AU KEONG v. CHUNG LAU HOI

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

-------------------

JUDGMENT

-------------------

1. On the 15th of September 1988, the Plaintiff took out his writ of summons in which he claimed that on the 2nd of September 1988, he purchased flat D at Yee Bo Mansion, ("the flat"), and that the purchase price was $450,000.00; that he paid the entire purchase price out of his own money and partly out of a loan he arranged, and was under an obligation to pay; and that with the concurrence of the Defendant, the property was placed in the sole name of the Defendant and that the property belonged to him. He therefore asked for a declaration that the property was held in trust for him and for an order that she transfer the property to him.

2. This produced a forthright reply from the Defendant on the 25th of November 1988 in which she said that the Plaintiff came to know her when she was working as a prostitute, that he patronized her regularly, that they fell in love and that he asked her to stop working as a prostitute and persuaded her to cohabit with him as husband and wife. As a result, she agreed and the Plaintiff promised the flat to her as a gift, and that accordingly the flat was given to her as a gift. The reply goes into considerable detail into which I need-not enter at this stage.

3. The Plaintiff put in a reply in which he denied the Defendant's defence and went on to raise three legal defenses,

4. I turn then to the facts. In 1987, the Plaintiff was about 62 years old. His wife had died in 1982. Their children had grown up. He was lonely, and in about April 1987 began a sexual relationship with the Defendant in her occupation as a prostitute. Each of them admits falling in love with the other. The Plaintiff says that the Defendant agreed to marry him, but asked him to keep it as secret and refused to meet his family. The Defendant, then 29 years of age, says she was hesitant about marrying the Plaintiff, primarily because of the difference of age and also because she doubted his sincerity and affection for her. But she adds that the Plaintiff persisted and promised to buy her a flat. It is not in dispute that they started to look for a flat.

5. Early in June 1987, the Plaintiff put down a deposit of $10,000.00 on a flat and a preliminary sale and purchase agreement was entered into in the Defendant's name. But shortly after that, the Plaintiff found another flat, which is the flat that is the subject of this action. He considered it a much better proposition. The two of them went to see it and he then put down a deposit of $5,000.00 upon it and again a sale and purchase provisional agreement was entered into, first in the estate agent's office, and again the Defendant's name was entered upon this form.

6. Later on the 25th of June, they went to the office of Samson Siu, solicitors, and a sale and purchase agreement was entered into; completion was to be on the 2nd of September. They obtained possession on that date and furniture costing about $11,000.00 or $13,000.00 was moved in on or about the following day, the 3rd of September.

7. It is not in dispute that the Plaintiff put down about $110,000.00 in total including the $5,000.00 deposit. I would mention at this stage, there is some dispute as to whether $50,000.00 of that amount was contributed by the Defendant.

8. The next step in the matter was that on the 11th of September, the Defendant went to China. She says that this was at the request of the Plaintiff who wanted her to get away from the pattern of her former life.

9. The Plaintiff says that no sooner was the sale and purchase agreement completed on the 2nd of September that the Defendant started avoiding him. He got worried and suspicious and could not sleep. He told his daughter that he had bought a flat and intended to get married. She told his elder son. He himself told his son about his suspicions. On the 12th of September, he went with his son to a lawyer's firm and there revealed to his son that the Defendant was a prostitute.

10. On the 15th, three days later, as I have said, this writ was issued and the door of the flat was chained.

11. The Defendant says that meanwhile in China where she had got to stay with her family, a few days after the 11th, she telephoned the Plaintiff. He sounded strange and she discovered he had not made any plan to move into the flat. So she came back to Hong Kong, found the door had been chained. She went to the Plaintiff's factory, but was not allowed by the Plaintiff's daughter to see him. Instead, she was asked to go to the Treasure Restaurant for a meeting. She went later that day, and there met the Plaintiff and several of his children. The eldest son did the talking. The Plaintiff remained silent. She says she was insulted and told that she had cheated the Plaintiff and asked to return the money or the flat. She left the meeting, went back to the flat and got a locksmith to open the door.

12. That, in very broad outline, is sufficient to come to the main issue which it is agreed, is whether the purchase in the Defendant's name was intended to be a gift to her. That primarily, it is also agreed, is a matter of credibility since almost all the relevant evidence comes from the testimony of the two parties, that is the Plaintiff and the Defendant. Only they and the Plaintiff's eldest son give evidence. There is a certain amount of documentary evidence, but it does not really take the matter very far.

13. The Plaintiff was the first witness, and it very quickly became apparent that there were aspects of his evidence that raised serious doubts about its veracity and reliability. But even before he came to give evidence, his version had changed. In his original reply, he had suggested that he intended to purchase the flat for himself and his lawful daughter, and to allow the Defendant to reside there as a licensee. But he changed that and claimed that he had purchased the flat for himself and the Defendant to live in as their future matrimonial home.

14. Basically, his version, which was somewhat confused and changed in some of its aspects in the course of his evidence, is that he wanted to get married. A flat had to be purchased because he had no place to live. Also because the Defendant's tenancy, he said, was due to expire at the end of August. She also would have no place to live. There were only two months in which to get the flat. He also wanted her to give up her occupation.

15. The Defendant's clear version was that she would not agree unless she had a place to live and also was satisfied he was sincere. She said the Plaintiff promised to give her a flat as a gift, and when he put down the deposit and treated her kindly, she was satisfied.

16. Asked if he promised her a flat as a gift, the Plaintiff repeatedly evaded the question, repeating time after time that he did not have any place to live. They talked of marriage, they had no place to live so he was in a hurry to get the flat. Later on, he kept saying that she had cheated him and that he would leave it to the court to do justice.

17. As I have said, both provisional sale and purchase agreements, were in the Defendant's name, the Plaintiff's explanation was that on both occasions, when he went to get the money for the deposits, in effect the Defendant managed to slip in her own name. He did not explain why he did not prevent a repetition on the second occasion or have both provisional agreements corrected in the first place.

18. Then at the office of the Solicitors Samson Siu, it is common ground that he gave his identity card ahead of the Defendant doing so, and that she objected, in his words, strongly. He says that the Defendant told him only if he could pay all the purchase money in one go would she agree to his name being put in. It is difficult to understand the logic or sense of that, nor is it easy to credit that, in contrast to the Defendant's version that if both names were to be put in, as she says, she said she told him he could take it back and it would not be a gift, above all it would show he was not sincere in promising a gift. It is clear that, at any rate, he persuaded her to go back from the lift lobby to the solicitor's office. I will return to this matter later.

19. Then the Plaintiff claimed that the Defendant, as I have said, did not want to reveal the matter for a year or two. Why ever she would not want to did not become clear.

20. On the other hand, the Defendant says it was the Plaintiff who did not want the relationship revealed to his staff, and that seems to me to be natural and understandable given her occupation. Nor would he want to reveal it to his family. It will be seen from what I have to say and, in my finding, it is clear that this was a respectable traditional middle-class Chinese family. The elder daughter was a nurse and she was married to a dentist. The eldest son was a foreign exchange dealer. Two other sons had been overseas for education. It is natural that they would have reservations about a prostitute coming into the family. And on the face of it, it is far more likely that it would be the Plaintiff who would have objected to the relationship being revealed rather than the Defendant.

21. I turn then, perhaps, to the most revealing stage of the matter. Everything was set for cohabitation or marriage upon the completion of the purchase of the flat on the 2nd of September, and that would have been clear for some time before. The furniture was then moved in on or about the 3th of September, and then suddenly everything seems to have fallen apart. Why? The Plaintiff says that the Defendant began avoiding him. Again no reason emerges as to why she would have done so. Among the reasons the Plaintiff gave as to why he was not able to contact the Defendant, apart from her avoiding him, was that he was too busy to go, although he himself said the Yee Bo flat was quite close to his factory where he worked and lived. His evidence on this phase of the relationship was unsatisfactory and thoroughly unconvincing. And as to who would not see the other, the Plaintiff made the revealing remark that that his daughter moved in to protect him from his workers; later he sought to deny it on being asked for an explanation.

22. The only explanation for the Defendant allegedly asking the Plaintiff not to reveal the relationship in the event was offered by Mr. Miu from the bar. He suggested that the Defendant deliberately lured and deceived the Plaintiff from the very start with the object of obtaining a flat and that no sooner had she got it in her name then she dropped the, Plaintiff. As will be seen, that suggestion must be rejected on my findings on the evidence. It also raises the question of why such a scheming person should give up having only got a fraction of the Plaintiff's wealth; moreover, in the realization that she would have to pay the remaining three quarters of the purchase price of the flat that was then still outstanding.

23. The Defendant's version, as I have said, was far more credible. As I have indicated, I believe the Plaintiff knew his children would not accept his marriage or cohabitation with a prostitute, and that he must have got cold feet when his marriage or moving into the Yee Bo flat would have precipitated the matter. The Defendant's absence in China would not only have produced a break with the Defendant's former life that he wanted her to have, but also a breathing space for him to deal with his own family.

24. In that regard, his account of how his family came to know was inconsistent, confused and wholly unconvincing. His eldest son was quite positive that he was informed of the matter on the 2nd of September, that is the very day the purchase was completed, by the elder sister who was at the time staying with the father at the factory. Yet the Plaintiff said it was after several days of the Defendant avoiding him following completion of the sale that he became suspicious, could not sleep because of that and so informed his daughter. There could not have been any reason for the Plaintiff to become suspicious on the 2nd of September. Indeed, on the 3rd of September, at his request, the Defendant took delivery of the furniture at the flat. In contrast, the Defendant's version of the matter is far more credible.

25. Then there was the meeting at the Treasure Restaurant. This necessitates consideration of the evidence of the Plaintiff's second witness, that is the eldest son, to which I now turn. If he is to be believed, he received the news of his father's marriage on the evening of the 2nd of September with incredible equanimity verging upon disinterest, notwithstanding that his sister mentioned her fear that their father might be cheated, although he said that that was in a joking way or he took it as a joke. Certainly he had no inkling that his father had before that been involved with any woman, much less did he know who the lady was, nor did he have any indication before that that there was the purchase of a flat contemplated. He spoke to his father with no excitement or eagerness to know anything about the lady. He simply expressed the view that he was not opposed to the marriage of his father, besides he said he himself was preoccupies with the mental breakdown of his younger sister. He did not see his father although he lived close by until a day or two later, and even then all he did was to offer to apply his fang shui knowledge to the flat. Although he was clearly a very able and positive person, he was vague and could not remember how his father came to talk about his worry of being cheated. He says that he and his siblings asked to meet their prospective stepmother. His father was not able to make contact with the lady and became worried. So he started to consider the possibility of his father being cheated and went to see someone in a lawyer's firm about the 11th or 12th. That person told him there was a chance of his father being cheated.

26. On the 15th, the writ was issued and the door of the flat chained. The Defendant was not permitted to see the Plaintiff. Yet the older son says he was quite willing to accept the Defendant as a mother and treated her with respect although she was younger than he, and that was his attitude when he met the Defendant at the Treasure Restaurant. He says he was very polite to her and it was the Defendant who was abusive used foul language, said she was a prostitute and had cheated the Plaintiff. I find that all too incredible and I do not believe it. The eldest son moreover in relation to when he was told of the matter was vague unsatisfactory and as I have said in my view, unbelievable is his evidence not only as to what happened at the Treasure Restaurant, but generally in relation to the foregoing matters.

27. Turning to the Defendant's evidence, she obviously had a great deal at stake and on that account alone, her  evidence had to be approached with caution. In addition, in her defence she had averred that she and the Plaintiff had cohabited in the flat after completion on the 2nd of September. Clearly, they had not cohabited in the ordinary sense of the word. However in her evidence she did not seek to disguise that but pointed out that since the deposit had been paid in June, she had treated the Plaintiff as a husband and afforded him gratuitous sex, and after the 2nd of September had moved to the flat and helped him to get it ready and was at all times ready to cohabit with the Plaintiff as husband and wife.

28. Also she claimed that on the 4th of July and the 4th of August, she gave the Plaintiff $20,000.00 and $30,000.00 respectively towards the purchase of the flat. These amounts were clearly drawn by her but look suspiciously like other withdrawals she had made to transfer to her deposit account. Unfortunately the Plaintiff chose to put the Defendant to strict proof and did not attempt to show that he procured the totality of his claimed contribution to the purchase price out of his own resources which as the circumstances indicate he should have been able to do it having become clear to him that a dispute would be involves as early as the 2nd of September or a few days thereafter when he became suspicious.

29. Also the Defendant's deposits suggest that she continued to work as a prostitute during the period of July and August. contrary to her claims that she gave that up from the 25th of June, but that matter is by no means altogether clear.

30. Finally, the Defendant was adamant that the Plaintiff gave her a cashier's cheque for payment of the flat deposit on the 31st of August whereas it is clearly dated the 2nd of September. She did not seek to change her view when confronted with the conflict and the cheque during her cross-examination. I conclude she must have been mistaken if there is no other explanation.

31. But notwithstanding these matters to which I have given careful consideration, the Defendant's version is manifestly the more credible and, in my view clearly had a ring of truth about it. Her evidence notwithstanding the matters I referred to, was unshaken by her ross-examination.

32. Needless to say I observed the demeanour of all three witnesses with particular care given that the action would have to be resolved upon their credibility. I have no doubt that the Plaintiff was being untruthful and less than truthful in several matters having a crucial bearing on the ownership of the flat. In other respects, his memory was not wholly reliable. The Plaintiff's son as I have indicated struck me as an intelligent, able and very determined and dominant person who, it seems to me, had quite deliberately set out to regain the flat and terminate the relationship of the Defendant with his father. I have no doubt whatever that he was lying where his evidence conflicted with that of the Defendant particularly in relation to what happened at the meeting at the Treasure Restaurant. In contrast to them, the Defendant's evidence was positive and unhesitating, and her demeanour, in my view, indicative and consistent with the truth. I have no hestitation in accepting her evidence in the essentials of her version and rejecting that of the Plaintiff and his son.

33. As I have said, the Plaintiff's family was a respectable middle class family and I have no doubt that the Defendant as a prostitute was totally unacceptable to them. The suggestion that the Defendant was from beginning to end engaged in a deception of the Plaintiff to procure flat is, on the evidence, not only unfounded but preposterous.

34. I turn then to consider the question of who acquired the beneficial interest in the flat when it was purchased. I find as a fact that the Plaintiff had promised to give it to the Defendant prior to the visit to the estate agents, and that that was the mutual intention when the viewing of flats took place and later at the estate agents offices when the Plaintiff paid the deposits in each case. And that it was with that intention that the Defendant's name was placed on the estate agents' forms in each case. As to the Plaintiff's attempt to get his name on the sale and purchase agreement at the solicitor's office on the 25th of June, this seems to have resulted from a suggestion made by the estate agent on the way to the solicitor's office. It was firmly resisted by the Defendant who was prepared to call off the whole matter on the ground that it would not be a gift to her and it would show the Plaintiff was not sincere in his promises. In persuading the Defendant to go back and complete the matter, the Plaintiff not only agreed to her name being inserted but, in my view, adhered to his intention. Certainly, he was not opposed to the Defendant having the flat; as he himself said they were going to live in it as husband and wife, and not only the flat but everything would go to her in the end.

35. In my finding and judgment, when the sale and purchase agreement was executed on the 25th of June and when the sale and purchase was completed on the 2nd of September, the intention of both the Plaintiff and the Defendant to be inferred from the evidence and their acts was that both would live there as husband and wife, but nonetheless that the flat was to be a gift to the Defendant. Their conduct before and after the purchase was consistent with that mutual intention save such of the Plaintiff's after purchase, which resulted from the intervention of his children.

36. When a person buys property and pays the purchase price but takes the purchase in the name of another who is neither his wife or child prima facie, there is no gift but a resulting trust for the person who pays the money. However, such presumption can be rebutted. (Halsbury s Laws, 4th Ed. Volume 20, paragraphs 39 & 45.) In my judgment, the presumption is totally rebutted by the evidence as I have found.

37. Mr. Miu, no doubt in anticipation of that conclusion, submitted that the intention was for the Defendant to have a gift of only a half share with the Plaintiff retaining the other half. There was not one iota of evidence to that effect; nor any suggestion from the Plaintiff; nor can such an inference be drawn from the facts, as implicit in the findings I have made in that regard. No common intention that each or both had a beneficial interest can be inferred upon an analogy of the facts in Grant v. Edwards [1986] 2 All ER 426 upon which Mr. Miu relied.  Nor do I find Bernard v. Josephs [1982] 3 All ER 162 of assistance given my finding of fact and inference that the common intention was that the Defendant should be the owner of the beneficial interest.

38. I turn then to the three additional grounds raised in the Plaintiff's reply.

39. First, that the gift was conditional upon the Defendant cohabiting or living with the Plaintiff as his wife. I am unable to infer any such condition from the evidence. On the contrary, the evidence does not point to any such linkage or condition. Although it was envisaged on the part of both the Plaintiff and the Defendant that they would live together in the flat as husband and wife, in my finding, it is equally clear that it was the intention of both that the Defendant was to have the flat as a gift, and the result of that is that she acquired the beneficial ownership. In any case, had there been such a condition, it would not have availed the Plaintiff for it was he who prevented the condition being fulfilled,  see Cohen v. Sellar [1926] 1 KB 536 at 547. The Defendant was at the material time able and willing to fulfill such a condition and indeed she did all that she could to that end.

40. The second point raised in the reply was that the Defendant had never any intention of marrying or cohabiting with the Plaintiff and misrepresented to the Plaintiff that it was her intention at the time to do so, so as to induce the Plaintiff to buy the flat. On the facts as I have found them, this ground must fail. It must also fail for the reason that the Defendant had every intention of cohabiting and marrying the Plaintiff. It was the Plaintiff, as I have said, who broke off the promise. In that regard, I would say again that he cannot get the gift back on the basis of what was held in Cohen v. Sellar.

41. I turn then to the third ground which was that the making of the gift was brought about by undue influence on the part of the Defendant in asking the Plaintiff not to reveal the matters to his children and thus depriving him of independent advice. This ground, in my view, fails in limine since, on the evidence, it was the Plaintiff who wanted matters kept secret and not the Defendant. Furthermore, with reference to the authorities and law relied upon by Mr. Miu, in particular paragraph 57 of Volume 20 of the 4th Ed. of Halsbury's Laws it is said that the gift amounting to some $80,000.00 or $100,000.00 was inexplicably large in the circumstances. I do not agree and specifically with reference to Zamet v. Hyman [1961] 1 WLR 1442 at 1446. I do not consider the gift upon its face as being much more favourable to the Defendant in the circumstances. The relevent dicta relied upon in Zamet is to the effect that in such circumstances the court may find a fiduciary relationship of a nature as to cast an onus on the party benefited of proving that the transaction was completed by the other party only after full, free and informed thought about it. However, in my view the gift was not "much more favourable" to the Defendant in all the circumstances in which it was made, in particular it being envisaged that the two of them would live together as husband and wife. Moreover, the circumstances in which the purchase was to be effected included the payment of the mortgage instalments by the Defendant. I pause there to say I do not consider that was purely an arrangement for convenience. It was in my view, part of their arrangements by which the flat would be acquired. Moreover, the circumstances were such in which it was the Plaintiff who first offered the flat apparently to compensate for the huge difference in age. It was also he who made the selection of the flat, he who made all the arrangements including the financing, payment of the loan by the Defendant, a guarantee by himself and payment of the deposit. The evidence establishes clearly, full, free and informed thought on his part in terms of Zamet. This ground must accordingly also fail.

42. I reiterate there is no doubt in my mind that the Plaintiff gave the flat to the Defendant freely without condition or reservation on the 25th of June and the 2nd of September. subsequent reconsideration on his part, probably because of the intervention of his children, does not affect the benificial interest by then already acquired by the Defendant.

43. It follows that the Plaintiff's claim fails and is dismissed. In view of his repeated statements in evidence that he left the matter to the court to do justice, I must tell him that I am here to decide the action upon the pleadings, the evidence and the established principles of law, and not to apportion the flat or its value upon some personal concept of what may be thought equitable or fair.

44. As to costs, having heard the submissions of counsel,  there seems to me to be no reason to depart from the ordinary rule that costs should follow the event. I accordingly order that the Defendant is to have her costs of the action.