WML v. LCK

CACV 82/2014 & HCMP 3011/2014

CACV 82/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 82 OF 2014

(ON APPEAL FROM FCMC NO. 5663 of 2011)

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AND

HCMP 3011/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 3011 OF 2014

(ON AN INTENDED APPEAL FROM FCMC NO. 5663 OF 2011)

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BETWEEN

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 (HEARD TOGETHER)

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J U D G M E N T

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Hon Cheung JA :

1. This is an appeal by the respondent husband (‘husband’) against the judgment of Deputy District Court Judge Simon Lo who granted the petitioner wife (‘wife’) a lump sum of $1 million by way of ancillary relief. Further the husband is ordered to pay to the wife a monthly sum of $6,000 as maintenance for the first son of the family until he reaches the age of 18. The husband appeals against the judgment.

2. The wife seeks leave to appeal out of time on the ground that due to the stay of execution of the judgment, the value of properties has increased so much that she could no longer be able to use the $1 million to buy any reasonable small accommodation for herself and the son.

Background

3. The parties were married in February 2007 and separated shortly thereafter in June 2010.  The wife presented her petition in May 2011 and the decree nisi was granted on 2 June 2012.  It was a short marriage of slightly over four years.  The couple has two sons and by consent custody of the first son is granted to the wife while the husband has the custody of the second son.

4. The couple has modest income.  The Judge found that the husband’s current monthly income from his employment is $19,000 and on top of that he also receives $8,000 being half of the monthly rental from a flat in a residential estate known as Emerald Green（翹翠峰）registered in the joint names of the husband and his mother.

5. The Judge found that the wife has a monthly income of $13,585.

6. However, by contrast, the husband had at one time three properties registered in the joint names of himself and his mother, two of which had since been sold.

	Purchase price	Purchase date
1) A flat in Villa by the Park (朗庭園) in Yuen Long (Sold on 30 June 2011 for $2,480,000)	$1,570,000	8 November 2005
2)  A flat in Metro Town (Phase 1) (都會駅) in Sai Kung (Sold on 23 March 2012 for $5,360,000)	$4,132,000	20 December 2006
3)  A flat in Emerald Green (翹翠峰) in Yuen Long	$3,064,000	29 October 2010

7. In addition the husband has two properties registered in his sole name :

	Purchase price	Purchase date
1) A shop in Tokyo Town (東京銀座) Kowloon	$1, 950,000	15 June 2006
2)  A property in Brilliant Terrace (輝煌台) Guangzhou	RMB 275,551	22 February 2009

8. Villa by the Park used to be the matrimonial home of the parties.  The wife and the first son moved out from there in June 2010.

9. The husband also owned a Premier account with HSBC.  In August 2010, the account had HK$361,217.18 deposit and HK$614,760 worth of securities.  In June 2011, shortly after the wife’s petition for divorce, the husband closed the account.  The amount in the account at the time of its closing was $980,000.

10. The wife and the first son are currently living in a public housing flat in Tin Shui Wai rented by the mother of the wife.  The mother and her other daughter have been living in the flat before the wife and the first son moved in.  The wife and the first son are not lawful occupants of the flat.

11. The husband sold Villa by the Park before the wife presented her petition.  The husband then moved to Emerald Green.  He lived there between 11 July 2011 and 24 January 2013.  He then moved out and the property is now rented out.  The husband is now living temporarily with a friend.  The second son has been taken care of by the husband’s mother and lives with the paternal grandparents at their home in Fairview Park in Yuen Long.

12. The Judge found that the value of the husband’s assets identified above was $5,998,000.

13. On top of that the husband also has other bank accounts, insurance policies and MPF.  By contrast, except for her MPF valued at $15,000, the wife has no assets of value.

14. The Judge considered the value of total family asset was $6 million and awarded the wife $1 million being one-sixth of the total assets so as to enable her to buy a property to live with her first son.

Beneficial ownership of the husband’s assets

15. The issue before the Judge was the beneficial ownership of the Premier account and the properties registered in the name of the husband either singly or with his mother.  The husband’s case is that the source of funds for these assets came from his father and he was holding them on trust for his father.  The Premier account was opened primarily for the purpose of making investments for and on behalf of the father.

16. The father met with an industrial accident and recovered damages of HK$16,957,500 in a claim arising from the accident.  $7,957,500 of which was released to the mother on behalf of the father by way of monthly payment of $160,000 between August 2000 and May 2001 and later $118,500 between June 2001 and December 2005.  The balance of $9 million was paid to the joint account of the parents on 11 January 2006. 

17. In May 2000, the mother used part of the money received by her to buy a property in Fairview Park, Yuen Long as a residence for the family.  The property was acquired by the mother as a trustee for the father.

18. The Judge rejected the husband’s claim that he was merely a trustee of the assets.  The Judge held that the husband is the actual beneficial owner of half of the joint name properties and the beneficial owner of the assets registered in his sole name :

		Husband’s share
1) Villa by the Park:	½ of net proceeds of sale of $1,422,000	$711,000
2)  Metro Town:	½ of net proceeds of sale of $2,811,178.75	$1,406,000
3)  Emerald Green:	½ of $3,420,000 (value at $5,220,000 less mortgage of $1,800,000)	$1,710,000
4)  Tokyo Town		$900,000
5)  Brilliant Terrace		$291,000 (equivalent)
6)  Premier account		$980,000
		______________________
	Total	$5,998,000

Basis of the Judge’s decision

19. It is a fair reading of the judgment that the Judge proceeded with the analysis of the husband’s beneficial interest on the basis that the money paid by the husband’s father into the husband’s account and the husband’s acquisition of properties with finance from the father are presumed to be advancements to the husband and not presumed to be held on resulting trust by the husband for his father.  The Judge recognized that the presumption of advancement can be rebutted but held that this presumption has not been rebutted in the present case for the following reasons :

1)  The husband’s father was familiar with the trust concept as he did make use of a trust deed when he acquired the Fairview Park property.

2)  K C Ho & Fong, the firm of solicitors (‘the firm’) who handled the conveyancing transactions would have advised the husband’s family to prepare trust deeds for the other properties if indeed there were trust arrangements.

3)  In the mortgage documents for Villa by the Park, Emerald Green and Metro Town, the husband and his mother have confirmed that they are the beneficial owners of these properties.

4)  In the Sales Agreement for the Villa by the Park, the mother and the husband confirmed that there was no third party interest.

5)  The firm is a reputable firm and if the husband and his mother are only trustees for the father, it would not have permitted the husband to make a false declaration to the banks which financed the transactions.  Otherwise the firm would be assisting the husband and his mother in making false declaration with serious consequence.

6)  In respect of the Premier account, the husband’s evidence that he only followed the instruction of his father in carrying out the purchase and sale of shares was unbelievable.  Further the husband was free to use the funds in the account which was inconsistent of him being merely a trustee.

7)  The family is a traditional Chinese family and since the father’s life expectancy would only be until 2022, it was natural to give the assets to the husband by way of gift.

8)  If the father had no desire to give the assets to the husband as gift, he could have signed a power of attorney to the husband instead.  There was no reason for the firm not to have advised the family.

9)  There was no contemporaneous written document concerning the trust arrangement.  Oral evidence regarding the trust arrangement is not admissible evidence.

Grounds of appeal

20. Two main grounds of appeal are advanced by Mr Patrick Chong (who did not appear below) for the husband.  First, the husband did not receive a fair hearing below.  Second, the Judge’s view that the husband is the beneficial owner of the assets is wrong both in law and on the facts.

Fair hearing

1)  The husband’s requests for adjournment

21. The hearing before the Judge took place on 3 July 2013 and was listed for three days.  The husband was initially represented by another counsel and the firm.  On the first day of the hearing the Judge took the view that the firm might be in a position of conflict because, on the one hand, it had handled the conveyancing transactions in which there was no indication of any trust arrangement, and, on the other hand, the husband’s assertion in this action that he is a trustee for his father.  The Judge went so far as to express the view that if the Court should find in favour of the husband that he holds the properties on trust for his father, the firm would be in trouble and in such circumstances the Court might have to consider reporting the matter to the Law Society. 

22. Mr Andy Hung who acted for the wife below did not share the Judge’s view that the firm was in conflict.

23. The matter was adjourned by the Judge in mid morning for the firm to take instructions.  Eventually when the matter was resumed in the afternoon the husband’s counsel informed the Judge that the husband had chosen to act in person without his team of lawyers.  The Judge then advised the husband that he might require the assistance of lawyers as the case involved important issue of law and he might not know how to cross-examine the wife. 

24. The husband informed the Judge that he was considering instructing lawyer but he needed time to familiarize himself with the case and requested the hearing to be adjourned to the following day and if by then he could not retain lawyer, he would conduct the case himself.  The Judge, however, took the view that the whole case should be adjourned instead to September for three days.

25. Although the husband repeatedly informed the Judge that he would like to adjourn the hearing to the following morning, the Judge went on at great length about the possibility of the Court not granting the husband any adjournment in the event that the husband’s new lawyers turn up the next day and request time to prepare the case. 

26. The long and short of the exchange between the Judge and the husband is that the Judge refused the husband’s request for adjournment and effectively treated the husband had decided to conduct the hearing himself.  The wife was then called by Mr Hung to give evidence.  Before the wife’s evidence was given, the husband asked for the cross-examination to be adjourned to the following day.  The Judge replied that such a request could not be made before the wife had finished her evidence in chief. When the wife completed her evidence in chief, the husband again requested that the cross-examination be adjourned to the following day.  The Judge again refused the request and told the husband that if he refused to question the wife then the Court would treat the wife’s evidence had been completed and the husband would have to begin his case.  The husband’s response was that he had no question to ask and the husband was then directed by the Judge to give evidence.  The husband gave evidence and on the following day his parents also gave evidence.  The Judge then directed written submissions to be lodged by the parties and adjourned the case at 1 p.m.

2)  Principles

27. The right of a person to have a fair trial is found in Article 35 of the Basic Law which provides that Hong Kong residents shall have the right to confidential legal advice, access to the courts, choice of lawyers for timely protection of their lawful rights and interests or for representation in the courts, and to judicial remedies. 

28. The requirement of a fair trial is expressly recognized by Article 10 of the Bill of Rights which provides that :

‘ All persons shall be equal before the courts and tribunals. In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone is entitled to a fair and public hearing by a competent, independent and important tribunal established by law.’ (emphasis added)

29. While Article 35 of the Basic Law does not use the term ‘fair trial’, it can hardly be argued this provision contains anything less.

30. The concept of a fair trial is also ingrained in our common law system. 

3)  Contextual consideration

31. Whether a trial is fair or otherwise is very much a decision based on the context of the case.  In this case the unfairness arises from the Judge’s refusal to grant the husband a short adjournment for him to seek legal representation and to familiarize himself with the case.

32. The benefit of legal representation has been recognized not only from the point of view of the lay litigants who do not have sufficient legal knowledge and skills and the ability to assess and present his or her own case but also from the point of view of the administration of justice because a judge cannot investigate the facts, advise and direct the conduct of the parties’ case and participate in conferences between lawyers and the parties in which confidential information may be imparted : see Dietrich v R (1992) 109 ALR 385 cited by Yuen JA in Dr Ip Kay Lo Vincent v Medical Council of Hong Kong (No 2) [2003] 3 HKC 579, paragraph 94. 

33. That a litigant may be deprived of a fair hearing by the tribunal’s refusal to grant him an adjournment in order to seek legal assistance is illustrated by Dr Ip Kay Lo Vincent.  This Court held in the circumstances of the case Article 35 of the Basic Law was breached (paragraph 35 of the judgment) and it was not necessary for the appellant to rely on Article 10 of the Bill of Rights.

34. In this case the husband had repeatedly asked for a brief adjournment on the first day of a three-day trial so as to enable him to seek legal advice when his own legal team had ceased to act for him after the Judge took the point upon himself that the husband’s firm of solicitors was in a position of conflict.  The husband’s request was clearly a reasonable one.  That the Judge should even question this request when he himself had indicated that the husband might need legal assistance is inexplicable.  The more likely explanation is that the Judge was displeased that the husband would not accept his suggestion to have the matter wholly adjourned to September and in consequence refused every attempt by the husband to have a short adjournment. 

35. The repeated pleas by the husband to adjourn the cross-examination of the wife after he was effectively forced to proceed on his own showed that the husband was concerned about his ability to conduct the hearing.  After all he went to court that morning with the expectation that his lawyers would conduct the case on his behalf but found all of a sudden that he did not have such benefits.  The refusal to grant the husband the adjournment clearly prejudiced him. 

36. The Judge stated that it was quite impossible for the husband to find a suitable lawyer so soon to continue with the hearing.  In this connection I will repeat what I said in Dr Ip Kay Lo Vincent :  

‘ 32. The Council’s refusal was based on the reason that there was no certainty that he would have a lawyer if an adjournment is granted. The Council had adopted the wrong approach. At that stage, its function was to consider the application for adjournment. The right of a party to have legal representation outweighs other consideration such as what the Council perceived to be the chance of him finding a lawyer. The focus must be to allow him an opportunity to find a lawyer of his choice. The decision of Dr Ip to seek a lawyer came after concern raised by a member of the Council whether he could defend himself. The application to adjourn cannot be viewed as a tactical move by Dr Ip for the purpose of delaying the inquiry. By then he must have realised the difficulty in conducting his own case after he was asked by the Council to address on matters on law relating to the charge.’

37. Yuen JA also expressed the same view :

‘      87.   As for there being ‘no guarantee' that the appellant could get legal representation (or get it within a reasonable time), with respect to the tribunal, that was not the right test.  The right test was surely to balance the inconvenience of an adjournment against the defendant doctor’s right to legal representation, a right which had been given to him by statute and which was important to a fair hearing, given the seriousness of the charge he was facing, the vagaries of the particulars supplied at the eleventh-hour and the complexities of the case.’

38. In any event the husband was until the discharge of his legal team represented by counsel as well as solicitors.  Even if a new team of solicitors may not be familiar with the case, the same counsel may be retained and in a position to continue with the hearing on the next day after the brief adjournment. 

39. Further in a trial a judge must not only act impartially but also give an appearance that he is acting impartially.  The refusal by the Judge to allow the brief adjournment as detailed in the exchange between the Judge and the husband did give an appearance of bias on the part of the Judge. 

40. In my view the husband did not have the benefit of a fair hearing.

Merits of the appeal

41. A more difficult question is what should be the outcome of the appeal?  There is no doubt that the judgment holding the husband to be the beneficial owner of the assets is flawed both in terms of law and facts.  The Judge was wrong to use the presumption of advancement as the starting point of the inquiry.  This is a case where the husband’s family said that there was discussion and agreement on the nature of the holding at the time of the acquisition.  The starting point should be whether there was a common intention constructive trust.  The elements required to prove this type of trust were succinctly summarized by Godfrey Lam J in Liu Wai Keung v. Liu Wai Man [2013] 5 HKLRD 9 which I will respectfully adopt :

‘ 46. The focus of the inquiry is therefore on the elements that the plaintiff has to prove in order to establish a constructive trust in his favour. In the context of this case, this means that the plaintiff must prove: (a) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47.   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: Gissing v Gissing [1971] AC 886, 906; Jones v Kernott [2012] l AC 776, 794 [51].

48.  In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49.  Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions.  It is only wherethere is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention: Lloyds Bank Plc v Rosset [1991] 1 AC 107, 132-133.

50.  Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.’

42. Further the presumption of advancement from a parent to a child is now a rather weak concept : see a summary of the relevant law in Suen Shu Tai v Tam Fung Tai [2014] 4 HKLRD 436 at paragraphs 10.16 and 10.17.

43. The Judge had not approached the analysis in this way (and in fairness he was not so assisted) and he proceeded on the basis that the only admissible contemporaneous evidence of the intention was confined to written evidence but not oral evidence.  This is wrong.  He further considered how the firm would have advised the family when there was no evidence from the handling solicitor of the firm on the conveyancing transactions.  The father was born in 1963 and is a quadriplegic as a result of the accident and requires assistance to carry out his daily life.  According to Dr Yu Yuk Ling’s medical report of 30 August 1999, the father has a life expectancy of 20.9 to 23.7 additional years from his then age of 37.  The acquisition of properties in which the husband is said to have an interest first began in 2005.  The Judge did not discuss how the father would fund his living for the rest of life if he gave away a substantial part of his award of damages to his son absolutely. 

44. I am of the view that the Judge’s finding on the son’s beneficial interest in the assets is flawed and needs to be set aside.  However, I do not consider that this Court is in position to form its own view on this issue when the husband was deprived of the opportunity of presenting his case fully at the hearing below.  In my view there must be a retrial.  The judge hearing the case afresh may well have to consider, among other things, whether all the assets are subject to trust or whether there is a distinction between the assets registered in the husband’s sole name namely, Tokyo Town, Brilliant Terrace and the Premier account and those registered in the joint names of himself and his mother.

The wife’s application

45. Since there will be a retrial it is not necessary to make any order on the wife’s application for leave to appeal out of time.  Evidence concerning the increase in price of accommodation can be addressed at the retrial.

The Court’s concern

46. At the hearing we expressed our concern to the parties about the wife and the first son being forced to live illegally at the public housing unit of the wife’s mother while the second son has the benefit of living in a private estate with his paternal grandparents.  The provision for the wife has a direct bearing on the welfare of the first son. The welfare of the first son and the possible impact on the minds and psychology of the two sons as well their relationship arising from the disparity of their lifestyle should seriously be considered by the husband and his parents in deciding their approach towards the wife’s application for ancillary relief.

47. In the hearing before this Court, both parties have made open offers to resolve their difference.  The wife’s offer is that the sum of $1,420,000 now in Court (being the proceeds of sale of Metro Town of $2.8 million less payment of the mother’s half share of $1,420,000) will be given to the wife by way of a lump sum award.  The wife will use this sum to buy a property, half of which will be held upon trust for the first son and will be vested in him upon the first son reaching 18.  The husband’s offer is that the grandparents will use the $1,420,000 in Court to buy a property in Yuen Long or Tuen Mun (depending on where the first son will attend school) for the accommodation of the wife and the first son until the first son ceases full time education.  The property will be comparable to the two-room flat in Villa by the Park.  The grandparents will pay for the Government rent and rates.  A monthly maintenance of $3,000 will be paid as maintenance to the first son until he ceases full time education.  The husband proposes that there will be no order as to costs here and below.  It is unfortunate that the dispute cannot be resolved before the hearing.  The Court strongly urges the parties to mediate before the retrial with a view to narrowing the differences between the parties and to come an amicable solution that is in the best interest and welfare of their children.  The costs of another three-day trial will be better spent in making provisions for the wife and the child.

Conclusion

48. Accordingly the husband’s appeal is allowed.  The judgment below is set aside and a retrial is ordered.

49. There will be no order on the wife’s application for leave to appeal out of time.

Costs

50. I will make an order nisi that there will be no order as to costs of the appeal and below and also of the wife’s application.

51. The wife’s own costs are to be taxed in accordance with Legal Aid Regulations.

Hon Chu JA :

52. I agree with the judgment of Cheung JA and the orders proposed.

Hon Poon J :

53. I agree.