LI MIAOLI AND OTHERS v. CHAN SHU FONG AND ANOTHER

HCA 845/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 845 OF 2011

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(by original action)

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(by counterclaim)

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JUDGMENT
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INTRODUCTION

1.  The late Chan Choi (陳彩), alias Chan Choy and Chan To Leung (陳渡良), (the “Father”), was a native of Toishan, Guangdong Province, China; he was born on 9 January 1881. 

2.  The late Chan Shee Yuen (“Shee Yuen”), the late Chan Shu Chun (“Shu Chun”), the 3^rd Plaintiff (“Shu Nam”) and the 1^st Defendant (“Shu Fong”) were sons of the Father.  Shee Yuen died in 2005 and Shu Chun died in 2013.

3.  The late Chan Sek Lam (“Sek Lam”) was the son of Shee Yuen and Li Miaoli is the widow of Sek Lam and personal representative of the estate of Sek Lam.

4.  Lee So Ying is the widow of Shu Chun and personal representative of the estate of Shu Chun.

5.  In this action, the estate of Shee Yuen, the estate of Shu Chun and Sek Lam claim against Shu Fong for their interest in 150 shares (“the Shares”) of the 2^nd Defendant (“Luk Hoi Tong”) registered under the name of the Father.  They also claim against Shu Fong for the return of the dividends in respect of the Shares received by him in the period between 1991 and 2002 amounting to HK$994,500.00.

6.  Apart from the aforementioned four sons, the Father had 3 other sons, namely the late Chan Shu Wing (“Shu Wing”), Chan Shu Tak (“Shu Tak”) and the late Chan Shu Yuk (“Shu Yuk”).  Shu Wing died in about 1992 and Shu Yuk died in about 1949.

7.  The Father married his kit-fat wife Chu Shi in about 1910 at Toishan.  Shu Wing and Shu Tak were born out of this marriage.  Chu Shi died in about 1928.  

8.  In about 1924 or 26, the Father married Tang Ngan Fung (鄧銀鳳) (the “Mother”), or took her as a concubine.  They gave birth to the other 5 sons. The Mother died in 1994.

9.  In the Re-Amended Statement of Claim, the Plaintiffs pray also for the relief of a grant de bonis non including the Shares in respect of the estate of the Father. However, Mr Wong, counsel for the Plaintiffs, indicated the withdrawal of this claim in his closing submission.  Thus, the Plaintiffs are now seeking:

(a) A Declaration that the Shares belong solely to the estate of the Father; and

(b) Shu Fong do return the trust money being dividends of the Shares received between 1991 to 2002 in the sum of HK$994,500.00 to the Plaintiffs for distribution to the beneficiaries.

10.  The Defence of Shu Fong is that the Father had in 1959 given the Shares to Shu Fong, or alternatively, assured Shu Fong that the Shares will be given as a gift to him and in reliance of the Father’s assurance, Shu Fong suffered detriments in maintaining the Mother for life and supporting his younger brothers to their independence.  Shu Fong’s case is that this gives rise to a proprietary estoppel in his favour. And he counterclaims for:

(a) A Declaration that he is the sole beneficial owner of the Shares; and

(b) A Declaration that the Shares are to be registered in his sole name.

11.  The 2^nd Defendant has no interest in the dispute and has been indifferent to the Plaintiffs’ claims.  It did not take part in the present proceedings.

ISSUES

12.  As there is no dispute that the Shares are registered in the Father’s name and Shu Fong had received the subject dividends, the sole issue in this case is whether there was a gift of the Shares to Shu Fong by the Father or any proprietary estoppel exists, as alleged.

13.  The burden is on Shu Fong to prove his case.

HCA 93/2002

14.  Much has been referred to by the parties a related action tried before Deputy High Court Judge To (now To J) in 2006.

15.  The action was took out by Shee Yuen in 2002 (HCA 93/2002) against Shu Fong in respect of a piece of land (“the Property”) in Tuen Mun succeeded by Shu Fong from the Father. 

16.  Upon the death of the Father in 1960, Shu Fong filed an application with the District Office for succession to the Property.  The application was approved by the District Officer and Shu Fong became the registered owner of the Property.  By a deed of gift dated 13 October 1981 (the “1981 Deed of Gift”), Shu Fong assigned three-fifths of the interest in the Property to each of his siblings (Shee Yuen, Shu Chun and Shu Nam), retaining two-fifths of the interest to himself.

17.  In the action, Shee Yuen claimed against Shu Fong, inter alia, (1) damages for loss of use of the Property; (2) an order for an account of and enquiries into Shee Yuen’s share in the rents, profits or other income arising or derived from the Property since July 1998; (3) an order for the partition of the Property or alternatively, an order for sale; and (4) an order restraining Shu Fong from ousting Shee Yuen from the Property.  Shu Fong counterclaimed for a declaration that Shee Yuen held his share of the interest in the Property as trustee for Shu Fong.

18.  Shu Fong’s case was that, as described by the learned Judge in his judgment[1], the Property was purchased by Shu Fong with his own money, but as he was then not of full age and capacity the Father purchased and held the Property under a resulting trust for him.  Thus, Shu Fong acquired title to the Property by the 1960 Succession in his own right as the beneficial owner of the Property for having provided the funds for its purchase.  He then assigned one fifth interest in the Property to each of his siblings under the 1981 Deed of Gift at their request for the purpose of enabling them to obtain resettlement or compensation in the event of a possible resumption of the Property by the Government and on their representation that they would not claim any legal interest to the Property.  Hence, Shee Yuen as well as the other siblings each held one-fifth of the interest in the Property on trust for him.

19.  The learned Judge rejected Shu Fong’s evidence as fabrication and found that the Property was purchased by the Father with the Father’s own money.  In arriving at the conclusion the learned Judge specifically rejected Shu Fong’s allegation that the Father was impecunious and dependent on Shu Fong for his living.

20.  The learned Judge’s findings were confirmed by the Court of Appeal on Shu Fong’s appeal.

21.  In the present case, notwithstanding the findings of the learned Judge in HCA 93/2002, it is still Shu Fong’s case that the Father has been impecunious and the whole family was supported solely by Shu Fong at the material times.

EVIDENCE

Plaintiffs

22.  Li Miaoli and Shu Nam gave evidence.  Shu Nam also confirmed the contents of the witness statement of Shu Chun filed for the purpose of these proceedings.

23.  Li Miaoli’s evidence can be of little assistance as she married to Sek Lam in 1973 and moved to Hong Kong from ToiShan only in 2005.

24.  In her witness statement, Ms Li stated that her late husband, Sek Lam, obtained the Letter of Probate to administer his father Shee Yuen’s estate but he could not get the grant de bonis non for the Shares because of the objection of Shu Fong.

25.  Shu Chun’s witness statement was signed on 5 March 2013.  In his statement, Shu Chun stated that the Father died intestate on 6 February 1960 in Hong Kong.  The Father’s estate consisted of the Property and the Shares.  There were 7 beneficiaries to the Father’s estate namely, the Mother, Shu Wing, Shu Tak, Shee Yuen, Shu Fong, Shu Chun, and Shu Nam.

26.  In 2004, Shee Yuen obtained Probate to administer the Father’s estate.  However, Shee Yuen died testate on 30 April 2005 and Sek Lam was appointed administrator of Shee Yuen’s estate under Shee Yuen’s will, including the right to administer the Father’s estate.

27.  The Father migrated to Hong Kong from Toishan in 1953.  In Shu Chun’s evidence, the reason why the Father came to Hong Kong was that the Father had once deposited a considerable sum of money in the Hong Kong Bank (“HSBC”).  In or about 1949, the Father used part of the money (HK$40,000) deposited in HSBC to purchase a 2-storey commercial building in Toishan.  At the time when the Father migrated to Hong Kong, there was about US$4,800 in the Father’s HSBC account. 

28.  In Shu Chun’s evidence, the family’s expenses were paid out of the Father’s savings.  It was never the case that Shu Fong supported the whole family.  In fact, Shu Fong was only 16 or 17 years old when he came to Hong Kong in 1954 and he became an apprentice in a garment factory only in 1958. 

29.  Before the death of the Father, the Father paid all the dividends of the Shares to the Mother for her savings and also family expenses.  After the Father’s death, Shu Fong brought with him the Father’s chop and the dividend record book to collect dividends from the 2^nd Defendant.  Before the Mother’s death in 1991, Shu Fong continued paying all the dividends collected to the Mother.

30.  Shu Nam gave evidence in court.  He was born in 1951 and therefore, his evidence is not of much assistance regarding what happened in the 1950s.  But he remembers when he was 8 or 10 years old he heard from the Mother that the Father has got money in his bank account in Hong Kong.  According to Shu Nam, the expenses incurred for his marriage in 1974 was paid by the Mother and the rent for his matrimonial home was paid also by the Mother.  In the period between 1974 until 1990, the Mother distributed the dividends to the brothers every year.

31.  Shu Nam rejected the suggestion that Shu Fong was the one to support the family.  He added that the family has savings and incomes (rent and dividend) and Shu Fong was very young when he arrived Hong Kong and thus not in a position to support the family.

1^st Defendant

32.  In his evidence, Shu Fong gave an account similar to his case in HCA 93/2002.

33.  In or about 1910, the Father left Toishan and worked as a laundryman in the United States.  In about 1950, the Father, who was then 69 years old, retired and returned to Toishan.  By that time, the Father had accumulated considerable wealth and purchased some properties (3 houses and farmland) in Toishan, partly for his family’s own residing purpose and partly for rental incomes. Before the Father returned to Toishan, he had also acquired the Shares.

34.  Pausing here, Shu Fong’s evidence that the Shares were acquired by the Father before his return to Toishan is contradictory to the findings of To J in HCA 93/2002. Mr Koo, counsel for Shu Fong, submitted that the evidence given by Shu Chun in HCA 93/2002 was inconsistent with To J’s findings.  According to Shu Chun’s evidence in the action, said Mr Koo, letters were sent to Toishan to the Father concerning distribution of dividends at the time when the Father was still in Toishan.

35.  In Shu Fong’s evidence, in about 1952, due to the “land reform” in China, most of the Father’s properties (2 houses and farmlands) in Toishan were confiscated. The Father’s family was classified as “landowners” and the Mother was subsequently sent for “labour reform”.  At that time, the Father was already 71 years old.  Shee Yuen, who married in about 1948, had to look after his own family (his wife and children), Shu Chun and Shu Nam were only 12 and 1 year old.  Accordingly, Shu Fong, who was then aged about 15, became the key person responsible for working at the farm for the family as well as delivering meals to the Mother. 

36.  In about 1953, the Father fled from Toishan to Guangzhou, and eventually to Hong Kong.  He shared with his clansmen a rented “partitioned room” (板間房) in Sham Shui Po.  In about April 1954, Shu Fong came from Toishan to live together with the Father in Hong Kong.  According to Shu Fong, the Father wrote to him requesting him to come to Hong Kong to work and to support his living.  Pursuant to the Father’s instruction, Shu Fong came to Hong Kong and went to the Father’s dwelling in Sham Shui Po, where the Father shared with his two clansmen the rented partitioned room.  Thereafter, Shu Fong, together with the Father and the two clansmen, resided at the rented partitioned room for about two months.  As described by Shu Fong, the condition of the rented partitioned room was poor and crowded, he had to sleep underneath the bed whilst the Father and the two clansmen (three together) slept on the bed, and there was water dripping from ceiling when raining.  The rent for the partitioned room was HK$60, and each of them shared HK$20.

37.  In Shu Fong’s evidence, through the introduction of Lee Foon, a clansman, Shu Fong found some farmland in Tuen Mun, and he then, together with the Father, moved from Sham Shui Po to live in Tuen Mun, where Shu Fong started running a farm.  Around that time, Shu Fong was 17 years old, whilst the Father was already 73 years old.  Shu Fong alone built up the farm and started rearing chicken and pigs.  In 1956, through the selling of farm products, Shu Fong was able to pay about HK$500 for Shu Nam and the Mother to come from Toishan to live in Hong Kong.  At that time, Shu Nam was only about 5 or 6 years old. Later, Shu Nam went to primary school.  In order to send Shu Nam to school, donation (HK$100 or HK$50) was made to the school; and the school fee was about HK$4 per month.  In 1958, as a result of Shu Fong’s efforts and payment of about HK$500, Shu Chun also came from Toishan to Hong Kong.  Since then, with Shu Fong’s financial supports, Shu Chun continued his study, and eventually completed his university education in 1966.

38.  In 1965, Shu Fong (who was then working as a master in knitting) brought Shu Nam, who was then 14 years old, to work as an apprentice at the factory in To Kwa Wan.  Shu Fong provided and/or arranged Shu Nam with accommodation and meals and let Shu Nam resided together with his own family free of charge, save that Shu Nam would share some of the living expenses the amount of which was decided by Shu Nam according to his own earning or financial condition.

39.  In 1966, Shu Chun, who was then 26 years old and had just completed university education, got married.  Shu Fong paid HK$3,000 being expenses for Shu Chun’s wedding banquet. In 1974 or 1975, Shu Nam, who was then 23 years old and residing at Shu Fong’s flat, got married, and therefore needed to rent a new place on his own.  Shu Fong, at Shu Nam’s request, passed on to Shu Nam the bank passbook (having HK$3,600) of his bank account opened at the Standard Chartered Bank and his signature chop for Shu Nam to go to the bank to withdraw whatever amount in the account.  Shu Nam eventually withdrew a total sum of HK$3,000.

40.  The Father died in February 1960 and Shu Fong paid all the funeral expenses.  Since after the death of the Father, Shu Fong had taken care of the living of the Mother for her life (until 1994), and his two younger brothers, Shu Chun and Shu Nam (until they got married in 1966 and 1974 or 1975 respectively).  Shu Fong paid all charges for the Mother’s elderly home (from 1991 to 1994) and funeral expenses.

41.  According to Shu Fong, in about October 1959 (when the Father was already 78 years old, and about 4 months prior to his death), the Father brought Shu Fong to HSBC in Central to take away all his belongings (his US passport, the Dividend Collection Book for the Shares and his signature chop for collecting dividends) kept in the safe deposit box, and close the box.  When the Father took out the said items, the Father said to Shu Fong that though the Shares did not worth much, he wanted to gift the Shares to Shu Fong, as a “gratuity” for Shu Fong’s contributions to the family and entrusted Shu Fong with the duty to continue taking care of the Mother for her life, Shu Chun and Shu Nam until they have their own families.  Further, on the same day, the Father brought Shu Fong to the office of the 2^nd Defendant with the view to effecting transfer of the Shares to Shu Fong. Nevertheless, the 2^nd Defendant refused to effect change of the registered name of the Shares on the grounds that the Father failed to produce the original share certificate of the Shares and the Father’s name recorded on the Dividend Collection Book was different from that shown on his document of identity.  According to Shu Fong, he had given all dividends received to the Mother, pursuant to the Father’s said request on him to look after the Mother, as living maintenance for the Mother, until the Mother’s death.

DISCUSSION ON THE FACTS

42.  The crucial factual issue in the present case is whether the Father did attempt to give the Shares to Shu Fong as alleged by Shu Fong.  If it has not happened then Shu Fong can assert no legal or equitable title to the Shares and will have to account for the dividends he received therefrom.

43.  On this point, this court should consider whether Shu Fong’s evidence is to be believed on balance.

44.  The parties have a major difference in their evidence concerning whether the Father was impecunious when and after he fled to Hong Kong from Toishan.  This is an important issue in that Shu Fong founds his case on the proposition that the whole family relied on him for living at the material times.

45.  This particular issue has been canvassed on by Deputy High Court Judge To in HCA 93/2002.  In the action, Shu Fong’s case was that he was the one who provided the money to purchase the Property and the Property was registered under the Father’s name only because Shu Fong was not of full age at the time of the purchase.

46.  In arriving at his decision learned Judge has the following to say in his judgment[2]:

“42. I now turn to the crucial issue of whether the Defendant provided the purchase money for the Property. The Defendant had the burden of proof. Before analysing the Defendant’s evidence, it should be recalled that the setting was that the Father was a retiree from the United States having worked to the end of his carrier as a carpenter. He had saved some money which bought him some properties and farmland in Toishan and some shares in Luk Hoi Tung Company Limited. He fled to Hong Kong from Communist rule in 1954 when he was 73 years old. The Defendant arrived Hong Kong to join the Father later that year. He was then seventeen years old.

43. In a nutshell, the Defendant’s case is that after he moved to Tuen Mun with his Father, he came to know Yeung Shing and Siu To Wing who gave him, a total stranger of seventeen, land to farm with. He was given seeds to grow vegetables by his neighbours and credit by suppliers to buy animal feed for his poultry and pigs. He was able to start a very profitable farming business with absolutely no capital and which earned him $3,000 to pay for the Property. He gave no credit to his Father, saying that the Father had no money, was suffering from rheumatism and was too old and feeble even to assist him in his farming. He said that not only he supported his aged parents, he provided food and shelter for the entire family, including the education of his two younger siblings. But when the Defendant’s evidence is analysed against the background at the material time, it is plainly incredible.

44. In contrast, the Father had undoubtedly been a rich retiree with substantial saving, at least at some stage. There was no evidence how much, if any, the Father had brought with him when he fled from Toishan. However, there was no dispute that the Father later bought some shares in Luk Hoi Tung Company Limited. The Defendant tried to play down the significance of those shares by saying that the shares had been given to him by his Father and that there were only a few shares. He said his Father gave him the shares because of his contribution to the family. The Father took him to the company office and transferred the shares to him. However, when asked about the dividend he last received, he said the company refused to pay him dividend because he could not produce the necessary probate documents. This is utterly inconsistent with his earlier evidence which show that he had something to hide and was making up his evidence as he went along. He then explained that when the Father took him to the company to transfer the shares to him, the staff of the company advised that there was no need transfer the shares and he could collect the dividend by showing the passbook to the company. Again, this is incredible. On the other hand, Chan Shu Chun’s evidence is that the Father wrote from Hong Kong back home and informed the family that he had bought shares in Luk Hoi Tung Company Limited and received dividends. Chan Shu Chun said that the Defendant gave him dividends in sums of $2,000 to $4,000 two or three times in about 1987 and 1988. The Defendant denied and said he only gave some petty cash of a hundred dollars or so to his brothers for the new year and did not give them dividends from the shares as the shares were his. I find the Defendant was not telling the truth about the shares. I accept Chan Shu Chun’s evidence about the dividends and about what the Father had told the family in his letter from Hong Kong. Though there is no evidence about the number of shares the Father bought, the quantity of shares was not insubstantial in view of the dividend in 1987 and 1988. The irresistible inference must be that the Father had either brought some money with him when he fled Toishan or he had left some US Dollars in his safe deposit box in Hong Kong And Shanghai Bank when he returned to Toishan en route Hong Kong as he had told his children. Whatever was the truth, the Father was not as unresourceful as the Defendant would have me to believe.

45. The Defendant’s story about his profit from farming is too good to be true. He said he made $3,000 in two years to buy the Property. That was a huge sum of money in 1957. According to the unchallenged evidence of Chan Shee Yuen, he earned $15 per month as a farmer in 1957 and $20 to $40 per month as a factory worker in 1960s. Thus the $3,000 which the Defendant allegedly made in two years was as much as 200 month’s wages for a farm worker. While luck and entrepreneurial success may go hand in hand, it is just too incredible that two strangers, Fung Yuen and Siu To Wing who only came to know the Defendant shortly would have given this young stranger of seventeen years of age three plots of land to farm with free of rent, instead of employing him to farm the land just like the Plaintiff was being employed to farm and raise pigs for another villager. It is also incredible that three suppliers could have supplied the Plaintiff, again a total stranger, animal feed on credit without any security to the extent of $2,000 to $3,000 in those days, which was enough to buy the Property or enough to pay 200 workers for one month.

46. The Defendant was confused in his evidence when accounting how he paid the purchase price for the Property. Initially, his evidence was that he borrowed $3,000 to purchase the Property from a Mr Tang and two other suppliers who sold him animal feed. Then he changed his evidence and said he meant that he purchased animal feed on credit. He was asked questions in Punti dialect which he was very fluent with. The questions asked were straightforward and clear. The two matters were unrelated and he could not have mixed them up. I think the confusion was not due to his inability to understand the questions asked of him or to his difficulties in expressing himself but because he was making up his evidence.

47. If the Property was purchased by the Defendant in the Father’s name because the Defendant was underage, it is surprising that the Defendant did not request the Father to transfer the Property back to him soon after he came of age two years later.  There was no reason why the Father would have refused as he must realize he was approaching the last of his days then.  It is also incredible that neither the Father nor the Defendant had prepared a memorandum or note of some sort as evidence of this fact in view of the old age of the Father.  It is also surprising that the Father would not have informed the other siblings that it was the Defendant’s house that they were living.  There was no reason for the Father or the Defendant to be secretive about the Defendant having paid the purchase price for the Property if that was the truth.  The Defendant said his Mother had always told the siblings that he was the true owner.  But this evidence was contradicted by Chan Shu Chun whose evidence was that it was through the Mother’s intervention that the Defendant agreed to assign one-fifth share of the Property to each of the siblings.  I consider Chan Shu Chun’s evidence closer to the truth than the Defendant’s.”

47.  Shu Fong told the same story about his farming business before Deputy High Court Judge To but the learned Judge rejected his story as simply incredible.  The learned Judge found it unbelievable that suppliers could have supplied Shu Fong animal feed on credit without any security to the extent of $2,000 to $3,000.  In those days, the amount was enough to buy the Property or enough to pay 200 workers for one month.

48.  In rejecting Shu Fong’s version the learned Judge has accepted that the Property was purchased with the Father’s own money.  That is, the Father was not impecunious at least to the extent that he has money to purchase the Property.

49.  This is directly contradictory to Shu Fong’s version, in the present case, that the Father and the family were so unresourceful as to rely totally on Shu Fong for their livings.

50.  Quite apart from the question of issue estoppel which will be discussed further at the later part of this judgment, given the fact that the Father purchased the Property in 1957, Shu Fong’s case that the Father was impecunious when he came to Hong Kong is inherently improbable.

51.  Although it is Mr Koo’s submission that many aspects of the learned Judge’s findings in HCA 93/2002 do not bind this court, he did not venture to suggest that I can deviate from the learned Judge’s finding that it was the Father who purchased the Property.  And it is not the case of Shu Fong in the present case.

52.  Mr Koo submitted that Shu Fong’s said account of the gift from the Father is not only reasonable and logical, but also highly probable.  He said there is ample evidence to prove that Shu Fong did make substantial contribution to the family from 1954 to 1959. In October 1959, both Shu Chun and Shu Nam were still studying at school, whilst Shu Fong had been the sole breadwinner for the entire family for years.  At that time, the Father, who was then 78 years old, must be worrying the future living of the Mother [aged 53], as well as Shu Chun [aged 19] and Shu Nam [aged 8], and therefore needed to do something to ensure and/or even to encourage Shu Fong to continue taking care of the Mother, Shu Chun and Shu Nam after his death.  Though there was no evidence regarding the value of the Shares, they should not worth much in 1959.  It is therefore not unlikely for the Father to have simply given all the Shares to Shu Fong as gratuity and in return of Shu Fong’s future taking care of the family, instead of leaving the Shares to be shared equally by all his children.  It was indeed recorded on the Dividend Collection Book the Father’s name as Chan To Leung, which was different from his another name, Chan Choi, as shown on his document of identity.  Since then, Shu Fong has indeed been permitted by the 2^nd Defendant to collect the dividends, even though it was known to them that he was not the Father himself.  It is not disputed that since the death of the Father, all dividends were collected by Shu Fong alone, and during the years from 1960 to 1990, all dividends were given by Shu Fong to the Mother.  Shu Fong had given all dividends to the Mother, pursuant to the Father’s said request on him to look after the Mother, as living maintenance for the Mother. 

53.  It may be true that Shu Fong has some contributions to the family, financially or otherwise.  However, whether the whole family relied on Shu Fong for their livings is another thing.  If the Father can afford to purchase the Property in 1957, there is no reason why he would leave the whole burden of supporting the family to Shu Fong alone.

54.  Besides, if Shu Fong was the only one in the family being resourceful and he all along shouldered the expenses of the whole family, and the value of the Shares were so insignificant as suggested by Mr Koo, while it would be understandable that the Father may offer the Shares to Shu Fong as a matter of gratitude, it would be, in my view, very strange that the Father and son would treat the Shares as some kind of consideration in return for Shu Fong’s promise to take care of the Mother and family in the future.

55.  Shu Fong paid all the dividends received to the Mother until her death and the Mother distributed the same to her sons.  This is also inconsistent with the allegation that the Shares has already been given to Shu Fong. 

56.  In his submission, Mr Koo criticized the evidence of Shu Chun and Shu Nam as unreliable.  He said that since the death of the Father, all the brothers (or at the least Shu Nam being the only brother giving evidence at the hearing) had full knowledge of the fact that the dividend was collected by Shu Fong.  However, Shu Nam and Shu Chun dishonestly confirmed in the witness statement of Shu Chun that Shu Fong has, since the death of the Father and without the consent or knowledge of other brothers, solely seized and utilized the Father’s signature chop and Dividend Collection Book to appropriate all of the dividends.  Besides, Shu Nam alleged that there was distribution of the dividends among brothers at the end of each year but there was no mention of any distribution of dividends in the plaintiffs’ pleadings or witness statements.

57.  I do not think it is fair to criticize Shu Chun or Shu Nam as dishonest.  Knowing Shu Fong collect the dividends does not necessarily mean they know him using the Father’s chop. But most importantly is that, even if this part of the evidence of Shu Chun and Shu Nam is not reliable, it does not make the evidence of Shu Fong more credible.

58.  Mr Wong, counsel for the Plaintiffs, in his written submission listed out various aspects of Shu Fong’s evidence being inconsistent with his evidence given in HCA 93/2002. Just to name a few examples:

(i) Shu Fong’s whole story of the Father giving the Shares to him in return for his continue maintaining the livings of the family has not been mentioned at all in HCA 93/2002;

(ii) Shu Fong gave details as to the amount of rent and period of tenancy regarding Yeung Shing’s land leased to him but in HCA 93/2002 he said that it was free; and

(iii) Shu Fong said Lee Foon offered him a piece of land to farm after knowing him for 2 months but in HCA 93/2002 he said it was only 20 days.

59.  As can be seen from the judgment of Deputy Judge To, initially, Shu Fong’s case regarding the Shares in HCA 93/2002 was that “his Father gave him the shares because of his contribution to the family.  The Father took him to the company office and transferred the shares to him.”  But when Shu Fong was questioned about when was the last time he received the dividends, he said “the company refused to pay him dividend because he could not produce the necessary probate documents” which is, according to the learned judge, “utterly inconsistent with his earlier evidence which show that he had something to hide and was making up his evidence as he went along.”  Shu Fong then explained that when the Father took him to the company to transfer the shares to him, the staff of the company advised that there was no need transfer the shares and he could collect the dividend by showing the passbook to the company.  Shu Fong did not tell the learned Judge about the issue of the different names of the Father and that the Shares were given to him in return for his future support to the Mother and the family.

60.  I find the story of Shu Fong incredible and I do not believe in what he said in his evidence, in particular, that he was the sole person to support the livings of the whole family and the Father intended to give the Shares to him, in return for his promise to continue support the Mother and family or otherwise.

ISSUE ESTOPPEL

61.  Mr Koo submitted that none of the findings in HCA 93/2002 is relevant to the present proceedings and binding upon this court.

62.  As submitted by Mr Koo, the application of the doctrine of issue estoppel has been discussed in Spencer Bower and Handley, Res Judicata[3] as follows:

“8.01 A decision will create an issue estoppel if it determined an issue in a cause of action as an essential step in its reasoning. Issue estoppel applies to fundamental issues determined in an earlier proceeding which formed the basis of the judgment.

…

8.23 An express decision will not necessarily create an issue estoppel. Only determinations which are necessary for the decision, and fundamental to it, will do so. Other determinations, however positive, do not.

8.24 The difficulty said Dixon J[4] ‘is to distinguish the matters fundamental or cardinal to the prior decision of judgment, or necessarily involved in it as its legal justification or foundation, from matters which, even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or groundwork of the judgment.’ The question is whether the determination was so fundamental that the decision cannot stand without it. Dixon J says that there is a further test viz: Whether the determination is the ‘immediate foundation’ of the decision or ‘no more than part of the reasoning supporting the conclusion’ ”.

63.  From the part of the judgment of Deputy Judge To I cited under paragraph 46 above, the learned Judge had made certain findings in relation to the Shares.  However, in my view, those findings are “no more than part of the reasoning” supporting the learned Judge’s conclusion not to believe Shu Fong in HCA 93/2002.

64.  The main or fundamental issue of HCA 93/2002 is who provided the money for the purchase of the Property and the learned Judge found that it was not Shu Fong. Although the learned Judge’s findings or analysis in relation to the Shares formed part of his reasoning, they are in my view not significant enough to be regarded as fundamental to the learned Judge’s decisions.

65.  Mr Wong submitted that the findings of Deputy Judge To regarding the financial situation of Shu Fong were essential in determining whether Shu Fong has provided the money for purchase of the Property.  Hence, the findings of the learned Judge under paragraphs 43 to 45 of the judgment should bind Shu Fong in the present case.

66.  Regarding paragraph 44 of the learned Judge’s judgment, which concerns the learned Judge’s findings on matters in relation to the Shares, I have given my views under paragraphs 63 and 64 hereinabove.

67.  As for paragraphs 43 and 45, they are but analysis made by the learned Judge in arriving at his finding that it was not Shu Fong, but the Father, who provided the money for purchase of the Property.  In my view, what is binding upon Shu Fong, is the fundamental issue that the Property was purchased by the Father and not Shu Fong.

PROPRIETY ESTOPPEL AND UNPERFECTED GIFT

68.  In the Re-Amended Defence and Counterclaim, Shu Fong pleaded that the Father “gave to [Shu Fong] the Shares and at the same time made to [Shu Fong] the representation that the Shares was given to [Shu Fong] because [Shu Fong] had in the past and all along taken care of the family members…”.

69.  It is common ground that the Shares are still registered in the name of the Father.  Therefore, legal interest of the Shares has not passed to Shu Fong and even if there was a gift it was an imperfect gift.  Shu Fong did not particularize his case in respect of the bases under which the imperfect gift was made complete in the present case, apart from relying on the doctrine of proprietary estoppel.  The alleged incident that the Father brought Shu Fong to the office of the 2^nd Defendant with a view to transferring the Shares to Shu Fong can hardly be sufficient to render the imperfect gift complete without more[5]. It is not Shu Fong’s pleaded case that by virtue of the said alleged incident the imperfect gift should be complete in equity.  Mr Koo is not running an argument as such in his submissions.

70.  What remains for consideration is whether Shu Fong has proved his case on proprietary estoppel.

71.  The law on proprietary estoppel is not a subject of dispute.  In Luo Xing Juan v Estate of Hui Shui[6] the Court of Final Appeal summarized the doctrine as follows:-

“55. A promissory estoppel may be said to arise where (i) the parties are in a relationship involving enforceable or exercisable rights, duties or powers; (ii) one party (the promisor), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers; and (iii) the promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.”

72.  With my finding of facts above, Shu Fong must fail to establish proprietary estoppel, not only because I am not satisfied that the Father had ever intended to give the Shares to Shu Fong, but also that Shu Fong failed to persuade me the Father had made the alleged representation to him, that the Shares was given to Shu Fong because the Father wished him to continue taking care of the family members.

73.  Furthermore, Shu Fong has also failed to show that he has relied on the Father’s promise to give him the Shares and has been induced to alter his position on the faith of it.  If Shu Fong has all along been the only resourceful one in the family and taken care of the family singlehandedly, there should be no reason why he would stop supporting the family even without the Father’s promise to give him the Shares. 

74.  In any event, as submitted by Mr Wong, Shu Fong has said in his own evidence that regardless of the gift of the Shares, he would maintain the Mother for life and take care of his brothers.

75.  Mr Koo submitted that, in Brikom Investment Ltd v Carr and Ors[7], Lord Denning MR faced with a similar situation, concerning a dispute between the landlord and tenants in which the tenant refused to pay for the roof repairs as the landlord has represented to them that he would be paying for the repairs prior to the signing of the leases.  During the trial, one of the tenants said in evidence that he would have bought the lease even if she had not received assurances regarding the roof from the landlord.  The landlord argued that the said tenant could not rely on the representations given to her because she had not acted on it since her on her own admission that she would have entered into the lease anyway.  On appeal, Lord Denning MR rejected the landlord’s argument as “too limited a scope to the principle”.  He went on to discuss on this issue as follows :- 

“It is no answer for the maker to say: ‘You would have gone on with the transaction anyway.’ That must be speculation. No one can be sure what he would, or would not have done in a hypothetical state of affairs which never took place… Once it is shown that a representation was calculated to influence the judgment of a reasonable man, the presumption is that he was so influenced.” (emphasis added)

76.  Mr Koo submitted that, according to the evidence, Shu Fong has all along been the sole person responsible for taking care of the Mother. If Shu Fong did not have the belief that he was the sole son having been given the Shares, it is inherently unlikely that he would have taken the full responsibility of taking care of the Mother without seeking other brothers’ share of responsibility.

77.  With respect, quite contrary to Mr Koo’s view, as I have mentioned in my judgment above, as Shu Fong has all along been the sole person responsible for taking care of the Mother and family as alleged, the probability would tilt in favour of Shu Fong willing to continue providing for the whole family, unless there is any reason make him stop doing so.  The death of the Father is obviously not a reason.

78.  In my view, what Lord Denning MR has expressed was that the court should not take too much face value of a mere oral admission of a representee under a hypothetical situation. Whether reliance exists in a particular case is fact sensitive.

79.  In the present case, the evidence points to there being no reliance.

CONCLUSION

80.  To conclude, Shu Fong failed to establish a gift of the Shares to him or a proprietary estoppel in favour of him.  The legal and beneficial interest of the Shares should belong to the Father’s estate.

81.  It is declared that the Shares belong solely to the estate of the Father.

82.  It is ordered that Shu Fong do return the trust money being dividends of the Shares received between 1991 to 2002 to the 1^st Plaintiff for distribution to the beneficiaries of the Father’s estate, in the sum of HK$994,500.00 and interest thereon, at 4% per annum from 11 January 2003 until judgment and thereafter at 8% per annum until payment, taking into account the sum of HK$138,000 being charges for elderly home and funeral expenses of the Mother paid by Shu Fong during the years from 1991 to 1994.

83.  Shu Fong’s counterclaims be dismissed.

84.  Costs of the original action be to the Plaintiffs to be taxed if not agreed.  Costs of the Counterclaim be to the Defendants in counterclaim to be taxed if not agreed. These costs orders are orders nisi which will be made absolute after 14 days from the date of this judgment.