canadian Properties nor over the Unitable/Weststrong shares, the sum of HK$300,000 could not have been repayments.  Thus, compared to D3’s version, I find P’s version was more probable, namely that the 2 sums of HK$100,000 and HK$200,000 simply represented loans made by P to D3 on about the date of each of the cheques, for which the 3^rd and 4^th Cheques were given to her by D3 as security for repayment.

E.6   5^th, 6^th, 7^th Cheques

209.  The 5^th Cheque was dated 2 July 2002 for a sum of HK$20,000 issued by D2 and signed by D3 in favour of P.  The 6^th Cheque was dated 21 August 2002 for a sum of HK$20,000 issued by D2 and signed by D3 in favour of P.  The 7^th Cheque was dated 10 April 2003 for a sum of HK$10,000 issued by D2 and signed by D3 in favour of P.

210.  As I have mentioned earlier, D3’s case on these 3 cheques was different from his case in relation to the other cheques.  D3’s case in his witness statement was that in about 2002-2003, P still owed D3 various sums and that she had told him that she had financial difficulties, and  requested D3 for financial assistance.  D3 agreed to give her 3 cheques, namely the 5^th, 6^th and 7^th Cheques to help her but told her that she could only clear them when notified by D3.  Thus, D3’s case in respect of the 4^th, 5^th and 7^th Cheques was that 3 cheques were not issued as “receipts”, but for P to cash when notified by him.

211.  As pleaded by Ds in their re-amended defence and counterclaim, P, at the material times:-

“…repeatedly and verbally informed Mr Yip King Wah that she was in financial perils, and verbally urged Mr Yip King Wah to pay her monies in order to ease her financial pressure.[80]”

212.  During cross-examination, D3 had tried to explain the reason why he attached a “condition”, namely not to cash the cheque until he told her to was because he all along held a suspicion that P did not really need the money.  According to D3, he held such suspicion even before he issued the 5^th Cheque to her (1^st of the 3 cheques), and he only wrote the cheques simply to “敷衍” P.

213.  I do not find D3’s evidence made any sense.  If P was indeed in such “financial perils”, or that she was in immediate need for money, she would have not have accepted cheques and waited for notification by D3 before cashing them.  She would have asked for immediate relief, such as actual payment in cash.  In fact, the 7^th Cheque was issued some 8 months after the 6^th Cheque which was in turn about 6 weeks after the 5^th Cheque.  Why would P wish to accept the 6^th Cheque if after 6 weeks she had not yet been able to cash the 5^th Cheque, or indeed why would P wish to accept the 7^th Cheque if after 8 months, she had not even been notified by D3 to cash the earlier 2 cheques.   

214.  I reject what D3 had said, and that I find P’s reason as to why she was given the 3 cheques, namely as security for repayment upon loans for those amounts being provided by her, was the more probable version.

E.7   8^th Cheque

215.  The 8^th Cheque was for a sum of HK$350,000 issued by D1 and signed by D3 in favour of P.  It was initially dated 23 September 2003 but P’s case was that the date was later amended to 23 September 2006 by D3 at the Family Meeting.  The 8^th Cheque then became the Amended Cheque.

216.  As mentioned earlier, Ds’ case was that P owed D3 a total amount of about HK$310,970.15 arising out of 2466 Eglinton, Unitable shares and Westrong shares for which P had repaid HK$300,000 by way of 3^rd and 4^th Cheques, leaving a balance of HK$10,970.15 outstanding.  Ds’ case was further P owed D1 an amount of about HK$ 1,337,237 arising out of the purchase of the South Horizon Property[81].  Ds’ case was then P had made repayments by 4 cashier orders, namely by the 2003 Cashier Order and the 2004 Cashier Orders, towards her total liabilities towards D 3 and D1 of HK$1,348,207.15 .

217.  It will be set out later in this judgment that P’s case was that the three 2004 Cashier Orders were her payments for the purchase of the Happy Valley Property.

218.  I have mentioned earlier that P’s case in relation to the loan of HK$350,000 to D3 as shown on the 8^th Cheque was supported by contemporaneous documents including a copy of her bank passbook extract showing her purchase of the 2003 Cashier Order for the same amount to advance to D3 on the same day and for which she said the 8^th Cheque was given to her as security for repayment.

219.  D3 had said he would not have given a cheque from D1’s account for over HK$300,000 as he had given instructions to the bank that any cheque over HK$300,000 would need his confirmation with the bank before clearance.  

220.  However, what D3 had said about the limit he placed on cheque withdrawals only meant that when some one presented a cheque issued by D1 which was over HK$300,000, all for D3 needed to do was to authorize the bank to clear the same. 

221.  In fact, Mr Lo had submitted this only went to show that D3 deliberately gave P a cheque for over HK$300,000 so that she would not be able to cash it without D3 authorising the bank.

222.  Anyway, I reject D3’s case that the 8^th Cheque was “a receipt” issued by D1 for P’s part repayment P towards alleged liabilities to D3/D1, for reason, in particular, that there was no valid explanation from D3 as to why D3 had not issued cheques as receipts for the other three 2004 Cashier Orders for similar part repayments allegedly made by P, and that all D3 could say under cross examination was that he was busy at the time and he forgot.  I have in any event found that there was no sufficient evidence that P had owed D3 any amounts arising out of 2466 Eglinton, Unitable/Westrong shares.

E.8   Conclusion on Ds’ case on the 8 Loan Cheques 

223.  To summarise, I reject Ds’ case on why the 8 Loan Cheques were issued to P, and I accept P’s evidence that the 8 Loan Cheques represented the Loans advanced by P to D3 upon his request during the period from 1987 to 2003 and the 8 Loan Cheques were given to her by D3 as security for repayment.  The total amount of the Loans on the 8 Loan Cheques was HK$1,030,000 and I accept that this was the amount outstanding after the date of the 8^th Cheque, 23 September 2003.

E.9   The outstanding amount of the Loans

224.  P had been asked during cross examination as to whether there had been any repayments from D3 after the 8^th Cheque, her answer was maybe once of several tens of thousands of dollars.

225.  P had produced a notebook purportedly in support of her payments in relation to the Happy Valley Property.  The notebook contained P’s handwritten notes including amounts of monthly rental from Happy Valley Property, monthly mortgage payments for Happy Valley Property, deductions from P’s monthly salaries for payment of monthly mortgage between 18 November 2004 and May 2006 and also notes on the payments regarding her purchase of the Happy Valley Property and records of various loans (“Notebook”)[82]. 

226.  According to P, the Notebook contained notes made by her from information supplied to her by the former accounts manager of Hung Fook Restaurant, Ms Tam, who was also in charge of the accounts at the Sushi Restaurant, and the notes therein were made after the purchase of the Happy Valley Property.  In fact, from what P had said in her witness statement[83] and also during the trial, the notes made in the Notebook could only made after May 2006, since that was the last record of the monthly mortgage payments.  Thus, the notes were clearly not contemporaneous records made at the time of the purchase of the Happy Valley Property, which was in November 2004.

227.  P was cross examined at length on the contents of the Notebook.  During cross examination on her records of various loans in the Notebook, on one occasion P had become emotional.  P’s answers were also rather confusing as to the notes of the loans between her and D3/New Sam Kee/D1/D2.  She had written in the Notebook an amount of HK$380,000 which Ping asked P to lend to D1 and under cross examination, she had said that the loans were made in 1999 and had included the amounts of HK$300,000 on the 3^rd and the 4^th Cheques.   Yet she had also said she was not able to recall whether her notes in the Notebook had included the amounts on the 8 Loan Cheques. 

228.  There was also a note in the Notebook of a repayment of HK$810,000 from D1 for P to purchase the Happy Valley Property, namely “森記還款$810,000給我買鋪”. 

229.  Mr Cheung had asked P to confirm during cross examination that the amount of the Loans outstanding from Ds, after taking into account her handwritten record of repayment of HK$810,000 from D1 was only HK$220,000, plus salaries which P claimed were owing to her.  P had agreed to this.  

230.  However during re-examination, P then clarified that the figure of HK$810,000 in the Notebook had come from D3 and there was no verification on her part.  Her evidence showed that she was not able to tell whether D1 did repay HK$810,000 or not.  I accept what she said since D3 was the person in charge of arranging all the payments for the purchase of the Happy Valley Property.

231.  I have earlier accepted P’s case on the 8 Loan Cheques and I find, after deducting what she said was repayment of several tens of thousands of dollars, the amount of about HK$1m should still be outstanding form D3 prior to the purchase of the Happy Valley Property.  

232.  As I have mentioned earlier, P’s Debt Claim for a sum of HK$350,000 was based on the Oral Acknowledgment by D3, that he had allegedly agreed and acknowledged during the Family Meeting that the then outstanding of the Loans after purchase of the Happy Valley Property was HK$350,000. 

233.  According to the Land Registry Record[84], the Happy Valley Property was assigned to D2 on 8 November 2004 at a consideration of HK$3,400,000. 

234.  There was a provisional agreement for sale and purchase signed by the vendor and Bonnie personally on 5 August 2004 under which an initial deposit of HK$80,000 was paid[85].  However, the provisional agreement was not registered, and thus any search of the Land Registry would not have revealed that it was Bonnie who had signed the provisional agreement.

235.  On 19 August 2004, Bonnie, as nominator, nominated Asia Creative to take up and to execute the formal agreement for sale and purchase and the assignment[86].  Subsequently Asia Creative executed a further nomination on 19 October 2004 nominating D2, as nominee, to take up the assignment[87].  A legal charge/mortgage to secure general banking facilities was executed on completion in favour of Bank of East Asia for all moneys. According to a letter of instruction from the bank to the solicitors to prepare for the legal charge and a guarantee, the mortgage loan amount was HK$2.2m, and that all the then directors, namely D3, Father, Ping, P, Kong and Tong had signed as joint and several guarantors.[88]

236.  In her statement of claim, P had pleaded that under the Acquisition Proposal, it was expressly agreed and/or implicitly understood between P and D3 that[89] :

(i) the total purchase price of the Happy Valley Property which  D3 had told her was in fact HK$3,800,000, namely the stated consideration on the assignment HK$3,400,000 + an additional HK$400,000 “under the table” money, and D3 had agreed for P to acquire the Happy Valley Property at a total consideration of HK$3,800,000 (“Consideration”);

(ii) D3 would arrange for a mortgage loan of HK$2,200,000 from Bank of East Asia (“Mortgage”);

(iii) P would pay D3 HK$980,000 to cover the initial deposit of HK$100,000, further deposit of HK$280,000 and the partial balance of the Consideration less the Mortgage;

(iv) D3 would on behalf of himself, D1 and/or D2 to pay or arrange for the payment of the outstanding balance at completion (HK$620,000), plus transaction costs of about HK$100,000 by setting off part of the outstanding Loans.

237.  In her witness statement, P had set out her calculations as to how the amount of HK$350,000 was arrived at[90].

238.  It would seem from those calculations set out in her witness statement the balance of the Consideration paid by D3 would be about HK$680,000 which was to be set off against the then outstanding amount of the Loans due from D3 to her of HK$1,030,000, leaving a sum of HK$350,000 being due from D3.

239.  D3 had denied there was any Acquisition Proposal and he had pointed out that the rental deposit for the Happy Valley Property was in fact HK$63,470[91], and not HK$30,000, and thus, even on P’s case, the amount outstanding from D3 should be some HK$380,000 and not HK$350,000.

240.  I accept the evidence showed that at that time the rental deposit was HK$43,470[92], and there was also a restaurant licence deposit payable by the tenant of HK$20,000[93].  Thus, the figure for the deposits payable by the vendor to the purchaser should indeed be HK$63,470, as stated by D3.

241.  D3 also denied that there had been any “under table” money of HK$400,000.  P had maintained that it was only when her lawyers conducted the company search of Asia Creative that she found out D3 and Bonnie were in facts the shareholders of this company and that she then realized that the “under table” money was “cheated” out of her, implying that D3 had made her pay more and that D3/Bonnie/Asia Creative had received the sum of HK$400,000[94].

242.  D3 had said if P were correct, then he could have sold P the property at even higher price, and as P had trusted him then, he could have “cheated” more money from P[95].

243.  Although D3 had said that P knew that it was him and Bonnie who saw the Happy Valley Property first, there was no sufficient evidence to show that D3 or indeed any one had disclosed to P that Bonnie had already signed the provisional agreement.  All the Land Registry record showed was that it was Asia Creative which signed the formal Agreement for Sale and Purchase on 19 August 2004[96].  There was no sufficient evidence that P was aware at the time of her signing the guarantee for the Mortgage that Asia Creative was a company owned by D3 and Bonnie.

244.  Although P’s evidence was confusing over the calculation of the outstanding amount of the Loans, and she had broken down emotionally on a number of occasions, as I have said, she did not appear to be a worldly or sophisticated person and her answers were spontaneous.  Given P’s education level, and weighing up her evidence and D3’s evidence, I do not think P could have made up such a story out of the blue, about D3 telling her that an “under-table” money of HK$400,000 had to be paid.  There was also no reason put forward by Ds as to why P would want to make up this story.  In fact, based on P’s case that there was to be a set off, the alleged “under-table” money would only reduce the outstanding amount of the Loans, which would be in D3’s favour.

245.  Having considered the evidence, I accept, on a balance of probabilities that D3 had indeed told P that there was a payment of “under-table” money of HK$400,000.  I also accept P’s evidence that it was only after her lawyers had conducted investigations and searches that she found out that Asia Creative was owned by P and D3.  However, having said this, apart from P saying she had paid HK$980,000, the balance of all initial payments for the purchase of the Happy Valley Property was handled and arranged by D3.  I find there was no sufficient evidence that the amount of HK$400,000 “under-table” money was actually received by D3/Bonnie/Asia Creative, or indeed paid by D2, notwithstanding D3 having told P of the amount being payable.  D2’s financial statements for the year ended 31 March 2005 only showed a total purchase costs of HK$3,490,620, which appeared to be the price of HK$3.4m plus transaction costs. 

246.  P had said in her witness statement that at the Family Meeting, it was D3 who had informed her that the outstanding amount of the Loans, after setting off what he had paid towards the Happy Valley Property was around HK$350,000, and after the Oral Acknowledgment, D3 took the 8^th Cheque, made amendments to the year from “2003” to “2006” and told her that she could deposit the Amended Cheque later for repayment of HK$350,000.

247.  D3 was silent as to what happened at the Family Meeting in his 1^st witness statement filed on 15 October 2013.  D3 only responded by saying what P said was nonsense or “一派胡言” in his 2^nd/supplemental witness statement.  D3 had further said that in relation to the Amended Cheque there was a lack of his initials next to the amended date, and as mentioned earlier, that there was a HK$300,000 limit in D1’s bank account for cheque withdrawals.  What he was saying was that he would not have amended the date on the 8^th Cheque without initialling, nor would he have given P the Amended Cheque which was over D1’s cheque withdrawal limit. 

248.  I have mentioned already that D3’s evidence showed that even if the cheque amount was over HK$300,000, all D3 needed to do was to authorize the bank to clear it had he wanted to.  There was also no sufficient evidence that the bank would not have accepted the amendment in the year without D3’s initials had D3 been prepared to authorise clearance.  It was not clear whether the bank telephoned D3 because of the cheque amount being over the limit or the amendment in the year, but in any event, the bank did alert D3 when the Amended Cheque was presented, and D3 did not authorise the clearance of the Amended Cheque. 

249.  D3 denied that it was he who had amended the date on the 8^th Cheque and his case was that any amendment thereon was made without his/D1’s consent.  Further, when the bank notified him, he had immediately made a report to the police. 

250.  The complaint made by D3 to the police was essentially that someone had stolen a cheque of D1’s.  On 10 February 2007, when P went to the bank to retrieve the Amended Cheque, she was arrested.  After being cautioned, P had immediately told the police that the Amended Cheque was given to her by her brother D3 for repayment of money and she did not steal it.  She later gave a statement to the police under caution on that day (“10.02.07 Police Statement”)[97] and had informed the police that the HK$350,000 was lent by her to D1 upon D3’s request at the time of SARS to meet D1’s cash flow problems and in turn D3 had given her the 8^th Cheque for repayment.  She further told police that thereafter she had on many occasions requested D3 for repayment of the loan.  She also told the police that at a family meeting in August 2006, she had produced the 8^th Cheque, and was told by D3 to credit the cheque after a few months, but on 4 February 2007, D3 had a dispute with one of her brothers, and thereafter P told Joyce to credit the cheque.  What P said in her 10.02.07 Police Statement was consistent with her present case.

251.  It seemed P was not asked about the matter of the amendment of the year when she was giving the 10.02.07 Police Statement.

252.  It was only about 3 months later that P was asked by the police about the amendment of the year on the 8^th Cheque, and under caution she gave another statement on 13 May 2007 to the police (“13.05.07 Police Statement”)[98].  P said she did not amend the year on the 8^th Cheque, and she had said all along the 8^th Cheque was in her possession and that she only showed D3 the 8^th Cheque during the Family Meeting, and that D3 had written something on the cheque and that he told her after a few months he would notify her to credit the cheque.  She had also mentioned that she had in her possession many cheques, and if she had wanted to make amendments, she could amend more than one cheque.  She had also said to the police words to the effect that she was planning to take civil action and “點會搞咁多嘢”, meaning why would she bother to create so much trouble.

253.  Joyce had also given a statement to the police on the same day and said she did not notice that there had been an amendment in the year on the cheque when she deposited it on behalf of P.

254.  Eventually, the police did not take any action on the Amended Cheque against any person.

255.  Thereafter, on about 23 May 2007, D3 had made a further report to the police in relation to someone using a false document.  This time, the complaint was about a provisional agreement for sale and purchase of the Happy Valley Property dated 1 September 2006 signed by P purportedly on a behalf of D2 with a “forged” chop of D2 as vendor, and purported to sell the property to Colourmax at a consideration of HK$3.4m. Pony signed the agreement on behalf of Colourmax.  I will come back to this complaint later in connection with the Property Claim.  Suffice to say at this stage, P, Pony, Joyce and Tong had each given a statement to the police on 13 July 2007 (“13.07.07 Police Statement”) during investigation by the police over D3’s complaint. 

256.  P had in her 13.07.07 Police Statement mentioned that she had made Loans of over HK$1m to D3 from about 1980 to 2004, and in 2004, D3 had persuaded her to buy a shop in Happy Valley for rental income, and that all matters in relation to the purchase were handled by D3, but she needed to pay him about HK$980,000 plus setting off part of the Loans.  P had also referred to the Family Meeting during which she said D3 had promised to transfer the Happy Valley Property back to P, and that he had asked her to go and deal with all the transfer procedures.

257.  Tong had also in his 13.07.07 Police Statement mentioned about the Family Meeting.  He said he was present at the meeting together with all the other directors of D2, and Tong had said they were discussing about transferring the Happy Valley Property back to P, together with paying P all outstanding salaries and the Loans made by her.

258.  It was clear from Tong’s 13.07.07 Police Statement that the matter of the outstanding Loans and salaries was also raised and discussed during the Family Meeting.

259.  In Tong’s witness statement, he had also said after Father’s death, P had all along requested D3 for the return of the Happy Valley Property and the repayment of the Loans.  Tong had worked in various restaurants run by the Family Companies since 1984 including Dragon Man Food Centre in Kwai Chung which was run by Kingstrong until December 2006.  He was then asked by D3 to leave the Family Companies, as he had taken P’s side and assisted P in the matter of the Happy Valley Property.

260.  However, like D3, Kong did not in his 1^st witness statement mention the Family Meeting at all and in his supplemental witness statement he had said he could not recall where he was during the evening of the Family Meeting.  During the trial, where cross examined, Kong was however quite categorical that he was not present at the Family Meeting.

261.  D3 had produced a copy of his entire diary for the year 2006 (“Diary”)[99] in support what he said took place at the Family Meeting. 

262.  P had challenged the authentically of the Diary. D3 had produced the Diary for the entire year 2006 and having considered the same, I am prepared to give D3 the benefit of the doubt that the notes in the Diary were contemporaneous, in that they were written by him on about the date under which the note appeared.  Under the date of 10 August 2006, D3 had written that he had to sever all relationship with Pony, and D3 said in his witness statement those notes were written on 9 August 2006 to remind himself what he needed to do on 10 August 2006.  Then he said the notes written on 11 August 2006 were notes written by him after the Family Meeting on the 10 August 2006, to remind him what he needed to do.  Those notes which were relevant and which one could make out appeared to be “(1) 問 May鍾 -- (a) 轉娟鋪手續 (b) 轉海怡手續 (c) 和買海怡手續 (d) 和清加拿大強的户口 (e) 長命契其中的一人轉名生前”.  May Chung was a solicitor at C&K.  D3 had said in his witness statement that he was going to ask his solicitor what procedure would be more convenient for the transfer by P of her interest in the South Horizon Property.

263.  There were in fact further notes in the Diary on 16 August 2006 and 19 August 2006, which were not quite legible.  Those on 16 August 2006 appeared to include words such as “(a) 80万定期 (b) 轉名娟鋪 (c) 海怡半層樓 (d) 簽協議書所有股票不能追 (d) 所有關係斷絕，各有各世界”[100].  There was a note about enquiring about P’s tax and also that D3 had bought Sam Kee insurance for Pony then those notes on 19 August 2006 appeared to be “問娟﹕娟答案 -- (i) 追強仔80万 + 海怡清數 + 娟鋪轉名 (一齊做)”[101].

264.  Thus, according to D3, the notes in the Diary showed that there was no agreement to unconditionally transfer the Happy Valley Property to P during the Family Meeting.  Further, according to D3’s evidence at trial, on the day of the Family Meeting, ie 10 August 2006, he had gone to speak to Mother about Pony and to seek return of a sum of HK$800,000 from Pony which D3 said Pony had wrongfully removed from Pony’s joint account with Father.  D3 denied that it was he who called for the Family Meeting.  When cross examined as to why he did not mention anything about the Family Meeting in his 1^st witness statement, D3 had however replied that there was no Family Meeting.

265.  Whatever D3 said, even on his own evidence, he did go to the Family Home and met with Mother.  P and Tong were present.  Further D3 had said, on about 7 August 2006, Joyce had made threats to him on the telephone, and had made further threats to Kong and his wife Ling on 8 August 2006 demanding that the Happy Valley Property be transferred to P.  In fact, D3 had made a report to the police on 17 August 2006 in relation to threats from Joyce.  

266.  In light of all that was happening at the time, I find it more probable than not D3 had gone to the Family Home on 10 August 2006 for the purpose of the Family Meeting to discuss various matters.  There was no dispute that D3, Ping, and Tong were present, as well as P and Mother.

267.  Although there were no notes in the Diary that I could see in relation to the Loans from P, it was clear that there were a number of other matters discussed in the Family Meeting, other than the Happy Valley Property and the South Horizon Property.

268.  What P had said in the 10.02.07 Police Statement and 13.05.07 Police Statement was consistent with her case that the matter of the outstanding amount the Loans was raised during the Family Meeting.  Tong’s 13.07.07 Police Statement also supported this, and it can be seen therein that not only the Loans, but also the matter of the outstanding salaries to P was raised at the Family Meeting.

269.  Again Ping was not called to testify on behalf of Ds as to what took place at the Family Meeting.

270.  Both Mother’s and Tong’s evidence indicated that at the Family Meeting, D3 had promised to repay P the outstanding amount of the Loans.  I accept their evidence and P’s, that the matter of the outstanding amount of the Loans was indeed raised at the Family Meeting and that there was still an outstanding amount of the Loans due from D3 (whether on behalf of D1/D2/D3) to P, after payment for purchase of the Happy Valley Property.

271.  Having said this, however, neither of P’s witnesses, Mother or Tong, had said anything about D3 acknowledging and agreeing the outstanding amount of the Loans to be $350,000. Neither of them had seen D3 amending the year on the 8^th Cheque, nor did they mention anything about the Oral Acknowledgment.  Having considered this, I do not find there was sufficient evidence that it was D3 who amended the year on the 8^th Cheque from 2003 to 2006.  In fact, I find there was no sufficient evidence for me to make a finding as to who had amended the year.     

272.  As for the outstanding amount of the Loans, P’s own evidence had indicated different amounts.  P had mentioned in her witness statement that one evening when she and D3 were having dinner at Hung Fook Restaurant, D3 had wanted to do the accounting with her, in relation to what was paid towards the balance of the initial payments for the purchase of the Happy Valley Property and the amount of the Loans still outstanding, and that D3 had mentioned rounding up the outstanding amount of Loans and all outstanding wages to HK$700,000[102], and D3 had wanted P to hand back to him all the cheques in her possession.  P then had told D3 that she would only hand over to him the cheques in her possession after seeing her name on the title deeds of the Happy Valley Property.  

273.  Then, P had recorded various amounts in the Notebook, and as earlier mentioned, P’s evidence was confusing on the amounts in the Notebook. 

274.  I have said that I accept that there was still an outstanding amount of the Loans due to P after setting off the amounts paid towards the balance of the purchase price of the Happy Valley Property.  However, the amount outstanding was not exactly clear and did not appear to be HK$350,000, and seen later was only about HK$310,620.  P’s case was based only on the Oral Acknowledgment.  The burden was on P to prove that there was the Oral Acknowledgment that D3 had agreed and acknowledged the outstanding amount was HK$350,000.  Having considered all the evidence, I am not satisfied that P had discharged the burden.  I do not find that there was sufficient evidence that there was the Oral Acknowledgment or D3 had agreed or acknowledged during the Family Meeting that the outstanding amount of the Loans was HK$350,000, after set off.

275.  In the circumstances, P’s Debt Claim would fail.  

F.  The Property Claim

F.1    Generally

276.  Mr Lo had clarified at the trial that P would not be relying on resulting trust, and only on express trust and alternatively on constructive trust for her Property Claim.

277.  In relation to constructive trust, Mr Lo submitted that the focus would be to ascertain the intention of the parties, and not just on direct financial contributions towards the purchase.  He had referred the court to what was said by Baroness Hale in Stack v Dowden [2007] 2 AC 432 :

“There is no need for me to rehearse all the developments in the case law since Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing [1971] AC 886. … The law has indeed moved on in response to changing social and economic conditions. The search is to ascertain the parties’ shared intentions, actual, inferred or impute, with respect to the property in the light of their whole course of conduct in relation to it[103].”

278.  It was held in Stack v Dowden, by a majority :

“that where a domestic property was conveyed into the joint names of cohabitants without any declaration of trust there was a prima facie case that both the legal and beneficial interests in the property were joint and equal; that the onus of proof lay upon any party seeking to establish that equity should not follow the law; that such a part had to prove that the parties had held a common intention that their beneficial interests be different from their legal interest, and in what way; that in order to discern the parties’ common intention the court should look at the parties’ whole course of conduct in relation to the property; that the law had moved on from the presumption of a resulting trust and many more factors other than the parties respective financial contributions might be relevant to divining their true intentions; and that when all relevant factors had been taken into account, cases in which the joint legal owners were to be taken to have intended that their beneficial interest should be different from their legal interest would be very unusual.[104]”

279.  Lam J, as he then was, in Chan Chui Mee and Mak Chi Choi [2009] 1 HKLRD 343, HCMP 1904/2005, 19/09/05 had also held, among other things, that:

“The determination of beneficial ownership under a common intention constructive trust involved a two-stage test. First, the key was to establish the parties’ true common intention that the claimant should have a beneficial interest. Second, it was necessary to ascertain the extent of the parties’ respective interests in the property, by adopting a holistic approach to quantification, surveying the whole course of dealing and conduct which threw light on what shares the parties must have intended. The court could not impose its own view of what it considered fair…[105]”

280.  Cheung JA had further set out the development of the law since the Pettitt v Pettitt and Gissing v Gissing cases in Mo Ying v Brillex Development Ltd & Anor [2015] 3 HKC 104.

281.  The above cases were in relation to beneficial ownership of a family home, but there was no real dispute that the general principles in those cases would apply to other situations where the court is asked to consider a constructive trust.  Each case will turn on its own facts.  Financial contributions are relevant but there are many other factors which the court will consider in deducing the common intention of the parties contending the beneficial ownership.

282.  During closing submissions, Mr Cheung had raised an issue over whether D2 could be a trustee being a corporate entity.  He had referred to the case of Good Profit Development Ltd (3^rd defendant) and Leung Hoi (plaintiff) [1993] 2 HKLR176.  In that case, Good Profit was a limited company and its only substantial asset was the subject property and the 1^st and 2^nd defendants were its only shareholders and directors.  The claim was made by the plaintiff against the 1^st and 2^nd defendants who had entered into an oral agreement to sell the subject property by transferring their shares in Good Profit.  It was common ground that Good Profit was not a party to the oral agreement nor was it alleged that the 1^st and 2^nd defendants had acted as agents of the company.  It was alleged by the plaintiff that Good Profit was either a bare trustee holding the property on trust of the 1^st and 2^nd defendants or was their “alter ego” and that the corporate veil of the company should be lifted.  The plaintiff had sought a declaration that the property was so held by the company.  The company then issued a summons to intended strike out the plaintiff’s claim, which was dismissed by a Master.  On appeal, Woo J, as he then was, held that a company did not hold property as an agent or trustee for its members and a foriori, it did not hold property as agent or trustee for its directors[106].

283.  Mr Cheung also relied on Luo Xing Juan and Estate of Hui Shui See (2009) 12 HKCFAR 1.  It was held therein, among other things, that the fact A and B might form a common intention that they should have shared beneficial interests in C’s property was not sufficient to impose a constructive trust on C to hold C’s Property in trust for A and B, irrespective of any liability between A and B[107].

284.  However, the facts of this case are different.  P’s case was that the beneficial ownership in the Happy Valley Property was hers right from beginning, namely from the date of purchase, and that the common intention between her and D2 (through its directors) was that she was the sole beneficial owner, and P relied on the Letter of Ownership in which D2 had declared itself (through its directors) that D2 was the holder of the Happy Valley Property for P’s sole and absolute benefit[108] and that D2 was only managing the property on behalf of P[109].

285.  It was not Ds’ pleaded case that D2 did not have the capacity to hold the Happy Valley Property on trust for P nor was this in the Agreed List of Issues[110].  In fact, Ds did not take any issue with the Letter of Ownership itself at all.  They only contended the Letter of Ownership was subject to the Happy Valley Agreement which was made orally between P and D3/Family Members before the Letter of Ownership was signed and further alternatively that D2 had paid the initial payments and any shortfall in the Mortgage repayments and that there should be an apportionment of interest. 

286.  In the above circumstances, I do not see how the Good Profit case or the Luo Xing Juan case would assist Ds’ case.

287.  According to D3’s witness statement[111], P wanted the Happy Valley Property after she learnt about it and that prior to the signing of the Letter of Ownership, Family Members orally agreed that D3 could arrange for the Happy Valley Property be transferred to P, but P had to transfer her one half interest in the South Horizon Property to D2, and D3 had listed 8 terms which he alleged were the terms of the Happy Valley Agreement reached between P and Family Members, as follows :-

(i) P had to immediately transfer the South Horizon Property;

(ii) D2 would pay for the 30% down payment for the Happy Valley Property and other purchase costs and expenses, and would complete the transaction, and further all knew that the property was not purchased with vacant possession and there was a tenancy, or rental HK$16,500 per month;

(iii) The South Horizon Property had to be first transferred to D2 or other Family Companies before the Happy Valley Property would be transferred to P;

(iv) Unless the South Horizon Property had been transferred, otherwise D2 was still the beneficial owner of Happy Valley Property;

(v) Before the transfer of the South Horizon Property, the South Horizon Agreement would continue to take effect;

(vi) After the transfer of the South Horizon Property, the South Horizon Agreement would be cancelled and the transferee would continue to be responsible for the Mortgage repayments thereafter;

(vii) Before the Happy Valley Property was transferred to P, the monthly rental would be used for the monthly Mortgage repayments, and the shortfall was to be paid from P’s director’s fees from D2;

(viii) After the Happy Valley Property had been transferred to P, she could collect the rental, but she was to be responsible for the mortgage loan repayments.

288.  It was thus Ds’ pleaded case that the transfer by P of her half interest in the South Horizon Property in (iii) above was a condition precedent to the transfer of the Happy Valley Property to P, and that Ds’ case was that the Happy Valley Agreement was evidenced by, among other things, both the 1^st Memo and the 2^nd Memo, and in particular, the 1^st Memo was pleaded to be a “confirmatory Chinese memorandum”[112].

289.  The 1^st Memo was signed on 2 July 2006 in a restaurant called西湖春天酒家 in Shenzhen (“Shenzhen Restaurant”) where P and Mother were having dinner with D3, Ping and Kong and the transfer of the Happy Valley Property to P was raised which led to the signing of the 1^st Memo.  The contracting parties in the 1^st Memo were stated to be D3, Kong and P.  The witnesses to their signatures were Mother and Ping. The 1^st Memo stated that:

“ 本人葉景華、葉景江現保証把店鋪安排到最好給葉鳳娟，而葉鳳娟亦同意把海怡半島 (地址：xxxxx) 之權益無條件歸還及轉名葉家名下之公司。口講無憑特立此據。”

290.  The 2^nd Memo was signed after the Family Meeting at the Family Home.  There were 12 items listed therein, and they were[113]: (1) 森記 (2) 建強 (3) 神祕人 (4) 酒牌(九龍) (5) 做布牌 (6) 加拿大保險箱 TD Bank (7) 1180排屋成交(取消律師信) (8) 121授權書 20% (9) 海怡半島50% 轉葉家名下公司 (10) 另税局如追葉家税 (因娟鋪引起，娟負責，簽協議書) 另340万→ 540万賺200万x 17.5% 交35万 (娟要比葉家) (11) 亞琼的正常律師 上海商業做按揭 (12) 建強比回娟30,000元.

291.  Against each item were the initials of D3, P and Kong.  There were two dates 30/9/06 and 29/9/06 under which there was another initial of P and the words “total 5 items”.  Against Items (1), (2) and (3), there were words written, namely “董事和股份全退”.  There were also 3 other comments written in by D3, as admitted by him which were after the initials of D3, P and Kong.  D3 had admitted that, save for initials of P and Kong, some of the hand written words were written by him and some by Ping, but none of the words in the 2^nd Memo were written by P. 

292.  As earlier mentioned, D2’s solicitors C&K had sent the 31.10.07 Letter in reply to P’s solicitors’ letter before action in relation to the Property Claim.  In this letter, C&K acting for D2 had attached a copy of the 2^nd Memo and set out some of the terms of the 2^nd Memo stating that the 2^nd Memo evidenced an agreement that the Happy Valley Property was to be transferred to P upon P, inter alia :-

(a) surrendering all her shares in D1, D2 and Kingstrong to D3;

(b) transferring the Mongkok Market Licence;

(c) returning to D2 all jewelleries in P’s safe deposit box in Canada;

(d) removing incumbrances made by P to the sale of 1180 Sandhurst;

(e) providing her power of attorney to receive the money withheld by the Canadian Government after sale of 121 Lansbury;

(f) transferring her ½ share in the South Horizon Property to Family Companies.  

293.  The above terms seemed to be much wider than the alleged Happy Valley Agreement.

294.  As Ds’ case in relation to the Happy Valley Agreement was predicated upon the transfer by P of her 50% interest/title in the South Horizon Property and the existence of the South Horizon Agreement, I will first of all consider the circumstances regarding the purchase of the South Horizon Property and the beneficial ownership of the South Horizon Property.

F.2    Purchase of the South Horizon Property

295.  P’s case was that although the South Horizon Property was purchased in the joint names of her and Pony, she was only a nominee for Pony who held 100% beneficial ownership.  According to her, in 2000, Pony had asked her assist him in applying for a Home Purchase Loan from the Government (“HP Loan”) to purchase the South Horizon Property, and that all other payments were paid by Pony.  Further, after she was forced to sign the 1^st Memo, she was worried that what she had signed would affect Pony, and that was why she later transferred her 50% title in the South Horizon Property to Pony on 15 August 2006 for which she received no consideration.

296.  It was not disputed that the South Horizon Property was purchased in December 2000 at HK$2,740,000 in the names of P and Pony as joint tenants with a HP Loan of HK$500,000 plus a mortgage loan from Bank of East Asia for HK$1,680,000.  According to Ds, the initial payments paid by D1 were about HK$352,235 and the monthly loan repayments paid by D1 were HK$25,337 per month.

297.  D3’s evidence was that in 1998, P had implied to Father that she would like more assets from the family and when D3 heard of this, he arranged for the South Horizon Property to be purchased in the joint names by P and Pony, and that it was the intention of D3 and the other Family Members that P and Pony would jointly own the South Horizon Property.[114]

298.  It was Ds’ pleaded case that at the time of the purchase of the South Horizon Property, it was intended by D1 and all the Family Members that D1 would assist P and Pony to acquire the South Horizon Property by D1 paying the initial payments as a loan to P and Pony, with P being responsible for the subsequent mortgage loan repayments[115].

299.  Ds’ case was further that the purchase was subject to the  South Horizon Agreement which was concluded orally between D3 acting for and on behalf of D1 and D2 on one hand and P on the other.

300.  Ds’ pleaded case of the terms of the South Horizon Agreement were[116]:

(i) As from January 2001 onwards, D1 would make the mortgage repayments for the South Horizon Property in the sum of HK$25,337 on behalf of P and Pony as directors’ loans from D1 to P unless D1 informed P otherwise;

(ii) D2 might also, in its discretion, issue cheques in the sum of HK$9,500 each to P as director’s emoluments, and when D2 had issued such a cheque and P had not drawn on such a cheque in a particular month, D1 would take that P had repaid HK$9,500 for the South Horizon Property mortgage repayment for that month, and P would waive her entitlement to draw on the said cheque. 

(emphasis added)

301.  As mentioned earlier in this judgment, and according to D3, as P had not cashed the 19 Remuneration Cheques from D2, under the South Horizon Agreement, she had therefore only repaid HK$180,500 towards the mortgage loan repayments of South Horizon Property paid on her behalf by D1.

302.  I must say I find Ds’ case in relation to the South Horizon Agreement did not really make sense.  First of all, the alleged oral agreement did not seem to have made any provision for the repayment of the loan which Ds alleged were made by D1 to P and Pony for the initial payments.  Then for the monthly mortgage repayments, on one hand, Ds were saying it was D1 which agreed to pay for the same as director’s loans to P and on the other hand, it was D2 which was paying P in its discretion cheques for her director’s emoluments, and that if P did not cash the cheques from D2, D1 would deem that P had repaid from those cheques not cashed by her[117].  

303.  One would have thought that if P did not cash the cheques from D2, the monies would still remain with D2.  I do not understand how such monies could then be deemed to be repayments to D1 by P.  Further, by stating that D2 “… might in its discretion issue cheques…” seemed that P’s repayment would be in D2’s discretion.

304.  Ds had pleaded that D1 made a total of 46 monthly mortgage repayments totaling HK$1,165,502 on behalf of P from January 2001 to October 2004, and that during the 46 month period, there were 36 cheques issued by D2 to P[118].  It would thus appear from Ds’ case that a total of only 36 cheques were issued during the 46 month period.  The 1^st of those 36 cheques issued in D2’s discretion was only in August 2001 and that the last/36^th of those cheques was dated July 2004.  Even if there had indeed been the South Horizon Agreement, it was not clear how P was to repay in those 10 months or in the months if D2 decided, in its discretion, not to issue any cheques to P.

305.  There was also no valid explanation from D3 as to why Pony was not a party to the South Horizon Agreement, and why the burden of the repayment of the mortgage loan would fall solely on P and not on Pony if it was indeed the intention of the Family Members that they should own the South Horizon Property jointly.  When D3 was cross examined on this, he then said D1 could lend money to P as loans to director, and Pony was not a director of D1, and further D3 believed that P would look after Pony and P herself had said she would be bear the responsibility to pay for the mortgage loan repayments.  P denied this, and in any event, it did not seem to make sense that P would want to bear sole responsibility for the repayment of the mortgage loan.   

306.  Anyway, it was Ds’ case that D1 had paid 46 monthly mortgage repayments from January 2001 to October 2004 – totaling HK$1,165,502 as director’s loans to P.  As Mr Lo had pointed out, thus by June 2005, the total amount should have been HK$1,368,198 for 54 months, and since according to Ds, P had only repaid HK$180,500, this would mean that in June 2005, there should still be some HK$1,187, 698 outstanding from P based on Ds’ case.

307.  D3 did not produce any financial statements of D1 and/or D2 for the year ended 31 March 2001 to the year ended 31 March 2003, but those for the year ended 31 March 2004 did not show any item “Due from director” at all.  When D3 was cross examined, he first tried to say that it was under the item of amounts “Due to director”, which again did not make any sense at all since this would mean D1 owing P sums and not the other way around as D3 had said.  Then D3 tried to explain that the loans to P were recorded under amounts “Due from related companies”, and that the related company should be under D2.  However, there was again no item “Due from director” in the financial statements of D2 for the year 31 March 2004 either.  D3 then came up with an answer that D2 had owed him money and there had been a set off between D2 and him.

308.  I find D3’s answers incomprehensible.  There were clearly no amounts recorded as being due from P, whether in the financial statements of D1 or D2.  I do not find D3 a reliable witness. He was clearly not able to explain how the mortgage repayments were paid by D1 as director’s loans to P, or how the 19 Remunerations Cheques could have been said to be used for repayment of such loans by P.  I do not find there was sufficient evidence that D1 had advanced HK$1,165,502 for the period from January 2001 to October 2004, or HK$1,187,698 for the period from January 2001 to June 2005 as director’s loans to P for the mortgage loan repayments of South Horizon Property.   

309.  The name of the purchaser on the provisional sale and purchase agreement dated 20 October 2000 for the South Horizon Property[119] was stated to be “Yip King Keung (space) Yip Fung Kuen – OR nominee”.  The document was signed by Pony solely and it would appear that P was named as a nominee.  Pony had further produced a cheque dated 20 October 2000 in the sum of HK$50,000 in favour of the vendor[120].

310.  Pony accepted that according to the provisional sale and purchase agreement, there were various sums which would be payable at the signing of the formal sale and purchase agreement and he had said that these initial payments had, according to his understanding, come from housing allowances not yet paid to him since August 1999 and that the balance of the initial payments for the purchase had come from Father who had supported him in purchasing the South Horizon Property.

311.  At that time Pony was working for Hung Fook Restaurant which was run by Kenox.  Pony had produced a letter dated 22 November 2000 signed by D3 on behalf of Hung Fook Restaurant certifying that Pony had since 8 August 1999 worked there as a sales manager, with a monthly salary of HK$14,500, and monthly housing allowance of HK$11,000 (“Hung Fook Letter”)[121]. According to Pony, this letter was issued and signed by D3 to assist him in applying for a mortgage loan from Bank of East Asia.  It appeared that the staff of Hung Fook Restaurant had prepared the letter as Pony’s request for D3’s signature. However, whether the Hung Fook Letter was prepared by staff or not, D3 had clearly signed it.

312.  Pony had further said that as from the date of payment of the 1^st loan repayment, he had received a monthly cheque for HK$25,337 which was credited into his bank account for him to meet the mortgage repayments, until he left Hung Fook Restaurant in June 2005.  In support thereof, Pony had produced 53 customer’s receipts during the period from March 2001 until June 2005 issued by The Bank of East Asia which indicated that a cheque for the monthly sum of HK$25,337 was credited into Pony’s bank account, the last being on 22 June 2005[122] for the mortgage repayments.  Pony’s evidence was in fact by June 2005, the monthly mortgage repayments had already reduced to about HK$21,029.90, and after he left Hung Fook Restaurant in June 2005, he had continued to pay the mortgage repayments out of his own funds.

313.  The monthly sum of HK$25,337 into Pony’s bank account was paid by D1.  Pony explained that the reason why the monthly sum was paid by D1 and not by Hung Fook Restaurant or Kenox was that D1 was making a profit every year and D3 had wanted D1 to pay less profits tax, and that was why D3 had arranged for Pony’s salaries and housing allowances to be paid by D1 instead of Hung Fook Restaurant/Kenox, although Pony was at all material times in fact working for Hung Fook Restaurant/Kenox.

314.  When D3 was cross examined as to why the cheques to Pony were issued by D1 when Pony was working for Hung Fook Restaurant/Kenox, D3’s answer was it did not matter from which company Pony was paid, since they were all Family Members. 

315.  D3’s evidence seemed to indicate that expenses of one Family Company would be charged to another Family Company at his discretion, as D3 clearly did not dispute the fact that Pony was working for Hung Fook Restaurant/Kenox and not D1at the time.

316.  Pony had said that he first returned from Canada in 1995 after graduating from university.  He had worked as an estate agent for about a year but later, at about the time when Hung Fook Restaurant commenced business, D3 had approached him and asked him to help.  They then orally agreed to his basic salary being HK$10,000, plus travel and entertainment allowances totalling HK$4,500 and housing allowance of HK$11,000, and also his medical expenses would be reimbursed.

317.  Pony had also said that when he returned to Hong Kong from Canada, he had to stay in Kong’s home, and had to share a bedroom with Kong’s daughter, and this was inconvenient.  Later, when D3 asked him to help and work for Hung Fook Restaurant, he had mentioned to D3 that he needed his own place to live in, and it was under those circumstances that D3 and he agreed that when he started to work for Hung Fook Restaurant, apart from a basic salary, he would be entitled to a housing allowance in order for him to purchase his own home.  Pony denied that the South Horizon Property was paid from any loans borrowed in P’s name from D1.

318.  I find what Pony said was more plausible than what D3 had said as to why the South Horizon Property was purchased.  Hung Fook Restaurant was in Apleichau where the South Horizon Property was.  Although P had said she would occasionally go and stay there, the evidence showed that she had always maintained her residence at the Family Home with her parents. D3’s evidence seemed to suggest that Pony had nothing to do with the decision to purchase the South Horizon Property.  When D3 was cross examined on this, he did not answer directly the question and had said instead “我唔覺得娟值成層樓”.  What he seemed to be saying as P was “not worth” the whole property and that was why Pony’s name was added.  D3 had also said P wanted the property for rental income “佢話要来揸手收租”.  However, the property was clearly for Pony’s residence and there was no rental income.  D3’s evidence did not seem to make any sense.

319.  Pony had explained that at the time of the purchase, a single person could only apply for HK$250,000 under the HP Loan and that P agreed to help Pony by allowing her name to be added as purchaser to the South Horizon Property and to jointly apply for a total amount of HK$500,000 under the scheme from the Government.

320.  Ds had challenged the information provided by P and Pony for their application process for the HP Loan and in fact shortly prior to the commencement of the trial issued a writ of subpoenaduces tecum on the Housing Authority on 21 August 2015 to produce, among other things, all the relevant documents in connection with the application for the HP Loan.  A representative from the Housing Authority attended the first day of trial to produce the documents under the subpoena including bank mortgage document executed in 2000, and assignment dated 15 August 2006, which could clearly have been obtained earlier from Land Registry.  Mr Lo had objected to the production of these documents on the ground that they were neither relevant nor necessary.

321.  After hearing submissions from both sides, in the end I only allowed production of certain documents which included copies of the application forms for the HP Loan on 12 June 2000, and copies of 2 declarations from P and Pony of 7 December 2000, and further a copy of the mortgage dated 28 December 2000 and a copy of the assignment dated 15 August 2006 in relation to the South Horizon Property.  As a result thereof, I also allowed P and Pony to each file a further witness statement, and a further list of documents.

322.  Much time was devoted to cross examining P and Pony on their application for the HP Loan and whether P had any beneficial interest in the South Horizon Property.  Ds’ case or allegation basically was that P and Pony had provided incorrect or false information about their then income and assets to the Housing Authority in order to qualify for the HP Loan, and further that as the mortgage deed of South Horizon Property referred to the mortgagors, namely P and Pony, mortgaging the property as beneficial owners, both P and Pony held beneficial interest in the South Horizon Property.

323.  In the application form for the HP Loan submitted on 12 June 2000 to the Housing Authority[123], for “Occupation”, Pony stated he was “受僱”/employed, and P stated she was “合資”/joint investor; for “Post”, Pony stated he was sales manager, and P stated she was manager; for “name of company”, Pony stated the Hung Fook Restaurant, and Pony stated the Sushi Restaurant.  Pony gave his monthly income to be HK$14,500 and P gave hers to be HK$9,800.  For “Assets”, Pony stated HK$162,000 and P stated HK$463,000.

324.  P and Pony had also each made an updated declaration on 7 December 2000[124].  P stated that during the period from 12 June 2000 to 19 October 2000, her average monthly income was HK$9,800 and her total assets did not exceed HK$480,000.  Pony stated for the same period his average income was HK$14,500 and his total assets did not exceed HK$160,000.

325.  Pony had explained that that he did not disclose the housing allowance under “income” as he had not yet started to receive the allowance at the time of the application for the HP Loan.  So far as the declaration of their respective assets were concerned, Pony had explained that he had thought that in the application form and/or declaration he only had to disclose his assets in Hong Kong, and that was why he did not include any assets in Canada.  P had said the same and explained that the amount of assets stated by her was only the balance in her bank account in Hong Kong at the relevant time, and further the forms were filled in by Pony on her behalf.  

326.  I accept P’s and Pony’s explanation as to what they stated in their respective declarations to the Housing Authority at the time of their application.  I do not find that there was sufficient evidence to show that they had deliberately made false declarations or provided any false information to the Housing Authority in order to qualify for the HP Loan.  In fact, it must have been clearly known to Ds and Father at the time of the purchase of South Horizon Property that P and Pony had applied for the HP Loan, otherwise Father/D1 would have to pay HK$500,000 more towards the purchase price.  In any event, even if there had been any incorrect/false information provided to the Housing Authority at the time of the application, this would be for the Housing Authority to take action against P and Pony, and I am of the view that this did not affect their overall evidence in relation to the issue as to who actually held the beneficial interest in South Horizon Property.

327.  Pony had said after signing the provisional sale and purchase agreement, he contacted Father to discuss in relation to the housing allowances D3 was to pay him and Father had told him not to worry, and Pony said he had understood from this conversation that Father had agreed to support and to pay for his purchase.  He said before the further deposit was due, he had contacted Ping who was responsible for making all payments on behalf of D1, and that Ping had said everything was ok.  Pony had agreed under cross examination that the balance of the initial payments for the purchase of the South Horizon Property was paid by D1. 

328.  Both P and Pony had maintained that P had not paid a single cent towards the South Horizon Property, and further as P had not paid anything, the beneficial interest in the property had 100% belonged to Pony all along.  Pony had said that as he ceased working for Hung Fook Restaurant in June 2005 and there had been no further salary paid to him thereafter.  He then pointed out that based on D3’s case of the South Horizon Agreement, even though Pony had ceased working, D3/D1 should have continued to pay the mortgage loan repayments but D3/D1 in fact ceased payment for the mortgage loan repayments completely as soon as Pony ceased working for Hung Fook Restaurant/Kenox.

329.  The last payment of HK$25,337 made by D1 to Pony was in June 2005.  I accept what Pony had said, if there had indeed been the South Horizon Agreement, and based on Ds’ case, D1/D3 should have continued to pay the mortgage loan repayments for the South Horizon Property after June 2005 on behalf of P. However, it was Pony who had continued to pay.

330.  As for the mortgage deed dated 28 December 2000 in respect of the South Horizon Property[125], it was stated therein that P and Pony “as beneficial owners” had mortgaged the South Horizon Property to the bank.  Pony said this was a standard document and also at the time the conveyancing solicitor’s clerk did not explain in detail each word in the legal document.   

331.  There was no evidence that the mortgage deed was anything but a standard document.  If Pony and P had misled or made a false statement to the mortgagee bank, then again it would be for the bank to take action against them.  I am of the view that the fact that P had jointly applied for a mortgage with Pony and the mortgage document stated that the mortgagors had mortgaged the property as beneficial owners would not preclude them from now putting forward a case that P in fact held no beneficial ownership in the South Horizon Property and was only a nominee for Pony.

332.  When P transferred her 50% title to Pony in August 2006, the assignment was on the face of it a sale with a consideration of HK$1m, rather than simply a transfer of beneficial interest by P as a trustee/nominee.  Pony had explained that the transfer took effect as a sale was a procedure suggested by the conveyancing solicitors who advised that it was a matter between P and Pony as to whether there would be actual payment of consideration, and having the transfer expressed as a sale would make it easier for Pony for future mortgage purposes.  Both P and Pony had maintained that there was no actual consideration paid.

333.  There was no evidence that the stated consideration of HK$1m was actually paid by Pony to P under the assignment of 15 August 2006, and I accept P’s and Pony’s evidence in this regard.

334.  Whether the initial payments came from Pony or Father or D1, I do not find there was any evidence that P had paid anything towards the initial payments for the purchase of the South Horizon Property, or that she had received any consideration upon the transfer to Pony.

335.  As for the mortgage loan repayments, P said she had never received any director’s emoluments from D1/D2.  Those 36 HK$9,500 cheques referred to by D3 were for her salaries from the Sushi Restaurant and paid by D2.  She said she was told not to cash/credit the 19 Remuneration Cheques due to the cash flow problems of D2 at that time and that before crediting, she had to ask the accounts manager Ms Tam.  As mentioned earlier, the last of the 19 Remuneration Cheques not presented by P was 6 July 2004.  P had said that from August 2004 onwards, D2 had allowed her to cash her monthly salary cheques, as she needed money to pay for her purchase of the Happy Valley Property. 

336.  Anyway, as later set out in this judgment, there was no sufficient evidence that the 36 $9,500 cheques were P’s director’s remuneration.

337.  Although the South Horizon Property was held in joint names of P and Pony, they had satisfied this court their common intention was for P to hold as a nominee for Pony and that Pony was in fact the 100% beneficial owner of the South Horizon Property.  In fact, there was actually nothing in the South Horizon Agreement nor was there any evidence at the time of the purchase of the South Horizon Property that P was to hold 50% title/interest in the South Horizon Property in trust for D1/ D2/D3 or the other Family Members or Family Companies or that she was to transfer her 50% to Family Companies later, and there had been nothing to stop P transferring away such interest.

F.3    The Happy Valley Agreement

338.  I have earlier set out the Acquisition Proposal pleaded by P. and that Ds denied that there was the Acquisition Proposal or P had ever contributed any sum or sums towards the purchase price of the Happy Valley Property.

339.  D3 had said that in about middle of 2004 that he and Bonnie had planned to invest in a commercial property, and they eventually decided to purchase the Happy Valley Property.  According to D3, when P learnt about the Happy Valley Property, she had continuously expressed to Family Members that she also wanted to have a shop.  D3 then said it was only after discussing with Family Members and obtaining Bonnie’s consent, he and Family Members then reached an oral agreement with P and that based on this oral agreement, he could arrange for the Happy Valley Property be transferred to P “本人可安排將跑馬地物業轉讓给她”[126]. 

340.  Pausing here, what D3 seemed to be saying was that P knew that the Happy Valley Property had already been purchased by him and Bonnie.

341.  D3 did not explain how P could have learnt about the purchase of the Happy Valley Property by Bonnie (and/or him).  D3 had admitted in his witness statement that P was not involved at all in the initial viewing and decision making by him and Bonnie to purchase the Happy Valley Property, nor when Bonnie signed the provisional agreement to purchase[127].  Even if, as D3 said, P learnt about the Happy Valley Property having been purchased by Bonnie (and/or D3) and had wanted to have a shop space as well, there was no particular reason given by D3 as to why P would insist on having specifically the Happy Valley Property which had been bought by him and Bonnie.  

342.  D3 had said during trial that generally P often followed what he did, or wanted what he had.  D3 had also said that he and Bonnie had selected the Happy Valley Property after viewing a lot of properties, but even based on Ds’ case, all P wanted was a property/shop space for rental income only.  There was no evidence that D3 and Bonnie had asked a property agent to find P another property/shop space.  There was also no evidence that after letting P have the Happy Valley Property, D3 and Bonnie then bought something else for themselves, if it was indeed their plan to invest in a commercial property at that time.

343.  As I have said earlier, P received much less education than D3. Although certain of her answers were confusing and she was emotional at times, I have found her spontaneous in giving evidence.  I have earlier already found that there was no sufficient evidence to show that D3 had disclosed to P that the first purchaser was Bonnie and then Bonnie had nominated Asia Creative to sign the formal Agreement for Purchaser, or that the Asia Creative was a company belonging to D3 and Bonnie.  Having weighed up P’s evidence and D3’s evidence, I find that it is more probable than not that the proposal for her to purchase the Happy Valley Property had come from D3 after Bonnie had already signed the provisional agreement and that I accept P’s evidence that there was indeed the Acquisition Proposal made by D3 to her and the terms as set out by P. Mr Cheung had submitted that P’s case was not believable as on her case, D2/D3 should be having cash flow problems at that time and that why all of a sudden D3/D2 would want to or would have the money to pay the balance of the initial payments to purchase the property on P’s behalf.  However, whether D3/D2 actually had any cash flow problems, P would not know, and she was only told this by D3.  

344.  As for the Happy Valley Agreement, D3 said during the trial that the agreement was reached after he took P to see the shop and this was sometime in September/October/November before completion, and that there were only the two of them present at the time when the Happy Valley Agreement was reached.  

345.  What D3 said during the trial was inconsistent with what he had said in his witness statement, namely that he and the Family Members had agreed to the Happy Valley Agreement with P, in that not only he and P but the other Family Members were also parties to the agreement, and that the Happy Valley Agreement was reached prior to completion.

346.  Also, in Kong’s 1^st witness statement, he did not mention anything about the Happy Valley Agreement, and only referred to the dinner at the Shenzhen Restaurant when the 1^st Memo was signed, and also the meeting on 29 September 2006 when the 2^nd Memo was signed.  In Kong’s supplemental/2^nd witness statement, he then said when P learnt of D3 purchasing the Happy Valley Property, she often asked D3 to give the shop to her for collecting rent, and that she was harassing D3 over this and making scenes in a teahouse/“在茶樓大吵大鬧”, and that it was under such circumstances that to avoid P’s harassment, D3 “不勝其煩” and agreed to give her the shop if she would transfer her half interest in South Horizon Property to Family Companies[128].  Kong later said when D3 told him to sign a trust document stating that D2 would hold the Happy Valley Property in trust of P, he then learnt, as mentioned earlier, that there was a “condition precedent”, namely that P had to transfer her 50%  title/interest in the South Horizon Property to Family Companies, and that it was only under this “condition precedent” that he agreed to sign the Letter of Ownership, as he would not have agreed to give the property to P unconditionally.

347.  D3 never mentioned P had created any scenes in a teahouse.  All D3 had said was to P had continuously expressed her wish to Family Members to have a shop space for collecting rent.  Further, what Kong had said was merely that he would not have agreed to an unconditional gift of the Happy Valley Property to P, and that he only learnt of the condition precedent at the time of the signing.  Kong did not mention anything about the Happy Valley Agreement, nor did he seem to know that one of the terms of the alleged Happy Valley Agreement was that P had agreed to the shortfall monthly mortgage loan repayments being deducted from her monthly remuneration, and that it was not an unconditional gift. 

348.  Although Tong agreed that P had always asked D3 to help her buy a shop space, Tong said he and other Family Members were suddenly asked by D3 to attend the office of C&K to sign documents, and on 8 November 2004, they had all met at C&K’s conference room, and before the solicitor entered the room, D3 explained to everyone as P had to buy a shop space in Happy Valley, they all had to sign a mortgage document,  and that D3 had emphasised that the shop space belonged to P, and that no one could take it from her.  Thereafter, D3 produced the Letter of Ownership for everyone to sign.  Tong was asked during the trial whether he knew of any discussion between P and D3 on how to purchase or how the Happy Valley Property was to be paid for, his answer was no. Tong had further said according to his knowledge, P had paid for all the initial payments for the purchase and also the mortgage loan repayments.  When asked whether it would be fair for other Family Members for D2 to purchase a property for P as the Family Members, having each signed a director’s guarantee, might end up having to personally pay the mortgage loan repayments if P or D2 failed to pay.  Tong disagreed that it was unfair and had said he was not worried over P not paying, and he had further said that Father had said the Happy Valley Property was purchased for P’s retirement and that even if D2 failed to pay, he believed that Father or Sam Kee would pay for P.

349.  Anyway, Tong’s evidence again indicated there was no prior agreement involving the Family Members as alleged by D3, nor was there any “condition precedent” attached.

350.  Out of the 6 directors who were present at C&K’s conference room, apart from D3, P, Kong, and Tong, and Father now deceased, Ping was also present, and had signed the Letter of Ownership in her capacity as director.  She would be an important witness but Ds failed to call her.  I accept Mr Lo’s submission that I should draw an adverse inference against Ds for failing to call her, in that her evidence might not support Ds’ case that there was the Happy Valley Agreement.

351.  D3 had said at the trial that the Happy Valley Agreement was proved by the 1^st Memo, which was pleaded as a confirmatory memorandum.

352.  According to D3, the first term of the Happy Valley Agreement was that P had to immediately transfer 50% the South Horizon Property to D2[129].  Since according to D3, the Happy Valley Agreement was reached prior to the completion date for the purchase, if indeed P had agreed orally to this, such a transfer could have been carried out prior to, or at least at the same time, as the completion of the purchase of the Happy Valley Property.  There was no evidence that D3 had attempted to instruct his solicitors to prepare the transfer document for the South Horizon Property for P to sign at the same time as the purchase document for the Happy Valley Property, or indeed D3 could have instructed C&K to prepare a proper agreement containing the terms of the alleged oral Happy Valley Agreement for everyone to sign.  There was no evidence that he did so. 

353.  I find this odd, since everyone was already there in the solicitors’ office.

354.  Further, based on D3’s case, P should already be in breach of the Happy Valley Agreement at the time of completion, since she clearly failed to immediately transfer her title/interest in the South Horizon Property.  As she was already in breach, there was no valid explanation as to why D3/D2 would want to go ahead with the purchase and further why all the directors had to sign the Letter of Ownership.  In fact, based on Ds’ case, the sooner the transfers of the South Horizon Property and the Happy Valley Property took place, the better it would be for D2 since upon both transfers being effected, D2 could cease the mortgage loan repayments.  There was no evidence that Ds had ever demanded P to comply with the alleged Happy Valley Agreement.  Even in C&K’s 31.10.07 Letter, which was only sent in response to P’s letter before action, the solicitors did not mention any terms of the Happy Valley Agreement, and only referred to P accepting D3’s offer that in consideration of transferring her ½ share in the South Horizon Property to D3/Family Companies, the Happy Valley Property would be transferred to her subject to P continuing to pay for the mortgage loan repayments[130].  None of the other terms of the alleged Happy Valley Agreement were set out, and instead C&K had attached a copy of the 2^nd Memo and set out most of the terms of the 2^nd Memo.

355.  D3 had relied on the 1^st Memo as confirming the Happy Valley Agreement.  The terms of the alleged Happy Valley Agreement was initially said by D3 to be agreed between P and other Family Member and later his case was that only P and him were present when the alleged agreement was reached.  The Letter of Ownership was signed by D2 (through all 6 directors).  Yet, the “contracting parties” stated on the 1^st Memo were P, D3 and Kong.  In particular, D2 was not a contracting party.

356.  In any event, there was nothing in the 1^st Memo which referred to the Happy Valley Agreement or the terms thereof.  The 1^st Memo was drafted and written by Ping then and there at the Shenzhen Restaurant.  So far as Happy Valley Property was concerned, all that was stated in the 1^st Memo was that D3 and Kong guaranteed to “make the best arrangements” to give the property to P. What was written was unclear as to how the “giving” or transfer was to be effected, or whether it was to be subject to the mortgage loan or not.  Although the 1^st Memo stated that P agreed to transfer 50% interest in South Horizon Property at no consideration to one of the Family Companies, it was not expressed as a condition precedent to the transfer of the Happy Valley Property, nor did the 1^st Memo state that the South Horizon Property had to be transferred first before the transfer of Happy Valley Property, which according to D3, was one of the terms of the Happy Valley Agreement[131].  Further, the transfer of the 50% interest in South Horizon Property was not to D2[132], nor to D3 as referred to in C&K’s 31.10.07 Letter, but to any one of the Family Companies.

357.  So far as the 2^nd Memo was concerned, again, the 3 persons who had initialled/signed on the 2^nd Memo were P, D3 and Kong.  D2 was not a party.  As mentioned earlier, there were 12 items of matters set out in the 2^nd Memo.  The words “玩嘢定/轉鋪” were written against Item (3) relating to D2 after the initials of D3, P and Kong.  There were references to taxes arising out of this property ie “娟鋪” against Item (10).  There was no specific reference to the transfer of the Happy Valley Property. Further, although Item (9) stated that 50% of South Horizon Property be transferred to one of the Family Companies, this was again not expressed as any condition precedent to the transfer of the Happy Valley Property or a term of the alleged Happy Valley Agreement between D3 and P.  In any event, this was only one of the 12 items of assets written therein. 

358.  Kong was present at the signing of the 1^st Memo.  He had said in his witness statement during the dinner in the Shenzhen Restaurant on 2 July 2006, D3 had asked P to sign a document to confirm that she would carry out the agreement with D3 in relation to the Happy Valley Property and the South Horizon Property, and P had agreed, and Ping then started to write out a document for confirmation and for every one to sign.  

359.  Under cross examination, Kong had however said it was P who first raised the issue of the transfer of the Happy Valley Property during the dinner.  He said it was P and D3 who discussed and that he admitted that he was only a listener, and he further admitted that P and D3 would be clearer as to what they had discussed.  He also confirmed that that he only remembered that if P delivered up 50% interest in South Horizon Property, then “華會俾番娟跑馬地” or words to this effect, Kong confirmed that the 1^st Memo reflected what was discussed but he did not mention any Happy Valley Agreement under cross examination.

360.  Kong had also said in his witness statement that on 29 September 2006, namely the day when the 2^nd Memo was signed, he was about to go out to dinner, but was asked to go to the Family Home to be present when P and D3 were discussing various matters in relation to assets and that Mother and Ping were also present.  According to Kong, D3 and P reached agreement after one to two hours, and there was a document written by D3 and Ping, and that he was invited to sign, which he did, and thereafter he left. 

361.  However, when shown the 2^nd Memo during cross examination, Kong had said he had no impression/recollection of that document.  He was then shown what he had said in his witness statement and he then replied that P and D3 would know best as to what was discussed that day, namely on 29 September 2016 although he did see them discuss face to face.

362.  Kong did at one stage had an emotional outburst during the trial accusing Pony of being ungrateful towards D3 as it was D3 who had looked after every one after Father died, and that Pony had telephoned and asked to meet with him and Ling in a cafe on 8 August 2006 and that during the meeting, Pony had asked him to join forces with him and P to deal with D3, namely “對付華”.  Kong admitted that Pony did not explain why or how he wanted to “對付華” nor did Kong ask him.  Kong said he asked Pony why he wanted to “對付華” and Pony had said D3 was too strict towards him when he was too young and that D3 made a mistake of sending him to university.  Kong also accused Pony and Joyce of turning Mother against him and D3.

363.  Pony went to Canada with Father and Mother in December 1989 and later returned to Hong Kong in about 1995.  Pony later agreed to help D3 and worked as a manager in Hung Fuk Restaurant in August 1999 until June 2005.  There was no sufficient evidence that Pony had any resentment towards D3 at that time.

364.  D3 is 11 years older than Pony and it would not be surprising for D3 to be strict towards Pony, being the oldest brother and also the person controlling the Family Companies.  There was, however, no sufficient evidence that there was any hostility between Pony and D3 prior to Father’s death.  I find any hostility between D3 and Pony only arose over D3’s failure to transfer the Happy Valley Property to P after repeated demands.  Also, D3 was seeking the transfer of P’s 50% title in the South Horizon Property to one of the Family Companies, and this would obviously affect Pony’s interest in the South Horizon Property.

365.  Whether Pony had used the actual words “對付華” or not during the meeting on 8 August 2006, I accept that he probably did ask Kong to be on his and P’s side in P’s dispute with D3 over the properties, but as Kong was close to D3, he had refused.

366.  As mentioned earlier, D3 had said at the trial that only he and P were present when the Happy Valley Agreement was arrived at.  Kong clearly was not present.  Having considered all the evidence, I do not find that there was sufficient evidence that D3 had mentioned anything about the transfer of the South Horizon Property as a “condition precedent” at the time of the signing of the Letter of Ownership and I find what Kong had said was unreliable in this respect.  In any event, I find Kong’s evidence did not support Ds’ case that there had been a Happy Valley Agreement between P and D3 containing those terms as set out by D3.  I also find there was nothing in the 1^st Memo which confirmed that there had been the Happy Valley Agreement or that the 1^st Memo and the 2^nd Memo had evidenced there was the Happy Valley Agreement, with all those terms as set out by D3.

367.  Ds had denied that P had ever contributed any sum or sums towards the purchase price of the Happy Valley Property[133].  As I have said earlier, I have accepted that notwithstanding that I find more probable than not that D3 did tell P that there was “under-table” money, I find there was no sufficient evidence that such was indeed paid by D2 or received by D3/Bonnie/Asia Creative.  Anyway, on Ds’ case, the purchase cost for the Happy Valley Property was the price of HK$3,400,000 plus transaction costs which appeared to be HK$90,620, totaling HK$3,490,620[134].

368.  One of the terms of the alleged Happy Valley Agreement was that D2 would pay 30% of the purchase price for the Happy Valley Property plus transaction costs.  30% of $3,400,000 would come to HK$1,020,000, plus the transaction costs of $90,620, the total would only be HK$1,110,620.  As the mortgage loan was HK$2,200,000, the initial payments would have been in the region of HK$1,290,620.  If D2 agreed to pay only 30% of the purchase price, then there would still be a shortfall of some $180,000.  It was not clear from Ds’ case of Happy Valley Agreement as to how this amount was to be paid.

369.  The Happy Valley Property was recorded as an investment property in the financial statements of D2 after acquisition for which D2 had claimed commercial building allowances.  It was, however, not clear how the mortgage loan of HK$2,200,000 was recorded in D2’s financial statements since according to note no 8 in the financial statements for the year ended 31 March 2005, the “non current portion” of  the “secured bank loan” was only increased by about HK$1,496,980 from that of the previous financial year[135].  There was no sufficient evidence that by March 2005, namely about 5 months after the purchase, some HK$700,000, or about 30% of the mortgage loan had been paid off.

370.  As seen earlier, there was also be a total of rental and restaurant licence deposit of HK$63,470 paid by the tenant which presumably have been transferred to/received by D2.  It was also not clear how the deposits paid by the tenant were recorded in the financial statements.  Anyway, according to D’s case of the Happy Valley Agreement after collecting the rental, D2 would pay the monthly mortgage repayments from P’s director’s fees. If this was so, then there should be accounting records reflecting the deductions from P’s director’s fees, but none had been produced.    

371.  Having considered all the above, I am not satisfied on a balance of probabilities that there had been in existence the Happy Valley Agreement containing those terms as set out and as alleged by D3/Ds prior to the signing of the Letter of Ownership on 8 November 2004.

F.4    The Letter of Ownership

372.  The Letter of Ownership was signed on the same day as the completion day of the purchase of the Happy Valley Property, and prior to to the assignment, the mortgage deed and the guarantee by the directors were executed.   

373.  The Letter of Ownership stated as follows:

“擁有書

本公司 “神祕人企業有限公司”名下之物業“跑馬地成和道xxxx”，現得到葉鳳娟小姐 (身份証號碼：xxxxxxx) 之委托管理，而此鋪實在之擁有權是葉鳳娟小姐個人擁有，日後收租及業權都屬葉鳳娟小姐個人擁有，本公司只是代葉鳳娟小姐管理，口講無憑，特立此據。”

374.  It was clearly stated in the Letter of Ownership that P was the sole beneficial owner of the Happy Valley Property, and D2 was only managing the property on behalf of P.  

375.  As mentioned earlier, the Letter of Ownership was signed by Father, D3, Kong, Tong, and Ping, and P, all the then 6 directors of D2.  The 6 of them were also the only shareholders of D2 at that time.  Although there was no company chop of D2 affixed thereon, nor was it expressed as a resolution of the directors of the company, the word “director” appeared against the name of each of the 6 of them and it was not really disputed that they signed in their capacity as directors of D2, and that the declaration was made by D2, that P was the sole owner of the Happy Valley Property.  As I have said earlier, none of the Ds took any issue with the Letter of Ownership, nor did Kong, nor Tong. 

376.  Having coming to the view that there was no Happy Valley Agreement, and having considered the contents of the Letter of Ownership, I find the common intention of D2 (through its directors) and P on 8 November 2014 was that the Happy Valley Property was to be held by D2 under an express trust for P’s sole benefit absolutely as evidenced by the Letter of Ownership since 8 November 2004 and that D2 was only managing the property on behalf of P.

377.  That the Happy Valley Property had been regarded by D3 as all along P’s property was also evidenced by his own entries in the Diary, where the Happy Valley Property was simply referred to as “娟鋪” and the transfer of the Happy Valley Property was recorded as “娟鋪轉名”.  Kong had also used the words “俾番娟跑馬地” when referring to the discussion between P and D3 at the Shenzhen restaurant on 2 July 2006 which led to the signing of the 1^st Memo.

378.  I now come to the payment for the Happy Valley Property.

379.  As mentioned earlier in relation to the Debt Claim, P said she had paid by three 2004 Cashier Orders, the total sum of HK$980,000 towards the payment of the purchase price for the Happy Valley Apartment. 

380.  Further, as mentioned earlier, it was Ds’ case that that P owed D3 HK$10,970.15 in relation to the Canadian Properties after April 2000[136], and P also owed D1 about HK$1,337,237 arising out of the purchase of the South Horizon Property[137], and that it was Ds’ case that P had repaid HK$1,330,000 towards these liabilities to D3 by 4 payments, namely the sum of HK$350,000 by the 2003 Cashier Orders and the $980,000 by the three 2004 Cashier Orders.

381.  Leaving aside P’s alleged liabilities for the time being, on Ds’ case of alleged “repayments”, they had pleaded that on the occasion of each of the 4 payments, P had orally informed D3 that it was up to him to decide whether to appropriate the repayment towards P’s liabilities to D3 or to D1, and D3 had orally informed P that her repayments would be appropriated towards P’s liabilities to D3 personally of HK$10,970.15 and the balance to be paid by D3 to D1[138].  If what Ds pleaded was correct, these amounts repaid by P to D1 should be reflected in D1’s financial statements.  There were simply no amounts recorded in D1’s financial statements for the year ended 31 March 2004 and the year ended 31 March 2005[139], as being due from P, or D3, or any amounts “Due from directors” or “Due from shareholders” to the company.  There was only an item of amounts “Due from related companies” to D1 in each of the financial years ended 31 March 2004 and 31 March 2005, which seemed to have increased rather than decreased.

382.  I have earlier already found that there was no sufficient evidence that P owed D1 HK$10,970.15.  I have also found that P had not made any payments towards the purchase of the South Horizon Property, and in the circumstances, she would not have owed D1 HK$1,337,237.  I have accepted what P’s evidence that she lent D3 a sum of HK$350,000 by a cashier order dated 23 September 2003 and the 8^th Cheque was given to her by D3 as security for repayment.  The other three 2004 Cashier Orders of HK$980,000 were made around the time of the purchase of the Happy Valley Property namely August, September and October 2004, whereas the South Horizon Property was purchased some 4 years earlier in 2000.  The 3 payments were consistent with P’s case that the Acquisition Proposal was made in about August 2004 and it was pursuant to the Acquisition Proposal that she made the 3 payments prior to the completion of the purchase was on 8 November 2004.

383.  There was simply no sufficient evidence to connect those 3 payments with the South Horizon Property.  I find it more probable than not that P’s three 2004 Cashier Orders for payments totaling HK$980,000 were, as P had said, P’s payments for the purchase of the Happy Valley Property.

384.  I have also earlier accepted P’s evidence there was the Acquisition Proposal and the terms thereof.  Pursuant thereto, D3 did arrange for the Consideration to be partially met by a mortgage loan of HK$2.2m.  As for the initial payments, I accept P’s evidence that she had paid HK$980,000 towards the initial payments, leaving the balance to be met by D3, whether on behalf of himself, D1 and/or D2, and to be set off against the then outstanding amount of the Loans. Based on the purchase price of HK$3,400,000 plus transaction costs, the balance which was to be set off against the Loans appeared to be in the region of HK$310,620.

385.  So far as the Mortgage repayments were concerned, P had said these had been deducted from her monthly salaries.

386.  Notwithstanding Ds had denied that P had contributed any sum or sums towards the purchase price and Ds’ pleaded case that the shortfall in the monthly payments, after deducting monthly rental income, were met by D2, D3’s evidence in his witness statement was that the monthly shortfall of about HK$4,300 was met from P’s director’s fees[140]. 

387.  Whether the monthly remuneration was P’s director’s fees on Ds’ case or her salaries on P’s case, the fact was that P was receiving a monthly payment of HK$9,500 from D2 prior to the monthly deduction of HK$4,300, and this can be seen in her bank passbook[141].  It can also be seen from her passbook that as from January 2005 onwards until July 2006, her monthly payment from D2 was reduced to HK$5,200, after the deduction of HK$4,300.

388.  In light of the above, I am satisfied that P had paid for the mortgage loan repayments of the Happy Valley Property, in that, pursuant to the Acquisition Proposal, every month a sum of HK$4,300 was deducted by D2 from her monthly remuneration.  Thus, alternatively, if there was no express trust, having considered all the factors and circumstances, I find that it was the common intention of D2 through its directors and P that P to be the sole beneficial owner of the Happy Valley Property.  I have found that P paid $980,000 towards the initial payments of the purchase price and that the balance of the initial payments were amounts paid on her behalf by D3/D2 and set off against the Loans.  I further find that she had also paid the Mortgage monthly repayments until 30 June 2006, when her monthly remuneration ceased.

F.5    Whether P signed the 1^st Memo and the 2^nd Memo involuntarily

389.  P said she had only signed the 1^st Memo under threat of her not being transferred the Happy Valley Property, and Mother said she also signed the 1^st Memo as a witness involuntarily.  P had also said that she signed the 2^nd Memo involuntarily, which was what she reported and stated to the police in her police statement made on 29 September 2006[142].

390.  In fact, by the time of the 2^nd Memo, P had already transferred her title in the South Horizon Property to Pony on 15 August 2006[143].     

391.  P had explained in her witness statement as to the circumstances under which she signed the 1^st Memo and the 2^nd Memo.  Mainly she signed under D3’s threat and her fear that she would not get back the Happy Valley Property.  Further, for the 2^nd Memo, she said she signed in tears only at about 2 am under pressure of D3 and under his threat of not transferring to her the Happy Valley Property.  She had said that D3 told her to attend the solicitors’ office to sign a proper agreement the following day, but the following day she made a report to the police, as she dared not contact D3.

392.  It would thus appear from what P had said that the 2^nd Memo was would be subject to a formal agreement being signed the following day.  No formal agreement was in the end signed and at the trial, P had said that none of the matters set out in the 2^nd Memo had been dealt with. 

393.  The evidence showed that P was not well in about July 2006, and thereafter in November 2006 was diagnosed to be suffering from depression.  Kong had said he did not notice that P had signed the 2 Memos involuntarily and that she was not in tears, and in particular, at the time of the signing of the 2^nd Memo, P was pleased to hear that the Happy Valley Property had gone up in value.  Whether she was in tears or no, I accept her evidence that she was under pressure and she was under fear that she might not get back Happy Valley Property and it was under those circumstances that she had signed the 1^st Memo and also the 2^nd Memo.

394.  In any event, whether P signed these two documents involuntarily or not, I have said earlier I do not find that the 1^st Memo had confirmed or that it and the 2^nd Memo had evidenced the Happy Valley Agreement.

395.  D2 had counterclaimed against P for breach of the alleged Happy Valley Agreement only, and it was not Ds’ case that there was breach of a separate agreement reached between D3, Kong and P based on either the 1^st Memo or the 2^nd Memo, notwithstanding in C&K’s 31.10.07 Letter, D2 seemed to be alleging that P was in breach of an agreement contained in the 2^nd Memo.

396.  Anyway, I have accepted P’s case that P was only a nominee for Pony in relation to the South Horizon Property.  Any transfer by her could thus only be a transfer of her legal title. 

F.6    Colourmax

397.  There was another issue arising out of the Happy Valley Property.  I have mentioned earlier that on about 23 May 2007, D3 had made a report to the police about someone using a false document, namely someone had forged a chop of D2 and affix it to a provisional agreement for sale and purchase for the Happy Valley Property dated 1 September 2008 which was signed by P on behalf of D2 to purportedly sell the property to Colourmax, a company owned by Pony at a consideration of HK$3.4m[144].  The formal agreement was stated to be signed on or before 14 September 2006 and completion was to take place on 31 October 2006.  The solicitors acting for the purchaser were Messrs Tang, Wong, Cheung (“TWC”).

398.  Joyce had in her witness statement stated that all the Family Members knew that that P had bought the Happy Valley Property through D3, and in early 2005, P had asked her to conduct a search in the Land Registry.  Joyce said she did a search in about April 2005 and discovered that the registered owner of the Happy Valley Property was not P but D2.  Thereafter, P had been requesting D3 to have the property to be transferred back to her name.  Joyce had said after Father’s death, during the Dragon Boat Festival that year when the Family Members were having a meal, P had brought this up, and then D3 became very angry and scolded P and said that within 100 days of Father’s death, he would not do anything and would not be arranging any transfer. 

399.  According to Joyce, P was already suffering from depression in early August 2006, and Joyce was trying to help her by telephoning D3 to request of the transfer of Happy Valley Property, but D3 had scolded her.  It was also Joyce’s evidence that she, Pony and Kong and Kong’s wife Ling had a meeting on 8 August 2006 and that she had told Kong and Ling about being scolded by D3, and that Kong and Ling had agreed to ask D3 to transfer the Happy Valley Property back to P as soon as possible.

400.  Kong had denied what was said by Joyce, and I do not find there was sufficient evidence that Kong had agreed in a meeting on 8 August 2006 with Pony and Joyce that he would ask D3 to transfer the Happy Valley Property to P. 

401.  Joyce had further said she then learnt from P that there was the Family Meeting, during which, D3 had promised P that he would transfer the title of the Happy Valley Property to her, but asked P to deal with the transfer procedures herself.  Joyce said as P would not know how to, she and Pony decided to help P.

402.  During the trial, Joyce had said that she first instructed TWC to prepare a provisional agreement for the transfer and she had telephoned to ask D3 to attend the office of TWC to sign, but D3 failed to do so.

403.  When by 17 August 2006 D3 still had not attended TWC’s office to sign, Joyce then caused to be prepared a rubber chop in the name of D2, and asked P to sign on behalf of D2.  She said if P were to sign both as vendor and then as purchaser, this might cause complication for a future mortgage, and she then decided to purchase a British Virgin Island shelf company for Pony, namely Colourmax, and that the intention was to transfer the Happy Valley Property to Colourmax and then later transfer all the interest in Colourmax to P (“Scheme”).  I note it was also on 17 August 2006 that D3 had made a report to the police complaining that Joyce was making threats to him.

404.  Joyce had produced an undated one page of a provisional agreement which had been signed by P on behalf of D2, and Pony signed on behalf of Colourmax[145], and then Joyce arranged for this to be faxed to TWC to prepare the formal agreement.  She said thereafter she discovered that there were some terms in that provisional agreement which were not applicable, and thus she prepared a new one, namely the one dated 1 September 2006 (“Colourmax Provisional Agreement”).  Again, Joyce arranged for P to sign this document on behalf of D2, and Pony to sign on behalf of Colourmax.

405.  According to Joyce, she had telephoned to inform D3 about the Colourmax Provisional Agreement, and that D3 had objected and insisted on P being named as the purchaser[146].  In the circumstances, Joyce prepared yet another provisional agreement on 29 September 2006 with D2 as vendor and P named as purchaser and signed by P, and instructed TWC to send to D3’s solicitors C&K for D3 to sign on behalf of D2[147].  However, D3 changed his mind again and on 10 October 2006 C&K replied to TWC that D2 denied having entered into any agreement for sale of the Happy Valley Property[148].

406.  Joyce said D3’s constant change of mind had exhausted P and by middle of March 2007, the transfer still had not taken place.  Joyce then learnt from property agents that D3 was trying to sell the Happy Valley Property on the market, and thus on 11 April 2007, they instructed TWC to present the Colourmax Provisional Agreement for registration .

407.  Further, both P and Tong had signed a minutes of a meeting of D2 which purportedly took place on 10 August 2006 at the Family Property which stated that a directors’ meeting had taken place that day, and that D2 had entered into an agreement to “purchase” the Happy Valley Property, and that it was resolved that P was authorized to execute the formal sale and purchase agreement on behalf of D2[149]. 

408.  Joyce admitted that she was the one who had caused the rubber chop of D2 to be prepared, and further she was the one who prepared the directors’ minutes for P and Tong to sign, and said she had used a standard form for the directors’ minutes.  Under cross examination, Joyce had said that according to her knowledge and belief, any director could use the company chop to enter into a provisional agreement, and if the chop was missing, than any director could make a new one, but she admitted that she was not entirely clear about the rights of a director.  

409.  It was P’s case that at the Family Meeting that D3 had asked her to go ahead to deal with the transfer of the Happy Valley Property on her own.  Even if what P said was correct, I find there was no sufficient evidence that a directors’ meeting was held at the Family Meeting or that P was authorised to execute any transfer/sale agreement on behalf of D2.

410.  Joyce was cross examined at length for over two days.  She graduated from university in business and commerce and had worked as a bank manager from 2004 and then she had worked for a mortgage company and she clearly had some knowledge about conveyancing matters.

411.  Although P said she had been told by Joyce and Pony about the Scheme, it was quite clear from the evidence of P and Joyce that it was Joyce, and not P, who had come up with the Scheme and all documentations were prepared by or on the instructions of Joyce.  Having said this, it appeared from the letter dated 29 September 2006 from TWC that by then, the Scheme was really abandoned and that a provisional agreement was sent to D3’s solicitors for D3 to sign on behalf of D2.  This was about 6 months before D3 had discovered the Scheme.  I accept what Joyce had said that it was only after she found out that D3 was trying to sell the Happy Valley Property without letting P know that the Colourmax Provisional Agreement was presented on 11 April 2007 for registration at the Land Registry.  

412.  However, if the Scheme was abandoned, then the Colourmax Provisional Agreement should not have been presented for registration.  I find the Scheme was extremely unwise and unnecessarily complicated the issues between the parties, and that P should have been advised to seek proper legal advice on the matter of the Happy Valley Agreement, instead of Joyce and Pony taking matters into their own hands.  However, as I have found that the beneficial ownership of the Happy Valley Property had vested in P from the completion date of the purchase, namely 8 November 2004, and that D2 was holding the property on trust for P’s sole benefit, Joyce and Pony were only trying to help P to get back what belonged to P beneficially.  In the circumstances, there was no sufficient evidence that Ds had suffered any loss or damage as a result of the actions of Joyce, Pony, P, Tong and Colourmax.

F.7    Conclusion on the Property Claim

413.  To conclude, in light of what I have said above, I am prepared to grant P the declaration she sought, namely that D2 held the Happy Valley Property on trust for P’s sole and absolute benefit as from the date of completion of the purchase of the Happy Valley Property. 

414.  P had also sought a full and proper account to be taken in respect of all monies paid or received by P and D2 in respect of the Happy Valley Property, including but not limited to the purchase thereof, and an order that D2 or P to pay to the other party any such net sum found due upon the taking of such account.  I am prepared to make such an order.

415.  I am also prepared to order that D2 at its costs do forthwith convey the Happy Valley Property to P subject to the outstanding mortgage at nil consideration.

416.  I understand that P no longer sought any damages for loss of opportunity to sell in late 2007/early 2008.  In any event, there was no independent valuation of the Happy Valley Property at that time, nor at present.  I therefore make no order for any damages.

G.  Employment Claim

G.1   Generally

417.  P’s basis for the Employment Claim was founded on oral employment agreements made between her and D3 on behalf the Family Companies from time to time as she was directed by D3 to work for different Family Companies during the period from 1978 to 29 September 2006.

418.  P had pleaded that her obligations and rights under express and implied terms of such agreements were[150]:

(i) 10 hours of work a day, 6 days a week;

(ii) 1 rest day on Sundays for every 7 working days;

(iii) A monthly salary payable in arrears :- in January 1978 it was at around HK$1,000; in July 1997, it was increased to HK$8,000; in April 1998 it was increased to HK$9,800 and in March 2001, it was increased to HK10,000;

(iv) mployer’s MPF contributions where applicable;

(v) Overtime pay, calculated pro-rata of her monthly salary;

(vi) Paid annual leave (accruable from year to year), statutory or substituted holiday pay within the meaning of and in accordance with the Employment Ordinance (Cap. 57);

(vii) Medical benefits in the form of reimbursements for incurred medical expenses upon production of relevant receipts; and

(viii) All other benefits available to employees under the provisions of the Employment Ordinance (Cap 57).

419.  From 1978 to 29 September 2006, P pleaded she had worked in the following work places[151]:-

(i) About 1978 to 1985: Old Sam Kee held by Father and/or Mother, and later New Sam Kee held by Father/D3/Kong;

(ii) About 1985 to 1991: Mr M’s Restaurant (held by Unitable);

(iii) About 1991 to Dec 1995: Dragon Man Food Centre (held by Kingstrong);

(iv) About Dec 1995 to 30 June 2006 : the Sushi Restaurant held by D2 ; and

(v) 1 July 2006 to 29 September 2006: D1.

420.  P’s case was that her employers at the relevant times were, among others, the operators of the respective businesses.

421.  P’s pleaded claim for monetary relief against D1 and/or D2 was based on losses suffered by her as a result of breaches of the employment agreements as regards her entitlements and over-deduction of her monthly salaies for the Mortgage repayments in respect of the Happy Valley Property:-

(a) Monthly salary from 1.1.03-30.9.06;

(b) Over-deduction of her monthly salary;

(c) Overtime payments;

(d) End of year payments;

(e) Annual leave not granted;

(f) Statutory holiday payment;

(g) Medical expenses;

(h) Wages in lieu of notice; and

(i) Long service payment or severance payment.

422.  At the trial, P was no longer pursuing the claim for long service payment or severance payment.

423.  Ds’ challenge to P’s Employment Claim was focused on whether P’s income at the relevant time was in the nature of “salary” or “director’s emoluments”, in other words, the work carried out by P was carried out not in the capacity of an employee since she was one of the “bosses”/directors of the Family Companies concerned.

424.  Thus Mr Lo submitted that the main issue was whether P’s work was done under a contract of employment, or whether she was an “employee” within the meaning of the Employment Ordinance.

425.  Mr Lo had referred to the leading authority in Hong Kong  Poon Chau Nam v Yim Siu Cheung (2007) 10 HKCFAR 156 in which the Court of Final Appeal cited the following 8 factors which are relevant for the purpose of the enquiry as to whether there had been a contract of employment :-

(i) The degree of control exercised by the employer;

(ii) Whether the worker’s interest in the relationship involved any prospect of profit or risk of loss;

(iii) Whether the worker was properly regarded as part of the employer’s organization;

(iv) Whether the worker was carrying on business on his own account or carrying on business of the employer;

(v) The provision of equipment;

(vi) The incidence of tax and national insurance;

(vii) The parties’ own view of their relationship; and

(viii) The traditional structure of the trade or profession concerned and the arrangements within it.

426.  First, in relation to the degree of control, D3 had said under cross examination that he very seldom went to the Sushi Restaurant and that P was the main one who was in charge, and that he had no first hand knowledge of what was happening in the Sushi Restaurant.  D3 had said in his witness statement that whatever decisions P made in relation to the Sushi Restaurant, she often would inform him, as they were part of the same family, and this would be the same as a partner informing another partner.  D3 argued that this did not mean he had any power to control, and if P accepted his opinion, this was only because of his experience in conducting business[152].

427.  P’s evidence was she was working at Dragon Man Food Centre when the Sushi Restaurant started business and D3 had asked P to go and work there as a cashier.  This was not disputed by Ds.  At that time, D3 had already employed a manager, a sushi chef and two assistants.  After a year, as the manager and the sushi chef could not get along, the manager left and P had to take over his job and ended up doing everything.

428.  It was further not disputed that P had occupied a managerial position at the Sushi Restaurant and had certain degree of flexibility in her work hours (eg for attending medical appointments).  She had however maintained that it was D3 who had the final decision-making power in relation to important matters.

429.  Ds’ Counsel Mr Cheung had argued that P clearly did not regard herself as an employee in the Sushi Restaurant as in the application for the HP Loan, P had stated that she was a joint investor/“合資ˮ, rather that an employee.  This, in my view, however, would not necessarily preclude P from saying that she had been an employee working for D2/D1 under a contract of employment.

430.  It was not disputed that P had to keep time cards recording her work hours (“Time Records”), like other employees at the Sushi Restaurant.  P had produced her Time Records for May to December 2005 and January to June 2006[153].  P’s working hours of 10 hours of work a day and 6 days a week, her entitlement to overtime pay, and the number of hours of over-time and “under-time” each day, and also P’s rest days on Sundays were reflected in her Time Records.

431.  Further, P had said under cross examination that when working at the Sushi Restaurant, every day before closing, during the last two hours, she would calculate the cash received that day by the cashier  and the following day, she would take this to Ping who would arrange for the cash to be credited into the bank.

432.  Ping had not been called by Ds.  Kong’s wife Ling had made a witness statement as to matters of the Sushi Restaurant as Ling had worked part time there as a waitress between August 2000 until August 2003.  However, as earlier mentioned, Ling did not attend trial for cross examination, I attach no weight to what she had said in her witness statement. 

433.  I have earlier said that at the time of the trial, Ping was still married to D3 despite his relationship with Bonnie.  Ling was also still married to Kong.  As I have said earlier, Ds had not provided any valid reason as to why they had not called Ping, nor Ling.  I accept what was submitted by Mr Lo, and I draw an adverse inference that they were not called as they could give evidence against Ds among other things, on P’s Employment Claim.

434.  Having considered the evidence, although D3 did not attend to the daily running of the Sushi Restaurant, I find he had a final say and control in how the restaurant was to be run, given that he was the largest shareholder of D2 and that the Sushi Restaurant was the only business operated by D2 and indeed it seemed to be his decision to cease the business of the Sushi Restaurant at end of June 2006, which was then transferred/sold.  Further, it was never denied that D3 was the person in control of all the Family Companies, and that he was also in control of which of the Family Members was to work for which of the Family Companies, and he could transfer P out of the Sushi Restaurant to work elsewhere, as he had transferred P from Dragon Man Food Centre to the Sushi Restaurant.

435.  P’s monthly income from her work at the Sushi Restaurant was fixed at HK$10,000, and after deducting MPF, HK$9,500.  D3 admitted that there was never any distribution of dividends to P, in respect of her shareholding in D2. He had also confirmed that he had no impression/recollection that P or any other shareholders were asked to contribute if ever D2 needed to raise funds from shareholders as a result of making losses in its business.  In other words, P would earn the same regardless of the performance of the business. 

436.  Mr Cheung had referred to P agreeing not to cash the 19 Remuneration Cheques.  P had explained that she agreed not to cash the 19 Remuneration Cheques as she was told that there were cash flow problems. However, there was no evidence that she had waived the payments, and she had only agreed to defer the cashing of the cheques as she was told and she had believed that there were cash flow problems at the time.  This did not mean that P’s work at the Sushi Restaurant or at other Family Companies involved any prospect of profit or risk of loss.

437.  As mentioned earlier, P soon took the post of the then manager at the Sushi Restaurant after she joined and she was responsible to do all different tasks in the restaurant.  According to D3’s evidence[154], P was there to supervise the staff at the restaurant and all the everyday affairs of the business.  It was clear on the evidence that P was part of the Sushi Restaurant, or part of D2’s organization.

438.  I do not find there was sufficient evidence that P was running a business/the Sushi Restaurant on her own account.  In my view, she was carrying on business of her employer, which was D2 when she was working at the Sushi Restaurant.  As pointed out by Mr Lo, P’s Time Records were consistent with her being an employee instead of being the employer.

439.  P had also said during the trial that she had to wear uniform at work, namely she had to wear a gown of a sushi chef, or when she was washing dishes, she would wear a plastic apron which was provided by the Sushi Restaurant, although at the cashier counter, she would wear her own clothes. Anyway, there was no evidence to suggest that P had to bring her own equipment to work. When she was asked about the “director’s emoluments”, P had said she  received reimbursement for her personal expenses eg her clothing by either D1/D2 , but this did not mean she was only working as a director, and was not working as an employee. In any event, P was not referring to work garments such as sushi gowns/aprons when she was asked about the “director’s emoluments”.

440.  In fact, in June 1989, when P was applying for a visa to travel to America, Unitable/Mr M’s Restaurant had issued a letter certifying that P was the manager and director of the company[155] (emphasis added) , which indicated that P held two capacities, one as director, and the one as manager at Mr M’s Restaurant.

441.  According to Pony, all Family Members who were working for the Family Companies did not need to pay tax themselves, which was either borne by the Family Companies or was arranged by D3 to be “waived”.  Support of what Pony had said could be found in P’s salaries tax returns being sent to a firm of professional accountants and meet to her direct.

442.  The tax returns for 2003/2004, 2004/2005, and 2005/2006 were filed by D2 for P and signed by D2 as employer of P, and from the notices of assessment for years 2000/2001, 2002/2003, 2003/2004 issued to P, and also P’s tax payment vouchers for 24 January 2006 and 25 April 2006, P was assessed for salaries tax based on her salaries from D2/Sushi Restaurant[156].

443.  Ds had produced the remittance statements for MPF contribution periods for the 5 months of May to September 2006 made by D2 (“MPF Remittance Statements”)[157].  The MPF Remittance Statements for May and June 2006 bore the name of the Sushi Restaurant as employer, and those from July to September 2006 bore the name of D2 as employer.  The “employees” in respect of which the Sushi Restaurant/D2 had made MPF contributions had included directors and non directors.  What was clear was that the Sushi Restaurant/D2 had clearly made mandatory contributions for P as her employer of HK$500 per month for each of those 5 months.

444.  P had also produced her own membership certificate from BEA (MPF) Industry Scheme dated 21 November 2006 and a MPF Unit Transfer Statement for employees dated 14 February 2008 (“MPF Transfer Statement”)[158].  P’s MPF Transfer Statement stated her employer’s name to be D2, and her last date of employment was 30 September 2006.

445.  Kong had said in his witness statement that he regarded himself as the employer at D1 and that his other siblings would be regarded as employers in the respective company/business they were in charge of, and that their director’s remuneration was each HK$10,000 per month plus other reimbursements of expenses[159].  Although Kong had 60,000 shares in D2, he admitted in the trial that he never worked at the Sushi Restaurant nor was he ever involved in the Sushi Restaurant.  It was not clear as to whether he realised that he was also stated to be an employee of the Sushi Restaurant on the MPF Remittance Statements and that he was given a salary of HK$15,000 a month.  Anyway, I do find that his evidence would shed any light on whether P was an employee or not at the Sushi Restaurant/D2.

446.  Although Ds claimed that the monthly payments made to P by D2 were director’s remuneration, this was not reflected in D2’s financial statements.  There was an item for “Directors remuneration” in the financial statements for 2003/2004 and 2004/2005.  However under this item, there were two sub-items, namely “Fees” and “Other emoluments”. Against the sub-item of “Fees”, there was no amount for those years, which indicated that no fees were paid in cash.  There was only an amount of HK$120,000 against “Other emoluments”, but there was no supporting evidence to indicate as to which directors the emoluments were for, bearing in mind there were 6 directors in those years.  Anyway, the “emoluments” appeared to be reimbursement of certain expenses. The amounts for “MPF contribution” and also “Salaries and allowances” for 2003/2004 and 2004/2005 also did not tally with the MPF contributions and salaries stated on MPF Remittance Statements for the 5 months in 2006, although I accept that the latter were for the year of 2006. 

447.  Having considered all the evidence, I find there was no sufficient evidence that the monthly payment to P was her director’s remuneration.  It is my finding that those monthly payments were her salaries from D2, and that that she was an “employee” within the meaning of the Employment Ordinance.  Further, I find she had worked under a continuous contract of employment with the Sushi Restaurant and/or D2.

448.  It was not disputed that the business of the Sushi Restaurant ceased/transferred on 30 June 2006. P said thereafter, she was transferred back by D3 to work for D1 on 1 July 2006, and carrying out more or less the same work duties at D1 as she was doing before.

449.  P then said at the Family Meeting, D3 had on behalf of D1 and/or D2 acknowledged all sums due and payable to P under her employment, but D1 and/or D2 failed to pay her, and therefore she stopped working for D1 and/or D2 after 30 September 2006.

450.  The MPF Remittance Statements showed that D2 had continued to make the mandatory MPF contribution for P for the months of July, August and September, as employee of D2.  The MPF Transfer Statement clearly indicated that P’s last date of employment with D2 was 30 September 2006, and that the termination reason was “resignation”[160].

451.  P said after Sushi Restaurants transferred, she had worked at D’s frozen meat shop in cleaning and dealing with vegetables and meat products.

452.  Kong had worked for D1 for some 30 years.  Kong had said in his witness statement that during the months of July to September 2006, he was working at D1 but did not see P working there[161].  In fact, during the trial, Kong had said that P did not have any substantive work at D1 since 1988 after the limited company was incorporated, and it was only before when there was a retail shop during the Old Sam Kee/New Sam Kee that P had helped and worked there.

453.  Mr Cheung had pointed out that in P’s police statement on 29 September 2006, she had stated that she had no occupation.  When cross examined on this, P had said she was not paid any salary nor was there any work, and that was why she had stated she had no occupation.

454.  Whether P was actually assigned any work or not, the MPF Remittances Statements and the MPF Transfer Statement all showed that she had remained an employee of D2 until 30 September 2006.  It is my view that, notwithstanding the cessation of the Sushi Restaurant and her own case that she was employed by D1 for the three months July-September 2006, she had remained an employee of D2 until she resigned on 30 September 2006.  

G.2   Quantum

455.  Ds had indicated at the trial that they were not challenging the quantum of P’s claim. I will set them out.

G.2.1 Outstanding Salaries

456.  P’s claim for outstanding salaries was supported by her evidence and:-

(i) 19 Remuneration Cheques of HK$9,500 each from D2 dated between 6 January 2003 and 6 July 2006[162];

(ii) P’s MPF Transfer Statement and D2’s MPF Remittance Statements indicated and I have found that that P was still working as an employee for D2 from July to September 2006.

457.  Giving credit to MPF contribution made by D2 on behalf of P, her outstanding salaries would amount to a total of HK$209,000 as follows :-

a. For 1.1.03-31.7.04 – HK$180,500 ($9,500 x 19)

b. For 1.7.06-30.9.06 – HK$28,500 ($9,500 x 3)

G.2.2 Over-deduction of monthly salaries

458.  The calculation for this claim was set out in Schedule 2 of P’s statement of claim[163] and was supported by the following documents:-

(i) P’s bank passbook showing the reduced monthly salary payments after the deductions for mortgage repayments;

(ii) BEA repayment schedule[164] showing the proper amount of deduction from her monthly salary for the Mortgage repayment in respect of the Happy Valley Property.

459.  Under this head, P claimed a total of HK$20,804.30 against D2, which I accept.

G.2.3 Overtime payments

460.  This claim was supported by P’s evidence in her witness statements[165].  For the period of May 2005 to June 2006, P’s overtime work was also evidenced by her Time Records.

461.  Under this head, P claimed a total of HK$27,933.33 against D2, which I accept.

G.2.4 End of year payments

462.  This claim was supported by P’s own evidence[166].

463.  Section 11C of the Employment Ordinanceprovides that the payment period in respect of which an end of year payment is payable is that agreed in the employment contract, or if not agreed, a lunar year.

464.  Section 11D of the Employment Ordinance provides that the amount of an end of year payment payable is the specific amount agreed in the contract, or if the specific amount is not agreed, a full month’s wages.

465.  Section 11F of the Employment Ordinance provides for the payment of a pro-rata amount of the end of year payment if an employee has been employed for not less than 3 months in a payment period, but his contract of employment is terminated at any time during the payment period. This does not apply if the termination is done by the employee, or where the termination is pursuant to summary dismissal under section 9.

466.  P had only made this claim against D2 in respect of end of year payments from D2 in respect of her employment period from January 2001 to June 2006 in the total amount of HK$55,000 (HK$10,000 x 5.5 years).  In light of my finding that she continued to be employed by D2 until 30 September 2006, the total amount should be HK$57,500, which I allow.

G.2.5 Annual leave

467.  As pleaded by P, she started her employment with D2/Sushi Restaurant in December 1995 and at the end of June 2006, pursuant to section 41AA of the Employment Ordinance :-

(a) In the year 1999, she was entitled to annual leave of 8 days;

(b) In the year 2000, she was entitled to annual leave of 9 days;

(c) In the year 2001, she was entitled to annual leave of 10 days;

(d) In the year 2002, she was entitled to annual leave of 11 days;

(e) In the year 2003, she was entitled to annual leave of 12 days;

(f) In the year 2004, she was entitled to annual leave of 13 days;

(g) In the year 2005, she was entitled to 14 days; and

(h) From January to June 2006, she was entitled to 7 days.

468.  P had clarified during the trial that her annual leave taken in 2000 was a total of 5 days and in 2004, a total of 5 days.  In respect of January to June 2006, P had clarified during the trial that she had taken 4 days annual leave for :- (a) Father’s death (1 day); (b) 100-day religious ceremony (百日齋) for Father (1 day); and (c) a holiday to Zhuhai (2 days).

469.  On the basis of the above, P’s revised claim for annual leave pay was a total of 56 days, with breakdown as follows :-

(a) For 1999 :- 8 days (ie 8 days – 0 day taken);

(b) For 2000 :- 4 days (ie 9 days – 5 days taken);

(c) For 2001 :- 10 days (ie 10 days – 0 day taken);

(d) For 2002 :- 11 days (ie 11 days – 0 day taken);

(e) For 2003 :- 12 days (ie 12 days – 0 day taken);

(f) For 2004 :- 8 days (ie 13 days – 5 days taken); and

(g) For January to June 2006 :- 3 days (ie 7 days – 4 days taken).

470.  It was not disputed that P’s monthly salary for 1999-2000 was HK$9,800 and that for March 2001 onwards was HK$10,000, P’s total claim for unpaid annual leave as against D2 until 30 June 2006 was a total amount of HK$18,586.67 (ie HK$9,800 x 12/30 + HK$10,000 x 44/30).  I allow this amount.

471.  P did not pursue any claim for annual leave pay between 1 July 2006 to 30 September 2006.

G.2.6.  Statutory holidays payment

472.  Being an employee of D2 at the material times, P was entitled to be granted statutory holidays under section 39(1) of the Employment Ordinance.  Under section 40A(2) of the Employment Ordinance, D2 was obliged to pay P the salary in respect of any outstanding holidays within 7 days of termination of employment.

473.  This claim was supported by P’s own evidence. 

474.  P sought statutory holiday payment of a total of HK$ 16,986.33, which I allow :-

a.	For 50 days until 30 June 2006 - $16,653
	(HK$9,800 x 2/30 + HK$10,000 x 48/30 )
b.	For 1 day from 1 July 2006 - $333.33
	(HK$10,000 x 1/30)

G.2.7 Medical expenses

475.  This claim was supported by various receipts produced by P, and her case was:

(a) Dr William W H Yuen[167]: HK$800 on 1.8.06;

(b) Drugs (Arcoxia 120mg)[168]: HK$87 on 12.9.06;

(c) Chinese Dr Chan Kwok Man[169]: HK$1,650 for June 2006 and HK$2,200 for July 2006;

(d) Dr Choi Kin[170]: HK$3,050 for June to October 2006

476.  For Dr Choi Kin’s fees, Mr Lo suggested an average of HK$378 for 7 consultations, which meant a total of $2,646 for June to September 2006.  As I have found that P had continued to be employed by D2 until 30 September 2006, I accept her total claim for medical expenses until this date of a total of $7,383.

G.2.8 Salaries in lieu of notice

477.  P’s case was that her employment contract with D1 for 1 July 2006 to 30 September 2006 was a “continuous contract”, and as such it was deemed to be a contract for 1 month renewable from month to month pursuant to section 5(1) of the Employment Ordinance.  Mr Lo had argued that it would follow from this that a notice of 1 month must be given pursuant to section 6(2)(2) of the Employment Ordinance.

478.  I have found that P had continued to be employed by D2 from June 2006 to September 2006.  It was not disputed that she was not paid any salaries during this period.  However according to her MPF Transfer Statement, it was she who had resigned.  She said it was constructive dismissal as no salaries were paid to her.  However, in light of the parties’ relationship at the time, I am not satisfied her resignation was due to non payment of salaries or any constructive dismissal.  I am not prepared to allow any sums under this head.

G.3.   Conclusion on the Employment Claim

479.  In light of the above, I allow P’s claim of a total of HK$358,193.63 as against D2.  P also claimed pre-judgment interest on this sum at the rate of prime rate plus 1% p.a. from the respective due date to date of judgment, and thereafter at judgment rate until full payment.  P herself had admitted that she agreed to withhold cashing of the 19 Remuneration Cheques, and it was only on 15 November 2006 that she sent a demand letter to D2 for her outstanding salaries, and that it was only on 22 November 2006 that she made a claim for outstanding salaries and all her statutory entitlements.  Having considered the circumstances of this case, I am only prepared to allow pre-judgment interest as from 22 November 2006 until judgment, and thereafter at judgment rate until full payment.

H.  The Counterclaim

480.  On the 1^st counter claim, namely D1’s claim against P for a sum of HK$220,903.15 being alleged outstanding liabilities in the form of director’s loans. This sum of HK$220,903.15 was made up of:

(a) HK $18, 207.15

(b) HK$202,696

481.  The sum of HK$18,207.15 was made up of:

(a) HK$10,970.15 said to be owed to D3 arising out of the purchase of Canadian Properties;

(b) HK $1,337,237 said to be owed to D1, being initial payments of HK$ 352,235 and the mortgage loan repayments of HK$1,165,502, for the South Horizon Property, less P’s contribution by way of the 19 Remuneration Cheques of HK$180,500

(c) The net total amount of (a) and (b) would be HK$18,207.15, namely the total amount of (a) HK$10,970.15 and (b) HK$1,337,237, LESS HK$1,330,000 being P’s repayment by the 2003 Cashier Order and the 2004 Cashier Orders.

482.  As for the amount of HK$202,696, this was made up of 8 mortgage loan repayments made by D1 on behalf of P as loans to her from November 2004 to June 2005.

483.  For the reasons set out earlier in this judgment, I have found that there was no sufficient evidence that P had owed D3 any sums arising out of the purchase of the Canadian Properties, and further I have found that P had held any interest in the South Horizon Property in trust of or as nominee for Pony, and there was no sufficient evidence that D1 had advanced any of the mortgage loan repayments to P as director’s loans.

484.  The 2^nd counterclaim made by D2 against P was based on the P’s alleged breach of the Happy Valley Agreement, and her alleged breach of fiduciary duties and/or breach of trust.  For the reasons given earlier, I have found that the Happy Valley Agreement did not exist.  The alleged breaches of fiduciary duties and/or trust were based on P, as director of D2, had entered into “forged” minutes on behalf of D2 and executed the Colourmax Provisional Agreement and had sent a letter to the bank purportedly on behalf of D2 to authorise discharge/release of the Mortgage of the Happy Valley Property with a “forged” chop of D2.  For the reasons set out earlier in this judgment, I have found that D2 had held the Happy Valley Property in trust for P’s sole benefit since date of completion of purchase.  The chop was arranged to be made by Joyce.  There was no sufficient evidence that P was in breach of fiduciary duties or in breach of trust, or that any secret profits were made by P as director of D2.  There was also no sufficient evidence of any loss or damages suffered by D2.

485.  The 3^rd counterclaim was made by D2 against Colourmax based on its dishonest assistance of P’s alleged breaches of fiduciary duties and/or trust.  Colourmax was absent at the trial, and in light of my findings that there was no sufficient evidence of P’s alleged breaches, Ds’ case against Colourmax had not been made out.

486.  As regards the 4^th counterclaim by D2 against P and Colourmax on the attempted disposition of the Happy Valley Property and/or conspiracy, as I have found that P was the 100% beneficial owner of the property, there was no sufficient evidence that D2 had suffered any loss and damage, and in any event, Ds had not adduced expert valuation evidence regarding the market price of the Happy Valley Property in October 2007 for any loss to be quantified[171].

487.  To conclude, for all the above reasons, Ds had not been able to prove their case on their counterclaim against P and/or Colourmax.  I dismiss all of Ds’ counterclaims against P and/or Colourmax.

I.  Orders

488.  In light of the above, I make the following orders and/or declarations:

Under the Debt Claim

(i) P’s Debt Claim be dismissed.

Under the Property Claim

(i) The Happy Valley Property is declared to have been held by D2 on trust for the sole benefit of P absolutely since 8 November 2004;

(ii) A full and proper account be taken in respect of all monies paid or received by P and D2 in respect of the Happy Valley Property, including but not limited to the purchase thereof, and an order that D2 or P do pay to the other party any such net sum found due upon the taking of such account together with interest thereon at judgment rate;

(iii) D2 do forthwith take all steps necessary, and at its costs, to convey the entire title and estate it currently holds in the Happy Valley Property to P at nil consideration subject to the outstanding Mortgage. Any repayments for the outstanding Mortgage shall be paid by P after the transfer/conveyance. 

Under the Employment Claim

(i) D2 do pay the total sum of HK$358,193.63 to P together with pre-judgment interest of 6% pa from 22 November 2006 to the date of judgment, and thereafter at judgment rate until full payment.

Under the Counterclaim

(i) All counterclaims against P and Colourmax are hereby dismissed;

J.  Costs

489.  Although P did not succeed with the Debt Claim, as I have said this claim was connected with the Property Claim which was the main subject of the litigation. Further, I have accepted P’s case on the 8 Loan Cheques.  As P is the overall successful party, I order that (a) Ds do bear P’s costs in the main action jointly and severally and (b) D1 and D2 do bear P’s costs in the counterclaim jointly and severally, including all costs reserved.  P’s own costs in the main action and the counterclaim be taxed in accordance with the Legal Aid regulations.

490.  This is a costs order nisi, which shall be made final after 21 days.

HCA 1897 of 2009

Index