MAN SHUN HO v. LIU HOI WAH

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. The Plaintiff, by an Originating Summons, asks this Court to make Orders for Sale under Section 6 of the Partition Ordinance, Cap. 352, in respect of two properties, namely, Flat 6A, No. 21 Broadway, Mei Foo Sun Chuen ("Flat 6A") and Workshop Unit 5A on 4th Floor of Goldway Industrial Centre, Kwai Chung ("Workshop 5A"), both of which were purchased in 1986 and 1985 respectively in the joint names of the Plaintiff and the Defendant as joint tenants. The Plaintiff claims to be entitled to a half share of the proceeds of sale from these two properties after deducting any outstanding mortgage charges and the costs of the sales.

2. The Defendant contests the Plaintiff's claim to a half share of each of these two properties on the basis that both these properties were funded by him entirely and that the Plaintiff had never paid or contributed in any way to either the purchase price or the mortgage payments in respect of both properties. In the circumstances the Defendant says that he has the beneficial interest of the Plaintiff's share, and accordingly she holds her share of both properties on trust for him. The Defendant counterclaims for various declarations against the Plaintiff to this effect.

3. The background of this case goes back to the late 1960's when the Plaintiff started to cohabit with the Defendant at 11th Floor, 385 Ki Lung Street (the "Ki Lung Street premises") where the Defendant was principal tenant. When the Plaintiff started to cohabit with the Defendant, she brought along her daughter and son from a former marriage. The daughter was then 8 years old and the son slightly younger. It is common ground that the Plaintiff and the Defendant never married but cohabited until 1993 when they separated. Although they never married, the Plaintiff and the Defendant, during their cohabitation, lived with the Plaintiff's two children as one family. The Defendant provided financially for the Plaintiff and the two children. The Plaintiff did not have any regular employment. She took care of the children, the household and performed the normal duties of a housewife. Initially when they were not financially well off, she took in lodgers or sub-tenants thereby assisting the family finances. When the Defendant's home industry of processing knitwear met with difficult times, the Plaintiff helped him out by taking on baby-sitting work at home. Both had a common goal - to build up a better life for the family and the children.

4. In 1982, the daughter, by then working and of marriageable age, suggested moving home to Mei Foo Sun Chuen. Initially the daughter together with the Defendant (as tenants in common) purchased Flat 19B, 68 Broadway, Mei Foo Sun Chuen ("Flat 19B"). Soon after by a Nomination, the Defendant nominated the daughter to take over the flat in her sole name and she obtained a mortgage also in her sole name. The family lived in this flat for about 1 year.

5. In 1983 the daughter decided to marry. She sold Flat 19B to the Plaintiff and the Defendant in their joint names at a discount for them to on-sell Flat 19B at a profit of some $80,000.00. Using this profit of HK$80,000.00 the Plaintiff and Defendant purchased Flat 18D, No. 19 Glee Path, Mei Foo Sun Chuen (the "Glee Path premises"). After two months of the purchase, the Glee Path premises was sold at a small profit. The proceeds of this sale was used to partly finance the purchase of another flat in Mei Foo Sun Chuen being Flat 12C, No.25 Broadway (the "Flat 12C"), which was purchased in August 1983 and which the Plaintiff and the Defendant lived in until the end of 1985 when it was sold at a profit of about $190,000.00. Once again the proceeds of sale including the profit from this sale was used to partly finance the purchase of Flat 6A. This was purchased in January 1986 for HK$460,000.00. and the Plaintiff and the Defendant lived in Flat 6A until their separation in 1993. Flat 6A continued to be used by the Defendant until now and is one of the two subject matter of these proceedings. All the above flats were purchased in the joint names of the Plaintiff and the Defendant as joint tenants.

6. In 1985 the Defendant carried on a machinery business in rented factory premises in Kwai Chung. In June of that year Workshop 5A was purchased in the joint names of the Plaintiff and the Defendant as joint tenants to be used by the Defendant as a factory premises for his business. The Defendant retired from this business in about 1991 and these premises are now rented out by him. These premises form the second subject matter of these proceedings.

7. The break-up between the Plaintiff and the Defendant came about towards the late 1980's or early 1990's amidst allegations by each against the other of infidelity. Suffice it to say that each alleged the other of having affairs with third parties resulting in their separation. The Plaintiff alleged that the Defendant had kicked her out of the Flat 6A whereas the Defendant accused the Plaintiff of leaving the flat on her own to make a new home with her new lover. These accusations and cross-accusations led to acrimony and hatred between the Plaintiff and the Defendant which was only too apparent when each of them gave evidence from the witness box. It was this acrimonious parting of ways between the Plaintiff and the Defendant which undoubtedly led to the institution of these proceedings. Before the proceedings were instituted the Plaintiff, through her former solicitors, had served on the Defendant two Notices of Severance dated 2nd February 1994 and 28th February 1994 in respect of the two disputed properties under Section 8 of the Conveyancing and Property Ordinace Cap. 219, severing the joint tenancy in each case.

The Plaintiff's evidence

8. The Plaintiff had filed two affirmations in support of her claim. Her evidence is the witness box was by and large what she had affirmed.

9. The Plaintiff's evidence was that in around 1982, the daughter had wanted the family to move to better accommodations in Mei Foo Sun Chuen rather than to live in the Ki Lung Street premises which the Plaintiff described as "dirty". Accordingly, the daughter, who was working then, suggested to the Plaintiff and Defendant to purchase a flat in Mei Foo Sun Chuen. The Plaintiff then suggested that the daughter and the Defendant use their names for the purchase and to leave the name of the Plaintiff out of it. The Plaintiff gave evidence that initially the Defendant was not in favour of purchasing a flat in Mei Foo Sun Chuen as he thought the prices in Mei Foo were too high, but that he preferred the area of Castle Peak Road. Despite that, however, the daughter and the Defendant did jointly enter a Sale and Purchase Agreement for the purchase of the Flat 19B. According to the Plaintiff, the daughter and the Defendant each forked out HK$30,000.00 for the downpayment. After paying the downpayment, the daughter had second thoughts about the matter and undertook to pay the mortgage for this flat on her own. With the Defendant's consent the property was put into the daughter's sole name and the Defendant's name removed. The Plaintiff did not know if the daughter repaid to the Defendant his contribution to the downpayment for this flat but in any event the Defendant did live there - so did the whole family - for about a year.

10. Some time in 1983, the daughter decided to get married. She found a buyer for the flat but instead of selling the flat to the buyer directly the daughter sold the flat to the Plaintiff and the Defendant in their joint names (Sale and purchase Agreement between daughter and Plaintiff and Defendant dated 6th June 1983) for them to on-sell to the buyer (Sale and Purchase Agreement between Plaintiff and Defendant and ultimate buyer dated 8th June 1983) enabling the Plaintiff and Defendant to make a profit of HK$80,000.00. This 'generosity' of the daughter was explained by the Plaintiff in her evidence as being due to the fact that the daughter was marrying into a rich family and had wanted the Plaintiff and Defendant to utilise the HK$80,000.00 profit for a downpayment for the purchase of a smaller flat in the Mei Foo area so that the daughter could gain 'face'.

11. Accordingly, using the HK$80,000.00 profit, the Glee Path premises was purchased by the Plaintiff and the Defendant in their joint names as joint tenants. They lived there for about 2 months.

12. The Glee Path premises was then sold at a small profit (of HK$25,000.00) and Flat 12C was purchased - again in the joint names of the Plaintiff and Defendant as joint tenants. They moved into Flat 12C and made it their home.

13. Towards the end of 1985 or early 1986, the Flat 12C was sold. This sale generated a profit of some HK$190,000.00 and with this profit and the proceeds of sale, the Plaintiff and Defendant bought Flat 6A, A mortgage of HK$200,000.00 was obtained from the Hang Seng Finance and the parties made that their home until their relationship ended in 1993.

14. It was the Plaintiff's evidence that the Defendant did not have a brain for property investment but that she always kept her eyes open for a 'good buy' in the property market especially in the Mei Foo area. It was all through her own efforts each time they purchased a new home selling the one they were living in and thereby making a profit from the sale which was ploughed back into the new property. Moreover according to the Plaintiff, the Defendant was too busy in his business and his work at the construction site so that he left all the 'property investment' to her to handle.

15. She also gave evidence that the responsibility for the mortgage payments fall on the Defendant but there were times when he did not pay or was not in Hong Kong. when that happened she would make the payment herself. However she was not able to say how much she had paid.

16. The Plaintiff also gave evidence that in 1985. The Defendant was carrying on his machinery business in rented factory premises and had to endure rent increases every 2 years. In June 1985 she came to know that the landlord of the Ki Lung Street premises where the Defendant was principal tenant wanted to sell those premises. She seized upon the chance of persuading the landlord to sell those premises to her at a price which was below market. She then found a buyer for the Ki Lung Street premises and quickly realised a profit of HK$90,000.00 selling as a confirmor. The sale of the Ki Lung Street premises by the landlord was to the Plaintiff in her sole name, the Defendant was not a party thereto. Completion took place on 27th August 1985.

17. After making this quick profit of HK$90,000.00 she suggested to the Defendant to purchase a premises for his business so that he need not suffer rent increases every 2 years. As a result Workshop 5A was purchased. HK$30,000.00 of the HK$90,000.00 profit made by the Plaintiff from the sale of the Ki Lung Street premises was used as downpayment. The Plaintiff's evidence was that because she paid the downpayment for Workshop 5A it was put in the joint name of the Plaintiff and the Defendant as joint tenants. After she had paid the downpayment, the Defendant was responsible for paying off the mortgage. The total purchase price of Workshop 5A was HK$132,000.00.

The Defendant's evidence

18. The Defendant had filed two affirmations in these proceedings.

19. The Defendant gave evidence and said that after he started to co-habit with the Plaintiff, the Plaintiff took care of the children, did the housework and cooked for him. According to him the Plaintiff did not engage in gainful employment except for 9 months when she did baby sitting at home when he was facing difficult times in his business.

20. As for the initial purchase of the Flat 19B, he gave evidence that he and the daughter each contributed HK$30,000.00 for the downpayment. The balance was by mortgage and although the mortgage was taken out in the daughter's name, he was also responsible with the daughter for the mortgage repayments. Later when the daughter wanted to get married and withdraw her name for the property, he added in the Plaintiff's name. When asked why he had added in the Plaintiff's name, he gave 2 reasons for so doing. Firstly he felt that the mortgage sum of HK$400,000.00 was a big burden and he did not want to be solely responsible. Secondly he said since he was working at a construction site and could meet with a fatal accident doing the work he was engaged in, he was advised by his solicitors that if the Plaintiff's name was added as a joint tenant, she would be entitled to the property if something happened to him. He added that he did not intend for the Plaintiff to get half share of the interest in the property.

21. He also said in evidence that apart from the advice given to him by the solicitor as to the effect of a joint tenancy, there was no express argeements between him and the Plaintiff as to how each of the property purchased should be divided between them.

22. He said that for each of the property purchased, he was the person paying the mortgage payments and that the Plaintiff did not contribute to either the downpayment or the mortgage re-payments. He would raise the money either by borrowing from friends or from the bank. He also agreed that each time a property was sold and another flat purchased, the proceeds of sale would be used to finance the new purchase.

23. He said in evidence that in 1985 the landlord of the Ki Lung Street premises had asked him, as the principal tenant, for the premises back. He said the landlord did not want the premises back for the landlord's use but had wanted cash. As he was busy he entrusted the matter to the Plaintiff to handle. A buyer was found and the Plaintiff met with the landlord and the buyer. An arrangement was reached whereby the landlord sold the premises to the Plaintiff who on-sold it to the buyer thereby generating a profit of HK90,000.00 for the Plaintiff which was kept by the Plaintiff.

24. The Defendant also gave evidence that in 1985 as his factory business was doing well, he was able to pay HK$30,000.00 downpayment which he obtained from his business account for the purchase of Workshop 5A. He paid the downpayment and the balance of the purchase price was paid by a mortgage loan obtained from the bank. The mortgage repayments for this was paid off by him. When asked why Workshop 5A was also put into the joint names of himself and the Plaintiff, the Defendant answered saying that the Plaintiff had insisted on adding her name and that she had followed him closely when she knew he was buying a factory therefore her name was added. He said it was not the case that he was willing to let her sign.

25. In cross examination the Defendant agreed that during financially difficult times, the Plaintiff had worked as a baby sitter to help out the family and the moneys earned by the Plaintiff was used for household expenses. He further agreed that when each of the 4 Mei Foo premises were initially bought the Plaintiff took charge of the decoration of these premises and part of the decoration expenses was paid by the Plaintiff from her own pocket.

26. He further agreed that because he was busy and had no time to deal with buying and selling of properties, he left all the matters relating to buying and selling properties and their decorations to the Plaintiff. He only went along to the solicitor's office to sign.

27. The Defendant did, however, concede in cross examination that for 5 or 6 months in 1992 or 1993, when he was away from Hong Kong, the Plaintiff did make the mortgage repayments in his absence.

28. In answer to questions from the Court, the Defendant said that at the time of acquisition of Flat 6A it was not his intention to share Flat 6A with the Plaintiff at a half share each. What was in his mind was that the property was his as long as he lived but when he died the property would go to the Plaintiff, not at that time but in the future. However this intention of his was, according to the Defendant, not told to the Plaintiff face to face. The Defendant also said that he did not say anything to the Plaintiff as to what would happen to the flat if they should stop co-habiting.

29. What was stated by the Defendant in the latter half of paragraph 5 and in paragraph 9 of the Defendant's 1st Affirmation not only was it not repeated by him in his evidence in the witness box but was in fact contradicted by the oral evidence he gave. I can therefore place no reliance whatsoever on the matters stated in those parts of his affirmation.

Findings of Facts

30. Having heard all the evidence in this case, I cannot help but feel that, perhaps due to the acrimony between the parties, both tended to exaggerate in their evidence - marginally more so by the Defendant.

31. From all the evidence presented in this Court, I make the following findings of fact:-

Common Intention

32. As already stated above, it is common grounds between the parties that there were never any express agreement or arrangement as to how the disputed properties were to be divided between them. This is true also of the earlier properties purchased in the parties joint names and used by the parties as their home at one time or another. Neither was there any declaration in the documents of title as to share.

33. I must therefore look at the conduct of the parties to see if I can infer from their conduct what was the common intention of the parties in relation to the disputed properties. The first question I have to ask is what conduct can I look at to infer such common intention.

34. In the case of Burns v Burns [1984] 1 Ch. 317, the judgment of the Court of Appeal was to the effect that since the Plaintiff in that case had not made a substantial financial contribution to the acquisition of the house, the court could not impute a common intention that she should acquire a beneficial interest in it; that the Plaintiff's contribution to the welfare of the family by performing the domestic duties of the household and bringing up the children were not factors which could be taken into account in determining whether or not she had acquired a beneficial interest in the house.

35. Then again the words of Lord Bridge of Harwich in Lloyds Bank Plc v Rosset [1990] 2 WLR 867 at 877 makes the matter crystal clear :-

36. The first observation I make in the present case is that the two disputed properties were acquired in the joint names of the Plaintiff and the Defendant, unlike the case of Burns v Burns where the home was acquired only in the name of Mr. Burns and in the case of Lloyds Bank Plc v Rosset where the acquisition of the home was in Mr. Rosset's sole name.

37. Where the property is in joint names, the Court must still look to find the common intention of the parties. The authority for this proposition is to be found in the case of Hon Po Sun v Lau Ngai [1995] 1 HKC 556.

38. In the present case, from the findings of facts made above, it cannot be said that the Plaintiff did not make any substantial financial contribution to either of the two disputed properties.

39. It follows from my findings that in the case of Flat 6A, the Plaintiff's financial contribution can be traced back to the initial HK$80,000.00 profit made by the Plaintiff and Defendant jointly though the grace of their daughter who allowed them to jointly earn the profit from the sale of Flat 19B. This profit went into the Glee Path premises and from then onwards the subsequent profits made from the sale of the Glee Path premises and from the sale of Flat 12C is attributable solely to the Plaintiff's efforts. These profits - in particular that from the sale of Flat 12C amounting to some HK$190,000.00 were used to finance in part Flat 6A.

40. I therefore come to the conclusion, firstly, that the Plaintiff did make substantial financial contributions in the acquisition of Flat 6A. Secondly, that Flat 6A was put in the joint names of the Plaintiff and the Defendant. Thirdly, the fact that the Defendant had never conveyed across to the Plaintiff that he did not intend for her to have a present half share of the property but intended that if he should die she should inherit the premises. From these three factors I can and do infer that the common intention of the parties was that the Plaintiff should have a share in Flat 6A.

Detriment

41. Put another way, the cumulative effect of these three factors was such that the Plaintiff must have been led to believe that she was getting a share of Flat 6A - as indeed also the earlier two properties in Mei Foo which had been purchased in their joint names. It was under such a believe, no doubt, that the Plaintiff went around looking for 'good buys' thereby adding to the profits with each successive sale. This I find to be the kind of conduct described by Nourse L.J. in Grant v Edwards [1986] 1 Ch. 638 at 648 in these words:

"... it must be conduct on which the woman could not reasonably have been expected to embark unless she was to have an interest in the house."

42. In adopting this kind of conduct the Plaintiff is seen to act to her detriment on the faith of the common intention.

43. In so far as Workshop 5A is concerned, having found that the Plaintiff had contributed HK$30,000.00 as downpayment for its purchase and that being the reason why Workshop 5A was put in the joint names of the Plaintiff and Defendant, I draw the inference from these two factors that the common intention of the parties must have been that Plaintiff was to have a share of the interest in Workshop 5A.

Size of Interest

44. While once it was thought that property in joint names the share of it would always be in equal shares, it is clear now since the decision of Lord Denning M.R. in Bernard v Josephs [1982] 1 Ch. 391 at 397-8 that in that situation, and where there is no declaration of trust as to the shares, the shares are to be ascertained by reference to their respective contribution in cash, in kind or in services - up to the time of separation.

45. I therefore turn to the question what is the size of the Plaintiff's interests in both the disputed properties.

46. No difficulty arises in so far as Workshop 5A is concerned. It was the Defendant's place of business. The Plaintiff's contribution was the HK$30,000.00 downpayment and possibly several months of mortgage repayments when the Defendant was away from Hong Kong in about 1992. The purchase price for Workshop 5A at its acquisition by the parties was HK$132,000.00.

47. Doing the best I can mathematically on these figures I find that the Plaintiff must be entitled to a quarter share of Workshop 5A. This is based on her financial contribution to its purchase.

48. More difficult is the question of Flat 6A. As already indicated, the Plaintiff's contribution comes by way of the profits generated through her efforts in the sale of the earlier premises used by the parties as their home. Moreover I am entitled, for this purpose, to take into account her contributions as the woman of this household doing the housework, decorating the home each time new premises were purchased, bringing up the children, cooking not only for the family but also for the paying lodgers. When all these matters are taken into account, there should be little distinction between the Plaintiff's contribution and that of the Defendant, albeit that the Defendant bore the brunt of the mortgage repayments.

49. In the circumstances of this case I am of the view that the Plaintiff's contribution in cash, in kind or in services up to the time the parties ended their relationship in October 1993, entitles her to a half share of Flat 6A.

50. In the situation that the parties find themselves now, the only feasible thing to do in respect of the two disputed properties is to make an order for sale in respect of both. I therefore make an Order in terms of prayer 1 and 2 of the Originating Summons. The proceeds of sale will be distributed to the parties in the shares I have found above after redeeming their respective mortgages and/or legal charges and after deducting the costs of such sales.

51. I will, however, order a postponement of such sale (in respect of both properties) for 4 months so as to allow the Defendant a chance to purchase from the Plaintiff her share of either or both of these properties if he so wishes and if the parties can come to agreement as to price.

52. Needless to say, by reason of what I have found above, the Defendant's counterclaim is dismissed.

Consequential Order

53. In so far as prayer 4 of the Originating Summons is concerned I order the Defendant to prepare and serve on the Plaintiff within one month of this judgment a full set of accounts from October 1993 to date relating to the rent and/or any other income derived by the Defendant in relation to Flat 6A and Workshop 5A. Hopefully, when such accounts are available the parties' legal advisers will be able to work out the Plaintiff's entitlement thereto based on the Plaintiff's share in these premises as found by me above. However, should the parties fail to agree in this or any other matter relating to these proceedings I give the parties liberty to apply for further directions.

Costs

54. I see no reason why costs should not follow the event in this case and I accordingly make an Order Nisi for costs of the claim and the counterclaim to the Plaintiff to be taxed if not agreed.