TSANG TAT HUNG AND ANOTHER v. TSANG TAT WING

CACV 93/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 93 OF 2016

(ON APPEAL FROM HCAP NO 6 OF 2013)

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REASONS FOR JUDGMENT
AND
DECISION ON COSTS

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Hon Lam VP:

1.  I agree with the Reasons for Judgment and Decision on Costs of Yuen JA.

Hon Yuen JA:

2.  This is the defendant’s appeal from a judgment (“the Judgment”) of L.  Chan J in a probate action concerning the estate of Madam Ng Hau Siu 伍巧笑 (“the Deceased”) in which he ordered (among other things):

(1) the revocation of Amended Letters of Administration of the Deceased’s estate which had been issued to the defendant Tsang Tat Wing 曾達榮, the Deceased’s eldest son,

(2) the grant of Letters of Administration with the Will annexed to the plaintiffs Tsang Tat Hung 曾達鴻 and Tsang Tat Wo 曾達和, who are two of the Deceased’s other sons[1],

(3) the defendant to render accounts of the estate,

(4) the defendant to pay to the 2^nd plaintiff the net proceeds of the sale of a property that had been registered in the Deceased’s name (“the Property”) and

(5) the defendant to pay the costs of the probate action.

3.  At the conclusion of the hearing, we dismissed the appeal but reserved judgment on the costs of the appeal.  My reasons for dismissing the appeal and decision on costs appear below.

Background

4.  The Deceased, who died aged 80 on 1 October 2011 of renal failure and diabetic nephropathy, was a widow whose husband died in 1999.  They had five children, a daughter Tsang Yin Ping 曾燕萍[2] and the four sons named above. 

5.  It was common ground that the Deceased was an authoritative person.  She had been an intelligent investor who had made financial provisions during her lifetime for the benefit of her children whether in a group[3] or individually[4]. 

6.  By the time of the Will the subject matter of the probate action (“the Will”), the only substantial property left in her sole control was the Property in which she resided and money in some bank accounts.

7.  The Deceased resided in the Property on her own.  The daughter had emigrated with her husband to Canada in 1996, and all the sons (except the 2^nd plaintiff) owned residential units in Hong Kong in which they lived.  The 1^st plaintiff lived in a unit just below that of the Deceased and was close to her.  The 2^nd plaintiff, the youngest son, was residing with his wife and son in a rented unit in Shenzhen.

8.1.   The 1^st plaintiff’s evidence, which the judge accepted[5], was that in early 2010, about one and a half years before the Deceased died, she told him that she wanted to make a will giving the Property to the 2^nd plaintiff. The Deceased had also mentioned this to all the sons at a family dinner at Chinese New Year the following year. 

8.2.   The 2^nd plaintiff’s evidence, which the judge accepted[6], was that the Deceased had also told him in 2010 that she would give him the Property.  He said his sister had at one stage suggested to him that the Property be sold, and that if he wanted to reside in Hong Kong he could rent the Hoi Pa St unit.  When he related this suggestion to the Deceased, she (the Deceased) told him that the Property was not to be sold, and that she would add the 1^st plaintiff’s name to prevent the 2^nd plaintiff selling it[7].

8.3.   Tsang Tat Chi’s evidence, which the judge also accepted[8], was that the Deceased told him in August 2011 that she would give the Property to the 2^nd plaintiff in her will.

The Deceased’s instructions to the 1^st plaintiff

9.  Coming back to the 1^st plaintiff’s evidence, he said that early in 2011, the Deceased had chased him up to prepare a will for her.  He then prepared a document which stated that the Property would be given to the 2^nd plaintiff. 

10.1.   However subsequently, the Deceased told him (the 1^st plaintiff) that she wanted him to “be one of the co-owners to help manage and preserve the Property for the sole use and enjoyment of the 2^nd plaintiff and his own family members”[9]. (He added in re-examination that the Deceased told him to assign the Property to the 2^nd plaintiff when the latter turned 60)[10].

10.2.   Although the Judgment did not refer to evidence of the 1^st plaintiff’s express agreement to the Deceased’s wishes recounted above, the judge found that the 1^st plaintiff did prepare a new draft incorporating those wishes by adding himself as a co-owner of the Property in addition to the 2^nd plaintiff.  I will discuss the effect of this piece of evidence later in this judgment[11].

11.  The judge found that about a week before 29 August 2011, the 1^st plaintiff had prepared a new version of the will, incorporating the Deceased’s wishes for co-ownership referred to above, which was ready for her execution.  For this purpose, the 1^st plaintiff arranged for two friends[12], Mr Mak Lung Fei 麥龍飛 (“Mr Mak”)[13] and Mr Leung Yiu Wing 梁耀榮 (“Mr Leung”), to be nearby, ready to attend as attesting witnesses.  The 1^st plaintiff took the document up to the Deceased at her flat, but she then indicated that she also wished his wife Ida Chiu Ngai Sam 趙藝深 (“Madam Chiu”) to be an attesting witness.  Accordingly the 1^st plaintiff had to arrange for the typing of another document[14] so that Madam Chiu’s name and particulars could be added, and execution did not take place.  

Events of 29 August 2011

12.  The judge found[15] that on 29 August 2011, the 1^st plaintiff, Madam Chiu, Mr Mak and Mr Leung went to the Deceased’s flat for the purpose of executing the Will.  He found that before the Will was executed, the 1^st plaintiff had read it out and explained it to the Deceased.  In the course of doing so, the 1^st plaintiff noticed his description as the “second” son of the Deceased 第二兒子 and he changed the Chinese character “second” to “third” son of the Deceased 第三兒子.  He then passed the Will to the Deceased who read it for 5 minutes before signing it.  The judge found[16] that the signature was written by the Deceased herself, stroke by stroke and with an unsteady hand, which was similar to the Deceased’s signatures on bank withdrawal slips in November 2010, a Consent Form for blood transfusion in December 2010 and a letter to the Incorporated Owners of the building in which the Property was situated in June 2011[17]. 

The Will  

13.1.   The Will stated as follows:

「平安紙

本人伍巧笑(Ng Hau Siu)，身份証號碼：[redacted]，本人確認在身體及精神健康正常況下，現以書面確立此平安紙，並在下列三位人士見証下，簽署及確認這份文件的真確性。

本人在此聲明及確認如本人因任何原因身故，本人名下位香港新界大埔安慈路3號翠屏花園B座21樓6室 (Flat 6, 21/F, Block B, Jade Plaza, 3 On Chee Road, Tai Po, N.T., Hong Kong) 的房地產物業，將會全部由第三兒子曾達鴻 (Mr Tsang Tat Hung)，身份証號碼 [redacted]及第五兒子曾達和先生 (Mr Tsang Tat Wo)，身份証號碼：[redacted]，承繼及擁有，任何人士不得異議。

此致

立紙人	見証人
__________________________ 伍巧笑 (Ng Hau Siu) HKID: [redacted] 日期：2011年8月29日	__________________________ 麥龍飛 (Mak Lung Fei) HKID: [redacted] 日期：2011年8月29日
見証人	見証人
__________________________ 趙藝深 (Chiu Ngai Sam Ida) HKID: [redacted] 日期：2011年8月29日	__________________________ 梁耀榮 (Leung Yiu Wing) HKID: [redacted] 日期：2011年8月29日」

13.2.   The English translation set out in the Judgment was as follows:

“WILL

I, Ng Hau Siu, Hong Kong Identity Card No.: [redacted] hereby confirm that I, in normal physical and mental health, hereby establish in writing this will and, in the presence of the below three witnesses, sign and confirm the authenticity of this document.

I hereby declare and confirm that if I should die for whatever cause, the entirety of the real property under my name at Flat 6, 21/F., Block B, Jade Plaza, 3 On Chee Road, Tai Po, the New Territories, Hong Kong will be inherited and owned by my third son Tsang Tat Hung, Hong Kong Identity Card No.: [redacted] and my fifth son Tsang Tat Wo, Hong Kong Identity Card No.: [redacted], nobody should raise any objection.

In WITNESS whereof:

Will maker	Witness
__________________________ Ng Hau Siu HKIC: [redacted] Date: 29 August, 2011	__________________________ Mak Fei Lung HKIC: [redacted] Date: 29 August, 2011
Witness	Witness
__________________________ Chiu Ngai Sam Ida HKID: [redacted] Date: 29 August, 2011	__________________________ Leung Yiu Wing HKIC: [redacted] Date: 29 August, 2011”

13.3.   The judge found that Madam Chiu, Mr Mak and Mr Leung were present when the Deceased signed the document, that they signed it as well, and that on the Deceased’s instructions, the 1^st plaintiff kept the Will.

Subsequent events

14.  The Deceased died on 1 October 2011. 

15.  The judge found that after the funeral, the next occasion when all four sons were gathered together was on 5 February 2012.  He found that the 1^st plaintiff had shown the Will to his brothers and that Tsang Tat Chi had told the gathering that the title deeds to the Property were with him.  All the brothers authorized the 1^st plaintiff to deal with the bank accounts in the Deceased’s sole name.

16.1.   On 16 May 2012 however the defendant applied for Letters of Administration to the Deceased’s estate, declaring that he had not found any will of the Deceased. His brothers were not informed of this application.

16.2.   On 10 July 2012 the defendant obtained Letters of Administration.  As a result of certain actions taken by his solicitors in respect of the Property, the plaintiffs wrote to the Probate Registry on 26 September 2012 seeking the revocation of the Letters of Administration.

16.3.   However on 19 October 2012 the defendant entered into a sale and purchase agreement of the Property.  On 30 November 2012 the transaction was completed on the basis of the defendant’s statutory declaration that the original title deeds were lost[18].

Proceedings

17.  This led to the Probate Action which was commenced in 2013.  In the Statement of Claim filed on 21 March 2013, the plaintiffs are described simply as “the beneficiaries” under the true last will of the Deceased (para. 1) and “the sole beneficiaries” of the Property under the Will (para. 18). 

18.  However in the Further and Better Particulars filed on 15 July 2013, the plaintiffs pleaded that it was the real intention of the Deceased to give the Property to the 2^nd plaintiff, and that the role of the 1^st plaintiff was to manage and preserve the Property for the sole use and enjoyment of the 2^nd plaintiff and his own family members. 

19.  There was no amendment to the Defence in response to that disclosure in the Further and Better Particulars.

20.  This assertion that the Deceased intended the Property to be given to the 2^nd plaintiff and that the 1^st plaintiff was to manage it for the 2^nd plaintiff’s sole enjoyment was repeated in the 1^st plaintiff’s witness statement which was filed in October 2014, one and a half years before the trial of the probate action.

Issues

21.  At the trial, both plaintiffs gave oral evidence, as did Madam Chiu, Mr Mak and Mr Leung.  The defendant, his sister and her husband also gave evidence. 

22.  By the end of the trial, the issues as formulated by the judge were as follows[19]:

(1)   Have the plaintiffs proved that there was due execution of the Will? Was the Will signed by the Deceased or was her signature on it forged?

(2)   Have the plaintiffs proved that the Deceased was of testamentary capacity?

(3)   Have the plaintiffs proved that the Deceased knew and approved of the contents of the Will?

Principles

23.  The legal principles were discussed by the judge at paras. 164 – 171 of the Judgment which I will not repeat here.

Judgment

24.1.   For reasons set out in detail in the Judgment, the judge found that:

(1)   the Deceased had duly executed the Will and it was not forged (para.172);

(2)   even though no medical practitioner was on hand at the time of the execution who could testify to the Deceased’s condition, the Deceased was of sound mind (para.177) and had testamentary capacity (para. 180);

(3)   despite the “suspicious circumstances” submitted by the defendant, the plaintiffs have proved that the Deceased had knowledge and approved of the Will immediately before she signed it.

24.2.   The judge also made certain findings of fact against the defendant relating to his application for Letters of Administration and his sale of the Property.  These are not material to the appeal.

Appeal

25.  The defendant appealed.  As I understand the submissions of Miss Athena Wong, counsel for the defendant, they may be summarized as follows:

(1)   the judge should have held that the plaintiffs had failed to prove the Deceased’s knowledge and approval of the Will because it did not reflect the Deceased’s testamentary intentions, for on the plaintiffs’ own evidence the Deceased intended to give the Property to the 2^nd plaintiff only (with the legal title to be transferred when he turned 60), and yet the 1^st plaintiff received a substantial benefit under the Will contrary to the Deceased’s real intentions, and these “fundamental discrepancies” were not explained;

(2)   further, the judge should have held that the plaintiffs had failed to prove the Deceased’s knowledge and approval of the Will in view of “suspicious circumstances” including:

a.   the 1^st plaintiff’s close relationships with the attesting witnesses,

b.   the 1^st plaintiff’s name was not in the first draft, and

c.   the 1^st plaintiff received substantial benefit under the Will but had helped in its preparation and drafting;

(3)   further, the judge should have held that the plaintiffs had failed to prove due execution because of:

a.   identical passages in the statements of the attesting witnesses,  

b.   undisputed evidence that the Deceased was suffering from rheumatoid arthritis, had not done banking transactions by signing her name in 2011, and had used her thumbprint to sign documents soon after the date of the Will,

c.   inconsistencies in the plaintiffs’ evidence, as set out in the Amended Notice of Appeal.

The Court’s directions for further submissions on Secret Trust

26.1.   On 13 April 2017 about a week before the hearing of the appeal, this court directed counsel for both parties to provide further submissions on the following:

(1)   whether the evidence disclosed a Secret Trust;

(2)   if so, how that would impact on the (appellant’s) submission that the Will did not reflect the Deceased’s testamentary intentions. 

26.2.   Further submissions were duly provided by Miss Wong and Miss Rachael Siu, counsel for the plaintiffs[20].

26.3.   Miss Siu submitted that a fully Secret Trust was created, as the Deceased had wished the Property to benefit the 2^nd plaintiff solely and had told the 1^st plaintiff to hold it for the 2^nd plaintiff’s benefit, to which the 1^st plaintiff had agreed.  Accordingly, the defendant’s argument that the Will did not reflect the Deceased’s true intentions did not stand.

26.4.   Miss Wong submitted that the evidence did not disclose a Secret Trust and that even if it did, it would have no bearing on the argument that the Will did not reflect the Deceased’s testamentary intentions because it had not been pleaded, it was a new point which the plaintiffs should not be allowed to raise, and in any event the Secret Trust did not explain the “fundamental discrepancies” because there was no reason for secrecy.

Discussion 

Can the issue of Secret Trust be considered on appeal?

27.  I shall first discuss whether the issue of Secret Trust can be considered on appeal. 

28.  Although the Statement of Claim only referred to both plaintiffs as “beneficiaries” of the Property under the Will, as early as the Further and Better Particulars (filed only four months later) the plaintiffs had disclosed that their case was that the Deceased’s instructions were that the 1^st plaintiff was to co-own the Property as “manager” for the 2^nd plaintiff, who was to have sole enjoyment of the Property.

29.1.   If, as Miss Wong argued, this showed that the Deceased did not know or approve of the contents of the Will in that it did not reflect her testamentary intentions, one would have expected the Defence to be amended to plead this. However no such amendment was made even though O.76 r.9(3) RHC stipulates that

“ … any party who pleads that at the time when a will, the subject of the action, was alleged to have been executed the testator did not know or approve of its contents must specify the nature of the case on which he intends to rely …”. (Emphasis added).

29.2.   The judge picked up this point at paras. 182 to 184 of the Judgment when he set out the requirements of O. 76 r.9(3) and held

“There is no particular pleaded that relate to the discrepancies between the Will and [the Deceased’s] so-called real testamentary intent. I will not deal with this issue”.

30.  In my view if the defendant had amended his Defence as discussed above, then I would have expected the plaintiffs to plead in their Reply that a Secret Trust of the 1^st plaintiff’s share of the Property had been created, and that since a Secret Trust takes effect outside the Will, the Will remained valid.  

31.  Be that as it may, in light of the above Further and Better Particulars, the case of a Secret Trust had been foreshadowed although the actual technical legal term and the acceptance of the trust as such were not pleaded.

32.  In any event, the 1^st plaintiff’s witness statement (provided one and a half years before the trial) stated clearly that in compliance with the Deceased’s instructions, he abandoned the first draft of the will which contained a bequest to the 2^nd plaintiff solely, and included in the new draft the co-ownership of the Property which the Deceased had requested (thereby accepting the trust). 

33.  In my view, as (1) this is a probate action, where the court should adopt an inquisitorial approach and not be hamstrung by defects in the parties’ pleadings; and (2) the evidence of a Secret Trust was placed fairly and squarely before the defendant and the court at a very early stage of the proceedings, I do not think it lies in the defendant’s mouth now to argue that the court should not consider the issue of Secret Trust as it had not been pleaded by the plaintiffs.   

34.  Accordingly we rejected the defendant’s objections and considered the Secret Trust issue.     

Principles of secret trusts

35.1.   The principles governing secret trusts have been set out in Lewin on Trusts 19^th ed para. 3-076 as follows:

“These are trusts outside a will that affect a beneficiary under a will [the 1^st plaintiff]. Equity has engrafted on the above common law principles rules of its own, by which the primary donee taking under a will [the 1^st plaintiff] may be compelled to hold the gift [the part share of the Property] on trust for a secondary donee [the 2^nd plaintiff] under an arrangement with the testator [the Deceased] taking effect outside the will. Such trusts are called ‘secret trusts’ because one reason for creating them is to keep the ultimate beneficial interest out of the will, which is a public document[21]. Secret trusts arise where a testator intends his gift to the primary donee to be employed as he, and not the primary donee, desires and tells the primary donee of his intention and (either by an express promise or by the tacit promise which is signified by acquiescence) the primary donee encourages the testator to bequeath his money in the belief that his intentions will be carried out. …” (Emphasis added).

35.2.   Although that passage refers to “encouragement”, it is clear that that is not essential to the creation of a secret trust as the editors of Lewin said in the following paragraph (3-077):

“ The equitable rules seem originally to have been based upon there having been a fraudulent encouragement of the testator but the fraud theory has more recently been formulated in terms that equity fastens a trust on the primary donee under the will where his conscience is bound by the extraneous arrangement. The competing explanation of secret trusts is that the statutory requirements of the Wills Act 1837 are entirely disregarded since the secondary donee does not take by virtue of the will. Though the facts commonly involve immoral and selfish conduct on the part of the primary donee, that is not a necessary element. This would seem to support the theory that secret trusts take effect outside the will, which is relevant only so far as it completes the constitution of the trust”.

36.  A fully secret trust is created where the following are proved (para.3-078):

“(1) an intention on the part of the testator to subject the primary donee to an obligation in favour of the secondary donee; (2) communication of that intention to the primary donee during the testator’s lifetime; and (3) acceptance of that obligation by the primary donee, either expressly or by implication”.

37.  There are passages to like effect in Snell’s Equity 32^nd ed para. 24-025 and Theobald on Wills 18^th ed paras. 5-015 – 5-020.  It is particularly interesting to note the following passage in Theobald, para. 5-020:

“Acceptance may be express, in writing or oral, or may be by tacit acquiescence, but in either event must occur during the lifetime of the testator. As regards tacit acquiescence, unless the apparent beneficiary [the 1^st plaintiff] protests once communication has taken place, the courts will readily infer his acceptance. …” (Emphasis added).

Evidence of a secret trust

38.  In the present case the 1^st plaintiff’s evidence, which was accepted by the judge, was that the Deceased wished the 2^nd plaintiff to be the sole beneficial owner of the Property but told the 1^st plaintiff to amend his first draft of the will so that his name would also be included as a co-owner on the basis that he would only hold his share as a manager for the 2^nd plaintiff.  That evidence clearly satisfies the first two requirements for the creation of a fully secret trust. 

39.  As for the third requirement, as noted earlier, there appears to be no evidence of an express acceptance of the trust on the part of the 1^st plaintiff, but the judge found that the 1^st plaintiff duly amended the draft to add himself as co-owner, for which there was no other reason than that it was in accordance with the wishes of the Deceased (para. 40, Judgment), an authoritative person to whom the 1^st plaintiff was close.  In my view, that was clear evidence of an implied acceptance of the trust obligation.  

40.  As for Miss Wong’s submission that there was no need for secrecy, that is beside the point.  It was common ground (at least by the end of the trial) that the Deceased was mentally capable and had not been subject to any undue influence.  It is unsafe, to say the least, for a court to probe into the dynamics of family relationships after a testator’s death to speculate why he or she felt there was a need for secrecy.    

Grounds of appeal based on “fundamental discrepancies”

41.  Once the analysis of a secret trust outside the will is adopted, Miss Wong’s submission[22] that the plaintiffs had failed to prove the Deceased’s knowledge and approval of the Will because it did not reflect the Deceased’s intention (that the 2^nd plaintiff was to be sole beneficiary of the Property) must fall away.

Grounds of appeal based on “suspicious circumstances”    

42.  The analysis of a secret trust also answers the submission[23] based on the alleged “suspicious circumstances” that the 1^st plaintiff, who had been named as a beneficiary under the Will, had taken part in the drafting and arrangements for its attestation.  Under the secret trust, the 1^st plaintiff took only as a trustee for the 2^nd plaintiff, who had not been involved at all in the drafting or arrangements for attestation.

43.  In any event, the judge was well aware of the legal principles (summarized in para. 171), and having considered all relevant circumstances (set out in paras. 181-193), he found that the plaintiffs had proved on a balance of probabilities that the Deceased did have knowledge and approval of the Will immediately before she executed it.

Grounds of appeal based on due execution

44.  Finally, Miss Wong submitted that because of:

a.   identical passages in the statements of the attesting witnesses,  

b.   undisputed evidence that the Deceased was suffering from rheumatoid arthritis, had not done banking transactions by signing her name in 2011, and had used her thumbprint to sign documents soon after the date of the Will,

c.   inconsistencies in the plaintiffs’ evidence, as set out in the Amended Notice of Appeal,

the judge should have found that the plaintiffs had failed to prove due execution.

45.  It is well-established that an appellate court would not readily interfere with a trial judge’s findings of fact, especially when he has had the benefit of seeing witnesses give evidence under cross-examination.  There is nothing in Miss Wong’s submissions which give rise to concern with the judge’s findings.

46.  As far as the identical passages in the attesting witnesses’ statements are concerned, the judge was well aware of this feature (paras. 75 and 84). More importantly, he had seen and heard these witnesses being tested under cross-examination and none had been shaken.  He described the attesting witnesses as “direct” (para. 71) and “straightforward” (paras. 80 and 92).  Having said that, I have to remind solicitors that to avoid criticism of “witness-coaching”, they should strive to prepare witness statements in the words each individual witness uses when asked to recount an event.    

47.  As for the medical evidence, the judge was well aware of the Deceased’s arthritic condition and found that she did sign her signature on the Will, noting that it could well be that she wanted to sign her name to avoid any argument on whether it was indeed her will (paras. 155-160).    

48.  Finally as for the “inconsistencies” in the plaintiffs’ evidence, the judge had dealt with submissions of this nature at the trial and had dismissed them as minor conflicts, bearing in mind that the event happened more than four years ago (para. 129) and the inconsistencies were of little significance (para. 140) when viewed against the overall evidence.  Having read the list of “inconsistencies” set out in the Notice of Appeal, I am not persuaded that any “inconsistency” (or a combination thereof) was of such a serious nature that the judge’s dismissal warranted an appellate court’s intervention in his findings of fact.  

Order

49.  For the reasons set out above, I dismissed the appeal.

Costs

50.  Miss Siu asked that costs follow the event.  Miss Wong asked for no order as to costs, on the ground that the issue of Secret Trust had only been raised by this court and had not been pleaded by the plaintiffs.

51.  As I have sought to explain above[24], in my view the secret trust analysis would have been a matter for a Reply if the defendant had amended his Defence to plead, as he argued on appeal, that the “fundamental discrepancies” showed that the Deceased did not know or approve of the Will.  The Defence was however not so amended.

52.  Further this was not a case where the evidence took the defendant by surprise.  The 1^st plaintiff’s witness statement was filed more than a year before the trial[25].

53.  For these reasons, I would make the usual order that costs of the appeal follow the event, in other words, that the unsuccessful appellant should pay the costs of the appeal.

Hon Kwan JA:

54.  I agree with the Reasons for Judgment and Decision on Costs of Yuen JA.