LAM SO YUK HANG MINNIE AND OTHERS v. SUPERYIELD HOLDINGS LTD. AND OTHERS

HCMP6440/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.6440 OF 1998

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J U D G M E N T

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The nature of these proceedings

1. This is the hearing of a petition under s.168A of the Companies Ordinance in respect of a company known as Superyield Holdings Ltd ( "the Company").

2. By an order made by Le Pichon J on 7 January 2000, this hearing is only concerned with the question of liability. The parties have agreed a number of issues to be tried. I will refer to them after a brief recital of the facts.

3. The provisions of s.168A of the Ordinance are well-known. For our purposes, the material parts of subsection (1) reads as follows :-

" Any member of a company who complains that the affairs of the company are being or have been conducted in a manner unfairly prejudicial to the interests of the members generally or of some part of the members (including himself) ...., may make an application to the court by petition for an order under this section.

4. Subsection (5) of s.168A provides :

"The personal representative of a person who, at the date of his death, was a member of a company, or any trustee of, or person beneficially interested in, the shares of a company by virtue of the will or intestacy of any such person, may apply to the court under subsection (1) for an order under this section and, accordingly, any reference in that subsection to a member of a company shall be construed as including a reference to any such personal representative, trustee or person beneficially interested."

5. At an earlier stage of these proceedings, there was some question as to be locus of the petitioners. This is no longer an issue before me.

The parties

6. The petitioners are the wife and four children of the late Albert Lam Kwong Leung ("the deceased"). The 1st respondent is the Company. The 2nd respondent is Mr Gordon Lam (the "2nd respondent"), also a son of the deceased and the brother of four of the petitioners. The 3rd respondent is a company, associated with and controlled by the 2nd respondent.

The background

7. The Company was incorporated in 1981 with a nominal capital of $100,000, divided into 100,000 ordinary shares of HK$1 each.

8. Prior to 19 January 1998, the Company's capital issued and paid up or credited as paid up was HK$2.

9. Prior to 15 February 1996, the date of the death of the deceased, the issued shares of the Company were registered as to one share in the name of the deceased and as to the other share in the name of the 2nd respondent. The directors of the Company in 1981 were the deceased and the 2nd respondent.

10. It is common ground that apart from the 2nd respondent, none of the petitioners had anything to do with the affairs of the Company, nor do the petitioners have much or any knowledge of the Company's affairs or transactions. The Company appeared not to have done very much by way of business since incorporation and is basically a holding company.

Other corporate entities

11. The Company was and is the registered holder of one share of HK$1 in a company known as Superyield Construction Company Limited ("Superyield Construction"). Lam Kwan Realty Ltd held the other subscriber share when Superyield Construction was incorporated on 28 September 1982, and this was the position until 19 January 1998.

12. Superyield Construction had a nominal share capital of HK$100,000 divided into 100,000 ordinary shares of HK$1 each. Superyield Construction became, in late 1990, the registered owner of a property, being the 2nd floor and the roof of Block A and carparking space No.3, Ascot Villa, Nos.37-41 Shatin Heights Road, Shatin, New Territories, Hong Kong ("the Ascot Villa Property").

13. Miss Wong for the petitioners has produced a number of very useful schedules and charts describing the various companies and the businesses and properties associated with the Lam family.

14. Apart from the Company and Superyield Construction, I have already mentioned Lam Kwan Realty as holding initially one share, amounting to 50% of the then issued share capital of Superyield Construction.

15. Lam Kwan Realty is the main holding company of the shares in the various corporate entities associated with the deceased and the 2nd respondent. It holds shares, directly or indirectly, in most if not all the other corporate entities, the details are in the various schedules carefully prepared by Miss Wong. The current registered shareholders of Lam Kwan Realty are the 2nd respondent as to 66%, the deceased as to 33% and another company, Superyield Nominees Ltd ("Superyield Nominees") , as to the remaining 1%.

The plaintiff's case

16. The case for the plaintiff is tolerably straightforward . In simple terms, and at the risk of perhaps some inaccuracy, the petitioners say that on the face of it the deceased had an equal shareholding with the 2nd respondent in the Company. The estate of the deceased must therefore be entitled to a half share of the Company.

17. Similarly, and again in simple terms, the Company and Lam Kwan Realty each held a 50% share in Superyield Construction. By virtue of the deceased's shareholding in the Company and in Lam Kwan Realty, his estate also has an interest in the Ascot Villa Property which, for our purposes, is the only substantial asset of Superyield construction.

18. The petitioners bring these proceedings as persons beneficially interested in the deceased's one share in the Company on the intestacy of the deceased. They rely on subsection (5) of s.168A of the Companies Ordinance. As I said earlier, their locus to petition is no longer in issue.

The administration of the deceased estate

19. The 2nd respondent initially took charge of the application for the grant of letters of administration in respect of the deceased's estate. The 5th petitioner has since late 1999 taken over. There are clearly differences between the parties as to how the matter should have been proceeded with, and there is no less clearly some ill-feeling amongst the siblings over the administration of the deceased's estate. The rights and wrongs are not matters which are necessary of resolution by me in these proceedings.

The petitioners' complaints

20. The 2nd respondent has been running the Company and Superyield Construction. On 19 January 1998, he caused the Company and Superyield Construction to : first, issue and allot 9,998 ordinary shares of HK$1 each in the Company to the 3rd respondent, a company incorporated with limited liability under the laws of the Territory of the British Virgin Islands and secondly, to issue and allot 19,998 ordinary shares of HK$1 each in Superyield Construction to the 3rd respondent.

21. As a result of these allotments, the issued shares in the company are as follows : the deceased's estate now holds one share, amounting to 0.01% of the Company's share capital; the 2nd respondent also holds one share; the 3rd respondent now holds 9,998 shares, amounting to 99.98% of the Company's share capital.

22. The issued shares in Superyield Construction have since the allotment been as follows : the Company now holds one share, which amounts to 0.005% of the Company's share capital; Lam Kwan Realty Ltd likewise holds one share and the 3rd respondent now holds 19,998 shares, amounting to 99.99% of Superyield Construction's share capital.

23. Similar exercises in dilution, say the petitioners, also occurred at about the same time in other family companies, namely Superyield Properties Ltd ("Superyield Properties") and Wong Ma Kok Development Ltd. Another company, Kilmaron Ltd ("Kilmaron") underwent a similar exercise somewhat earlier on 4 April 1997.

24. The petitioners, in particular, Mr Andrew Lam, the 5th petitioner, believed that apart from receiving and holding the one share in Superyield Construction, the Company never carried on any other business, nor did it require the infusion of new capital by way of any issue of shares. This is not really in dispute although there is evidence that the Company also held a subscriber's share in Superyield Nominees.

25. The petitioners' case is, also, that apart from holding the Ascot Villa Property, Superyield Construction did not carry on any other business, nor did it require the infusion of new capital by way of an issue of shares. This, too, is not in dispute.

The issues

26. A list of issues as agreed by the parties are as follows :

1. Whether the 2nd respondent paid for the Ascot Villa Property.

2. If so, whether Superyield Construction holds the Ascot Villa Property on a "purchase-money" resulting trust for the 2nd respondent and as his nominee.

3. Whether the 1st respondent holds the 1 (50%) share in Superyield Construction registered in its name as the 2nd respondent's nominee.

4. Whether the deceased and, after his death on 15 February 1996, his estate, hold the 1 (50%) share in the 1st respondent registered in the name of the deceased as the 2nd respondent's nominee.

5. If the answers to the aforesaid are in the affirmative, whether the court should make an order that upon a grant of administration to the deceased estate, that the 1 share in the 1st respondent registered in the name of the deceased be transferred to the nominee of the 2nd respondent and such transfer be entered upon the register of members of the 1st respondent.

6. If the answer to questions 1 to 5 are in the negative, whether the 2nd respondent had conducted the affairs of the 1st respondent in a manner unfairly prejudicial to the interest of the estate of the deceased by alloting

(1) 19,998 shares in Superyield Construction to the 3rd respondent;

(2) 9,998 shares in the 1st respondent to the 3rd respondent on 19 January 1998;

7. If so, the appropriate remedy for the petitioners.

27. The petitioners' position is that if the first issue is answered in the affirmative, they make no further submissions on the second and third issues. Miss Wong did emphasize that, as far as the third issue is concerned, that is on the basis that the Ascot Villa Property is the only asset of Superyield Construction. Clearly if there are other assets, the position may have to be revisited.

28. Similarly, if issue 4 is answered in the affirmative, the petitioners make no submission on issue 5 and Miss Wong accepts that issues 6 and 7 would not then arise.

The petitioners' evidence

29. For the petitioners, only the 5th petitioner, Mr Andrew Lam, the younger brother of the 2nd respondent, gave oral evidence. He made four affirmations which contained evidence of the family background, the beneficiaries of the deceased's estate, details of the companies with which the deceased was associated, the properties and shareholdings of the various corporate entitles, the steps taken in the administration of the deceased's estate, the dilutions complained of, and generally casting doubt on the assertions made by the 2nd respondent in his affirmations.

30. What seems clear, however, is that none of the petitioners had much personal knowledge of the affairs of these companies. This, it seems to me, was part of the discontent they felt with the 2nd respondent. So that the petitioners' case, as developed in Mr Andrew Lam's evidence, is by and large one based on the available documents and inferences which Miss Wong invites me to draw from them and from the other surrounding circumstances.

31. There is no dispute that the 2nd respondent started assisting the deceased in the management of the deceased's business and assets since the early 1970s after the 2nd respondent's return from Australia. The dispute is as to which of the companies and the shares in them belong to the deceased, as the petitioners claim, or to the 2nd respondent, as he asserts, with the deceased holding such shares on his behalf as his nominee.

The defence

32. In broad terms, the 2nd respondent's response to the petition may be summarized as follows :

(1) The Company which was incorporated in January 1981 was dormant until it subscribed for one share in Superyield Construction in September 1982. Other than this share, the Company had no other assets. Miss Wong has, however, pointed out correctly that the Company had earlier taken up a subscriber share in Superyield Nominees.

(2) The 2nd respondent paid up the Company's capital of HK$2 and paid for all its expenses, not apparently amounting to very much. This I accept.

(3) Superyield Construction was dormant until it purchased the Ascot Villa Property in November 1990. This property remains Superyield Construction's only asset.

(4) The Ascot Villa Property was paid for entirely by the 2nd respondent.

(5) The Company held the one share in Superyield Construction basically as the 2nd respondent's nominee and the deceased was appointed a director of Superyield Construction to comply with the requirements of the Companies Ordinance; in other words, the deceased had no real function in Superyield Construction which, similar to other Superyield companies or some of them at any rate, is the 2nd respondent's company to hold properties.

(6) The deceased held the one share in the Company as the 2nd respondent's nominee and the office of director also to comply with the requirements of the Ordinance.

(7) The deceased did not have any beneficial interest in these two companies.

33. Items (4) to (7) are in issue in these proceedings and I will deal with them later on. The 2nd respondent also says that Kilmaron and Superyield Properties are companies controlled by him.

The defence evidence

34. In addition to the 2nd respondent, whose evidence I will have to consider in some detail, two other witnesses provided affirmations and oral testimony.

35. The first, Mr Spencer Lam, is the eldest son of the deceased and the elder brother of both the 2nd respondent and the 5th petitioner. His evidence really went to peripheral matters and he had no personal knowledge as to the source of funds with which the Ascot Villa Property, which was put into Superyield Construction, was paid for.

36. The other witness, a Madam Lam Shui Lin, a sister of the deceased and an aunt of Mr Spencer Lam and the 2nd respondent, sold units in Ascot Villa to her two nephews. She knew that she was selling those units to them at a discount, as she thought, although they disagreed, that they were short of funds. She also mentioned somewhat confusingly about benefiting the deceased by so doing.

37. Her evidence was somewhat confused and I did not find it of assistance in resolving the disputed contentions of the parties.

The 2nd respondent's evidence

38. The 2nd respondent made two affirmations which were supplemented by oral testimony. The oral testimony, in particular, was carefully and ably tested by Miss Wong in cross-examination. His evidence is to the following effect.

39. While the deceased was alive, the 2nd respondent assisted in the deceased's business and in the management of the deceased's properties. The 2nd respondent had his own separate business and investments. He established "shelf companies", although he might not use them immediately after incorporation. He gave evidence about the various companies mentioned in these proceedings.

40. After the death of the deceased, Lam Kwan Realty, his son Geoffrey and daughter Sharon were also appointed as directors of the Company which the 2nd respondent says was always his own company. It was natural, so he says, for him to appoint members of his family to be the directors of it. Lam Kwan Realty was appointed as a director also for convenience. Lam Kwan Realty's Board of Directors consisted of himself, another younger brother, his son, his daughter and his aunt, Madam Lam Shui Lin and a corporate director, Superyield Nominees, which is also a company said to be controlled by the 2nd respondent.

41. Similarly, Superyield Construction was incorporated by him. This was on 28 September 1982 and the two subscribing members were the Company and Lam Kwan Realty. As at 28 September 1995, the deceased, the 2nd respondent's daughter Sharon and the 2nd respondent were the directors. After the death of the deceased, the 2nd respondent's son Geoffrey and Lam Kwan Realty were also appointed as directors of Superyield Construction, which was also his own company, in which the deceased had no beneficial interest.

42. The deceased took no part in the management of the Company and had no interest in its affairs, nor did he put in any capital or assets into the Company which had very little expenses, all of which the 2nd respondent paid for.

43. Superyield Construction was also dormant until the 2nd respondent purchased the Ascot Villa Property in its name in November 1990. The deceased, according to the 2nd respondent, was not conferred any benefit by having his name as a subscriber and a director in Superyield Construction. He said that the deceased was never paid any dividend or director's fee or salary by the companies and he did not contribute any capital for the purchase of the Ascot Villa Property and have no beneficial interest in or entitlement to it.

The purchase of the Ascot Villa Property

44. The actual details relating to the purchase of the Ascot Villa Property are, in certain respects, not entirely clear.

45. The 2nd respondent's evidence is that he paid his aunt $1 million because she refused to take more even though it was valued at $1.38 million. The aunt seemed to think that he paid less than that. She mentioned a figure of $600,000 in evidence, but again her recollection was, as she acknowledged, faulty. The figure in the assignment which was carried through to Superyield Constructions audited accounts for successive years was also $1.38 million.

46. The 2nd respondent's explanation, taken with what he had said in his 1st affirmation and what appears from contemporaneous bank statements, is somewhat confusing.

47. The upshot, as I inferred from the evidence available, is that by using the figure of $1.38 million in the assignment, which was, as I have mentioned, the valuation used by the bank, he was able to get a loan of $966,000 from the bank which was prepared to lend at 70% of its valuation.

48. The loan was credited on 11 December 1990 to Superyield Construction's bank account which also showed payments in of $400,000.00 in cash and withdrawals of $380,000 on 26 November 1990 - three days after the assignment in which the Vendor (the aunt) had acknowledged receipt of $1.38 million which of course she never received. And 23 November 1990 was also the date the 2nd respondent said that his aunt, the Vendor, had agreed to the discount. The $400,000 was, however, initially said by the 2nd respondent to be for his aunt. Why was this necessary? By 26 November 1990, the aunt had already agreed to accept $1 million three days earlier.

49. The 2nd respondent's further explanations about balancing the books of accounts did not, unfortunately, clarify the confusion.

50. In making these comments about his evidence, I do not say that the 2nd respondent was trying to be deliberately untruthful. It is more likely that he simply made a mistake. Having said that, it does seem clear that the purchase money was arranged by the 2nd respondent alone through a mortgage with the Hongkong and Shanghai Banking Corporation Limited ("the bank") for a loan at HK$966,000. I also accept that the balance of the purchase price, namely some $34,000, was paid by the 2nd respondent and that it was the 2nd respondent who arranged to pay off the bank loan largely from income from letting the Ascot Villa Property. The balance of the monthly repayments of the mortgage loan, where there were initial shortfalls from the rental receipt, was paid by him and treated as loans to Superyield Construction. The mortgage loan was completely repaid in April 1998. Apart from being party to a joint and several guarantee in respect of the mortgage loan, to which I will have to return, I find that the deceased had no participation in the purchase of the Ascot Villa Property.

51. The deceased's role as a joint and several guarantor in respect of this mortgage loan for $966,000, was not something which surfaced in the evidence until a few days before the commencement of the hearing and the 2nd respondent was unable to shed much light as to how the deceased came to be a joint and several guarantor.

52. Miss Wong criticized the 2nd respondent for his inability to clarify the circumstances surrounding the guarantee. My view is that the 2nd respondent has simply forgotten what happened. The 2nd respondent also said that the various allotments in January 1998, of which complaints are made in the petition, were all made for his own convenience. I will deal also with this aspect later on.

53. Miss Wong mounted an effective and sustained attack on the 2nd respondent's evidence. In relation to the Ascot Villa Property, she reminded me that there was no declaration of trust and pointed out the incomplete and unsatisfactory discovery in relation, in particular, to the evidence of payment for the Ascot Villa Property.

54. Miss Wong made the point that the documents produced did not show :

(1) how much the Aunt was paid;

(2) when she was paid; or

(3) that she was paid with funds from the current account of Superyield Construction.

55. While this is all strictly correct, clearly these questions have to be considered in the light of all the evidence, including the oral testimony of the 2nd respondent.

56. Further, says Miss Wong, while the bank statements show the repayment of the mortgage loan with funds from the current account, other than deposits which were obviously attributable to rent paid by the tenants of the Ascot Villa Property, the documents disclosed do not show :

(1) the source of the $400,000;

(2) the uses to which that sum was put by Superyield Construction; or

(3) the sources of those deposits in the statements of the current account identified as the 2nd respondent's loans to Superyield Construction.

57. I make the same comment about having to consider all the evidence. My own view is that the $400,000 seems very much a side issue.

58. On Miss Wong analysis, there is thus no documentary evidence of the payments by the 2nd respondent of :

(1) a downpayment;

(2) the cost and disbursements associated with the purchase;

(3) the difference between the rental and the monthly repayments of the mortgage loan.

59. I accept that the documents do not tell the whole story. Nor would I expect them to. Clearly the different questions depend on, as well, the testimony in this case of the 2nd respondent. I find that no downpayment was ever made.

60. As for the respondents' evidence on the trust of the deceased's share in the Company, Miss Wong pointed out that there is also no declaration of trust. Moreover, the share had been put down as an asset of the estate of the deceased in the 2nd respondent's affidavit to the Commissioner of Estate Duty dated 9 January 1997, although he had given it the nominal value of $1. Clearly, says Miss Wong quite legitimately, if this share had been held on trust by the deceased for anyone, it ought to have gone in the appropriate schedule as property held on trust by the deceased. The 2nd respondent's explanation, which I accept, is that he was not experienced in such matters and left it to his solicitors, or perhaps to the solicitor's clerk, and it did not appear to matter to him very much since that share was only valued at $1.

61. Miss Wong made the further point that even if the 2nd respondent's testimony of the trust of the Ascot Villa Property is accepted, it does not follow that the deceased and, after his death, his estate, holds the share in the Company as the 2nd respondent's nominee. This is because, apart from the one share in Superyield Construction, the Company had at least another asset, namely, a 50% shareholding in Superyield Nominees which in turn holds, amongst others, 1% of the shares in Lam Kwan Realty at the top of the Lam family group of companies.

62. These are valid observations made of the documentary evidence adduced by and on behalf of the 2nd respondent. I accept that the documents themselves do not identify that the 2nd respondent necessarily provided all the funds for the purchase of the Ascot Villa Property. I also accept that the evidence in relation to the $400,000 is confused and not entirely satisfactory, and that the bank statements and the audited accounts show that there may have been at least four sums paid into Superyield Construction's bank account which did not come directly from the 2nd respondent. The 2nd respondent was able to explain these four sums to my satisfaction in the cross-examination.

63. At the same time, as I have mentioned earlier, I do not think that the 2nd respondent was guilty of deliberate untruths in the course of his evidence to which I have already recounted. In particular, I am unable to and do not reject his evidence that both the Company and Superyield Construction are his companies and that the presence of the deceased as a shareholder and director in the Company and as a director in Superyield Construction is anything more than to satisfy the requirements of the Companies Ordinance. On the contrary, his evidence to this effect is convincing and I accept it. He and the deceased were clearly in a close personal and business relationship. He was the son who assisted the deceased and later the deceased siblings in their property affairs, except those of one of the deceased's brothers, even since the 2nd respondent returned from Australia in the early 1970s. They clearly trusted one another.

64. As for the funds for the purchase of Ascot Villa, I have already commented on the unsatisfactory nature of certain items of the evidence. That does not mean that I am in doubt as to who arranged for the funds and who purchased from Madam Lam, or the consideration that Madam Lam was actually paid. I am satisfied that it was the 2nd respondent who arranged for the funds, including the loan from the bank, and Madam Lam was paid $1,000,000 by cheque drawn on Superyield Construction's bank account on 11 December 1990.

65. I am also satisfied that the beneficial owner of those funds is the 2nd respondent, that the deceased had no interest in them and, apart from making himself jointly and severally liable on a guarantee to the bank, did not do anything else to arrange for the purchase which had nothing to do with him. It was the 2nd respondent's purchase which was carried out via the corporate vehicle of Superfield Construction. On the evidence, I am satisfied the deceased had no interest in the Company, nor directly or indirectly in Superyield Construction which the 2nd respondent chose to hold the Ascot Villa Property.

66. The 2nd respondent was clearly not entirely sure of his ground in a number of instances in the course of his evidence. One area in which he had problems was in relation to questions put to him in connection with his affidavit to the Commissioner of Estate Duty, including the valuation of certain of the shares in the various companies and how the deceased's share in the Company was treated and described in the affidavit. I agree with much of Miss Wong's criticism of parts of what appear in the documents for the Estate Duty Office and in parts of the 2nd respondent's evidence, and it may be that some of the information supplied was less than complete.

67. On the whole, however, these difficulties, although ably deployed by Miss Wong, do not have too much of an adverse impact on the 2nd respondent's credibility in connection with the matters directly germane to the issues which I have to consider.

68. I am satisfied that despite some of these difficulties in the 2nd respondent's evidence and despite, as I have said a searching and very wide-ranging cross-examination by Miss Wong, that the 2nd respondent emerged essentially unshaken on the areas of the beneficial ownership of the Company, of the beneficial ownership of Superyield Construction, on the funds for the purchase of the Ascot Villa Property and of his sole beneficial interest to these companies and that property.

69. Submissions were also made on a number of other points. For completeness, I deal with them briefly.

The dilution complaint under s.168A

70. If I had not found in favour of the 2nd respondent on the foregoing matters, and if I had found that the deceased had interests in the Company, and therefore indirectly in Superyield Construction, I would have found that the allotments were unfairly prejudicial to the Company and the estate of the deceased for these reasons :

(1) Neither Superyield Construction nor the Company carry on at any time any business requiring the infusion of new capital.

(2) The sums raised were nominal and plainly insufficient for any genuine or bona fide commercial reasons.

(3) Even if Superyield Construction and the Company genuinely required these sums for the purposes of their businesses, the Company and the deceased's estate could have been but were not invited to subscribe for any part of the new shares. It cannot be suggested that either Superyield Construction or the deceased's estate would not have been financially able to take up their proportionate parts of the new shares or that they would not have done so.

(4) The price at which the new shares were allotted to the 3rd respondent, i.e. HK$1 per share, fell far short of the net asset value of Superyield Construction and that of the Company.

71. The 2nd respondent's initial explanation for the allotment in his affirmation is that the disputed allotments were done for his convenience. This was elaborated upon in oral testimony. Basically, they were supposed to have had the effect of minimising stamp duty and estate duty. Despite Miss Wong's very patient exploration with the 2nd respondent, I have to say that his explanation and rationale are not convincing to me.

72. Miss Wong referred to amongst others, ss.34 and 35 of the Estate Duty Ordinance, s.57B of the Companies Ordinance and art.38 of the Articles of the Company which deals with the issue an allotment of shares following an increase in capital. In the light of my findings it is unnecessary to refer to these provisions. Miss Wong also helpfully referred to a number of authorities including Re a Company [1986] BCLC 362, where at p.367 Hoffmann J, as he then was, made these observations :

" Nevertheless, I do not think that the bona fides of the decision or the fact that the petitioner was offered shares on the same terms as other shareholders necessarily means that the rights issue could not have been unfairly prejudicial to his interests. If the majority know that the petitioner does not have the money to take up his rights and the offer is made at par when the shares are plainly worth a great deal more than par as part of a majority holding (but very little as a minority holding), it seems to me arguable that carrying through the transaction in that form could, viewed objectively, constitute unfairly prejudicial conduct. ..."

73. This was followed by Godfrey J, as he then was, in the case of Tseng Yueh Lee Irene v. Metrobilt Enterprises Ltd. [1994] 2 HKC 648, 689-690. I need not refer to the other authorities on this point.

Resulting Trusts and the Burden of Proof

74. On the factual findings I have already made, it may be that the legal submissions on the issue of the burden of proof do not call for much further discussion. The matter was, however, gone into in some detail and as the point is not without interest, observations on those submissions may not be out of place.

75. Miss Wong's starting point is that the petitioners were not at any time involved in or privy to the formation or subsequent management of the Company or the group of companies of which it forms part, or their businesses or assets. She refers to the well-known principles stated in Phipson on Evidence, 15th ed. paragraphs 4-03 to 05 at pages 56-58. I need only read short extracts from what the learned editors say in those paragraphs :

"4-03 So far as the persuasive burden is concerned, the burden of proof lies upon the party who substantially asserts the affirmative of the issue.

...

This rule is adopted principally because it is but just that he who invokes the aid of the law should be the first to prove his case; and partly because, in the nature of things, a negative is more difficult to establish than an affirmative. ...

4-04 In deciding which party asserts the affirmative, regard must be had to the substance of the issue and not merely to its grammatical form, which latter the pleader can frequently vary at will. Moreover, a negative allegation must not be confused with the mere traverse of an affirmative one. The true meaning of the rule is that where a given allegation, whether affirmative or negative, forms an essential part of a party's case, the proof of such allegation rests on him. An alternative test, in this connection, is to strike out of the record the particular allegation in question, the onus lying upon the party who would fail if such a course were pursued."

76. On the basis of these and other passages, Miss Wong submitted that the burden is upon the 2nd and 3rd respondents to establish, on the balance of probabilities, the alleged trusts of :

(1) the Ascot Villa Property;

(2) the Company's share in Superyield Construction; and

(3) the deceased's share in the Company.

77. Miss Wong made very helpful and detailed submissions on the law of resulting trust. The propositions I set out hereunder I have drawn heavily on her written and oral submissions :

1. A useful starting point is article 31(1) of Underhill & Hayton, Law of Trusts and Trustees, 15th ed., p.317 as follows :

"When real or personal property is conveyed to a purchaser jointly with others, or to one or more persons other than the purchaser, a resulting trust will be presumed in favour of the person who is proved ... to have paid the purchase-money in the character of purchaser (as opposed to that of donor or lender)."

2. The better view is that this is a rebuttable presumption of law in that

(a) it applies as soon as the fact of contribution to the purchase price is proved; and

(b) in the absence of other evidence, it is conclusive for the party in whose favour it operates and for the purpose for which it operates.

3. The fact being presumed is that of the intention of the parties (or more precisely, the providers of the purchase-money) in the absence of evidence of their actual intention. That being the case, the presumption can be rebutted by :

(a) the application and non-rebuttal of the presumption of advancement;

(b) evidence of an actual intention on the part of the purchaser to benefit the holder of the legal title.

4. The principle is applicable to different combinations of factual circumstances :

(a) Where one person pays the whole of the purchase price and title is taken in the name of another, it is presumed, unless the contrary is shown, that it was intended that the property be held in trust for him.

(b) Where two persons contribute to the purchase price in equal shares and title is taken in the name of one only, it is presumed, unless the contrary is shown, that it was intended that the registered owner holds the property in trust for the other person to the extent of 50%.

(c) Where two persons contribute to the purchase price in unequal shares and title is taken in the name of both as joint tenants or tenants-in-common in equal shares, it is presumed, unless the contrary is shown, that it was intended that the property be held in trust for both of them as tenants-in-common in proportion to their respective contributions.

5. The material intention is that of the provider of the purchase money. See Calverley v. Green (1984) 155 CLR 242, per Gibbs CJ at 251 and per Mason & Brennan JJ at 261.

6. The implied trust arises at the time of the purchase so that the contributor acquires an equitable interest at the outset and such interest corresponds to the share he or she paid for at the time of purchase. See Underhill & Hayton at p.321.

7. The time to take stock of the respective interest taken by the parties is the time of acquisition.

8. It follows that the time at which the respective contributions are to be calculated for the purpose of fixing the parties' respective interest is also the time of acquisition. See Crisp v. Mullings [1976] 2 EGLR 103G-K and Calverley v. Green at pp.252 and 262.

9. Where land is purchased to be built on, the extent of the parties' interest would be fixed at the conclusion of the activities of purchase, building and improvement. See Tracy v. Bifield [1998] 23 Fam LR 260, a decision of the Supreme Court of Western Australia.

10. Where some or all of the purchase price is borrowed, the acceptance of a personal liability as against the lender to repay, for instance, by the execution of a mortgage containing a personal covenant to repay, constitutes a contribution to the purchase. Where the covenants to repay the lender is joint and several, each party to the covenant to repay is taken to have contributed half of the sum raised for the purchase. In addition to Crisp v. Mullings and Calverley v. Green, a number of other Australian cases discussing this proposition were referred to. I need not go into the details of these cases. I touch on some of them later on in another context. Most of them are, as to be expected, decisions on their own facts.

11. The better view is that post-completion unequal contributions to mortgage repayments, whether by prior agreement or otherwise, cannot affect the quantum of interest taken by the respective parties at the date of acquisition under, I emphasise, a resulting trust. Such contributions may, however, have a bearing on the remedies which may be available under what is now usually referred to as a common intention constructive trust or under some form of proprietary estoppel. See again, for instance, Crisp v. Mullings; Calverley v. Green at pp.252 and 257-8; Piper v. Knowles, an unreported decision of the Equity Division of the Supreme Court of New South Wales, Ref. 1784 of 1986 dated 31 January 1989) and Ammala v. Sarimaa [1993] 17 Fam LR 529, a decision of the Federal Court of Australia.

12. The fact that the mortgage debt was not repaid by the parties equally may, however, be relevant to an equitable accounting between the parties. See Calverley v. Green, Piper v. Knowles and Jancso v. Vuong, another unreported decision of the Equity Division of the Supreme Court of New South Wales, Ref. 2714 of 1986, a judgment of Young J delivered on 4 October 1988.

13. The burden falls upon the party asserting, in I believe Miss Wong's words, or perhaps not, that "the equitable right is not at home with the legal title". See the similar sentiments in Crisp v. Mullings at 103F-G.

14. These principles are not restricted in their application to persons within any particular category of relationships.

Mr Pirie's submission on this point for the 2nd and 3rd respondents

78. I have extracted from his written propositions to which I have added other comments.

79. First, Mr Pirie says equity is suspicious of gifts of land to persons who do not provide the purchase price. It seems to me that this puts the matter too high. In any given case in which there is an allegation of a gift of land, the circumstances may be such that the court will feel obliged to scrutinise the evidence, but that hardly elevates the court's task in a particular case into a general proposition of law, or that any category of transaction must be regarded with suspicion.

80. Secondly, Mr Pirie says that there is no evidence that the deceased provided any money for the purchase of the one share in the Company, nor for any consideration in the purchase of the Ascot Villa Property. I note that, while this is correct, it ignores the submission that the deceased contributed to the purchase of the Ascot Villa Property by his provision of the joint and several guarantee in respect of the mortgage loan to Superyield Construction.

81. Thirdly, Mr Pirie says that neither the Company nor Superyield Construction provided the whole purchase price for the Ascot Villa Property. This is correct. He goes on to say, in those circumstances, the onus probandi is upon the party seeking to upset the resulting trust in favour of the 2nd respondent in the initial provision of the Company's share capital, and in relation to the provision of the purchase money for the Ascot Villa Property. In this connection, he refers to dicta of Bagnall J in Cowcher v. Cowcher [1972] 1 WLR 425 at 431 as follows :

"A resulting trust arises where a person acquires a legal estate but has not provided consideration, or the whole of the consideration for its acquisition, unless a contrary intention is proved."

82. Mr Pirie also refers to Watson v. Smith [1998] 3 HKC 461 at 464, where Godfrey JA (as he then was) said :

" When there is evidence available for the resolution of questions such as this, which unfortunately arise all too frequently, the court has to consider that evidence, and decide where the truth lies. There are factual presumptions which can sometimes assist the court in resolving these questions, such as the presumption of advancement (ie gift). However, since there is no equitable obligation on a mother to advance a daughter, there is no presumption of advancement when a mother makes a purchase of property in the name of her child ... Rather, in the absence of other evidence, there would in such a case be a presumption of a resulting trust, that is to say, that the property purchased belonged to the mother, as to the person who paid for it, no matter in whose name it was taken. And, where it is said that money was advanced for the purchase of a property by way of gift to a donee, the donee has to prove that that was the case. The burden of proof that a transaction was intended to be by way of gift rests on the donee: cp Seddon v Davidson [1968] 1 WLR 1083."

83. Fifthly, Mr Pirie says that the presumption of a resulting trust may still arise even if only part of the consideration was provided presumably by one of the parties. This is not in controversy.

84. Sixthly, Mr Pirie says that the presumption of resulting trust arises if mortgage payments are paid and he refers to Gissing v. Gissing [1971] AC 886 at 907. The whole passage from the speech of Lord Diplock is as follows :

" Similarly when a matrimonial home is not purchased outright but partly out of moneys advanced on mortgage repayable by instalments, and the land is conveyed into the name of the husband alone, the fact that the wife made a cash contribution to the deposit and legal charges not borrowed on mortgage gives rise, in the absence of evidence which makes some other explanation more probable, to the inference that their common intention was that she should share in the beneficial interest in the land conveyed. But it would not be reasonable to infer a common intention as to what her share should be without taking account also of the sources from which the mortgage instalments were provided. If the wife also makes a substantial direct contribution to the mortgage instalments out of her own earnings or unearned income this would be prima facie inconsistent with a common intention that her share in the beneficial interest should be determined by the proportion which her original cash contribution bore either to the total amount of the deposit and legal charges or to the full purchase price. The more likely inference is that her contributions to the mortgage instalments were intended by the spouses to have some effect upon her share."

85. Lord Diplock was there referring to the position as between husband and wife and his Lordship was, it seems to me, discussing evidential matters rather than laying down any rule of law.

86. Seventhly, Mr Pirie says that it does not matter to the operation of a resulting trust that the donor, here on his analysis the 2nd respondent, of the property did not have the specific intention to create a resulting trust. I believe that this follows from the concept of a resulting trust. In Allen v. Snyder [1977] 2 NSWLR 685, Samuels JA had this to say at p.698 :

"... I would, however, have thought it tolerably plain that there is a clear distinction between a resulting trust and a constructive trust. ..."

87. After referring to authority, His Honour continued :

"... From this it appears that a resulting trust depends upon the presumption, or inference, that the settlor intended the legal owner to hold the beneficial title in trust for him: per Jordan C.J. (89), or that he did not intend the legal owner to have the beneficial interest in the property, as Professor Scott puts it. Whether affirmative or negative, it is still a matter of intention; and, whether the presumption which raises the inference of intention is strictly one of fact or law, the state of fact so arising is rebuttable by evidence to the contrary effect. A constructive trust, however, does not depend upon intention. In Jacobs', Law of Trusts in Australia, 4th ed., p.232 its character is described thus: 'A constructive trust differs from an express trust in that it is raised by operation of law without reference to the intentions of the parties concerned and, certainly, in the cases which come before the courts, contrary to the intentions and desires of one of the parties; while it differs from a resulting trust in that, in the case of a resulting trust, although the resulting trust arises by operation of law, the courts imply that a trust was actually intended and in the face of evidence to the contrary will discard the implication. However, in the case of a constructive trust the intention of the parties is irrelevant. Constructive trusts arise where no trust has directly or indirectly been declared, but where, according to the principles of equity, it would be a fraud for the person on whom the court imposes the trust to assert a beneficial ownership.'"

88. The evidence shows that the deceased was registered as a shareholder of the Company which in turn was a registered shareholder in Superyield Construction. Prima facie, if no other evidence was available, it would be a very strong thing to hold that the beneficial ownership did not go with the legal title. So, at the first step, it would have been for the 2nd respondent to displace that prima facie position.

89. Where, as I have held, the evidence is to the effect that both the Company and Superyield Construction are companies belonging to the 2nd respondent beneficially and in which the deceased had no beneficial interest, and that the 2nd respondent arranged the purchase money for the purchase of the Ascot Villa Property, the presumption - if it is still necessary to resort to one after that evidence - is that he is entitled to the beneficial interest in the property by virtue of a resulting trust in his favour where the property is not put into his own name, unless the circumstances indicate, for instance, that a gift of the property was intended, either in whole or in part. There are no such circumstances in this case. In this connection, it may be pertinent to refer to other dicta of Lord Diplock's in Pettitt v. Pettitt [1970] AC 777 at 823G-H :

" A similar technique is applied in imputing an intention to a person wherever the intention with which an act is done affects its legal consequences and the evidence does not disclose what was the actual intention with which he did it. This situation commonly occurs when the actor is deceased. When the act is of a kind to which this technique has frequently to be applied by the courts the imputed intention may acquire the description of a 'presumption' - but presumptions of this type are not immutable. A presumption of fact is no more than a consensus of judicial opinion disclosed by reported cases as to the most likely inference of fact to be drawn in the absence of any evidence to the contrary ..."

90. In my judgment, the court resorts to the presumption of resulting trust and advancement only where there is no acceptable evidence of the actual intention of the provider or providers of the purchase money as to the vesting and apportionment of the beneficial interest. Where there is evidence of actual intention upon which the court may act and where the intention proved is not consistent with the legal title, the court gives redress, no longer under a resulting trust, in my view, but under a common intention constructive trust or an equitable proprietary estoppel.

91. Which brings me to the final legal issue on which I ought to consider.

The effect of the joint and several guarantee provided by the deceased

92. Miss Wong relies heavily on the decision of the High Court of Australia in Calverley v. Green and on a number of other cases, mostly from Australia, some of which I have already mentioned, for the proposition that, by providing such a joint and several guarantee, the deceased was a provider of part of the purchase price and acquired a beneficial interest in the Ascot Villa Property. I can take the facts of the case from the Headnote :

" A man and woman lived together for about ten years as though they were husband and wife. At first they lived in a house owned by the man. Later they decided to move to another area if they could find a house that the man could afford to buy. They found a house, but the man had difficulty obtaining finance, and told the woman that the finance company required the purchase to be in their joint names. Money was then raised on a mortgage under which the parties were jointly and severally liable to make repayments. It was agreed between them that the man in fact would make the repayments, and he did so. The house was purchased, the man paying the deposit out of his own funds and the balance being raised on the mortgage. The parties were registered as joint tenants. Some years later they parted company.

Held: (1) by Gibbs C.J., Mason, Brennan and Deane JJ., that the fact that the balance of the price was raised by a mortgage under which both parties were liable to the mortgagee constituted a contribution by the woman to the price and the arrangement between them that the man would make the repayments did not establish that he alone provided the whole of the price."

93. Miss Wong referred to a number of passages in the judgments and I think I ought to refer to some of them. First, at page 252, in the judgment of the Chief Justice :

" The extent of the beneficial interests of the respective parties must be determined at the time when the property was purchased and the trust created. The fact that the mortgage debt was repaid by the appellant is therefore not relevant in determining the extent of the interests of the parties in the land, although it may be relevant on an equitable accounting between the parties.

...

In taking accounts between the parties it will become necessary to consider that the appellant has been making the payments under the mortgage but that on the other hand he has been for some time in sole occupation of the property. Although the appellant may be entitled to credit for the amount of the mortgage payments which exceeded her share of the amount payable the respondent may, on the other hand, be entitled to receive an occupation rent in respect of the period during which the appellant had sole occupation of the house."

94. Then at page 257 to the joint judgment of Mason J and Brennan J (as they then were) :

" The first question is whether the plaintiff was a contributor to the purchase price of the property, as the Court of Appeal found, or whether she was not, as Rath J. found. The defendant's payment of the instalments due under the memorandum of mortgage, in accordance with the arrangement made between the parties, may be thought to be, or to be the equivalent of, the provision pro tanto of the purchase price of the property. After all, the only moneys which were actually paid out of what the parties had owned before settlement of the contract for the purchase of the Baulkham Hills property or out of what they had earned thereafter had come out of the defendant's pocket. The property was purchased on the basis that the purchasers should pay it off over twenty years, a basis familiar to many home buyers. It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. In this case, the price was $27,250, of which $18,000 was borrowed from the mortgagee by the plaintiff and defendant jointly. The balance was paid by the defendant out of his own funds, being part of the proceeds of the sale of the Mount Pritchard property. Thus the plaintiff and defendant both contributed to the purchase price of the Baulkham Hills property. They mortgaged that property to secure the performance of their joint and several obligation to repay principal and to pay interest. The payment of instalments under the mortgage was not a payment of the purchase price but a payment towards securing the release of the charge which the parties created over the property purchased. We would agree with the view expressed by the English Court of Appeal in Crisp v. Mullings, a case in which the material facts are not distinguishable from the present :

'The situation, in our view, is that the defendant does not establish that he alone provided the purchase price, any more that he would have, had the whole price been provided by a joint mortgage; and the resulting trust of the whole is therefore not established.'

As both parties contributed to the purchase price, there could not be a resulting trust in favour of the defendant alone."

95. And then at p.267, the judgment of Deane J :

"... Regardless of motivation however, the fact remains that the loan made pursuant to the mortgage was made to Miss Green jointly with Mr. Calverley and that, in the absence of a contrary understanding to the effect that the borrowed money should be Mr. Calverley's alone (and none was shown), the loan moneys applied in the purchase of the home were Miss Green's as well as Mr. Calverley's. That being so, the Court of Appeal was correct in holding that the case could not properly be approached on the footing that the purchase price had been provided by Mr. Calverley alone. Upon a proper analysis, one-half of the moneys which were jointly borrowed and applied towards the purchase were provided by Miss Green. The residue was provided by Mr. Calverley."

96. Lastly, we go back to the judgment of Murphy J at p.264 :

" The general presumption of a resulting trust when the purchaser of property causes it to be transferred to another should be discarded ... The presumption of advancement, supposed to be an exception to the presumption of resulting trust, has always been a misuse of the term presumption, and is unnecessary. Transfer of the title of property wholly or partially to another is commonly regarded as of great significance, especially by those in de facto relationships. The notion that such a deliberate act raised a presumption of a trust in favour of the transferor, would astonish an ordinary person.

In the absence of those presumptions, the legal title reflects the interests of the parties, unless there are circumstances (not those false presumptions) which displace it in equity.

...

In this case, the fact that the title to the property is in the parties jointly, is not displaced by anything in the circumstances. The circumstance that the contributions to the purchase were unequal, and that by arrangement the mortgage payments were made by Mr. Calverley during their living together, while Miss Green paid most of the household expenses, raises no equity. The property is that of the parties jointly. The members of the Court of Appeal were correct in taking the view that there was no presumption which detracted from the legal title, which should prevail. Their decision in this respect should stand, and if that were all, the appeal should be dismissed.

The fact that since the parting, although the mortgage payments were a joint obligation, they were made by Mr. Calverley, may raise questions of contribution due to him, against which should be set-off the value of the occupation of the property by Mr. Calverley."

97. I do not take issue with any of the utterances contained in the majority judgments in Calverley v. Green, or even with the sentiments expressed in the judgment of Murphy J, although I would not have considered myself at liberty to embrace His Honour's views if the question of the continued existence of the various presumptions had arisen.

98. In Calverley v. Green, one of the issues was whether the presumption of advancement applied to what was referred to as a de facto relationship between a man and a woman. The majority held that it had no application to such a relationship. The parties were registered as joint tenants and the decision turned on the equitable presumption that the parties held the legal estate in trust for themselves in shares proportionate to their contributions, which, on the facts, was not rebutted. The legal liability under the mortgage was clearly a factor to be considered as part of the circumstances. There are two other short passages in the judgment of the Chief Justice to which I should refer. The first is at p.246 :

" Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, e.g., as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money."

99. And at p.251 :

" However, both the presumption of advancement, and the presumption of a resulting trust, may be rebutted by evidence of the actual intention of the purchaser at the time of the purchase : see Charles Marshall Pty. Ltd. v. Grimsley. Where one person alone has provided the purchase money it is her or his intention alone that has to be ascertained."

100. In the present case, the only evidence of intention, perforce, came from the 2nd respondent. Once his evidence is accepted as to the beneficial ownership of the Company and Superyield Construction, and the role of the deceased in those companies, and the role or lack of one of the deceased in the purchase of the Ascot Villa Property, including the intention behind the purchase as to who is to benefit therefrom, namely the 2nd respondent, there is no longer any question of any presumption, equitable or otherwise, which has to be rebutted to establish beneficial ownership. The Ascot Villa Property was purchased and registered in the name of Superyield Construction alone and the lack of evidence surrounding the execution of the guarantee does not assist the petitioners since the relationship between the deceased and the 2nd respondent is such that the presumption of advancement applies. I note Miss Wong's submissions that there is other evidence which should rebut the resumption of advancement, but I do not accept that the other evidence referred to by Miss Wong has that effect.

101. Miss Wong also referred me to a number of Australian cases. I was greatly assisted by them. Most of them clearly support the proposition for which Calverley v. Green was cited.

102. Miss Wong says, and I accept, that on the facts of this case, there is no difference in principle between assuming liability as a mortgagor and as a joint and several guarantor. In principle, that seems to me to be correct. In both instances, the key is the potential liability of the party under the obligation assumed.

103. I also accept that, as a matter of analysis that, it is appropriate to consider the purchase of the Ascot Villa Property, if the evidence justifies it, to be a joint purchase by two individuals in the name of a third party, here a $2 company with no other asset and leading to the conclusion that its covenant to repay would not be a meaningful one.

104. This guarantee troubled me initially. In the end, however, while there was no evidence of the circumstances surrounding the guarantee, any possible presumption of a resulting trust based on the deceased's contribution to the purchase by the provision of the guarantee is negatived and displaced, as I have indicated earlier, by the presumption of advancement. The consequence of applying the presumption of advancement, as it happened, also seems to me to be far more likely in the circumstances, because of the very close relationship between the deceased and the 2nd respondent.

105. The concept of a resulting trust depends on the intention of the party putting up the purchase money. In a number of husband and wife cases and cases of cohabitation drawn to my attention, the courts were in the main concerned to ascertain the intention of the parties, usually both contributing in some shape or form, either for the purchase or to the household generally. So that where, on the face of it, both parties are legally liable under a mortgage arranged to purchase the property, that is quite likely to be a determinative factor which the courts consider in deciding in whom or in what proportion the beneficial interest in the property vests, even without the assistance of Calverley v. Green. I note that there are a couple of instances where Calverley v. Green was not, as it were, applied unreservedly. I need not go into those cases, but for completeness I will mention them. They are : The Trustee of the Property of Sandor, a Bankrupt v. Ramirez, an unreported decision of the Court of Appeal of the Supreme Court of New South Wales, Ref: 40290/97, dated September 1999 and Stockbridge v. Lupton, an unreported decision of McLelland J of the Supreme Court of New South Wales, dated 14 March 1989. These are both cases which may be, not unlike some of the others I have been shown, better explained as examples of a common intention constructive trust.

106. It certainly does not follow that one who is asked to stand surety on a loan to effectuate the purchase of a property necessarily becomes a beneficial owner to the extent that he is a surety. Miss Wong did not put it so high. Whether any beneficial ownership is conferred by any given transaction depends on the intention of the parties at the time the transaction is undertaken. If there is evidence of the actual intention, then there is little scope for the operation of the various presumption. The circumstances in this case do not lead to an inference of the deceased having any beneficial entitlement to the Ascot Villa Property, to the Company or to Superyield Construction by virtue of the deceased having been allotted a subscriber share in the Company.

107. My conclusion then is that both the first and fourth of the agreed issues to be tried are to be answered in the affirmative.

108. I mention just one other matter.

109. This is an unfortunate and unhappy piece of litigation where family members are polarized into opposite camps. The deceased clearly left a sizable estate and I am sure he would have been disappointed to learn that his descendents and survivors are at loggerheads and engaged in a hostile squabble over his financial achievements. It would be far better if the brothers and sisters can try to work together and co-operate on the administration of the deceased's estate.

110. I will now hear the parties on costs and any other matters which may still be outstanding.

[Submissions from Counsel]

111. Mr Cheung, for the 2nd and 3rd respondents, applied for costs against the petitioners. He made the point that costs normally follow the event and on my findings and ruling, his clients have been successful. He reminds me that, although I have a discretion, unless there are exceptional circumstances, my discretion ought to be exercised in favour of the successful party or parties.

112. Miss Wong, on the other hand, pointed out a number of factors which she says I ought to take into consideration. First of all, she says that the publicly available documents all indicate that the deceased was a legal owner of 50% of the issued shares of the Company. The beneficial ownership normally goes with the legal title, and it was reasonable for the petitioners to commence these proceedings, otherwise all that they were left with is the say so of the 2nd respondent as to the deceased's entitlement. She also pointed out that much of the evidence marshalled in support of the 2nd respondent's case did not emerge until either shortly before trial, or during the trial. She reminded me that in the course of the 2nd respondent's evidence, he was given the opportunity to supplement the documents he had already produced on discovery on more than one occasion and it was those documents which, as it turned out, had a material bearing on my ruling in his favour. She also pointed out that those documents, including what had been shortly referred to as the ledger and vouchers, produced during the course of the trial, were all documents covered by previous orders for discovery made, as I understand it, by Le Pichon J and had been the subject of requests from the solicitors quite a while back. And that even the bank statements were not produced until 20 January of this year.

113. I also note that apart from what I have termed this drips and drabs method of discovery, the affirmations filed in these proceedings by the 2nd respondent were clearly not as full and complete as his evidence turned out to be after these other documents were produced and expanded upon orally.

114. In the circumstances, taking, I hope, everything into account, I believe the correct order is that each party should pay its own costs. I make no order as to costs.

115. Mr Cheung also asked for the petition to be dismissed. Miss Wong accepted that dismissal followed from my judgment and I order that the petition be dismissed.