LO MAN YAU v. CHIU SUNG FAI AND ANOTHER

DCCJ 2516/2013

[2019] HKDC 1489

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2516 OF 2013

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D E C I S I O N

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A. INTRODUCTION

1.  By a Judgment handed down on 14 August 2019 (“the Judgment”), I dismissed the plaintiff’s claim for possession of the property situated at Flat B7 and B8 on 3^rd Floor, Tung Lee Building, Nos 1C, 1D, 1E, 1F, 1G, 1H, 1J and 1K Water Street, Nos 1-15 On Ling Lane, Hong Kong (“the Property”) and mesne profits and granted a declaration that the 1^st defendant is the beneficial owner of the Property to the extent of 30.77% under a resulting trust.

2.  The Judgment was my determination on the issue directed by the Court of Appeal in paragraph 25 of its judgment dated 9 July 2018 (the “CA Judgement”).  The issue is: whether the claim of trust as pleaded by the 1^st defendant arose, being in mind that, as found by this court, the 1^st defendant did make contributions of HK$558,534 towards the purchase of the Property. 

3.  In this connection, in paragraph 22 of the CA Judgment, the Court of Appeal stated that under the legal principles on resulting trust for a corporate context (which are set out in paragraph 12 of the CA Judgment), as a starting point, the rebuttable inference is that both the legal and beneficial interest in the Property is vested in South Sea and the burden is on the 1^st defendant to rebut the inference.  The Court of Appeal further stated that all the circumstances of the case ought to be assessed to determine whether the 1^st defendant had rebutted the inference by showing that the parties intended at the time of purchase to vest the beneficial interest of the Property in the 1^st defendant personally (or the beneficial interest in the Property corresponding to the 1^st defendant’s contributions, see paragraph 24 of the CA Judgment).  In particular, in respect of the 1^st defendant’s contributions, the court should approach them against his pleaded case in paragraphs 3 and 5 of the defence and counterclaim and any evidence relevant to the parties’ intention at the time of purchase of the Property.

4.  In finding that the 1^st defendant is the beneficial owner of the Property to the extent of 30.77% under a resulting trust, this court in effect found that the 1^st defendant had rebutted the inference that both the legal and beneficial interest in the Property was vested in South Sea and the 1^st defendant had shown that the parties intended at the time of purchase to vest the beneficial interest of the Property in the 1^st defendant personally corresponding to his contributions.

5.  By a Summons filed on 9 September 2019, the plaintiff applied for leave to appeal to the Court of Appeal against the Judgment. 

6.  Unless otherwise stated, in this Decision, I shall adopt the abbreviations used in the Judgment. 

B.  LEAVE TO APPEAL: APPLICABLE LEGAL PRINCIPLES

7.  It is trite that leave to appeal shall not be granted unless the court is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard: section 63A(2) of the District Court Ordinance (Cap 336).

8.  It is common ground that a reasonable prospect of success involves the notion that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125, at para.17 per Le Pichon JA.

C.  APPLYING THE LAW TO THE FACTS OF THIS CASE

9.  The parties agreed that an appeal against a finding that the 1^st defendant has rebutted the inference that both the legal and beneficial interest in the Property is vested in South Sea is an appeal against a finding of fact.

10.  In relation to appeals against findings of fact, I bear in mind the well-established principle that the question for the Court of Appeal was whether, even though it did not have the advantages enjoyed by the trial judge who received the evidence first hand, it was nevertheless satisfied that his conclusion on the facts was plainly wrong: Ting Kwok Keung v Tam Dick Yuen & Others (2002) 5 HKCFAR 336. 

11.  The plaintiff advanced 6 grounds of appeal as set out in paragraphs 2(a) to (d), 3 and 4 of the Draft Grounds of Appeal.  Proposed grounds 1 to 4 (paragraphs 2(a) to (d)) are grouped under the sub-heading “the Judge took into consideration irrelevant or inadmissible matters and considerations or gave undue weight to them”.  Proposed grounds 5 and 6 (paragraphs 3 and 4) are not so grouped but are separate grounds.

12.  It ought to be mentioned at the outset that most if not all of the proposed grounds have been canvassed in the plaintiff’s skeleton submissions lodged for the re-trial and at the hearing on 14 August 2019 and have been dealt with by this court in the Judgment. 

13.  Proposed grounds 1 and 2 (paragraphs 2(a) and 2(b)) can be dealt with together.  They state:-

“The repeated references and reliance in Section B (paragraphs 12, 13(1) and 13(3)) of the Judgment to the fact and the finding of the learned Judge that D1 made contribution (‘D1’s Contribution’) to the purchase price of the Property at the time of purchase by South Sea in support of D1’s case of rebuttal of the inference/presumption are misconceived and wrong. The fact and finding of D1’s Contribution is the underlying fact which necessitates the inquiry concerning the rebuttal issue (‘the Rebuttal Issue’). It is wrong for the Judge to give any weight to the fact of D1’s contribution in the Rebuttal Issue.”

“Similarly, the repeated references and reliance in Section B (paragraphs 13(1), (2) and (3)) of the Judgment to the fact that the Judge had found that D1’s Contribution was not a loan to the South Sea are misconceived and wrong. D1’s interest in South Sea is reflected by his 50% shareholding of the company. Even if D1’s Contribution was not a loan to South Sea and not repayable D1’s Contribution (of less than 50% of the purchase price) was more than adequately reflected by D1’s said shareholding in South Sea. Therefore it is wrong for the Judge to conclude that the said finding gives rise to ‘strong and convincing evidence’ in favour of D1 in the Rebuttal Issue.”

14.  With respect, proposed grounds 1 and 2 are not reasonably arguable.

15.  First, it is clear that that the focus of paragraph 13 of the Judgment is on the nature of the sum of HK$558,534 paid by the 1^st defendant towards the purchase of the Property.  As noted in paragraph 13(1) of the Judgment, the only explanation the plaintiff could offer for the sum of HK$558,534 was that it was a loan from the 1^st defendant to South Sea, which explanation this court has rejected.  If, as this court has found, the sum of HK$558,534 was not a loan by the 1^st defendant to South Sea, then by parity of reasoning with the considerations mentioned in Re Fortune King Trading Limited, HCCW 432/2012 (unrep, 19 May 2017) (see paragraph 13(2), Judgment), this is consistent with an intention on the part of the 1^st defendant to acquire a beneficial interest in the Property corresponding to his contributions, because otherwise there would be no reason why he would have paid the sum of HK$558,534 towards the purchase of the Property.

16.  Secondly, consistent with his evidence that the sum of HK$558,534 was not a loan from him to South Sea, at the meeting on 12 October 2009, the 1^st defendant stressed that because the Property was to be acquired by him, and South Sea was used solely to hold the Property so acquired by him, he made contributions to the purchase of the Property (see paragraph 14(1), Judgment).  Thus, the fact that the sum of HK$558,534 was not a loan from the 1^st defendant to South Sea is intricately linked to 1^st defendant’s intention to acquire a beneficial interest in the Property. 

17.  Thirdly, under these circumstances, I cannot see how it can be said that this court was wrong to give weight to the fact of the 1^st defendant’s contribution to the purchase of the Property.  It is trite that weight is a matter for the judge.

18.  Fourthly, in respect of proposed ground 2 (paragraph 2(b)), the statement therein that “D1’s interest in South Sea is reflected by his 50% shareholding of the company” is a tautology.  The statement therein that “D1’s contribution was more than adequately reflected by D1’s shareholding in South Sea” is beside the point.  The issue is not whether the 1^st defendant’s contribution was adequately reflected by his shareholding in South Sea, but is rather whether the parties intended at the time of purchase of the Property that the 1^st defendant had a beneficial interest in the Property corresponding to his contributions. 

19.  Proposed grounds 3 and 4 (paragraphs 2(c) and 2(d)) can be dealt with together.  They state:-

“The references and reliance by the Judge (paragraphs 14(4) and (5) of the Judgment) that the Property was purchased intended to be used as a residence of D1’s family is wrong and misconceived. The said fact is totally equivocal and not indicative of D1’s intention of creating a trust and retaining beneficial interest in the Property in the Rebuttal Issue. It is common that even for an individual person purchasing a residential property for his own use in the name of a limited company (with all the issued shares of which belong to the person) and paying all the purchase price the whole beneficial interest still vests in the company.”

“All the conversations between D1 and members of his family five years after the purchase of the Property in 2009 and at meetings when D1 and the other members had a dispute over the ownership of shares in South Sea and control of the company were inadmissible in the context of the Rebuttal Issue since they were self-serving declarations made long after the time of purchase. In the Rebuttal Issue the material time of inquiry is the mutual intentions of the parties (i.e. D1 and South Sea) at the time of the purchase of the Property. Any such conversations five years afterwards and especially when the parties of the family including D1 were contesting for the ownership of shares and control of South Sea could not be admissible and should not be given any weight. The Judge erred in relying on and giving weight to the above evidence of conversations (paragraphs 14, 16 and 17 of the Judgment).”

20.  I do not think that proposed grounds 3 and 4 have any reasonable prospect of success.

21.  Proposed ground 3 refers to paragraphs 14(4) and (5) of the Judgment.  However, paragraphs 14(4) and (5) should not be considered in isolation, but should rather be considered in conjunction with paragraphs 14(1) to (3) of the Judgment in which this court found:-

“Secondly, the 1^st defendant’s case that at the time of purchase of the Property the parties intended that he would acquire a beneficial interest in the Property corresponding to his contributions is also supported by what the parties said in the meetings on 25 September 2009 and 12 October 2009. I see no reason to disbelieve their evidence.

(1) At the meeting on 12 October 2009 amongst the 1^st defendant, Sung Leung, Madam Lam and Shuk Har, Sung Leung and the 1^st defendant stressed that because the Property was to be acquired by the 1^st defendant, and South Sea was used solely to hold the Property so acquired by him, he made the contributions to the purchase of the Property

… …

(2)  The 1^st defendant’s intention was shared by Daniel Ng, upon whose suggestion the Property to be acquired was held in the name of South Sea. … on 25 September 2009, the 1^st defendant, Sung Leung, Madam Lam had a meeting with Daniel Ng and Shuk Har. At that meeting, Daniel Ng brought with him the one-page 12.05.2004 PSLA on which he wrote down the 1^st defendant’s contributions to the purchase of the Property in the total sum of HK$418,263, as follows: (a) further deposit of HK$100,000; (b) second deposit of HK$300,000; (c) miscellaneous expenses of respectively HK$6,703 and HK$11,560. … at that meeting, Daniel Ng said that the sum of HK$418,263 was the 1^st defendant’s investment in the Property.

(3)  The 1^st defendant’s intention was also shared by Shuk Har, the other 50% shareholder and one of the three directors of South Sea (the other two directors were the 1^st defendant and Madam Lam).  At the meeting on 12 October 2009, Shuk Har said that Daniel Ng would transfer the Property back to Sung Leung and the 1^st defendant in March 2013 and that the Property was merely held in the name of South Sea…”

22.  It is clear that it was the 1^st defendant and Sung Leung’s evidence at the meetings on 25 September 2009 and 12 October 2009 that the 1^st defendant purchased the Property for the purpose of providing a residence for the 1^st defendant, Sung Leung and their family.  Thus, contrary to the plaintiff’s submission, the fact that the Property was intended to be used as a residence for the 1^st defendant’s family is part and parcel of the 1^st defendant’s intention to acquire a beneficial interest in the Property corresponding to his contribution.  In other words, as this court found in paragraph 14(4) of the Judgment, “… the 1^st defendant’s intention to purchase the Property as a residence for himself, Sung Leung and their family is inseparable from and consistent with his intention to acquire a beneficial interest in the Property corresponding to his contributions”.

23.  As to proposed ground 4, I do not agree that the conversations between members of the family at the meetings on 12 October 2009 and 25 September 2009 are inadmissible or should not be given any weight.  The meetings were held long before this Action was commenced in 2013.  Furthermore, apart from the 1^st defendant and Sung Leung, Shuk Har and Daniel Ng also mentioned about the parties’ intention at the time the Property was purchased: see paragraphs 14(2) and 14(3) of the Judgment (summarized in paragraph 21 above).  As this court found in paragraphs 16 and 17 of the Judgment:-

“… It is clear that at the meeting on 25 September 2009, Daniel Ng was mentioning about the intention of the parties at the time when the Property was purchased in 2004, i.e. that the sum of HK$418,263 was regarded by the parties as the 1^st defendant’s investment in the Property. It is also clear that at the meeting on 12 October 2009, the 1^st defendant and Sung Leung were mentioning about the intention of the parties at the time when the Property and the Cheong Ling Property were purchased …

… at the meetings on 25 September 2009 and 12 October 2009, the parties were mentioning about their intention at the time the Property and the Cheong Ling Property were purchased and were not making ‘subsequent declarations’.”

24.  As this court also found in paragraph 15 of the Judgment, the 1^st defendant’s case that at the time of purchase of the Property the parties intended that he would acquire a beneficial interest in the Property corresponding to his contributions is also supported by his evidence at trial, which this court also accepted.  The relevant evidence is then set out in paragraphs 15(1) to (4) of the Judgment and is not repeated here, suffices to point out that the gist of the 1^st defendant’s evidence is that at the time of purchase of the Property he already knew that he had a beneficial interest in the Property by reason of his contributions. 

25.  Proposed grounds 5 and 6 state:-

“The Judge erred in law to rely on D1’s oral evidence and reasoning stated in paragraph 15 of the Judgment in support of D1’s case in the Rebuttal Issue. The said evidence of D1 does not relate to D1’s intention of having proportionate beneficial interest in the Property at the time of purchase of the Property by South Sea.”

“The Judge erred in law in not giving full weight to D1’s oral evidence as summarized in paragraph 19 of the Judgment and referred to in paragraphs 23 and 24 of the Plaintiff’s final submission at the re-trial, which is direct evidence of D1’s own admission under cross examination that D1’s intention at the time of purchase of the Property was to have interest in the Property through his shareholding in South Sea. The Judge erred in his reasoning that it is doubtful if the said question and answer was asked in the context of the Rebuttal Issue. In law it does not matter in what context the question and answer were made; sofaras there is clear evidence from D1 himself which answers the very question in the Rebuttal Issue the Court should take the evidence into account and give full weight to D1’s admission (especially when it is against his interest).”

26.  I do not think that proposed grounds 5 and 6 have any reasonable prospect of success.

27.  Firstly, for the reasons stated in paragraph 19 of the Judgment, I do not agree that the 1^st defendant admits under cross-examination that his intention at the time of purchase of the Property was to have interest in the Property through his shareholding in South Sea.  On the contrary, as this  court found in paragraph 15(1) of the Judgment, in cross-examination, the 1^st defendant was asked whether at the time of purchase of the Property he already knew that he had a beneficial interest in the Property by reason of his contributions, and he answered in the affirmative and specifically said this was he who actually purchased the Property. 

28.  Secondly, as also noted in paragraph 15(1) of the Judgment, it was not put to the 1^st defendant that he did not know or intend to acquire a beneficial interest in the Property corresponding to his contributions or that it was not the parties’ intention at the time of purchase of the Property that the 1^st defendant would acquire a beneficial interest in the Property corresponding to his contributions. 

29.  Thirdly, as also noted in paragraph 19(3) of the Judgment, if it is the plaintiff’s case that the 1^st defendant did not have any beneficial interest in the Property corresponding to his contributions or that it was not the parties’ intention that the 1^st defendant would acquire a beneficial interest in the Property corresponding to his contributions, the plaintiff should have specifically put the questions to the 1^st defendant.  This court failed to see how the plaintiff could then make the submission in paragraphs 23 and 24 of the plaintiff’s skeleton submission lodged for the re-trial when he had failed to specifically put the relevant questions to the 1^st defendant in cross-examination.

30.  Further, I am of the view that there is no other reason in the interests of justice that the appeal should be heard.  This ground was not even mentioned in the plaintiff’s skeleton submissions lodged in support of the plaintiff’s application for leave to appeal.  It was only at the hearing on 25 October 2019 that this point was raised for the first time.  At the hearing, Mr Cheung (for the plaintiff) accepted the principles stated by the Court of Appeal in paragraph 12 of the CA Judgment.  His contention was that this court erred in failing to apply those principles.  For the reasons stated above, I do not think that the plaintiff’s contention has any reasonable prospect of success.

D.  CONCLUSION

31.  To conclude, none of the grounds raised by the plaintiff has any reasonable prospect of success.  There is also no other reason in the interests of justice that the appeal should be heard.  The plaintiff’s summons is dismissed with a costs order nisi that the 1^st defendant’s costs are to be paid by the plaintiff to be taxed if not agreed with certificate of counsel and that the 1^st defendant’s own costs are to be taxed in accordance with the Legal Aid Regulations.

32.  It remains for me to thank counsel for their assistance.