NG CHO CHU JUDY v. CHAN WING HUNG

DCMP 2498/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2498 OF 2014

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DECISION

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INTRODUCTION

1.  This is the hearing of an application by the plaintiff for final judgment for declaratory relief against the defendant pursuant to RDC Order 28 rule 4.

2.  The dispute concerns the beneficial ownership of a flat in Cheong Wing Court, 5 Water Street, Hong Kong (“the Property”).

3.  The defendant has been the sole registered owner of the Property since 31 July 2007.

4.  The plaintiff claims that, pursuant to a Deed of Trust dated 10 June 2007 (“the Deed of Trust”), she and the defendant have been the beneficial joint tenants of the Property since then.  In this action, she seeks declaratory relief in recognition of her beneficial ownership in the Property against the defendant.

FACTUAL BACKGROUND

5.  The plaintiff and the defendant had lived together as cohabitees at another property in Tin Hau, referred to as “the Lin Fa Kung Property” in the affidavit evidence, since 2004. This property was owned by the defendant, who had inherited it from his late father.

6.  The couple moved to reside at the Property after its acquisition in July 2007.  There was a serious breakdown in the relationship in 2014 and the plaintiff moved out of the Property.  The break up did not happen in harmonious circumstances. Scuffles broke out between the couple.  The police were involved, with criminal charges and personal injuries claims to follow as a result.

7.  The following matters are common ground or not disputed.

8.  Shortly prior to the acquisition of the Property, the plaintiff and the defendant took part in the following property transactions:-

(a) The execution of a power of attorney by the defendant to authorise the plaintiff to deal with the sale of the Lin Fa Kung Property on his behalf in February 2007.  The defendant retained Leonard KL Heung & Co (“LHC”) to act for him.  The handling solicitor was Mr Tse Wai Hang (“Mr Tse”).

(b) The sale of the Lin Fa Kung Property in March 2007.  LHC was retained by the defendant for this purpose.  At that time it was already contemplated by the parties that the sale proceeds would be used to buy another property for their occupation.

(c) The attempted purchase of a flat in Kennedy Town, referred to as “the Catchick Street Property” in the affidavit evidence, in April 2007.  However, the purchase did not go through due to some unauthorised structures and title problems.  It was shortly after this aborted purchase that the Property was identified and acquired in July of the same year. 

9.  In respect of both the aborted purchase of the Catchick Street Property and the purchase of the Property, Mr Tse acted for both the plaintiff and the defendant.

10.  As regards the acquisition of the Property, the defendant signed the provisional agreement for sale and purchase (“the Provisional Agreement”) with the vendor on 10 June 2007.  An assignment was executed in his favour on 31 July 2007.

11.  I would pause here to note that it is common ground that Mr Tse first came to know of the plaintiff and the defendant in February 2007 when the defendant was about to sell the Lin Fa Kung Property.  Mr Tse had been introduced to the couple by the vendor of that sale.  Prior to that, they had no prior dealings with each other. 

THE PLAINTIFF’S CASE

12.  It is the plaintiff’s case that when the Provisional Agreement was entered into, the plaintiff and the defendant agreed that the Property was to be held by them as joint tenants but it would be registered in the sole name of the defendant.

13.  The Deed of Trust was executed on 10 June 2007, the day on which the Provisional Agreement was entered into by the defendant, to give effect to this agreement.  The Deed was signed by the plaintiff and the defendant, in each case in the presence of Mr Tse.  There was also a remark made at the bottom of the Deed to the effect that it was interpreted by Mr Tse.

14.  As the plaintiff’s case is primarily premised upon the Deed of Trust, it is necessary to set out the relevant terms.

15.  Recital (B) stated:-

“It has been agreed between the Trustee [ie, the defendant] and the Beneficiary [ie, the plaintiff] that the deposit paid on entering into the said preliminary sale and purchase agreement, as well as the balance of the deposit and the balance of the purchase price and the costs and expense for completing the purchase of the Property was and will be jointly provided by the Trustee and the Beneficiary.”

16.  Recital (C) stated:-

“The Beneficiary is desirous of not to be made a party to the formal Agreement for Sale and Purchase and also the Assignment of the Property.”

17.  Clause 1 stated:-

“The Trustee hereby declares that the Trustee will henceforth hold all estate, right and interest of and in the Property, and all the rents, income and profits thereof UPON TRUST for the Trustee and the Beneficiary as JOINT TENANTS.”

18.  Clause 2 stated:-

“The Trustee hereby undertakes that the Trustee will at the request costs and direction of the Beneficiary ASSIGN the Property to the Beneficiary to the intent and effect that the Trustee and the Beneficiary will hold the Property as JOINT TENANTS and that the Trustee will execute and deliver such instrument and perform such acts as may be directed by the Beneficiary and necessary for such purpose.”

19.  The plaintiff contends that the Deed of Trust is valid and binding on the parties. 

20.  As to the contribution of the purchase price and the completion expenses, the plaintiff’s case is that the defendant had owed her money prior to the sale of the Lin Fa Kung Property and therefore a large part of the sale proceeds of that property should have been paid to the plaintiff as repayment of the debt but in fact it was applied towards the purchase of the Property which formed the plaintiff’s contribution to the purchase of the Property.  Her contribution was half of the total costs as confirmed by Recital (B) in the Deed of Trust.  In fact, the defendant had to give the plaintiff a further sum of $280,000 out of the sale proceeds as further repayment of the debt. 

21.  In gist, therefore, it is the plaintiff’s case that:-

(a) She made contribution to half of the purchase price of the Property and the associated expenses when it was acquired in July 2007;

(b) The Deed of Trust is valid and binding; and

(c) Accordingly, the defendant has held the Property on trust for himself and the plaintiff jointly.

In her originating summons, apart from declaratory relief, she also seeks an order for sale.  At the hearing, Mr Ching Ming Yu, appearing for the plaintiff, confirmed that she will not pursue this relief in these proceedings.

THE DEFENDANT’S CASE

22.  The defendant does not deny that he had signed the Deed of Trust.  It is also not disputed that he and the plaintiff had jointly instructed Mr Tse to prepare the Deed of Trust.  However, he disagrees that the purpose of the Deed was to give effect to the agreement as alleged by the plaintiff.  In fact, there was, says the defendant, no such agreement in the first place and the Property was solely owned by him and he had never intended to give away any interest in it to anyone.

23.  He explained in his affirmation how the Deed of Trust came about.  It was part of his estate planning which purpose was to make sure that the Property would be applied by the plaintiff for the care of his mother in the event of his death.  He said (at §6 of his 2^nd Affirmation):-

“Signing the said Deed of Trust was to give effect to my estate planning whereby the Plaintiff will, upon my death but not earlier, hold and deal with the Property for the purpose of care and benefit of my mother, to which the Plaintiff agreed, provided that the said Deed of Trust has not been revoked or terminated. The Plaintiff has promised me that she will honour my wishes and will not take the Property as if it were her own assets.” (emphasis added)

24.  The defendant went to some length in his affirmations explaining why he, amongst his siblings, had shouldered the primary responsibility and the financial burden for the care of his mother, who was elderly and mentally ill, by referring to the personal vow he made to his late father in 1990 and a family agreement in 1997 amongst the siblings.  It is not necessary to set out the detailed account here.  Suffice it to say that the defendant’s case is that his estate planning was made against the background of his having primary responsibility to look after his mother.

25.  Pausing here, it is immediately apparent that the content of the Deed of Trust plainly does not reflect the estate planning intention as alleged by the defendant. 

26.  The defendant made an attempt in his 3^rd Affirmation to explain as follows:-

“54. I remember requesting or suggesting the making of a Will to bequest the Property to the Plaintiff under my Will. However, the Plaintiff objected to this idea. I also remember a suggestion by Mr. Tse and/or the Plaintiff to include the Plaintiff as one of the registered owner of the Property. I disagreed to this suggestion and made it clear that it is my property and therefore will not agree to include anyone else as one of the owners. After some discussion between the Plaintiff and Mr. Tse Wai Hang, a solicitor of LHC, they came up with the idea of signing a deed of trust.

55. At the time, I did not understand the concept and meaning of a trust. However, as I trusted the Plaintiff and as I have emphasised to Mr. Tse that I would agree only to an arrangement that will operate and take effect in the same way as a will, I agreed to and signed the Deed of Trust believing that it will fulfil my estate planning purpose.” (emphasis added)

27.  The defendant further said that he did not understand the Deed of Trust as it is in English. He received education up to Form 1 only and has a limited command of the English language.

28.  As to the contribution of the purchase price of the Property, the defendant’s case is, in gist, that the sale proceeds of the Lin Fa Kung Property were used to purchase the Property and that the plaintiff had made no contribution at all as she did not have the financial means.  The defendant denies that he was then indebted to the plaintiff and further denies that he repaid the indebtedness by way of set-off against the sale proceeds of the Lin Fa Kung Property as alleged by the plaintiff.  As to the payment of $280,000 out of the surplus to the plaintiff (see §20 above), the defendant says that the payment was for the renovation of the new home.

29.  The defendant’s version of event as to what was agreed then is thus diametrically opposite to the plaintiff’s account.  The plaintiff says that the beneficial ownership of the Property was joint as provided for in the Deed of Trust whereas the defendant says that the plaintiff had in fact promised that she would not take beneficially.

30.  In summary, it is the defendant’s case that:-

(a) The plaintiff did not make any contribution to the acquisition costs of the Property;

(b) The plaintiff promised then that she would not take the Property beneficially and that she would hold the Property for the mother if the defendant died early;

(c) The Deed of Trust is not valid or binding as it does not reflect the estate planning arrangement; and

(d) Accordingly, the plaintiff has never had any beneficial interest in the Property.

THE EVIDENCE OF MR TSE

31.  Given that the validity of the Deed of Trust forms the crux of the dispute, steps were taken in these proceedings to obtain the evidence of Mr Tse, who had been retained by the parties to prepare the document in 2007. 

32.  With the parties expressly waiving any legal professional privilege they might have, Mr Tse made an affirmation, in which he gave a detailed account of his retainer in relation to the conveyancing transactions which took place in 2007.  In addition, each party had put forward to Mr Tse a list of questions and he also included his detailed answers in his affirmation.  Copies of the files kept by LHC on the acquisition of the Property, which comprise draft documents and correspondence with the vendor’s solicitors etc, are also disclosed.

33.  The material parts of the evidence comprise what was said and done when Mr Tse acted for the parties in relation to the aborted purchase of the Catchick Street Property and the subsequent acquisition of the Property.  His evidence in this regard is of significant relevance to the determination of the plaintiff’s present application.

34.  In respect of the Catchick Street Property, Mr Tse said:-

(a) The plaintiff and the defendant together entered into a provisional agreement.

(b) They then engaged LHC to act for them.

(c) They expressed to Mr Tse that they would prefer not to reveal on public records that the plaintiff was one of the owners.

(d) Mr Tse advised that they could first sign a nomination to state that the purchase was by the defendant solely but then simultaneously execute another deed to confirm that the defendant nonetheless would hold the property on trust for himself and the plaintiff as joint owners.

(e) Following his advice, a Nomination and a Deed of Trust were signed at the same time and both dated 20 April 2007.

(f) The plaintiff and the defendant confirmed to Mr Tse that they were each to bear one half of the purchase price.

(g) The above arrangement was also reflected in a letter written by LHC to the Stamp Office of the Inland Revenue Department dated 5 May 2007 in response to the latter’s enquiries.

35.  Further, in respect of the Property, Mr Tse confirmed thus:-

(a) The plaintiff and the defendant again engaged LHC to act for them.

(b) The defendant alone entered into a provisional agreement.

(c) They instructed Mr Tse to prepare, same as the Catchick Street Property, a deed of trust to record that they in fact were to hold the Property as joint tenants.

(d) Mr Tse said (at §22 of his affirmation):-

“It was under such circumstances the Deed was prepared, approved and executed by the Defendant and also the Plaintiff. The purpose and intention of the Plaintiff and the Defendant, insofar as they instructed and disclosed to me, was the same as in the aborted purchase of the Catchick Property, namely the purchase would be in the sole name of the Defendant but in fact beneficially by the Plaintiff and the Defendant jointly.” (emphasis added)

36.  I further set out some replies made by Mr Tse in response to the questions put to him by the parties:-

(a) As to who gave instructions to him with regard to the Deed of Trust, Mr Tse confirmed that it was the plaintiff and the defendant together and that he had gone through the contents of the Deed with both of them immediately before it was executed.

(b) As to whether the defendant had ever informed Mr Tse about his estate planning, Mr Tse answered no and stated that had he been so informed, he would not have advised the parties to execute the Deed of Trust and “would not have allowed the Deed to be put through by [his] firm”.

(c) As to the financial situation of the parties and their respective contributions to the purchase price of the Property, Mr Tse said at that time he was told that the plaintiff had assisted the defendant financially and that both had made contributions but he did not know the precise details. 

37.  It can be seen that Mr Tse’s evidence largely corroborates the plaintiff’s and refutes the defendant’s.

ISSUES IN DISPUTE

38.  The primary question is whether final judgment should be granted to the plaintiff with respect to her alleged beneficial interest pursuant to Order 28 rule 4.

39.  In his written submissions lodged shortly before the second day of the hearing, however, Mr Norman Nip, counsel for the defendant, raised for the first time a jurisdiction point, which if upheld, would mean that this case falls outside of the jurisdiction of the District Court. 

40.  At the hearing, it was agreed that I should first determine the jurisdiction issue and if I agree with the defendant on this point, that would be the end of the matter meaning that I would have no jurisdiction to determine the Order 28 rule 4 application.  On the other hand, if I am with the plaintiff, I should then proceed to consider the substantive merits of her application.

JURISDICTION

41.  The District Court is a court of limited civil and criminal jurisdiction.  It only has such jurisdiction and powers as are conferred upon it by the District Court Ordinance, Cap 336 (“the Ordinance”) and other enactments of law in force: section 3(2) of the Ordinance.

42.  Practice Direction 27 provides general guidance on civil proceedings in the District Court and §4 imposes a requirement that all writs and originating summonses “should contain a plea that the relief sought do fall within the jurisdiction of the District Court, specifying which section(s) of sections 32 to 39 of the [Ordinance] do apply to the case”.

43.  Here, the originating summons refers to section 52 of the Ordinance in its heading and contains a statement in its body that the case is within the jurisdiction of the District Court.  Further, the plaintiff has produced affidavit evidence confirming that the rateable value of the Property is below the monetary limit of $240,000 set out in the Ordinance.

44.  A specific point relating to the rateable value was raised by the court on the first day of the hearing, which Mr Ching answered satisfactorily.  As noted above, when Mr Nip lodged his further written submissions prior to the second day of the hearing, he mounted a challenge for the first time that the plaintiff has failed to demonstrate that the District Court has jurisdiction to hear the present case.

Issues raised at the hearing

45.  Mr Nip submitted that the only sections which the plaintiff could potentially rely on are sections 35 and 37(1)(b) of the Ordinance.

46.  Section 35 provides:- 

“The Court has jurisdiction to hear and determine any action for the recovery of land, where the annual rent or the rateable value of the land, determined in accordance with the Rating Ordinance (Cap. 116), or the annual value of the land, whichever is the least, does not exceed $240,000.”

47.  Section 37(1)(b) provides:- 

“(1) Subject to the maximum limits in amount or value set out in subsection (2), the Court has the jurisdiction of the Court of First Instance to hear and determine the following proceedings–

……

(b) proceedings for the execution of a trust or for the declaration that a trust subsists or proceedings under section 3 of the Variation of Trusts Ordinance (Cap. 253);

……

(2) The maximum limits in amount or value referred to in subsection (1) for–

……

(b) in the case of subsection (1)(b), an estate or fund subject or alleged to be subject to the trust;

…

are … (iii) $3,000,000, where the proceedings wholly involve or wholly relate to land; ……”

48.  Mr Nip’s submission was that section 35 does not apply as this case is not concerned with the recovery of land and that the plaintiff having omitted to adduce evidence on the value of the Property, she fails to bring herself within section 37(1)(b).  Further, section 52 deals with the jurisdiction to grant injunctions and declarations and the section is thus concerned only with the type of relief that can be granted and does not operate to confer substantive jurisdiction on the District Court.

49.  In response to this, the plaintiff promptly obtained a valuation report showing that the Property is worth $5,800,000.  Since the plaintiff is claiming only one-half of the beneficial interest, that brings, argues the plaintiff, the case under the monetary threshold of $3,000,000 applicable to section 37(1)(b).

50.  In addition to the above sections, I drew the parties’ attention to section 36 which applicability should also be considered in the present context, in the event that all the above sections are not applicable. 

51.  Section 36 provides:- 

“The Court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the Court and in which the title to an interest in land comes into question if–

(a) for an easement or licence, the rateable value, determined in accordance with the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the land, over which the easement or licence is claimed, does not exceed $240,000; or

(b) for any other case, the rateable value, determined in accordance with the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the land, does not exceed $240,000.” (emphasis added)

52.  There are two conflicting District Court decisions on the interpretation of section 36, in particular the “otherwise” wording as italicised above.  The point in issue is this – in a case where land title is in question but where the case does not come within any other section in the Ordinance, does section 36 confer jurisdiction on the District Court to hear such case, provided that the monetary limit of the rateable value of the land is not exceeded?  I shall refer to this category of cases as “pure” title cases below. 

53.  In Wong Kum Chi v Lee Tit Ying [2002] 1 HKLRD 420, HH Judge Lok (as he then was) held that the section should be construed literally and answered the question in the negative because of the “otherwise” wording.  In Ma Yu Cheung v Yu Wai Chun DCMP 268/2001, 22 November 2001, HH Judge Andrew Cheung (as he then was) held that the section should be construed liberally and answered the question in the affirmative, notwithstanding the “otherwise” wording. 

54.  The present case involves a dispute concerning the beneficial title of the Property.  If I come to the view that no other section of the Ordinance confers jurisdiction on this court to hear this case, it is then a “pure” title case.  Section 36 will become relevant and how it should be construed will conclusively determine the issue of jurisdiction.

55.  In summary, I need to decide whether the District Court has jurisdiction to hear the present case pursuant to sections 35, 36, 37(1)(b) or 52 of the Ordinance.  If none of these sections apply, the District Court will have no jurisdiction and it is up to the plaintiff to apply to have the case transferred to the Court of First Instance in order to proceed with it.

Section 35

56.  Section 35 confers jurisdiction where an action is for the recovery of land.  The original reliefs sought by the plaintiff were declarations and an order for sale.  She is not seeking possession of the Property.  Clearly, the plaintiff’s claim does not come within section 35.

Section 37(1)(b)

57.  Section 37 confers equity jurisdiction on the District Court by defining discrete types of equity cases and prescribing a monetary limit for each type. 

58.  The plaintiff’s claim is that the Deed of Trust gives rise to a valid and binding trust over the entire Property in favour of herself and the defendant.  Section 37(1)(b) is potentially engaged.  The question here is whether the monetary limit is exceeded.  The plaintiff says it is not since the plaintiff’s alleged beneficial interest only extends to half of the Property, ie, $2,900,000, whereas the defendant says the limit is exceeded since one should look at the value of the entirety of the alleged trust, ie, $5,800,000, not just the part over which relief is claimed.  The dispute therefore turns on the construction of the words “an estate or fund subject or alleged to be subject to the trust” in section 37(2)(b) – does it refer to the value of the entire trust, of which the claimed amount forms only part, as contended by the defendant, or just the value of the claimed amount, as argued by the plaintiff?

59.  It is clear in my view that the defendant’s contention is correct.  That construction accords well with the plain meaning of the wording.  Mr Nip also referred me to an authority in support.  In Re CYC [2008] 2 HKLRD 317, HH Judge Marlene Ng decided (at 336) that the maximum limit prescribed for section 37(1)(a), which concerns “an estate of a deceased person”, is referable to the value of the entire estate and not the value of the plaintiff’s claim.  Mr Nip argued that the same construction should apply to section 37(1)(b) by analogy.  I agree. It should be noted that although the decision in Re CYC was subsequently overruled in Re Estate of Chow Nai Chee [2010] 5 HKLRD 640 at 649, the view expressed by Judge Ng on the construction of the section 37(1)(a) limit was not discussed or overturned in the latter case.

60.  Accordingly, the monetary limit prescribed for section 37(1)(b) is referable to the value of the entire trust as alleged, namely, $5,800,000.  The maximum limit having been exceeded, the plaintiff cannot rely on section 37(1)(b) to establish jurisdiction.

Section 52

61.  Section 52(1)(c) confers jurisdiction on the District Court “to grant and to enforce injunctions of whatsoever nature and as the case may require and to make binding declarations of right” in all matters affecting immovable property, subject to the monetary limit of the rateable value of the Property not exceeding $240,000.

62.  This is the section referred to in the originating summons.  However, Mr Ching did not seriously rely on this section at the hearing to establish jurisdiction.  I agree with Mr Nip’s submission that it cannot be so relied upon, for the reasons set out in §48 above. Judge Cheung in Ma Yu Cheung made this remark (at §23):-

“[Section 52] …… only relates to the type of relief a court may grant in an action which it has jurisdiction to hear, but does not, in my judgment, deal with what type of actions the court may hear.” (original emphasis)

63.  The same view was expressed by Judge Lok in Wong Kum Chi (at §9) referring to such jurisdiction as “ancillary jurisdiction”.  This view is also reinforced by §4 of Practice Direction 27 which does not include section 52 as one of the sections which confer jurisdiction.

64.  Accordingly, section 52 is of no assistance to the plaintiff.

Section 36

65.  The issue concerning section 36 is whether it confers jurisdiction on the District Court to hear “pure” title cases. 

66.  These may include cases concerning land but where possession is not sought as a relief.  One example which readily springs to mind is where a squatter seeks a possessory title against a paper owner claiming adverse possession.  In this scenario, since the squatter is already in possession, his action is not one of recovery of land.  Further, his cause of action does not lie in contract or tort.  The equity jurisdiction is not invoked because the case does not fall within any of the discrete categories set out in there.  Does the squatter’s claim come within section 36?

67.  Wong Kum Chi is also a “pure” title case.  There, the defendant unjustifiably lodged a document for registration in the Land Registry against the subject property, thus introducing doubt on the title of the registered owner.  The owner applied to the District Court for an order to vacate the purported registration.  And he sought to rely on section 36 to establish jurisdiction, all the other sections of the Ordinance being inapplicable on the facts of the claim.

68.  It was held that section 36 did not give the District Court jurisdiction over the claim. Judge Lok explained as follows:- 

“7. After perusing the wordings of the said section in some detail, it is clear that section 36 is not a provision which, subject to the monetary limits stated therein, confers jurisdiction on the District Court to deal with all actions relating to title in land. In other words, section 36, unlike sections 32, 33, 35 and 37, is not a "jurisdiction-conferring" provision. The important wordings are definitely "which would otherwise be within the jurisdiction of the Court", and so the effect of this section is impose an addition limitation on the District Court to deal with actions involving title in land. Hence, if an action based on, say, breach of contract also involves title in land and the District Court wants to exercise jurisdiction to hear the claim, then apart from the monetary limit of $600,000 as provided for in section 32, the rateable value or the annual value of the land concerned must not exceed the limits as provided for in section 36.

8. To me, the heading of section 36, which reads as "Jurisdiction where title in question", is quite misleading. It seems to suggest that the District Court, subject to the monetary limits stated therein, does have jurisdiction to deal with all kinds of action involving title in land. Unfortunately, this is not the case.

……

11. Despite what I have mentioned above, I am not suggesting that the District Court has no jurisdiction to hear any actions involving title in land. In most of these cases, the plaintiff's claim would fall within one of the categories of cases mentioned in the other “jurisdiction-conferring” provisions, and in such circumstances, the District Court can properly exercise its jurisdiction to hear the matter. Hence, practitioners should be cautious in determining the proper forum for commencing such kind of action.” (emphasis added)

69.  Judge Lok adopted and applied the same literal interpretation of section 36 in a subsequent land case – see Harvest Development Ltd v The Personal Representative of the Estate of Liu Wa Fuk Deceased DCMP 1367/2006, 28 August 2007 at §7.  These two decisions of Judge Lok were mentioned in passing in the Court of First Instance decision in Fu Sum v Fu San Fat [2008] 5 HKLRD 271 at §25.

70.  This is to be contrasted with the earlier decision in Ma Yu Cheung, another “pure” title case, in which Judge Cheung reached the opposite conclusion, namely, that upon a liberal interpretation, section 36 is a jurisdiction-conferring provision, which gives the District Court the power to hear “pure” title cases and such power is not dependent on whether the action is “otherwise” within the jurisdiction of the court.  It is necessary to set out below in full his reasoning:-

“23. Now what about section 36?  As I said, under section 36, the caption of which reads “Jurisdiction where title in question”, the court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the court and in which the title to an interest in land comes into question if certain jurisdictional limits are not exceeded.  On the face of it and in a careful literal reading, the section itself does not confer any jurisdiction as such.  It simply says that the court has jurisdiction to hear and determine any action “which would otherwise be within the jurisdiction of the court.”  In other words, the section does not confer positively any jurisdiction on the court; it simply removes a hurdle to the court's having jurisdiction, the hurdle being that the action is one concerning title to land if certain restrictions laid down in subsection (a) and (b) of section 36 are not exceeded. In other words, in order for the court to have jurisdiction to hear the case concerning title to land, the court must have otherwise got jurisdiction elsewhere. By “elsewhere”, I am excluding section 36 itself. ……

……

25. That I must say is a fair reading of section 36.  But if that is the correct reading of section 36, it must mean that the court does not have any jurisdiction in the present case to decide the title question or make the relevant declaratory relief relating to title because, as I say, this case is not concerned with an action founded on contract.  This is, as I say, fairly and squarely a title case with the Plaintiff seeking a declaration of title against his vendor and a prior intending purchaser whose contract with his vendor has been registered with the Land Registry.  If section 36 does not by itself confer on the court jurisdiction to hear such a title action, then I cannot grant any relief to the Plaintiff, no matter how fair and just I would otherwise have considered it would be to do so.

26. But is that the correct construction?  The District Court Ordinance was amended last year to give the court extended jurisdiction in civil matters.  The monetary jurisdiction has been increased from the previous amount of $120,000 to $600,000 and other jurisdictions have been increased as well or added to the District Court, and, amongst others, section 36 has been added alongside section 35 and section 37.  In my judgment, the intention behind these amendments in general, and the intention behind section 36 in particular, must have been to give the court some, albeit not unlimited, jurisdiction to deal with, amongst other things, land matters and one important land matter which the courts deal with all the time is a title problem.

27. So, in my judgment, section 36 should not be construed in such narrow way as I have indicated, although a literal reading of section 36 would require such a construction.  For my part, I am quite prepared to construe section 36 to mean that the court has jurisdiction to hear any action concerning title to an interest in land if the jurisdictional limit set down in subsection (a) or (b) has been satisfied.  In order to literally achieve this construction, I must confess one needs to construe, where necessary, the word “and” appearing immediately after the phrase “within the jurisdiction of the court” as “or”.  So, in other words, in my reading of section 36, the section should be construed as saying, where necessary (i.e. if the other sections do not confer jurisdiction), that the court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the court or in which the title to an interest in land comes into question if the jurisdictional limit in subsection (a) or (b) is not exceeded.

28. Now, this reading of mine would mean that if under other parts of the Ordinance the court has jurisdiction to hear a case, and the case contains a title question, then the case can be heard by the court provided that the jurisdictional limit in subsection (a) or (b) has not been exceeded. Alternatively, if the case concerns title to land, then again, if (a) or (b) is not exceeded, the court equally has jurisdiction to hear the case.  That, in my judgment, accords well with the intention behind the amendments to the District Court Ordinance last year.  Although some violence is done to the wording of section 36, in my judgment, that is justified by the circumstances, particularly if one bears in mind section 19 of the Interpretation and General Clauses Ordinance, Cap. 1, which reads;

“An ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the ordinance according to its true intent, meaning and spirit.”

29. Adopting such legislatively ordained approach to statutory interpretation in the case of section 36 of the Ordinance, I have come to the construction of section 36 I mentioned above.” (emphasis added)

71.  So, here, on the authorities, we have two diametrically opposite interpretations of section 36.

72.  The two decisions were made at around the same time – November 2001 and January 2002, respectively.  It is of note that since then Wong Kum Chi seems to have gained general recognition as stating the position of the law, at least as far as practitioners’ books are concerned.  See the commentary at §36.03 in The Annotated Ordinance of Hong Kong, Cap 336 (2015 Reissue) which starts with a general statement that section 36 is not a jurisdiction conferring provision, citing Wong Kum Chi and referring to Ma Yu Cheung only by comparison at the end.  The relevant paragraph in Halsbury’s Laws of Hong Kong, Vol 19, 2015 Reissue contains a similar statement and does not even mention Ma Yu Cheung – see §125.227 at footnote 2. 

73.  It is also curious to note the subsequent development of Wong Kum Chi.  Upon holding that the District Court had no jurisdiction to hear the case, Judge Lok transferred it to the Court of First Instance.  Some nine months later in October 2002, it was Judge Cheung, then sitting as a deputy High Court judge, who heard and ruled on the substantive application.  In his written decision (reported at [2003] 1 HKLRD 594), Judge Cheung twice referred to Judge Lok’s decision on the jurisdiction point (see §§7 and 19) without making any substantive comment on it.  Notwithstanding this, I do not think that Judge Cheung should be taken to have changed his mind and agreed with the earlier Wong Kum Chi decision on the jurisdiction point.

74.  In the circumstances, the construction of section 36 is still very much in issue.  At the hearing, not surprisingly, Mr Nip invited the court to follow the literal interpretation in Wong Kum Chi whereas Mr Ching invited the court to adopt the liberal interpretation in Ma Yu Cheung. 

75.  In order to answer the question, the court must interpret section 36 in accordance with the applicable rules of statutory interpretation.

Legal principles on statutory interpretation

76.  The approach to statutory interpretation is well-established.

(a) The task of the court is to ascertain the intention of the legislature as expressed in the legislation: Town Planning Board v Society for the Protection of the Harbour Ltd (2004) 7 HKCFAR 1 at §28.

(b) The court adopts a purposive approach.  The statutory language must be understood in its context and having regard to its purpose.  The court should adopt an interpretation which is consistent with and gives effect to the legislative purpose and should avoid an interpretation which is inconsistent with and does not serve that purpose: Town Planning Board at §§28-29 and HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568 at §12.

(c) Context and purpose are considered in the first instance when interpreting the words used and not only at some later stage when an ambiguity may be thought to arise: HKSAR v Lam Kwong Wai (2006) 9 HKCFAR 574 at §63; Cheung Kwun Yin at §12; Vallejos Evangeline Banao v Commissioner for Registration (2013) 16 HKCFAR 45 at §§77-78.

(d) The purpose and proper context of the legislation can be gathered and ascertained from (i) the legislation itself, (ii) the existing state of the law, (iii) where the legislation implements the recommendations of a report, the report, (iv) the Explanatory Memorandum or Objects and Reasons annexed to a bill, (v) a statement made by the responsible official of the government in relation to the bill in the Legislative Council as long as such statement is used to identify the legislative purpose and is not to be treated as the meaning of the legislation: Cheung Kwun Yin at §14.

(e) The court should also pay due regard to the legislative history of the enactment as the proper interpretation of a statute is informed by an examination of its history, including the pre-enacting, the enacting and the post-enacting history: Bennion on Statutory Interpretation (6^th ed) at section 208, p548.

(f) The court may imply words into the statute, so long as in doing so, it is giving effect to the legislative intention as ascertained on a proper application of the interpretive process.  What the court cannot do is to read words into a statute in order to bring about a result which does not accord with the legislative intent properly ascertained: Lam Kwong Wai at §63.

77.  Applying the above principles, I shall first identify the purpose of the Ordinance and ascertain the overall context in which the provisions relating to the civil jurisdiction of the District Court, including in particular section 36, are to be construed.  I shall do so with reference to materials admissible for this purpose.

78.  I shall, however, begin by setting out a brief legislative history of the Ordinance and its amendments throughout the years, with a focus on the provisions relating to the civil jurisdiction of the District Court.  

Legislative history

79.  The District Court was established under the District Court Ordinance, 1953.  It has undergone many amendments throughout the years which have brought about, amongst other things, a gradual increase in the monetary limits applicable to the jurisdiction of the court.  More specifically, the legislation has undergone two major revamps in 1962 and 2000.  I set out below the major developments.

80.  As regards the District Court Ordinance, 1953:-

(a) It was passed into law in January 1953.

(b) It conferred limited civil jurisdiction on the District Court pursuant to section 14 and the First Schedule.  The effect, in gist, was to transfer the summary jurisdiction then exercisable by the Supreme Court (except Admiralty jurisdiction) to the District Court.

(c) Two matters are of note – one relating to the format and the other the content.  First, this Ordinance conferred the jurisdiction by referring to and incorporating the relevant provisions in the Supreme Court (Summary Jurisdiction) Ordinance, Cap 5.  Secondly, as far as land cases are concerned, the jurisdiction only covered cases for the recovery of land.  Cases concerning questions of land title were not covered at all.

81.  As regards the 1962 amendments:-

(a) The extensive amendments were passed into law in June 1962 and gave rise to two Ordinances – the original District Court Ordinance, 1953, as amended and a new Ordinance entitled District Court (Civil Jurisdiction and Procedure) Ordinance, 1962 (“the 1962 Ordinance”).

(b) The underlying structure was that the amended 1953 Ordinance was to provide for the constitution of the District Court, its criminal jurisdiction and matters common to both its civil and criminal jurisdictions whereas the 1962 Ordinance exclusively covered matters concerning the court’s civil jurisdiction.

(c) The amendments implemented the recommendations contained in the “Second Interim Report of the District Court Committee” made in November 1959.  The Committee had been appointed by the Chief Justice to consider and advise on the revision of the 1953 Ordinance.

(d) The Report stated (at §2):

“It is generally accepted that the present legislation, both substantive and procedural, governing the Civil Jurisdiction of the Court might be considerably improved, particularly as regards the substantive legislation in that the jurisdiction is conferred by reference to an Ordinance which has largely been repealed, namely, the Supreme Court (Summary Jurisdiction) Ordinance (Cap. 5).

It appears to the Committee that what is required is a precise conferment of jurisdiction, defined in terms of contract, tort and equity, and for this purpose the Committee has given considerable attention to the pattern of the English County Court Act, paying due regard however to the established features of the District Court and to necessity of not disturbing unduly an institution which has formed a valuable part of the judicial system of the Colony.

Likewise with regard to the procedure of the Court it is considered that the same should be placed upon a more secure foundation. …” (emphasis added)

(e) The 1962 Ordinance was largely modelled on the English County Courts Act 1959 (“the 1959 Act”), as recommended in the Report. But it must be noted that the Hong Kong legislation was not a wholesale adoption of the 1959 Act as only certain parts of that Act were adopted. A number of features of the county courts in England, eg, its limited admiralty jurisdiction, were not “imported” into and hence were not present in the Hong Kong regime.

(f) For present purposes, the most notable feature of the 1962 Ordinance is that it contains provisions relating to civil jurisdiction which are substantially the same as the present provisions, both in terms of the structure of the sections and the substantive content of the jurisdiction. It granted jurisdiction by reference to the types of cases (sections 3 to 8) and made provisions for ancillary jurisdiction and powers to grant reliefs (sections 19 to 21).

(g) More specifically, section 7 of the 1962 Ordinance, which adopted its wording from section 51 of the 1959 Act, provided:-

“The Court shall have jurisdiction to hear and determine any action in which the title to any hereditament comes in question, being an action which would otherwise be within the jurisdiction of the Court – [followed by provisions on monetary limits].” (emphasis added)

(h) It can be seen that it is substantially the same as section 36 of the present Ordinance, with a change in the ordering of the words.

82.  Then, in December 1972, the original 1953 Ordinance and the 1962 Ordinance were consolidated into the present Ordinance pursuant to the Revised Edition of the Laws Ordinance, 1965, without any change in substance.  Section 7 of the 1962 Ordinance thus became section 36 of the Ordinance from then onwards.

83.  As part of the amendments to the Ordinance in 1981, a new section 73A was introduced.  This enables the monetary limits to be amended in the future by resolution of the Legislative Council.  From then on, it would not be necessary to formally amend the Ordinance in order to revise the monetary limits.

84.  The next milestone event would be the extensive amendments made to the Ordinance in 2000:-

(a) The extensive amendments were passed into law in May 2000.  (These were the changes referred to in §26 of the Ma Yu Cheung decision).

(b) The amendments were largely to give effect to the recommendations contained in the “Report of the Working Party on Amendments to the District Court Ordinance and Civil Procedure (General) an (Forms) Rules (Cap 336)” made in June 1993.  The Working Party had been appointed by the Chief Justice to consider and recommend amendments to the Ordinance and its rules and chaired by Mr Justice Kempster.

(c) There was no material change made to the substantive provisions governing what types of cases or reliefs are within the jurisdiction of the District Court. 

(d) The significant changes brought about by the amendments are, first, the substantial increase in the monetary limits from $120,000 to $600,000 (in respect of claims in contract, tort etc) and from $100,000 to $240,000 (rateable value of property); second, the introduction of the Rules of the District Court, modelled on the Rules of the High Court, in replacement of the previous rules which were less formal and catered for smaller claims; third, the strengthening of the District Court Registry to deal with the expected increase of the workload and the increasing complexity of the cases.

(e) In this round of amendments, section 36, first introduced by the 1962 Ordinance, was amended to its present form.

85.  To complete this overview of the legislative history of the Ordinance, I would also briefly mention two subsequent developments.  First, the monetary limit of $600,000 applicable to claims in contract, tort etc was increased to the current limit of $1,000,000 in 2003 by a Legco resolution pursuant to section 73A.  Secondly, in August this year, the Judiciary issued a consultation paper on the review of the monetary limits (“the 2015 Consultation Paper”) proposing, amongst other things, a substantial increase of the civil claim limit from $1,000,000 to $3,000,000 and the land-related limit from $240,000 to $320,000.

Purpose

86.  Throughout the long history of the Ordinance and its amendments, the legislative purpose has been made clear and manifest in the various reports and other admissible materials in the enactment process.  I set out below the relevant passages.

87.  The Objects and Reasons for the District Court Bill, 1952 (which was subsequently enacted as the 1953 Ordinance) stated:-

“The volume of litigation, civil and criminal, passing through the courts of this Colony is such that it cannot be adequately and rapidly dealt with by the present establishment of judges and magistrates. … It is, however, anomalous that there is no court in Hong Kong, other than the Supreme Court, with jurisdiction in civil proceedings where the subject matter of the dispute is not of great value. In the United Kingdom, there are the County Courts and in other colonial territories civil jurisdiction is frequently given to magistrates or to a court of intermediate jurisdiction. … It is considered that the best solution is to create a District Court of Hong Kong.” (emphasis added)

88.  It can be seen that the purpose of establishing a District Court and conferring limited civil jurisdiction on it was to offload some of the cases – those cases “not of great value” – then dealt with by the Supreme Court to the District Court.

89.  In the Objects and Reasons for the District Court (Civil Jurisdiction and Procedure) Bill, 1962 (which was subsequently enacted as the 1962 Ordinance), it was stated that the object of the bill was “to make detailed provision for the civil jurisdiction and procedure of the District Court”.  This was implemented by “a precise conferment of jurisdiction” by reference to the types of cases which the District Court has the power to hear and the adoption of a set of rules specifically tailored for the District Court.

90.  The Kempster Report which recommendations were followed in the District Court (Amendment) Bill 1999 (“the 1999 Bill”) (which was later passed into law in 2000) stated the purpose of the proposed amendments as follows (in Section IV):-

“(a) To encourage a greater flow of civil work directly into the District Court; thereby relieving pressure on and delays in the High Court. If this aim is achieved the District Judges now sitting as additional judges of the High Court will rather be required in Wan Chai than in Queensway, the skills of the High Court judges be devoted to cases warranting their attention and the costs incurred by litigants be proportionate to the subject matter of their claims.

……

(d) To provide an appropriate jurisdictional and procedural framework, approximating to that of the Supreme Court, in which litigation involving both substantial and modest sums may be conducted and allowing, when appropriate, compliance with the rules to be dispensed with as provided in the proposed section 72(6).” (emphasis added)

91.  An Information Note for the Bills Committee in relation to the 1999 Bill entitled “New Procedural Framework for the District Court” contained the following informative passages on the evolving function of the District Court:-

“1. The District Court was set up at a time before the Small Claims Tribunal or the Labour Tribunal were established in Hong Kong. It was intended as a court for smaller claims and for unrepresented litigants. The District Court Civil Procedure (General) Rules (DCCP(G)R), which was enacted in 1963, were accordingly drafted to deal with a simple procedure of trial without pleadings and interlocutory applications. On the other hand, the District Court has the power to apply most of the Rules of the High Court (RHC), with the necessary modifications, for represented cases.

……

2. With the increase in jurisdiction over the years and extension of legal representation, civil procedures adopted by the District Court have approximated those of the High Court by combining the provisions of the DCCP(G)R and RHC. …”

92.  The Report of the Bills Committee on the 1999 Bill stated the main objective of the Bill as follows (at §6):-

“… to lower the costs of civil litigation to enhance access to the judicial system by increasing the financial jurisdictional limits of the DC. … [The Bills Committee] also supports the broad objective of strengthening the DC by providing it with more comprehensive rules of procedure and a registry under the charge of judicial officers. These reforms aim to better equip the DC to take over a significant portion of the present caseload of the Court of First Instance.” (emphasis added)

93.  The 2015 Consultation Paper explains why the costs of conducting litigation would come down as the jurisdiction of the District Court is enlarged (at §13):-

“…… It is because as the legal costs for CFI cases are in general higher than those of the DC where, in particular, solicitors have full rights of audience, a proposed increase in the DC’s jurisdictional limits will enable more litigants to file their claims in the DC, thereby reducing their litigation costs.”

94.  In summary, it is manifestly clear from the above that the purpose of the establishment of the District Court and the ongoing enlargement of its civil jurisdiction throughout the years is to divert more civil cases to the District Court from the Court of First Instance to the extent that it is feasible and appropriate to do so.  (On the two occasions – 1962 and 2000 – where the jurisdiction was significantly increased both in terms of the substantive scope and the monetary limits, the rules of procedure and the infrastructure of the District Court were correspondingly strengthened to support the anticipated increase in the  caseload.)

95.  And, in summary, there are two underlying reasons for the preference to offload cases to the District Court to the extent practicable:-

(a) First, it enables the Court of First Instance judges to focus on and devote their time and efforts to “cases warranting their attention”.  These would include cases where either large value is at stake or where complex issues are involved.  The Court of First Instance judges are more experienced and more competent and should spend their time on these cases for the better development of the jurisprudence.

(b) Second, from a litigant’s point of view, where the value of the claim is small or the case is of a straightforward nature, he can benefit from the relatively low costs of litigating in the District Court, because a lower scale of costs applies than that in the High Court and solicitors have full rights of audience in the District Court.  The legal costs should then be proportionate to the claims.

Context

96.  To achieve the above purpose, the Ordinance has adopted two means to control what cases can be diverted to the District Court.  This is readily apparent upon a review of the Ordinance itself.  It first confers jurisdiction by reference to the types of cases that will come within the District Court.  They include actions in contract, quasi-contract and tort (section 32), actions for money recoverable under enactment (section 33), actions relating to land (sections 35 and 36), actions raised in equity (section 37) and actions under the Married Persons Status Ordinance, Cap 182 (section 38).  In this regard, it is pertinent to note that certain areas of laws are altogether excluded from the jurisdiction of the District Court – for example, admiralty, judicial review, bankruptcy and winding-up cases.  This accords well with the underlying legislative purpose that certain specialist areas should be reserved for the Court of First Instance, considering the expertise required in these cases.

97.  And, secondly, within the prescribed types of actions, the Ordinance specifies monetary limits which ensure that the “low value” cases are heard by the District Court and the “high value” ones stay in the Court of First Instance.

98.  However, once a case is within the jurisdiction of the District Court because it is of the “right” type and the amount involved is below the monetary limit, the District Court has the same power as the Court of First Instance to grant relief and remedy as the circumstances of the case warrant.  This is made clear in a number of sections dealing with the court’s ancillary jurisdiction.  See, in particular, section 48(1) which provides as follows:-

“The Court has the same power as the Court of First Instance in any proceedings before it–

(a) to grant the relief, redress, or remedy or combination of remedies, either absolute or conditional; and

(b) subject to section 46 [on infancy], to give effect to every ground of defence or counterclaim, equitable or legal,

which ought to be granted or given.”

99.  See also sections 48A (power to award damages) and 52 (injunctions and declarations).  This serves as an illustration that it is the type of cases which dictate (subject, of course, to the monetary limit) whether a case is within or outside of the jurisdiction but not the relief sought by the party.

100.  It should also be noted that the Ordinance provides for an elaborate mechanism for the transfer of cases between the District Court and the Court of First Instance.  This would cater for situations where, for instance, a party commences an action in the “wrong” court or where a party has commenced in the “right” court but the nature of the case is such that it should be heard in the other court etc – see sections 41 to 44A.  However, notwithstanding the presence of the transfer mechanism, a party should still take care in determining the proper forum because any subsequent transfer will cause delay and may attract adverse costs consequences.

101.  Another important feature which stands out from a review of the Ordinance itself concerns land cases.  It is plain and obvious that the District Court is clearly regarded by the legislature as having the competence and capability to deal with issues concerning land title.  This is because title issues can and do come up in all kinds of cases, including those which also come within the other sections of the Ordinance, eg, in actions for the recovery of land (section 35).  Even if one applies the more restrictive approach, namely, the literal interpretation, it is clearly contemplated that, under section 36, the District Court will from time to time have to adjudicate on issues concerning title of land.  Hence, in contrast with other areas of law such as admiralty or winding-up cases which are handled exclusively by the Court of First Instance, title issues are something which the District Court is considered to be able to handle and does, in fact, deal with from time to time, even applying the literal interpretation of section 36.

102.  In my view, it is against the above legislative purpose and the overall context of the Ordinance that section 36 is to be construed.

103.  By way of footnote, section 36 and its previous version, section 7 of the 1962 Ordinance, were based on the wording appearing in section 51 of the 1959 Act – see §81(g) above.  For present purposes, it is open to the court to look at the case law on the interpretation of that English section as well as its origin.  However, there does not seem to be any direct case discussing whether section 51 of the 1959 Act would apply to “pure” title cases. 

104.  As far as its origin is concerned, that section was “inherited” from the County Courts Act 1934.  Prior to that, the county courts’ jurisdiction on title issues were defined in differently worded provisions appearing in a yet earlier version of the Act – see sections 60 and 61 of the County Courts Act 1888.  For a brief account of the long history of the various County Courts Acts enacted since the nineteenth century, see, eg, Halsbury’s Statutes of England, Vol 5 (2^nd ed, 1948) at pp1-3 and The County Court Practice 1952 at pp4-7.  Suffice it to say that when the Hong Kong legislature “borrowed” the wording from the 1959 Act in 1962, it was not intended that the entire structure of the English county courts was to be duplicated here.  Accordingly, how the equivalent sections in the English Acts on title issues had evolved over the years may not shed much light on how our section 36 is to be construed.  In that sense, the English legislation does not provide as useful a context as one might initially think for the purpose of the present construction exercise.

Analysis

105.  Returning to the proper construction of section 36, I am of the view that the liberal approach adopted in Ma Yu Cheung reflects the intention of the legislature regarding the District Court’s jurisdiction over land cases and gives effect to the underlying legislative purpose and should therefore be followed.  I have come to this conclusion by taking into account the following matters.

106.  First, there is no apparent logic or reason why in cases where land title is in issue, the jurisdiction of the District Court should depend on whether another cause of action (eg, contract, tort or trust etc) is raised or whether recovery of the land is sought as a relief in the same action.  As noted above, there is a clear recognition in the Ordinance that the District Court does have the skill and competence to deal with land title cases.  When viewed against this, there is no plausible reason why the District Court should be disabled from hearing “pure” title cases in such an arbitrary manner.  The admissible materials relating to the enactment of the original Ordinance and its subsequent amendments do not reveal any reason for such a treatment of “pure” title cases.

107.  Secondly, the adoption of the literal interpretation of section 36 would sometimes lead to anomalous, if not absurd, results.

108.  At the hearing, a hypothetical situation based on a slightly modified version of the plaintiff’s factual case was considered.  If the Deed of Trust had provided that the defendant was to hold the Property on trust for the plaintiff solely, rather than jointly (on the basis that she had contributed to the whole purchase price), apart from seeking declaratory relief, the plaintiff would likely have asked for vacant possession of the Property to be delivered to her as well.  Had she done so, the case would have come within section 35 which confers jurisdiction in respect of actions for recovery of land.  That would have been so notwithstanding that the monetary limit under section 37(1)(b) was exceeded.  The District Court would have jurisdiction to hear the case.  Now compare this hypothetical situation to the present case.  The outcome of adopting the literal approach is that, on substantially similar facts, where the plaintiff asks for more remedies ie, recovery of land as well as declarations, she can bring her case to the District Court whereas if she asks for less, ie, declarations only, she will have to go to the Court of First Instance.

109.  Thus the literal approach leads to an anomalous result which cannot really be justified, whether in terms of logic or the underlying legislative intent.  Mr Nip submitted that there is no anomaly in such circumstances.  I do not agree.  The literal approach, when applied, would produce a result which is strange in itself and is also at odds with the general theme running through the Ordinance, namely, that the jurisdiction question is always to be answered by reference to the type of cases to be tried, rather than the remedy sought.

110.  Another illustration can be drawn from adverse possession cases, which, as mentioned above, are often typical “pure” title cases.  Consider the following potential claims which values are below the monetary limit and assume the literal interpretation applies:-

(a) The paper owner sues the squatter claiming vacant possession of the land and the squatter claims in defence that the paper owner’s title is extinguished by reason of the squatter’s adverse possession pursuant to sections 7 and 17 of the Limitation Ordinance, Cap 347.  Assume in this case that the squatter does not seek any declaratory relief by way of counterclaim.  The paper owner’s claim would come within section 35 and the District Court would have jurisdiction over the action.

(b) On the same facts, the squatter sues first and seeks the relevant declaratory relief.  This would be a “pure” title case and therefore section 36 is not invoked.  The squatter would not come within any of the other jurisdiction-conferring sections.  Hence the District Court cannot hear it.  This is so whether or not the paper owner makes a counterclaim to recover vacant possession of the land.

111.  Once again, the literal approach leads to the anomalous result where on exactly the same facts, the District Court’s jurisdiction to hear a land case would be dictated by what remedies are being sought by the parties and, worse still, by who initiates the action first.  This in itself is a strange enough outcome. Worse still, this completely goes contrary to the general approaches adopted in the Ordinance, ie, first, it is the type of claims which matters, not the relief sought; and, further, once a case is of the “right” type, the court can grant such relief as it deems appropriate.  Furthermore, when one keeps in mind the legislative purpose of the Ordinance, namely that the District Court should, where feasible, take over from the Court of First Instance civil cases which are of a straightforward nature, one would reasonably expect that the District Court should have the power to hear simple adverse possession cases. As Judge Cheung observed in Ma Yu Cheung (at §27 of his decision), the intention behind section 36 must have been to give the court some jurisdiction to deal with land matters, obviously including those in which title is in question.  The above example illustrates the absurdity of adopting the literal approach.

112.  The absurdity becomes even more acute when one considers the type of adverse possession cases brought by squatters to claim possessory title where the paper owners cannot be traced – another subset of “pure” title case.  This would arise where the squatter has long been in possession, eg, for decades, and the paper owner or his estate is nowhere to be found or cannot be identified.  Such action, if brought, would be uncontested.  Although the squatter would still have to prove his case at trial, the action would normally be straightforward as there will unlikely be any disputes on either fact or law.  Adopting the literal interpretation of section 36, it would mean that all such cases would have to be brought in the Court of First Instance as there is no other section conferring jurisdiction on the District Court.

113.  This clearly goes against, if not defeats, the legislative purpose of offloading run-of-the-mill cases from the Court of First Instance to the District Court.  The resources of the Court of First Instance are better used on other more complex cases or specialist areas which warrant the expertise, skill and attention of the judges there.  Further, the litigant will be subject to higher legal costs in the Court of First Instance.  The legal costs may in many cases not be proportional to the value of the land involved.

114.  To sum up, there is no inherent logic in treating “pure” title cases any differently from other land cases in the context of jurisdiction.  As illustrated above, the literal interpretation is capable of giving rise to anomalous or absurd outcome which could not have been intended by the legislature when the Ordinance and its subsequent amendments were enacted.  Such interpretation does not give effect to the legislative purpose and is at odds with the overall context of the civil jurisdiction conferred on the District Court.  The literal interpretation should be avoided.  (Just by way of observation, in the event that the jurisdictional monetary limits are increased following the proposals put forward in the 2015 Consultation Paper, the absurdity would be even more pronounced, since, notwithstanding a marked increase in the limits, a “pure” title claim involving a low value property will still have to be brought in the Court of First Instance.)    

115.  On the other hand, in my view, the liberal interpretation is consistent with and gives effect to the legislative purpose of enabling more civil cases, which are within the expertise and competence of the District Court, to be tried there.  Given that the District Court is already allowed to hear cases where land title is in question, there is no reason why it should be arbitrarily prevented from hearing “pure” title cases.

116.  Mr Nip submitted that the liberal approach is not appropriate as it involves straining the meaning of these words in section 36 – “which would otherwise be within the jurisdiction of the Court and”.  According to the liberal interpretation, the word “and” (as italicised) will read, where appropriate, as “or”.  Judge Cheung admitted in Ma Yu Cheung that “some violence” is done to the wording but “that is justified by the circumstances”. 

117.  On this, it must be borne in mind what the Court of Final Appeal said in Lam Kwong Wai (see §76(f) above).  In the process of construing a statutory provision, the court is not allowed to attribute to it a meaning which the language is incapable of bearing.  However, the court is allowed to imply words into a statute so long as in doing so it is giving effect to the intention of the legislature as ascertained on a proper application of the interpretative process.  Having gone through that process, I am of the view that the liberal construction placed on the words in Ma Yu Cheung is in line with the applicable principle. 

Conclusion on jurisdiction

118.  For the above reasons, I would follow and adopt the liberal approach and hold that section 36 is capable of conferring jurisdiction in respect of a case in which land title is in question but which does not otherwise come within the jurisdiction of the District Court.

119.  As empowered by section 36, I now proceed to consider the substantive application.

LEGAL PRINCIPLES – ORDER 28 RULE 4

120.  In an Order 28 rule 4 application, the plaintiff must first justify its entitlement to summary judgment.  The plaintiff is required to demonstrate a prima facie case on the evidence.  Once that is done, the burden then shifts to the defendant to show that he does have a defence or defences to the claim.  In this way, there is in practice little difference between an Order 28 rule 4 application and an Order 14 application.  See Wing Hang Bank Ltd v Liu Kam Ying [2002] 2 HKC 57 at §§7 and 10, per Ma J (as he then was); Bank of China (Hong Kong) Ltd v Twin Profit Ltd [2010] 2 HKLRD 1065 at §§6-8, per Fok J (as he then was).

121.  Applying the well-known Order 14 principles, in determining whether the defendant has a defence, the approach is twofold.  First, factually, is what the defendant says believable?  Secondly, as a matter of law, even if what it says is believable, does what it says amount to an arguable defence in law?  See, eg, Schindler Lifts Hong Kong Ltd v Ocean Joy Investments Ltd [2003] 1 HKC 438 at §10 per Ma J.

122.  On the first question, it is not appropriate to embark on a mini-trial of the action on affidavit evidence.  The court simply asks itself whether what the defendant says is credible.  As Godfrey JA put it in Ng Shou Chun v Hung Chun San [1994] 1 HKC 155 at 158: “The issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable”.  Further, the court will not take the alleged defence on its face value but test it against the evidence disclosed, including contemporaneous documents.  The court will also consider the inherent probability of the defence: see, eg, Paul Y Management Ltd v Eternal Unity Development Ltd CACV 16/2008, 12 August 2008 at §19 per Cheung JA.

ANAYLSIS

123.  Applying the above, three questions fall to be determined:-

(a) Has the plaintiff demonstrated a prima facie case based on the Deed of Trust? 

(b) Is the factual case of the defendant believable?

(c) If believable, does this amount to an arguable defence in law?

Has the plaintiff demonstrated a prima facie case?

124.  I am satisfied that the plaintiff has shown a prima facie case, which is premised on the Deed of Trust, and she is prima facie entitled to the declaratory relief which she now seeks and which accords recognition to her one-half beneficial interest in the Property.

125.  Mr Nip raised a legal point challenging the validity of the Deed of Trust.  He relied on the following passage in Gray and Gray, Elements of Land Law (5^th ed) which in turn cites Dye v Dye (1884) 13 QBD 147 at 157 in support:-

“However, no express trust can be validly declared in respect of land in which the declarant has as yet no proprietary interest. Nor, obviously, can the declarant create a trust of any larger estate than he himself owns.” (at §7.1.18)

126.  Mr Nip submitted that the Deed of Trust is invalid because it purported to create a trust over the Property at a time when the defendant had as yet no proprietary interest. He had no interest whatsoever because:-

(a) First, the legal title was only conveyed to him on 31 July 2007, subsequent to the date of the Deed;

(b) Secondly, he had no equitable or beneficial interest in the Property when the Deed was signed. Given that the remedy of specific performance was specifically excluded in the Provisional Agreement, the defendant as purchaser did not derive any beneficial interest in the Property since the Provisional Agreement was not specifically enforceable by him.

127.  I do not agree with this legal submission.  The quoted passage in Gray and Gray and the authority of Dye v Dye simply endorse the common sense logic that a person cannot create a trust over something which he does not own.  That is all there is to it.  These authorities do not purport to discuss, and are not concerned with, other scenarios concerning, for instance, trust over future property.  The reliance on them in support of the submission that the Deed of Trust is invalid by reason of the defendant not owning any interest in the Property at the time of execution is clearly misplaced.

128.  On the plaintiff’s factual case, there are, in my view, at least two routes by which the beneficial interest can be established.

129.  First, the Deed of Trust can operate as a trust over future property.  By executing the Deed of Trust, the defendant agreed to hold the Property, when acquired, on trust for himself and the plaintiff jointly.  This agreement, as contained in the Deed and supported by consideration (see Recital (B)), gives rise to a valid trust and is specifically enforceable and upon the assignment, the Property has become subject to the trust thus created: see, eg, Pullan v Koe [1913] 1 Ch 9 at 14-15; Lewin on Trusts (19^th ed) at §§10-11.  In this regard, I do not accept Mr Nip’s submission that the subject matter of the Deed was not expressed to be a future estate and hence cannot give rise to a trust over future property.  It is quite plain to me that the operative provisions of the Deed are not so narrowly worded.

130.  Secondly and alternatively, by executing the Deed of Trust, the defendant is prima facie estopped from disputing the validity of the Deed as against the plaintiff by arguing that he did not in fact own any interest in the Property at that time.  The estoppel is fed when the Property was subsequently assigned to him and, at that point, the plaintiff acquired a beneficial interest in the Property in accordance with the terms of the Deed of Trust.

131.  In First National Bank plc v Thompson [1996] 1 All ER 140, Millett LJ (as he then was) explained the origin of this type of estoppel, sometimes referred to as estoppel by deed:-

“It is the product of the fundamental principle of the common law which precludes a grantor from disputing the validity or effect of his own grant. Contrary to the submissions to us by counsel for Mr Thompson, it is exclusively the creation of the common law, not equity; and the companion doctrine of feeding the estoppel, which applies in both kinds of case, operates automatically without further assurance. It appears to be merely the product of the relative character of title to land in English law.” (at 145b-c)

132.  On the plaintiff’s own case, it seems clear to me that, by operation of this type of estoppel, the plaintiff acquired an interest by estoppel when the Deed of Trust was executed on 10 June 2007 and subsequently acquired a beneficial interest proper in the Property on 31 July 2007 when the assignment took place: applying First National Bank plc at 148c-d.

133.  The plaintiff having demonstrated a prima facie case on her evidence, the burden is then on the defendant to show a triable defence.

Is the factual case of the defendant believable?

134.  Mr Nip submitted that the defendant’s factual case is at least believable and in any event there are a number of factual disputes between the parties, which can only be properly resolved at trial where the witnesses can be cross-examined.

135.  He highlighted the following factual disputes:-

(a) The oral discussion between the plaintiff and the defendant regarding the beneficial ownership of the Property before the execution of the Deed of Trust.  The parties’ versions are clearly in conflict.

(b) Who made what contribution to the purchase of the Property.  The dispute also revolves around whether the defendant was indebted to the plaintiff or whether the plaintiff had no financial means at the time.

(c) What was communicated to Mr Tse by the defendant in respect of the purpose of the Deed of Trust, ie, whether it was to provide for the plaintiff’s half beneficial ownership or to reflect the defendant’s estate planning arrangement.

136.  Subject to the matters referred to in the next paragraph, I accept that each of these factual disputes cannot normally be determined on affidavit evidence alone.  It is because the parties are really putting forward opposite versions of events and it certainly seems that at least one of them is not telling the truth.  In such circumstances, the credibility of the witnesses becomes a key issue to be determined by the court and cross-examination seems rightly called for.

137.  That said, however, I consider that there are two crucial features in this case which one must not overlook and which would have a determinative effect on the resolution of the factual disputes at this stage.  They are, first, the existence of a contemporaneous document in the form of the Deed of Trust which sets out in unequivocal terms the allocation of the beneficial interest in the Property; and, secondly, the evidence of Mr Tse, which must be seen and assessed in the context of his overall involvement in the transactions.

138.  Having given due regard to these features, I am of the view that the defendant’s factual case is unbelievable and must be rejected and accordingly the factual disputes as outlined above should be resolved against him.  I shall explain how I arrive at this conclusion.

139.  First of all, it is important and necessary to identify that part of the factual background against which the defendant’s allegations are to be looked at which are either not disputed or indisputable.  And it is this.  Prior to the conveyancing transactions as set out in §8 above, there had been no prior dealings between Mr Tse and the plaintiff and the defendant.  Apart from earning a fee for his firm, Mr Tse can be said to have no interest in the conveyancing transactions engaged by the parties in 2007 and is in a way an “outsider”.  His role was strictly confined to preparing the relevant legal documentation in accordance with the instructions of his clients.  It is against this background that the conflicting evidence of Mr Tse and the defendant ought to be looked at.

140.  As is obvious from the above, the defendant’s case is largely refuted by Mr Tse’s evidence. On the defendant’s case, notwithstanding the instruction of the defendant about estate planning, Mr Tse went off to prepare a document which did not at all reflect the defendant’s instruction.  In fact, the Deed of Trust has achieved the opposite of what the defendant had wanted to – it vested half of the beneficial ownership in the plaintiff when the defendant said the Property was entirely his.

141.  Insofar as this application is concerned, the defendant’s position vis-à-vis Mr Tse is that the defendant is not yet able to formulate a case against Mr Tse as the defendant does not understand why Mr Tse did not follow his instruction.  The defendant says it could be negligence and at this stage there is not enough material to suggest fraud carried out by him or jointly with the plaintiff.

142.  On the defendant’s case, if Mr Tse’s failure to follow the defendant’s instruction was unintentional and was a result of his negligence, that would be negligence in the extreme.  Here, we are not talking about a situation where a solicitor overlooked some case law in his research or was careless in putting in a wrong figure in some calculations.  It was a wholesale mistake in producing a totally wrong document.  The mistake is so blatant that, in my view, the possibility that Mr Tse was careless goes completely contrary to inherent probabilities.

143.  On the other hand, the possibility that Mr Tse deliberately disobeyed the defendant’s instructions and came up with the Deed of Trust is equally improbable.  He had nothing to gain by doing this and there was really no conceivable motive that one could think of why he would do so.  The defendant himself cannot suggest any.

144.  In the circumstances, given the nature of Mr Tse’s involvement in the transaction, I consider that he is an impartial person and there is no reason at all why his evidence, given on affidavit in his capacity as a solicitor, should not be accepted.  On the other hand, the defendant’s case, which is in direct conflict with Mr Tse’s, is so tainted with inherent improbabilities that the only conclusion one can draw is that it is a fabrication on his part and his case is not believable.

145.  There are two points which the defendant raises against Mr Tse which I should also address. 

146.  First, the defendant argues that Mr Tse is not an “independent” witness and this casts doubt on his evidence.  The argument goes as follows.  If the defendant’s account is found to be truthful at trial, Mr Tse will be found to have failed to discharge his duty properly and he will almost certainly face a civil claim. Accordingly, Mr Tse has a self-interest in saying what he says now, namely, that the Deed of Trust did reflect the instructions of the plaintiff and the defendant.  While I can see the logic underlying the argument, I do not consider that the value, relevance and significance of Mr Tse’s evidence can be properly gauged by simply trying to see whether he can be branded as an “independent” witness or not.  The court should apply the well-established principle when evaluating the evidence before it in a summary application – namely, the process which I sought to go through above – at the same time bearing firmly in mind its task is simply to determine the “believability” of the defendant’s case and paying close attention to what can and what cannot be looked into at this summary stage.

147.  Secondly, the defendant claims that Mr Tse’s evidence on the instruction as to joint ownership is not supported by any attendance note and questions how he managed to have a clear recollection in this regard.  I do not think there is much force in this point.  It does seem to be the case that the file sought from LHC and disclosed now concerns only the acquisition of the Property but not the earlier transactions.  Mr Tse’s evidence is that the Deed of Trust is a “repeat deal” of the Catchick Street Property and hence it is perhaps not surprising that there was no specific attendance note in the file relating to the Property.  In any event, the instruction was a straightforward one and the absence of any attendance note is really not indicative of anything.

148.  I am mindful that I should not conduct a mini-trial based on affidavits alone.  However, that does not mean that the defendant’s allegations should be taken at face value. Instead, they should be tested against the evidence disclosed and against inherent probabilities – see §122 above.  Having gone through that exercise, it is clear in my mind that here is a case where the defendant’s allegations are so unbelievable as against the indisputable factual background and inherent probabilities that it can safely be rejected outright in a summary fashion.

Does the defendant’s factual case give rise to any arguable defence as a matter of law?

149.  As I have come to the view that the defendant’s factual case is not believable, it is not necessary to proceed to the third question.  Suffice it to say that if I had arrived at the contrary view, I would have found that the defendant would have at least an arguable defence in law and the dispute ought to be resolved at trial. 

150.  I accept Mr Nip’s submissions in this regard – on the defendant’s factual case, it is arguable that the plaintiff would not be entitled to rely on the Deed of Trust or the doctrine of estoppel by deed to assert her beneficial interest as she knew the truth of the circumstances under which the Deed of Trust was signed, namely, that it was for the defendant’s estate planning purposes but not for creating joint beneficial ownership: see, eg, Tsui Hoi Pan v Wong Chun Ling CACV 150/1999, 1 December 1999 at §§9-10, per Godfrey JA.

CONCLUSION AND ORDERS

151.  For the above reasons, I conclude that the plaintiff is entitled to final judgment as sought in her Order 28 rule 4 summons, save for the order for sale that she is no longer pursuing in these proceedings.

152.  No specific objection having been raised by the defendant as to the wording of the declarations sought (except the date from which the trust has commenced is to be the date of the assignment of the Property, instead of the date of the Deed of Trust), I make the following declarations, which are broadly in terms of the plaintiff’s summons:-

(a) The defendant has been holding the Property on trust for the plaintiff and himself as joint tenants since 31 July 2007;

(b) The plaintiff is a beneficial joint tenant of the Property;

(c) The plaintiff is entitled to a half-share in the proceeds of sale in the event of the Property being sold, subject to payment of costs of such sale and the discharge of any prior encumbrance.

153.  I also make an order nisi that the defendant pay the plaintiff’s costs of the application (including any reserved costs) and costs of these proceedings, to be taxed if not agreed. 

154.  In respect of the plaintiff’s application seeking leave to file the valuation evidence on the second day of the hearing (see §49 above), I make an order nisi that there be no order as to costs.