NG, ROSE KAI CHING AND OTHERS v. LIANG YUM SHING HOWARD (in his personal capacity and as the executor and trustee of the estate of LIANG TING SEN THOMAS, deceased) AND ANOTHER

HCMP 2013/2018

[2023] HKCFI 1867

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2013 OF 2018

_______________________

_______________________

______________________

________________

JUDGMENT

_________________

_____________________

Table of Contents

_____________________

A.  INTRODUCTION

1.  The plaintiffs and the 1^st defendant are siblings. Their father was the late Mr Liang Ting Sen Thomas (“Father”) and their mother was the 2^nd defendant herein (“Mother”). In the present action, which was begun by an originating summons and ordered to proceed as if begun by writ, the plaintiffs (collectively referred to herein as “Ps”) are essentially seeking to remove the 1^st defendant (“Howard”), the executor of Father’s estate (“Estate”) and for an independent administrator to be appointed in his place.

2.  Mother passed away on 2 December 2019 about a year after the commencement of this action, at the age of 89.

3.  Prior to her passing away, Mother was legally unrepresented as her position was a neutral one[1]. There was no one appearing on behalf of Mother’s estate at the trial. Mr Douglas Lam SC appeared as leading counsel for Ps at the trial, and Mr Bernard Man SC appeared as leading counsel for D1 (Howard).

B.  BRIEF BACKGROUND

B.1  The Liang family

4.  The family was said to come from a very traditional Hakka background. The 1^st plaintiff (“Rose”) was born in 1951 and she is the eldest of the 4 siblings, followed by Howard born in about 1955[2], 2^nd plaintiff (“Lucy”) born in 1956 and the 3^rd plaintiff (“Christopher”) born in 1957. Howard being the eldest son in the family was said to be their parents’ favourite child.

5.  Father and Mother came to Hong Kong from the Mainland in the 1950s. They first settled in Ping Shan in Yuen Long and Father earned a living by farming. He later found a job working as an interpreter for Maryknoll Fathers of the Catholic Foreign Mission Society of America, and had helped in discharging the Catholic Church’s charity activities and he developed a close relationship with the Catholic Church.

6.  In 1962, with the then Bishop’s encouragement, Father established a private Catholic school called St Johannes College (“SJC”) in Kowloon City, initially at rented premises on Prince Edward Road and later on Sau Chuk Yuen Road. SJC is held in the name of a limited company St Johannes College Limited (“SJC Limited”). The school campus on Sau Chuk Yuen Road was rented by Father but the lease came with an option to buy the land which was exercised by Father. The site was later developed into a residential building, when SJC had to move to bigger premises for expansion, and this brought Father his “first pot of gold”. In the 1970s, Father started buying properties at 2 Somerset Road and 143 Waterloo Road in Kowloon Tong and later he continued buying neighbouring properties.

7.  In summer 1971, Mother emigrated to the United States with Howard, Lucy and Christopher. At the time, Rose was almost 20 years old and was already studying at a university there. Father, being the sole breadwinner of the family, did not move to the States with the rest of the family, although he went to help them settle down. He bought a house for the family in Piedmont East Bay, San Francisco before returning to Hong Kong alone to earn his living. Mother and the children did return to Hong Kong from time to time to visit Father and vice versa.

8.  Rose worked in a jewellery company in the United States after graduating with a bachelor of science in business administration at California State University, Fresno. She then started a business in selling silver jewellery and later changed to selling garments and had worked as an assistant buyer for Macy’s before she moved back to Hong Kong in 1987 to work for the California International School (“CIS”) set up by Father, later renamed American International School (“AIS”). Shortly after she moved back to Hong Kong, Rose’s husband (“Patrick”) and their daughter followed. Patrick also graduated from the California State University, Fresno and after moving to Hong Kong, had helped in running Father’s business Thomas Securities Company Limited (“Thomas Securities”)[3] from around 1989 until around 1992. Thereafter, Patrick established a BVI company (“Grandmart”) which carried on retail business in Hong Kong. This business did not go well and Patrick was declared bankrupt in October 1999. He was discharged in October 2003. During this period, Rose and Patrick had established another company (“King Path”) with a retail store (“Prizemart”) selling food, groceries and household products in Hong Kong similar to Grandmart. The shareholders of King Path are all off shore companies. According to Howard, Prizemart had developed into a rather successful and renowned regional chain.

9.  Lucy graduated with a degree in social welfare from University of California, Berkeley. She worked in a child care centre and later operated her own child care centre. In the 1980s she opened an elementary school called Oakland International School for which she said she worked pro bono. She and her husband (“Hong Lu”) married in the United States and they have 3 children, including a son called Brian (“Brian”). According to Howard, Hong Lu is the co-founder of a listed company on NASDAQ. Lucy eventually returned to Hong Kong for good shortly after Father’s death and on 8 January 2010, at Howard’s invitation, she became the Supervisor of SJC until she was required to leave her job in 2018[4].

10.  Christopher emigrated to the States with Mother and his siblings when he was around 14 years old. He returned to Hong Kong in 1992 and worked for UPS as an Operations Supervisor after his return, and thereafter had worked as an administration manager in the Dongguan office of a US listed company. In 1996, he went to Harbin to work in human resources and administration in a department store owned by New World for about a year before returning to Hong Kong and started a logistics company with a partner. The business ceased in 2001 and he had not worked since then. He drew a salary of HKD 20,000 per month from Father’s company Golden Fook Company Limited (“Golden Fook”) even though there was no work for him there and according to him, he relied on the income of his wife. Christopher was never involved in Father’s business. According to Christopher, he did not have a happy childhood since birth as for some reasons neither of his parents liked him, and he rarely had contact with Father. This had made him disobedient and rebellious and his siblings did not like him either, and he used to keep a distance from his family members although he did speak to Mother quite often because she was willing to listen to him.

11.  As for Howard, he said he was about 15 when he emigrated with Mother to the States. He attended a university in the States for 3 years in business but did not graduate. His wife, Luanna, also known as Liang Lok Ho Ling (“Luanna”) was a graduate of a university in the States. Howard and Luanna have 4 children, 3 daughters and a son. The eldest daughter is working at AIS, the 2^nd daughter is working for Golden Fook, the 3^rd daughter is working at SJC, and the son is working in the international school business in Thailand, which was set up with investments from Howard (“Thai School Business”). Luanna ceased working after birth of their 3^rd daughter.

B.2  Father’s schools and businesses

12.  Father had a close relationship with the Maryknoll Fathers and in around 1979, he was introduced through them to representatives from Union Trust Company in Connecticut, a USA bank held by Northeast Bancorp Inc which wanted to set up their financing business in Hong Kong. As a result, they partnered with Father in a joint venture to set up a deposit-taking company UT Finance Limited (“UT Finance”) in 1981 with Northeast Bancorp Inc holding 70% and Father holding 30%. Thereafter, Father’s business became diversified.

13.  According to Howard, as Father’s business became diversified, Father wanted him, being the eldest son, to help him in his business. Before Howard’s return to Hong Kong, he was sent by Father to the Union Trust Company at Stamford, Connecticut to receive training in financing business for 8 months. It was Howard’s case that after his return, he became involved in Father’s business and was appointed a director of UT Finance in 1980, and that he had helped Father in developing and managing the business as his partner until Father passed away in 2009.

14.  In around February 1991, when Northeast Bancorp Inc faced problems, Father bought out all their shares and later due to banking requirements, UT Finance surrendered the Deposit Taking Licence to the government and obtained a Money Lender’s licence instead. UT Finance then became a subsidiary of two BVI companies Rimax Limited (“Rimax”) and Chieflink International Limited (“Chieflink”). Howard had/has been a director of UT Finance since December 1980.

15.  It was in 1982 Father incorporated Golden Fook which he had used for the rest of his life for his business holdings and investments. Howard was appointed a director of Golden Fook in 1983 and since then he had been a director. He held 1% of its shares while the remaining was held by Father. Golden Fook had been described by Mr Lam as Father’s “crown jewel”.

16.  According to Howard, in around 1983 to 1985, due to a change in the education policy on the part of the Education Department, Father eventually closed down the secondary section of SJC and set up an international school providing USA standards-based school curriculum. CIS was then founded by Father in 1985 and in 1986, the first school term began at 143, Waterloo Road in Kowloon Tong.

17.  After the founding of CIS, Father had continued buying neighbouring properties, for school use.

18.  The first school principal for CIS was called Elsie Gee who was the Principal from 1986-1989. Rose said it was in or around the end of 1986 beginning of 1987 that she was required by Father to urgently return to Hong Kong from the States in order to assist Father in his businesses and in particular to run CIS. After Elsie Gee returned to the USA in 1989, Rose took up the post as the Principal of CIS in the school year beginning 1989.

19.  It was Howard’s case that Father was not particularly happy with the way CIS was run by Rose and that in around 1996, Father asked Howard’s wife Luanna to help in the administration. However, Rose then became upset and gave Father the ultimatum that he had to choose between her and Luanna to run CIS but apparently Father insisted that they worked together or else Rose could leave. Upon hearing that, Rose apparently literally stood up and left CIS and never went back and Howard said Rose did not speak to Father and Howard and his family for a period of almost 8 years before she re-connected with them. Father had to ask Elsie Gee to return to take over Rose’s position as Principal until 2003.

20.  However, according to Rose, she decided to quit CIS after having dedicated 10 years to the school to spend more time with her husband and daughter. According to Rose, Father was very disappointed and upset over her decision to leave and that it was Father who would not talk to her for years. Whichever, it was not disputed that Father and Rose had eventually re-connected before he passed away.

21.  CIS had achieved outstanding success and in 1997, it was renamed AIS and is held by a company limited by guarantee called American International School Limited (“AIS Limited”).

22.  Father’s businesses and investments continued to flourish and Father had acquired further properties and in particular, on 29 February 1996, Father bought a property at Flamingo Gardens (“Flamingo Gardens House”) in the name of Chieflink[5]. It had been occupied by Howard and his family rent free as their residence. It was not really disputed that Howard was the one who had assisted Father in Father’s businesses and investments.

B.3  The Will

23.  Father passed away on 12 September 2009, leaving a will executed by him on 19 August 2008 (“Will”)[6]. Howard was appointed the sole executor and trustee of the Will. In the Will, amongst other things, Father made a number of pecuniary legacies, which were briefly as follows:

(1)  HKD 50m to a Hong Kong charity set up during his lifetime, and if none had been set up, his trustee was to set up one named as “Dr Thomas Liang Charity Trust Fund” or similar name (“Charity”) (Clause 3) ;

(2)  HKD 10m to one Chung Kwai Ying Barbara (“Barbara Chung”) (Clause 4);

(3)  such sum as required to discharge any indebtedness due from Barbara Chung to UT Finance (Clause 5);

(4)  USD 500,000 (approx. HKD 3.8m) to one Yiu Yau Wah (“Ms Yiu”) with a declaration that the trustee was to trace her whereabouts by notice in local newspapers, and if Ms Yiu failed to turn up, then her legacy would be given to the Charity. (Clause 6)

24.  Father then directed under Clause 7 that his real and personal estate of whatsoever kind and wheresoever situate not specifically disposed of in the Will be bequeathed to his trustee upon trust to sell call in and convert into ready money (with power on the part of the trustee to postpone such calling in and conversion) and after payment out of his just debts, funeral and testamentary expenses and estate duty, if any (“Residuary Estate”), to hold upon trusts as to 63% to Howard, 11 % to Rose, 17% to Lucy, 5% to Mother and 4% to Christopher (collectively referred to herein as “Residuary Beneficiaries”).  

25.  Father directed that his trustee shall not, and none of the beneficiaries shall demand the trustee to distribute the Residuary Estate within 5 years from the date of his death, subject to a proviso and an exception therein (Clause 12).

26.  In addition to powers conferred by law, Father also directed the trustee be given the power to carry on or discontinue any business, to act as director, officer or employee and to receive remuneration of benefit for so acting without being liable to account (Clause 13).

B.4  The Probate

27.  On 14 December 2009, Howard was granted probate of the Will[7] (“Probate”).

28.  As set out in the Schedule of Assets and Liabilities dated 10 November 2009 annexed to the Probate (“Schedule”)[8], the Estate comprised the following assets and liabilities at the time of Father’s death:

“Assets

(i) Around HK$722,136 in cash at bank

(ii) 99 out of 100 shares in Golden Fook, namely 99%

(iii) 1,500 out of 2,000 shares in SJC Limited, namely 75%

(iv) 5,000,000 out of 5,500,000 shares in Thomas Securities, namely 91%

(v) ‘Other assets’ including various club memberships, a member of the ‘Changjiang Syndicate’ (owner of the racing horse ‘Blade Force’, a member of ‘Fox Syndicate’ (owner of the racing horse ‘Fox’), Replacement Permit issued by Hong Kong Jockey Club, PP Permit issued by Hong Kong Jockey Club and a sum of HK$27,792,368.24 due from SJC Limited (‘Other Assets’).

Liabilities

Debts of some HK$221 million, comprising mainly of: (a) HK$97,547,739.05 due to Golden Fook; (b) HK$95,047,981.28 due to Thomas Securities; and (c) HK$28,395,868.34 due to UT Finance”

B.5  The Plan and Mega Best

29.  According to Howard, upon obtaining Probate, he commenced the administration of the Estate. Although he did not establish the Charity at the time, he had made donations in the name of the Father. There was litigation between him/SJC Limited and Barbara Chung (who was the former Principal of SJC) but she was eventually paid on 3 February 2012 and that after his advertisements in the newspapers, Ms Yiu did appear and collected the bequest of USD 500,000 to her from Father.

30.  As regards the Residuary Estate, suffice to say at this stage, it was Howard’s case that in around August 2010, during a Sunday lunch gathering attended by the Residuary Beneficiaries (“August 2010 Lunch Gathering”), Howard put forward a plan to Ps and Mother (“Plan”) that, instead of distributing to them the Residuary Estate, (i) a holding company (“Holding Company”) was to be formed to hold the assets and liabilities of the Estate and (ii) shares of the Holding Company to be allotted to the Residuary Beneficiaries in the same proportions as their entitlement in the Will. According to Howard, the Plan was agreed to by Ps and Mother, and pursuant thereto, a British Virgin Island (BVI) company was set up on 20 January 2011 (“Mega Best”)[9], and on the same day, on the applications of the Residuary Beneficiaries, shares in Mega Best were issued to them in accordance with their respective entitlement in the Will, namely 63% (63 shares) to Howard, 11 % (11 shares) to Rose, 17% (17 shares) to Lucy, 5% (5 shares) to Mother and 4% (4 shares) to Christopher (“Entitled Proportions”). Thereafter, Father’s shares in various companies were transferred to Mega Best pursuant to the Plan.

31.  It was Howard’s case that upon the Plan being implemented, his administration of the Residuary Estate, insofar as the Residuary Beneficiaries were concerned, had been completed.   

32.  Thereafter, in 2013, there was further agreement between Howard and each of Ps for him to purchase certain number of shares in Mega Best from them respectively (“2013 Transfers”). Pursuant to the 2013 Transfers, (i) a cheque dated 6 September 2013 in the sum of HKD 10m was drawn from Howard’s personal bank account in favour of Rose[10]; (ii) a cheque dated 6 September 2013 in the sum of HKD 8,844,000 was drawn from Howard’s personal bank account in favour of Christopher[11], and (iii) a cheque dated 6 September 2013 in the sum of HKD 7,600,000 was drawn from Howard’s personal bank account in favour of Lucy[12]. Each of Ps had signed an acknowledgment of receipt of his/her cheque (“Receipt”).

33.  Ps denied the alleged Plan. So far as the 2013 Transfers were concerned, it was Rose’s and Lucy’s case that the sums paid to them were a distribution of the prize monies of a race horse (“California Memory”) which belonged to the Estate. As for Christopher, his case was that the sum received by him was for him to purchase a property to live in.

B.6  Events leading to the present action

34.  According to Howard, his relationship with Ps was amicable until around 2017 when he and Rose started to have disagreement over the medical treatment for Mother who was diagnosed with lung cancer[13].

35.  On the other hand, it was Ps’ case that all along there had been no disclosure by Howard of the contents of the Will and/or Probate to them, and/or what assets were in the Estate or their respective values, and in August 2017, Rose and Lucy started sending letters to Howard raising various queries concerning the Estate and seeking a copy of the Probate and the statement of accounts.

36.  On 4 September 2017, Mother had requested through Howard a “family meeting” to take place on 12 September 2017[14], which Ps declined to attend, seeking a postponement thereof until Howard had sent to them all those documents signed by them. This was followed by further exchange of letters between the siblings.

37.  On 7 May 2018, Ps’ solicitors sent a letter before action to Howard, which eventually led to Ps’ issue of the originating summons herein on 14 November 2018.

C.  THE LITIGATION

38.  The originating summons was issued under Order 85 of the Rules of the High Court, Cap 4A(RHC), sections 33 and 56 of the Probate and Administration Ordinance, Cap 10 (“Cap 10”), and section 42 of the Trustee Ordinance, Cap 29 (“Cap 29”). The orders sought by Ps were essentially for Howard to be removed as the executor and trustee of the Estate, and for the appointment of an independent administrator, and also for Howard to render a full and proper account of the Estate.

39.  In Howard’s 1^st affidavit filed on 18 February 2019, his evidence was that pursuant to the Plan agreed by Ps and Mother, Mega Best was formed to hold the assets of the Estate and that the Residuary Beneficiaries were allotted shares in their Entitled Proportions. It was Howard’s then case that his administration of the Estate was fully and duly administered “in around 2011 and 2012”[15] and that he denied that he was guilty of any misconduct, or that there was any ground to apply for his removal as the executor. In response, Ps’ 2^nd affidavits were then filed strenuously denying the existence of the alleged Plan amongst other things.

40.  The originating summons was later heard before Chung J on 17 July 2019 for directions. Ps were represented by their then senior counsel Mr Andrew Liao[16] and Howard was represented by his present senior counsel Mr Man[17]. It was submitted by Mr Man on behalf of Howard that, due to the serious factual disputes, the action should continue as if begun by writ. On 17 July 2019, Chung J ordered that[18], amongst other things, that:

(1)  Howard do within 56 days give to Ps a true and accurate inventory and account of the Estate from Father’s date of death to the date of the order;

(2)  the present proceedings commenced by Ps’ originating summons to continue as if begun by writ.

41.  In Howard’s 2^nd affidavit filed on 25 September 2019, he produced an inventory and account of the Estate as ordered (“Inventory”)[19], indicating the balance of the Estate as at 3 dates:

(1)  At date of Father’s death, 12 September 2009 - HKD 221,711,493.98

(2)  At 31 December 2011 - HKD 588,483,988

(3)  At 19 August 2019 - HKD 1,024,802,103.04  

42.  Ps’ statement of claim was filed on 17 September 2019 and was amended on 11 January 2021 (“ASOC”). Howard’s defence was filed on 5 December 2019 (“Defence”), and Ps’ reply was filed on 9 March 2020 (“Reply”). The trial was later fixed for 11 days commencing 4 January 2023 (“Trial”), and the PTR was fixed for hearing on 25 August 2022.

43.  3 days before the PTR, on 22 August 2022, a summons was suddenly issued on behalf of Howard to seek an adjournment of the Trial (“Adjournment Summons”). No affirmation was filed to support the Adjournment Summons, although at the PTR, the Court was informed that it was Howard’s health condition which led to the issue of that summons. As the Adjournment Summons was opposed, it was then adjourned to a substantive hearing with directions. This Court did make certain observations in relation to any adjournment and further on the possibility of giving evidence by video-conferencing facilities (“VCF”). Thereafter, in light of this Court’s observations and/or comments, Howard did not pursue the Adjournment Summons, but instead another summons was issued on 13 September 2022 for leave for Howard to give evidence by video-conferencing facilities (“VCF Summons”).

44.  In his supporting affidavit for the VCF Summons, Howard explained that he was diagnosed with pancreatic cancer in around October 2020 for which he received surgery and chemotherapy. In around October 2021, it was diagnosed that his pancreatic cancer had recurred, and he underwent another operation in around November 2021, but in around July 2022, it was diagnosed that it had recurred again, and that Howard was told that it had spread.

45.  The VCF Summons was then fixed for argument on 2 November 2022. Ps again opposed the application mainly on the ground that notwithstanding Howard’s alleged health issues, he was seen at the horse races. Eventually, Howard abandoned his application in the afternoon of 28 October 2022, as his condition appeared to have improved and kept under control.  

46.  The hearing on 2 November 2022 was then directed to be vacated and the pasties’ submissions on disposal of the summonses and costs were directed to be dealt with on papers.

D.  DISPOSAL OF THE ADJOURNMENT SUMMONS AND THE VCF SUMMONS

47.  The Adjournment Summons was not supported by any affidavit or documentary evidence at all. The dates for the Trial were milestone dates and due to the state of the Court’s diary, if adjourned, it would not be possible to be able to fix dates for a 11 day trial within, say next 12 months. In my view, the application should not have been made in the first place without any supporting evidence. It should be dismissed.

48.  As for the VCF Summons, it was issued some 4 months before the Trial and fixed for substantive argument 2 months before the Trial. There was no sufficient evidence to contradict Ps’ evidence that Howard was seen attending the horse races. In any event, it turned out eventually that Howard was able to attend the Trial physically. The VCF Summons was clearly premature, and it should be dismissed.

49.  Costs of both summonses should follow the event. As there was no sufficient ground to support those summonses, I order Ps’ costs should be paid by Howard personally on indemnity basis, to be taxed if not agreed, with certificate for two counsel.

E.  THE AGREED DISPUTED ISSUES FOR THE TRIAL

50.  There were a total of 7 agreed disputed issues, namely:

(1)  whether the administration of the Estate insofar as the distribution of the Residuary Estate to the Residuary Beneficiaries were concerned had been completed? If so when? (“Issue (1)”)

(2)  As regards the Plan:-

(i)  Whether Ps had knowledge of, had consented to and/or acquiesced in the Plan?

(ii)  Or alternatively, whether any such agreement is valid or binding on the parties or the Estate? (“Issue (2)”)

(3)  Are Ps estopped from asserting that the implementation of the Plan constituted a breach of duty owed to them on the part of Howard as the executor of the Estate? (“Issue (3)”)

(4)  Whether Howard has been in breach of any duties owed by him to Ps as the executor of the Estate? (“Issue (4)”)

(5)  Did Ps have knowledge of and agree to the 2013 Transfers? (“Issue (5)”)

(6)  Whether Ps are entitled to apply for further reliefs relating to accounts and inquiries or any other relief sought in the ASOC? (“Issue (6)”)

(7)  Should an independent administrator be appointed to replace Howard? (“Issue (7)”)

51.  The key issue in this case was whether there was the alleged Plan and whether Ps had agreed to it. Issues (2) and (5) concern the alleged Plan and the 2013 Transfers, and I intend to consider these issues first, followed by Issues (3) and (4) on Howard’s alleged breach of duties, and then Issues (1), (6) and (7) on the administration of the Estate.

F.  THE WITNESSES

52.  Ps did not call any other witnesses to give evidence at the Trial apart from themselves. They had each filed 2 affidavits and each filed a further witness statement. They all attended the Trial for cross examination.

53.  Howard had filed two affidavits and two witness statements, one on 28 August 2020 and a supplemental one on 26 May 2021. He called one witness, namely the Office Manager of Golden Fook, Kwok May Yuk Ruby (“Ruby”) and both attended the Trial for cross examination.

G.  ISSUES (2) AND (5) – THE ALLEGED PLAN AND THE 2013 TRANSFERS

G.1  Issue (2) – The alleged Plan

G.1.1.  Howard’s case

54.  It was Howard’s pleaded case in paragraph 10 of the Defence, amongst other things, that[20]:

(1)  He had consulted an accountant friend named SK Lo, a then partner of an accounting firm BDO Limited[21], which was used by Father for accounting and auditing matters for a majority of his companies regarding the Plan.

(2)  After Howard consulted SK Lo who had confirmed the Plan was viable, Howard verbally suggested to the Residuary Beneficiaries during a Sunday lunch in around August 2010 (ie the August 2010 Lunch Gathering) the Plan, namely that instead of distributing the Residuary Estate to them in accordance with the Will, (i) a company (ie the Holding Company) should be formed to hold the assets and liabilities of the Estate and (ii) shares in the Holding Company be allotted to the Residuary Beneficiaries in their Entitled Proportions (respectively referred to below as “(i) Part” and “(ii) Part”).

(3)  Howard explained the advantages of adopting the Plan were that (i) the Residuary Beneficiaries would only need to sign documents in respect of one company, ie the Holding Company, as opposed to multiple companies and (ii) Father’s business could be kept intact and continuing in order to fulfil his wishes.

(4)  Rose indicated to Howard that she did not want her status as a shareholder of the Holding Company to be a matter of public record and in response Howard suggested that a BVI company could be used as the Holding Company , to which Rose did not raise any objection.

(5)  None of the Residuary Beneficiaries raised any objection to the Plan, and that he told the Residuary Beneficiaries he would proceed to implement the Plan.  

55.  It was pleaded by Howard that the Residuary Beneficiaries had agreed to the implementation of the Plan and soon after the August 2010 Lunch Gathering, Howard instructed Ruby to engage a secretarial services company Fair Wind Secretarial Services Limited (“Fair Wind Secretarial”) to acquire a shelf company incorporated in BVI as the Holding Company, ie Mega Best. On around 20 January 2011, pursuant to (ii) Part of the Plan, each of the Residuary Beneficiaries signed an “Application for Shares” pursuant to which they were allotted shares in Mega Best in their Entitled Proportions for a nominal consideration of HKD 1.00 per share.

56.  It was further pleaded in paragraph 13 of the Defence[22] that between September 2011 and December 2012 pursuant to the (i) Part of the Plan, the assets and liabilities of Father’s companies under the Estate were transferred to Mega Best. To this end, Howard had sought the advice of McCabe Secretarial Services Limited (“McCabe Secretarial”) to reduce the amount of stamp duty payable by the Estate. Howard had set out respectively in paragraphs 13.4 and 13.5 how Father’s shares in Golden Fook and Thomas Securities were transferred to Mega Best.

57.  Howard had further stated in paragraph 14 of the Defence that during various family gatherings between August 2010 and December 2012, he had verbally updated Ps and Mother on the progress of the implementation of the Plan[23] (“Updates”).

58.  As for the 2013 Transfers, it was Howard’s pleaded case that he agreed to purchase and Ps agreed to sell part of the shares held by them individually to Howard at an agreed consideration[24], which was HKD 5,000,000 per share.

59.  On 31 August 2015, it was agreed that the entire shareholding in Thomas Securities be sold to a third party and to this end, each of Ps and Mother had signed a letter dated 5 or 7 February 2016 in which they agreed to sell their shares which were held on trust for them by Mega Best and Howard[25].

60.  It was further Howard’s pleaded case in paragraph 22 of the Defence[26] that there had been representations on the part of Ps including the following:

(1)  in paragraph 10 of the Defence – none of the Residuary Beneficiaries raised any objection to the Plan and agreed to the implementation of the Plan

(2)  in paragraph 12.1 of the Defence – each of the Residuary Beneficiaries signed the “Application for Shares”

(3)  in paragraph 13.4.4 of the Defence – each of the Residuary Beneficiaries signed a “Bought and Sold Note” dated 14 December 2012 transferring their beneficial interests in Golden Fook to Mega Best

(4)  in paragraphs 15-18 of the Defence – each of the Ps signed documents in relation to the 2013 Transfers

(5)  in paragraph 19 of the Defence – until August 2017, none of the Ps raised any query or objection regarding the Plan or the administration of the Estate

61.  Howard’s further or alternative case in paragraph 22 of the Defence was that by reason of the above, each of Ps had unequivocally represented to Howard that after the implementation of the Plan, they would not require Howard to administer the Residuary Estate in accordance of the Will and they agreed to and had no complaint or objection to the Plan (“Representations”), and that he had administered the Residuary Estate in accordance with the Plan instead of the Will, and that he had acted in reliance on Ps’ Representations to his detriment, and Ps should be estopped from asserting that the implementation of the Plan constituted a breach of duty owed to Ps on part of Howard as executor of the Estate (“Estoppel”)[27].

G.1.2.  Ps’ case

62.  In their Reply, Ps had averred in paragraph 19 thereof that contrary to what was pleaded by Howard, he had never “suggested ” or “explained” the so-called Plan to Ps and Ps had never agreed to the Plan to take place[28]. Ps further pointed out, amongst other things, that (1) Howard’s allegation that it was Father’s wishes that his business should be kept intact and continuing was untrue, and that it was contrary to the express wishes of Father as stated in the Will; (2) Howard’s pleaded case in relation to the August 2010 Lunch Gathering was not consistent with his evidence in his affidavits in various aspects, including there was no mention of the suggestion of the forming of the Holding Company was to be “instead of” distribution of the Residuary Estate in accordance with the Will.

63.  Ps did not deny that they had signed at least 3 sets of documents respectively in 2011, 2012 and 2013 concerning Mega Best and their case was that they did not read the documents before signing. It was submitted on behalf of Ps that, amongst other things, it was inherently improbable that the Plan was discussed with Ps and Mother over a routine weekly Sunday dim sum lunch gathering with family where his teenage children were in attendance as well and it was also inherently unlikely that Howard could have had a discussion with Ps regarding the Plan when they had no idea of what was in the Estate[29]. It was also submitted on behalf of Ps that there was a total lack of particulars about the progress he had updated Ps with and that in light of the fact that on Howard’s own pleaded case[30], he had never provided to Ps with any information on the contents or value of the Estate until 17 August 2017, Howard’s alleged Updates over routine Sunday family dim sum lunches inherently unlikely.

G.1.3.  Analysis of the evidence on the alleged Plan

G.1.3.1.  Inherent improbability of discussion of the Plan and Updates

64.  It was not disputed that prior to 2017, the siblings were in a rather amicable situation[31]. Although it was Rose’s evidence that Howard was hostile towards her after he learnt that she had instructed solicitors to write to Father’s solicitors Messrs Woo, Kwan, Lee & Lo (“WKLL”) on 22 February 2010 to seek a copy of the Will without asking him[32], it was also Rose’s own evidence that at that time she did not want to start a bitter dispute within the family[33], and that she had asked for a copy of the Will from WKLL as she was planning to set up a charitable organisation herself towards which she was planning to donate the moneys that she thought she should receive from her entitlement in the Estate[34]. Thus, on Rose’s own case, there was no hostility on her part towards Howard. It was also Rose’s evidence during the Trial that not long after Father’s death, Howard had told her that when the property at No 3 , Flint Road , Kowloon Tong[35] was developed into a family home, she could occupy an annexe therein and that she was very touched and was very grateful towards him. What was not disputed was that it was on Howard’s proposal that Rose’s application for Full Membership of The Hong Kong Jockey Club (“HKJC”) was approved on 7 October 2009. In fact, it was also Rose’s evidence during the Trial that Howard was the sibling she was most fond of and that she had trusted him and they had a good relationship and that she would sign whatever documents Howard asked her to sign, when asked about those documents she signed in relation to Mega Best in 2011.

65.  Prior to proposing Rose to be a Full Member, Howard had also proposed Lucy’s son Brian to become a Full Member of The Hong Kong Jockey Club and this was approved on 1 April 2008. As mentioned earlier, Lucy was also invited by Howard to replace Barbara Chung as both the role of Supervisor and Principal of SJC and that Lucy started to work under Howard on 8 January 2010 as the Supervisor of SJC, and that as part of her remuneration package, she was provided with free accommodation since around 2010 until she was required by Howard to leave her job in 2018[36]. Again, it was Lucy’s evidence that in 2011 she would sign documents which Howard asked her to sign.

66.  As for Christopher, as said earlier, he was distant from his siblings. His evidence that whilst he did attend the family gatherings, he was usually very quiet and did not say very much and that Howard rarely talked to him directly[37]. Even though he was not close to his siblings in 2010 and 2011, he did talk to Mother and his evidence was again he would sign documents Howard asked him to sign.

67.  Having considered Ps’ evidence, there was no evidence that in August 2010 there was any lack of trust on the part of Ps towards Howard and/or his ability to handle Father’s assets and businesses.

68.  Mother was also present at the August 2010 Lunch Gathering and even though the family lunch gatherings were described as a casual occasion and held in a “noisy ambience in a Chinese dim sum restaurant” with Howard’s teenage children also there[38], there was no reason why the siblings and Mother could not have discussed something concerning their family assets or the Estate, nor was it inherently improbable that such discussion could have taken place in a noisy Chinese dim sum restaurant. There was also no sufficient evidence that Ps were not aware of their Entitled Proportions during the discussion. Rose had already obtained a copy of the Will in February 2010. Lucy admitted during the Trial that Howard did tell her her entitlement in the Will although she was not provided a copy of Will. She could not recall when she was told by Howard but said it was probably after she became the Supervisor of SJC in 2010. As for Christopher, even though he claimed he did not know of his entitlement in the Will, I find it inherently improbable that he was not curious at all and/or that such would not have been brought up during his conversations with Mother and/or during family lunch gatherings.

69.  There was also no reason why there could not have been Updates provided by Howard during these lunch gatherings between August 2010 and December 2012.

G.1.3.2.  The contents of the alleged Plan

70.  However, notwithstanding that it was not inherently improbable for Howard to have brought out discussions about the alleged Plan and/or to provide the Updates to Ps and Mother in noisy Chinese dim sum restaurant/s, it was not in fact clear as to exactly what had been put forward by Howard orally to Ps and Mother during the August 2010 Lunch Gathering and/or what was provided by Howard during the oral Updates.

71.  During cross examination, when asked whether he had sought legal advice from WKLL on the alleged Plan, Howard initially said he could not recall, although he seemed to be able to recall quite a lot of his telephone conversation/s with his accountant friend SK Lo. Later he then admitted that he did not seek legal advice in relation to the alleged Plan. If he had sought legal advice, he would likely to have been advised to put the alleged Plan in writing and/or to enter into a deed of family arrangement with the rest of the Residuary Beneficiaries, and what had been discussed and agreed by the Residuary Beneficiaries would have been clearly put on record.   

72.  Howard admitted during the Trial that he was experienced in banking and finance and that he was responsible for dealing with the banks in relation to Father’s companies. He further admitted during the Trial that he did not provide his friend SK Lo with a copy of the Will when he sought SK Lo’s advice as to whether it was feasible and simpler to set up a holding company to hold Father’s assets and liabilities. Under cross examination, Howard agreed he was only asking SK Lo for advice in relation to a corporate structure, and that it had nothing to do with him being the executor of the Estate even though SK Lo was aware that Father had passed away.

73.  Howard’s evidence as to when the oral discussion of the alleged Plan took place and what was discussed was confusing and in my view not consistent. In a letter dated 1 June 2018 from WKLL to Ps’ then solicitors setting out Howard’s reply to Ps’ queries about the Estate[39], it was stated that during the year of 2010, Howard had “worked out” with the Residuary Beneficiaries to form a company ie Mega Best to hold the Residuary Estate and that Ps were fully aware of the reasons why Mega Best had to be incorporated.  The letter then went on to state that Ps were well aware that Father had the wish that his estate to remain intact and that if the Estate was to be distributed, Howard had to sell call in and convert it into ready money and doing so would inevitably interrupt the intactness of the Estate, and that to implement Father’s wish, the Residuary Beneficiaries had reached consensus in forming Mega Best for holding the Residuary Estate which was done on 20 January 2011[40].

74.  First, what was alleged in the above letter was only that Ps were fully aware of the reasons of why Mega Best was incorporated. There was no mention that it was during a lunch gathering in August 2010 that any discussion was first brought out by Howard, and in fact, as stated in Howard’s own earlier replies to Ps’ initial query, it was “during the course of the year of 2010” that Howard had “worked out” with Ps the forming of Mega Best. There were no details as to what was discussed between the siblings. There was no mention of the August 2010 Lunch Gathering. Second, it was also confusing as to whether Mega Best was formed to hold the assets and liabilities of the Estate or only to hold the Residuary Estate. Third, what Howard was saying was that Father’s wish was his estate was to remain intact.

75.  It was only in paragraph 31 of his 1^st affidavit filed on 18 February 2019 that Howard then mentioned it was during a lunch gathering in August 2010 that he brought out the discussion and set out what was actually said/explained by him to Ps and Mother during the August 2010 Lunch Gathering. What he said was as follows[41]:

“31. ... I brought out the discussion of forming a company to hold the assets and liabilities of the Estate with shares of the company issued to the Beneficiaries for their entitlements set out in the Will. I also explained by this way it could keep Father’s business intact and continuing so as to fulfil his wishes. As no one raised any objection, I told them that I would accordingly proceed with the arrangement. In subsequent Sunday lunch family gatherings, I also update the family members on the progress.”

(emphasis added)

76.  Contrary to what was pleaded in the Defence, there was no mention by Howard in his 1^st affidavit that the forming of the company was to be “instead of ” distributing the Residuary Estate. Further, it appeared that what was to be kept intact was “Father’s business” only.  

77.  As to why a BVI company was used to be the Holding Company, Howard’s evidence was that it was Rose who mentioned that she did not want her name to be seen publicly in company records. However, his evidence was also confusing as to when Rose mentioned this and whether when she mentioned this, all the other Residuary Beneficiaries were present. From what was pleaded in the Defence, it appeared that Rose mentioned this during the August 2010 Lunch Gathering, but Howard’s evidence in his 1^st affidavit appeared to indicate that it was after the August 2010 Lunch Gathering. Following paragraph 31, what Howard then said in paragraph 32 was as follows:

“32. In one of the discussions on this topic, [Rose] mentioned that she did not want her name seen publicly in the company records. Though she did not expressly give the reason, I guess that she might have a tax issue in the USA. From my experience in using BVI companies when I helped Father in buying the properties in Waterloo Road, I considered that using a BVI company could suit [Rose’s] purpose. I was also given to understand by my accountant friend that there are a number of advantages of using a BVI company including stamp duty savings. So I decided to use a BVI company to hold the assets of Father’s residuary estate …”

(emphasis added)

78.  First, his above evidence would mean it was during one of the discussions subsequent to the August 2010 Lunch gathering that the use of a BVI company to hold the Residuary Estate was raised. During cross examination, Howard’s evidence was he could not remember whether Lucy, Christopher and Mother were present when Rose told him that she did not want her name to be shown as a shareholder on public record whereupon it was proposed that a BVI company was to be formed. Second, notwithstanding what he said paragraph 31 about forming a holding company to hold the assets and liabilities of the Estate, in paragraph 32, he then said it was to hold assets of the Residuary Estate.

79.  Anyway, it was Howard’s own evidence during the Trial that it was his own understanding that using one company to hold everything would be easier and that it would be easier for the Residuary Beneficiaries, or Ps, to sell their respective shares in the holding company, rather than selling their respective shareholding in each of the companies. He also admitted during the Trial that forming a holding company would make it easier for Howard himself to operate Father’s businesses.

80.  I have to say I find Howard’s own evidence in relation to the alleged Plan brought up by him for discussion with Ps and Mother was confusing and not quite consistent, and it was not clear as to what was orally discussed among the siblings. The burden was on him to satisfy this Court what he had put forward to Ps, and in my view, only one thing was clear, that a holding company was to be formed to hold Father’s shareholdings in the companies and that the shareholders of the holding company were to be the Residuary Beneficiaries in their Entitled Proportions. In particular, I do not find that there was sufficient evidence that Howard had put forward to Ps clearly that the alleged Plan was to be “instead of ” distributing the Residuary Estate, in other words, by agreeing to the alleged Plan, Ps were to abandon all their rights and entitlements under the Will in return for their respective shareholdings in the holding company. It was also not clear what Howard had said to Ps about Father’s wishes, and as set out later, I do not find there was sufficient evidence to support those wishes of Father which were alleged by Howard.

81.  As for the Updates on the transfers of the assets of the Estate into Mega Best, as set out later, the transactions involved were complicated. There was also various costs involved for the transfers. I do not find it inherently probable or likely that Howard could have orally provided all those details of the transfers to Ps and Mother over Sunday dim sum lunches. Whatever Updates provided by Howard to Ps and Mother could only be in very broad and brief terms, and would not have in my view included information such as, any estimated valuations and details of Father’s shareholdings in the companies and their underlying assets, the full extent of assets of the Estate and the full extent of Father’s indebtedness, and also the costs and stamp duties payable for the transfers.

82.  To summarise, in light of Howard’s own unsatisfactory evidence, I find the Plan put forward by Howard to Ps at the August 2010 Lunch Gathering was essentially only one of a corporate structure, namely a holding company was to be formed with the Residuary Beneficiaries being shareholders in their Entitled Proportions, to hold Father’s shareholdings in the companies.

G.1.3.3.  Whether Ps had agreed to the Plan as found above by this Court

83.  After the August 2010 Lunch Gathering, Howard did proceed to take steps to arrange the setting up of the Holding Company. His evidence was supported by the Ruby’s evidence in this respect. Ruby had said that she had assisted Howard to apply for the grant of Probate and she was aware of the entitlements of the Residuary Beneficiaries. It was Ruby’s evidence that Howard mentioned to her the idea about having one holding company to hold the assets and liabilities of the Estate and to allot shares of the company to the Residuary Beneficiaries according to their respective entitlements under the Will. Ruby was the one who contacted Fair Wind Secretarial on about 3 September 2010 on instructions of Howard in relation to acquiring a BVI shelf company[42].

84.  Ruby had produced her email exchanges with Fair Wind Secretarial[43]. It was Ruby’s evidence that after receiving from Fair Wind Secretarial in September 2010[44] instruction sheets for completion of the shareholders’ information, she had called Rose to ask Rose whether to use her office or home address to which Rose asked Ruby to use her home address. Christopher’s address was provided to Ruby by Howard’s secretary at that time, and for Lucy’s address, she was instructed by Howard to use Mother’s address. Ruby’s evidence indicated that at least Rose should be aware that Howard was proceeding with the acquisition of the Holding Company.

85.  It was on 20 January 2011 that Ruby emailed to Fair Wind Secretarial the completed instruction sheets with all the required information together with copies of identity cards of shareholders for handling. Ruby said she later received from Fair Wind Secretarial documents which had to be signed by the Residuary Beneficiaries for the allotment of shares, and that she did not recall anything unusual concerning the signing of the Applications for Shares by Mother and Ps. After awhile, Ruby said she received 5 original share certificates of Mega Best from Fair Wind Secretarial, all with issue date of 20 January 201l, in the respective names of the Residuary Beneficiaries with the number of shares held by them respectively[45], and she was told by Howard to lock them in the office safe for safe-keeping.

86.  Ps, and also Mother and Howard, had signed “Application for Shares” in Mega Best which were all dated 20 January 2011[46], followed by “Sold Notes” dated 14 December 2012, for transferring their respective shares in Golden Fook to Mega Best[47]. As pointed out by Mr Man, these were all simple, one-page documents.

87.  As said earlier, Ps’ case was that they did not read the documents before signing. According to Rose’s evidence in her 1^st affidavit, Ps’ general recollection at the time of receiving Howard’s letter in reply to their initial enquiries about the Estate was that they had signed some documents on a number of occasions from time to time upon Howard’s requests, generally on the understanding on Ps’ part that such were required in the ordinary course of administration of the Estate[48].

88.  However, Rose was a well educated and a business woman. Rose was a shareholder and director of Prizemart when it was first established in around 1999 and currently Prizemart is held by King Path which is in turn held by two Samoa companies. I do not find Rose’s evidence, that she was not familiar with off shore companies and that she regarded herself a housewife dependent on her husband and Father, probable. As for Lucy, she claimed that she did not read those documents because whenever she was asked to sign any documents, she would assume that it was for SJC. As pointed out by Mr Man, Lucy herself accepted during the Trial that she as the Supervisor/Principal of SJC would not be required to sign documents such as “Application for Shares” and “Sold Notes” and those words were prominently displayed on those 1 page documents and were unmissable, and she must have at least taken a quick look at each of those 1 page document before signing it. I have to say I find Lucy’s evidence, that she thought what she was signing was in relation to SJC, not probable. As for Christopher, he was also educated and had lived in the States for many years. He said he never had to sign anything in relation to Father’s companies, and that the “Application for shares” was the first document he had ever been asked to sign as a member of the Liang family. Christopher accepted that even if Father were to leave only a small percentage of the Estate to him it would be life-changing to him. Again, as the documents he signed were simple documents with the “Application for Shares” and “Sold Notes” prominently displayed thereon, it did not seem probable that he would not even have been curious to read them.

89.  Having considered Ps’ respective education level and work experience and even though they clearly trusted Howard and would sign anything Howard asked them to sign, I do not find it probable that they did not even glance over what they had signed, and by doing so, they should have knowledge as to what they had signed. Even though the discussion to use a BVI company might not have been mentioned during the August 2010 Lunch Gathering and/or in the presence of all the Residuary Beneficiaries, the name of Mega Best with an address in BVI was clearly stated on the respective “Application for shares” signed by Ps, as well as the odd number of shares which were allotted to each of Ps. I am of the view that by the time Ps signed their respective “Application for shares”, they should be aware that the Holding Company was called Mega Best and had an address in BVI and they should also be aware of their respective Entitled Proportions.

90.  To summarise, it is my finding that Ps did agree to the Plan (as found by this Court), namely for a holding company in BVI called Mega Best to be formed with the Residuary Beneficiaries as shareholders in their Entitled Proportions, to hold Father’s shareholdings in the companies.

G.1.4.  Father’s alleged wish

91.  As said earlier, Howard’s evidence about Father’s wish was confusing and inconsistent. His pleaded case was Father’s wish was to keep the business “intact and continuing”[49].  

92.  Contrary to Howard’s evidence[50], there was no provision in the Will which indicated that it was Father’s wish to keep either his assets and/or his businesses intact. Howard had relied on Clause 12 of the Will, but the restriction in Clause 12 of the Will was first of all for a period of 5 years and secondly, it was only in respect of capital and thirdly, this restriction was subject to 2 provisos/exceptions, namely:

(1)  there was to be distribution of the net income arising from the Residuary Estate to the Residuary Beneficiaries during the 5 year period at such intervals as the Trustee deemed fit;

(2)  the restriction was not to apply to payment of the legacies or moneys under Clauses 3, 4, 5 and 6 of the Will.

93.  As there appeared to be insubstantial cash held by Father in his personal bank accounts at the date of his death, it was clearly anticipated by Father under (2) above that his assets (namely his shareholdings in companies and/or indirectly, the underlying assets) would have to be resorted to in order to generate sufficient cash to meet his bequests in Clauses 3, 4, 5 and 6. In any event, Clause 7 of the Will has provided for the Trustee to sell, call in and convert into ready money all such parts of Father’s real and personal estate as the Trustee thought fit, which would appear to include the underlying assets of the companies as well, and the restriction was for only a period of 5 years.

94.  In fact, under Clause 13(a) of the Will, Father’s trustee is specifically provided with the power “to carry on or discontinue any business or part or parts thereof and to increase of diminish the capital used in that part of the business”.

95.  During cross examination, Howard admitted that it was only his own understanding that Father’s wish was not to sell the assets in the Estate and that Howard was to continue the education business perpetually. This was not really his evidence in his affidavits and witness statements. In his witness statement, Howard only referred to Father’s passion in education and said that Clause 12 should not be read to mean that it was Father’s intention to liquidate the entire Estate for distribution once the 5 year period had lapsed. When it was pointed out to Howard that there was no provision in Clause 7 of the Will that he was never to liquidate any assets, subject to Clause 12, Howard maintained that it was Father’s wish not to distribute the Estate and to continue the education business, as his ancestors were all scholars, and that it would be impossible to find alternative space to continue operating the school/s if the landed properties on which the school/s were sold. However, there was no sufficient evidence to support what he said, in that no evidence had been produced by him to show whether it was possible for the schools to relocate to some cheaper land. Even though this could result in loss of students in the Kowloon Tong area, they could be replaced by other students in the new area. There was no legal impediment to sell the land and to continue the schools, ie the education business elsewhere, and in any event, not all Father’s businesses were education related and/or not all landed properties were linked to the schools.

96.  When it was pointed out to him during cross examination that the restriction in Clause 12 in fact would mean that Howard could not even have the power to transfer/distribute Father’s shareholdings in various companies to the Residuary Beneficiaries or Mega Best within the period of 5 years, as this was to distribute Father’s shareholdings in specie, Howard said his understanding was that he could not sell any of Father’s shares/ assets within 5 years but he had the power to distribute Father’s shares in specie within that period of time. He said he held a different understanding when it was pointed out to him by Mr Lam that Clause 7 did not in fact authorise him to distribute Father’s shares in specie and only to sell. There was no evidence produced by Howard to support his “different understanding”.

97.  WKLL was Father’s solicitors and they had prepared the Will for Father. WKLL was instructed by Howard to apply for the grant of Probate. Although Howard admitted that he had discussed with WKLL as to how to find Ms Yiu to carry out Father’s bequest in Clause 6 of the Will and how to place notices in newspapers, he said he did not recall whether he had asked WKLL as to what he needed to do as an executor and/or his duties as an executor. On one hand, Howard admitted that the Estate was of substantial value and that it was complicated as it involved many companies, both Hong Kong and BVI, and yet on the other hand, his evidence was that distributing Father’s shares in specie was a straightforward matter and that was why he did not seek or did not recall seeking any legal advice.

98.  Anyway, it appeared that what Howard said was Father’s wish was only his own understanding. However, Howard’s substantial withdrawals of funds from the companies, in particular Golden Fook, through Mega Best’s and/or his own current accounts during the period after Father’s death until end of 2018 did not in my view lend support to his case that he wanted to fulfil Father’s wish of maintaining the assets of the Estate intact. The withdrawals recorded against Mega Best current account (an increase from HKD 220,999,557 to HKD 300,673,399 during the period) and the withdrawals recorded against Howard’s personal current account (an increased from nil to HKD 359,265,896 during the period) appeared to be have been drawn from bank loans. Anyway, as seen in the Inventory, the bank loans of Golden Fook of HKD 443,715,120.12 at date of Father’s death were increased substantially to HKD 802,308,663.23 by 31 December 2018 and such were secured against the landed properties.

99.  Having considered all the evidence, I do not find sufficient evidence that Father had conveyed to Howard that his wish was for his assets and businesses (including his education business) to all remain intact perpetually. In any event, such was contrary to Father’s express provisions in the Will. If it had been Father’s wish to keep his education business intact perpetually, he would have specified this in Clause 13 (a), or made a special provision in the Will.

G.1.5.  Whether Ps’ agreement to the Plan as found by this Court binding on the parties or the Estate

100.  I have found that Ps agreed to the Plan (as found by this Court), namely Ps did agree to a BVI holding company namely Mega Best be formed to hold Father’s shareholdings in various companies, with the Residuary Beneficiaries holding their shares in Mega Best in the Entitled Proportions. The agreement (as found by this Court) would, on the face of it, be binding on the parties, subject to what will be further set out hereinafter. However, I find no sufficient evidence that Ps had agreed that the forming of Mega Best was to be instead of distribution of the Residuary Estate, or that they had agreed to abandon their rights and entitlements under the Will and/or that there was never to be any distribution of the Residuary Estate.

G.2  Issue (5) – The 2013 Transfers

G.2.1.  Analysis of the evidence on the 2013 Transfers

101.  As set out earlier, it was Howard’s case that in around August 2013, there was further agreement between him and Ps and that he had bought out some of Ps’ shares in Mega Best for HKD 5m per share. According to Howard, the “buy out” arose out of Rose’s suggestion during a family lunch in around August 2013 for him to buy a house for Christopher and after he offered to buy out Christopher’s share, he then offered to buy out Lucy’s share in order for her to settle her personal debts to Howard and her son Brian’s debts to Golden Fook. He further also offered to buy out those share[51].

102.  Although Ps were paid by personal cheques issued by Howard, during the Trial, Howard admitted that the monies he used to pay Ps in fact came from Golden Fook but according to him, the monies drawn by him from Golden Fook were recorded under his “current account” with Golden Fook. Howard had said there were interests payable, even though according to the audited financial statements of Golden Fook, the amounts were recorded as “interest free loans”. Howard then appeared to say that the audited financial statements did not correctly categorise those loans. Anyway, insofar as Ps were concerned, they did receive their respective payments by way of personal cheques from Howard, said to be for the sale of part of their respective shareholding in Mega Best.

103.  There was no mention by Rose in her 1^st affidavit in relation to the 2013 Transfers, nor was there any such mention in Lucy’s or Christopher’s respective 1^st affidavits. As said earlier, their evidence in their 1^st affidavits was that they had only signed some documents in the ordinary course of administration of the Estate.

104.  As pointed out by Mr Man, Rose’s and Lucy’s explanations for the 2013 Transfers only first surfaced in their 2^nd affidavits filed in May 2019, almost two years after Ps had signed the Receipts and received their respective sums. Rose’s explanation was that in around 2013, the horse California Memory purchased by Father had won a total of some HKD 50 m in prize monies and that it had netted total stakes of HKD 42m between 2010 and 2013, and as Rose’s relationship with Howard was quite cordial at the time, she had suggested to him that he should make a distribution of the prize monies to Lucy and Christopher to which Howard agreed[52]. Thereafter, Howard told Rose that he was giving HKD 10m each to Lucy and Christopher, and that there was also another HKD 10m for Rose, and she was then contacted by Howard or one of his assistants who gave her the cheque and asked her to sign certain documents to acknowledge receipt which she did.

105.  As for Lucy, she admitted having received a sum of HKD 7.6m from Howard on or about 6 September 2013 but claimed that at all material times, her belief was that this was in the nature of a distribution to her from the prize monies of California Memory[53].

106.  As for Christopher, his explanation was that on an occasion in 2013, Howard told him that a sum of money would be paid to him to purchase a property to live in, and that Christopher was later contacted by Ruby to go and collect a cheque dated 6 September 2013 for HKD 8,844,000. According to Christopher, Ruby told him that the sum was supposed to be HKD 10m and that the amount of HKD 8,844,000 represented the balance payable to him after deduction of his past salaries/monies he owed to Mother but Ruby provided no details to him. He said he was asked to sign a number of documents which he did quickly on the rooftop of his car[54] when he drove to collect the cheque. He said it was only shortly before Ps jointly wrote to Howard in 2017 that he was told by Rose that the payment he received in 2013 was meant to be a distribution of the prize monies won by California Memory, but he said he was not aware of this in 2013.

107.  Howard had in his 1^st affidavit produced a “worksheet” showing how the consideration of HKD 5,000,000 per share was arrived at and “rounded down”. Ps’ evidence was that this was the first time they saw this “worksheet”. There was no sufficient evidence to contradict what they said. Howard had explained the reason why Lucy and Christopher had respectively received a sum less than HKD 5,000,000 per share and briefly, in Lucy’s case, the deduction was in respect of her loans outstanding to Howard and loans outstanding from her son Brian to Golden Fook and in Christopher’s case, it was a deduction made in respect of previous outstanding amounts to Mother/past salaries. Howard’s evidence, insofar as the deductions concerning Lucy and Christopher were concerned, was supported by Ruby’s evidence on the calculations.

108.  Mr Man also pointed out amongst other things, the prize monies achieved by California Memory did not reach HKD 30 m by August 2013, and there was not enough money to distribute HKD 10m each to each of Ps, not to say to distribute to Mother and Howard. I accept that it would not make sense that only Ps should be distributed the winnings and the other Residuary Beneficiaries, namely Mother and Howard, were not entitled to such distributions. However, there was no sufficient evidence that Ps would know in August 2013 of those calculations relating to California Memory, in particular in relation to its expenses, as the undated “California Memory’s Account” calculated up until the retirement of the horse in March 2015 appeared to be only produced in Howard’s 2^nd Supplemental List of Documents in these proceedings. There was no mention of California Memory in the Inventory.

109.  The fact was that Ps did each sign an “Instrument of Transfer”, “Sold Note” and the “Receipt”. They had respectively received a sum from Howard and in total, Howard had paid to Ps HKD 26,444,000. As said, they were all educated, and the documents for the 2013 Transfers were signed by them on two occasions. I find it inherently improbable that they did not even glance over the documents they had signed in relation to the 2013 Transfers and if they did, they must know that the documents were for purchase of their shares in Mega Best by Howard.

110.  In so far as Christopher was concerned, as mentioned, his evidence in his 2^nd affidavit was that he quickly signed the documents on the rooftop of his car when he drove to pick up his cheque from Ruby. It was his evidence in his 2^nd witness statement that he was told by Howard on an occasion in 2013 that the sum was for him to purchase a property to live in[55]. During the Trial, Christopher mentioned that it was at Mother’s home when for some reasons they were discussing regarding his situation, and that it appeared that Rose and Howard were there.

111.  Although it was Christopher’s evidence in his 2^nd witness statement that it was only in July 2014 his landlord increased the rent substantially, he said that during the Trial that in about August 2013, he had been warned of the increase. Christopher maintained during the Trial that the sum received from him was for him to buy a property as this was promised by Father to Christopher’s wife before Father passed away. On the other hand, Howard’s evidence was that notwithstanding Rose’s suggestion that he bought a property for Christopher, he did not agree as previously Christopher had sold the property Father bought him earlier in Shatin. According to Howard, he only agreed that to buy out Christopher’s shares in Mega Best so that Christopher could buy his own home out of his own monies. Whether the purpose of the buy out was for Christopher to buy a property or not, as said earlier, Christopher had lived and received education in the United States, and those documents he signed were simple documents and there was no reason why he would not understand what he was signing.  

112.  As mentioned, Rose and Lucy raised queries for the first time in relation to the administration of the Estate by theirs in August 2017, and in Howard’s first reply to them on 17 August 2017, Howard had already referred to the Mega Best being formed and the 2013 Transfers, but it was not until their 2^nd affidavits on 25 May 2019 that Ps only mentioned the horse winnings for the first time.

113.  Even though throughout November 2017, there had been letters between Ps and Howard, with Howard pointing out to Ps that they had each signed various documents in relation to the allotment of shares in Mega Best, and the 2013 Transfers, Ps never sought copies of the documents which Howard said they signed and instead they continued to ask Howard whether he had already supplied to P copies of all the relevant documents signed by them[56]. Those letters from Ps appeared to indicate that their concern was to try to find out all the documents Howard had which were signed by them before considering their own response/s. When asked during the Trial, Rose’s evidence was that by 8 September 2017, Ps had already instructed lawyers and their lawyers had drafted their letters to Howard. Having considered this, I find it probable that Ps were following legal advice, and I do not find sufficient evidence that Ps were “tailoring” their evidence. Further, what was also clear was that by August 2013, California memory had done very well and had won substantial stakes monies. It was not improbable that Ps thought this was the reason for the “buy out”, and that the amounts they received came from the stake monies of the horse. In any event, I am not satisfied that they have come to the court with “unclean hands” as submitted by Mr Man.

G.2.2.  Conclusion on Issue (5) – the 2013 Transfers

114.  In relation to the 2013 Transfers, whether Rose and Lucy believed they were paid by Howard because of prize monies/stake monies from California Memory and whether Christopher believed the sum paid to him was for him to buy a property or not, having considered all the evidence, I find that by signing the “Instrument of Transfer”, the “Bought and Sold Note”, Ps should be aware that the documents they signed were in relation to a “buy-out” by Howard, namely that by signing those documents, they were selling to Howard a portion of their respective shares in Mega Best. Having said this, the Instruments of Transfer and the Bought and Sold Notes they signed only stated consideration of HKD 1.00 each share. Only the Receipts indicated the consideration for the transfers was at HKD 5,000,000 per share. However, the Receipts did not reflect the actual amounts received by Lucy and Christopher. There was no sufficient evidence that the detailed calculations of the deductions from their entitled amounts were produced to Lucy and Christopher respectively at the time and/or agreed by them. Anyway, in light of this Court’s finding below that Mega Best was only a trustee holding the legal title to the shares in the 5 Companies (defined below) for the Residuary Beneficiaries, and had no substantial value of its own, what took place was in my view, Howard “buying out” part of Ps’ shares in the 5 Companies. Whether the consideration of HKD 5,000,000 per share was a true and fair value of the valuations of the 5 Companies and whether the deductions were justified, this would be another matter. However, the sums received by Ps respectively should be taken into account in any final distribution.

G.3  Role of Mega Best

115.  To reiterate, the Plan (as found by this Court) which Ps had agreed to during the August 2010 Lunch Gathering was essentially only one of a corporate structure, namely for a holding company to be formed to hold Father’s shareholdings in various companies.

116.  Whether the Plan agreed to by the Residuary Beneficiaries was as found by this Court, or as pleaded by Howard, what followed was according to Howard’s evidence, transfers of Father’s shareholdings in 5 companies to Mega Best, namely Golden Fook, SJC Limited, Thomas Securities (5,000,000 shares only), Rimax and Chieflink (“5 Companies”) were effected by various transactions. The details of the transactions involved in the 5 Companies will be set out later in this judgment.

117.  What can be seen is that in the case of Golden Fook, upon Howard (as executor of the Estate) transferring to Mega Best Father’s 99 shares on 8 September 2011 at nil consideration, Mega Best signed a “Declaration of Trust” of the same date to hold the 99 shares in trust for the “Beneficial Owners”, ie the Residuary Beneficiaries in their Entitled Proportions. In the case of Thomas Securities, Father had held a total of 5,500,000 shares, amounting to 100% of the issued shares, and 5,000,000 shares were transferred to Mega Best at nil consideration, and on the “Instrument of Transfer” signed by Howard as executor of the Estate on 8 September 2011, it was stated that the transfer was “a distribution of estate to the trustee of the beneficiaries”. On 8 September 2011, Mega Best executed a “Declaration of Trust” in favour of the Residuary Beneficiaries as “Beneficial Owners” in their Entitled Proportions. As for the remaining 500,000 shares held by Howard, on the same day 8 September 2011, he signed an “Instrument of Transfer” transferring 315,000 shares from himself as executor as transferor to himself as transferee, stating that it was “a distribution of the estate to the beneficiary”, and he then signed a “Declaration of Trust” declaring he held 185,000 shares in trust for Ps and Mother in their Entitled Proportions.

118.  On 8 September 2011, Mega Best was registered as shareholder of 99 shares in Golden Fook as trustee for the Residuary Beneficiaries. Notwithstanding the advice of McCabe Secretarial (which was mainly regarding stamp duties), when on 6 December 2012, Mega Best applied for the 9,801 shares in Golden Fook at nominal value HKD 100 each after dilution, Mega Best was applying for those shares in its capacity as trustee for the Residuary Beneficiaries, and therefore the shares acquired by Mega Best should in my view still be held on trust for the Residuary Beneficiaries.

119.  It was not really Howard’s case that the transfers of Father’s shareholdings in each of the 5 Companies to Mega Best were different in nature, or Mega Best held those shares in different capacities. Even though there appeared to have been no other “Declarations of Trusts” produced, I am of the view that Father’s shares in the 5 Companies were transferred to and/or held by Mega Best as a trustee only for the “Beneficiaries”, namely the Residuary Beneficiaries.

120.  It was not disputed that Mega Best had/has no bank account of its own. There was no evidence that Mega Best held/holds any assets, save the legal title to Father’s shares in the 5 Companies, or that it was/is of any substantial value.

H.  ISSUE (3) – ESTOPPEL

121.  As set out earlier, it was Howard’s pleaded case in paragraph 22 of the Defence that by reason of the Representations, each of Ps had unequivocally represented to Howard that after the implementation of the Plan (as pleaded by Howard), Ps would not require Howard to administer the Residuary Estate in accordance with the Will and that he had administered the Residuary Estate in accordance with the Plan instead of the Will, and acted in reliance on Ps’ Representations, and that Ps should be estopped from asserting that the implementation of the Plan constituted a breach of duty owed to Ps on the part of  Howard as executor of the Estate.

122.  It appeared from Howard’s evidence that what he meant by having “administered the Residuary Estate in accordance with the Plan instead of the Will” was simply “distributing” Father’s shareholdings in the 5 Companies to Mega Best. However, such distribution appeared to be premature. As set out later, at that time, the Residuary Estate had not yet been ascertained.

123.  As said, I have found no sufficient evidence that Ps had agreed to the Plan being “instead of” distributing the Residuary Estate, and/or that Ps by agreeing to the Plan (as found by this Court) had abandoned all their rights and entitlements under the Will in return for their shares in Mega Best. I find no sufficient evidence that Ps made the Representations as alleged by Howard, namely that after the implementation of the alleged Plan, they would not require Howard to administer the Residuary Estate in accordance with the Will. In any event, whether the Residuary Beneficiaries were/are shareholders in Mega Best or not, as said earlier, the role of Mega Best was only a trustee for those shares in the 5 Companies distributed by Howard and which were to be held in trust for the beneficial owners, ie the Residuary Beneficiaries, and there was no sufficient evidence that Mega Best was of any substantial value.

124.  As further set out later in this judgment, I do not find that Howard by his implementation of the Plan in distributing Father’s shares in the 5 Companies to Mega Best to hold as trustee meant that he had completed the administration of the Estate.

125.  For all the above reasons, I do not find that Ps were/are estopped from asserting that the Howard’s implementation of the Plan as pleaded by him constituted a breach of duty owed to them by him as executor of the Estate.

I.  ISSUE (4) – WHETHER HOWARD WAS IN BREACH OF ANY DUTIES OWED BY HIM TO PS AS EXECUTOR OF THE ESTATE

126.  It was submitted on behalf of Ps that even if one were to accept Howard’s case on the Plan as pleaded by him, this was no answer to Ps’ case that Howard was in serious breach of his fiduciary duties to the Residuary Beneficiaries (including Ps) for acting in contravention of the “self-dealing” and “fair-dealing” rules.

I.1  Self-dealing rule

I.1.1.  The legal principles

127.  First of all, section 55 of Cap 10 states that:

“55. Purchase by personal representative of deceased’s property

If a personal representative purchases, either directly or indirectly, any of the property of the deceased, the sale shall be voidable at the instance of any other person interested in the property sold.”

(emphasis added)

128.  The above statutory provision embodies the self-dealing rule in equity.

129.  The self-dealing rule has also been explained at paragraph 46-008 of Lewin on Trusts (20^th Edition) as follows:

“A trustee is disabled from purchasing the trust property … The rule was developed because a person who undertakes to act for another in any matter cannot, in the same matter, act for himself. The situation of a trustee gives him an opportunity of knowing the value of the property, and, as he acquires that knowledge at the expense of the beneficiary, he is bound to apply it for the beneficiary’s benefit. The rule, now often called the self-dealing rule, is based not only upon the consideration that a trustee cannot be both seller and buyer… but also on the wider principle that a trustee must not put himself in a position where there is conflict or possible conflict between his interest and duty. Moreover, unless there are exceptional circumstances, the court will not entertain any inquiry as to whether the trustee did in fact take any advantage of his situation, for the fact that he held the office of trustee and might possibly have had the means of taking advantage of his situation suffices to make him subject to the rule. The rule is thus a severe one which applies however honest the circumstances, even though the price is fair and irrespective of whether any profit is made by the trustee. Where the rule applies, the trustee and his successors in title (other than a bona fide purchaser for value of a legal estate for value without notice) take a voidable title on the authorities as they stand, and any beneficiary whose claim is not barred by concurrence or delay is entitled to have the transaction set aside ex debito justitiae. This may, however, be more a rule of practice than an absolute rule of law.”

(emphasis added)

130.  In Re Thompson’s Settlement, Thompson and anor v Thompson and others [1985] 2 All ER 720, Vinelott J had quoted the following passage in Tito v Waddell (No2) [1977] 3 All ER 129 at 240-241, [1977] 1 Ch of Megarry V-C who explained the scope of the self-dealing rule and the relationship between that rule and the fair-dealing rule, at 240, as follows:

“(3) Self-dealing and fair-dealing Let me revert briefly to the subject of the rules about self-dealing and fair-dealing, … As I have indicated, counsel for the Attorney-General took what I may call the orthodox view, namely, that there were two separate rules. The self-dealing rule is (to put it very shortly) that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction. The fair-dealing rule is (again putting it very shortly) that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and the transaction is fair and honest. On the other hand, counsel for the plaintiffs strenuously contended that there was only one rule, though with two limbs, and he formulated an elaborate statement to that effect which I do not think I need set out. I can well see that both rules, or both limbs, have a common origin in that equity is astute to prevent a trustee from abusing his position or profiting from his trust; the shepherd must not become a wolf. But subject to that, it seems to me that for all practical purposes there are two rules: the consequences are different, and the property and the transactions which involve the rules are different. I see no merit in attempting a forced union which has to be expressed in terms of disunity. I shall accordingly treat the rules as being in essence two distinct though allied rules.”

131.  It can also been in in the Heading of Re Thompson’s Settlement that it was held by Vinelott J that[57]-

“The self-dealing rule was an application of the wider principle that a person was not permitted to put himself in a position where his duty and his interest conflicted, or where his duty to one person conflicted with his duty to another. That principle applied strictly where a trustee concurred in a transaction in which he had an interest and which could not be carried into effect without his concurrence. In such circumstances the transaction could not stand if it was challenged by a beneficiary because in the absence of an express provision in the trust instrument beneficiaries were entitled to require that the trustees acted unanimously and that each brought to bear a mind unclouded by any contrary interest or duty in deciding whether it was in the interests of the beneficiaries that the trustees concurred in the transaction. That same principle also applied, but less stringently, where the case fell within the fair-dealing rule, such as the purchase by a trustee of a beneficiary’s beneficial interest. In such a case there were genuinely two parties to the transaction and therefore it would be allowed to stand if it was freely entered into and if the trustee had taken no advantage from his position or from any knowledge acquired as a result of it …”

132.  Mr Lam had further submitted that the rule precludes not merely the purchase by a fiduciary personally but extends also to his nominee company or a company in which he is controlling shareholder and director, given the conflict of interest with his duty as trustee, and in this respect, the Court was referred to 46-023 of Lewin on Trusts, which sets out as follows:

“A sale by a trustee to a “one man” company formed by the trustee for the purpose of the sale, and in effect the alter ego of the trustee, is within the self-dealing rule. A self-dealing transaction in favour of a company of which the trustee is a substantial shareholder and managing director has also been held to be within the self-dealing rule, for even though the company may have a genuine separate identity from the trustee, nonetheless there is a conflict between the duty of the trustee as such and his duty as director of the company. But where the purchase is a company in which the trustee is a small minority shareholder the transaction, though considered suspect, may be justified by showing that the consideration was adequate at the time, even though a better price might have been obtained by postponing the sale, but the weight of authority suggests that the strict self-dealing rule applies to such a purchase, unless the shareholding is so small that it can as a practical matter be disregarded. …..”

133.  On the other hand, Mr Man referred the Court to paragraph 46-091 in Lewin on Trusts:

“The self-dealing rule, which applies irrespective of the fairness of the transaction, does not apply in relation to a purchase of a beneficial interest in trust property. Such a purchase is subject to a distinct but allied rule, often called the fair-dealing rule, namely that while the purchase is not voidable ex debito justitiae, it can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.”

(emphasis added)

134.  With the above principles in mind, I now turn to the facts in the present case.

I.1.2.  The transactions

135.  As found earlier, what Howard did was to transfer Father’s shareholding in the 5 Companies to Mega Best to hold as trustee for the “beneficiaries” which presumably referred to the Residuary Beneficiaries.

136.  To start with, Father’s shareholdings in only 3 companies, namely Golden Fook, SJC Limited, and Thomas Securities were disclosed by Howard in the Schedule. According to a chart set out in Appendix 1 to Howard’s witness statement (“Appendix 1”)[58], at date of Father’s death, apart from the 3 companies in the Schedule, Father also held 1 share in Rimax and 1 share in Chieflink. Chieflink was/is (i) the registered owner of the Flamingo Gardens House occupied by Howard and his family, (ii) a 70% shareholder of UT Finance, and also (iii) a 50% shareholder of a Hong Kong company Sherri Investment Limited (“Sherri”), the registered owner of 121 Waterloo Road which was purchased in 2001. As for Rimax, according to Appendix 1, it held (i) 30% of UT Finance and (ii) 50% of Sherri.

137.  Further, according to Appendix 1, UT Finance was/is the registered owner of 14 floor, First Commercial Building. The property consisted of 2 offices (“Office Units”), which were for non-school use.

138.  According to Appendix 1, Golden Fook was stated to hold 100% shareholding in 2 BVI companies, namely Asiahome Limited (“Asiahome”) and Maxflow International Limited (“Maxflow”). Asiahome and Maxflow were stated to hold respectively 100% of two Hong Kong companies, namely Keen Hill Investment Limited (“Keen Hill”) and Long Come International Limited (“Long Come”) through Fairwind Nominee Limited. Keen Hill and Long Come were respectively the registered owner of 119 and 117, Waterloo Road acquired in 2007. As seen in Appendix 1, Golden Fook was/is the direct registered owner of 7 landed properties, 3 for use of SJC and 3 for use of AIS, and one property at 4/F, Tower 1, Grand Court for non-school use, and further through Keen Hill and Long Come, Good Fook owned 2 further landed properties for use of AIS.

139.  Howard had further attached an Appendix 2 to his witness statement as to the corporate structure after the transfers of Father’s shares in the 5 Companies to Mega Best (“Appendix 2”). The transfers of Father’s shares in the 5 Companies appeared to be as follows:

(1)  In relation to Father’s 99 shares Golden Fook (set out under item 4 under section A of the Schedule, and according to the Inventory, 99%),

(i)  Golden Fook was incorporated on 20 August 1982[59]. There were a total of 100 shares of HKD 100 each issued by Golden Fook at the date of Father’s death, with Father holding 99 shares and Howard holding 1 share thereof. Father and Howard were the two directors. After Father’s death, Howard’s wife, Luanna, was appointed on 15 October 2009 as a director in Father’s place.

(ii)  On 1 January 2011, Father’s/the Estate’s entire liability to Golden Fook (which at time of Father’s death was HKD 97,547,739.05 in his current account maintained in Golden Fook[60]) was transferred to the current account of Mega Best set up in Golden Fook[61], and as at 31 December 2011, Mega Best’s liabilities were recorded as “Amount due from a shareholder”, of HKD 122,379,500[62];

(iii)  On 31 August 2011, the 2 directors, Howard and Luanna, held a directors’ meeting approving the transfer of 99 shares held by Father to Mega Best[63];

(iv)  On 8 September 2011, Howard, as executor of the Estate, signed an “Instrument of Transfer” of 99 shares in Golden Fook to Mega Best at nil consideration, with Howard signing both as executor, and on behalf of Mega Best[64], and Mega Best signed “Declaration of Trust” to hold the 99 shares in trust for the “Beneficial Owners” (ie the Residuary Beneficiaries) in their Entitled Proportions[65];

(v)  On 5 December 2012, the 2 directors, Howard and Luanna, held a directors’ meeting to pass a declaration of interim dividend o HKD 1,000,000 to the shareholders of the company[66];

(vi)  On 6 December 2012, the shareholders of Golden Fook passed a resolution to increase the share capital of Golden Fook from HKD 10,000 to HKD 1,000,000 by the creation of an additional 9,900 shares of HKD 100 each, the resolution being signed by Howard, in his capacity as authorised signatory for Mega Best, and also in his personal capacity as shareholder of Golden Fook[67]

(vii)  On 6 December 2012, the directors of Golden Fook, namely Howard and Luanna, passed a resolution allotting the additional 9,900 shares, as to 9,801 shares to Mega Best and 99 shares to Howard[68], and on same day, Howard signed “Application for Shares” for 9,801 shares on behalf of Mega Best, and “Application for Shares” for 99 shares on behalf of himself[69]

(viii)  On 14 December 2012, Mega Best signed as purchaser “Bought and Sold Notes” to purchase the shares of HKD 100 each from each of the Residuary Beneficiaries, with Howard signing as authorised signatory of Mega Best as purchaser, and each of the Residuary Beneficiaries signed in their respective personal capacity as seller[70].

(2)  In relation to Father’s 1,500 shares in SJC Limited (set out under item 4 under Section A of the Schedule, and according to the Inventory, 75%),

(i)  As at Father’s date of death, there were 2,000 shares of HKD 100 issued in SJC Limited, with Father holding 1,500 shares and Howard holding 500 shares. As at 25 November 2009, the 2 directors were Howard and Luanna. On 31 August 2011, the 2 directors, Howard and Luanna passed a resolution to transfer Father’s 1,500 shares to Mega Best[71];

(ii)  On 8 September 2011, Howard, as executor of the Estate signed an “Instrument of Transfer” and a “Sold and Bought Note” and transferred the 1,500 shares in SJC Limited held by Father to Mega Best at HKD 1.00 per share[72].

(3)  In relation to Father’s 5,000,000 shares in Thomas Securities (set out under item 4 under section A of the Schedule, and 91% according to the Inventory),

(i)  Thomas Securities was incorporated in Hong Kong as a limited liability company. There were a total of 5,500,000 shares issued by Thomas Securities at the date of Father’s death. However, according to Howard, notwithstanding what was set out in the Schedule and the Inventory, Father held 100% shareholding in Thomas Securities, with Father holding 5,000,000 shares and Howard holding 500,000 shares on trust for Father[73].   

(ii)  As at date of Father’s death, there were 2 directors, namely Father and Howard. Upon Father’s death, Luanna was appointed a director.           

(iii)  In around 2011, Father’s /the Estate’s entire liability to Thomas Securities (which at time of Father’s death was HKD 95,047,981.28[74]) was transferred to the current account of Mega Best, and as at 31 December 2011 and 31 December 2012, the amount due from Mega Best was recorded as “Amount due from holding company”, which was respectively HKD 94,157.981 and HKD 93,657,981[75] .

(iv)  On 31 August 2011, the 2 directors, Howard and Luanna passed a resolution of transferring the 5,000,000 shares held by Father to Mega Best[76];

(v)  On 8 September 2011, Howard in his capacity as executor of the Estate signed an “Instrument of Transfer” of 5,000,000 shares to Mega Best at nil consideration stating that it was “a distribution of the estate to the trustees of the beneficiaries”[77], and Howard on behalf of Mega Best signed a “Declaration of Trust” of the 5,000,000 shares in trust for the “Beneficial Owners” (ie the Residuary Beneficiaries) in their Entitled Proportions[78];

(vi)  On 8 September 2011, Howard in his capacity as executor of the Estate signed an “Instrument of Transfer” of 315,000 shares to Howard in his personal capacity, stating that it was “a distribution of the estate to the beneficiary”[79], and Howard signing a “Declaration of Trust” of 185,000 shares held by him in trust for the “Beneficial Owners”, ie Ps and Mother in their Entitled Proportions[80];

(vii)  On 31 August 2015, Howard and Mega Best signed a “Sale and Purchase Agreement” as vendors to sell the entire issued share capital of Thomas Securities to a purchaser Best Capital Limited (unrelated to the parties)[81];

(viii)  On 11 February 2016, the 2 directors, Howard and Luanna, passed a resolution to waive a debt of HKD 1,519,083.17 due from Mega best to Thomas Securities as at 11 February 2016 to waived[82];

(ix)  On 11 February 2016, Thomas Securities and Mega Best executed a “Deed of Waiver” stating that as at 11 February 2016, Mega Best owed HKD 92,007,981.28 to Thomas Securities and that the directors proposed to declare a final dividend of HKD 90,488,898.11 to the members for the year ended 31 December 2015, leaving a balance of HKD 1,519,083.17 due, and that Thomas Securities agreed to waive the repaying of this sum[83].

(4)  In relation to Father’s shareholding in Rimax (Father’s said shareholding was not disclosed in the Schedule),

(i)  Father’s shareholding in Rimax was not set out in the Schedule.

(ii)  According to the Inventory, Father held 50% in Rimax.

(iii)  As set out earlier, Rimax was incorporated under laws in BVI on 28 March 2001 and on 4 April 2001 2 shares of USD 1 each were issued respectively to Father and Howard[84]. Howard was appointed a director on 4 April 2001 and Luanna was appointed as a director on 15 October 2009, upon Father’s death.

(iv)  On 31 August 2011, the 2 directors Howard and Luanna, passed a resolution to transfer Father’s 1 out of 2 shares, ie 50%, in Rimax to Mega Best and Howard as executor of the Estate signed “Instrument of Transfer” to transfer the 1 share in Rimax to Mega Best at nil consideration[85];

(v)  According to the Share Register dated 12 December 2011 and the Certificate of Incumbency dated 11 August 2017, Howard held 1 share and Mega Best held 1 share as at 31 August 2011[86].

(5)  In relation to Father’s shareholding in Chieflink (Father’s said shareholding in Chieflink was not disclosed in the Schedule),

(i)  According to the Inventory, Father held 50% in Chieflink.

(ii)  According to the Certificate of Incumbency dated 24 January 2017 issued by the registered agent for Chieflink[87], Chieflink was incorporated under the laws of BVI on 6 March 1992, and initially there were 2 issued shares of USD 1.00 each. Father became a shareholder holding 1 share on 6 October 1992, and Howard became a shareholder holding 1 share on 4 April 2001. Chieflink was stated to be automatically re-registered under the BVI Business Companies Act 2004 on 1 January 2007 with an authorised capital of USD 50,000 comprising of 50,000 shares of USD 1.00 each.

(iii)  Howard was appointed as a director on 4 April 2001 and upon Father’s death, Luanna was appointed a director on 15 October 2009.

(iv)  Chieflink was the registered owner of the Flamingo Gardens House where Howard and his family has been residing rent free;

(v)  The 2 directors Howard and Luanna passed an undated resolution to transfer Father’s 1 share, ie 50% in Chieflink to Mega Best, and Howard as executor of the Estate signed “Instrument of Transfer” to transfer the 1 share to Mega Best at nil consideration[88];

(vi)  According to the Share Register as at 6 February 2012, 1 of 2 shares was transferred from Father to Mega Best on 11 November 2011[89].

I.1.3.  Whether Howard was in breach of section 55 of Cap 10 and/or the self-dealing rule

140.  It was submitted by Mr Man that the Plan (as pleaded by Howard) in substance involved a purchase by Mega Best of Ps’ beneficial entitlement in the Residuary Estate, in return for allotment of shares in Mega Best, and that the essence of the Plan was that Ps had sold their rights as residuary legatees for shares in Mega Best and that this was a sale and purchase of a beneficiary’s right, and that this would be a subject matter of the fair-dealing rule and not the self-dealing rule[90].

141.  As said, I find Mega Best was/is only a trustee for the Residuary Beneficiaries. Anyway, as seen in the transaction documents, Father’s shares in the 5 Companies, which were trust property held by Howard as executor and trustee of the Estate, were transferred by Howard in that capacity to Mega Best, a company controlled solely by him at nil or nominal consideration. On the face of it, it would appear that Howard did fall foul of the self-dealing rule”.

142.  However, as found earlier, Ps did agree to Father’s shares in the 5 Companies being transferred to Mega Best, and they were fully aware that Howard was the majority shareholder of Mega Best, and that Mega Best was under Howard’s sole control. There had also been delay on the part of Ps in raising queries about the transfers, such queries being raised only in August 2017.

143.  In light of the above, I am of the view that the transactions should not be voidable ex debito justitiae, even if Howard did fall foul of the self dealing rule and/or section 55.

I.2  Whether Howard was in breach of the fair-dealing rule

I.2.1.  The legal principles

144.  Mr Lam referred the Court to what had been set out by Anthony Chan J in relation to the fair-dealing rule in Yang Foo Oi v Wai Wai Chen & Anor HCA 1739/2010, unrep 29.11.16 at paragraphs 157-158:

“157. … Under the rule, where a fiduciary deals with his principal, he must prove that: (a) the transaction is fair or that the fiduciary gave full value; and (b) he had made full disclosure of all material facts. It was held in the well-known authority of Bristol and West Building Society v Mothew [1998] Ch 1 at 18D-E, per Millett LJ (as he then was):

‘where the fiduciary deals with his principal ... he must prove affirmatively that the transaction is fair and that in the course of negotiations he made full disclosure of all facts material to the transaction. Even inadvertent failure to disclose will entitle the principal to rescind the transaction.’

158.  It is equally trite that the burden of proof on these matters is firmly on the fiduciary …”

(emphasis added)

145.  There was no real dispute to the above general principles. Mr Man did not dispute the above but submitted that “inadvertent failure to disclose” still meant that the fiduciary had to have knowledge of those material facts.

146.  Mr Man had also submitted amongst others that the Court will adopt a common sense approach to questions of disclosure in a family context: Sharma v Sharma (2014) BCC 73, at para 66.

147.  In Sharma, the Court of Appeal noted, at paragraph 71, that the duty to make full disclosure is not so onerous that it requires the fiduciary to identify and analyse a range of unlikely, but possible, future scenarios, and also at paragraph 52(iv), the beneficiaries’ knowledge of the relevant facts “does not entail an understanding of their legal incidents”.

I.2.2.  No plea of the fair-dealing rule

148.  One of Mr Man’s main submissions was that Ps’ pleading was defective as there was no plea of the fair-dealing rule, nor any particulars of Howard’s alleged breach of the rule, including (i) the reasons for alleging that the transaction was not “fair”; (ii) the information which Howard had allegedly failed to disclose: (iii) the reasons for alleging that such undisclosed information constituted “material facts” in that the beneficiaries did not appreciate such facts or their relevance themselves, and yet those facts could have affected their decision to agree; and (iv) whether Howard was said to have known about the information at any material times.

149.  On the other hand, Mr Lam referred the Court to Wong Lung v CUHK Employees’ Credit Union HCA 1122/2010 unrep, 02.22.16, at paragraphs 40-47. In particular, it was said by Wilson Chan J in relation to a similar “pleading point” being made in that case, that the authorities had made it clear that the burden was on the fiduciary to positively show full disclosure and consent[91].

150.  Mr Lam submitted that it was incumbent upon Howard, the fiduciary, to prove positively that the Plan (as pleaded by him) was to be upheld, and that the burden was firmly on Howard to positively plead and prove that (i) the Residuary Beneficiaries gave their concurrence to the transfers having full knowledge of all the material circumstances, in other words, not just consent, but fully informed consent, in order to satisfy the requirements of fair-dealing and in defence of self-dealing; and (ii) that the transaction was fair and honest, in order to satisfy the requirements of fair dealing.

151.  Mr Man had argued that the fact the burden being on Howard as fiduciary to prove that he had obtained informed consent would not obviate the need for Ps to plead the point and the alleged non-disclosures in the first place, and in this respect, he had referred the Court to the decision of the High Court of Australia in BLB Corp of Australia Establishment v Jacobsen (1974) 48 ALJR 372.

152.  Although there was no express reference to the “fair-dealing rule” in the ASOC, it was submitted by Mr Lam Ps had pleaded, amongst others, that Howard had the duty to ensure the beneficiaries had obtained timely independent advice and to make full and frank disclosure of all material information to the beneficiaries so as to enable them to obtain timely independent advice, and that Howard ought to have disclosed and drawn Ps’ attention to the disadvantages and risks of such transaction or deal including any unusual or abnormal features thereof, and that Howard was in breach of such duty[92].

153.  It was pleaded by Ps in paragraph 43 of the ASOC[93], amongst other things, that Howard had never informed and/or consulted Ps as to (i) which adviser had been engaged by Howard and what advice had been received by him, (ii) what were the assets of the Estate, what were their proper values, and what valuations had been obtained by Howard; and (iii) how the entire assets of the Estate were transferred and converted into Mega Best. As set out earlier, it was Howard’s case that Ps never sought the information, and that he had provided the Updates.

154.  In the Reply, Ps had reiterated amongst other things in paragraph 37(b) that there was no mention by Howard that he had made any full disclosure of all the material information relating to the assets and liabilities of Father’s companies that were supposed to be transferred to Mega Best[94].

155.  Although Ps’ pleadings of lack of full and frank disclosure of material information were generally in respect of Howard’s alleged breach of his fiduciary duties, what was clear was the Ps did plead throughout that there was a lack of full and frank disclosure of material information at the time when the alleged Plan was put forward by Howard, in particular that there was no disclosure as to what assets would be transferred to Mega Best and the value of those assets at the time. In my view, Ps’ pleadings were sufficient to raise Howard’s breach of fair-dealing rule. In any event, I also agree with Mr Lam’s submission that it was incumbent on Howard to plead and to satisfy this Court that there was “informed consent” on part of Ps to the alleged Plan as pleaded by him.

I.2.3.  Whether there was breach of the fair-dealing rule

156.  The burden of proving not just consent, but fully informed consent would rest entirely on the fiduciary[95], namely in the present case, the burden was on Howard to prove that there was “informed consent” on the part of Ps to the Plan as pleaded by him.

157.  It was however not pleaded by Howard in the Defence that Ps’ consent to the alleged Plan (as pleaded by him) was a fully informed consent, nor was there any assertion in Howard’s evidence that all material information was disclosed to the Residuary Beneficiaries at the time when he put forward the alleged Plan and/or at the time when they consented to the Plan (as pleaded by him).

158.  It was Howard’s own evidence in his witness statement that he was the one who fully understood Father’s vision, operation and the financial management of his businesses and assets and that he was the only sibling in the family helping Father in the daily operation of Father’s business and that his family members had little or no knowledge of involvement in the handling of Father’s business and wealth. As said by Howard, for all the bank accounts of Father’s business empire and property holdings, it was only Father and Howard who could operate the bank accounts and sign cheques singly before Father’s death[96].

159.  Based on Howard’s own above evidence, Ps could not have any knowledge of the extent Father’s businesses and wealth which Howard alone had, other than Father had operated the schools successfully and was a very wealthy man with landed properties upon which the schools were situated. Rose and Lucy perhaps would have more information of the operations of the schools during the period they were Supervisor/Principal, but this could not have been said of Christopher. In any event, Howard was clearly the only one who had all the financial information about Father’s businesses and companies and of the Estate. I have earlier found that any Updates provided by Howard in relation to the transfers into Mega Best could only be in very broad and brief terms, and would not have included information such as any estimated valuations and details of Father’s shareholdings in the 5 Companies and their underlying assets, the full extent assets of the Estate and the full extent of Father’s indebtedness, and also the costs and stamp duties payable for the transfers. I am of the view that all such would be material information for there to have been any “informed consent” to the Plan as pleaded by Howard, namely for Ps to agree to abandon all their rights and entitlements under the Will pursuant to the Plan as pleaded by Howard, they should have been provided with such material information by Howard, which were in my view within Howard’s knowledge or within his power to obtain.

160.  Without such material information being provided to Ps, Ps would have no clue as to what their respective Entitled Proportions in the Residuary Estate would be worth, and the transaction could not be said to be fair.

161.  Having considered all the evidence, I am of the view that there was no “informed consent” to the alleged Plan as pleaded by Howard, and Howard had fallen foul of the fair-dealing rule.

I.3  Whether breach of other fiduciary duties

162.  As will be set out later, it is my view that Howard’s administration of the Estate had not ceased upon his implementation of the Plan (whether as pleaded by him or as found by this Court), and thus, he continued to owe fiduciary duties to Ps as executor and trustee of the Estate.

163.  The fiduciary duties owed by an executor and trustee had been pleaded by Ps in paragraphs 11 and 12 of the ASOC which included the following:

(1)  duty to account

(2)  duty of good faith

(3)  duty to avoid personal benefit

(4)  duty to avoid conflict

(5)  duty to avoid self-dealing

(6)  duty to avoid abuse

(7)  duty to ensure independent advice

(8)  duty to distribute

164.  Even though the Plan as found by this Court was essentially a corporate structure of forming a BVI holding company to hold as trustee Father’s shares for the Residuary Beneficiaries, in effect, upon the Plan being implemented, Ps would be further “distanced” from the operations of the 5 Companies being minority shareholders with their shares in the Residuary Estate held by a BVI company as trustee solely controlled by Howard.

165.  As set out in Appendix 1, at the date of Father’s death, apart from 7 landed properties directly owned by Golden Fook, there were 2 other landed properties indirectly owned by Golden Fook through Hong Kong companies held by 2 BVI companies. Further, Father’s shareholdings in Rimax and Chieflink were not disclosed by Howard in the Schedule and were only disclosed by him in the Inventory in November 2009, and the corporate structure of Father’s shareholdings at the date of his death and after the implementation of the Plan were only disclosed by Howard in Appendix 1 and Appendix 2 in his witness statement in August 2020.

166.  As said, there were no valuations, not even estimated valuations, of the Estate provided by Howard to Ps at the time of Ps agreeing to the alleged Plan (as pleaded). No inventory/account of the Estate was provided by Howard to the Residuary Estate.

167.  There was no evidence that Howard had advised Ps to obtain independent advice before agreeing to the alleged Plan (as pleaded) by Howard.

168.  In her letter of 7 August 2017 to Howard, Rose had asked for a copy of the Probate and a most current and updated account of the Estate. Even though a copy of the Probate was subsequently provided, no updated account of the Estate was provided, with Howard maintaining that Ps had agreed to the alleged Plan (as pleaded). In any event, the Schedule was deficient. Suffice to say, it was only after Chung J made an order, that Howard eventually provided the Inventory to Ps in September 2019. There was no reason as to why Howard could not have provided Ps earlier with an inventory and account of the Estate.

169.  Howard’s administration of the Estate will be set out later, and in light of this Court’s finding (as set out later) that Howard had not completed administration by his simply distributing and transferring Father’s shareholdings in the 5 Companies to Mega Best as trustee for the Residuary Beneficiaries, I find that Howard had/has a continuing duty to account and to provide inventory and accounts and to make distributions, which he had been in breach of.

170.  Howard’s own evidence was that he had continued to live rent free in the Flamingo Gardens House rent free after Father’s death. He had continued to withdraw substantial sums from Golden Fook for the benefit of himself, Luanna and their children, their dogs, and/or their horses. On the face of it, it appeared that he had also been in breach of his duty to avoid personal benefit and conflict.

171.  Having considered all the evidence, in my view, Howard had been in breach of his fiduciary duties towards Ps.

J.  ISSUE (1) – WHETHER THE ADMINISTRATION OF THE ESTATE INSOFAR AS THE DISTRIBUTION OF THE RESIDUARY ESTATE TO THE RESIDUARY BENEFICIARIES HAD BEEN COMPLETED, AND IF SO, WHEN

J.1  Legal principles

172.  Mr Lam had referred the Court to the following principle:

“The beneficiary has no equitable proprietary interest in the narrower sense, and of course no equitable ownership, if either his rights or the assets in which they are to be enjoyed are not sufficiently ascertained ... if assets are in course of administration and debts have to be paid out of them before the trust property is ascertained, the beneficiaries have no interest or ownership in a particular asset: it may be needed to pay the debts. They are nonetheless entitled to enforce due administration of the assets, and so are interested in a wider sense, and the personal representatives cannot be said to have “beneficial ownership” of any of the assets.”

See: Lewin on Trust (20^th Edition) at 1-08

173.  It had also been explained by Yuen JA in Pacific Harbor Advisors Pte Ltd v Winson Federal Ltd HCMP 1285/2015 at paragraph 28.2:

“[I]t is well-established that a beneficiary has no legal or beneficial interest in the assets of a deceased person’s estate until administration and distribution. What a beneficiary has is only a chose in action to have the deceased person’s estate property administered and applied for his benefit when the administration is complete: see Commissioner of Stamp Duties v Hugh Duncan Livingston [1965] 694 at 708 and 717 ….”

174.  It was also set out in Kleinwort Benson (Hong Kong) Trustees Ltd v Wong Foon Hang [1993] 1 HKC 649 (at 657-658):

“Unless the residue has been ascertained, a will trust cannot come into existence, for there will be no certainty of subject matter …. Kleinwort Benson has never produced a residuary account showing what was the ascertained residue it was supposed to have taken over as trustee on 31 March 1989 … Lack of ascertained residue is fatal to Kleinwort Benson’s claim to have turned into trustee of the will trust, from having been an administrator of the estate.”

175.  As further submitted by Mr Lam:

“A residuary legatee has no right to any specific item of property at all, and until the executors have discharged all payments there is nothing which can be regarded as residue. No action at law lies against an executor for a general legacy or share of residue … The rights of a residuary legatee before distribution are defined by this House in Lord Sudeley v Attorney-General (3), which is directly in point.”

Barnardo’s Homes v Special Income Tax Commissioners [1921] 2 AC 1 at 5

J.2  Howard’s purported administration of the Estate

176.  According to Howard, his administration of the specific legacies in Clauses 3-6 of the Will was as follows:

(1)  In relation to Clauses 4 and 5 concerning Barbara Chung, according to Howard, on 3 February 2012, he issued a cheque of HKD 10,000,000 to Barbara Chung and it was only in his witness statement of 28 August 2020 that he disclosed, contrary to his earlier evidence in paragraph 38 of his 1^st affidavit, on review of the accounts, as Barbara Chung did not in fact owe any money to UT Finance at the date of Father’s death, and that there was no need for any payment from the Estate to UT Finance in accordance with Clause 5 of the Will[97];

(2)  In relation to Clause 6 concerning Ms Yiu, Howard did not disclose in his written evidence as to when Ms Yiu was paid, and only mentioned that it was from 12 to 18 July 2010 that advertisements were placed in two newspapers to look for Ms Yiu and that she then appeared and collected from his lawyer a cheque in the sum of USD 500,000[98]. During the Trial, Howard said he could not recall when Ms Yiu collected the cheque and said there should be a record. However, no such record had ever been produced by Howard, nor was there any mention in Ruby’s witness statement as to when Ms Yiu was paid. Under further cross examination, Howard’s evidence was that Ms Yiu was paid before Barbara Chung, which would be prior to 3 February 2012, or in other words, Ms Yiu was allegedly paid some time between 18 July 2010 and 3 February 2012.

(3)  In relation to Clause 3 regarding the Charity, it was only disclosed by Howard in his supplemental witness statement dated 26 May 2021 that a company called “Dr Thomas Liang Charitable Foundation Limited” was set up on 19 April 2021[99]. It was Howard’s evidence that the Estate had already donated HKD 22,488,591[100] from Golden Fook, and that his intention was to donate another HKD 27,511,409 to the Charity[101]. However, it appeared at the time of the Trial, such donation had still not been made.

177.  According to Howard, his administration of Clause 7 was as follows:

(1)  The “cash at bank” set out in item 2 under section A (Assets) of the Schedule of a total of HKD 722,136.43 was, according to Howard, used in around 2011 to settle partially Father’s debt owed to Golden Fook (which debt had by then under Howard’s arrangement been assumed by Mega Best)[102].

(2)  The transfers of Father’s shareholdings in the 5 Companies to Mega Best as set out earlier.

178.  There were also “Other Assets” set out in the Schedule, namely (i) Father’s various club memberships, (ii) Father’s memberships in 2 racing horse syndicates, (iii) Replacement Permit and PP Permit issued by HKJC, and (iv) an amount of HKD 27,792,368.24 due from SJC Limited to Father.

179.  According to the Inventory produced by Howard on 25 September 2019, items (i) to (iii) in the “Other Assets” were all cancelled. It was not quite clear when and/or how they were cancelled. Further, according to the Inventory, item (iv) was held by Mega Best as at 31 July 2011 as per item 15 on page 22 of the audited financial statements of SJC Limited of that date. However, those audited financial statements as at 31 July 2011 (prepared on 23 April 2012), reflected that as at 31 August 2010, the “Amount due to a director” was HKD 27,792,368 but as at 31 July 2011, the “Amount due to holding company” was HKD 25,518,870, and the “Amount due to related companies” was HKD 3,200,531. It was not clear as to which related companies were referred to. Presumably, the “holding company” referred to Mega Best even though Father’s shares in SJC Limited were only transferred to Mega Best on 8 September 2011. It was not clear as why there was a discrepancy of about HKD 2.3m in the amounts stated in the financial statements of SJC Limited and the amount stated in the Schedule.

180.  As for Father’s liabilities set out in the Schedule:

(1)  As set out earlier, Father’s personal liabilities due to Golden Fook, Thomas Securities and UT Finance in his current account were transferred to Mega Best’s current account with the respective companies, instead of being cleared or paid off.

(2)  The small amounts outstanding in Father account with Hong Kong Jockey Club and in his credit card account were paid off by Golden Fook.

181.  There were other assets of the Estate not set out in the Schedule. It was not quite clear as to why the 500,000 shares held by Thomas in trust for Father at the time of Father’s death were not disclosed by Thomas in the Schedule nor were they transferred to Mega Best pursuant to the Plan as pleaded by him, and why there was a different arrangement in respect of those 500,000 shares.

182.  There was also no disclosure of California Memory. Howard only made disclosure of California Memory in his witness statement of August 2020 and through Ruby’s evidence in her witness statement of same date in August 2020 as follows:

(1)  On 25 June 2009, Father purchased “California Memory” from France at the cost of USD 350,000, and he paid HKD 8,750 for commission for the purchase, and both sums were booked in Father’s current account maintained in Golden Fook[103]. The horse arrived in Hong Kong on 19 September 2009 and between October 2009 to September 2010, monthly expenses were required to be paid out of Father’s current account to cover the maintenance fee of the horse.

(2)  On 10 October 2010, the horse achieved its first winning with stake/monies distributed to Father’s account at HKJC (“HKJC Account”), and from October 2010 to January 2011, the horse’s monthly expenses were deducted from the stake monies in Father’s HKJC Account;

(3)  On 24 January 2011, the ownership of California Memory was transferred to Howard as executor of the Estate. Father’s HKJC Account was closed on 11 February 2011, and a cheque was issued to Howard in the sum of HKD 1,649,699.21 which was said to be remitted to Golden Fook, and booked in Mega Best’s current account with Golden Fook on 22 February 2011[104];

(4)  Since February 2011 until August 2013, all of the monthly expenses and the relevant facilities charges of California Memory were paid out of Mega Best’s current account with Golden Fook, amounting to HKD 2,906,984.92, and commissions were made to the horse’s trainers and paid by Howard personally amounting to around HKD 1,372,457.03.

(5)  The stake monies achieved by California Memory were deposited into Howard’s personal account at the HKJC, and the total stake monies received from February 2011 to August 2013, were HKD 32,810,283.19;

(6)  Howard had treated California Memory as an asset of the Estate, from time to time, he transferred the horse’s stake monies from Howard’s personal account at HKJC to Mega Best’s current account in Golden Fook[105].

183.  What was clear was that California Memory, although an asset of the Estate, was not held by Mega Trust but by Howard, and all the transactions regarding California Memory were said to be “booked” in Mega Trust’s current account with Golden Fook. There was no declaration of trust in favour of the Residuary Beneficiaries made by Howard in relation to California Memory, or any of the horses purchased after Father’s death and paid by Golden Fook. It was not clear why Howard would only transfer the stake monies to Mega Best’s current account from time to time and not immediately which he should, being only a fiduciary. As said earlier, there appeared to be no mention of California Memory in the Inventory, or any other horses paid out of Golden Fook.

184.  During the Trial, it was put to Howard that after Father’s death, there had been some 20 horses purchased and held by Howard and/or his children, and also by Mother, and Howard’s response was that he did not recall. However, Howard admitted that all the horses were purchased with monies from Golden Fook and according to him, all expenses were also charged to Mega Best’s current account with Golden Fook what was clear was that he had never consulted Ps as to such purchases. As seen in the audited financial statement of Golden Fook, as at 31 December 2018 and also the Inventory the “Amount due from a shareholder”, namely Mega Best, was stated to be HKD 266,569,911, and the “Amount due from a director”, ie Howard’s current account was stated to be HKD 359,265,896 (which was nil at date of Father’s death). It was clear that until Howard made disclosure in the present action, Ps would not have known of such figures or of any information in relation to California Memory.

185.  What was clear was that there was no full disclosure by Howard of all the assets of the Estate even in the Inventory, his sale of Thomas Securities clearly indicated that at least in early 2016 (completion of sale), he was still administering the Estate.

J.3  Howard’s evidence and pleaded case

186.  In any event, Howard’s evidence as to when he said his administration of the Estate was concluded and completed and his role as executor was discharged was confusing and inconsistent, as seen in his following evidence and his pleaded case in the Defence:

(1)  in his letters to Rose and Lucy dated 17 August 2017[106], he had stated that the date that marked the conclusion of the administration of the Estate and the completion of his duty as the Executor was 20 January 2011, 13 months after Probate was granted to him and upon Mega Best being formed and shares allotted to the Residuary Beneficiaries.

(2)  In WKLL’s letter dated 1 June 2018 to Ps’ solicitors[107], it was reiterated that the Residuary Beneficiaries had reached consensus in forming Mega Best which was done on 20 January 2011 when Ps were allotted shares in Mega Best, at which juncture, Howard had fully administered the Estate and his duties under the Will had been discharged.

(3)  However, in his 1^st Affidavit, Howard’s evidence was that the Estate was fully and duly administered “in or around 2011 and 2012”[108].

(4)  Then, it was Howard’s pleaded case in paragraph 13 of the Defence that between September 2011 and December 2012, the assets and liabilities of Father’s companies under the Estate were transferred to Mega Best[109], which marked completion of his administration.

(5)  As pleaded in paragraph 18 of the Defence, the entire shareholding of Thomas Securities was sold to a third party on 31 August 2015[110].

(6)  The Charity was only set up on 19 April 2021[111], with Howard as “Founding Member” and the directors were Howard, and his daughters Chloe Shun Yin Liang, and Charmian Shun Ming Liang[112].

187.  Hence, as set out above, Howard’s own evidence was confusing as to when he said he had completed administration of the Estate.

J.4  Conclusion on Issue (1)

188.  Having considered all the evidence, I am not satisfied that the administration of the Estate had been completed by Howard distributing and transferring Father’s shareholdings in the 5 Companies to Mega Best as trustee, whether by 20 January 2011, or “around 2011 and 2012”, or by December 2012, or by 31 August 2015. Further, whatever donations Howard had made in the name of the Father, there was no sufficient evidence that they were made pursuant to Clause 3 of the Will. Until such time that the sum of HKD 50m has been fully paid into the Charity pursuant to Clause 3 of the Will and Father’s “just” debts fully repaid, the Residuary Estate could not have been clearly ascertained, nor could the amount of the entitlement of each of the Residuary Beneficiaries be ascertained and distributed, upon which administration could then be said to have been completed.  

K.  ISSUE (6) – WHETHER PS ARE ENTITLED TO APPLY FOR FURTHER RELIEFS RELATING TO ACCOUNTS AND INQUIRIES OR ANY OTHER RELIEF SOUGHT IN THE ASOC

189.  In light of my finding that the administration has not been completed, I find Ps are entitled, to apply for further reliefs relating to accounts as Howard, as executor or the new administrator is under a continuing duty to administer the Estate and to render an inventory and accounts of the Estate.

L.  ISSUE (7) – SHOULD AN INDEPENDENT ADMINISTRATOR BE APPOINTED TO REPLACE HOWARD

190.  At the commencement of the Trial, Mr Lam had clarified to the Court that Ps’ grounds for removing Howard as executor were as follows:-

(1)  Howard’s breach of fiduciary duties

(2)  Howard’s ceasing administration as according to him, he had completed his duties as executor

(3)  Howard’s delay and failure to provide a proper inventory of the Estate

(4)  Howard’s dissipation of the assets of the Estate

191.  As found earlier, there had been breach of fiduciary duties on the part of Howard including delaying and/or failing to provide a proper inventory and to make distributions and breach in duty to avoid personal benefit and conflict. I would also add, in light of my finding that Howard had not completed administration, and the fact that Howard only produced the Inventory and Appendix 1 after commencement of these proceedings, I find Ps’ complaints in (2) and (3) above justified. I am not prepared to find at this stage that there had been dissipation by Howard of the assets of the Estate even though the substantial increases of liabilities in Mega Best’s current account and also in Howard’s own current account, in particular in Golden Fook and also the substantial increase of bank liabilities since the date of Father’s death may call into question Howard’s handling of the Estate. Further, it was only on 1 January 2019 that a sum of about HKD 5,618,334, being the net sale proceeds of Thomas Securities, was reallocated and credited against Mega Best’s current account in Golden Fook from Howard’s personal current account[113]. In short, the sum was received by Howard and credited against his personal current account in Golden Fook in early 2016, and without these proceedings, the sum would not have been reallocated, and Ps would never have found out. Suffice to say, Ps have satisfied this Court that, notwithstanding Howard was the one chosen and appointed by Father to be the executor, due and proper administration of the Estate and the interests of the persons beneficially entitled thereto require Howard should be removed as executor and trustee of the Estate and another person be appointed in his place.

M.  CONCLUSION AND ORDERS

192.  As I have found Ps did agree to the Plan (as found by the Court). I am not prepared to make a declaration sought in Relief (1A) in the ASOC. I am only prepared to order at this stage that:

(1)  Howard be removed as the executor and trustee of the Estate upon an independent professional administrator being appointed in his place. I will direct the parties to submit proposed directions as to such appointment and for further administration of the Estate and if such directions cannot be agreed, I direct that a hearing be fixed in consultation with counsel’s diaries, for directions (estimated length 2 hours).

(2)  Costs of this action will also be heard at the directions hearing, unless agreed.