ERIC EDWARD HOTUNG v. HO YUEN KI AND OTHERS

HCA 571 OF 2003 & HCMP 2820/2002
& HCMP 4511/2002 (Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

----------------------

----------------------

(Consolidated by the Order of Deputy High Court Judge To dated 10th April 2003)

----------------------

---------------------------------------------------------------

DECISION ON REVIEW OF TAXATION

-------------------------------------------------------------

Introduction

1.  By this 2^nd Review, the Plaintiff seeks to set aside the compromise reached between the parties in respect of the profits costs of Messrs. Stevenson Wong (“SW”), the subject matter of Part I of the amended bill that has been taxed.  The review was strenuously opposed by the 2^nd Defendant.

Grounds for the Application

2.  Mr. Chain contends that the amount of profits costs claimed in the sum of $1,699,195 on the amended bill was grossly inflated as SW’s actual bills were for a much lower sum of $899,816.46.  Paragraphs 8 and 9 of the 8^th Affirmation of the Plaintiff’s solicitor, Mr. Chan Wai Leung were to that effect.  This material discrepancy had come about through concealment of the true state of affairs by Messrs. Oldham, Li & Nie, the current solicitors for the 2^nd Defendant (“OLN”).  It is therefore said that the Plaintiff was negotiating settlement at a considerable disadvantage and he should not be held to the bargain struck even without considering whether the indemnity principle had been breached.  Mr. Peaker for the 2^nd Defendant refuted all allegations of impropriety.

3.  The compromise was struck at the beginning of October 2007 during the course of taxation.  To place matters in their proper perspective, it is necessary to refer to the redacted letter from the Plaintiff’s solicitors of 3 October 2007 to OLN.  It was issued in response to the offer from OLN and was entitled without prejudice save as to costs.  I set it out in extenso.

“We refer to the resumed taxation hearing before Master de Souze (sic) and your open offer made before the Court on 2 October 2007 that our client shall agree (redacted) as Profit Costs under Part I and II of your client’s Bill of Costs, breakdown of which are as follows:-

		HK$
1.	Part I Profit Costs	Less 30% being
	HK$1,640,434.00	HK$1,148,303.80
	(redacted)

We are instructed by our client that your client’s offer is not acceptable to our client.

Your client’s offer in respect of Part I is unrealistic.  You are reminded that the Court has reduced the hourly rate of the principal handler, Ms. Por by 20% (from HK$4,000.00 to HK$3,200.00)  (redacted)

Our calculation is that for Profit Costs in Part I based on the respective allowed hourly rate for Angus Forsyth (AF) and Catherine Por (CP) of HK$4,000.00 and HK$3,200.00 per hour, the amount for your client’s Part I claims is as follows:-

1.	AF – 1 hour and 43 minutes x $4,000 per hour	$6,867.00
2.	CP – 406 hours and 46 minutes x $3,200 per hour	$1,301,653.00
3.	LE – 15 minutes x $1,200 per hour	$300.00
4.	LC – 3 hours and 4 minutes x $1,000 per hour	$3,067.00
	Total	$1,311,887.00

In the premises, we are instructed to propose to adopt 40% discount and agree Part I Profit Cost in the sum of HK$787,132.20 based on the figure of HK$1,311,887.00.  This together with the taxed disbursements items in Part I being HK$55,061.00 (items 1 to 339) and HK$153,000.00 being Counsel fee make a total proposed agreed costs of HK$995,193.00 under Part 1.

(redacted)

Please be informed that this offer is opened for acceptance until 5:00 p.m. on 5 October 2007.  This offer is made on the basis of 100% liability and subject to our client’s argument on the issues of joint retainers and interest.

The offer is made on calderbank basis and we reserve our right to produce this letter to the Court on arguments on costs.

Yours faithfully,

SIT FUNG KWONG & SUM

4.  As happened SW’s profits costs were indeed agreed at $787,132.20.

5.  It can readily be seen that at the material time, the Plaintiff clearly did not have the true figures of SW’s profits costs in his possession.  He was most certainly mistaken about them.  What information and knowledge he and his lawyers had acquired came from OLN, and from the amended bill itself.  Quite aside from the issue of deliberate concealment now raised against OLN, I am of the considered view that the Plaintiff’s position had been severely hampered and prejudiced through no fault of his own or on the part of his legal representatives when conducting the negotiation for settlement.  For that reason alone, I am prepared to set aside the compromise following the approach adopted in Wong Tak-sing and Anor formerly t/a Tak Shing Hong Textiles (a firm) v Amertex International Ltd [1988] 1 HKLR 98.  Having that portion of the bill re-taxed would not in any way prejudice the 2^nd Defendant.

6.  Mr. Peaker was cross-examined by Mr. Chain in respect of this review on an earlier occasion.  I have re-read the portions of the transcript of that cross-examination and counsel’s submission in that regard.  I am also alive to the fact that OLN had experienced considerable difficulty obtaining papers from SW for the purpose of drafting the bill in question.  And payment records were only produced by Miss Por after SW had been ordered to so do.

7.  In the circumstances of the case, I am unable to find any inappropriate conduct on the part of Mr. Peaker or OLN of the type now being raised against them.  More specifically, the available evidence falls far short of establishing a deliberate concealment of material facts on the part of OLN as submitted.

8.  In sum, I shall allow that part of the bill to be reopened.  The review being successful would entitle the Plaintiff to his costs thereof against the 2^nd Defendant, taxed if not agreed.  There shall be a certificate for counsel.

HCA 571 OF 2003 & HCMP 2820/2002
& HCMP 4511/2002 (Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

----------------------

----------------------

(Consolidated by the Order of Deputy High Court Judge To dated 10th April 2003)

----------------------

-----------------------------------------------------------

DECISION ON REVIEW OF TAXATION

---------------------------------------------------------

Background

1.  Review of counsel’s refresher forms the subject matter of what Mr. Chain, counsel for the Plaintiff has convenient termed the 1^st Review.  The 2^nd Review touches upon an entirely, and perhaps more thorny issue.  It will be the subject of another, later decision as the matter is currently being argued.

The argument

2.  Mr. Chain has contended that Mr. Egan’s refreshers for representing the various defendants before the trial were excessive and unreasonable.  He drew a comparison with the refreshers charged by the Plaintiff’s counsel, Mr. McCoy.  Mr. Egan’s daily refresher was $70,000 as against Mr. McCoy’s of just $40,000.

3.  Mr. Chain further submitted that it was legitimate to take into consideration the refreshers paid by his client.  It was, he urged, a relevant factor.

4.  Mr. Peaker for the 2^nd Defendant said such a comparative approach was wrong in principle.  Fees paid to opposing counsel cannot be a yardstick by which the reasonableness or otherwise of counsel’s refresher should be determined.

Determination

5.  O. 62 Part III (Fees to Counsel) of the appendix affords a convenient starting point.  The relevant paragraphs of 62/App/28 provide (2008 ed.):

(4)  A refresher fee, the amount of which shall be in the discretion of the taxing master, shall be allowed to counsel, either for each period of five hours (or part thereof), after the first, during which a trial or hearing is proceeding or, at the discretion of the taxing master, in respect of any day, after the first day, on which the attendance of counsel at the place of trial if necessary.

(5)  Every fee paid to counsel shall be allowed in full on taxation, unless the taxing master is satisfied that the same is excessive and unreasonable, in which event the taxing master shall exercise his discretion having regard to all the relevant circumstances and in particular to the matters set out in paragraph 1(2).  They are:

(a)  the complexity of the item or of the cause or matter in which it arises and the difficulty or novelty of the questions involved;

(b)  the skill, specialized knowledge and responsibility required of, and the time and labour expended by, counsel;

(c)  the number and importance of documents (however brief) prepared or perused;

(d)  the place and circumstances in which the business is transacted;

(e)  the importance of the cause or matter to the client;

(f)  where money or property is involved, its amount or value;

(g)  any other fees and allowances payable to counsel in respect of other items in the same cause or matter, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.

6.  This was a sufficiently complex and heavy piece of litigation to have warranted the engagement of counsel of the calibre and experience of Mr. McCoy and Mr. Egan in the trial before Hon Tang JA sitting as an additional judge of the Court of First Instance.  The documentation counsel had to peruse was undeniably extensive.  At issue was the alleged right of the Plaintiff to revoke the two trusts set up for his children, the personal defendants in the suit.  Huge sums of money were at stake and the matter was plainly of considerable significance to the clients.  The cross-examination skill of Mr. Egan undoubtedly contributed to the result that was achieved.

7.  I remain mindful that this review (as was the actual taxation) is on the party and party basis.

8.  The rubric under 62/App/31 warned against treating the fee paid by the other party as a yardstick on party and party taxation.  Mr. Chain submitted that that was a mis-reading on the part of the learned editors of the decisions of Simpsons Motor Sales (London) Ltd v Hendon Borough Council [1965] 1 W.L.R 112 and Ngan Wun Yeung v Lok Sin Tong Benevolent Society, Kowloon & Ors [2000] 2 HKC 404.  He argued that the authorities did not go that far.  Rather, they justified taking Mr. McCoy’s refreshers into consideration.

9.  I do not agree that there has fairly speaking been a mis-statement of the effect of the two decisions in any way.

10.  In Simpsons Motor Sales (London) Ltd, Pennycuick J in addressing the complaint premised on a numerical comparison of counsel’s briefs, commented:

“The point does not admit of much elaboration, but I must answer in conclusion certain specific points taken by Mr. Harman.  First, he naturally stresses the fact that the plaintiff company’s leader, who was also counsel of high caliber, was content to accept 400 guineas only upon his brief for the plaintiff company.  This is certainly a factor of weight but not, I think, by any means conclusive.  In the ordinary course of events it often happens that the clerks to counsel of comparable degree ask for rather different fees, but I do not think that in these circumstances one is justified without more ado in saying that one counsel has asked too much. It can equally be said that the other has asked too little.  The truth is that there is no exact figure which can be said to represent the proper fee.  I agree with the taxing master’s comment that it is not a sound principle of taxation to treat the fee paid by the other party as the appropriate yardstick; indeed, the application of such a principle would lead to obviously undesirable consequences.” (at 119H-120A-B) (emphasis mine)

11.  The decision was followed in the Ngan Wun Yeung case.  In assessing counsel’s brief fee on an application for review, Master Poon, as he then was, stated:

“Mr Pirie further submits that in determining his brief, I should compare the fees charged by other counsel acting for the defendants, one of whom is a senior counsel.  He relies on Lord High Chancellor v Wright & Anor [1993] 4 ALL ER 74.  There Garland J held that when determining defence counsel’s fees in a criminal case in the Crown Court the fee paid to counsel for the prosecution is ‘other relevant information’ within the meaning of the Legal Aid in Criminal and Care Proceedings (Costs) Regulations 1989 to which regard may be had.  That case is clearly distinguishable.  First, it is a criminal case.  Secondly, the court was concerned with the construction of a particular regulation.  I would, with respect, prefer and adopt the approach approved by Pennycuick J in Simpsons Motor Sales (London) Ltd v Hendon Corp (No 2), supra, at p 120:

I agree with the taxing master’s comment that it is not a sound principle of taxation to treat the fee paid by the other party as the appropriate yardstick; indeed, the application of such a principle would lead to obviously undesirable consequences.

Therefore, I decline Mr Pirie’s request to compare the fees paid to the defendants’ counsel with his own.” (at 416H-417C)

12.  It is therefore patent that the court when assessing what is the appropriate brief fee to allow on taxation may take into consideration the fees paid to other counsel in the case.  Such is relevant, albeit not conclusive information that would be of some assistance in the exercise.  As a matter of principle, the same approach is equally applicable to a determination of the reasonable level of the refresher.

13.  In assessing Mr. Egan’s refresher, I have considered Mr. McCoy’s remuneration as also on what fee a hypothetical counsel capable of conducting the case effectively, but unable or unwilling to insist on the high fees demanded by counsel of pre-eminent reputation, would be content to accept instructions.  I have equally taken into consideration the various factors adumbrated in 62/App/28.

14.  I find on review that Mr. Egan’s daily refresher is neither unreasonable nor excessive given the nature of the litigation.  The review is therefore dismissed with costs to the 2^nd Defendant, taxed if not agreed.

HCA 571/2003 & HCMP 2820/2002
& HCMP 4511/2002 (Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

----------------------

----------------------

----------------------------------------

D E C I S I O N

--------------------------------------

Introduction

1.  The taxation of the order for costs of Hon Tang JA (sitting as an additional judge of the Court of First Instance) of 17 June 2005, tortuous in its progress, has raised further issues for determination.

The Issues

2.  Mr. Chain, counsel for the Plaintiff paying party has urged the court to exercise its discretion to either totally disallow or to order but minimal interest on the taxed costs on two bases.

3.  The principal argument runs thus.  As the 2^nd Defendant has paid no more than about $400,000 to his solicitors to fund the litigation, he is out of pocket only to that extent.  It follows therefore that no interest should be paid as a matter of fairness except on that amount and thereafter no interest should accrue on the balance of the taxed costs until taxation.  Mr. Egan, counsel for the 2^nd Defendant, updating the amount that has since been paid by the 2^nd Defendant to about $900,000, contends that the quantum paid by his client is entirely irrelevant, there being no power conferred on the taxing master to vary interest on taxation.  Mr. Chain argues otherwise.

4.  Mr. Chain’s secondary argument is premised on undue delay.  There are two aspects to his contention.  Firstly, he submits that there was dilatoriness in presenting a proper bill for taxation.  Secondly, the cross-examination could have been dispensed with or could have been completed expeditiously had the 2^nd Defendant accepted much earlier on that the dispute over the nature of the retainer could have been resolved by reference to the retainer and its attending circumstances.  Mr. Egan submits that no inordinate or inexcusable delay in prosecuting the taxation has occurred.

5.  Briefly summarized, those are the conflicting positions.

Jurisdiction to vary interest

6.  S. 49 of the High Court Ordinance, Cap. 4 is the provision giving jurisdiction to the High Court to order interest on judgment debts.  It reads:

Interest on judgments

(1)  Judgment debts shall carry simple interest –

(a)  at such rate as the Court of First Instance may order; or (amended 25 of 1988 s. 2)

(b)  in the absence of such order, at such rate as may be determined from time to time by the Chief Justice by order,

on the aggregate amount thereof, or on such part thereof as for the time being remains unsatisfied from the date of the judgment until satisfaction.

(2)  Interest under this section may be calculated at different rates in respect of different periods.

7.  It has been judicially determined that an order for costs to be taxed is, for the purpose of s. 49, a judgment debt and interest runs from the date of the costs order: Caltex Oil Hong Kong v Director of Buildings and Lands [1994]HKDCLR 31.  At page 42 (line 25-35) of the judgment, His Honour Judge Cruden in setting out his reasons for so holding, observed:

“The Tribunal having held that there is no material difference between s. 49 of the Supreme Court Ordinance and s. 17 of the Judgments Act 1838, it follows as a matter of stare decisis, that the House of Lords judgments on s.17, are at least of powerful persuasive authority, if not strictly binding.  The House of Lords in Hunt v Douglas (Roofing) Ltd., agreeing with the Court of Appeal in Erven Warnink BV v Townend & Sons (No.2) held that the words “judgment debt” in s. 17 applies to costs and that interest runs thereon from the date of the order for payment of costs to be taxed.”

8.  Hon Tang JA, not having stipulated the applicable interest rate when ordering costs to be taxed, must have intended the statutory rate to apply, such rate to be determined by the Chief Justice from time to time under s. 49.  In short, the interest rate or rates accruing on the taxed costs until full settlement have been determined.  It cannot now be argued that the rate of interest can somehow be revisited and determined afresh by this court.  The court simply has no jurisdiction to do so on a plain reading of the section.  Its task is to quantify the costs payable pursuant to the order and that has been accomplished.

9.  The power to determine the interest rate accruable on judgment debts is conferred on “the Court of First Instance”, a term defined by s. 2 of Cap. 4 to mean the Court of First Instance of the High Court.  Whilst it has been correctly observed that the Registrar and masters of the High Court are empowered to exercise the same jurisdiction as may be exercised by a judge sitting in chambers, except in respect of certain matters listed under sub-paragraphs (a) to (f) of O.32 r.11 and that the question of interest rate falls without those exceptions, I am not persuaded that it was the legislative intent to include the Registrar and Masters under s. 49(1)(a).

10.  Mr. Chain’s contention on jurisdiction therefore falls away.

Delay

11.  Where there has been undue delay in the preparation of the bill of costs, the taxing master has a very wide discretion under O. 62. r.22(3) to make any appropriate orders, including disallowance of any items in the bill, disallowance of the costs of taxation, allowance of the costs of taxation to the paying party and disallowance of taxing fees.  This punitive jurisdiction is exercisable on proof of inordinate or inexcusable dilatoriness on the part of the receiving party in proceeding to taxation failing agreement on costs or where prejudice to the paying party is established.  The sanctions that may be imposed in my considered view do not run to varying the interest rate or to suspending the period of accrual as urged.  The court’s disapproval is to be reflected in the reduction or disallowance of costs.

12.  The bill of costs was filed in March 2006, some 8 months after the costs order of 17 June 2005.  In the interim, clarification had to be sought from the trial judge before his order could be sealed.  The bill, complex and lengthy running to 270 odd pages would have taken some time to compile.  It covered the costs of both sets of solicitors and there was clearly some difficulty obtaining the files from the 2^nd Defendant’s former solicitors.  The time taken for preparation of the bill cannot therefore be said to be unreasonable.

13.  The bill was amended quite substantially in February 2007.  That bill was subsequently taxed.  In the circumstances of the case, I am unable to find that there has been any inexcusable or inordinate delay of the kind asserted or that the 2^nd Defendant has by his own conduct or that of his legal representatives unreasonably and unnecessarily prolonged the taxation process so as to warrant the court’s interference, particularly given the parties’ entrenched and combative positions throughout and the Plaintiff’s requirement for cross-examination.  As for the Plaintiff’s complaint that the 2^nd Defendant would be benefiting unduly from interest accruable on fees paid by the 3^rd and 5^th Defendants to the lawyers, the short point is that the bill of costs was taxed pursuant to the learned judge’s order with the taxed costs representing no more than what the 2^nd Defendant would have been properly entitled to.

14.  The Plaintiff’s application is accordingly dismissed.  As to costs, I shall give counsel an opportunity to address me.

HCA 571 of 2003 & HCMP 2820/2002
& HCMP 4511/2002 (consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

____________________

____________________

AND

MISCELLANEOUS PROCEEDINGS NO. 2820 OF 2002

____________________

BETWEEN

___________________

AND

MISCELLANEIOUS PROCEEDINGS NO. 4511 OF 2002

___________________

BETWEEN

(Consolidated by the Order of Deputy High Court Judge To
dated 10th April 2003)

________________________

Dates of Hearing:  9, 14 & 18 April 2008, 18 & 28 July 2008, and 8 August 2008

___________________

D E C I S I O N

__________________

The issue

1. Yet another preliminary issue has arisen to be determined following completion of taxation of the lengthy bill of costs.  It is this.

2. Pursuant to the order for costs of Hon Tang JA (sitting as additional judge of the Court of First Instance) dated 17 June 2005, the unsuccessful Plaintiff, Mr. Eric Hotung, was ordered, inter alia, to pay the costs of the consolidated action to the 2^nd, 3^rd, and 5^th Defendants, respectively, Anthony Hotung, Sean Hotung and Sheridan Hotung, three of his four off-springs named in the suit.  The ensuing bill presented for taxation covers those costs.

3. The Plaintiff has now sought to argue that his liability for costs is indeed circumscribed and ought to be limited to a third of the total allowable costs, the solicitor client retainers of D2, D3 and D5 with their two sets of solicitors being in the nature several rather than joint contracts.

4. D2 advances a contrary position, contending that the retainers are not only joint but also joint and several on their true construction.  Accordingly, each of D2, D3 and D5 would be liable to their solicitors for all the costs and disbursement incurred in their defence.  Albeit D3 and D5 did not participate in the taxation (they having no interest in pursuing the costs order in their favour), D2 submitted that he was entitled to be indemnified for all their taxed costs as the solicitors may look to him and him alone for satisfaction of their entire costs.

5. The extent of the Plaintiff’s liability to indemnify and D2’s contractual obligations in particular under the retainers falls therefore to be decided on a true and proper construction of the retainers in question.

The principles

6. It is as well that one should be reminded of basic principles.

7. In Asia Television Ltd v Mak Chi Kin &Anor [2006] 4 HKC 347, at 350, 351 Cheung JA stated:

1. It is sufficient for the purpose of this judgment to give a brief statement on the nature of joint liability on one hand and joint and several liability on the other hand and also their respective consequences.

1)     Joint Liability

Joint liability arises when two or more persons jointly promise to do the same thing.  There is only one obligation, and consequently, performance by one discharges the others.  Joint liability is subject to a number of strict and technical rules of law.

2)     Judgment against one joint debtor

Among the technical rules is the effect of a judgment against one joint debtor.  At common law, the general rule was that a judgment against one joint debtor operated to bar an action against the others, even though the judgment was not satisfied.  (see King v Hoare (1844) 13 M & W 494 and Kendall v Hamilton (1879) 4 App Cas 504).  This was explained on the ground that the debt was merged in the judgment, and also on the ground that joint debtors had a right to be sued together; but neither ground was satisfactory, and the rule was capable of working hardship.  The rule has now been abrogated by s 5 of the Civil Liability (Contribution) Ordinance (Cap 377) which is based on s 5 of the English Civil Liability (Contribution) Act 1978.

3) Joint and several liability

Joint and several liability arises when two or more persons in the same instrument jointly promise to do the same thing and also severally make separate promises to do the same thing.  Joint and several liability gives rise to one joint obligation and to as many several obligations as there are joint and several promisors.  It is like joint liability in that the co-promisors are not cumulatively liable, so that performance by one discharges all; but it is free from most of the technical rules governing joint liability.

4)     Judgment against one joint and several debtor

When the liability is joint and several, a judgment against one debtor did not, even at common law, bar a several action against another.

(see Chitty on Contracts (29^th Ed) Vol 1 para 17-002, 17-003, 17-015 and 17-016)

8. On joint and several retainers, reference was made to Cordery on Solicitors, 9^th Ed at E/256 to E/257.  The pertinent passages follow:

[429]

Where the retainer is joint, each client is liable for the whole of the solicitor’s costs[1].  On a several retainer each client is only responsible for his own portion of the costs[2].  The advantage to the solicitor of a joint retainer is that he can recover all the costs from any solvent party. A judgment obtained against one party to a joint retainer will not bar a subsequent action against another party[3].

1 Burridge v Bellew (1875) 32 LT 807.

2 Elingsen v Det Skandinaviske Compani [1919] 2 KB 567, CA.

3 Civil Liability (Contributions) Act 1978, s 3.

[430]-[440]

Where a solicitor is acting for joint litigants the retainer is presumed to be joint until the contrary is shown1. A retainer which is joint may be construed to be joint and several, for example, where a solicitor is retained by two tenants in common2. If the matter is unclear the question of whether a retainer is joint or several is to be decided by the court in an action or on a reference to a taxing master3.

1 Starving v Cousins (1835) 1 Gale 159.

2 Furlong v Scallan (1875) IR 9 Eq 202.

3 Burridge v Bellew (1875) 32 LT 807.

9. Halsbury’s Laws of England 4^th Ed, Vol 44 at para. 89 helpfully summarized the position of legal retainers as follows:

Joint and several retainers.  Retainers by two or more persons may be either joint or several, depending upon the intention of the parties and the nature of the business1. In the former case each party is liable for the whole of the costs incurred for the benefit of himself or any of the other parties to it2, while in the latter case each party is only liable for his proportion of the costs incurred on behalf of all3. Where, however, a retainer joint in form is in fact joint and several, and the work done enures for the benefit of all, for instance in a partition suit, each party to it will be liable for the whole costs incurred4.

1 See e.g. Hall v Meyrick [1957] 2 QB 455, [1957] 2 All ER 722, CA, where a man and woman who had lived together for fifteen years instructed a solicitor to prepare wills conferring mutual benefits, and there were held to be several retainers.

2 Burridge v Bellew (1875) 32 LT 807

3 Re Colquhoun, ex parte Ford (1854) 5 De G M & G 35; Re Allen, Davies v Chatwood (1879) 11 Ch D 244; Ellingsen v Det Skandinaviske Co [1919] 2 KB 567, CA; Keen v Towler (1924) 41 TLR 86. Cf. para. 182, post (taxation).

4 Furlong v Scallan (1875) 9 IR Eq 202.

The Retainers

10. I turn then to consider the retainers of which there are two sets, one with the former solicitors, Messrs Stevenson, Wong & Co. (“SW”) and the other with the current legal advisors, Messrs Oldham, Li & Nie (“OLN”).  They appear at page 158 et seq in the Bundle of Court Document and Correspondence.

11. A common feature of both sets of retainers is the total absence of any direct reference to the precise nature of the clients’ liability under the contracts.  The liability of D2, D3 and D5 to SW and OLN for costs though clearly spelt out has not in any way been qualified by the use of the terms joint liability, or several liability, or joint and several liability.  Accordingly, the intentions of the contracting parties shall have to be construed as best one can by examining the retainers in light of the attending circumstances.

12. A copy each of D2’s and D3’s retainers with SW has been made available.  D5’s retainer has not been exhibited.  The SW retainers both dated 12 September 2001 and in identical terms, came into existence before the current suit was launched.  The retainers were in relation to the business of Hotung Enterprises Limited and Hotung Investment (China) Limited.  They appear to have been signed once by the same partner and then emailed separately to D2 and D3 who were resident in different parts of the world at the time for their acceptance, signature and return.  This they duly did.  Each retainer addressed to both D2 and D3 bore an identical file reference.

13. Mr. Egan on behalf of D2 contended that in respect of the SW retainers, there was but one file, essentially one retainer letter, and one joint contract between SW on the one hand and D2 and D3 on the other hand.  He made essentially the same argument when dealing with the OLN retainers, of which more later.

14. D3 though not a party before the court has filed a number of affirmations.  In his first affirmation, he deposed to the fact that D5 had assigned all her interests in certain shares in Hotung Enterprises Limited and in Hotung Investment (China) Limited to him and therefore he had the authority to represent D5 in the consolidated action.  Following from that, Mr. Egan stated that when D3 signed and returned the SW retainer, he was acting for himself and D5.  He further submitted that all three defendants with their common interest represented but one client as far as SW were concerned.  With a common purpose, they had come together to instruct SW as a single client or entity and in the process undertook a joint liability for their costs to that firm.

15. Mr. Egan has also made some play of clause (G) of the SW retainer.  It stipulated:

In addition to solicitors’ fees, during the course of your case other costs will be incurred for which you will be responsible.  Those costs which are separately billed to you are items such as barrister’s fees, court filing fees, costs of service of process, secretarial overtime, outside messenger fees, international long distance telephone and fax, photocopying (@ HK$3 per copy), transcripts of court proceedings, etc.  You are immediately and separately responsible for all costs incurred in your case.  We do not advance costs on behalf of our clients. ……..

16. He contended that the use of the words ‘separately responsible’ was indicative of each client having additionally undertaken a several liability for all the solicitor’s costs.  I do not find that the provision can fairly and reasonable lend itself to such an interpretation.  Perhaps inelegantly drafted, the clause was intended to convey no more than the client’s obligation to pay for disbursements and other items of profits costs such as telephone attendances in addition to the solicitors’ professional charges for advisory and drafting work and court attendances, etc.

17. Counsel for the Plaintiff, Mr. Chain conceded that it is open to the parties and their lawyers to enter into joint retainers as a matter of contract but submitted that such a course is an exception rather than the rule.  He stated that such a situation would generally not arise unless the clients’ interest are truly joint in the legal sense as distinct from merely sharing common characteristics for example in their defence.  Even in such a scenario, a joint retainer must be intentionally contracted.  In developing his contention, he referred to a number of authorities, in particular Longreach Oil Ltd v Southern Cross Exploration NL 1988 NSW Lexis 9762, unreported and Burridge v Bellew (1875) 32 LT 807.

18. From Longreach Oil Ltd v Southern Cross Exploration NL supra, Mr. Chain extracted the following passage in support of his case for separate rather than joint contracts in this case.  It reads:

 ….. just because solicitor or counsel appear for a series of parties does not indicate that those parties have jointly retained the solicitor.  Indeed, it very often occurs that parties realize that the court will not entertain more than one set of costs for defendants in the same interest and so a series of people in no way connected each retain the same solicitor.

19. One can have no quarrel with that statement as a matter of principle.  Indeed, Mr. Egan also agreed with the principles of law and practice enunciated in the various decisions referred to by Mr. Chain.  His response on the cases cited is that they are facts sensitive and therefore not particularly helpful in construing the retainers in question.  With that I agree.

20. In Burridge v Bellew, supra, the court opined that “… the mere fact that the several defendants appear by the same solicitor, that they join in putting in the same answer, join in the same affidavits, and attend joint consultations, would not, to my mind, amount to evidence that there was any joint retainer.”  Mr. Chain contends that much the same situation obtains in the present case.  Unless there is unambiguous evidence of a deliberate intent on the part of D2, D3 and D5 to make a single promise to their solicitors and so enter into joint contracts, the resulting retainers must be several in nature.  In the circumstances of the case, Mr. Chain argued that there was no compelling reason for any of the defendants to agree to pay all of their solicitors’ fees.  That in essence is his argument on both sets of retainers.

21. When D2, D3 and D5 terminated by written notice from each of them the services of SW, they turned to OLN.  The three retainers that resulted are all dated 1 December 2004.  Each was addressed to all three defendants, had the same reference or file number and identically captioned but separately sent to them as they were still living in different parts of the world.  Mr. Peaker, the handling partner and instructing solicitors of Mr. Egan had in fact created a single document which he signed but once before dispatching a copy to each of the three defendants for their acceptance.  Needless to say, the three retainers contained identical terms of engagement.  Each of the three defendants signed on his or her own copy before returning it to OLN.  Deposits were paid and bills were issued by OLN to all three Defendants.  Throughout, and this has been substantiated by the evidence, both oral and on affidavit from Mr. Peaker that he treated all three Defendants as a single client.

22. As was the case with the earlier retainers, the words joint or several no where appear.

23. In the consolidated action, the Plaintiff sued for declaratory relief that the trusts created for his children were revocable by him during his lifetime and that he had legitimately exercised that right.  In the event, the court found against him.  As Mr. Egan submitted, the reliefs the Plaintiff sought against his children were identical in nature.  The children were concerned to uphold the trusts under which they had virtually identical interests.  There was commonality in their interests and in their defence against the action.  D2, D3 and D5 were represented by the same counsel and solicitor at trial and D2 was the sole defence witness.  While it is wholly accepted that these factors on their own on the authorities are in themselves not determinative of the issue, there was more.  There is cogent and uncontradicted oral and affidavit evidence from D2 and affidavit evidence from D3 that their liability for costs was not only joint but joint and several in nature.  Mr. Peaker’s evidence was to like effect.  From the Plaintiff, there was not a scintilla of evidence suggestive of a contrary position.

24. On the evidence adduced, I am able to infer that the legal effect of the retainers with SW and OLN was as Mr. Egan has urged.  The retainers created joint and several liabilities and I so rule.

Representations:

HCA571/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

ACTION NO. 571 OF 2003

___________________

Coram : Deputy High Court Judge Carlson in Chambers

_________________

R U L I N G

_________________

1.  I take the view that this application is, in fact, I am sorry to say, misconceived.  The matter before me on the appeal was whether I felt able, in all the circumstances, to overlook certain defects in the affidavit. And as appears in my judgment, I took the view that it was proper to overlook them.  Then there was the separate point as to whether it was necessary to have an apostille and I took the view that this was not necessary in these particular circumstances.

2.  What has now happened is that the defendants’ solicitors acting on behalf of the 2nd, 3rd and 5th defendants wish an extension of time so that they may lodge an appeal against that decision by me.  Time expired on 8 December, and I am told and, of course, I accept that under Order 59 rule 7 there is in fact no need to ask for leave to appeal notwithstanding that this is very much an interlocutory order and this could have been done in good time.  What Mr Peaker says is that this has all come about as a result of a letter that was written by the plaintiff’s solicitors to his firm, dated 5 December, stating a position, in paragraph 2, that they took the view that on the evidence no issue was raised as to the fact that a settlement on costs between the 3rd and 5th defendants and the plaintiff had been reached.  That, they say, is a bare statement of fact; it is not accepted by the defendants, of course, and as a result of that they applied, as a matter of urgency, for a transcript of the appeal before me to be prepared so that they could know precisely what was submitted on behalf of both parties before me. They do not accept that this is the position at all.  Really, this is the reason why they seek an extension of time so that they can have time to consider the appeal and consider their position.  It seems to me that this is entirely misconceived.

3.  The question of an appeal from my order must turn entirely on the correctness of the order that I made and whether I was correct to have exercised my discretion to overlook the irregularities on the face of the affidavit and whether I was correct in saying that an affidavit sworn in the State of New York did not, in fact, require an apostille, having regard to the provisions which deal with the admissibility of affidavits as set out in the particular rule of the High Court.

4.  This point as to the effect of the letter of 5 December can all be dealt with.  The affidavit will go in before the Master on the taxation.  I am told there is a summons taken out by the plaintiff to strike out the bill of costs.  It is very much a question of fact as to whether such a settlement was arrived at.  My own recollection is that the point was certainly not conceded by Mr Egan on the appeal before me, and I think that is going to be borne out by the transcript, and the Master himself, on hearing the summons to have the bill struck out, will, no doubt, as a matter of case management decide whether this issue of fact, as to whether a settlement was arrived at or not, will need to be determined before he goes any further.  That point, therefore, is entirely available to the defendants to take.  They are not in any sense prejudiced by the outcome of the appeal before me; the appeal only determined that use could be made of the affidavit, notwithstanding its defects.

5.  The other point that I ought to make is that where time has now run its course, it is only right that there should be an explanation for the delay.  Some explanation is now forthcoming from Mr Peaker but it seems to me that where I am exercising a discretion I need to be shown grounds of appeal to show that there is reasonable merit in the appeal from my order and I have got no such grounds.  So that is an additional reason for dismissing the application, which I do, with costs.

Benjamin Chain, instructed by Messrs Sit, Fung, Kwong & Shum, for the Plaintiff

Stephan Peaker, of Messrs Oldham, Li & Nie, for the 2^nd, 3^rd and 5^th Defendants

HCA 571/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

____________

BETWEEN

______________________

AND

HCMP 2820/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2820 OF 2002

____________

______________________

BETWEEN

______________________

AND

HCMP 4511/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4511 OF 2002

______________________

______________________

____________

(Consolidated by the Order of Deputy High Court Judge To dated10^th April 2003)

_______________

J U D G M E N T

_______________

Introduction

1.  Certain important formalities need to be observed before an affidavit or affirmation can be adduced into evidence.  When such an affidavit is sworn overseas there are additional requirements to be observed.  This is an appeal from an order of Master de Souza on 5 October this year refusing the 3^rd Defendant leave to make use of an affirmation affirmed by him in New York State, USA on 20 April 2006.  The 3^rd Defendant had sought leave from the Master to allow him to dispense with some of the requirements of O.41 r.(1)(4) of the RHC, this Order being the one that governs the formalities and the use of affidavit evidence.  Before I embark on the issues which fall to be determined by me it will be helpful if I briefly set out the background which has given rise to the appeal.

Background

2.  Over a number of days in January 2005, Tang JA, (as he then was) sitting as an additional Judge of the Court of First Instance, tried a consolidated action between the Plaintiff and four of his eight children, as well as an individual trustee and a trustee company.  The Plaintiff who had set up certain trusts in favour of his children, asserted that these trusts were subject to conditions including the power of revocation, exercisable by him.  It is not necessary for me to rehearse the matter further save to record that the Plaintiff substantially failed in the action and now has to face up to orders for costs made against him in favour of the 2^nd, 3^rd and 5^th Defendants, in addition to the costs of the 1^st, 4^th and 6^th Defendants.

The Costs Dispute

3.  At the trial, the firm of Oldham, Li and Nie (“OLN”), solicitors, represented the 2^nd, 3^rd and 5^th Defendants.  The matter which I am required to determine only relates to them and the Plaintiff, represented by Sit, Fung, Kwong and Shum (“SFKS”).  It does not involve any of the other Defendants.  The Plaintiff’s case is that he has come to a separate agreement on costs as between himself and the 3^rd defendant to settle the 3^rd Defendant’s costs and those of the 5^th Defendant, whose interests have, throughout these proceedings, been represented by the 3^rd Defendant.  Affirmations purporting to demonstrate that this is so have been filed by Mr Alex Chan of SFKS.  Included in the evidence is a letter from the 3^rd Defendant dated 15 March 2006 to OLN which, on its face, unequivocally confirms this agreement.  Given its importance I propose to set out its contents in full:

“Re:  Taxation HCA 571/2003

1. I hereby confirm I have reached an agreement with the Plaintiff of HCA 571 with regard to mine and Sheridan Shea’s part of the costs.  I, therefore will not be proceeding with taxation.

2. Please adjust the Bill of Cost accordingly.

3. In light of the above, please take this as notification that Oldham, Li & Nie’s services in all matters regarding Sean Hotung is hereby terminated.

4. Please, hereafter, direct any queries to Ms Catherine Por of Stevenson, Wong & Co. who will be acting on my behalf.  Any and all e-mails and or post sent to me shall be forwarded to Ms Catherine Por without being opened.”

4.  Having regard to this agreement SFKS wrote to OLN and asked them to present their bill of costs excluding any reference to the 3^rd and 5^th Defendants’ costs.  OLN have declined to do so.  They wish to see some evidence that the Plaintiff has in fact paid the 3^rd Defendant in respect of his and the 5^th Defendant’s costs.  SFKS say that they are unable to do so because the Plaintiff and the 3^rd Defendant have had a further falling out which has resulted in the 3^rd Defendant bringing a further action against the Plaintiff.

5.  The present position therefore is that OLN has presented a bill of costs which represents the costs of all three of the successful Defendants which it represented at the trial and not just the costs of the 2^nd Defendant as SFKS had expected.  A taxation hearing has been appointed but adjourned because SFKS have taken out a summons on behalf of the Plaintiff to strike out so much of OLN’s bill of costs as relates to the 3^rd and 5^th Defendants.  In support of this summons they have had prepared an affirmation by the 3^rd Defendant [see pages 48-55] which they would wish to adduce in evidence.  This affirmation serves to confirm the agreement on costs that he has arrived at with the Plaintiff.  Objection has been taken to its admissibility by OLN for want of proper form in a number of respects.  This being so SFKS took out a summons [pages 7-9] with a view to obtaining leave from Master de Souza to make use of the affirmation notwithstanding its irregularities.  The Master having refused leave the Plaintiff now appeals to me.

The Defects

6.  There are four irregularities which OLN say are apparent, the first two of which, as I will list them in a moment, are accepted by the Plaintiff but which are said to be of no moment and which the Master was prepared to overlook, the third of which the plaintiff says has, as a matter of requirement, been complied with and the fourth as a matter of form is not required at all and so cannot arise as a matter to which objection can be taken.

7.  The defects complained of are the following:

(i)      The affirmant’s address and occupation does not appear in the affirmation;

(ii)     The exhibit ‘SEMH-1’ referred to in paragraph 2 of the affirmation has not in fact been exhibited;

(iii)    The jurat by the affirmant has not been completed because it does not say before whom and where it has been affirmed; and

(iv)    Having been purportedly affirmed in New York, it lacks an apostille.

The Master’s Reasons

8.  In deciding this matter the Master held that he would have been prepared to overlook the first two defects but he considered that the incomplete jurat was a “crucial and substantial omission” and that he also considered that the affirmation required an apostille.  In the circumstances, there being a number of defects, he was not prepared to allow the affirmation to be used in evidence.

9.  Mr Egan in responding to this appeal has invited me to give due weight to the Master’s reasoning whilst accepting, as he must, that this appeal is a complete rehearing of the summons.  Whilst any decision of Master de Souza is one to be accorded considerable respect, these things do strike different people differently and where this is a rehearing before me I must approach this matter afresh and come to my own decision in resolving this appeal.

The Appeal

10.  There is a sense of unreality about these proceedings.  On the one hand Mr Chain, who appears for the Plaintiff, says that he does not need this affirmation having regard to OLN’s letter of 31 March 2006 [page 42] in which they acknowledged receipt of the 3^rd Defendant’s letter of 15 March 2006 [ibid.] to them that he has reached agreement on costs with the Plaintiff and, on the other hand, nothing could be simpler than for SFKS to ask the 3^rd Defendant to affirm another affirmation free of the technical irregularities that have beset the present one.  Mr Chain tells me that he is only here, because the Master suggested an appeal in respect of whether an apostille is required in these circumstances with the result that I must now rule on all of the irregularities.  I say that despite the fact that the Master had said that he would have been prepared to overlook the lack of the Defendant’s address and occupation and of the failure to produce the exhibit.  This is because Mr Egan, in resisting the appeal, has addressed me on a very broad front.  By way of general submission he says that this affirmation must been viewed with the deepest suspicion.  The summons to have it admitted into evidence is supported by a series of affirmations from Mr Chan, the Plaintiff’s solicitor.  Mr Egan complains that there is not a scrap of direct evidence from the Plaintiff himself about this agreement which he suggests should make me wary about the whole arrangement and secondly, that Mr Chan’s affirmations can only be hearsay evidence which I should not admit.  In this regard Mr Chain says that there is nothing objectionable in having hearsay evidence in interlocutory proceedings.  He relies on O. 41 r.5(2) which says that an affirmation sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief, with the sources and grounds for such information and belief.  The rubric to the rule says that for the purposes of the rule, interlocutory proceedings are only those which do not decide the rights of the parties.  I have no doubt that this proceeding which, of course, is merely ancillary to the issue of taxation of costs, is plainly interlocutory rather than substantive.  I have no doubt that Mr Chan’s affirmations are admissible in this appeal.  Where Mr Egan has embarked on something akin to a jury speech taking in much of the background to this dispute I am not really assisted by such considerations where what I have to decide are short points on the construction of Order 41 as they bear on the two admitted defects and also whether the jurat provisions have been complied with and whether an apostille is necessary.  I now turn to these issues.

The Address, Occupation and the exhibit

11.  As the Master did, I am of the view that these two defects can be overlooked as points of the highest technical order.  The decision of Tang J (as he then was) in Tsui Koon Wah v Lam King Yuen [2005] HKEC 816 is in point.  There is absolutely no doubt that the 3^rd Defendant is the affirmant.  Equally, as to the exhibit there is absolutely no doubt as to which document the 3^rd Defendant is referring to.  This is made clear from Mr Chan’s 1^st affirmation starting at page 18 of the bundle and referred to at paras 5 and 8.  The document is exhibited to his affirmation and is at page 23.  OLN had been provided with it as long ago as 2002, it having been put in by 3^rd Defendant for the purpose of the action to show that he represented the 5^th Defendant’s interests.  To put the matter beyond doubt I will make clear that these defects fall to be overlooked and the affirmation can be used notwithstanding these irregularities.

The Jurat

12.  The Master held that this was a crucial irregularity which he felt unable to overlook.  The question here is whether this is an irregularity at all.  This issue is dealt with under O.41 r.1.  The note at 41/1/9, page 654 of the current practice, says that the jurat of every affidavit should contain the full address of the place where the affidavit was sworn, sufficient for identification.  The relevant page of the affirmation in this matter is at page 50.  The jurat is signed, together with the stamp of “Chloe Dresser, Notary Public, State of New York, Reg. No. 01DR6016483, Qualified in Ulster County, Commission Expires 11/23/06” [being the 23^rd November 2006].  There are also e-mail communications in Mr Chan’s 4^th affirmation, the important one being that at page 73, from Chloe Dresser providing the address where this was done and confirming her status as a Notary Public empowered to notarise oaths and affirmations.  O.41 r.12(2) says that an affirmation taken in a foreign country before, amongst other officials, a Notary Public may be used in court in all cases where affirmations, or affidavits, are admissible.  Sub-rule 3 says that an affidavit purported to have been sworn in this manner shall be prima facie evidence of the seal or signature of the individual authorized to administer the oath.  I am satisfied that Miss or Mrs Dresser’s (whichever it is) stamp falls within the purview of the rule.  The only remaining question is whether the fact that her address does not appear, either as part of her stamp or, separately forming part of the jurat is fatal.  Mr Chain says that the important thing is that her registration number is there, from which she can readily be identified and located and this should be sufficient.

13.  Mr Egan submits that the overall flavour of this case demands that there be strict adherence with the rule.  There is no way of telling whether she is qualified to administer an oath for this class of document particularly where she appears to be an estate agent or realtor (in the USA), which presumably he gets from her address on her e-mail at page 73.

14.  My view of this is that the jurat as it stands does not strictly comply with the rule because it does not “contain the full address of the place where the affidavit was sworn”.  Mr Chain says, never mind about that because the Notary’s registration number is given, which sufficiently identifies her and no doubt her address, be it her residence or place of work.  Nevertheless, in my judgment this information will not provide an indication of where the affirmation was actually taken.  That only comes later from the e-mail at page 73.  To this extent therefore the affirmation must be defective.  The rule is that such an irregularity cannot be waived by the parties, nevertheless O.41 r.4 is relevant here as it is in relation to the other two irregularities which I have been prepared to waive.  The rule which is of general application says this:

“An affidavit may, with leave of the court, be filed or used in evidence notwithstanding any irregularity in the form thereof.”

The rubric says that the rule is permissive.  If the irregularity can be cured without undue hardship, or is not a matter of substance, or affects its actual contents, then it should be put right.  There is provision to put such matters right ex parte before the practice master.

15.  Insofar as this is an irregularity which has been corrected in substance by the e-mail from the notary at page 73, I am content to exercise my discretion to allow the use of this affirmation notwithstanding the absence of the place of affirmation being identified in the body of the jurat. In attacking this affirmation in an all embracing way Mr Egan has sought to cast doubt on the validity of the Notary’s qualifications and general authenticity.  For my part that is really going too far.  She is not a party to this bitter, hard fought litigation.  All that she was required to do was to authenticate the affirmant’s signature which I am satisfied she has done.  What she has not done was to follow the requirements of O.41 r.1 to set out the address where the affirmation was taken and it is to this extent that the jurat is defective.  That information has now been provided.  The combined effect of O.41 r.(2) and (3) deals with the status of this affirmation, making it admissible in this court.  If OLN wish to demonstrate that matters are not as they purport to be then it would have been open to them to seek out that evidence and put it before the court.  The lacuna, being the address where the affirmation was taken, has now been filled and whilst this simple mistake should not have occurred the relevant information has now come by e-mail.  Mr Egan’s submissions to the contrary do not persuade me that this lady has not notarised the affirmant’s signature as her stamp and signature attests and at the location which her e-mail has provided.  I am content therefore to exercise my discretion to cure this defect as well.

The Apostille

16.  Finally I come to the point that appears to have troubled the Master most of all.  In my judgment, this is a very short point indeed.  It is submitted by Mr Egan, as it was before the Master, that this affirmation requires an apostille as contemplated by the 1961, Hague Convention Abolishing the Requirement of Legalisation for foreign public documents (“The Hague Convention”).  The Master upheld that submission.

17.  In my judgment, there is no requirement for an apostille in this case.  The formalities to be followed before our courts are those contained in O.41 r.12 which have been complied with.  O.41 r.12(2) covers the matter.  This affirmation was taken before a notary overseas which is sufficient.  Sub-rule 3 says that once the affirmation has been taken in purported compliance with sub-rule 2 this will be prime facie evidence of the seal or signature of the notary.  This is the comprehensive regime which our Rules provide.  I respectfully agree with the analysis of Mr Recorder, McCoy, SC in Top Flying Investment Ltd v Open Mission Assets Ltd [2006] 4 HKLRD 83 in this regard.  If confirmation were required, that one need go no further then O.41 r.12, this is amply provided by Article 3 of the Hague Convention which specifically exempts the formalities of the Convention where the laws, regulations or practice in place in the State (the Hong Kong SAR) where the document is produced have abolished, or simplified it, or exempted the document from legalisation (by the affixing of an Apostille).  Hong Kong has its own code in this regard which is O.41 r.12 and that is the end of the matter.

18.  The fact that the judiciary in Hong Kong has its own apostille office cannot assist the argument.  That is there to provide apostille services for countries that require an apostille for the recognition of documents produced from Hong Kong into those countries and that is perfectly understandable.  Nevertheless, Hong Kong has its own provisions and these appear in, as I have already said, O.41 r.12.

Conclusion

19.  For these reasons, I am going to allow this appeal and the affirmation can now be used for the purpose contemplated in the summons.  By way of general comment I wish to say that whilst the Rules of Court are of vital importance for the efficient conduct of proceedings in this  court, where a discretion exists to cure or overlook defects in compliance these will be looked at on a case by case basis having regard to the particular circumstances of the situation which confront of the court.  In

this matter, I have found three defects which I have been prepared to overlook.  It seems to me to be a mistake to have regard to what maybe an accumulation of errors, as in this case, and say that this, of itself, is reason to refuse an application under O.41 r.4.  This is not, after all, an examination or test with a pass mark.  The court will need to look at each defect individually and having regard to its nature it will wish to consider whether it can be cured, as the rubric states, without undue hardship, provided always it is not a matter of substance or affects the content of the affidavit.  None of these defects have fallen into this category.

Costs

20.  The costs before the Master will be to the 2^nd Defendant as the summons contemplates.  As to the costs of the appeal, where the Respondent to the appeal has directed a wholesale opposition to this matter which has failed, it seems to me only right that these costs should follow the event.  They will therefore be to the Plaintiff.  I have already heard provisional argument on the issue of costs and so this will be a final order.

Benjamin Chain, instructed by Messrs Sit, Fung, Kwong & Shum, for the Plaintiff

Kevin Egan, instructed by Messrs Oldham, Li & Nie, for the 2^nd, 3^rd and 5^th Defendants

HCA 571 of  2003 & HCMP2820/2002
& HCMP4511/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

____________________

BETWEEN

______________________

AND

MISCELLANEOUS PROCEEDINGS NO. 2820 OF 2002

____________________

BETWEEN

______________________

AND

MISCELLANEIOUS PROCEEDINGS NO. 4511 OF 2002

 ___________________

BETWEEN

(Consolidated by the Order of Deputy High Court Judge To dated 10th April 2003)

________________________

__________________

D E C I S I O N

__________________

1. The application this morning is for specific discovery and production of two documents referred to in Mr Peaker’s affidavit, erstwhile solicitor for the 3rd and 5th defendants. 

2. Reference has been made in his affidavit to two sets of documents concerning those defendants.  These are the retainer documents as well as a deed which purported to give Mr Peaker’s firm, Oldham, Li & Nie (OLN), the first charge on any costs which any or all of those several defendants may recover against their father, the plaintiff, in a suit.

3. I am satisfied on the authorities referred to in argument that  Mr Peaker has sufficiently made reference not only to the existence of the documents, but also to their contents, so that there has perhaps been an unintentional waiver of legal professional privilege in respect of those documents.  It is clear from the affidavit that he has referred to the effect of the documents in question in resisting the application for striking out of the bill of costs launched by the plaintiff and to be fully ventilated in October this year.  There has clearly been deployment of the contents of those documents.

4. The parties have made references to cases which are clear to everyone, so I do not propose to allude to them.  On general principles therefore the attempt to resist the argument on waiver fails in total.

5. The short point, I think then, is whether or not I should go on to order the production of those documents.  It is the exhortation of the rules of procedure that even if there has been a waiver of legal professional privilege, pursuant to Order 24, rule 13(1), such an order should only be made where it is necessary, either for the fair disposal of the striking out application, or to save costs.  So in other words, an order for disclosure does not follow automatically.

6. I have heard the arguments advanced, particularly from Mr Egan, and I must admit that I am persuaded by his submissions on this particular point.  What is the relevance of those documents if their effect is simply to state that Mr Peaker’s firm (OLN) has the first charge over whatever costs as may be recoverable from the plaintiff to the striking out application?

7. On that short point alone I think the matter should be dismissed and I so rule.

(Discussion re costs)

8. The costs of the application shall be to the 2nd defendant to be taxed if not agreed.  Certified fit for counsel. 

Representations:

Mr Steven Kwan, instructed by Messrs Sit, Fung, Kwong & Shum, for the Plaintiff

Mr Kevin Egan, instructed by Messrs Oldham, Li & Nie, for the 2nd Defendant   

HCA 571/2003

HCMP 2820/2002 and

HCMP 4511/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

MISCELLANEOUS PROCEEDINGS NOS. 2820 and 4511 OF 2002

______________

______________

AND

MISCELLANEOUS PROCEEDINGS NO. 2820 OF 2002

______________

BETWEEN

______________

AND

MISCELLANEOUS PROCEEDINGS NO. 4511 OF 2002

______________

______________

(Consolidated by the order of Deputy High Court Judge To

dated 10 April 2003)

_______________________________________

RULING ON ORDER AND COSTS

_______________________________________

1.  The parties were unable to agree on the terms of my order. Nor on costs.

2.  According to the plaintiff, having regard to paragraphs 124, 125, Nos. 128 and 129 of my judgment, the plaintiff is entitled to the following orders:

“	1.	The Ho-Trusts (as pleaded in paragraph 4 of the Re-Re-Amended Statement of Claim) were subject to the condition that the 1st Defendant was not to and was not permitted to interfere in or with the affairs and management of Hotung Enterprises Limited and Hotung Investment (China) Limited.
	2.	the Hillhead-Trusts (as pleaded in paragraph 5 of the Re-Re-Amended Statement of Claim) were subject to the condition that the 4th Defendant was not to and was not permitted to interfere in or with the affairs and management of Hotung Enterprises Limited and Hotung Investment (China) Limited.
	3.	Despite the setting up of the Ho-Trusts and the Hillhead Trusts the Plaintiff were and are still entitled to retain control over the administration and management of Hotung Enterprises Limited and Hotung Investment (China) Limited without any interfere from the 1st Defendant or the 4th Defendant.
		…
	5.	The 1st Defendant be restrained from acting upon the instruction or purported instruction of the 2nd and 3rd Defendants as mentioned in paragraph 15(a) of the Re-Re-Amended Statement of Claim until the death of the Plaintiff or until such time as the Plaintiff expressly relinquishes his right to manage the companies referred to therein, whichever is earlier.
	6.	The 4th Defendant be restrained from acting whether by its directors or agents or otherwise howsoever upon the instruction of the 3rd Defendant, made purportedly in his capacity as the purported trustees of the beneficial interest of the 5th and 6th Defendants, as mentioned in paragraph 15(b) of the Re-Re-Amended Statement of Claim until the death of the Plaintiff or until such time as the Plaintiff expressly relinquishes his right to manage the companies referred to therein, whichever is earlier.
	7.	The trust deeds pleaded in paragraphs 11(a) and 11(c) of the Re-Re-Amended Statement of Claim be rectified by inserting thereto provisions stipulating that the Ho-Trusts are subject to the condition set out in paragraph 1 hereinabove.
	8.	The trust deeds pleaded in paragraphs 11(b) and 11(d) of the Re-Re-Amended Statement of Claim be rectified by inserting thereto provisions stipulating that the Hillhead-Trusts are subject to the condition set out in paragraph 2 hereinabove.”

3.  In the Re-Re-Amended Statement of Claim one of the conditions relied on by the plaintiff was that:

“

(c)

that the trustee was not to be concerned with and would be relieved of all duties regarding the management of the company to which the shares related.”

4.  This condition is the foundation for the above orders.

5.  Little submission was made at the trial on the meaning or effect of this condition.  Nor was any submission made to me on the form of the order in the event that this was the only condition established by the plaintiff.

6.  I had not found that to be a condition of the trust.  Nor would I make any of these orders.

7.  The condition as pleaded has little meaning, since the trustees as trustees of the shares were not obliged to manage any of the companies.  It was not the plaintiff’s case that the trustees were required to turn a blind eye to mismanagement or that the trustees should not look after the interests of the beneficiary as shareholders.  Nor did it purported to qualify or limit the right of the trustees as shareholders or their duties towards the beneficiaries.

8.  I did not deal with this condition at any length in my judgment because of the possibility of litigation over the plaintiff’s management of the companies.  Mr Steven Kwan who appeared for the plaintiff accepted that when the plaintiff managed the companies he must do so as a fiduciary. I think certainly so vis-à-vis the companies.  Possibly also as constructive trustee owing fiduciary duties to the children too.  I did not decide the point. It was not for me to decide.  Nor do I decide it now.  Having regard to the potential liabilities of the plaintiff and the 1^st and 4^th defendants, I say nothing more about this “condition”.

9.  The order I would make is simply that the plaintiff's claim be dismissed with the exception that in relation to one share in HEL currently held by the 1^st defendant, I will make an order in the following terms: 

“	The one share in Hotung Enterprises Limited held by the 1st Defendant in favour of the plaintiff prior to 17 September 1979 and now standing in the name of the 1st defendant is held by her on trust for the plaintiff absolutely”.

I understand that no consequential order is required.

Costs

10.  I have no doubt that costs should follow the event.  And that the 2^nd, 3^rd and 5^th defendants (the defendants) should have the costs of the consolidated action against the plaintiff.

11.  It was submitted on behalf of the plaintiff that the defendants should be deprived of or ordered to pay costs because the defendants’ conduct in the preparation of witness statements and in giving evidence have unnecessarily lengthened the proceedings and occasioned additional expense.  Mr Kwan submitted that the least I should do is to order the defendants to pay the plaintiff's costs attributable to such conduct.

12.  I appreciate that in some of the witness statements filed on behalf of these defendants serious allegations were made against the plaintiff.  Eventually the litigation was conducted without undue personal animosity.  But it was obvious that there was little love or respect on both sides of this family.  Also Anthony probably gave evidence because of the serious (but unfounded) insinuation made against him.  In all the circumstances, I do not believe I should order the defendants to pay any costs or to deprive them of any costs.  Nor do I think the fact that the plaintiff had succeeded in relation to 1 out of 20,004 shares in HEL makes any difference.  So the order I make is that the plaintiff should pay the costs of the defendants in the consolidated action.

13.  The defendants asked for costs against the plaintiff on an indemnity basis.  I see no good reason for ordering costs on that basis and I would not do so.

14.  I turn to consider the costs of the 4^th defendants.  On 10 April 2003 on the 4^th defendant’s Beddoe application, Deputy Judge To ordered by consent that:

“	1.	HCMP no. 2820 of 2002, HCMP no. 4511 of 2002 and HCA no. 571 of 2003 shall thereafter proceed as one action and the consolidated action shall be HCA no. 571 of 2003 (“the Consolidated Action”) and the 2nd Defendant herein shall be the Plaintiff in the Consolidated Action.
	2.	the Plaintiff (the 4th defendant) herein shall take a neutral stance in the Consolidated Action, namely, it shall put in a formal Defence, give discovery of all relevant correspondence, take such steps as the Court may direct and agree to be bound by the Court’s judgment in the Consolidated Action.
	3.	Without prejudice to any costs order that maybe made in the Consolidated Action, the costs of the Plaintiff herein in defending the Consolidated Action should be paid by the losing party in the Consolidated Action and insofar as those costs cannot be recovered from the losing party, they should be paid out of the trust assets.”

The costs of the 4^th defendant are not controversial and I order that the 4^th defendant’s costs in the consolidated action to be borne by the plaintiff, such costs to be taxed if not agreed on the party and party basis.  Subject thereto, the 4^th defendant’s costs may be taxed and paid out of the trust assets on the trustee basis.

15.  I turn to the 1^st defendant.  The 1^st defendant had not applied for a Beddoe order.  Mr Yin, who appeared on behalf of the 1^st defendant, asked for an order similar to that which I would make in favour of the 4^th defendant.

16.  So far as the plaintiff is concerned the plaintiff accepted that the 1^st defendant was entitled to costs from the plaintiff.

17.  The fact that the 1^st defendant had not applied for a Beddoe order would not necessarily disqualify her from an order for costs against the trust assets.

18.  Mr Yin has referred me to O. 62 r. 6(2), which provides that the court may only deprive her of costs against the trust assets only on the ground that she has acted unreasonably.

19.  Mr Yin admitted that although the 4^th defendant had behaved reasonably in applying for a Beddoe order and took no steps in the proceedings (apart from giving discovery and filing a formal defence) and agreed to be bound by the court's judgment, the 1^st defendant was not unreasonable in not doing the same.

20.  I think it is obvious where the 1^st defendant’s sympathy laid.  But I have to ask myself whether she has acted unreasonably.  Moreover I have to ask myself whether I should not at least let her have such costs as a hypothetical reasonable trustee might have incurred.

21.  I think the 1^st defendant has acted unreasonably.  She had no interest to serve in this proceedings at all.  She was not concerned with the beneficial ownership of the shares.  She should have taken no part in the proceedings.  I believe that had she applied for a Beddoe order she would have been directed to take a neutral stance and to take no part in the proceedings other than filing a formal defence and making discovery.  The question here is whether I should make an order in her favour to cover the difference between party and party costs and trustee’s costs confined to such costs.  I believe such difference is likely to be small and the ascertainment of such costs difficult because of the active part she has taken in the proceedings.  Any such order will add to costs.  In all the circumstances, I would not make such an order. 

22.  Lastly, I turn to consider the 3^rd defendant’s application relating to HCMP 2820 of 2002, HCMP 4511 of 2002.

23.  HCMP 2820 of 2002 was the action brought by Sean to compel the 4^th defendant to execute a power of attorney, essentially, giving to Sean, the power to vote under the Hillhead trusts.  HCMP 4511 of 2002 was an action by Sean against the 4^th defendant as holder of 10,002 shares in HEL to convene an EGM pursuant to section 113 of the Companies Ordinance.

24.  Neither action had been pursued by the 3^rd defendant after the order of the consolidation made by Deputy Judge To of 10 April 2003.  I am bound to say that I thought that they had taken overtaken by event and the 3^rd defendant had not intended to proceed with them.

25.  Mr Egan submitted that that was not so, and that the 3^rd defendant now wishes to have directions for the further conduct of those proceedings.  It is now too late.  Even if I have a discretion to allow those two proceedings to proceed because I am not yet functus, I do not believe in the circumstances of this case I should do so.  Not least because I did not believe it will serve any useful purpose.  If Sean now wishes to request the 4^th defendant to take any action in relation to the shares in HEL, he can do so.  If the 4^th defendant refuses, and he thinks that is wrong, he can start new proceedings.  It seems quite clear that the 4^th defendant would have complied with reasonable requests from the 3^rd defendant but for the plaintiff’s claim.  No doubt the 4^th defendant was aware that even as bare trustees they might under suitable circumstances come under an obligation to protest trust assets.

HCA 571/2003
HCMP 2820/2002 and
HCMP 4511/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

MISCELLANEOUS PROCEEDINGS NOS. 2820 and 4511 OF 2002

---------------------

---------------------

AND

MISCELLANEOUS PROCEEDINGS NO. 2820 OF 2002

---------------------

BETWEEN

---------------------

AND

MISCELLANEOUS PROCEEDINGS NO. 4511 OF 2002

---------------------

BETWEEN

---------------------

(Consolidated by the order of Deputy High Court Judge To
dated 10 April 2003)

Before : Hon Tang JA in Court (Sitting as an additional Judge of the Court of First Instance)

-------------------------

J U D G M E N T

-------------------------

PARTIES

1. The plaintiff, Mr Eric Edward Hotung, has eight children by his wife Patricia Ann Shea (“Mrs Hotung”).  Their names and dates of birth appear below :

	Name	Date of Birth
(i)	Michael Eric Hotung (“Michael”)	8 January 1960
(ii)	Robert Eric Hotung (“Robert”)	28 January 1961
(iii)	Eric Shea Kim Hotung (“Eric”)	10 August 1963
(iv)	Sean Eric Mclean Hotung (“Sean”)	17 January 1965
(v)	Anthony Eric Ryan Hotung (“Anthony”)	14 March 1966
(vi)	Mara Tegwen Hotung Lamb (“Mara”)	20 July 1967
(vii)	Gabrielle Marie Hotung (“Gabrielle”)	3 January 1972
(viii)	Sheridan Patricia Hotung Shea (“Sheridan”)	27 March 1973

2. Anthony, Sean, Sheridan and Gabrielle are the 2^nd, 3^rd, 5^th and 6^th defendants respectively. 

3. The 6^th defendant has withdrawn her defence.  So only three of the children are now involved in these proceedings. 

4. The 1^st defendant, Ho Yuen Ki, is the trustee of the so-called Ho Trusts.  The beneficiaries of the Ho Trusts are the plaintiff’s third, fourth and fifth sons, namely Eric, Sean and Anthony (“the three sons”).  The 1^st defendant is a cousin of the plaintiff.  The plaintiff is the father of two of her children. 

5. The 4^th defendant, Hillhead Limited (“Hillhead”), is the trustee of the so-called Hillhead Trusts.  Hillhead was a service company used by Arthur Young & Co.  As a result of various mergers, Arthur Young & Co. has become part of Ernst & Young.  The beneficiaries of the Hillhead Trusts are his three daughters, Mara, Gabrielle, and Sheridan (“the daughters”). 

6. I shall refer to the Ho and Hillhead Trusts collectively as the Trusts.

THE TRUSTS

7. The assets of the Trusts are shares in Hotung Enterprises Limited (“HEL”) and Hotung Investment (China) Limited (“HICL”).  In particular, 20,004 shares in HEL and six shares in HICL.  The 1^st defendant and Hillhead each made two declarations of trusts. 

8. The first dated 29 November 1979 in respect of 10,002 shares in HEL by which the 1^st defendant declared that she held those shares upon trust for the three sons equally.  Hillhead made a declaration of trust also dated 29 November 1979 in favour of the daughters in respect of 10,002 shares in HEL equally.

9. The Hillhead declarations of trusts were witnessed by Peter Mark, a well-known solicitor and director of some of the plaintiff’s companies.  Both the Ho and Hillhead declarations of trust were prepared by his firm.  

10. There were also a declaration of trust made by the 1^st defendant in respect of the three shares in HICL in favour of the three sons equally and a declaration of trust made by Hillhead in respect of the three shares in HICL in favour of the daughters equally.  They were both dated 6 February 1980.  The declaration of trust executed by the 1^st defendant was witnessed by Peter Mark.  It is not known who prepared these declarations of trusts.

DEVOLUTION OF SHARES

HEL

11. Prior to 17 September 1979, the authorised share capital of HEL was $2 million divided into 20,000 shares of $100 each.  The 20,000 shares in HEL were held as to 19,999 thereof by the plaintiff, the remaining share was held by the 1^st defendant.  Although there was no declaration of trust, I am satisfied that the 1^st defendant held her one share in trust for the plaintiff.  By a resolution dated 17 September 1979, the authorised share capital of HEL was increased by the creation of a further 10 shares of $100 each. 

12. By a resolution of the board of HEL held on 17 September 1979 chaired by Peter Mark, it was resolved that the transfer of 10,002 shares by the plaintiff to Hillhead as well as the transfer of 9,997 shares by the plaintiff to the 1^st defendant be approved and that : “the relative new share certificates be sealed and issued in connection therewith”.  New share certificates were indeed issued to the 1^st defendant and Hillhead dated 17 October 1979.

13. At the same meeting, it was recorded that four shares of $100 each allotted to the 1^st defendant had been fully paid up for cash.   

HICL

14. Prior to 28 September 1979, it had only two paid up shares.  The board minutes of a meeting held on 28 September 1979 resolved that the transfer by Malcolm Anthony Barnett to the 1^st defendant of one share and the transfer by Brian Henry Tisdall to the 1^st defendant of one share in HICL be approved.  Barnett and Tisdall held those shares for the plaintiff.

15.  It was also resolved that four shares of $50 each be allotted as fully paid up for cash and that three of these shares be allotted to Hillhead and one share to the 1^st defendant.

16. It was also resolved that relative share certificates be sealed and issued in connection with both the transfer and the allotment.  New certificates were duly issued dated 6 February 1980.

HILLHEAD MINUTES

17. To complete the corporate documents : there were minutes of (i) a meeting of the board of Hillhead on 17 October 1979, where it was resolved : “a trust deed in the attached form was tabled before the meeting and it was resolved that Mr Alan Hann (“Alan Hann”) and Mr C.P. James be authorised to sign on the document under the common sealed of the company”, (ii) a similar board minutes of a meeting held on 6 February 1980 in relation to a trust deed in respect of the three shares in HICL. 

18. The trust deeds were the declarations of trusts referred to in paragraphs 8 and 10 above.

PLAINTIFF’S CASE

19. It is the plaintiff’s case that the trusts that he intended to set up in favour of his children were subject to conditions.  These conditions as pleaded in the plaintiff’s Re-re-amended Statement of Claim in relation to the Ho Trusts were :

(a)	that the trusts would be subject to a power of revocation exercisable by the plaintiff during his lifetime and that the trustee would only be entitled to distribute the shares to the sons in equal shares after the death of the plaintiff;
(b)	that during the lifetime of the plaintiff, the trustee was to hold and to deal with any income that may be derived from the shares, in the trustee’s absolute discretion, by distributing the same to the plaintiff, his wife and the sons including his other two sons Robert and Eric (or any of them), or to accumulate the same; and
(c)	that the trustee was not to be concerned with and would be relieved of all duties regarding the management of the company to which the shares related.

20. It is the plaintiff’s case that similar conditions were imposed in relation to the Hillhead Trusts save that the distribution of income was confined to the plaintiff, his wife and the daughters or any of them. 

PLAINTIFF’S CLAIM

21. The plaintiff’s claim for relief has been put on several bases in the Re-re-amended Statement of Claim : rectification, paragraph 18; mistake, paragraph 18A; and because the deeds did not accord with his intentions they ought to be set aside, paragraphs 17 and 18.

22. But the heart of the matter is : whether or not the plaintiff intended when the Trusts were established that they should be subject to all or some of these conditions, in particular, that they should be revocable.  If so, whether, insofar as the declaration of trusts did not give effect to his intention, they ought to be set aside or rectified.

LARCO (CAP. 23)

23.  In relation to these conditions, it did not matter exactly when or how the trusts were established.  However by an amendment made on 26 November 2004, the plaintiff relied on section 6(1)(c) of the Law Amendment and Reform (Consolidation) Ordinance, Cap. 23 (“LARCO”).  Section 6(1)(c) was in force in 1979/1980 although it has been since been repealed by Ordinance 62 of 1984.  Section 6(1)(c) provided as follows :

“	a disposition of an equitable interest or trust subsisting at the time of the disposition, shall be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will”

Section 6(1)(c) was based on section 53(1)(c) of the Law of Property Act, 1925. 

24. The LARCO point depended on whether at or immediately after the time of the transfer or allotment of shares to the 1^st defendant and Hillhead, they held the shares on resulting trusts for the plaintiff.  If they or either of them did then the declarations of trusts would have amounted to a disposition of an equitable interest within the meaning of section (6)(1)(c).  Since neither the 1^st defendant nor Hillhead who signed the trust deeds had been authorised in writing by the plaintiff to do so, the depositions were invalid.  I will deal with this point separately later. 

REVOCATION

25. By two deeds of revocation both dated 14 January 2004, the Trusts were revoked by the plaintiff.  The recital of the two deeds of revocation are in substance the same.  For convenience sake, I shall refer to the recitals in the deed of revocation in relation to the Ho Trusts. 

“	(A)	By oral declaration made in or about 1979, the Settlor constituted Ho Yuen Ki (‘the Trustee’) trustee of certain property and directed the Trustee to hold the same upon certain trusts then specified for the benefit of three of his sons namely Michael Eric Hotung, Sea Eric Mclean Hotung and Anthony Eric Ryan Hotung but orally reserved to himself the power to revoke the trusts in whole or in part should he so think fit.
	(B)	The Trustee recorded the said trusts by two Declarations of Trusts respectively dated 29th November 1979 and 1980 without mentioning the power of revocation (but without being authorized by the Settlor to omit any reference to the same) but the Trustee affirmed the continuing control of the Settlor over the trusts (as intended to be achieved by his reservation of the power of revocation) by vesting the said deeds in the possession of the Settlor and allowing him to retain the same together with the certificate to the shares comprised in the said trusts.”

THE LAW

26. The law can be taken from Gibbon v. Mitchell [1990] 1 WLR 1304, when Millett J (as he then was) after reviewing the authorities said at 1309E :

“

In my judgment, these cases show that, wherever there is a voluntary transaction by which one party intends to confer a bounty on another, the deed will be set aside if the court is satisfied that the disponor did not intend the transaction to have the effect which it did.  It will be set aside for mistake whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained by entering into it.”

In that case, Millett J was “satisfied on the internal evidence of the deed itself, as well as on the evidence provided by the contemporaneous correspondence…” that the deed was contrary to the settlor’s “instructions and intentions” 1309F.  He set aside the deed.

27. The standard of proof is the civil standard of the balance of probability as explained by Buckley LJ in Thomas Bates Ltd v. Wyndham’s Ltd [1981] 1 WLR 505 :

“

… The requisite degree of cogency of proof will vary with the nature of the facts to be established and the circumstances of the case.  I would say that in civil proceedings a fact must be proved with that degree of certainty which justice requires in the circumstances of the particular case.  In every case the balance of probability must be discharged, but in some cases that balance may be more easily tipped than in others.”

28. Mr McCoy SC, leading counsel for the plaintiff, has referred me to authorities illustrating the approach of the court to this kind of cases.

29. AMP (UK) Ltd plc v. Barker& Ors [2001] OPLR 197, (Lawrence Collins J), there AMP claimed that certain amendment to the rules of the pension scheme (“the scheme”) of the National Provident Institution (“NPI”) were made as a result of a mistake by the trustees who passed the resolution to amend the rules of the scheme and which amendments were subsequently approved by NPI in accordance with the scheme rules.  On a claim for revocation, the learned judge said :

“	59.	The starting point is free form difficulty.  In the case of a bilateral transaction, there must be convincing proof that the concluded instrument does not represent the common intention of the parties.  The policy reason for the need for convincing proof is that certainty and ready enforceability of transactions would otherwise be hindered by constant attempts to cloud the issue: The Olympic Pride [1980] 2 Lloyd’s Rep 67, at 72.  The claimant does not have to meet more than the civil standard of balance of probabilities, but convincing proof is required to counteract the cogent evidence of the parties’ intention displayed by the instrument: Thomas Bates and Sons v Wyndham’s Ltd [1981] 1 All ER 1077, [1981] 1 WLR 505, 521 (CA); Grand Metropolitan plc v William Hill Group Ltd [1997] 1 BCLC 390 at 394; Lansing Linde Ltd v Alber [2000] Pensions LR 15, 44.
	…
	66.	There must, therefore, be cogent evidence of the intentions both of the Trustees and of NPI, but not necessarily of their agreement or accord.  In some of the earlier cases on voluntary settlements, rectification was ordered on the uncontradicted affidavit evidence of the settler without any need for objective manifestation of intention: see, eg, Hanley v Pearson (1879) 13 Ch D 545.  Mr Nigel Inglis-Jones QC for the Trustees suggested that a similar approach would be appropriate in a case such as this.  It may be that the need for objective manifestation in the case of a unilateral transaction is simply one element of the need for convincing proof of the mistake.  It was present in the two leading modern cases on mistake in unilateral transactions, Re Butlin’s Settlement and Gibbon v Mitchell [1990] 3 All ER 338, [1990] 1 WLR 1304, infra, para 81.  The certainty of transactions would be undermined if the court could act, otherwise than in exceptional circumstances, simply on the assertion of a party to the transaction.  But when one is considering the intentions of a collective body such as a group of trustees or a committee of a board it is their collective intention which is relevant, and it would be a very odd case (and certainly not this one) if that collective intention were not objectively manifested.”

30. Anker-Petersen & Ors v. Christensen & Ors [2002] WTLR 313 was a decision of Davis J.  In that case the claimants, who were the beneficiaries sought to set aside two deeds of assignments made by them in favour of the defendants as trustees, arising out of the exportation of the trusts outside the United Kingdom for tax purposes, on the basis that they were mistaken as to the effect of the declarations of trusts and that they had been led to believe that these declarations of trusts were the same as, or at least substantially similar to, the existing Will trust as varied.  Davis J said :

“

36.

Moreover, it is clear that this equitable jurisdiction is analogous to the equitable jurisdiction as to rectification.  It has always been the law that where a person seeks to rectify an instrument the burden of proof is upon the person seeking so to rectify.  Indeed it is commonly said that cogent evidence needs to be adduced before rectification will be granted.  Accordingly in my view the burden in this case is upon the claimants to show why the deeds of assignment should be set aside and to know that they had not understood the effect of the deed into which each of them had entered.”

31. Here in Hong Kong in Keswick v. Jardine Matheson & Co. & Ors [1959] HKLR 29, at page 39, Reece J relied on the following dictum of Cotton LJ :

“	In Tucker v. Bennett at page 15, cited by Mr. D’Almada, Cotton L.J. emphasized the type of evidence required to justify rectification of a voluntary settlement in these words: —
	‘	It requires very clear and distinct evidence to show that there was some different intention at the time when the settlement was executed, and, with the exception of this, there is hardly a single case where many years after the settlement was executed, on mere parol evidence, uncontradicted because there was no one to contradict it, the Court has altered a deed because one of the parties afterwards desired that it should not stand as it was executed.’ ”

32. I refer to two other authorities.  First, Shephard v. Cartwright [1955] AC 431, the leading authority on rebuttal of the presumption of advancement.  At page 445, Viscount Simonds cited with approval this passage from Snell’s Equity which has been retained in all subsequent editions :

“

The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the part who did the act or made the declaration … But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.”

But as Viscount Simonds went on to say :

“

But although the applicable law is not in doubt, the application of it is not always easy.  There must often be room for argument whether a subsequent act is part of the same transaction as the original purchase or transfer, and equally whether subsequent acts which it is sought to adduce in evidence ought to be regarded as admissions by the party so acting, and whether, if they are so admitted, further facts should be admitted by way of qualification of those admissions.”

33. Secondly, Ip Man Shan Henry & Anor v. Ching Hing Construction Co. Ltd & Ors (No.2) [2003] 1 HKC 256, a decision of Lam DJ (as he then was) where he expressed the view that evidence of the settlor as to his intention was admissible when the court had to decide whether he had intended to make a gift.  This was a case where the parents bought a property in the name of their son, and the issue was whether they intended to make a gift of the property to the son.  The learned judge was of the view that evidence of the parents of their intention at the material time was admissible.  At paragraph 181 of his judgment, he cited and relied on the dictum of Heydon JA in the case of Damberg v.Damberg [2001] NSWCA 87 :

“

… However, Viscount Simonds’ formulation does not exclude testimonial evidence of intention.  The reference to ‘declarations’ is a reference to out of court declarations.  In truth the propositions enunciated by Viscount Simonds are not peculiar to this field, nor are they an exhaustive statement: they merely summarise parts of the common law rules relating to res gestae evidence and admissions.  ‘Questions … as to the relevancy and admissibility of evidence … can best be considered … by reference to the principles and authorities to be found in a textbook on evidence.  There are no special rules relating to cases of this kind; such cases merely illustrate general evidentiary principles’: Davies v The National Trustees Executors & Agency Co. of Australasia Ltd [1912] VLR 397 at 402 per Cussen J.  In general a person whose intention at an earlier time is in issue may give evidence of it, and the position is the same here, even though the weight of the evidence, coming as it does from an interested witness, must be scrutinized with care: Devoy v Devoy (1857) 3 Sim & Giff 403 at 406; 65 ER 713 at 714 per Stuart VC; Dumper v Dumper (1862) 3 Giff 583 at 590; 66 ER 540 at 543 per Stuart VC; Davies v The National Trustees Executors & Agency Co. of Australasia Ltd [1912] VLR 397 at 403; Drever v Drever [1936] ALR 446; and Martin v Martin (1959) 110 CLR 297 at 304 per Dixon CJ, McTiernan, Fullagar and Windeyer JJ.  It follows from the proposition that the rules for admissibility of evidence tendered to rebut the presumption are simply those of the general law that any modifications effected by the Evidence Act 1995 are applicable.”

34. It is obvious that evidence by a solicitor of what the settlor told him as to his intention at or about the time of the establishment of the trust is admissible.  I see no logical reason why evidence from the settlor of what he told the solicitor should not be admissible.  So I approach the matter on the basis that the plaintiff’s evidence of his intention at or about the time of the Trusts is admissible evidence.  Naturally, such evidence must be scrutinized with such care as the circumstances require.

35. I do not believe it is disputed that the plaintiff had intended to give the beneficial interests in the shares to his children.  The dispute is whether the gifts were subject to conditions, in particular, the condition of revocability.  Nor am I concerned with uncommunicated intention.  It is the plaintiff’s case that he had communicated his intention to the trustees and possibly to Peter Mark who was in charge of the preparation of at least some of the trust deeds.

36. Mr McCoy accepted that I am entitled to approach the plaintiff’s evidence and his case with caution.  I must decide whether they are sufficiently cogent for me to act on them.  I believe the authorities cited above support this approach. 

BACKGROUND

37. The plaintiff was born on 8 June 1926.  He is now 78 years old.  Unfortunately, he suffers from bad health.  He was 53 in 1979.  Even then he was not in good health.  Moreover, he had received death threats, it seems, because of his toughness as a businessman.

38. He is the grandson of Sir Robert Hotung.  He came to his inheritance as a relatively young man.  Sir Robert Hotung died in 1956 and his father Mr Edward Sai Kim Hotung died in 1957.  So he inherited part of the vast fortune of his grandfather as well as part of his father’s considerable estate.  

39. The plaintiff was no idler.  He was engaged in many different businesses including development of real estate, import and export, and trading in shares.  It would appear that in the middle of 1960s, he had suffered some reverses of fortune but he was able to weather the storm because of his inheritance.  By the 1970s, his business was steady and prosperous again and he had floated two companies, Hong Kong Development and Cosmopolitan Properties & Securities Limited (“Cosmopolitan”).  His evidence is not very clear because when he was asked about his health in the 70’s, he said words to the effect that one day he was looking at his fingers and thought that he would be happy to swap a finger to pay off debt.  However, it seemed clear enough that by 1979/1980, he had recovered financially, although he said he had to work so hard that he became a wreck.  He said that he was worried about his children and he wanted to protect his family. 

40. So in 1978 he asked Mr Peter Vine, a well-known solicitor, to prepare a Will which he signed.  Under the Will, he appointed his wife as sole executrix and trustee, and failing her, his “three oldest living sons who shall then have attained the age of 21…”.  His residuary estate was to devolve “upon trust for such my children who shall survive me and attain the age of 21 years in equal shares as to the corpus thereof one-third thereof when each such child shall attain the age of 30, one-third thereof when each such child shall attain the age of 35 and the balance when each such child shall attain the age of 40 and as to the income thereof …”.  He also made careful and detail provisions which showed his care and concern for the welfare of his family.  The only comment I wish to make about this Will is that it was such as one would expect a loving husband and father to make. 

41. There is no evidence that this Will had been revoked prior to the establishment of the Trusts.  Indeed there is no evidence whether this Will had been revoked prior to a later Will of the plaintiff, dated 3 October 2001, when he disinherited all his sons. 

42. The plaintiff was asked in chief his reasons for establishing the Trusts.  He said they were to be his second line of defence because one could never tell how trustees might behave and because he had been dissatisfied with professional trustees.  He also said that the Trusts were to provide a “rapid deployment fund”.

43. The plaintiff said his experience with professional trustees was unsatisfactory.  I believe he was referring to the trustees of his grandfather’s Will.  His father had not appointed a professional trustee.  I believe he was complaining about their deferring to his uncle.  That may explain why in his 1978 Will, he appointed his wife and failing her, his adult sons, if any, as trustees of his Will. 

44. According to the plaintiff, two of his sons, the two elders, had behaved badly because they were involved in a bar brawl in Wanchai so he decided when he set up the Ho Trusts that the beneficiaries should be the three younger boys who were then aged 16, 14 and 13 respectively.

45. The plaintiff also explained why there were two sets of trusts.  He said he picked the 1^st defendant because she was a brilliant businesswoman and that he wanted his sons to learn from her.  However, he did not want her to be trustee for the daughters because that might hurt Mrs Hotung’s feelings.  He said that he spoke to the 1^st defendant in his office at 10 Stanley Street and that he told her of the conditions quite briefly namely, that they were to be revocable at any time, they were to be secret, and income, if any, were distributable as and when needed.  But as far as distribution was concerned, she could distribute not just to the three sons but also to his wife and himself.  I believe also the other two sons.

46. As for the daughters he approached Mr Ronald Ho (“Ronald Ho”), his nephew, who was an accountant at Arthur Young & Co.  He said he told Ronald Ho in his office that he wanted a secret trust with powers of revocation and that Ronald Ho told him that he had to report to his partners. He was told that a nominee company would be used as trustee and the company was Hillhead.  The same conditions were imposed on Hillhead although the income, if any, were to be distributed, if necessary, to the daughters as well as Mrs Hotung and him.  Hillhead was to have nothing to do with the management of HEL or HICL.

47. The plaintiff said that one Eric Machado who was his trusted assistant was asked to help.  The plaintiff was unable to locate Eric Machado despite efforts to find him.  There was some suggestion that the plaintiff had left it to Eric Machado to tell Peter Mark the conditions.  Peter Mark was clear that he received no instructions from Eric Machado.

48. The plaintiff instructed Peter Mark to prepare the trust deeds.  He said to the best of his memory or recollection he told Peter Mark the conditions.  He said that when the trust documents were returned to him after execution, he only looked at them superficially.  He also said that he had expected the conditions to be included in the trust deeds and that he had never authorised any of the trustees to execute a trust deed without those conditions.

49. The plaintiff also said he decided to come to the court to see where he stood after he was told about other proceedings (see paragraphs 62 to 69 below) brought by the children against the 1^st and 4^th defendants.

50. As I have said the plaintiff said he established the Trusts for the protection of his children and because he wanted a rapid deployment fund.  When the plaintiff was asked by me how would the children know that a rapid deployment fund was available in case of need since the Trusts were to be kept secret from them, he said Peter Mark who had his ears close to the ground would tell him if any of his sons were to get into trouble.  He also explained that in case he and Mrs Hotung were to be incapacitated the trustees would be able to help.  It is obvious that the concept of a rapid deployment fund was an important reason for the establishment of the Trusts.  If he had merely intended to make a revocable gift to take effect on death, he could do so by a will or a codicil.  If he wanted to help his children during his lifetime, he could do so, even without the Trusts.

HAD THE PLAINTIFF TOLD PETER MARK?

51. Peter Mark was a good friend.  It is common ground that Peter Mark was a competent solicitor.  Peter Mark was also a director in a number of the plaintiff’s companies, including listed companies. 

52. Peter Mark said that although he might have taken instructions from the plaintiff over a cup of tea, he would normally record the instructions on an internal memo and pass it on to one of his assistants. 

53. There was no reason why the plaintiff should not have told Peter Mark.  Particularly, having regard to his idea of the rapid deployment fund and his belief that Peter Mark had his ears close to the ground.

54. Peter Mark said he did not remember being told.  I believe he had not been told.  Had he been told, I find it inconceivable that he would have made no reference to these conditions in the declaration of trusts.  Although the Trusts were to be kept secret from the children, there was no suggestion that the conditions themselves should not appear on the face of the declaration of trusts.  Indeed, the plaintiff’s evidence was to the contrary.  As a competent solicitor, he would have recorded the conditions in the declaration of trusts especially the conditions under which the trustees were given power to use the income of the trusts, if any, for the benefit of persons other than the beneficiaries.  If Mr and Mrs Hotung were incapacitated, the trustees would be unprotected if they allow income to be used their benefit should they not recover from their incapacity. 

55. As for the plaintiff’s evidence regarding Peter Mark, Mr McCoy reminded me that in the plaintiff’s first witness statement, he said :

“

31.

I could not recall the exact instructions I gave to Peter Mark for the preparation of the trust documents except that I said I wanted the trust documents to be simple.  I had not informed Peter Mark about the conditions I wished to impose on the trusts because I thought the trusts would be kept secret from my children during my lifetime and those conditions and terms I would like to impose (such as my right of revocation or the trustees not being required to manage the business of HEL and HICL) would no longer be relevant after my death.  In any event, I also retained the power to revoke the trusts.”

56. But in the transcript of his oral evidence in the afternoon of 12 January 2005, at page 5 this is recorded :

“	Q.	And did you tell Peter Mark about the conditions you’d imposed on the trustees?
	A.	Yes, I said that, to the best of my memory.
	COURT:	You said you did.
	A.	To the best of my memory.”

57. The discrepancy between the plaintiff’s witness statement and his oral evidence supports caution when I come to assess the reliability of the plaintiff’s recollection. 

58. I believe the plaintiff had not told Peter Mark the conditions.  I do not believe he left it to Eric Machado to tell Peter Mark the conditions.  I believe the fact that he had not told Peter Mark cast doubt on whether he really had the conditions in mind at the time.  I believe, had he intended the Trusts to be subject to these conditions, he would not have failed to tell Peter Mark. 

RONALD HO AND ALAN HANN

59. The plaintiff said he told Ronald Ho and Alan Hann the conditions.  Both Ronald Ho and Alan Hann were called as witnesses.

60. Ronald Ho is the nephew of the plaintiff.  He is the grandson of the adoptive son of Sir Robert Hotung.  He is a chartered accountant.  In 1979, he was an audit manager at Arthur Young & Co.  He retired in 2002.  By that time, Arthur Young & Co. had become part of Ernst & Young.  In 1979, he was in charge of the audit of Cosmopolitan.  He was reporting to Alan Hann who was the managing partner.

61. Ronald Ho gave his evidence in a narrative form.  I told him I was more interested in the actual conversation that he had with the plaintiff.  He said he would try his best to recollect and this is the transcript of his evidence :

“	A.	Yes.  Basically Mr Hotung says he wanted to set up a trust for his daughters and he would have total control of the trusts and the trust would be a secret trust, not to be divulged to anybody until his demise.
	COURT:	And were these the words used by Mr Hotung?
	A.	Yes.  But if he didn’t use the word ‘demise’ but used this word ‘until my death’.
	Q.	And you recall where this conversation took place?
	A.	In the Stanley Street headquarters of Cosmopolitan Group.
	Q.	And are you able to remember approximately when it took place?
	A.	Some time in 79, I cannot remember the exact month or date.”

And then at page 24 of the transcript of his evidence of 18 January 2005, he said :

“	Q.	Well, for whatever reason he did that, what is your evidence as to revocation being imposed as a condition of the trust when it was formed in 1979?
	A.	Mr Hotung wanted ultimate control, including revocation – total control of the trust.  As I said, once the package of documents which includes the declaration of trust, the instrument of transfer signed blank and bought and sold note and the share certificates returned to the client, our service would have come to a conclusion.
	Q.	And what you’ve just described was the normal practice that your firm would carry in just these cases.
	A.	Yes.
	COUIRT:	Now, when you said he wanted ultimate control, including revocation, earlier in your evidence you did not say that he mentioned revocation.
	A.	I - - maybe I did not say he wanted revocation, but his instruction clearly include that he wants ultimate control and for …
	COURT:	Now, I understand, but - - and then what effect it may have as a matter of law is of course something that we have to decide in due course.
	A.	M’mm.
	COURT:	So I’m more interested in exactly what it was that he said to you rather than any gloss that you might put on it, do you see what I mean?
	A.	He said he wants to have ultimate control.
	COURT:	Ultimate control.  Good, yes.  That I understand.  He wanted ultimate control.
	Q.	I’m going to ask you, did he use the expression – his Lordship’s asked you questions about this – did he use the expression ‘revocation’ at all, the phrase ‘revocation’?
	A.	I can’t remember whether he used the word ‘revocation’. But by the fact that he stressed on ultimate control, I take it that it includes transferring the shares to some other parties including himself, and to me that’s a complete - - it would completely nullify the trust.”

OTHER PROCEEDINGS

62. It would be helpful to the consideration of Ronald Ho’s evidence if I were to pause and mention other proceedings between the parties. 

63. There were earlier proceedings brought against the trustees. 

64. The first proceeding brought was HCMP 5851/2001.  That was brought by Anthony and Sean against the 1^st defendant.  Essentially, it was an action for documents and some documents were ordered to be supplied by the 1^st defendant by Gill DJ on 11 December 2001.

65. The second set of proceeding was HCMP 2031/2002.  The parties were the same.  Essentially, it was an action to compel the 1^st defendant to execute certain powers of attorney in relation to the Ho Trusts.  This was dismissed by Chung J on 26 June 2002.  The appeal, CACV 315/2002, was dismissed on 29 April 2003.  The application for leave to appeal to the Court of Final Appeal had been stayed until after the determination of HCA 571/2003 or until further order.

66. HCMP 2820/2002 was an action brought by Sean against Hillhead, to compel Hillhead to execute certain powers of attorney, essentially, giving to Sean, the power to vote the shares under the Hillhead Trusts.  This was stayed pending the disposition of CACV 315/2002 by Chu J on 5 September 2002. 

67. HCMP 4511/2002 by Sean against Hillhead requiring Hillhead as holder of 10,002 shares in HEL to convene an EGM pursuant to section 113 of the Companies Ordinance.  This was adjourned by Kwan J on 15 January 2003 to await the determination of the Beddoe application in HCMP 5250/2002.

68. HCMP 4815/2002 brought by Sean and Anthony against the 1^st defendant for a declaration that each of the plaintiffs was beneficially entitle to 3,334 shares in HEL and one share in HICL and an order that the 1^st defendant as trustee requisition or convene meetings of HEL and HICL.

69. Lastly, HCMP 5250/2002, the Beddoe application brought by Hillhead against Sean, Eric, Mara, Sheridan and Gabrielle.  Hillhead who was the plaintiff in the Beddoe application was, as now, represented by Simmons & Simmons.  One of the partners who had conduct of the Beddoe proceedings was Mr Henry Ong (“Henry Ong”). 

HENRY ONG

70. Henry Ong made three affirmations in the Beddoe application and Ronald Ho was cross-examined on the some of the contents of these affirmations.

71. As background, I should also mention that on 5 November 2002, Simmons & Simmons wrote to Ms Anthea Chan, a solicitor acting for the plaintiff that :

“	…
	As you are aware, pursuant to trust declarations or trust deeds dated 29 November 1979 and 6 February 1980 (‘Trust Declarations’), Hillhead holds the HEL Shares and the HICL Shares (collectively, ‘Shares’) respectively as bare trustee and nominee of Mara Tegwen Hotung, Gabrielle Marie Hotung and Sheridan Patricia Hotung (together ‘Mr Hotung’s Daugthers’).  You will also be aware of Eric Hotung’s suggestion or assertion in August this year to the effect that there is in existence some other or further understanding or arrangement such that the Shares (or perhaps only the HEL Shares) should vest in Mr Hotung’s Daughters only upon Mr Hotung’s death.
	Mr Hotung’s assertions appear inconsistent with what is stated in the Trust Declarations.  This is very surprising, given in particular that Mr Hotung had sight of the Trust Declarations on many occasions since 1979/1980 and it was not until August 2002 that Mr Hotung raised this issue for the first time.  In any event, Mr Hotung’s assertions are clearly of concern to Hillhead.
	Accordingly, the purpose of this letter is to seek clarification and further information with respect to Mr Hotung’s assertions and, if Mr Hotung maintains such assertions, to request Mr Hotung to make the appropriate Court application to rectify the present arrangements and the Trust Declarations (or otherwise to settle the issue by agreement with his daughters and/or Sean Eric Hotung).
	…
	If Hotung’s position is that his assertions are correct:
	1.1	Mr Hotung should provide this firm, on behalf of Hillhead, with further details and particulars of the understandings or arrangements that he believes exist pertaining to the Shares, including his views as to:
		·  the identity/identities of the present beneficial owner(s) (whether absolute or contingent) of the HEL Shares and the HICL Shares;
		·  the person(s) entitled to instruct Hillhead in respect of the Shares; and
		·  whether or not Hillhead should comply with the EGM Request.
	1.2	In addition, Mr Hotung should apply to Court for rectification of the Trust Declarations.  An obvious alternative is for Mr Hotung to seek to settle this issue with his daughters and/or Sean Eric Hotung by agreement (if that is possible).”

72. Messrs Herbert Choi & Partners replied on behalf of the plaintiff on 5 December 2002.  Since the plaintiff was not cross-examined in relation to the alleged August assertions, I cannot take them into consideration, in particular, I cannot proceed on the basis that in August 2002, the plaintiff’s assertions were in any way different from those which were made in December 2002.  I mention this to show that in considering the reliability of the plaintiff’s evidence, I would not take into consideration any suggestion that in August 2002 he had made any different assertions from those which were made in December 2002.  Also, I have placed no weight on Mr Egan’s submission, on behalf of the 2^nd, 3^rd and 5^th defendants, on the amendments made to the conditions in the Re-re-amended Statement of Claim.  I do not believe they are sufficiently serious.  Moreover, there had been no meaningful cross-examination on the discrepancies.  

73. Paragraphs 7 to 10 of Henry Ong’s first affirmation were put to Ronald Ho :

“	Mr Ronald Ho
	7.	In relation to Mr. Ho, I am advised by Mr. Howard Lau, a former director of the Plaintiff and a partner of Ernst & Young, that Mr. Lau had a telephone discussion with Mr. Ho following the initial oral assertions of the 2nd Defendant and that Mr. Ho’s response was to the effect that Mr. Ho did not know, and was not in a position to know, the circumstances surrounding the establishment of the Trusts back in 1979 and 1980 and that the persons who should have such knowledge are Mr. Hann and Mr. James.
	8.	I am informed by Mr. Lau that, following receipt of the Assertions Letter and during the first half of December 2002, Mr. Lau again attempted to contact Mr. Ho at his home in Canada, but to no avail. It later transpired that Mr. Ho was then in Hong Kong and, on 19th December 2002, I wrote to Mr. Ho seeking his comments on the 2nd Defendant’s assertions (‘the Assertions’) and the various allegations regarding the Plaintiff's administration of the Trusts (‘the Allegations’). There is now produced and shown to me a copy of my letter to Mr. Ron Ho marked ‘OSLH-2’.
	9.	As I had not heard from Mr. Ho by Monday 30th December 2002, I tried to contact Mr. Ho and did manage to speak to him at his house in Hong Kong on that date. Mr. Ho stated that it was difficult to recollect the circumstances surrounding the establishment of the Trusts back in 1979/1980 and that, in any event, Mr. Hann and Mr. James would be in a better position to advise on that issue.  I pointed out to Mr. Ho that, in the Assertions Letter, it was suggested that the 2nd Defendant had informed Mr. Ho of the terms of the Trusts, and that Mr. Ho had initially agreed to act as trustee. Mr. Ho’s response was that he could not be sure as to whether or not the 2nd Defendant had discussed this with him.
	10.	Mr. Ho did comment, however, that the Plaintiff had not charged any fees for the holding of the shares in Hotung Enterprises Limited (‘HEL’) and Hotung Investment (China) Limited (‘HICL’) and, if the Trusts were not bare trusts, the Plaintiff would have charged fees on the basis of a percentage of the value of the trust assets; and on that basis he would be surprised if the Trusts were anything other than bare trusts. Mr. Ho also stated that, at all I relevant times, he had dealt only with the 2nd Defendant (or the 2nd Defendant’s office) in relation to administrative matters concerning the Trusts. Mr. Ho confirmed that it was the office of the 2nd Defendant who instructed the Plaintiff to send to the 2nd Defendant the instruments of transfer relating to the shares in HEL and HICL (executed by the Plaintiff but left blank as to transferee). As far his involvement with the Trusts was concern1d, Mr. Ho stated that the Trusts would have been administered as ‘normal’ bare trusts.”

74. Ronald Ho was also cross-examined on paragraphs 7 and 8 of Henry Ong’s third affirmation which I produce below :

“	Ron Ho
	7.	I had meeting with Mr. Ron Ho on 9th January 2003 at my office.  I was told by him that the 2nd Defendant approached him on 24th December 2002 requesting him to sign a statutory declaration regarding the Assertions in the form as shown hereto and marked ‘OSLH-14’.  During that meeting, when Mr Ho had an opportunity to review some of the documents from his ‘old’ files, Mr Ho indicated that what he could recall at that point was that, when the two Trusts were set up, it was the 2nd Defendant’s intention to retain control over the administration of Hotung Enterprises Ltd. and Hotung Investment Ltd. notwithstanding that the legal interest in the shares of these companies had been transferred to Madam Y.K. Ho and the Plaintiff.
	8.	On 10th January 2003, I received a draft statutory declaration from Mr. Ho regarding the Assertions which is now produced to me and exhibited ‘OSLH-15’.  I was told by my partner, Wanda Tong, that she had been trying to get hold of Mr. Ho seeking his confirmation whether he would be signing the statutory declaration but Mr Ho asked her to speak to his lawyer, Mr. Thomas Chau of Rowland Chow Chan & Co.  I was further told by Ms. Tong that she was advised by Mr. Chau at 4:00pm today that Mr. Ho had still not decided whether to sign the statutory declaration or any other documents in relations to the Assertions.”

75. So far as paragraph 7 of Henry Ong’s first affirmation was concerned, Ronald Ho denied the content.  Mr Howard Lau has not been called.  I ignore this paragraph.

76. Henry Ong gave evidence on behalf of the defendants.  He also produced the notes of his conversation with Ronald Ho.  They were sketchy.  But they are in general agreement with what he had deposed to in his affirmations.  For example, in his note of conversation dated 31 December 2002 (at page 2 of the typed up version) :

“	So long ago – diff. [difficult] to recollect
	Not even a partner – Just made principal.  Could X [not] [sentence incomplete]
	Did X [not] believe Hillhead had any obliges [obligations].
	…
	Hillhead would x [not] have been used for a trust like this.
	Whether he had spoken to me – need to really scratch
		my head
		Cannot be sure.”

77. I find Henry Ong’s evidence helpful and reliable.  I believe the passages quoted from his affirmations are reliable and accurate record of what he was told by Ronald Ho. 

RONALD HO

78. Ronald Ho said that he was cautious when he was speaking to Henry Ong.  Indeed shortly after the conversation on 31 December, he retained separate solicitors and that it was only after he had been given an indemnity by the plaintiff that he was willing to give a statement.  I can understand his caution because he might be liable to a claim by the plaintiff, the beneficiaries, or his former firm.  I do not have to assess the risk of any such claim.  It is sufficient that he believed he had reason to be cautious.

79. Be that as it may, it is clear from the evidence of Ronald Ho that so far as he was concerned, there never was the second condition.  In other words, he was not aware that Hillhead could use the income, if any, for the benefit of the beneficiaries much less than the plaintiff and Mrs Hotung.  So far as Ronald Ho was concerned, Hillhead was given no discretion or power.  That is in general agreement with what Henry Ong had recorded, and paragraph 10 of his first affirmation.

80. However, Ronald Ho supported the evidence of the plaintiff on the first condition. 

81. Mr McCoy said that the conditions do not have to succeed or fail together.  Strictly speaking, that is right.  However, given the fact that according to the plaintiff, the purpose of the Trusts was to establish a rapid deployment fund, it would make no sense if he had not made known this condition to Ronald Ho.  But, as will be seen later, Alan Hann was also unaware of this condition.

82. As for Ronald Ho’s evidence on revocability, I believe it is more probable that he had confused control with revocability.  I do not believe he was ever told by the plaintiff that the plaintiff wanted to have the power to revoke the Hillhead trusts.  Mr McCoy said that the plaintiff might not have used the words, “revoke” but that he would have used other “lay” expressions.  Even so, I do not believe that any such intention was ever conveyed. 

83. I do not doubt Ronald Ho’s honesty.  Indeed, that was never challenged.  But after a lapse of 26 years, I do not believe his recollection on this vital issue is reliable enough for me to act on it.  I am not satisfied that his oral evidence has provided me with a sufficiently clear or convincing basis to find that the plaintiff had told him of his intention to retain a power of revocation.  I believe it is more likely that insofar as Ronald Ho’s evidence was to that effect, it was the result of an inference drawn by him based on his belief that all the documents including blank instruments of transfer had been given to the plaintiff. 

ALAN HANN

84. Mr McCoy realised the vulnerability of Ronald Ho’s evidence.  That is why in his final submission he laid particular emphasis on Alan Hann’s evidence.  He made the valid point that if I was sufficiently satisfied with Alan Hann’s evidence, that was enough.

85. I have considered his evidence with care.  He said that he did not remember being given any instructions as to the payment of dividends or interests, either from the plaintiff or anyone else.  In other words, no recollection of the second condition at all.  He also said that it was the practice of Arthur Young & Co. at the time to make a record in Hillhead’s files of any particular specific wishes and understandings, pertaining to any of the trusts set up where Hillhead was a trustee and party.  Also that they would have been recorded in the minutes book behind the minutes.

86. He said under cross-examination that he was contacted in December 2003 and January 2004 by Simmons & Simmons who were acting for Hillhead and he said he recollected two or three phone calls from Henry Ong. 

“	Q.	I think you were contacted in both December 2003 and January 2004 by Simmons & Simmons, that is the solicitors for Hillhead.  Did you mention these oral conditions at that time to Simmons & Simmons?
	A.	Now, my recollection of the - - I think there are two or three phone calls from a Mr Henry Ong.  My recollection of those discussions was that I would need time to allow me to recollect as best as I could the circumstances surrounding the two trusts.  And I think before I could go back to Henry, the question of my drawing up an affidavit came about and, therefore, the affidavit needed my attention.  It took time to produce that accurately.  And, ultimately, that affidavit was copied to Simmons & Simmons, as I recollect it.
	Q.	When did the clouds part and your recollection become as clear as it is today?
	A.	Well, when you say ‘as clear as it is today’, it would suggest that you’re saying it’s crystal clear.  It is not.  It is to the best of my recollection.  Each - - everything that I am saying is subject to that comment.  It can only be something of that 20 years’ duration.”

And later, in his evidence, he said :

“

I was not bound to reveal them (Simmons & Simmons) to anybody until I had completed my recollections, which were formulated into the affidavit that I’d signed.  I think as much as we’re dealing with something that is in excess of 20 years ago, one needs to do some ferreting around before just giving an off-the-cuff reaction to a question asked over the telephone out of blue.”

87. I am satisfied that he tried his best to recollect the events of 26 years ago.  He too had been separately represented.  He also had the plaintiff’s indemnity.  His lawyer’s fees were paid for by the plaintiff.  He was also paid professional remuneration for the time he had taken in preparing his witness statements, giving evidence and debriefing after his testimony.  On top of his lawyer’s fees, he was paid $274,000.  This gives some idea of the time he required for recollection before he could give evidence.

88. It is understandable that after so many years Alan Hann needed time to complete his recollection.  The result, of course, can be perfectly reliable evidence. 

89. He also said that he had personal knowledge or experience of some 40 or 50 trusts which were set up by Hillhead.  There might have been other trusts set up by other partners and that in almost all of them, the control would revert to the settlor and that he did not remember any case where Hillhead was actually trustee in a proper sense, for example, with duties or powers.

90. He also explained in chief, why he was able to recall. 

“	Q.	May I ask why it is that you are able to recall him imposing these specific pre-conditions on you?
	A.	Well, it is, as I mentioned right at the beginning, to the best of my recollection.  But the facts surrounding the setting up of the trust, the documentation that I see in front of me, and various other supporting information, and the knowledge that a number of trusts were set up in exactly this manner throughout the office in Hong Kong, during the period that I was there, lead me to believe that my recollections are, to the best of my knowledge, true and fair.”

91. Alan Hann’s evidence was that in the trusts which had set up by him, the documentation would normally include a blank signed instrument of transfer and this is what he said at page 7 of the transcript :

“	Q.	And you have already indicated that the majority of the trusts that Hillhead was trustee for contained some power of revocation.  Was that orally imposed, or would that be in written trust document?
	A.	Typically, it was not in the written trust document.  It was understood by virtue of the fact that the documentation would normally include a blank signed Instrument of Transfer over the shares which were the subject of the trust, which, of course, gives the holder of that document a revocability power.”

92. Alan Hann did not say he had any particular reason to recall the Hillhead Trusts.  According to him, the assets were small.  I believe he probably inferred from the fact that it was the normal practice of Hillhead, indeed of Arthur Young & Co., to provide the settlor with blank instruments of transfer, thereby giving the settlor the ability to transfer the shares to anyone he pleased, that the plaintiff intended to retain a power of revocation. 

93. I am not satisfied that Alan Hann’s recollection is reliable enough for me to conclude that the plaintiff had made known his intention to him that the Hillhead Trusts were intended to be revocable.

94. I have noted Mr McCoy’s point that the conditions need not succeed or fail together.  That is correct.  But I am not satisfied that I can rely on Alan Hann’s evidence about the first condition.

THE 1^ST DEFENDANT

95. She is in bad health.  I permitted her to give evidence by video link from her home.  During her evidence, it was obvious that she was not following the proceedings very well.  Although she had given a statutory declaration in December 2002 when her health and presumably memory was better, I do not think I can rely on her evidence.  There was little cross-examination of her, which was understandable, having regard to her health and obvious difficulty in following the questions. 

BLANK INSTRUMENTS OF TRANSFER

96. In 1998 the plaintiff by his assistant, Mrs Patricia Will (“Mrs Will”), requested Ronald Ho or Hillhead to provide them with blank instrument of transfer in relation to the shares in HICL.  Hillhead was prepared to provide blank instrument of transfer provided that the daughters were willing to give them an indemnity.  Indemnities were duly given by the daughters at the request of the plaintiff.  The indemnities as drafted were given on the basis that there had been earlier blank instrument of transfer which had been lost or mislaid and that the daughters agreed to indemnify Hillhead against any improper use of the earlier instrument of transfer. 

97. The evidence is not very clear how or when the plaintiff became aware or thought that there were earlier blank instruments of transfer or how and when, if there were such blank instruments of transfer, they had become lost.  There has been a faint suggestion, both by the plaintiff as well as Mrs Will, that they might have been purloined, to use the word of the plaintiff, by one of the sons. 

98. Mr McCoy accepted that there was no evidence that any of the sons had done so.  There were other serious allegations by the father and some of the children in their witness statements.  Happily, these allegations were not given in evidence before me and I can ignore them.

99. It is clear from the evidence that the plaintiff’s control of important documents was inadequate.  Thus, Hillhead’s trust deed of 29 November 1979 was in the custody of Johnson Stokes & Masters (“JSM”) although neither JSM nor the plaintiff could remember when, how or by whom, that document was given into JSM’s custody. 

100. It was Alan Hann’s evidence that, it was the normal practice of Arthur Young & Co. as well as his own normal practice, when Hillhead was used as a nominee shareholder, for blank instruments of transfer to be provided to the settlor.  In its simplest form, a client would cause shares to be transferred to Hillhead to hold on trust for the transferor.  Ronald Ho said this was very often done by multinationals.  The nominee would hold on a resulting trust anyway.  But the nominee would make a declaration of trust.  For companies, such as Hillhead, they would also execute blank instruments of transfer, bought and sold notes, so that the shares could be transferred to whomever the transferor pleased without further reference to Hillhead.

101. In answer to a question by me, Ronald Ho said that he told the plaintiff that “the trust will be set up and he will be in possession of all the controlling documents so that he can execute the transfer, whatever, however, and to whoever he wants to”.

102. Be that as it may, Mr McCoy accepted that even if the plaintiff wanted ultimate control, that was not necessarily the same as reserving to himself the power of revocation.  Control would be consistent with a power of revocation but does not necessarily give such a power.  Indeed, one could have the power of revocation without control.  A settlor could reserve to himself an express power of revocation whilst at the same time leaving control in the hands of the trustees. 

103. Here there was no express power of revocation, so unless the plaintiff actually intended to reserve to himself a power of revocation and that is proved and accepted by the court, no power to revoke can arise. 

104. Here, the Trusts were kept secret from the children for many years.  The daughters learned about the Hillhead Trusts in 1998 because of Hillhead’s requirement for indemnity.  According to Anthony (who gave evidence), Sean learned of the Ho Trusts from Gabrielle.  The secrecy is consistent with a power of revocation.  But it is not necessary or enough to establish a power of revocation.  However, it is part of the circumstances which I must take into consideration.

105. But were blank instruments of transfer provided to the plaintiff?  That was the evidence of both Alan Hann and Ronald Ho.  Their evidence seemed to be based on their understanding of the normal practice, rather than on any personal recollection.  According to Alan Hann, there should have been some written record of the fact that blank instruments of transfer had been provided but no such written record has been found. 

106. There are two documents from Hillhead which may have some bearing on this.  First, a letter dated 28 February 1980, signed by Alan Hann and addressed to the plaintiff :

“	As requested, I enclose herewith the following documents in respect of Hotung Investment (China) Limited for your safe custody:-
	1.	Declaration of Trust executed by Madam Ho Yuen Ki together with Share Certificate No . –1– for 3 shares held in trust for Michael Eric Hotung, Sean Eric Mclean Hotung and Anthony Eric Ryan Hotung.
	2.	Declaration of Trust executed by Hillhead Limited together with Share Certificate No. –2– for 3 shares held in trust for Mara Tegwen Hotung, Gabrielle Marie Hotung and Sheridan Patricia Hotung.
	Kindly acknowledge receipt by signing and returning the attached copy of this letter to us.”

107. The other letter is a letter dated 5 September 1983 from Tenby Company Limited (“Tenby”).  It covered the shares in HEL.  Otherwise, it was similar in terms to the letter of 28 February 1980.  So far as the letter of 5 September 1983 was concerned, it might have been written in response to a letter which is undated but signed by Mr Ricky Chan, an employee of the plaintiff’s companies, which asked for the share certificates and declarations of trust in relation to HEL.

108. The evidence of Alan Hann is that he would expect the blank instruments of transfer together with the board and sold notes to have been supplied together with the letter of 28 February 1980.  He could not explain why there was no reference to the blank instrument of transfer in the letter of 28 February 1980 which was signed by him.  He also said that there should have been a written record somewhere but no such record has been found.  The letter dated 28 February 1980 was very close to the date of the declaration of trusts which was 6 February 1980.  The fact that there was no reference to blank instruments of transfer suggests that they had not been supplied together with the letter of 28 February 1980.  There is no evidence as to when, if ever, blank instruments of transfer were supplied.    

109. So far as the shares in HEL were concerned, the only letter showing that the declaration of trusts and relevant share certificates were supplied is the letter dated 5 September 1983 by Tenby.  Again, there was no reference to any blank instrument of transfer.  Tenby was a service company for Hillhead and that is why the letter dated 5 September 1983 was written in the name of Tenby. 

110. I also note that in both letters Hillhead and Tenby were sending to the plaintiff not just the Hillhead’s declaration of trust and the associated share certificates, but they were also sending to the plaintiff the Ho declarations of trusts together with the relevant share certificates.  There is no evidence when and how the Ho declarations of trust and the share certificates were supplied to Hillhead.

111. Mr Yin, counsel for the 1^st defendant, in his argument suggested in relation to the letter of 5 September 1983 that there might have been an earlier occasion when the relevant documents were sent to the plaintiff but that they were subsequently returned, and that the letter of 5 September 1983 showed their return to the plaintiff.  But this is pure speculation.  That is no evidence to that effect. 

112. There is also a letter dated 22 February 1990 from Ernst & Young to Cosmopolitan (attention Mrs Patricia Will).  It reads as follows :

“	RE:	HOTUNG INVESTMENT (CHINA) LTD.
	HOTUNG ENTERPRISES LTD.

Further to our telephone conversation this morning, I enclose some correspondence in relation to the above two companies for your kind attention.  As you can see, both the Declarations of Trusts and the Share Certificates were forwarded to the companies for their safe keeping.  I trust that this would be of assistance to you in locating the original documentations.”

113. Again in this letter, there was no reference to any blank instrument of transfer.  It seems that Mrs Will was not then trying to locate any blank instruments of transfer.  It is not entirely clear what were the enclosed correspondence.  I believe they were probably the letters dated 28 February 1980 and 5 September 1983 referred to (paragraphs 106 and 107) above. 

114. The two deeds of revocation referred to in paragraph 25 above mentioned that the settlor had possession of the trust deeds together with the share certificates.  There was no mention of any blank instrument of transfer.  Nor that they had been supplied to affirm “the continuing control of the settlor over the trusts …”.

115. Even so, in 1998, Ronald Ho seemed to have proceeded on the basis that blank instruments of transfer had been supplied earlier.  So did Mrs Will.  I have to say that both Alan Hann and Ronald Ho in their witness statements seemed to have assumed that to be the case.  Of course, the daughters had given letters of indemnities in respect of “lost” instruments of transfer.

116. I also refer to a letter dated 10 July 1998 from Mrs Will to Gabrielle in connection with the letter of indemnity that was required of the daughters.  In this letter, Mrs Will wrote :

“I have been informed by Mr. Ronald Ho of Ernst & Young that originally several years ago, he signed a blank Transfer Form regarding the shares held by Hillhead Ltd. in Hotung Enterprises Ltd.  This Transfer Form cannot now be found and must be considered lost.”

117. It was not the evidence of Ronald Ho and Alan Hann that blank instrument of transfer were only supplied “several years ago”.  Nor that they were signed by Ronald Ho.  I am not assisted by this letter.

118. I turn to consider whether it has been proved that blank instruments of transfer had been supplied at or about the time of the relevant declaration of trust. 

119. I should say that in the course of the evidence of Alan Hann and Ronald Ho, they emphasised the absolute control which the plaintiff had by reference principally to the fact that he had in his possession blank instruments of transfer which he could have filled in any time he pleased.  Also that if the beneficiaries had not been told about the existence of the Hillhead trusts, nobody would ever get to know of the trusts anyway and to that extent, the plaintiff could do what he wanted.   

120. However there was not how the case was opened on behalf of the plaintiff.  There was not how the case was pleaded.  The Statement of Claim was first issued on 24 March 2003, it was amended on 26 July 2003.  Again, on 6 February 2004 and then lastly, on 26 November 2004.  In the evidence-in-chief of the plaintiff, he made no reference to the fact that he had been given any blank instrument of transfer at or about the time of the establishment of the Ho or Hillhead Trusts.  However, the recital in the deeds of revocation gives some support to this argument. 

121. So far as the Ho Trusts were concerned, there was no evidence that any blank transfer was given.  In the core bundle, at p. 380, there was a blank transfer in relation to three shares in HICL signed by the 1^st defendant.  However, there was no evidence that this was provided at or about the time of the Ho Trusts.  Indeed, from the address given of the witness, it appears more likely that this was given in late 1990s.  It may be that as the plaintiff said in his evidence he was confident that the 1^st defendant would do his bidding.  However, in the case of sudden death or incapacity of the 1^st defendant, he was not in a position to procure a transfer of the shares.

122. I turn again to consider whether the fact that, Ronald Ho and Alan Hann, both by word and conduct seemed to have proceeded on the basis that blank instruments of transfer had been supplied to the plaintiff, is sufficient evidence for me to infer that that had been done.  I do not believe in the circumstances of this case, I should proceed on that basis.  I am not satisfied that it has been proved on a balance of probabilities that blank instruments of transfer had been supplied. 

123. I take into account that according to Alan Hann, the normal practice was for all the documents (trust deeds, instruments of transfer, bought and sold notes, etc) to be given to the settlor.  However as would have been seen from the Tenby letter, so far as the HEL declaration of trusts and share certificates were concerned, they had been kept by Tenby until September 1983.  Even in the case of the HICL, in Hillhead’s letter of 28 February 1980 the declaration of trusts and share certificates were enclosed “as requested”.  In other words, they were not being returned as a matter of course.  It seems to me, it may be that in this particular case, the normal practice had not been followed.

124. But, even if blank instruments of transfer had been given to the plaintiff, it did not follow that he had reserved to himself a power of revocation.  Nor that he intended thereby to reserve a power of revocation.  It might simply indicate that he wanted absolute control vis-à-vis Hillhead to the extent that should he wish to do so, he could change the trustees without the cooperation or agreement of Hillhead.  Or so that he could run the companies without any interference from the trustees.  This is consistent with paragraph 7 of Henry Ong’s third affirmation quoted in paragraph 74 above.  Ronald Ho confirmed that he might have said that to Henry Ong.  The plaintiff could simply transfer the shares to new trustees should he wish to do so.  That would protect him against any interference by the trustees.  One’s control over trustees often depended on one’s ability to change them.

125. Mr McCoy made the point that all the witnesses spoke to the plaintiff’s insistence on absolute control.  I am prepared to accept that he wanted absolute control vis-à-vis Hillhead and the 1^st defendant, and that in the case of Hillhead the possession of blank transfers would ensure control.  Also that the 1^st defendant would simply do his bidding.  I believe the plaintiff was used to getting his way.  I also accept that the trustees were not permitted to interfere in the affairs of the companies.  This is similar to the third condition though not quite the same.  Mr McCoy said that it was not in the plaintiff’s DNA to have made unconditional gifts of the shares to his children.  That I believe is an overstatement.  It seems to be common ground that in 1985, he established the MR Trust and put a property bought for $1.9 million in 1985, on trust for Anthony, Mara, Gabrielle and Sheridan equally.  Although the existence of the MR Trust was kept secret until 1991, there was no suggestion that it was revocable.  I note also that the plaintiff’s eldest son, Michael, was a co-trustee in the MR Trust.

126. I should also mention that at the time of the Trusts, the underlying assets were, according to the plaintiff, worth 10 to 12% of his fortune.  Although those assets have since increased substantially in value, they constituted a smaller percentage of the plaintiff’s wealth today.  It is probable that the plaintiff did not believe it was necessary for him to make the Trusts revocable.  He might well have thought that the expectation of a share in his larger estate would be a powerful incentive to the children not to displease him. 

127. Mr McCoy also referred to Deepak Fertilizers and Petrochemical Ltd v. Davy McKee (UK) London Ltd [2002] EWCA 1396, a decision of the English Court of Appeal.  Mr McCoy submitted that Mr Egan not having challenged the integrity of any of the witnesses he was not entitled to do so in his closing submission.  That is right.  Any suggestion by Mr Egan, no matter how faint, in this regard, will be disregarded by me.  Mr McCoy also submitted that as Mr Egan had not put the reliability of the witnesses’ recollection in issue in his cross-examination, he was not entitled to submit that I should find the witnesses’ recollection to be unreliable.  Reliability of recollection was clearly in issue.   Anyway, as Latham LJ said at paragraph 51 of the judgment “at the end of the day each case will defend upon the way in which the issue arose, and was dealt with in evidence”. 

CONDITIONS NOT PROVED

128. Although the plaintiff said the first condition was more important than the second, I think, it is clear from his evidence, that the idea of a rapid deployment fund, was the reason for the Trusts.  I believe Alan Hann and Ronald Ho were not told about the second condition at all.  Nor Peter Mark.   I do not believe if they had been told they would have forgotten the second condition.  That throws serious doubt on the reliability of the plaintiff’s recollection.  Nor am I satisfied that I should proceed on the basis that the plaintiff’s recollection of the second condition (but not the first) was faulty since the idea of a rapid deployment fund was an important reason for the establishment of the Trusts.  If the plaintiff misremembered the reason for the Trusts, how much weight can I rely on his recollection of the first condition.  I believe the only “condition” at the time was that the trustees were not to interfere in the management of the companies.  This is consistent with paragraph 7 of Henry Ong’s third affirmation.  This is consistent with the conduct of the plaintiff and Hillhead.  I believe this condition led Ronald Ho and Alan Hann to infer that the plaintiff had intended to retain a power of revocation.  I have explained why I think that if the plaintiff had the conditions in mind, he would not have failed to tell Peter Mark and indeed the trustees.  I am of the view that Ronald Ho and Alan Hann’s evidence on revocation were inferences drawn by them from what they believed to be the standard practice of Hillhead and not from any communication from the plaintiff.

129. So for the reasons stated in this and earlier parts of the judgment, I am not satisfied that the plaintiff has proved the first condition.  I do not regard his recollection to be sufficiently reliable.  I will not act on his evidence.  The second condition is academic because there was never any income.  But I am not satisfied that there ever was this condition.  As for the third condition, I am prepared to accept that probably it had been made known to Alan Hann and Ronald Ho that they were not to interfere with the management of the companies.  I am also satisfied that the plaintiff insisted on secrecy.  As for the 1^st defendant, I do not think it ever entered into the plaintiff’s mind that she would interfere.  But I do not believe he ever communicated any intention to retain a power of revocation to anyone.

130. The plaintiff’s case was not based on any uncommunicated intention.  It is not necessary for me to deal with that possibility.  For the avoidance of doubt, I should say that I do not accept that possibility.  It made no sense for him not to communicate any such intention.

131. This is not a case which turned on the honesty of any of the witnesses called on behalf of the plaintiff (which, of course, included the plaintiff himself).  I accept that they have tried their best and told me what they believed to be true.  However, I am not satisfied that I can rely on their recollection.  As for Anthony (the only defence witness), he was unable to give any evidence regarding the conditions.

LARCO

132. I turn to consider the LARCO point.  In my opinion, this turned on one issue and one issue alone, namely, whether at the time when the transfers and allotments were made, there was a resulting trust in favour of the plaintiff.  In this connection, with the exception of the one share in HEL held by the 1^st defendant in favour of the plaintiff prior to 17 September 1979, I am of the opinion that when the transfers or allotments were made, there was no resulting trust in favour of the plaintiff.

133. The leading authority on the subject is Vandervell v. Inland Revenue Commissioners [1967] 2AC 291, the headnote reads as follows :

“Held, (1) that section 53 (1)(c) of the Law of Property Act, 1925, was inapplicable since it was directed to cases where dealings with the equitable estate were divorced from the legal estate.  The object of the provision was to prevent hidden oral transactions in equitable interests in fraud of those truly entitled, and, therefore, cases where the beneficial owner of the whole beneficial estate desired and was in a position to give directions to his bare trustee to deal with the legal estate as well as the equitable estate were not within its ambit (post, pp. 311B-312B, 317E-318A).”

Lord Reid said at page 307 :

“The law with regard to resulting trusts is not in doubt.  It is stated conveniently in Underhill on Trusts, 11^th ed. (1959), p. 172, and in Lewin on Trusts, 16^th ed. (1964), p. 115.  Underhill says:

‘(1)  When it appears to have been the intention of the donor that the donee should not take beneficially, there will be a resulting trust in favour of the donor…’  Lewin says that the general rule is that whenever ‘it appears to have been the intention of a donor that the guarantee, devisee or legatee was not to take beneficially’ there will be a resulting trust.  The basis of the rule is, I think, that the beneficial interest must belong to or be held for somebody: so if it was not to belong to the donee or be held by him in trust for somebody it must remain with the donor.” (Emphasis added)

134. I have no doubt that at the time of the transfer of the legal title to the trustees, it was intended that the beneficial interests be held by the trustees in trusts for the children.  Hence, there was no resulting trust in favour of the plaintiff.  This is what Lord Upjohn said at page 312 :

“  So I will be as brief as I can upon the principles.  Where A transfers, or directs a trustee for him to transfer, the legal estate in property to B otherwise than for valuable consideration it is a question of the intention of A in making the transfer whether B was to take beneficially or on trust and, if the latter, on what trusts.  If, as a matter of construction of the document transferring the legal estate, it is possible to discern A’s intentions, that is an end of the matter and no extraneous evidence is admissible to correct and qualify his intentions so ascertained.

But if, as in this case (a common form share transfer), the document is silent, then there is said to raise a resulting trust in favour of A.  But this is only a presumption and is easily rebutted.  All the relevant facts and circumstances can be considered in order to ascertain A’s intentions with a view to rebutting this presumption.

As Lindley L.J. said in Staning v. Bowring :

‘Trusts are neither created nor implied by law to defeat the intentions of donors or settlers; they are created or implied or are held to result in favour of donors or settlers in order to carry out and give effect to their true intentions, expressed or implied.’

The law was well stated by Mellish L.J. in Fowkes v. Pascoe :

‘Now, the Master of the Rolls appears to have thought that because the presumption that it was a trust and not a gift must prevail if there was no evidence to rebut the presumption, therefore when there was evidence to rebut the presumption he ought not to consider the probability for improbability of the circumstances of the case, and whether the presumption was really true or not, but ought to decide the case on the ground that the evidence of Pascoe and his wife taken alone was not satisfactory.  But, in my opinion, when there is once evidence to rebut the presumption, the court is put in the same position as a jury would be, and then we cannot give such influence to the presumption in point of law as to disregard the circumstances of the investment, and to say that neither the circumstances nor the evidence are sufficient to rebut the presumption.’

James L.J. in the same case also pointed out in effect that it was really a jury matter, on the basis, I may add, of weighing the evidence on the balance of probabilities.

A very good example of this is to be found in the case of In re Curteis’ Trusts where Bacon V.-C., without any direct evidence as to the intention of the settlor, drew a common-sense deduction as to what he must have intended.  In reality the so-called presumption of a resulting trust is no more than a long stop to provide the answer when the relevant facts and circumstances fail to yield a solution.”

135. I think the plaintiff had not intended a resulting trust.  I do not believe he intended that if he should die following the transfer or allotment to the trustees but before the declaration of trusts were executed, the shares should go to his estate rather than to his children. 

136. Indeed, if the trustees had made their declaration of trust on the same day as the transfers or allotments to them there was really no reason for the implication of a resulting trust in the plaintiff’s favour.

137. I do not know why there was delay between the transfer or allotment and the declaration of trust.  It was suggested by Mr Yin that the plaintiff wanted time to consider the conditions or to change his mind.  I think that is highly speculative and inconsistent with his evidence.  I believe it was more likely that there was a time gap because the declarations were considered to be formalities and not urgent.

138. I also note that in the Hillhead declaration of trust in relation to the 10,002 shares in HEL, this recital appears :

“…

(2)  Such transfers as aforesaid specified in the Schedule hereto were made to the Trustee as a nominee of the Beneficiaries of 3334 (Three thousand three hundred and thirty four) shares each and it was agreed prior to the date of such transfers that the Trustee should execute such declaration of trust as hereinafter contained.”

This recital does not appear in any of the other trust deeds. 

139. However, I believe that it is reasonable to infer that the same was true in relation to each of the transfer or allotment.  So going back to Lord Upjohn’s dictum above, “where A transfers, or directs a trustee for him to transfer, the legal estate in property to B otherwise than for valuable consideration it is a question of the intention of A in making the transfer whether B was to take beneficially or on trust and, if the latter, on what trusts”.  So, on what trusts, the 1^st defendant and Hillhead, were to hold?  In my opinion, trusts in favour of the children and not a resulting trust for the plaintiff. 

140. I also refer to the recital in the deed of revocation :

“(A) By oral declaration made in or about 1979, the Settlor constituted Ho Yuen Ki (‘the Trustee’) trustee of certain property and directed the Trustee to hold the same upon certain trusts then specified for the benefit of three of his sons namely Michael Eric Hotung, Sea Eric Mclean Hotung and Anthony Eric Ryan Hotung but orally reserved to himself the power to revoke the trusts in whole or in part should he so think fit.”

There is a similar one in respect of Hillhead Trusts.  They support the view that the settlor never intended to reserve to himself the beneficial interest by means of a resulting trust prior to the written declaration of trusts. 

141. Mr Yin made a point regarding the difference in the dates between the board resolution approving the transfers or allotments, the dates of the share certificates and the dates of the trusts.  He said the recital quoted in paragraph 138 above is ambiguous.  I do not think so.  Nor does it matter.

142. I think it is clear that it was intended by the plaintiff that at the date of the transfer, whenever the transfer was effectuated, he was transferring the legal title to the trustees to hold on trusts for his children.  In other words, there was no room for any resulting trust in his favour.  Put another way, if there was a presumption of resulting trust that had been rebutted by all the circumstances. 

143. I turn to consider that one share in HEL which was held by the 1^st defendant in favour of the plaintiff.  See paragraph 11 above.  I have no doubt that the 1^st defendant held that share on a resulting trust for the plaintiff.  That being the case, that share is caught by section 6(1)(c).  See Grey v. Inland Revenue Commissioners [1960] AC 1.

144. Mr Steven Kwan, junior counsel for the plaintiff, submitted that having regard to the pleadings, the 2^nd, 3^rd and 5^th defendants were not entitled to argue that there was no resulting trust in favour of the plaintiff (apart from on the basis that there were valuable considerations for the shares) or that the trusts were not only constituted by the declarations of trusts.

145. I am not satisfied that any valuable consideration had been given in respect of any of the shares. 

146. I regret to say the defence has not been well pleaded.  But the plaintiff has not been taken by surprise.  Moreover, the plaintiff claims declaratory relief, and it is for the plaintiff to satisfy me that the shares were or are held by the 1^st and 4^th defendants on trust for the plaintiff (prayer (g)).  That is why notwithstanding Gabrielle’s withdrawal of her defence, no judgment has been entered against her for any declaratory relief. 

CONCLUSION

147. For the above reasons, the plaintiff’s claim is dismissed save that in relation to one share in HEL held in the name of the 1^st defendant, I would make a declaration that she holds that share on trust for the plaintiff absolutely.

COSTS

148. The parties are invited to make written submissions to me on costs within 21 days of this judgment.  If a hearing is required, the parties should fix a date for the hearing as soon as is practicable.

Mr Gerard McCoy, SC leading Mr Steven Kwan, instructed by Messrs Sit, Fung, Kwong & Shum, for the Plaintiff

Mr Michael Yin, instructed by Messrs C.K. Mok & Co., for the 1^st Defendant

Mr Kevin Egan and Ms Kathy Kukreja, instructed by Messrs Oldham, Li & Nie, for the 2^nd, 3^rd and 5^th Defendants

Mr Anderson Chow, SC (appear on 11, 19 and 21 January 2005), instructed by Messrs Simmons & Simmons, for the 4^th Defendant

The 6^th Defendant, absent