LAI SUK KING v. THE PERSONAL REPRESENTATIVE OF THE ESTATE OF LEUNG YUNG, DECEASED

HCA 2222/2018

[2022] HKCFI 1087

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2222 OF 2018

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J U D G M E N T

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1.  The late Madam Leung Yung (“the Deceased”)  was not the biological mother of the plaintiff, but raised the plaintiff as her own daughter since childhood. The two have lived together as such until the former passed away intestate in 2017. The Deceased left no issue while the plaintiff is not in a position to inherit the former’s estate. By the present action, the plaintiff seeks to establish her proprietary interest in the Deceased’s landed property in question on the basis of an agreement between them, common intention constructive trust and proprietary estoppel.

Procedural background

2.  The claim is, as it should be, filed against the estate of the Deceased.  In the absence of any person representing the estate, the Official Solicitor was requested to step in.  By the order of the court dated 25 January 2019, the Official Solicitor was appointed to represent the estate of the Deceased for the limited purpose of accepting service of the writ in the present action.  Naturally, no intention to defend the claim has been indicated.

3.  In the event that this action does not succeed, there is the possibility that the estate of the Deceased[1] will fall into the hands of the government as bona vacantia pursuant to section 4(9)  of the Intestates’ Estates Ordinance, Cap 73 (“IEO”).  In view of that, the Secretary for Justice has been informed of the present action.  The correspondence between the solicitors for the plaintiff and the Department of Justice in 2019 suggests that the Department had no intention of taking part in this action.

4.  By the order of the court dated 11 December 2019, this action was permitted to proceed in the absence of a person representing the estate of the Deceased, and any such judgment or order made or given in this action shall bind the estate to the same extent as it would have been bound, had a personal representative of the Deceased been a party to this action.  The order as directed was also served on the Department of Justice.

5.  The plaintiff applied for default judgment in January 2020. The application was disposed of on paper by DHCJ Liu. The learned Deputy Judge declined to dispose of the action without trial, and explained his decision in writing on 24 July 2020.

6.  Hence the setting down of this case for trial.

Summons filed on 15 November 2021

7.  The plaintiff sought leave to rely on a further witness statement.

8.  Admittedly the application was made late.  The principles set out in Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 705 at §6 apply. Amongst others, the court must have regard to circumstances such as the potential disruption to the trial, the prejudice to the other parties, and the explanation offered by the applicant for the late application.  These matters have to be considered and weighed in the light of and against the underlying objectives of the rules of court to ensure cost effectiveness and economy, expedition, proportionality, and fairness between the parties.

9.  I indicated that I would allow the plaintiff to adduce and rely on the evidence in, and the documentary evidence incidental to, her further statement for reasons to be given, which I now do.

10.  The further statement sought to adduce a tenancy agreement of the Property dated 25 July 2014 which was recently discovered by the plaintiff in early November 2021, and to give an account of the formation of the tenancy, the payment of rent and the term of the tenancy.

11.  It also pointed out that the aforesaid tenancy agreement and two other tenancy agreements respectively dated 19 March 1995 and 7 December 2001 already adduced in the evidence have not been duly stamped pursuant to the Stamp Duty Ordinance (Cap. 117).  However, remedial actions have been taken.  In that connection, the plaintiff’s solicitors offer a personal undertaking to cause those 3 tenancy agreements to be stamped and any penalty payable paid.

12.  The above further evidence is relevant to the trial.  It does not give rise to new claim or contention not already pleaded. It is not substantial.  The additional tenancy agreement belongs to the same class and nature of documents already adduced in relation to the same contention as to fact, namely the tenancies in respect of the Property handled by the plaintiff.

13.  In the circumstances of this case, no prejudice will be caused to the defendant.  Nor would adjournment of the trial be necessitated.

14.  I therefore formally allow the application upon the undertaking of the plaintiff’s solicitors to cause the relevant tenancy agreements to be stamped and any penalty to be paid, which, this court was just informed, has recently been effected.

The facts

15.  At the trial, the plaintiff adopted the content of her witness statements.  In court, she also explained various aspects of the documentary evidence[2]. The duration of the course of her evidence in court was understandably short. Nevertheless, it could still be observed that the plaintiff was a simple and straight forward witness.  She demonstrated solid knowledge about the facts, a lot of which were firsthand.  Together with the documentary evidence in support and in the absence of contradiction in the trial, the plaintiff’s evidence is both inherently and on the balance of probabilities credible.  Unless otherwise specified, I find the matters set out below to be the facts.

16.  The property in question is Flat C on the 5/F of Pao Fung Building, Nos 1-7 Hop Yick Road, Yuen Long, New Territories (“the Property”).  The Deceased became in 1986 and (her estate now)  remains its registered owner.  All the circumstances both prior to and subsequent to the acquisition of the Property are relevant to the claim in this action.

17.  The Deceased was married to Mr Lai Pak Fook (“Lai”)  in Guangzhou in the Mainland on 16 February 1956.  No child was born out of their marriage.

18.  The Plaintiff was born on 5 May 1969 out of the relationship between Lai and another woman Madam Wong Yuk Ngor (“Madam Wong”).

19.  Madam Wong played no part at all in the plaintiff’s life.  Ever since her birth, the Plaintiff had lived with and been raised by Lai and the Deceased as their own daughter.  The plaintiff did not get to realise the truth about her background until 1980 when she had to obtain her minor identity card.  However, the revelation then did not change the de facto parents and child relationship between Lai, the Deceased and the plaintiff.  Nor did the plaintiff feel compelled to find out further details about what exactly happened between Lai and Madam Wong.  Madam Wong never appeared.

20.  Lai passed away on 26 August 1981, when the plaintiff was 12 years old.  The Deceased continued to bring up and live with the Plaintiff.

21.  In 1983, the Deceased brought the plaintiff to move to a two-storey building at No 15 of the 5^th Lane of Tai Tau Leng Tsuen, New Territories (“the Village”), and started to run a kiosk on the ground floor.  The plaintiff helped out when she was off school.  In her evidence, the plaintiff gave detailed account of her life as a schoolgirl much loved and well treated by the Deceased.

22.  In November 1986, the Deceased purchased the Property at HK$132,000 with a view to letting it out for rental income.  The purchase was completed on 20 November 1986.  The plaintiff was then 17 years old.  She recalled viewing the Property with the Deceased, and the Deceased expressing her intention of adding the name of the plaintiff as an owner.  The plaintiff also recalled that such idea was dismissed upon the advice of the staff of the lawyers’ office that that was not feasible when she was still a minor.  She could not recall the name of the firm though.

23.  After graduation from secondary school, the plaintiff started to work, and has since had different jobs.

24.  In 1993, the Deceased and the plaintiff moved to No 11 of the 4^th Lane of the Village, and both of them started running a cafeteria at the village office.  The Deceased would give the plaintiff salary in the sum of HK$6,000.

25.  Meanwhile, the Deceased had since 1988 let the Property for rental income as planned.  She also paid for the management fees, government rent, rates and costs of maintenance and repair out of the rental income.  Amongst the tenancy agreements produced, one of them dated in 1996 was identified to have been signed by the plaintiff on behalf of the Deceased. According to the plaintiff, the Deceased instructed her to do so on that occasion. She was then 27 years old.  The Deceased should be about 68 years old.

26.  In about the same year, the Deceased also said to the plaintiff that she had no children or relative but the plaintiff, and the Property would be left behind to the plaintiff after her death.  The Deceased therefore proposed the plaintiff to take charge of the management and the letting of the Property.  Apart from taking share of the rental income from the Property for the living expenses, the Deceased would leave it to the plaintiff to make payments of the outgoings of the Property out of the residual rental income, and to make up any shortfall if necessary (“the Representation”).

27.  The plaintiff was agreeable to what the Deceased proposed.  Idea came about for the two to go to the solicitors to add the plaintiff’s name as an owner of the Property.  What practically happened was that the two just let the matter sat on.  Occasionally, the Deceased would bring up the subject, including once in 2000 and once in 2010 as the plaintiff recalled.  The latter occasion would be referred to further below.

28.  That said, the plaintiff did act in accordance with the terms of the Representation.  Since then, the plaintiff has engaged estate agents to put the Property for letting every now and then.  She also opened a joint bank account with the Deceased for the purpose of receiving the monthly rentals.  The Property was still let to a tenant at $6,500 per month. The plaintiff has been responsible for paying the monthly management fees (ranging from HK$473 to HK$1,620)  and the quarterly rates and government rents as well as the various utilities of the Property.  The plaintiff has engaged contractors to carry out maintenance and repair works of the Property from time to time, of which she could identify a sum of HK$22,000.00 spent on such works and a total sum of HK$7,523 as contribution towards the remedial works to the common parts of the building where the Property is as required by the incorporated owners.  The plaintiff footed the above expenses by the residual monthly rental income of the Property (after deducting for the Deceased’s living expenses)  and the plaintiff’s own money if necessary.  All along, no property tax was paid as the Deceased’s personal allowance exceeded the rental income. The plaintiff admittedly was unable to produce all the documentary evidence concerning the tenancy matters over the decades.  The plaintiff attributed that to the loss of the rest of the documents after the removal out of No 11 of the 4^th Lane to No 4 of the 3^rd Lane of the Village in 2010.  It was in the same year when the Deceased retired at the age of 82.  The plaintiff continued to operate the cafeteria on her own.

29.  In 2010, the Deceased brought up the subject of the addition of the name of the plaintiff as a registered owner of the Property.  This time the two attended Messrs Yip Tse Tang, Solicitors, for such purpose.  The advice received then was that any concern about the mental capacity of the Deceased should be addressed by way of certification by two doctors.  The Deceased and the plaintiff eventually did not follow through the matter.

30.  The condition of the Deceased did not improve afterwards, and the plaintiff had to accompany her to see the doctor from time to time.  In 2016, the Deceased fainted at home once, which required regurgitation at the hospital.  The plaintiff continued to live with and take care of the Deceased while running the cafeteria.

31.  The plaintiff never got married.

32.  In the plaintiff’s own words, which this court believes to be a fair and accurate description of the reality over the past decades, the Deceased and the plaintiff, albeit not by blood, had been de facto mother and daughter since the plaintiff’s childhood, whichever way one sees it.  They had only each other since the passing of Lai in 1981.  The Deceased raised and took care of the plaintiff.  She provided for the plaintiff.  The reverse happened when the Deceased became elderly and dependent on the plaintiff.  It became the plaintiff providing for the Deceased.  In the 2000s, the plaintiff would still take out various insurance policies, all naming the Deceased as the beneficiary in case anything adverse happened to the plaintiff.

33.  On 16 October 2017, the Deceased died at the age of 89.  Not surprisingly, the plaintiff paid for and arranged the burial of the Deceased as the de facto daughter.  Since then, the plaintiff continued to manage the tenancy in respect of the Property as before.

34.  In 2018, the plaintiff came to consider the administration of the estate of the Deceased, which mainly consists of the Property.  As advised by the solicitors acting for her in the present case, she has no locus to apply for grant.  Nor is she entitled to inherit the estate unless by way of a will of the Deceased.  Without succession under intestacy, the estate of the Deceased may end up with the government by virtue of bona vacantia.  After obtaining legal advice, the present action was commenced.

Agreement

35.  The first cause of action advanced by the plaintiff is based on an alleged oral agreement arising out of the Representation.  The pleaded case is that the failure of the estate of the Deceased to transfer the title of the Property to her amounted to repudiation of the agreement, which she now seeks to specifically enforce.

36.  Insofar as the Representation amounted to terms of offer by the Deceased, which the plaintiff accepted, is concerned, it did not satisfy section 3(1)  of the Conveyancing and Property Ordinance, Cap 219 (“CPO”).  Pursuant to that section, a contract for disposition of land or some memorandum or note thereof has to be in writing and signed by the party to be charged or by some other person lawfully authorized by him for such purpose.  The plaintiff relies on her actual conduct in compliance with the terms which, she contends, amounted to part performance of the oral agreement recognized by section 3(2)  of the CPO.

37.  Counsel refers to numerous authorities, abroad and local, regarding applicability and application of the law relating to part performance.  The emphasis is that the approach of equity is to consider all the acts done arising out of and subsequent to the alleged agreement and the circumstances to decide if the agreement could be inferred.  Now, it is argued, the estate of the Deceased is also bound by such agreement concerning proprietary interest in land.

38.  In my judgment, the contention in respect of a specifically enforceable agreement between the Deceased and the plaintiff established by part performance is not a realistic view of the circumstances. When all the circumstances surrounding the Representation are considered, the one crucial component of a binding agreement between the Deceased and the plaintiff that is doubtful is the very intention to create legal relationship between them.  In none of the authorities cited by counsel was the intention to create legal relationship an issue.  On the contrary, it was not purely domestic context but the conception and intention of the parties to enter into a bargain in those cases.

39.  Domestic context does not prevent intention to create enforceable legal relationship from arising.  However, the more I am satisfied about the common intention of the Deceased and the plaintiff behind the former’s representation to the latter in 1996, the more I am compelled to find that the requisite intention of them to perceive the Representation as offering of terms for creating a legally binding and enforceable agreement is lacking.  The suggestion that the two had the intention of arriving at an oral agreement at the time falls out of line with the reality, if it is not artificial.  So is the formulation of the claim on the basis of the repudiation of the alleged agreement on the part of the Deceased (or her estate now)  and affirmation of the alleged agreement by the plaintiff in order to found the claim for specific performance.  If anything, any legal relationship that might arise out of the Representation and the plaintiff’s conduct upon that was that by operation of law, namely, the alternative causes of common intention constructive trust or proprietary estoppel also pleaded.

Common intention construction trust

40.  I agree with counsel’s following summary of the applicable principles.

41.  In the context of interest in property, a constructive trust arises when the claimant’s detrimental reliance on the common intention of him and the property owner as well as the resultant unconscionability of the property owner to depart from it: see for instance, Luo Xing Juan Angela v Estate of Hui Shui See Willy, deceased (2009)  12 HKCFAR 1 at §38.

42.  Whether or not a common intention existed can be deduced objectively from the whole course of conduct of the parties.  In ascertaining whether there was a common intention, it is the objective intention of each party which was reasonably understood by the other party to be manifested by that party’s words and conduct that one must examine: see for instance Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §47.

43.  Circumstances vary from case to case.  Common intention may be found from any agreement, arrangement or understanding at any time prior to the acquisition of the property or exceptionally at some later date based on evidence of express discussions between the parties, however imperfectly remembered and however imprecise their terms may have been.  Where there is no evidence to support a finding of such an agreement or agreement, the court would see if the relevant common intention may be inferred from the conduct of the parties: see Lloyds Bank Plc v Rosset [1991] 1 AC 107 (HL)  at 132 – 133.

44.  Even where reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter of reference to which their assertions about the agreement or understanding must be gauged and tested: see Liu Wai Keung (above)  at §50.

45.  An equity arose from common intention constructive trust can bind the personal representatives of the legal owner and a third party.  The cut-off date for ascertaining the existence of detrimental reliance is the date of death of the legal owner.  If detrimental reliance is not present at that point of time, the beneficial ownership would be devolved either by way of testamentary disposition or in accordance with the law on intestacy without being encumbered by any constructive trust: see Cheung Lai Mui v Cheung Wai Shing [2020] 2 HKLRD 15 at §§1.3, 1.6, 6.35-6.38 (on final appeal in Cheung Lai Mui v Cheung Wai Shing (2021)  24 HKCFAR 116 at §31).

46.  Against the background and relationship between the Deceased and the plaintiff mentioned above, the intention of the former to have the latter as her de facto daughter to inherit the Property one day, in my judgment, is beyond doubt.  The Deceased had no child or relative.  The love and affection behind was evident from the circumstances.  When the Property was acquired in 1986, the Deceased suggested, admittedly prematurely, to add the name of the plaintiff as an owner of the Property. Similar idea came about after the Representation was made in 1996, though the two never really put themselves to implement that.  That said, they had no real reason for perceiving any risk arising out of such failure.

47.  Even if the focus is placed on the point of time when the Representation was made, the common intention could also still be readily deduced.  The Deceased made the Representation with a clear view and communicated her expectation that the plaintiff would have to take over the management of the Property, including its letting and maintenance.  Against the background mentioned above, the pretext of that was not only for the Deceased’s own benefit during the rest of her life but primarily for paving the way for the plaintiff to inherit her upon her death.  The plaintiff’s equity in the Property arose upon and since her acting upon such common intention.

48.  Since 1996, the plaintiff has indeed been acting in accordance with the terms of the Representation and the common intention.  To the extent that she has been taking charge of managing the Property as well as its letting and maintenance, the plaintiff relied on the Representation and has been acting to her detriment.

49.  One may question whether the detriment has been real, as such undertaking appeared to have been funded by the rental income. However, the plaintiff was expected to take the risk of any possible rental vacuum between tenancies.  She was expected to underwrite any shortfall. Further, love and affection aside, the plaintiff demonstrated her understanding of the expectation of the Deceased that the former would continue to take care of not just the Property but essentially all walks of the Deceased’s life in her later years.  As mentioned, they had only each other for a large part of their lives.  The plaintiff met such expectation by spending her time and effort dutifully.  That indeed caused her to reflect that it was essentially because of that that she has remained single even as at the time of the trial.

50.  The question to ask is whether it would be conscionable to deny her equity in the Property arising out of the matters discussed above.  Reference is made to the court’s consideration both in the context of post-acquisition common intention constructive trust and proprietary estoppel in Chan Gordon v Lee Wai Hing and Ors [2011] 2 HKLRD 506.  For analogy, that is. However, a peculiar and significant feature of the present case is that not only did the Deceased and the plaintiff share the common intention of the latter inheriting the Property, but there is also known to be no one in the former’s estate whose potential interest may enter into the balancing scale. If the intention was not given effect to, the estate may have to fall into bona vacantia. In my judgment, equity in the circumstances should not allow that.

Proprietary estoppel

51.  It is trite that the requirements of proprietary estoppel are: (i) a representation or assurance made to the claimant; (ii) reliance thereon by the claimant; and (iii) detriment to the claimant in the consequence of that reliance.  See Cheung Lai Mui (CFA)  (above)  at §23.

52.  The Court would look at the words of the promisor objectively to see whether the promisee would form a reasonable view that the promisor was giving him an assurance that he was to receive the benefit and that he could rely on it: see Cheung Lai Mui (CA)  (above)  at §6.39.

53.  As for detrimental reliance, the Court of Final Appeal stated in Cheung Lai Mui (CFA)  (above)  at §31 that where there is not the necessary reliance by the promisee prior to the death of the promisor, the promise or assurance by the promisor must be taken to have lapsed.  The executor or administrator of the promisor otherwise, if it were sufficient that the detriment occurred after the death of the promisor, would be giving precedence to an interest which only accrued after the interests of the testamentary beneficiaries or of the next of kin under the IEO had taken effect.  In other words, the requirement of detrimental reliance should be satisfied before the promisor’s death, but the state of affairs subsequent to the promisor’s death are relevant to the question of reliefs: see Cheung Lai Mui (CFA)  (above)  at §32.

54.  It has been repeated in recent years that the legal analysis of proprietary estoppel should adopt a broader approach directed at ascertaining whether in the circumstances of a given case, it would be unconscionable for a party to be permitted to deny that which, knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of preconceived formula serving as a universal yardstick for every form of unconscionable behaviour: see Best Star Holdings Ltd v Lam Chun Hing & Ors HCA 409/2008 (22 February 2012)  at §143 (citing Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133 at 151H).  In Cheung Lai Mui (CFA), decision (of the 3^rd defendant in that case)  not to invest in any other properties as well as emotional and sentimental attachment to the property in question and family home for years were considered to suffice in turning his dispossession unconscionable.  Proprietary estoppel arose in his favour.

55.  To do equity, the minimum award is entailed in making good what would have met the expectation of the claimant as a result of his reliance on the encouragement by the property owner: see Stack v Dowden [2007] 2 AC 432 at §37; Cheung Pak Chuen v Au Yeung Wing Chi HCA 1858/2010 (13 May 2013)  at §92.  Where the relevant expectations were that the plaintiff would be entitled to ownership of the property instead of merely licence coupled with an equity, full beneficial interest of the plaintiff in the property will be recognised: see for instance Cheung Pak Chuen (above); Chan Gordon (above).

56.  The above discussion in respect of common intention constructive trust equally applies.  The circumstances were such that the plaintiff’s equity could only be represented by the recognition of her 100% beneficial interest in the Property. Denying that to the plaintiff will be unconscionable.

Conclusion and order

57.  All circumstances considered, including those specifically discussed above, I find that the plaintiff has proved her claim. There will be judgment for a declaration that the plaintiff is the 100% beneficial owner of the Property by virtue of common intention constructive trust or alternatively proprietary estoppel.

58.  The plaintiff also asks for an order that the legal title and beneficial interest of and in the Property be assigned, transferred and/or caused to be assigned and transferred to her.  In default, she asks that the Registrar of the High Court be authorised to execute all the necessary assignments, transfers and/or deeds so as to enable such assignment and transfer.

59.  What the plaintiff seeks above appears to have become a relief normally sought in circumstances whenever the claimant could not secure the execution of the assignment and transfer of property rights by the property or interest holder.  During the hearing, I expressed my reservation about that.  Whilst I am satisfied that the plaintiff may need the vesting of the legal title, I maintain my reservation about directing the Registrar to execute the transfer and assignment.  The reason is that such order of the court per se does not necessarily remove the ramification of involving the Registrar, in the absence of indemnity, when not even the root of title to the Property is known by the court, let alone the Registrar.  All matters considered, I would be prepared to order that a partner of the solicitors acting for the plaintiff be authorised to execute the necessary assignment and transfer.  I so order.  I give liberty to apply in this respect.

60.  I make a nisi order that there be no order as to costs.