CHAN KWONG AND OTHERS v. CHAN CHEUK TONG AND ANOTHER

HCMP 202/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 202 OF 1998

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BETWEEN

(By counterclaim)

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DETERMINATION

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1.  This determination deals with issues between the Co-trustees, Messrs Tony Fan and Chan Kwong, arising from the finalization of the list of shareholders / beneficiaries of the Trust pursuant to paragraph (3) (a) and (b) of the Order dated 18 July 2005 (“the Order”) as subsequently varied. Pursuant to the directions given on 25 August 2009, the Co-trustees had lodged written submissions on the issues as well as other issues relating to the further conduct of the Order.

A.   Finalization of the list of shareholders / beneficiaries of the Trust and their respective shareholdings

A1. The approach

2.  Mr Tony Fan raises a doubt as to whether the original shareholders in the following cases had indeed parted with the beneficial ownership of their shares, namely, (a) Shares no. 15 and 16: (b) Share no. 58; (c) Shares no. 75 and 76; (d) Share no. 88; (e) Share no. 139; (f) Shares no. 157 and 158; and (g) Share no. 214.

3.  Mr Fan’s primary objections are: (1) In a number of other cases where the original shareholders had sold their shares, they would be named as confirmors in the assignments of the properties that were allocated pursuant to the shares in question. Further, the original shareholders would give notice to the then trustees (Chan Kwong and Law Hon Fong alias Law Yu Ping). These practices were not followed in the seven cases in issue. (2) There was no mention of the sale of the shares in the assignments of the properties in question. (3) The purchase price paid by the assignee(s) to the original shareholder was more than necessary, having regard to the construction costs.

4.  In my view, the assignment by the original shareholder to the assignee of the properties allocated pursuant to the share in question is an assignment of the interest under the share. At the relevant time, the properties allocated to the share were the only interest under the share because it was not envisaged that there would be surplus units for distribution to the shareholders. It is therefore not surprising that the documentation dealt only with the sale and transfer of interest in the properties and not the share itself.

5.  As to Mr Fan’s reservation on the manner of conveyance, I accept it may have been better practice for the conveyance to take the form of an assignment from the trustees to the assignee with the original shareholder joining in as confirmor. However, the fact that the conveyance was not effected in this way does not invariably give rise to an inference that the original shareholder has retained an interest in the share. Neither can it be assumed that the beneficial interest in the share in question had not been validly transferred. Similarly, the failure of the original shareholder to give notice of the sale to the trustees does not mean that there was no sale. As to the point about the purchase price being too high, it is a speculative point. Ultimately, what is important is to analyze the evidence available to see whether there is a real risk that the interest in the shares had not been validly transferred and where it is clear that the original shareholder had assigned his interest in the share, to identify to whom the beneficial interest had been assigned.

6.  I turn now to deal with the seven cases in question.

A2. Shares no.15 and 16

7.  The Chinese sale and purchase agreement dated 5 November 1987 together with the receipt for the deposit and the cashier order for the payment of the balance of the purchase price are clear evidence of the sale of the two shares by Lee Chor to Kong Yiu Hung. The English declaration of trust dated 1988 is consistent with the sale of the shares and affords further evidence of the sale in that the recital recited an agreement to sell the shares. The fact that the properties in question were assigned by the trustees to Lee Chor before they were separately assigned to Kong Yiu Hung and to Lam Yuet Ngor with Kong Yiu Hung as the confirmor does not cast doubt on the sale of the shares. Accordingly, Kong Yiu Hung should be admitted as the beneficiary of Shares no.15 and 16.

A3. Share no. 58

8.  The Chinese declaration dated 19 August 1977 is evidence of the sale of the share from Kan Shui Lan to Yip Ching Chee (“Yip”).  The fact that the properties were assigned by the trustees to Kan Shui Lan before being assigned (on the same day) to Chan Yip Che (“Chan”) does not raise any doubt on whether Kan had transferred his interest in the share. 

9.  As between Yip and Chan, however, although they are husband and wife and it may be that the assignment to Chan was done at the direction of Yip, this should be clarified. Hence, the Co-trustees should obtain a confirmation or declaration from Chan or both Yip and Chan that the beneficial interest of the share rests with Yip. Subject to obtaining this confirmation, Yip may be admitted as the beneficiary of Share no. 58.

A4. Shares no. 75 and 76

10.  Although Tam Chi Keung Alan did not sign the Chinese instruction to solicitors, what is important is that Lai Chun Man had signed and this evidences his agreement to sell the shares to the two Mr Tam. The manner in which the properties were assigned from Lai Chun Man to the two Mr Tam does not cast doubt on the sale of the shares.  Tam Fou Kwan and Tam Chi Keung Alan should be admitted as the beneficiaries of Shares no. 75 and 76. 

A5. Share no. 88

11.  The English declaration of trust, which recited the agreement to sell the share, is evidence of the sale of the share from Chow Hin Ming to Lam Sau Lan Amy. The assignment dated 24 May 1990 further evidences the transfer of interest in the share. It matters not that the properties were first assigned to Chow Hin Ming instead of directly to Amy Lam.

12.  The Chinese declaration of the daughter, which was made some 15 years later, is a peculiar document. It is strange that she should make a specific declaration about the share while claiming not to have any paper relating to the share or properties that were allocated pursuant to the share.

13.  That said, however, further steps should be carried out by the Co-trustees to establish the beneficiary of this share. They should: (a) try to contact the daughter to see whether she still makes a claim to the share; (b) conduct a search at the Probate Registry to see whether probate had been obtained for the estate of Chow Hin Ming and whether the share is listed as part of the estate; (c) if the answers to (b) are in the affirmative, contact the administrator to see whether the estate still makes a claim to the share; and (d) obtain from Amy Lam a declaration confirming the completion of the sale of the share to her and her interest in the share.

A6. Share no. 139

14.  The English instruction to solicitors evidences an agreement between Chau Wan Hing and Lam Yuet Ngor for the sale and purchase of Share no. 139. The assignment of the properties from Chau Wan Hing to Lam Yuet Ngor on the same day as the properties were assigned from the trustees to Chau Wan Hing amounts to an act in pursuance of the agreement to sell the share and its interest.  There is no other circumstance casting doubt on the completion or validity of the sale of the share.  Accordingly, Lam Yuet Ngor should be admitted as a beneficiary of Share no. 139.  

A7. Shares no. 157 and 158

15.  The English declaration of share dated 1986 recited that Hui Yue Tak (“Hui”) had agreed to sell the shares to Ip Choi Hing (“Ip”). The document is evidence of an agreement for the sale of the shares between them. On the same day as the trustees assigned to him the properties allocated under the shares, Hui assigned the properties to Ip alone, Ip and Lam Yu Yuk (“Lam”) jointly and Lam alone. The assignments provide further evidence that Hui had sold his interest in the shares. 

16.  However, as between Ip and Lam, while it may be that Lam is a family member of Ip and that it was at Ip’s direction that part of the properties were assigned to Lam, this should be clarified. The Co-trustees should obtain a confirmation or declaration from Lam or both Ip and Lam that the beneficial interest of the share rests with Ip. Subject to obtaining this confirmation, Ip may be admitted as the beneficiary of Shares no. 157 and 158.    

A8. Share no. 214

17.  The English instruction to solicitors is evidence of the agreement between Chun Chung Ching and Kwan Ping for the sale and purchase of Share no. 214. The three assignments all dated 23 December 1989 from Chun Chung Ching to Kwan Hoi Ping, Kwan Hoi Ching Osward and Kwan Hoi Yin (collectively “the Assignees”) with Kwan Ping as the confirmor amount to a transfer of Chun’s interest under the shares and provide evidential support of a sale of the share by Chun Chung Ching to Kwan Ping.

18.  However, what is unclear is whether Kwan Ping merely assigned the interest in the properties to the Assignees or whether he had assigned all interest in the share to the Assignees (considering that no property had been assigned to him).  Hence, the Co-trustees need to obtain declaration(s) from Kwan Ping and/or the Assignees regarding the beneficial interest of the share.  The identity of the beneficiary of Share no. 214 is dependent on the content of the declaration(s).

A9. Summary

19.  In summary, the position with regard to the seven outstanding cases are:

Share no.	Beneficiary	Remarks
15 & 16	Kong Yiu Hung	Nil
58	Yip Ching Chee	Subject to confirmation/ declaration of beneficial interest from Chan Yip Che or both Yip Ching Chee and Chan Yip Che.
75 & 76	Tam Fou Kwan & Tam Chi Keung Alan	Nil
88	To be established	Co-trustees to: (a) contact Chow Suet Lin to see whether she still claims interest in the share; (b) conduct a probate search to see whether probate had been obtained for the estate of Chow Hin Ming and whether the share is listed as part of the estate; and (c) obtain from Amy Lam a declaration confirming the completion of the sale of the share to her and her interest in the share.
139	Lam Yuet Ngor	Nil
157 & 158	Ip Choi Hing	Subject to confirmation/ declaration of beneficial interest from Lam Yu Yuk or both Ip Choi Hing and Lam Yu Yuk.
214	To be established	Co-trustees to obtain declaration(s) from Kwan Ping and/or Kwan Hoi Ping, Kwan Hoi Ching Osward, Kwan Hoi Yin regarding the beneficial interest in the share.

B.    Notice of the shareholders meeting

20.  By the direction dated 25 August 2009, the Co-trustees are to endeavour to agree on the manner of giving notice of the shareholders’ meeting to the existing shareholders/ beneficiaries pursuant to paragraph (3)(i) of the Order. Mr Chan Kwong has no disagreement to the manner proposed in paragraph 8 of Messrs Tam & Partners’ submissions.  The proposed manner shall be adopted accordingly.

C.   The accounts of the Trust

21.  Paragraph 9 of the submission of Messrs Tam & Partners also raises an issue with regard to the accounting documents of the trust accounts. With respect, it is unclear from the submission what are the further documents that Mr Fan says are within possession custody or power of Mr Chan and which he has failed to disclose.

22.  If Mr Fan wishes to pursue the enquiry, he should within 14 days serve a list of the required documents.  Within 14 days thereafter, Mr Chan Kwong shall file and serve an affidavit exhibiting such of the required documents that he has and stating in respect of the other required documents, whether he had ever had them in his possession, custody or power and if so when and how he parted possession with them.        

23.  The Co-trustees are also reminded of their duties under paragraph (3) (g) and (h) of the Order. They should jointly or separately report to the court the outcome of their investigations of the accounts of the Trust and also any disagreement between them.  

D.   Further directions

24.  For the further conduct of the case, there are the following further directions:

(1)   The Co-trustees shall within one month report to the court on the outcome of the further steps to finalize the list of existing shareholders / beneficiaries of the Trust and their respective shareholdings (see para.19 above).

(2)   The Co-trustees shall endeavour to agree on the final trust accounts within two months and to report the outcome to the court at the end of the two months’ period.

(3)   The Co-trustees shall agree on a target date for the shareholders’ meeting, which shall take into account the time required for finalizing the list of shareholders / beneficiaries of the Trust and the finalization of the trust accounts, and to report the same to the court.

E.Costs of this determination

25.  I make an order nisi that the costs of the Co-trustees incurred in connection with the work and submissions leading to this determination be paid out of the Trust on trustee basis. If neither Co-trustee applies to vary within 14 days after the date of this determination, the order nisi shall become absolute and the respective Co-trustees shall within 14 days thereafter provide to the court their statement for costs for summary assessment.