MAN YUET FONG AND OTHERS v. MAN KAM CHEUNG RICHARD

HCA 761/2016

[2019] HKCFI 89

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 761 OF 2016

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J U D G M E N T

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I. THE DISPUTE

1.  This is a dispute between four siblings over a sum of money kept in a bank account of their late mother, Madam Wong Fung Chuen (“Mother”).  The four siblings, in descending order of seniority, are the 1^st Plaintiff, Man Yuet Fong (“P1”), the 2^nd Plaintiff, Man Kwan Oi (“P2”), the 3^rd Plaintiff, Man Pak Wan Paul (“P3”) and the Defendant (ie the youngest son), Man Kam Cheung Richard (“the Defendant”).

2.  Prior to her death in 1998, Mother held the bank account with P1 and P2 only.  It is P1 and P2’s understanding that the fund maintained in the bank account (“the Fund”, details of which will be set out below), upon Mother’s death, should be distributed not just between the two of them, but between all four siblings.  Hence, after Mother’s death, P1 and P2 told P3 and the Defendant about the Fund.  Thereafter, all four of them signed on a piece of paper which recorded a schedule of the assets left by Mother (defined as the 1^st Note below).

3.  In 2002, the Fund was still maintained in the bank account.  With the consent of all four siblings, the joint account holders were changed from P1 and P2 to P2 and the Defendant.

4.  In about October 2005, Mother’s assets (save and except the Fund) were distributed between the four siblings while the Fund remained in the bank account with further investments on the same.

5.  In November 2012, the four siblings considered distributing the Fund.  However, when P2 sought to terminate the fixed terms deposits of the Fund for the proposed distribution, she was told by the bank that the Defendant had already transferred the entirety of the Fund to another bank account held in the joint names of the Defendant and his wife.

6.  Despite repeated requests, the Defendant refused to return any part of the Fund to the Plaintiffs.  Hence, this action.  The Plaintiffs claim that the Defendant wrongfully, in breach of his duty as co-trustee holding the Fund for the four siblings’ benefit and without the consent of the Plaintiffs, caused the Fund to be transferred into another account.

7.  The Defendant alleges that the entirety of the Fund belonged to him as it consisted of rental income collected by Mother solely on his behalf in relation to a property held in his sole name and thus he is the sole beneficial owner of the Fund.  In reply, the Plaintiffs also contend that the Defendant is not allowed to make assertions on his interest in the Fund by reason of laches and waiver.  It is noted however that the Plaintiffs’ closing submissions focused only on laches but not waiver.

II.   FACTUAL BACKGROUND

8.  The four siblings’ late parents are Man Kuen Wan (“Father”) and Mother.  Father was an indigenous villager of San Tin, Yuen Long, New Territories.  In about 1957, Father emigrated to the Netherlands where he started his business and ran a successful restaurant.  Mother and the four siblings later joined Father in the Netherlands in about 1968.

9.  During the period between 1978 and 1981, Father purchased, for the purpose of investment, two properties in Yuen Long, namely, Shop 21 G/F, Ho King Building, Nos 110‑136A, Yuen Long On Hing Road, Yuen Long (“Ho King Property”) and Shop L on Ground Floor and Cockloft, Shui Yat House, No 8 Chun Yin Sqaure, Yuen Long (“Shiu Yat House”).  Ho King Property was acquired and registered in the joint names of Father and Mother as joint tenants whereas Shiu Yat House was registered in P3’s sole name.

10.  In about 1980, Father decided to return to Hong Kong with Mother and left behind his restaurant business to be managed by P3 and the Defendant in the Netherlands.  P1 moved back to Hong Kong in 1981.  P3 also returned to live in Hong Kong in about 1992, a few years after he sold his share in the restaurant business to the Defendant.  Both P2 and the Defendant continued to live in the Netherlands.

11.  It is the Plaintiffs’ case that Father, as part of his estate planning, assigned his share in Ho King Property to the Defendant in March 1979 such that Ho King Property was, after the assignment, registered in the joint names of Mother and the Defendant as joint tenants. 

12.  Father passed away on 24 August 1994.  Prior to his passing, on 23 February 1994, Mother’s share in Ho King Property was assigned to the Defendant’s wife, Madam Chung Lai Chun and since then, Ho King Property has been registered in the names of the Defendant and Madam Chung as joint tenants.

13.  On 17 April 1998, Mother passed away.  From 1968 to 1998 (when Mother died), the Defendant returned to Hong Kong on only 6 to 7 occasions. During the period between 1998 and 2004, the Defendant seldom came back to Hong Kong.  Since 2005, the Defendant has travelled to Hong Kong about once or twice a year.

14.  Before Mother’s passing, the Fund, which consisted of a total sum of about HK$2.78 million (made up of two fixed term deposits in the sums of HK$2,189,457.49 and HK$602,866.44), was kept at a bank account with Hang Seng Bank in the joint names of P1, P2 and Mother (“Joint Account 1”) with the mandate that any single account holder could operate the account.  The maturity dates for the two fixed term deposits were 23 April 1998 and 28 April 1998 respectively.  

15.  According to the evidence of P1 and P2, Mother told them that the Fund was not only for the two of them but for all four siblings.  Hence, upon Mother’s death, P1 and P2 informed P3 and the Defendant about the Fund.

16.  On 23 April 1998, when the fixed term deposit in the sum of HK$2,189,457.49 became mature, the entire sum was first transferred to a joint bank account held by P1 and her husband (“Joint Account 2”).

17.  It is not in dispute that on 24 April 1998, all four siblings together with the Defendant’s wife attended Hang Seng Bank.  It is the case of the Plaintiffs that the Defendant requested for a payment in the sum of HK$160,000 (as his alleged entitlement in Man Shek Chung Wui (石涌田)) to be taken from the Fund.  Further, after P1 gave an account of the monies and other properties left by Mother, the details were recorded on a piece of paper (“the 1^st Note”) which was signed by all four siblings. Apart from the sum of HK$160,000 which was recorded as a sum which would need to be paid to the Defendant upon the maturity date of a fixed term deposit, there was no reference in respect of any particular interest or entitlement that the Defendant had in respect of the Fund or other properties left by Mother. 

18.  In respect of the sum of HK$2,189,457.49 which had been first transferred to Joint Account 2, HK$160,000 was withdrawn by P1 on 24 April 1998 and the remaining sum of HK$2,029,457.49 was on the same day deposited back into Joint Account 1.  As I will further explain below, there is a factual dispute as to whether the sum of HK$160,000 in relation to Man Shek Chung Wui was eventually paid to the Defendant.

19.  It should be noted that according to the Defendant’s evidence, on 24 April 1998, he and his wife also opened a new joint account at Hang Seng Bank.  They arranged a sum of HK$50,000 to be transferred to their new joint account from another joint account of theirs in Hong Kong.  Hence, as at 24 April 1998, the Defendant and his wife had at least two joint bank accounts in Hong Kong.

20.  Upon the maturity of the other fixed term deposit in the sum of HK$602,866.44 on 28 April 2018, the sum was first transferred to Joint Account 2.  On the same day, another sum of HK$160,000 was withdrawn and transferred to the Defendant’s bank account.  It is the Plaintiffs’ case that the sum was for reimbursement of the Defendant’s advanced payment for Mother’s funeral expenses but this is denied by the Defendant.  The remaining sum of HK$442,866.44 was subsequently withdrawn from Joint Account 2 and continued to be kept in Joint Account 1.

21.  In about 2002, the Defendant replaced P1 to become one of the holders of Joint Account 1 together with P2.  Despite this change, P1’s residential address in Tin Yiu Estate, Tin Shui Wai remained as correspondence address of Joint Account 1 for the purpose of receiving bank statements and other information.

22.  On 11 October 2005, according to the Plaintiffs, the four siblings met and distributed some chattels left by Mother which included jewellery and watches by way of a random draw.  Apparently, this has never been disputed by the Defendant.  Upon the distribution of such properties, they signed on another piece of paper (“the 2^nd Note”) on about 13 October 2005, whereby the items of Mother’s personal properties were crossed out (apparently signifying that they had been distributed).  The 2^nd Note further provided that “壹佰伍十萬買[匯豐]和恆生股票” and “壹佰柒十壹萬做定期”.  According to the Plaintiffs, the four siblings discussed and agreed that HK$1.5 million should be invested in HSBC and Hang Seng Bank shares whereas HK$1.71 million should be kept as fixed-term deposit.  The Defendant denies that there was any such discussion or agreement.  He alleges that the investment proposals were for his own monies only and he requested that such proposals be recorded in order to show that the other siblings knew how the sums would be invested.

23.  According to P2, in about late October 2012 when both she and the Defendant were in Hong Kong, she suggested that the Fund be distributed equally between the four siblings.  P1 and P3 agreed with P2 but the Defendant did not express any views.  It is also P2’s evidence that on 15 November 2012, when she went to the bank seeking to terminate the fixed term deposits of the Fund for the purpose of distributing the same between the four siblings, she was told that the Defendant had already transferred the entirety of the Fund, which was in the total sum of HK$3,352,443.71, to another account held in the joint names of the Defendant and his wife.

24.  As stated above, it is the Defendant’s case that the Fund belonged to him solely as it came from the rental income derived from Ho King Property which had been collected by Mother on his behalf.   Hence, it is contended that the Defendant has always been the sole beneficial owner of the Fund and he was entitled to deal with the same according to his own wish.

III.   ANALYSIS

25.  In view of the above factual background relating to the present dispute, the key issue is whether the Fund was held for the benefit of the four siblings in equal shares or for the sole benefit of the Defendant only.  Further, there is also a question as to whether the Defendant should be barred from asserting his alleged interest in the Fund by virtue of laches.

26.  It appears to me that the following factors are of significance for the purpose of determining who should be beneficially entitled to the Fund.

27.  First, it is important to note that in the present case, the Fund has been kept at a bank account which was opened in the joint names of P1, P2 and Mother (and remained so held at the time of Mother’s death).  According to the principle of survivorship, the Fund would pass to P1 and P2 jointly upon Mother’s death. However, it is the evidence of P1 and P2 that Mother had told them that the Fund was not only for the two of them but for all four siblings to share upon her death.  Obviously, upon Mother’s passing, P1 and P2 did not take advantage of the principle of survivorship and, according to their evidence, they candidly informed P3 and the Defendant of Mother’s wish regarding how the Fund should be distributed. 

28.  No technical expressions are necessary for the creation of an express trust, which may be created without the settlor being aware of this, so long as he intends to create a state of affair that can only be accomplished if it creates a trust: Underhill & Hayton Law of Trusts and Trustees (19^th ed), Article 8.1(1).  Further, whether an intention to create a trust is sufficiently evinced is in each case a question of objective contextual interpretation: Underhill & Hayton, Article 8.1(2).  The Plaintiffs have therefore established that prima facie, by keeping the Fund in a bank account which was opened together with P1 and P2 and also telling them Mother’s intention regarding the use of the Fund (which was duly conveyed by P1 and P2 to the other siblings upon her death), a trust was created with a view to carrying out Mother’s intended distribution of the Fund.

29.  Secondly, since the Defendant’s case is that the Fund belongs to him solely, it is incumbent upon him to prove (as admitted by the Defendant’s counsel) that the Fund was derived entirely from the rental income in relation to Ho King Property that Mother collected from 1979 until her death for and on behalf of the Defendant. In February 1994, Ho King Property was registered in the joint names of the Defendant and his wife and at about the same time, the Defendant and his wife, via a Power of Attorney, appointed Father and Mother to collect rental income and manage the property on their behalf.  The Plaintiffs’ response in this regard is that despite the assignment of Ho King Property to the Defendant and his wife (which was effected for the purpose of estate planning), their parents retained the power to deal with the property during their lifetime.  However, the questions on whether Ho King Property was beneficially owned by the Defendant and his wife and whether Mother collected rental income for and on behalf of the Defendant in relation to that property are beside the point.  Even assuming that the Defendant was fully entitled to the rental income, the relevant question is whether the Fund came from such income.

30.  The Defendant relies on another bank account with Hang Seng Bank which was jointly held by him and Mother (“Joint Account 3”) to show that rental income was deposited into the account and a sum of HK$600,000 was withdrawn from the account (which was subsequently deposited into Joint Account 1).  However, the bank passbook of Joint Account 3 shows that apart from the rentals received from Ho King Property, there were credit entries of other substantial amounts in the sums of HK$690,000, HK$230,736 and HK$200,000 on 16 June 1997, 18 February 1998 and 10 March 1998. The Defendant admitted during cross-examination that he did not know where such deposits came from and neither is there any explanation from the Defendant that such amounts had any correlation with the rental income derived from Ho King Property.  There is only a bare assertion in the Defendant’s closing submissions that “it is possible” that such deposits “were related to rental income” in view of the Defendant’s case that Mother had collected rent since 1979 and she would transfer monies between her bank accounts.  In the circumstances, there is simply no sufficient evidence to prove that the HK$600,000 which was withdrawn from Joint Account 3 was derived from the rental income generated by Ho King Property.

31.  Even assuming that HK$600,000 came from the rental income, the Defendant has not adduced any evidence to explain how the rest of the Fund (ie about HK$2.1 million) was related to the rental income at all.  Further, given the existence of Joint Account 3 held by Mother and the Defendant, it is inconceivable as to why Mother would have chosen to use Joint Account 1 (opened in the names of P1, P2 and Mother) instead of Joint Account 3 for the purpose of holding the monies collected for the sole benefit of the Defendant.

32.  Thirdly, it is submitted on behalf of the Defendant that “the contents of [the 1^st Note and 2^nd Note] do not spell out any agreement to distribute the assets stated therein equally”.  However, both the 1^st Note and the 2^nd Note, which were signed by all four siblings, were clearly presented in such a way that the Fund and Mother’s other personal belongings were, as a whole package, treated as properties left by Mother for the benefit of the four siblings, given their unequivocal acknowledgement by signing on the documents. As stated above, apart from the sum of HK$160,000 which was recorded in the 1^st Note as a sum which would need to be paid to the Defendant upon the maturity date of a fixed term deposit, there was no reference or remark to the effect that the Defendant was solely entitled to the Fund (or any part thereof) or other personal belongings.

33.  In his Witness Statement, the Defendant stated that at the meeting on 24 April 1998 (ie the date on which the 1^st Note was signed), he told the Plaintiffs that Mother deposited the rental income into Joint Account 1 and that the money amounted to about HK$2‑3 million.  According to the Defendant, no issue was taken by the Plaintiffs at that time.  There is, nevertheless, no evidence on how the Defendant explained to the Plaintiffs that the entirety of the Fund belonged to him, given that this was the first time, according to the Defendant’s case, that he informed the Plaintiffs of his interest in the Fund.  Further, had the Plaintiffs accepted that the Fund belonged solely to the Defendant, it is difficult to understand why the Plaintiffs would have subsequently changed their stance by commencing this action.  The Defendant’s case is therefore inherently inconsistent. It is the evidence of both P1 and P2 that before the Defendant filed his Defence in this action, no one had ever told them that the Fund came from the rental income of Ho King Property which Mother collected on behalf of the Defendant.

34.  In addition, the Defendant, as an experienced businessman, ought to have at least considered making a brief note on either the 1^st Note or the 2^nd Note (or on a separate document contemporaneously when the 1^st Note or the 2^nd Note was prepared or signed) to record his interest in the Fund.  The Defendant’s only explanation for his failure to do so was that he was not in a good mood with Mother having then recently passed away and was in a rush to leave after the 1^st Note was signed.   Moreover, under cross-examination, he simply stated that he believed that the other siblings would take care of the Fund on his behalf.  This does not make sense since there was nothing in the 1^st Note or the 2^nd Note which would enable any of the Plaintiffs to know that the Fund belonged to the Defendant.   Worse still, as mentioned above, even the Defendant’s own evidence fails to address how he explained to the Plaintiffs in relation to his alleged sole beneficial interest in the Fund.

35.  According to the Defendant’s evidence, the reason why the proposed investment plan was recorded in the 2^nd Note was that he wanted to leave some evidence which can show that the Plaintiffs knew about such plans. Nonetheless, at the time when the 2^nd Note was prepared and signed, the Defendant was already one of the holders of Joint Account 1. If the Defendant were the sole beneficiary of the Fund, he ought to have the sole discretion to make a decision on the investment plan for the Fund.  There was no legitimate reason why the Defendant would have found it necessary to make a record so as to notify the Plaintiffs of the investment plan for the Fund when he completely failed to make any note on either the 1^st or the 2^nd Note to record his alleged interest in the Fund.

36.  Fourthly, I agree with the Plaintiffs that it is inherently implausible for the Defendant to have allowed the Fund (in the total amount of about HK$3 million) to be kept in a joint account as opposed to an account in his own name or in the joint names of both himself and his wife for a period of about 14 years since 1998.  This is particularly so when, as stated above, as at 24 April 1998, the Defendant had at least 2 bank accounts jointly held with his wife.  In the circumstances, he could have easily arranged for the Fund to be held in one of those accounts.

37.  During cross-examination, the Defendant was asked why he did not consider holding the Fund in another account designated by him when he had ample opportunities to do so while he and his wife were in Hong Kong in 1998, 2003 or 2005, he was unable to give any answer.  He only managed to say either that he did not pay attention to this matter or that he was otherwise preoccupied on each of those occasions.  His explanation that he could not use such account for investment simply cannot stand as an investment account could have been easily opened with the bank.

38.  On the basis of the above matters alone, it is sufficient to conclude that the Defendant’s case lacks credibility and must fail.  However, for the sake of completeness, I will deal with the other points which may also help assess the credibility of each party’s evidence.

39.  The Defendant relies on various withdrawals from the Fund, namely HK$62,500, HK$20,000, HK$40,000 and HK$50,000 which were made on 12 May 2009, 10 November 2010, 9 April 2011 and 17 October 2011 respectively in order to show his entitlements to the Fund on the basis that those sums were used to pay for the Defendant’s legal costs incurred in a legal action (ie HCA 1731 of 2009) against P3, the subject matter of which is not relevant to the present proceedings.

40.  It is the evidence of P1 and P2 that they were misled by the Defendant regarding this claim against P3 when they allowed the above sums to be withdrawn for the Defendant’s use.  In this regard, the case of P1 and P2 is that the sums were allowed to be withdrawn pursuant to their consent and the Defendant was required to return the sums in due course.  In the circumstances, P1 made various remarks “取六萬二仟伍佰元”, “取二萬元”, “9-4-11取4万元” and “取五萬元” on the relevant monthly statements in respect of the above transfers.  At trial, the Defendant did not challenge P1 regarding why any of such remarks was made.  As a matter of common sense, had P1 known that the Fund belonged entirely to the Defendant (who would be at liberty to decide how the Fund should be used), it would have been unnecessary for her to make any such remarks.

41.  The 1^st Note made reference to payment in respect of the Defendant’s entitlement in Man Shek Chung Wui in the sum of HK$160,000 as “(石涌田)” was written on top of “戶口到期扣16万給錦祥”.  However, the Defendant’s evidence is that although he received a sum of HK$160,000, it had nothing to do with Man Shek Chung Wui.  Again, this is contrary to the records as stated in the bank passbook of Joint Account 2 (held by P1 and her husband) which shows the following:-

(1)  On 24 April 1998 (ie upon the maturity of the fixed term deposit in the sum of HK$2,189,457.49), a sum of HK$160,000 was withdrawn and a handwritten note of “過石涌” was made next to the sum withdrawn.

(2)  On 28 April 1998 (ie upon the maturity of the fixed term deposit in the sum of HK$602,866.44), another sum of HK$160,000 was withdrawn and a handwritten note of “過媽去世用” was made next to the sum withdrawn. 

42.  The above records (and the notes contained therein) have not been disputed by the Defendant.  At trial, the Defendant alleged that he did not receive HK$160,000 on 24 April 1998 and that he merely asked P1 to transfer HK$160,000 from the fixed term deposit referred to in paragraph 41(2) above (ie the sum of HK$160,000 transferred on 28 April 1998) for his son’s expenses.  However, the Defendant’s Supplemental Witness Statement (which was filed after the Plaintiffs had adduced evidence by way of P2’s Witness Statement regarding the payment of HK$160,000 to the Defendant on 24 April 1998) is silent on whether the sum of HK$160,000 transferred on 24 April 1998 was received.  Further, in his 2^nd Supplemental Witness Statement, while the Defendant made a mere assertion that the sum of HK$160,000 received on 28 April 1998 had nothing to do with his entitlement in Man Shek Chung Wui or Mother’s funeral expenses, he said nothing about the nature and purpose of the sum transferred on 28 April 1998.

43.  Finally, there is a dispute on the nature of the sum of HK$111,200 which was transferred from the Fund to P3’s bank account on 26 October 2010.  According to the Plaintiffs, the sum of HK$111,200 was the cost of repairing their late parents’ tomb, which, as agreed by the four siblings, should be settled via the use of the Fund.  It was on this basis that the transfer was made.  The Defendant denies that the sum of HK$111,200 was the total cost of repairing the tomb and he alleges that the amount of HK$111,200 only represented his half share of the repairing cost. However, the Defendant’s evidence is flatly contradicted by the relevant receipt which shows that the cost of repairing the tomb was HK$111,200.  It is important to note that the Defendant has never taken any issue on the contents of the receipt.  The above points further strengthen my view that the Defendant’s evidence is not credible. On the contrary, I find the Plaintiffs’ evidence clear and straight-forward.

44.  It follows from my analysis and rulings above that it is unnecessary for me to deal with the Plaintiffs’ arguments on laches.  I only wish to add that insofar as necessary, I am of the view that even if the Defendant were to succeed in establishing his beneficial ownership over the Fund, his claim would in any event be barred by the defence of laches.

45.  In light of my findings above, for 18 years from 1998 (when Mother passed away) to 2016 (when the Defendant filed his Defence in these proceedings), the Defendant had not once asserted his beneficial title to the Fund. 

46.  Further, there is a paucity of contemporaneous evidence which supports the Defendant’s case that he is the sole beneficial owner of the Fund.  The only piece of evidence which may be said to be supportive of the Defendant’s case emanates from his Witness Statement where he gave evidence to the effect that in September 1997, Mother told him during her stay with the Defendant’s family in the Netherlands that (i) she would place the rental income she received on the Defendant’s behalf in respect of Ho King Property since 1979 into her joint bank account with P1 and P2 so that they could help manage the money when she was not around and (ii) she had told P1 and P2 that the Fund belonged to the Defendant.

47.  Given that Mother has passed away, there is simply no way in which the Defendant’s assertions could be verified, less still refuted, by the Plaintiffs.  In the circumstances, the substantial lapse of time coupled with the death of an important witness (ie Mother) has rendered it inequitable to enforce the Defendant’s claim even if the Defendant were to be successful in proving his beneficial title to the Fund: Wing Ming Garment Factory Limited v The Incorporated Owners of Wing Ming Industrial Centre [2014] 4 HKLRD 52 at 107.

IV.    CONCLUSION

48.  By reason of the above analysis, I am satisfied that the Plaintiffs have successfully proved their claims against the Defendant.  I find that the Defendant on or about 9 November 2012 wrongfully, in breach of his duty as co-trustee holding the Fund for the four siblings’ benefit and without the consent of the Plaintiffs, caused the Fund (which was then in the total sum of HK$3,352,443.71) to be transferred into another account.  I order that the Defendant shall pay a sum of HK$838,111 (ie HK$3,352,443.71 x ¼) to each of P1, P2 and P3. Notwithstanding that the claims are formulated on breach of trust, the Plaintiffs do not ask for compound interest or interest on a higher basis. I therefore also make an order nisi that interest on the above sum at the commercial rate (ie prime rate + 1%) from 9 November 2012 to the date of this Judgment and thereafter at judgment rate be paid by the Defendant to each of the Plaintiffs.  Further, I make an order nisi that costs of this action (save and except any previous costs orders made) be paid by the Defendant to the Plaintiffs, to be taxed on the basis of a certificate for one counsel, if not agreed.  All orders nisi shall become absolute upon the expiry of 14 days from the date of this Judgment in the absence of any application to vary the same.