YU CHI MAN AND OTHERS v. YU YIP LAM

DCCJ1252/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1252 OF 2013

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JUDGMENT

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1.  Most unfortunately, disputes between the plaintiffs and their father end up filing a lawsuit. Seeing the father’s ill-feelings and resentment over the son, win or lose, it is most likely their relationship will be torn further apart. This is much to be regretted.

2.  The claim arises from the dispute over a property known as House 12A on Ground Floor, Peng Chau Lot 538, Peng Chau, New Territories, Hong Kong (“the Property”).  At all material times, the  Property was and still is registered in the sole name of the plaintiffs’ late mother, Madam Mok Shuk Ying, deceased (“the late Madam Mok”).

3.  The plaintiffs’ claim is for, inter alia, a declaration that they are the joint beneficial owners of the Property in equal shares. The defendant asserts 100% beneficial interest in the Property; he also counterclaims against the 1^st plaintiff for repayment of 5 loans in the total sum of HK$390,000. 

Issues for Determination

4.  Regarding the dispute over the Property, issues for determination (after the defence of resulting trust was abandoned) are narrowed down to the following:

(1)   Whether there was a common intention construction trust that the Property be held by the defendant and the late Madam Mok as joint tenants; such that the beneficial interest has vested solely in the defendant upon the death of the late Madam Mok by  survivorship?

(2)   Whether there was an oral arrangement between the plaintiffs and the defendant whereby it was agreed, inter alia, that the beneficial interest of the Property be vested in the plaintiffs? and

(3)   If answer to (2) is in the affirmative, whether the said oral arrangement is enforceable in law?

5.  Regarding the dispute over the loans, issues for determination include the following:

(1)   Whether the 1^st plaintiff owes the defendant any of the 5 loans? and

(2)   If the answer to (1) is in the affirmative, whether the claim is time-barred?

Background

6.  The late Madam Mok immigrated from Dongguan China to Hong Kong in March 1979 with her four children, namely the plaintiffs and adaughter named Yu Suet Ching who predeceased her in 1999.

7.  After 5 years, the defendant in April 1984 also immigrated to Hong Kong; and the family was reunited.

8.  In December 1985, the Property was purchased under the sole name of the late Madam Mok. The purchase price of HK$80,000 was paid one-off.

9.  In February 2006, the defendant and the late Madam Mok purchased a property in Dongguan in joint names with equal shares (“the Dongguan Property”). (Parties agreed that the purchase price was RMB230,000 notwithstanding that this figure does not match any of the conveyancing records.) .

10.  On 5 June 2006, the late Madam Mok died intestate in Dongguan during her visit there. She was survived by the defendant and the plaintiffs.

11.  Apart from the registered ownership of the Property and the Dongguan Property, the late Madam Mok at the time of  her death also had the following assets:-

(a)   a credit balance of HK$199,481.99 in her personal bank account with HSBC; and

(b)   a credit balance of approximately HK$600,000 together with the stocks and shares in a bank account held jointly with the defendant.

Assessment of the defendant’s evidence as a whole

12.  At the time of trial the defendant is 83 years old; and unfortunately he is blind and wheelchair bound. His Counsel Ms Chong  confirms that despite his old age and physical constraint, there is no question of the defendant’s fitness to give the intelligible testimony required of a competent witness. 

13.  With an attempt to prove resulting trust in that the purchase price of the Property including all related expenses was solely paid by him, the defendant in his witness statementhas accounted for his source of money with precise details and in certain terms. However, he readily denied and overturned the same under cross-examination. Thedefence of resulting trust was then abandoned,apparently as a result of the relevant evidence having collapsed in completely on itself.

14.  Notwithstanding that resulting trust is no longer in issue, in assessing the credibility and reliability of the defendant’s evidence as a whole, sufficient regard should still be given to the defendant’s sharp change and denial of his own evidence.

15.  Further, the inability to recall very important events has also shaken the reliability of the defendant’s evidence. He had no recollection of having purchased the Dongguan Property with the late Madam Mok. He had no idea of how much the 1^st Plaintiff allegedly owed him despite he has verified his Counterclaim by the Statement of Truth. He even failed to recall having made a report to the Macau Prosecutorial Authority (“MPA”) in 2010 against the 1^st Plaintiff for forgery.  

16.  Up to a certain stage of cross-examination, the defendant refused to answer any further questions. With leave of the court, Ms Chong has advised the defendant regarding such refusal and its possible adverse consequences. However, the defendant stuck to his own way. 

17.  On whether adverse inference should be drawn against the defendant, it depends on whether the evidence is incomplete to the extent that itaffects analysis and assessment by the court on his evidence as a whole.

18.  In the present case, questions which the defendant refused to answer are related to the essential facts which are important and pertinent to the central issues for determination.By his refusal to answer these questions, the plaintiffs were denied the opportunity to examine the defendant onthe credibility and reliability of his witness statement. As such, assessment by the court on his evidence as a whole is greatly affected.

19.  In the premises, only scanty weight should be given to the defendant’s evidence as a whole.In my assessment of inherent probability and finding of facts, I shall resort to consideration of the overall factual matrix of the case,analysis of contemporaneous documents and evaluation of the plaintiffs’ evidence.

Issue 1: Whether there was a common intention construction trust?

20.  As held inLloyds Bank Plc v Rosset [1991] 1 AC 107, constructive trust can be imposed as a result of common intention inferred from parties’ express discussions. In the absence of such express discussions, the conduct of making direct financial contribution justifies the finding of a common intention. 

21.  In the present case, there is no evidence of any express discussions between the defendant and the late Madam Mok from which  any agreement, arrangement or understanding can be inferred that the Property was beneficiallyto be owned jointly.

22.  The plaintiffs denied any financial contribution by the defendant to the purchase. Although they were unable to provide the exact figure of the defendant’s monthly income in the relevant periodof more than three decades ago, their evidence is clear direct and unshaken that the defendant’s earnings was too meager in the relevant period to afford any of the purchase price.

23.  I find that the defendant has not made any financial contribution to the purchase of the Property; the purchase price and related expenses were all paid by the late Madam Mok solely.

24.  Although the defendant failed to satisfy any of the two recognized requirements under Lloyds Bank Plc v Rosset,with the liberal approach of the law as developed in Stack v Dowden[2007] 2 AC 432,there can be greater room for the application of constructive trust in the domestic context.

25.  By majority view in Stack v Dowden, it was held that conducts other than direct financial contribution are recognized for the inference of common intention. 

“60. ...... The law has indeed moved on in response to changing social and economic conditions. The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it. (at p. 455F)

......

69. In law, “context is everything” and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired ...... the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; ...... The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay ......

70. This is not, of course, an exhaustive list ...... (at p. 459 B-F)”   

26.  It is noted that the marital relationship between the late Madam Mok and the defendant was harmonious and good; and the Property was purchased as the matrimonial home.However, mere fact that the late Madam Mok willingly shared with her family the fruit of her labor does not necessarily confer non-distinction of wealth with the defendant. At all material time it was she alone who took up the responsibility of providing the children a home.

27.  In deciding where intention lays, I regard it relevant and necessary to consider the character and personality of the late Madam Mok. From her history of struggling to settle in Hong Kong with her four young children without any assistance or financial support from the defendant, the late Madam Mok respectably should be a persevering, tenacious and strong-will person with plans. I have no doubt she had the initiative, ability and independence to procure an investment of her own.

28.  When the purchase price was the hard earned savings of the late Madam Mok, the Property was purchased in her sole name. By contrast, at the time when the Dongguan Property was purchased, the defendant already had joint wealth with the late Madam Mok from their joint herbal medicine business, the purchase was thus in joint names.

29.  Having considered the overall circumstances in its context, I find that the defendant failed to prove common intention constructive trust that the Property was to be held by the late Madam Mok and the defendant as joint tenants. 

Issue 2: Whether there was an oral arrangement between the plaintiffs and the defendant?

30.  On the plaintiffs’ evidence, their meeting with the defendant concerning distribution of the estate of the late Madam Mok took place at the Property on 22 June 2006. In the meeting they acceded to the following suggestions of the defendant (“the Agreed Items”).

(1)   the defendant shall have all the cash as well as the stocks and shares in his joint bank account with the late Madam Mok;

(2)   the defendant shall have all the cash in the personal bank account of the late Madam Mok;

(3)   the defendant shall have the late Madam Mok’s 50% share of the Dongguan Property;

(4)   the plaintiffs shall jointly take the ownership of the Property;

(5)   the defendant could reside at the Property  during his stay in Hong Kong; and

(6)   the 1^st plaintiff shall act as the administrator of the estate of the late Madam Mok.

31.  Ms Chong challenged in four aspects the credibility of the plaintiffs’ evidence regarding the oral arrangement.

32.  Firstly, it is submitted that there are inconsistencies of the Agreed Items in pleadings, witness statements and oral testimonies.  

33.  It is noted that Agreed Item (1) regarding the defendant taking the joint account assetwas neither pleaded nor mentioned in the 1^st plaintiff’s witness statement; both Agreed Items (5) and (6) regarding respectively the defendant’s right to reside at the Property and the 1^st plaintiff acting as the administrator were not mentioned in the witness statements of the 2^nd and 3^rd plaintiffs.

34.  However, the plaintiffs’ evidence being tested under cross-examination remained firm and consistent on the core of the oral arrangement; that is how the Property and the Dongguan Property were to be distributed. I do not think the inconsistencies constitute any radical departure from the pleaded case. See: Waghorn v George Wimpey & Co Ltd [1969] 1 WLR 1764.

35.  Secondly, Ms Chong criticized that there was no written document recording the Agreed Items; and it is inconceivable that lawyers were not informed so that a binding contract could be prepared.

36.  This argument is untenable. Unlike commercial dealings where parties’ agreement will normally be evidenced in writing or by a formal agreement, in a family context this may not be regarded as necessary especially when no future dispute or litigation is contemplated. I find nothing inconceivable.

37.  Thirdly, Ms Chong emphasized that since the alleged oral arrangement should have been mentioned and recorded in the MPA inquiry record dated 15 November 2010, omission is strong evidence that the alleged oral arrangementnever exists.

38.  On this, the 1^st plaintiff explained that he has told MPA about the oral arrangement but the officers refused to record it; and the incomplete inquiry record was only signed by him involuntarily under inducement, stress and/or fear. Although the 1^st plaintiff is apparently an honest and sincere witness whose testimony commands belief, this explanation is inconceivable and I have to reject it.

39.  However, I do not think this blemish alone would render the 1^st plaintiff’s evidence on the oral arrangement incredible and unreliable.A series of undisputed events which took place after the family meeting evident by contemporaneous documents are compelling evidence in support of the oral arrangement.

(1)   The defendant had all the cash of HK$600,000 odd as well as the stocks and shares in his joint bank account with the late Madam Mok;

(2)   On about 23 August 2006, the defendant signed a Renunciation of Administration to renounce his right to act as the administrator of the estate of the late Madam Mok;

(3)   On 5 February 2007, the plaintiffs respectively executed documents prepared by the defendant’s lawyers to renounce their rights to inherit the late Madam Mok’s 50% share in the Dongguan Property; on the same day, the defendant signed a document entitled “繼承遺產聲明書” for the purpose of inheriting all of Madam Mok’s 50% share and interest in the Dongguan Property;

(4)   On or about8 February 2007, the defendant obtained the “繼承權公証書” from the relevant government authorities in Mainland China; he inherited the late Madam Mok’s 50% share in the Dongguan Property;

(5)   On or about 10 April 2007, the 1^st Plaintiff became the personal administrator of the estate of the late Madam Mok pursuant to letters of administration granted by the High Court of Hong Kong;

(6)   On or about 21 May 2007, the 1^st plaintiff as the personal administrator transferred to the defendant’s bank account all the cash in the personal bank account of the late Madam Mok then at the sum of HK$206,544.73 inclusive of interest; and

(7)   The defendant resided in the Property during his stay in Hong Kong.

40.  The defendant contends that the said renunciation of rights and transfer of cash were done simply out of the plaintiffs’ filial piety to the father, and had nothing to do with the ownership of the Property. I reject this contention because it is contradicted by the fact that the defendant has passed the title documents of the Property to the 1^st plaintiff in 2010. The defendant testified that it was the 1^st plaintiff who has stolen the title documents from him; this empty talk is absurd and utterly untrue.  

41.  Lastly, Ms Chong suggested that sincethe plaintiffs has takenno steps over the years to effect the oral arrangement by registering the Property in their names, it shows that there was never such an oral arrangement as alleged.

42.  I think theplaintiffs’ inaction supported their evidence that they have not taken the issue of ownership to heart; the Property to them is more of sentimental value. The 1^st plaintiff said he had no intention to fight with the father over financial interest.

43.  The relationship between the defendant and the 1^st plaintiff had always been good. It started to change in 2010 when the 1^st plaintiff refused to make monthly advancement to the defendant’s female friend, a mainlander whom the 1^st plaintiff suspected to be a swindler. By the time the defendant made a report of forgery to the MPA against the 1^st plaintiff in late 2010, their relationship has already turned sour.

44.  I accept what the plaintiffs said, only when matters transpired that there is a risk the Property may fall into wrong hands, they sue in order to preserve the same.

45.  By reason of the aforesaid, none of the criticisms can discredit the plaintiffs. I find that there was an oral arrangement between the plaintiffs and the defendant whereby it was agreed, inter alia, that the beneficial interest of the Property be vested in the plaintiffs.

Issue 3: Is the oral agreement enforceable in law?

46.  Ms Chong relied on section 6 of the Conveyancing and Property Ordinace, Cap 219 (“CPO”) and submitted that the oral agreement (if any) not evidenced in writing is unenforceable. However,  even section 6 applies, section 7 of CPO provides that nothing in section 6 shall affect the operation of law relating to part performance.  

47.  The plaintiffs pleaded part performance of the oral arrangement; they have acted upon it to their detriment and it would be unconscionable for the defendant to go back on it.

48.  Based on her calculation and comparison of the purported value of each item of the late Madam Mok’s estate, Ms Chong submitted that the plaintiffs have not suffered any monetary detriment.

49.  I reject this argument on two grounds. First, the calculation or comparison is not supported by any valuation of the Property . Secondly, detriment is not a narrow concept limited to quantifiable monetary detriment only.

50.  The relevant legal principles are laid down in Gillett v Holt [2000] 2 All ER 289 at page 232D-F:-

“The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

There are some helpful observations about the requirement for detriment in the judgment of Slade LJ in Jones v Watkins 26 November 1987.  There must be sufficient casual link between the assurance relied on and the detriment asserted.  The issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it.  Whether the detriment is sufficiently substantial is to be tested by whether it would be unjust or inequitable to allow the assurance to be disregarded – that is, again, the essential test of unconscionability.  The detriment alleged must be pleaded and proved.”

51.  The legal principles in Gillett v Holt were applied by the Hong Kong Court of Appeal in Mak Ho Fung v Mak Kai & Others, CACV 246/2011, unreported, 5 December 2013 where Cheung JA stated at para 37 as follows:-

“More importantly, although countervailing benefits should be taken into account in judging detriments, the court should not embark upon a quantified comparison of the benefits received and the detriments suffered by a claimant. The issue is to be approached on the basis of a board inquiry.”

52.  In the present case, the plaintiffs havepursuant to the oral arrangement renounced their rights to inherit the late Madam Mok’s share and interest in the Dongguan Property; the 1^st plaintiff has been paying government rates and rents of the Property; the plaintiffs have allowed the defendant to have exclusive use and enjoyment of the Property; the plaintiffs have abandoned their right to share the cash in the personal account of the late Madam Mok.

53.  Applying the aforesaid legal principles, I find that the detriment suffered by the plaintiffs is substantial although the amount is not quantified. It would be unconscionable for the defendant to renege on it. The oral arrangement is therefore enforceable.

Relief

54.  Ms Chong submitted that relief for proprietary estoppel is discretionary; she invited the court not to make the declaratory relief as claimed, but to order a monetary compensation in an amount commensurate with what the plaintiffs have given up.

55.  I refused this for two reasons. Firstly, there is no valuation of the Property or relevant information to enable the court to assess the amount of compensation.

56.  Secondly,it is not shown that the defendant has the ability to make compensation. It is evident that the defendant is no longer the registered owner of the Dongguan Property, itwas already registered in the name of his female friend in July 2012. The whereabouts of his cash savings and other assets are all unknown.Further, the defendant’s overall financial condition is uncertain. He came to court on a wheelchair of an elderly home; when he was asked to confirm that he resides in an elderly home while his female friend occupies the Property, the defendant denies.

57.  To conclude, I find that the plaintiffs havingsucceeded on their claim are entitled to the declaratory relief sought.

The Counterclaim

Issue (1): Whether the 1^st plaintiff owes the defendant any of the 5 loans?

58.  Regarding the 5 loans allegedly advanced by the defendant to the 1^st plaintiff during the period from December 2001 and November 2003, the defendant’s evidence is far too general without the necessary particulars.

59.  While the 5^th advancement by a cashier order was money withdrawn from the personal account of the late Madam Mok, there is no explanation by the defendant on how and why it was a loan by him personally.

60.  According to the defendant, the 5 loans were advanced to help the 1^st plaintiff with his purchase of a property in Macau. This does not sit well with the relevant documents; the said purchase was already completed in December 2001, well before the 2^nd to 5^th loans were made.   

61.  Further, the defendant has never demanded for repayment of the loans. The allegation of loans was first made in late 2010 when he made a report to the MPA against the 1^st plaintiff for forgery after his relationship with the 1^st plaintiff has turned sour.

62.  On the contrary, the 1^st plaintiff is able to provide factual background and details about each of the 5 advancements made by the late Madam Mok. His clear and direct evidence is consistent with the contemporaneous documents and is unshaken under cross-examination.

63.  The defendant failed to discharge his burden of proof. I find that the defendant has not advanced any of the 5 loans to the 1^st plaintiff. For completeness sake, I shall consider the issue of limitation.

Issue (2): Whether the claim is time-barred?

64.  The defendant argues that the limitation period of 6 years under Hong Kong law does not apply.

65.  Parties have adduced expert evidence on Macau law.There is no dispute on the following.

(a)   Pursuant to article 302 of the Macau Civil Code, the limitation period of any party to a contract to commence any legal action is 15 years; and

(b)   Pursuant to article 41 of the Macau Civil Code, when the governing law is not designated or provided in the contract, the governing law of such contract would be jurisdiction of law which is more closely connected to the contract.

66.  The defendant’s expert opined that Macau law should be the  applicable law because the contracts of loan in question bear elements of close connection with Macau; namely the 1^st plaintiff’ is habitual resident of Macau; the cashier orders were presented to the bank in Macau for payment; the purpose of the loans was for purchasing a property in Macau.

67.  I do not think the purpose of the loans is relevant at all. Further, both the defendant and the 1^st plaintiff are still permanent residents of Hong Kong. As a matter of fact, the 1^st plaintiff only moved to Macau in 2003, and he only obtained his Macau permanent residency in 2009.

68.  As opined by the 1^st plaintiff’s expert, looking at the essential elements of the transaction itself, namelythe parties to the contract, subject matter of the transaction, the place where the contract was entered into, Hong Kong law is applicable.

69.  Therefore, even if the defendant can prove the 5 loans as alleged, the claim is already time-barred. 

Conclusion

70.  I enter judgment in favor of the plaintiffs as follows:

(a)   A declaration that the 1^st, 2^nd and 3^rd plaintiffs are the joint beneficial owners of the Property in equal shares; and 

(b)   An order that the legal title of the Property be assigned to the 1^st, 2^nd and 3^rd plaintiffs in equal shares. 

71.  The counterclaim against the 1^st plaintiff be dismissed. 

Costs

72.  I make an order nisi that the defendant do pay the plaintiffs’ costs of the action with certificate for Counsel, to be taxed if not agreed.

73.  The defendant’s own costs be taxed in accordance with the Legal Aid Regulations. 

74.  The order nisi shall become absolute unless an application to vary is made within 14 days from today.