LEE CHI HANG AND OTHERS v. WELL DONE GARMENT FACTORY LTD AND ANOTHER

HCA 227/2012, HCA 464/2013, HCA 465/2013 (Consolidated) &
HCA 913/2013

[2021] HKCFI 1835

HCA 227/2012, HCA 464/2013, HCA 465/2013 (Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 227 OF 2012

(On transfer from DCCJ No 3995 of 2009)

ACTION NO 464 OF 2013

(On transfer from DCCJ No 928 of 2011)

ACTION NO 465 OF 2013

(On transfer from DCCJ No 4775 of 2011)

________________________

_________________

JUDGMENT

_________________

TABLE OF CONTENTS

A.     INTRODUCTION

1.  These 4 actions are tried before me at the same time.  By the Order of Master Hui dated 4 July 2013, HCA 227/2012, HCA 464/2013, and HCA 465/2013 are consolidated together.  For ease of reference, the consolidated action is referred to as the “Loans Action” in this judgment. By the Order of DHCJ Winnie Tsui dated 9 February 2021, the evidence admitted in the Loans Action is admissible in HCA 913/2013 and vice versa.

2.  This is a sad case.  The disputes herein are disputes between relatives.  The battles are between Mr Wong Shiu Luen (“WSL”) and the late Madam Wong Wai Chun (“WWC”)[1] on the one hand, and Mr Wong Ying Wai (“WYW”) on the other hand. For ease of reference, in this judgment, I would refer to WSL and WWC’s camp as “Ps”, and WYW’s camp as “Ds”.

3.  HCA 913/2013 concerns a number of companies in which WSL, WWC (or her estate), and WYW are the registered shareholders.  In this action, in essence, WSL and WWC are challenging the following:

(1) an allotment in Well Done Garment Factory Ltd (“Well Done”) procured by the late Mr Wong Chun (“WC”)[2] in 1996 (“the 1996 Allotment”) diluting WSL’s and WWC’s shareholdings; and

(2) the transfer of various shares by WC to WYW made in 2001 (“the 2001 Transfer”).

4.  The Loans Action concern certain deposits of funds made by WWC to Well Done, and certain funds deposited by WSL to Hongkong Welldone Garment Factory Co Ltd (“HK Welldone”).  WWC’s estate and WWC claim that these sums are loans repayable to them.  There are some other miscellaneous issues in the Loans Action, which have been set out in [34] and [35] below. 

B.     BACKGROUND

B1.    The parties

5.  WC was the father of WYW, and the younger brother of WWC and WSL (WWC being the eldest sibling).  WC was all along the largest shareholder in the various companies involved in these proceedings (except Welldone Garment Company Limited (“the New Co”)), namely:

(1) Well Done;

(2) Wong Chun Kee Piece Goods Co Ltd (“Wong Chun Kee”)

(3) HK Welldone; and

(4) Wonder Step Ltd (“Wonder Step”).

For ease of reference, these 4 companies would be referred to collectively as “the 4 Companies” in this judgment.

6.  WSL and WWC held minority shareholding and were directors in Well Done.  WSL also held minority shareholding in and was a director of Wong Chun Kee and Wonder Step, while WWC held minority shareholding in and was a director of HK Welldone.

7.  Well Done was the main operating company, which carried on a garment business.   WC, WWC, WSL, and WYW after WC’s death, all worked in Well Done.

8.  Well Done was originally established by WC. WC’s ex-wife, Madam Ma Yiu Fong (“Madam Ma”), was the other shareholder until 1991.  They divorced in 1991.

9.  WSL and WWC were appointed directors of Well Done in 1991 (at the same time when Madam Ma resigned).  They became shareholders in 1992 and by March 1993, Well Done’s shareholders were: (1) WC holding 1,100 shares (36.67%); (2) WSL holding 950 shares (31.67%); (3) WCC holding 950 shares (31.67%).

10.  Wong Chun Kee holds the property which was used as the office premises of each of the above companies.  Up until 2001, its shareholders were: (1) WC holding 1,600 shares (53.3%); (2) WSL holding 1,400 shares (46.7%). Its directors were WC and WSL.

11.  Both HK Welldone (former name “Well Stable Ltd”) and Wonder Step do not carry on any business and each held a golf club licence with the Chung Shan Hot Spring Golf Club (“Chung Shan Golf Club”).   Up until 2001:

(1) HK Welldone’s shareholders were: (1) WC holding 90 shares (90%); (2) WWC holding 10 shares (10%).  

(2) HK Welldone’s directors were: WC and WSL.

(3) Wonder Step’s shareholders were: (1) WC holding 90 shares (90%); (2) WSL holding 10 shares (10%).  

(4) Wonder Step’s directors were: WC and WSL.

12.  The New Co is a company set up in 2009 by WYW. WYW is the ultimate beneficial owner of New Co.

B2.    The 1996 Allotment

13.  The 1996 Allotment was made on 1 December 1996.  By that allotment, Well Done allotted 87,000 shares to WC (“the 1996 Allotted Shares”), such that its shareholding become: (1) WC holding 88,100 shares (97.89%); (2) WSL holding 950 shares (1.06%); (3) WWC holding 950 shares (1.06%).

14.  The 1996 Allotment was approved at an EGM of Well Done held on 1 December 1996 (“1996 EGM”), whereby it was resolved that: (1) the share capital of Well Done be increased to HK$9m (of HK$100 each) by creating 85,000 new shares; (2) 87,000 shares be allotted to WC.  The minutes of the 1996 EGM was signed by WC, with WC, WSL and WWC all stated to be present.

15.  WC, WSL and WWC all signed a “Consent to Short Notice” dated 12 November 1996 (“the 1996 Consent”), consenting that the above EGM be held at short notice.

16.  The 1996 Allotment was unchallenged for many years, and the new shareholding has since been reflected in Well Done’s documents registered in the Companies Registry.

B3.    The 2001 Transfer

17.  In mid-October 2001, WC was diagnosed with terminal cancer and was admitted to hospital.  He eventually passed away on 5/11/2001.

18.  On 20/10/2001, WC signed documents appointing WYW as a signatory of Well Done’s bank accounts, authorizing WYW to sign singly.

19.  On 21/10/2001, WC made his last will (“the Will”), giving all real and personal properties to WWC and WSL in equal shares, and appointing them as executors and trustees of his estate.

20.  Shortly before he passed away, his shares in Well Done, Wong Chun Kee, HK Welldone and Wonder Step were transferred to WYW. WYW’s case is that his father told him that he (WC) wished him (WYW) to inherit his estate and to succeed his business.

21.  In relation to the transfer of the WC’s 88,100 shares in Well Done (including the 1996 Allotted Shares and the 1,100 shares originally held by WC), the following documents were executed:

(1) Minutes of board meeting of Well Done dated 30/10/2001 resolving: (a) to approve the transfer of shares to WYW; (b) to appoint WYW as a director.  WC and WWC were stated to be present and both signed on the minutes.

(2) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(3) WC and WYW had also signed documents registered in the Companies Registry reflecting WYW’s appointment.

22.  In relation to the transfer of the WC’s 1,600 shares in Wong Chun Kee, the following documents were executed:

(1) Minutes of board meeting of Wong Chun Kee dated 30/10/2001 resolving: (a) to approve the transfer of shares to WYW; (b) to appoint WYW as a director.  WC and WSL were stated to be present and both signed on the minutes.

(2) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(3) WC and WYW had also signed documents registered in the Companies Registry reflecting WYW’s appointment.

23.  In relation to the transfer of the WC’s 90 shares in HK Welldone, the following documents were executed:

(1) Minutes of board meeting of HK Welldone dated 30/10/2001 resolving: (a) to approve the transfer of shares to WYW; (b) to appoint WYW as a director.  WC and WSL were stated to be present and both signed on the minutes.

(2) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(3) WC and WYW had also signed documents registered in the Companies Registry reflecting WYW’s appointment.

24.  In relation to the transfer of the WC’s 90 shares in Wonder Step, the following documents were executed:

(1) Minutes of board meeting of Wonder Step dated 30/10/2001 resolving: (a) to approve the transfer of shares to WYW; (b) to appoint WYW as a director.  WC and WSL were stated to be present and both signed on the minutes.

(2) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(3) WC and WYW had also signed documents registered in the Companies Registry reflecting WYW’s appointment.

B4.    Events after 2001 and the breakdown of relationship in 2009

25.  After the death of WC, WYW took over WC’s role in the affairs of Well Done.

26.  The relationship between WSL and WWC on the one hand and WYW on the other hand broke down in late 2008 or 2009.  Eventually, WWC and WSL left the employment of Well Done sometime in 2009.

27.  Following the breakdown of relationship, WWC and WSL commenced various actions against WYW, Well Done and the other companies. These actions include the Loans Action and HCA 913/2013.

C.     THE PARTIES’ RESPECTIVE CASES

C1.    HCA 913/2013

28.  In HCA 913/2013, Ps challenge the 1996 Allotment and the 2001 Transfer.

29.  Ps’ case is as follows:

(1) The 1996 Allotment was improperly procured by WC by reason of the following:

(a) The allotment was done without their knowledge or consent, and without a proper shareholders’ meeting authorizing the allotment.  The resolution purportedly passed was therefore invalid for lack of notice to shareholders, inquorate, and not approved by the general meeting, which was required for a non-pro rata allotment under Well Done’s Articles and section 57B of the former Companies Ordinance (“the former CO”). 

(b) WC acted in breach of fiduciary duties for procuring the 1996 Allotment, since the same had no commercial justification and would only serve WC’s personal interest.

(2) The transfer of WC’s shares in Well Done to WYW is not valid for the following reasons:

(a) The directors’ meeting approving the transfer was held without notice to them or their knowledge.  Although minutes of meeting (and other documents) bear their signatures, they claim that they did so relying upon explanations given to them by an account clerk of Well Done, Madam Wong Yee Ching (“Madam Wong”).

(b) WC acted in breach of fiduciary duties for procuring the approval of the transfer for depriving the board’s right to refuse to approve the transfer.

(c) WYW was not a bona fide purchaser for the shares because he did not provide value.

(3) Based on the above, it is said that Well Done can claim for: (a) declarations or orders that the 1996 Allotment and the 2001 Transfer (and the resolutions approving them) are invalid and be set aside; (b) an order that the shares allotted under the 1996 Allotment be cancelled; and (c) an account of any dividends received by WYW.

(4) These claims were brought by WSL and WWC as a derivative action on behalf of Well Done.  WSL and WWC also claim in their personal capacity as shareholders to set aside the 1996 Allotment.

(5) WSL and WWC also claim that the resolutions approving the transfers of WC’s shares in Wong Chun Kee, HK Welldone and Wonder Step to WYW in 2001 are invalid because the respective directors’ meetings approving the transfer were held without notice to them or their knowledge. Although minutes of meetings bear their signatures, they claim that they did so relying upon explanations given to them by Madam Wong.

(6) They also claim that WC lacked mental capacity to execute documents for the aforesaid share transfers in 2001 shortly prior to his death, and thus the transfers are invalid and should be set aside.

(7) Pursuant to the Will, WSL and WWC were the executors and only beneficiaries in WC’s estate and WWC took the probate.

(8) They also claim that WYW procured the New Co to be established in 2009 and diverted Well Done’s business to it.  They therefore claim on behalf of Well Done against WYW and New Co an account of profits or damages.

(9) In their pleadings, there is also claim that WYW has procured the sale of the 2 golf club licences at Chung Shan Gold Club held respectively by HK Welldone and Wonder Step and had misappropriated the proceeds.  They therefore claim for an account.

30.  Ds’ case is as follows.

(1) In relation to the 1996 Allotment:

 WSL and WWC had both signed documents consenting to the holding of the EGM with short notice and the minutes of the meeting suggested that they were present.  Thus, the allotment was properly approved by Well Done’s shareholders.  It is also pleaded that s.57B(7) of the former CO had the effect that the allotment was not invalid.  WYW also relies on the Turquand rule as to any irregularity in the holding of the EGM.  WYW further relies on s.57C of the former CO and/or s.146 of the current Companies Ordinance to validate the 1996 Allotment, because it is just and equitable to do so.  WYW seeks an order to that effect by counterclaim.

(2) In relation to the 2001 Transfer of WC’s shares in Well Done to WYW:

(a) At the time, it was WC’s intention to pass most of his assets to WYW and for WYW to inherit the business in Well Done, and the transfer of shares to WYW was done to give effect to this.  In order to avoid trouble from Madam Ma after his death (such as influencing WYW to give assets to her), WC devised a scheme (“the Scheme”) to transfer all or most of his assets to WYW shortly before his imminent death, but would make a will leaving all his assets to WWC and WSL, in order to create the impression that all his assets were left to WWC and WSL. Both WWC and WSL, who were the only other directors and shareholders, were aware of the Scheme and knew of and agreed to the transfer of the shares to WYW.

(b) Indeed, WWC had signed on the board minutes resolving to approve the transfer of shares.  The transfer was thus validly approved by the directors.

(3) It is an undeniable fact that WWC and WSL had taken no steps until the issue of HCA 913/2013 to challenge the 1996 Allotment (ie 17 years after the allotment) and the 2001 Transfer (ie 12 years after the transfer).  The following points arise from such delay:

(a) Any claim arising from the breach of fiduciary duties by WC in relation to the 1996 Allotment and the 2001 Transfer (including the personal claim as shareholders), and any relief arising from such breach, would have been time-barred under the Limitation Ordinance.

(b) Any claim by Well Done or by WSL / WWC to reverse the allotment or the transfer would be barred by reason of waiver / laches / acquiescence / subsequent assent or ratification / estoppel on their part, by reason of all or a combination of the following matters: 

(i) The 2001 Transfer of WC’s 88,100 shares to WYW had been approved, and WYW was all along treated by them as the holder of those shares and a director in Well Done, and WYW had all along acted on the basis that this was the case.

(ii) The name of WYW was entered into the register of members.

(iii) WWC and WSL both knew of the transfer, being aware of the Scheme, signed the relevant minutes approving the transfer, and also confirmed this in the administration of WC’s estate.

(iv) WWC and WSL had signed various documents, including various formal documents of Well Done (such as resolutions, annual returns, audited financial statements) which stated that WYW was a director and shareholder (holding the shares transferred from WC). 

(v) The prejudice on WYW, who gave up a career in law and devoted his time since 2001 in the garment business in Well Done.

(vi) The delay in taking action also resulted in the loss or destruction of evidence and fading of memory of the witnesses.

(4) In relation to the 2001 Transfer of WC’s shares in Wong Chun Kee, HK Welldone and Wonder Step to WYW:

(a) The transfers were properly approved by the directors because:

(i) WSL (who was the only other director and shareholder in each of the companies in 2001) had signed on the minutes of board meetings of each of the companies resolving to approve the transfer of shares. 

(ii) These would also be valid as written resolutions by all directors.

(iii) WWC and WSL also knew of the Scheme and agreed to the transfer of shares.

(b) Any claim by Well Done or by WSL / WWC to reverse the transfers would be barred by waiver / laches / acquiescence / subsequent ratification / estoppel, for similar reasons in relation to the shares in Well Done.

(5) It is denied that WC lacked mental capacity, especially when he devised the Scheme during the same period.  In any event, any claim by WC’s estate is now time-barred and/or barred by laches / acquiescence. 

(6) As to the claim in respect of the New Co, WYW and New Co has accepted that: (a) the business of Well Done was run by New Co; (b) New Co had been holding the business and its profits on trust for Well Done.

(7) As to the golf club licences,

(a) The licence held by HK Welldone was sold at HK$195,000 in 2009 (and there was a further deduction of a fee charged by the golf club) but the proceeds were paid into the account of HK Welldone.

(b) The licence held by Wonder Step was never sold.

31.  In their Reply and Defence to Counterclaim, WWC and WSL denied that it would be just and equitable to confirm the 1996 Allotment by relying upon the following matters:

(1) WWC and WSL only came to know of the 1996 Allotment in September 2009.

(2) They would sign documents of Well Done relying on the explanation of Madam Wong.

(3) It is denied that they have any knowledge of the Scheme.  They assisted WYW whole-heartedly without knowledge of the 1996 Allotment or the 2001 Transfer, and in the belief that they would inherit WC’s shares in Well Done by virtue of the Will.

(4) WYW did not come to the court with clean hands because he devised or joined the Scheme to falsely present that all property of WC, including the shares in the companies, would be given to WWC and WSL.

32.  At the beginning of the trial, Mr Tony Ng for Ps informed me that he would not pursue the claim relating to the golf club licences.  Accordingly, I would dismiss this claim in any event.

C2.    The Loans Action

33.  In the Loans Action, Ps’ case is that they have deposited certain sums (“the Sums”) into Well Done and HK Welldone, and the Sums are loans which should be repaid by the companies.

34.  Ps claim that:

(1) WWC deposited sums totalling HK$2.3m into Well Done’s bank accounts:

(a) HK$1m on 9/6/2007

(b) HK$700,000 on 25/6/2007

(c) HK$300,000 on 25/6/2007

(d) HK$300,000 on 20/11/2007

(2) WSL transferred sums totalling HK$1.131m into HK Welldone’s bank account:

(a) HK$480,000 on 29/8/2007

(b) HK$400,000 on 4/10/2007

(c) HK$251,000 on 12/11/2007

(3) WSL, trading as Well Tai Trading Co (“Well Tai”), was owed a debt of HK$252,404.16 by Well Done and HK Welldone over a period of time (“Well Tai’s Claim”).

35.  Ds’ case is as follows:

(1) Prior to WC’s death, WC maintained a bank account in Macau (“Macau Account”) which had accumulated a substantial amount of cash, and the account was passed to WYW as part of the Scheme prior to WC’s death.  It was an established practice that when the companies were in need of money, WYW would utilise the money in the Macau Account to fund those companies.

(2) In early 2007, WWC told WYW that Well Done needed HK$4m to pay for the land premium of a factory in Zhongshan and certain other expenses.  She suggested to WYW that the money from the Macau Account should not be paid directly into Well Done’s account as this may raise accounting or tax issues, but should be paid through WWC or WSL.  WYW did as suggested and withdrew HK$4m cash from the Macau Account and gave it to WWC.

(3) In June 2007, WWC / WSL also told WYW that there was a shortage of cashflow in Well Done and HK Welldone, and suggested WYW to withdraw HK$2m from the Macau Account.  WYW did as suggested and withdrew HK$2m cash from the Macau Account and gave it to WWC.

(4) The money that WSL and WWC claimed to have deposited into Welldone and HK Welldone came from these HK$6m cash.  Thus, the funds were in fact owed by the companies to WYW, and not to WWC or WSL.

(5) Further, when the HK$6m cash was handed by WYW to WWC, she received the same as trustee or agent either for Well Done, HK Welldone (to use them for their purposes), or for WYW (to use them to his order), such that WWC would be liable to account to Well Done / HK Welldone / WYW as to how the HK$6m had been used, including any balance remaining, and to repay such balance.

(6) There are also claims that WWC and WSL acted in breach of fiduciary duties for bringing the false claims under the Loans Action.  The reliefs sought by Well Done, HK Welldone and/or WYW against WSL and the estate of WWC include an account of the HK$6m, an inquiry as to what balance of the said HK$6m remained in the estate of WWC, and an order requiring the estate of WWC to repay the balance to WYW.

(7) In April 2008, WWC received a sum of HK$45,994.46 being Well Done’s contribution to MPF when in fact the sum should be deducted as she had received her long service payment in full.  This sum ought to be repaid.

(8) WYW, Well Done and HK Welldone therefore made a counterclaim against WWC and WSL.

36.  In respect of the Well Tai’s Claim, Ds’ case is that Well Tai was all along trading using the funds of WC or Well Done, and thus any sum owed to Well Tai in fact would be owed to WC or Well Done.  In other words, Ds are saying that in substance, any debt owed to Well Tai should not be regarded as a debt owed to WSL personally, but in fact should be a debt owed to WC or Well Done.

37.  As to the counterclaim, WWC and WSL denied that they had received the HK$6m cash and alleged that the moneys paid to Well Done and HK Welldone were their own moneys.

38.  At the final submissions stage, counsel have agreed that if Ds’ case is accepted by this court, the court may take a particular approach to deal with Ps’ claim and Ds’ counterclaim in the Loans Action (“the Agreement”).  However, after the trial is completed, it seems that the parties have some disagreement as to what exactly has been agreed in the Agreement.  I would discuss these matters in [155] to [159] below.

39.  In respect of the counterclaim for the repayment of the MPF contribution against WWC’s estate, Well Done is claiming that on or about 7/4/2008, without the prior consent or knowledge of Well Done, WWC withdrew a sum of HK$45,994.46, being Well Done’s contribution to the Mandatory Provident Fund (“the MPF”) of WWC.  In essence, Well Done is saying that Well Done has paid long service payment to WWC, and after setting off against the long service payment, Well Done has overpaid MPF contribution to WWC in the sum of HK$45,994.46.

D.     THE PRINCIPLES

40.  In respect of evaluating the evidence given by witnesses, a valuable guidance can be found in Hui Cheung Fai and another v Daiwa Development Limited^[3], in which DHCJ Eugene Fung SC said:

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

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

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

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

41.  Similar guidelines can also be found in Lee Fu Wing v Yau Po Ting Paul^[4], in which DHCJ Au (as he then was) said:

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following: -

(1) Whether the party’s case is inherently plausible or implausible.

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable.

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility.

(4) The demeanour of the witnesses.”

42.  The principles set out in Northampton Borough Council v Cardoza and others^[5] are also helpful:

“36. As to the considerations applicable to evaluating evidence, a useful starting point is Goff J’s (as he then was) observation as to resolving conflicts of evidence in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 LL Rep 1 at p.57

‘… Where there is a conflict of evidence … reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth’.

37. Factors relevant to the evaluation of a witness’s evidence were identified by Lewison J (as he then was) in Painter v Hutchinson [2007] EWHC 758 (Ch) at [3] when addressing the unsatisfactory nature of the defendant’s approach to giving evidence. These included : evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. This was not intended to be an exhaustive list, but it is important and very helpful.

38. A useful recent reminder or guidance on the approach to the evidence of factual witnesses, and expanding on the guidance given by Goff J in The Ocean Frost, was given by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm). After noting that human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents, Leggatt J concluded that the best approach for a judge to adopt at the trial of a commercial case is to base factual findings on documentary evidence and known or probable facts and the inferences to be drawn therefrom. Witness evidence, written and oral, is not without purpose; but, its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.

39. In similar vein, in the recent case of Freemont (Denbigh) Ltd v Knight Frank LLP [2014] EWHC 3347 (Ch) reference was made to an article written by Bingham J (as he then was) entitled “The Judge as Juror: The Judicial Determination of Factual Issues” published in Current Legal Problems 38 in 1985. Bingham J considered the approach to deciding upon the reliability of a witness’s evidence and regarded the following to be helpful indicators of where the truth lies: the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred; the internal consistency of a witness’s evidence; and, the consistency of a witness’s evidence with what (s) he has said or deposed on other occasions. Bingham J considered that the credit of a witness in matters not germane to the litigation was of less assistance, and that the demeanour of a witness was on the whole not a reliable pointer to a witness’s honesty.”

43.  In respect of lies told by a factual witness on a central issue, the reminder given by Sir John Dyson in MA (Somalia) v Secretary of State for the Home Department^[6] has to be borne in mind:

“31. ....... where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong. It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie. But much depends on the bearing that the lie has on the case……

32. Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence……

33.  ...... where the appellant tells lies on a central issue in the case, the [tribunal] may conclude that they are of great significance……It will be a matter for the [tribunal] to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellant’s lies.”

44.  Where there is a long passage of time between the events and the trial, contemporaneous documentation is of particular importance.  In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd ^[7], Stock JA (as he then was) said:

“…… Comparison with contemporaneous documentation is always an aid to reliability of oral testimony, unless there is reason to believe that the documentation is contrived or materially incomplete; but where the passage of time between events and trial is as long as it was in the present case, and where there is such a host of contemporaneous documentation, as there was in this case, the documentation must, I would have thought, assume a special importance. ……

I would venture to suggest that the truth, in so far as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to have been created, as well as to inherent probabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known. This is particularly so in a case such as the present, where events have taken place so long before trial and where there exists a mountain of contemporaneous documentation that can be used to point the way. This is not to say that the documentation should have been treated as if it stood on its own, not to be explained, contradicted or supported by oral testimony. It is however to say that in this case the approach adopted to assessment of the facts placed far too much emphasis on character impression and too little upon what was suggested by the documentation and by the inherent probabilities in their historical context. That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts ……” (Emphasis added)

45.  A person of full age and understanding is bound by the document signed by him, unless a recognized legal basis for concluding that his apparent consent has been in some way vitiated or that reliance on the document by some other person falls into some category of unconscionable conduct justifying relief in equity.  Choosing to sign a document without knowing its contents cannot be a sufficient reason for not being bound by the document.  As said by Ribeiro PJ in Ming Shiu Chung & Others v Ming Shiu Sum & Others^[8]:

“84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regardedit as enough to show that he signed without knowing its contentsfor the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.

85. Thus, in Saunders v Anglia Building Society [1971] AC 1004 at 1016, Lord Reid warned against an approach, like that of the Court of Appeal, which inverts the general rule:

‘We find in many of the authorities statements that a man’s deed is not his deed if his mind does not go with his pen. But that is far too wide. It would cover cases where the manhad taken no precautions at all, and there was no ground forhis belief that he was signing something different from thatwhich in fact he signed. I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted. It is for the person who seeks the remedy to show that he should have it.’

86. And in Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at p.533, Litton NPJ acknowledged:

‘… the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.’ ” (Emphasis added)

46.  The disputes herein are disputes between relatives, who were having a close relationship before the breakdown of the relationship in late 2008.  Accordingly, the following have to be borne in mind in assessing the evidence:

(1) In Chen Tek Yee & Ors v. Chan Moon Shing^[9], Yuen JA said:-

“29. …… when the parties are in a personal relationship (as contrasted with parties in a commercial transaction), it would be unrealistic to expect written records of assurances ……”

(2) Similarly, in Cheung Lai Mui v. Cheung Wai Shing & Ors^[10], WYW Chan J said:

“95. …… Members of the family dealt with each other on the basis of trust, not mistrust. They could not have envisaged litigation in the future, and they would not have generated records to protect themselves out of the blue.”

47.  With these principles in mind, I turn to analyse the evidence in these proceedings.

E.     THE EVIDENCE

48.  WSL and WYW have given evidence in both the Loans Action and in HCA 913/2013 in support of their respective cases.  WYW has also arranged Madam Wong to give evidence in HCA 913/2013 in support of Ds’ case.  Apart from the live evidence from these witnesses, in the Loans Action, there is a witness statement made by WWC on 4/10/2013 but filed on 4/12/2014 (“WWC’s WS”).

E1.    WSL

49.  WSL is 79 years old.  According to him, WWC came to Hong Kong from Mainland China in the 50s, and he and WC came to Hong Kong in the 60s.  For many years, the 3 of them had a very close relationship.

E1.1  WSL being an evasive witness

50.  Having seen and heard his evidence, I am of the view that WSL is an evasive witness.  Examples of his evasiveness are as follows:

(1) WSL’s son is Mr Wong Ying Kit (“WYK”).  During cross-examination, Mr Keith Lam for Ds asked WSL a simple question, ie whether WC had paid for WYK’s university fees.  This is a very simple question, inviting just a “Yes” or “No” answer.  However, WSL just evaded the question and refused to give a direct answer.  It was only after a few questions WSL was forced to agree that WC did pay for WYK’s university fees.  WSL was trying not to admit anything done by WC and WYW rendering assistance to him or his family.

(2) He would always say that he had no knowledge of certain matters to try to avoid questions, even if it is clear that in respect of those matters, he would plainly have personal knowledge.  A clear example is when he was asked whether he was aware of the reasons for WYK being fired by WYW[11], and whether he (WSL) was unhappy about it.  WSL claimed that he did not know why WYK left the companies, but at the same time when referred to knowing WYK was fired, he said that he couldn’t help (or be on the side of) either of them (ie WYW and WYK), since both were relatives.  He also claimed that he didn’t care whether WYK was fired.  However, judging from his reaction when he was saying all these, this was plainly not the case.

(3) Another example is when WSL was asked whether he knew that in October 2001, when WC was seriously ill, WYW was studying law in the UK, and WYW gave up his studies in UK and returned to Hong Kong to look after WC and his business, and WYW did not return to the UK to continue his legal studies after WC’s death.  WSL refused to give a direct answer on all these.  Given his repeated confirmations that he had a close relationship with WC and WWC, it is inherent improbable that he has no knowledge of these matters.

(4) A further example is his claim that he didn’t know whether WWC would visit WC at other times apart from those visits together with WSL, and whether WYW and Well Done’s staff had visited WC.  Given the serious illness of WC and the good family relationship at that time amongst WWC, WSL and WC, and the close working relationship at Well Done, it is inherently improbable that WSL would not know of the other visits by WC’s family members and the visits by Well Done’s staff.  His answers in respect of visits by WYW show that he was trying to evade the questions and not telling the truth.  His response was first that “I didn’t see him”, and thereafter he said that “he didn’t even want to buy congee for WC”, and then finally he claimed that he didn’t know.

51.  Apart from his evasiveness, as explained in the paragraphs below, WSL has given untrue evidence on the key issues in these proceedings.

E1.2  The practice of making decisions and signing documents in the 4 Companies

52.  In his witness statement filed in HCA 913/2013, WSL claimed that the practice in the 4 Companies was that WWC and WSL would sign the documents presented to them by Madam Wong.  As they could not read or write English, they would rely on Madam Wong to inform them of the nature of the documents.  In respect of the documents signed by him which are relevant in these proceedings, WSL claimed that the true nature of the documents in question was either misrepresented or not properly explained to him.

53.  However, under cross-examination, WSL conceded that WC or Madam Wong (or whoever presented the documents to him) did not misrepresent the documents to him.  WSL’s evidence under cross-examination is that Madam Wong would say to him that the documents were to be forwarded to the accountant for handling, and he would sign it.

54.  Under cross-examination, WSL accepted that in the 4 Companies, WC was the one in charge and he would raise the matters with WWC and him, and they (WWC and WSL) had never objected to the matters raised by WC or decisions made by him.

E1.3  Knowledge of and consent to the 1996 Allotment and the 1996 EGM

55.  There are contemporaneous documents showing that that both WWC and WSL knew of and consented to the 1996 Allotment. 

(1) Minutes of the 1996 EGM signed by WC as the chairman of the meeting.  In the minutes, it was recorded that WC, WWC and WSL were present at the meeting, and the resolutions passed were: (a) the authorised capital of Well Done be increased from HK$500k to HK$9m; (b) 87,000 new shares be allotted to WC.

(2) The 1996 Consent, signed by WC, WWC and WSL, confirming that the shareholders have consented to the EGM being held at short notice.  There is no dispute that WWC and WSL did put their respective signatures on this document.  WSL only claimed that the nature of the document had not been explained to him.

56.  WSL accepted that in 1996, Well Done was in the course of setting up a factory in Mainland China, and that it was WC’s decision to do so, and that WWC and he (WSL) had been told this by WC.

57.  WSL has signed subsequent documents which clearly recorded the increased shareholding of WC as a result of the 1996 Allotment.

(1) WSL signed a series of annual returns of Well Done which were prepared up to a time after the 1996 Allotment, ie the Annual Return up to 18/3/1997 (“the 1997 AR”); the Annual Return up to 18/3/1998 (“the 1998 AR”); and the Annual Return up to 18/3/1999 (“the 1999 AR”).  The first is in English only, while the last 2 are in both English and Chinese.

(2) WSL is unable to read English, but he can read and understand Chinese.

(3) As to why he has signed the 1998 AR and the 1999 AR which are in both Chinese and English if he disagrees with the number of shares held by each shareholder as shown therein, WSL has given untrue evidence.

(a) In his oral evidence, WSL has repeatedly confirmed that he would read the documents which are in Chinese before signing.  In particular, when he was shown the audit confirmation dated 2/9/2008 issued by Well Done’s auditors to him, he confirmed that since the document was also in Chinese, he would look at it himself and would ensure the correctness of the contents before signing, and that he would not sign if he didn’t agree to its contents.  He also agreed that he would not sign if the document contained incorrect information such as that he owed the company a lot of money.

(b) In respect of the 1997 AR (the one in English only), when WSL was shown the page showing the shareholding of Well Done, he was immediately able to recognize the number of shares (950) for both himself and WWC.  WSL’s evidence was that he did not see the numbers because the page was in English and he did not read it, but that if it was in Chinese, he would read it.

(c) In respect of the 1998 AR and 1999 AR (both in English and in Chinese), WSL was wholly unable to explain why he signed them if he disagreed with their contents.  In these annual returns, the followings have been clearly shown: (i) the increased shareholding of Well Done (ie with 90,000 allotted and fully paid up shares); and (ii) the respective shareholding of each shareholder, with WC holding 88,100 shares.

(d) In particular, in both the 1998 AR and the 1999 AR, on the signature page and immediately above the signing space, there was a certificate (also in both English and Chinese) that those who signed certify that the information given in the return is true to the best of the signatory’s knowledge and belief.

(e) WSL was wholly unable to give any coherent or consistent explanation as to why he signed the 1998 AR and the 1999 AR.  At one time, he said that he read the document casually and he had just read the first and last page.  However, at another time, he said that he could not explain why he signed the documents.  These answers are obviously inconsistent with his repeated confirmations that he would read and check Chinese documents before he signed.

(f) In re-examination, it was suggested to WSL that perhaps all the pages of the 2 sets of bilingual annual returns were not shown to WSL when he was asked to sign these annual returns.  However, WSL was unable to give any evidence to this effect.  In fact, such suggestion is contrary to WSL’s earlier evidence that he had just read the whole document casually or he had read only the first and last page.

(g) In my judgment, WSL’s evidence concerning the annual returns is utterly untrue.

58.  Bearing in mind that the siblings had a good and close relationship among them in 1996, it is inherently improbable that WC did not inform WWC and WSL of the 1996 Allotment and to arrange the same behind their backs.  According to WSL, WWC, WSL and WC all along had a good relationship, especially since they lived in the same building and worked in the same business.  They were basically working together to ensure that the business would succeed.

59.  If WC was trying to hide the 1996 Allotment from WSL, he would not let WSL to sign the aforesaid annual returns, for the respective shareholdings of the shareholders after the 1996 Allotment are clearly shown in those annual returns.

E1.4  WSL’s knowledge of and agreement to the Scheme

60.  WYW’s case is that WSL was not present on those occasions when WC talked to him about the Scheme or the share transfers, and he did not see WC talking to WSL about the Scheme.  However, under cross-examination, WSL conceded that he knew the 2001 Transfer intended by WC.

61.  WSL’s case initially was that all that WC had told him was that WYW and WYK would take over the business and that WC wished WWC and WSL to help them to run the companies.  WSL claimed that WC did not talk to him about the Will or why WWC and WSL were made beneficiaries, nor had he asked.  In my view, it is inherently improbable that WSL would not ask WC any question when WC said that he would make WWC and WSL as the only beneficiaries under his last will.  Given that WC had 3 children (WYW and two other children, all of them were young in 2001), on this important matter, it is inherently improbable that WSL would not asked WC whether he intended to achieve something by making this arrangement.

62.  Initially, WSL claimed that that WYW would only take over WC’s posts in the 4 Companies, but not the shares.  In my view, this does not make any sense.  It is inexplicable that why WC would only intend his eldest son, WYW, to take over the posts but not the shares.  After much resistance, WSL finally accepted that if WC had completed the share transfers and had mental capacity, there was nothing strange or unreasonable that he would leave his shares to WYW, and in the end he finally accepted that WC had asked WSL to help WYW to take over his (WC’s) shares and his role in the 4 Companies.

63.  WSL’s knowledge of the 2001 Transfer and his agreement to the same can be inferred from his subsequent conduct:

(1) He made no claim to the shares through WC’s estate until the disputes arose.

(2) He had all along allowed WYW to occupy important decision making roles in the business (ie the role previously taken by WC) after WC’s death.  The only sensible reason why he had never objected was because he knew and he agreed to the 2001 Transfer.

E1.5  Signing of the share transfer documents and the relevant minutes by WSL

64.  In respect of the 2001 Transfer, WSL signed the board minutes regarding Wong Chun Kee, HK Welldone (at the time named Well Stable), and Wonder Step.  All these are evidence demonstrating WSL’s knowledge of and agreement to the 2001 Transfer.

E1.6  WSL’s subsequent conduct

65.  WSL’s subsequent conduct in respect of (1) the operation of the business and each of the 4 Companies; and (2) the administration of WC’s estate, also show that he knew and agreed to the 2001 Transfer.

66.  In respect of the operation of the 4 Companies after WC’s death:

(1) WSL did not dispute that after WC’s death, WYW has taken over the role of WC in the business of Well Done, namely, to handle the office matters, account and financial matters, dealing with outside and customers and banks etc.   WSL also confirmed that he knew that WYW was acting as bank signatories in signing most of the cheques, and that he was also the signatory of the export quotas.  WSL accepted that WYW had taken over both the post of WC as well as his authorities in Well Done.

(2) WSL also accepted that WYW’s roles in the other 3 companies were the same.

67.  WSL had signed various company documents which were also signed by WYW.  These include:

(1) The minutes of AGM / EGM of Well Done from 2002 to 2008, usually signed by WYW, WSL and WWC.

(2) Audited financial statements of Well Done from 2002 to 2008, always signed by WYW and also signed by WSL and sometimes by WWC.

(3) The minutes of AGM / EGM of Wong Chun Kee from 2002 to 2008, signed by WYW and WSL.

(4) Audited financial statements of Wong Chun Kee from 2001 (signed in 2002) to 2007, signed by WYW and WSL.

68.  Under cross-examination, WSL accepted that:

(1) When signing these documents, he was able to recognize the English names of the individual companies, and also the English name of WYW.

(2) When signing the audited accounts, he knew that they were accounts of the companies, and that he was signing as a director or a shareholder (not as an employee).  He therefore knew that WYW was also signing the same as a director or a shareholder of the company.

(3) WSL accepted that WYW was signing as one of the persons in charge (負責人), and that WYW was a person in charge because of his role as a shareholder and a director.

(4) Specifically, in relation to WSL’s transfer of his 10 shares in HK Welldone to his son WYK in November 2002, WSL initially claimed that he did not talk to WYW regarding the transfer and appointment of WYK as a director, and claimed that it was he himself appointing WYK.  However, when WSL was shown the documents registered in the Companies Registry and signed by WYW appointing WYK, WSL was forced to admit that he did ask WYW and did seek WYW’s agreement to the appointment.  In the end, WSL was forced to admit that he sought consent from WYW because WYW was a shareholder of HK Welldone.

69.  From all these matters, it is clear that WSL must have known that WYW was acting as a shareholder and a director in the 4 Companies, and that WYW had taken over WC’s shares.

70.  In relation to the administration of WC’s estate, WSL’s case is that he was one of the beneficiaries and would be entitled to (together with WWC) the shares in the 4 Companies.  However, those shares were never transferred to him from 2001 to 2009.  If there is any truth in WSL’s case, it is inherently improbable that WSL would not have done anything or asked WWC (WWC was the executrix of WC’s estate) about what had happened to the shares and when they could be transferred to WWC and himself. When questioned, WSL was unable to explain why, and resorted to evasive answers like “I did not need to have so many assets”, or that shareholding was just a “numbers game”.

E1.7  Matters in the Loans Action

71.  In the Loans Action, Ps’ case is that there were cashflow difficulties in Well Done and HK Welldone in 2007, and Madam Wong, acting on WYW’s instructions, told WWC and WSL this and asked them to provide funds to the companies.  In the case of WWC, she said that this was the case in June 2007 and Madam Wong made the requests to her “between June and November 2007”.  In the case of WSL, he said that Madam Wong made the requests in August 2007 and October to November 2007.

72.  In respect of the HK$1.131m claimed by WSL, the money came from an account with the Bank of China (Hong Kong) held by WSL (“the 1^st BOCHK Account”).  There was not a lot of spare money in the 1^st BOCHK Account in 2007, as it was invariably the case that money would be deposited and then immediately withdrawn.  Otherwise, the balance in that account was usually about HK$10,000.

73.  In my view, this suggests that the HK$1.131m from the 1^st BOCHK Account in fact was from another ultimate source.  According to WSL, the 1^st BOCHK Account was Well Tai’s account and he had another personal account with the same bank (“the 2^nd BOCHK Account”), and that the money in the 2^nd BOCHK Account was even less.  When asked how much money he had in the 2^nd BOCHK Account, he first said HK$100,000 to HK$200,000, and later he said sometimes more than HK$500,000, sometimes less. Even if there is any truth in this answer, it is clear that WSL would not have enough money of his own in the 1^st BOCHK Account or the 2^nd BOCHK Account to lend HK$1.131m to HK Welldone.

74.  Under cross-examination, WSL slipped comments to the effect that, “if WYW had so much money in that account, he would be investigated by the tax authorities”, and that “there were definitely problems with the source of that money”.  These answers clearly suggest that he was aware of the existence of the Macau Account. This is consistent with WYW’s evidence that both WWC and WSL had told him that the source of the money in the Macau Account might have been dubious.

75.  For the reasons further explained below, I am of the view that WSL’s evidence concerning the HK$1.131m does not assist his own case but lends support to Ds’ case in the Loans Action.

76.  In respect of the HK$252,404.16 claimed by Well Tai, there is a letter dated 1/3/2011 issued by Well Done’s auditors to WSL stating that the sum of HK$252,404.16 was owing to Well Tai according to Well Done’s accounting records.  Based upon a “對帳單” issued by Well Tai to Well Done dated 28/2/2009, this appears to be a net sum.

77.  Under cross-examination, WSL has given the following evidence:

(1) Well Tai’s role in the garment manufacturing business is one of middleman between Well Done and the garment factory in Mainland China, in that Well Done would engage Well Tai, and Well Tai would in turn place orders with the garment factory.  This was done because in order to comply with certain requirements relating to tax or to reduce tax liability, there needed to be a separate entity.

(2) At first, WSL said that as a middleman, Well Tai would only charge (from Well Done) enough to cover its expenses (including what it would pay to the garment factory, its transport expenses, and other administrative).  Later, he tried to change his answer and said that there would be a little profit. However, WSL was unable to explain what was the little profit and how this was calculated.  As per the accounts of Well Tai, the profit made each year in fact was negligible – about just HK$10,000 when the turnover amounted to HK$9m or HK$10m.

(3) In his oral evidence, WSL said that when the business of Well Tai was first run, it was WC who asked WSL to start running that business.  This contradicts WSL’s pleading and evidence in his witness statement.

(4) In my view, it is clear that WSL did not make the decisions for Well Tai.  He is unable to explain why or how the profit margin was decided or calculated, and repeatedly said that it was done by the accounts people. This is unbelievable if he was the real boss of the business. Despite claiming that this is a separate business, the accounting matters were handled by Madam Wong.  This clearly suggests that the business decisions were made by WC during his lifetime, and thereafter by WYW.

78.  In my judgment, the business of Well Tai was run by WSL on behalf of WC (and later WYW) or Well Done, and the funds came from either of them. 

E1.8  Refusing to accept WSL evidence

79.  For the reasons above, in my judgment, WSL is an untruthful and unreliable witness.  Save and except the concessions made by him, I refuse to accept his evidence in its entirety.

E2.    WWC

80.  Mr Ng submits that although there cannot be any live evidence from WWC at the trial, WWC’s WS is a hearsay statement and full weight should be given to the matters set out in WWC’s WS, for the matters in that witness statement are supported by the documentary evidence, and it is undeniable that the Sums have been provided to Well Done and HK Welldone.

81.  Mr Lam submits that no or only little weight should be given to WWC’s WC. The matters set out in that witness statement have not been subject to cross-examination, it would not be safe and it would not be fair to Ds if full weight is given to WWC’s WS in these circumstances.

82.  I am unable to see any reason justifying giving full weight to WWC’s WS.

(1) WWC (or her estate after her death) is a party to these proceedings and has significant personal interests in these proceedings.  It would not be safe to accept the matters stated in WWC’s WS as facts in the absence of any cross-examination.

(2) In the Loans Action, there is no dispute that the Sums were provided to Well Done and HK Welldone.  However, the core issue in the Loans Action is whether the Sums are originated from the Macau Account as contended by WYW, or are WWC’s and WSL’s own personal funds.  That the Sums have been provided to Well Done and HK Welldone cannot be a ground for giving full weight to WWC’s WS.

(3) If there is clear documentary evidence in support of WWC’s case as contended by Mr Ng, whether any weight is given to WWC’s WS would not make much difference. However, if there is in fact no or no sufficient documentary evidence in support of WWC’s case, to give full weight to WWC’s WS would be grossly unfair to Ds.

(4) WWC passed away on 7/10/2015.  There is no evidence from Ps showing whether WWC’s death on 7/10/2015 was a sudden death.  If WWC’s death on 7/10/2015 was not a sudden death but was something which could be anticipated at a time reasonably before that date, Ps in fact should take steps to secure the evidence from WWC by deposition under Order 39 rule 1.  Had such course been taken, Ds would have had an opportunity to cross-examine WWC.  Without taking that course, and without offering any explanation as to why that course has not been taken, no weight should be given to WWC’s WS.  Otherwise, there would be severe prejudice to Ds.

83.  Save and except the concessions made in WWC’s WS, I decline to attach any weight to that witness statement.

84.  No witness statement made by WWC has been filed in HCA 913/2013.

85.  There are some documents bearing WWC’s signatures in these proceedings.  Since I have refused to attach weight to WWC’s WS filed in the Loans Action and no witness statement of WWC has been filed in HCA 913/2013, Ps have not shown any recognized legal basis for concluding that WWC’s consent to the documents as evidenced by her signatures thereon has been vitiated.

86.  WWC signed the 1996 Consent.  Based upon this, WWC must have knowledge of the 1996 EGM.  Although the minutes of the 1996 EGM has not been signed by WWC, there is no reliable evidence before this court showing that the matters recorded in the minutes are untrue or incorrect.

87.  WWC was the executrix of WC’s estate.  She made a corrective affirmation of WWC dated 24/4/2003 in connection with the administration of WC’s estate, in which WWC mentioned WC’s transfer of the shares prior to his death to WYW.

(1) The affirmation was to correct the information in an earlier affirmation made in 2002 before the grant of probate.  It was affirmed at a solicitors’ firm and contained an interpretation clause confirming that its contents had been interpreted to WWC in Punti.

(2) One of the purposes of the affirmation is to record that WC’s 88,100 shares in Well Done (and the 1,600 shares in Wong Chun Kee) were sold to WYW prior to WC’s death, and that WYW had not paid the price of those shares (HK$88,100 and HK1,600), and to correct the value of the estate by increasing it by this unpaid price.  For this purpose, the instruments of transfer and bought and sold notes were exhibited to this affirmation.

(3) Based upon the admission made by WWC in this affirmation, it is clear that: (a) WWC knew of the transfer of the 88,100 Well Done shares from WC to WYW prior to WC’s death; (b) WC’s shareholding in Well Done prior to his death was 88,100 shares, which had been significantly increased from his original shareholding of 1,100 shares.

88.  The fact that WYW has not paid the price of the shares transferred to him by WC is neither here nor there.  In respect of the unpaid price of those shares, the one who could take action against WYW is WC’s estate.  However, WC’ estate is not a party in these proceedings.

89.  In respect of the 2001 Transfer, WWC signed the board minutes regarding Well Done.  The board minutes is evidence showing WWC’s knowledge of and agreement to WC’s shareholding in Well Done prior to his death was 88,100 shares, and WWC’s agreement to the transfer of the 88,100 Well Done shares from WC to WYW prior to WC’s death.

90.  Given that WWC was the executrix of WC’s estate and had signed the corrective affirmation which was interpreted to her in Punti, WWC must know that the shares in the 4 Companies were not part of WC’s estate.  This is particularly so when the corrective affirmation dealt specifically with the shares in Well Done and Wong Chun Kee.

91.  In the Loans Action, the evidence shows that it is unlikely that the HK$2.3m from WWC to Well Done was from WWC’s own funds.

(1) WSL has given evidence that WWC’s monthly salary when she left Well Done in 2009 was HK$15,000 per month.  Based upon this, it can reasonably infer that WWC’s salary level was not high throughout her employment, and it is unlikely that she would have a lot of savings to be able to come up with HK$2.3m spare money in 2007.

(2) WWC has only disclosed the bank passbooks of her bank accounts at the Standard Chartered Bank and Nanyang Commercial Bank which cover 2007.  Although these accounts usually had significant moneys coming in and out, it cannot be known where was/were the ultimate source(s) of those funds.  Further, the maximum amount of funds in these accounts did not appear to exceed HK$2-3m at any given time, which paled in comparison to the amounts in the Macau Account.

(3) On 25/6/2007, there was a cash deposit of HK$700,000 into WWC’s Nanyang Commercial Bank account, which was immediately transferred out.  This corresponds with the HK$700,000 she deposited into Well Done on that day by cashier’s order.  So one can conclude that the HK$700,000 provided by WWC to Well Done on 25/6/2007 was in fact originated from a cash deposit.  As to from where WWC could obtain the cash, there was no explanation in the evidence adduced by Ps.

(4) On the same date, there was another sum, ie HK$300,000, deposited by WWC into Well Done’s account.  It was deposited by cash.  There was no corresponding entry in either account of WWC.  As to from where WWC could obtain the cash, there was again no explanation in the evidence adduced by Ps.

(5) In my view, the only reasonable explanation is the one provided by WYW in his evidence.  I would further discuss this in the below.

E3.    WYW

92.  WYW is the eldest son of WC.  By the summer in 2001, he obtained a LLB Degree in the UK.  In October 2001, he was undertaking a legal practice course in the UK.  However, upon learning that his father had suddenly become very ill, he rushed back to Hong Kong to see his father.  From his personal knowledge, WYW could only give evidence in respect of the matters as from 2001 onwards.

93.  WYW impressed me as an honest and reliable witness.  He gave straightforward answers and would not shy away from difficult questions.  He frankly admitted that he had diverted the business of Well Done to the New Co while clearly explaining his reason for doing so.  He was also forthcoming and did not attempt to hide that in the past, WWC and WSL had told him that there was a practice of paying “Lai See” money in the Mainland for the purpose of facilitating the business there.

E3.1  The Scheme

94.  In respect of the Scheme, WYW’s evidence is as follows:

(1) In mid-October 2001, WC was diagnosed with terminal cancer.  At the time, WYW was undertaking the Legal Practice Course in the UK and was planning to have a career in law.  As a result of his father’s health situation, WYW immediately returned to Hong Kong.

(2) WC told WYW that he wished WYW to inherit his estate and his business.  However, he was concerned that if Madam Ma should come to know of WYW’s inheritance, she might exert undue influence on WYW and demand money from him, and also that there might be disputes with WYW’s other siblings over WC’s estate.

(3) WC therefore devised the Scheme.  He would transfer to WYW most of his properties, including cash, stocks and the shares in his various companies, but he would also execute a will which would state that all his properties would be given to WWC and WSL.  This would give the impression that all his properties were left to WWC and WSL.  WC also told WYW that WWC and WSL could resist or fight Madam Ma.

(4) WC also told WYW what assets he had at the time and what he would give to WYW. The assets that would be given to WYW included the cash in the Macau Account and the shares in the few companies in WC’s name.

(5) Another aspect is that WC would leave some of the assets in his estate to WWC and WSL under the will.  These would include a Hong Kong property, some Hong Kong cash, and some Mainland properties.  The idea was that such properties would provide a degree of protection to WWC and WSL who had provided mortgage security to secure bank finances for the business.  If WYW was unable to run the business successfully, then WWC and WSL would still be protected and compensated by these properties.  WC had specifically told WYW that he should try his best to work on the business and redeem the mortgage provided, whereupon WWC and WSL would return those properties in the estate to WYW and he would divide those amongst his siblings.

(6) WWC was present when WC told all these to WYW.

95.  WC had also told WYW on other occasions that he intended to transfer the shares in the 4 Companies to WYW.  This happened a few times, first in St Theresa’s Hospital (only WC and WYW were present), then also at least 3 times in Hong Kong Sanatorium Hospital (sometimes WWC and Madam Wong would be present).

96.  According to WYW, WC had told him that he would inform WWC and WSL about the matters relating to WC’s will and WC would ask for their help.  These included that the will would leave assets to WWC and WSL, so that they would help fight off Madam Ma, and that there would be assets to cover the mortgage put forward for Well Done’s business, and that after redemption, the properties in WC’s estate should be transferred back to WYW.

97.  In order to carry out WC’s intention under the Scheme, WC executed the Will on 20/10/2001, which prima facie left all his estate to WWC and WSL and appointed them as executors.  Separately, he also instructed Madam Wong to arrange for various documents to be executed to effect the transfer of shares from WC to WYW and to appoint WYW as Well Done’s bank account signatory and export quota signatory.

98.  The following documents had been prepared and executed:

(1) instruments of transfer and bought and sold notes (and also other Companies Registry documents) executed by WC and WYW to effect the transfer of the shares in the 4 Companies to WYW;

(2) board minutes, signed by the directors, for approving the transfers and for the appointment of WYW as a director to be signed by the respective directors of the companies;

(a) Madam Wong is now unable to recall what share transfer documents she had handled (“the Share Transfer Documents”).  This is understandable due to the long lapse of time.

(b) However, I am of the view that the Share Transfer Documents are the following documents, for these are the documents used to effect the transfers in 2001.

(c) In relation to the transfer of the WC’s 88,100 shares in Well Done (including the 1996 Allotted Shares and the 1,100 shares originally held by WC):

(i) Minutes of board meeting of Well Done dated 30/10/2001 resolving: (1) to approve the transfer of shares to WYW; (2) to appoint WYW as a director.  WC and WWC were stated to be present and both signed on the minutes.

(ii) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(iii) WC and WYW had also signed company registry documents reflecting WYW.

(d) In relation to the transfer of the WC’s 1,600 shares in Wong Chun Kee:

(i) Minutes of board meeting of Wong Chun Kee dated 30/10/2001 resolving: (1) to approve the transfer of shares to WYW; (2) to appoint WYW as a director.  WC and WSL were stated to be present and both signed on the minutes.

(ii) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(iii) WC and WYW had also signed company registry documents reflecting WYW’s appointment.

(e) In relation to the transfer of the WC’s 90 shares in HK Welldone:

(i) Minutes of board meeting of HK Welldone dated 30/10/2001resolving: (1) to approve the transfer of shares to WYW; (2) to appoint WYW as a director.  WC and WSL were stated to be present and both signed on the minutes.

(ii) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(iii) WC and WYW had also signed company registry documents reflecting WYW’s appointment.

(f) In relation to the transfer of the WC’s 90 shares in Wonder Step:

(i) Minutes of board meeting of Wonder Step dated 30/10/2001 resolving: (1) to approve the transfer of shares to WYW; (2) to appoint WYW as a director.  WC and WSL were stated to be present and both signed on the minutes.

(ii) Instrument of transfer and bought and sold notes dated 1/11/2001, signed by WC and WYW.

(iii) WC and WYW had also signed company registry documents reflecting WYW’s appointment.

(3) Bank mandate documents executed by WC, WYW, WSL and WWC making WYW the sole signatory of Well Done’s bank accounts.

(4) Bank mandate documents executed by WC and WYW making WYW the sole signatory of WC’s bank account.

99.  WC also transferred his bank cash (over HK$12m) to WYW by opening the Macau Account.   WYW said that WC had called from the hospital the bank manager at Wing Hang Bank Macau and asked him to make arrangements for opening an account for WYW and transferring the cash / assets to the new account.

100.  There is no dispute that the export quota signatory documents were also signed before WC’s death.  WSL accepted that WWC and himself never signed documents appointing WYW, so it must be WC appointing WYW as the export quota signatory prior to WC’s death.

101.  As to the execution of the Share Transfer Documents:

(1) WYW’s evidence is that he had gone to the hospital to sign these documents.  This happened a few times, and each time WWC and Madam Wong would be there. Madam Wong must be there because it was her who arranged and prepared the documents and brought them there.  WWC sometimes might not be there because Madam Wong might have arrived first.

(2) WYW was unable to remember whether all the Share Transfer Documents were signed at the same time.  However, the likelihood is that they were.

(3) Where a document has also been signed by other persons, WYW is unable to recall how that came to be signed.  He does recall seeing WWC signing certain documents in the hospital.

102.  There is no dispute that after WC’s death, WYW (who was only 22 years old at that time) took over WC’s role in the business and began running the business with the assistance and guidance of WSL and WWC.

103.  In my judgment, the evidence in support of the existence of the Scheme is clear and cogent.

104.  The Scheme explains what would otherwise be a very odd situation in relation to WC’s intention on his estate planning.  It explains why WC left all the assets to WWC and WSL in the Will but also at the same time transferred the shares in the 4 Companies and his substantial wealth in the Macau Account to WYW.  Otherwise, there is no sensible reason why WC would have done so.

105.  In his oral evidence, WSL claimed that WC had once said that he intended to leave his assets to WWC and WSL, because he did not trust Madam Ma, and WWC and WSL would then distribute them to his 3 children. This was told by WC around the time of his divorce with Madam Ma, at a time in 1991-1993.  I am of the view that WSL is an untruthful and unreliable witness, and I do not accept what he alleged as true.  Further, even if there is any truth in this allegation, what WC said many years before 2001 cannot simply be taken as his intention in 2001.  In particular, WC’s 3 children were at a much younger age when WC said this (in around 1991-1993), and it would make sense for the assets to be left to WWC and WSL at that time, but this would no longer apply in 2001, when WYW was already 22.  Indeed, this outdated idea is inconsistent with the fact that WC did transfer the shares and Macau cash to WYW.

106.  The Scheme is completely consistent with the family background which is not in dispute.  WC and Madam Ma had a hostile relationship after their divorce.  In fact, after the death of WC, Madam Ma started litigation together with WYW’s other 2 siblings against WWC and WSL in respect of WC’s estate.  The fact that the other 2 siblings joined in the litigation suggests that they were susceptible to Madam Ma’s influence. This actually demonstrated that WC’s assessment of the situation was correct.

107.  WC’s intention to effect the share transfers is supported by the evidence of Madam Wong, who has no interest in this matter. There would have been no reason for her to prepare the Share Transfer Documents if WC had not instructed her to do so.

108.  WYW was questioned that the Scheme would not work, for he had been given the shares and the Macau cash, and Madam Ma could still cause trouble to him.  WYW’s answer is that (1) when his father told him all these, he did not put his mind to whether the Scheme would work or not, given that his father was in a critical health condition at that time and WYW’s focus at that time was to remember everything said by his father; (2) as it turned out, his mother did not cause him trouble in respect of the shares.  As for the Macau cash, WYW said that Madam Ma would not know about the account which was in Macau.

109.  WYW was also challenged that the Scheme would exclude WYW’s other siblings, but there was no reason to exclude them as WC had a good relationship with them.  WYW’s answer is that his siblings were still living with Madam Ma and were clearly much more susceptible to her influence, as demonstrated by the fact that Madam Ma was able to influence them into issuing proceedings later.  Further, WC has actually told WYW to use the assets given to him to take care of his siblings.

110.  In my judgment, the challenges in relation to the Scheme has been satisfactorily answered by WYW.  I accept the existence of the Scheme as told by WYW.

E3.2  Implementation of the Scheme

111.  As said in the above, in my view, there is clear evidence showing that both WWC and WSL had knowledge of and agreed to the 2001 Transfer.  Given that the 2001 Transfer were effected just a few days after WC making the Will, it is inherently probable that both WWC and WSL knew that the 2001 Transfer and the Will were parts of the Scheme.  Given their agreement to the 2001 Transfer, WWC and WSL in fact have assisted in the implementation of the Scheme.

E3.3  The Loans Action - Macau Account being the ultimate source of the funds

112.  As to the Loans Action, WYW’s evidence is as follows:

(1) Initially, he gave the passbook of the Macau Account to WWC to keep, so that she could see if WYW had been using the money in that account.  In fact, initially WWC and WYW would go together to Macau to withdraw money from the Macau Account.  This practice continued for 3 or 4 years after WC’s death.  Thereafter, WYW would get the passbook from WWC and go to Macau alone to withdraw money.

(2) WYW would give the money withdrawn from the Macau Account to WWC for handling.  WWC would prepare a list, in which she would set out in what way the money was used.  WWC would pass the list to Madam Wong for checking.  Thereafter, the list would be given to WYW.  WYW in fact did not pay much attention to those lists, for he trusted WWC.

(3) In early 2007, WWC and WSL asked WYW to fund Well Done for paying the land premium for Well Done’s factory in Zhongshan. They asked for around HK$4m.  WWC explained to WYW that he should not pay any money directly to Well Done, but should pay the money to WWC and WSL who would then put the money into Well Done.  This should be done because Well Done had been investigated by the Inland Revenue Department (“the IRD”) previously, and WYW was too young to have such significant funds.  If WYW injected funds into Well Done directly, the IRD might question the source of those funds.  If the money was paid through WWC and WSL, it would be easier for them to explain the source of the funds.

(4) WYW did as suggested.  He withdrew HK$4m from the Macau Account in cash and passed the same to WWC at her home.

(5) In June 2007, WWC and Madam Wong asked WYW for funds to ease the cashflow of Well Done and HK Welldone.  He therefore withdrew another HK$2m from the Macau Account in cash and passed the same to WWC at her home.  On this occasion, WWC told him that WSL had made arrangements in the Mainland and there was a need to pay “Lai See” money in respect of the work to be done for paying land premium.

(6) For the payment of the land premium, the money needed to be put into Well Done’s account first, and then put by Well Done into the Mainland, as there were certain procedures requiring this.  In particular, one could not simply take cash into the Mainland and there were regulations against it.

(7) After he paid the money to WWC, he did not ask WWC or Madam Wong whether the money had been put into the company or been used.  He trusted that the matter would be handled.

In my judgment, WYW’s evidence is true and reliable.

113.  There is no dispute that in early 2007, there was an issue as to the payment of land premium for Well Done’s factory in Zhongshan.  The issue arose from the need to extend and consolidate the expiry dates for the different land certificates for that piece of land.

114.  As to the amount of the land premium, WSL claimed that the land premium paid was only RMB 186,297 and was paid for by his own money.   However, according to the letters written by one Mr Fok (霍鍾勝) (a government official for handling the land premium issue) to WSL, RMB 186,297 was only one of the sums actually paid by Well Done (or its Mainland related company), which concerned extending the land certificate for only part of the land.  Well Done has in fact also paid RMB 1,385,981 for other parts of the land.

115.  Mr Fok suggested that he had helped Well Done saved a large part of the fees / premium that would otherwise need to be paid, amounting to RMB 1,579,362.  He wrote a letter dated 2/6/2007 to WSL to ask for a “reward” for his efforts.  This suggests that at an earlier stage, it was indeed contemplated that this amount would also have to be paid, making the total amount RMB 3.15m.

116.  In the light of all these, there is truth in WYW’s case that WWC and WSL asked for HK$4m in March 2007.

117.  Mr Ng submits that it is unconvincing that WYW has never checked the accounts of the Well Done and the Zhongshan factory to ascertain the details of the payment of the land premium.  No document concerning the payment of land premium has been disclosed by Ds.  In these circumstances, an adverse inference should be drawn against Ds.  I am unable to accept these submissions.

(1) In fact, WYW has given evidence and said that he had checked and was told that the documents concerning the payment of land premium was not available.  This answer has not been challenged.

(2) It is an undisputed fact that there was a discussion among WWC, WSL and WYW concerning payment of land premium in early 2007. The issue of the payment of land premium is relevant because it was the reason why WWC and WSL initially asked WYW for money in March 2007.  Whether the land premium was eventually paid or how much money was paid is neither here nor there.  It would at most only be relevant as to whether WWC and WSL had accounted for the sums paid to them by WYW.

(3) In my view, there is no basis to draw any adverse inference against WYW.

118.  The bank statements of the Macau Account show that WYW had withdrawn HK$4m on 6/3/2007 and HK$2m on 12/6/2007.  It is on any view extraordinary for such large amounts to be withdrawn from the bank in cash.  There would normally be no reason to do so.  WSL also agreed with this. These withdrawals are also consistent with WYW’s case.

119.  There is no dispute that Well Done, Wong Chun Kee, WC and WSL had indeed been investigated by the IRD from 1999-2005.  The IRD had seized documents from Well Done’s office in 1999, which were only returned in 2005.  As a result of the investigation, Well Done had to pay a tax penalty of about HK$3.6m.  Against this background, there is truth in WYW’s evidence saying that it was WWC and WSL suggesting to him that there should not be direct injection of funds by him into Well Done.

120.  Under cross-examination, WYW was asked that he had also put money into HK Welldone in his own name in 2007 (HK$500,000 and HK$850,000 respectively), which would be inconsistent with his explanation for the secrecy for the HK$6m.  WYW answered that the money came from his bank account in Hong Kong, not from the Macau Account. With his monthly salary of HK$40k to HK$50k, he would be able to save enough money over his working years (2001-2007) to come up with HK$1.35m, but he could not have come up with HK$6m.  I accept the answer given by WYW.

121.  WYW said that he was given an impression by WWC and WSL that the money in the Macau Account was money with dubious source.  He was worried that this might be the case but he had no way to verify this.  WYW said that this was the reason why the withdrawals from the account were always made in cash.  WWC and WSL also suggested to him that it would be safest to use cash withdrawals when they were talking about paying the land premium in March 2007.

122.  WYW was criticized for being inconsistent with his witness statements or some contemporaneous documents.  Having considered the evidence, I am of the view that the alleged inconsistencies in fact are readily explicable.

(1) In cross-examination, WYW gave evidence that he first learned of the figure of HK$2.3m recorded in Well Done’s accounts as deposited or owing to WWC was when the new account clerk, Madam Au Yuet Kwai (“Madam Au”), raised this with him in 2009. Before that, he knew that money was deposited but not the exact amount.  Mr Ng submits that this was not consistent with [32] of WYW’s witness statement filed in HCA 913/2013.  In my view, WYW said there that he had checked the accounts and found that a substantial amount was marked as loan to WWC and WSL and he inquired with WWC and Madam Wong.  He explained in evidence that this was in August 2007.  At the time, the amount that WWC had put into the company was only HK$2m.  This is entirely consistent with his oral evidence. Further, as WYW explained, from his perspective, the 2009 occasion concerned when the final figures were being handed over to the auditors, but the event at [32] of his witness statement only concerned the internal accounts of Well Done, and that he was focusing on the first point when answering the questions in cross-examination.  As to the criticism that WYW never mentioned the conversation with Madam Au in his statement, I am of the view that this is not a significant matter which ought to have been mentioned in WYW’s witness statements.

(2) In fact, the full HK$2.3m deposited by WWC was only completed by November 2007.  By that time, Madam Wong has already left Well Done.  After the retirement of Madam Wong, Well Done was not able to find another suitable account clerk for some time.  It is inherently probable that WYW would only know about the full HK$2.3m in 2009.

(3) Mr Ng submits that in WYW’s witness statements, WYW never mentioned the purpose of the HK$2m withdrawn in June 2007 was the payment of “Lai See” money.  In my view, it is understandable that this sensitive matter was glossed over in WYW’s witness statements.  Further, looking the matters in the round, I am of the view that this point would not undermine WYW’s credibility and reliability as a whole, and would not have any impact on any issue to be resolved in these proceedings.  

(4) In [16] of WYW’s witness statement filed in the Loans Actions, WYW mentioned that in June 2007, WWC told him that the money would be paid into the company account. WYW explained that he could have confused this aspect with the April 2007 incident, and that how the money would be dealt with was up to WWC / WSL to arrange.  In fact, in his later witness statement filed in HCA 913/2013, at [31], he did not mention that the HK2m would be paid into the company account.

(5) Mr Ng also submits that WYW had already set up the New Co on 14/8/2009, before the termination of the employment contract with WSL, and thus the reason for setting up the New Co was not the dispute with WSL.  However, WYW’s evidence is that the dispute between him and WSL occurred in late 2008. WYW was not cross-examined on the precise timing of the dispute with WSL.  The dispute clearly occurred at a time well before the termination of WSL’s employment contract.  WYW has given evidence that he appointed Madam Au as a director because WWC and WSL refused to sign auditors’ report, and Madam Au was appointed as a director on 15/8/2009.  Obviously, by that time, the disputes had already arisen.

(6) Mr Ng also argues that Arthur Mo continued to act as Well Done’s auditor and therefore WYW’s evidence that WSL caused the resignation of the auditor was false.  In my view, this is not a valid criticism.  According to WYW, the auditor had to resign because he could not continue to act due to directors’ disputes.  WYW mentioned that after Arthur Mo, the name of the new auditor was “Fu something”. The documents show that the new auditor was 富立會計師行 (Philip Leung & Co Ltd), who was Well Done’s auditor in March 2011, at a time when WSL was still a director.   WYW’s evidence in fact did not give a clear time for the resignation of which auditor.  In any event, given the long lapse of time, it is understandable that WYW might not be able to recall the minute detail of some matters.

123.  I accept WYW’s evidence and hold that the ultimate source of the funds provided by WWC and WSL (which are the subject matters of the Loans Action) is the Macau Account, and these funds are indeed WYW’s own money.

Madam Wong

124.  Madam Wong was the account clerk of Well Done from February 1992 to October 2007.  She is a neutral witness, having no personal interest in these proceedings.  Madam Wong is asked to give evidence of events occurred many years ago.  Given the passage of time, it is understandable that she would not have clear memory of some matters.  Having heard her evidence, I am of the view that she is an honest witness, and her evidence as a whole supports WYW’s case.

125.  The following points mentioned by Madam Wong in her evidence are not challenged by Ps:

(1) According to Madam Wong, she would handle both financial statements of Well Done and minutes of annual general meetings, in the sense that she would ask the accountant to prepare them.

(2) Madam Wong would pass documents to WC (and later WYW), WWC and WSL and ask them to sign the documents.  Madam Wong would say that the documents would be passed to the accountant for further handling.

(3) In respect of the making of decisions by the company, when WC was still alive, Madam Wong’s evidence is that such decisions would be made by WC first who would then raise the matter or explain the decision to WWC and WSL, then he would direct documents to be prepared, and after documents were prepared, he would approve them and give them to WWC and WSL for signatures.

(4) Madam Wong said that the decisions of the company would be made informally and that no formal shareholders’ or directors’ meeting would be held.

126.  As to the 1996 Allotment, Madam Wong’s evidence is that in around 1996, WC told her that Well Done needed to increase its share capital to prove its financial strength because it was going to invest in Mainland China.  Madam Wong could no longer remember the detailed steps of the allotment exercise, but she was sure that this was WC’s decision, and was done by going through the normal procedures (ie WC made the decision first, then discussed with WWC and WSL.  Thereafter, documents were prepared and signed by WC, WWC and WSL).  Madam Wong herself was not involved in the allotment exercise and did not prepare the documents.

127.  Madam Wong also said that in 2001, while WC was in hospital, WC instructed her to prepare documents to transfer all his shares in the 4 Companies to WYW, and also making WYW as a signatory of the companies’ accounts and a signatory of the export quota documents.  I have no reason to doubt Madam Wong’s evidence.

128.  Madam Wong is unable to remember how the documents were signed.  This is understandable given the lapse of time.  In these proceedings, it is common ground that all the signatures on the documents are genuine signatures.  Subject to the discussion of WC’s mental capacity in [141] to [146] below, how the documents were signed would not be a material issue.

129.  In relation to the Macau Account, Madam Wong’s evidence is that after WC’s death, WWC had asked WYW to take out money from the Macau Account for WWC to keep, which WWC would use to pay for WYW’s various daily expenses.  Madam Wong would be responsible for keeping a list of the money spent each month, which she would give to both WWC and WYW to check. Madam Wong said that WWC said this to WYW and her face-to-face, as WWC was giving instructions to her to prepare the lists.  Madam Wong’s evidence on this has not been challenged in cross-examination.

130.  As to the incident of payment of land premium in early 2007, Madam Wong said that she knew that Well Done did not have enough money to pay the land premium at that time.  This shows that the land premium would be much larger than the RMB186,297 as suggested by Ps.  Madam Wong further said that she knew that WWC and WSL had asked WYW to come up with funds to pay for the land premium.  She further said that (because she oversaw the company’s accounts) that the company did not have enough money to pay for the land premium, and she told WWC, WSL and WYW about this (perhaps separately). She recalled that WWC had said to her that they would have to ask WYW to use the money WC left to him.

131.  Madam Wong also said that in respect of the sum of HK$500,000 transferred by WSL to HK Welldone on 29/8/2007[12], WWC took a deposit slip and orally informed her that this amount came from the money she (WWC) held for WYW, and asked her (Madam Wong) to include the amount in the list that she would prepare each month.  As a result, Madam Wong booked this as an amount in the account with WSL.  Again I have no reason to doubt Madam Wong’s evidence. Madam Wong’s evidence clearly support Ds’ case and contradicts Ps’ case.  Madam Wong’s evidence also shows that WSL was aware of the existence of the Macau Account and the money in that account was WYW’s own money.

132.  In this respect, during cross-examination, it was suggested to Madam Wong that she might have confused this sum of HK$500,000 with the HK$500,000 deposited by WYW into HK Welldone on the same date.  This was denied by Madam Wong.  The HK$500,000 from WYW came from his Hong Kong HSBC bank account.  This sum could not possibly have come from the money held by WWC for WYW, and the sum could not possibly be included in the list.

133.  Mr Ng submits that WYW has never intended to disclose the list concerning the payment of HK$500,000 on 29/8/2007.  In my view, as submitted by Mr Lam, there is no force in this criticism.

(1) That list has already been mentioned by Madam Wong in [18] of her witness statement filed in HCA 913/2013.  However, there has never been any discovery request made by Ps.

(2) Further, in respect of that list, no question has been put to WYW.  WYW’s own evidence is that WWC did not give him the list for the June 2007 HK$2m payment.  He also said that he would generally throw away the lists for the Lai See moneys made in previous years. 

(3) In these circumstances, it would not be fair to make any criticism against WYW by saying that WYW never intended to disclose the list concerning the payment of HK$500,000 on 29/8/2007.

134.  Understandably, given the long lapse of time, Madam Wong and WYW would have different recollections of the details of some events, such as (1) whether Madam Wong was present and overheard the discussion among WWC, WSL and WYW as to whether to pay land premium; (2) whether WYW had asked Madam Wong whether the land premium should be paid; (3) whether WYW had asked Madam Wong about the source of funds in the Macau Account.  However, I am of the view that these minor discrepancies would not affect the credibility of both WYW and Madam Wong.  Based upon their evidence and the documentary evidence, I have no difficult in reaching the conclusion that WYW’s case should be accepted.

F.     MY FINDINGS AND RULINGS

135.  To sum up, I refuse to accept WSL’s evidence in its entirety, save and except those parts which are consistent with WYW’s case. I also refuse to attach any weight to WWC’s WS, save and except the concessions therein.

136.  I accept WYW’s evidence and Madam Wong’s evidence, and attach full weight to their evidence.

137.  Based upon the evidence accepted by this court, I make the following findings and rulings.

F1.    The 1996 Allotment

138.  At the time of the 1996 Allotment, s.57B(1) of the former CO was in force. That section provided:

“Notwithstanding anything in a company’s memorandum or articles, the directors shall not without the prior approval of the company in general meeting exercise any power of the company to allot shares: Provided that no such prior approval shall be required in relation to the allotment of shares in the company under an offer made pro rata by the company to the members of the company…”

139.  I make the following factual findings:

(1) Before the 1996 Allotment, WWC and WSL knew and agreed to the allotment.

(2) The 1996 Consent is valid and is binding upon WWC and WSL.

(3) The 1996 EGM is a valid general meeting of Well Done, in which the 1996 Allotment has been unanimously approved by all the members of the company.

(4) The 1996 Allotment has been properly approved by all the members of Well Done in the 1996 EGM.

140.  Based upon these, I rule that the 1996 Allotment is valid and should not be set aside.  It would not be necessary for me to go into the other points advanced by Ds in support of the 1996 Allotment.

F2.    Mental capacity of WC at the time of the 2001 Transfer

141.  Ps challenge the validity of the 2001 Transfer by saying that WC did not have the necessary mental capacity to execute the documents for effecting the transfer of shares in 2001.  The relevant documents are: (1) the board resolutions dated 30/10/2001; and (2) the instruments of transfer and bought and sold notes, which were dated 1/11/ 2001.

142.  In respect of such a challenge to mental capacity, save in probate cases, every person is presumed to have mental capacity until the contrary is proven.  In particular, if a long time has elapsed since the impugned act, the court will uphold the act unless there is strong and cogent evidence to the contrary.[13]

143.  Ps are relying upon the following matters:

(1) WC was hospitalised from 17/10/2001 to 5/11/2001;

(2) the nursing records of WC showing that WC was “at times confused” on 31/10/2001, which was a sign of his impending liver failure.; and

(3) a letter by a Dr Paul Cheng (the treating doctor of WC) dated 19/11/2012 to WSL and WWC’s former solicitors (“Dr Cheng’s Letter”).

144.  I am of the view that there is no evidence showing that WC did not have the necessary mental capacity at the time of the 2001 Transfer.  In fact, the evidence is showing that WC did have the mental capacity to execute the documents effecting the 2001 Transfer.

(1) It is true that WC was in hospital during the period from 17/10/2001 to 5/11/2001.  However, this does not mean that WC did not have the mental capacity to execute any legal document during the whole period.  It is not disputed that WC executed the Will on 21/10/2001.  WSL and WWC have never said that WC did not have the mental capacity to make the Will.

(2) The nursing notes at most can only show that WC was “at times confused” on 31/10/2001, but not on any other dates.  On the face of the documents effecting the 2001 Transfer, none of the documents was signed by WC on 31/10/2001.

(3) In Dr Cheng’s Letter, Dr Cheng stated:

(a) WC was mentally lucid during his entire hospital stay between 17/10/2001 and 5/11/2001, except on 31/10/2001, when he was reported on nursing records to be “at times” confused.

(b) WC was mentally capable to understand and execute documents during the period, except on 31/10/2001.

(c) The medical procedures applied to WC, including during the period he was in the ICU, were carried out to alleviate his symptoms and should not have caused any mental confusion, except on 31/10/2001.

145.  In his evidence, WSL has said that he had serious doubts concerning WC’s mental capacity because WC was in ICU.  For the reasons set out above, I have held that WSL is an untruthful and unreliable witness, and I would not attach any weight to his evidence.  In any event, WSL would not have the necessary expertise to comment on the mental capacity of WC.

146.  I hold that WC did have the necessary mental capacity when he executed the documents concerning the 2001 Transfer.

F3.    Validity of the 2001 Transfers

147.  Based upon the evidence accepted by this court, I hold that before the 2001 Transfer, both WSL and WWC in fact knew and agreed to the 2001 Transfer.  WC executed the documents effecting the 2001 Transfer with the necessary mental capacity.  There is no ground upon which the 2001 Transfers can be vitiated.  It would not be necessary for me to go into the other points put forward by Ds in support of the 2001 Transfer.

F4.    The Loans Action

148.  Based upon the evidence accepted by this court, I make the following factual findings:

(1) The money in the Macau Account was a gift from WC to WYW during WC’s lifetime.  After the death of WC, the money in the Macau Account was and is WYW’s own money.

(2) In March 2007, upon WWC’s request, WYW withdrew HK$4m cash from the Macau Account and passed the HK$4m cash to WWC.  As told by WWC, the sum would be used to pay a land premium concerning Well Done’s Zhongshan factory.

(3) In June 2007, upon WWC’s request, WYW withdrew HK$2m cash from the Macau Account and passed the HK$2m cash to WWC.  As told by WWC, the HK$2m would be used by Well Done, and some of which would be used to pay “Lai See” for the purpose of facilitating Well Done’s business in the Mainland.

(4) The HK$2.3m claimed by WWC, and the HK$1.131m claimed by WSL in the Loans Action, in fact are originated from the HK$6m given by WYW to WWC.

(5) The balance of the HK$6m, ie HK$2.569m, has not yet been accounted for by WWC’s estate.

(6) In respect of Well Tai’s Claim, the HK$252,404.16 owed to Well Tai is not a debt owed to WSL, but should be a debt owed to WC or Well Done.  WSL himself is not entitled to claim back that sum.

149.  In his final submissions, Mr Ng suggests for the first time that some cash could have been deposited back to the Macau Account at a later time.  Since WYW has not disclosed all the bank statements of the Macau Account, this possibility cannot be ruled out.  With respect, this is not a point open to Mr Ng.  It has not been pleaded by Ps that some cash was deposited back to the Macau Account at a later time.  Since this point has not been pleaded, naturally there would be no discovery on the point.  As this is an unpleaded point, Mr Ng would not be entitled to take this point at the final submissions stage.

F5.    Repayment of the MPF Contribution

150.  As to the case put forward by Ds that Well Done has overpaid a MPF contribution of HK$45,994.46, WWC has admitted in [13(e)] of WWC’s WS that full amount of the long service payment had been paid to her by Well Done.  There is also documentary evidence showing that WWC had withdrawn HK$45,994.46 from her MPF account on 7/4/2008.  As a matter of law, having received the full amount of long service payment, WWC would not be able to get the HK$45,994.46.[14] In my view, in relation to this claim, WWC’s estate is unable to put forward a defence substantiated by evidence.  I therefore must allow this claim made by Well Done.

F6.    Reliefs in HCA 913/2013

151.  As a result of my findings and rulings as set out in the above, all Ps’ claims in HCA 913/2013 should be dismissed, save and except the claim relating to diversion of business by WYW to the New Co.

152.  It is WYW’s evidence that after the breaking down of the relationship between him and WSL, WSL would scold the clients of Well Done, and it would be very difficult for Well Done to continue to have business with these clients.  Since WSL was a shareholder of Well Done, the only way to continue the business without WSL is to set up a new company to run the business.  I accept WYW’s evidence.  However, as a matter of law, WYW has diverted business from Well Done to the New Co (“the Diversion”).  Mr Lam fairly conceded on this point.  At the moment, there is no evidence showing what damages have been suffered by Well Done as a result of the Diversion. Having considered all these, I order that:

(1) there be a declaration that the New Co holds as trustee and is liable to account to Well Done the profits made as a result of the Diversion; and

(2) all necessary accounts and inquiries be taken.

153.  Save and except the order set out in the aforesaid paragraph, all Ps’ claim in HCA 913/2013 be dismissed.

154.  Ds counterclaim that there be an order confirming the 1996 Allotment.  I so order.

F7.    Reliefs in the Loans Action

155.  Earlier on, I have mentioned that counsel at the final submissions stage have reached the Agreement.  However, after the conclusion of the trial, the parties are of different views as to what has exactly been agreed.

(1) On 27/5/2021, Ds’ solicitors wrote to the court and suggested that it had been agreed that if Ds’ case is accepted, it would not be necessary for me to require Welldone and HK Welldone to repay the Sums (ie the HK$2.3m and the HK$1.131m) to WWC’s estate and WSL, and at the same time it would not be necessary for me to grant any relief to Ds in respect of the Sums.  However, Ds would still purse the relief relating to the balance of the HK$6m.

(2) On 28/5/2021, Ps’ solicitors wrote to the court and suggested that it had been agreed if Ds’ case is accepted, it would not be necessary for me to require Welldone and HK Welldone to repay the Sums to WWC’s estate and WSL, and at the same time there would be no order requiring WWC’s estate to account for the entire HK$6m.

156.  I have checked the record. In respect of the contents of the Agreement, I am of the view that Ds are correct.[15] Since I have found that the HK$2.3m and the HK$1.131m indeed are originated from the Macau Account, I would proceed to consider what order should be made as a result of the Agreement.

157.  As a result of my findings and as a result of the Agreement, Ps’ claims in the Loans Action should not be allowed.  I would dismiss those claims.  At the same time, although WWC’s estate would not be required to account for the HK$3.431m, there is no reason why WWC’s estate should not be required to account for the remaining balance, ie HK$2.569m.  WWC’s estate is holding that sum as trustee for WYW.  I would make the following order in favour of WYW and against WWC’s estate:

(1) an account of HK$2.569m received by WWC as trustee from WYW and the manner in which WWC applied the said money; and

(2) repayment of the said HK$2.569m or any sum found due to WYW after taking into consideration the aforesaid account and inquiry.

158.  At the final submissions stage, Ds’ position was already the one as set out in Ds’ solicitors’ letter dated 27/5/2021.  If there has been any misunderstanding in the hearing and Ps in fact have not agreed to this position, as a result of my factual findings, I would still make the order as set out in the aforesaid paragraph.  After all, the HK$3.431m were originated from the Macau Account and were the money of WYW.  WWC only provided the money to Well Done and HK Welldone in accordance with the instructions given by WYW. In these circumstances, there is no reason to allow Ps’ claim in relation to the HK$3.431m.

159.  In respect of Well Tai’s Claim, I have held that in fact the HK$252,404.16 could not be regarded as a loan owed to WSL.  I dismiss this claim.

160.  I also allow Well Done’s claim for the MPF contribution.  I order that WWC’s estate do repay the HK$45,944.46 to Well Done. There be interest on the said sum at 1% over the best lending rate of HSBC from 7/4/2008 to the date of this judgment, and thereafter at the judgment rate until full payment.

F8.    Costs of these proceedings

161.  Costs should follow the event.  To facilitate taxation, I am of the view that there should be one costs order covering both HCA 913/2013 and the Loans Action.

162.  Ds have succeeded on all issues save and except the Diversion.  In my view, the time spent on the Diversion issue is minimal. I make a costs order nisi that 95% of the costs (including all costs reserved, if any) of these proceedings (ie both HCA 913/2013 and the Loans Action) be paid by Ps to Ds, including all costs reserved (if any), to be taxed if not agreed.

G.     DEPOSITION

163.  I dispose of HCA 913/2013 and the Loans Action in the way as set out in the above.

164.  Lastly, it remains for me to thank counsel for the helpful assistance rendered to the court.

H.     EPILOGUE

165.  Before leaving this judgment, I wish to add an epilogue.  As said in the beginning of this judgment, this is a sad case.  I can only resolve the disputes between the parties in accordance with the law and the evidence in this judgment.  However, what this judgment cannot do is to untie the knots in their hearts.  I urge the parties to have some discussion and to try to have reconciliation among them.  After all, they are relatives and family members.  There is much wisdom in a Chinese saying, “冤家宜解不宜結，各自回頭看後頭”.  I hope that the parties can take a pragmatic approach and try to resolve the real issues in their hearts by frank and sincere communication.