HO TAK MING v. CHIU KA TSIN AND OTHERS

HCA 3130/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3130 OF 2001

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J U D G M E N T

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1. The Plaintiff in this action was appointed pursuant to an order of the court as the administrator of the estate of Chiu Tso To, deceased ["the Father"] who died on 12 September 1996. Letters of Administration with a will annexed was granted in HCAG000183/1999 on 20 April 1999. The Defendants are sons and daughters of the Father and Madam Yu Wai Fong ["Yu"], his first wife. Yu died in 1959. In 1961, the Father remarried with Madam Tse Lap Jing ["Tse"] and two sons were born out of that marriage.

2. The last will of the Father was annexed to the Grant. It was a will made on 5 August 1968. Under the will, Tse and all the sons (including the 1st, 2nd, 3rd, 4th and 5th Defendants and the two sons of Tse) are beneficiaries to the estate of the Father in equal shares. The three daughters (6th to 8th Defendants) were excluded.

3. The subject matters of the action are some publicly listed shares held in the name of the 1st and 2nd Defendants prior to the disposal thereof in the circumstances described below. It is alleged by the Plaintiff that 187,960 shares in Hong Kong Telecommunications Ltd and 225,715 shares in the Bank of East Asia Ltd ["the D1 Shares"] were held by the 1st Defendant on trust for the Father. The Plaintiff also alleged that the 2nd Defendant held 311,328 shares in the Bank of East Asia Ltd ["the D2 Shares"] on trust for the Father. Hence, according to the Plaintiff, the beneficial interest in these shares should vest in the estate upon the death of the Father.

4. Similar claims were advanced by the Plaintiff against the 1st Defendant in High Court Action No. 20952 of 1998 in respect of the shares held in the name of the 1st Defendant. Judgment was entered against the 1st Defendant in that action on 10 January 2001. The other defendants in this action were not parties to that action. The present action was commenced on 12 July 2001. The 1st Defendant did not file any acknowledgment of service. Nor did he file any defence. He was not present nor represented at the trial. Although his son Chiu Kai Chi did come to court on the second day of the trial, he did not address the court and I have no justification to assume that he came to court as a representative of the 1st Defendant. Hence, for the purpose of this trial, the 1st Defendant was absent.

5. Although Mr Chan, counsel for the Plaintiff, brought my attention to some aspects as to the service of the Writ of this action on the 1st Defendant by reference to an affirmation of Ma Sai Yim of 8 March 2003, he eventually was content to proceed on the basis that service had been sufficiently proved by the affirmation of Lee Chun Ho of 27 November 2001 and he did not ask the court to make any specific order. According to that affirmation, the Writ had been served to a last known address of the 1st Defendant at Shing Nam Road, that being an address given by the 1st Defendant to the court in High Court Action No. 20952 of 1998.

6. Although Mr Ma, the solicitor acting for the Plaintiff, asked for certain relief in that affirmation, as I mentioned above, Mr Chan did not pursue that application. Mr Ma mentioned another attempt to serve the Writ by sending the same to an address at Tak Ku Ling Road. On the assumption that Mr Ma had made full and frank disclosure as to all material facts about service of the Writ on the 1st Defendant in his said affirmation (and the court must proceed on that assumption), I see no reason for this court to act on any basis other than that the Writ had been validly served on the 1st Defendant. The trial proceeded accordingly.

7. The other Defendants were represented by Mr Chong at the trial. The reference to the defence case and the defendants hereinbelow shall be, unless otherwise stated, reference to the 2nd to 8th Defendants. Their case was that the D1 Shares and D2 Shares were not properties of the Father. They claimed that those shares originated from shares acquired by Yu as a gift for her children in 1952. It was alleged that 50 shares in the Bank of East Asia Ltd was purchased by Yu in the name of the 6th Defendant and another 50 shares in the Bank of East Asia Ltd and some shares in Hong Kong Telephone Company Ltd in the name of the 1st Defendant. They were respectively the eldest daughter and son in the family. In 1968, the 6th Defendant transferred the D2 Shares to the 2nd Defendant due to her personal circumstances. However, whether under the names of the 1st and 2nd Defendants or under those of the 1st and the 6th Defendants, the shares were, according to their case, held on trust for all the defendants in equal share.

8. The Defendants accepted that the Father had been having custody of the share certificates of the D1 and D2 Shares and dividends generated from the same had been collected by the Father since the death of Yu. The latter was achieved by saving accounts opened in the names of the 2nd and 6th Defendants respectively and the name chops for the operation of the said accounts were kept by the Father. As for the 1st Defendant, there is evidence that he issued cheques to the Father regarding the dividends paid to him.

9. The Defendants said they allowed the Father to have the dividends generated from the D1 and D2 Shares because Yu had told them to use the dividends as provision for the Father.

10. It is common ground that there had been subdivision, rights issues and bonus issues since 1952 as a result of which the number of the D1 and D2 Shares were increased to the quantities as they were in 1996. However, there is no evidence before me as to the history in respect of the Hong Kong Telephone Co. Ltd shares. The trial bundles contained information provided by the Bank of East Asia Limited regarding the history of the 50 shares held originally in the names of the 1st and 6th Defendants respectively. From such information, it can be seen that there had been rights issues subscribed by the registered shareholders in 1978 and 1982 respectively. The Plaintiff's case is that those rights issues were paid for with money from an account in the name of Tse. Tse gave evidence that the Father decided to subscribe for the rights issues because he considered the same to be profitable.

11. There had also been sale of some of the shares over the years. According to the record supplied by the Bank of East Asia Limited, 200 shares of Bank of East Asia Limited under the name of the 2nd Defendant were sold in 1973; 10,000 shares of Bank of East Asia Limited under the name of the 1st Defendant were sold in 1983; 30,095 shares of Bank of East Asia Limited under the name of the 1st Defendant were sold in 1993.

12. The Defendants also added an alternative plea of gift from the Father by way of re-re-amendment to the Defence. I granted the Defendants leave to amend on 11 March 2003 on condition that the Defendants could only rely on the presumption of advancement in support of such plea. Such condition was imposed with the consent of Mr Chong.

13. After the death of the Father, the 1st and 2nd Defendants distributed the D1 and D2 Shares equally amongst all the defendants. The Plaintiff said that they were not entitled to do so and by this action, sought to recover the shares for the benefit of the estate of the Father.

14. The primary issue of fact is therefore who paid for the D1 and D2 Shares. If they were acquired by Yu, the Plaintiff's claim must fail as the Plaintiff did not plead any case of gift from Yu to the Father. But if they were acquired by the Father, the question is what was the intention of the Father or the common intention of the parties when he acquired the same in the name of the 1st and 6th Defendants. Bearing in mind that there had been rights issues, the intention of the Father at the time of the subscription for the rights issues would also be relevant.

Who purchased the shares?

15. As I said, the Plaintiff was unable to produce any evidence as to the history regarding the dealings in the shares in the Hong Kong Telephone Company Limited held under the name of the 1st Defendant. Although both parties seem to take the position that the same originated from acquisitions made in 1952, there is no direct evidence as to that apart from the oral evidence of the 6th Defendant. Neither party was able to say the exact quantity of Hong Kong Telephone Company Limited shares which were said to be acquired in 1952. As to the Bank of East Asia Ltd shares, there are some records produced by the company.

16. There is also a lack of direct documentary evidence as to who paid for the acquisitions in 1952. The Plaintiff called Tse as his witness. Since she only married the Father in 1961, she could not have any personal knowledge as to the acquisitions in 1952. She said she learnt about the shares from the Father in or about 1968 or 1969. Taking her evidence to the highest, she only said the Father told her that the shares were his. As to how the shares became his, the Father did not tell her. The Father did not mention when and how he bought the shares, if he did buy the same. Hence, Tse did not give any direct evidence as to the purchase of the shares by the Father.

17. I would also mention at this juncture that although I find Tse to be more reliable as a witness as compared with the 6th Defendant, I bear in mind that due to the disharmony between Tse and the Defendants since mid 1960's, she was not privy to some of the dealings between the Father and the Defendants. She only learnt second hand from the Father as to what happened and there could be inaccuracies in her recollection of the events. One example was the date when she first learnt about the shares. Mr Chong had highlighted the different versions of her evidence in his closing submissions. Her repetition of what the Father told her about the ownership of the shares was in effect post acquisition declarations by the Father, the admissibility and weight thereof were challenged by Mr Chong. She also strikes me as a vindictive person and her evidence might in some respects coloured by her feeling towards the Defendants. For example, she was reluctant to admit that there were contacts between the 1st Defendant and the Father after the dishonoured cheque of 1993. There are also other points made by Mr Chong as to her credibility in Paragraphs 75 to 77 of his written closing submissions which I have taken into account. I do not find it necessary to discuss those points at length.

18. On the whole, notwithstanding Mr Chong's submissions, I find Tse to be an honest witness although I would only place limited reliance on her evidence due to the aforementioned reservations I have as to the usefulness of her evidence. I shall place prime reliance on incontrovertible matters and the documentary evidence. Insofar as I rely on the evidence of Tse as expressly mentioned below, I am satisfied that her evidence in those aspects is reliable.

19. The defence called the 6th Defendant to give evidence about the acquisitions of the shares in 1952. She was then 14 years old. The Father was living in Hong Kong with the 1st Defendant whilst Yu and some of the siblings lived in mainland China. She testified that she came to Hong Kong with her mother, Yu, and her brother the 2nd Defendant in 1952 for visit. On that visit, Yu brought some cash (in Hong Kong dollars), gold and jewellery to Hong Kong. The 6th Defendant said that some of those were given to Yu by Yu's parents. They stayed in Hong Kong between May and August 1952. During that stay, Yu took her and the 6th Defendant to a stock broker in Central on three occasions and the 1st Defendant was also with them on two occasions. The shares were acquired by Yu on those occasions and Yu told her and the 1st Defendant to sign the documents to register as owners. According to her evidence in the witness box, Yu told them that these were bought by her at the time of the purchases. It was only on the day after all three purchases had been made, Yu told them the shares were gift by her to her children and the 1st and 6th Defendant were told to keep the same for all their siblings. Yu also told them to be filial to the parents. Yu did not mention anything about the dividends generated from these shares at that time. Subsequently, Yu and the children also came to live in Hong Kong in 1953. At a later stage (the 6th Defendant did not specify when), Yu mentioned to her children that the dividends could be used for the provision of the Father and the education of the children.

20. I do not believe the 6th Defendant and she did not impress me as a truthful witness. When she gave evidence in the witness box, she was quite specific as to the three occasions on which the shares were acquired in 1952. She firmly said that the Hong Kong Telephone Co. Ltd shares were acquired together with the third batch of the Bank of East Asia Ltd shares on 26 August 1952. However, it is obvious to me that she made that up. In her Defence as well her witness statement, she was quite vague about the acquisition of the Hong Kong Telephone Co. Ltd shares. All she could say in those documents was, "in about 1952, certain number of shares in Hong Kong Telephone Company Limited were purchased and registered in the name of the 1st Defendant". She was however quite specific as to the dates and quantities of acquisitions of the Bank of East Asia Ltd shares. As mentioned, the records of the acquisitions of the Bank of East Asia Ltd shares were available but not those for the Hong Kong Telephone Co. Ltd shares. Yet, if she could truly remember independently from the records as to these acquisitions, and if she could truly recall that the purchase of the Hong Kong Telephone Co. Ltd shares happened on the same occasion as the purchase of the third batch of the Bank of East Asia Ltd shares, she should be able to say so in her Defence as well as her witness statement instead of being coy about the same. When she was cross-examined about this, she initially prevaricated and on further questioned by the court, she resorted to the explanation that it was probably due to the failure on the part of the others in understanding what she said. I do not find that to be a credible explanation. The initial acquisitions of these shares have always been an important issue in this action and those acted for the defence must have gone through this issue with the 6th Defendant a number of times in the preparation of the Defence and the witness statement. If the 6th Defendant had been telling the same story, there was no room for misunderstanding.

21. I do not believe the 6th Defendant has any independent recollection about the dates and quantities of shares acquired in 1952. In my judgment, she only recited in her evidence what she could gather from the available records and then made up a story therefrom. In fact, when she gave evidence about these transactions initially in her evidence-in-chief, she mixed up some of the dates.

22. There are discrepancies between the oral testimony of the 6th Defendant and what she said in her witness statement as to what happened in the course of the purchase of the shares. The 6th Defendant said in the witness box that when they were at the stock broker, Yu only told her that the shares were purchased by her and nothing else. She also testified that it was the broker who handed her the document for her execution. She said it was only on 27 August 1952, the day after all the shares had been acquired, Yu told them that the shares were purchased as a gift to all the children and the 1st and 6th Defendants were to keep the same for all the siblings and they should also look after their father. On the other hand, in her witness statement, she said that these things were said by Yu when they executed the instruments of transfer which were handed to them by Yu. Again, Mr Chan cross-examined the 6th Defendant on these discrepancies and again she prevaricated and failed to give any credible explanation.

23. According to some correspondence between the Father and those family members lived in mainland China between 1949 to 1952, life was pretty hard in the mainland during those times. There were letters from those in the mainland written to the Father asking for money and acknowledging receipt of the same. Although Yu's family had run a business of vegetarian delicatessen and food wholesaler, the business ceased when the Japanese invaded China in 1938. Yu had brought her children to escape to Hong Kong during that time. When the Japanese occupied Hong Kong, they moved back to China. In a letter dated 7 June 1952, the brother of Yu, Yu Yim Kei wrote to the Father asking urgently for a sum of RMB 1 million or several ten thousands. In the letter, he said that the money was needed for their daily provision as they could not carry on with their businesses and they had no rental income. The Father then remitted a sum of RMB 600,000 on 9 June 1952 (the HK$ equivalent was $154.65). In another letter written in 1949, the 6th Defendant told the Father they had no money to pay for the family provisions and asked him to send more money. When she gave evidence in the witness box, she accepted that between 1949 and 1952, everything had been expropriated by the government and her uncle and maternal grandparent became poor.

24. During the same time, the Father appeared to be rather well off in Hong Kong. According to the 6th Defendant, the Father had succeeded to his own father's position as a cashier in Nam Jam Factory, a business operated by his relative Chiu Fuk Sun. He also had some shareholdings in that business. Mr Chong's submission that the Father was a mere clerk or salesman in the factory does not accord with the evidence of the 6th Defendant. Apart from being able to make various remittances to the mainland to support Yu and her brother, there is evidence to show the Father also bought shares in listed companies in 1952. The 6th Defendant said the Father bought a property at Carpenter Road which became their matrimonial home after the whole family reunited in Hong Kong in 1953. She said the Father told her it was about $10,000 odd. The land search record regarding the property showed that the Father together with four other persons had been the tenants in common in equal share in respect of the land. These are evidence of wealth on the part of the Father. I reject Mr Chong's submission that the documentary evidence showed that the Father only accumulated wealth after Yu's alleged visit in 1952. Annexure 1 to his Closing Submissions failed to take into account of the letters written during the war time and the evidence of the 6th Defendant concerning the Father's succession to the interest and post of his own father in the factory.

25. However, she said life was not too difficult in mainland China in 1952 and she thought Yu was financially better off than the Father. She said that the letter of 1949 was written by her in accordance with the instructions of her mother. The purpose of that letter was to tell the Father to send them maintenance. She was of the view that although Yu was well off enough to take care of their living, the Father should also have responsibility to the family. I do not accept this explanation. The 1949 letter itself recorded that the Father had been sending them money previously and I do not see any basis for suggesting that the Father needed to be reminded about his obligation to the family in China. The 6th Defendant gave evidence that Yu and the Father trusted each other and were on good terms. I cannot believe that Yu would tell the 6th Defendant to lie to the Father in the letter in order to extract money from him.

26. Mr Chong attempted to elicit a further explanation about the wordings of these letters from the 6th Defendant in his re-examination. He asked the 6th Defendant about the inspection of mail by the Chinese government at that time. Then he led the 6th Defendant to tell the court that the letters had to be written in these terms because if it were otherwise, the government would have found out that the Yu family in China had money and would attack them as capitalists. It is quite clear to me that this was not a spontaneous explanation. Rather, it was an explanation prompted by Mr Chong. I do not find this explanation credible. If the Yu family were concerned about disclosure of their wealth in the letters for fear of the same being inspected by the government, they would not write so much about receiving money remitted by the Father or money brought to them through someone else. Further, even if they wished to hide their wealth, there was no need to stress how poor they were and how difficult life was. As a matter of fact, they were not shy from saying that they were capitalists in the letters. There were references to their business (which they said could not be operated) and lack of rental income. In my view, the letters did not support this explanation.

27. Mr Chong submitted that Yu came from a family which had operated this delicatessen business for some 150 years. He submitted that it was inconceivable that the family did not have any accumulation of wealth. He said it was unrealistic to suggest that all the family wealth had been depleted by the effect of Communist takeover of China. He asked this court to take judicial notice that during those days, a lot of capitalists smuggled their wealth to Hong Kong and he said this was what Yu had done in 1952.

28. Mr Chong based his submission on an extract from a book called Foshanshi Shangyezhi (佛山市商業誌) which was published in 1991. It was compiled by the Foshan City Commercial Bureau (佛山市商業局). A brief introduction was given about this Tak Sum Delicatessen (得心斋). It was said at the preface of the book that the purpose of the book was to introduce the various businesses in Foshan with emphasis on the developments after 1949. An extract on得心斋from another book called 佛山文史資料 was also included in the trial bundle.

29. Whilst I accept that there is evidence that Tak Sum Delicatessen had a long history, I do not think I derive much assistance from that extract as to the state of business and family well-being of the Yu's family between 1949 and 1952. The 6th Defendant's evidence was that the business had ceased since Japanese invasion of China and there is no reliable evidence to show that family wealth prior to the war had been preserved up to 1952. I do not accept the submission of Mr Chong. Given the devastating effect of the war, it would not be surprising that the family fortune had been substantially depleted by 1952.

30. On the balance of probabilities, I find that the contents of the letters between 1949 and 1952 truly reflected the difficulties faced by the Yu's family in China during those years. Yu simply had no family wealth to smuggle to Hong Kong. I reject the 6th Defendant's evidence as to how she witnessed Yu packing bundles of $500 Hong Kong dollars banknotes and gold and jewellery into the luggage which she brought to Hong Kong in 1952. I also reject her evidence that Yu's family was better off than the Father during that period of time.

31. The version of the 6th Defendant as to the events in 1952 is also improbable. It seems incredible to me that Yu had so much Hong Kong dollars banknotes in mainland China in 1952. According to the contemporaneous correspondence and remittance documents, the Father did not send them Hong Kong dollars and they had not asked for remittances in Hong Kong dollars.

32. The 6th Defendant said Yu brought her children to Hong Kong in 1952 to watch a parade celebrating the accession of Queen Elizabeth the Second. The 6th Defendant gave evidence that she watched the parade one or two days after she arrived in Hong Kong. That cannot be correct. Although the Queen ascended to the throne due to the unexpected demise of King George VI in February 1952, official celebration took place after the coronation on 2 June 1953. The celebration in Hong Kong also took place in 1953. In May 1952 the official mourning period of the death of the King was still running and it is improbable that there would be a parade in Hong Kong at that time celebrating the accession of the Queen. It is a reflection on the lack of credibility on the part of the 6th Defendant when she maintained her story about watching a parade in 1952 when Mr Chan, counsel for the Plaintiff, confronted her with these matters.

33. Further, if there is any truth in the story of the 6th Defendant and Yu actually nominated the 1st and 6th Defendants to hold the shares for all the siblings, when Yu was admitted to hospital before her death, she would have handed those to them rather than to the Father for safe keeping. After all, by that time (in 1959), the 1st Defendant was 25 years old and the 6th Defendant was 22 years old. The 6th Defendant had married in 1958 and lived apart from her parents.

34. More significantly, even if for whatever reasons Yu found it more convenient to let the Father keep the shares instead of placing the same under the custody of the 1st and 6th Defendants, there was no good reasons why the latter did not get back the same after the Father remarried in 1961 and his finance allegedly came under the control of Tse. The 6th Defendant said that Yu's children did not have a good relationship with Tse and this was borne out by an incident in 1964 as reflected in a letter wrote by the Father in May 1964 (which the 6th Defendant said she had not received). I do not think this could be explained by the 6th Defendant's answer in re-examination that the shares could not be sold without their signatures. The evidence was that the Father had all along been getting all the dividends and blank transfer forms executed by the 1st and 2nd Defendants had been left with the Father. The fact that the 6th Defendant did not execute such blank transfer forms is neither here nor there. The 2nd Defendant chose not to give evidence and no explanation was offered about these blank transfer forms.

35. The credibility of the 6th Defendant is also marred by how the term of a trust created by Yu in favour of her children had been formulated differently at different stages and neither the 6th Defendant nor any defendants came forward with satisfactory explanation about these changes. I do not propose to repeat what was recited by Mr Chan in his written submissions in this regard. Suffice to say that the deviations were quite substantial and the unexplained shifting of stance is, in my judgment, an indicia of lack of credibility. The 6th Defendant tried to avoid such difficulties by saying that she had not discussed the matter with the 1st and 2nd Defendants. I cannot believe so. Plainly, it was a deliberate tactic adopted by the Defendants that the 6th Defendant was only person to give evidence for the defence in this case. Given that all the Defendants (apart from the 1st Defendant) were represented by the same team of lawyers, and the other defendants who could give material evidence chose not to go into the witness box, it is incredible that the 6th Defendant had no knowledge as to how the case had been conducted previously and crucial aspects thereof. She admitted that she was involved in the liaison with the solicitors.

36. It is also unbelievable that she had not discussed with the other Defendants at length about the claim of the Plaintiff and their common tactics in defending such claim. The evidence showed that it was very much a concerted efforts on the part of all the Defendants (including the 1st Defendant) in distributing the Shares amongst themselves to the exclusion of Tse and her two sons. I accepted Tse's account as to how the share certificates were removed stealthily from her possession after the death of the Father. The 3rd and 4th Defendants went to the home of Tse when she was not there and took away the share certificates without her knowledge or consent. Then the 1st and 2nd Defendants executed the transfers in favour of the other defendants for effecting the distribution.

37. These were done against the background that shortly after the death of the Father, there was a family meeting. At that meeting, in the presence of Chiu Cho Ming, a brother of the Father, the Shares were shown to all the children and Chiu Cho Ming said that these were the Shares of the Father and they could be inspected and some could be sold for funeral expenses. He also said the rest could be distributed later. The 6th Defendant said she was not present at that meeting whilst Tse said she was. I prefer the evidence of Tse. The 6th Defendant had not explained why she would be absent from such family meeting. In any event, the 6th Defendant said that she knew that the relationship between Tse and the defendants had been less than cordial. She must have appreciated that Tse would not have agreed to the distribution of the Shares by the 1st and 2nd Defendants.

38. Hence, when the 6th Defendant learnt about the action brought by the Plaintiff against the 1st Defendant in High Court Action No. 20952 of 1998, she could not have been indifferent. She must have appreciated that sooner or later the Plaintiff would trace the disposal of the Shares. As one of the transferees of the Shares, she had every reason to be concerned about the 1st Defendant's defence in that action and how the case of a trust created by Yu had been put forward on his behalf. The 6th Defendant admitted during her cross-examination that when she learnt about the previous action against the 1st Defendant, she was still able to contact the 1st Defendant at the Carpenter Road address.

39. Although the 6th Defendant tried to marginalize her concern as to the previous action against the 1st Defendant, I do not believe that the Defendants (including the 1st Defendant) did not get together to discuss about the Plaintiff's claim. As explained, as transferees of the Shares, they had a real reason to be concerned. Further, it was just a development in the long-standing animosity between Tse and her two sons on the one part and the Defendants on the other part. Having started this saga by joint efforts in their distribution of the Shares, there was no reason why the Defendants did not join force in resisting the claims by the Plaintiff. The solidarity of the Defendants was demonstrated by the attendance of the 2nd, 4th, 5th and 7th Defendants at the trial (even though they chose not to give evidence). The son of the 1st Defendant also attended court on 11 March 2003.

40. The maintenance of contacts by the other Defendants with the 1st Defendant is also highlighted by what had originally been pleaded in Paragraph 41 (b) and (c) of the Defence. The 6th Defendant admitted that information concerning those pleas could only come from the 1s Defendant. She was unable to explain how these pleas come into the Defence of the Defendants (excluding the 1st Defendant) if the 1st Defendant had not been contacted. Nor did Mr Chong offer any explanation in his closing submissions. I do not believe the 6th Defendant when she said the defendants lost contacts with the 1st Defendant.

41. I therefore do not feel able to attach any weight to the evidence of 6th Defendant as to the acquisitions of the shares by Yu as I do not find her to be a credible witness.

42. Mr Chong submitted that the letter of 7 June 1952 from Yu Yim Kei showed that Yu was in Hong Kong during that time. I do not think the letter said so unequivocally. The sentence Mr Chong relied on reads,

"啓者 百贰十万元交家姊，又後借六十万元，未取过。在若干時候，與家姊取过十餘万元，完了。..."

43. Mr Chong read the first part of this sentence as a request by Yu Yim Kei to the Father to hand RMB 1,200,000 to his sister, viz. Yu. Hence this suggested that Yu was in Hong Kong. I do not think this is the correct interpretation. Reading as a whole, the sentence suggested after the RMB 1,200,000 had been handed to his sister, Yu Yim Kei had borrowed another RMB 600,000 and yet this sum had not been collected. On such reading, the handing of RMB 1,200,000 to the sister happened some time in the past and it could mean that Yu Yim Kei had handed RMB1,200,000 to his sister. On the whole, the whole paragraph seems to be a postscript explaining to the Father why Yu Yim Kei still needed money after some had been sent by the Father in the past. Thus, the first part of the paragraph could not be regarded as evidence that Yu was in Hong Kong at the time of this letter. The evidence showed that the Father then remitted RMB 600,000 to Yu Yim Kei on 9 June 1952 and the latter acknowledged receipt in a letter of 15 June 1952. Hence, neither party acted on the basis that there had been a request for the money to be handed to Yu.

44. I therefore do not regard that letter as evidence that Yu was in Hong Kong in June 1952. As to the execution of the relevant instrument of transfer by the 6th Defendant, I need not speculate whether she did so personally in Hong Kong or otherwise. This is not a crucial issue as there is no inconsistency between her execution of the instrument of transfer in Hong Kong and the shares being purchased by the Father.

45. Once I rejected the evidence of the 6th Defendant, bearing in mind my finding as to the financial position of the Yu family between 1949 and 1952 as set out in Paragraph 28 above, there is no basis for holding that the shares were acquired by Yu in 1952.

46. Does it mean that the shares were purchased by the Father? As mentioned, there is no direct evidence that the Father paid for those shares. On the evidence before me, for reasons already given, I find that the Father did have the means to pay for those shares. The parties did not suggest that there could be other persons purchasing the shares apart from the parents. Having eliminated the possibility that the shares were purchased by Yu, having regard to the conducts of the 1st, 2nd and 6th Defendants in respect of the custody of the shares and the use of dividends discussed below, I am of the view that in the circumstances of the present case this court could safely infer that the Father did purchase those shares and registered the same under the names of the 1st and 6th Defendants respectively and I find accordingly.

47. In respect of the subscriptions for the rights issues in 1978 and 1982, Tse gave evidence that they were paid by money from her account at the request of the Father. It was also pleaded in Paragraph 16 of the Reply dated 23 October 2001 and Paragraph 3 of the voluntary particulars dated 19 February 2003 furnished by the Plaintiff. Mr Chan explained in the course of the trial (in the context of an argument as to whether Mr Chong was entitled to question Tse as to the beneficial ownership of the money in her bank account) that the Plaintiff's case was that Tse provided such money to the Father for the rights issues on the basis that they were his shares. Since the challenge of the beneficial ownership of the money in Tse's account would take the Plaintiff by surprise and would go beyond the scope I allowed the defence to rely on the plea of gift added by way of amendment made at the trial (as stated in Paragraph 12 above), I ruled that Mr Chong could not challenge the beneficial ownership of the money in Tse's account.

48. My ruling did not prevent Mr Chong from challenging Tse's evidence that the money came from her bank account. However, Mr Chong did not challenge Tse's evidence in this regard. Despite my reservations as to some parts of her evidence, I am satisfied that Tse was telling the truth when she said that the money from the subscription of the rights issues came from her account and she provided such money to the Father on the basis that this would be subscription for his own benefit.

The plea of gift: whether the Defendants need to make any election?

49. Before the 6th Defendant gave evidence, Mr Chan submitted that the defence should make an election between the case of gift by Yu and the case of gift by the Father. He applied to have the defence struck out unless such election was made. He did not quite specify whether he was relying on a limb of Order 18 Rule 19 or whether he was relying on the inherent jurisdiction of the court. The essence of his submission was that unless such an election was made, the Plaintiff would be prejudiced in terms of the cross-examination of the 6th Defendant. He relied on the judgment of Ma JA (as he then was) in Poon Hau Kei v. Hsin Cheong Construction Co. Ltd [2003] 2 HKC 408 in particular a passage at p. 417 D to F. He also referred to other parts of the judgment and the case of Tsang Shiu Tim v. Hang Fong [1959] DCLR 25 at p. 28.

50. In my judgment, Poon Hau Kei did not decide that inconsistent lines of defence could not be run and unless an election is made by a defendant before evidence is given, such a defence should be struck out. Of course, a party can only put forward one version of fact in his evidence. However, there are circumstances under which an alternative plea based on an inconsistent version of fact is permissible (see Hong Kong Civil Procedure 2002 Para. 18/15/4). It depends on the facts of each case and if the other party is seriously prejudiced by inconsistent alternative cases being put forward, such a pleading could be embarrassing and the court can exercise its power to strike out such a pleading.

51. In the present case, Mr Chong had assured the court that the primary case of the defence was that the shares were gift from Yu. He also indicated that the defence would not adduce any positive evidence to support the alternative plea of gift from the Father. He said the Defendants would only rely on the presumption of advancement. In granting leave to the Defendants to amend the defence to add this plea, the court has imposed a condition that the Defendants could only rely on the presumption of advancement in support of the plea and the trial had been conducted on that basis. Against that background, I am not satisfied the Plaintiff would be so prejudiced by the lack of election that fair trial would not be possible.

52. The alternative case only became material if I disbelieve the 6th Defendant on the primary case of the defence. Since she would be barred from giving positive evidence as to the claim of gift from the Father pursuant to the condition imposed on granting leave to amend, the Plaintiff needed not worry about inconsistent versions of facts put forward by the 6th Defendant in her evidence. Mr Chong informed the court that he would not rely on anything said and done between the 6th Defendant and Yu to support the alternative case. Mr Chan said he could not cross-examine the 6th Defendant on the basis that the shares were purchased by the Father. I fail to see why that would be so. The 6th Defendant might be able to answer by saying that it was a gift by Yu. But that would not take her very far once I reject her primary case. I therefore do not consider that this is an appropriate case to strike out the defence in the absence of an election by the Defendants and I have already ruled accordingly at the trial.

Trust or gift

53. Having decided that it was the Father who purchased the shares and procured Tse to fund the subscription for the rights issues, the next question is what was the presumed intention of the Father or alternatively what was the common intention of the parties at the material time. Mr Chan argued the Plaintiff's case by three alternative lines,

(a) express trust;

(b) constructive trust; and

(c) resulting trust.

The respective basis for these alternative cases of trust were pleaded in the Voluntary Particulars dated 19 February 2003. In essence, the Plaintiff relied on the same underlying factual matters to advance the three alternative cases.

54. Express trust and constructive trust depended on the actual intention of the Father and the 1st, 2nd and 6th Defendants. On the other hand, the case of resulting trust is based on presumed intention. For reasons I have given in my judgment in Ip Man Shan v. Ching Hing Construction Co. Ltd [2003] 1 HKC 256, if the matter can be disposed of by reference to the actual intention of the parties, there is no scope for the operation of resulting trust.

55. As pleaded in the Voluntary Particulars, the Plaintiff's case of express trust founded upon the submission that the court should draw inference from certain primary facts that the Father had expressly made it known to the 1st and 6th Defendants and the latter agreed when the shares were acquired in 1952, they were to hold the same for the use and benefit of the Father. It cannot be disputed that there is no direct evidence as to what was said between the Father and these two defendants in 1952. The alternative case of constructive trust is built upon an invitation to the court to draw an inference as to common intention based on the same primary facts.

56. As said, the Plaintiff had no evidence as to the origin of the shares in Hongkong Telephone Co. Ltd and I have rejected the evidence of the 6th Defendant as to these being acquired by Yu in August 1952. However, on the pleadings, both parties asserted that these shares were acquired in 1952 (see Para. 2(a) of the Voluntary Particulars and Paragraph 29 (c) of the Re-re-amended Defence). Hence, this is common ground and I have no reason to hold otherwise.

57. The primary facts relied upon by the Plaintiff are as follows,

(a)	the Father kept all share certificates;
(b)	the Father controlled, received and enjoyed all dividends;
(c)	the 1st and 2nd Defendants executed blank instruments of transfer and gave the same to the Father for his custody;
(d)	the 2nd Defendants opened saving account for the deposit of dividends and the passbook and chop for operation of the accounts were kept by the Father;
(e)	the 1st Defendant accounted to the Father about the dividends after receiving the same and issued a cheque in favour of the Father;
(f)	the Father's record of assets in 1970 included references to the Shares;
(g)	the Father procured Tse to pay for the rights issues;
(h)	30,063 shares of Bank of East Asia were sold in June 1993 at the request of the Father and a cheque of $1,109,500 was issued by the 1st Defendant to the Father. The cheque was subsequently dishonoured;
(i)	the lack of dispute on the part of defendants when the Shares were shown to all the children as the Father's properties shortly after the death of the Father in the presence of Chiu Cho Ming (Mr Chong informed that court on 12 March 2003 that the Defendants would not challenge Tse's account of this meeting).

58. The Plaintiff also referred to the positions taken by the Defendants in this action and the 1st Defendant in the previous action. Mr Chan argued powerfully that the defence had always taken the stance that the Shares were held by the registered owners (viz. 1st Defendant, 2nd Defendant and at the earlier stage the 6th Defendant) as trustees. It is only on the basis that the 6th Defendant held the shares as trustee that the transfer of the shares in 1968 to the 2nd Defendant makes sense. Evidence from both sides showed that the transfer in 1968 from the 6th Defendant to the 2nd Defendant was triggered by the marital discord between the 6th Defendant and her husband. In order to avoid unnecessary complications regarding ownership of the shares to the prejudice of the beneficial owner(s) of the shares (the case of the Plaintiff was that the Father was the beneficial owner whilst the case of the defence was that the Defendants were beneficial owners), the 6th Defendant transferred the shares to the 2nd Defendant for him to hold as trustee. This transfer would be inexplicable if the shares held in the name of the 6th Defendant were gift to her in 1952. On the balance of probabilities, based on the evidence of Tse, I find that it was the Father who decided in whose name the shares were to be transferred and the 6th Defendant transferred the shares to the 2nd Defendant in 1968 pursuant to the direction of the Father.

59. Further, the distribution in 1996 to the Defendants by the 1st and 2nd Defendants was on the basis that the 1st and 2nd Defendants were trustees instead of beneficial owners of the Shares. It has never been asserted by the Defendants that the distribution was by way of gift from the 1st and 2nd Defendants.

60. Mr Chan also relied on other matters which I find to be of less significance. In the Voluntary Particulars, he referred to the notices of dividends being sent to the Father's address instead of the 1st Defendant's address. That in my view is equivocal. As to the 1st Defendant's failure to defend the previous action, it is more accurate to say the 1st Defendant's default in attending a hearing caused his defence to be struck out and judgment being entered against him. I am not prepared to regard that as admission of liability on the part of the 1st Defendant as he had previously filed Defence and witness statement in that action resisting the Plaintiff's claim.

61. Regarding the custody of the share certificates, Mr Chong submitted that according to the 6th Defendant's evidence, it was initially under the custody of Yu. Mr Chong said that it was a reasonable arrangement given the tender ages of the 1st and 6th Defendants at that time. For reasons already given, I find the 6th Defendant to be an unreliable witness and I do not accept her evidence. Mr Chong further submitted that keeping custody of the share certificates is, in the circumstances of the case, merely the discharge of parental duty rather than the exercise of the right of ownership. This submission ignores some material facts of the case. The 6th Defendant got married in 1958 and moved away to live elsewhere. The Father remarried in 1961 and the Defendants did not get along very well with Tse. At 29 years old, the 1st Defendant remained to live at the unit at Carpenter Road and operated a retail business there whilst the rest of the family moved to a unit in Prince Edward Road in 1963. By 1968 when some shares were transferred from the 6th to the 2nd Defendants, the 2nd Defendant was 18 years old and the 6th Defendant was 31 years old. Mr Chong told this court in his final submission that the 2nd Defendant emigrated to Canada in 1976 and lived there ever since. In his cross-examination of Tse, Mr Chong suggested that the 2nd Defendant went to Canada in 1970. By the time of the rights issues, viz. 1978 and 1982, the 1st Defendant was 40 odd years old and the 2nd Defendant was in his late twenties and early thirties. By any standard, it is very difficult to account for the custody of the share certificates by the Father throughout the whole period by way of discharge of parental duty.

62. Furthermore, the custody of the share certificates by the Father must be considered together with the blank transfer forms placed with him by the 1st and 2nd Defendants. Hence, the Father could sell the shares concerned if he so wished. If the shares were intended to be a gift by the Father to the 1st and 2nd Defendants, it is inexplicable why they would be required to sign some blank transfers in advance. Mr Chong submitted that there is no evidence as to the circumstances under which these blank transfer forms were executed. However, that was simply because the 1st Defendant chose not to defend the action and the 2nd Defendant chose not to give evidence despite he was in Hong Kong and was at the public gallery during the trial. They must know the circumstances under which they executed these instruments and placed the same with the Father.

63. By giving these blank transfers to the Father, the 1st and 2nd Defendants empowered the Father to sell the shares which were registered in their names. On the face of these blank transfers, there was no restriction with regard to the Father's use of these documents to sell. That is the prima facie situation. If there were matters pertaining to the leaving of the share certificates with the Father and the giving of the blank transfers to him which showed that the Father was under certain obligations or restrictions in exercising the power to deal with these shares, the 1st and 2nd Defendants would certainly know of the same and they should be able to give evidence about it. There is no explanation whatsoever as to why the 1st and 2nd Defendant did not bother to give evidence at the trial.

64. The same observation can be made with regard to the use of the dividends by the Father (facilitated by the 2nd Defendant's passbook and chop left with the Father), the accounting of the same by the 1st Defendant to the Father and the issue of the cheque in 1993. The prima facie position is that the sons treated the dividends (and the sale proceeds in 1993) as belonging to the Father. Again no evidence from either of them to explain why there was such an arrangement if they regarded themselves as beneficial owners of the dividends.

65. Mr Chong submitted that all these acts of the sons were equivocal and could be explained as "act of reverence and good manners". He relied on several cases cited by Snell on Equity 13th Edn., Para. 9-16. But what was said by Snell plainly does not assist Mr Chong,

"The fact that the son permits the father to receive the profits of the property has been said to be no evidence against him, for it is an "act of reverence and good manners"; but it is otherwise if the father retains the title deeds." (my emphasis)

Mr Chong failed to have regard to the latter part of this passage.

66. Likewise, there is a dicta in a case cited by Mr Chong that is against him. In Grey v. Grey (1677) 2 Swans 594 at p. 600-601, it was said,

"but if the son be married in his father's lifetime, and by his father's consent, and a settlement be thereupon made, whereby the son appears to be fully advanced, and in a manner emancipated, there a subsequent purchase by the father in the name of such a son, with perception of profits etc. by the father, will be evidence of a trust; for all presumption of an advancement ceases."

Isn't that what happened with regard at least to the 1978 and 1982 rights subscriptions?

67. As I have said in Para. 151 of my judgment in Ip Man Shan, ultimately it is a question which must be decided on the facts of each case and it is not particularly helpful to extract a dicta from one case and blow it up into a legal principle. What is important in the present case, as far as this particular aspect of Mr Chong's submissions is concerned, is that neither son came forward to give evidence to testify that they were doing all these purely out of reverence even though they were the beneficial owners of the shares in question.

68. Another area where the sons should be able to give positive evidence is the circumstances under which the rights issues were subscribed for. The evidence of Tse is that the Father told her the shares were his and money was taken from her account to subscribe for the rights issues. Although the sons were not privy to the conversation between Tse and the Father, if the Father had told them why he would pay for the subscription instead of letting them to decide whether to subscribe by their own means, they could certainly give evidence to refute the effect of Tse's evidence.

69. Mr Chong pointed to the fact that the Father did not use the Instrument of Transfers to sell the Shares and asked the court to take this into account. I bear this in mind in the overall assessment of the situation. I note that there were sales of some Bank of East Asia shares over the years, e.g. 200 shares under the name of the 2nd Defendant were sold in 1973 and 10,000 shares under the name of the 1st Defendant were sold in 1983. There is no evidence as to whether those were sold by means of blank instruments of transfer signed by the 1st and 2nd Defendants placed with the Father. Again, the 1st and 2nd Defendants should be able to give evidence about the circumstances surrounding those sales. If there were anything pertaining to those sales that showed that the Father was not the beneficial owner, it is difficult to understand why they chose to remain silent.

70. Mr Chong placed reliance on the facts that the Father did not sue the 1st Defendant in respect of the dishonoured cheque for $1,109,500 dated 11 June 1993 and the Father did not disinherit the 1st Defendant by amending his Will. He also highlighted that the Father did not recover possession of the shop at 144 Carpenter Road from the 1st Defendant or sell the other shares by using the blank transfers after the cheque was dishonoured. Again I agree that these are matters which I should take into account. However I must consider these against all the circumstances of the case. Between 1993 and 1996 when the Father died, he had been hospitalized for lengthy periods from time to time. Tse had changed her evidence about whether the 1st Defendant maintained contacts with the Father after the bouncing of the cheque. On the balance of probabilities, I find that the 1st Defendant and the Father did maintain contacts with each other up to the latter's death. The dishonour of the cheque therefore did not cause a complete breakdown of relationship and it was not surprising that the Father did not take the actions mentioned by Mr Chong.

71. I agree with Mr Chan's submission that the argument of Mr Chong as to dual purpose of the shares in his closing submissions is not open to the Defendants. It is neither pleaded nor supported by anything said in the witness statement of the 6th Defendant. Once the evidence of the 6th Defendant is rejected, there is no evidence to support this argument. This is not an argument which the defence could tag onto the defence case of gift by way of presumption of advancement. It has never been the defence case the Father made a gift to the children for this so-called dual purpose.

72. Mr Chong submitted that there could not be any adverse inference unless there is a prima facie case of express trust, resulting trust or constructive trust. Reliance was placed on McQueen v. Great Western Railway (1875) LR 10 QB 569 at p. 574. He argued that by reason of the principle laid down in Shepard v. Cartwright [1955] AC 431, the matters relied upon by the Plaintiff did not establish a prima facie case. Hence, counsel contended that inference could not be drawn from the failure of the Defendants to give evidence.

73. In his oral submissions on 19 November 2003, Mr Chong contended that the rule as to inadmissibility of evidence in Shepard v. Cartwright [1955] AC 431 is applicable to a case of express trust as well as resulting trust. He however accepted that the rule has no applicability in respect of constructive trust. It follows that inference could be drawn at least in respect of the constructive trust claim. Further, the rule of Shepard v. Cartwright does not prohibit the admission of evidence as to acts and declarations of the alleged trustee against his interest. The matters I have referred to in Paragraphs 61 to 64 above were acts of the sons against their interest. Hence, this court is entitled to infer that even if they were to give evidence about these matters, their evidence would not assist them.

74. The relevant principles for drawing adverse inference in civil proceedings against a party who chose to remain silent despite that he could give material evidence on a relevant issue at a trial can be found at p. 36 to 38 of Cross & Tapper on Evidence 9th Edn. I have also summarized the same in Paragraph 155 of my judgment in Ip Man Shan, Henry v. Ching Hing Construction Co. Ltd [2003] 1 HKC 256.

75. In the circumstances of the present case, I do not need to go so far to infer a case of trust solely because the 1st and 2nd Defendants did not give evidence. I am certainly entitled to draw the inference that even if they were to give evidence, their evidence would not be helpful to their case of gift by the Father. In fact, given their primary case that the shares were gift by Yu, it is impossible to envisage how they could testify that their actions were consistent with a gift by the Father.

76. I find the documents written by the Father in June 1970 a bit equivocal and I am not going to rely on it in the resolution of the dispute. I am also prepared to ignore what the Father told Tse when he got money from her bank account to subscribe for the rights issues in considering the beneficial ownership of the shares acquired in 1952. In my judgment, based on the other matters relied on by Mr Chan as set out in Paragraph 57 above (which are all admissible under Shepard v. Cartwright as acts of the sons and the 6th Defendant against their interest), taking into account of what I have said from Paragraph 58 onwards, the conclusion must be that the shares were held by the 1st and 2nd Defendants as trustees for the Father.

77. My legal analysis is as follows. Express trust requires acceptance by the trustee of the trust obligation at the time of creation. Constructive trust requires agreement, arrangement or understanding reached between the trustee and the beneficiary when the property was acquired (see Lloyds Bank v. Rosset [1991] 1 AC 107 at p. 132-3). The common intention to support a constructive trust need not be as specific as the certainty of words for creation of express trust (see Grant v. Edwards [1986] Ch 638 at p. 653D to F). Such common intention can be inferred from evidence of express discussion between the parties or from conducts of the parties. But, apart from the case of subsequent fresh agreement redistributing the beneficial ownership (which I have ruled to be not open to the Plaintiff on the existing pleadings), the relevant intention is still the intention at the time of acquisition (see Gissing v. Gissing [1971] AC 886 at p. 906 C to F). The conducts relied upon by a party to support an inference of common intention at the time acquisition must be very concrete and compelling. Direct contribution to the purchase price is recognized by Lord Bridge in Lloyds Bank v. Rosset as conduct "readily justify the inference necessary to the creation of a constructive trust".

78. In the present context, regarding the shares acquired in 1952, there is no evidence of any discussion between the Father and the 1st or 6th Defendants. Mr Chan invited me to draw an inference from subsequent events that the Father must have told the 1st, 2nd and 6th Defendants that the shares were held by them on trust instead of as gift from the Father. On the evidence, I can and do infer that the Father did at some point in time tell these Defendants or made known to them that they were merely holding the shares for him. The children must have known about that before the 6th Defendant transferred the shares to the name of the 2nd Defendant in 1968. The 2nd Defendant was probably told about that, if not earlier, when he was asked to open a saving account and leave the passbook and chop with the Father to enable him to get the dividends. The 1st Defendant must have been told about that before he accounted to the Father of the dividends. However, there was no material before me to support an inference that such discussions took place before the acquisitions in 1952.

79. As far as conduct is concerned, I have found that the Father contributed to the purchase price of the shares in 1952. Although such contribution may justify an inference of common intention, I would not draw this inference in the present case bearing in mind the ages of the parties at the material time. I prefer to rest my decision on the intention of the Father. I respectfully adopt the approach set out by Godfrey JA in Overseas Trust Bank Ltd v. Lee See Ching John [1999] 3 HKC 197 at p. 201A to G. Based on the matters referred to earlier, I find as a fact that the Father did not intend the shares to be gifts to the 1st and 6th Defendants (and subsequently the 2nd Defendant) and I hold that the presumption of advancement has been rebutted.

80. There is evidence from Tse as to the discussion between her and the Father concerning the subscription for rights issues in 1978 and 1982. Given the respective ages of the 1st and 2nd Defendants at the time of these rights issues, an inference can drawn from the use of the money from Tse's accounts to pay the subscription that there was a common understanding between them and the Father in respect of the Father's beneficial ownership of these rights issues when their names were used for the subscriptions. In any event, I make a similar finding in respect of the Father's intention as I did regarding the shares acquired in 1952 and I hold that the presumption of advancement has been rebutted. That would be sufficient to dispose of the defence of gift arising from presumption of advancement.

81. Given my aforesaid conclusion, it is not necessary to discuss the precise scope of Shepard v. Cartwright [1955] AC 431. As I mentioned in Ip Man Shan, I am bound by the Court of Appeal's decisions in that regard.

82. Therefore, my conclusion is that the Father was the beneficial owner of the shares held by the 1st and 2nd Defendants before they distributed them in 1997.

Results

83. The Plaintiff therefore succeeds. However, unless parties could reach agreement, I will hear parties on the appropriate order to be made. In view of the fact that the shares had been distributed to the defendants and some, if not all, of those had been sold, it may not be useful to grant declaratory or injunctive relief as prayed for by the Plaintiff in the Statement of Claim. I direct the parties to liaise with each other as to the order to be made in the light of the above. If no agreement could be reached within 10 days after the handing down of this judgment, the parties should restore the matter before me with an agreed estimated length of hearing. In that event, each party shall submit to this court their version of the draft order together with their skeleton submissions at least 5 days before the restored hearing.