NG AU YUEN NGAR, PAMELA v. NG KIT LING AND OTHERS
HTML content
HCMC000001/1995
| DJ 1 of 1995 |
IN THE HIGH COURT OF HONG KONG SAR
COURT OF FIRST INSTANCE
DIVORCE JURISDICTION
-----------------
| BETWEEN | ||
| NG AU YUEN NGAR, PAMELA | Petitioner | |
AND | ||
| NG KIT LING alias KIT LING NG alias DOUGLAS NG | 1st Respondent | |
| CHAN SHAN SHAN | 2nd Respondent | |
| JOYFINE LIMITED | 3rd Respondent | |
| JANNOCK LIMITED | 4th Respondent |
-----------------
Coram: The Hon. Mr. Justice Waung in Court
Dates of Hearing: 17, 20 - 24, 27 - 30 April, 1, 4 - 8, 11 - 14, 26 - 29 May 1998
Date of Delivery of Judgment: 20 August 1998
-----------------
JUDGMENT
-----------------
HISTORY
1. The 1st Respondent, Douglas Ng ("Douglas") was a law student when he first met the Petitioner, Pamela Au ("Pamela"). Pamela was a secretary and she helped Douglas with his legal studies by typing his notes and his papers. They were a well suited couple as they shared many interests including tennis which they played together. They married in 1975 and very quickly he established himself as a successful solicitor in Hong Kong, becoming a partner in the firm, Ng, Lie Lai & Chan which bore his name.
2. Douglas however did not confine his activities to being merely a solicitor. He was also an entrepreneur. He invested in stocks and shares, in Hong Kong properties and in Chinese enterprises. He had a wide range of financial interests.
3. Chan Shan Shan. the 2nd Respondent ("Chan") was born in Shanghai in 1959 and was brought up in Shanghai. She came from a relatively well off family, which was well connected. Through the family connections, she obtained the necessary permit to come to Hong Kong. When she first arrived in 1980, she lived with her uncle ("4th Uncle") and aunt at their place in Mei Foo. She worked in her 4th Uncle's factory and she learned about working in Hong Kong. In 1981 Chan was given a new job at China National Aviation Corporation ("CNAC"), being initially a telephonist. A few months later still in 1981, she was transferred to the accounts department of CNAC as an accounts clerk and while in that position she came to know many of the senior members of CNAC in Hong Kong including in particular Du Xue Qian ("Du") who was at that time the Finance Department Manager of CNAC. Chan worked in the accounts department for about 3 years and in late 1984 she left CNAC and started as a sort of sales manager of a battery factory ("Battery Factory") belonging to a friend of her mother, Mr. Ting ("Ting").
4. Ting's Battery Factory was undergoing restructuring and it was while she was working at the Battery Factory, three significant events took place, the first being her purchase in late 1984 of a flat at Hiu Kwong Court in Kwun Tong ("Hiu Kwong Flat") which she said she purchased with money from her savings, a loan from her 4th Uncle and a mortgage finance from the Hang Seng Bank Finance. She lived in the Hiu Kwong Flat after her purchase. The second significant event was that while so working at the Battery Factory, in or about March 1985 she met Douglas who was married and quite a few years older. The third significant event was that she came to know while working at the Battery Factory a Hung Yiu Wing ("Hung") with whom she subsequently started the company Jannock Ltd.
5. Chan's work at the Battery Factory exposed her to the world of business and the possibility that she could start her own business. This she did in March 1985, more or less at the same time when she met Douglas. She started her own firm of Y Mindex ("Mindex") as a sole proprietor. Mindex was successful and money was made by Mindex certainly in the initial period.
6. But a year later in April 1986, Chan was ready to move on to something different and better. She formed her own limited company Jannock limited, the 4th Respondent ("Jannock") with Hung. Chan took up 80% of the shares and Hung had a 20% share holding. Jannock's business was in buying from the western sellers electronic connectors for Chinese buyers, so as to take advantage of Chan family's connections in China. In May 1986, Alison Lam was employed by Chan for Jannock and she proved to be a key employee working for Chan companies. Jannock's business also progressed over time.
7. By the end of 1987, Chan said she started dating Douglas. Prior to that time, her relationship with Douglas was purely business, restricted to matter such as purchasing the Jannock company from the Douglas's firm or asking Douglas to act as additional signatory for the bank account of Jannock, but there was no boyfriend relationship until the end of 1987. It was also shortly after the start of this new boyfriend relationship with Douglas, that she together with Tsang Ping Ling ("Tsang") acting for Feng Xiao Ping ("Feng") of Yue Xiu Enterprises Co. Ltd. ("Yue Xiu") acquired the company Gosi Ltd. ("Gosi"). Chan took 30% of the shares in Gosi and the Tsang/Yue Xiu interest took 70% of the shares. Feng and his associate Tam Lai Sheung ("Tam") became also director. Gosi's business was slightly different from Jannock and was in the buying of electric sockets and lighting from China which were then resold to USA.
8. In August 1988 there was the second significant purchase of property by Chan, namely the purchase for $1.35 million of a flat at Elizabeth House ("Elizabeth House Flat") which purchase was partly financed with a loan of some $800,000 from Douglas to Chan. There was no mortgage. In September 1988, Chan moved from her Hiu Kwong Flat into her new Elizabeth House Flat. (In December 1989, the Hiu Kwong Flat was sold for $625,000.)
9. More changes were to come in the next few months in late 1988 and early 1989 for Chan, as she acquired the 20% shares in Jannock from Hung and became the complete beneficial owner of Jannock. From December 1988 until September 1989, it would seem that Chan also made a number of payments to Douglas which she said was for repayment of the Elizabeth House Flat loan.
10. In April 1989, a new activity was started by Chan, namely the buying from Charles Chow, WBC of a new overseas company, Inter Marine Exports Ltd. ("Inter Marine") in which Chan was taking 30%, with Tam and others taking the other 70%. But this new shelf company Inter Marine was not used for sometime until the purchase of the key flat in this case, the flat at Convention Plaza.
11. According to Chan it was only in early 1990 that her daring of Douglas developed into a physical relationship. It was about that time in January 1990, that Chan sold Elizabeth House for $1.78 million. In a period of about 2 months, from December 1989 to January 1990, two flats namely Hiu Kwong Flat and Elizabeth House Flat were sold by Chan. She was to remain out of the property market for some 18 months until the purchase of the Paterson Building flat in August 1991.
12. In March 1990 there was completion of the sale of Elizabeth House and Chan moved out of Elizabeth House Flat to a flat at Viking Garden ("Viking Flat"), the lease for which was held by Douglas. There she lived with her mother and her elder sister, Chan Yee Wah. Chan was paying $6,000 per month to Douglas as her rent for Viking Flat. That tenant relationship was regularized in March 1991 when her company, Jannock took a formal lease of Viking Flat from the landlord for 2 years from 18th April 1991. Viking Flat was to be Chan's home from March 1990 to March 1993.
13. On 29th July 1991, Douglas gave to Chan a cheque of $1.1 million which sum was to be used for the purchase by Chan of a flat at Paterson Building ("Paterson Flat") at $1.56 million. There was however a mortgage by Shanghai Commercial Bank ("SCB"), the favourite bank of Chan. This Paterson Flat was according to Chan supposed to be a gift from Douglas to Chan but the so called gift was later returned.
14. At that time in September and October 1991, the relationship between Douglas and Chan must have been so intimate that Douglas took the drastic step of leaving a letter for Pamela informing her that he was ending their marriage. The receipt of that letter was to start a process in the lives of these three people Douglas, Pamela and Chan which eventually led to this litigation lasting some four years.
15. It was also in October 1991, that apparently Chan acquired all the shares in Gosi from her partners, Tsang and Tam. In November 1991, through the influence of Chan and her uncle Yeung who was the Secretary General at the New China News Agency in Hong Kong, Douglas was appointed a China appointed Attesting Officer, a position much coveted by solicitors in Hong Kong. In January/February 1992, the Paterson Flat was sold for $2.5 million giving rise to a profit of close to $1 million for a property owned for less than 6 months.
16. In February 1992, Chan learnt that over the Chinese New Year holidays, Douglas had gone to Bangkok with Pamela for a reconciliation holiday and this made Chan break with Douglas and return his gift of the Paterson Flat by giving him in March 1992, 3 cheques totally over $1.5 million. The so-called break however did not last long. A month or so later, they were back together as he bought in April 1992 a flat at Fairview Mansion ("Fairview Flat") for $3.45 million, purchased in the name of Koko Ltd. his service company and she helped him with the finance of the purchase. Douglas required money for that Fairview Flat purchase and Chan said she gave him a loan of $1.75 million. Fairview Flat according to Chan was a troublesome purchase because Douglas bought too high in too much of a rush and she had to use all her PRC connections to sell that flat for him which she said she succeeded in doing in February 1993 for the price of $4.2 million. According to Chan, the $1.75 million loan from Chan to Douglas were repaid in February/March 1993 by cheques from Douglas to Chan.
17. 1992 was however important because of the activities of Chan which led to the payment of US$4 million in early August 1992 by CNAC to the Chan company, Gosi. The reason for this very large payment was because of the floppy disc joint venture that she got Du (her old friend in her days at CNAC) of CAAC, the parent company of CNAC to agree to participate in. Ho Wai Ming ("Ho"), a computer friend of Chan was to be her partner and they were to invest jointly with CNAC in the proposed project of a new disc factory in Shenzhen. The US$4 million was the CNAC share of the proposed investment in this joint venture.
18. In August 1992, the shelf company Joyfine Ltd., 3rd Respondent ("Joyfine") was purchased for Chan and this company was intended to be part of the complicated vehicle to be used in this floppy disc joint venture. There were visits by Chan and Ho to Japan and Shenzhen about this joint venture business and steps were taken on the secretarial side in relation to Inter Marine and Joyfine to implement this joint venture business. But Ho and Chan discovered in November 1992 that this disc manufacturing business was not viable commercially and so the project had to be abandoned. The sum of US$4 million was repaid by Gosi to CNAC on the 23rd December 1992, some 4 and half months after payment was first received. But Joyfine however was retained by Chan and Chan formally paid in January 1993 for the acquisition cost of Joyfine.
19. In February 1993, Chan found a flat at 3404 Convention Plaza ("Convention Plaza Flat") which she wanted to buy. The price was $9.7 million. This was a large luxury flat and a very substantial purchase. Chan asked Du of CAAC for a loan to purchase the property in Hong Kong and Du agreed. The purchase was made in the name of Joyfine, the shares of which were held 99.9% by Inter Marine by an allotment made in February 1993. The structure of the purchase was advised by Chow. The Purchase Agreement was signed on 16th February 1993 and on the same day, Chan on behalf of Joyfine paid the initial deposit of $200,000 followed by a further deposit on 2nd of March 1993 of some $773,400 and a payment of $267,696 for stamp duty. A mortgage of $6.8 million was also eventually organised for this purchase of Convention Plaza Flat and when the HK$8 million remittance from CNAC arrived on 1st of March 1993, there was apparently too much money, according to Chan. (One cheque of Douglas in late February and two cheques from Douglas in late March came to some $2.8 million were paid to Chan.) Completion took place on the 31st March 1993 and Chan moved in days later, terminating her residence at Viking Flat. This Convention Plaza Flat was the new home for Chan and Douglas, although Douglas has still his own small flat two floor down on the 32nd Floor of Convention Plaza. For tax purposes, the Convention Plaza Flat was leased to Gosi and the rental from Gosi to Joyfine largely paid for the monthly mortgage instalments.
20. Bliss for the couple in their new home did not last long as Pamela commenced the Divorce Petition against Douglas and Chan on the 21st of June 1993 which was served on Chan the next day.
21. In August 1993, Du asked for the repayment of the loan which previously was agreed between Du and Chan to be for 6 months with interest at $400,000. On 28th August 1993, repayment was made at the office of CNAC by the delivery of 3 cheques, one of Joyfine for $6,000,000, one of Douglas for $2,000,000 and another one of Douglas for $400,000.
22. On the 30th September 1993, Chan also caused the purchase by Jannock of Office A, 3rd Floor of Centre Mark II, Queen's Road Central ("Centre Mark Office") for her new office. The purchase price was $3.32 million and completion took place on 30th October 1993 with a $2,000,000 mortgage from SCB.
23. On the divorce side, the Decree Nisi was granted on 13th October 1993 and Decree Absolute was ordered on 15th October 1994. However the main battle on the ancillary relief was yet to come and there had been a great deal of activity in these proceedings in 1994, so that by late 1994 it was known that the Trial in respect of the Ancillary Relief was going to be heard in the High Court in early March 1995.
24. In October 1994, there were the unusual activities involving a reconfiguration of the $2.4 million paid by Douglas to CNAC in August 1994. A series of cheque transactions took place as follows:-
| 15/10/94 | Cheque for $2,400,000 by Chan to Joyfine | |
| 15/10/94 | Cheque for $2,000,000 by Joyfine to CNAC | |
| 15/10/94 | Cheque for $400,000 by Joyfine to CNAC | |
| 18/10/94 | Cheque for $2,400,000 by CNAC to Joyfine but corrected to Douglas. |
Chan said she received the CNAC's $2.4 million cheque at the CNAC office whereas Douglas said in Court to Barnett, J. that he did. This somewhat unusual recycling of payment through CNAC was to be the source of much controversy during the Trial before me.
25. In January 1995, although she was pregnant and the Ancillary Relief Trial (of which she was not served) was to begin in early March 1995, Chan left Hong Kong for Hawaii and there she stayed until April 1995. The Ancillary Relief Trial started on the 2nd of March before Mr. Justice Barnett and lasted until the 29th March 1995, with a break on the 17th March 1995 to enable Douglas to visit Chan in Hawaii. Douglas and Pamela gave evidence but Chan was not a party and did not give evidence. Douglas conducted the Trial himself and Miss Leong, Q.C. appeared for Pamela. It was a long Trial and Judgment was reserved. At the Trial, the two most important current properties, namely the Convention Plaza Flat and the Centre Mark Office were contended by Pamela to be beneficially owned by Douglas and ought to be taken into account in arriving at the proper Ancillary Relief Order. In the Judgment of Barnett, J. delivered on the 12th of May 1995, this contention of Pamela was accepted and the learned Judge assessed the total value of assets of Douglas at between $30 to $40 million and awarded to Pamela a lump sum of $16 million ("Judgment Sum").
26. Douglas did not pay Pamela the Judgment Sum but instead he made himself difficult to find physically. There was a cloak and dagger episode on the 26th September 1995 whereby at the telephone request of Douglas from Shanghai, Chan agreed to give him $1,000,000 paid by way of cash hand-delivered to Douglas' law partner, Robert Lie at the public lobby of a Central Building. That secretive payment of $1,000,000 was timely as two days later, Barnett, J. granted an ex parte Mareva Order against Chan, Joyfine and Jannock which Order was served the next day on the 2nd, 3rd and 4th Respondents. Douglas from that time onwards effectively had disappeared from Hong Kong, although Chan told this Court that she had met Douglas once in November 1995 in Shanghai and another time in June/July 1996 in Los Angeles, USA.
27. Upon the deliberate failure by Douglas to pay the Judgment Sum (there was some minor recovery), it was inevitable that the attempt by Pamela to collect what was awarded by a Hong Kong Court to her, would turn to Chan and her companies and in particular to the two specific assets, namely the Convention Plaza Flat and the Centre Mark Office. The Mareva Injunction Order imposed upon Chan and the two companies were varied by Order of Mr. Justice Rogers in December 1995 when he also ordered that there should be a Speedy Trial of Pamela's Execution proceedings ("Execution Action") against Chan, Joyfine and Jannock (hereinafter referred to collectively as the "Respondents"). Most of 1996 was spent on pleadings and discovery disputes and just before Christmas 1996, Mr. Justice Rogers moderated somewhat the Mareva Injunction Order but granted discovery order in respect of the Gosi documents and granted leave to set down the trial of the Execution Action with estimated trial length of 10 days. Chan appealed the discovery Order which was dismissed by the Court of Appeal in July 1997. On the 14th of May 1997, the Listing Judge set down for Trial of the Execution Action and on the 19th May 1997, the Trial was fixed to commence on 5th January 1998. On the 22nd November 1997, the clerk of the new Matrimonial Judge, Waung, J. sent notice to the parties of a Pre-Trial Review on 27th November 1997 directed by Waung, J. but the Pre-Trial Review however was postponed at the request of the parties to 11th December 1997 when in addition to the Pre-Trial Review, there was also an application by the Special Managers of the Bankrupt Estate of Douglas Ng for a general stay of the Execution Action. By my Reasons for Judgment handed down on the 15th December 1997, I refused the application for adjournment, gave directions for Trial of the Execution Action including directions in respect of exchange of Witness Statements, Expert Reports, Lists of Issues etc. and refixed the Trial dates to 14th April 1998 with 3 weeks reserved. After some further last minute discovery application made in mid March 1998, the Trial of this Execution Action was ready to start on the 14th April 1998 when lawyers for Pamela applied to me again for a general stay of the Execution Action on the basis of her last minute application for Legal Aid as it was said that she had finally ran out of money from this extended litigation. By my Reasons for Decision handed down on the 16th April 1998 I refused the adjournment sought by Pamela and I ordered that the Trial was to resume properly on the 17th April 1998. There was however yet two more further twists to this saga. Firstly, subsequent short adjournments had to be given to Mr. S.H. Kwok who was briefed late to appear for Pamela and the second twist was the appearance of Mr. Thomas Lai on the 6th May 1998 to lead the Petitioner's team. I recounted all this litigation history because of the effect of this history on the eventual issues which the Court were finally asked to resolve by the parties at the conclusion of the Trial.
ABANDONED ISSUES
JANNOCK, GOSI, CENTRE MARK OFFICE, PANYU
28. At the Pre-Trial Reviews and at the beginning of the Trial, the case of the Petitioner was that Douglas Ng was the beneficial owner of Jannock, Joyfine, Gosi, the Convention Plaza Flat, the Centre Mark Office and even the two small houses in Panyu, China. After a Trial lasting some 24 days with extensive and the most searching investigation of every aspect of Chan's life and financial dealings, it became clear to everyone including the legal team for Pamela and the accountant acting for Pamela that the hard evidence did not permit the previous wide targeting. Mr. Lai leading for Pamela therefore conceded that:-
| (1) | the two trading companies, Jannock and Gosi were properly conducting business of Chan and not of Douglas; |
| (2) | these two companies, Jannock and Gosi were beneficially owned by Chan and not by Douglas; |
| (3) | the Centre Mark Office was not beneficially owned by Douglas to which Pamela could not make any claim; |
| (4) | apart from a claim against the Convention Plaza Flat, there was insufficient evidence for the Petitioner to maintain her claim that Douglas has any beneficial interest in the bank accounts of Chan or of Gosi or of Jannock. |
CREDIBILITY OF MAIN WITNESSES
29. It is conceded by both parties at the Trial that credibility specially of the main witness, Chan will be crucial to the determination of the Trial. Since December 1997, I have seen Chan on numerous occasions when I had to case manage this Execution Action. She also gave evidence before me for some 10 days in addition to sitting in my Court during the entire 24 days of the Trial. I think therefore I had a much fuller exposure to her as a witness and as a person than would have been the case in most proceedings.
30. As a witness, she gave evidence in Cantonese often too fast which perhaps is an indication of her mental agility as well as her forthrightness. She was a good witness, not evasive but gave her answer directly and to the point. She conceded mistake where she realized she had made an error and she had sufficient confidence in herself when she stood her ground on any particular point of which she was certain. I have no doubt she is highly intelligent and very capable in her work. In my judgment she is an honest witness and gave truthful and reliable evidence. As a person I believe in addition to being very resilient and independent, she is also dominant, confident, complex and interesting. This might explain why Douglas was attracted to her. I think he was probably more attracted to her mind than to her body and in that sense it was not surprising that the physical side of their relationship came rather late in the day rather than in the first few months as suggested by Pamela. She was a lady with little English who had made her way forward, through her own personal efforts, to manage two companies and to be owner of substantial assets. Of course she made shrewd use of her connections and her friends but this was the give and take of business and friendship, where a little bit of help at the right time will open doors and give rise to opportunities. On all the material aspects on which she had given evidence, I accept her evidence and it therefore follows that where I need to find fact or draw inferences I would find such facts and draw such inference in her favour and regrettably against the Petitioner.
31. There are two other factual witness for the Respondents where credibility is also relevant, namely Ho and Charles Chow. Both of them gave their evidence most intelligently and convincingly and I accept them as truthful witnesses.
32. Miss Kwong of CNAC also gave evidence. She is a neutral witness and came to give evidence under subpoena. She gave me the impression that sometimes she was somewhat confused as to the court proceedings but on the whole I believe that she is a truthful witness who was doing the best she could to assist the Court.
33. The last remaining factual witness is Pamela. She is physically a very attractive lady who had obviously suffered greatly by what had happened, not only by the infidelity of the husband, who had abandoned her for a younger lady but mostly by his extraordinary behaviour in first fighting bitterly her justified application for Ancillary Relief and subsequently by his total irresponsible disappearance from Hong Kong, leaving the two ladies to fight out this oppressively difficult Execution Action, which for Pamela was her only means to a decent future life style. I do not therefore find it surprising that she gives the appearance of sometimes being bitter and extremely resentful of Chan. But I suspect that without sometimes realising it, her strong feelings and bitterness had influenced and tempered her views and sometimes her evidence. I therefore have occasional reservations about Pamela's evidence. Where therefore it is material and there might be a conflict between her evidence and that of Chan, I prefer the evidence of Chan.
34. As for the expert witnesses, the accountants more or less at the end of the day agreed with each other on most matters and where they do not, their evidence is not for me very significantly material. I find however that although both are able accountants, I have derived far more help from Mr. Tam, specially by the additional materials which he had given to the Court in the course of his evidence. There is for me in the evidence of Mr. Grimsdick here and there just a touch too much of interpretation of facts in advancement of the cause of the Petitioner. Miss Zhang, in the light of the concession made by the Petitioner at the stage of the final speeches, lost her considerable value as a witness for the Petitioner. Her professional experience was somewhat limited although she gave evidence well but I have very considerable reservation about her evidence and in my view, Miss Eu was justified in saying that Miss Zhang was too theoretical and that her evidence was not sufficiently grounded on the real commercial world of China and Hong Kong. On the whole, therefore much of her evidence I do not accept.
MAIN ISSUE - DOUGLAS' BENEFICIAL INTEREST IN
JOYFINE, INTER MARINE AND CONVENTION PLAZA FLAT
35. The main issue and at the end of the hearing, the only proper issue which this Court has to determine in this Execution Action is whether Douglas could in some way be said to have a beneficial interest in:-
| (a) | Inter Marine and/or Joyfine; |
| (b) | The Convention Plaza Flat. |
But to have a beneficial interest in the circumstances there must be a financial connection between Douglas with these two companies or with this Convention Plaza Flat and the connection must be sufficiently close and of such probative value to enable the Court to be satisfied with a sufficient degree of conviction that Douglas has the alleged beneficial interest. The Court is not concerned if someone else or strictly speaking if Chan has the beneficial interest in these two companies or in this Flat because even if that be the case, it would not help the Petitioner. It is not for this Court to speculate as to who else might be beneficially interested. The Court is only concerned with whether Douglas is beneficially interested in these two companies or Flat and if so to what extent. It is not for Chan and Joyfine to prove that Chan has a beneficial interest in the 2 companies and in the property but it is for the Petitioner to prove that Douglas has a beneficial interest in the 2 companies and in the property. It seems to be vitally important for me to bear this basic principle in mind as otherwise it is too easy for the Court and for the Petitioner's legal team to stray into a maze full of diverting amusements but of no material relevance to the case.
36. As a broad overall view of the purchase of Convention Plaza Flat, it is worthwhile to remember that it was purchased in February 1993 by Chan as a residence for herself and her family. At that time, the lease for Viking Garden was coming to an end and Chan wanted to have a place of her own which reflected her improved position in society. The Convention Plaza Flat would be a perfectly reasonable residence for her and was not an illogical huge jump for her. In early 1993, Chan owned two trading companies and she had substantial money in the bank. The purchase was made in the name of Joyfine and Chan's clear evidence was that she beneficially owned Inter Marine and Joyfine. The first dispute on the Main Issue is whether Chan beneficially owned Inter Marine and Joyfine.
Inter Marine Beneficial Ownership
37. Inter Marine was purchased in April 1989 on the advice of Charles Chow, the accountant. Inter Marine is an overseas company which Chan purchased for the intended business with Feng of Yue Xiu. Chow personally advised Feng and Chan against using an existing Hong Kong company such as Gosi for the intended business. Chow advised the necessity to set up an overseas company such as Inter Marine. Chan's 30% interest in the company was held by a nominee company for her. The acquisition cost for Inter Marine was paid by Gosi. There was no evidence of any connection between Feng and Douglas. There was no evidence that any money of Douglas paid for the acquisition of Inter Marine. There was no evidence of any connection between Douglas and Chow in relation to this purchase of Inter Marine company. The contemporaneous documents both from Chan, from Inter Marine and from the files of Chow all clearly show that it was Chan and not Douglas who had set up this Inter Marine company and that it was Chan who had a beneficial interest in this company together with people from Yue Xiu. The evidence from the Respondents all of which I accept, shows that Inter Marine was something of a white elephant after it was purchased by Chan in 1989 as she had no use for it and she could not get rid of it easily. Chan had to continue paying the costs of keeping the company. Douglas certainly did not pay.
38. In October 1991, Chan bought out the Yue Xiu interest in Gosi and she became the 100% beneficial owner of Gosi. Some one year later, a similar transfer of beneficial interest in Inter Marine from Yue Xiu to Chan took place. The 40 shares held by Tam of Yue Xiu was transferred to Chan and Manseco and Triseco the other two nominal company shareholders also executed letters dated 14th October 1992 confirming that they held the 60 shares in Inter Marine for and on behalf of Chan.
39. The documents and the oral evidence by Chan and her witnesses have convincingly shown that Inter Marine has nothing to do with Douglas and I hold as a fact that Douglas had and has no beneficial interest in Inter Marine.
Joyfine Beneficial Ownership
40. There is no dispute that 99% of the shares of Joyfine are registered and held by Inter Marine. Once it is accepted that Inter Marine is beneficially owned by Chan and not by Douglas, it is inevitable that the beneficial ownership of Joyfine is also not in Douglas but in Inter Marine or indirectly through Inter Marine in Chan. However to complete the picture, I will examine what financial connection Douglas might have with Joyfine.
41. Joyfine came into the picture in 1992 when the disc production business was first considered and it was to be one of the companies which would be required to be used in this proposed joint venture. By the sheer preponderance of evidence there is no doubt that this joint venture did come into being although it had to be prematurely aborted. This joint venture was the subject of the most critical cross-examination at the Trial because of the USS4 million remittance received by Gosi from CNAC in August. The relevance of the US4 million remittance has two aspects, one is whether it shows that there was any genuine joint venture with CNAC which could explain this large payment by a state enterprise and secondly whether it shows any financial involvement of Douglas in this joint venture or remittance. Notwithstanding all the doubts cast by the Petitioner and by their expert Miss Zhang, I accept that there was a genuine joint venture between CAAC/CNAC and Ho/Chan and that the payment of the US$4 million by CNAC was a genuine payment for a joint venture which eventually failed. I of course accept that by western documenmtion or commercial standards what happened might seem to be somewhat odd but this episode ought to be viewed in the context of the lax and free legal and commercial culture in China and Hong Kong prevailing in those boomy days when much more extraordinary events did take place. As for the possible involvement of Douglas in this US$4 million remittance and joint venture, there was simply no credible evidence advanced before me let alone being able to persuade me that Douglas has any financial or other involvement with this matter. What happened was simply that US$4 million was paid and then repaid a few months later when the joint venture had to be aborted. I see nothing sinister in what happened and I am not prepared to be mesmerized by the size of the remittance or be lured into conspiracy theories when there was not a shred of evidence to support such theory. The reality is that Chan was well connected and like everyone who was very well connected in China, things happen for them and their projects can proceed forward. I accept the evidence of Ho and Chan on this whole episode and I accept in particular their evidence that this disc production joint venture has nothing to do with Douglas. Therefore I find that in 1992, it was not Douglas but Chan who had the involvement with Joyfine.
42. When the joint venture failed, Chan decided to keep Joyfine and she paid formally for the acquisition cost of Joyfine in January 1993. This is again both documented as well as the subject of oral evidence which I accept. Douglas has no involvement at that time with formally acquiring Joyfine or with paying for its acquisition.
43. After the purchase of Convention Plaza Flat by Joyfine, there is plentiful evidence both oral and documentary of Chan's beneficial ownership of Joyfine but there is nil evidence of Douglas' financial or beneficial involvement with Joyfine.
44. I accept the evidence from Chan and from her witnesses as well as their documentation and I find as a fact that Douglas has no beneficial interest in Joyfine and that Chan is the beneficial owner of Joyfine by way of her beneficial ownership of Inter Marine.
Beneficial Ownership of Convention Plaza Flat
45. There are two questions raised at the trial as to the beneficial ownership of the Convention Plaza Flat, first as to the structure of the holding and secondly as to the source of funds for the acquisition of the Convention Plaza Flat.
46. Chow gave good and most convincing evidence on what happened on the corporate side which led to acquisition of the Convention Plaza Flat being structured to be made in the name of Joyfine and I accept his evidence as well as the evidence of Chan on this aspect. There is simply no evidence that Douglas was in any way responsible or even involved with this structure or could be said to be behind this purchase of the Convention Plaza Flat by Joyfine.
47. The main dispute from beginning to the end is over the source of funds for the purchase of the Convention Plaza Flat and whether any part of the purchase money could be said to come from Douglas or had some Douglas involvement. I regret to say that after the closest scrutiny by everyone, including both Mr. Lai and Mr. Kwok for the Petitioner as well as by their accountant, not even an arguable case let alone a credible case has been made out to show any financial interest by Douglas in the purchase money for the Convention Plaza Flat.
48. Of the purchase price of some $10 million, $6.8 million was indisputably from the SCB Mortgage which left only $3.2 million. The question is whether at the end of the day the Petitioner has shown that any of that $3.2 million was money of Douglas which was paid by him intended for the purchase of the Convention Plaza Flat. The Petitioner raised two arguments in support of her case that some of the $3.2 million might give rise to a case of beneficial interest of Douglas in that property. The first argument is based on the HK$8 million payment from CNAC. The second argument is that the fund flows might show a possible beneficial interest of Douglas.
CNAC $8 Million
49. The evidence that CNAC paid HK$8 million to Joyfine was clear and there was no dispute that such money was paid. The dispute was what it was for and from that whether the money might not really be that of CNAC. The oral evidence from Chan was that the money was a loan to purchase a property in Hong Kong which she requested from Du of CAAC. That she had a long term good relationship was borne out by the evidence and this evidence was not even challenged at the Trial. What was worth remembering is that having established her trustworthiness with the repayment of the US$4 million loan in December 1992, she must have been regarded as someone who could be trusted in early 1993 when she sought the loan of US$1 million. The documentation indicated that there was a loan of that amount to Joyfine and that it was a loan with interest to be paid within 6 months. What did not quite match was that the loan note indicated a loan for investment in sock factory, rather than in property in Hong Kong. Du was more forthcoming on this than Chan as Du accepted in his second statement that the loan agreement reference to investment in socks factory was not accurate, the real reason being for loan to buy property in Hong Kong. But the fundamental question in relation to this $8 million payment from CNAC is not whether there was a CNAC loan of which I am sure there was, but whether that money had anything to do with Douglas. The evidence on this is really all one way. There was no evidence at the Trial that Douglas was in any way involved with the securing of the loan from CNAC or that he had any connection with CNAC or CAAC or that (the most incredible theory of the Petitioner) he had paid CNAC or CAAC some money so that CNAC could make the $8 million payment to Joyfine. At the end of the day, the legality of the CNAC payment or of the CNAC loan is really irrelevant because the issue is not whether it was legal or illegal loan or legal or illegal payment but whether any of such payment was with the money or involvement of Douglas or paid on his behalf. There was no such evidence at all and all speculation of the Petitioner's able lawyers could not fill the void which required good hard evidence for even an arguable case to be mounted.
50. Strictly speaking this ought to dispose of the $8 million argument but much had been made of the $2.4 million repayment from the two cheques of Douglas in 1992. What happened was that the end of August 1993 repayment of the $8 million loan was achieved by a $6 million cheque of Joyfine and two cheques from Douglas totalling $2.4 million, the $400,000 being the interest at 5% for the 6 months period. The source of the $6 million payment by Joyfine had now been cleared and the experts accepted that the money did all come from Chan and none from Douglas. As for the $2.4 million, Chan's explanation was that this was a loan from Douglas to her by his giving the two cheques payable directly to CNAC which loan she repaid to Douglas in mid October 1994 by the most unusual manner of routing the payment from her to Joyfine, from Joyfine to CNAC, from CNAC to Douglas which cheque was handed over at the office of CNAC on the 18th October 1994 but only after that cheque wrongly made out originally to Joyfine was corrected to Douglas Ng at the office. Originally the Petitioner questioned the source of funds for Chan's payment to Joyfine of the $2.4 million on 15th October 1994 but this aspect had been cleared by the evidence of the two accountants and by the flow charts of Mr. Tam, the accountant of the Respondents. The explanation of the rerouting through CNAC in 1994 of the repayment by Joyfine to Douglas of the $2.4 million loan by Douglas to Joyfine is somewhat unusual but Douglas was an extraordinarily complex and unpredictable and secretive man. If a successful professional man could disappear because of a matrimonial payment order of $16 million then in my judgment he could equally seek the repayment of the $2.4 million through the route of CNAC. That CNAC would agree to being used as a payment window only goes to show how much Chan's relationship and connection was valued by CNAC and CAAC. I accept totally her evidence that she was and is connected in the highest places and that many people would go to a great deal of trouble to open doors for her or to make things happen for her. I have therefore no hesitation in accepting her explanation of what had happened but in the end this explanation is less important than the question of whether that $2.4 million payment by Douglas to CNAC in August 1993 was a loan by Douglas to Chan as Chan had told the Court or was an indication of his involvement somehow with the $8 million loan. Here again I accept Chan's evidence as I accept her as a witness of truth plus the fact that in my view her evidence was consistent with the tenor of the relationship between her and Douglas in which she could call on him for a loan if and when required.
51. At the Trial before Barnett, J. this aspect of the $2.4 million was touched upon. The learned Judge was unfortunately much handicapped. He did not have the benefit of valuable documentary material nor the extensive oral evidence of Chan and Miss Kwong Kun Man of CNAC. I accept the oral and documentary evidence presented to me and I find as a fact that it was Chan and not Douglas who went up to the CNAC office when the cheque of $2.4 million from CNAC was corrected from Joyfine to Douglas Ng and then handed to Chan. I find also as a fact that $2.4 million payment by Douglas to CNAC in late August 1993 was in the nature of the loan by Douglas to Chan and not indicative of any involvement of Douglas in the $8 million payment by CNAC to Joyfine in early March 1993. I find as a fact that Douglas was not involved in any way with the $8 million loan by CNAC to Joyfine in early March 1993 and I find that the $8 million received by Joyfine in early March 1993 from CNAC did not contain any money from Douglas.
Fund Flow
52. The fund flow argument took up a great deal of time at the Trial and there was a lot of chasing after various payments. The contention behind this argument is that somehow money from Douglas went into the purchase money for this Convention Plaza Flat and therefore a large number of payments from late 1988 onwards to late 1995 were looked at. This exercise might be justified at the initial stage of the Trial because so much was still in issue including the beneficial ownership of many properties and companies. But now that these are all out of the way and we are only concerned with whether Douglas might have a beneficial interest in the Convention Plaza Flat on the basis that part of the purchase money for that property might come from him, the search can be narrowed down in my view to three payments, namely the $1,000,000 paid by Douglas to Chan on 27th February 1993, the $800,000 paid by Douglas to Chan on 25th March 1993 and the $1,000,000 paid by Douglas to Chan on the 26th March 1993. These three payments are significant because they are not only large but they are just one month (in the case of the February cheque) and a few days (in respect of the two March cheques) before the completion of the purchase. The earlier payments were too far away in time for any probative connection to be made. But with these three large payments, there was at least a sufficient proximity between the purchase money paid to the vendor and these payments in time and amount as to raise a possible inference of resulting trust. These payments of Douglas to Chan however were not made in vacuo. Chan's clear evidence was that the March cheques were made to her in repayment of her loan of $1.75 million she gave to Douglas in 1992 for his purchase of the Fairview Flat and that the February cheque was possibly to pay for the profit made on the Fairview Flat transaction although in her Witness Statement she stated she could not remember what that February $1 million payment was for. The combination of course could be the other way round, namely February $1 million combined with March $800,000 as repayment of loan and March $1 million as Fairview Flat profit for her. It was submitted by Mr. Lai that the $1 million of the February payment could be regarded as Douglas' payment for the second deposit of $773,440 and the stamp duty of $267,696 which payments were made some 3 or 4 days after the receipt of the $1 million from Douglas. Although the timing and the appropriate amount might work, why should Douglas suddenly be making a payment for the purchase of the Convention Plaza Flat when he made no payment before or after. It was a coincidence of timing and amount which is made clear when one looks at the receipt of $8 million from CNAC on 1st March and the two late March payments by Douglas as his repayment of her Fairview Flat loan. I accept Chan's evidence that the February/March payments to her were related to Fairview Flat and not to the Convention Plaza Flat and most importantly I accept her evidence that these money paid to her in February and March 1993 have nothing to do with Douglas buying the Convention Plaza Flat. It is to be remembered that the Fairview Flat was eventually sold in February 1993 for $4.2 million and therefore the repayment to Chan by Douglas of the $1.75 million loan in February/March 1993 not only made sense but was convincing, having regard not only to Chan's oral evidence but also to the fact that at that time she was entering into a large purchase transaction and wanted as much money in her hands as possible. I find therefore as a fact that no money of Douglas went directly into the purchase of the Convention Plaza Flat.
53. Strictly speaking this ought to be sufficient for the purpose of deciding this aspect of the Main Issue but it seems to me that I also ought to indicate that in my view, the Petitioner has really no hope of success on the subject of Fund Flows as one of the essential requirements of establishing beneficial interest by resulting trust is not only to show that there was some money which went somehow into a purchase of a property but that there was an intention by the parties that such money was intended to be used for such property purchase. In a case where the money went directly from a non-purchaser to the vendor of the property, the burden on the non-purchaser to show an intention of acquiring beneficial interest in that property is worthy of consideration by the Court. But in a case such as this, where the payment was not directly paid by the non-purchaser to the vendor but by a non-purchaser such as Douglas to a shareholder of a purchaser company and then from the shareholder of the purchaser company the money had to be further traced to the purchaser and then from the purchaser to the vendor, the task becomes simply impossible to establish with that degree of certainty and conviction. Such payment made could be for one of many reasons given by Miss Eu, such as loan, repayment of loan, settlement of account, discharge of existing liabilities, investment, payment for services, payment as agent etc. This very important consideration undermines the whole case of the Petitioner on Fund Flows to establish resulting trust. It is to be noted that funds flows argued by the Petitioner are confined to flows between Douglas and Chan (traffic both ways) and not flow of funds from Douglas to Joyfine, let alone from Douglas to the vendor of the property.
Beneficial Ownership based on conspiracy or everything being a sham
54. A faint hearted attempt was made in the course of the final submission by Mr. Lai to suggest that the Court could infer conspiracy or that the whole business was a sham devised by Douglas and Chan to disguise the ownership of the Convention Plaza Flat by Douglas. Apart from strong technical reasons such as that this alleged case was neither pleaded nor put in cross-examination nor covered in the Witness Statements. I just do not see where there is the positive evidence on which the Court could draw such inference. But in any event all this is irrelevant as the Petitioner falls down on my findings of facts and credibility against her.
Conclusion on Beneficial Ownership by Douglas
55. I regret to say that the case of the Petitioner on beneficial ownership is so weak that at the end of the Trial, no amount of advocacy could save the day. I have given anxious consideration to all aspect of her claim to see if a case could be put in a favourable light for the Petitioner or whether the evidence could be interpreted in some way which could justify her persistence in this protracted set of proceedings. I regret that I have been unable to find any. The case of Douglas Ng having a beneficial ownership in the Convention Plaza Flat could not be sustained and it therefore follow that the claim against the Respondents must fail.
SIDE ISSUE-ADMISSION OF TAPES
56. Towards the end of the cross examination of Chan, the Petitioner raised the matter of the two tapes found in the home of the Petitioner amongst the things left behind by Douglas. There was no previous discovery of the tapes by the Petitioner. Application was made to admit the tapes and the Chinese transcript. The two tapes contained what was apparently two separate sessions with a Chinese fortune teller on some unknown date. There is no direct evidence as to where and when the tapes were made and whether the voices were those of Douglas and Chan. The fortune teller was doing all the talking and there were very few words uttered by the unknown man and unknown woman the contents of which were faint and not clear. Pamela had closed her case and she would have to be recalled to give evidence about the finding of the tapes and to identify the voice in the tapes as being that of Douglas. In any event Chan denied it was her voice. Strictly speaking, it is doubtful that the tapes are even admissible under the hearsay rules. But what is fatal to the application in my view, apart from its general lateness and the prejudice it would cause to the Respondents is that it is really not material to the issues at trial or if material is of so little probative value as not worthy of my exercise of discretion in favour of reception. There was nothing in the tapes to suggest any buying of the Convention Plaza Flat by Douglas or that Douglas and Chan were even buying any property together. For me the whole exercise therefore was a waste of time and I exercised my discretion against the admission of the tapes as I took the view that it could in no way advance the case of the Petitioner.
SIDE ISSUE-ADMISSION OF EXPERT EVIDENCE ON NOTEBOOK PAGES
57. Towards the tail end of the Trial, the Petitioner sought to introduce expert evidence for the first time on two of the torn pages from the 1993 notebook of Chan. Chan was in the habit of keeping working notes in her notebook. Miss Eu in a frustrated response to the repeated and insatiable demands for discovery by the Petitioner advised that all the notebooks of Chan should be made available to the Petitioner's legal team. The notebooks contained her daily working notes, orders, contracts, shipments, meetings and all sorts of scribbles relating to a business lady running two trading companies. The legal team of the Petitioner pored over these notebooks and discovered that two sheets or four pages appeared to be torn from the 1993 notebook and they became suspicious. Long after the Trial started, they called in handwriting expert to see what could be made from the remaining pages in the notebook immediately preceding and following the torn sheets and whether anything could be reconstructed of the missing torn pages. A quick report was produced by the Petitioner's expert indicating not unexpectedly that they could read something but nothing material relating to the purchase of the Convention Plaza Flat. That conclusion of the Petitioner's expert ought to have ended the matter but Mr. Lai persisted and applied nevertheless to have this matter opened up, which application was opposed by Miss Eu. Apart from lateness which alone would have defeated the application, I exercised my discretion against admission as this was again a desperate useless exercise which has only at best marginal relevance and which was distracting the Trial into another side show. There was nothing in the Petitioner's expert draft report which indicated any connection of the missing pages with Douglas having anything to do with the purchase of the Convention Plaza Flat. Even if there was handwriting by Douglas in the missing pages, which was disputed by Chan but asserted by Pamela (she having been his secretarial help claimed to know his handwriting without needing to call handwriting expert), such handwriting did not assist me in deciding the material question of beneficial interest or contribution by Douglas into the purchase of the Convention Plaza Flat. The missing scribblings (made around the time of purchase) are about a complaint in relation to some goods. How that could be relevant to the issues in this Trial is simply for me too far fetched and remote, even if it could somehow be arguable. To allow the Petitioner to have such evidence admitted at that stage of the Trial would probably mean first prolonging the Trial considerably and second my having to grant an adjournment of the Trial at least sufficient to enable the Respondents to obtain expert assistance to oppose the Petitioner's contentions. Special leave is required to adduce such expert evidence and in the circumstances, it seems to me that my discretion could only be properly exercised by refusing the application.
CONCLUSIONS
58. This is the Trial of the Execution Action which took 24 days not counting the number of days which were lost initially as result of the Petitioner seeking various adjournments because of her inability to proceed with the Trial. This Trial eventually took place after a Mareva Injunction Order and numerous interlocutory applications to the Court. I of course understand the strong feeling of the Petitioner in seeking to recover from the lady whom she blamed for destroying her home and her world. The Petitioner therefore sought the only valuable asset which she believe ought to go to her and her son, the Convention Plaza Flat which is of course also the home of Chan and Chan's son. The evidence however was simply not there for her lawyers or her accountant to establish a sufficient case that Douglas Ng her ex-husband had a beneficial interest in either this Convention Plaza Flat or any other assets held in the name of the various companies controlled by Chan. It is a matter of great regret for the Court that these two brave ladies had to find the outcome in this painful way. The hard reality of the vigor of the law however cannot be avoided. I conclude for reasons given earlier that Douglas Ng has no beneficial interest in any of the properties or companies sought by the Petitioner. In the circumstances, the claim of the Petitioner against the 2nd, 3rd and 4th Respondents must be dismissed with costs. There shall be a Certificate for two Counsel. The remaining Mareva Injunction in respect of Joyfine and the Convention Plaza Flat must be discharged. I shall hear the parties as to what further consequential orders I should make to put an end to this protracted and most unhappy litigation.
| William Waung | |
| Judge of the Court of First Instance High Court |
Representation:
Mr. Thomas Lai (from 6th May 1998) and Mr. S.H. Kwok for the Petitioner instructed by Messrs Johnson Stokes & Master
Miss Audrey Eu, S.C. & Mr. Jat Sew Tong for the 2nd, 3rd and 4th Respondents instructed by Messrs Deacons Graham & James