NG SHING CHIT v. LEE KIN CHU by her guardian ad litem GO MAN YIN

CACV 558/2018

[2019] HKCA 1084

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 558 OF 2018

(ON APPEAL FROM HCA 1228 OF 2015)

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JUDGMENT

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Hon Lam VP:

1.  I respectfully agree with the judgment of Yuen JA. On the evidence, Chow J was entitled to find that there had not been any promise by the Defendant to the Plaintiff as she had only proffered her promise to his son. The learned judge was also entitled to find that the Plaintiff repaid the loan instalments out of kindness. As my lady observed, in light of the long-standing relationship between the two parties, the finding of the judge cannot be regarded as plainly wrong. Hence, I agree that the appeal should be dismissed with costs.

Hon Yuen JA:

2.1. This is the plaintiff’s appeal from a Judgment of Chow J (“the judge”) given on 29 October 2018 dismissing his claim against the defendant, the registered owner of a residential unit1 (“the Property”), for:

(a)   a declaration that the defendant holds the Property on trust for the benefit of the plaintiff, subject to the defendant’s “life interest” in the Property;

(b)    an order that the defendant do assign or vest her legal title in the Property to or in the plaintiff and that the defendant do execute all necessary instruments for the purpose of assigning or vesting her legal interest in the Property to or in the plaintiff, subject to the defendant’s “life interest” in the Property.

2.2. The relief sought in the Statement of Claim will be discussed later in this Judgment2.

Background

3.  The factual background material to this appeal is as follows.

4.1. The plaintiff is now about 75 and the defendant is 84.  They met in 1976 in Hong Kong when they became colleagues.  The plaintiff was about 32; his wife and children were then living on the mainland and he lived in Hong Kong with his mother.  The defendant was about 40; she was married but was separated from her husband who lived overseas.  She lived with her then teenage son Go Man Yin (“Man Yin”).  The plaintiff and the defendant began a relationship which lasted 30 years.

4.2. In 1977, the plaintiff started his own business and the defendant ceased working outside the home.  The plaintiff provided the defendant with some living expenses, but she also made some money of her own by sub-letting rooms in her rented flat and as a child minder. 

4.3. In 1978, the plaintiff’s wife and children moved to Hong Kong.  The plaintiff lived with them but continued his relationship with the defendant.  The plaintiff’s children and the defendant got to know one another as he used to take them to visit her when they were young3.

Parties’ purchase of the Property

5.1. In 1984, the parties wished to acquire a property for the defendant to live in. The parties agreed to purchase the Property as joint tenants. 

5.2. It is common ground that of the purchase price of $249,000, the defendant provided about half ($120,000) as down payment, with the balance provided by a mortgage loan from a building society (“the 1^st mortgage”). There was a dispute between the parties as to whether the mortgage instalments were entirely repaid by the plaintiff, or also by the defendant and Man Yin4, but that is not relevant to this appeal.

5.3. In 1987, the 1^st mortgage was discharged, and the Property was mortgaged to a bank (“the 2^nd mortgage”) to secure banking facilities in favour of the plaintiff and the defendant.

5.4. Also in 1987, the plaintiff applied with his wife for a Home Ownership Scheme unit. They were initially successful, but were subsequently disqualified due to the plaintiff’s ownership of the Property.

Sale of plaintiff’s interest in the Property to the defendant

6.1. In 1989, the plaintiff sold his interest in the Property to the defendant for $128,000.  There was a dispute between the parties as to whether the purchase price was paid.  The judge accepted the defendant’s case that she paid the purchase price in full.  This finding is not under appeal. 

6.2. The effect of the sale was that the defendant became the sole legal and beneficial owner of the Property.  She became the sole registered owner. 

6.3. At the same time, a 3^rd mortgage was obtained from the bank (“the 3^rd mortgage”) to secure banking facilities in favour of the plaintiff and the defendant.

Plaintiff’s purchase of another property

7.  In 1991, the plaintiff purchased another unit (with the help of a mortgage5) where he lived with his wife and family.  Meanwhile he continued his relationship with the defendant.

Charge over the Property

8.1. In January 1996, the 3^rd mortgage over the Property was discharged and a 1^st legal charge (“the 1^st charge”) was given to Liu Chong Hing Bank (“LCHB”) to secure banking facilities provided to Man Yin only.  The plaintiff said he was aware of this and agreed to it6.

8.2. In 1997, a further charge was given to LCHB increasing the amount of banking facilities for Man Yin.  The plaintiff said he was not aware of this until 20007.

9.  In June 2000, Man Yin became heavily indebted and was no longer able to service the LCHB loan8.  The defendant (who was then 65) became very concerned that the bank would recover possession of the Property where she was living, and discussed the matter with the plaintiff.  The Property was then worth about $700,000, and the total sum due was about $500,0009, payable by monthly instalments of $8,800 (“loan instalments”).

10.  It is at this juncture that the matters disputed by the parties occurred.  

The plaintiff’s case

11.1. The plaintiff’s case is as follows.

11.2. By this time, his business was producing significantly less income than before, and he still had to pay mortgage instalments for 3 more years for the unit where he and his wife lived.  It would place a heavy strain on his finances if he had to come up with the additional sum of $8,800 a month¹⁰. 

- The Pleaded Representation 

12.1. The defendant proposed that the plaintiff approach his sons for help.  The plaintiff’s pleaded case¹¹ was that the defendant represented to him that “whoever repaid the loans would get her interest and share of her Property after her death” (emphasis added) (“the Pleaded Representation”).

12.2. The plaintiff approached the elder son first, but this son refused as he had financial responsibilities for his own family.  The younger son (“Chi Chiu”) however was single, employed in a managerial position and earned about $30,000 a month.

12.3. The plaintiff took some time to persuade Chi Chiu to help.  During this period (5 July - 25 September 2000), the plaintiff himself paid a total of 4 loan instalments (“the plaintiff’s 4 instalments”). 

12.4. According to Chi Chiu, whose evidence the judge accepted¹², he was prepared to repay the loan on behalf of the defendant, because he had ample financial resources and also to “give face” to his father, but more importantly, because the defendant promised to transfer the Property to him upon her death.  Accordingly he and the defendant opened a joint account at LCHB, and he duly paid 4 loan instalments (October 2000 to February 2001) (“Chi Chiu’s 4 instalments”). 

12.5. However, after paying those loan instalments, Chi Chiu changed his mind.  He came to the view that he was not getting much of a bargain because he would be paying a total of about $500,000 for a property worth only $700,000 which he would not be able to get until the defendant’s death, which he thought might not occur for some time given the long life expectancy of women.  Also he did not wish his mother to find out he was helping the defendant¹³.  He then ceased paying the loan instalments.

12.6. According to the plaintiff¹⁴, after the defendant came to know that Chi Chiu ceased payment, she became very agitated, and begged the plaintiff on her knees to help her repay the loan.  He said that because of their long emotional attachment, he could not bear to see her so sad, and so he promised her that he would help her and Man Yin clear the debt owed to LCHB.

12.7. The plaintiff’s pleaded case was that he paid the instalments in reliance on the Pleaded Representation (that whoever paid the loans would get the defendant’s interest in the Property after her death).

- The further Representation

13.  During his evidence at trial however¹⁵, the plaintiff alleged that at that point in time (i.e. after payment of his 4 instalments and Chi Chiu’s 4 instalments), the defendant made a representation to him that she would transfer the Property to him as soon as he repaid all the loan instalments (“the further Representation”).

- Release of bank charge

14.  The plaintiff took to driving a taxi full-time making $15,000 - $16,000 a month, and repaid the loan instalments until the bank charge over the Property was released in January 2006.

- Defendant’s refusal to transfer the Property

15.  According to the plaintiff, a few months after the release, he asked the defendant to transfer the Property to his name, but she refused¹⁶.  Despite that, they continued their relationship until he moved to stay on the mainland in 2009.  Thereafter he visited her every time he returned to Hong Kong¹⁷.  However in 2011, they had a “severe quarrel” when the defendant refused to transfer the Property to his name, and their relationship deteriorated¹⁸.

- Plaintiff’s pre-action letter

16.1. On 15 January 2014, the plaintiff instructed solicitors to write a pre-action letter to the defendant.  After referring to the defendant’s fear of repossession by the bank in 2000, the following was asserted:

“2(7). As you did not want the Property to be repossessed by LCHB, you begged our client and his son Mr Ng Chi Chiu for financial assistance in repaying the loans. In return, you promised our client and his son that whoever repaid the loans would get the Property after your death. You also promised to our client’s son that his name could and would be put in the Property as joint owner with you. At your request and in reliance on your promise, our client’s son initially paid several monthly instalments of the loan and thereafter our client started making monthly payment of about $8,800 to the mortgagee bank for repayment of the loans on your behalf”. (Emphasis added).

“2(9). Due to the advancing age of you and our client and for fear of the untimely death of the parties before proper conveyance is made in accordance with the agreed arrangement set out in para. 2(7) above, our client repeatedly requested you on various occasions to do legal documentation to include his name in the Property. However, you refused our client’s requests”. (Emphasis added).

“4. In the circumstances, we are instructed to demand your agreement to forthwith transfer the Property to our client subject to your right to occupy the Property during your lifetime”. (Emphasis added).

16.2. Pausing there, it would be noted that:

(1)   there was no mention of the plaintiff’s 4 instalments;

(2)   there was no mention of the further Representation;

(3)   the demand of an immediate transfer of the Property to the plaintiff was on the ground of the parties’ “advancing age” and “fear of the parties’ untimely death”, and it was not alleged that the plaintiff had been entitled to an assignment for the past 8 years (since January 2006 when the LHCB loan was fully repaid).

16.3. The defendant did not reply.

The plaintiff’s claim

17.1. About 18 months later, the plaintiff issued a writ.  The relief claimed¹⁹ (set out earlier in this Judgment²⁰) gave rise to the following questions. 

17.2. First, the plaintiff originally sought a declaration that the defendant holds the Property on trust for his benefit subject to the defendant’s “life interest” in the Property.  The use of such a term without more does not indicate to the other party or the court what is the interest being asserted.  If the basis for this relief is the Pleaded Representation, it is difficult to see why it is alleged that the defendant only has a “life interest”, when she can satisfy that promise by enjoying the rights and interests of a legal and beneficial owner and leaving the Property to the plaintiff in her will.  However as seen in the pre-action letter²¹, the plaintiff’s solicitors asserted that the defendant only had the right to occupy the Property during her lifetime.

17.3. Before this court, Mr Kevin Poon for the plaintiff stated his case was that the defendant retained the power to deal with the Property during her lifetime (eg by mortgaging it) subject only to the plaintiff’s interest as remainderman.  He reformulated the declaration the plaintiff now seeks as follows:

“A declaration that the defendant holds the Property subject to the equity that it will be conveyed to the plaintiff upon the death of the defendant”. (Emphasis added).

This declaration is contradictory to the further Representation alleged by the plaintiff in his oral testimony.

17.4. Second, the plaintiff had originally sought an order for an inter vivos assignment from the defendant.  This order is contradictory to the Pleaded Representation which refers to the defendant’s interest being obtained “after her death”. Before this court, Mr Poon abandoned the prayer for this order.

The defendant’s case

18.1. At trial, the defendant’s case was advanced by reference to the Defence she had filed in September 2015 when acting in person, and to two witness statements made in March and October 2016.  By the time of trial, she had become a mentally incapacitated person.  A medical report made in November 2017 stated that she was “diagnosed suffering from several years’ standing Neurocognitive Disorder, due to Vascular Disease ... (previously known as Vascular Dementia ...) and co-morbid Depression”.

18.2. Basically her case was that:

- she had not made the Pleaded Representation²²;

- she had opened the joint account with Chi Chiu so that she could keep track of funds if one of her overseas relatives asked him to do some decorating work, which did not take place²³; and

- whatever money the plaintiff gave her was given to her unconditionally, and it was for her to use, whether for her living expenses or for repayment of the loan instalments²⁴.

18.3. The defendant could not respond to the plaintiff’s allegation of the further Representation as it was only made at trial, by which time she was not mentally able to give instructions.

The judge’s Judgment

19.1. The trial took 3 days, with the plaintiff being cross-examined at length.  Chi Chiu and Man Yin also gave oral evidence.

19.2. As mentioned earlier in this Judgment, the judge found that the plaintiff had sold his interest in the Property to the defendant for consideration in 1989²⁵.  Consequently she did not hold any interest in the Property on trust for him (a finding which is not under appeal).

19.3. The judge also rejected the plaintiff’s unpleaded alternative case of “resulting trust” said to arise solely from his repayment of the loan instalments²⁶ (this is also not under appeal).

19.4. The judge accepted Chi Chiu’s evidence that the defendant had made a representation to him to the effect that if he would repay the loans on her/Man Yin’s behalf, she would give the Property to him after her death²⁷. 

19.5. In relation to the issue whether the plaintiff was entitled to the Property (subject to the defendant’s “life interest”) by reason of a representation, the judge focused on the plaintiff’s pleaded case which he quoted verbatim:

“16. The Defendant ... made a representation to the Plaintiff to the effect that whoever repaid the loans would get her interest and share of the Property after her death (‘the Defendant’s Representation’).

17. In reliance of the Defendant’s Representation, and fearing that any failure of repayment would result in the Property being entered into possession by LCHB and in turn affect his beneficial interest therein, the plaintiff caused his son, Ng Chi Chiu (‘NCC’) to open a joint bank account at LCHB with the Defendant for making repayments of the outstanding loans under the Charges. After 4 repayments [were] made, the plaintiff himself took over from NCC the responsibility of repayment and further repaid until the Charges were ultimately released in January 2006 by way of a Release ...”.

19.6. Pausing here, it would be noted that it was not pleaded that in reliance on the Pleaded Representation, the plaintiff himself paid the 4 instalments (which payments preceded the opening of the joint bank account and Chi Chiu’s 4 instalments).  This is material to the discussion later in this Judgment²⁸ as to who was intended to be the representee of the Pleaded Representation. 

19.7. The judge found that the pleaded case was not established by the plaintiff’s evidence.  He held:

“34. The evidence adduced by Mr Ng does not, however, quite measure up to his pleaded case. (Emphasis added).

(1) According to Mr Ng, the initial agreement or arrangement with Madam Lee was that his son, Chi Chiu, would be responsible for repaying the loans, and would be entitled to the Property after Madam Lee’s death (see paragraph 41 of Mr Ng’s first witness statement). There was no agreement at that stage that Mr Ng would make any repayment, or would be entitled to the Property after Madam Lee’s death.

(2) It was only after Chi Chiu had decided, having paid 4 instalments, not to continue with the repayment ... that Mr Ng stepped in and repaid the balance of the loans. It is not, however, pleaded, nor is there any evidence to the effect, that Chi Chiu ever assigned to Mr Ng his [Chi Chiu’s] right or interest (if any) that he might have arising from the 4 instalments paid by him.

(3) There is no plea or evidence to the effect that Madam Lee made any further promise or representation, or that any further agreement was made between Mr Ng and Madam Lee, to the effect that Mr Ng could combine his payments with those made by Chi Chiu for the purpose of satisfying the condition laid down by Madam Lee for claiming entitlement to the Property after her death.

(4) It is also not pleaded that after Chi Chiu had decided not to continue with the repayment, Madam Lee made any further promise or representation to Mr Ng that if he continued to repay the balance of the loans until the same were fully discharged, he would be entitled to the Property after her death. Although Mr Ng did say something to that or similar effect in his oral evidence, such evidence does not appear in either of his two witness statements, or in Wan and Leung’s pre-action letter. I do not accept Mr Ng’s oral evidence in this regard.

(5) According to Mr Ng, after Madam Lee came to know that Chi Chiu refused to make any further repayment, she became very agitated and begged Mr Ng to help her out, and Mr Ng agreed to do so. In Mr Ng’s own words, at paragraph 44 of his first witness statement [the following is a translation]:-

‘After [the defendant] knew that my son Ng Chi Chiu refused to make repayment on her behalf again, she was emotionally very agitated, and even knelt by the side of the bed, grabbing hold of me begging me to help her repay money. Due to the many years of emotional attachment between me and her, I could not bear to see [the defendant] so sad, so I promised [the defendant] I would help her and Go Man Yin clear the debt owed to [LCHB]’.

(6) I believe this to be the true reason why Mr Ng decided, and in fact continued, to make repayment on behalf of Madam Lee/Man Yin, namely, his long standing relationship with Madam Lee. I consider the true nature of his payments to be a ‘gift’, even though he might not have expressly used the word ‘gift’, in the same way that when he used to give Madam Lee money for living or household expenses he would not have said to her that the money was a gift”.

19.8. The judge went on to find the following:

“39. I believe what happened was that Madam Lee initially sought help from Mr Ng. He was, however, not able or willing to help at that time because he was also financially tight and therefore suggested asking his sons for help. It was in that context that Madam Lee promised or represented to Chi Chiu that if he repaid the loans she would give the Property to him after her death. Later, Chi Chiu decided not to continue with the repayment and, upon Madam Lee’s ‘begging’, Mr Ng decided to help because of his long standing relationship with her (as stated in paragraph 44 of Mr Ng’s first witness statement). (Emphasis added).

40. I do not accept Mr Ng’s evidence that Madam Lee ever represented to him that (i) if he would repay the loans, or continue to repay the loans after Chi Chiu stopped making repayment, she would give him the Property after her death, or (ii) whoever (meaning or including Mr Ng) repaid the loans would be entitled to the Property after her death²⁹. I also find that Mr Ng has failed to prove the case against Madam Lee as advanced by him in the Statement of Claim”. (Emphasis added).

19.9. The judge accordingly dismissed the plaintiff’s action with costs. 

Appeal

20.  The plaintiff appealed. The plaintiff’s challenges before this court³⁰ were categorized by Mr Poon as follows:

(i) the judge adopted a wrong approach and hence incorrectly evaluated the evidence when deciding whether the defendant’s Representation was ever made to the plaintiff (Grounds 1 and 2);

(ii)   at para. 41 of the Judgment, the judge wrongly required the plaintiff to satisfy a higher burden of proof on the ground that the delay in the prosecution of the action led to loss of the defendant’s evidence (Ground 3);

(iii)  the judge failed to take into account the inherent improbabilities of the plaintiff’s repayments being a gift made out of love for the defendant (Ground 4). 

Discussion

21.  Grounds 1, 2 and 4 may be discussed together. 

22.1. First in Grounds 1 and 2, Mr Poon referred to §34 of the Judgment which has been set out in §19.7 above.  Mr Poon’s reading of this paragraph is as follows³¹:

“The learned Judge however suggested only four scenarios in paragraphs 34(1)-(4) of the Judgment where P could measure up to his pleaded case:-

(i) P took up the responsibility of repayment without the involvement of Chi Chiu in the first place (Scenario 1).

(ii) Chi Chiu assigned his right or interest arising from his repayments to P and P settled the balance of the outstanding loans (Scenario 2).

(iii) D agreed to combine the repayments made by Chi Chiu and those made by P for the purpose of satisfying the condition under D’s Representation (Scenario 3).

(iv)  D made a fresh representation same as D’s representation after Chi Chiu stopped payment and P relied on such fresh representation (Scenario 4)”

22.2. Mr Poon submitted that “none of these scenarios could measure up to P’s pleaded case” and that the judge failed to adjudicate on the plaintiff’s pleaded case³².

23.1. With respect to counsel, that is a misreading of §34.  The judge started that paragraph with the words “The evidence adduced by Mr Ng does not, however, quite measure up to his pleaded case”.  The exercise the judge undertook in that paragraph was to set out the plaintiff’s evidence of the events in chronological order, and then compare it with the pleaded case.  The judge did not accept all of the plaintiff’s evidence.  He was entitled to, and did, reject some of it.  Thus there was set out in §34(1)-(4) the judge’s factual findings, followed in each sub-paragraph by a comparison of those findings with the pleaded case. 

23.2. The judge was not “suggesting scenarios” where the plaintiff could measure up to his pleaded case.  It was not his task to do so.  A judge’s task is to assess the evidence, make findings of fact, and compare those findings with the pleaded case to see if the plaintiff has succeeded in establishing his case. That was what the judge did in §34, as expressly prefaced in the opening words of that paragraph.  With respect, his approach was clearly correct. 

24.  Mr Poon’s further or alternative submission was as follows.  He acknowledged that at the outset, the plaintiff was not prepared to repay the instalments.  The parties decided that the plaintiff would approach his sons.  The incentive for the sons (or either of them) to help was the transfer of the Property after the defendant’s death.  It was only when Chi Chiu changed his mind after paying 4 instalments and the defendant begged the plaintiff for help that “P then changed his mind and decided to take up the responsibility of repayment”³³.  Nevertheless, Mr Poon submitted that “when D again sought help from P after Chi Chiu refused to repay further, D’s Representation still subsisted and was operative” (emphasis added), and that the “delay” of 4 instalments (ie Chi Chiu’s 4 instalments) could be explained by the plaintiff’s lack of funds and the fact that he had “caused Chi Chiu to help”.

25.1. In my view, this submission also fails.  It is well-established that “the effect of words or action must be assessed in their context”³⁴.  The judge was entitled to find on all the evidence (including the plaintiff’s oral evidence³⁵) that because the plaintiff’s personal financial circumstances at the outset did not allow him to clear the loan, the Pleaded Representation was not directed to the plaintiff.  In light of the plaintiff’s financial circumstances, the parties decided to ask the plaintiff’s sons.  In that context, even if the defendant had said that “whoever” would be prepared to pay the loan instalments would get the Property after her death (the Pleaded Representation), and even if it was said to the plaintiff, he would only have been the conduit for the representation to be forwarded to whoever of his sons would be prepared to clear the loan on behalf of the defendant. 

25.2. Even on the plaintiff’s own evidence, the 4 instalments he made at the start were only paid because he needed time to persuade his sons.  It is notable that in §§16-17 of the Statement of Claim, it was not pleaded that in reliance on the Pleaded Representation, the plaintiff himself paid those 4 instalments and then he carried on after Chi Chiu ceased to make repayments. That corroborates the judge’s finding at §34(1) that the plaintiff was not the intended representee. 

25.3. There was no pleading that after Chi Chiu ceased to make repayments, the defendant made the Pleaded Representation to the plaintiff personally.  Although the plaintiff did mention something to that effect in his oral evidence, that was rejected by the judge on the ground that it was not in his solicitors’ pre-action letter or in either of his two witness statements³⁶. 

25.4. The plaintiff cannot (for want of a better word) hi-jack the Pleaded Representation which was made as an incentive to his sons, not himself.  The sons owed the defendant nothing, and a financial incentive was clearly necessary for them to clear the loans on the defendant’s behalf.  In contrast, the plaintiff and the defendant were still in an emotional relationship which had already lasted 25 years (and which, at that time, the parties would have been expecting to continue as it did).  In the circumstances, the judge was entitled to find on the evidence that that was the true reason why the plaintiff then promised to clear the loan for the defendant, it being his own evidence that she was sad and he could not bear to see her in that state. At the very least, it cannot be said that the judge was “palpably wrong” to make that finding of fact, such as to entitle this court to interfere.

26.  The despondent state in which the defendant found herself in 2000, and the plaintiff’s reaction to that state, makes the situation very different from the sale and purchase in 1989.  There was no evidence that emotions had anything to do with that earlier transaction.  Accordingly it cannot be said that the earlier transaction made it inherently improbable that the plaintiff made the repayments because of the parties’ relationship, rather than by reason of the Pleaded Representation. 

27.  For the reasons set out above, Grounds 1, 2 and 4 must be dismissed.

28.  As for Ground 3, Mr Poon submitted that at §41 of the Judgment, the judge required the plaintiff to overcome a higher burden of proof.  The judge expressly stated at the start of that paragraph that what followed was an observation, and ipso facto it did not form part of his reasons for the Judgment.  In any event, all that the judge said was that it is important for a plaintiff to conduct proceedings expeditiously when he had already been “sitting on his rights for many years”, and that when such a delayed claim is made against a mentally incapacitated registered owner, the court has to act with caution when there is no documentary evidence of the alleged trust.  In my view, that observation did not indicate that the judge had imposed a higher burden of proof on the plaintiff. 

29.  Accordingly, Ground 3 must also be dismissed.

Order

30.  I would dismiss the appeal with costs, with the defendant’s own costs to be taxed in accordance with Legal Aid Regulations.  The plaintiff’s oral application to amend the prayer is also dismissed with no order as to costs, because on the reasons given above, it would not assist him in any event.

Hon Au JA:

31.  I agree with the judgment of Yuen JA.