WONG KWAI OI v. LEE TAK KWONG

In The High Court Of The

Hong Kong Special Administrative Region

Court Of First Instance

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Judgment

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Introduction

1. These proceedings concern a dispute between a mother and her natural and lawful son in respect of an unencumbered property known as Flat No.26, 5th floor, Yick Fat Building, Nos. 1048-1056 / Nos. 2-32, Yau Man Street, Hong Kong ("the premises"). The premises, following the completion of the sale in September 1972, was at all material times registered in the sole name of the mother, the plaintiff ("the mother"). It had been purchased as an uncompleted building for $50,400 on 21 July 1971. The funding was by way of an initial deposit followed by a number of instalment payments. A mortgage was taken out at the time of the assignment and the mortgage loan was fully repaid in about 1975. The premises served for a time as the Lee family home, but was eventually rented out when the family returned to their public housing unit in Chaiwan. There was no controversy that the son in question, the defendant ("the son") had occupied the premises first with some incumbent tenants and latterly after his marriage with members of his own family since about 1982. He remains there to this day, refusing to vacate and deliver vacant possession to the mother despite oral and written demands to do so. It was the mother's contention that the son had occupied the premises under a licence revocable at will which she granted and had since terminated.

2. In September 1992, the mother and son signed a memorandum for the sale and purchase of the premises at Messrs. Leo Lok & Co. Had the sale gone ahead, the son would have acquired one half of the interests in the premises as a joint tenant for the price of $450,000. No sooner had the ink on the memorandum dried than the mother accused the son of mala fides and conspiracy to cheat her of the property. In the result, the sale did not proceed to completion.

3. In about July 1993, whilst the mother was in China, she suffered a minor stroke, and upon her return, was eventually admitted to the Buddhist Hospital. The events that ensued were highly controversial, leading to the commencement of this suit.

4. In very broad outline, it was the mother's allegation that the son had visited her at the hospital in September 1993 and lied about the need to execute fresh documentation as the original deed of the premises was somehow irregular or obsolete. As she was unwell and basically illiterate and ignorant, she executed two documents, a deed of gift and a will by affixing crosses to them that the son and two men had brought along to the hospital. It was her case that no one had explained the true nature and import of the documents to her and that at all relevant times, she was acting under a misapprehension as to what she was in fact signing. The son's position cannot be more diametrically opposed.

5. He alleged that the mother had invited him to the hospital for discussion with a view to passing one half of her rights in the premises to him as a tenant in common for nil consideration. He said she had requested him to instruct lawyers on her behalf but at his own expense to draw up the necessary deed of gift. Respecting the balance of her interests in the premises, it was his evidence that she had of her own volition desired to make a testamentary disposition of them in favour of him and his younger brother in equal shares after her demise. It was, he maintained, in faithfully, albeit somewhat reluctantly, carrying out her wishes that he instructed Messrs. Chong, Leung & Co. to prepare the necessary papers. They being her lawyers, had properly explained the deed of gift and the will to her before she executed them in October 1993. The deed of gift was registered without delay. On 27 November 1993, the mother through a separate firm of solicitors, Messrs. Liu, Chan, Lam & Co., wrote to Messrs Chong, Leung & Co, and to the son, effectively complaining of deception in the execution of the deed of gift and demanding the vacation of its registration. The demand went unheeded and the mother instituted the present suit in January 1994.

6. By her further re-amended pleadings, the mother averred that the deed of gift of gift was invalid on account of fraudulent misrepresentation and pursued damages to be assessed in respect thereof. Praying in aid the doctrine of Non Est Factum, she sought a declaration that the deed of gift was void and should be set aside. Its registration being wrongful, an order that it be vacated was included. The claim that she lacked the necessary faculty to execute the deed of gift was, in the event, not pursued at trial. Further, or alternatively, should it be held that she was not, or was not the sole beneficial owner of the premises, a declaration that the premises formed part of the unadministered estate of her late husband, Lee Kong Loi ("the husband"), and subject to various payments, fell under certain statutory trusts for the benefit of herself, the son and her three other offsprings was added. There were also the usual claims for further or other relief and costs.

7. In the Re-Amended Defence And Counterclaim, the son pleaded that the premises had been solely funded by his paternal grandfather ("the grandfather") whose declared intention was that the premises were to be preserved for the male descendants of the Lee family of whom there were only two candidates, his younger brother and himself. The mother was regarded as no more than a trustee holding the property for their benefit.

8. As regards his admitted occupation of the premises since 1982, it was his pleadings and evidence that he had done so at the mother's request in order to secure the eviction of some errant tenants and upon her intimation that the premises would eventually be returned to him and his brother. Having expended monies on improving the premises, he claimed, inter alia, to having acquired a half interest in the premises by reason of proprietary estoppel.

9. His claim in relation to the deed of gift was straightforward enough. No trickery or subterfuge had been practised and the deed of gift was accordingly perfectly above board, lawful and valid in all respects. A declaration was requested to acknowledge that it had been effective to assign a half share in the premises to him. Alternatively, based upon the trust created by the grandfather, he sought a declaration that since 1972, the mother had become a trustee holding one half of the beneficial interests in the premises for him as beneficiary. Further, because of proprietary estoppel, he had equally acquired a similar interest in the premises and a declaration to that end was sought. Further or other relief and costs were also included in his pleadings.

The issues

10. A proper and full analysis of the competing claims entails a determination of the circumstances surrounding the acquisition of the premises all those years ago. If the mother was a bare trustee of the premises or her beneficial interests in it had been so insignificantly small, then questions relating to proprietary estoppel and the validity of the deed of gift would, as submitted by Mr. Hung, counsel for the mother, indeed be academic. It is but common sense that one cannot give what one does not possess. That being so, I propose to commence by examining the history of ownership of the premises. Unless otherwise stated, the facts are as I find them.

To whom did the premises belong?

11. When the premises were acquired, the Lee family consisted of the grandfather, the mother and her husband, the son and his three siblings, a younger brother and two elder sisters. Although married, the mother had apparently taken up with another man called Lai Sun, now deceased, with whom she had other daughters. It was for a time, a menage a trois and a source of much friction and discontent.

12. The mother, aged 65 at the time of the trial and a woman with only three months of formal schooling behind her, came to Hong Kong from China to join her husband in 1957. As she was unable to read and write Chinese, being capable only of signing her name, her employment prospect had been severely limited. When the children were young, she remained at home to care for them, earning what little she could by assembling plastic flowers. The husband, a watchman with a proclivity for gambling, made irregular contributions towards the family's upkeep. He did, however, pay the rent. As the children grew and required less attention and care, the mother began to take on full-time employment of a manual nature. She worked on construction sites and hawked fruits. Her meagre income went towards the purchase of food and daily necessities. Those were difficult years which saw the family being supported regularly by remittances from the grandfather in Canada.

13. Upon his retirement as a seaman, the grandfather came back from Canada and moved in with the family at Room 422, Block 12, Chaiwan Estate. The year was 1968, a year after the tumultuous riots. He had accumulated some savings that were remitted to him after his return. The son alleged that the grandfather had amassed US $10,000. The mother countered that the savings had been no more than about HK $20,000. As the son was of a fairly young age at the time, being no more than 9 or 10, he having been born on 14 March 1958 on his own evidence, it was most improbable that he would have been privy to such information. Even had there been mention of such matters within his hearing or in his presence, the subject would have had little interest for and impact upon a boy of his age. There was, it seemed, no especial reason to retain such detail. I accept the mother's account in this regard as being truthful and reliable as I wholly accept her evidence of her work history and contribution towards the maintenance of the family.

14. A shop space on the ground floor of Block 10 in Chaiwan Estate was purchased with approximately $10,000 of the grandfather's savings partly for his accommodation and partly for storing fruits that the mother had begun to hawk for a living. When that business folded, the shop was rented out to a man called Lam Sing for $400 a month. The monthly rentals were used to fund the purchase of the premises. The balance of the grandfather's savings and his two monthly pensions of Can $100 and US $110 were all deposited into a bank account jointly opened with the mother at the Hongkong Bank at her suggestion. I have no hesitation in finding that the grandfather's monies had been employed to acquire the premises.

Funding of the premises

15. Owing to insufficient accommodation and following discussions between the mother and the grandfather, it was decided to purchase a new family home. On 31 July 1971 an agreement was entered into between the developers and the grandfather for the purchase of premises. The price was $50,400. Originally, it was contemplated that title would be taken in the grandfather's name. Relations between the grandfather and his son, the husband had been poor for some considerable time as the grandfather had disapproved of the son's gambling behaviour. The fact that the son had been cheated of money had only made matters worse. There was a period when the grandfather had even stopped supporting the family prior to his return to Hong Kong. With a view to preserving the new family asset, it was decided that the mother's name as purchaser be substituted. This was duly done.

16. The purchase was to be paid for in stages. The agreement stipulated a downpayment of $500 followed by six instalments payable on completion of various stages of the building. All these monies were duly paid. The balance of $30,240 was funded by a mortgage since redeemed.

17. It was the mother's testimony that she had had to borrow the deposit from her then employers, a decoration company. There was no actual repayment as the loan was gradually deducted from her salary. As to the balance of the purchase price, the evidence was unambiguous that it had come from rentals derived from letting out two cubicles in the premises and the shop and from the grandfather's monies in the joint bank account and from his pensions. Although she claimed to have paid the legal fees and stamp duty, it was equally plain that such payments had been borrowed from the shop's tenant and the loan subsequently repaid by off-setting against the rental. She said her live-in lover had done the decoration on the premises with the costs of materials and electrical fittings being borne by her. The actual amount spent in this connection was not quantified when she took the witness stand. In all likelihood, it would not have been significant in the overall scheme of things, given the modest background of this family.

18. The son had endeavoured to argue that the mother had made no financial contribution whatsoever towards the acquisition of the premises. He even went so far as to positively assert that she had worked only occasionally, earned very little, and, therefore, had no financial means or savings of any kind to support her claim of contribution.

19. On the evidence, there can be no real dispute that the mother had paid the deposit and the costs of certain decoration and fittings. Her actual financial input was modest when compared to the grandfather's, but contribution it remained nonetheless. I find that she had acquired a small beneficial stake in the premises. What then was its size?

20. On a simple arithmetic approach, the mother's share could not have been much greater than 1% on any view. Leaving aside the costs expended on decoration and fittings, she had in truth paid only $500. In terms of percentage, her beneficial interests in the premises would have been a minuscule 0.99% ($500 divided by $50,400 x 100). Thus, the major contributor to the purchase was the grandfather.

Resulting trust

21. When the premises were jointly purchased as a family home with no financial input from the husband, the evidence disclosed that it had been the grandfather's intention to preserve the asset and to avoid its dissipation by his own son with whom he had, on the evidence, sadly fallen out. To that end, title was taken in the sole name of the mother. As the bulk of the purchase monies had emanated from the grandfather and there having been no evidence indicative of an intention to make a gift of the premises to the mother, a resulting trust would, in my view, have come into existence at the time. Furthermore, no presumption of advancement could have operated in the circumstances. Accordingly, a resulting trust with the mother holding the majority share in the premises for the benefit of the grandfather had been created. With his death intestate in 1975, his beneficial interests would have passed to the husband, he having been the only surviving issue. There was no evidence that the grandfather had a spouse, or if he had one, that she had survived him.

22. When the grandfather took ill for the final time, he was admitted to the Hong Kong Sanatorium where he passed away some 10 days later. The medical costs were funded by the balance of his savings of about $10,000 in the joint bank account referred to. The ensuing funeral arrangements had been expensive. The mother testified that she had to sell 18 taels of gold that she had accumulated over the years and raise a further $15,000 by re-mortgaging the premises. The mortgage, she explained, was financed by rentals. I find her to have been truthful and reliable in this regard. She had always been diligent and frugal, taking care of the family as best she could with limited assistance from the husband. For a time after the son had moved into the premises, she had even worked at four jobs as claimed. By all accounts, it would seem that she had striven to remain financially independent of her grown-up children from both unions. That she had achieved a remarkable degree of success by dint of hard work was only too obvious.

23. The husband died a year after the grandfather in 1976, also leaving no will. As Mr. Hung has very pertinently and correctly submitted, his beneficial interests in the premises then passed to his estate which to this day remains unadministered. Although no administrator has been appointed, this estate fell ultimately to be distributed in terms of section 4 of the Intestates Estates Ordinance, Cap. 73 (1971 version). Accordingly, on a plain reading of the provision, the husband's share in the premises is charged with the payment of a net sum of $25,000 free of death duties and costs to the mother, the surviving spouse, with interest on that sum from the date of death at the rate of 5% per annum until paid or appropriated and, subject to providing for that amount and interest, the residuary estate shall be held as to one half, in trust for the mother absolutely and as to the other half, on statutory trusts for the son and his three siblings. That no letters of administration had been taken out cannot affect either the existence or the validity of the statutory trusts in any way. Thus, in reality, the mother would have assumed the role of trustee as to one half of the residuary estate for her herself as beneficiary, and as to the balance of the estate, for the benefit of herself and her four lawful issues. Right from the time of the purchase of the premises, she had also been holding her very small stake as trustee.

24. It is trite that beneficiaries have no proprietary interest in unadministered estates. Assuming for the moment that the mother's contention regarding the deed of gift to which I shall refer in greater detail in due course, is insupportable, in light of her very insignificant share in the premises, any attempt by her to alienate as much as one half of the legal and beneficial interests to the son must in reality fail. On that account alone, the son's request for a declaration as to the validity of the deed of gift in passing a half share to him founders and must, consequently be dismissed.

Declaration of trust

25. It was the son's contention that the mother had contributed not a sou to acquire the premises and that when the grandfather decided to put the premises in her name, it was his unmistakable wish that the premises should be kept for the male descendants of the Lee family. In short, only he and his younger brother would benefit. That position shifted in the course of his testimony as the beneficiaries were enlarged to include his two older sisters.

26. On the evidence of the son, the grandfather's intention was apparently made known at a house-warming party held not long after the family moved into their new accommodation. The move would necessarily have occurred only after the sale had been completed in September 1973. It was asserted that the grandfather had spontaneously declared to the gathered relations and friends that "it is the Lee family's assets. In the future it is to be given to the descendants of the Lee family". This utterance was apparently heard by the son who unquestionably shared a table with the rest of the children away from where the adults were seated. At the time, the son could not have been older than 14 or 15 on his own reckoning. The mother denied that such a declaration had been made.

27. The premises consisting of three bedrooms and a living room are of modest dimensions, being approximately 530 sq. ft. There were four tables of guests and family members. In all probability, the living room would not have been capacious enough to accommodate everyone. The children were admittedly chatting and playing amongst themselves and would have paid scant attention, if at all, to what was taking place at the tables where the adults were. The son with his young friends and siblings might even have been in another room. Given those circumstances, I find it difficult to accept the son's version of what had transpired at the banquet. In addition, because of his altered position regarding the alleged objects of the declared trust, I find his veracity and reliability wanting. I did not believe him.

28. Even wholly accepting his evidence, such a trust could not have been validly constituted by the grandfather.

29. To begin with, a declaration of trust respecting land or any interest in it must be manifested and proved in writing signed by the grandfather. Equally, no equitable interest in land can be created or disposed of except by writing signed by him: see section 5 of the Conveyancing and Property Ordinance, Cap. 219. On the son's evidence, the grandfather did not such thing.

30. The terms of the alleged trust were also uncertain and ambiguous. The persons intended to benefit as descendants of the Lee family were vague at best. The description would be wide enough to encompass issues other than the son and his younger brother and elder sisters. As interests could possibly vest outside the traditional period of lives in being and a further twenty-one years, the rule against perpetuities would be infringed. The trust is also void as the words allegedly said by the grandfather were no more than a general statement of what he might have wished to do with his share of the premises. There was nothing imperative in the words spoken by him.

31. For those reasons, the son's alternative claim for a declaration that the mother was a trustee holding one half of the beneficial interests for him is equally incompetent and must be dismissed.

Proprietary estoppel

32. As was previously stated, the son returned to the premises to live in 1982. There was no question that the mother was at wit's end having to deal with a particularly difficult tenant who had failed to pay his bills and even resorted to stealing electricity. I find that she was only too pleased to have the son's help in regaining possession of the premises. It was common ground that the recalcitrant tenant finally departed in 1988.

33. It was the son's case that the mother when requesting his return had led him to believe that the premises would eventually go to him and his younger brother, a fact strenuously refuted by the mother. It was further alleged that she had suggested that he should do up the premises at his own expense since he was about to marry and would need a home. This allegation was similarly rejected. In response, the mother countered that the son had carried out improvements not upon her request but because he fancied better quality accommodation.

34. The son asserted that he had accepted the challenge to collect rent and evict the tenant upon that basis and understanding and had spent some $94,000 on improving the premises which at the time had become dilapidated and were in dire need of repairs on his testimony. But for her inducement, he would not have incurred any expenditure. He did, however, agree that no mention of the capital outlay had been made to his siblings or to the mother prior to being ordered via correspondence to leave the premises.

35. The son was an unconvincing witness, a fact that became only too apparent as his cross-examination proceeded. I find the mother's version of events more believable in this connection. What she said had a ring of truth to it. She had clearly enlisted his help and requested his return and had permitted him to remain in situ. On her evidence, which I prefer and accept, his right to remain there was under a licence that was revocable at will. I find that the mother had tried unsuccessfully to remove the son from the premises as described by her. I also find that she had not encouraged him to improve the premises as alleged. It was a matter of which she had only very late in the day become aware. In reality, the son had incurred expenses so as to provide a better living environment for himself and his family. On facts alone, no proprietary estoppel could have arisen.

36. The doctrine of equitable estoppel is succinctly set out in Snell's Equity, 29th ed. at page 573 et seq. and Halsbury's Laws of England 4th ed. Reissue, Vol. 16 para 1072 et seq. Counsel have also very carefully taken me through a number of cases to illustrate the operation of this equitable relief. These included Dodsworth v Dodsworth, (CA) The Estates Gazette, Vol. 228 at pg. 1115, Pascoe v Turner [1979] 1 WLR 431, Kung Wong Sau Hin & Anr v Sze To Chun Keung & Ors.

37. On the authorities cited, even if I were to hold that the son had been encouraged to spend money on the premises and assured that he and his brother would acquire the premises as alleged, the conditions for activating the doctrine have not been established. The mother with her very limited beneficial interests by her conduct cannot materially affect the major portion of the interests subsisting in the premises. The son did not in reality incur expenditure improving the mother's property save possibly as regards her relatively small stake in it. The personal representative of the husband's estate has yet to be identified and appointed. In the circumstances of the case, such a claim is a non-starter as submitted. Sanctioning the claim would effectively prejudice the beneficiaries under the statutory trusts arising upon the husband's intestacy.

38. On his own evidence, the son had accepted that mother should retain one half of the shares while the balance would be apportioned between himself and his brother and sisters. To grant the relief sought would in fact run completely counter to his own genuine expectations. Furthermore, even if he had suffered a detriment that should be addressed, in light of the fact that he had lived rent free in the premises for a large of years and before then had enjoyed accommodation there at very little cost to himself as submitted by Mr. Hung, his equity should have been amply satisfied. When all the circumstances have been examined, the son is not entitled to a declaration based on proprietary estoppel and the claim must also be dismissed.

The deed of gift

39. Although I have found the mother truthful and credible on the contentious matters so far discussed, her testimony relating to the circumstances surrounding the execution of the deed of gift and the will, being wholly at odds with that adduced from Mr. Chong and Mr. Fu, was suspect. These two gentlemen had no reason to lie. Had they been minded to mislead the court, doubtless they would have gone on to explain that both documents had been explained to her over a much longer period of time than was the case. Yet the overall effect of what they said was that the documents had been gone over fairly quickly with her. There had been no attempt to explain the concept of trust to her. Mr. Fu very fairly conceded that if both documents had been more fully explained, it would have taken considerably longer.

40. I do not accept that they had conspired with the son to defraud her. Having made enquiries with the hospital staff, they were satisfied at the material time that the mother was alert and capable of executing the documents which they said she had understood following their explanation of the contents.

41. The mother was incapable of reading and writing English or Chinese. Despite having suffered a stroke, the effect had not been such that her mental faculty or ability to communicate had been impaired in any way. In point of fact, her only difficulty was signing her proper name in Chinese because of an injured hand. She claimed that no one had bothered to explain anything to her before she was requested to sign the deed of gift and the will. This was plainly untrue as this was a most improbable scenario. I find that she was fully aware of what was then happening before proceeding to execute the documents.

42. It was her allegation that the son had informed her in the presence of the legal representatives that the deed of the premises was defective and new documentation had to be signed. I do not accept that this was so, nor can I accept that she was never told of the identities of Mr. Fu and Mr. Chong.

43. The mother finally conceded that she had requested the daughter, Lee Ngan Hang to make arrangements for the son to visit her in the hospital. She testified that in the ensuing discussions the subject of his leaving the premises in return for a loan to purchase his own dwelling was canvassed. She was, however, adamant that he had not been advised that it was her desire to pass one half of the premises to him outright or that she intended to make testamentary disposition of the rest of her interests to him and his brother in equal shares. The suggestion that she had specifically asked him to instruct lawyers for that purpose was likewise rejected.

44. I am satisfied to find that the son had not been guilty of any misrepresentation, fraudulent or otherwise, as alleged. For some unexplained reason, she had decided to change her mind after the execution of the deed of gift and will.

45. Both documents had been drawn up pursuant to her instructions. Albeit that they should have been more fully explained to her in the hospital, she was fully apprised of their nature. She was also made aware of their contents. Both Mr. Fu and Mr. Chong were satisfied that she was able to follow their explanations. It follows that the plea of Non Est Factum and the claim for damages for fraud are unsustainable. Her prayers for a declaration that the deed of gift was void and for damages for fraudulent misrepresentation are dismissed.

46. Regardless of this finding, the deed of gift was ineffective to vest a half share interest in the premises in the son as the mother did not possess such a share that she could have divested for the reasons stated earlier.

47. On my findings, the mother is entitled to have the deed of gift set aside and its registration vacated as prayed. She has also succeeded in her claim for a declaration in terms of prayer 3A. The son's counterclaims, save on the question of costs are dismissed.

48. Being the legal owner of and having a partial beneficial share in the premises would entitle the mother to seek an order for possession of the premises against the son whose status as a beneficiary under a statutory trust confers no right upon him to continue to remain in residence. It is in everyone's interest that the husband's estate is administered and the statutory trusts for the wife and the children are given effect to without further delay. Under the general prayer for further or other relief, I order the son to deliver up vacant possession. When that should take effect I should like the parties to address me. Mr. Hung has indicated that he would like to be heard as to the precise terms of the orders should his client succeed. For that reason, the parties are advised to take out an appointment at the earliest opportunity so that the matter including the question of costs can be dealt with.