HK88 ENTERPRISES LTD v. SU YUAN YU

HCA 926/2018 [2024] HKCFI 1678 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 926 OF 2018 BETWEEN HK88 ENTERPRISES LIMITED (香港88企業有限公司) Plaintiff and SU YUAN-YU (蘇原裕) Defendant (by Original Action) AND BETWEEN SU YUAN-YU (蘇原裕) Plaintiff and HK88 ENTERPRISES LIMITED (香港88企業有限公司) 1st Defendant KUO JUI JEN (郭瑞仁) 2nd Defendant SU LING HUEI (蘇玲慧) 3rd Defendant (by Counterclaim) Before: Deputy High Court Judge Phoebe Man in Court Date of Hearing: 11 – 12 April, 15 – 18 April and 31 May 2024 Date of Joint Written Submissions: 6 and 8 August 2024 Date of Judgment: 29 August 2024 JUDGMENT Factual Background HK88 Enterprises Limited (“HK88”), the plaintiff by original action, was incorporated in 1988 and was founded by Kuo Jui Jen (the 2nd defendant by counterclaim) (“Kuo”). Kuo is at all material times married to Su Ling Huei (“Madam Su”), who is the 3rd defendant by counterclaim. Su Yuan-Yu (“Su”), the defendant by original action (and the plaintiff by counterclaim), is the brother of Madam Su and the brother-in-law of Kuo. At all material times Kuo and Madam Su were and still are the only shareholders of HK88 each holding 1 ordinary share and are the only directors of HK88. The following workshops were purchased using funds from HK88: Date of purchase Address Registered owners 29 April 1997 Workshop No. 13 on 17/F, Wah Wai Centre, Nos. 38 – 40 Au Pui Wan Street, Shatin, New Territories, Hong Kong (“Workshop 1713”) Kuo and Madam Su as joint tenants 24 June 1997 Workshop No. 13 on 16/F, Wah Wai Centre, Nos. 38 – 40 Au Pui Wan Street, Shatin, New Territories, Hong Kong (“Workshop 1613”) Kuo and Madam Su as joint tenants 4 August 1998 Workshop No. 14 on 16/F, Wah Wai Centre, Nos. 38 – 40 Au Pui Wan Street, Shatin, New Territories, Hong Kong (“Workshop 1614”) Su and Madam Su as tenants-in-common in a 60:40 ratio The present dispute concerns the beneficial ownership of Workshop 1614. There is no dispute that the consideration for Workshop 1614 of HK$2,642,250 was paid with funds from HK88’s bank account in the following manner: HK$50,000 as deposit in May 1998. HK$214,225 as 2nd deposit in May 1998. HK$15,212.50 recorded as “Expense to purchase [Workshop 1614]” in August 1998. HK$2,362,882.50 recorded as “Amount for purchasing [Workshop 1614]” in August 1998. The dispute arose when HK88 demanded, but Su refused, to assign the 60% interest in Workshop 1614 back to HK88. HK88’s case is that all individuals: Kuo, Madam Su and Su all hold the respective workshops as trustees for and on behalf of HK88. HK88 claims that despite Su being the 60% legal owner of Workshop 1614, the beneficial owner of Workshop 1614 is in fact HK88 due to a resulting trust in its favour. The basis for the resulting trust is that the purchase price, costs, expenses incidental to the purchase, renovation costs, maintenance expenses and the regular outgoings of Workshop 1614 were all solely paid by HK88 with no monetary contribution by Su. HK88 claims a declaration that Su holds his 60% legal interest in Workshop 1614 as a trustee in favour of HK88. HK88 originally also claimed that Su had harassed the tenant of Workshop 1614, leading to loss suffered by way of the early termination of the tenancy agreement. This was subsequently abandoned at closing submissions by Ms Ema Leung, counsel for HK88 and Kuo. Su denies HK88’s claims. Su’s contention is that pursuant to the 1993 Agreement, the 1997 Agreement and the 1998 Agreement (as defined below), there was a common intention that Su was the 60% beneficial owner of Workshop 1614. At closing submissions, Ms Lydia Leung, counsel for Su, clarified that the counterclaims sought by Su were: A declaration that Su was the 60% beneficial owner of Workshop 1614; mesne profits for the occupation by HK88 of Workshop 1614; and an order for Workshop 1614 to be sold under the Partition Ordinance (Cap 352). Su’s case depends on whether factually he could prove that there were the 1993 Agreement, 1997 Agreement and the 1998 Agreement as alleged. Applicable Legal Principles Parties agreed on the applicable principles on resulting trust. In Westdeutsche Landesbank Girozentrale v Islington LBC, the two types of resulting trust in law were explained: “Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counterpresumption of advancement or by direct evidence of A’s intention to make an outright transfer … (B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest … Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention ...” Parties also agreed that the recent approach of courts is that the presumption of resulting trust is only a last resort. Lord Briggs explained in the Privy Council case of Gany Holdings (PTC) SA v Khan that: “It is convenient to begin with a restatement of the basic principles by which equity … provides for identification of beneficial interests arising from a gratuitous transfer of property. First, if either the transferor or the transferee makes a written (or oral) declaration as to those beneficial interests, or they do so together in an agreed form, that will generally be decisive, regardless of the subjective intentions of either of them … Secondly, and in default of any such declaration, the court looks for evidence from which a common intention as to beneficial ownership may be inferred. This may include evidence of statements made by either party before, at the time of or even after the relevant transfer, the parties’ conduct, and the factual context in which the transfer takes place. Sometimes, a choice between possible conclusions as to beneficial interest may properly be arrived at by a process of elimination, whereby the most unlikely conclusions are first removed, leaving the least unlikely as the correct one. Finally, recourse may be had to timehonoured presumptions, such as the presumption of advancement or the presumed resulting trust, where there really is no evidence from which an inference as to common intention may properly be drawn. But these are, in modern times, a last resort, now that historic restrictions on the admissibility of evidence have been removed, and the forensic tools for the ascertainment and weighing of evidence are more readily available to the court.” Stock NPJ in Leung Wing Yi Aster v Kwok Yu Wah held: “53. … The presumptions of resulting trust and advancement arise as a matter of default; in other words, where there is otherwise insufficient evidence of subjective intention. That is the point made in the passage cited by the Judge from Lavelle v Lavelle that: ‘Normally there will be evidence of the intention with which the transfer is made. Where there is not, the law applies presumptions.’ … ‘Even where this [an express declaration of trust] is absent, the court aims to arrive at the parties’ real intentions by considering direct evidence of the entire transaction. This requires an objective inference drawn from the parties’ words and conduct. As a result, the presumptions of resulting trust or of advancement are only relied upon as default rules where there is no sufficient evidence to displace them.’” In Mok Hing Chung v Wong Kwong Yiu , Kwan VP endorsed the trial judge’s approach in treating any presumption of resulting trust simply as an evidential tool, which is not necessary if there is actual evidence of intention. It is thus ultimately a question of intention of the person who provided the purchase price at the time the property was acquired. In the assessment, the court should have regard to inherent probabilities in light of the surrounding circumstances at the time the property was acquired: Woo Tat Huen v Lee Wai Ping (the executor of the Estate of Tsang Kam Ho, deceased) . In relation to burden of proof, Kwan VP in Mok Hing Ching observed that: “The starting point where there is joint legal ownership is joint beneficial ownership. It is assumed that equity follows the law and that the beneficial interests reflect the legal interests in this property. The onus is on the person seeking to show that the beneficial ownership is different from the legal ownership and in what way, and this is not a task to be lightly embarked upon …” As Su holds the legal title to 60% of Workshop 1614, the onus lies on HK88 to establish that beneficial interest in Workshop 1614 lies with HK88 instead of with the legal owners. Ms Lydia Leung fairly accepted that as the funds for the purchase of Workshop 1614 came from HK88’s bank account, if the court does not accept Su’s case on the 1993 Agreement, the 1997 Agreement and the 1998 Agreement, the presumption of resulting trust would be engaged. Su thus bears the burden of proving the existence of the 1993 Agreement, the 1997 Agreement and the 1998 Agreement. The 1993 Agreement, the 1997 Agreement and the 1998 Agreement Su’s case on the 1993 Agreement, the 1997 Agreement and the 1998 Agreement runs as follows: In about May 1993, Kuo and Madam Su invited Su to join HK88 and work in the Mainland and in Hong Kong. Su originally had his doubts, as his family was in Taiwan. However, after repeated invitations from Kuo and Madam Su, Su accepted the proposal and joined HK88. He had all along worked for HK88, notwithstanding that he was “registered” as an employee of two of Kuo’s companies: 凱浩實業有限公司 (“凱浩”) and later 全方位系統控制開發有限公司 (“全方位”). It was agreed that Su would work in the Mainland and in Hong Kong at the monthly salary of TWD 60,000. After 3 years, Su would be entitled to 30% of HK88’s net profits (the “1993 Agreement”). In 1997, Su had already been working for more than 3 years with HK88. Accordingly under the 1993 Agreement, he should be entitled to 30% of the net profits of HK88 for the year 1996 – 1997. At that time HK88 purchased Workshop 1613. Kuo and Madam Su then suggested to Su that since the funds for the purchase of Workshop 1613 came from HK88’s profits, Su should be entitled to 30% of the interest in Workshop 1613, which would be held on trust by Kuo and Madam Su for him. Su agreed with this arrangement (the “1997 Agreement”). As Workshop 1613 was not registered under Su’s name, Madam Su had set out the terms of the 1997 Agreement, including the fact that Su was entitled to 30% of Workshop 1613 in a memorandum (the “Memorandum”). In about 1998 when Workshop 1614 was purchased, Su was similarly entitled to 30% of HK88’s net profit for the year 1997 – 1998. Kuo and Madam Su then suggested to Su that his entitlement to the 30% of HK88’s net profit should be satisfied by way of a 30% interest in Workshop 1614. As the size and layout of Workshop 1613 and Workshop 1614 were largely the same, Kuo and Madam Su proposed that Su should consolidate his respective 30% interest in each of Workshop 1613 and Workshop 1614 into a 60% interest in Workshop 1614 alone. Mr Su agreed to such proposal (the “1998 Agreement”). After having become the 60% owner of Workshop 1614, Su gave the Memorandum back to Madam Su and the 1993 Agreement and the 1997 Agreement were terminated. Su had received rental incomes throughout the years as a 60% beneficial owner of Workshop 1614. HK88, Kuo and Madam Su deny the existence of the 1993, 1997 and 1998 Agreements altogether. Kuo’s and HK88’s case is as follows: Before joining Kuo’s company 凱浩 in around 1993, Su was working as a maths teacher in Taiwan and was not in good financial state. Upon Su’s request, Kuo agreed to employ Su through 凱浩 and arranged him to work in a mainland factory owned by Kuo’s company 漳州永發裝飾品有限公司 (“永發”) so that Su could learn about the Mainland trade and production. In 1996, in order to further help Su and his family financially, Kuo engaged Su to supply ceramic products to HK88 from which Su had earned substantial profits and Su continued to receive his monthly salary of around NT$60,000 per month. When Workshop 1614 was purchased, Kuo was pre-occupied with HK88’s business. Su happened to be present in Hong Kong and unbeknownst to Kuo, Su suggested to Madam Su that he could be the other registered owner of Workshop 1614. As Su was Madam Su’s brother, she had no reason not to trust him and agreed. Madam Su’s case is: She purchased Workshop 1614 for and on behalf of HK88 for its use and investment purposes. On the day of purchase, Kuo was pre-occupied with HK88’s business and left Madam Su to deal with the formalities. At that time, Su was present in Hong Kong and suggested that he could accompany Madam Su to attend the matters concerning the said purchase, lend his name for the registration of Workshop 1614 and be assigned 60% interest in the same. The payments made by Madam Su to Su in 2009 were not Su’s 60% share of the rental incomes but were gratuitous payments made to appease Su following Kuo’s rejection of his request to be made as a shareholder of HK88 without capital contribution. The payments made by Madam Su to Su in 2012 to 2015 were made to pay for Su’s retirement benefits since 全方位 had little income at that time. Credibility of Witnesses As can be seen from the diametrically opposed versions of events from the witnesses, the determination of whether the 1993, 1997 and 1998 Agreements existed would depend on their credibility. In assessing credibility of the witness, I adopt the often cited principles in Hui Cheung Fai and Other v Daiwa Development Limited and Others (unreported, HCA 1734/2009, 8 April 2014) by Deputy High Court Judge Eugene Fung SC at §§76-82:- “76. In making my findings of fact in this case, I am guided by a number of general principles which judges apply as to fact finding and the assessment of credibility. 77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce)… 78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J). 79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement. 80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA))…” [emphasis added] In Star Glory Investment Limited v Kai Tou (H.K.) Technology Company Limited & Ors, Chung J adopted the following test: “There are two objective tests for assessing a witness’ credibility regarding a matter to which he has testified: - a) Whether that part of his testimony is inherently plausible or implausible; b) Whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents). Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’ motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest.” Hsu’s evidence I find Hsu, an employee responsible for most of the administrative work of HK88 to be overall honest and credible. However, as Hsu did not have direct knowledge on the dealings between Kuo, Su and Madam Su, little weight can be attached to her impression of who is the beneficial owner of Workshop 1614. Circumstances under which Workshop 1614 was registered Kuo’s evidence Kuo gave evidence for himself and HK88. He is an experienced businessman who was the main person managing the businesses through all his companies. He was the one who established 凱浩、全方位. His business acumen can be seen from his explanation on how throughout the years he had analysed the market at different times and decided which area of business he focused on and branched out to: at first it was the manufacturing of decorative products. Afterwards, it was the market in software technologies and security systems. Despite the involvement of Madam Su in the administration side of the business, Kuo was clearly the driving force of the businesses and was aware of all matters that went on. His control over all matters can be demonstrated by his evidence that he was able to discover, without looking at any Auditor’s Reports, that Madam Su had been inappropriately handling the financial affairs of HK88 at one point. As someone who had the overall management of his businesses, I find it incredible, and I reject Kuo’s evidence that he did not agree to, or did not know that Workshop 1614 was registered in Su and Madam Su’s name in a 60% - 40% ratio: Workshop 1713 and Workshop 1613, which were purchased prior to Workshop 1614, were both registered under the names of Kuo and Madam Su as joint tenants. This was upon the advice from Judy, an ex-employee of HK88 (whose husband was once responsible for handling accounting matters in HK88). Kuo clearly understood the effect of holding such properties under a joint tenancy: if either of them passed away, the interest would pass to the other joint tenant. Kuo said that he did not consider registering the properties under the name of HK88, as the effect is the same, because HK88 belonged to himself and Madam Su. It can thus be seen that Kuo had understood the effect of putting someone as the registered owner of a property. By registering his name and Madam Su’s name to Workshops 1713 and 1613, Kuo clearly intended that these 2 workshops would belong to himself and Madam Su jointly. Likewise, by having Su’s name put down as the registered owner, it must have been understood and agreed that Su was to be a 60% beneficial owner of Workshop 1614. Kuo’s explanation of the registration of Su as a registered owner was that it was only done pursuant to the “name-borrowing” practice which was prevalent in Taiwan. However, this does not explain why Su was put down as the “borrowed name”, instead of his name, or Madam Su’s name. Kuo was in Hong Kong when Workshop 1614 was purchased. There was no satisfactory reason provided as to why he could not have attended the signing of the formal sale and purchase agreement for Workshop 1614, if he had wished to. Given the gravity and importance of the purchase of a property, I reject Kuo’s explanation that he could not attend as he was simply busy with work. In fact, Kuo was involved in the negotiation of the price for Workshop 1614 as the vendor was the same one as in Workshop 1613. In those circumstances, it is inconceivable that Kuo would not have been the natural person to have been put down as the purchaser, but instead, Su, someone who was not involved in the negotiation of sale, would have been put down as the purchaser of Workshop 1614 without Kuo knowing. Madam Su clearly only played a supporting role in the businesses and Kuo is the ultimate decision maker of major matters. It is inconceivable that Madam Su would make such an important decision to register Su as a 60% unilaterally without the agreement of Kuo. On Kuo’s own case, he had found out in 2008 about Su having been a registered owner of Workshop 1614. However, it was not until 7 years later in 2015 that he had begun asking Su to return Workshop 1614. If he had truly not been aware of Su being a registered owner of Workshop 1614, and if he had truly believed that Su had no basis for having such 60% interest in Workshop 1614, it would have been inconceivable that he would have waited for 7 years before demanding for the return of the 60% legal interest in Workshop 1614. When Kuo was cross-examined as to why he did not confront Su earlier about the fact that Workshop 1416 was registered in his name, Kuo’s answer was that it was not possible as Madam Su was on Su’s side and they had even bigger influence and strength than he did (聲勢比他還大). Kuo admitted that he did not try to ask Su to transfer the legal title back to HK88 as he could not convince Madam Su (我擺不平老婆). Also, when he gave a note to Su demanding the return of Workshop 1614, he had to do it via Su’s daughter who gave it to Su’s wife. This was to avoid going through Madam Su and upsetting her. This suggests that Madam Su at one point in time at least, was on Su’s side and was reluctant to agree with Kuo on the issue of asking Su to return the 60% interest in Workshop 1614; and Kuo was aware of it. I also find Kuo’s denial that the gratuitous payments made by Madam Su represented rental payments to Su based on his 60% ownership of Workshop 1614 to be disingenuous. This can be seen from the hand-written note that he sent to Su in 2015, where it was said: “一切你清楚，我明白，租金領取多年，可也。請將房子返還你姊”. This shows that Kuo was aware of Su having received rental income for years, without even denying his entitlement to such rental incomes. There was no basis for Kuo to allege now, that such payments were mere gratuitous payments instead of Su’s share of rental income of Workshop 1614. If Kuo truly believed that Su was not the beneficial owner of 60% of Workshop 1614, he would not have thought Su to have been entitled to payments equivalent to 60% of the rental incomes. I thus reject Kuo’s evidence that the registration of Su as the 60% owner of Workshop 1614 was without his knowledge or consent. Madam Su’s evidence I find Madam Su to be an evasive and unreliable witness who would testify in accordance with her needs and interests. Whilst giving oral evidence, the majority of her answers were not definitive. She would always preface her answers with “that should be the case” (應該有、應該是、應該會…). Despite the court having indicated and reminded her that if she could not remember something or she was unsure, she should say so, this pattern of evidence continued. I reject Madam Su’s evidence that she did not mean to let Su have a 60% interest in Workshop 1614 when he was put down as a registered owner: Although Madam Su asserted that it was Su who suggested putting himself down as a 60% owner of Workshop 1614, she had provided no reason why she had agreed to such a proposal. Madam Su had admitted during cross-examination that she was well capable of going through the formalities of the sale and purchase of Workshop 1614. Therefore, even if were true that Kuo was busy on the day, there was no reason to add Su as an additional owner and Madam Su could well have registered herself as the sole owner of Workshop 1614. There is no sense in Madam Su’s explanation that she had agreed to Su’s proposal as her family had always favoured the sons over the daughters, and she was used to Su taking advantage of her. If the arrangement was truly a mere name-borrowing arrangement as alleged, there was no advantage to be spoken of. There is also no explanation given by Madam Su as to why Su was a 60% owner, a specific percentage, as opposed to a 50% owner or a joint tenant. In the Taiwanese proceedings where Su had brought against Madam Su in 2017 for rental payments of Workshop 1614, Madam Su had instructed lawyers to put in a defence in 2018 (the “Taiwan Defence”). In the Taiwan Defence, the reason put forward for Su having been made a registered owner was not due to Kuo being unavailable, but that Kuo and Madam Su’s accountant had advised them not to hold too many real properties under their names. Madam Su tried to explain this inconsistency by claiming that she had not given instructions to the Taiwanese lawyers to say so. I reject this explanation. It is inconceivable that the Taiwanese lawyers would put in such a detailed explanation without instructions. I find Madam Su to be an untruthful witness who would provide whatever answer that suits her case instead of telling the truth. In the Taiwan Defence, Madam Su also stated that the payments she made to Su in 2009 were equivalent to 60% of the rental income of Workshop 1614. The Taiwan Defence is a contemporaneous document showing what Madam Su’s stance was at that time. The stance as shown in the Taiwan Defence is in fact consistent with the original version as pleaded in Madam Su’s Amended Defence and Counterclaim in the present litigation, that she had paid Su approximately 60% of the rental income of Workshop 1614 after deduction of all relevant expenses. She then amended her pleadings to say that those payments were simply “gratuitous payments” without reference to 60% of Workshop 1614’s rental income. Similarly, in the original Reply of HK88 and Kuo, which was subsequently amended, the payments made by Madam Su to Su in 2009 were originally described as having been taken from the rental income of Workshop 1614 and the amount was in the ratio of 60% of Su’s registered interests in Workshop 1614. Based on the above, the amount of the payments made to Su in 2009 clearly represented 60% of Workshop 1614’s rental income at the time. If Madam Su had thought that Su was never entitled to a 60% interest in Workshop 1614, there would have been no reason why the allegedly gratuitous payment to Su would have been in amount equivalent to 60% of the rental income. Further, the payments made to Su in 2009 had been ratified by HK88. Based on the above, Kuo and Madam Su clearly intended the registered owners to be the beneficial owners of the various properties. Su’s evidence In contrast, the explanation provided by Su as to the incidence to his acquiring the 60% interest in Workshop 1614 (as analysed below) is much more reasonable and believable. I thus find that Madam Su and Kuo were aware of and had agreed to the registering of Su as the 60% owner (both legal and beneficial) of Workshop 1614. Su’s evidence: The 1993 Agreement Ms Ema Leung (counsel for HK88 and Kuo) and Mr Tse and Ms Yeung (counsel for Madam Su) criticized the fact that the 1993 Agreement was not supported by any documentary evidence. However, it needs to be borne in mind that this is an alleged agreement made between family members. There was no dispute that at the time when the 1993 Agreement was alleged to have been reached, parties were in an amicable relationship. I agree with Ms Lydia Leung’s submission, that when considering disputes between family members or those with a personal relationship, in contrast with parties in a commercial transaction, it would be unrealistic to expect written records of assurances, as the parties deal with each other in trust, not mistrust. Ms Ema Leung also submitted that the 1993 Agreement is inherently implausible, because Su was at that time already well remunerated by a monthly salary which was higher than his previous salary as a mathematics teacher in Taiwan. It was also submitted that there was no reason for Kuo and Madam Su to give 30% of HK88’s profit to Mr Su. However, I do not agree that the 1993 Agreement was far-fetched or inherently implausible for the following reasons: At the material time, May 1993, parties were in an amicable relationship. Su’s family would look after the 3 daughters of Kuo and Madam Su when they were working in the Mainland. The truth is, all parties would have benefited from the arrangement of Su moving to the Mainland to help with the business: on the one hand, there would be someone within the family with prior business experience to help Kuo and Madam Su with their growing business in the Mainland that they could trust; on the other hand, Mr Su would have an opportunity to develop his business skills and experience in the Mainland. It therefore cannot be said that the arrangement only benefited one side and not the other. As such, I am of the view that the question of who had initiated the proposal for Su to join Kuo and Madam Su in their Mainland business would not affect the assessment of the inherent probability of the 1993 Agreement. It was accepted by Kuo that Su had not received any pay-rise throughout his employment/engagement with HK88/凱浩. It was accepted by Kuo that as Madam Su’s brother, Su had always had a special status within HK88/凱浩. Mr Tse and Ms Ema Leung further submitted that Kuo and Madam Su would not have agreed to the 1993 Agreement as Su had been a contractor of HK88 supplying ceramic products to HK88 since around 1996 and had been earning profits on the side. As a contractor, it was said that Su did not need to provide the breakdown (明細) in the invoices (請款單) he issued to Madam Su and therefore he could earn a profit by incorporating the fees he wished to earn in the invoices he issued to Madam Su, and Madam Su would never inquire about the breakdown of the amount stated in the invoices. I reject the suggestion that Su had later on become a sub-contractor of HK88 and find that Su was and had all along been an employee of HK88 for the following reasons: Firstly, when the 1993 Agreement was allegedly reached, Su had not yet become a contractor (even if he had subsequently become one, as alleged). This therefore cannot be a factor in determining whether the 1993 Agreement was inherently improbable at the outset. Further, the allegation that Su was a contractor is contradicted by Madam Su’s oral evidence, that she had requested many times for Su to provide particulars to the 請款單but to no avail. If Su was truly a contractor, there would have been no need for him to provide breakdowns in the invoices (請款單) to Madam Su, as shown in the invoices dated 2010 and 2011. The breakdowns included items including “運雜費”, “郭R”, “蘇”, “樣品快件”, “代付WA Dink手機費” and “辦事處費用”. Moreover, there was a breakdown sheet of transportation fee (運雜費) and sample fee (樣品快件費). Such would not have been necessary if Su was truly a contractor. There was also no actual evidence proving that Su had obtained profits from being a subcontractor of ceramic products. An insurance policy was still bought for Su in 2000, 4 years after Su had allegedly become a contractor. There would have been no obligation for Kuo/Madam Su /HK88 to buy insurance for Su if he had since then become a contractor. Most importantly, in the Taiwan Defence, she accepted and confirmed Su’s position as an employee of HK88: “讓告訴人[Su]進入被告[Madam Su]之配偶[Kuo]所設立之香港88企業有限公司任職” ,“告訴人彼時已在香港88公司任職五年”, “告訴人約於2011年離開香港88公司”. This is a contemporaneous document showing the stance of Madam Su as at 2018, upon being sued by Su upon related matters. Based on the above evidence, I prefer the evidence of Su on the issue of the 1993 Agreement and find that on a balance of probabilities, the 1993 Agreement existed. Su’s evidence: The 1997 Agreement and the 1998 Agreement Su’s case is that in 1997, after Kuo and Madam Su purchased Workshop 1613, they agreed with Su that 30% of the ownership in Workshop 1613 was held on trust for Su. This was to replace his entitlement to 30% of the net profits in HK88 for 1996 to 1997. This 1997 Agreement was recorded in a memorandum which had not been produced as it was not kept by Su. Ms Ema Leung criticized that it was implausible for Su to accept the 1997 Agreement, as Su admittedly did not even know what was HK88’s net profits for 1996 to 1997. It did not make sense for Su to accept something that he did not even know if it was of a lesser value. Further, it was criticized that Su had not kept the Memorandum, which was the only piece of evidence of the alleged 1997 Agreement. Ms Lydia Leung submitted, and I accept, that for the following reasons, Su’s decision to accept the 30% interest in Workshop 1613 and forgo a claim for 30% of HK 88’s net profits was reasonable and credible in the circumstances: Su accepted that 30% of the net profits of HK88 for 1996 to 1997 might have been more than the 30% interest in Workshop 1613. However, as an employee of HK88 and a younger brother of Madam Su, and Kuo as his boss, he had no way of ascertaining the real profits of HK88 and had to accept whatever suggestion proposed to him at that time given the circumstances. Further, Su also said that he accepted that HK88 had to retain some working capital to sustain the operation of the company and could not simply distribute all its profits without having reserves. Ms Ema Leung sought to challenge Su’s credibility by saying that in his Amended Defence and Counterclaim, Su had referred to the 1993 Agreement as giving him 30% of HK88’s “實際利潤”. However, during cross-examination, Su had referred to the 1993 Agreement as being 30% of “他們願意拿出來分紅的部份”. Although it is a different description, I accept Su’s explanation that in fact, it did not make any significant difference as he was in any event unable to ascertain exactly how much HK88 had made in terms of profit. He had little choice but to accept what Kuo and Madam Su were willing to give him. I do not consider this difference in description affected Su’s overall credibility. I also accept Su’s explanation that he did not keep the Memorandum nor made any copies thereof as the 1998 Agreement was in place, and he thought his interest was assured after having been registered as the 60% owner of Workshop 1614. As to the 1998 Agreement, Mr Tse and Ms Ema Leung submitted that there was no reason why Su would have abandoned what he claimed to have been an entitlement to 30% of all future net profits of HK88 under the 1993 Agreement in return for only an additional 30% interest in Unit 1614. However, I find that Su’s explanation in this regard was reasonable and credible: Su explained that at that time the business of HK88 was clearly on the decline as Kuo had switched his focus onto the business of 全方位 with the husband of his sister. Su was clearly not part of that new business venture. It was questionable whether HK88 would continue to have substantial profits. Su was happy to have a tangible interest in a landed property. The fact that Su had 60% interest in Workshop 1614 meant that he would have been entitled to the rental income derived from any future tenancy if it was leased out. This was reinforced by the fact that he had in fact been receiving payments from Workshop 1614’s rental income. Retirement Benefits or Rental Income From 2012 to 2015, Madam Su transferred the following sums from her personal bank accounts to Su (the “2012 to 2015 Transfers”). Madam Su claimed that such payments represented Su’s retirement benefits whereas Su said that they represented 60% of HK88’s rental income from Workshop 1614: Date Amount 23 April 2012 HK$55,873 2 May 2013 HK$66,888 30 April 2014 HK$106,425 14 May 2014 NT$402,365 It is Kuo’s evidence that there were two types of retirement payments that an employee could receive in Taiwan. One being a sum of about NT$1.5 million distributed by the Taiwan Bureau of Labour Insurance, Ministry of Labour, which Mr. Su had received (“Taiwan Authority Pension”); and one being a sum needed to be paid by the employer that is equivalent to the sum distributed by the Taiwan authority (“Employer’s Contribution”). Kuo and Madam Su’s case was that these payments were made as the Employer’s Contribution to Su’s retirement payment as HK88 did not have enough funds to make a one-off payment to Su. However, according to Kuo, his own assets, Madam Su’s assets and HK88’s assets were treated as belonging to him and Madam Su. There was no documentary evidence that either he, HK88 or Madam Su had problem with paying for what Su was entitled to as Employer’s Contribution in a single payment. Further, Madam Su had provided no explanation as to why the payment amounts were in such irregular numbers if all she was doing was to pay Su by instalments. In light of my finding that they knew about and had agreed to Su acquiring 60% of Workshop 1614, I find that the characterization by Kuo and Madam Su of the 2012 to 2015 Transfers as retirement benefits was just an afterthought to suit their case. I find that similar to the payments Madam Su made to Su in 2009, the 2012 to 2015 Transfers were made as Su’s entitlement to rental income as a 60% owner of Workshop 1614. Authority on behalf of HK88 Kuo and Madam Su were together the directing mind and will of HK88, as Kuo was in charge of the main decision making and management whilst Madam Su was responsible for looking after the financial side of the business. It cannot be said that they lacked authority in reaching an agreement with Su in relation to the ownership of Workshop 1614. As such, HK88 was bound by the agreement reached by Kuo and Madam Su on its behalf. Determination: - relief As a result, I find that there was an agreement between Kuo, Madam Su and Su in accordance with the 1993 Agreement, 1997 Agreement and the 1998 Agreement, which culminated in Su having acquired an interest and was registered as the 60% registered owner of Workshop 1614. The claim by HK88 that Su holds the 60% interest in Workshop 1614 as a trustee fails. Su is thus entitled to a declaration that other than being a legal owner, he is also the beneficial owner as to 60% of Workshop 1614. There is no dispute that Su had been deprived of the use of Workshop 1614 since January 2017 and had suffered loss. It has been agreed by parties that such loss be reflected by 60% of the mesne profits. Parties have agreed that 60% of the mesne profits for Workshop 1614 (after taking into account certain deductions) was HK$1,624,532 for the period between 1 January 2015 to 31 March 2024. 60% of the mesne profits from 1 April 2024 onwards have been agreed at HK$14,444 per month, until Su regains possession of Workshop 1614. Ms Ema Leung and Mr Tse accepted that if I find for Su, he would be entitled to an order under the Partition Ordinance (Cap 352) for Workshop 1614 to be partitioned such that either HK88 and/or Kuo and/or Madam Su could buy out Su’s 60% share or that it be sold and the proceeds be distributed as to 40:60 as between Madam Su and Su, as the registered owners of Workshop 1614. Costs follow the event, and I will make an order nisi that Kuo and Madam Su do pay Su costs of and occasioned by Su in the original claim and in the counterclaim, on a party-and-party basis, with certificate for one counsel. (Phoebe Man) Deputy High Court Judge Ms Ema Leung, instructed by Waller Ma Huang & Yeung, for the plaintiff (by original action) and the 1st and 2nd defendants (by counterclaim) Ms Lydia Leung, instructed by Siao, Wen and Leung, for the defendant (by original action) and the plaintiff (by counterclaim) Mr William Tse and Ms Lily Yeung, instructed by Bobby Tse & Co, for the 3rd defendant (by counterclaim)