LAU KOON YING MATTHEW as the Executor of the estate of LAU YIU WING, deceased (“the Deceased”) v. LAU TARK WING AND ANOTHER

HCAP 23/2013
HCA 2305/2012
HCA 2306/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO 23 OF 2013

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2305 OF 2012

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2306 OF 2012

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(Consolidated by Order of Master K. Lo dated the 9^th September 2013)

(De-consolidated by Order of Registrar K.W. Lung dated the 24^th day of February 2016)

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(Heard together)

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J U D G M E NT

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INTRODUCTION

1.  These three actions, which have been tried together, concern the estate of Mr Lau Hin Chi, deceased (“the Grandfather”), and the estate of Mr Lau Yiu Wing, deceased (“the Father”).

2.  In HCAP 23/203 (“the Probate Action”), Mr Lau Koon Ying Matthew (“Matthew”), in his capacity as executor of the estate of the Father, sues his uncle and his grandmother for (inter alia):-

(1) an account of various sums of money allegedly held by them on trust for the Father, and payment of those sums and/or profits therefrom; and

(2) an order for (a) the setting aside of a Deed of Family Arrangement dated 19 November 1997, and (b) the retraction of a Renunciation of Probate dated 14 November 1997.

3.  In HCA 2305/2012 and HCA 2306/2012 (“the High Court Actions”), Matthew:-

(1) in his capacity as executor of the estate of the Father, sues his uncle and his uncle’s company for an account of the rental income generated from properties owned by the Father and collected and held by them, and payment of such income and/or profits therefrom; and

(2) in his personal capacity, sues his uncle and his uncle’s companies for an account of the rental income generated from properties owned by Matthew and collected and held by them, and payment of such income and/or profits therefrom.

4.  In the course of these proceedings, the parties have raised a large number of allegations against each.  Some of those allegations are not relevant to the issues raised on the pleadings.  In view of their family relationship, I do not propose to refer to or resolve all the allegations which the parties have raised unless they are strictly relevant and necessary for a proper resolution of the issues raised on the pleadings in these actions.

BASIC FACTS

(i)   The family background

5.  The Grandfather was an indigenous villager of a village called Shun Fung Wai in Tuen Mun, New Territories.  He was born in 1913, and passed away on 15 July 1997.

6.  From the 1950s to 1970s, the Grandfather ran a small transportation business in the name of Wing Hing Vehicle.  He also kept a pigeon farm from late 1960s to mid-1980s.  In addition, the Grandfather had been the school supervisor of a primary school formed by him and some other fellow villagers for over 20 years.

7.  Madam Tang Mei Ho, deceased (“the Grandmother”) was the wife of the Grandfather (collectively “the Grandparents”).  The Grandmother was born in 1919, and passed away on 2 April 2016, after the commencement of the Probate Action.  Her estate is currently represented by her son and executor, Mr Lau Tark Wing (“Tark Wing”).

8.  The Grandfather and Grandmother had 3 sons and 5 daughters.  One of the sons passed away during infancy.  The other 2 sons were the Father and Tark Wing:-

(1) The Father, born in 1938, was the eldest son.

(2) Tark Wing was born 15 years later in 1953.  

9.  The Father moved to England to work in restaurants in 1962 when he was about 24, and got married in 1967.  He had 2 children, namely, (i) Matthew, born in 1970, and (ii) Ms Lau Ting Ting Fanny (“Fanny”), born in 1972.  According to Matthew, the Father suffered at least 2 strokes in 2002, which left him severely disabled and requiring 24-hour care from his wife, Fanny and him.  The Father passed away on 12 November 2007.  Probate of the Father’s will dated 15 April 2004 was granted to Matthew, being the sole executor and trustee named in that will, on 18 April 2012.

10.  Tark Wing went to England in around 1973 to study accountancy, first in London and then Birmingham.  During his stay in London, he lived with the Father and his family for a period of time (about 1.5 years according to Tark Wing).  He finished his study in accountancy in about June 1976.  He obtained a trainee chartered accountant contract with the Glasgow office of Messrs Deloitte, and later qualified as a chartered accountant in the United Kingdom.  He returned to Hong Kong in around 1980, started his own accounting firm in about 1983, and continued to practise as an accountant in Hong Kong until around 2012 when he retired and closed down his firm.

11.  The Father brought Matthew and Fanny back to Hong Kong in or about 1973, and they were under the care of the Grandparents until they returned to England in about 1981 and 1982 respectively.  Both Matthew and Fanny are qualified lawyers.  Matthew once worked as a trainee solicitor with Allen & Overy and then as an assistance solicitor of Johnson Stokes & Master in Hong Kong before returning to the United Kingdom in about 2000.

12.  Wing Hing Resources Limited (“Wing Hing”) and Caba Resources Limited (“Caba”) were incorporated in Hong Kong on 5 February 1988 and 7 August 1987 respectively.  They were at all material times, and are, controlled by Tark Wing.

(ii)   Sale of Lot 2785 and Lot 3825

13.  As evidenced by a Division of Property dated 20 May 1966, the Grandfather inherited various properties in the New Territories, including:-

(1) Lot No1219A in DD No 130 (“Lot 1219A”);

(2) Shun Fung Wai House Lot No 3 (“SFWH 3”); and

(3) Lots No 3763, 3825 and 2785 in DD No 124 (“Lot 3763”, “Lot 3825” and “Lot 2785” respectively).

14.  By assignments dated 16 August 1980, 19 August 1980 and 4 September 1980 respectively, the Grandfather transferred to each of the Father, Tark Wing and the Grandmother a 1/4^th undivided share in Lot 2785 and Lot 3825 by way of gift.  Hence, Lot 2785 and Lot 3825 became vested in the Grandfather, the Grandmother, the Father and Tark Wing as tenants in common, each holding a 1/4^th undivided share in those properties.

15.  On 20 February 1991, the Father executed a general power of attorney in favour of Tark Wing pursuant to Section 7 of the Powers of Attorney Ordinance, Cap 31.

16.  On 21 September 1992, the Grandfather, the Grandmother, the Father and Tark Wing assigned Lot 2785 and Lot 3825 by way of sale to a third party for the consideration of HK$4,338,468.  That assignment was executed by (inter alia) Tark Wing as lawful attorney on behalf of the Father.

17.  The Father, as a co-owner of Lot 2785 and Lot 3825 holding a 1/4^th undivided share in those properties, was, prima facie, entitled to a quarter of the sale proceeds in the gross sum of HK$1,084,617.  Matthew’s complaint is that the Father never received his share of the sale proceeds of those properties.

(iii)   Resumption of Lot 1219A

18.  As earlier mentioned, the Grandfather inherited Lot 1219A in around May 1966.  On 4 December 1973, the Grandfather assigned Lot 1219A to the Father and Tark Wing (with the Grandfather as trustee for him) in equal shares by way of gift.   By a vesting assignment dated 8 November 1980, the Grandfather assigned the half share in Lot 1219A held by him on trust to Tark Wing.

19.  On 24 August 1990, Lot 1219A was resumed by the Government.  In relation to this resumption, compensation in the sum of HK$1,910,000 was paid by the Government which, according to Tark Wing, was paid into a bank account held in the joint names of the Father and Tark Wing.  Matthew’s complaint is that the Father never received his half share of the compensation, in the amount of HK$955,000.

(iv)   Resumption of Lot 3757 and the Lau House

20.  On 25 May 1967, the Grandfather acquired Lot No 3757 in DD No 124 (“Lot 3757”) and two other lots in Tuen Mun, New Territories, at the price of HK$5,500.  A family house (“the Lau House”) was subsequently constructed upon Lot 3757 in around 1967/1968. Since that time, the Grandparents had been staying in the Lau House until around July 1994 when the Government resumed Lot 3757 and the Lau House.  Tark Wing and his siblings also stayed in the Lau House until they got married.  On 4 December 1973, the Grandfather assigned Lot 3757 together with the Lau House to the Father for “nil” consideration.

21.  In relation to the resumption of Lot 3757 and the Lau House, the Government paid cash compensation and other allowances to the Father in the total sum of HK$1,811,094 (including an ex-gratia compensation in the sum of HK$1,210,194), and granted to him Lot No 884 in DD 379 (“Lot 884”) pursuant to Conditions of Grant dated 21 February 1995.  A 3-storey house has been erected upon Lot 884 since around 1997.

22.  Matthew’s complaint is that Tark Wing and/or the Grandmother failed to account to the Father the cash compensation and allowances paid by the Government in relation to the resumption of Lot 3757 and the Lau House.  He accepts, however, that the proceeds of the resumption contributed to the construction costs of the house erected on Lot 884 (see paragraphs 11.2 and 18 of the Reply filed in the Probate Action).

(v)   The Renunciation of Probate and Deed of Family Arrangement

23.  The Father was the sole executor named in the Grandfather’s will dated 4 May 1996 (“the Grandfather’s Will).  Under that will:-

(1) the Grandfather gave, devised and bequeathed -

(a) all his cash to the Grandmother absolutely;

(b) SFWH 3 to the Father absolutely;

(c) Lot No 2539 in DD No 130 to Tark Wing absolutely; and

(2) subject to the aforesaid specific gifts, the Grandfather gave his residuary estate (after payment of debts and funeral and testamentary expenses) to the Father to hold the same as trustee for the Father and Tark Wing in equal shares.

24.  The Grandfather passed away on 15 July 1997.  On 14 November 1997, the Father executed a Renunciation of Probate (“the Renunciation”) to renounce all his right and title to probate and execution of the Grandfather’s Will.  On 19 November 1997, the Grandmother, the Father and Tark Wing executed a Deed of Family Arrangement (“the DFA”), under which the Father agreed to waive, release and disclaim all his rights, benefits, shares and interests in the estate of the Grandfather, and agreed and declared that those rights, benefits, shares and interests were to be succeeded by Tark Wing solely and absolutely. 

25.  Matthew’s complaint is that the Father was induced to execute the Renunciation and the DFA by the following representation and promise made by Tark Wing shortly after the passing away of the Grandfather in July 1997, namely:-

(1) “since the [Father] resided outside Hong Kong, it would not be possible for the [Father] to administer the Grandfather’s estate unless he signed documents to disclaim all his rights and benefits and renounce his entitlement to the grant of Probate under the Grandfather’s Will” (“the Representation”): see paragraph 46 of the Statement of Claim filed in the Probate Action (“the HCAP 23 SoC”); and

(2) “[Tark Wing] would distribute the Grandfather’s estate in accordance with the terms of the Grandfather’s Will to the [Father]; he further promised that he would divide the Grandfather’s residual estate equally and that he would distribute half of what he receives from the Grandfather’s residual estate to the [Father]” (“the Collateral Promise”): see paragraph 48 of the HCAP 23 SoC.

26.  In passing, I should mention that Matthew previously alleged that he had been shown a different version of the DFA by Mr Peter Hon (Tark Wing’s legal advisor) at a meeting in the office of Messrs Hon & Co on 16 November 2011.  However, as confirmed by Mr Eugene Fung SC at the trial, this allegation is no longer pursued by Matthew.

(vi)   The rental proceeds generated from Lot 3763C, Lot 3763D and Lot 3763RP

27.  As earlier mentioned, the Grandfather inherited Lot 3763 in around May 1966.  For the purpose of this judgment, it is not necessary to trace the history of how Lot 3763 was subsequently sub-divided and how the sub-divided lots became vested in various parties, because it is either agreed or clear on the evidence that -

(1) the Father has been the sole owner of Section C of Lot 3763 (“Lot 3763C”) since no later than 13 September 1994;

(2) Matthew has been the sole owner of Section D of Lot 3763 (“Lot 3763D”) since no later than 13 September 1994;

(3) Tark Wing has been the sole owner of Section E of Lot 3763 (“Lot 3763E”) since no later than 13 September 1994;

(4) the Father and Tark Wong have been tenants in common in equal shares of the Remaining Portion of Lot 3763 (“Lot 3763RP) since no later than 13 September 1994;

(5) a 3-storey house has been constructed upon each of Lot 3763C, Lot 3763D and Lot 3763E since around 1997;

(6) a 2-storey temporary house has been constructed upon Lot 3763RP since around 1997;

(7) Tark Wing and his staff were responsible for, or involved in, collecting the rents from the tenants of Lot 3763C, Lot 3763D and Lot 3763RP;

(8) since late 2010, Matthew had repeatedly requested Tark Wing to give him vacant possession of Lot 3763C and Lot 3763D; and

(9) Tark Wing did not comply with Matthew’s requests until around December 2011 when Matthew obtained vacant possession of Lot 3763C and Lot 3763D.

28.  Matthew’s complaint is that Tark Wing failed to render a proper account in respect of the rental proceeds generated from Lot 3763C, Lot 3763D and half of the rental proceeds generated from Lot 3763RP (hereinafter collectively referred to as “the Rental Proceeds” and “the Rental Properties”) collected by Tark Wing and his companies since around 1997, or paid the Rental Proceeds to the Father or to him, despite repeated requests and demands, including a demand letter dated 16 April 2012. It is not in dispute that Tark Wing’s staff did provide a “Schedule of Rental Proceeds” to Matthew in 2010, but that schedule was not complete (covering only part of 2009 and 2010), and its contents are not agreed.

29.  There are three other matters that may be noted at this stage:-

(1) In the High Court Actions, there were originally claims by Matthew against Tark Wing for damages for breach of duties in failing to maintain the relevant properties.  However, those claims were abandoned by Matthew at the trial and do not therefore have to be further considered in this judgment.

(2) In the statement of claim filed in HCA 2305/2012, Matthew also raised a claim in respect of Section F of Lot No 3763 in DD No 124.  However, as is evident from Mr Fung’s opening and closing submissions on behalf of Matthew, such claim is no longer pursued.

(3) In the Probate Action, a defence dated 24 April 2014 was filed on behalf of Tark Wing (“the HCAP 23 Defence”).  On 3 October 2014, a separate defence was filed by the guardian ad litem of the Grandmother on her behalf.  The contents of that defence are materially the same as the HCAP 23 Defence.  In this judgment, I shall omit references to the defence filed on behalf of the Grandmother unless it is necessary to do so.

30.  I should also mention that, in my consideration of various issues below, unless otherwise expressly indicated, I generally place no weight on hearsay evidence, including what Matthew or Fanny might have been told by their father or mother, or what Tark Wing might have been told by the Grandfather or Grandmother, previously, because such hearsay evidence as given by Matthew, Fanny or Tark Wing is generally of poor quality and lacking in particulars.

DISCUSSION

(i)   The Arrangement

31.  As will be seen below, a major plank of the defences of the Grandmother/her estate, Tark Wing and his companies in the three actions is based on an alleged oral arrangement (“the Arrangement”) agreed to amongst the Grandfather, the Grandmother, the Father (for himself and on behalf of Matthew) and Tark Wing.

32.  According to Tark Wing, Lot 3763, which the Grandfather inherited in 1966, was transferred to the Father and him in the 1980s as gift.  Lot 3763 was agricultural land, and there was restriction on its use and development.  In view of the Government’s proposed resumption of the Lau House, the Grandfather was worried about losing the family home and wished to get planning permission to build three replacement houses on Lot 3763, which was situated about 500 metres from the Lau House.  The Grandfather’s logic for building 3 small houses was that, at that time, he had two sons and one grandson over the age of 18 who would each be qualified to apply to build a small house (the Grandfather himself being unable to do so since he had already built one on Lot 3757).

33.  It was against the aforesaid background that the following Arrangement was reached after discussion amongst the Grandfather, the Grandmother, the Father (for himself and on behalf of Matthew) and Tark Wing:-

(1) A village house with 3 floors would be built on Lot 3763C using the Father’s name to apply for permission to build the same.

(2) A village house with 3 floors would be built on Lot 3763D using Matthew’s name to apply for permission to build the same.

(3) A village house with 3 floors would be built on Lot 3763E using Tark Wing’s name to apply for permission to build the same.

(4) Another village house would be built on Lot 884 (a building lot) under the name of the Father.

(5) The construction costs would come from the Grandfather and/or the Grandmother as well as from the compensation monies received in the Father’s name arising from the resumption of Lot 3757.  The Father and Tark Wing would also make some contributions.  In essence, the whole family would pool together their resources to fund the construction of the houses and related expenses.

(6) The net rental income (after deducting property tax, rent and rates as well as repairs and maintenance) generated from the village house developed on Lot 3763C registered under the name of the Father would be used to maintain the Grandfather and the Grandmother for life.  The Father would be entitled to Lot 3763C, the village house erected thereon and all income generated therefrom absolutely after both the Grandfather and the Grandmother had passed away.

(7) In respect of the village house built on Lot 3763D registered under Matthew’s name, the ground floor thereof would be reserved for the Father and/or his family members so that they would have a place to live in whenever they returned to Hong Kong. The net rental income (after deducting tax, rent and rates as well as repairs and maintenance) generated from the other 2 floors of this village house would be used to maintain the Grandfather and the Grandmother for life including paying health care and medical bills for them, and to pay the expenses for ancestral worships and maintenance of the general area of Lot 3763.  The Father and/or Matthew would be entitled to Lot 3763D, the village house erected thereon and all income generated therefrom absolutely after both the Grandfather and the Grandmother had passed away.

(8) In respect of the small house built on Lot 3763E registered under the name of Tark Wing, the Grandfather and the Grandmother would take up the Ground Floor thereof whilst Tark Wing would take up the 1^st floor.  The 2^nd floor was reserved for occupation by Tark Wing’s sisters who might be in need and/or return to Hong Kong from abroad.

(9) In respect of the house erected on Lot 884, all interests including income (after deducting property tax, rent and rates as well as repairs and maintenance) and capital would belong absolutely to the Father who had by 1994 indicated to the Grandfather that he was considering to return to Hong Kong permanently for retirement and he would like to have some steady income after his retirement.

34.  Tark Wing said that, in pursuance of the Arrangement, Lot 3763D was transferred to Matthew (in 1994) without consideration prior to the application to the District Lands Office for the construction of a small house on that lot in Matthew’s name. Since Lot 3763 was situated outside the “village zone”, it was necessary to obtain planning permission before small houses could be built on Lot 3763.  It was through his hard work that planning permission was eventually obtained to develop three small houses on Lot 3763.  Further, the rental proceeds generated from Lot 3763C and Lot 3763D were given to the Grandmother, while the rental proceeds from Lot 884 were given to the Father.  During the Father’s lifetime, in particular during his visits to Hong Kong in 1997, 2002 and between 2004 and 2006, he never raised any complaint regarding the Arrangement, nor made the complaints now raised by Matthew.

35.  The Arrangement is denied by Matthew.  He says that Tark Wing never mentioned the Arrangement during the London Meeting in 2002 or the Yuen Long Meetings in 2003 (see below), or during the time when he was seeking information from Tark Wing in relation to the receipt and application of the Rental Proceeds.  Matthew also relies on the fact that Tark Wing eventually gave him vacant possession of Lot 3763C and Lot 3763D in around December 2011 without insisting upon the Arrangement as evidence that the Arrangement did not exist.  Tark Wing’s answer is that although Matthew’s demand for vacant possession was unreasonable and contrary to the Arrangement, the Grandmother and he reluctantly gave in to Matthew’s demand because the Grandmother was getting old.

36.  I do not accept Tark Wing’s evidence regarding the Arrangement for the following reasons.  First, his evidence on the making of the Arrangement is vague and unsatisfactory.  The date or approximate date on which the Arrangement was made has never been stated in the defences, or made clear in Tark Wing’s evidence (including his witness statements filed in the three actions).  When Tark Wing was asked in cross examination as to when it was that the Arrangement was made, he said that it was made in various stages, during various periods, and different agreements were made at different times.

37.  Second, not only was the Arrangement never reduced into writing, there was no contemporaneous document which evidenced the existence or terms of the Arrangement.  While it is understandable that the parties might not have reduced the oral Arrangement into a written agreement in view of the relationship of the parties and the nature of the Arrangement, it is significant that the Arrangement was not mentioned in the numerous letters exchanged between the parties from 1966 to the Grandfather’s death (July 1997).  Neither Tark Wing, nor his counsel, has referred the court to any letter which evidenced the existence or the terms of the Arrangement.

38.  Third, if the Arrangement existed, it was likely that the Father would have mentioned it to Matthew and/or Fanny.  It seems to be clear from their evidence, which I accept, that the Father never told them about the Arrangement.

39.  Fourth, it is not in dispute that some time in or after 2010, Tark Wing (through his staff) gave to Matthew various schedules of the rental proceeds generated from Lot 3763C and Lot 3763D for part of 2009 and 2010.  Further, Tark Wing said that he was at one stage prepared to pay Matthew the net rental proceeds (less HK$5,000 per month as the Grandmother’s living expenses) for each financial year starting on 1 April 2009, and had set aside the sum of HK$100,000 to be paid to Matthew. If the Arrangement did exist, there was no reason for Tark Wing to pay Matthew or the Father’s estate the rental proceeds generated from Lot 3763C and Lot 3763D during the lifetime of the Grandmother.

40.  On the whole, while I believe that there was probably some general discussion amongst the Grandfather, the Grandmother, the Father and Tark Wing on how the construction of the new houses on Lot 3763 and Lot 884 was to be funded, I do not accept that the parties had reach any definite, legally binding, Arrangement as alleged by Tark Wing.

(ii)   Proceeds of sale of Lot 2785 and Lot 3825

41.  Matthew complains that the Father never received his share of the sale proceeds of Lot 2785 and Lot 3825 in the gross sum of HK$1,084,617.  Tark Wing accepts that he received the sale proceeds of Lots 2785 and 3825, which he first deposited into his bank account and later paid over to the Grandmother.  His defence to Matthew’s claim is as follows:-

(1) the Father “specifically indicated that he did not want any of the sale proceeds to be remitted to him in London and the same could be contributed and/or applied to the construction costs of the village houses on Lot 3763 as the same was the Grandfather’s gift anyway”; and

(2) the Father “had never demanded for the said sum of HK$1,084,617 during his lifetime as he had agreed that the same be applied towards the construction costs of the village houses on Lot 3763 and had agreed to various terms under the Arrangement.”

See paragraphs 28 and 30 of the HCAP 23 Defence, and paragraph 19 of his witness statement filed in the Probate Action. 

42.  According to Tark Wing, the sale proceeds were indeed applied towards the construction costs of the village houses on Lot 3763, a fact which the Father was aware of all along.

43.  It is clear that Tark Wing’s defence to this claim of Matthew is based on the Arrangement. That this is so is confirmed in paragraph 39 of Mr Richard Leung’s opening submissions dated 2 June 2017.  As earlier mentioned, I reject Tark Wing’s case in respect of the Arrangement.  I also do not accept Tark Wing’s allegation that the Father indicated to him (Tark Wing) that he (the Father) did not want any of the sale proceeds to be remitted to him (the Father) in London and the same could be contributed and/or applied towards the construction costs of the village houses on Lot 3763 as the same was the Grandfather’s gift anyway.  Such allegation is based entirely on Tark Wing’s bare assertion and is not supported by any contemporaneous documents.

44.  There is no dispute that Tark Wing acted as the Father’s attorney in relation to the sale of Lots 2785 and 3825.  It follows that Tark Wing held the Father’s share of the proceeds of sale as his agent and was under a fiduciary duty to properly account to him in respect of the sale proceeds.  Tark Wing’s payment of the same to the Grandmother, in the absence of proof of consent or approval by the Father, constituted a breach of his fiduciary duty owed to the Father.

45.  In all, subject to the defence of limitation (which I shall consider below), I consider that Matthew is entitled to an account of the Father’s share of the sale proceeds of Lots 2785 and 3825 received by Tark Wing and the Grandmother.

(iii)   Proceeds of resumption of Lot 1219A

46.  As in relation to the proceeds of sale of Lot 2785 and Lot 3825, Matthew’s complaint, in relation to the proceeds of resumption of Lot 1219A, is that Father never received his half share of the compensation, in the amount of HK$955,000.

47.  According to Tark Wing, the compensation was paid into a bank account held in the joint names of the Father and himself.  His pleaded defence to this claim of Matthew is as follows:-

(1) the Father and Tark Wing each drew a sum of HK$50,000 from the compensation for personal spending; and

(2) the balance was paid to the Grandfather as “Lot 1219A was a gift from the Grandfather as well as applied towards the costs for the construction of the various village houses [on Lot 3763]”.

See paragraph 44 of the HCAP 23 Defence, and paragraph 28 of Tark Wing’s witness statement filed in the Probate Action.

48.  In his oral evidence, Tark Wing said that the Father and he each drew a sum of HK$50,000 for their respective own use, and that around a month after receiving the compensation from the Government, he transferred the balance of his (Tark Wing’s) share of the compensation (ie HK$905,000) to the Grandfather, and then told the Father that he had placed his share with the Grandfather to build his [Tark Wing’s] house on Lot 3763A.  Tark Wing further said that he understood from conversations with the Father and the Grandfather that the Father also transferred his share of the compensation to the Grandfather (for the purpose of building the Father’s house on Lot 3763C), but he was not present when the Father transferred the money to, or discussed this matter with, the Grandfather.

49.  The fact that Lot 1219A was originally a gift from the Grandfather to (inter alia) the Father was not a legal justification for paying the Father’s share of the proceeds of resumption to the Grandfather.  In so far as it is suggested that the resumption proceeds were used for the construction of the village houses on Lot 3763, it should be noted that it is no part of the Arrangement as pleaded in paragraph 16 of the HCAP 23 Defence that the proceeds of resumption of Lot 1219A should be used for the construction of the village houses on Lot 3763.  In any event, as earlier mentioned, I reject Tark Wing’s case in respect of the Arrangement.

50.  These having been said, the burden is on Matthew to prove that Tark Wing paid the Father’s share of the resumption proceeds to the Grandfather or otherwise used it without the Father’s consent or approval.  If, as alleged by Tark Wing, the resumption proceeds were first paid into a bank account held in the joint names of the Father and Tark Wing, and the Father subsequently took HK$50,000 for his own use and paid the balance of his share of the resumption proceeds to the Grandfather, plainly there could not any valid claim against Tark Wing.  On the other hand, if one rejects the evidence of Tark Wing, there is still no proof that it was Tark Wing who took the Father’s share of the resumption proceeds from the joint bank account and paid it to the Grandfather or otherwise used it without the Father’s consent or approval.  In my view, Matthew has failed to prove his claim against Tark Wing in relation to the Father’s share of the proceeds of resumption of Lot 1219A.  There is also no evidence that the Grandmother (or her estate) ever received the Father’s share of the resumption proceeds.

(iv)   Proceeds of resumption of Lot 3757 and the Lau House

51.  Before I consider Matthew’s claim in respect of the proceeds of resumption of Lot 3757 and the Lau House, I should briefly deal with an allegation raised by Matthew on which quite some time was spent at the trial, namely, that part of the monies that the Father remitted from England to the Grandparents in Hong Kong was intended to be kept as his savings and for investment on his behalf in Hong Kong such that the assets acquired by the Grandparents from such monies became “trust assets”.

52.  According to Matthew, the Father remitted at least £5,218 to the Grandparents in Hong Kong between 1962 to 1967 “for keeping his savings in Hong Kong and assisting his parents to support the family in Hong Kong”, and at least £29,890 from 1962 to 1989 (see paragraphs 7b and 20 of the HCAP 23 SoC, and paragraph 8 of Matthew’s witness statement filed in the Probate Action).  It is his case that the purchase consideration of Lot 3757, which the Grandfather acquired in 1966, was paid out of funds provided by the Father (see paragraphs 21 and 22 of the HCAP 23 SoC).

53.  Tark Wing accepts that the Father did, from time to time, remit monies back to Hong Kong while he was in England, including around £5,230 from 1966 to 1968 (see paragraph 31(1) of the HCAP 23 Defence).  He said, however, that Lot 3737 was paid by the Grandfather out of his personal savings and earnings.

54.  The contemporaneous correspondence passing between the Grandfather, the Father and other members/relatives of the Lau family suggests that the Father sent monies to his parents primarily for the purpose of supporting their living expenses (including the living expenses of Matthew and Fanny when they were in Hong Kong under the care of the Grandparents), although some of the monies received by the Grandparents were kept on his behalf.  The evidence before the court is not sufficient to enable me to determine what portion of the monies sent by the Father was intended to be used for the living expenses of the Grandparents, and what portion was intended to be kept for him.  It is also unclear on the evidence as to what had become of the monies kept by the Grandparents on behalf of the Father, and whether the Grandparents had already properly accounted to the Father in respect of such monies.  The arrangement between the Grandparents and the Father regarding the monies remitted by him was, understandably, a loose one.  I do not consider that the evidence before the court is sufficient for me to find a trust of any particular assets (including Lot 3757) held by the Grandparents for the Father.  There is also insufficient evidence to prove that Lot 3757 was purchased out of funds remitted by the Father.

55.  On the other hand, Tark Wing said that the transfer of Lot 3757 and the Lau House by the Grandfather to the Father was on the understanding that the Father would be the registered owner in name only and all family members could continue to enjoy the benefits of the same which would remain as the home of the Lau family (see paragraph 11 of his first witness statement filed in the High Court Actions, and paragraph 7 of the HCAP 23 Defence).  However, in paragraph 35 of the HCAP 23 Defence, he admitted that the assignment of Lot 3757 and the Lau House was a gift by the Grandfather to the Father.  I do not accept Tark Wing’s evidence that the transfer of Lot 3757 and the Lau House by the Grandfather to the Father was subject to any legally enforceable mutual understanding or condition as alleged by him.  I believe that the assignment was an outright gift of Lot 3757 and the Lau House by the Grandfather to the Father.

56.  As earlier mentioned, in relation to the resumption of Lot 3757 and the Lau House, the Government paid cash compensation and other allowances to the Father in the total sum of HK$1,811,094 (including an ex-gratia compensation in the sum of HK$1,210,194). Matthew’s complaint is that Tark Wing and/or the Grandmother failed to account to the Farther the cash compensation and allowances paid by the Government.

57.  It is not in dispute that the bulk of the compensation and allowances, in the total sum of HK$1,800,094, was paid into the Father’s bank account at HSBC, numbered 034-8-142258 (“the HSBC Account”), including:-

(1) HK$1,210,194 (representing ex-gratia compensation) on 1 October 1994;

(2) HK$31,700 on 19 October 1994; and

(3) HK$558,200 on 18 March 1995.

58.  It is also not in dispute that the Grandmother held a power of attorney in respect of the HSBC Account which allowed her to withdraw monies from that account.

59.  The following can be seen from the passbook of the HSBC Account:-

(1) The account was opened on 1 October 1994 with an initial opening balance of HK$10.

(2) Between March 1995 and January 1996, there were a number of substantial withdrawals, totalling HK$1,673,500. 

(3) As at 5 January 1996, the balance was only HK$1,612.23.

60.  Tark Wing said in evidence that he did not know who made the various withdrawals from the HSBC Account between March 1995 and January 1996.

61.  The pleaded defence of Tark Wing and the Grandmother in respect of this claim is that “[t]he said compensation was paid to the [Father] from the Hong Kong Government by way of cheque in his personal name and [was] subsequently used and/or applied towards the construction of the various village houses pursuant to the Arrangement …” (see paragraph 39 of the HCAP 23 Defence).

62.  It follows from my earlier conclusion in respect of the Arrangement that this defence cannot stand.  Nevertheless, as in relation to Matthew’s claim in respect of the resumption proceeds of Lot 1219A, the burden is on Matthew to prove that the resumption proceeds of Lot 3757 and the Lau House were taken or improperly used by the Grandmother without the consent or approval of the Father.  On behalf of Matthew, Mr Fung refers to a particular instance on 28 November 2002 when the Grandmother withdrew the sum of HK$36,420 from the HSBC Account which was converted into £3,000 and, apparently, was given to the Father when Tark Wing visited him in England in late 2002.  However, the fact that the Grandmother held the aforesaid power of attorney in respect of the HSBC Account, or used it to withdraw some money from the HSBC Account in November 2002, cannot lead to the conclusion that it was also the Grandmother who made the various withdrawals from the HSBC Account between March 1995 and January 1996.  There is also no evidence that Tark Wing took or improperly used the resumption proceeds of Lot 3757 and the Lau House without the consent or approval of the Father.

63.  In all, I find that Matthew has failed to prove his claim against the Grandmother or Tark Wing in relation to the resumption proceeds of Lot 3757 and the Lau House.

(v)   The validity of the Renunciation of Probate and Deed of Family Arrangement

64.  It is Matthew’s case that the Father was induced to execute the Renunciation and the DFA by the Representation and Collateral Promise made by Tark Wing shortly after the passing away of the Grandfather in July 1997.

65.  Tark Wing denies Matthew’s allegations in respect of the Representation and Collateral Promise. His case is that:-

(1) The Father was motivated to execute the Renunciation and the DFA in 1997 because:-

(a) the estate of the Grandfather was not of substantial value (at that time); and

(b) the Father was very concerned with the practical financial advantage that might accrue to him as a beneficiary under the Grandfather’s Will vis-à-vis the time, costs and trouble to administer the Grandfather’s estate given that he was residing in the United Kingdom.

(2) Having decided that the benefits accrued to him under the Grandfather’s Will would not justify the costs and time for him to fly back to Hong Kong regularly to administer the Grandfather’s estate, the Father asked Tark Wing to take over all of his entitlements under the Grandfather’s Will with the mutual understanding that Tark Wing and his descendants would also take over and assume the obligations of worshipping the ancestors as well as administering the Grandfather’s estate.

See paragraphs 48 to 50 of the HCAP 23 Defence.

66.  Tark Wing said that the Father executed the Renunciation and the DFA after he had been explained the legal effect of those documents by lawyers at the office of Messrs Fong & Ng.  Further, the Father never questioned the validity of the DFA during his lifetime.

67.  Since Matthew and Fanny were not present at the time when Tark Wing allegedly made the Representation and Collateral Promise to the Father, they are not in a position to give direct evidence on those matters.  Matthew seeks to make good his allegations, however, by reference to (i) subsequent events, namely, what transpired during and after the “London Meeting” and the “Yuen Long Meeting”, and (ii) the inherent improbabilities of the defence (see paragraph 69 of Mr Fung’s closing submissions).

68.  The London Meeting: it is not in dispute that Tark Wing visited the Father at his home in London in around November 2002 (“the London Meeting”).  There is, however, a substantial dispute between Matthew/Fanny on the one side and Tark Wing on the other as to what transpired during that meeting.  According to Matthew:-

(1) Matthew and Fanny were both present at the London Meeting.

(2) At that meeting, Tark Wing spoke most of the time, updating the Father on the status of the Rental Properties.  While doing so, Tark Wing made certain notes in respect of the Rental Properties (“the Rental Properties Notes”) on a notebook (“the Notebook”) which he had brought with him to the meeting (see page 389 of Bundle B1).

(3) Tark Wing further reassured the Father, in writing, that he would look after the Rental Properties and the surrounding grounds and walls.  During the meeting, Tark Wing wrote the following words, in large Chinese characters over 4 pages, in the Notebook (see pages 410 to 413 of Bundle B1): “嘉和里將來續約事我會處理。永興閣事情不用掛心。圍牆已開工。萬事健康為重。餘事勿念。”.  The words “嘉和里” referred to the house on Lot 884, “永興閣” referred to the development on Lot 3763, and “圍牆” referred to the boundary wall of Lot 3763.

(4) Matthew asked Tark Wing for information about the Grandfather’s estate and how it would be distributed, and Tark Wing gave him a brief summary with some written explanation on the Notebook (“the Summary”) (see pages 408-409 of Bundle B1).  I pause to observe that these 2 pages were written in English and appeared to tally with how the Grandfather’s estate was supposed to be distributed to the Grandmother, the Father and Tark Wing under the Grandfather’s Will.

(5) At no point during the meeting did Tark Wing indicate to the Father or Matthew that the Father did not have any interest in the Grandfather’s estate.  Neither did Tark Wing mention the Arrangement at the meeting.

(6) As a result, the Father and Matthew came away from the meeting in the understanding or belief that nothing had changed, ie the Father remained entitled to his share in the Grandfather’s estate and the entire Rental Proceeds still belonged to him.

(7) Tark Wing left behind the Notebook in the Father’s home which was kept by Matthew.

69.  According to Fanny, she was present at the London Meeting.  She said that during the meeting, Tark Wing did not mention the Arrangement.  She further said that whilst she was generally nearby to ensure that the Father would be looked after, she did not fully participate in the Father’s discussion with Tark Wing in relation to the Rental Properties, although she recalled that Tark Wing assured the Father that the Rental Properties were in safe hands.  Significantly, Fanny said, in her evidence in chief, that when Tark Wing was describing the Grandfather’s estate and scribbling some notes on the Notebook (a reference to the Summary), Tark Wing was speaking to the Father (who was sitting quite close to him), instead of to Matthew (who was standing by a fireplace).

70.  Tark Wing accepts that he visited the Father in England in late 2002.  According to Tark Wing:-

(1) The purpose of the visit was simply to express and extend his concerns and care to the Father, who had suffered a stroke earlier in around June 2002.  He went with his third son to England and stayed in the Father’s home for about 2 days. 

(2) During his stay in the Father’s home, he and the Father talked mostly about matters happening in their village in Hong Kong and how their cousins and uncles in the village were getting on.  There was no specific “meeting” as such.

(3) There was one conversation between them when the Father asked him generally about leasing matters in respect of Lot 884 and the progress of some minor works in relation to the boundary wall of 永興閣.  He answered the Father orally and, to put him at ease, wrote the Chinese characters mentioned in paragraph 68(3) above in the Notebook which he happened to have brought with him to England.

(4) Matthew did not ask him about the Grandfather’s estate and how it would be distributed, and he did not give any information to Matthew about the Grandfather’s estate.

(5) The Summary was in his handwriting, but it was his own notes which he had previously made for his own reference.

(6) He did not explain the status of the Rental Properties as alleged by Matthew, and the Rental Properties Notes were not written at the London Meeting but were his own notes that he had previous made (although he could not recall when they were written).

(7) He left behind the Notebook in the Father’s home, which he came to realize only after the commencement of the lawsuit by Matthew.

71.  There are other relatively minor discrepancies between the evidence of Matthew/Fanny on one side and Tark Wing on the other as to what transpired at the London Meeting (including whether the writings on various pages of the Notebook were made at the meeting) which I do not propose to set out in detail in this judgment.

72.  The Yuen Long Meeting: Matthew says that he met Tark Wing again at his office in Yuen Long in around March/April 2003 (“the Yuen Long Meeting”).   At that meeting, he asked Tark Wing about the Father’s properties and his property in Hong Kong (including Lot 884 and the Rental Properties), but did not get a full response.  Tark Wing briefly explained to him the Collateral Promise, indicating that 2 steps were required.  First, the Father had to execute a renunciation of his rights to be appointed as the executor under the Grandfather’s Will.  Second, once all the assets of the Grandfather’s estate had been vested in Tark Wing, he would distribute them in accordance with the provisions in the Grandfather’s Will.  In particular, he would distribute half of the Grandfather’s residuary estate to the Father. Tark Wing believed that such arrangement would be the easiest from an administration perspective, as it would be difficult for the Father to administer the Grandfather’s estate from London.  During that meeting, Tark Wing also made some written explanations and notes on the Notebook (including pages 391-392, 399 and 400-403 of Bundle B1) which Matthew had brought with him to the meeting.  Tark Wing did not mention (i) the Arrangement, (ii) the existence of the DFA, or (iii) that the Father had given up his inheritance in respect of the Grandfather’s estate, at the Yuen Long Meeting.  Matthew further said that when he returned to London after the Yuen Long Meeting, he told the Father of his understanding gained at that meeting, including his understanding of the Collateral Promise, and the Father confirmed to him that was also his understanding of the arrangement in relation to the Grandfather’s estate.

73.  On the other hand, Tark Wing’s evidence is that he did not have any meeting with Matthew, whether in Yuen Long or anywhere else, at all in the entire year of 2003.  He said that there was an outbreak of SARS in Hong Kong in around March 2003 and he took his children away from Hong Kong in April 2004.  Further, he had taken up a big tax investigation case at that time and he was busy with his work.   Tark Wing denied that he wrote anything in the Notebook in March 2003 as alleged by Matthew.  In particular, he said that pages 391, 399 and 400-403 of Bundle B1 were his own notes which he had previously written, but he could not recall when that was done.

74.  In support of his version of what transpired at the London Meeting, Matthew places strong reliance on the Summary in the Notebook which he alleges was written by Tark Wing during that meeting. However, as earlier mentioned, Fanny’s evidence is that the Summary was written by Tark Wing while he was describing the Grandfather’s estate to the Father. It is of note that the Summary was written in English and in relatively small characters, in stark contrast to the large Chinese words (of comfort) which it is not disputed were written by Tark Wing at the meeting (see pages 410 to 413 of Bundle B1), presumably in view of the poor physical condition of the Father after the stroke.  If, as alleged by Fanny, Tark Wing wrote the Summary while explaining or describing the Grandfather’s estate to the Father, it is, in my view, much more likely that the Summary would also be written in large Chinese characters. 

75.  On balance, I accept Tark Wing’s evidence that Matthew never asked him about the Grandfather’s estate and how it would be distributed, and Tark Wing did not give any information to Matthew about the Grandfather’s estate during his visit to London in November/December 2002.  I also accept Tark Wing’s evidence that he did not have any meeting with Matthew in Yuen Long in March 2003.  In coming to these conclusions, I have taken into account Mr Fung’s various criticisms about Tark Wing’s evidence, including that some of the matters said by Tark Wing were not set out in his witness statements or were not put by Mr Leung to Matthew or Fanny during cross examination.  I have given careful consideration to these matters, but do not consider that they should cause me to reject Tark Wing’s evidence in relation to the London Meeting and Yuen Long Meeting.

76.  I do not consider that Matthew has produced any or any satisfactory evidence of the alleged Representation or Collateral Promise, still less that the Father was induced to execute the Renunciation and the DFA by the Representation and Collateral Promise made by Tark Wing.  The alleged inherent improbabilities of Tark Wing’s explanation as to why the Father was prepared to give up his entitlement to the estate of the Grandfather cannot, in my view, be used as proof of the alleged Representation or Collateral Promise.   It follows that I do not consider that there is any valid basis to set aside or rescind the Renunciation and the DFA.

(vi)   The claim in respect of Rental Proceeds

77.  It is not in dispute that Tark Wing and/or his companies (Caba and Wing Hing) collected the Rental Proceeds generated from Lot 3763C, Lot 3763D and Lot 3763RP since around 1997. Matthew’s case is that Tark Wing, Caba and Wing Hing failed to render a proper account in respect of, or pay, the Rental Proceeds to the Father and to him. The defence put forward by Tark Wing, Caba and Wing Hing is based on the Arrangement: see paragraphs 2(14)(f) and (16) of the Defence filed in HCA 2305/2012, and paragraphs 2(14)(g) and (16) of the Defence filed in HCA 2306/2012.  Tark Wing further confirmed, in his evidence, that the net rental proceeds generated from Lot 3763C and Lot 3763D were given to the Grandmother.  In view of my earlier conclusion regarding the Arrangement, this defence cannot stand.

78.  It is clear, in my view, that Tark Wing, Caba and Wing Hing should be regarded as holding the Rental Proceeds as “trustees” for the Father and Matthew, and ought properly to account to the Father and Matthew for the Rental Proceeds, which they have failed to do.

(vii)   Limitation

79.  It can be seen from the above discussion that I accept Matthew’s claims in respect of (i) the Father’s share of the sale proceeds of Lot 2785 and Lot 3825, and (ii) the Rental Proceeds generated from Lot 3763C, Lot 3763D and Lot 3763RP.  I consider that the proper relief that should be granted would be to order the defendants in the various actions to render proper accounts in respect of the same.

80.  In the Probate Action, the defendants rely on Sections 7(2), 8(2) and 21 of the Limitation Ordinance, Cap 347 (“the Ordinance”), to contend that Matthew’s claim in respect of the Father’s share of the sale proceeds of Lot 2785 and Lot 3825 (amongst others) is time barred.  In my view:-

(1) Sections 7(2) and 8(2) are plainly not applicable because the claim is not an action to recover any land.

(2) Section 21 is also inapplicable because the claim is not an action “in respect of any claim to the personal estate of a deceased person or to any share or interest in such estate, whether under a will or in intestacy”.

81.  In the High Court Actions, the defendants rely on Section 4(2) and (7) of the Ordinance to contend that Matthew’s claim in respect of the Rental Proceeds (amongst others) is time barred:-

(1) Section 4(2) provides that an action for an account shall not be brought in respect of any matter which arose more than 6 years before the commencement of the action.

(2) Section 4(7) provides that the section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment contained in the Limitation Act 1980 is applied in the English Courts.

82.  I do not accept that Matthew’s claim in respect of the Rental Proceeds is time barred, for the following reasons:-

(1) Section 4(2) has no direct application because Matthew’s claim for an account in respect of the Rental Proceeds is a claim for equitable relief based on breaches of fiduciary duty on the part of Tark Wing and his companies (as agents): see Hollywood Shopping Centre Owners Committee Ltd v Incorporated Owners of Wing Wah Building Mongkok Kowloon, HCA 1582/2007 (23 April 2008), at paragraphs 36 to 37, per Mr Recorder Joseph Fok SC (as he then was).

(2) Matthew’s claim in respect of the Rental Proceeds is a claim to recover from a “trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use” within the meaning of Section 20(1)(b) so that no period of limitation prescribed by the Ordinance would apply to such claim: see Paragon Finance plc v D B Thakerar & Co (a firm) [1999] 1 All ER 400, at 408-410 and 415-416 per Millet LJ (as he then was); Peconic Industrial Development Ltd v Lau Kwok Fai (2009) 12 HKCFAR 139, at paragraphs 19 and 20 per Lord Hoffmann NPJ; Williams v Central Bank of Nigeria [2014] AC 1189 at paragraphs 7-11 and 28, per Lord Sumption JSC.

(3) That being so, Section 4(2) cannot be applied to the claim by analogy under Section 4(7): see Gwembe Valley Development Co Ltd (in receivership) v Koshy (No 3) [2004] 1 BCLC 131, at paragraph 111 per Mummery LJ.

83.  In all, I reject the defence of limitation raised by the defendants in the three actions.

DISPOSITION

84.  In relation to the Probate Action, I accept Matthew’s claim in respect of the Father’s share of the proceeds of sale of Lot 2785 and 3825 but reject the rest of his claims. In relation to the High Court Actions, I accept Matthew’s claim in respect of the Rental Proceeds.  I order and direct that:-

(1) an account be taken of the Father’s share of the proceeds of sale of Lot 2785 and 3825 received by Tark Wing and the Grandmother;

(2) an account be taken of the Rental Proceeds received by Tark Wing, Caba and/or Wing Hing; and

(3) the questions of (i) the appropriate period and rate of interest, and (ii) what (if any) credit should be given for the construction costs of the houses on Lot 3763C, Lot 3763D, Lot 3763RP and Lot 884, be dealt with in the taking of the accounts.

85.  On the question of costs, I make the following orders nisi:-

(1) there be no order as to costs in relation to the Probate Action, in view of the fact that the Matthew has succeed in one claim but failed in the rest of his claims;

(2) the defendants shall pay the costs of the plaintiff in the High Court Actions, to be taxed if not agreed with certificate for two counsel; and

(3) to assist the Taxing Master, two-thirds of the trial costs shall be attributed to the Probate Action and one-third of the trial costs shall be attributed to the High Court Actions.

86.  Lastly, it remains for me to thank counsel for the assistance that they have rendered to the court.