1993, No. A4573




DIANE BRENNAN 2nd Defendant
BANK OF NEW YORK 3rd Defendant


Coram: Hon. Woo, J. in Court

Dates of hearing: 18, 19, 20 and 21 November 1996

Date of handing down of judgment: 25 November 1996




1. The plaintiff claims that certain funds of her late father, Mr Nicholas Victor Marsh (“Mr Marsh”), which were in account with MrLi Ka Shing (“Mr Li”), belong to her.


2. The 3rd defendant is and was at all material times the executor of Mr Marsh’s estate appointed by the court of the State of New York,USA. The 1st and 2nd defendants are and were at all material times the lawful attorneys of the 3rd defendant in Hong Kong and theadministrators pendente lite of the Hong Kong estate of Mr Marsh.

3. Mr Marsh died on 15 March 1988 in the State of New York, USA. Surviving him were his wife, Mrs Irene B Marsh and three daughters,Loretta Marsh Fine whose husband is Howard Fine, Adrienne Marsh Lefkowtiz (the plaintiff) and Claudia Marsh Appelbaum. On 26 May1983, Mr Marsh made a will. On the same day, he entered into a written agreement with his wife, who also made a will on the sameday, to bind each other not to alter the dispositions in their respective wills in their lifetime or as a survivor. The plaintiffwas one of the executors appointed by Mr Marsh’s will. The will did not identify the constituents of his estate.

4. Mr Marsh was trading in, inter alia, plastic flowers and since 1958 he had developed business, and later on close personal, relationshipwith Mr Li. Since the late 1960’s, Mr Li held certain funds belonging to Mr Marsh and subsequently these funds were used to acquireshares in Cheung Kong Holdings Limited (“CKH”), a company of which Mr Li was the chairman. The transactions were recorded in statementsof account at irregular intervals by Mr C W Chow (“Mr Chow”), a director of CKH, upon Mr Li’s instructions.

5. In the statement of account dated 15 January 1973, it was recorded that on 25 October 1972, shortly before CKH shares were publiclytraded in Hong Kong, a total of 1,033,000 shares in CKH were acquired with the funds in the account. However, the shares were splitinto three lots, being 833,000, 100,000 and 100,000, and a sum of $300,000 was stated to be for purchasing 100,000 of the sharesat the unit price of $3 “for account of Adrienne”, and another sum of $300,000 was stated to be for purchasing another 100,000 ofthe shares at the same price “for the account of Howard”, i.e., Howard Fine, the husband of Loretta. The same statement of accountalso recorded that the shares together with other CKH shares were sold on 3 January 1973 at $9.45 per share, and the net profitsof the sale were stated to be including $640,747.50 each “for Howard and Adrienne”.

6. This account became to be identified as Account No. 1 in the statement of account dated 15 March 1973 because apparently anotheraccount, Account No. 2, was set up on the same day.

7. In the statement of account dated 15 March 1973 of Account No. 1, it was recorded that on 7 March 1973 a sum of $940,747.50 was transferredto Account No. 2 and another sum of $940,747.50 was to Howard Fine. There is little doubt that each sum of $940,747.50 representedthe initial investment of $300,000 for the purchase of 100,000 CKH shares and $640,747.50 being the net profits of the sale of suchshares.

8. The first statement of account of Account No. 2 was dated 15 March 1973. Following the heading of “STATEMENT OF ACCOUNT NO. 2” theword “(Adrienne)” appeared in Mr Chow’s handwriting. In this statement, it was recorded that on 7 March 1973, a sum of $940,747.50was credited as being by transfer from Account No. 1. This entry appears to correspond to the aforesaid entry regarding the transferto Account No. 2 in the statement of account dated 15 March 1973 of Account No. 1. Thenceforth, it was recorded in statements ofaccount of Account No. 2 various transactions relating to the purchase and sale of CKH shares. Also recorded from time to time werethe number of CKH shares held, various receipts of bonus shares and dividends on the shares held and interest payments on the remainingbalance of the amount in credit. The transactions relating to the CKH shares ended on an entry relating to the sale of all the accumulatedshares on 19 April 1984, and from that time onwards, the account was credited with payments of interest on the balance amount fromtime to time.

9. In October 1984, Mr Marsh gave the plaintiff a cheque drawn by Mr Li for US$500,000 together with a note written by Mr Marsh statingthat the cheque was a gift from Mr Li to her. It transpired after the death of Mr Marsh that the amount on this cheque was takenfrom an account known as Account No. 1A. Account No. 1A was apparently opened by Mr Marsh with Mr Li on 31 August 1977, and the sumof US$500,000 was, and is admitted by the 3rd defendant to be, money drawn out of Account No. 1A.

10. Mr Marsh’s name did not appear in any of the statements of account of the various accounts.

11. In September 1992 and March 1993, Mr Li transferred, among the funds in Account No. 1, the credit balances in both Account No. 2and Account No. 1A to the 3rd defendant either directly or through the 1st and 2nd defendants. The defendants admitted through theircounsel that the credit balances were respectively $12,084,606.28 and $2,228,176, and that these sums were held by the 3rd defendantfor the account of the 1st and 2nd defendants as the administrators of Mr Marsh’s estate in Hong Kong.


12. The above stated facts are mainly borne out by the statements of accounts and are not subject to dispute. Based on these facts andother evidence that I shall detail later, the plaintiff claims that the said two sums, being the credit balances in Account No. 2and Account No. 1A, belonged to her. While Mr Merry, for the plaintiff, at first suggested that the sums were gifts from Mr Marshto the plaintiff, he conceded that as such they were invalid in law as they were imperfect gifts. He put the plaintiff’s claim ontwo other bases:

(a) Mr Li held the said two accounts and the said credit balances in them as trustee on trust for the plaintiff; and/or

(b) Mr Marsh had declared himself the trustee of the funds in the said two accounts on trust for the plaintiff.

13. Mr Thomas, for the defendants, drew my attention to several authorities stating some well-settled principles and Mr Merry did notseem to dispute them. In Timpson’s Executors v. Yerbury [1936] 1 KB 645 at 664, Romer LJ stated:

“Now the equitable interest in property in the hands of a trustee can be disposed of by the person entitled to it in favour of a thirdparty in any one of four different ways. The person entitled to it (1) can assign it to the third party directly; (2) can directthe trustees to hold the property in trust for the third partly (see per Sargant, J. In re Chrimes); (3) can contract for valuable consideration to assign the equitable interest to him; or (4) can declare himself to be a trusteefor him of such interest.”

In the present case, only categories (2) and (4) are relevant.

14. Regarding a direction to the trustee to hold trust property on trust for a third party, it is an essential element for the establishmentof such a new trust that the trustee accepts the direction. Mr Thomas relied on the arguments of Pennycuick QC in Grey v. IRC [1960] AC 1, 5-6, as follows:

“An equitable owner can assign his equitable interest to another and can declare himself trustee of his equitable interest for another.He can also direct the legal owner to hold the property on trust for another instead of himself, and if this direction is acceptedby the legal owner, the direction creates a trust in favour of that other. …

If A directs X to hold the cup in trust for B, who is an infant at the time, and on his attaining 21 years to hand it over to himand X accepts the trust, that direction creates a new trust. … A new equitable interest is created.”

15. In the context of the present case, as the plaintiff mentioned secret trust in her evidence, it is also relevant to note that a similarrule applies to secret trusts, which is that the person who receives the property and the direction must have either expressly orimpliedly accepted the trust imposed by the direction. Snell’s Equity, 29th Ed., 108-109, states the law as follows:

“If a testator makes a gift of property to T without stating in the will that he is to hold it on trust, and either before or aftermaking his will tells T, directly or through an authorised agent, that he wishes him to hold the property on trust for B, or to makea will in B’s favour, T (or his personal representatives) will be compelled to carry out the trust if T either expressly promisesthat he will do so, or by silence implies it; for he has induced the testator to leave him the property, and had T not accepted thetrust, the testator would not have made the gift to him, or, if it was already made, would have revoked it.”

16. Richards v. Delbridge (1874) LR 18 Eq 11 and Milroy v. Lord (1862) 4 De G F & J 264 dealt with declarations of trust. It suffices to cite the references to them in Paul v. Constance [1977] 1 WLR 527. At 531B-H, Scarman LJ observed:

“In the second case to which Mr Blythe referred us, Richards v. Delbridge (1874) L.R. 18 Eq. 11, the facts were that Mr Richards, who employed a member of his family called Edward in his business, was minded to give the businessto the young man. He evidenced his intention to make this gift by endorsing on the lease of the business premises a short memorandumto the effect:

‘This deed’ — that is the deed of leasehold — ‘and all thereto belonging I give to Edward from this time forth with all the stockin trade.’

Sir George Jessel M.R., who decided the case, said that there was in that case the intention to make a gift, but the gift failed becauseit was imperfect; and he refused to draw from the circumstances of the imperfect gift the inference of the existence of a declarationof trust or the intention to create one. The ratio decidendi appears clearly from the report. It is a short passage and because ofits importance I quote it. Sir George Jessel M.R. said, at p. 15:

‘In Milroy v. Lord (1862) 4 De G.F. & J. 264 Turner L.J. after referring to the two modes of making a voluntary settlement valid and effectual, adds these words: “The cases,I think, go further, to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred,the court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the courtwill not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectualby being converted into a perfect trust.” It appears to me that that sentence contains the whole law on the subject.’

… The facts of the two cases do not, therefore, very much help the submission of Mr Blythe but he was able to extract from themthis principle: that there must be a clear declaration of trust and that means that there must be clear evidence from what is saidor done of an intention to create a trust — or as Mr Blythe put it, ‘an intention to dispose of a property or a fund so that somebodyelse to the exclusion of the disponent acquires the beneficial interest in it.'”

Bridge LJ stated at p. 532G:

“I agree. In delivering his judgment in Richards v. Delbridge, L.R. 18 Eq. 11, 14, Sir George Jessel M.R., discussing the requisites of a valid declaration of trust, said:

‘It is true he need not use the words “I declare myself a trustee,” but he must do something which is equivalent to it, and use expressionswhich have that meaning, for, however anxious the court may be to carry out a man’s intentions, it is not at liberty to construewords otherwise than according to their proper meaning.'”


17. Mr Marsh, Mrs Irene Marsh and the keeper of the accounts, Mr Chow, all of whom might shed light on the matters in issue, passed away.Three persons testified before me, the plaintiff herself, Mr Li and his son, Mr Victor Li (“Victor”).

The Plaintiff’s Evidence

18. The plaintiff’s evidence is to the effect that she was told by Mr Marsh that he had helped Mr Li financially many years ago whenthey had dealings in the plastic flower business. As a result of that help and their friendship, Mr Li always felt indebted to MrMarsh. Although there were financial links between Mr Marsh and Mr Li, she was not aware at the time of the nature of the financialarrangements between the two men. On or about 16 October 1984, Mr Marsh gave her the above-mentioned note and cheque for US$500,000drawn on Mr Li’s personal bank account. She was not surprised because of Mr Marsh’s relationship with Mr Li and his wife, Amy Li,as well as her own relationship with them.

19. In about May 1986, Mr Marsh suffered a massive stroke. In September or October 1986, Victor came to New York to see Mr Marsh. AfterVictor’s visit, Mr Marsh told the plaintiff that he had asked Victor to convey a message to Mr Li to give her US$1 million. Mr Marshwas concerned not only that his estate would be destroyed but that the plaintiff would be immersed in litigation by his estrangedwife, Mrs Irene Marsh, and daughter (whether it was Claudia or Loretta was not specified), and the plaintiff would be left with little.The plaintiff therefore believed that Mr Marsh wished her to have access to funds from Mr Li. Mr Marsh repeated to the plaintiffnumerous times what he had told Victor. Mr Marsh also told the plaintiff that Mr Li did not owe him any money and that he had nomoney with Mr Li. Mr Marsh only told her that Mr Li had some money for her, and it was gratitude money. As there was no responsefrom Mr Li, Mr Marsh dictated a letter addressed to Mr Li for the plaintiff to transcribe it. In that letter, Mr Marsh asked Mr Lito make several “bequests” including US$1 million to the plaintiff. The plaintiff construed this letter to be a request to Mr Lithat Mr Li make the bequests from Mr Li’s own assets. She did not have a copy of the letter. This letter was later produced by MrLi when he was giving evidence, as exhibit D1. I shall return to it later.

20. After Mr Marsh’s death, the plaintiff became the preliminary executrix of the estate, and she held that office between 25 April 1988and 31 January 1990 when she was restrained, presumably by the court with which she proved probate, from exercising her duties. Shewas removed from that office on 19 April 1990. During her executorship, she made extensive inquiries concerning Mr Marsh’s assets,being aware that there was a financial connection between him and Mr Li. However, no funds were revealed to her by Mr Li. When shecame to Hong Kong and met with Mr Li in the latter part of 1988, he told her that Mr Marsh had no assets with him, but he had moneyto dedicate to Mr Marsh. Late in 1990, Mr Li asked the plaintiff to see Mr Marsh’s will. On 4 January 1991, Mr Li revealed that hedid hold assets which he regarded as belonging to Mr Marsh. It was not until early March 1993 that the actual records of the statementsof accounts (kept by Mr Li) were disclosed to her by the 3rd defendant.

21. The plaintiff also discovered a power of attorney dated 12 July 1977 apparently executed in Hong Kong by which Mr Marsh granted fullpower to her and Claudia in respect of a bank account held by Mr Marsh with the Swiss Bank Corporation in Zurich (“the power of attorney”).However, she had no recollection of signing such a power of attorney and certainly she was not in Hong Kong at the time. The powerof attorney stated not only that it survived death but that it authorised the plaintiff and Claudia to dispose of the assets in thebank account in their own favour.

22. The plaintiff admitted in cross-examination that Mr Marsh had companies incorporated and being operated in Hong Kong known as ArcadiaTrading Co Ltd (“Arcadia”) and Bay Novelty & Inspection Co Ltd (“Bay Novelty”) and the beneficial ownership of the shares inthese companies were stated in declarations of trust made by nominee companies. She also saw affidavits prepared by lawyers and swornby Mr Marsh which clarified the beneficial ownership of the shares in Arcadia and Bay Novelty. All these shares belonged to Mr Marsh’sfamily members and she had an interest in some of these shares. While she agreed that Mr Marsh would go to a lawyer to prepare documentsto establish a beneficial interest in property, she said this did not apply to a secret trust. Mr Marsh did not tell her that hehad money with Mr Li for her, because it was a secret trust. Mr Marsh never told her that he had money for her lying in Hong Kong,but told her that Mr Li had some money for her.

23. The plaintiff also discovered in proceedings in the New York Surrogate’s Court that Mr Bergman, Mr Marsh’s lawyer, wrote at leasttwo letters signed by Mr Marsh and addressed to Mr Li, one requesting Mr Li to make available US$1 million to her and the other requestingMr Li to give 1 million CKH shares to her. Mr Bergman told her that he had forgotten to send these letters, and she was taking MrBergman to court for negligence and other matters.

24. It is also relevant to note that the plaintiff told the court that Mr Marsh went to law school but never passed the Bar, whereasshe also went to law school and was admitted to the New York State Bar although she never practised law.

Mr Li’s Evidence

25. The only person who is able to tell the court about the accounts, what instructions were given by Mr Marsh relating to the operationof the accounts and the transactions relating to the funds and shares in the accounts is Mr Li.

26. Mr Li told me that he started to know Mr Marsh in about 1958. Mr Marsh did not help him in his plastic flower business. He was thesupplier and Mr Marsh the buyer. He might have asked Mr Marsh for deposits for the purchase orders but it was a commercial matterand that they were neither loans nor financial assistance from Mr Marsh. After 1969, when the plastic flower business was drawingto a close, their relationship became deeper because they liked each other.

27. Since about 1969, Mr Marsh began to ask Mr Li to keep sums of money in Hong Kong, and that was how an account started. Mr Chow keptthe accounts. Sometimes Mr Marsh came to collect the account statements, and sometimes Mr Chow sent them to Mr Marsh. All decisionsrelating to the transactions in the accounts were made by Mr Marsh and Mr Marsh alone. Mr Marsh conveyed his decisions to Mr Li orallywhenever they met or over the phone, and Mr Marsh rarely wrote to him. Mr Li would then instruct Mr Chow to carry out Mr Marsh’sinstructions. Thereafter, Mr Chow would write up the accounts accordingly.

28. At first there was only one account. In October 1972, shortly before CKH shares were publicly traded on 1 November 1972, 1,033,000shares in CKH at the issued price of $3 each were acquired for Mr Marsh at his request. In fact, CKH shares offered to the publicwere greatly oversubscribed and Mr Li just sold his own shares to Mr Marsh as a friend. Mr Marsh told Mr Li that out of that quantityof shares, 100,000 were to be for account of Howard Fine and 100,000 were to be for account of the plaintiff. Mr Li immediately raisedobjection that he would not hold the shares for anyone else in Mr Marsh’s family. In fact, Mr Li was very busy and he did not wantto hold anything for Mr Marsh except for the fact that they were good friends. In cross-examination, Mr Li disclosed that he knewthat Mr Marsh had a strained relationship with Mrs Irene Marsh and that was a strong reason for him to refuse to hold anything foranyone in the Marsh family save Mr Marsh. Mr Marsh told Mr Li that the shares belonged 100% to himself and his request to make anote of “for Howard” and “for Adrienne” was for his own purposes, for his own convenience. Mr Marsh also told Mr Li not to worryabout his request, stressing that all the money and assets in the accounts belonged to him (Mr Marsh) and if he wanted to give itto anybody, he would tell Mr Li or write a note to Mr Li.

29. In early 1973, Mr Marsh asked Mr Li to open accounts in addition to the existing one, and asked Mr Li to transfer a sum of $940,747.50to Account No. 2 and Account No. 3. That was when the existing account was renamed Account No. 1. Mr Li did not wish to do it andMr Marsh gave him the same assurances as when he asked Mr Li to note the two lots of 100,000 CKH shares were for Howard Fine andthe plaintiff.

30. Regarding the annotation at the bottom of the statement of account dated 15 January 1973 of Account No. 1 that net profits of $640,747.59each were for Howard and the plaintiff, Mr Li said that it was done by Mr Chow and when he noticed it he asked Mr Chow for an explanation.Mr Chow told him that that was only made as his own note. When Mr Li noticed the handwritten annotation of “(Adrienne)” in the accountstatement dated 15 March 1973 of Account No. 2 and queried Mr Chow about it, Mr Chow gave the same explanation.

31. There was an entry in the account statements of Account No. 1 and Account No. 2 of a reversal of purchase of CKH shares. Quantitiesof CKH shares were purchased on 7 March 1973 at $26.95 each. The purchases were made on the instructions of Mr Marsh. The Hong Kongstock market crashed shortly thereafter, and in September 1973, CKH shares were traded at around $6. Mr Marsh regretted the purchaseand Mr Li volunteered to reverse the purchase and treat much larger quantities of CKH shares as having been purchased at $6.232 on6 September 1973 instead. The reversal caused Mr Li about $8 million. Mr Li told me that he would not have agreed to the reversalbut for such a good friend as Mr Marsh; he would not have done that for anyone but Mr Marsh, and he did not know Howard Fine or theplaintiff so well.

32. There were corresponding entries in the statements of account of Accounts Nos. 1 and 2 that on 9 May 1974, a sum of $24,000 was transferredfrom Account No. 2 to Account No. 1. The transfer was done pursuant to the decision of Mr Marsh.

33. On 19 April 1984, Mr Marsh was in Hong Kong and gave instructions for all the shares in all his accounts with Mr Li to be sold. Henceforth,there was no further acquisition of CKH shares or any other shares. The money remaining in the respective accounts were merely earninginterest. There was no agreement between Mr Marsh and Mr Li regarding interest, but Mr Li just caused interest, at higher than bankrate, on the credit balances in the accounts to be credited. Before Mr Marsh’s death, he never told Mr Li that any of the accountswere held for anyone else.

34. In May 1986, Mr Li heard from the plaintiff that Mr Marsh had a stroke and was very ill. Mr Li did not visit Mr Marsh for fear thathis presence might make Mr Marsh too emotional and that might affect his health, knowing that he was suffering from high blood pressure.Yet Mr Li was worried as to how he should deal with the funds held by him for Mr Marsh in the accounts if Mr Marsh died. In aboutSeptember or October 1986, Mr Li sent Victor to visit Mr Marsh, with a view to seeking instructions from Mr Marsh on the disposalof the funds. Victor later informed Mr Li that Mr Marsh said that Mr Li could deal with the funds in whatever manner he liked, exceptthat nothing should be given to Mrs Irene Marsh. After that, there were certain letters between the parties which were produced byMr Li to the court, namely,

(a) exhibit D1, a letter dated 27/10/86 written by the plaintiff and signed by Mr Marsh addressed to Mr Li;

(b) exhibit D2, a copy letter dated 17/11/86 from Mr Li to Mr Marsh in reply to exhibit D1;

(c) exhibit D3, a letter dated 27/10/86 written by the plaintiff to Mr Li which he received before he received exhibit D1; and

(d) exhibit D4, a letter dated 3/10/90 written by the plaintiff to Mr Li.

35. After Mr Marsh’s death, the plaintiff came to Hong Kong and had lunch and dinner with Mr Li on several occasions. Mr Li had beentreating the accounts he held for Mr Marsh as private between him and Mr Marsh, and nobody save Mr Marsh, not even Howard Fine, askedhim about such funds or accounts, let alone giving him instructions on these funds. According to Mr Li, exhibit D1 which was writtenby the plaintiff on behalf of Mr Marsh, showed very clearly that she must have known that Mr Marsh had funds with Mr Li, and duringthe plaintiff’s stay in Hong Kong, Mr Li discussed with her how to deal with the funds, mentioning to her that he had about $60 millionheld for Mr Marsh without telling her the exact amount. Mr Li said it was untrue that he did not tell the plaintiff the existenceof such funds. Mr Li refused to see Claudia but he saw the plaintiff because she was the person who had been communicating with himthrough Mr Marsh’s illness before death.

Mr Victor Li’s Evidence

36. Victor also testified about his visiting Mr Marsh in New York around 21 September 1986. He did not remember if he met the plaintiffduring that visit, but he was certain that when Mr Marsh saw him in private, others having been asked by Mr Marsh to go out of thebedroom, Mr Marsh told him that Mr Li could deal with his funds in Hong Kong in whatever manner Mr Li thought fit, save not to giveany money to Mrs Irene Marsh. Victor was certain that Mr Marsh did not ask him to convey a message to Mr Li to give US$1 millionto the plaintiff.


37. I have recited the evidence in some detail because it is pertinent to my resolving the differences in the relation of some eventsby the plaintiff on the one hand and by Mr Li and Victor on the other.

38. The plaintiff told me that she held the belief that Mr Li felt indebted or grateful to Mr Marsh because of financial assistance givenby Mr Marsh to Mr Li. It was based on that gratitude that Mr Li would make gifts to her although no money was held by Mr Li for MrMarsh; and prior to his death, Mr Marsh told her that he did not have any money with Mr Li. Mr Li also told her when she came toHong Kong after Mr Marsh’s death that he did not have any of money belonging to Mr Marsh. She only learned of the existence of MrMarsh’s funds in Mr Li’s hands in late 1990.

39. On the other hand, Mr Li said he did not receive any financial assistance from Mr Marsh in the plastic flower business. The relationshipwas purely commercial. The two men then developed a very close friendship because they liked each other. Mr Marsh was kind to himand organised a big party in New York for him and his wife Amy when they got married in 1963. The plaintiff was the person who communicatedwith him since Mr Marsh had the stroke, and wrote exhibit D1 for Mr Marsh. Mr Li had little doubt that by reason of exhibit D1, theplaintiff knew that Mr Marsh had funds in his hands, and therefore when she came to Hong Kong after the death, he discussed withher about the funds and told her that there was roughly $60 million. Mr Li further said that he found exhibit D4, a letter dated3/10/90 written by the plaintiff to him, unusual and hurting, and after he read that letter, he immediately asked his secretary totelephone the plaintiff to ask her to discuss the matter when she came to Hong Kong shortly thereafter. After they met, Mr Li refusedto see the plaintiff any more. The letter stated that Mr Li had indicated that he wanted to make a written statement that he didnot have any assets belonging to Mr Marsh.

40. Another dispute over facts is the content of the message told by Mr Marsh to Victor to be conveyed to Mr Li in September 1986. BothMr Li and Victor said that the message was that Mr Li could deal with the funds at his own discretion save that nothing should begiven to Mrs Irene Marsh. The plaintiff maintained, however, that the message was a request to Mr Li to give her US$1 million.

41. On these conflicting versions, I prefer the evidence of Mr Li and Victor to that of the plaintiff. Mr Marsh and Mr Li were obviouslythe closest of friends. While Mr Marsh was most trusting of Mr Li in leaving with him large sums of money and large bundles of valuableCKH shares in Hong Kong without a signed receipt or even his name being mentioned in the statements of account, Mr Li was extremelygenerous to Mr Marsh. Mr Li sold over 1 million of his own CKH shares to Mr Marsh at the issued price of $3 when CKH shares wereheavily oversubscribed by the public; and he was willing to bear a substantial monetary loss in order to reverse Mr Marsh’s purchaseof CKH shares which were bought on Mr Marsh’s instructions before the stock market crash. As far as the plaintiff is concerned, MrMarsh might have told her that Mr Li was grateful to him, for that would, if not for any other reason, satisfactorily make her believeMr Marsh’s representation to her that the cheque for US$500,000 given to her in October 1984 was a gift from Mr Li. As it turnedout, it was money drawn out of Account No. 1A. She might have been under that impression for a long time. But as a person trainedin the law, she would not have mistaken about the true meaning of exhibit D1 that was dictated by Mr Marsh to her. Exhibit D1 requestedMr Li to execute five bequests, namely,

(1) to Mr Li’s sons, Victor and Richard, and wife Amy, US$50,000 each as a very small token of years of friendship,

(2) to the plaintiff, US$1,000,000,

(3) to Mr Marsh’s sister Elizabeth Karol, US$25,000,

(4) to Claudia, US$1,000,000, and

(5) to a charity to be named by the plaintiff.

42. The bequests to Mr Marsh’s family and relative can be said to be consistent either with Mr Li’s willingness to be generous to thefamily members of a good friend or with Mr Li keeping large sums of money for Mr Marsh. The bequests to Mr Li’s sons and wife, however,bear only one irresistible inference, and that is, that Mr Li was holding money for Mr Marsh. How could Mr Li’s gratitude or generositytowards Mr Marsh be possibly reflected by these bequests to Mr Li’s family members? Certainly, if Mr Li were so generous to his closefriend, his close friend would not reciprocate by limiting his generosity towards his own family members to a relatively meagre sumof US$50,000 each. The plaintiff described exhibit D1 in paragraph 4(c) of her witness statement thus: “a letter to Mr Li … inwhich my father asked that several bequests be made by Mr Li, including one million US$ to me. I construed this letter to be a requestto Mr Li that Mr Li make the bequests from Mr Li’s own assets. I do not have a copy of that letter.” Mr Merry also argued on herbehalf that the bequests to Mr Li’s family members might be understood to mean that Mr Marsh requested Mr Li to use Mr Li’s own fundsto make the bequests to Victor, Richard and Amy so that they would remember Mr Marsh. Both constructions, if either was in fact theplaintiff’s truly believed construction, would cast grave aspersion to one’s confidence in legal training in the United States. EvenMr Li, never trained as a lawyer, had little doubt that exhibit D1 clearly showed to the reader that Mr Marsh had assets with him.On the basis that exhibit D1 was written by the plaintiff, Mr Li believed that the plaintiff must know that Mr Marsh had funds withhim, and when the plaintiff came to Hong Kong in late 1988, he discussed with her about the funds, telling her that they amountedto roughly $60 million. I am unhesitant that that was the logical development of events. There was never any suggestion that Mr Litried to benefit himself by hiding the funds, nor indeed is there any evidence that he was operating under that motive. I accepthis evidence. The plaintiff’s version that in late 1988 she did not know that Mr Marsh had funds with Mr Li and that Mr Li told herthat he did not have any money held for Mr Marsh is rejected.

43. On the conflict of what message Mr Marsh asked Victor to convey to Mr Li, I also accept the two gentlemen’s version. Mr Li describedexhibit D1, dated 27/10/86 as Mr Marsh changing his decision. That was a change from the message which allowed Mr Li to deal withthe funds at his own discretion to that of making specific bequests in exhibit D1. On the other hand, the plaintiff made no mentionof this message in exhibit D3, her own letter dated the same day to Mr Li. Her version of the message was that Mr Marsh requestedMr Li to give her US$1 million. She believed that her father intended her to have access to funds from Mr Li. She must have realisedthat a gift of US$1 million from Mr Li would be more immediate than a bequest of the same amount in exhibit D1 unless, if I may beforgiven for saying so, she believed that Mr Marsh was so near death as to make little difference. The difference between the twoin tax implications must also be obvious. If she believed that the two sums were separate, which was not her evidence, then her interestin this alleged immediate gift of US$1 million would be even bigger. Yet surprisingly her letter, exhibit D3, was mute about thisalleged message to be conveyed by Victor to Mr Li. Nor was the plaintiff’s alleged message mentioned in exhibit D2, Mr Li’s replyto exhibit D1. Mr Li had never failed to carry out Mr Marsh’s instructions, even those involving the withdrawal of large sums, likeUS$500,000 paid to the plaintiff and US$3,500,000 paid to Mr Marsh on the same day. Although he treated the fact that Mr Marsh hadfunds with him as a private matter and would not lightly disclose it to any third party, he had never denied the existence of suchfunds, and he turned over all the funds to the 3rd defendant after he obtained advice from his lawyers.


44. Mr Merry, for the plaintiff, argued that the following evidence demonstrated clearly that Mr Marsh intended to make a gift of whatwas in Account No. 2 to the plaintiff:

(a) the wording and annotations used in the statements of account dated 15 January 1973 and 15 March 1973 of Account No. 1 and thatdated 15 March 1973 of Account No. 2, showing that $300,000 was used to buy 100,000 CKH shares for the account of Adrienne and whenthe shares were sold, the proceeds including the cost and profits were transferred from Account No. 1 to Account No. 2 with the firststatement of account dated 15 March 1973 of Account No. 2 annotated “(Adrienne)”;

(b) a similar transaction relating to the purchase and sale of 100,000 CKH shares was recorded for the account of Howard Fine, andthat on 7 March 1973, a sum of $940,747, similar to the sum transferred from Account No. 1 to Account No. 2, was recorded as “toHoward Fine”;

(c) since the transfer to Account No. 2, funds in Account No. 2 were earning interest and then used to make investments and re-investmentsin CKH shares, without any further injection of funds by Mr Marsh; and Account No. 2 was kept separately from any other account heldby Mr Li for Mr Marsh;

(d) the power of attorney which in effect made a gift of what was in the Swiss bank account to the plaintiff and Claudia;

(e) Mr Li’s cheque for US$500,000 given by Mr Marsh to the plaintiff showing that Mr Marsh intended to benefit the plaintiff eventhough his note stated that it was a gift from Mr Li;

(f) exhibit D1 showing that Mr Marsh intended Mr Li to make a bequest of US$1 million to the plaintiff when at the time the creditbalance in Account No. 2 was slightly over this sum; and

(g) the two letters prepared by Mr Bergman for Mr Marsh showing that Mr Marsh requested Mr Li to give US$1 million and 1 million CKHshares to the plaintiff.


45. All these pieces of evidence must be closely analysed to see if any can fit in with the two legal bases upon which the plaintiffgrounds her claim.

No Declaration of Trust

46. Even if I accept Mr Merry’s arguments that Mr Chow must have made the entries and annotations regarding the references to “Adrienne”in the statements of account of Accounts Nos. 1 and 2 upon the instructions of Mr Marsh, I am afraid that is not sufficient to persuademe that Mr Marsh had effectively declared himself a trustee to hold what was in Account No. 2 for the plaintiff. What are the precatorywords used by Mr Marsh to declare himself the trustee holding Account No. 2 on trust for the plaintiff? There is no evidence fromanyone as to what words Mr Marsh used when giving instructions to Mr Chow. The only evidence is that of Mr Li who was told by MrMarsh that the assets in the accounts belonged 100% to himself and that the notes that Mr Marsh requested to put on the statementsof account “for Adrienne” or “for account of Adrienne” were only for Mr Marsh’s own purposes or own convenience. Mr Merry asked meto disregard the statement of Mr Marsh that the accounts belonged 100% to himself but to construe “own purposes or own convenience”as meaning that Mr Marsh had clearly intended Account No. 2 to belong to the plaintiff. Apart from an intention to create a trustin favour of the plaintiff, Mr Marsh’s assurances to Mr Li are equally consistent with intentions such as creating a tax-avoidanceor accounting device, or to give some benefit in the account to the plaintiff on the occurrence of a future event. The referencesin the account statements to the plaintiff and the words Mr Marsh uttered to Mr Li are, in my view, not sufficient to amount to adeclaration of trust.

47. The subsequent acts and omissions of Mr Marsh also reinforce my view. There were corresponding entries in the statements of accountof Accounts Nos. 1 and 2 that on 9 May 1974, a sum of $24,000 was transferred from Account No. 2 to Account No. 1. This took placeless than one and a half years from the date when the annotations about “Adrienne” in the relevant statements of account were made.There is little doubt that this transfer was made on the instructions of Mr Marsh. Had Mr Marsh intended to declare himself a trusteeto hold the funds or assets in Account No. 2 for the plaintiff, he would have treated himself as a trustee and not as a beneficialowner in respect of such funds and assets. By this transfer to Account No. 1, which is not disputed to belong to Mr Marsh alone,it is shown that Mr Marsh had not divested himself fully of any beneficial interest in whatever was in Account No. 2.

48. Mr Merry sought to argue that Mr Marsh might have intended only to declare himself trustee of the CKH shares held in Account No.2 and not the funds. I must say this viewing of the facts is too artificial. The $24,000 was transferred in 1974 when Account No.2 held both CKH shares and this sum of $24,000 which was derived from dividends on the CKH shares. However, all the accumulated CKHshares in the account were sold in 1984, and the account only held funds thereafter. Would that intention to deal with the fundsin the account by Mr Marsh as his own, as in respect of the $24,000, not be similarly applicable to the funds remaining in the accountsince 1984? There is no sufficient evidence to persuade me that Mr Marsh had changed that intention after the transfer of the $24,000,or he declared himself trustee after that transfer. The power of attorney in 1977, the gift of US$500,000 to the plaintiff withdrawnfrom Account No. 1A, exhibit D1 and the letters Mr Bergman wrote for Mr Marsh did not alter my view. None of these pieces of evidencepoint to any declaration of trust made by Mr Marsh regarding the funds or shares in Account No. 2, although he might very well haveintended to benefit the plaintiff through those other devices. There is no evidence presented as to what happened to the $940,747.50recorded as to or for account of Howard Fine, and this does not help me either to reach a conclusion in favour of the plaintiff.

49. Mr Merry further argued that the withdrawal of $24,000 was but a minor exception. I am, however, not persuaded that there shouldbe a detraction from the clear principle as stated by Scarman LJ in Paul v. Constance, supra that there must be a clear “intention to dispose of a property or a fund so that somebody else to the exclusion of the disponentacquires the beneficial interest in it.” To allow this so-called minor exception would bring total disregard to equitable principlesand enable a person to approbate and reprobate, e.g., when he is faced with a tax assessment, he claims the assets and income onthe assets to be subject to a declaration of trust and belong to somebody else, while at the same time, he can continuously treatthe assets and income as his own and enjoys them.

50. I accept Mr Li’s evidence that all the instructions as to the dealing with the funds and shares in Account No. 2 had invariably beengiven by Mr Marsh to Mr Li; the plaintiff, according to her own evidence, did not even know the existence of any account held byMr Li for Mr Marsh until long after the death of Mr Marsh. Nothing further was done by Mr Marsh after the establishment of AccountNo. 2 to indicate either to Mr Li or to the plaintiff that Account No. 2 belonged to the plaintiff. Had Mr Marsh intended the fundsand shares in Account No. 2 as a gift to the plaintiff or that he held such assets on trust for the plaintiff, he should have atleast let the plaintiff know about it or made arrangements with Mr Li accordingly prior to his death. Yet this did not happen. Regardlessof how secret Mr Marsh wished to have kept Account No. 2, if he had intended the plaintiff to be its beneficial owner, he could simplymake a slightest effort to give effect to his intention. Mr Marsh was legally trained and he readily had lawyers on his service.He was not unfamiliar with declarations of trust and affidavits declaring interest, as borne out by such documents used to clarifythe beneficial interest in the shares of Arcadia and Bay Novelty. But not a single thing was done by him or at his direction.

51. On the contrary, Mr Marsh had not treated himself as having no further interest in whatever was in Account No. 2. There was no deliveryof the money and shares in the account to the plaintiff, nor was there any clear document evidencing his wish to declare himselfa trustee, let alone any effective assignment of any chose in action, regarding them. Even exhibit D1 did not state that the bequestof US$1 million to the plaintiff should be drawn out of this account.

52. Mr Merry further argued that as the account balance of Account No. 2 showed an amount slightly over US$1 million, the bequest tothe plaintiff stated in exhibit D1 must have referred to the money in this account. Having regard to a bequest of a similar amountto Claudia, Mr Merry’s argument is just stated to be dismissed. There is simply no reference by Mr Marsh in exhibit D1 to any ofthe accounts Mr Li held for him. This is inconsistent with the alleged intention of Mr Marsh to earmark the funds in Account No.2 for the plaintiff. Victor’s evidence that Mr Marsh asked him to tell Mr Li that Mr Li could deal with the money in any way he sawfit also tells against the alleged intention of Account No. 2 being held by Mr Marsh for the plaintiff. No matter what the intentionof Mr Marsh was relating to these funds and shares, the court is powerless to assist to carry out that intention for him, save tosay that they belonged to him. The basis that there was a declaration of trust by Mr Marsh fails.

Mr Li Not Trustee for the Plaintiff

53. Now I turn to the question whether Mr Li held Account No. 2 on trust for the plaintiff. Mr Li’s evidence is that he had never agreed,and indeed he objected to the idea, to hold any account of Mr Marsh’s for anybody but Mr Marsh himself. Mr Li only held money andshares for Mr Marsh because they were goods friends, and he saw it as a strong reason not to hold such money or shares for anyoneelse but Mr Marsh that he knew Mr Marsh’s relationship with Mrs Irene Marsh was strained. Upon Mr Li making known his objection toMr Marsh’s request to record that 100,000 CKH shares each were for account of Howard Fine and the plaintiff, Mr Marsh clearly toldMr Li that the recording of the notes relating to Howard Fine and the plaintiff was for his own purposes and convenience, and thathe did not request Mr Li to hold the money or shares for anyone else except himself. As to what were his own purposes, there is noevidence. Mr Marsh assured Mr Li that all assets held by Mr Li for him belonged to himself and no one else. I accept Mr Li’s evidence,for I do not believe that his memory of these events were in any way faulty or unreliable or that he had any motive to exclude theplaintiff from Account No. 2. The plaintiff was the person who communicated with him on behalf of Mr Marsh ever since Mr Marsh sufferedthe stroke in May 1986. She was the person whose name was mentioned in exhibit D1 which Mr Li thought must have disclosed to herthe existence of the funds held by him for Mr Marsh, and that that disclosure was made by Mr Marsh in dictating exhibit D1 to her.Whether the funds in Account No. 2 go to one beneficiary of the estate of Mr Marsh or another matters not to Mr Li. In fact, at leastMr Li appeared to feel more comfortable with, if not closer to, the plaintiff than Claudia after Mr Marsh’s death for he was havinglunch and dinner with the plaintiff but refused to see Claudia.

54. On the question of an express trust or a secret trust that is alleged to have been held by Mr Li in favour of the plaintiff, thenecessary element of Mr Li expressly or impliedly accepting the trust is missing. In order for such a trust to be constituted, theperson receiving instructions or directions from the settlor must have agreed to hold the subject matter on trust for such beneficiaryas directed. Mr Li never promised Mr Marsh or agreed to hold Account No. 1 or Account No. 2 for anyone else but Mr Marsh. In thecircumstances, Mr Li cannot be a trustee under an express trust, a secret trust or a trust implied or construed by law, in favourof anyone other than Mr Marsh.

55. Again, the withdrawal of $24,000 from Account No. 2 is contrary to the existence of any direction from Mr Marsh to Mr Li to holdthe account on trust for the plaintiff.

56. When visiting Mr Marsh, Victor did not remind him of such an alleged trust imposed on Mr Li, nor did exhibit D2, Mr Li’s reply toexhibit D1, make any hint as to this alleged trust. Exhibit D1 and Mr Bergman’s two letters did not help the plaintiff either: noreference was made to Account No. 2. The plaintiff’s claim based on Mr Li being her trustee must fail.


57. The evidence regarding Account No. 1A is even weaker, for the plaintiff’s claim to this account is merely based on the fact thata cheque for US$500,000 drawn by Mr Li in her favour represented money drawn out of this account. There is no evidence to show thatother than the withdrawal of the US$500,000 from Account No. 1A Mr Marsh treated funds in that account not as his own. There wereno notes or annotations in Account No. 1A indicating otherwise or that the plaintiff should be benefited with the assets kept init. The fact that Mr Marsh informed the plaintiff that the cheque for US$500,000 was a gift from Mr Li, instead of a gift from himself,tends to tell against the plaintiff’s case, far less strengthening it in any way. Mr Marsh did not wish the plaintiff to know thatit was a gift from himself. There were no further activities in this account which could help the plaintiff to show that the fundsand shares in it were intended to be a gift from Mr Marsh to her, let alone to establish any declaration of trust made by Mr Marshor any trust held by Mr Li in her favour.

58. If this claim be allowed to succeed, it would make a mockery of the law and logic, for any child can claim after the death of a parentthat the parent’s funds in a bank account belong to it because during the parent’s life-time, a cheque had been drawn from that accountin its favour. Indeed, Mr Merry very properly refrained from addressing me on Account No. 1A at all in his final submissions. Theplaintiff’s claim on Account No. 1A also fails.


59. In the result, the plaintiff’s claims are dismissed with an order nisi that the defendants do have their costs in this action againstthe plaintiff.

(K.H. Woo)
Judge of the High Court


Mr Malcolm Merry, instructed by Messrs Boase Cohen & Collins, for the plaintiff.

Mr Michael Thomas, QC and Mr Ian Payne, instructed by Messrs Oldham, Li and Nie, for the 1st, 2nd and 3rd defendants.