CWK v. CPL AND ANOTHER

FCMC 6562/2021

(formerly FCMC 4610/2019)

[2023] HKFC 247

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 6562 OF 2021

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JUDGMENT

(Preliminary Issue on Beneficial Ownership)

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Introduction

1.  This is the trial in respect of the determination of beneficial interest in a landed property situated at Broadway, Mei Foo Sun Chuen, Kowloon, Hong Kong (“Property”) which is registered under joint tenancy in the names of the Petitioner (“Husband”) and the 1^st Respondent (“Wife”).

2.  By an application filed on 14 June 2022, the father of the Husband sought to join in these proceedings to assert beneficial interest on the Property (“Joinder Application”).  By consent, the father of the Husband was joined as the 2^nd Respondent (“Father”) and that the Wife be re-named as the 1^st Respondent in these proceedings.

3.  Pleadings and evidence were subsequently directed to be filed in accordance with the adopted procedure under TL v ML & Other (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263. In a nutshell, it is the Father’s case that there exists a common intention constructive trust between the Father, the Husband, and the Wife at the relevant time of purchasing the Property in 2010 that the Father was the sole beneficial owner of the Property and the legal owners, namely the Husband and Wife, were holding the same on trust for him at all material times.  The Father pleads in the alternative to rely on the presumption of resulting trust by reason that he had exclusively contributed to both the down payment as well as subsequent monthly mortgage repayments of the Property.

4.  By and large there is no dispute that since the purchase of the Property in 2010, the Husband and Wife, as well as the Father and the Husband’s mother, i.e. the Father’s wife (“Mother”) resided together.  Two children were born within wedlock of the Husband and Wife, in 2013 and 2015 respectively.  The martial relationship turned sour in around 2019 and the Wife moved out of the Property, leading to the divorce in 2019.

5.  The Husband confirms at Trial that notwithstanding he has filed pleadings and evidence and has made submissions, he does not have a positive case and concedes to the Father’s claim in its entirety.

6.  The Wife opposes the Father’s claim. 

Background

7.  The Husband and Wife were married in 2006, when they were aged 24 and 26 respectively.  In fact, prior to the marriage they were already co-habiting since 2001 when the Wife moved in to live with the Husband’s family at a property situated at Ching Yi (“Ching Yi Property”).  There is no dispute that the Ching Yi Property was purchased under the Home Ownership Scheme on the strength of the Father’s “green form” application and solely financed by the Father, in around 1987.

8.  The Husband’s family consisted of the Father, the Mother, the Husband’s elder brother (“Elder Brother”), and the Husband. When the Wife moved in in 2001, they were all residing together, thus a unit of five persons.  In around 2003, the Elder Brother’s girlfriend also wanted to move in and as a result, a private estate unit at the Liberte, Cheung Sha Wan, Kowloon (“Liberte Property”) was purchased under the name of the Mother and the six of them moved in and resided therein.

9.  The Ching Yi Property was then left vacant and according to the Husband, it could not be leased out due to government restrictions.  In around 2005, the Father sold the Ching Yi Property and purchased another property at Mei Foo Sun Chuen and it was at this juncture when the Husband and Wife – still not married then – moved back into the Ching Yi Property on their own, leaving the Father, the Mother, the Elder Brother and his then girlfriend moving into this Mei Foo Sun Chuen property (a different property – not the Property here in question).

10.  This is the start of the relevant timeframe where the Wife says that the Ching Yi Property was gifted to the Husband and Wife by the Father, prior to their marriage in 2006 – and therefore when the same was later sold in around May 2010, it was merely in anticipation of an exchange for the purchase of the Property in around June 2010, evidencing the continuance of the gift; and the fact that the Property was registered under joint tenancy of the Husband and Wife was also evidence that it was intended as a gift to the parties.

11.  As to mortgage repayments, the Wife disputes the nature of the monies the parties received from the Father by suggesting the monthly sums received from the Father throughout the material times represent the Father’s contribution to the ‘family pie/pool’, as opposed to without specifically earmarking the same as mortgage repayment monies.     

12.  The Husband presented a petition for divorce on 18 April 2019. Thereafter the Wife filed for bankruptcy and as a result, a Bankruptcy Order dated 28 March 2022 under HCB 6381/2021 was ordered against the Wife (“Bankruptcy Order”).  The Husband and the Father were aware of the same.  The Wife, on the other hand, was also aware of the fact that her interest in the Property would in any event be vested in the Official Receiver, represented by Fred Lee and Christine Chow acting as trustees in bankruptcy (“TIB”) in the event she successfully defends against the Father’s present claim. I shall say more on the bankruptcy related matters below. 

Bankruptcy Order against the Wife

Locus Standi of the Wife 

13.  It is firstly noted that the Father’s present claim was taken out after the Bankruptcy Order was in place and in his supporting affirmation the Father made it clear that he knew about the Bankruptcy Order; notwithstanding that the Father in his joinder application chose against joining the TIB.  The TIB on the other hand wrote to the Court on 26 July 2022, consenting to the joinder application of the Father and sought leave to be excused from attending the hearing returnable on 28 July 2022. Such leave was granted.

14.  By the time pleadings were directed to be filed, it was clear that all parties knew the Wife had to seek approval from the TIB in the further conduct of these proceedings.  I was told at the start of the Trial that the Father had been serving relevant papers to the TIB but only up to a certain stage of proceedings; on the other hand, whilst the Wife did seek approval from the TIB in the filing of her evidence, there was no evidence that she has sought the consent/approval of the TIB in the conduct of this trial.

15.  The said letter from the TIB to the Court dated 26 July 2022 was the only document before the Court in connection to the Wife’s locus standi in the preparation of this trial and the content of that letter is inconclusive to say the least.  As such, this Court issued a memo dated 14 February 2022 to the parties and copied to the TIB and therein, it was communicated to the parties the following :-

1.  Having received the parties’ respective Openings, it is noted that none of the parties has addressed this Court on the issue of R1 (wife)’s Bankruptcy Order dated 28 March 2022 under HCB 6381/2021. With reference to the Bankruptcy Ordinance, Cap. 6 or otherwise, please address this Court the effect of the above in the upcoming Trial, if any;

2.   R1 do bring to the Court for inspection the written approval from the trustee-in-bankruptcy in defending R2’s present claims at this Trial. The letter dated 26 July 2022 to the Court by the trustee-in-bankruptcy only concerned their consent to the then joinder application of R2.

3.   A recent Determination by the Family Court on a similar situation under WWGW v CSKL & Ors., FCMC 10898/2019, per. HHJ K. K. Pang, dated 12 April 2022, unrep., is brought to the parties’ attention for the purpose of the above discussion at the start of the Trial.”

16.  As a result of the aforesaid memo, on the first day of trial, the TIB has instructed a representative, a Ms. Tsui, to attend and with the consent of all parties, this Court allowed her participation in the related discussion prior to the start of trial.  She has brought along a letter from the TIB dated 14 February 2023 (faxed to the Court at around 6pm on the same day) which states, inter alia, that “the 1^st Respondent has not requested for our approval to defend the 2^nd Respondent’s claim at the Trial. However, if she had made this request, we would grant our approval for her to defend the 2^nd Respondent’s claim”.

17.  With respect, I must say this is worrying at first sight. Consent to a bankrupt to litigate is not an issue that can be taken lightly: Re Chan Sik Chung Lhamshirman (29/11/2019, HCB 8969/2016) [2019] HKCFI 2868 at [18]:

“18. The principles are also trite. It is prudent for the trustee in bankruptcy not to proceed or give consent to a bankrupt to proceed with an action in her name, unless she is satisfied that the action is meritorious and there is sufficient funding or indemnity to cover costs, including potential adverse costs in the event that the claim in the action fails: see Dr Vincent Kay Lo Ip v Dr Andrew Kee Suan Koh, FAMV 8/2001 (24 April 2001).”

18.  The matter was stood down and the TIB then produced another letter to the Court, dated 15 February 2023, which states, inter alia, that “We write to confirm that we shall grant approval for [the Wife] to defend the 2^nd Respondent’s claim at the Trial which is fixed to be heard on 15^th, 16^th and 17^th February 2023.”.

19.  It was confirmed by Ms. Tsui in Court that the TIB acknowledges the nature of this Trial and will be bound by the result of the same.  Ms. Tsui further confirms that the TIB in the circumstances does not seek to be joined / to participate at the trial.  

Impact of the Bankruptcy Order to this Trial?

20.  Discussions were invited by the Court as to whether there exists a meaningful purpose to proceed with the trial given the various limitations of the Wife under the Bankruptcy Order.  In WWGW v CSKL & Ors. (12/04/2022, FCMC 10898/2019) [2022] HKFC 86, an application to assert beneficial interest of a landed property taken out by a bankrupt wife was dismissed, inter alia, for the reason that by such claim, the wife is in essence asking the Court to declare a property to be under the wife but held on trust for the benefit of the trustee-in-bankruptcy, which is unavailable for distribution in the ancillary relief application and thereby the wife’s application is irrelevant to the parties’ matrimonial proceedings even if she succeeds.

21.  On this point, the Wife who is acting in person just wishes this Court to proceed to the determination.  The Father and the Husband adopt the same position also and submitted that in this present matter, the legal title of the Property is under both the Wife and the Husband under joint tenancy, the determination of beneficial interest will not only have a bearing on the Wife, who has made an ancillary relief claim in these proceedings, but also on the Husband, who has also made an ancillary relief claim on behalf of the children who are under his care and control.  In other words, even if the Wife’s interests in the Property, if any, will be subject to the TIB, the same cannot be said of the Husband and this means there is a meaningful purpose to proceed with the determination.

22.  My view on the issue is this.  Firstly, WWGW (supra) is distinguishable on the facts.  In that case, the bankrupt wife therein was an applicant of a third-party application, therein positively asserting beneficial interest to an asset which is not under her name.  In other words, it was the bankrupt’s decision to initiate such an application but in doing so, knowingly accepts that whatever beneficial interests she claims would in any event be vested in the official receiver.  Here, the situation is categorically different where the Wife is the joint legal owner of the Property at all times.  She did not initiate any third-party claims and is merely defending against a claim from a third party, the Father.

23.  Further, it is trite that in family proceedings, often these third-party proceedings in relation to an alleged trust arrangement to an asset are taken out and determined as preliminary issues – for a specific purpose – namely to assist the Family Court to determine what is available for distribution in the ancillary relief applications to be followed.  Indeed, for the third party, namely the Father in the present matter, he is an intervener by nature (albeit he was named as the 2^nd Respondent) and he is also entitled to have his claim heard and adjudicated so as to bring justice to him. If his claim was so irrelevant he would not have been joined in these proceedings in the first place.  The Father has, as early as in his joinder application claimed that he has been financially solely responsible for the Property in addition to residing in the same at all material times; thus prima facie his joinder must be justified on these grounds alone.

24.  As to the Husband, I agree with the observation of the Father and the Husband that in this particular case, the Husband also wishes his beneficial interest (or the lack of it to be more precise) in the Property to be determined, which may have an effect on the ancillary relief applications of not only the Wife, but also the Husband. 

25.  It is further noted that in the Father’s claim, the alleged trust arrangement existed since the purchase of the Property in around 2010, years before the bankruptcy of the Wife.  Mr. Lai for the Father further draws my attention to s.43(1) and (3) of the Bankruptcy Ordinance (“BO”) which provides as follows:

“43. Definition of bankrupt’s estate

(1) Subject to this section and sections 43A to 43E, a bankrupt’s estate comprises—

(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy; and

(b) any property which by virtue of any of the provisions of this Ordinance is comprised in that estate or is treated as falling within paragraph (a).

…

(3) Subsection (1) does not apply to property held by the bankrupt on trust for any other person.”

26.  I understand the Father is suggesting that in the event this Court comes to the conclusion that there is indeed a trust arrangement as alleged or otherwise, then notwithstanding the legal interest was vested in the Wife as at the date of her bankruptcy, it would not be treated as a bankrupt’s estate by way of s.43(3) BO.

27.  For the reasons set out above, as well as having fully considered the respective views of the parties as well as the TIB, I am satisfied that unlike the situation in WWGW (supra), there is a real and meaningful purpose for this Court to determine the beneficial ownership of the Property, notwithstanding the Wife is now under the Bankruptcy Order.  I am also satisfied that the Wife has the full consent of the TIB in the conduct of this trial.

The Parties’ respective Pleaded Case

28.  The Father’s case, as his Points of Claim[1] reveals, rests on a common intention between the Father, the Husband and the Wife as at the time of purchasing the Property.  The details of this common intention are summarised as follows:

(i)      In early 2010, the Father, together with the Mother, planned to purchase a property to cater for their elderly years;

(ii)     In the course of resourcing for bank mortgage loan facilities, the Father was informed that his portfolio would not pass the necessary requirement;

(iii)    The Father resorted to discuss with both his sons, with a view to ask them to be the registered owner of this intended property, thereby resolving the mortgage issue;

(iv)    The Father stated to the sons that all the funds needed for the purchase, including deposit, down payment, and all subsequent mortgage repayments, would be solely provided by him and thereby the Father would be the sole beneficial owner;

(v)     The Elder Brother refused the Father’s request, by reason that the Elder Brother was already a registered owner of another landed property and thereby would trigger stamp duty related issues;

(vi)    The Husband replied by acknowledging and agreeing to the Father’s request;

(vii)   Knowing that the Husband’s financial portfolio alone would not satisfy the mortgage requirements, the Father discussed with the Wife with the view to ask her to be a joint registered owner with the Husband for the purpose of securing mortgage;

(viii)  Again, the Father stated to the Wife that all the funds needed for the purchase, including deposit, down payment, and all subsequent mortgage repayments, would be solely provided by the Father and thereby the Father would be the sole beneficial owner; and

(ix)    The Wife replied by acknowledging and agreeing to the Father’s request.

29.  Based on the above agreement, and in reliance of the said common intention, the Father sold the Ching Yi Property on around 18 May 2010 at a consideration of HK$2,400,000 and a net sale proceeds of HK$1,475,244 was received by the Father.  On the next day, the Father arranged a transfer of HK$1,350,000 to the Husband’s bank account for the purpose of purchasing the Property.

30.  The Father went property viewing with the Mother and decided, on 20 June 2010, to purchase the Property for the consideration of HK$4,280,000.  On the same day and prior to the signing of the preliminary sale and purchase agreement, the Father once again expressed to the Husband and Wife about the alleged trust arrangement whereby the Father was the sole beneficial owner.  Both the Husband and Wife replied by acknowledging and agreeing to the arrangement.

31.  In his closing submission, the Father confirms his primary case to be the one as he has pleaded[2]. Alternatively, in the event this Court does not find a common intention constructive trust in the manner as pleaded in his favour, the Court is invited to impute a common intention to reflect what the Court believed to be the likely circumstances.  Only in the event no such common intention can be found, the Father relies on resulting trust[3].

32.  The Husband adopts the same approach in his closing submission and also invite the Court to infer a common intention in case an express one cannot be found[4].

33.  The Wife has been acting in person in these proceedings, with the consent of the TIB. Her pleadings were drafted in the format of an affirmation, which was accepted by the Court by the Order of HHJ C. K. Chan dated 1 December 2022 to be treated as her Points of Defence[5]. In gist, her case is one of gift, claiming that:

(i)      The Father had earlier gifted the Ching Yi Property to the Husband and the Wife in around the time they married in 2006;

(ii)     Consequently in 2010 when the decision of purchasing the Property was made, the Ching Yi Property was firstly sold and sale proceeds therefrom were used as down payment of the Property. The Wife claims that by the above, the seed money originated from the Husband and the Wife, not the Father;

(iii)    There was at all times no express agreement between the Father and the Wife regarding the ownership of the Property;

(iv)    There was no objection from the Father regarding the Property being registered as joint tenancy under the Husband and the Wife;

(v)     As to mortgage facilities, it was the Wife who made the relevant enquiries and decision, to the exclusion of the Father;

(vi)    Notwithstanding acknowledging the Father and the Mother had been regularly contributing financially to the household since its purchase, the Wife pleads that those financial contributions were seen as overall general household contributions with the Father never expressly stated his contributions were for mortgage repayments;

(vii)   Thus, the Wife says there was no trust arrangement at all material times and that the presumption of resulting trust does not apply in favour of the Father by reason that the financial contributions were not from the Father in the first place; and

(viii)  The Wife also seeks to rely on the presumption of advancement where applicable as part of her case.

Applicable Legal Principles

34.  The applicable principles concerning a dispute involving third party beneficial interest in property such as this have been helpfully summarised by Mostyn J in Bhura v Bhura & Others [2014] EWHC 727 at [8].

35.  The legal principles on common intention constructive trust, presumption of resulting trust and presumption of advancement are well settled and can be summarised as follows:

(i)      The starting point is that legal ownership of a property is normally consistent with the beneficial entitlement;

(ii)     The burden of proof falls squarely on the non-legal owner i.e. the party who seeks to show that the beneficial title does not follow its legal title: TL v ML (supra) at [38]-[39]. In this case, that would be the Father;

(iii)    Where it is asserted that a constructive trust arose on the basis of the parties’ common intention, the claimant must prove that (a) there was a common intention between him and the legal owner that he was to be the beneficial owner of the property despite that it was acquired in the name of the legal owner; (b) the claimant altered its position in detrimental reliance upon such common intention; and (c) it is unconscionable for the legal owner to assert ownership in reliance of the legal title to the property: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327; Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224 at [33] to [46] Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at [46];

(iv)    To ascertain whether there was a common intention, one must examine the objective intention of each party “which was reasonably understood by the other party to be manifested by that party’s words and conduct” at the time of acquisition of the property: Liu Wai Keung (supra) at[47] – [48];

(v)     The intention of the parties must be found based on evidence of express discussions of any agreement, arrangement or understanding reached between the parties. There must have been some actual discussions between the parties, however imperfectly remembered and however imprecise their terms may have been. Such express discussions should be pleaded in the greatest detail, both as to language and as to circumstance: Mo Ying (supra) at [37] – [38]

(vi)    Only where there is no evidence to support a finding of such an agreement or arrangement that the court may infer from the conduct of the parties the relevant common intention. The parties’ actual shared intention is to be deducted objectively from their words and their actions taking into account the whole course of conduct: Liu Wai Keung (supra) at[49] – [50]; Mo Ying (supra) at [39]

(vii)   In assessing the intention of the parties, the Court is to assess all relevant evidence holistically having regard to the context. The domestic context is very different from the commercial context. The parties in a domestic context might not have put their agreement on paper. Moreover, when assessing the parties’ intention in a domestic context, especially in relation to a matrimonial home, the Court is not constrained by pure direct monetary contribution to the purchase price: Stack v Dowden [2007] UKHL 17 at [69]; Primecredit (supra)at [1.6];

(viii)  Resulting trust operates in the absence of evidence of intention of the parties. If the Court makes a finding on the intention of the parties with respect to the beneficial ownership, it would not be necessary to resort to presumptions, including the presumption of resulting trust: Primecredit (supra)at [2.15];

(ix)    In a non-corporate context, there is a rebuttable presumption that the person who provide the funds for the purchase of a property has a beneficial interest in the property by virtue of a resulting trust; and

(x)     The presumption of advancement can be regarded as being on its ‘death-bed’ as it can be rebutted on comparatively slight evidence: Bhura (supra) at [8] citing Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776

(xi)    Traditionally the presumption of advancement is only available to relationships such as husband and wife and father and child. There is no presumption of advancement in respect of real property to child-in-law: Lee Tso Fong v Kwok Wai Sun & Anor [2008] 4 HKLRD 270 at [19].

36.  As to pleadings, it is elementary that a party must plead all the elements and particulars required to support a cause of action.  The principles on the significance of pleadings in civil cases are equally applicable to the present trial on preliminary issue concerning beneficial ownership of properties held in the name of third parties, where the family Court shall approach the issues in the same way as one would expect in the civil court: TL v ML (supra) at [34] ;YYT v CCM and ors (31/10/2022, FCMC 4498/2016) [2022] HKFC 230 [80-85]

The Evidence

The Father

37.  The Father together with the Mother came to Hong Kong from the PRC in 1980 and started off residing at a 50 square foot unit in Cheung Sha Wan area.  They both worked hard in casual jobs and often taking up more than one job to utilise their working capacities.  In about 1987, the Father took advantage of the Government Home Ownership Scheme and with their savings, the Father purchased the Ching Yi Property for $342,000.  Since, the Father, Mother, the Elder Brother and the Husband moved in and resided at the Ching Yi Property.

38.  In Around 2000, the Father and the Mother started their own business in providing cleaning services to residential estate buildings.  It was a small-scale self-proprietorship business with the Father and Mother being the only staff at all times.  They would together earn between $50,000 to $100,000 per month up till present.

39.  In 2001, the Wife moved into living with the Husband’s family at the Ching Yi Property with the consent of the Father since the Husband was only 19 years old back then.  Such arrangement lasted for about two years where the five of them resided together.  In about 2003, the girlfriend of the Elder Brother also wanted to reside together with the Husband’s family.  As a result, the Father and Mother purchased the Liberte Property for $3,000,000, registered under the Mother’s name.  The family of six moved to the Liberte Property and the Ching Yi Property was left vacant.

40.  Then in 2005, the Father sold the Liberte Property by reason that he did not like the environment.  He purchased a unit at the Mei Foo Sun Chuen and planned to move therein.  It was discussed and agreed by the Father and the Husband that since the Ching Yi Property remained vacant and the Husband did not prefer Mei Foo Sun Chuen environment, the Husband and Wife could reside at Ching Yi Property on their own.  By the above, the Father, Mother, Elder Brother and his girlfriend moved into this newly purchased Mei Foo Sun Chuen unit while the Husband and Wife moved into the Ching Yi Property.

41.  By 2008, the Father found out the Mei Foo Sun Chuen unit was in fact listed as a ‘haunted unit’.  The Father decided to sell it and purchased another property at Cheung Sha Wan, under the names of the Mother and the Elder Brother.  By this time, the Elder Brother had married his girlfriend in 2007.

42.  The Father nevertheless preferred the surrounding environment of Mei Foo Sun Chuen and therefore in 2010, through his estate agent one Madam Cheng, the Father engaged in flat viewings on his own with a budget of around $4,000,000.  The Father eventually shortlisted the Property but was then informed by Madam Cheng that the Father’s financial background would struggle to obtain mortgage facilities. Madam Cheng suggested the Father to seek assistance from his family members.

43.  In order to finance the down payment of the intended purchase of the Property, the Father would have to sell the Ching Yi Property.  As such, the Father informed his family (which consisted of the Mother, the Elder Brother and the Husband) that (i) he planned to purchase the Property; (ii) he planned to sell the Ching Yi Property; and (iii) as advised, he needed his sons’ assistance to obtain mortgage.  His family all acknowledged the Father’s decisions, except the Elder Brother explained to the Father that he was not in a position to help with obtaining mortgage by reason that he himself has another property under mortgage.  The Husband, on the other hand, agreed to help and would agree to all necessary arrangements.

44.  The Father was then given to understand that even with the Husband’s income, which was at around $10,000 per month, it was not sufficient to support the grant of mortgage facilities.  The Father then suggested to the Wife about the possibility of adding her name also for the purpose of obtaining mortgage, and thereby explaining to her that the Property would be solely financed by the Father and therefore belonging to him at all times.  The Wife acknowledged and agreed.

45.  Upon the above agreement of the family, the Father arranged viewing of the Property with his family, including the Elder Brother’s wife and the Wife.  Thereafter, in May 2010 the Father arranged the sale of the Ching Yi Property at $2,400,000 with a net sale proceeds of HK$1,475,244.  Out of which, the Father immediately arranged a sum of $1,350,000 to be transferred to the Husband’s account the next day, for the purpose of purchasing the Property.

46.  The Property was purchased in June 2010 at the price of $4,280,000, under the names of the Husband and Wife.  $428,000 was the down payment and mortgage facilities of $2,996,000 was approved, leaving a balance of $856,000 paid from the sale proceeds of the Ching Yi Property.

47.  The Father, Mother, Husband and Wife moved into the Property since; whereas the Elder Brother decided to reside separately at his self-own unit with his Wife.

48.  In the course of obtaining mortgage, the Father instructed the Husband and Wife to make relevant enquires and that they came back with a few banks for the Father to choose from.  The Father decided to engage Hang Seng Bank in the end by its more attractive rates.

49.  The monthly repayment of mortgage commenced in October 2010 and the sum was around $11,000 per month.  At all times, the Father says the Mother would, on his behalf, provide sufficient cash to the Husband or the Wife for them to arrange payment from their joint account.  Such arrangement was maintained until around April 2019 when the Wife moved out of the Property.

50.  The Father would always provide more than $11,000 per month since it was his intent to have any extra monies as subsidy to the Husband and Wife.  The Father usually would provide around $15,000 per month in cash.  In addition, the Father also knows the Mother would also provide cash to the Husband and Wife.

51.  The Father continued his mortgage obligations after the Wife left the Property in 2019 and has been solely financially responsible for all utilities arising from the household.

52.  It was brought out at trial that due to the cash nature of his cleaning business, the Father would at times have to resort to borrowing from finance companies in order to keep his monthly payment to the Husband / Wife on time for mortgage repayments.  He has provided some bank statements in 2015 to prove his borrowing and repayments from financial institutions.  The Father’s point here is that he has all along assumed financial responsibilities towards the Property even at times when his financial abilities could not satisfy the same. This lends support to his case that he has been treating the Property as his own and that the monies paid to the Wife were not voluntary subsidies nor being part of a gift.

53.  When asked whether it was intended to be a gift to the Husband and/or the Wife, the Father denied and said that he wanted to move to a bigger flat within his budget of $4,000,000 and that he had viewed a few tens of units before shortlisting the Property for his other family members to view.  The Property was meant to be his retirement home.

54.  The Father was asked in cross-examination why he did not directly deposit the monthly mortgage repayment sum to the relevant bank account.  The Father said because his business was cash based and that his working hours are late there would often be occasions when he would simply pass the cash to the Mother for her to pass to the Husband / Wife in return.

55.  It was also put to the Father by the Wife that at the time when the Liberte Property was purchased, it was registered under the Mother’s name; the Elder Brother and the Husband’s names were added but only as guarantor, for the purpose of obtaining mortgage.  The Wife asked why the same mechanism cannot be used in the purchase of the Property, if it was meant to be solely owned by the Father.  The Father replied that to the best of his recollection, the Liberte Property required a second mortgage and that was the reason why guarantors were required.  When further asked, the Father admitted he was not fully aware of the concepts of joint tenancy nor guarantor.

56.  When asked what was explained to the Father by the estate agency regarding legal title and ownership, the Father said he had entrusted and authorised the Husband to arrange all necessary procedures and once he knew he had provided the Husband sufficient money and that the bank has approved mortgage he just focused on his busy work schedule instead.  While he said he had been to banks for enquiries, he had also left the details for the Husband to handle since he believed given his age, the banks would not grant a mortgage loan to him in any event.

57.  The Mother gave evidence and confirmed that she had not directly expressed to the Wife on the ownership of the Property but she expected the Husband would have explained to her.  She confirmed her belief that the Property belonged to the Father and it was meant to be the retirement home of the Father and the Mother. Only that the Husband and Wife were financially not capable to having their own household they had all lived together.

58.  The Mother also confirmed that the monthly payment to the Husband / Wife was $15,000 from the Father and $12,000 from herself, totalling around $27,000 per month.  The receipt of this monthly sum is not disputed in any event.  In her belief, the Father’s sum represented mortgage repayment whereas her sum represented household expenses since they were residing together.  The Mother did not know if the Husband had separately paid the Wife and/or the Father any money for household.

59.  The Mother also testified that there would be occasions where the Father and/or the Husband were out at work and therefore leaving the Mother to provide the cash to the Wife.  To this end, an audio recording[6] was played at trial purportedly showing a conversation between the Mother and the Wife. The Mother also believed that her portion of $12,000 included her financial generosity towards her grandchildren.

The Husband

60.  The Husband gave evidence and adopted the Father’s case. He said that in 2005, he was then suffering from pneumothorax with only a quarter of his lung functional.  Notwithstanding his illness, he was busy with work.  This was when the Father told the Husband to live in the Ching Yi Property in order to have a better physical recovery.  Not only did the Father never said nor made any gestures to suggest the Ching Yi Property was by then gifted to the Husband, to the contrary, the Husband said that the Father had told him that the Father had wanted the Ching Yi Property to be his retirement home as he did not want to be admitted into an elderly home in future.

61.  At the time the Husband and Wife got married in late 2006, there was once again no such words nor gestures from the Father in suggesting the Ching Yi Property would be gifted to the Husband (and/or to the Wife).

62.  Then in 2010, the Father asked the Husband in one evening whether he would be agreeable to reside together once more.  The Father told the Husband about the various flats he had been viewing and shortlisted very few, including the Property.  The Husband thought the Father had the Husband’s interest at heart since the Husband was then residing at the Father’s Ching Yi Property.  The Husband very seldom gave his opinion and instead followed the Father’s wishes.

63.  Having identified the Property the Father held more talks with the Husband only, usually at a public park nearby.  The Husband understood the mortgage issue the Father was facing and suggested by adding the Wife might help to speed up the process.  By then, the Husband was earning between $10,000 to $20,000 and knew by his own finances the banks will not grant the mortgage loan.  The Husband also believed the procedures involving a guarantor would be more complicated.

64.  When asked whether the Father had spoken to both the Husband and Wife on the same occasion, the Husband said the Father came from a very traditional agricultural family and that he would not speak to the Wife on money matters.  The Husband gave an example of even the laundry within the household, the Father would ask to be separated from the female members.

65.  The Husband confirmed that there was no need for the Father to ask the Wife about the arrangement prior to the purchase of the Property as he would speak to the Wife direct, about moving and about securing mortgage facilities.

66.  The Husband knew the Father had already made enquiries with the Bank of China and told the Wife the same; the Wife made enquiries with Hang Seng Bank and having reported the findings to the Father, the Father decided to engage Hang Seng Bank.

67.  As to the $15,000 and $12,000 monthly sums from the Father and the Mother, the Husband says the usual practice is for the Mother to pass both sums to the Wife, both being females; but in practice either the Father / Mother could pass to the Husband / Wife. He knew the Father would sometimes resort to borrowing in order to fulfil his obligations and that this sum of $15,000 was never late, always provided to the Husband / Wife before the first day of each month.

68.  The Husband further gave an example of an incident in around 2016, where he had resorted to some personal loans and wanted to seek the Father’s permission to arrange a second mortgage against the Property in order for the Husband to clear his debts.  The Father’s permission was required and the Father approved the same.

69.  The Husband was challenged in relation to other possible ways to resolve the mortgage issue upon purchase, namely by adding the Wife as a guarantor instead of a legal owner.  The Husband admitted he was weak in these technical concepts, and that the Liberte Property arrangement was done by the Elder Brother who had an estate agent licence.  He only concerned about satisfying the bank’s requirements in obtaining a mortgage for the Father at the time.

70.  The Wife further challenged the Husband as to why both the Father and the Husband had now registered themselves as creditors to her bankruptcy matters.  In gist, the Husband said it was upon legal advice and with a purpose of encouraging settlement in these proceedings.  I have interjected at this stage and told the parties that for one, I am not privy to the details of the bankruptcy matters and further, if there had been any negotiations on a without prejudice basis, the content of which cannot be disclosed.

71.  The Husband also admitted that he was weak in the concepts of trust arrangements and admitted that he only alleged a trust on the Property after learning about the bankruptcy matter of the Wife.

The Wife

72.  At the start of her testimony, I have given the Wife the opportunity to clarify her case on gift, as it seemed to me at least from the documentary evidence that it was unclear. The Wife explained that it was in around 2005, when the Husband and Wife moved back to the Ching Yi Property on their own, she got the message that the Father had then executed his division of assets to his two sons, namely that the Elder Brother would be gifted the Liberte Property and that the Husband would be gifted the Ching Yi Property.  The Wife said that the Father expressly told her, in the presence of the Husband, in about 2005, that she and the Husband could live in the Ching Yi Property forever.  The Wife treated that as conduct reflecting an unconditional gift.  This was her latest version during her examination in chief.

73.  The Wife said that in around 2003, there were arguments between the Elder Brother and the Husband in relation to the landed properties, and this had caused the Father to have divided his assets by way of gifts to his two sons in advance.  She said that by 2003, there was no plan on her part to marry the Husband notwithstanding co-habiting.

74.  Under cross-examination, the Wife clarified that the Ching Yi Property was a gift to the Husband only; it was only at the time of the purchase of the Property in 2010 that the Mother (not the Father) said to her expressly that the Property would be for her and the Husband. She said at the time of their marriage in 2006, nothing in relation to gifting a landed property was ever discussed by anyone.

75.  Then in around 2015 to 2016, upon the elder son of the Husband and Wife enrolled in kindergarten, the Wife said the Mother promised her by the time the elder son enters primary school, the Father and Mother would move out of the Property by reason that there would not be enough space.

76.  As to the material periods in 2010 at the time of purchasing the Property, the Wife confirmed that the Father had said nothing to her in relation to the ownership of the Property, except the Father knew the Property was arranged to be under joint tenancy held by the Husband and Wife. She also confirmed that at the time of purchase of the Property she did not know if she would have an interest in the Property; she was only concerned with finding a property for the relevant parties to live together.  She considered only at the stage when she signed the preliminary sale and purchase agreement of the Property on 20 June 2010 that she had an interest in the Property.

77.  It was put to the Wife that the Husband had told the Wife that it was the Father who purchased the Property.  The Wife said the Husband only told her that the Property was financed by the Father.

78.  The Wife stated that she was earning around $16,000 per month and later around $20,000 per month, whereas the Husband was earning around $18,000 per month and later around $20,000 per month.

Analysis

Express Agreement?

79.  The importance of pleadings in civil cases including preliminary issues in family cases has been emphasised.  The first point to note on my part, for which I had indicated to the parties at the conclusion of evidence, is that from what I can observe throughout trial, the Father’s pleaded case is quite different from the evidence he has sought to elicit.  His pleaded case is one of an oral express trust, with direct conversations between the Father and the Wife on material matters.[7]  The Husband at all times seeks to run the same case as the Father and conceding to the latter’s claim in its entirety.  However, the Husband testified to say, to the effect that at the time of purchase of the Property, there were no direct discussions between the Father and the Wife.  In a nutshell, the Husband was the go-between passing on information.  This is in my view contradictory to the Father’s pleaded case.

80.  On this alone, it is sufficient for me to come to the view that the pleaded case of the Father has not satisfied the requisite standard of proof.  Not only there was no evidence of any express agreement reached by the relevant parties, there was evidence (from the Father/Mother/Husband) suggesting the contrary where no direct communication with the Wife took place.

81.  Nonetheless, the Wife’s pleaded case is no better in this respect.  Leaving aside formalities of pleadings requirement (given that the Court by an earlier Order accepted the Wife’s affirmation to be her Points of Defence), and focusing on the content pleaded therein, the Wife was unable to commit to a consistent version of event regarding the Ching Yi Property as to (i) the timing of the alleged gift; and (ii) to exactly whom this gift was for.  This obviously has a strong bearing on whether or not the Property was to be treated as a gift.

Inferring Common Intention

82.  Perhaps also recognising the inherent difficulties they face, in their respective closing submissions the Father and the Husband both placed weight on an alternative case to ask the court to infer a common intention in the circumstances.  Guided by the relevant legal principles as I have set out, I am indeed obliged to do so.  Having considered all the circumstances, I form the following views:

(i)      The Father, and also the Mother in this respect, came from very humble working class background and throughout their lives they had contributed to society through hard labour;

(ii)     The Father had always preferred to reside in self-owned properties throughout the years;

(iii)    The Father is not retired at all times. Up till trial, the Father was and is still running his cleaning business together with the Mother. There is undisputed evidence that both the Father and Mother continue to work hard in their business, with the Father often having to work in small hours due to the nature of his business;

(iv)   The Father is still working because he had to make ends meet. He has financial obligations towards the household, including inter alia mortgage repayments;

(v)    From the evidence, the Father is not a person of substantial wealth either. He was not at his retirement-age as at the time of the purchase of the Property and he was not able to finance the same without having to sell the Ching Yi Property first, and then to apply for mortgage facilities;

(vi)   This means that the decision to purchase the Property must have been an important, if not one of the most important decisions the Father has had to make;

(vii)  The Wife says the decision to purchase the Property was made by herself and the Husband and only that she invited the Father and the Mother to live with them. On the balance, I find it difficult to accept this when the Husband and Wife at the material times could not afford such a purchase;

(viii) Assuming for a moment, for the sake of discussion, that the Ching Yi Property was a gift to the Husband and Wife (or only to the Husband, as the Wife’s case is not clear), the Property was clearly an asset with a much higher value ($4,280,000), worth around three times more than the Ching Yi Property (around $1,400,000 net sale proceeds). This means that the gift, if it was one, was upgraded substantially. The Wife in this respect had not given much explanation other than her testimony in saying she had an expectation that the Father would contribute to the mortgage repayment after purchase (when on the other hand it was her case that she denies the Father had exclusively made mortgage repayments);

(ix)   Notwithstanding the Wife says the Father’s monthly contribution did not represent mortgage repayment, the amount received from the Father each month (around $15,000) was both more than the mortgage repayment required amount (around $11,000), and equally importantly, on time;

(x)    These are not spare monies from the Father, nor his subsidies out of generosity. The Father from time to time had to resort to some bridging loans when he encountered cash flow problems in order to keep to his timely monthly payment for the household, not to mention working hard in his advancing years;

(xi)   The Father clearly had in mind that his contribution was to be exclusively used for mortgage repayments, otherwise he would not have emphasised the importance of paying on time;

(xii)  The Wife’s suggestion that she has mixed the incoming funds of the Father ($15,000) and the Mother ($12,000) with her own before she arranges payment for the mortgage, thereby it cannot be proved that the Father exclusively paid for mortgage, is simply untenable;

(xiii) The Father was at all times residing at the Property since its purchase and treated it as his own home. Even though I also accept the Property was partially used as a former matrimonial home of the Husband and Wife in the latter stage of their marriage, there was no evidence that the Father had required a licence to reside at the Property or that the Husband / Wife could at any time dispose of the Property without the permission of the Father.

83.  As to the Ching Yi Property, I have come to the following views having carefully considered all the evidence:

(i)      The Wife alleged that the Ching Yi Property was gifted to the Husband and herself, then she changed her case during trial to say that it was gifted to the Husband only;

(ii)     The Wife is not able to pinpoint a specific time when this gift took place. She has said a few versions, ranging from as early as around 2003, or 2005 when she alleges the Elder Brother and the Husband engaged in arguments and thus the Father split his assets in advance and gifted his assets to the two sons. This is what the Wife meant by “預付的財產”[8], as she explained during her testimony;

(iii)    According to the pleadings, she stated the Ching Yi Property was gifted to the Husband and her after marriage. This would mean in late 2006 or 2007. However, in her testimony she admitted the gift of Ching Yi Property had nothing to do with her marriage with the Husband and not conditional upon them getting married;

(iv)    Why would the Father gift away the majority, if not all, of his substantial assets to the sons in mid-2000s troubles me. This was not a father who was then looking to retire, or to move on to a next chapter of his life by living a different lifestyle. Nor was this a father suffering from serious illness. Nor was this a father looking to rearranging his finance upon professional advice. Nor was this a father looking to sever ties with his children. After the Husband and Wife moved into the Ching Yi Property by themselves, the Father continued with his work and lived his life in the same manner and eventually asked the Husband to live together. There was simply no logical reason for the Father to have gifted away his assets in advance, in the manner as alleged by the Wife or otherwise;

(v)     Prior to the purchase of the Property, the Ching Yi Property would have been the Father’s only retirement home. The Husband did testify to this and I find this reasonable. Provided the Father is a man who has always invested in landed properties for self-use and has worked hard all his life, it would not make sense if he had no retirement plans insofar as a roof over head is concerned;

(vi)    I accept the reason for the Husband and Wife to return to the Ching Yi Property back then was a combination of a few factors: (a) the Husband was suffering from ill health and would benefit from a more spacious environment; (b) the Ching Yi Property was vacant and leasing out was not viable due to the Home Ownership Scheme; and (c) the family of the Father was expanding, in that both sons had girlfriends in wanting to reside together, it would make sense not for all six persons to reside together in one household. By the above, I take the view that the Ching Yi Property at all times was a property owned by the Father and at no times had he gifted the same to the Husband and/or the Wife. 

(vii)   Accordingly, when the Ching Yi Property was sold in 2010, the net sale proceeds belonged to the Father.

84.  Given the then intended purchase of the Property, together with the idea of the Father and Mother once again residing with the Husband and Wife, this would have been one of those situations where there must have been an understanding between the relevant parties.  I am ready to accept that conversations must have taken place and understanding must have formed prior to the purchase of the Property.

85.  With my finding that the Ching Yi Property belonged to the Father and was not a gift as alleged, I view that on the balance, it would have been the Father who initiated the purchase of the Property and that it was him who had researched and viewed various flats before shortlisting the Property. I accept that the Father had spoken to the Husband privately about the idea and thereby asking him to talk to the Wife.  I accept that the Father had not formally spoken to the Wife about the purchase of the Property nor its logistics.  He relied on his son and trusted his son to do so on his behalf.  This rings well with the traditional culture of this family, as they had revealed to me during trial.

86.  I do not believe that the Husband would have told the Wife, words to the effect that the Property would belong to the Husband and Wife upon its purchase.  Whether or not the Wife was justified in having some thoughts about the future ownership of the Property was beyond the point since the Court is concerned here with the common intention of the parties as at the time of purchase.  I could understand to some extent if the Wife were to have thoughts about the Property being eventually vested in the Husband and/or herself.  She had in fact testified that at some point after moving into the Property, after the sons of the Husband and Wife were born, the Mother said to her that the Father and Mother would move out in future upon the elder son entering primary education.  The Wife also testified that the Mother assured her that she could live in the Property forever.

87.  To me, the totality of these conversations, assuming that they did take place, is that the Father may have possibly intended to eventually gift the Property to the Husband and/or the Wife, but it was clear that insofar as the Father was and is himself still using the same and was still contributing to the mortgage repayments solely, he intended and still intends the Property to be his own.  H had paid for the Property and relied on the same to be his retirement home. There is evidence that the Wife’s income was barely sufficient for her own expenses including her children’s; while the Husband was apparently always in debt.  What if the Father and Mother for whatever reason stopped their contributions and moved out?  That would in my view almost certainly leave the Husband and the Wife in a dire situation without the financial ability to handle the expenses of the Property.  In other words, the Property could not have been a gift by the simple reason that the Husband and Wife were not in a position to repay mortgage without the continued contribution of the Father.

88.  The Wife has never run a case of an ‘improved’ gift where the Father having gifted the Ching Yi Property, sought to upgrade the gift to the Property, the Father would continue to gift the same until the Property becomes mortgage free.  This was not the Wife’s case. Rather, it was the Wife’s case that she herself had contributed to the mortgage repayments.

89.  The next question would then be the reason for the Property to be registered under the Husband and Wife under joint tenancy.  To this end, much evidence was put forward regarding mortgage facilities and the relevant parties’ respective understanding of the legal or technical concepts of mortgage, guarantor, joint tenancy, and trust. Having considered all circumstances including the background of these parties, I am prepared to accept that on the part of the Father, all he was concerned of was the viability of purchasing the Property with mortgage facilities and that the source of funds was sorted.  It was not unreasonable for him to delegate the requisite knowledge and skills to the Husband, nor was it unreasonable for him to pay heed to the advice of the estate agent, in involving the Husband, and later the Wife, for the sake of obtaining mortgage facilities.

90.  On the part of the Husband, I can also accept that he has limited knowledge as to these concepts.  He has no past experience in dealing with property transactions and he was merely tasked with the completion of the purchase as per the wish of the Father.  Knowing his own income would not satisfy the mortgage requirements, he turned to the Wife for help.  As to why the Property was registered under joint tenancy, as opposed to tenants in common, there is no evidence before me that the relevant parties know clearly the difference between the two.  The Wife sought to argue that joint tenancy implies beneficial ownership to her.  With respect, I fail to see the necessary connection.  All in all, I accept that none of the relevant parties in this matter had a relatively good grasp at these technical issues and their common goal at the time was simply to have the deal completed in a workable manner.

91.  By the above, and absent any common intention as pleaded in this matter, I am prepared to infer a common intention that the Property, at the time of its purchase, beneficially belonged to the Father, with both the Husband and Wife registered as the legal owners acting as trustees for and on behalf of the Father.

Presumption of Resulting Trust

92.  As I have found in favour of a tacit understanding between the relevant parties above, there ought to be no need for me to address the point on the presumption of resulting trust. However, for the sake of completeness, it is perhaps better for to me to consider and state my views on the issue of resulting trust in any event.

93.  From the evidence, the source of funds for the purchase of the Property is not in dispute.  It is sufficient to say that with the purchase price of $4,280,000, mortgage facilities were obtained in the sum of $2,996,000, with the remaining sums all settled by the net sale proceeds of the Ching Yi Property.

94.  Since I found earlier that the Ching Yi Property was not gifted to the Husband and/or the Wife as alleged or at any times, and that the Ching Yi Property was registered under the name of the Father, it naturally follows that its sale proceeds were the Father’s monies.

95.  I have also found earlier that since the mortgage was taken out, the Father has been using his own funds to repay the same on a monthly basis without fail.  The amount the Father provided to the Husband / Wife was always above the required repayment amount.  The Father would resort to borrowings in order to meet this pattern, demonstrating that he sees this as his own obligation.

96.  Financial contribution by a party is a most weighty consideration under the realm of resulting trust.  In considering whether there is sufficient evidence to rebut the presumption of resulting trust in the circumstances, I consider that it is unlikely for the Father (and the Mother too) who had spent a substantial part of their resources on a property, as their own matrimonial home, and then made an immediate gift to the Husband:Primecredit (supra) at [2.15] & [46].  For the avoidance of doubt, my view above would apply to the Ching Yi Property as well as the Property.

Presumption of Advancement

97.  The Wife wishes to rely upon the presumption of advancement. As stated above, such a presumption can be regarded as being on its death-bed.  In simple terms, it can be very easily rebutted by any actual evidence available.  Here in this case, it is clear that there is ample evidence before the Court where it would be wrong for the Court to resort to this presumption in the circumstances.

98.  Further, this presumption only operates between a parent and a child and does not operate vis-à-vis a parent and a child-in-law.  All in all, I am satisfied that the presumption of advancement does not apply in favour of the Wife in this matter.

Orders

99.  For all the reasons set out above, I find that the Father is the beneficial owner of the Property.

100.  Accordingly, I make the following order:

(i)      The 2^nd Respondent was and is the sole beneficial owner of the Property notwithstanding the Petitioner and the 1^st Respondent were the registered legal owners thereof; and

(ii)     The Petitioner and the 1^st Respondent were holding the Property on trust for the 2^nd Respondent at all material times.  

Costs

101.  Costs should normally follow the event and it is ultimately a matter of discretion on the part of the Court.  Although practically speaking, the Father and the Husband have been successful in that the Court came to the finding that the Father is the beneficial owner of the Property, I must say that such a conclusion was reached via a different route from what the Father has pleaded.  Since his pleaded case did not succeed, and that the testimony of the Husband in Court was contradictory from the pleadings in relation to the express oral agreement, I decide to exercise my discretion and order that there be no order as to costs between all the parties in this preliminary issue, including all costs previously reserved.  This is an order nisi and shall become absolute in the absence of any application to vary within 14 days.

102.  Lastly, I thank counsel for their assistance rendered to the Court throughout the trial.