CHEUNG PUI YUEN AND OTHERS v. WORLDCUP INVESTMENTS INC. AND OTHERS

cacv 389/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 389 of 2006

(on appeal from HCA NO. 1138 of 2005)

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J U D G M E N T

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Hon Rogers VP:

1.  This is an appeal from the judgment of Reyes J given on 22 September 2006.  The matter before the judge was the determination of a dispute which had come to the fore in the course of an application under an originating summons.  The issues before the judge were, first of all, the determination of whether in 1985 the testator, Cheung Kung Hai (“CKH”) gifted the entire issued share capital of 2 Liberian companies namely the first and third defendants, which will be referred to herein individually as Worldcup and Profit-taking (comprising 500 shares) together with 1 of the 2 issued shares of the second defendant (“Doran”) to Chin Lan Hong (“CLH”), CKH’s concubine, who was treated as his second wife.  Worldcup, Profit-taking and Doran will be referred to herein collectively as the 3 Liberian companies.  There were then two subsidiary issues namely as to the the beneficial ownership of the assets held by the 3 Liberian companies and their subsidiaries and issues as to the amounts due from CKH to the 3 Liberian companies at the time of his death.

2.  The judge held that the beneficial ownership of the assets held by the 3 Liberian companies and their subsidiaries were respectively owned by them; that the fourth defendant was the legal and beneficial owner of 500 shares in Worldcup and 1 share in Doran and that the fifth defendant was the legal and beneficial owner of 500 shares in Profit-taking.  As to costs, he ordered that the costs of the first to fifth defendants to be taxed on a party-and-party basis and to be recoverable against the interests in CKH’s estate of the members of the Lim Bee side of CKH’s family, the plaintiffs’ costs to be taxed on an indemnity basis and to be recoverable against the interests in CKH’s estate of the members of the Lim Bee side of CKH’s family and that the executors’ own costs to be taxed on an indemnity basis and to be recoverable on an indemnity basis against CKH’s estate.

3.  The plaintiffs appealed against both the orders in relation to the ownership of the shares and assets and in relation to the costs order.  The sixth to ninth defendants appealed in relation to their costs which they said should be paid on the basis that their party and party costs were to be paid on the same basis as the first to fifth defendants and the balance to be part of the costs of the estate.  At the conclusion of the hearing of this appeal judgment was reserved save that it was indicated that an order would be made for the appellants’ solicitors to show cause within 28 days as to why an order should not be made that no costs should be allowed, whether as between the solicitors and their clients or otherwise, in relation to the preparation of the documents for use on this appeal.  On this occasion the bundles were prepared seemingly without any regard to the Practice Direction 4.1.  Because of the state of the bundles, counsel on all sides found it necessary, from time to time, to hand up their own selections of documents in order to avoid unnecessary difficulty in making their submissions.

Background

4.  CKH died on 2 October 2000.  He was aged 84.  CKH spoke Fujianese, with limited Cantonese, and could neither read, speak nor write English.  As the judge observed he was at his death an immensely rich man.  It seems that had not always been the case and, indeed, it seems that in the 1980’s he lived in Taiwan apparently because there was at the time a considerable reversal of his fortunes.

5.  CKH had had 2 households.  One consisted of his wife Lim Bee, who had died in February 1977.  His children by, or adopted with, her were Cheung Kwong Wai (deceased), Cheung Chin Chye (deceased), Cheung Theam Siew, Cheung Poh Geak, Cheung Poh Choo, Cheung Yee Ching, Cheung Po Kam, Cheung Poh Luck, Cheung Poh Chit and Cheung Poh Cheok and there were also grandchildren.  The other household consisted of his concubine CLH (the sixth defendant) whom he had taken as a concubine in 1947.  His children by her were Cheung Kee Wee (the seventh defendant), Cheung Lin Wee (the eighth defendant), Cheung Ying Wai, Cheung Poh Chuan, Cheung Poh Suan and Cheung Poh Yuen and grandchildren of those offspring.  At the time of the hearing before the judge CLH was about 80 years old.

6.  By his will dated 26 July 1996 CKH appointed the sixth to ninth defendants, CLH and two of his sons by her, Cheung Kee Wee and Cheung Lin Wee, as his executors.  Under the will CKH left his estate to be distributed in different proportions.  Without analyzing the proportions in full detail, it suffices to say that CLH received 90 portions out of a total of 390 shares.  Her 3 sons received 60 portions each.  CKH’s two grandchildren from the only natural son born to Lim Bee received 15 portions each, their father having died, the only surviving adopted son of CKH and Lim Bee received 12 portions and the CKH’s daughters both from Lim Bee and CLH received either 12 portions or 6 portions each.

7.  In September 2002, 4 of the daughters together with CKH’s two grandchildren from the only natural son born to Lim Bee, caused an originating summons to be issued seeking an account of all the assets, which belonged to CKH, and other accounts essentially seeking to look into everything concerned with CKH’s estate and the administration of the estate by the executors.

8.  Unfortunately there has been a great deal of litigation between members of CKH’s family.  The judge referred to them as the “Lim Bee” and “Chin” factions of the family.  The judge referred to there having been strong feelings and much tension between the two factions, even whilst CKH was alive.  Reference is made in some of the evidence to a letter before action being served on behalf of the first and second plaintiffs, CKH’s grandchildren, in relation to other matters before CKH had died.  That caused a writ to be issued for defamation in which CKH, CLH and the surviving adopted son of Lim Bee were named as plaintiffs.  The defendants were the first and second plaintiffs in this action, the 2 sons of the deceased natural son of Lim Bee.  That writ was apparently never served, the defendants were out of the jurisdiction, they could not be located at the address for service and CKH died before the order for substituted service could be carried into effect.  That did not prevent those two grandsons issuing proceedings, HCA 3480 of 2001, alleging breach of trust by their grandfather, CKH.  In addition there have been no less than 9 separate petitions under section 168A of the Companies Ordinance, Cap. 32, by the third plaintiff.  There was also hard fought litigation about the occupancy and sale of one of the family houses, 4A South Bay Road, which reached this court.

9.  Be all that as it may, these proceedings relate to the 3 Liberian companies and what has been said in respect of them.  In paragraph 22 of the 2^nd affirmation which was made by the second named defendant in the originating summons HCMP 3956 of 2002 issued on 27 September 2002, the seventh defendant in these proceedings, it was said that Worldcup did not form part of the estate of CKH.  The relevant documents including a statutory declaration made by CKH on 11 January 1996 declaring that the shares in Worldcup had been given to CLH in 1985 together with the minutes of a Board Meeting showing that 500 shares were registered in the name of CLH and that those shares had been transferred to the fourth defendant in these proceedings were exhibited.  That affirmation was filed on 5 March 2003.  The same affirmation also contained details relating to the ownership of Doran.  There were exhibited 2 statutory declarations, one by CKH and the other by CLH, relating to lost share certificates in Doran showing that CKH had owned one of the 2 shares and CLH had owned the other of the 2 shares in that company.

10.  In paragraph 24 of the seventh defendant’s affirmation made on 8 August 2003 in HCMP 3477 of 2003 similar documents to those in relation to Worldcup were exhibited in respect of Profit-taking, namely a statutory declaration by CKH together with Board minutes showing registration of the 500 shares of the company in the name of CLH followed by an assignment of the shares to the fifth defendant in these proceedings.

11.  There is no doubt that the revelation of these matters caused some consternation.  Members of what the judge has referred to as the Lim Bee faction expressed their dissatisfaction with the prospect of Worldcup and Profit-taking and half Doran not belonging to the estate and they were not prepared to accept that as a fact.  It was in those circumstances that the executors caused the originating summons in HCMP 3477 of 2003 to be issued on 8 August 2003.  That summons was the commencement of a Beddoes application.  The executors sought directions as to whether they should instruct a firm of solicitors which had had no connection with the affairs of CKH or the 3 Liberian companies to advise the executors on whether the estate should take action, and if so what action, in respect of the shares of the 3 Liberian companies registered in the names of the fourth and fifth defendants.

12.  However, the plaintiffs in the proceedings HCMP 3956 of 2002 which were issued in September 2002, joined together with two other daughters of Lim Bee, to have the originating summons in HCMP 5186 of 2003 issued.  The relief sought on that summons was that there be an enquiry as to the legal and beneficial ownership of the shares in the 3 Liberian companies which were registered in the names of the fourth and fifth defendants, that there be an enquiry into the beneficial ownership of the assets of the 3 Liberian companies and that there be an enquiry into the validity and enforceability of the debts alleged by the executors to be due from the estate to the 3 Liberian companies.  That latter matter was a reference to a notification by the executors that a claim had been made on behalf of the 3 Liberian companies that the estate owed debts of $19,409,347.38, $22,743,584.78 and $76,501,395.13 alleged to be due from the estate to Doran, Profit-taking and Worldcup respectively.

13.  Those, however, were not the only orders sought by the summons.  Paragraph 3 of the summons sought orders that a Trust Corporation be appointed to act as Judicial Trustee jointly with the executors of the estate and that forensic accountants be appointed to prepare a report in relation to the ownership of the shares of the 3 Liberian companies.  Paragraphs 5 and 6 of the summons sought orders that Ms Grace Fung and Wilkinson & Grist be prevented from acting on behalf of the executors and, finally, paragraph 7 sought orders that the costs of the application be paid by the executors personally.

The hearing in January 2004

14.  The first matter to come before the court was the summons in HCMP 3956 of 2002, i.e. that which had been issued in September 2002.  This court was shown passages in the transcript of the first hearing of that summons.  The matter was seemingly before the court over an extended period.  The decision giving directions starts by referring to various principles that the judge considered relevant to the matter before him.  Important amongst those was that the judge said that, as a matter of general principle, a beneficiary should be allowed to see documents in the custody, possession or power of his fiduciary relating to assets over which the latter exercises duties in equity in favour of the former.  He went on to say that the Court would normally exercise its discretion in favour of disclosure of relevant documents, unless a fiduciary can show that there are special circumstances justifying the withholding of the documents.

15.  In relation to the assets the judge said that where it appeared from the number and type of objections made by a beneficiary to an account rendered or, perhaps, from the rival contentions of beneficiary and fiduciary on some issue, that there was a serious dispute between beneficiary and fiduciary as to what constitutes the assets of an estate or as to the proper administration of the estate and that dispute could not be resolved by the provision of an account by the personal representatives, the Court could order that there be an inquiry into the question.

16.  It was in those circumstances that the judge came to consider the course that should be taken.  He was made fully aware of the proceedings in the other 2 originating summons and, indeed, he agreed that any investigation of the matters raised in HCMP 5186 of 2003 should take place sooner rather than later.  The question he had to decide was how that should take place.  The judge considered that it would be more advantageous to have separate proceedings but he left it to the parties to agree directions as to what procedure should be adopted and what questions should be canvassed.

The hearing in June 2005

17.  Hardly surprisingly given the extent of the litigation that has been generated between the various members of what has been referred to as CKH’s households, no agreement was reached.  Shortly before the matter came before the judge again in June 2005 the 3 Liberian companies acknowledged that almost all the disputed debts were unrecoverable because they were statute barred.  The judge said at paragraph 39 of his decision of 7 June 2005 that, as a result, a substantial part of the so-called disputed debts were no longer in dispute.  He went on to say, correctly in my view, that the issue of the disputed debts would seem to have little or no bearing on the substantive issue of beneficial ownership of the 3 Liberian companies and their assets.  Despite that the plaintiffs argued that, irrespective of the judge’s views expressed in the January 2004 decision, proceeding by way of a separate writ with the overseas companies as parties was unworkable.  They sought to amend the summons in HCMP 5186 of 2003 seeking an order for the outright removal of the executors and their replacement by Judicial Trustees.

18.  The plaintiffs’ stance at the hearing was recorded by the judge in paragraph 20 of his decision of 7 June 2005 where he said that it had been submitted on behalf of the plaintiffs that the determination should initially proceed by way of an investigation into the validity of the disputed debts.  The appointment of forensic accountants in connection with the same had been pressed for and it had been submitted that whether or not the ownership of the 3 Liberian companies and their assets had to be determined, would depend on the outcome of the inquiry into the disputed debts.

19.  The judge did not agree with that view of the matter.  He said in paragraph 6 of his decision that the parties fell into 2 factions.  One faction (represented by the Plaintiffs) contended that the 3 Liberian companies and their assets belonged to the estate and they queried the validity of the disputed debts.   The other faction (including the executors in their capacity as beneficiaries) contended that the fourth and fifth defendants, which were under their control, had beneficial interests in the 3 Liberian companies.  Whereas that faction maintained that the disputed debts were valid, it accepted that a substantial part of those debts were time-barred and no longer enforceable.

20.  As regards the dispute as to the ownership of the 3 Liberian companies and their assets he said at paragraphs 27-30:

“27.      Ms. Li suggested that the Plaintiffs may just not be sure that the 3 companies and their assets were entirely owned beneficially by the Estate.  The beneficiaries may simply want the matter to be “investigated”.  The directions which I proposed would force the beneficiaries to take the driving seat.

28.       I do not think that it is the function of the Court to order “investigation” for the mere sake of investigating.  There must be some “lis”.  It is not enough vaguely to allege “suspicions”.  Both factions agreed that I should order a determination into the 3 companies, their assets and the disputed debts.  I assume that this is because there was (and remains) a difference between the parties on these issues. 

29.       As I pointed out to Ms. Li at the hearing, a party must have the courage of his convictions.  One cannot blow hot and cold as to his case.  If one has no real case, there is no point to a determination.  If one has a case, he should state clearly what it is.  He cannot avoid responsibility for the consequences of his act by merely alleging that “the evidence is unclear”.

30.       Both in her skeleton and orally before me, Ms. Li seemed to be attempting to turn the determination into something which I had not ordered.  She repeatedly stressed that the Plaintiffs had a prima facie case that the Executors had breached their fiduciary duties.  The Executors (she said) were in an impossible position of conflict since they were both beneficiaries and executors.  The determination (Ms. Li believed) should effectively be into whether the Executors had duly administered the Estate.”

21.  It was in those circumstances that the judge made the order that the dispute as to the ownership of the 3 Liberian companies be resolved.  That, as the judge said, was the primary issue that he had to determine.  There were 2 subsidiary issues that would become relevant if the judge found that all or some part of the 3 Liberian companies did not belong to CKH.  The first concerned the beneficial ownership of the assets held by the 3 Liberian companies and their subsidiaries; the other the amounts due from CKH to the 3 Liberian companies at the time of his death.  The judge had made clear in his June 2005 decision that he would not be considering the plaintiffs arguments as to whether the executors should be allowed to remain in office.  It was thus that the writ in this action came to be issued, with all relevant parties joined so that they would be bound by the result.

The judgment below

22.  The judge considered the evidence as to how the 3 Liberian companies had been formed and their use.  He then went on to consider the circumstances surrounding the transfer of bearer shares to CLH in 1985 and the claimed gift of bearer shares to CLH in 1985.  He then considered the evidence as to the execution by CKH of the statutory declarations in 1996.

23.  The judge then dealt with the manner in which the companies that CKH had set up were run and kept their accounts.  That included not only the 3 Liberian companies, their subsidiaries but also companies indisputably owned (in whole or in part) by CKH (including companies associated with the Liberian companies).

24.  Worldcup and Profit-taking had been incorporated in 1984.  The judge outlined their history and, briefly, some of their assets.  Doran, too, had also been incorporated in 1984, its first directors were appointed in March 1985 and they were CKH, CLH and Lam Wai Ping who was Lim Bee’s nephew.  One bearer share had been issued to each of CKH and CLH.

25.  It appeared that in 1984 the group of companies controlled by CKH had experienced financial difficulties and CKH had moved from Hong Kong to Taiwan to avoid creditors.  He lived there with CLH in a flat which was by no means as substantial or as luxurious as the house in Black’s Link where they had previously lived.  At that time it appears that they had few of the luxuries of life, such as a driver and a maid which they had previously enjoyed.  For a long time CKH never came to Hong Kong but he did travel to Singapore.  The judge recorded in paragraph 56 of that judgment that:

“56.      According to Chin Lan Hong’s witness statement, shortly thereafter upon her return to Taiwan with CKH:

“CKH gave me a suitcase with keys and told me to keep it safely as it contained important and valuable documents which he wanted me to own.  This suitcase was put in our bedroom and it had a small lock on it.  I was the only person who held the key to this lock.  Whenever we went out, we would also lock the bedroom door apart from the main door as I understood that the document inside the suitcase was very important.” ”

26.  The judge went on to hold that CLH had done no more in respect of running the companies than she had been told to do either by her husband, her sons and possibly the staff of the companies.  He said that at least until 1996 when CKH was diagnosed as having a brain tumour the affairs of the companies including the 3 Liberian companies were “firmly under the management and control of his CKH”.

27.  The judge then considered the circumstances in which the statutory declarations in respect of the 3 Liberian companies came to be made.  It was clear from his findings that the initial approach to Ms Grace Fung of Messrs. Fung and Liu, who had prepared all the documents, had been made by the eighth defendant and probably because concern had been raised that not only had the statutory books of Worldcup and Profit-taking been lost but that the share certificates of Doran had also been mislaid.  The judge also found that the statutory minute books of Doran were also missing or lost.

28.  It appeared that Ms Grace Fung had little recollection of the exact conversations which took place in her office 10 years prior to her giving evidence.  She gave evidence as to what she would have done and that she would have explained the documents to CKH to make sure he understood them.  One specific matter she did remember was recorded by the judge in paragraph 83 of his judgment when CLH:

“jokingly said something to the effect that, since CKH had already given to her all the shares in the two offshore [Liberian] companies why, in relation to the third offshore company, did he not give the remaining half of the shares to her as well.  CKH’s response was to the effect that if he gave her the remaining half of the shares of the third offshore company that would only mean further benefitting her sons.”

29.  There were 2 visits by CKH to Ms Grace Fung’s office.  On the first visit he was accompanied by CLH and the eighth defendant.  He signed statutory declarations in respect of both Worldcup and Profit-taking the material parts of which read:

“2.        In early 1985, out of natural love and affection for my wife, Chin Lan Hong (秦蘭鳯), I transferred the Shares to her by delivery of the share certificates in respect thereof to her.

3.         The Shares had at all times thereafter belonged to my wife, the said Chin Lan Hong and the share certificates representing the Shares had at all times thereafter been in her possession and under her control and I had no further right or interest in the Shares.”

30.  He also signed Board minutes which authorised the cancellation of the bearer shares and the registration of the shares of the two companies in the name of CLH.

31.  On the second occasion on which CKH visited Ms Grace Fung’s office both he and CLH signed statutory declarations recording that it had been discovered that their shares in Doran had been lost.  Both of them then signed documents as directors authorising the issue of 2 replacement bearer shares and then those shares were cancelled and 2 registered shares were issued in their stead.

32.  The judge considered that he could not rely on what had been said by CLH as to what CKH had said when he had handed over the suitcase to her in 1985.  He considered that if all the court had had was her evidence as to what had transpired in 1985 it would have been insufficient as a basis to conclude that there had been a gift of the beneficial interest in any bearer shares to her.  However, he then went on to hold that that was not the only evidence of the gifts of the shares in 1985.  He considered that the statutory declarations which CKH had made in 1996 were an acknowledgement by CKH that he regarded himself as having made effective gifts in 1985.  He considered that the declarations showed that it had been CKH’s intention to make a gift of the Worldcup and Profit-taking shares in 1985.  As regards Doran, the judge concluded that the signing of the Board minute and the share certificate issued to CLH, coupled his actions in the earlier visit demonstrated that CKH had intended the beneficial ownership of the 1 Doran share to vest in CLH.  The judge considered that this conclusion was supported by the joke referred to in paragraph 28 above.

33.  On the medical evidence that was given the judge was satisfied that CKH had been in control of his faculties and knew precisely what he was doing.  In paragraph 131 of the judgment he said:

“131.    CKH was a shrewd and respected businessman.  He did not amass his great wealth by being pushed around.  There is simply no evidence supporting a contention that, in signing the declarations of January and February 1996, he was subject to undue influence from Chin Lan Hong or anyone else.”

34.  The judge then went on to consider various matters which he set out and categorised as miscellaneous factors which had been relied upon by the plaintiffs in an attempt to dispute the gifts of the shares.  The first matter which he considered were handwritten charts which had been prepared by Ms Connie Liu.  She had been working in the secretarial office of the CKH’s companies.  She had prepared the charts for her own internal use.  The charts had shown that CKH held 100% interest in the 3 Liberian companies.  Her evidence was that she had relied on “office hearsay” especially from her superior, Ms Betty Sen.  The judge considered this and as to how these charts had been prepared and why they had been prepared and as to the likely accuracy given what CKH had been doing in 1985 and afterwards.  He came to the conclusion that he was not assisted by the handwritten charts.

35.  The next matter that the judge referred to was the strong reliance which had been placed by the plaintiffs on the declarations of interest which CKH had signed as chairman of Wah Ha Realty Ltd of which he was chairman.  He had disclosed that he had held interests in E Hing Cheung Realty, Fu Kung San Realty and Wing Tung Hing Realty.  The judge observed that such disclosures would only have been right if CKH was regarded as the beneficial owner of Worldcup and Doran.  The judge accepted the evidence that this had been prepared by the group secretarial services department and that the forms had been drafted by Ms Connie Liu and finalised by Ms Betty Sen.  The judge came to the conclusion that the accuracy of the disclosures was suspect because it was subject to Ms Betty Sen knowing what had happened in respect of the shares and that CKH and CLH would simply have signed the documents without considering them carefully.

36.  The judge then went on to consider matters in relation to the group accounts.

This appeal

37.  On this appeal Ms Li SC, who appeared on behalf of the plaintiffs, argued that there had been no basis for the judge to make the order which he did.  It was suggested that the judge’s finding that CKH had given the shares beneficially to CLH was imprecise.  In so far as it related to the gift having been made in 1985 no gift had taken place because there had been no sufficient delivery of the various shares certificates, nor was there proof of gift at that stage.  In so far as it had been held that there might have been a gift in 1996, again, the evidence as to physical delivery was insufficient to show perfection of a gift.  Furthermore, the defendants had only pleaded a gift having been made in 1985.  Reliance on the gifts having been made in 1996 deprived the plaintiffs of taking points such as undue influence. 

38.  Ms Li also relied on 6 factors as indicating that whatever had taken place in 1985 and 1996 there had in fact been no gifts and that the shares in Doran had both belonged to CKH.  Those factors were the disclosure of interest forms which CKH had signed in relation to E Hing Cheung Realty, Fu Kung San Realty and Wing Tung Hing Realty; Connie Liu’s handwritten charts; matters relating to the accounts of the subsidiaries of the 3 Liberian companies; evidence that daily bank statements which were shown to the third plaintiff during the lifetime of CKH were said not to contain the balances of companies which are owned by CLH or her children but they contained the balances of wholly-owned subsidiaries of the 3 Liberian companies and finally that the accounting system used in relation to the subsidiary companies included an arrangement whereby transactions between two companies were shown in the accounts as being routed through CKH as an “accounting intermediary”.

The 1985 gifts

39.  I have no doubt that the judge’s conclusion in relation to the 1985 gifts of the shares was correct.  Whilst the judge had difficulty with CLH’s evidence in relation to what was said at the time, he had no difficulty in accepting that CKH had given CLH the suitcase in Taiwan which contained, amongst other things, the bearer share certificates of Worldcup and Profit-taking.  Some point was sought to be made that the share certificates had not been detached from the books in which they came.  I consider that there is nothing in that point, just the same as there is nothing in the fact that the share certificates were in the suitcase.  If the share certificates were given they were given no matter what they were contained in.  The fact that the suitcase may have contained CKH’s own share in Doran, again, cannot negative the fact that he had given the Worldcup and Profit-taking shares and the other share in Doran.  It was quite clear from the evidence about the joke that CKH and CLH both knew that each of them held one share in Doran.  It is abundantly clear from the evidence about the joke that CKH well knew that he had already given to CLH all the shares in Worldcup and Profit-taking.

40.  Some point was also sought to be taken on the fact that the letter of resignation of the treasurer of Doran which was dated 30 June 1988 was found stapled in the minute book of Doran.  How that came about and when that happened despite the fact that the suitcase had apparently been locked when delivered to CLH, who had retained the keys is not known but it in no way undermines the fact that the relevant bearer shares certificates of Worldcup and Profit-taking had been given.

41.  In my view the judge was entirely correct in his approach.  When he said at paragraph 124 of his judgment that the declarations show that it was CKH’s intention to make a gift of the Worldcup and Profit-taking shares in 1985, that, in my view, is precisely what the statutory declarations did show.

42.  Nothing could be clearer from the documents which CKH had signed at Ms Grace Fung’s office in 1985 than that he was accepting that he retained no interest in Worldcup and Profit-taking.  The judge was amply justified in holding that a man of CKH’s calibre, who had built up his wealth in the way he had and who was in control of his faculties, had clearly intended that that should be so.  The will, which he made nearly half a year later, demonstrated that it was his intention to benefit CLH and her sons.

43.  Various points were raised on the appeal as to the fact that the initial instructions for the preparation of the documents signed in 1996 had not been given by CKH.  That, however, cannot undermine the fact that CKH would have known exactly what he was signing.  The judge was perfectly justified in accepting Ms Grace Fung’s evidence that she would have explained the various documents properly to CKH.  It is no more than idle surmise to suggest that she would not have done so.  This court was taken to various parts of Ms Fung’s evidence before the judge.  I fail to see how they undermine the fact that she would have explained the documents fully and carefully at the time they were signed and that CKH fully understood what he was signing.

44.  It is not surprising, therefore, that whilst the plaintiffs in this action may have resented the beneficence which CKH bestowed upon CLH, no doubt to the ultimate benefit of her offspring, and wished to challenge that, when it came to the directions hearing in June 2005 they were reluctant to have their challenge as to the gifts of the Worldcup and Profit-taking shares decided before they had tried to discover something whether through a search through the accounts or otherwise.  As paragraphs 27 to 30 of the decision of 7 June 2005 demonstrated the plaintiffs clearly appreciated the difficulties which faced the challenge which they had mounted and which the judge considered they either had to pursue or abandon.

45.  With regard to the various matters which were raised and referred to by the judge as miscellaneous factors and dealt with in paragraphs 137 onwards of his judgment, I consider that he was amply justified in the decision to which he came.  Indeed, Ms Li put the argument on the basis that any one of those matters would not on its own be sufficient to show that there had been no gift of the shares.  What was said was that taken together they demonstrated that CKH had retained ownership of the shares in Worldcup and Profit-taking and in the other share in Doran.

46.  Quite apart from the fact that such an exercise is a matter for the judge and the points go to the weighing exercise that is for the judge to perform and this court has to be very slow in overturning a judge’s decision on fact, I do not consider that the points can be taken as demonstrating that CKH retained the ownership in the shares.

47.  The fact that CKH continued to run the companies as he always had is hardly surprising.  He himself had built up companies and the assets which they held and the fact that he had given them away to CLH did not demonstrate that he was not going to continue to run the companies.  Likewise, as the judge said although he might have given away the shares in the companies it did not mean that CKH would not use some of the money himself.

48.  The complicated system of accounting intermediaries is one the purpose of which I find difficult to understand.  Nevertheless the evidence was that it was a system that had been in use for many years and it was continued to be used.

49.  That Connie Liu might have misunderstood or indeed not known that CKH had given away his shares is neither here nor there.  That would account for mistakes being made in relation to the disclosures under the Securities (Disclosure of Interests) Ordinance Cap. 396.

Costs

50.  In relation to the appeal as to costs it was the plaintiffs’ case that their costs in the court below, which we were informed were in excess of $30 million, should be borne by the estate.  No doubt that would be attractive to the plaintiffs since CLH and her 3 sons were entitled to 270 portions out of 390 of CKH’s estate and the plaintiffs were only entitled to 72 portions.

51.  The judge took the view that this litigation was hostile litigation.  In my view he was correct.  Not only is it hostile it would appear to have all the attributes of a legal war of attrition.  Nothing could be clearer than from these proceedings themselves without having regard to the plethora of litigation which has taken place between the parties.  One might observe that in the summons in HCMP 5186 of 2003, which formed the basis of the questions as to the ownership of the shares, the plaintiffs thought it right and proper to seek an order for costs against the executors personally.  They could have only done so on the basis that the litigation was hostile.  No doubt the professional advisers would have benefited from the work generated but I see little benefit accruing to the litigants themselves.  There is little reason to suppose that that flow of litigation will cease, at least not until the parties’ monies inherited from CKH is depleted.

52.  Our attention was drawn to the approach as to costs in applications to the Court relating to the construction or administration of estates.  In the case of in Re Buckton [1907] 2 Ch. 406 Kekewich J identified three classes of such proceedings, the first two of which were not regarded as hostile but more in the form of determinations of legitimate questions about construction.  At page 415 he went on to consider that there was what was said to be a third class of cases which differed in form and substance from the other two.  He said:

“In this class the application is made by the beneficiary who makes a claim adverse to the other beneficiaries, and really takes advantage of the convenient procedure by originating summons to get a question determined which, but for this procedure, would be the subject of an action commenced by writ, and would strictly fall within the description of litigation.”

53.  Our attention was also drawn to the fact that this approach has been followed by others and in particular by the Court of Appeal in McDonald and others v Horn and others [1995] ICR 685 and to what Hoffmann LJ (as he then was) said adopting the approach of Kekewich J.

54.  Quite apart from the fact that matters of costs are questions of the exercise of the judge’s discretion and this court will not interfere with decisions as to costs unless it can clearly be shown that there has been some error of law or disregard of legal principles, the judge’s familiarity with this action and the background to it far exceeds anything that this court could have.  His decision that this was hostile litigation cannot be faulted.

55.  There is one further aspect of the costs order which did not form any major part of the appeal but causes some concern.  The order made referred to the first to fifth defendants’ costs being recoverable against the interests in the Estate of the Lim Bee side of the Deceased’s family on a party and party basis and that the plaintiffs’ costs should also be recoverable against the interests in the Estate of the Lim Bee side of the Deceased’s family but on an indemnity basis.  The fact that the judge regarded the litigation as one between the Lim Bee side and Chin side of the family is entirely understandable and it has to be pointed out that none of CLH’s daughters joined in the action as plaintiffs although they would have stood to gain had the action been successful.

56.  Nevertheless, the order made would have affected the interests of 5 people on Lim Bee’s side who were not parties to the action.  Whether or not they supported the action by the plaintiffs is not known.  Whilst they have not taken any steps to object to the order and there may be some arrangement between them and the plaintiffs, it does not, on the face of the matter seem correct that they should bear part of the costs.  One might also observe that as already mentioned Lim Bee’s adopted son Cheung Theam Siew had joined as a plaintiff with CKH in the action against the 2 grandsons, referred to in paragraph 8 above.  I would therefore vary the judge’s order as to costs to make those costs which had been ordered to be recoverable against the interests in the Estate of the Lim Bee side of the Deceased’s family, to be paid out of the plaintiffs’ interests in the Estate.

The cross appeal as to costs by the executors

57.  In relation to the appeal by the executors as to costs the same considerations apply: the order made by the judge was a matter of discretion.

58.  One of the matters raised by the appeal was that the costs of the discovery were extensive.  In this respect the judge had approached the matter on the basis that the beneficiaries were entitled to discovery.  He had been quite clear about this in his decision in January 2004.  Despite the fact that the discovery was in the most part directed either to the plaintiffs trying to discredit the conduct of the executors or to investigating the validity of the alleged debts, a matter which had become irrelevant, I consider that the executors’ costs, as opposed to the costs of the first to fifth defendants, should be regarded as costs in relation to the administration of the estate.

59.  As to the costs of the rest of the proceedings below, the executors remained neutral in relation to the ownership of the shares in the companies and their presence was necessitated by their having to be bound by the result.  Whereas I might have come to a different conclusion from that arrived at by the judge, I do not consider that the circumstances are such that this court should disturb the exercise of his discretion.

Conclusion

60.  In conclusion, therefore, I consider the appeal by the plaintiffs must be dismissed save as set out in paragraph 56 and that the costs incurred by all the defendants should follow the order made by the judge in relation to the first and fifth defendants as varied hereby namely that they be taxed on a party and party basis and paid out of the plaintiffs’ share of the estate and that in so far as the remaining costs of the executors are concerned those should be borne by the estate.

61.  The appeal by the executors should also be dismissed.  The costs of that appeal should be borne by the estate.

62.  I would make an order nisi accordingly.

Hon Le Pichon JA:

63.  This is an appeal by the plaintiffs from the order dated 22 September 2006 of Reyes J and arises out of proceedings concerning the Estate of the late Cheung Kung Hai (“the testator”) who died on 2 October 2000.  The main issue below was the beneficial ownership of the 500 issued shares in each of Worldcup Investments Inc (“Worldcup”), Profit-taking Company Inc (“Profit-taking”) and one of two issued shares in Doran Ltd (“Doran”).  Specifically, the issue was whether these shares (collectively the “Disputed Shares”) in the three companies (“the Liberian companies”) formed part of the testator’s Estate.

64.  The Liberian companies are the ultimate holding companies of a complex web of well over 100 subsidiaries that are Hong Kong registered companies, holding substantial assets consisting of real estate and shares in listed companies.  Ownership of the Liberian companies would mean control of the very significant assets held through their subsidiaries.

The parties

65.  The plaintiffs are some of the beneficiaries under the testator’s Will made in 1996.  They are some of the children and grandchildren of the testator by his marriage to Lim Bee who had died in 1977.  Under the Will, the plaintiffs are together entitled to 72/390 shares or 18.46% of the residuary Estate.

66.  During his lifetime, the testator had maintained a second household, having in 1947 taken Chin Lan Hong (“Madam Chin”), the sixth defendant, as his ‘concubine’.  Madam Chin and the testator had six children including three sons, namely, Cheung Kee Wee, Cheung Lin Wee (who are respectively the seventh and eighth defendants) and Eric Cheung Ying Wai.  The sixth to eighth defendants (collectively “the Executors”) are the Executors of the Will.  Madam Chin and her three sons are also beneficiaries under the Will and together they are entitled to 270/390 shares or 69.23% of the Estate.  No conflict of interest arises out of the mere fact that the Executors were also some of the beneficiaries under the Will.  Qua beneficiaries, the plaintiffs and the Executors have the same interest in the Estate.

67.  However, it emerged that the Executors asserted a personal interest that is adverse to the interests of the Estate.  Madam Chin claimed to be the donee of the Disputed Shares under an inter vivos gift made by the testator during his lifetime.  The fourth and fifth defendants respectively, (“Four Pillars” and “Megabest”) are her successors in title and are BVI companies.  Four Pillars is the registered owner of the issued shares in Worldcup and one of two issued shares in Doran.  It is beneficially owned by the three sons of Madam Chin, two of whom act jointly with her as Executors.  Megabest is beneficially owned by Madam Chin and is the registered owner of the issued shares in Profit-taking.  The Liberian companies in which the Executors had a significant beneficial interest as owners of Four Pillars and Megabest also claimed to be creditors of the Estate of some $118 million.  In this judgment, I will refer to the first to fifth defendants collectively as “the defendants”.

Procedural background

68.  The genesis of the present proceedings and the procedural background are relevant as they bear upon the true nature of the present proceedings and merit consideration in some detail.

HCMP 3956/2002

69.  It would appear that through company filings published shortly after the testator’s death, it came to the attention of some of the plaintiffs in the present action (“the plaintiffs”) who were directors at that time in many of the family controlled companies that the testator was no longer shown as the beneficial owner of Perchgold (a wholly-owned subsidiary of Worldcup) in the annual returns of one of the Hong Kong listed companies over which the testator had exercised control during his lifetime.  Not surprisingly, that gave rise to concern and questions were raised.  In February 2002 the Executors wrote to the beneficiaries ‘confirming’ that the Disputed Shares did not form part of the Estate.  That stance on the part of the Executors as well as what was perceived to be a reluctance on the part of the Executors to provide information culminated in the issuance of an originating summons by 6 of the 8 plaintiffs in the present action (hereinafter referred to as “the HCMP 3956 plaintiffs”) seeking accounts and an inquiry as to the properties belonging to the Estate.

70.  In response to that originating summons Cheung Kee Wee made an affirmation on behalf of the Executors on 17 December 2002.  In that affirmation, there was no mention of any inter vivos gift having been made by the testator to Madam Chin or of the then ownership of the Disputed Shares.  In actual fact when HCMP 3956 was instituted, Four Pillars was the registered holder of the Disputed Shares having acquired them from Madam Chin on 3 July 1998 for a nominal consideration.  Within a month of the proceedings, on 17 October 2002, Four Pillars sold its shares in Profit-taking to Megabest which is a BVI company wholly-owned by Madam Chin for HK$8 million.  These facts were not known to the plaintiffs at the time they instituted the proceedings.  Further, there was not a hint in the December affirmation of substantial amounts said to be due from the testator to the Liberian companies, these being the Disputed Debts referred to in paragraph 74 below.

71.  Cheung Kee Wee made a second affirmation on 4 March 2003 and exhibited the corporate records for Worldcup revealing, for the first time, the personal interest on the part of two of the Executors and thus a conflict of interest.  The corporate documents showed that Worldcup had been incorporated on 31 August 1984, that the one subscriber share had been transferred to the testator on 3 September 1984 and on 1 October 1984 the board (comprising the testator, Madam Chin and a Madam Hoh) had issued one bearer share to the testator.  On the same day a further 499 bearer shares had been allotted to the testator.  A statutory declaration of the testator dated 11 January 1996 said to “record a transfer of the entire issued capital of Worldcup being 500 bearer shares to [Madam Chin] by delivery of the share certificates” was exhibited.  Also exhibited were corporate documents dated 11 January 1996 authorising and evidencing the replacement of the 500 bearer shares by 500 registered and fully paid-up shares in the name of Madam Chin and the subsequent transfer (in July 1998) of those shares to Four Pillars whose beneficial ownership was also disclosed.

72.  In the same affirmation, Cheung Kee Wee further disclosed the corporate records relating to Doran.  These showed that it had been incorporated on 3 December 1984 and the one subscriber share had been transferred to the testator on 5 December 1984.  The first directors appointed on 18 March 1985 were the testator, Madam Chin and Lam Wai Ping (Lim Bee’s nephew).  On the same day the testator as transferee had been allotted one bearer share.  The board minutes further recorded the approval of an application that had been received for the allotment of one share at the price of US$1 to Madam Chin.  There were statutory declarations dated 10 February 1996 (“the February declarations”), one by each of the testator and Madam Chin, to the effect that he/she had lost his/her share certificate in Doran.  Also disclosed were corporate documents authorising the replacement of the lost share certificates, the issuance of replacement bearer share certificates and their replacement by a fully paid-up registered share to each of the testator Madam Chin all dated 10 February 1996 as well as a subsequent transfer by Madam Chin (in July 1998) of the share registered in her name to Four Pillars.

73.  At that stage, nothing was said about the beneficial ownership of Profit-taking which would have revealed Madam Chin’s personal interest.  In fact, as will become apparent, the corporate records relating to Profit-taking (similar to those of Worldcup except as for the dates) were not disclosed until some four months later in HCMP 3477/2003.  See paragraph 76 below.  The disclosures made revealed the personal interests of two of the Executors in Four Pillars whose claims to the ownership of Worldcup and one Doran Share were plainly adverse to the interests of the Estate.

74.  Following hard on the heels of the Worldcup and Doran disclosures was a letter from the Executors dated 31 March 2003 to the beneficiaries enclosing, inter alia, a “List of Liabilities due from the Estate to Foreign Companies as at 2 October 2000” showing liabilities due to the Liberian companies totalling HK$127,933,327.39 made up as follows:

Doran                       28,689 347.48

Profit-taking              22,743,584.78

Worldcup                 76,500,395.13

A summary showing details was attached.  This showed that the analysis had been prepared “according to companies records” by Raymond Chu who had been the Chief Accountant of the testator’s group of companies since 1998.  His evidence was that he had been asked by Cheung Kee Wee to prepare the analysis.  A week or so later, the beneficiaries were advised that that amount should be revised downwards by $9.28 million.  Not surprisingly, the HCMP 3956 plaintiffs requested sight of supporting documentation such as journals and ledgers for the Disputed Debts.

75.  It is to be noted that the disclosure of the alleged gift of the Worldcup and Profit-taking did not take place until about 30 to 34 months after the testator’s death and some 6 to 10 months after the proceedings in HCMP 3956 had been instituted although inquiries had been made of the Executors by the HCMP 3956 plaintiffs well before the proceedings.  It is all the more remarkable when one considers that the alleged donee was herself one of the Executors and the remaining two were some of her successors-in-title.

HCMP 3477/2003

76.  The next relevant event was the application by the Executors by way of originating summons issued on 8 August 2003 seeking directions as to what action, if any, the Estate should take in relation to the beneficial ownership of the Disputed Shares.  The supporting affirmation of Cheung Kee Wee dealt, inter alia, with the shareholding history of Profit-taking and exhibited corporate documents relating to Profit-taking similar to those for Worldcup including a statutory declaration also dated 11 January 1996 relating to Profit-taking and thus revealing, belatedly, Madam Chin’s personal interest Profit-taking.  (In this judgment, I will refer to the two statutory declarations relating to Worldcup and Profit-taking as “the January declarations”.)

77.  By this stage, it would appear that the Executors accepted that they were in a position of conflict having regard to their personal interests but, seemingly, only as claimants to the beneficial ownership of the Disputed Shares and not also as creditors of the Estate in relation to the Disputed Debts as the directions sought did not extend to the matter of the Disputed Debts.  In passing, I would observe that the directions proposed – that the Executors seek the advice of independent solicitors relating to the ownership of the Disputed Shares – could not have removed the conflict that existed since the instructions would still have had to come from the very persons in a position of conflict.

78.  Also exhibited to the supporting affirmation were accounts described as the audited accounts of the Liberian companies from the date of incorporation to 30 September 2000.  These had been audited by PricewaterhouseCoopers and were dated 28 July 2003 and appear to have been approved by Cheung Kee Wee and Eric Cheung as directors of the Liberian companies.  Each set of accounts stated an amount due from the testator which corresponded to the revised amounts given in April 2003 constituting the Disputed Debts save for a small adjustment in the case of Worldcup.

79.  Far from reassuring the beneficiaries that the Disputed Debts were properly due, the audited accounts supplied added to their concerns as to the due administration of the Estate.  The directors of the Liberian companies (which would include two of the Executors) had been responsible for the preparation of the accounts.  Despite these matters the Executors were seemingly relying on accounts of the alleged creditors of the Estate i.e. the Liberian companies (in which companies they claim a direct beneficial and financial interest) to justify the Disputed Debts.  In fact, unknown to the plaintiffs at the time, the situation was worse than that.  Sometime later, in May 2004, the Executors’ solicitors advised that:

“As a matter of fact, there were no contemporaneous vouchers or ledgers prepared for Worldcup, Profit-taking and Doran until 2003.  It was only after the death of the Testator in 2003, that the accounts including vouchers and ledgers, of these 3 companies were prepared.”

They further clarified that computerised records that the Executors had presented as “Ledgers” of the Liberian companies “were done by a computer software” and

“since the accounts were prepared only in 2003 (as a reconstruction exercise), nobody had ever signed against these items.”

On any view, given the fiduciary duties of the Executors, it was a remarkable state of affairs.  Yet, the Executors did not see fit to seek any relief in respect of the Disputed Debts.

HCMP 5186/2003

80.  These developments led to HCMP 5186/2003.  On 26 November 2003, the HCMP 3956 plaintiffs and two other daughters of the testator and Lim Bee took out an originating summons for, inter alia, an order that an inquiry be conducted for the determination of (1) the legal and beneficial ownership of the Disputed Shares; (2) the beneficial ownership of the assets held by the Liberian companies and/or their subsidiaries; and (3) the validity and enforceability of the Disputed Debts.  As the directions sought in HCMP 3477 could not have resolved the conflict of interest issue, the plaintiffs sought the appointment of a judicial trustee to act jointly with the Executors.  It has been suggested by the Executors that this was unreasonable but the jurisdiction to appoint a judicial trustee is commonly resorted to where it is expedient to do so, for example, because of conflicting interest on the part of a personal representative.  See Snell’s Equity, 31^st Ed. para. 25-14.

The Order dated 29 January 2004 in HCMP 3956/2002 (“the 2004 Order”)

81.  HCMP 3956/2002 came on for hearing in late January 2004.  Leading counsel for the plaintiffs in those proceedings handed the judge a document entitled “Plaintiff’s Proposed Orders” summarising the inquiries and discovery sought which the judge attached to his Decision.  By the date of this hearing, the originating summonses in HCMP 3477/2003 and HCMP 5186/2003 had already been issued.  I should mention that the materials considered by the judge at this hearing included the second affirmation of Cheung Kee Wee as it was mentioned in the recitals to the 2004 Order.  By this stage (January 2004) some evidence had been filed in the related proceedings but it is unclear how much of this material was before the judge at the hearing.  The judge was fully aware of these related proceedings and, indeed, made specific reference to HCMP 5186/2003 in his decision of 29 January 2004.  The judge said:

“12.      There is no dispute between the parties that the Court should order a determination of the legal and beneficial ownerships in Worldcup Investments Inc., Doran Limited and Profit-taking Co. Ltd. (collectively, ‘the 3 companies’) and the assets held by those 3 companies or their subsidiaries. There is no dispute among the parties that the validity of debts of $19,409,347.38, $22,743,584.78 and $76,501,395.13 alleged to be due from the Estate to Doran, Profit-taking and Worldcup respectively should also be investigated. There is no dispute that any investigation of the foregoing matters should take place sooner rather than later. The only substantial question is over the mechanism of where (whether in these proceedings, HCMP 5186 of 2003 (‘5186’) or some other proceedings) and how that investigation should be ordered.

13.       On that question I agree with Mr Wong. I do not see the point in waiting for 5186 to come for hearing before I make an Order which everyone believes desirable. I initially had reservations about making an order here because, although there is substantial overlap between the parties seeking relief (and the reliefs sought) here and in 5186, the parties and reliefs in the 2 proceedings are not identical. But Mr Wong’s solicitors also act for those plaintiffs in 5186 who are not parties (‘the non-party plaintiffs’) to these proceedings. Mr Wong has told me on instructions from his solicitors that, if inquiries of the nature sought by the Plaintiffs in Document §1 are directed here, the non-party plaintiffs will not pursue the reliefs sought by §§ 1 and 2 of their Originating Summons in 5186.”

This did not mean that the application was unopposed.  It was only in the course of the hearing which lasted 3 days that the Executors accepted that there should be an inquiry.  As reflected in the skeleton submissions of counsel for the Executors for the directions hearing the following year,

“… the Inquiry was desirable for the sake of the proper administration of the Estate.”

82.  The 2004 Order ordered, inter alia, that:

“1.   An inquiry be conducted for the determination of the following:

(1)    The legal and beneficial ownership of the following shares (‘the Disputed Shares’):

(i)     500 shares in Worldcup Investment Inc. (‘Worldcup’) currently registered in the name of Four Pillars Investments Limited;

(ii)    1 share in Doran Limited (‘Doran’) currently registered in the name of Four Pillars Investments Limited;

(iii)   500 shares in Profit-taking Co. Ltd. (‘Profit-taking’) currently registered in the name of Megabest Securities Limited;

(2)    The beneficial ownership of all the assets held by Worldcup, Profit-taking, Doran, and/or their subsidiaries;

(3)    The validity and enforceability of the following debts alleged by the Defendants to be due from the Estate of Cheung Kung Hai (‘the Estate’) to Worldcup, Profit-taking and Doran (‘the Disputed Debts’):

(i)	Doran	: HK$19,409,347.38
(ii)	Profit-taking	: HK$22,743,584.78
(iii)	Worldcup	: HK$76,501,395.13

…

6.   The following matters shall form part of the determination ordered under paragraph 1 hereinabove insofar as the same does not overlap with the inquiry ordered thereunder, namely:

(1)    the alleged payments, transfer of funds, loans, repayments, proceeds received, sums payable, amounts due, dividends receivable, dividends distributed, as referred to in the Summary of Nature of Current Account Transactions between the Estate and Doran, Profit-taking and Worldcup respectively as disclosed on 31^st March, 2003 and the corrected version as disclosed on 7^th April, 2003 (“the Transactions”);”

83.  I would make the observation that although the parties were ad idem that the ownership of the Liberian companies be determined and the Disputed Debts be investigated, that fact of itself would not have ‘entitled’ the parties to an order, much less could such an order have been demanded as of right, as it were.  The order would not have been made if the judge had not been satisfied that the HCMP 3956/2002 plaintiffs had made out a case for relief and that the relief sought was appropriate.  Not only was the judge satisfied, he took a dim view of the Executors’ conduct as appears from an extract from the transcript of the hearing on 29 January 2004 (at p. 233 O-R) and the costs order made:

“COURT:     ….  I think, in the circumstances, that the conduct of the executors has been unreasonable and that in their opposition to the plaintiffs’ application, they have acted in less than a neutral fashion.  They have been partisan.

For that reason, I believe that the executors should pay the costs out of their own pocket, rather than out of the estate.”

84.  The judge then left the parties to agree directions as to the precise procedure and questions to be canvassed in the determination under paragraph 1, failing which the matter was to be restored for directions.  The 2004 Order also dealt with the other relief sought most of which was granted but that is not relevant for present purposes.

The directions hearing in June 2005

85.  As the parties were unable to agree on the way forward, the matter was restored before the judge for directions on 1 June 2005.  It is unclear whether both HCMP 3956/2002 and HCMP 5186/2003 were listed for hearing.  The Reasons for Decision and the transcript were intituled under both sets of miscellaneous proceedings although the order dated 1 June 2005 (“the 2005 Order”) was only intituled under HCMP 3956/2002.

86.  Be that as it may, shortly before the hearing, on 26 May 2005, a few days before the directions hearing on 1 June 2005, the plaintiffs’ solicitors were sent copies of correspondence that had been exchanged between the respective solicitors of the Liberian companies and the Executors since 12 May 2005 to the following effect.  When asked by the Liberian companies whether they were willing to acknowledge the Disputed Debts, the Executors made the point that the debts appeared to be time-barred apart from 5 sums (totalling approximately $11.33 million) that had been advanced by Doran between 10 April and 7 August 2000 and, on a without prejudice basis, they suggested that these amounts be set off against a dividend in the sum of $8.665 million payable to the Estate.  This resulted in a proposal of settlement from Doran providing “supporting documents” for the two advances made on 10 April 2000 and offering to settle by waiving the remaining 3 advances on the basis that the dividend due to the testator would be set off against this amount (which by happenstance also totalled $8.665 million).

87.  There is at least one aspect of this exchange that calls for comment.  The fact that Doran as an alleged creditor of the Estate was providing “supporting documents” in May 2005 for the advances made on 10 April 2000 suggests that what was being provided had not hitherto been provided.  In any event, given the matters referred to in paragraph 79 above, what reliance could be put on the so-called “supporting documents”?  The basis for the Executors’ unequivocal acceptance of the Disputed Debts which plainly encompassed the advances of 10 April 2000 in March 2003 is thus far from clear.

88.  In the event, it was ordered that:

“1.   the hearing of the Inquiry ordered under paragraphs 1 and 6 of the Order made herein on 29^th January 2004 be reserved to Mr. Justice Reyes;

2.   a separate Writ action be issued by the Plaintiffs (including the 5^th and 8^th Plaintiffs in HCMP No. 5186 of 2003) for the conduct of the Inquiry against Chin Lan Hong, Cheung Kee Wee and Cheung Lin Wee as executors and trustees of the Estate of Cheung Kung Hai, deceased, Worldcup Investments Inc., Doran Limited, Profit-taking Co. Inc., Four Pillars Investments Limited and Megabest Securities Limited joining such other parties (if any) or any of the aforesaid parties in other capacities as the Plaintiffs deem necessary and/or appropriate (the ‘Defendants’);”

Various directions were then given including directions for the filing of what was described as “Statement of Case”, “Statement in Reply” and “Statement in Rebuttal”.

89.  In his Reasons for Decision, the judge did not appear either to have had the reasons why he had made the 2004 Order in the first place firmly in mind or to have focused on where the real conflict of interest lay.  First, if in January 2004 the inquiry ordered was desirable “for the sake of due administration” of the Estate, that remained the position in June 2005.  The underlying factors had not changed.  Second, the judge appeared to attach importance to the fact that the Executors had a “parallel capacity” as beneficiaries of the Estate when that fact did not create any conflict of interest and would not have prevented them from taking the driving seat for the inquiry.  Rather, what created a conflict of interest were the claims of the Executors as beneficial owners of the Disputed Shares and through their interest in the Liberian companies as creditors of the Estate in respect of the Disputed Debts.  It was that conflict that compromised their independence and impartiality and, in my view, disqualified them from discharging their duties as Executors in relation to those matters.  I would add that the fact that fiduciaries find themselves conflicted out in relation to certain issues arising in the administration of an Estate of itself carries no overtones of wrongdoing and does not imply any impropriety.  But it would mean that someone else who is not in a position of conflict would have to assume that role in respect of matters in which the Executors have a personal interest.

90.  The 2005 Order was, on any view, an usual order.  The plaintiffs had no choice but were compelled to commence a separate writ action in order to carry into effect the Inquiry ordered by the 2004 Order.  Possibly taking a pragmatic view of the prospects of overturning what, in all probability, would be regarded as a case management decision, the plaintiffs did not appeal the 2005 Order.

This appeal

91.  The substantive issue which arises is whether the judge’s conclusion that a valid gift of the Disputed Shares to Madam Chin had been established was correct.  There is also an appeal and cross-appeal relating to the costs order.

Ownership of the Disputed Shares

The judge’s findings

92.  The background and circumstances surrounding the transfer of the bearer shares and the making of the 1996 declarations appear in paragraphs 51 to 86 of the judgment and the main points are summarized in paragraphs 25 to 31 of the judgment of Rogers VP which I gratefully adopt.  I would add that as recorded by the judge in paragraph 69 of his judgment, Grace Fung was consulted “for advice on how the family could best to protect itself in relation to the bearer shares”.  It is clear from the evidence that the instructions to Grace Fung for the preparation of the 1996 declarations did not emanate from the testator.  Rather, Cheung Lin Wee made the initial contact with Grace Fung and instructions had come from him and Madam Chin but Cheung Lin Wee himself did not give evidence.  Grace Fung gave advice and on the basis of that advice a number of corporate documents were prepared for execution at the same time as the January declarations.  Further, there was never any question but that one of the two Doran shares had throughout belonged to testator and formed part of his Estate.  Only the Doran share that had been transferred to Four Pillars in 1998 formed part of the Disputed Shares.

93.  The judge accepted Madam Chin’s evidence that in 1985 the testator had handed her a suitcase containing, inter alia, the share certificate books of the Liberian companies including Doran and had said something to her at the time.  He found that the testator never intended in 1985 to gift Doran completely, that his known intention in relation to Doran was to retain an interest in at least one Doran share.  He made no findings as to what was said by the testator, having rejected Madam Chin’s evidence on that issue.

94.  As recorded in paragraph 6 of the judgment, the judge considered that the main question he had to determine was whether, in 1985, the testator had “gifted” the Disputed Shares (which included one Doran share) to Madam Chin, this notwithstanding the defendants’ pleadings and submissions below that different considerations applied to the Doran share because one bearer share payable in full had been issued to Madam Chin on 18 March 1985.  Although he made no express findings as to who owned that Doran share immediately prior to the suitcase episode, it would appear that the judge proceeded on the basis and must have found that the testator was the beneficial owner of all the Doran shares at that time.  In paragraph 136 of the judgment he concluded that the one Doran share was part of the gift.  Unless he considered that the testator was the beneficial owner immediately prior to the gift, that conclusion would not have made any sense.

95.  In relation to Worldcup and Profit-taking, the judge considered that the January declarations constituted sufficient evidence of the testator’s intention to make a gift of those shares in 1985 and if for whatever reason there had been no effective gift of shares in 1985, the testator’s acknowledgement in January 1996 that he regarded himself as having made an effective gift in 1985 and his acceptance in January 1996 that he retained no interest in those shares were sufficient to establish the gift.  As for the one Doran share, whilst noting that there was no statutory declaration for Doran acknowledging the gift of that share to Madam Chin, the judge discerned the necessary intention for the gift of that share from the testator’s conduct in signing a Doran board minute in February 1996 authorising the issue of a registered share to Madam Chin and in signing the registered share so issued, when coupled with similar conduct in relation to the shares of Worldcup and Profit-taking.

Applicable legal principles

96.  As Plowman J stated in Thomas v Times Book Co Ltd [1996] 1 WLR 911 at 915D-E:

“ … in order to establish a gift the [donee has] to establish two things, first of all, the relevant animus donandi, or the intention of making a gift, and secondly, a delivery of the subject-matter of the gift …to the donee.”

In that case it was held that a valid gift had been made when, prior to his departure abroad where he died several weeks later, Dylan Thomas told the donee who was the producer in charge of the broadcast production of “Under Milk Wood” that if he (the donee) could find the manuscript he could keep it and Thomas suggested a number of public houses in Soho where they might have lost it or that he might have lost it in a taxi.  A few days later the donee found the manuscript in one of the places suggested.  The Thomas case is also authority for the proposition that the onus of proof is on the donee and where the donor is dead the claim that there was a gift must be approached with suspicion.  In the words of Brett MR in In re Garnett (1885) 31 Ch D 1, 8:

“the evidence ought to be looked at with great care; the evidence ought to be thoroughly sifted, and the mind of any judge who hears it ought to be, first of all, in a state of suspicion …”

97.  Where the gift is a parol gift, it would appear from the reported cases that the requisite intention is invariably established by evidence of what the donor had said at the time of the gift.  That evidence can come from the donor himself or from the donee.  See, for example, Thomas v Times Book Co Ltd (supra), Kilpin v Ratley [1892] 1 QB 582 (express words of gift uttered by the donor to his daughter: ‘I give you this furniture; it will be something for you.’) and In re Cole [1964] 1 Ch 175 (a gift of the contents of a new family home to the wife where the husband said “It’s all yours” which established the necessary intention although the gift failed because of insufficient delivery).  I have not been able to find any instance of a parol gift being established without proof of the express words of gift.  Although Mr Chan SC submitted that in order to establish the necessary intention, there was no need to prove the express words of gift, that being merely a manifestation of the intention to give, he cited no authority for that proposition.

98.  The present case unquestionably involved a parol gift.  There was no finding of express words of gift because Madam Chin’s evidence had been rejected and none of the 1996 declarations recorded what had been said in 1985.  Nevertheless, the indisputable fact is that the testator did say something at the time.  Given the facts, apart from anything else, the subject matter of the gift had to be established because what had been handed over to Madam Chin included property which the testator had no intention of giving away, namely, at least one share in Doran.  There has to be clear evidence of what the testator intended to give away, and in my view, on the facts of the present case, that could only have been established from the words used by testator at the time.

99.  Paragraphs 2 and 3 of each of the January declarations stated as follows:

“2.       In early 1985, out of natural love and affection for my wife, Chin Lan Hong (秦蘭鳯), I transferred the Shares to her by delivery of the share certificates in respect thereof to her.

 3.       The Shares had at all times thereafter belonged to my wife, the said Chin Lan Hong and the share certificates representing the Shares had at all times thereafter been in her possession and under her control and I had no further right or interest in the Shares.”

The testator’s statement in the January declarations that he had transferred the shares by “delivery” to Madam Chin in 1985 requires closer consideration.  Although there had been a transfer of possession of a number of items of property in 1985, the change in possession related to everything that had been handed over.  Whether on Mr Chan’s primary case or his secondary case, the change in possession was not confined exclusively to property that formed the subject matter of the gift.  It could not have done so because it included the share certificate book of Doran and it was found to be the testator’s intention to retain beneficial ownership in at least one share in Doran.  Accordingly, the word “delivery” meant nothing more than giving Madam Chin possession of the shares and cannot be read as sufficient delivery for the purposes of effecting a valid gift in 1985.  Nor do I consider that the subject-matter of the gift effected in 1985 can somehow be discerned from the January declarations themselves which did not record the words used.

100.  The same applies to the other corporate documents executed at the same time as the January declarations which implemented the advice sought and obtained from Grace Fung for the protection of bearer shares and were prepared on the basis of instructions that had been given by Madam Chin/Cheung Lin Wee.

101.  For clarity, I should state that is not suggested that the testator intended to make any new gift in 1996 by the January declarations.  Those declarations were not instruments effecting transfers of property but simply pieces of evidence.  Grace Fung’s evidence is clear in this regard:

“Q.      I’m sorry, Ms Fung, but he was not about to sign gift of shares to his wife, not according to the statutory declaration, which you had prepared.  Right?

A.      It was confirmation of the gifts.

Q.      It’s a statutory declaration on its face, which is referring, apparently, to a gift made some time in early 1985?

A.      Yes.

Q.      It’s not a transfer?

A.      It’s not a transfer.

Q.      And it’s not a gift of shares in 1996?

A.      No.”

(Tr. 7 Sept. 2006, p. 111 l. 24 – p. 112 l. 6)

102.  So either an effective gift was made in 1985 or it was not.  I confess that I have considerable difficulty with the notion that the January declarations somehow perfected what had been an imperfect gift.  Mr Chan SC made reference to re Stoneham [1919] 1 Ch 149.  But I do not see how that case can assist.  That was a case where the donee had been put in possession of the chattels all of which formed the subject matter of a parol gift made subsequently.  No gift was made when the donee was put in possession.  The parol gift, which the court found had been satisfactorily established, took place much later.  The facts are therefore very different from that of present case which is not about a fresh gift being made in 1996.

103.  I now return to consider the one Doran share issued to Madam Chin on 18 March 1985.  As mentioned above, the share certificate book for Doran was amongst the contents of the suitcase.  That being so, the handing over of the suitcase could only have taken place after 18 March 1985.  In relation to Doran, it would appear that the defendants’ primary case below as in this court was that on 18 March 1985 Madam Chin became the legal and beneficial owner of one Doran share on the basis that either there had been a gift to her by the testator on 18 March 1985 or she had acquired it in her personal capacity then.  Reliance on a gift having been made on the occasion of the suitcase episode which took place subsequently would only be necessary in the event of their primary case being rejected.

104.  Madam Chin’s witness statement made no reference to her acquisition of that Doran share on 18 March 1985 as legal and beneficial owner although in her witness statement she had made specific reference to the occasion in 1985 when she had accompanied the testator to Singapore for the purpose of dealing with assets from the testator’s adopted son Cheung Theam Siew who was emigrating to Canada.  When asked about that occasion by her counsel, she replied to the effect that the testator “signed the documents in relation to Cheung Theam Siew and half of it was given to me”, apparently meaning “the things of Theam Siew”.  However she had not a clue what ‘it’ involved.

105.  It had been argued below that the presumption of advancement applied to negative any resulting trust.  Although the judge did not deal with this point in his judgment, he must have regarded it, in my view correctly, as one without substance.  It is of course for Madam Chin to establish that she is within the category of persons in whose favour a presumption of advancement would arise.  Essentially her case was that a ‘de facto’ matrimonial relationship was sufficient for the presumption to apply.  Not only was no authority cited for that proposition, it would appear to be contrary to the approach of the Court of Final Appeal in Suen Toi Lee v Yau Yee Ping [2002] 1 HKLRD 197, a case concerning valid “unions of concubinage” for the purposes of the Intestates’ Estates Ordinance.  The capacity to enter into a union of concubinage would depend on whether Chinese customary law applied to the testator and Madam Chin in the jurisdiction where they were domiciled at the relevant time i.e. 1947.  No such evidence had been adduced and no findings made in that regard.

106.  As explained in paragraph 94above, although the judge did not articulate his reasons for doing so, he must have rejected the defendants’ primary case.  In any event, the judge’s conclusion is sustainable on the basis that the evidence from Madam Chin was vague and unsatisfactory and it was open to the judge to conclude that immediately prior to the suitcase episode, Madam Chin was holding that share on a resulting trust for the testator.  Insofar as it was suggested that Madam Chin was the legal and beneficial owner because she had paid for that share, the ledger entries relied on as reflecting payment cannot establish payment as Doran had never kept any books of account.  The ledger entries were ex post facto reconstructions and, in any event, they are wrong inasmuch as Madam Chin is shown to have paid for them on 5 December 1984 when the share was not allotted to her until 18 March 1985.

107.  For the reasons set out above, I would allow the appeal on the substantive issue and I would make a declaration that the Disputed Shares form part of the Estate.

Miscellaneous factors

108.  I do not purpose to go into the judge’s conclusions on some of these factors the correctness of which has been challenged.  I express no view on those issues.  Suffice it to say that I regard the validity of the gift as the real and only issue on the substantive appeal.

The costs order

109.  The judge ordered that (1) the defendants’ costs be taxed on a party-and-party basis and be recoverable against the interests in the Estate of “the members of the Lim Bee Side” (which was defined); (2) the plaintiffs’ own costs be taxed on an indemnity basis and be recoverable against the interests in the Estate of the members of the Lim Bee Side; and (3) the Executors’ own costs be taxed on an indemnity basis and be recoverable on an indemnity basis against the Estate.

110.  The plaintiffs seek an order, in the event of the present appeal being successful, that the defendants bear the plaintiffs’ costs here and below and that the plaintiffs be indemnified by the Estate in respect of such costs that are not recoverable on a party-and-party taxation and alternatively if unsuccessful, they should be indemnified as to costs out of the Estate.  By a respondents’ notice, the Executors seek an order that the order set out in (3) above be set aside and that the Executors’ costs be paid on a party-and-party basis out of the interests in the Estate of the members of the Lim Bee Side and that they be indemnified as to any costs not recovered out of the Estate.

111.  The judge’s reasons appear in paragraph 212 of his judgment:

“212.    … in my view the Chin faction’s contentions have largely prevailed.  Even on the disputed debt, the Chin faction has long been saying that much of the debt has been time-barred and has ceased to be a practical issue.  Nonetheless, I do not think it would be fair for the Plaintiffs alone to bear the costs of this inquiry.  This is because, if the Plaintiffs had succeeded, the Lim Bee side of CKH’s family would have benefited.”

112.  Two preliminary observations need to be made.  First, in his order, the judge defined “the members of the Lim Bee Side” as meaning not only the plaintiffs (who together have an interest of 18.46% in the Estate) but also other children of the testator and Lim Bee, i.e. an adopted son Cheung Theam Siew and a daughter Cheung Poh Kam as well as the three grandsons of a deceased adopted son all of whom are beneficiaries under the testator’s Will.  Together they are entitled to 24/390 shares or approximately 6.15% of the Estate.  They have an interest in the litigation but only insofar as they are beneficiaries under the Will and that is all.  They were not parties to the action.  Second, the term “the Chin faction” was used in the judgment as meaning the testator’s household by Madam Chin, apparently including Madam Chin’s three daughters who were not parties to the action but, unlike another son of Madam Chin who was also not a party to the action, they were not said to have any beneficial interest in Four Pillars or Megabest.  Their interest is therefore identical to that of the members of the Lim Bee Side.

113.  The judge appears to have treated the litigation as hostile litigation and applied the general rule that the losing party should pay.  But who was the real losing party?

114.  The starting point must be the 2004 Order.  As explained in paragraph 83, orders for relief against the Executors such as an inquiry into any aspect of the administration of an Estate are not lightly granted.  A beneficiary seeking relief must establish at least a prima facie case.  In the present case, the application was initially opposed and evidence had been filed by the Executors to that end.  If the evidence filed had adequately addressed the beneficiaries’ complaints (and it included the affirmation disclosing the corporate documents of Worldcup and Doran), the summons would have been dismissed and no relief granted.  That was not the case.  If by the time of the hearing in June 2005, having regard to the materials then before the court, the judge was satisfied that the evidence adduced was such as to render all or part of the inquiry ordered unnecessary, a further order setting it aside or varying it would have been made in 2005.  It was not.  Nor, for that matter, was any application made then or subsequently on the basis that the information provided pursuant to the 2004 Order and/or in the related proceedings had adequately addressed one or more of the matters into which the inquiry had been ordered.  In fact, the 2005 Order sought to implement paragraphs 1 and 6 of the 2004 Order and that could only have been on the basis that the fundamentals had not changed since the 2004 Order was made.

115.  That the Executors had a conflicting interest is indisputable.  As noted in paragraph 81 above, even the Executors agreed in January 2004 that an inquiry was desirable “for the sake of due administration” of the Estate.  Given that the fiduciary conflict rule is an inflexible rule, the Executors were conflicted out of dealing with the claims of the defendants and, on any view, could not have conducted the inquiry ordered.  Instead, someone else had to perform their role to look after the interests of the Estate.  Thus the action the plaintiffs were ordered to commence was in substance a derivative action by beneficiaries.  See Lewin on Trusts, 17^th Ed. at 43-05.

116.  Therefore, when analysed and looked at objectively, the contest was, as regards the Disputed Shares, between the Estate on the one hand and Four Pillars and Megabest on the other hand and, as regards the Disputed Debts, between the Estate on the one hand and the Liberian companies on the other.  Although the proceedings were hostile, they were not between one group of beneficiaries against another group of beneficiaries.  Had the plaintiffs been successful, the Estate and thus all the beneficiaries under the Will would have benefited.  Not only would the members of the Lim Bee Side have benefited, but also the Chin faction, including the three daughters of Madam Chin.  The only reason why such an outcome would not have resulted in a net benefit to Madam Chin and her three sons would be because of their personal interest in the defendants who would be the losing party in that scenario.  So instead of owning 100% of the Disputed Shares, they would only be owning 69.23%.  The last sentence of paragraph 212 of the judgment is therefore wrong if what was meant was that the Lim Bee Side and no one else would have benefited.

117.  For my part, I have no hesitation in concluding that the present case falls squarely within the second class of cases set out in the judgment of Kekewich J in In re Buckton [1907] Ch 406 at 414-415:

“In these cases it is admitted on all hands, or it is apparent from the proceedings, that although the application is made, not by trustees (who are respondents), but by some of the beneficiaries, yet it is made by reason of some difficulty of construction, or administration, which would have justified an application by the trustees, and it is not made by them only because, for some reason or other, a different course has been deemed more convenient.  To cases of this class I extend the operation of the same rule as is observed in cases of the first class.  The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate regarded as a whole.”

Here a difficulty in administration had arisen.  The Executors were conflicted out from dealing with the matters which formed the subject matter of the inquiry, irrespective of fault or misconduct.  By court order, their responsibilities were being discharged by the plaintiffs for and on behalf of the Estate as a whole.

118.  It may be that the judge viewed the proceedings as hostile litigation between beneficiary and beneficiary because of his own categorisation of the beneficiaries under the Will as falling into two camps.  The court has not been shown anything that would warrant that categorisation.  The fact that they ‘belong’ to one or other of the two households in the sense that they are the offspring (including adopted children) of different mothers is irrelevant.  What mattered was the nature of the interest of the parties in the litigation: whether it was purely qua beneficiary or whether in addition to that there was any personal interest involved.  The daughters of Madam Chin who, according to the judge’s categorization, are part of the Chin faction stood to gain as much as the members of the Lim Bee Side.

119.  In my view, the costs order made in favour of the defendants was wrong in principle.  The litigation was for the benefit of the Estate as a whole.  On the judge’s ruling, the loser was the Estate and not the members of the Lim Bee Side.

120.  In any event I can see no legal basis upon which nonparties to this action, namely, the members of the Lim Bee Side other than the plaintiffs, can be visited with a costs order.  They, like Madam Chin’s daughters stood on the sidelines with no active involvement in the proceedings.  They were interested only qua beneficiary.  As a matter of principle, the costs order against them is unsustainable.

121.  Ms Wong SC who appeared for the Executors submitted that a trustee would only be allowed to charge his costs of a failed action against the trust estate without a prior Beddoe order if the court could conclude that it would have authorised the action had it been applied for and, further, that no court would have authorised the action below.  But in In re Beddoe [1893] 1 Ch 547 what Lindley LJ was addressing (at p. 557) was a case where the action had been commenced or defended “without the prior sanction of the Court” which is not the case here because the plaintiffs were actually ordered to commence the action.  Further, even in a case where the court’s prior sanction had not been obtained, there was still no absolute rule that he would not be allowed to charge those costs.  The usual rule would not apply if there were “very exceptional circumstances”.  This was just such a case.

122.  I take the view that the inquiry undertaken had been sanctioned by the court and, in any event, the facts were wholly exceptional such as would warrant the application of the exception to the usual rule.

The Disputed Debts

123.  I now turn to deal with the question of the costs incurred in relation to the Disputed Debts.  In paragraph 40 of his Reasons for Judgment dated 7 June 2005 the judge said that to the extent that the debts were no longer disputed there was nothing further to investigate on that score.  If so, I find it inexplicable that he did not vary the 2004 Order by eliminating the Disputed Debts from the inquiry.  As shown in paragraph 127 below, as at the date of the 2005 Order, at least $11.33 million would not have been time-barred.  In those circumstances, I do not see how the judge could have dispensed with the inquiry into the Disputed Debts.

124.  One comes to the judge’s findings after the trial.  The Liberian companies themselves did not maintain accounting records but the subsidiaries did, after a fashion.  The judge found that in order to determine how much the testator owed any of the Liberian companies and its subsidiaries, “it would at least be necessary to strip out all transactions in which the testator’s name was merely used as a dummy cipher”.  At paragraphs 96-97 of his judgment, the judge said:

“96.      Here I agree with Mr. Grimsdick that the use of the accounting intermediate system to record transactions does not give a true and fair view of a given company’s affairs.  In particular, the system might show a company as being owed money by CKH whereas in actual fact money would be owing by Y.

97.      That might possibly not matter if the entire CKH group (including the Liberian companies and their subsidiaries) were beneficially owned (not just controlled) by the same person.  However, what happens if (say) an outside investor wishes to acquire an interest within a group company.  The intending purchaser would then rely at his peril on the books of his target company.”

The judge further found that since the incorporation of the Liberian companies, the testator had been drawing monies from their subsidiaries “as and when he wished” and “continued to do so until just before his death”.  The judge would not have been able to make these findings absent the forensic exercise undertaken by the plaintiffs’ expert.

125.  The judge found the amount due from the Estate to be substantially less than the amount originally claimed because the Liberian companies had failed to strip out all relevant accounting intermediary transactions.  By the time of the trial even the much reduced amount (just under 10%) had become time-barred and was thus unenforceable.  Although at the hearing below Mr Chan had stated that the defendants “do not intend to claim any amount due” and the judge then made reference to this being a “waiver” by the Chin faction that would not appear to be correct.  It cannot be a question of “waiver” since that would mean foregoing something to which one had a legal entitlement.  Here, waiver or no, the amounts said to be due were no longer recoverable.

126.  It was also said that the Disputed Debts were a non-issue.  The thrust of that submission was that when the writ was issued, very little of the $118 million remained owing to the creditors.  It was said that because the Liberian companies were prepared to accept the limitation point, only about $11.33 million was left outstanding and given the waiver and set off proposal mentioned in paragraph 86 above, what was left was only $2.665 million odd and by the time of the trial even these had become time-barred.  So, it was said, the inquiry into the Disputed Debts was a waste of time.

127.  That analysis is not correct.  First, there were strings attached to the so-called offer to waive made in May 2005: it was subject to a set-off of the $8.665 million due to the Estate by way of a dividend payment.  Second, the Liberian companies could have withdrawn the offer at any time because it was madewithout consideration.  Third, the time bar in respect of the $11.33 million only operated in stages between April and August 2006.  As at 9 April 2006, $11.33 million of the amount claimed still remained outstanding.  As the trial itself took place in early September 2006, the bulk of the costs of the forensic accountant would thus already have been incurred. 

128.  For the reasons stated above, I would allow the plaintiffs’ appeal on the costs order and dismiss the Executors’ appeal.

Conclusion

129.  In view of the conclusion I have reached on both issues, I would order that paragraphs 5.1 and 5.2 of the order dated 22 September 2006 be set aside, that the plaintiffs’ costs here and below be borne by Four Pillars and Megabest on a party-and-party basis,that the plaintiffs be indemnified out of the Estate against such costs as cannot be recovered on a party-and-party taxation and that the Executors’ own costs be taxed on an indemnity basis and be recoverable against the Estate.

Hon Sakhrani J:

130.  I have had the benefit of reading the judgments of Rogers VP and Le Pichon JA in draft.  I wholly agree with the judgment of Rogers VP and the reasons given by him.  I agree with Rogers VP that orders should be made as set out in paragraph 60 to 62 of his judgment.  There is nothing that I can usefully add.

Hon Rogers VP:

131.  There will therefore be an order in terms of paragraphs of 60 to 62 hereinabove.