WONG WAI HUNG v. WONG WAI LEUNG

DCCJ 4448/2016

[2018] HKDC 1078

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4448 OF 2016

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JUDGMENT

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BACKGROUND

1.  The present dispute arose from a piece of land known as Lot no 977 in Demarcation District no 122 in Yuen Long, New Territories (the “Land”).  The following factual background is not disputed.

2.  The plaintiff was born in 1966 and the defendant in 1970.  The plaintiff is the elder brother of the defendant.  They have 2 elder sisters, 1 younger sister and 2 younger brothers.  The other 5 siblings are however not involved in the present dispute.

3.  The Land was firstly partially occupied by the maternal grandparents of the plaintiff and the defendant in about 1950s for cultivating vegetables and raising pigs and poultry.  In 1960, their maternal grandfather passed away.  Their maternal grandmother, namely one Madam Lee Ho, continued her partial occupation of the Land (the area that she occupied is referred to as the “Occupied Area” hereinafter).

4.  According to the Crown Lease, the Land (including the Occupied Area) could only be used for agricultural or garden purpose.  As shown in the modification of tenancy dated 25 April 1968, however, the Hong Kong Government granted Madam Lee Ho (on behalf of the then registered owner, namely one Madam Li Wong So Ching) a permit to maintain certain structures on the Land.  As explained by Mr Wallace Cheung who appeared on behalf of the defendant, this was how the Hong Kong Government managed those squatter structures erected on agricultural land in the New Territories at that time.  The overall legal effect was that in consideration of a fee, Madam Lee Ho was granted a permit/licence by the Hong Kong Government (and the registered owner) to maintain her structures.

5.  Both the plaintiff and the defendant grew up on the Occupied Area with their family and Madam Lee Ho.  In or about 1979, their family moved out while Madam Lee Ho stayed until about 2003 when she moved to an elderly home.  Madam Lee Ho passed away in 2006.

THE PLAINTIFF’S CASE

6.  From the plaintiff’s pleadings, witness statements and oral evidence, the plaintiff’s case can be summarized as follows.  In or about 2004/2005, the structures originally maintained by Madam Lee Ho were in a dilapidated state.  The plaintiff therefore suggested to his mother and brothers to renovate those structures.  His mother agreed and said that the renovated structures would belong to those who paid for the renovation costs.  In or about March 2005, the plaintiff, the defendant and their 2 younger brothers had a discussion and reached the following oral agreement (the “March 2005 Agreement”):-

(1)  The plaintiff and the defendant would pool in their money to renovate the relevant structures and would obtain the ownership/occupation rights of them;

(2)  The 2 younger brothers would not participate and would not get any ownership/occupation rights of the relevant structures;

(3)  The plaintiff, the defendant and their respective families would move back to live at the Occupied Area after the renovation works; and

(4)  The plaintiff and the defendant would later decide the division of the structures and the costs.

7.  In or about the end of 2005, the plaintiff started to replace the enclosure walls and gates.  On the other hand, the defendant started to carry out interior fitting-out works to one of the main existing structures (ie FCT 385 Living Room).  In or about early 2006, the defendant was asked to quit his residence at a rented village house in Yuen Long by his landlord.  He asked the plaintiff if he could move into FCT 385 Living Room temporarily.  The plaintiff agreed.

8.  In or about May 2007, the plaintiff and the defendant had another discussion and reached another oral agreement (the “May 2007 Agreement”) that:-

(1)  The plaintiff would pay $50,000 to the defendant and obtain the ownership/occupation rights of FCT 385 Living Room, FCT 386 Shelter, FCT 387 Kitchen, 1 of the 2 bedrooms at FCT 388 Bedroom, FCT 389 Bedroom and FCT 390 Bathroom – the plaintiff’s family would therefore have exclusively a living room, 2 bedrooms, a kitchen and a bathroom[1];

(2)  The defendant would obtain the ownership/occupation rights of FCT 382 Bedroom/Living Room, FCT 383 Shelter, FCT 384 Kitchen/Bathroom and the other bedroom at FCT 388 Bedroom – the defendant’s family would therefore also have, separately, a living room, 2 bedrooms, a kitchen and a bathroom[2];

(3)  The plaintiff and the defendant would each be solely responsible for the renovation costs of their respective structures; and

(4)  They would share the costs of renovating the common open area.

9.  Consequently, the defendant moved out of FCT 385 Living Room and moved into one of the bedrooms at FCT 388 agreed to be given to him.  The plaintiff and the defendant also carried out the renovation works accordingly.  In or about late 2007, the renovation works were almost finished.  The plaintiff and his family moved into the Occupied Area.  The 2 families occupied their respective structures as agreed above.

10.  In or about early 2009, the registered owner of the Land, namely one Mr Tang Ping Fai (“Mr Tang”), commenced DCMP 622/2009 against “unlawful occupiers” to recover the possession of the Land.  After the plaintiff received the Originating Summons, he and the defendant discussed and reached the following oral agreement (the “2009 Agreement”):-

(1)  The plaintiff and the defendant would share equally the legal costs of DCMP 622/2009;

(2)  They would use adverse possession as a ground to resist the claim and obtain rights to or interests in the Occupied Area;

(3)  As the defendant’s income/asset was less than that of the plaintiff, the defendant would appear as a party in DCMP 622/2009 and would later apply for legal aid; and

(4)  Upon any successful conclusion of the proceedings, the plaintiff and the defendant would share equally what the defendant would obtain out of the proceedings.

11.  In reliance on the 2009 Agreement, the plaintiff helped the defendant prepare his defence in DCMP 622/2009.  After the defendant’s application for legal aid was approved, the plaintiff also paid the sum of $20,000 on behalf of the defendant as the costs contribution required by the Legal Aid Department.

12.  Subsequently, the registered owner Mr Tang was willing to settle with the defendant.  By that time, the defendant came to know that the Occupied Area related only to one portion of the Land.  The other separate portion was some distance away, although it was still within the Land[3].  Mr Tang was willing to give the former portion of the Land to the defendant while retaining the latter portion.  As a result, the defendant further discussed with the plaintiff.  Both of them agreed to settle the case with Mr Tang.  Consequently, Registrar S T Poon made an order on 15 July 2019 that:-

“(一) 申請人黃偉良加入本案成為第二被告人，因他現時為佔用該土地的人士，並希望就應否作出收回管有的命令此一問題獲得聆聽；

(二) 原告人須在本令發出起計四個月內簽立轉讓契據將原告人在該土地的所有產業業權、受益、份數及利益讓給予第二被告人，原告人並需簽立所有必要的文件及以便促使完成該轉讓；

(三) 第二被告人需全數支付上述轉讓該土地所衍生的合理律師費用及雜費，包括原告人委托律師辦理該土地轉讓的費用、僱用測量師以量度及辦認該土地的準確位置的費用及釐印費。為免生疑問，前述的所有費用均為第二被告人全數親自支付，而並不會由法律援助處支付；…”

13.  By a deed poll dated 13 November 2009, the Land was divided into two portions.  The portion agreed to be given to the defendant was named as “Section B of Lot no 977 in DD no 122” (“Section B of the Land”).  On the same day, Mr Tang assigned Section B of the Land to the defendant.  Subsequently, on one night, the defendant handed over a note to the plaintiff setting out the account for the plaintiff’s share of the legal costs (the “Accounting Note”) with the content as follows:-

	“律師費	$26500
	印花稅	$100
	合共	$26600
	$26600 ÷ 2  每人	$13300
	雄 – 已付	$10000
	欠	$3300
	良欠雄	$4500
	餘款	@1200 ”

14.  The plaintiff explained that the sums of $26,500 and $100 were for title transfer documents costs and stamp duty respectively in DCMP 622/2009.  In accordance with the 2009 Agreement, each of the plaintiff and the defendant should bear half, ie $13,300.  As the plaintiff had previously paid $20,000 on behalf of the defendant for legal aid, he was regarded to have had over-paid $10,000.  The defendant therefore wrote in the Accounting Note that the plaintiff had paid $10,000 (“雄 – 已付$10000”) and still owed $3,300 (“欠$3300”).  As the defendant separately owed the plaintiff $4,500, the balance of the account was that the defendant still owed the plaintiff $1,200.  In reliance on the 2009 Agreement, the plaintiff accepted the account.

15.  Since after 13 November 2009, the plaintiff had repeatedly asked the defendant to transfer half share of Section B of the Land to him.  The defendant only said he would deal with it later.  In or about mid July 2016, the plaintiff realized that the defendant had no intention to make the transfer.  He therefore wrote formally to the defendant demanding him to do so since 13 May 2016 and issued the Writ on 6 September 2016.

16.  The plaintiff says that by reason of the 2009 Agreement[4] and his detrimental reliance thereof, on the basis of common intention constructive trust, he was entitled to half share of the beneficial interest in Section B of the Land.  Further or alternatively, he was entitled to specifically enforce the 2009 Agreement.

17.  The plaintiff originally also relied on the March 2005 Agreement and May 2007 Agreement as his alternative cause of action.  He also claimed damages on various basis including an allegation that the defendant threw away his personal properties.  At the beginning of the trial, Mr Li on behalf of the plaintiff and Mr Cheung on behalf of the defendant sensibly agreed that both parties would focus on the beneficial interest of Section B of the Land.  They therefore applied for withdrawal of their peripheral claims, including the defendant’s slander counterclaim.  I gave leave accordingly^[5]. As stressed by Mr Li, however, the March 2005 Agreement and the May 2007 Agreement remain relevant factual background leading to the 2009 Agreement and will be important in assessing the credibility of the parties’ case and evidence.

THE DEFENDANT’S CASE

18.  The defendant says that his relationship with Madam Lee Ho was particularly good.  Before she passed away in 2006, she had already told his mother and himself that the structures in the Occupied Area would belong to him.

19.  He denies the existence of the March 2005 Agreement.  He says that in 2005, it was he, instead of the plaintiff, who replaced the enclosure walls and renovated FCT 385 Living Room.  He started to move into the Occupied Area since January 2006.

20.  He also denies the existence of the May 2007 Agreement.  He says that he paid for most of the renovation costs incurred in 2007.  What happened was that in or about February 2007, the plaintiff requested that his family move into FCT 387, part of 388, 389 and 390.  The defendant agreed on the basis that the plaintiff paid him $50,000 as licence fee.  The plaintiff did so in or about May 2007.

21.  In or about December 2007, the plaintiff’s family moved into the Occupied Area.  The defendant and his family moved from FCT 385 Living Room to another part of FCT 388.  Both families shared FCT 385 Living Room.

22.  On 25 February 2009, Mr Tang commenced proceedings against “unlawful occupiers” to recover the possession of the Land.  After the defendant received the Originating Summons, he sought help from the plaintiff who had higher education level.  Subsequently, the defendant decided to defend the case and applied for legal aid.  He denies the existence of the 2009 Agreement.  He says that he only borrowed $20,000 from the plaintiff for the costs contribution as required by the Legal Aid Department and had repaid by instalments by the end of 2009.

23.  As explained above, the defendant originally also had a slander counterclaim which was withdrawn at the beginning of the trial.  During Mr Cheung’s subsequent submissions, he also informed the court that the defendant would withdraw his defence based on maintenance/champerty, illegality/clean hands and time-bar[6].  There was no objection from the plaintiff and I also gave leave accordingly.

ANALYSIS

Legal principles

24.  The legal principles in relation to common intention constructive trust are not in dispute and can be briefly summarized as follows:-

(1)  The plaintiff has the burden of showing, on the balance of probabilities, that the defendant held the concerned property on trust for him;

(2)  The plaintiff must prove: (a) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the concerned property despite that it was acquired in the defendant’s name; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on his legal title to the property;

(3)  In ascertaining whether there was a common intention, it is the objective intention of each party “which was reasonably understood by the other party to be manifested by that party’s words and conduct” that one must examine;

(4)  In the present case it is the parties’ common intention prior to and at the time of the acquisition of Section B of the Land that is relevant;

(5)  Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions.  It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention;

(6)  Even where reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.

See: Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9, at paragraphs 44-50, per G Lam J; Gissing v Gissing [1971] AC 886, at 906; Jones v Kernott [2012] 1 AC 776, at 794; Lloyds Bank Plc v Rosset  [1991] 1 AC 107, at 132-133.

Applying the legal principles to the present case

25.  The plaintiff gave evidence and was cross examined.  He gave straightforward answers to the questions put to him.  His evidence was consistent with contemporaneous documents and was unshaken under cross examination.  In my judgment, he is an honest and credible witness.

26.  The plaintiff also called 4 other witnesses who were the contractors/workers responsible for the replacement of the enclosure walls and gates in 2005.  They corroborated the plaintiff’s evidence in relation to the March 2005 Agreement.  Their evidence was also unshaken under cross examination.  They have no financial interest in this case.  I accept that they are also honest and truthful witnesses.

27.  In contrast, the defendant’s evidence is inconsistent with or unsupported by contemporaneous documents.  He was evasive under cross examination.  Many of his answers to the questions put to him are contrary to common sense.  There are various examples.  I do not need to set them out all but will just highlight some of them below:-

(1)  In relation to the replacement of gates in 2005, the defendant in his first witness statement dated 28 September 2007 alleged he did that.  After receiving the plaintiff’s supplemental witness statement dated 27 February 2008 and the 4 independent witness’ statements dated 14 March 2008, he changed his evidence in his second supplemental witness statement dated 21 May 2008 and said that it was actually the plaintiff who changed the gates as a gift to him without any prior notice.  In my view, there was no good reason that the plaintiff would have done that.  The purported explanation is contrary to common sense.

(2)  In relation to the replacement of enclosure walls in 2005, the defendant also alleged he did that.  However, the allegation is in direct contradiction to the evidence of 4 independent witnesses.

(3)  The defendant said the plaintiff did not pay any renovation expenses before 2007.  The allegation is however again inconsistent with a written note produced by the plaintiff, which records that “2006年6月®給良4000元買料做後門閘及詹蓬”.

(4)  As regards the Account Note, the defendant in his oral evidence explained that “雄 – 已付$10000” refers to the previous “loan” by the plaintiff.  This is inconstant with the natural meaning of the phrase, which means the plaintiff “had paid” him $10,000.  It is also inconsistent with the context of the accounting exercise as set out in the Account Note itself.

(5)  The defendant alleged in his first witness statement that he asked the plaintiff to share $13,000 costs in around 2009 because he thought the plaintiff should pay for his family’s use of the Occupied Area.  But according to the defendant’s own case, the plaintiff had already paid $50,000 for his family’s use of the Occupied Area in May 2007 for 3-5 years.  There was no good explanation why the defendant was suddenly entitled to demand more.

28.  All in all, I accept the evidence of the plaintiff and reject the evidence of the defendant.  I find that the 2009 Agreement did exist and there was a common intention between the parties prior to and at the time when the defendant acquired Section B of the Land that the plaintiff was to have half of the beneficial interest in the concerned property despite that it was acquired in the defendant’s name.  In reliance on the Agreement, the plaintiff helped the defendant prepare his defence in DCMP 622/2009 and shared the legal costs and stamp duty arising out of DCMP 622/2009.  It is now unconscionable for the defendant to assert ownership in reliance on his legal title to the property.

29.  Consequently, I am satisfied that the plaintiff has proved all the elements of a common intention construction trust in his favour and he is entitled to half of the beneficial interest in Section B of the Land.

30.  I now deal with the issues raised by the defendant in his closing submissions.  I do not intend to deal in each and every issue raised but will only highlight some of the major contentions below.

31.  Firstly, the defendant argues that there was no oral agreement between the parties in 2009 as alleged by the plaintiff. As explained above, I accept the plaintiff’s evidence and rejected the defendant’s evidence.  I find that the 2009 Agreement did exist.

32.  Secondly, the defendant argues that the 2009 Agreement contained no reference to the settlement with Mr Tang. As I have explained above, the plaintiff’s case (which I accept) is that the parties first agreed in early 2009 that upon any successful conclusion of DCMP 622/2009, they would share equally what the defendant would obtain out of the proceedings.  Subsequently, the defendant told the plaintiff about the settlement proposal.  They agreed to accept the proposal.  Their subsequent agreement on the settlement defined and supplemented what they would ultimate share under the 2009 Agreement.  There was therefore reference to the settlement with Mr Tang.

33.  Thirdly, the defendant contends that there was no intention for the parties to enter into legal relation.  I disagree.  As clearly shown by the Account Note, the plaintiff and the defendant were serious and meticulous about the sharing of legal costs and their respective obligation to contribute. I reject such contention.

34.  Thirdly, the defendant criticized that the language used in the plaintiff’s pleadings and witness statements in relation to the 2009 Agreement was uncertain and imprecise.  It seems to me it is only natural that no one cannot recall the exact words used in reaching the said Agreement.  The substance of the 2009 Agreement (as I have set out in “The plaintiff’s case” above) is however clear. I do not think there is much force in this criticism.

Specific performance of the 2009 Agreement

35.  Given that I have found in favour of the plaintiff in relation to his cause of action based on common intention constructive trust, technically, as agreed by Mr Li, I do not need to deal with his alternative argument in relation to specific performance of the 2009 Agreement.  However, as both parties have made submissions on that, I will also briefly deal with it below.

36.  As I have found that the 2009 Agreement exists, the remaining issue raised by the defendant as regards its specific enforcement is that the plaintiff cannot do so because of lack of writing.  In particular, Mr Cheung relies on s 3 of the Conveyancing and Property Ordinance (Cap 219) which provides that:-

“(1) Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

(2) This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”

37.  In answer to that, the plaintiff relies on part performance.  As held by Mr Recorder Yu SC in Lam Tin Hing and Tsang Tung Ying v Lam Kwai Choi (HCA 1531/2007, 30 September 2008), at paragraph 27, applying Steadman v Steadman [1976] AC 536 at 540:-

“If one party to an agreement stands by and lets the other party incur expense or prejudice his position on the faith of the agreement being valid he will not then be allowed to turn around and assert that the agreement is unenforceable.”

38.  In the present case, the plaintiff helped the defendant prepare his defence in DCMP 622/2009 and shared the legal costs and stamp duty arising out of DCMP 622/2009.  If I have to decide the issue, I am inclined to hold that there was sufficient part performance referable to the Agreement and the plaintiff is entitled to specific performance of the Agreement.  However, as I do not need to decide this issue, I will rest this case upon the common intention constructive trust ground.

CONCLUSION

39.  For the reasons above, I make the following orders:-

(1)  A declaration that since 13 November 2009, the defendant has been holding half share of the interest/title of Section B of the Land as tenant in common on trust for the plaintiff;

(2)  The defendant shall, within 3 months from the date of the aforesaid declaration and at the plaintiff’s costs assign/cause to assign half of the interest/title of Section B of the Land to the plaintiff as tenant in common;

(3)  If the defendant fails/refuses to assign as aforesaid, the Registrar of the District Court shall execute the assignment in lieu of the defendant at the defendant’s expenses and costs;

(4)  The defendant’s counterclaims be dismissed;

(5)  There be a costs order nisi that the defendant shall pay the plaintiff’s costs of this action, including all costs reserved if any, to be taxed if not agreed with a certificate for counsel.  The costs order nisi shall become absolute in the absence of any application to vary the same within 14 days of handing down.