WONG CHOR CHEUNG v. WONG HARK CHUNG

HCA 1676/2006

[2020] HKCFI 3162

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2006

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JUDGMENT

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A. INTRODUCTION

1.  The plaintiff is the husband of the sister of the defendant. That is, the plaintiff and the defendant are brothers-in-law.

2.  By an agreement for sale and purchase dated 30 November 1995, the defendant agreed to purchase a property at Flat D, 14^th floor, Woodbury Court, Discovery Bay, Lantau, Hong Kong (“the Property”) at a price of HK$2,700,000.  The purchase was completed by an assignment dated 30 December 1995.  As from that date, the defendant has been the sole registered owner of the Property.

3.  Apart from the purchase price, according to the documents disclosed by the defendant, the other expenses in relation to the purchase of the Property by the defendant were:

(1)     Legal fees and disbursements of HK$21,835;

(2)     Stamp duties of HK$54,000 for the agreement for sale and purchase and HK$100 for the assignment;

(3)     Agency fees of HK$24,300.

The total is therefore HK$2,800,235.

4.  On the other hand, in the Statement of Claim, the plaintiff pleads that the expenses, apart from the purchase price, were estate agent commission of HK$27,000 and stamp duty of HK$54,000, making a total of HK$2,781,000.  In the light of the documents disclosed by the defendant, I find the total cost of the purchase to be HK$2,800,235.

5.  It is not in dispute that for the payment of the total cost, HK$730,000 came from the bank account of the plaintiff (or an unincorporated business owned by him) (“the plaintiff’s bank account”).  A cheque of HK$100,000 drawn on the plaintiff’s bank account was paid over as the initial deposit when the provisional sale and purchase agreement was signed.  Two cashier orders, in the sums of HK$14,770 and HK$615,230 (totalling HK$630,000), were also purchased with money from the plaintiff’s bank account to pay partly for the balance of the purchase price.

6.  The plaintiff claims that because he contributed HK$730,000 for the purchase of the property, he is entitled to a proportionate share of the beneficial ownership of the Property, and seeks a declaration to that effect together with other reliefs.  Based on his pleaded total of HK$2,781,000, he claims that his share of the beneficial ownership is 26.24%.  However, on the figure of HK$2,800,235 which I find, the share should be 26.07%, if I otherwise accept the plaintiff’s case.

7.  In his statement of claim, his witness statement, and testimony before me, the plaintiff’s claim to a share of the beneficial ownership is based purely on the bare fact that he “contributed” HK$730,000.  He does not plead or allege any discussion, agreement or understanding between him and the defendant on the nature of the payments around the time of the purchase leading to him paying over HK$730,000.

8.  On the other hand, the defendant’s pleaded case is that he paid for the Property with funds he borrowed from his family members other than the plaintiff, together with a mortgage loan from a bank. 

9.  In his witness statement, the defendant further elaborates his case as follows.

(1)     He says that in 1995 he identified the Property and he wished to purchase it.  He telephoned his mother (“Madam Chan”), who was living in Australia at the time, and asked her to lend him money to pay for the initial deposit for the purchase of the Property.

(2)     Before she left for Australia, Madam Chan had authorised the defendant’s brother, Wong Hak Wah (“Wah”), to sell a property in Hong Kong left to her by her late husband (i.e. the defendant’s father). The net proceeds of the eventual sale were HK$750,000.  After deducting HK$180,000 which Wah gave her when she left for Australia, the remaining HK$570,000 which belonged to Madam Chan was kept by Wah.

(3)     Madam Chan told the defendant that she had discussed the matter with Wah and told him to forward the HK$570,000 to the defendant.  However, Wah told Madam Chan that he had not retained enough money, and proposed to pay the defendant with money from a property joint venture he had with the plaintiff.

(4)     Therefore, according to the understanding of the defendant, the monies that were paid from the plaintiff’s account belonged, as to HK$570,000, to Madam Chan, while the remaining balance (i.e. HK$160,000) came from Wah’s share of the joint venture he held with the plaintiff.

10.  Wah has produced a witness statement and given testimony before me. 

11.  In his statement, Wah says that of the HK$570,000 which Madam Chan allowed him to keep (following the sale of the property) pending her further instructions, he used it to enter into a joint venture with the plaintiff to purchase a property to be leased out for rental income.  The property was then sold in December 1993 (which Wah clarifies in the witness box as being a sale of the holding company of the property rather than a direct sale of the property), with his share of the profit to be HK$837,787.10 and that of the plaintiff to be HK$971,880.71. He says that both his share (which he told the plaintiff included HK$570,000 from Madam Chan) and the plaintiff’s share were kept by the plaintiff who agreed to “draw out the amount when necessary”. The defendant had sought and obtained Madam Chan’s agreement to use the money to purchase the Property, and so Wah asked the plaintiff to transfer HK$570,000 to the defendant’s account.  He therefore considers that he has fully repaid the HK$750,000 he owed Madam Chan from the sale of the property he handled for her.

12.  Madam Chan passed away in March 2013.  The defendant has produced before me an undated handwritten note in Chinese purportedly by her, as well as an affirmation dated 27 October 2006 purportedly made by her, which are consistent with the evidence of the defendant and Wah. In effect, she confirmed that she lent HK$570,000 to the defendant via Wah.  I say “purportedly” in relation to both documents becauseI note here that the plaintiff challenges the admissibility of these documents, including whether those documents were in fact made by Madam Chan.

B.      DISCUSSION

13.  When a person (A) provides all or part of the purchase price of a real property but the legal title is put in the name of another person (B) only, then it is a matter of the subjective intention of A as to whether he is to have a beneficial interest in the property to the extent of his contribution, held on trust for him by B.  The Court will seek to ascertain this intention by reference to the actual evidence adduced regarding the transaction, and will apply the presumption of resulting trust, or the presumption of advancement, as the case may be, only if there is no sufficient evidence for it to make a finding of intention:

(1)     In Lewin on Trusts[1], the learned editors said:

“The Court of Appeal (in the context of a purchase by a father in the name of his child) has more recently indicated that the law applies presumptions only where there is no evidence of the intention with which a transfer is made, and the court did not draw any distinction in this regard between voluntary transfers and purchases, nor between the difference kinds of relationship to which the presumption of advancement applies”.[2]

(2)     The Court of Appeal judgment cited in Lewin is Lavelle v Lavelle^[3], where Lord Phillips of Worth Matravers MR (as he then was, and with whom May and Jonathan Parker LJJ agreed) said:

“13. Where one person, A, transfers the legal title of a property that he owns or purchases to another, B, without receipt of any consideration, the effect will depend on his intention. If he intends to transfer the beneficial interest in the property to B, the transaction will take effect as a gift and A will lose all interest in the property. If he intends to retain the beneficial interest for himself, A will take the legal interest but will hold the property in trust for A.

14.  Normally there will be evidence of the intention with which a transfer is made. Where there is not, the law applies presumptions. Where there is no close relationship between A and B, there will be a presumption that A does not intend to part with the beneficial interest in the property and B will take the legal title under a resultant trust for A. Where, however, there is a close relationship between A and B, such as father and child, a presumption of advancement will apply. The implication will be that A intended to give the beneficial interest in the property to B and the transaction will take effect accordingly” [emphasis added]

(3)     In Leung Wing Yi Asther v Kwok Yu Wah^[4], Stock NPJ (with whom Ribeiro and Tang PJJ and Chan and Lord Collins of Mapesbury NPJJ agreed) said:

“There was no need in the circumstances for the Judge to invoke the presumption of a resulting trust or to look to the presumption of advancement and he did not do so. The presumptions of resulting trust and advancement arise as a matter of default; in other words, where there is otherwise insufficient evidence of subjective intention. That is the point made in the passage cited by the Judge from Lavelle v Lavelle that:

Normally there will be evidence of the intention with which the transfer is made. Where there is not, the law applies presumptions.

and summarised thus, that:

Even where this [an express declaration of trust] is absent, the court aims to arrive at the parties' real intentions by considering direct evidence of the entire transaction. This requires an objective inference drawn from the parties’ words and conduct. As a result, the presumptions of resulting trust or of advancement are only relied upon as default rules where there is no sufficient evidence to displace them”.^[5] [emphasis added]

14.  The question before me is therefore what was the subjective intention of the plaintiff when he provided the HK$730,000. Did he intend to have a beneficial interest in the Property to the extent of that contribution?  This is a question which I shall seek to answer by making a finding of fact by reference to all the evidence before me.  Only if I cannot make any finding of his intention one way or another, shall I resort to the “default” rule of the presumption of resulting trust in his favour (as there is no suggestion that the presumption of advancement applies in favour of the defendant).

15.  On this issue, apart from the bare fact that he provided HK$730,000, the plaintiff himself does not offer any evidence, by way of a witness statement or oral testimony before me, of any words or conduct around the time of the purchase in support of an objective inference that the subjective intention of his was that he was to have a proportional beneficial interest.  He is in fact asked in cross-examination expressly whether there was any written agreement between him and the defendant regarding the money, and he simply says that this was not necessary because his understanding was that if he provided the money he would have the corresponding proportion of the beneficial ownership.  He does not refer to any oral discussion or agreement or understanding between him and the defendant regarding the nature of the money he was providing. The only discussion he alleges in his testimony is that he and the defendant agreed to use the rental income to pay the loan instalments, or the defendant himself would so pay if he resided in the Property himself.  In effect, all he is saying is that at the time of the purchase he thought and understood that he was to have a beneficial interest in the Property because he provided part of the purchase money.[6]

16.  I do find this to be quite unreal.  No matter what the position is in law, I do find it quite incredible that, as between two laymen, and who were (and are) relatives and supposedly to be close at the time (according to the plaintiff himself), there was no discussion or at least some understanding as to the nature of the money to be provided by the plaintiff (was it to be a contribution by a prospective co-owner, or was it assistance provided by one relative to another (younger) one by way of a gift or a loan, or was it, as the defendant alleges, a repayment by the plaintiff in effect of money he owed to Wah).  Someone had to raise the question of the plaintiff providing some money first, and in that context, in my judgment, there must have been some discussion as to the nature of the contribution.  I cannot believe that there was not.  The plaintiff is simply unable or unwilling to say what the discussion was, even when asked, and the only inference which I can (and do) draw is that any such discussion would not have supported his case.

17.  I do not find the alleged discussion of how to repay the bank loan by instalments, even if it did occur, helps the plaintiff as that is neutral: it could have been a discussion between co-owners or it could have been advice given by a relative to another as to whether the defendant could afford to buy the Property and on his ability to repay the bank.

18.  Further, by an email sent on 23 July 2005, the plaintiff sent to the defendant a note in Chinese dated 19 July 2005 (“the Note”) whereby the former said that there were two issues which needed to be resolved between them.  The certified translation of the Note reads as follows:[7]

“Re: Issues:	(i) Housing Loan HKD750K for your Discovery Bay Property
	(ii) 40 Rumrunner St., Gold Coast, Australia
1st item:	The amount of $750,000 I’ve lent to you (including the legal fee and stamp duty etc) to purchase the property of Discovery Bay
[…]
(We) now suggest the following ways to resolve:
1st item:	From the date this amount $750,000 was lent to you to date, calculate the sum of money to be returned to me including the principal with interest based on the bank interest. Bank interest is negotiable”.

19.  Even though there is a discrepancy between the figures (HK$730,000 as against HK$750,000), it is clear that in the Note the plaintiff was referring to the money he provided for the purchase of the Property. When cross-examined on this Note, the plaintiff does not suggest that he was talking about another property or some other contributions to the purchase of the Property. 

20.  In the Note, the plaintiff himself stated that the money he provided for the purchase of the Property was a loan by him to the defendant.  The wording suggests that the money was a loan from the plaintiff to the defendant from the beginning, and not that the original beneficial contribution was somehow converted into a loan later.  Although this is also at variance with the defendant’s case, more crucially, this is inconsistent with the plaintiff’s pleaded case herein. 

21.  The Note is also inconsistent with what the plaintiff says in his witness statement.  He says:

“Subsequently the value of the Property has increased, [the defendant] was unwilling to calculate my deserved appreciated share in the Property according to the proportion of my investment. Therefore he suggested to treat my contribution (HK$730,000) as a loan to him, however as his funds have always been insufficient, he was unable to submit any concrete repayment proposal immediately for my consideration. As we are relatives, I have been tolerating him, waiting for him to submit a concrete repayment proposal. However, [the defendant] has been avoiding and delaying, and has never submitted a repayment proposal. On 4^th August 2006, I had no other choice but to commence legal proceedings against him claiming for the interest in the Property”.[8]

This passage suggests that the money was not, and was not converted into, a loan as the defendant did not submit any concrete proposal.  This is inconsistent with the Note.

22.  When cross-examined on the Note, the plaintiff says that at that time he needed money for his business so he wanted to get back the money he had invested in the Property.  So he asked the defendant to sell the Property. However, the Property was still under mortgage, and as it was not known when the Property could be sold, discussion ensued to convert his contribution into a loan, rounded up to HK$750,000. The plaintiff says he just wanted to get his money back, and he did not care about the increase in value of the Property since the purchase.  However, the discussion was not successful and nothing came out of it.  The effect of this evidence is that the “conversion” did not take place.  This is also inconsistent with the Note.

23.  This explanation during cross-examination is also at odds with the witness statement.  The statement suggests that it was the defendant who first initiated the entire discussion because he did not want the plaintiff to share in the increase in the value of the Property.  The testimony of the plaintiff suggests, however, that it was he who raised it because he needed money for his business.  The reasons given for the discussion also differ. 

24.  Since the plaintiff is claiming a partial beneficial ownership of the Property in this case without any claim, not even in the alternative, for repayment of a loan, it is clear that it is not the plaintiff’s current case that there was an agreed conversion of the alleged beneficial contribution into a loan to the defendant.[9]

25.  The Note is clear evidence that the plaintiff did not consider the money from him to be a beneficial contribution to the purchase of the Property, and is inconsistent with, and I reject, what he says in his witness statement and during cross-examination about what happened in about 2005, around the time the Note was written and sent. 

26.  On the other hand, the defendant has provided evidence of what he says to be the circumstances of the purchase of the Property and the reason for the plaintiff providing the HK$730,000.  His evidence, as to HK$570,000 of the money advanced by the plaintiff, is backed up by the evidence of Wah.

27.  I note, however, that even though the defendant says in his witness statement that his understanding is that, apart from the HK$570,000, the balance of the monies provided, i.e. HK$160,000 (HK$730,000 less HK$570,000), was money that belonged to Wah, and thus was a loan from Wah to him (and he does plead that he purchased the Property with loans from his family members), the evidence of Wah deals only with the sum of HK$570,000.  In his statement, Wah says that he asked the plaintiff to transfer the sum of HK$570,000 to the defendant, and he does not mention how HK$160,000 which, according to the defendant, was money which belonged to Wah, came to be made available to the defendant by the plaintiff.

28.  In so far as HK$570,000 is concerned, the evidence (both oral and written) from the defendant and Wah is consistent and inherently credible.  I also find both the defendant and Wah to have given their evidence in a convincing and coherent manner. On the other hand, the plaintiff’s evidence is, as I said above, seriously lacking in his failure to explain the factual circumstances of him handing over the money around the time of the purchase, and his case is seriously undermined by his own Note.

29.  I accept the evidence of the defendant and Wah set out above and find the following as facts:

(1)     Wah and the plaintiff were in a property joint venture together in the early 1990’s resulting in profits of HK$837,787.10 to Wah and HK$971,880.71 to the plaintiff after the property was sold via the sale of the holding company.  After the sale, the plaintiff kept Wah’s share of the money which included (to the plaintiff’s knowledge) HK$570,000 which belonged to Madam Chan.

(2)     Madam Chan agreed to lend HK$570,000 to the defendant to help him to pay for the Property, and she asked Wah who in turn asked the plaintiff to make the same available to the defendant for the purchase of the Property.

(3)     As for the remaining HK$160,000, while there is no direct evidence from Wah that this was a loan by him to the defendant, the fact remains that there is no basis which has been suggested for me to treat this sum differently from the HK$570,000 in terms of the subjective intention of the plaintiff thereon.  On either side’s case, it is “all or nothing” in that either the entire HK$730,000 was a contribution by the plaintiff with the intention that he was to have a proportional beneficial interest in the Property, or that it was made in circumstances he was not to have any. The fact that he might only have an interest to the extent of HK$160,000 out of HK$2,800,235 (i.e. 5.71%), i.e. he made available HK$730,000 partly as a repayment and partly as a beneficial contribution, is not advocated for by the plaintiff, and there is nothing in the evidence to support or justify such a finding. It appears to me that, reading his statement in context, Wah is merely focusing on explaining the HK$570,000 being money which belonged to Madam Chan, rather than suggesting by implication that he did not lend any money of his own to the defendant.  He did suggest that the money which the plaintiff was keeping for him (including money that belonged to Madam Chan) was HK$837,787.10. To this extent, the fact that he does not deal with the remaining HK$160,000 expressly does not, in my judgment, suggest that he did not lend any money of his own to the defendant.  Nor does this undermine the evidence adduced by or on behalf of the defendant on the HK$570,000 which I accept.  In the light of the above, there is no basis for me to find that the HK$160,000 was a sum made available by the plaintiff to the defendant with the intention of the former to have a proportional beneficial interest in the Property, differently from the HK$570,000.

(4)     On the balance of probabilities, the subjective intention of the plaintiff, when he contributed the HK$730,000, was not that he was intending to have a proportional beneficial interest in the Property. This is sufficient for me to dispose of the plaintiff’s claim.  I further find that the entire HK$730,000 was a repayment by the plaintiff of moneys which he was keeping for Wah (including HK$570,000 which in turn was owed by Wah to Madam Chan).

30.  I am able to make the above findings without any reliance on or reference to the two documents purportedly made by Madam Chan, which are otherwise supportive of the defendant’s case.  It is therefore strictly unnecessary for me to rule on the objections by the plaintiff on their admissibility.  I shall deal with the plaintiff’s objections briefly.

31.  The plaintiff says that to be admissible, the maker of the documents must be present at the trial to be cross-examined. He further questions whether those documents (the originals of which were produced for inspection by me and the plaintiff during the trial) were indeed signed by Madam Chan, whose mental state and condition at the time of signing (if she really did) is unknown.   

32.  The affirmation from Madam Chan was purportedly made on 27 October 2006 under and for the purpose of this action, whereas the handwritten note is undated and there is no evidence on the circumstances of its making, including its purpose. There is, however, no suggestion that the handwritten note was made contemporaneously (i.e. around the time of the provision of money by Madam Chan to the defendant for the purchase of the Property).  The factors listed under section 49(2) of the Evidence Ordinance[10] are relevant to the question of whether the handwritten note, as hearsay evidence, should be excluded under section 47(1)(b) of the Evidence Ordinance.[11]

33.  Going through the factors listed in section 49(2) of the Evidence Ordinance in relation to the handwritten note:

(1)     It is obviously not reasonable and practicable for Madam Chan to be produced as a witness;

(2)     It is not suggested, and there is no evidence, that the document was made contemporaneously with the events in question;

(3)     There is no multiple hearsay involved;

(4)     The defendant has not shown why the factors at section 49(2)(d)-(g) are satisfied in his favour[12].

34.  On the whole, I am satisfied that the exclusion of the handwritten note is not prejudicial to the interests of justice and in any event for the same reasons even if I do not exclude it I will not attach any weight to it.

35.  As for the affirmation of Madam Chan, it ought to be admitted, if at all, by directions given under Order 38, rule 2, of the Rules of the High Court.[13] For the same reasons as for the handwritten note, and taking note of the fact that Madam Chan can no longer be called as a witness, I decline to admit the affirmation of Madam Chan and in any event will attach no weight to it.

36.  The plaintiff also makes a number of points which, in my judgment, do not assist him:

(1)     He refers to and relies on a decision of DHCJ To in HCB 1048/2017, which was a petition by the defendant herein for the bankruptcy of the plaintiff herein, based on a failure by the latter to pay a sum of AUD114,763.92 being the costs awarded against him in a dispute between them in the Supreme Court of Queensland.  One of the grounds of opposition to the petition was that the plaintiff had a cross-claim in the present action, and the learned Judge said, after reciting the parties’ cases in this action:

“On balance, [the defendant herein] does not appear to have a credible defence to [the plaintiff’s] claim in HCA 1676/2006. In other words, the debtor appears to have a good counterclaim or cross-claim against the petitioner exceeding the petitioning debt”.[14]

With respect, that decision was not made after a full trial, and the question before the learned Judge was whether the petitioning debt was disputed on substantial ground, which is a more limited issue than what I have to deal with at this trial.  I have to make my own findings and judgment based on the evidence and submissions before me. 

(2)     The plaintiff queries the lack of documentary proof in the various transactions or arrangements the defendant and Wah refer to in their evidence.  However, all of them involved members of the same family, i.e. Madam Chan, Wah, the defendant and/or the plaintiff, and there is nothing remarkable or unusual that no document was made.  Indeed, regarding a property in Queensland, Australia, which was the subject matter of the litigation between the plaintiff and the defendant in the Supreme Court of Queensland which resulted in the costs order which formed the basis of the defendant’s bankruptcy petition against the plaintiff before DHCJ To, the plaintiff alleged in that Court that there was some sort of agreement between him and the defendant on the title thereof.  When asked about it in cross-examination, the plaintiff himself says that the agreement was not reduced into writing because it was between family members.  I of course make no findings as to whether the alleged agreement existed but the point is that the lack of written record or agreement between family members is not surprising at all.

(3)     Equally, on his own case, the plaintiff says that there was no need to prepare anything in writing between him and the defendant regarding the Property as they were family.

(4)     The plaintiff also questions Wah on why he does not produce any documents to support his case that he sold Madam Chan’s property for her, or that they had a joint venture together, for example, the land search record, the company search of the holding company, and the accounts and financial statements of the company.  While Wah’s evidence could have been strengthened by such documents, I do not regard the absence thereof affects the credibility of Wah’s evidence in his statement and testimony, which I accept.

(5)     The plaintiff in fact queries whether solicitors for the defendant do have the relevant documents and are deliberately withholding them.[15] However, the fact remains that the plaintiff has not asked for specific discovery of them, even after he received Wah’s statement which refers to the sale of the property of Madam Chan, and the joint venture.  The plaintiff’s case is also odd in that he is complaining about the failure of the defendant or his solicitors to produce documents in support of Wah’s evidence, when his case is that at least the joint venture did not exist and so there would have be no documents.

C.     DISPOSITION

37.  For the above reasons, I dismiss the plaintiff’s claim.  The plaintiff is to pay the costs of this action, including all reserved costs, to the defendant, to be taxed if not agreed.