WOO TAT HUEN v. LEE WAI PING the executor of the Estate of TSANG KAM HO, deceased

HCA 1725/2017

[2021] HKCFI 576

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1725 OF 2017

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BETWEEN

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JUDGMENT

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1.  This action concerns the ownership of the property known as Unit A, 15^th Floor, Yue Cheung Centre, Nos. 1-3 Wong Chuk Yeung Street, Shatin, New Territories (“Property”), which is registered in the sole name of the late Madam Tsang Kam Ho (“Deceased”), who passed away in December 2016.

2.  The Plaintiff and the Deceased were cohabitees for over 30 years. They were never married, because the Plaintiff was (and still is) married to another lady (“Wife”), with whom he has two sons. Throughout the years the Plaintiff maintained (and still maintains) a relationship with the Wife and his sons, and supported them financially.

3.  The Property is a unit in an industrial building, which since its acquisition in 1986 had been and is still used as a workshop for roasting meat for the Plaintiff’s Chinese roast meat business, which he operates under the trade name Tak Cheong Roasted Meat “德昌燒味” (“Tak Cheong”).

4.  The Plaintiff claims that he provided all of the purchase price for the Property, and the Property was registered in the sole name of the Deceased pursuant to an understanding they had reached prior to its acquisition to the effect that such registration was to facilitate the Deceased’s application as sponsor for an entry permit for her nephew from the Mainland, and the Property would be transferred back to the Plaintiff when necessary after her nephew had successfully come to Hong Kong.  The Plaintiff claims to be the sole beneficial owner of the Property by reason of resulting trust or common intention constructive trust.

5.  The Deceased had no children. She made a will on 31 October 2016 (“Will”), after she had undergone major surgery, naming the Defendant, the son of her close friend whom she treated as her god son, as the executor of her estate, and devising the Property to him.  The Plaintiff is the legatee of the residuary estate under the Will. The validity of the Will has never been challenged.

6.  This action was commenced on 21 July 2017, after the Deceased had passed away, and after the Plaintiff has entered into an agreement in Chinese with the Defendant dated 3 July 2017 (“Chinese Agreement”) confirming the distributions made under the Will and undertaking not to make any claims with respect to such distributions thereafter.  

THE EVIDENCE AND THE WITNESSES

7.  There is a dearth of relevant documentary evidence in this case.  In particular, documentary evidence relating to the financial position of the Plaintiff and the Deceased respectively, and the source(s) of funds used for acquiring the Property, is not available to the Court.

8.  Only one passbook of the Deceased for the period 1986 to 2000 (when it is common ground that the Deceased had a number of accounts with different banks), and 3 pages extracted from the Plaintiff’s 2 bank accounts (when he admittedly had more accounts) for August 1998 and May and August 1999, have been disclosed.  There is some evidence to suggest that the Plaintiff’s solicitors tried to obtain the transaction records of one of the Plaintiff’s accounts with the Bank of Communications (“BoComm”) between May 1986 and May 1989, and the bank responded that those records could not be retrieved.  The Plaintiff claims that he has renovated his home in 2017 and many of the documents were disposed of at the time, and he was not told then that those documents would be required for the purpose of this litigation.

9.  Four witnesses testified orally. The Plaintiff was the only witness called on his side, and was cross-examined over the course of two days in Punti.

(1) I find the Plaintiff to be an intelligent person, even though he was only educated up to primary six in the Mainland.

(2) He was clearly aware of what are the key factual issues in this case, for example whether the Deceased had worked in or contributed to Tak Cheong and what was allegedly discussed and agreed upon between the Deceased and him prior to the acquisition of the Property.

(3) He was very conscious of the version of events on these crucial matters that he should give, as evidenced by a number of occasions when he got carried away in answering questions and provided answers which were inconsistent with his stated case, he immediately tried to back-track from them (one such example being his evidence on whether the Deceased had helped out at the Tak Cheong stall).

(4) Moreover, the Plaintiff has a tendency to embellish his answers on the crucial factual issues by providing details which were neither referred to in his pleadings or witness statements nor consistent with the same, for example with respect to the money he gave to the Deceased monthly for different purposes, and the time when he became aware that the application for entry permit of the Deceased’s nephew was successful.

(5) On matters that he did not perceive or believe to be directly relevant to the crucial factual issues, he did provide answers in a straight-forward manner.

(6) Overall, I do not consider the Plaintiff’s testimony on the crucial factual issues – in particular on whether there was any discussion and agreement with the Deceased prior to the acquisition of the Property as he alleges – to be reliable.

10.  The Defendant called 3 witnesses, himself; his wife朱敏琪(Chu Man Kei, “Chu”), and his mother 黃玉嬋 (Wong Yuk Sim, “Wong”). I find each of them to be credible witnesses, although none of them have personal knowledge on the relevant circumstances (save for the events relating to the Will and those that took place after the Deceased’s demise).  They fairly acknowledged that their evidence on what they understood to be the financial position of the Deceased and the Property were wholly based on what the Deceased told them.

11.  I bear in mind that in the fact-finding exercise, the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to be created, as well as inherent probabilities having regard to all the facts that are known: Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439, §135. Applying that approach I make the following findings of fact.

THE FACTS

12.  The Plaintiff came to Hong Kong from the Mainland in 1970. At that time the Wife and their eldest son (the younger son was not yet born) remained in the Mainland.

13.  For the first few years after the Plaintiff came to Hong Kong, he worked three jobs daily, as a bread-maker early morning, in the abattoir during the day, and in a restaurant for the rest of the day.  At the outset he earned wages totalling around HK$700 per month.  He supported the Wife and his son by sending HK$200 to them each month. He opened a bank account with BoComm in July 1974 (although the relevant records could no longer be retrieved).

14.  After he had worked for a few years and saved up some money, in or around 1975 he took over a roast meat business trading as Tak Cheong at a shop on Wong Chuk Street in Shamshuipo.  At the time the Plaintiff operated the Tak Cheong shop in Shamshuipo with the assistance of two employees.

15.  While the Plaintiff was operating the Tak Cheong shop in Shamshuipo, he met the Deceased, who frequented a nearby shop.  It is common ground that the Deceased was what is colloquially referred to as a nightclub hostess.  They started a relationship, and after a few years, in no later than 1979, they began cohabitation.

16.  In the meantime, in 1978 the Plaintiff acquired a property known as Flat C on 3^rd Floor, No.154A Tung Choi Street, Kowloon (“MK Property”) in his sole name for HK$130,000.  Shortly thereafter he used the MK Property as security to obtain general banking facilities of HK$50,000 from BoComm.

(1) There is a dispute between the parties on the source of funds for acquiring the MK Property – the Plaintiff claims that his Tak Cheong business in Shamshuipo was relatively successful financially and the acquisition funds came solely from him; whereas the Defendant claims that they wholly came from the Deceased, relying on the evidence of Wong of an assertion by the Deceased that she had once lent HK$130,000 to the Plaintiff when he was in financial difficulties.

(2) Although the Plaintiff has not produced any documentary evidence as to the level of profitability of the Tak Cheong business at the time, I find that the acquisition funds for the MK Property came from the Plaintiff, having regard to (i) the size of the business (which employed two staff); (ii) the fact that the Plaintiff was able to arrange for the Wife and his son to move to Macau (see §18 below); (iii) the expansion of the Tak Cheong business and the move to Wo Che Market shortly thereafter (see §19 below); (iv) the inherent improbability of the Deceased making such a substantial advance (whether by way of loan or gift) to the Plaintiff, at a time when they were only in a relationship for a relatively short period; when she was not married to the Plaintiff and had no prospect to be so as the Plaintiff was already married; and when she did not own any property; and (v) the statement the Defendant relies upon refers to the alleged loan being advanced at a time when the Plaintiff was in financial difficulties, which does not sit well with the other objective circumstances in 1978 to 1980 as described above and is unlikely to be referable to this acquisition.

17.  The MK Property was the family home of the Plaintiff and the Deceased throughout their relationship until her demise.

18.  In or around 1979, the Plaintiff arranged for the Wife and his son to move to Macau. His younger son was born in Macau in 1980.

19.  In 1980, the Plaintiff moved the Tak Cheong business from Shamshuipo to Wo Che Market, Wo Che Estate, Shatin (“Stall”).  Various items of cooked food, including roast meats, marinated meats, fried pigeons and mutton clay pot were sold at the Stall. At the time the roast meats were prepared at a workshop near Mei Lam Estate, which was unlicensed for use as a food factory.  The Plaintiff employed two staff full-time to work at the Stall and the workshop.

20.  Although the Plaintiff disputed this initially, he eventually accepted in his evidence that the Deceased assisted at the Stall frequently, although not with the regularity of an employee; she would help with the sales at the Stall, prepare cooked food for sale, cook meals for the Plaintiff and the employees there, and collect the cash receipts from the Stall daily to deposit into the Plaintiff’s bank account.

21.  The Plaintiff claims that the business of Tak Cheong after moving to the Stall was profitable, that in 1980 it was generating revenue of around HK$10,000 per day, and in 1986 there was net profits of HK$80,000 to HK$90,000 per month. No documentary evidence (whether in the form of bank statements, tax returns or documents relating to the business) have been produced to substantiate this assertion. I find that the business at the Stall was profitable between 1980 and 1986, albeit not to the extent suggested by the Plaintiff:-

(1) The limited bank statements disclosed by the Plaintiff (see §8 above) show that in 1998 and 1999, the daily deposits into the Plaintiff’s bank accounts with BoComm ranged between mid- to high-thousands, and occasionally they would exceed HK$10,000.  Giving the Stall had all along been at the same location, selling the same wares and operated by the same personnel, in the absence of explanation (and none has been suggested) I find it difficult to believe that the Stall would be generating more turnover in the first half of 1980s than in late 1990s.

(2) I also note that in addition to the general banking facilities of HK$50,000 obtained in August 1978, the Plaintiff using the MK Property as security had obtained further loans of HK$100,000 in 1981 which he said were for business use.  If the business had been generating as much cash as the Plaintiff asserts, the Plaintiff would not have needed such general banking facilities, or would likely have repaid them long before 2010 (when all the outstanding facilities were repaid and the charges released).

(3) That said, I find that the Tak Cheong business must have been profitable between 1980 and 1986, given the Plaintiff was able to invest HK$300,000 into a seafood restaurant in Wo Che Estate in or around 1987.[1]

22.  In around 1986, the Plaintiff began to contemplate moving his workshop into another premises which would allow him to operate his workshop lawfully, as he was incurring substantial penalties from operating at the unlicensed premises near Mei Lam Estate.  He and the Deceased went to look at the Property, which at the time was still under construction, and it was decided that the Property would be acquired to be used as the workshop for Tak Cheong.

23.  It is the Plaintiff’s case that after he had decided to buy the Property for use as his workshop, the Deceased requested that the Property be registered in her sole name for the purpose of facilitating her sponsorship of her nephew’s application for an entry permit from the Mainland to Hong Kong.  He claims that the Deceased told him that her nephew was her closest relation, and as she had no income or asset, it would be difficult for her to act as sponsor for the nephew’s application as the Hong Kong Government would not consider her to be an appropriate sponsor.  He further claims that the Deceased stated the Property would only be used for Tak Cheong’s business, and she would transfer back the same to the Plaintiff when necessary after her nephew had successfully come to Hong Kong.  I will examine the veracity of these assertions below.

24.  Around this time, the Plaintiff started to apply for the Wife and his sons (who by then had resided in Macau for 7 years) to come to Hong Kong. 

25.  The Property was acquired in the sole name of the Deceased in 1986. Both the agreement for sale and purchase dated 5 June 1986 and the assignment dated 28 November 1986 were in the name of the Deceased.  The consideration was HK$212,520, of which:-

(1) HK$42,520 was paid in cash to the developer, which the Plaintiff claims he paid for, from his savings and the profits he made from trading listed shares, which is disputed by the Defendant although he does not assert positively that the Deceased had paid for the same; and

(2) HK$170,000 was financed by a mortgage loan from The Chase Manhattan Bank, N.A., Hong Kong Branch (“Chase Manhattan”), with the Deceased stated to be the sole borrower in the equitable mortgage as well as the legal charge that replaced it.  

26.  The Chase Manhattan loan required monthly repayment of just under HK$3,000.  The Deceased had opened an account with Chase Manhattan for such purpose and the evidence shows that towards the end of each month, cash of HK$3,000 would be deposited into this account and the monthly instalment would then be deduced therefrom on the 28^th or 29^th day of the month.  It is the Plaintiff’s case that those cash deposits derived from the cash receipts from the Tak Cheong business that he told the Deceased to use as mortgage repayments.

27.  In 1989, the Wife and the sons moved from Macau to Hong Kong, although the Plaintiff continued to live with the Deceased.

28.  Although the Chase Manhattan loan had a tenor of 10 years, it was repaid in full in 1989 upon the request of the Deceased to redeem the Property.  According to the Plaintiff, the Deceased told him that the Immigration Department informed her that since the Property was encumbered, that might adversely affect the application of her nephew, and if she were to redeem the Property, that would enhance the prospect of the application as that would be proof of her financial ability to support her nephew.  The Plaintiff claims that he drew a cheque of HK$100,000 and deposited that into the Chase Manhattan account for the Deceased to repay the loan and redeem the Property, which she did in mid 1989.

29.  Who paid for the initial deposit, the monthly repayments and the final redemption monies are hotly contested in this case, and will be addressed below.

30.  It is the Plaintiff’s evidence that after the Wife and his sons moved to Hong Kong in 1989, he purchased a property in Shatin in the sole name of the Wife (“ST Property”), by paying down payment of HK$100,000 and having the balance of HK$400,000 financed by a mortgage loan, and later the Wife sold the ST Property and retained all the sale proceeds herself.

31.  The Plaintiff says that the Deceased engaged a law firm to make the application for her nephew and he did not make any inquiry as to the progress of that application.  Nevertheless it is common ground that the Deceased’s nephew did obtain an entry permit and moved to Hong Kong. In his affirmation (in English) and witness statement (in Chinese), the Plaintiff stated that this took place shortly after the redemption of the Property in 1989.  In his oral testimony he changed his evidence to 1997 or 1998. I do not accept this new version of events, when (i) the affirmation and witness statement were prepared by solicitors, who must have confirmed the contents with the Plaintiff; (ii) the witness statement is in Chinese which the Plaintiff can understand; and (iii) there is no explanation from the Plaintiff as to why he would have got the time wrong in his affirmation and witness statement. Accordingly I find that the Deceased’s nephew came to Hong Kong not long after redemption of the Property in 1989.

32.  It is the Plaintiff’s evidence that he was aware that the Deceased’s nephew had come to Hong Kong, since upon the nephew’s arrival he spent the first few months working for the Plaintiff at the Stall.

33.  However, the Plaintiff has given conflicting evidence on what happened afterwards:-

(1) In his affirmation and witness statement, the Plaintiff claims that he decided not to arrange for the Property to be transferred back to him, because he considered leaving the same in the Deceased’s name would be beneficial to him, in case the Wife was to divorce him in which case the Property would not be counted towards the family pool; and the first time he raised the issue of transferring the Property back to him was after the Deceased had become seriously ill in 2016, when he became worried that the Property might end up bona vacantia after the Deceased’s death.

(2) In his oral evidence, he first claimed that he asked the Deceased twice during her lifetime to transfer the Property back to him, once in 2000 and once in 2016 after she had fallen ill; then he claimed he had asked her many times; and when questioned on the inconsistency he asserted that there were 3 times, once in 2000 and twice in 2016.

(3) I find the Plaintiff’s oral evidence in this regard to be wholly unsatisfactory and would reject the same.  I find that the Plaintiff had not asked the Deceased to transfer the Property to him.

34.  As mentioned above, throughout the years the Plaintiff maintained a relationship with the Wife and his sons.  The Plaintiff says that the Deceased had asked him to divorce the Wife and he refused.  It is common ground that the relationship between the Deceased and the Wife was not good – both sides testify to an incident where the Wife hit the Deceased in the presence of the Plaintiff.  It is also the Plaintiff’s evidence that the Deceased had a poor relationship with his eldest son, and there were frequent disputes between them since his son joined the Tak Cheong business in 2006.  In the end he told the Deceased to retire from Tak Cheong in 2006.

35.  On the other hand, it is not disputed by the Plaintiff that the Deceased and the Defendant had a good relationship, that she treated the Defendant like her god son, and that relationship remained a close one after the Defendant grew up and became married to Chu.

36.  It appears that the Deceased fell ill quite suddenly in 2016, and her condition was serious as she had decided to make the Plaintiff a signatory to her safe deposit box, to cater for the contingency that she would not be well enough to operate it.  She had surgery in August 2016 but her condition did not improve; after she was discharged from the hospital she had to be moved into a care home, where she remained until she passed away in December 2016.

37.  It is not disputed that while the Deceased was hospitalized after her surgery, the Plaintiff’s eldest son and daughter-in-law visited her, and she sent them away in acrimonious circumstances.  The Defendant and Chu say that they were informed by the Deceased that the son and daughter-in-law demanded that she should transfer the Property to the Plaintiff, which she had refused. This is consistent with the Plaintiff’s own evidence that at the time, he had asked the Deceased to transfer the Property to him, which she refused and cited as a reason she did not want to benefit his son.  I find that after the Deceased’s surgery, the Plaintiff and his son and daughter-in-law had made demands of the Deceased to transfer the Property to the Deceased.

38.  This was followed by an incident, unchallenged by the Plaintiff, that two persons had showed up at the hospital asking the Deceased to sign certain documents.

39.  After the above incident, on 31 October 2016, the Deceased made the Will at the hospital.  The Will, which was in English, was prepared by Messrs. Simon C.W. Yung & Co., with an interpretation clause stating that a named solicitor had interpreted the contents of the Will to the Deceased.  As explained in §5 above, by the Will the Deceased named the Defendant as executor of her estate, devised the Property to the Defendant and bequeathed the residuary estate to the Plaintiff.

40.  The circumstances in which the Will came to be made were hotly disputed between the parties.

(1) The Plaintiff claims that after the Deceased had turned down his request, in 2016, to transfer the Property to him, he requested Chu to help him to persuade the Deceased to execute a will to devise the Property to the Defendant, and once the Defendant obtained the Property he would transfer the same to the Plaintiff for which the Plaintiff would pay him a reward of HK$300,000 (pleaded as the “Property Transfer Agreement” in the Reply).

(2) The Defendant and Chu deny the Plaintiff’s version. They say that when they visited the Deceased at the hospital, they were informed by her of the events in §§37-38 above, that she had rejected such requests, and she wanted to make a will to leave the Property to the Defendant. They were asked by the Deceased to find a solicitor to help her prepare her will.  Accordingly they helped the Deceased engage the firm of solicitors referred to in §39 above and they proceeded to prepare the Will for the Deceased.

(3) I reject the Plaintiff’s assertion that there was any “Property Transfer Agreement” or that the Will was made pursuant thereto:-

(a) The alleged “Property Transfer Agreement” is wholly inconsistent with the Chinese Agreement entered into by the Defendant and the Plaintiff, whereby the Plaintiff clearly and unequivocally confirmed the distribution set out in the Will and undertook not to raise any dispute over the distribution of the Deceased’s estate.

(b) The Plaintiff has not been able to provide any satisfactory explanation as to why he would have executed the Chinese Agreement, other than to say that he thought this would expedite completion of distribution of the Deceased’s estate to enable the Defendant transferring the Property to him.  This, however, is inconsistent with the wording of the Chinese Agreement which clearly stated in Chinese that the Plaintiff would have no claim against the Defendant thereafter.

(c) Nor did the letter from Messrs. Angela Lau Law Office sent on behalf of the Plaintiff on 7 July 2017 advance the Plaintiff’s case. In that letter, the signing of the Chinese Agreement on 3 July 2017 was referred to, and it went on to state that “[a]fter the completion of the formality abovesaid and still in the presence of [the solicitor], [the Plaintiff] and [the Defendant] entered into a dialogue to the effect that [the Plaintiff] asked [the Defendant] as to when he would transfer to [the Plaintiff] the Property at $300,000.  [The Defendant] declined saying that $300,000 was not enough and he would sell [the Property] with nothing payable to our client.”  The Defendant’s evidence is that after the Deceased’s demise the Plaintiff had intimated to the Defendant’s mother his interest in purchasing the Property and that was not disputed by the Plaintiff. As such, the aforesaid statement would be consistent with the parties having a discussion on the possibility of sale and price (which discussion continued thereafter although they never reached agreement on the price).

(d) I also do not consider the Plaintiff’s version to be inherently credible, given Chu’s (or indeed the Defendant’s) obvious lack of incentive in entering to the alleged “Property Transfer Agreement”. Even though there is no evidence on the then value of the Property, it must have been obvious to Chu that its value would have far exceeded HK$300,000; and if the Defendant could persuade the Deceased to devise the Property to him, he would become the 100% owner of an unencumbered Property with a value much higher than HK$300,000.  It is also not suggested by the Plaintiff that he had a particularly close personal relationship with the Defendant or Chu.  In the circumstances it is difficult to see why, even if the Plaintiff had raised the suggestion, Chu would have agreed to the “Property Transfer Agreement” as alleged.

(4) Accordingly I reject the Plaintiff’s case on the “Property Transfer Agreement” or that the Will was made pursuant thereto.  I accept the Defendant’s and Chu’s version of events as set out in (2) above.

(5) Although I reject the Plaintiff’s case on the “Property Transfer Agreement”, it is significant that the Plaintiff seeks to rely on such an allegation, which effectively acknowledges that beneficial title of the Property vested with the Deceased such that he would have to resort to such circuitous means to obtain the Property (see below).

THE LAW

41.  The law in this area is relatively well settled.

42.  The starting point where there is sole legal ownership (as is the present case) is sole beneficial ownership, and the onus is on the person seeking to show that beneficial ownership is different from the legal ownership; in other words, it is for the non-owner to show that he has any interest at all: Stack v Dowden [2007] 2 AC 432, §56.

43.  The relevant principles have been conveniently summarized recently by Coleman J in Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647; HCA 537/2017 (unrep., 23 October 2020), §§8-16:-

(1) Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership.  The trustee holds the legal title on trust for the beneficiary.

(2) Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the plaintiff regarding their shared beneficial interests in the property that matters.  The trust is constituted by the three elements of (i) the common intention, (ii) the plaintiff’s detrimental reliance on their common intention, and (iii) the unconscionability of the property owner departing from it.

(3) The burden of proving each element of common intention, detrimental reliance and unconscionability is on the person seeking to show that the beneficial ownership is different from the legal ownership. The focus is on the intention of the parties at the time of acquisition of the asset. Contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event.

(4) Common intention can be expressed or implied.  It can be deduced or inferred objectively from the parties’ conduct. As a matter of common sense, it is easier to infer such an intention prior to the acquisition of property which results in an obvious change in legal ownership (rather than after such an acquisition where there is no change in legal ownership and a change in beneficial ownership is not otherwise apparent).

(5) In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, §§2.3-2.4, Cheung JA identified two situations where a common intention constructive trust may arise.

(a) The first is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially.  The finding of such an agreement or arrangement can only be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been.

(b) The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property, and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation, direct contributions to the purchase price by the party who is not the legal owner, whether initially or by mortgage instalment payments, will readily justify the inference necessary to the creation of a constructive trust.

(6) A resulting trust arises by virtue of the plaintiff’s contribution in money or in some other way towards the property's acquisition. Equity holds the legal owner to be a trustee of that property for the plaintiff in an appropriate share, giving effect to the parties presumed intention. Particularly in a domestic context, but also generally, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust.

(7) As emphasized in Stack v Dowden §§68-69, an intention to have beneficial interest different from legal interest in property is unlikely, and the task of showing that should not be lightly embarked upon. It was recognized that, in family disputes, strong feelings are aroused when couples split up which can often lead the parties, honestly but mistakenly, to reinterpret the past in self exculpatory or even vengeful terms.  If a difference is to be found between the beneficial and legal interest, clear evidence will be required.  Unequal contributions to the purchase price of property will not likely be enough to move away from the starting point that equity follows the law.

44.  As can be seen from the above, ultimately it is a question of intention – in the case of constructive trust, the common intention of the property owner and the plaintiff; and in the case of resulting trust, the intention of the person who provided the purchase price at the time the property was acquired. Between the two, and particularly in a domestic context, if it is possible to resolve the matter by reference to common intention, it would not be necessary to resort to resulting trust at all: Primecredit §1.3.

45.  The modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context.  In a domestic context (particularly in relation to a matrimonial home), the court is not constrained in that exercise by pure direct monetary contributions to the purchase price: Primecredit §1.6.

46.  Moreover, in the assessment (whether on constructive trust or resulting trust), the court should have regard to inherent probabilities in light of the surrounding circumstances at the time the property was acquired: Primecredit §1.4.

47.  Whilst the authorities cited above are mostly concerned with matrimonial homes or residences of cohabitating couples, whereas the Property in this case is an industrial premise and not a home, in my view the same approach applies.  The matrimonial home / residence is just an additional context which may be taken into account in an appropriate case (whether for the assessment of intention or inherent probabilities) which does not feature in this case.

THE ISSUES

48.  The Plaintiff’s pleaded case is that (i) he provided all of the purchase price of the Property; (ii) the Property was conveyed into the sole name of the Deceased pursuant to a request and representation by the Deceased to the Plaintiff that such arrangement was to facilitate her sponsorship of her nephew’s entry permit into Hong Kong and the Property would be transferred back to the Plaintiff when necessary after her nephew had successfully landed in Hong Kong.  The Plaintiff pleads that by reason of the above, the Property belongs beneficially to the Plaintiff and the Deceased was a trustee holding the Property on trust for the benefit of the Plaintiff.

49.  Given the above pleaded case, it is clear that the case advanced by the Plaintiff is one of common intention constructive trust.

50.  Nevertheless, counsel for the Plaintiff submitted in opening that the Plaintiff’s primary case is based on resulting trust (although he would still be relying on constructive trust), and proceeded in closing to assert that the Plaintiff would not rely on common intention constructive trust in his claim, since the common intention in this case was premised upon the Plaintiff being the sole contributor to the purchase price and both types of trust serve the same purpose.

51.  In my view, the submissions of counsel for the Plaintiff were based on a misunderstanding of the law (as set out in §§43-44 above) as well as his own pleadings on the Plaintiff’s case, which clearly shows that the Plaintiff is advancing a factual case of an express arrangement or understanding between the Deceased and him (which the Plaintiff continued to maintain throughout the trial and gave evidence on).  This is also how the Defendant understood the Plaintiff’s case, as counsel for the Defendant has addressed both common intention constructive trust and resulting trusts in her closing.  In the premises, I will proceed to assess the Plaintiff’s claim by reference to firstly to common intention constructive trust and then resulting trust, which is consistent with the pleaded case, consistent with the law, and occasions no prejudice to the Defendant.

52.  As to the Defence, the Defendant effectively pleaded bare denials to the two main aspects of the Plaintiff’s case ((i) and (ii) in §48 above). However, in her written closing, counsel for the Defendant attempted to raise arguments for the first time on presumption of advancement, illegality, lack of clean hands, lack of certainty in respect of the trust claimed, and the Plaintiff having “revoked” the trust or otherwise being estopped from asserting it by reason of the Chinese Agreement. None of these have been pleaded.  It is wholly inappropriate to raise these substantive arguments for the first time in closing, there being no or no fair opportunity for the Plaintiff to address the same. Accordingly I will not consider any of these arguments belatedly raised by the Defendant’s counsel.

53.  In the premises, the issues to be resolved are:-

(1) Who paid the purchase price for the Property?

(2) Was there an understanding or arrangement between the Deceased and the Plaintiff that the Property would be placed in the Deceased’s sole name only for the purpose of facilitating her sponsorship of her nephew’s entry permit into Hong Kong and would be transferred back to the Plaintiff when necessary after her nephew had successfully landed in Hong Kong?

(3) In light of my findings on (1) and (2) above, has the Plaintiff made out a case on common intention constructive trust?

(4) Alternatively, has the Plaintiff made out a case on resulting trust?

DETERMINATION

54.  My findings on each of the issues set out in §53 above are as follows.

A. Payment of Purchase Price

55.  In considering this issue, I bear in mind that (i) counsel for the Defendant has confirmed it is not the Defendant’s case that the Deceased paid for the same, and the Defendant is merely putting the Plaintiff to proof; and in any event (ii) although there is no evidence as to the Deceased’s worth between 1986 and 1989, what available evidence there is does not suggest that she was a lady of substantial means[2].

56.  In my view, the Plaintiff has discharged his burden of proving that the purchase price for the Property, the monthly mortgage repayments as well as the final redemption amount of HK$100,000 were all paid by him.

(1) I refer to my finding in §21 above that the business at the Stall was profitable between 1980 and 1986.

(2) It is also clear that the Plaintiff managed to amass not insubstantial savings over the years – in 1978 he was able to pay HK$130,000 to acquire the MK Property without the assistance of bank loans (the MK Property was only mortgaged later), and in 1987 he had free cash of HK$300,000 to invest in a restaurant business.

(3) To acquire the Property, only HK$42,520 had to be paid upfront.  The balance of HK$170,000 was financed by a mortgage loan from Chase Manhattan.  In light of the evidence in (2) above, the Plaintiff was plainly in a position to pay HK$42,520.  

(4) The Chase Manhattan loan was serviced by monthly repayments of just under HK$3,000.  The Deceased’s Chase Manhattan bank passbook shows that when the account was opened there was only HK$500 in the account, and each month a sum of HK$3,000 would be paid in by cash from which sum the monthly mortgage instalment would thereafter be deducted.  The Plaintiff’s evidence is that these HK$3,000 payments were from the revenue of the Stall which the Deceased would collect daily and deposit into the Plaintiff’s bank account, and which the Plaintiff had directed the Deceased to set aside HK$3,000 per month for servicing the Chase Manhattan mortgage.  I find this aspect of the Plaintiff’s evidence to be credible and is consistent with the documentary evidence available.

(5) As for the final redemption amount of HK$100,000, I also accept the Plaintiff’s evidence that it was paid by him by cheque drawn, given (i) my findings in (2) above as to the level of his savings; and (ii) the Plaintiff had checking accounts with BoComm while there is no evidence or suggestion that the Deceased was able to draw cheques.

B. Alleged Common Intention

57.  On this issue, I find that the Plaintiff has failed to discharge his burden of proving the pleaded understanding or arrangement between him and the Deceased as set out in §48 above (under (ii)).

58.  Further, I find that while it was the Plaintiff who provided all of the purchase price for the Property, the Plaintiff intended to gift the Property to the Deceased.

59.  My findings are based on the following reasons.

(1) First, although the Plaintiff and the Deceased were never married, by 1986 they had been in a relationship and had cohabitated as man and wife for a substantial period of time.

(2) The Deceased had given up her previous vocation, did not have a job or income of her own, and was wholly dependent on the Plaintiff financially. However, the Plaintiff was unable to give her security by marrying her, since he was already married to the Wife and he refused to divorce the Wife and marry the Deceased.

(3) This is not a case where the Plaintiff gifted away the only substantial asset he had.  On the contrary, the Plaintiff had paid for three properties in his lifetime, and had arranged them such that he himself held one, and the Deceased and the Wife – being his common law and legal wife respectively – each held one. An arrangement whereby each of the Wife and the Deceased would be legal and beneficial owner of the property given to them (as was admittedly the case of the Wife) made sense in the context of the Plaintiff’s circumstances and his relationship with these women.

(4) That the Property was the workshop for the Tak Cheong business is not inconsistent with the intention to gift.  Given (i) the Plaintiff and the Deceased had been working together for the Tak Cheong business at least until 2006 such that she must have fully supported the Tak Cheong business and understood its needs, and (ii) they had been in a long term, steady relationship as man and wife, gifting the Property to the Deceased would not have jeopardized the Plaintiff’s or Tak Cheong’s ability to use the same as a workshop.

(5) By 1986, the Plaintiff had already purchased the MK Property in his sole name, and though it was used as the family home of the Deceased and him, it would have been more convenient to convey the newly acquired Property to Deceased than transferring MK Property to her, not least because the MK Property was at that time subject to a mortgage for which the Plaintiff was the borrower.

(6) As to the early redemption of the Chase Manhattan mortgage over the Property in 1989, that took place around the same time when the Wife and her children moved to Hong Kong.  The Plaintiff accepts that all along he had maintained a relationship with the Wife and the children even though he did not live with them, and it is common ground that the relationship between the Deceased and the Wife was acrimonious. In these circumstances, it was hardly surprising for the Deceased to request that the Plaintiff to redeem the mortgage, so that she would have (at least) the security of an unencumbered Property if her relationship with the Plaintiff were to change in the future.

(7) Further, the Plaintiff accepts that after Deceased’s nephew moved to Hong Kong, he did not ask the Deceased to transfer Property back to him for a long time (he claimed to have made the first demand in 2000, which was not mentioned in his witness statement and is in any event inconsistent with his explanation below which was mentioned in his witness statement).  His explanation that he did not do so because it suited him to leave the Property in the name of the Deceased for fear that the Wife might divorce him and laid claim against the Property is unconvincing, given he had already purchased the ST Property for the Wife a year or two after she arrived in Hong Kong.

(8) Moreover, that the Plaintiff sees fit to advance a case based on the alleged “Property Transfer Agreement” (which I have rejected above) indicates that he knew and accepted that the Defendant was the beneficial owner of the Property and was free to do what she liked with it such that he would have to deploy a device such as the alleged “Property Transfer Agreement” to obtain the same.

(9) Indeed, that the Plaintiff had intended to gift and knew that he had gifted the Property to the Deceased is clearly borne out by his own oral evidence that (i) if the Deceased had not passed so quickly after she made the Will, he would not have insisted that she transferred the Property to him even though he knew by the Will she had devised the Property to the Defendant; and (ii) if he were to predecease the Deceased, the Property would be hers.

(10) The above is also consistent with the Plaintiff’s signing of the Chinese Agreement to confirm the distribution of assets under the Will and that he has no claims with respect to the same against the Defendant. 

C. Common Intention Constructive Trust

60.  In light of my findings above, I reject the Plaintiff’s case on the alleged arrangement or understanding between the Deceased and the Plaintiff prior to the acquisition of the Property that the Property was held by the Deceased solely for the purpose of facilitating her sponsorship of her nephew’s entry permit into Hong Kong and would be transferred back to the Plaintiff when necessary after her nephew had successfully landed in Hong Kong.  The Plaintiff’s claim on common intention constructive trust thus fails.

D. Resulting Trust

61.  Given (i) the Plaintiff has pleaded and relied on an express understanding or arrangement between the parties (which I have rejected), and (ii) in light of my finding above that the Property was intended to be a gift, the claim based on resulting trust does not arise for consideration at all (by reason of (i)), and in any event would have failed (by reason of (ii)).  Accordingly I also dismiss the Plaintiff’s claim based on resulting trust.

62.  Accordingly I will order that the Plaintiff’s claims against the Defendant be dismissed.

63.  As to costs:-

(1) I see no reason why costs should not follow the event.  I make a costs order nisi that the Plaintiff pays the costs of this action to the Defendant, to be taxed if not agreed.

(2) The parties have been directed to make submissions on whether costs should be on the High Court scale or the District Court scale, given the amendment to the District Court Ordinance (Cap.336) increasing the jurisdiction of the District Court on claims relating to the declaration of a trust to a value of HK$7,000,000 where such proceedings wholly relate to land, which took effect on 3 December 2018.  Both parties submitted that this action should be heard in the Court of First Instance, given the interlocutory steps had already been completed and the trial was ready to be heard by the time the legislative amendments took effect. In the premises I will direct that costs should be assessed on the High Court scale.

(3) Finally, the Defendant applied for indemnity costs against the Plaintiff. Indemnity costs may be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner, such as to constitute an affront to the court: Hong Kong Civil Procedure 2021: 62/App/12. In this case, while I have rejected the Plaintiff’s case on common intention constructive trust, and I also take into account this action was only commenced after the Deceased passed away such that the Defendant (as executor of her estate) may be limited in his ability to fully defend each and every aspect of the factual allegations raised, after serious consideration I decline to exercise my discretion in favour of ordering indemnity costs, as I am not satisfied that the manner in which the Plaintiff conducted this action (both at the pre-trial stage and during the trial) could be said to have amounted to an affront to the court as to warrant such an order being made. Costs will accordingly be taxed on party-and-party basis.