LEE SEE BUI FREDDY v. CHOY KIM PONG LEWIS THE PERSONAL REPRESENTATIVE OF TANG WAI SAU DECEASED

HCMP 1239 / 2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1239 OF 2008

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BETWEEN

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J U D G M E N T

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A. Introduction

1.   Mr Freddy Lee (“Freddy”), the Plaintiff, was the husband of the late Madam Tang Wai Sau. Madam Tang passed away on 16 March 2008. She left behind a will and apparently had bequeathed all her assets to her son from her previous marriage, Mr Choy Kim Pong Lewis.

2.   Freddy now brings these proceedings against Mr Choy (as the personal representative of the late Madam Tang) seeking a declaration that Madam Tang (and now her estate) has been holding on trust for him the HK$1,800,000 kept in her bank account and 30,000 shares in Guangdong Investment (‘the shares”) held in her brokerage account opened with Harmony Securities Co Ltd.

3.   It is not in dispute that the HK$1,800,000 and the money used to purchase the shares came from the sale proceeds of a Happy Valley flat (“the Happy Valley Flat”) registered in Madam Tang’s name, which was sold in 2007. It is however Freddy’s case that in fact it was he who had paid for all the purchase price of the Happy valley Flat bought in April 1991. Freddy further says when the flat was purchased, Madam Tang had agreed to hold and had been holding the Happy Valley Flat on trust for him. As a result, she (and now her estate) has also been holding the sale proceeds and thus the HK$1,800,000 and the shares on trust for him.

4.   Mr Choy disputes that Freddy had paid for the purchase price of the Happy Valley Flat. Alternatively, if Freddy had in fact paid for it, it was intended as a gift for Madam Tang. Therefore, there is no question of Madam Tang holding on trust for him the Happy Valley Flat, the sales proceeds thereof or the HK$1,800,000 and the shares.

5.   It is common ground at trial that, if Freddy can show that he had in fact paid for the purchase price, and did not intend the Happy Valley Flat to be a gift for Madam Tang, he should be entitled to the reliefs sought.

6.   In the premises, the issues before me are:

(1) Whether Freddy had paid for the purchase price of the Happy Valley Flat.

(2) If so, whether Freddy intended to give Madam Tang the Happy Valley Flat as a gift.

B. Background

7.   Unless otherwise stated, the following are the relevant uncontroversial background facts.

8.   Freddy first met Madam Tang in 1963. At that time, Madam Tang had joined the Preventive Service of the Commerce and Industry Department and Freddy was an officer in the Customs and Excise Department. They soon started dating with each other.

9.   They both separately had a previous marriage and have children of their own from the previous marriages. When they met, Madam Tang’s ex-husband had already passed away. He had however set up a trust to maintain the living expenses of Madam Tang’s children.

10.   One or two years after they had started dating each other, Madam Tang resigned from the Preventive Service and moved with her children to live with Freddy and some of his children at Freddy’s government quarter. Madam Tang had not worked again since then.

11.   In 1985, they eventually got married.

12.   In May 1988, Freddy and Madam Tang entered into a sale and purchase agreement as purchasers to purchase a flat (“the Jin Hui Flat”) at Jin Hui Garden for investment purpose. The purchase price was HK$682,400.00. At that time, Jin Hui Garden was still under development.

13.   Freddy had contributed HK$10,000.00 to the purchase of the Jin Hui Flat.

14.   An equitable mortgage dated 17 June 1988 was granted by a finance company to them to secure the sum of HK$614,160.00 for the purchase of the Jin Hui Flat.

15.   On 3 November 1988, the equitable mortgage was released.

16.   In August 1989 (i.e, about 9 months after the release of the equitable mortgage), the Jin Hui Flat was sold for a price of HK$855,00.00.

17.   On 22 April 1991, the purchase of the Happy Valley Flat in the name of Madam Tang was completed. The completion was apparently made with the assistance of a mortgage granted by the bank.

18.   On 1 May 1991, Freddy retired from the Customs and Excise Department. He was a Senior Superintendent of the Department when he retired. Upon retirement, he had to move out of the government quarter.

19.   Under the retirement scheme operating at the times before Freddy’s retirement, a retiring civil servant would be paid a monthly sum until his death. However, when it came to Freddy’s retirement, the government had newly introduced an option under the retirement scheme for a retiring civil servant to choose to take a lump sum retirement payment upon retirement and to receive a lesser monthly payment thereafter. Freddy opted for this new retirement scheme.

20.   As a result, on 25 May 1991, he received HK$2,895,200.00 as his lump sum retirement payment. Other than this, he continued to receive monthly retirement payment of about HK$17,000.00 per month.

21.   In November 1991, the mortgage on the Happy Valley Flat was discharged.

22.   After moving out from the government quarter upon Freddy’s retirement, he and Madam Tang started to live at the Happy Valley Flat.

23.   Since their marriage and both before and after his retirement, Freddy had been paying Madam Tang one-third of his monthly income for her to use for their food expenses and her personal expenditures. Freddy accepted that the food expenses constituted only a small portion of this one-third monthly payment.

24.   In late 2006, Madam Tang was diagnosed to be suffering from various illnesses, and started to have the need to go to Queen Mary Hospital regularly for consultations and treatments.

25.   In April 2007, the Happy Valley Flat was sold for HK$2,380,000, apparently because Madam Tang wanted to move to live nearer to the hospital to facilitate her frequent visits there. After the sale of the Happy Valley Flat, Freddy and Madam Tang rented a flat at Chi Fu Fa Yuen in Pokfulam as their residence, which was located much closer to Queen Mary Hospital than the Happy Valley Flat.

26.   Out of the sale proceeds of the Happy Valley Flat, Madam Tang used part of them to buy the shares and deposited another HK$1,800,000 into her bank account.

27.   Madam Tang eventually passed away in March 2008. As mentioned above, apparently in her will, she has bequeathed all her assets to Mr Choy. The will is not before the Court.

28.   Freddy only came to know about the presence of the will after Madam Tang’s death, when he was told by Mr Choy about the same.

29.   He then brought the present claim against Mr Choy and Madam Tang’s estate.

C. The issues

C1. Issue 1: Whether Freddy had provided the purchase price of the Happy Valley Flat

C1.1 Freddy’s case and supporting evidence

30.   Freddy gave evidence at trial to support his claim. He has also called one Mr Raymond Wu to give evidence for him. Mr Wu was Freddy’s social friend, and the solicitor who handled the conveyance of the Happy Valley Flat in 1991.

31.   Freddy’s case and evidence can be summarized as follows.

32.   As he knew that he had to move out of the government quarter upon his retirement, he had some time before his retirement decided to use part of his retirement funds to purchase a flat for retirement purpose and as a matrimonial home for him and Madam Tang.

33.   After they had decided to purchase the Happy Valley Flat, he had left everything to Madam Tang to deal with in relation to the purchase of the flat. He had also introduced Mr Raymond Wu to Madam Tang for handling the conveyance of the flat.

34.   He was aware of the fact that the purchase of the Happy Valley Flat was completed before his retirement funds became available. He did not know how this was done as he had left everything to Madam Tang to take care of, and asked her to come to him if she experienced any problems. But she had not approached him asking for help. He was not aware of the mortgage until this was brought up in Mr Choy’s evidence in opposition of the present claim.

35.   He speculated that Madam Tang might have borrowed money from her friends or relatives to pay for the initial deposit for the purchase of the Happy Valley Flat.

36.   He remembered that about one or two days after he had received the lump sum retirement payment, he paid to the solicitor approximately HK$1,000,000 for settling the purchase price of the Happy Valley and related legal fees and expenses.

37.   Mr Raymond Wu’s evidence is as follows.

38.   Mr Wu confirmed that when he was instructed by Freddy to deal with the conveyance of the Happy Valley Flat, Freddy told him in a proud manner that he was going to use his retirement funds to buy a flat for retirement. Mr Wu felt that Freddy was trying to impress him that he (Freddy) was an honourable man who could buy a property for his wife and himself for retirement.

39.   He only first came to know Madam Tang when she went up to his office in relation to the purchase of the Happy Valley Flat.

40.   However, as the transaction occurred more than 18 years ago, and the relevant file is no longer available[1], he could not now recall how the mortgage was arranged, and who had in fact paid his firm the redemption money for the release of the mortgage.

41.   When asked under cross-examination as to why the mortgage was only for 6 months, he said he could not remember now, but it was not unusual for a purchaser to arrange a short term mortgage loan pending the arrival of funds, and that sometimes the bank or financier might impose a minimum term of the loan for fixing a lower interest rate or not imposing any penalty for redemption.

42.   He also could not remember when he was paid the redemption money to arrange for the discharge of the mortgage. However, he said it was possible that sometimes a client would ask him to put the redemption money in an interest bearing account for a period of time, as the client did not want to repay the bank immediately to avoid paying any early redemption penalty or extra charge.

C1.2 Mr Chow’s evidence

43.  Mr Chow has offered no evidence at trial other than the transactional documents in relation to the Happy Valley Flat and Jin Hui Flat conveyances. 

C1.3  Discussion

44.  I accept Mr Raymond Wu’s evidence that he was told by Freddy in his instructions that Freddy was going to use his retirement fund to purchase the Happy Valley Flat.  I so accept Mr Wu’s evidence because:

(1) Mr Wu is an independent witness.  There is nothing to show why he would have been prepared to give evidence which he knew was incorrect or which he in fact did not know or remember to support the Plaintiff’s case.

(2) He gave evidence in a straightforward and honest manner.  For example, he readily accepted under cross-examination that there were many things concerning the transaction which he could not now recall, in particular without the assistance of the file.  He also accepted that he did not advise the mortgagee (whom he also acted for in the transaction) the potential doubt of Madam Tang’s alleged beneficial ownership of the property in the mortgage given that Freddy had indicated that he would be the one providing the funds to purchase it.  Something now he accepted that he should have done.

(3) His evidence was not in any material way shaken under cross-examination.

45.  Save and except the matters set out in paragraphs 46, 48 and 49 below, I also find Freddy’s evidence under this issue to be reliable and credible, and accept the same:

(1) His evidence in this regard is consistent and materially unshaken under cross-examination.

(2) The evidence that he had paid for the purchase price is consistent with Mr Wu’s evidence (which I accept) that Freddy had indicated to him that he (Freddy) would be using his retirement fund to buy the flat.

(3) It is inherently more likely that Freddy would be responsible to provide the fund to purchase the Happy Valley Flat, as this is consistent with the following unchallenged facts and evidence:

(a) Madam Tang had not been having any meaningful income for many years since moving to live with Freddy.

(b) Madam Tang had since then all along been financially supported by Freddy.

(c) Freddy was going to receive a significant lump sum pension payment, which was much more than enough to pay off the purchase price of such a flat. 

46.  Insofar as if the gist of Freddy’s evidence under this issue is to suggest that he purchased the Happy Valley Flat for him (or for him and Madam Tang together) beneficially, I would deal with it below in the discussion relating to the second issue. 

47.  Mr Lee Yee Hung, counsel for the Defendant, submitted that for the following reasons, Freddy’s evidence was incredible and should not be accepted.

48.  First, Mr Lee said Freddy must have not been telling the truth when he said he had provided Mr Wu the money one or two days after he received the lump sum payment on 21 May 1991, as the mortgage was only discharged some 5 to 6 months later.  Mr Lee submitted that no reasonable person in Freddy’s position would have given his solicitor the money 5 to 6 months before it was necessary to do so.

49.  Although there is some force in this submission, I do not think this is sufficient to outweigh my acceptance of Freddy’s evidence for the reasons I have set out above.  In particular:

(1) I bear in mind that the transaction occurred more than 18 years ago, and it is not unlikely that Freddy might have remembered wrongly precisely when he actually paid the fund to Mr Wu’s firm.   The inaccuracy of this evidence does not in my view outweigh the general tenor of the objective and unchallenged facts I have set out above which support my acceptance of Freddy’s evidence.

(2) In any event, it is also Mr Wu’s unchallenged evidence that there were occasions where his client would give him funds to be deposited into an interest bearing account to satisfy some future liability.  In the premises, it cannot be said that it was inherently unlikely that Freddy would have done so, in particular when there was no suggestion that Freddy could have used those money for other more profitable purposes at that time. 

50.  Secondly, Mr Lee submitted that the evidence suggested that it could well be the case that Madam Tang had received all the HK$855,000 from the sale of the Jin Hui Flat, which provided her with the necessary financial ability to pay for the purchase price of the Happy Valley Flat.  This is so because (Mr Lee further said):

(1) Freddy said that he had only contributed HK$10,000 to the purchase of the Jin Hui Flat and had given all the profits upon its sale to Madam Tang.  Therefore, effectively none of the said sale proceeds went to Freddy.

(2) The Jin Hui Flat was sold for HK$855,000 when it was not subject to any mortgage or encumbrances.  This sum should therefore all go to Madam Tang.

51.  I do not accept Mr Lee’s submissions:

(1) It is entirely speculative for Mr Lee to say that Madam Tang should have had pocketed the HK$855,000 from the sale of the Jin Hui Flat.  A speculation which I find to be without sufficient basis for the following reasons.

(2) It is common ground that there was originally an equitable mortgage created over the Jin Hui Flat to secure a loan of HK$614,000.  Although this was redeemed sometime before the sale of the Jin Hui Flat, there is no evidence to indicate the source of the redemption fund.   There is certainly no evidence that the redemption fund belonged to Madam Tang herself.   If the fund had come from other sources (which is at least equally possible in the complete lack of evidence to show one way or the other), it in the ordinary course of event would have to be repaid.

(3) As such, in my judgment, it has not been shown that on the balance of the probabilities, it is more likely than not that Madam Tang had kept the entire sale proceeds (instead of just the profit made on the sale) of the Jin Hui Flat.

(4) Moreover, if (as suggested by Mr Lee) Madam Tang had in fact kept the entire HK$855,000 which she had used to pay for the purchase price of the Happy Valley Flat, this runs contrary to the objective fact that she had to take out a mortgage to purchase the flat, and the mortgage was only redeemed after Freddy’s retirement fund had become available.

C1.3  Conclusion under issue 1

52.  For the above reasons, I accept the relevant evidence of Freddy and Mr Wu, and find that Freddy had effectively paid for the purchase price of the Happy Valley Flat from his lump sum retirement fund.

C2.    Issue 2: Whether Freddy intended to give to Madam Tang the Happy Valley Flat as a gift

C2.1  Mr Choy’s case

53.  As Madam Tang has already passed away, Mr Choy is not in a position to adduce any direct or positive evidence to show that Freddy intended to purchase the Happy Valley Flat as a gift for Madam Tang.

54.  He however principally relies on the following to support his case:

(1) The doctrine of presumption of advancement.

(2) The fact that Freddy had always been giving Madam Tang one-third of his income, and whereas the value of the Happy Valley was also approximately one-third of the lump sum. This therefore is consistent with the presumption.

C2.2  Freddy’s case and evidence

55.  The burden is on Freddy to rebut the presumption of advancement.

56.  Freddy’s evidence in gist is that he had never intended to give the Happy Valley Flat to Madam Tang as a gift.  He described the circumstances leading to the purchase of the Happy Valley Flat in Madam Tang’s sole name as follows.

57.  Before moving out of the government quarter, Madam Tang convinced him to purchase a property in Happy Valley, and the prime intention of the purchase was for life-long residence and not for investment.  Madam Tang played the leading part in looking for a suitable property, and in eventually identifying the Happy Valley Flat.  She did not have the money to contribute to the purchase of it, but she had requested Freddy to purchase the flat in her sole name and, in order to convince him, she had pledged that she would not sell the Happy Valley Flat before his death.  As Freddy never doubted his late wife’s integrity and as requested by her, he purchased the Happy Valley Flat in her sole name on trust for him^[2].

58.  The essence of Freddy’s evidence is that the Valley Happy Flat was purchased in Madam Tang’s sole name because she had requested for that to be done, and Freddy only agreed to do so given her undertaking that she would not sell it before Freddy’s death.  He never intended it to be a gift for her.

C2.3  Discussion

59.  I do not accept Freddy’s evidence as to why he purchased the Happy Valley Flat in Madam Tang’s sole name.  After seeing him in Court, I find him to be an unreliable witness in relation to the evidence he gave under this issue.  He gave contradictory evidence, and was prepared to change and beef up his evidence whenever that suited his case.  Moreover, for no good reasons, some of his important and fundamental evidence were not contained in his affirmations filed in support of the application and were in any event inherently incredible.  

60.  My above conclusions are reached after assessing Freddy’s evidence as a whole.  But I will set out below what I regard to be some of the more notable and obvious examples of these unreliable features of his evidence.

61.  At trial, I asked Freddy why his wife had requested for the Happy Valley Flat to be registered in her sole name.

62.  He said he purchased the Jin Hui Flat in joint names with his late wife.  At that time, he was usually required to attend many and various meetings and conferences held both locally and overseas, and sometimes at very short notice.  Further, he might also have to go to see his ailing father in Toronto at very short notice.   As a result, he had found it very troublesome to purchase a property in his name, as he would be required to go to the solicitors’ office to sign documents amidst his busy schedules.  Given this experience, he decided not to purchase the Happy Valley Flat in his own name so as to avoid such troubles.

63.  I find this evidence incredible and do not accept it:

(1) This important part of the evidence came out only for the first time at trial and was not contained in the three affirmations Freddy has filed in support of the present application.  In my view, if what Freddy said were true and correct, there are no good reasons (and none is provided) as to why it was not initially included in Freddy’s affirmations, in particular when he specifically sought to explain in his 2^nd Affirmation the circumstances under which he purchased the Happy Valley Flat in Madam Tang’s sole name.  To me, it bears all the hallmarks of an afterthought.

(2) This is inconsistent with and is contrary to his evidence in the affirmation that it was Madam Tang who herself requested to have the Happy Flat purchased in her own name.  If Freddy’s above evidence were correct, it should have been his own idea and initiative to purchase the flat in Madam Tang’s name, but not Madam Tang’s own suggestion and request to do so.   When this inconsistency was pointed out to him by me, Freddy sought to explain it away by further saying (for the first time) that he had had a number of discussions with his late wife about his concern of the troubles in purchasing the flat in his name, and it was then Madam Tang suggested to him to purchase the flat in her sole name.   I do not accept this explanation.  This again is not mentioned at all in his affirmations, which I think should have been so included if it were true.  This explanation is also inconsistent with the tone of the evidence set out in his 2^nd affirmation, where, objectively looked at, he tried to give the readers the impression that it was Madam Tang’s own strong personal request and wish to have the flat purchased in her sole name. 

(3) All these show not only that Freddy’s evidence is contradictory and inconsistent, but also that he was prepared to change and beef up his evidence as he went along to “patch up” his case.

(4) In any event, I also find this evidence inherently incredible: Freddy admitted under my question that at the time when he was to purchase the Happy Valley Flat, practically he did not have any urgent or frequent meetings (locally or overseas) to attend given his imminent retirement.  Therefore, there was simply no question of the alleged possible anticipated troubles even if the Happy Valley Flat was to be purchased in his own name.  The explanation that he did not want to purchase the flat in his own name as he might have to visit his ailing father in Toronto in short notice is similarly incredible.  In my view, there could not be that many documents that would be required to be signed by him as a purchaser, which could not be arranged if in case he needed to go to Toronto at short notice.

64.  Freddy also gave evidence under cross-examination that after the sale of the Happy Valley Flat, Madam Tang had promised to keep the sale proceeds for him so that Freddy could purchase another retirement residence in a pleasure home in Kowloon side sometime in the future.

65.  This important part of the evidence is again not contained in Freddy’s three affirmations, which in my view should have been if it were true.  Freddy only said this for the first time when he was asked as to why he did not ask Madam Tang for the whereabouts and use of the sale proceeds.  This is yet another example of Freddy’s readiness to beef up his evidence as he went along in trying to improve and patch up his case. 

66.  Finally, when pressed further under the Court’s questions, Freddy at the end gave the evidence that he purchased the Happy Valley Flat for himself and Madam Tang, and he should therefore have half of the interest in the sale proceeds.   I reject this evidence as well:

(1) This is entirely inconsistent with his evidence all along that he was the sole beneficial owner of the Happy Valley Flat.

(2) This was never mentioned in his supporting affirmations, but was raised for the first time towards the end of his oral evidence.

(3) This is also inconsistent with his claim for a declaration that effectively he has the entire beneficial interest in the HK$1,800,000 and the shares.

(4) There are no good reasons why, if this were true, the Happy Valley Flat was not purchased in the joint name of Madam Tang and him.  I repeat my observations at paragraphs 62 and 63 above. 

67.  For the above reasons, I reject Freddy’s evidence in explaining why he had purchased the Happy Valley Flat in Madam Tang’s sole name. 

68.  Further, I also find the following objective evidence to be consistent with the intention of an advancement:

(1) The purchase price of the Happy Valley Flat amounted to approximately one-third of the lump sum retirement payment.  Purchasing it as a gift for Madam Tang is consistent with Freddy’s practice to give one-third of his income to Madam Tang for predominantly her use.   This is further underlined by the fact that had Freddy not opted for the retirement plan to take a lump sum payment, he would have been able to receive a much larger monthly retirement payment, which in turn would have resulted in Madam Tang receiving a much larger one-third monthly payment out of this. 

(2) Freddy confirmed under cross-examination that he did not participate in the sale of the Happy Valley Flat and was not concerned with the sale price.    He also had not asked for the return or the whereabouts of the sale proceeds.  In this regard, I repeat my comments at paragraphs 64 and 65 above. 

69.  In the premises, I am not satisfied that Freddy has rebutted the presumption of advancement.  In coming to this conclusion, I have reminded myself of the following principles:

(1) The presumption of advancement is just a judicial instrument of last resort and could be rebutted even by only slight accepted evidence of a contrary actual intention:  McGrath v Wallis [1995] 2 FLR 114 at 115A; Overseas Trust Bank v Lee See Ching [1999] 3 HKC 197 at 201E to G per Godfrey JA.

(2) However, given the local context in Hong Kong, the presumption of advancement should not be treated as so easily displaceable as that accepted in the English jurisprudence:  Cheung Pui Yuen & Others v Worldcup Investments Inc & Ors (unrep., FACV 34 of 2007, 29 October 2008, Bokhary, Chan, Ribeiro, PJJ, Litton and Lord Scott NPJJ) at para 7 per Litton NPJ.

C2.4  Conclusion under issue 2

70.  I find that Freddy purchased the Happy Valley Flat in Madam Tang’s name as a gift for her, and she was not holding it on trust for him.   It follows that Freddy does not have any beneficial interest in the sale proceeds thereof or the HK$1,800,000 and the shares. 

D.      Conclusion

71.  For the above reasons, Freddy has failed to show that he has any beneficial interest in the HK$1,800,000 and the shares.    I therefore dismiss his claim.

72.  Costs should follow the event.  I further make an order nisi that costs of this action be to the Defendant to be taxed if not agreed.  Unless any of the parties applies by Summons to vary the same, the costs order nisi shall be made absolute 14 days from today.