The Hong Kong High Court has recently held that Eric Hotung had not imposed a trust in his favour when he gave HK$2,000,000 to Ho Yuen Ki in 1961 for the purchase of shares in a Macau gambling business.1 Whilst the Court declined to characterise the transfer of the funds as a gift or loan or otherwise, the Court held that the claimant's evidence at trial was so inconsistent that on the balance of probabilities it could not conclude a trust had been created.


The claimant (Eric Hotung, "Eric") and the first defendant (Ho Yuen Ki, "Winnie") were lovers. In 1961, a Macau gaming licence was obtained by a company set up by, among others, Winnie's elder brother and her brother-in-law. Eric's evidence was that Winnie told Eric about the licence and suggested that Eric invest HK$2,000,000 into the company. Eric agreed to invest HK$2,000,000. It was also agreed that the investment would be represented as a joint interest by Wong Man Lay (a pseudonym because Winnie did not want her elder brother to know the funds came from Eric) and Winnie's brother-in-law. Eric's evidence at trial was that the investment was by then represented by a number of shares in the company either held by Winnie or the second defendant (a Panamanian company which Winnie transferred a portion of shares to) (the "Shares"). In 2011, Eric wrote to Winnie requesting that the Shares "which [he] entrusted to [her] for safe keeping" be transferred to a trustee company administered by Eric. Winnie replied that the original investment by Eric was a loan and that the Shares belonged to her absolutely. The issue for the Court was to determine whether the Shares were held on trust for Eric.


In rejecting Eric's case that the Shares were held in trust for him, the Court concluded that various inconsistencies in Eric's evidence undermined his credibility as a witness and accordingly the Court could not be satisfied a trust was created.

The Court noted that in assessing a witness's evidence, the Court should have regard to:

  1. "the inherent probabilities, or improbabilities of the events put forward by the witness;
  2. the consistency, or inconsistency of the witness's evidence with undisputed background facts or documents; and
  3. the consistency, or inconsistency, of the witness's evidence with his/her previous statements and pleadings."

The Court recognised that HK$2,000,000 was a huge sum of money in 1961. However, the Court did not consider it "beyond the realm of possibility" that Eric, from a very rich family, would lend or gift such sum to Winnie. It was also improbable that, if Eric believed the Shares to be beneficially his, he did not ask Winnie from the proceeds of sale from a portion of the Shares in 1965, did not ask for the share certificates and did not show sufficient interest in obtaining dividends. Further, Eric's oral evidence contained multiple inconsistencies with his previous statements and pleadings. For example, Eric's pleaded case included an oral agreement between him and Winnie regarding the "investment". At trial he accepted that nothing was said between the parties.


The decision offers some useful guidance as to the circumstances in which a Court may not be willing to find establishment of a trust. In the case, whilst Winnie filed a number of witness statements in the action, she did not give oral evidence at trial due to health issues. Thus the Court assessed the validity of the claimant's claim in the main on the claimant's evidence at trial, which it found to be inconsistent with his prior statements of case. The need to rely on oral evidence was heightened by the absence of documentation around the establishment and maintenance of the alleged trust some 55 years earlier.

A key point arising from the judgment is to make sure all gifts, loans and settlements of property are properly documented. This will help the parties (and Court) determine the true intention at the time of asset transfer.