IP MAN SHAN, HENRY v. CHING HING CONSTRUCTION CO. LTD.

HCA 3675/1985

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3675 OF 1985

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J U D G M E N T

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Parties and background

1. The late Ip Ching Ping ["ICP"] and his wife Madam Wong Miu Sim ["WMS"] were the founders of Ching Hing Construction Company Limited ["Ching Hing"]. Ching Hing was a construction contractor that undertook public works for the Government since 1950's. ICP and WMS were also property developers. Vacant lots were acquired and buildings were erected thereon. This case concerns one of those properties. It is a large family residence built at Lot No. 1940 in Survey District No. 2 at Fei Ngo Shan ["the Property"]. The land was about 50,000 square feet. It was acquired by auction in November 1957 in the name of Ip Man Shan, Henry ["Henry"]. Henry was the eldest son of ICP and WMS. There is no dispute that Henry did not pay the premium for the acquisition of the Property. At that time he had just returned from England after he graduated. The premium in the sum of $121,000 was paid by a cheque issued by Ching Hing. The evidence showed that ICP deposited $121,000 into Ching Hing's bank account on the same day when Ching Hing issued the cheque.

2. Apart from Henry, ICP and WMS had another son and five daughters. They are Sammy (who passed away in 1997), Loretta, Roseanna, Maimie, Marion and Henrietta. The parents and Henry passed away in the 1980's. WMS died on 2 May 1981, ICP on 12 April 1983 and Henry on 29 August 1988. Roseanna, Marion and Henrietta are the executrices of the estate of ICP ["the Estate"]. Roseanna and Marion are also the executrices of the estate of WMS.

3. The Special Conditions attached to the Memorandum of Agreement executed at the auction provided that a building had to be built on the lot within 24 months from date of sale and at least a sum of $175,000 (excluding site formation, foundations, access roads and other ancillary works) had to be expended thereon. Special Condition 25 provided,

"The Purchaser shall not be allowed to erect any buildings on the lot except one private dwelling house of not more than two storeys with outbuildings proper thereto. The new lot and all structures thereon shall be used for private residential purposes only. No apartment development will be permitted."

4. After the acquisition of the land, it took some time before the building plans were approved. It is not disputed that Ching Hing paid for all the construction costs of the building and related expenses. The total amount incurred was $1,014,565.71. The building was recorded in the books of Ching Hing as its fixed asset although the land cost was apparently not included. Construction was completed in 1965 and occupation permit was issued on 22 February 1965.

5. On 23 May 1958, Henry executed a Power of Attorney ["the Power of Attorney"] in favour of his mother WMS in respect of the Property. By that document, WMS was given very wide power in dealing with the Property, including the sale of the Property as well as letting thereof. After the construction of the building on the land, on 28 June 1965, Henry granted a lease of the Property to Ching Hing ["the Lease"] "for the residue now to come of the term of years under which the demised premises are or shall be held from the Crown less the last day thereof" at a monthly rent of $500. The Lease was executed by WMS as Henry's attorney.

6. The Lease contained the following covenant ["the Covenant"] by Henry,

"At the appropriate time before the expiration of the term of year under which the demised premises are or shall be held from the Crown the Lessor shall at his own expense apply to the Government for a renewal thereof and take all necessary step to acquire such renewal and will then offer to the Lessee ... a renewal of the term hereby created at the expense of the Lease for the remaining period of the original term and for the term of the new renewal granted by Government less the last day thereof at such rent as shall be mutually agreed upon between the parties hereto and on the same terms conditions covenants and provisos as are herein contained so far as they shall then be applicable."

7. Under the Memorandum of Agreement dated 14 November 1957, the term of the lease from the Government was "75 years from 1 July 1898 with right of renewal for a further term of 24 years less the last three days." The original term expired on 30 June 1973. However, the Property being situated in the New Territories and subject to the operation of the New Territories (Renewable Crown Leases) Ordinance Cap. 152, the right of renewal was deemed to have been exercised. Further, by reason of the New Territories Leases (Extension) Ordinance Cap. 150, vis-a-vis the Government, the leasehold interest was further extended to 30 June 2047.

8. As shown in the model produced as Exhibit P-3 and the building plans, the whole building could be divided into four self-contained units. It is accepted by Mr Chan SC, leading counsel for Arnold Ip, that ICP intended the Property to be occupied by members of his family. ICP and WMS resided in one of the units from 1965 to 1968 and the daughters also lived at the Property during that period when they were in Hong Kong. After their parents had moved to another residence, amongst the daughters, only Marion lived there until around 1971. Sammy also lived there since 1965 until he passed away in 1997. His widow lived there until March 2000. Henry and his family had never lived there.

9. However, even after he had moved to live elsewhere, ICP visited the Property on a daily basis. He had moved away in 1968 because he had a stroke that year and it would be more convenient in terms of medical care to reside at the Hong Kong side. His daily routine included a visit of the Property after breakfast to do some exercise. A special passageway and a therapy pool were constructed within the Property to facilitate that.

10. Arnold Ip ["Arnold"], one of the protagonists in this case, is the eldest son of Henry. Henry married Cecilia Chan ["Cecilia"] on 18 May 1959. They divorced in March 1980. In accordance with the last Will of Henry, the executors and trustees of Henry's last Will assented the Property to Arnold.

11. Although Henry was the plaintiff (and also a defendant by counterclaim) in High Court Action No. A3675 of 1985, his estate dropped out of the picture eventually. On 10 February 1997, his estate discontinued the action by a payment into court on account of costs pursuant to an order made on 23 January 1997. In respect of the Counterclaim in that action, his estate consented to an order of 6 January 2001 that the estate would abide by any order or judgment that the court would make in the proceedings.

12. Another party to the actions is the Estate, or more precisely the executrices of the Estate. Although they remain parties to the action on the record, for practical purposes, the outcome of the actions may not affect them very much except on question of costs. This is because on 19 June 2002, they entered into an agreement with Ching Hing to assign to it all beneficial rights and interests in the Property and claims in connection with or arising out of these two actions. Ching Hing and the Estate were therefore represented by the same team of lawyers at the trial. However, Mr Yu SC, leading counsel for the Estate and Ching Hing urged me to grant declaratory relief in favour of Ching Hing and the Estate in accordance with my findings as to their respective interest, if any, in the Property. The case of the Estate is that ICP paid for the Property and Henry held the same on trust for ICP. Due to the fact that Ching Hing was reimbursed by ICP immediately regarding the payment of premium in November 1957, the Estate was able to argue that ICP was the payer of the purchase price in respect of the land. I shall have to come back to the evidence on this payment later. However, I have not heard any suggestion made on behalf of the Estate at the trial that ICP paid for the construction costs. In fact, the evidence showed clearly that the construction costs were paid for by Ching Hing.

13. The other protagonist in these actions at the commencement of the trial before me was Ching Hing. Ching Hing is still very much a family company and its shareholders, as far as I am told, are the five sisters, Arnold, Cecilia, Desmond Ip (Arnold's brother), the executrices of the Estate, the estate of Sammy and the estate of Ip Man Kong (a relative of the Ip family).

14. Ching Hing's primary case is that the Property was held by Henry as trustee for Ching Hing only and he did not have any beneficial interest personally. As successor in title of Henry by way of gift, Arnold is in the same position. On this basis, Ching Hing demanded Arnold to transfer the legal title over the Property to Ching Hing.

15. Alternatively, Ching Hing contended that Henry and Arnold are bound by the Covenant to offer a renewal of the Lease up to 29 June 2047 to Ching Hing. Ching Hing also averred that the tenancy was protected under Part IV of the Landlord and Tenant (Consolidation) Ordinance Cap. 7.

16. On the other hand, Arnold's position is that the Property was a gift by ICP (or alternatively by ICP and WMS) to Henry. Hence, Henry was the beneficial owner of the Property. The Lease expired on 29 June 1973 and thereafter, Ching Hing occupied the Property as a tenant at will or as a monthly periodic tenant. The Covenant was void for uncertainty. By a letter dated 11 March 1985, Henry gave notice to Ching Hing to terminate the latter's right of occupation on 30 April 1985. Arnold also advanced an alternative plea that the Lease as renewed expired on 26 June 1997. It is contended that the option to renew can only be exercised once and not more than once and it was spent. On these bases, Arnold seeks, inter alia, possession of the Property and mense profits.

17. The findings set out below up to Paragraph 63 are based on the documentary evidence placed before me as well as the oral evidence of the daughters. Given the approach adopted by Mr Chan in cross-examining them, I do not think the factual findings set out hereinbelow (unless otherwise stated) are controversial. In any event, I have fully considered Mr Chan's submissions on the credibility of the daughters and taken the same into account. I do not find sufficient reasons to question the honesty of these witnesses. In respect of controversial matters, I will expand on my reasons for accepting their evidence when I discuss the same.

ICP and WMS: the early days

18. ICP was born in Canton in mainland China on 26 December 1903. His name was originally Ip Kwong Lam. He came from a well off family in Canton and he received good education. He studied in Ellis Kadoorie School in Canton and came to Hong Kong for secondary education. He was admitted to Queen's College in February 1922 and finished with matriculation in November 1924. According to the Leaving Certificate signed by the headmaster of Queen's College, he was a very good student. He passed the Junior Local Examination in 1923 and the Matriculation Examination in 1924. He was unable to study in university because, unfortunately, due to some mishaps, there was a change in the family fortune and university education could not be afforded. He worked as a clerk in the Public Works Department in Hong Kong between 1925 and 1933.

19. At the same time, ICP sought further education by taking correspondence courses related to construction and civil engineering. He managed to attain certain qualifications in that field although I have not been told of their precise nature. He also placed great importance in proficiency in the English language and the evidence before me suggested that he had a good command of that language.

20. ICP married WMS in January 1931. She was ten years younger than ICP and she was 18 when they married. WMS did not receive so much education as ICP. She got a few years' education from her own mother who was a teacher of the traditional mode of Chinese education. Her father died very early and she and her mother had to live with different relatives in different periods. Hence, WMS had to work at a very young age. However, she was certainly a very capable person and had contributed substantially to the family wealth. She made money by knitting sweaters and selling soft drinks. Later she acted as property agent. It seems that she was able to accumulate some capital by profits derived from property transactions in which she acted as agent. From the books and accounts kept by her, it is also clear to me that she was a very careful and meticulous person.

21. Three of the children were born between 1931 and 1935 whilst the other four were born between 1941 and 1947. In view of the family history, it is fair to say that ICP and WMS were self-made entrepreneurs who were able to excel in their business by their dedication, hard works and perseverance. There had been incidents in which they suffered losses due to the artifices of others and hard lessons were learnt. There is no evidence before me as to what was ICP's occupation between 1933 and 1941. It is probable that after he got his engineering qualification, he started to be engaged in the construction industry. It is clear that even before the incorporation of Ching Hing as a limited company in 1954, ICP operated a firm by the same name as a Government contractor. This is evidenced by a statement to that effect by ICP in his application for naturalization in 1953. Marion said in her evidence that Ching Hing as a firm started to operate in 1948. But there were entries in cash journals kept by WMS referring to Ching Hing earlier than 1948, e.g. see Exhibit P-10 at p. 4 an entry of expenses on 16 September 1947; p. 6 entries of expenses on 14, 23, 28 October 1947; p. 8 entries on 29 November 1947. I do not know precisely when ICP started his own business. However, by 1941, ICP must have had sufficient experience in construction works to inspire him to undertake his own property development.

22. With their joint savings, ICP and WMS started to engage in real estate development before the Second World War. The earliest transaction that the parties have been able to identify was the acquisition of Kowloon Inland Lot No. 4300 by ICP together with a relative called Ho Tso Fu on 10 April 1941. Hence, within 10 years of their marriage, ICP and WMS apparently accumulated sufficient savings to start their property development ventures. This lot was subsequently carved into two sections and became Nos. 158 and 160 Prince Edward Road West respectively. According to the plan attached to the Government Lease, that lot was sold by Government as a vacant lot.

23. In September 1941, ICP successfully bid for New Kowloon Inland Lot No. 2874. That was another vacant lot and the Conditions of Sale required the purchaser to build on the land. Again, it was carved into two sections and became Nos. 9 and 11 Fat Tseung Street respectively. No. 11 Fat Tseung Street was sold to Ho Tso Fu in 1951.

24. In December 1941, the Japanese invaded Hong Kong and occupied the territory until August 1945. ICP and WMS remained in Hong Kong. Kowloon Inland Lot No. 4300 was developed into two buildings. The buildings were completed during Japanese occupation and according to Exhibit P-1, the Ip's family lived at one storey at No. 160 Prince Edward Road since 1944 if not before. The other storeys were let out for rent. No. 158 Prince Edward Road was sold in May 1948.

25. During the last year of Japanese occupation, ICP and WMS acquired other landed properties. In October 1944, New Kowloon Inland Lot No. 1222 (Nos. 1154, 1156, 1158 and 1160 Canton Road) was acquired in the name of WMS. In February 1945, ICP acquired New Kowloon Inland Lot No. 70 (Nos. 370 and 372 Tai Nan Street). In March 1945, WMS acquired Sub-section 1 of Section D of Inland Lot No. 199 (No. 83 Queen's Road East). From the assignments regarding these transactions, it would appear that there were already buildings erected on these properties when the parents acquired them. According to the records in the cash journals kept by WMS, these properties were mainly acquired for rental income (see for example, the income entries in Exhibit P-10).

26. After the War, other properties were acquired and rental incomes derived therefrom were recorded in the Cash Journals kept by WMS. I do not think it is necessary for me to go through each and every property in this judgment. Suffice to say that by 1957, ICP and WMS had accumulated considerable wealth and were active as property developer.

27. The residence at No. 160 Prince Edward Road was a bit crowded, especially when the children grew older. According to the evidence of Marion, the unit was about 1,500 square feet. There were three bedrooms and apart from the family, other relatives also lived together in this unit. The 5 daughters had to sleep in one of the bedroom. Marion described themselves as sleeping like sardines. The 2 sons had to sleep in a space between a bedroom and the bathroom.

28. Hence, a piece of land was acquired at Tai Po Road, viz. New Kowloon Inland Lot No. 3512. A building called Park Mansion was erected thereon and the family occupied the Ground Floor (converting two units there into one single residence). The whole lot was about 20,000 square feet and there were a very big garden, a farm where animals were kept and a tennis court. The internal area of the residence was about 4,000 to 4,500 square feet. The family actually moved to live there after the building was completed. Although the Memorandum of Agreement regarding this lot is not in the bundles, the cash journals kept by WMS suggested that the lot was acquired in about February 1948 and construction works started later (see the following entries at Exhibit P-10: 16 February 1948 at p. 13, 12 February 1948 at p. 14; 29 October 1948 at p. 32; 26 March 1949 at p. 42; 21 February 1950 at p. 59; 2, 7, 17 March 1950 at p. 60; 7 November 1950 at p. 64; 16 and 27 August 1951 at p. 72). According to an entry of 16 August 1951, the electricity deposit for the unit at Tai Po Road was paid on 16 August 1951. Subsequent to that date, there were payments of electricity charges for Tai Po Road flat according to the journal entries. It seems probable that it was around that date, the family moved into Park Mansion although in Exhibit P-1, it was suggested that they moved there in 1950. Like the building in Prince Edward Road, the upper floors of Park Mansion were leased out for rent.

29. In the course of construction of Park Mansion, there was an accident as a result of which ICP suffered head injuries. After he recovered, ICP had difficulties in walking with his left leg. Apart from that, he was quite healthy until he suffered a stroke in 1968. When they first moved in, Park Mansion was an ideal home. It was spacious and the building commanded a panoramic view. In those days, the neighbourhood was very much like the countryside. There was a village at the foot of the hill and it was green everywhere. However, a few years later, the environment changed. Squatters at the foot of the hill started to spread uphill. It is a matter of common knowledge and judicial notice can be taken of the disaster caused by the fire at Shek Kip Mei squatters area in 1953. As a result resettlement estates were built by the Government. Public housing were built in an area quite near to Park Mansion. Further, with the influx of illegal immigrants in the 1950's, there were security problems. Burglary had occurred at the Ip's residence and the family was alarmed.

The acquisition of Fei Ngo Shan site and the construction of the family mansion

30. On a day in 1957, ICP and WMS brought their children together with some relatives to visit a vacant site at Fei Ngo Shan. It is not clear whether the sons were there because according to Exhibit P-1, they were studying in England in that year. However, the daughters were there and according to their recollection, it was a very happy occasion. The parents showed the site to everybody and proposed to build a new family residence there. That was before they actually acquired the lot but the parents were apparently quite excited about the idea of building a large house there. Fei Ngo Shan was familiar to ICP as he had a quarry at Clear Water Bay Road in the vicinity. Further, he passed through the area whenever he went swimming, a sport he enjoyed very much (he continued to swim daily even after he had a stroke in 1968), at the Clear Water Bay. Marion said the place was like a paradise, very clean and very clear. It was like living in the countryside.

31. The auction of the lot took place on 14 November 1957. ICP attended the auction together with Henry who had graduated in England and just come back to Hong Kong. As mentioned in Paragraph 1, the Property was successfully bid for in the name of Henry. The original Memorandum of Agreement dated 14 November 1957 (the root of title to the Property) and receipts for payment of premium and road improvement works and other documents relating to the Property listed in Exhibit P-76 were kept in a safe of the parents at the office of Ching Hing.

32. At first, an architect called David Wong was engaged to prepare for the drawings for the building to be erected at the Property. The plan as drawn provided one bedroom and one study for each unmarried daughter and son. Each would also have his/her own bathroom. That design was rejected by the Government as being not in compliance with Condition 25 set out in Paragraph 3 above. A number of extensions for compliance with the building covenants were obtained and Ching Hing paid for the penalties relating thereto. The internal memorandum of the Government showed that the design was regarded by the Government as too much like an apartment. In about 1963, another set of plans was submitted by another architect firm Spence Robinson Prescott & Thornburrow and approval was obtained from the Government. It was based on those plans that the building was erected on the Property and Occupation Permit was issued in February 1965.

33. Ching Hing was involved in respect of the Property from the very beginning. The premium was paid by a cheque of Ching Hing. According to the ledgers of Ching Hing, in particular exhibit P-36 (the general ledger for 1958 to 1959), the following expenditure in connection with the Property were booked as Ching Hing's expenses in 1958. On 15 August 1958, a sum of $100.00 was paid by Ching Hing for a model of "Fei Ngo Shan" (see p. 3 of ledger 196 in P-36). That model, of course, could not be the model produced to the court as exhibit P-3 at the trial because in 1958, the plans for that building had not yet been drawn. However, this entry was significant in showing that Ching Hing's involvement with the lot at Fei Ngo Shan continued after its cheque was used to pay for the premium. Further expenses in term of transportation costs and material used for site formation or other preliminary construction works from November 1958 were booked in P-36, e.g. ledger 131 at p. 3-6; ledger 149 p. 1; ledger 156 p. 1; ledger 180C p. 1; ledger 180E p. 1). Clause 12 of the Special Conditions in the Memorandum of Agreement of 14 November 1957 obliged the purchaser of the lot to form the specified areas in the lot to such levels as the District Commissioner, New Territories may require within 12 months.

34. I have alluded to the difficulties in respect of securing Government's approval to the design of the building. By reason thereof, the construction works at the lot were delayed. As a result, the building covenant in the Memorandum of Agreement was not complied with within the time prescribed and penalties were paid by Ching Hing to the Government for extensions of time. The accounts of Ching Hing (some of which are reproduced in Bundle G3 of the trial bundles) showed that construction works regarding the building were mainly undertaken in 1963 and 1964.

35. Loretta got married in December 1957 and she lived on the Hong Kong side after that. As mentioned, Henry married Cecilia in May 1959. He also started his own business Henry Engineering & Construction Company on 1 June 1959. Roseanna and Maimie went to study in England in September 1959, Marion went in September 1961. The youngest daughter Henrietta also went abroad in September 1963.

36. Henry and Cecilia did not live with ICP and WMS after their marriage. At first they lived at Estoril Court in Garden Road. Later, they moved to a unit in Henry's Mansion at Waterloo Road, a building erected by Ching Hing. Afterwards, in about 1962 or 1963, they moved to live in a unit at the second floor of Park Mansion. Arnold was born on 4 October 1962. Henry's family later moved to a unit in Brewin Court in about 1965 or 1966. In about 1972, they moved to Unit E 8 at Granville House, Magazine Gap Road.

37. In the summer, the daughters would come back for holidays and when they came back in the summer of 1965, the family residence had been moved to the Property. Sammy completed his study and came back to Hong Kong in the end of 1965 or early 1966. He lived at Unit C of the Property until his death. ICP and WMS mainly occupied Unit B of the Property. Roseanna came back for good in 1967 and she lived with the parents in Unit B until she married in 1969. The daughters also resided at the Property when they were in Hong Kong, either at Units B, C or D.

Personalities of ICP and WMS and their relationship with the children

38. According to the evidence, ICP was a man of a strong character. He was quite strict towards his children and played the role of a disciplinarian. He worked very hard and in turn expected others to be diligent. He was very devoted towards his family and provided generously for his children. He was highly intelligent and remained alert and having a clear mind up to his demise. There were a number of incidents which show clearly that ICP was able to form his independent judgment on matters and up to the time of his death, he was not susceptible to influence from others. The wordings and contents of his last will are good illustrations. Despite the suggestions of the daughters and his lawyer to the contrary, he insisted on disinheriting the sons and included certain remarks against them in his last will. His refusal to execute documents presented to him by Henry in 1981 regarding the transfers of his shares was another example.

39. Mr Chan also emphasized that according to the evidence of the daughters, ICP was a decisive man and his words were the law within the family. He was careful with signing documents because he had once had bad experience of being cheated in his younger days by virtue of his failure to read documents carefully.

40. ICP and WMS were always together. According to the evidence of Marion, ICP consulted WMS on everything. Roseanna said that they went to work together every day and they left the office together as well. After the stroke in 1968, ICP did not go to the office and WMS attended to the business of Ching Hing at the office every morning. However, she would come home to have lunch with ICP and attended the office again before going out to the sea with ICP. This shows that they were very close to each other and the sudden demise of WMS in 1981 must have been a severe blow to ICP.

41. WMS was a gentle person and she was very protective in respect of the family. She was a very shrewd business-woman and as mentioned, she contributed substantially in building up the family business and wealth. ICP must have relied on her greatly in respect of the accounting and financial aspects of the business. Not only was she responsible for the book-keeping of the accounts, ICP obviously left it to her to manage a large part of the family wealth. This was reflected by the fact that her estate was much bigger than the estate of ICP. According to the evidence of the daughters, WMS had all along strived to be fair in her overall treatment of the sons and daughters. She always told them that they could examine her books and they would find that she treated them equally. In this connection, notwithstanding the deterioration of the relationship between WMS and the two sons, apart from her jewellery and shares in Ching Hing, she basically left her estate to the 7 children in equal shares. Her Will was included in the Trial Bundles at p. G2178.

42. Mr Chan invited the court to examine the intention of the parents by reference to the circumstances in 1957 as distinct from that in the later years. He submitted that it was quite obvious in those days, the parents favoured sons. In this regard, Mr Chan relied on the distribution of the shareholdings of Ching Hing and the appointment of directorship, and the gifts made by the parents to Henry during his marriage and the arrangement for wedding banquet. He also referred to the mutual wills of the parents made in 1967 and the nominal salaries paid by Ching Hing to the children.

43. The daughters who were cross-examined by Mr Chan on this issue disagreed with this suggestion. In their eyes, the parents did not favour sons to daughters.

44. Objectively speaking, the sons were allotted larger number of shares in Ching Hing in the early days. It is not necessary for me to recite in details the history of allotment of shares of Ching Hing. They were conveniently summarized in a table at C191 of the Trial Bundles. Shortly after the incorporation of Ching Hing, as at 6 October 1954, ICP and WMS each held 40 shares in Ching Hing whilst Henry and Sammy were each given 30 shares. Loretta was given 10 shares. By November 1957, ICP and WMS each held 65 shares (each accounting for 28.26% of the entire shareholding in Ching Hing), Henry and Sammy each held 40 shares (accounting for 17.39%) and Loretta held 20 shares (8.69%). This has to be considered in the light of the age of the children. The three elder children were born in the 1930's whilst the four younger daughters were born in the 1940's. In 1957, the four younger daughters were still very young and had yet to go abroad for further education. Shares were allotted to these four daughters in April 1959. Between 1960 and 1965, shares were also allotted to Cecilia (held jointly with Henry) and Arnold. In 1965, the distribution of shareholdings were as follow,

ICP	75 shares (18.61%)
WMS	75 shares (18.61%)
Henry	44 shares (10.92%)
Henry & Cecilia jointly	22 shares (5.46%)
Arnold	10 shares (2.48%)
Loretta	22 shares (5.46%)
Sammy	66 shares (16.38%)
Roseanna	22 shares (5.46%)
Maimie	22 shares (5.46%)
Marion	22 shares (5.46%)
Herietta	22 shares (5.46%)
Ip Man Kong	1 share (0.24%)

45. A couple of points are to be noted from this distribution of shareholding of Ching Hing in 1965. Firstly, although ICP and WMS were running Ching Hing, their shareholding did not constitute a majority. Of course, one may say that it was unlikely that the children would disagree with their parents in those days in the affairs of Ching Hing. However, it has not been suggested at the trial that the children were holding the shares as nominees for the parents. Further, Ip Man Kong was not one of the children.

46. Secondly, Henry's shareholding, even adding those held by him jointly with Cecilia, only account for 16.38%. Sammy also held 16.38%. The five daughters, each held 5.46% and adding together, they constituted 27.3%. It cannot be suggested that the interest of Ching Hing was identical to that of Henry. Nor could it be suggested that the other children's interest in Ching Hing were insignificant.

47. Whilst it is correct to say that more shares were held by each of the two sons than each of the daughters, this must be considered against the background that the two sons received education pertaining to the construction industry whilst the daughters did not. Although the daughters, especially Loretta, did from time to time assist WMS at the office of Ching Hing, it is quite reasonable to infer that the parents in the 1960's expected the sons to play more significant roles in Ching Hing. This was probably the reason why the two sons were appointed as directors of Ching Hing after they finished their education (Henry in June 1959, Sammy in June 1967). The daughters were only appointed as directors in 1980's under very different circumstances.

48. The mutual wills of the parents executed in 1967 did provide for larger bequests to Henry and Sammy. They were named as executors and were to receive double the shares of the daughters. Hence, in term of testamentary intent, the parents did favour the two sons in the 1967 wills. But can one deduce from that a general favouritism towards the sons during their life time?

49. Regarding the wedding banquet arrangements and wedding gifts, I do not think one can attach too much weight on those matters. Mr Yu was able to demonstrate that the parents also spent a large sum in respect of Loretta's marriage in 1957 in Appendix 4 to his Closing Submissions. As Marion put it, it could be a matter of style or taste of the son or daughter involved. In the context of favouritism, the gift of a car upon graduation was of minimal significance in view of Loretta's evidence that each child got his/her own car.

50. Mr Chan is on stronger ground when he referred to the allotment of shares of Ching Hing to Arnold and Desmond. No allotment had been made in favour of the children of the daughters.

51. Mr Yu submitted that it was impossible to judge whether the parents favoured sons to daughters by focusing on a few individual events. According to the evidence, in 1957 the family was very harmonious and there was no jealousy amongst the children. Both Loretta and Marion gave evidence as to how Henry had been looking after the sisters when they were young. In a letter written by Henry on 13 January 1956 to the parents (at p. G72-1) when he was in London, he expressed how he looked forward to coming home and he mentioned about the sisters several times.

52. Even assuming the question of favouritism could be resolved by a court of law (which I doubt very much), it is not for me to adjudicate whether the parents had treated the children equally, whether throughout their life times or at any particular point in time. The crucial issue which I have to decide is whether the parents intended to make a gift of the Property to Henry. No doubt I must take into account of the evidence on the relationship between the parents and their children at the material time in resolving that issue. However, in my judgment, even taking all the aforesaid matters relied upon by Mr Chan into account, the alleged favouritism harboured by the parents towards the sons during 1957 to 1965 was only a very small factor in the scale. As pointed out by Mr Yu, the alleged favouritism, even if established, could not account for the making of a gift of the family estate to only one son (as opposed to both sons).

Deterioration of relationship between Henry and the parents

53. Sadly, the relationship between the parents and the two sons deteriorated. There is no dispute between Mr Yu and Mr Chan that after 1980, ICP became very angry with Henry. In Appendix G to his closing submissions, Mr Chan set out a series of events between 1980 and 1983 to highlight the point. The high watermark in the manifestation of ICP's displeasure with his sons must be the execution of his last will on 6 January 1982, a copy of which can be found at p. G2422 of the Trial Bundles. That has to be read with the judgment of Deputy Judge Cruden in the probate action in respect of the father's will. Certain words in Clause 7 of the will were eventually excised from the will admitted to probate. I would not repeat those excised words in this judgment but one can gather what those words were from the judgment of Deputy Judge Cruden. It would take a very angry father to include such a remark against his own sons in his will. In the light of the respective position adopted by the parties regarding these incidents in the present actions, I do not think it is necessary for me to set out the unpleasant incidents occurred between 1980 and 1983. I find as a fact that ICP was very angry with Henry and I have to take this into account in considering the weight to be attached to ICP's statutory declaration and statement made on 13 November 1981 and 15 March 1982 respectively and a draft declaration dated 14 October 1982, if they were admissible as evidence.

54. At the same time, those events also reflected that Henry had no qualm about antagonizing ICP on matters affecting his personal interest. Those events have to be examined against the background that ICP was a man of strong character and he had deep feeling for his wife. I only need to refer to a few examples. Shortly after the death of WMS, on 15 May 1981, Henry instructed the family lawyer Mr Gallant Ho to prepare a power of attorney giving Henry full power to deal with the assets of Ching Hing and asked ICP to execute the same in his favour. ICP refused to sign after Mr Ho explained the effect of the power of attorney to him. The reading of the will of WMS took place that afternoon and the sons learnt of WMS bequeathing all her shares in Ching Hing to the daughters. In the evening when the family was holding a traditional ceremony in memory of WMS called "yee chat (二七)" (literally meaning the second seventh day), Henry called for a directors' meeting of Ching Hing. At that meeting, he asked ICP to execute a minute for the transfer of all his shares in Ching Hing to the two sons. After consulting every daughter, ICP refused to sign. ICP was understandably very angry. Henry said if ICP did not sign the minute, he would not look after Ching Hing. On 23 May 1981, there was a board meeting of Ching Hing. ICP proposed the appointment of Roseanna to fill the vacancy in the board upon death of WMS and the appointment of Henrietta as an additional director. Henry opposed and Sammy abstained. ICP had to exercise his casting vote as chairman. Henry then resigned as director of Ching Hing.

55. In mid 1981, there was an occasion when ICP visited Henry at his new office. Roseanna and Marion were also there. Henry made a proposal to ICP in the presence of Roseanna regarding the redevelopment of the Property. Arnold disputed about what was actually said by Henry. When Roseanna gave evidence in the witness box, she said she could not remember the exact words used by Henry but the gist was that Henry asked ICP to give the Property to him for redevelopment. ICP immediately signaled to leave as soon as he heard this. Henry then said he would wait until ICP had passed away. Mr Chan challenged the credibility of Roseanna on this point by reference to her witness statements. In her first witness statement, Roseanna referred to this incident and said at that meeting Henry asked ICP to release him from the Lease. She corrected herself in her second statement. She explained that she was not even aware of the existence of the Lease at the time of that meeting and it was only afterwards when she looked into the documents at the request of ICP, she learnt about the Lease. She said what she put in her first witness statement was her own rationalization of what Henry meant at the meeting and in fact he did not mention about the Lease.

56. She repeated the same explanation in the witness box when she was cross-examined by Mr Chan. She emphasized that she might not recall distinctly the actual words used in the conversation but she remembered that she did not know about the Lease at the time of that meeting in Henry's office and Henry did not mention about the Lease. Mr Chan also made some criticism about the last sentence in Para. 16.2 of her second witness statement. Having heard the evidence of Roseanna and considered her evidence as a whole, I find that she was a truthful witness and I accept her explanation about the mistake in her first witness statement. As she herself put it in her evidence, she could remember what happened in an incident but she had problems in remembering what people said. A lot has happened between that incident at Henry's office and the preparation of her first witness statement and it is not surprising that her understanding of the case acquired subsequent to the meeting might have affected her in the preparation of the first witness statement. She was not very precise in expressing herself, certainly not as precise as a lawyer would be. She also appeared to me to be a very straightforward and spontaneous person. It is unlikely that she could lie in the witness box without being exposed.

57. I find as a fact that at the meeting at Henry's office, Henry did not mention about the Lease and Roseanna only found out about the Lease afterwards. Because Roseanna could not be sure of the words used by Henry, the court cannot tell whether Henry was asking ICP to give him the Property or only asking ICP to allow him to redevelop the Property for him. However, I find on the balance of probabilities that ICP took the request from Henry as an indication that Henry harboured some ill intention in respect of the Property. Hence, ICP signaled to leave immediately. The evidence also showed that ICP started to make preparation for his declaration soon afterwards.

58. There is evidence suggesting that the deterioration of relationship between Henry and the parents started earlier. Mr Chan said in Paragraph 16 of his Closing Submissions that 1966 to 1979 were relatively uneventful years. On the evidence before the court, although the events during those years were not as dramatic as those after 1980, I would not describe this period as uneventful.

59. The daughters gave evidence about Henry's dealings regarding certain investments made by the parents and how Henry profited himself at the expense of the parents in those dealings. These included a project involving 7 shops in Chung Hing House, Kwun Tong, a transaction regarding a piece of land at No. 29 Robinson Road. Marion also gave evidence about an occasion in 1966 when WMS requested Cecilia to act "as arbitrator" in respect of her plea for the return of certain unspecified investment from Henry. Mr Chan did not seriously challenge evidence of these matters but he submitted that such evidence has no relevance to the real issues in the actions and serves no useful purpose other than to smear the character of Henry.

60. In my judgment, such evidence has to be understood in the light of the contention of the Estate and Ching Hing that the reticence of Henry in asserting ownership over the Property is itself cogent evidence to show that Henry himself did not regard the Property to be a gift to him by ICP. I would deal with Mr Chan's submission in Paragraph 136 of his written submissions that no adverse inference should be drawn against Henry in respect of his failure to assert ownership later. Subject to that, to what extent the silence of Henry could be regarded as evidence to that effect depends on what sort of person Henry was and his relationship with the parents at the relevant time. For this purpose, the evidence of the matters referred to in the previous paragraph is relevant. However, the evidence adduced by the Estate and Ching Hing on these transactions is not sufficient, in my judgment, to establish any dishonesty on the part of Henry. Since the daughters were only told about these matters in a piece meal fashion by the parents, I do not think they could give the court a full picture of those incidents. Bearing in mind the cogency of evidence required to establish serious charges of misconduct, I am not satisfied on the evidence available that Henry had intentionally committed any wrongs against the parents in these dealings. On the other hand, the evidence does establish that the parents were upset in respect of these dealings and they had adverse impact on the relationship between Henry and the parents.

61. These incidents (which occurred in or prior to 1973) formed part of the background to later events in the late 1970's and early 1980's. There was also an occasion in the 1970's when WMS was unhappy about a complaint by Cecilia and Henry after they had moved into Granville House. They said that the parents did not buy them a property as residence. WMS paid them $430,000 on account of the original purchase price of their unit in Granville House. To put it neutrally, Cecilia and Henry made it known to WMS that their unit had increased in market value but WMS did not pay them more. Despite all these, the relationship between WMS and Henry was not too bad. According to the personal ledger kept by WMS, exhibit P-9, WMS continued to make gifts to Henry until November 1978. Henry was 47 years old and he received a birthday red packet of $4,700. WMS also made a gift of a piano to Arnold in 1978.

62. At the annual general meeting of Ching Hing in December 1979, WMS suggested to allot more shares to the daughters. Henry objected to that because it would mean dilution of his shareholding. He even threatened to take legal action if shares were allotted to the daughters. This was the prelude to the unhappy events in the 1980's. Because of that, no new share was issued. Instead, WMS made a new will on 17 January 1981 giving all her shares to the daughters.

63. On the whole, these incidents show that Henry was capable of being antagonistic to his parents during their lifetime when it came to matters affecting his financial interest.

The beneficial ownership of the Property: constructive trust or resulting trust?

64. Although parties have addressed the court on Ching Hing's rights under the Lease, the major bone of contention is whether the Property was given to Henry as a gift. If Henry were merely a trustee holding the beneficial interest of the Property on trust for either ICP or Ching Hing or both of them, it is accepted by Arnold that he could not succeed in his claims against the Estate or Ching Hing.

65. To resolve the question as to the beneficial ownership of the Property, the first issue is whether the Property should be considered as a whole instead of separate consideration being given to the land and building distinctly. Mr Yu advocated the former approach whilst Mr Chan submitted that the land and the building warrant separate consideration.

66. Mr Yu relied on the case of Tracy v Bifield (1998) 23 Fam LR 260, a decision of the Supreme Court of Western Australia. Templeman J said,

"... [E]ffect must be given to the intention of the parties that they would use their respective funds over the period necessary to purchase the land, build the house and then improve and furnish it. The extent of their respective interests must therefore be determined as at the conclusion of these activities, even though the trust was created on the date of the first expenditure, or on the date on which agreement was reached as to the way in which the funds would be used."

67. This was applied by Recorder Kotewall SC in Re Superyield Holdings Limited [2000] 2 HKC 90 at p. 107G. The same approach was adopted by the English Court of Appeal in Latimer v Latimer (1970) 114 SJ 973, a copy of the transcript of that judgment was supplied to the court by Mr Yu.

68. In my judgment, the same result could be better explained by the application of the approach set out by Lord Diplock in Gissing v Gissing [1971] AC 886 at p. 909D,

"And there is nothing inherently improbable in their acting on the understanding that the wife should be entitled to a share which was not to be quantified immediately upon the acquisition of the home but should be left to be determined when the mortgage was repaid or the property disposed of, on the basis of what would be fair having regard to the total contributions, direct or indirect, which each spouse had made by that date."

This was applied by the English Court of Appeal in Midland Bank v Cooke [1995] 4 All ER 562 and Drake v Whipp [1996] 1 FLR 826. Before the court adopts such an approach, the court must find that the parties have a common intention to share the property beneficially. Hence, Lord Diplock went on to say,

"Where this was the most likely inference from their conduct it would be for the court to give effect to that common intention of the parties by determining what in all the circumstances was a fair share." (my emphasis)

69. It is also clear that in order to arrive at such common intention, the law does not require the parties to have expressly agreed upon how each of their shares was to be quantified. At p. 908 E to G, Lord Diplock said,

"I take it to be clear that if the court is satisfied that it was the common intention of both spouses that the contributing wife should have a share in the beneficial interest and that her contributions were made upon this understanding, the court in the exercise of its equitable jurisdiction would not permit the husband in whom the legal estate was vested and who had accepted the benefit of the contributions to take the whole beneficial interest merely because at the time the wife made her contributions there had been no express agreement as to how her share in it was to be quantified.

In such a case the court must first do its best to discover from the conduct of the spouses whether any inference can reasonably be drawn as to the probable common understanding about the amount of the share of the contributing spouse upon which each must have acted in doing what each did, even though that understanding was never expressly stated by one spouse to the other or even consciously formulated in words by either of them independently...."

70. Conceptually, one may say that there is a distinction between contributions made by each party to the acquisition of the property and improvement to the property subsequent to the acquisition. This distinction was highlighted by Lord Upjohn in Pettitt v Pettitt [1970] AC 777 at p. 818A to F.

"...in the absence of agreement, and there being no question of any estoppel, one spouse who does work or expends money upon the property of the other has no claim whatever upon the property of the other." (at p. 818E)

Lord Morris expressed views to the same effect at p. 804B to H. In dealing with the scenario where improvement was effected to property belonging to the other, His Lordship observed that there were several possible conclusions, including a change in the beneficial ownership of the property.

"But each of these conclusions would have to be the result of some agreement. Sometimes an agreement, though not put into express words, would be clearly implied from what the parties did. But there must be evidence which establishes an agreement before it can be held that one spouse has acquired a beneficial interest in property which previously belonged to the other ..."

Lord Hodson also made the same distinction at p. 810G to H and p. 811E to F. On the other hand, Lord Diplock and Lord Reid did not perceive any valid distinction between contribution to acquisition and subsequent improvement, see p. 795E to G and p. 822B and F. This difference in opinions account for the difference between their Lordships as to the correctness of the decision in Jansen v Jansen [1965] P 478.

71. In the subsequent case of Gissing v Gissing [1971] AC 886, Lord Reid maintained his earlier view (see p. 895H, 896F to H). So did Lord Morris (see p. 897H). Viscount Dilhorne seems to agree with the majority in Pettitt v Pettitt that the law should not impute an intention on the parties when the evidence showed that they had not thought about the matter (p. 900D to G). But he applied the same test to acquisition as well as post-acquisition transactions (see p. 900C and p. 901D to E). Lord Pearson only examined the matter by reference to contributions towards purchase of the property.

72. In Gissing v Gissing, Lord Diplock accepted the view of the majority in Pettitt v Pettitt regarding the law's inability to impute a common intention when parties had not applied their mind to the question of beneficial ownership by reference to a notional common intention which would have been formed by them as reasonable persons had they actually thought about the same (see p. 904E to F). Concerning the distinction between pre-acquisition and post-acquisition matters, Lord Diplock said at p. 906C to F,

"...[I]n the branch of English law relating to constructive, implied or resulting trusts effect is given to the inferences as to the intentions of parties to a transaction which a reasonable man would draw from their words or conduct and not to any subjective intention or absence of intention which was not made manifest at the time of the transaction itself. It is for the court to determine what those inferences are.

In drawing such an inference, what spouses said and did which led up to the acquisition of a matrimonial home and what they said and did while the acquisition was being carried through is on a different footing from what they said and did after the acquisition was completed. Unless it is alleged that there was some subsequent fresh agreement, acted upon by the parties, to vary the original beneficial interests created when the matrimonial home was acquired, what they said and did after the acquisition was completed is relevant if it is explicable only upon the basis of their having manifested to one another at the time of the acquisition some particular common intention as to how the beneficial interests should be held. But it would in my view be unreasonably legalistic to treat the relevant transaction involved in the acquisition of a matrimonial home as restricted to the actual conveyance of the fee simple into the name of one or other spouse. Their common intention is more likely to have been concerned with the economic realities of the transaction than with the unfamiliar technicalities of the English law of legal and equitable interests in land." (my emphasis)

73. Further at p. 908C, Lord Diplock referred to two possible interpretations of a wife's contribution to mortgage instalments without initial contribution to the cash deposit and legal charges,

"it may be reasonable to infer a common intention of the spouses from the outset that she should share in the beneficial interest or to infer a fresh agreement reached after the original conveyance that she should acquire a share.... "

74. Hence, Lord Diplock accepted that there were two different possibilities. However, the difference was not in terms of the time when the contribution was made, but in terms of the time when the parties came to a common understanding as to beneficial ownership. If the common understanding was arrived at prior to the acquisition of the property, the beneficial ownership had not yet been crystallized and one may infer a common intention more readily. On the other hand, if the common understanding were only formed after the acquisition of the property, this would imply a change in the beneficial ownership of the property. The evidence must support an inference that there was a fresh agreement as to beneficial ownership before the court can give effect to the common understanding. In other words, in that situation, there must be some evidence to infer that the original beneficial owner has agreed to give up some of his interest in the property in favour of the other party.

75. The later English cases tend to categorize implied trusts arising from common intention of the parties as constructive trusts, see Lloyds Bank v Rosset [1991] 1 AC 107; Drake v Whipp [1996] 1 FLR 826; Yaxley v Gotts [2000] Ch 162. Although this analysis might have blurred the line between resulting trust and constructive trust (see the discussion in Gray & Gray, Elements of Land Law, 3rd Edn, p. 694-697; and p. 668-670), the court must do justice by reference to the intention of the parties.

76. Mr Yu urged the court to begin with an analysis of the matter from the angle of resulting trust instead of constructive trust. He submitted that the three cases cited in Paragraphs 66 and 67 above were decided on the basis of resulting trust. Since Ching Hing and the Estate did not contend for a larger share than the respective contribution by Ching Hing and ICP regarding the acquisition of the Property, Mr Yu argued that they did not need to rely on constructive trust. In support of this approach, he referred to Underhill & Hayton, Law relating to Trusts and Trustees, 15th Edn, p. 321-2. Those passages, in my view, only deal with the matter from a practical point of view. They do not address the question whether the court can still apply the principle of resulting trust if there were evidence of common intention.

77. The present case is complicated by the fact that the land was acquired first and the building was built later. One needs to address the issue raised by Lord Upjoin in Pettitt v Pettit cited in Paragraph 70 above (see also Lewin on Trusts, 17th Edn, Para. 9-72). This is substantially the same point relied upon by Mr Chan by reference to Megarry & Wade, The Law of Real Property, 6th Edn, Para. 14-311 and Melluish v BMI (No. 3) Ltd [1996] 1 AC 454 at 473. Relying on those authorities, Mr Chan submitted that as a matter of law, when Ching Hing erected the building on the land owned by Henry, the building also became the property of Henry. Mr Yu submitted that the authorities cited by Mr Chan only referred to the legal title whereas questions relating to the beneficial ownership of the property have to be determined by reference to contributions. With respect, I do not think this is correct. Lord Upjoin was clearly dealing with beneficial ownership. So was Lewin on Trusts. Similar observations were made by Lord Cranworth in Ramsden v Dyson (1866) LR 1 HK 129 at p. 141, a case decided by reference to proprietary estoppel, hence dealing with equitable interest instead of legal title.

78. Mr Yu submitted that the problem could be overcome by looking at the Property as a whole, viz. land and building. In my judgment, whether this approach is justified must depend on the common intention of the parties instead of a presumption arising from the fact that a person had incurred the construction costs of the building on the land owned by others. In principle, insofar as contribution is concerned, there is no material distinction between the construction of a building and improvement thereto. After all, construction of a duck shed could cost much less than the cost of improvement of a large house. Hence, if the sole requirement for giving rise to beneficial interest is that the claimant have made contribution in enhancing the value of the land of the others, it is difficult to explain why improvement to property could not achieve the same result (see Pettitt v Pettitt; Lloyds Bank v Rossett). It would also be inconsistent with the requirement of representation in the context of proprietary estoppel. I am therefore of the view that the mere fact that a person had spent money on another's land by constructing a house there cannot give rise to any equitable interest. In other words, one cannot resolve the matter by reference to resulting trust stemming from the presumed intention of the parties by virtue of contribution in this sort of situation.

79. Of course, Mr Yu did not solely rely on the fact that Ching Hing incurred the construction costs of the building. He also relied on the fact that when the land was acquired, it was clear to everybody involved that a building has to be erected thereon to satisfy the terms of the Conditions of Sale and substantial costs would be incurred by Ching Hing for that purpose. In effect, in my view, he was relying on a common intention to be inferred from these circumstantial matters. Hence, the issue which we should focus on is not the contribution by Ching Hing (although that would be part of the background which one should take into account). The focus should be the common intention of the parties and the applicable principle should be that of constructive trust (or common intention trust, see Lewin on Trusts, Para. 9-50) instead of resulting trust.

80. In Drake v Whipp [1996] 1 FLR 826, the English Court of Appeal dealt with a case in which a woman claimed beneficial interest in a property held in the name of her former cohabitee by reference to her direct and indirect contribution. At first instance, the judge decided the case by reference to resulting trust. On appeal, the Court of Appeal held that upon proper analysis, it was a case of constructive trust rather than resulting trust. The reason being that it was a case where it was clear that there was a common intention between the parties, there was no room for the operation of resulting trust. Peter Gibson LJ said at p. 828H to 829A,

"However, [the principle of resulting trust] could not apply if (1) there was a common intention to share the property beneficially found to exist on the application of the guidance given by Lord Bridge [in Lloyds Bank v Rosset], whether by dint of a finding of an agreement, arrangement or understanding on evidence of express discussions between the partners or by ready inference from direct contributions to the purchase price by the partner who is not the legal owner, and (2) that partner has acted to his or her detriment in reliance on the common intention."

81. To the same effect is the decision of Recorder Kotewall SC in Re Superyield Holdings Ltd [2000] 2 HKC 90 at p. 111D to F,

"In my judgment, the court resorts to the presumption of resulting trust and advancement only where there is no acceptable evidence of the actual intention of the provider or providers of the purchase money as to the vesting and apportionment of the beneficial interest. Where there is evidence of actual intention upon which the court may act and where the intention proved is not consistent with the legal title, the court gives redress, no longer under a resulting trust, in my view, but under a common intention constructive trust or an equitable proprietary estoppel."

82. In Muschinski v Dodds (1986) 160 CLR 583, the High Court of Australia also adopted the same approach, albeit in the context of a property registered in joint names. That was also a case where land was acquired with a view that a prefabricated house would be erected thereon. The purchase price of the land was paid by one owner whilst the costs of erecting the house was intended to be paid by the other. Through no fault of either party, the house was not erected. The relationship broke down. One of the co-owners claimed that she had contributed all the purchase price of the land and hence entitled to the sole beneficial ownership by way of resulting trust. That claim was dismissed because it was found that the common intention was that both parties would have equal beneficial interest in the property. One way to look at the matter was that the presumption of resulting trust by reference to the contribution to the purchase price was rebutted. In effect the court was saying that actual intention must prevail over presumed intention. Deane J said at p. 612,

"...the presumption [of resulting trust] operates by reference to the presumed intention of the party whose contribution exceeds his or her proportionate share; it cannot prevail over the actual intention of that party as established by the overall evidence, including the evidence of the parties' respective contributions."

The element of common intention was highlighted by Mason J at p. 598. At p. 593, Gibbs CJ also emphasized that,

"We are concerned to discover the actual intention which the appellant had when the land was put in the names of the parties as tenants in common, and not to impute to her an intention which she did not possess ..."

83. In the case of Tracy v Bifield, ibid., Templeman J found as a fact that there was an agreement between the parties to contribute their respective resources for the acquisition and improvement of the property (see p. 4 and 6 of the judgment). By implication the learned judge was giving to effect to the common intention of the parties although His Honour apparently approached the matter by reference to resulting trust. With great respect, given the finding as to common intention that should be considered as a case of common intention constructive trust.

84. Latimer v Latimer was also a case in which the wife acquired the land with her own resource whilst the husband paid all the mortgage instalments regarding the costs of construction. The property was held in the name of the wife. The land was acquired in 1945 and the building works were started in 1952 and were completed in 1954. The Registrar found the beneficial ownership to be shared half and half between the husband and the wife, the husband appealed against that apportionment. The judgment of the Court of Appeal dealt mainly with the respective percentage of beneficial ownership. The wife did not appear to dispute that the husband had a beneficial interest. The Court of Appeal in a short ex tempore judgment held that the proportion should be one-third to the wife and two-third to the husband. On the facts as recited by Lord Denning MR, the parties had a plan to build the house on the land when it was acquired. Hence, it was not a case on contribution alone although in assessing the respective beneficial ownership, the Master of the Rolls did refer to the respective financial contribution of the parties. I do not think one can regard this as an authority for the proposition that one can just derive a beneficial ownership by reference to his contribution to the construction costs. It must still depend on the common intention of the parties. In that case, the common intention was to build a house on the land. The dicta of Lord Denning referring to the acquisition of the house by the joint efforts of the parties must be read in this light.

85. I shall therefore proceed to consider the matter by reference to the common intention of the parties instead of merely focusing on the contribution by Ching Hing to the construction costs of the building. Before I turn to the evidence concerning the intention of the parties at the material time, I need to refer to Lloyds Bank v Rosset [1991] 1 AC 107. At p. 132-3, Lord Bridge said,

"The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do."

86. At first glance, the approach of Lord Bridge seems to be narrower than the approach of Lord Diplock in Gissing v Gissing in the dictum set out in Paragraphs 69 and 72 above. In the absence of evidence of express discussion between the partners, Lord Bridge's tentative view was that only contribution to the purchase price or mortgage payments could qualify as conducts leading to an inference that there was a common intention to share the property beneficially. On the facts of Lloyds Bank v Rosset, Lord Bridge was dealing with conducts which could hardly be sufficient to support an inference of common intention of joint beneficial interest. But I think it would be reading too much into the dicta of Lord Bridge to suggest that as a matter of law, a court can never draw an inference of common intention when the conducts relied upon were not payment of purchase price or mortgage instalments. After all, it is a matter of inference to be drawn from the circumstances of each case. The conducts relied upon must be examined against the background as to the dealings between the parties. In any event, although it has often been cited, Lord Bridge's view was only a tentative one. I do not think His Lordship intended to rule out completely the possibility of establishing common intention by inference through conducts other than payment of purchase price or mortgage instalments. I prefer to read the dicta as saying that the conducts relied upon have to be as concrete and compelling as those conducts. In Gissing v Gissing [1971] AC 886 at p. 909-910, Lord Diplock made a similar point. His Lordship observed that normal contribution to household expenses could not give rise to an inference of common intention to share the property beneficially.

"For such conduct is no less consistent with a common intention to share the day-to-day expenses of the household, while each spouse retains a separate interest in capital assets acquired with their own moneys or obtained by inheritance or gift. There is nothing here to rebut the prima facie inference that a purchaser of land who pays the purchaser price and takes a conveyance and grants a mortgage in his own name intends to acquire the sole beneficial interest as well as the legal estate..."

87. It is noteworthy that the distinction between cases where there was evidence of discussion prior to acquisition and cases solely dependent upon inference drawn from conducts referred to by Lord Bridge had been made earlier by the English Court of Appeal in Grant v Edwards [1986] Ch 638. Lord Bridge, as did the Court of Appeal, regarded the facts of Grant v Edwards as falling into the former category (see p. 133C). What happened in that case was that the defendant told the plaintiff that her name was not included on the title because it would cause her prejudice in her pending matrimonial proceedings with her former husband. Mustill LJ in Grant v Edwards [1986] Ch 638 at p. 653D to F observed that although strictly speaking, the discussion between the parties did not amount to an explicit bargain, it was enough that what the defendant said led the plaintiff to believe that she would in the future have her name on the title and she acted to her detriment on that basis. Hence, it is obvious that in the application of Lord Bridge's approach, the discussion prior to the acquisition needs not be very specific (See also Eves v Eves [1975] 1 WLR 1338 at p. 1345 per Brightman J).

88. Another point emerged from the dicta of Lord Bridge is that in the context of common intention inferred from conducts, the enquiry is not confined to conducts at the time of acquisition. The reference by His Lordship to mortgage payments suggested that conducts subsequent to acquisition could be relevant. See also Stokes v Anderson [1991] 1 FLR 391 at 399G; Mortgage Corporation v Shaire [2001] Ch 743 at p. 750E. This is also in line with the approach of Lord Diplock in Gissing v Gissing (see the dicta cited in Paragraph 72 above).

89. Mr Yu referred to the decision of High Court of Australia in Baumgartner v Baumgartner (1987) 164 CLR 137. That case marked a groundbreaking development in Australia in respect of remedial constructive trust based on the earlier dicta of Deane J in Muschinski v Dodds (1985) 160 CLR 583. The High Court held that there was a constructive trust notwithstanding that common intention could not be established (see p. 146). It is a constructive trust the operation of which does not depend on the actual or presumed intention of the parties. At p. 149, Mason CJ, Wilson J and Deane J identified the basis for such equity as unconscionable conduct,

"The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial or otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant's assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent."

90. Bearing in mind the different developments in England in the context of constructive trust, it is a moot point whether this kind of remedial constructive trust has taken root in Hong Kong. Counsel have not fully addressed the court on this point and in view of my decision by the application of the conventional English approach, I need not express any views on the Australian approach.

91. Before I turn to examine whether there was a common intention, I have to deal with two points. Firstly, the payment of the land was by way of a cheque from Ching Hing although we know that ultimately the fund came from ICP. There is a dispute as to who should be regarded as the payer, whether the payer was ICP or Ching Hing. Secondly, given the involvement of Henry, it is a tripartite situation instead of bipartite one. I have to explain how the above analysis is to be applied in these circumstances.

Who paid for the $121,000?

92. On the first point, Mr Chan submitted that the ledger entries of Ching Hing and other contemporaneous documents pertaining to the transfer of funds relating to this transaction show that Ching Hing issued the cheque on behalf of ICP. In Ching Hing's books, under the ledger of ICP, two entries on 14 November 1957 in the sum of $121,000 (one credit and the other debit) were relevant. The debit entry was described as "Pay on behalf, the land purchase price of Fei Ngo Shan" (支代付飛鵝嶺地价款). The credit entry was described as "Receive back the land purchase price of Fei Ngo Shan" (收回飛鵝嶺地价). In the cheque stub in respect of the cheque by which ICP transferred the $121,000 to Ching Hing, it was written that the cheque was for "repayment to Ching Hing for buying Fei Ngo Shan" (交回正興買飛鵝嶺地). In the personal books kept by WMS, there were entries regarding payment of the purchase price of Fei Ngo Shan. This tends to show that this payment of $121,000 was regarded as personal expenses rather than that of Ching Hing.

93. The evidence of the accounting expert is also consistent with this contention. Mr Eric Li, the expert called by Ching Hing and the Estate, explained the accounting position as shown in the ledger in the following manner,

"When the payment was first made to buy the land, of course Ching Hing's books in terms of its cash balance would have been reduced by that they have debited Mr Ip $121,000, and the corresponding entry under the double-entry system is Ching PingThen immediately, on the 's account, and Mr Ip Ching Ping then owes Ching Hing the money. same daythe bank balance goes , Mr Ip Ching Ping put a cheque back into Ching Hing for $121,000, so back up to its original position and the original debtHing, is then repaid. , created as if it is owing to Ching That is the bookkeeping entry as reflected by the recordsthe way the , as I have alluded here; that is bookkeeping went." (Day 11, Transcript p. 127-128, my emphasis)

If Ching Hing were paying for the land on its own account instead of making the payment on behalf of Ching Hing, ICP would not have owed that sum to Ching Hing before it was repaid on the same day. Although Mr Li tried to put a gloss on this by reference to the relative cash flow positions of Ching Hing and ICP on that date, I do not think he managed to unravel it satisfactorily. Lest it be suggested that I read this piece of evidence out of context, I have in fact re-read the Transcript of Mr Li's evidence from p. 120 to p. 129 several times. The relative cash flow positions could not explain why the debit entry was made in ICP's ledger if that payment was not made by Ching Hing on behalf of ICP.

94. The audited accounts of Ching Hing subsequent to the acquisition of the land also did not reflect Ching Hing as owner of the land, as contrast with it being the owner of the building. Quite apart from the notes to account stating that the land was owned by a director (which I shall deal with later), even Mr Li agreed that the accounts showed that the land was not owned by Ching Hing.

95. Ching Hing's case is pleaded in Paragraph 2 of the Rejoinder. In short it is alleged that payment by ICP to Ching Hing on 14 November 1957 was by way of advance and/or injection of capital. Mr Yu invited this court to consider the payment in the light of the cash flow position of Ching Hing at the material time. According to the evidence, Ching Hing's cash flow was tight and it was therefore necessary for ICP to replenish the cash used up for the acquisition of the land. Mr Yu argued that the wordings in the cheque stub, which were in ICP's handwriting, are ambiguous and equally consistent with ICP merely replenishing the cash position of Ching Hing. Unlike other cheque stubs, ICP did not record on this particular one that Ching Hing had made payment on his behalf.

96. Mr Yu submitted that the key issue was the intention of the ICP and evidence originated from him should merit more weight. The evidence showed that the ledger entries in the books of Ching Hing were neither made by ICP nor WMS. There is no evidence as to who made these entries and under what circumstances were instructions given for these entries to be made in the manner they were. Hence, Mr Yu contended that this court could not attach much weight to the same. Since the audited accounts were prepared in accordance with the books of Ching Hing, Mr Yu said that no conclusion on this point could be derived from the audited accounts. The evidence showed that ICP was not involved in the keeping of accounts of Ching Hing.

97. Mr Yu asked rhetorically if ICP's intention was that the $121,000 was paid by himself instead of Ching Hing, why would he use a Ching Hing cheque to make the payment. The evidence showed that ICP had planned in advance for bidding this piece of land. He brought the family and other relatives to view the site beforehand. This indicates how much he looked forward to acquiring it. There was, according to the evidence of Madam Koo, discussion between ICP and WMS about the land. Hence, it could not be sheer coincidence that he used a Ching Hing cheque. Mr Yu reminded the court that given that Ching Hing was a construction company and the requirement under the Conditions of Sale for a building to be erected, the inherent probability was that ICP intended Ching Hing to undertake the construction works and it would have an interest in the Property. This was corroborated by the evidence of Madam Koo.

98. One may say that the most direct evidence on the intention of ICP was his own statement and statutory declarations. In fact, Mr Chan also referred to paragraph 1 of the statement of ICP dated 15 March 1992 to support his case. On the other hand, Mr Yu relied on the following paragraph in ICP's statement dated 15 March 1982,

"My intention has always been that the Company was and will be benefited by this property. This was why I paid for the property with a company's cheque. I have always considered that the company is me and my wife and we are the company. I repaid the company with $121,000 because I had more than enough cash in my personal account and so that the company have more running capital. In those days in Hong Kong, all family business were ran that way (sic.). There were no clear cut line between my money and the company's money. My wife and I started the company and we were the only one who have put money in it."

99. There is a substantial legal argument between Mr Chan and Mr Yu as to the admissibility of these statement and statutory declarations of ICP. I shall deal with this point in detail below. For reasons given later, my conclusion is that such evidence should be admissible. However, bearing in mind this controversy, I shall first consider the question as to the identity of payer of the $121,000 without taking the statement and statutory declarations of ICP into account. Then, I would examine the position on the basis of taking all evidence into account.

100. Even without the statement of ICP, I agree with Mr Yu that the fact that the payment was by a Ching Hing's cheque had some significance. I recognize the force of his submission as set out in Paragraph 97 above. But I do not think I can brush aside the evidence in the ledgers and the accounts. The evidence showed that WMS was very much involved in relation to the book-keeping of Ching Hing as well as the personal accounts. Given the relationship between WMS and ICP and their collaboration in the management of Ching Hing at that time, it can be safely inferred that they had consulted each other on the financial arrangement for the buying of this property. Madam Koo's evidence (whose reliability I shall deal with later) supports this conclusion. Hence, I do not think it is entirely correct to suggest that the only relevant intention is the intention of ICP. In my judgment, on the evidence before me, WMS had as much a part to play in the matter as ICP and her intention is also relevant. This is highlighted by the fact by the Power of Attorney, Henry appointed her to be his attorney regarding the Property.

101. An examination of the accounts kept by WMS shows that she was quite meticulous and careful in the preparation of the same. She certainly distinguished between personal expenses and those of Ching Hing. She did not mix up ICP (or herself) as Ching Hing. Ching Hing was, in her accounts, recorded as a separate entity. By way of example, as early as 1951, there were entries of Ching Hing borrowing money from the personal bank accounts recorded in her personal ledger (Exhibit P-10), see p. 66, p. 70, p. 72, p. 80. In the personal ledger for 1957-1979, Exhibit P-7, there was a ledger for Ching Hing in which advances to and repayments from Ching Hing were recorded at p. 325-327. There was no record of loan made by ICP to Ching Hing regarding the $121,000. Rather, that sum was recorded in a ledger for the Fei Ngo Shan property as payment for the purchase price (at p. 223). Hence, WMS clearly regarded the payment as being made by ICP instead of Ching Hing borrowing the money from ICP to pay for it. If the intention were that Ching Hing paid for the land on its own account, WMS must have known that and the payment would not be recorded as an entry in the ledger of ICP in Ching Hing's book. The descriptions of the debit and credit entries would be different.

102. Whilst I accept the submissions of Mr Yu set out in Paragraph 97 above as valid points, I do not think those points are sufficient to take him home on this issue. In my judgment, the use of a Ching Hing cheque had its significance. But it does not necessarily follow that ICP intended the $121,000 to be a capital injection into Ching Hing or a loan to Ching Hing when the payment was made as opposed to his own payment for the land. The use of Ching Hing's cheque, in my view, signified that ICP contemplated Ching Hing to have a beneficial interest in the Property. But in view of the contrary evidence outlined above, I am unable to go further to conclude that the use of Ching Hing cheque also means that payment was made by ICP instead of Ching Hing. With respect, I do not think Mr Yu's submission that ICP owed a fiduciary to Ching Hing at the material time takes the matter further. It is after all a question of fact which I have to resolve by reference to the available evidence.

103. Does it make any difference if the statement of ICP is taken into account? I do not think so. Firstly, as Mr Chan pointed out, in other parts of his statements or declarations ICP suggested that the payment was made by ICP. In paragraph 1 of his statement of 15 March 1982, ICP referred to evidence as to the identity of the payer in respect of the $121,000. He did not stop at referring to the Ching Hing cheque by which the sum was paid. He went on to refer to his payment to Ching Hing. He in fact referred to the entry in the ledger in Ching Hing's book and described it as follows, "on 14/11/1957 Ching (sic.) Construction Co. Ltd paid, for Ip Ching Ping, the purchase money for Fei Ngo Shan". He did not suggest that this entry did not accurately reflect the position. He also referred to other expenses relating to the Property paid by him or WMS personally instead of by Ching Hing. There is no suggestion that those were paid by them on behalf of Ching Hing in the books and ledgers.

104. The statement of 15 March 1982 was not the first statement made by ICP. On 13 November 1981, he made a statutory declaration. Paragraph 3 thereof referred to acquisition of Lot No. 1940 in S.D. No. 2 as an example of land purchased by ICP and WMS put under the names of their children as nominees. Paragraph 6 stated that ICP paid for the premium and reference was made to the entries in the personal ledger kept by WMS. It is also significant that he made no reference to the payment being made by a cheque of Ching Hing. In contrast, Paragraphs 12 and 15 referred to cost of construction being borne by Ching Hing.

105. I also bear in mind that in December 1981, ICP at one stage wished to give instruction for a provision to be included in his Will for the disposition of his interest in the Property to Henry and Sammy in equal shares. He changed his mind subsequently. This episode was set out in the judgment of Deputy Judge Cruden and confirmed by the daughters in their evidence.

106. Further, in view of the evidence highlighted in Paragraph 101 above, I have reservation about the assertion by ICP in his March 1982 statement that there was no clear cut line between his money and the company's money.

107. In the circumstances, I have difficulties in finding that Ching Hing was the payer of the $121,000 based on the statement of ICP set out in Paragraph 98 above. In fact, ICP did not say that he regarded the payment as being a payment made by Ching Hing in that paragraph. At the most, he was only saying that it made no difference to him whether it was paid by Ching Hing or by himself.

108. My finding on this point is that the $121,000 was paid by ICP. I shall come back to discuss why a Ching Hing's cheque was used later. But on the totality of evidence, this fact is not sufficient to establish Ching Hing as payer of the $121,000.

The tripartite analysis

109. The three parties I referred to are ICP, Ching Hing and Henry. In November 1957, Ching Hing was basically managed by ICP and WMS. Although Henry, Sammy and Loretta were also shareholders of Ching Hing, they were not appointed as directors at that stage. Henry was first appointed on 21 June 1959. The others were appointed much later. Loretta was working at the office of Ching Hing. She handled tenancy matters and issued rental receipts. It is clear to me that up to November 1957, decisions regarding the affairs of Ching Hing were made by ICP and WMS.

110. Since the money for acquiring the land came from ICP and the costs of construction came from Ching Hing, their common intention was the most important one. In practical terms, it means the common intention of ICP and WMS. Henry was merely a volunteer and he would only have a beneficial interest in the Property if a gift were made to him by ICP and/or Ching Hing. Henry's intention or understanding is only relevant for limited purposes. Firstly, insofar as Henry's understanding could be regarded as reflection and thus evidence of the common intention (or the lack thereof) between ICP and Ching Hing or evidence of the intention of ICP, that would be relevant. Secondly, if Ching Hing for some reasons did not acquire any beneficial interest in the Property before Henry acquired a beneficial interest in the land by way of gift from ICP (assuming the court found that a gift was in fact made), one may need to look into the common intention between Henry and Ching Hing when Ching Hing built on the land. For reasons given below, I am of the view that this scenario did not arise in the present case.

111. Hence, I am of the view that the proper approach in deciding the beneficial interest in the Property is as follows,

(a) One should first enquire whether there was any common intention between Ching Hing and ICP, whether by reason of discussion or by permissible inference from subsequent conducts in accordance with the authorities as anaylsed above, before the land was acquired.

(b) A common intention that Ching Hing would have a beneficial interest necessarily means that ICP could not have intended to make a gift to Henry in respect of the same interest. In a sense, these are two sides of the same coin. Hence, before one can be satisfied as to the common intention, one must have regard to Arnold's submissions on the intention of ICP to make a gift to Henry in respect of the Property (viz. both land and building).

(c) If the common intention was that Ching Hing would have a beneficial ownership in the Property and it was on that basis Ching Hing constructed the building, Ching Hing acquired a beneficial interest over the Property by way of constructive trust when the land was acquired though the extent of the interest was only crystallized when the building was completed (viz. detriment was suffered in reliance on the common intention) by Ching Hing.

(d) Whether Ching Hing became the sole beneficial owner or a co-owner with ICP again depend on the common intention. If they were co-owners, one would also need to consider the possibility that ICP made a gift of his beneficial interest to Henry. As far as ICP's own interest is concerned, this depends on the intention of ICP.

(e) If there were no common intention that Ching Hing should have a beneficial interest in the Property before the acquisition of the land, the question is whether Henry acquired any beneficial interest in the land by way of gift. That again depends on the intention of ICP. The principles of resulting trusts would be relevant. I will call (a) to (e) Stage I of the investigation.

(f) The next stage deals with the scenario where there was no common intention as to Ching Hing's beneficial interest prior to the auction. Depending on the answers to (d) and (e), if there were a gift to Henry, the enquiry would be whether there was any common intention reached between Henry and Ching Hing after the auction but before Ching Hing constructed the building.

(g) If ICP did not intend to make a gift to Henry, the enquiry would be directed towards the common intention between ICP (as beneficial owner of the land) and Ching Hing before Ching Hing constructed the building.

(h) In both cases (f) and (g), if a common intention is established, Ching Hing would acquire a beneficial interest in accordance with the common intention by way of constructive trust.

(i) If a common intention could not be established, Ching Hing would have to rely on proprietary estoppel to support a claim for beneficial interest in the Property. I call (f) to (i) Stage II of the investigation.

112. Stage III of the investigation arises out of the argument of Mr Chan that even if Ching Hing acquired a beneficial interest in the Property in Stage I or II, it gave it up by reason of the acceptance of the Lease. In a nutshell, the argument is that because of wordings of the Lease, Ching Hing acknowledged the beneficial interest of Henry in the Property. By way of legal analysis, upon execution of the Lease, Ching Hing disposed of its beneficial interest in favour of Henry (or somehow Ching Hing's beneficial interest was extinguished). In return, Ching Hing became a lessee under the Lease. Although he did not expressly say so, my understanding of Mr Chan's submission is that this point only arises if Henry had acquired a beneficial interest in the land by way of gift from ICP. If Henry did not have any beneficial interest in the land in 1965 when the Lease was executed, it would indeed be extraordinary that he could have acquired any beneficial interest by virtue of the Lease. As I said, I do not understand Mr Chan to have advanced such a bizarre submission.

Stage I: pre-acquisition understanding of the parties

113. Applying the approach of Lord Bridge, the first question to ask in respect of common intention is whether such intention could be established by evidence of discussion between parties. It is only when there was no such evidence, one asks whether a common intention could be inferred from the conducts of the parties. In the present case, there is some evidence of discussions between WMS and ICP regarding the Property prior to the auction. Firstly, according to the evidence of the daughters in respect of the site visit referred to in Paragraph 30 above, ICP told the family (including WMS) that a new home for the family would be built there.

Madam Koo's evidence

114. Secondly, Madam Koo testified about a discussion between ICP and WMS in a car journey regarding the arrangement as to ownership of the Property. She was a good friend of WMS in 1957 and they saw each other very often. She often joined WMS and ICP in their trips to inspect projects. On one of those trips, she was in the car with ICP and WMS. WMS was driving and ICP sat at the front passenger seat. Madam Koo sat at the back. From the contents of the conversation, one can infer that the incident took place prior to the auction in respect of the Fei Ngo Shan site. But it was very close to the date of the auction because it happened after Henry had come back to Hong Kong from England. WMS and ICP discussed about the property. It was agreed between them that the son's name would be used to sign the contract but he would do so for Ching Hing. The understanding was that the land would belong to Ching Hing.

115. I have referred to the background leading to Madam Koo coming forward to give relevant information to Roseanna in my Ruling on 23 October 2002. At that stage, she was unwilling to come to court to give evidence and application was made by Mr Yu to admit her declaration as evidence. For reasons given in my said Ruling, I ruled against that application. Up to 30 October 2002, the indication was that she would not be giving evidence.

116. On 1 November 2002, just before Mr Chan about to start his closing submissions, Mr Yu informed the court the Madam Koo had finally decided to come forward to give evidence. He therefore applied for Ching Hing and the Estate's case be re-opened for the purpose of calling Madam Koo as a witness. That application was opposed by Mr Chan. Having heard submissions from both parties, for reasons given orally on 1st November 2002 (see transcripts at p. 9 to 15), I granted leave to Ching Hing and the Estate to re-open their case to call Madam Koo as a witness. I do not propose to repeat in this judgment what I said on that occasion. Afterwards, Madam Koo gave evidence before me and she was cross-examined by Mr Chan. After her evidence was concluded, I enquired with Mr Chan as to whether Arnold would wish to re-open his case by calling evidence. Having taken instructions from his client, Mr Chan informed the court that Arnold maintained his position of not calling any factual evidence.

117. Madam Koo came to court in a wheelchair. Although she is now 87, Madam Koo impressed me as a very intelligent and clear minded person. She answered questions straight to the point and the way in which she told the court her name and address showed how sharp her mind was. Mr Chan questioned her motive in coming forward to give evidence. Madam Koo said she finally decided to come to testify because of a sense of justice. She felt it would be unfair if nobody could give evidence to confirm that the land actually belonged to Ching Hing. I heard evidence as to why she was initially unwilling to testify. She said because of her difficulty in terms of movement, she thought it was too troublesome. She was asked by Mr Chan why did she turn down the request for evidence to be taken by video-link. She said it was also troublesome. She was not able to pinpoint any specific problems about such proposal. Mr Chan suggested that she just did not want to be troubled. He said this was inconsistent with her assertion that she gave evidence out of a sense of justice. I do not accept this as a valid criticism of Madam Koo. Having had the opportunity of hearing her evidence, I still think the points I made in Paragraph 7 of my Ruling on 23 October 2002 are valid. For ease of reference, I just repeat those points here,

"The circumstances under which Madam Koo volunteered information to Roseanna Ip impressed me that Madam Koo was doing all these out of a sense of righteousness. If she had remained silent, nobody would locate her since the Ip sisters had not maintained contacts with her for quite some time and they were not aware of the evidence that she would be able to give. It is quite natural for a lady in the condition of Madam Koo to be cautious about her health and for such a person, giving evidence could be a stressful experience."

118. The important thing, in my judgment, is that eventually Madam Koo did come to court to give evidence. Despite his able cross-examination, Mr Chan has not suggested to Madam Koo that she had ulterior motives in giving her testimony in court. There is nothing to suggest that Madam Koo would derive any personal advantage from giving evidence. Nor is there any suggestion that she acted out of prejudice against Henry or Arnold or out of bias in favour of anybody. I cannot find any justification for challenging the integrity of Madam Koo in giving evidence as she did.

119. Mr Chan also criticized the reliability of the evidence of Madam Koo. He basically made three points: (1) it is inherently improbable that she could remember this conversation which took place more than forty years ago; (2) there was discrepancy between her evidence and the contents of her declaration; and (3) her evidence shows that her memory was not that good. I can deal with (1) and (3) together. Counsel often challenge witnesses about their memories of events a long time ago by asking them why could they remember such a thing. Of course it is a legitimate question and the court will take that into account in assessing the reliability of the testimony. However, it is a fact of life that there are things that one remembers whilst other things one forgets even though they happened around the same time. Sometime, it would be difficult if not impossible to give an explanation for this phenomenon. I think it would be dangerous to say that because something happened so long ago, unless the witness could explain why he or she remembered it, the evidence is inherently unreliable. I do not think Mr Chan went that far in his submission. But he did submit that I should take into account of the fact that the conversation during the car journey was just a casual conversation which did not affect Madam Koo, it was inherently improbable that she could remember such a event which occurred so long ago. He also pointed to certain parts of the evidence of Madam Koo in which she said she could not remember something happened 45 years ago.

120. On the other hand, Madam Koo was quite firm in her evidence about this incident and in fact it prompted her to contact Roseanna on her own volition. Hence, it is quite obvious that this incident had somehow impressed her. It may or may not be due to the fact that she had a fond memory of the Property because she had spent weekends there at the invitation of WMS. It does not matter very much. The uncertainty she had about the type of car she was traveling in is insignificant. She managed to say it was a blue Chrysler although she, perhaps out of caution, pointed out that it was just a vague recollection. More pertinent to the present case is the fact that she could remember the details like who were in the car, the seating arrangement, and the occasion.

121. There was a discrepancy between her oral testimony and the declaration. She said in her oral evidence that it was ICP who suggested using Henry's name to sign the contract whilst in the declaration, she said the proposal came from WMS. When confronted about this, she admitted that she could not recall who proposed it first but she could remember that they agreed upon the proposal. Given the lapse of time, this confusion is not surprising. Although I must bear this discrepancy in mind in assessing her evidence, I do not think this impinges on her credibility.

122. Even bearing in mind all the criticisms leveled by Mr Chan, I find Madam Koo to be an honest and reliable witness. Whilst she had problems about who made the proposal, I see no difficulty in accepting her evidence about the agreement reached between WMS and ICP as to the beneficial ownership of the Property prior to the auction. Her evidence is consistent with the other evidence adduced at the trial (which I shall discuss later) about the common intention of the parents (and that would also be the intention of Ching Hing) as to the ownership of the Property. I find as a fact that such discussion between WMS and ICP did take place in the car journey and the agreed understanding was that Henry would only be holding the Property as a nominee.

123. In view of their control and management of Ching Hing at the material time, the discussions between WMS and ICP were in effect discussions between Ching Hing and ICP. Whilst there was no specific conversation at the site visit regarding question of ownership, the conversation in the car journey certainly proved the common intention was that Ching Hing would have at least a share in the beneficial ownership (if not the whole) of the Property.

Contribution by Ching Hing to the acquisition of the Property

124. The same conclusion could be reached by an alternative route. Even if Ching Hing has to rely on conducts to establish an inference of common intention (which it does not need to in view of my earlier conclusion), I am quite satisfied that, bearing in mind the events leading to the acquisition of the land and construction of the building, Ching Hing's expenditure relating to the construction works could be placed on the same footing as contribution to purchase price or mortgage payment in the acquisition of an ordinary flat in the application of the approach laid down by Lord Bridge. I have alluded to the involvement of Ching Hing and Mr Yu's submission in Paragraphs 33 and 97 respectively. Against that background, it seems to me the irresistible conclusion is that the purchase price for the Property must include the construction costs. The Conditions of Sale obliged the purchaser of the land to erect a building there and incur at least $175,000 in doing so (see Paragraph 3 above). In addition, the purchaser would also need to pay for site formation, foundations, access roads and other ancillary works. As compared with the premium paid for the land, these construction costs and related expenses were more substantial. A purchaser who did not comply with the building covenant would face the consequence of his leasehold interest being forfeited. Until the building covenant was complied with, the land was in a sense a liability rather than an asset. Looking from this angle, the payment of the construction costs in these circumstances must be on par with contribution in terms of payment of the premium. From that, this court could readily infer that the common intention was that Ching Hing would have a beneficial interest in the Property and I shall draw such an inference if necessary.

125. It is unimaginable that ICP had not planned for Ching Hing undertaking the construction works if the land was successfully acquired at the auction. The two previous matrimonial homes, viz. Prince Edward Road flat and Park Mansion were constructed by his company. As stated in Paragraph 33, Ching Hing was involved right from the beginning up till the completion of the building. Ching Hing's cheque was used for payment of the premium to signify Ching Hing's interest in the Property. Hence, the common intention must have formed prior to the acquisition of the land.

126. As I said in Paragraph 111 (b), I should not consider the issue of common intention in isolation. I would consider the totality of evidence and take into account the submissions of Mr Chan on ICP's intention to make a gift to Henry before I come to a conclusion on common intention. Although for the sake of presentation, I set out my conclusions on common intention in Paragraphs 123 and 125 before discussing other evidence, they should be read together with the rest of this judgment and I have in fact taken all matters set out in the judgment into account before coming to a final view on those conclusions.

Circumstantial factors

127. As Mr Yu pointed out, due to the election by Arnold not to call any factual evidence, there is no evidence before this court that ICP or the parents had expressly told anyone that the Property was a gift to Henry. Instead, Mr Chan relied on a host of objective circumstantial factors to argue that this court should conclude that the Property was a gift to Henry. He submitted that the evidence showed that by 1957, ICP was a successful and wealthy man and the premium for the land in the sum of $121,000 was a relatively small sum as far as he was concerned. He invited the court to consider this against the background that the parents gave Henry a lai-see of $100,000 on his marriage and a further gift in the sum of $203,000 was given to him on his marriage. There is also evidence as to extravagance of the wedding banquet and wide publicity of Henry's marriage. ICP had always made generous provisions for his children, including Henry. Mr Chan emphasized that between 1957 and 1965, the relationship between ICP and Henry was good. He described ICP as a very happy father, proud of the graduation of Henry from the University of London with an engineering degree. Obviously, ICP had high hopes of Henry and expected Henry to take up the family business. I have already alluded to Mr Chan's submission of the parents favoured sons in those days. In short, Mr Chan submitted that the circumstances showed that the Property was a graduation gift to Henry.

128. Mr Chan further submitted that there was simply no plausible explanation as to why ICP wanted to use Henry's name to hold the Property as trustee. If the intention were that Henry would only be a trustee, Mr Chan asked rhetorically why ICP did not ask Henry to execute a declaration of trust, a device which the parents had used in respect of another transaction not involving Henry. Mr Chan said the 1958 Power of Attorney and the Lease were inconsistent with Henry holding the Property as a trustee. The audited accounts of Ching Hing contained acknowledgment that the land belonged to Henry. Mr Chan asked this court to note that even with the deterioration of the relationship in the later years, ICP did not demand Henry to transfer the Property into his name or Ching Hing. The Property was not included as ICP's asset in the probate granted in respect of his estate.

129. Lastly, Mr Chan also relied on the presumption of advancement. In my judgment, that would only come into play if the court cannot be satisfied on the evidence as to the actual intention of ICP. The presumption has been described as a judicial instrument of last resort by Nourse LJ in McGrath v Wallis [1995] 2 FLR 114 at p. 115A. In Overseas Trust Bank v Lee See Ching [1999] 3 HKC 197 at p. 201E to G, Godfrey JA said,

"This 'presumption' (known as 'the presumption of advancement") is, like all presumptions, a device 'whereby the courts are entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence about it ... It describes the readiness of the courts to draw inferences from common human experience ... In reality it is no more than a slightly grandiose term for the ordinary process of judicial reasoning about facts": see Phipson on Evidence, 14th Edn 1990 at p. 83. It follows that if there is evidence, even if only slight evidence, militating against the operation of the 'presumption', the court is at liberty to treat the 'presumption' as displaced."

To the same effect is the judgment of Lord Brightman in the Privy Council in Neo Tai Kim v Foo Stie Wah [1985] 1 MLJ 397 at p. 399-400,

"In the opinion of their Lordships the presumption of advancement is not an immutable rule to be applied blindly where there is no direct evidence as to the common intention of the spouses. It is rather a guideline to be followed by the court in an appropriate case when it searches for the intention which ought, in the absence of evidence, to be imputed to the parties. It is proper for the trial judge to review the background of the case and to decide in appropriate circumstances that the guideline is not one which can sensibly be followed in the case before him."

130. On the other hand, Mr Yu submitted that there are matters pointing the other way, viz. the parents did not intend the Property to be a gift to Henry. Some factors I have referred to, e.g. the site visit by the family, the intention of ICP to build a large house for the whole family there, the use of Ching Hing's cheque to pay for the premium, the design of the building, the payment of the construction costs by Ching Hing, the occupation and use of the building after its construction. In addition, Mr Yu relied on the fact that the title deeds and evidence in respect of payment of relating to the land were retained by the parents instead of being given to Henry. He also referred to manner in which WMS recorded entries relating to the Property in her accounts.

131. He forcefully submitted that by reason of the nature of the land (as alluded to in Paragraph 124 above), it is most unlikely to be a gift to Henry. In 1957, Henry simply had no means to comply with the Conditions of Sale. Mr Yu also stressed that in 1957, the plans for the building had not yet been drawn and it was uncertain how much construction costs had to be incurred. It was impossible to make a gift of the building in those circumstances. Moreover, the Conditions of Sale also restricted the use of the land to the erection of one private dwelling house for private residential purposes. Hence, one cannot derive income from the land by building apartments for selling or letting out to several tenants. In any event, given the fact that the building erected was meant to be a family mansion and the parents intended that the family would move to live there, it would be very odd, to say the least, that the parents gave the Property as a gift to Henry from which he could not derive any immediate benefit.

132. In this connection, Mr Yu submitted that the Lease and the 1958 Power of Attorney showed that Henry was merely holding the Property as a nominee and did not have any beneficial interest in it. Henry's conducts since the acquisition of the land also showed that he knew he had no beneficial interest in the Property. During his lifetime, even in the course of High Court Action No. 3675 of 1995, Henry did not assert that the Property was a gift to him. If the Property did belong to him beneficially, why would he and Cecilia complain about the parents not buying a home for them? Henry never received any rent under the Lease. The evidence showed that Ching Hing paid the rent to WMS instead. After her death, the rents were paid to ICP. Henry did not have much say about the design of the building nor did he contribute anything to the construction. He did not live there, not a single night. After the stroke of ICP, substantial alterations were carried out at the Property to suit ICP's needs rather than Henry's. All these happened when Henry was already an adult, hence there was no question of ICP taking care of Henry's interest in the Property whilst he was a minor.

133. Mr Yu also invited this court to draw adverse inference against Arnold by reason of his election not to call any factual evidence when such evidence has been prepared and was available during the trial. Cecilia was in court throughout the trial and lengthy witness statements of hers have been filed in these actions. At the same time, there were evidence adduced by Ching Hing and the Estate concerning settlement negotiations in 1986 vis-à-vis Henry (when Arnold and Cecilia was on the same side of the daughters as shareholders of Ching Hing) and the divorce settlement between Cecilia and Henry which may impinge on the credibility of her evidence.

134. In my judgment, there is ample evidence in the present case to enable this court to come to a conclusion as to the actual intention of the parents (and Ching Hing) and it is not necessary to resort to any presumptions, whether presumption of advancement or presumption of resulting trust. Guided by the dictum of Lord Diplock in Gissing v Gissing and Lord Bridge in Lloyds Bank v Rosset, I would first focus on the circumstantial factors prior to the acquisition. In so doing, as suggested by Lord Diplock, I should not be unduly legalistic and should have proper regard to the economic reality of the transaction which might have bearing on the common intention of the parties.

135. As far as circumstantial evidence is concerned, I shall first focus on pre-acquisition circumstances. I ask myself what is the inherent probability in view of such circumstances. The nature of the property, as explained in Paragraphs 124 and 131 above, is of great importance. In my judgment, Mr Chan's theory of graduation gift from a happy father is inherently improbable. With respect, he started from a false premise that the land only cost $121,000, hence not an unlikely graduation gift by ICP to Henry. At the time when the land was acquired, it must have been clear to ICP that substantial construction costs would have to be incurred by Ching Hing to build the family mansion there. Such construction costs would be much more than the land premium. Hence, one cannot work on the assumption that this was a gift of $121,000.

136. Further, the involvement of Ching Hing is significant. Given Henry's dependence on the parents at that stage, Mr Chan's theory would only be a sound one if the parents intended not only that ICP would make a gift of the land in terms of the premium, but also procure Ching Hing to make a gift of the building to Henry in terms of construction costs. As mentioned earlier, even in 1957, it is not correct to identify the interest of Ching Hing as being equal to the interest of the parents. Sammy and Loretta were also shareholders. Bearing in mind the concern of WMS for fairness amongst the children, it seems to me to be quite unlikely that the parents would sacrifice the interest of the other children (in terms of their interest in Ching Hing) in committing Ching Hing to make such a gift to Henry. Although this only occurred in 1959, it is noteworthy that the parents caused shares in Ching Hing to be allotted to the four younger daughters in the course of planning for the construction of the family mansion. The parents were clearly taking steps to identify the interest of Ching Hing with that of the whole family. Even though ICP was a decisive man and what he said was the law within the family, and even assuming that he favoured sons in those days, I do not think he did not share WMS's concern about fairness amongst the children. The family history as outlined in the beginning of this judgment showed that WMS contributed a lot to the building up of the family wealth and ICP discussed with her on all matters. He was no doubt a happy father, but I am not persuaded that his happiness as to Henry's return from England caused him to make such a gift to Henry.

137. I accept Mr Yu's submission (as summarized in Paragraph 131 above) that the Property was not an appropriate graduation gift. If a father makes a graduation gift to his son, one would normally expect that the gift is something that the son could immediately enjoy as an encouragement. Not only was there a substantial lapse of time between the acquisition of the land and the completion of the construction works, but it is also accepted by Arnold that ICP intended the Property to be used as his family home. ICP was not very old at that stage and WMS and the daughters were younger. In the foreseeable future, it would be unlikely that the Property would be of any use to Henry apart from using it as his residence as a member of the family.

138. Hence, the pre-acquisition circumstances were wholly consistent with Madam Koo's evidence and pointed against the proposition that the Property was a gift in favour of Henry. Mr Yu was correct in saying at the end of his closing speech that if one were to examine the matters relied on by Mr Chan, those were all equivocal as to whether the Property was a gift to Henry. Arnold has not produced a single piece of evidence to prove that ICP had told Henry the Property was a gift to him.

139. I then turn to circumstances after the acquisition of the land. At the forefront of Mr Chan's argument is his submissions regarding the 1958 Power of Attorney, the Lease and the audited accounts of Ching Hing. In a nutshell, his point was that if the Property were not a gift to Henry, why would the parents arrange for these documents to be executed instead of a declaration of trust. Mr Chan also submitted unless and until these documents were set aside or rectified, it was not open to the Estate or Ching Hing to dispute the representations as to Henry's ownership of the Property embodied in these documents. Mr Chan has gone through at length some of the provisions in the Power of Attorney and the Lease and submitted that if Henry were merely holding the legal title as trustee, those provisions would not be necessary. With respect, I agreed with Mr Yu that this approach elevates form over substance. As a matter of substance, the Power of Attorney enabled WMS to deal with the Property without the need of procuring the signature of Henry in the dealings concerning the Property. The Power of Attorney was couched in very wide terms. Under Clause 3, WMS could even "assign by way of gift or otherwise either with or without any consideration ... to effect dispose of or deal with upon such terms and conditions as [she] shall think fit the said property" (my emphasis). Henry was already an adult when the Power of Attorney was executed. It is not a case of a mother taking care of the property of an infant son. Without the Power of Attorney, even if Henry were a bare trustee, the parents might not be able to compel him to enter into the Lease or to execute other documents, see Anthony Eric Ryan Hotung v Ho Yuen Ki, CACV 315 of 2002, 7 November 2002. Hence the Power of Attorney did serve some practical purposes. As regards the Lease, it was a very long lease at a relatively low rent. It was for the duration of the whole of the term held from the Crown less one day. Further, there was a right to renewal again for the whole of the renewed term held from the Crown less one day. For all practical purposes, it was intended that Ching Hing would occupy and use the Property for almost the whole of the leasehold period. The rents under the Lease were collected by WMS instead of Henry. The substance of these transactions showed that Henry was only a nominee. In that sense, they were against Arnold's contention of gift.

140. It is important to distinguish between two types of cases in considering Mr Chan's argument on this point. The relevant principle of law is set out in Goodman v Gallant [1986] Fam 106. At p. 110F to 111B, Slade LJ drew a distinction between cases where the written document contains express declaration of trust concerning the beneficial interests in the property and cases where the documents did not contain such declaration. In the former class of cases, there is no room for the application of the doctrine of resulting, implied or constructive trusts unless and until the conveyance is set aside or rectified. The declaration in the document determined the vesting of the beneficial interest. However, in the latter class, the way is open for persons claiming a beneficial interest to rely on resulting, implied or constructive trusts. There is no need for the document to be set aside or rectified (See also Huntingford v Hobbs [1993] 1 FCR 45; Chan v Leung [2002] All ER (D) 436).

141. In the present case, if one examines the 1958 Power of Attorney and the Lease, there was no declaration of beneficial interest in the Property. The wordings used in these instruments are equally consistent with the beneficial interest of the Property being vested in a person other than Henry. The phrase "my leasehold property" in the Power of Attorney sheds no light on the question of beneficial ownership. As Mr Yu submitted by reference to the case of Ingram v IRC [2000] 1 AC 293, the making of the Lease is perfectly consistent with Ching Hing being the beneficial owner of the Property and Henry being the trustee. The legal analysis of such a transaction was set out by Millett LJ (as he then was) in the Court of Appeal at [1997] 4 All ER at p. 423-4, endorsed by Lord Hoffmann in the House of Lords at p. 305D (and other members of the House of Lords). Nor could I find any declaration of beneficial interest in favour of Henry in the Lease. Mr Chan said that Mr Yu's reliance on Ingram v IRC is very much a chancery lawyer's analysis, unlikely to be the one adopted by the parents. But in my judgment, so was Mr Chan's approach in going through each and every clause in the Lease and in picking on certain expressions in the 1958 Power of Attorney to argue that the parents had acknowledged Henry's beneficial interest in the Property. As I said above, the substance of these transactions, which was probably what the parents cared most at the material time, was wholly consistent with Henry being a trustee only. I am not prepared to draw any inference from the fact that these documents were prepared by solicitors' firm.

142. Regarding the audited accounts of Ching Hing, Mr Chan focused on a note which appeared since 1974 that stated as follows,

"The building at Lot No. 1940 SD 2 Fei Ngo Shan Road at book value of $1,014,565.71 is erected on land owned by a Director. "

This note has undergone changes over the years. From the version in the accounts of 1981 to 1982, it is possible to deduce that the "Director" referred to in the note was Henry. After his resignation as director in June 1981, the note was changed to read as follows,

"The building under lease between 10-50 years at Lot No. 1940 SD 2 Fai Ngo Shan Road with a book value of $800,973 is erected on land owned by a shareholder. "

Mr Chan invited this court to contrast this note with another note in the audited accounts in respect of the property at Inland Lot No. 1308 in 1985/86 and subsequent years. That note read,

"The group's land and buildings in Hong Kong under long lease situated at Inland Lot No. 1308 amounting to $249,567 are registered in the name of the company and the executrices of the past director, Madam Wong Miu Shim."

With this contrast, he submitted that the ownership referred to in the note about the Property must be a reference to beneficial ownership instead of mere registered legal ownership.

143. The first thing to note is that these notes started to appear in 1974. According to Mr Eric Li, the accountancy expert called by Ching Hing and the Estate, in mid 1970's the accounting profession considered it more appropriate to segregate the treatment of land and building regarding depreciation policies. After some discussions, a new statement of accounting standards was issued by the Hong Kong Society of Accountants in Statement No. 123. The evidence also suggests that the notes were probably made on the advice of Ching Hing's auditor. Judging from the set-up and scale of operation of Ching Hing, it was quite dependent upon its auditor in the preparation of the audited accounts. The auditor of Ching Hing had always been Mr Kwan Man Wai, a good friend of ICP who knew each other since school days. ICP obviously trusted him very much. The auditor probably suggested this note to be added to allay the concern that the building was erected on land not registered under the name of Ching Hing. Against such a background, the evidential value of this note would not be as high as the contemporaneous events between 1957 and 1965.

144. Secondly, these were notes in the audited accounts instead of a declaration in an instrument by which the Property was conveyed or leased. I accept that the accounts were signed by WMS and ICP up to 1980/8. But there is still a difference between these notes and declaration of beneficial interest in a conveyance. I do not think one can derive any binding effect out of these notes as in a declaration. At the most, these notes may constitute admissions against interest by Ching Hing, or as evidence of the parents' understanding as to the ownership of the Property. But I do not think the principle laid down in Goodman v Gallant can be applied in respect of these notes so that Ching Hing could not go behind them without first applying for rectification of the same. There is a plea of estoppel advanced by Arnold by reference to these notes. However, in his closing submissions, Mr Chan did not develop on this argument. In fact there is no evidence of reliance or detriment suffered by Henry to support any case of estoppel.

145. Thirdly, the contrast by which Mr Chan derived support for his argument that the note was referring to beneficial ownership instead of legal ownership only began to appear in 1985/86 when ICP and WMS had been dead. The audited accounts for 1985/86 were signed by Henrietta and Maimie. It cannot be evidence of the intention of ICP or WMS.

146. Notwithstanding Mr Chan's contention as to ICP's knowledge as to these notes by reference to a paragraph in the unsigned draft declaration of ICP dated 14 October 1982, I do not regard the notes in the accounts signed by ICP and WMS as containing a declaration or acknowledgement of Henry's beneficial ownership in the Property. In my view, those notes were equivocal as to the kind of ownership which were referred to. In any event, given the circumstances under which these notes emerged, the weight that could be attached to them would not very great when compared with the other evidence pointing against a gift in favour of Henry. It is necessary to remind oneself of the dicta of Lord Diplock in Gissing v Gissing about conducts subsequent to acquisition,

"...what they said and did after the acquisition was completed is relevant if it is explicable only upon the basis of their having manifested to one another at the time of the acquisition some particular common intention as to how the beneficial interests should be held."

147. I have in fact travelled well beyond 1957. However, I find it convenient to deal with all the major planks of Mr Chan's argument at this stage. There are of course other post-acquisition circumstances relied upon by Mr Yu (outlined by me earlier) which could be said to tip the balance against Mr Chan's theory of gift. I do not even find it necessary to rely on those. The matters set out in Paragraphs 135 to 138 are sufficient to satisfy me that the parents did not intend to make a gift of the Property to Henry. There is simply no concrete evidence to counter balance against the evidence of Madam Koo as to the common intention of ICP and WMS to use Henry's name as a nominee only. This reinforced my finding as to the credibility and reliability of Madam Koo. In his cross-examination of Madam Koo, Mr Chan pointed out to her that she has not seen the 1958 Power of Attorney, the Lease nor the audited accounts of Ching Hing. It turns out, from the above analysis, that none of these matters.

148. I would mention some other matters which add strength to my aforesaid conclusion. After signing the Memorandum of Agreement in 1957, Henry gave it to the parents for their safekeeping. Likewise, the original receipt issued by the Hong Kong Government in respect of the payment of the premium was kept in the safe of the parents, as were other items relating to the Property as listed out in Exhibit P-76 including the Occupation Permit and both copies of the Lease. Mr Yu relied on the case of Warren v Gurney [1944] 2 All ER 472 in which Morton LJ attached great significance to the retention of title deeds in rebutting the presumption of advancement. On the other hand, Mr Chan submitted that whether significance could be attached to retention of title deeds depends on the facts of each case. He referred to Scawin v Scawin (1841) 1 Y & C Ch Cas 65 in which the court held otherwise. Mr Chan submitted that in the circumstances of the present case, bearing in mind that Henry was living with the parents at that time and the safe of the parents was a big one and was used by them to keep everything there, it was not surprising that Henry did not retain the title deeds himself.

149. Even without reading the statutory declaration and statements of ICP, I agreed with Mr Yu that it was extremely unlikely that there was no discussion between the parents and Henry when he was asked to attend the auction and signed the Memorandum of Agreement. After all, once he put down his signature, Henry would be obliged to develop the land by paying for the construction of the house and other related expenses. In 1957, he had no means to do so. It is wholly unreal to approach this case on the basis that there were no prior discussion between Henry and the parents before he attended the auction with ICP. I accept that apart from the statutory declaration and statements of ICP, there is no direct evidence as to the contents of such discussions. But I am firmly of the view that discussions must have taken place. I cannot accept the submission of Mr Chan that because ICP was not the sort of father who discussed matters with his children, it was possible that he had not communicated his intention about the Property to Henry. Although the evidence shows that ICP was authoritative within the family, it does not mean that he did not communicate his wishes to his children. The family visit to site was a good example of he telling the children about the Property. There was also an occasion when the plans drawn by David Wong were shown to the daughters. Further, given the gravity of the matter, even if the parents did not tell the other children about the land being bid in the name of Henry, surely they must have tell Henry what he was supposed to do with the land if the bid was successful.

150. If Henry had been told that the Property was a gift to him, it would be quite remarkable that the title deeds were not given to him even after he moved to live separately from the parents when he married and had his own business. Instead, he was asked to execute a Power of Attorney to enable WMS to deal with the Property. Even after construction works were completed, Henry did not ask for cancellation of the Power of Attorney and return of the title deeds. Instead, the Lease was made which on its face gave away all the rights of occupying and using the Property to Ching Hing for almost the full term of the Crown lease (Henry's knowledge of the Lease was proved by the correspondence with the Inland Revenue on property tax). Surely one would ask what kind of graduation gift it was.

151. Mr Chan submitted that all these could be explained by the fact that ICP was a man of strong character and there was no reason why Henry would offend the parents by bringing up the subject. After all, he was still receiving other substantial endowments from them. Mr Chan referred to several authorities including Sidmouth v Sidmouth (1840) 2 Beav 447 at 457, Commissioner of Stamp Duties v Byrnes [1911] AC 386 at 392 and Fowkes v Pascoe (1875) LR 10 Ch 343 at 354. With respect, I do not think these cases take the point further. As Mr Chan emphasized several times, each case must depend on its own facts. I do not think these cases established any principles of law in this regard. The answer to Mr Chan's submission can be found, in my judgment, in the evidence and my conclusion as to Henry's character as set out in Paragraphs 54 to 63 above. Whatever one may say with regard to ICP's personality, I do not believe that Henry would do nothing about the Property throughout these years if he had actually been told that the Property was a gift to him.

152. Although there is no direct evidence (apart from the statutory declarations and statement of ICP, which I shall come back to later), in view of the subsequent conducts of the parties, I think it is open to me to infer on the balance of probabilities that the parents had told Henry before the auction that the Property was only put under his name as nominee. He fully understood that he did not have any beneficial ownership in the Property. Hence, Arnold's argument based on the graduation gift theory or the presumption of advancement cannot stand.

153. This conclusion is consistent with other circumstantial matters relied on by Mr Yu. The retention of title deeds, the design and construction of the building, the use and occupation of the building, the collection of rent in respect of the building, the alteration works in respect of the building, none of these indicia of ownership points to Henry as beneficial owner. Mr Chan said these were all equivocal. If each factor is considered in isolation, that may be so. However, when these factors were taken together and considered against the other matters that I have alluded to, the inescapable conclusion is that Henry was not the beneficial owner of the Property.

Arnold's election not to call factual evidence

154. I hope Mr Yu would forgive me if I do not go through other points relied upon by him since I do not find it necessary and it would further burden this already lengthy judgment if I do so. I would just briefly comment on the election by Arnold not to call any factual evidence, in particular the evidence of Cecilia Chan in respect of the pre-wedding meetings. According to her witness statements, there were representations by the parents that the Property was a gift to Henry in those meetings. Mr Chan contended that the only effect of not calling such evidence is that Arnold cannot rely on these assertions. However, such election did not strengthen the case of the Estate or Ching Hing in the statement or declarations of ICP. He submitted all the matters set out therein were equivocal and no inference could be drawn.

155. On the other hand, Mr Yu relied on Cross & Tapper on Evidence, 9th Edn , p. 36-38 and invited this court to draw adverse inference against Arnold. In my judgment, the relevant principles applicable to civil proceedings can be summarized as follows,

(a) if a prima facie case is made out, and if there are evidence available to the party against whom the case is established which could displace the prima facie case, and he omits to call such evidence, an inference could be drawn;

(b) however, the inference could be rebutted by a plausible explanation by the party who elected not to call the evidence;

(c) if an inference is to be drawn, it would be an inference that such available evidence, even if adduced, would not displace the prima facie case;

(d) it is also open to a tribunal of fact, upon the drawing of such an inference, to take it into account in respect of a matter with respect to which the person not called as a witness could have spoken,

i. in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party;

ii. in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given.

156. In the present case, for reasons already canvassed, the evidence established a strong prima facie case that the intention of the parents was not giving the Property to Henry as a gift. Arnold did not call Cecilia as a witness who could give material evidence on this issue. She was available. The explanation advanced by Mr Chan on behalf of Arnold was that ICP's evidence in his statement and declarations was equivocal. Presumably, Mr Chan adopted the same position in respect of the circumstantial factors which I have alluded to. However, for reasons given, I disagree with him. In fact, I cannot see how it can be suggested that the evidence of Madam Koo is equivocal. Yet, Arnold maintained his election not to call factual evidence after Mr Yu had called Madam Koo. Hence, it is open to this court to draw the inference that even if Cecilia were called as a witness, her evidence could not displace the evidence adduced on this issue. I can also take this into account in deciding whether I should draw the inference set out in Paragraph 152 above. As Mr Yu pointed out, if Henry had been told by the parents that the Property was a gift, the inherent probability is that Cecilia would have learnt about it from Henry.

Declarations and statement of ICP

157. In accordance with the approach set out in Paragraph 99 above, I made these findings without referring to the statement and statutory declaration of ICP. If one were to take into account of those statements, the conclusion as to common intention is reinforced.

158. Before I discussed the contents of the declaration and statements of ICP, I must mention three points. Firstly, Mr Chan objected to the admissibility of these documents as evidence on the basis of Shepard v Cartwright [1955] AC 431. I shall deal with this issue in the next section. Secondly, before accepting what was said by ICP in these documents, I have to remind myself that ICP has not given evidence in the witness box and hence Arnold did not have the opportunity to cross-examine him. I must also be cautious in considering the weight that could be attached to these documents in view of the circumstances under which they were prepared. It is fair to say that at that time ICP was very angry with Henry (see Paragraph 53 above). On the other hand, as stated in Paragraph 38 above, I find on the evidence that ICP was not influenced by others in the preparation of these documents. He remained a very strong-willed person up till his demise. Mr Chan made criticism in respect of credibility of ICP both by reference to certain statements made in these documents and generally. I shall deal with his specific criticism when I discuss the contents of these documents. As regards general criticism leveled against ICP, Mr Chan relied on certain entries in the books of Ching Hing showing that the children were paid "salaries" and "directors' fees" when they could not have been working for the company. He suggested that these were presumably for the purpose of claiming tax deductions which were not permissible and such practice cast doubt on ICP's integrity. This is a serious allegation. In the absence of evidence that tax deductions were actually claimed and circumstances under which they were claimed, I do not think it is right for this court to presume that these entries were for the purpose of tax evasion. We have no information, for example, as to whether income tax were paid by the children in respect of these "salaries" or "director fees" or whether these were added back to the income of the parents in their income tax returns. In any event, I do not think one can attach too much significance on these entries when one considers the credibility of the statements made by ICP in the declarations and statement. The subject matters were not even remotely linked with each other.

159. There is some evidence from the daughters that ICP was a righteous person. He placed high regard for honesty and integrity. He also believed in treating people fairly. So much so that he changed his name to "Ching Ping" incorporating the Chinese character 正 meaning righteousness. He was known in the construction industry to be reliable. I note that the same character was used in the name of Ching Hing. Maimie gave an example that ICP paid for a lot of extra workers to complete a job satisfactorily when a machine broke down. Marion told this court in the old days, when corruption was prevalent in the construction industry, ICP refused to have any part in that. As a result, ICP did not make as much money in the construction business as he would otherwise have.

160. On the whole, I do not think Mr Chan succeeded in persuading me that no weight should be attached to the statement and declarations of ICP. However, mindful of the lack of cross-examination, I would be cautious in accepting such evidence and if possible look for corroborating evidence. It does not mean that I reject the evidence of ICP if it was not corroborated. But I would be extra cautious in approaching such evidence.

161. Thirdly, the draft declaration of ICP dated 14 October 1982 was not signed by ICP. Marion gave evidence about how these documents were prepared. ICP gave the daughters oral instructions which were reduced into handwritten drafts. The draft were typed and then read back to ICP for checking. It was only when ICP was perfectly happy with the typewritten document, he signed on it. Hence, the draft declaration was derived from information given by ICP although it was not as good as a signed statement or declaration. On that basis, counsel agreed that, subject to the point as to Shepard v Cartwright, the court could have regard to the draft declaration.

162. With these preliminary remarks, I now deal with the contents of these documents. The first document is the Statutory Declaration of 13 November 1981. This was prepared (and so were the other two documents) in anticipation of Henry advancing a claim of beneficial ownership as to the Property after the death of ICP. I have recited the incident in mid 1981 when ICP visited Henry's office in Paragraphs 55 to 57 above. After that incident, ICP worried about the lack of evidence to rebut Henry's claim after he died and he sought advice from lawyers and started to prepare the Statutory Declaration with the assistance of his daughters. The process also involved retrieval of relevant documents from the safe of the parents. ICP was able to recall that the documents had been kept. ICP signed the statutory declaration just before he had a dental operation at hospital. The operation required ICP to go through anaesthetic. ICP perceived that there was an element of risk and he was therefore anxious to sign this document before he had the operation.

163. I think the most controversial parts of this statutory declaration are paragraphs 3, 7, 9, 13 and 16 thereof. The other paragraphs basically recited facts already established by other evidence placed before the court and were not matters of serious disputes. For those controversial paragraphs, the evidence of ICP was pertinent in showing that,

(a) the parents' intention was that Henry would only be holding the Property as a nominee;

(b) Henry knew that he was merely a nominee;

(c) the 1958 Power of Attorney was an example of the customary mode adopted by the parents in respect of properties put under the names of the children;

(d) after completion of the building, the parents intended that the land should form part of the assets of Ching Hing and the Lease reflected such intention;

(e) Henry knew that the land and the building were assets of Ching Hing.

164. ICP's worry about Henry starting legal proceedings after his death was further confirmed by an incident which took place after this statutory declaration was prepared. Ching Hing held its annual general meeting on 5 December 1981. After the meeting, Henry said in front of Marion and Mr Gallant Ho, the solicitor, that he had taken legal advice in London about the validity of the Lease and he would commence legal action after ICP passed away. Mr Ho must have conveyed that message to ICP and it prompted the statement of 15 March 1982 to be prepared. Paragraph 10 of that statement expressly alluded to this incident. ICP's worry about lack of testimony to rebut Henry after his death was reflected in the last sentence of paragraph 5.

165. Again parts of the statement of 15 March 1982 are repetitions of other evidence already placed before the court. The controversial paragraphs, I believe, are paragraphs 4, 5, 6, 8 and 10. I would summarize the following as the most objectionable allegations from Arnold's point of view,

(a) Henry was nominated as a purchaser by ICP whose understanding was that the land was to benefit Ching Hing as a family company. Henry knew that. The purpose of nominating Henry as legal owner was to bring him up in the society;

(b) The common understanding between the parents and Henry was that the Property would be enjoyed by the whole family through Ching Hing;

(c) The reason why a Ching Hing cheque was used was to enable Ching Hing to have the benefit of the Property;

(d) The 1958 Power of Attorney was deemed necessary because Henry was going out with a divorcee who had bad influence on him. There were discussions with Henry before the Power of Attorney was executed;

(e) There were also discussions between the parents and Henry prior to the execution of the Lease. Because Henry was not the beneficial owner, the rent under the Lease was paid into the account of WMS.

166. The draft declaration of 14 October 1982 is essentially a revised version of the first declaration. It seems to me that ICP wished to elaborate on what he had said previously by adding more information. The controversial allegations, found in paragraphs 4, 6, 8, 10, 11, 15 and 18 are as follows,

(a) the Property was placed under the name of Henry as nominee, as in the cases of other properties held in the name of the children;

(b) before the auction, there were discussions in the presence of Henry about the purpose of acquiring the Land, viz. to erect a house on it as the family home;

(c) ICP instructed Henry to sign the Memorandum of Agreement to keep his acquisition confidential and to enhance Henry's status in the society;

(d) Henry knew that he was merely a nominee;

(e) It was customary for the children to execute documents pertaining to properties putting under their names to enable them to deal with the properties according to their wishes;

(f) After completion of building, the parents discussed with Henry and agreed that Ching Hing should have the benefit of the Property. Hence, the Lease was prepared;

(g) Regarding the notes in the accounts of Ching Hing, the parents were content to leave Henry remained as the Crown lessee as the real benefit of the Property was already vested in Ching Hing.

167. Mr Chan criticized certain parts of ICP's declarations and statements as submissions rather than evidence of facts. To some extent, this criticism is well founded. However, one must not read these documents as if one is construing a statute. I have in mind what Lord Hoffmann said in Mannai Ltd v Eagle Star Assurance [1997] AC 749 at p. 774D to E,

"I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays an indispensable part in the way we interpret what anyone is saying."

168. Reading these declarations and statement as a whole and considered the same against the totality of the evidence, ICP's evidence, if accepted by this court, established three crucial points which are fatal to Arnold's case,

(a) the common intention of the parents was that Henry would only be a nominee in holding the Property, hence it was not a gift;

(b) Henry knew that this was not a gift to him as he was privy to a number of discussions in which the understanding was made known and he agreed to it. Although if one read some paragraphs in these documents in isolation, there were assertions more in the nature of submissions than evidence as to facts, I do not think one could seriously dispute that ICP did refer to discussions with Henry about the common intention. Examples of such evidence can be found in paragraphs 3, 8 and 10 of the statement and Paragraphs 6 and 15 of the draft declaration.

"It is not possible for [Henry] to bid without my instruction ..."

"There were only conversations and no correspondence because he was living with us then ..."

"My wife and I have discussed it with him before it was done."

"Before the auction, my wife and I had on several occasions discussed in the presence of Henry the acquisition of the said Lot so as to erect a house on it as my home."

"My wife and I discussed the position with Henry. Henry said that as the Lot and the buildings erected on it were purchased and constructed at the expenses of my wife and I as well as Ching Hing, he would leave the matter entirely at my wife and I's (sic.) discretion."

The allegations made by ICP about the knowledge and understanding of Henry and he being nominated must be considered against such background, viz. there were communications by the parents to Henry as to their intention. For reasons set out in Paragraph 149 above, this accords with common sense and inherent probability;

(c) The Power of Attorney and the Lease were instruments executed in furtherance of the common intention to facilitate the vesting the substantive benefit of the Property in Ching Hing.

169. Mr Chan submitted that before this court can accept that Henry was merely a nominee in holding the Property, the Estate and Ching Hing must prove satisfactorily the reason for such an arrangement. Mr Chan extracted several reasons from ICP's statement and declarations and submitted that they were inherently improbable and inconsistent with the other evidence. Although I accept that there must be reason or reasons for this arrangement, I do not think it is imperative that the court must be in a position to say precisely what was the motive of ICP behind the arrangement. Of course, in assessing the credibility of ICP's evidence, I must take into account his evidence about the purpose of this arrangement. But the key issue remains whether the Property was intended to be a gift to Henry. If it was not, Henry did not acquire any beneficial interest in it. Further, it is a common occurrence that a person did something for a number of reasons and he may not feel obliged to tell everyone he knew all his reasons. I do not accept Mr Chan's submission that the reasons advanced by ICP in his statement and declarations for nominating Henry to be the registered owner of the Property were confusing. On a fair reading of those documents, the main reason put forward by ICP was to bring Henry up in the society. I think that was a perfectly plausible reason in the light of the background. Henry just came back for England after his education. He was about to start his career. There was also other evidence about ICP's efforts in introducing Henry to others in the construction industry. Some photos produced by Arnold showed that. Mr Chan asked rhetorically how could the bidding of the Land in Henry's name promote him. ICP himself provided answer to this in Paragraph 8 of the draft declaration,

"...at this time Henry was anxious to participate in various welfare organizations such as the Po Leung Kuk and the Tung Wah Hospital Group. However, as he possessed no asset of any significance, I thought it might help to further his interest in such organizations if he could appear as owner of a substantial piece of property."

I do not need to enquire whether this objective was achieved. It is sufficient if I believe that this was what ICP hoped to achieve.

170. I do not think the fact that other reasons were given by ICP and some other witnesses matters very much. Mr Chan was able to identify several additional reasons: "course of trade", convenience, to keep his ownership of property confidential. Even assuming that ICP did mention those other reasons in his statement or declarations or to other witnesses, they do not weaken the plausibility of ICP's evidence as to the main reason.

171. The next attack by Mr Chan is on the alleged inconsistency in ICP's own evidence as to when he intended the Property to become Ching Hing's asset. He submitted Paragraph 13 of the declaration and Paragraph 15 of the draft declaration suggested that the intention was only formed after the building was completed whilst Paragraphs 4 to 6 of the statement suggested that such intention was formed before the auction. This point should be considered together with the question as to the identity of the payer of $121,000. On the latter question, I have already set out my assessment of the evidence and conclusion in the relevant section above. But I do not think ICP actually asserted that he was not the payer of the $121,000. What he said in the statement was that from the beginning it was intended that Ching Hing would have a beneficial interest in the Property. It seems to me that ICP did not address his mind to the issue whether he himself retained any beneficial interest in the land by reason of his payment of the premium.

172. On a fair reading of Paragraphs 13 of the Declaration and Paragraph 15 of the draft declaration, I do not think ICP was saying that the parents only considered Ching Hing to have a beneficial interest in the property after the building was completed. Since Paragraph 15 was later in time and can be read as an elaboration of Paragraph 13 in the declaration, it would be more helpful to refer to it to gather what exactly did ICP say in those paragraphs. Paragraph 15 said,

"...After completion of the building my wife and I thought that Ching Hing should hold the substantial benefit of the said Lot so as to ensure the continued enjoyment of the building that Ching Hing built on it. My wife and I discussed the position with Henry. Henry said that as the Lot and the buildings erected on it were purchased and constructed at the expenses of my wife and I as well as Ching Hing, he would leave the matter entirely at my wife and I's (sic.) discretion. Accordingly, we consulted to (sic.) Messrs P C Woo & Co. and a Lease was prepared ..."

173. The focus in that paragraph (as well as Paragraph 13 of the declaration) was to recount how the Lease came to be executed. In both declarations, ICP referred to the fact that Ching Hing contributed to the construction costs of the building. I do not read these two paragraphs as negating an intention on the part of the parents being formed earlier that Ching Hing would have a beneficial interest in the Property. It is also probable that the exact distribution of the beneficial interest between each contributor was not yet crystallized at the beginning (see the dicta of Lord Diplock in Gissing v Gissing cited in Paragraph 68). It was only when the building works were completed that the parents explored means to ensure Ching Hing to have full enjoyment of the Property. Viewed thus, the alleged inconsistency is more apparent than real.

174. Mr Chan also criticized ICP's explanation as to why Henry was asked to execute the 1958 Power of Attorney. I think I can deal with it together with his submission that Henry was not asked to execute a declaration of trust. I have already alluded to the importance of considering the substance of these transactions rather than form in earlier part of this judgment. For reasons given earlier, I do not discern any inconsistency between the execution of this Power of Attorney by Henry and his holding of the legal title of the Property as a trustee only. I am not going to speculate why the parents chose to use a Power of Attorney instead of a declaration of trust. There is evidence that similar device was adopted by WMS in respect of Borrett Mansion held in the name of Maimie. Mr Chan said each transaction was different and relied on So Amy v Au Leslie [1995] 2 HKC 113 and Sky Heart Ltd v Lee Hysan Estate [1997] 1 HKC 313; [1998] 1 HKC 505 and [1999] 1 HKC 18 and argued that such similar fact evidence should be excluded. It seems to me that Mr Chan could not be permitted to blow hot and cold. On the one hand, he tried to support this point by reference to a declaration of trust in respect of Inland Lot No. 293A dated 5 February 1953, on the other hand he objected to reference being made to the power of attorney granted by Maimie in respect of Borrett Mansion. I am prepared to exclude from my consideration all similar facts evidence, including the Borrett Mansion power of attorney. Confining myself to the documents and evidence pertaining to the Property, I see no reason to doubt the credibility of ICP as to why the 1958 Power of Attorney was executed.

175. Regarding the notes in the audited accounts, ICP said these in paragraph 18 of the draft declaration.

"When my wife and I signed statements of account of Ching Hing, we did not feel any need to alter this sentence. We were content to leave Henry remaining as the Crown lessee as the real benefit of the Crown Lease is already vested in Ching Hing. All my children are shareholders of Ching Hing. Throughout these years they regularly receive audited accounts of Ching Hing which indicate quite clearly that the house erected on the said Lot is part of Ching Hing's fixed assets."

176. Mr Chan submitted that this explanation was unconvincing. With respect, I do not find the criticism well founded. The gist of ICP's explanation seems to me to be that since Ching Hing had got the real benefit of the Crown Lease, it did not matter to the parents that Henry remained as registered owner. In effect, ICP was saying that they did not regard the notes have any bearing on beneficial ownership. Mr Chan argued that if that were so, the accounts were not accurate. But this trial is not about whether the accounts were accurate, the key issue was the intention of the parents. ICP might have understood the accounts differently from Mr Chan or Mr Hague, the expert called by Arnold. In fact, there are assertions in the declarations and statement which showed that ICP might have been mistaken about the accounts. Paragraph 15 of the declaration, paragraph 11 of the statement and paragraph 18 of the draft declaration gave the wrong date as to the inclusion of the value of the building in Ching Hing's accounts. ICP thought it was 1975 whilst in fact, the value had been included as fixed asset of Ching Hing since 1966. In these circumstances, also bearing in mind what I have said in Paragraphs 142 to 146 above, I do not think the notes could be taken as an acknowledgment by the parents that Henry was the beneficial owner of the Property. Nor could one cast doubt on the credibility of ICP's evidence as to the intention of the parents by reason of these notes and his explanation for the same.

177. On the whole, I do not find any reasons to doubt the credibility of ICP's evidence set out in the declarations and statement, especially in the light of their consistency with other evidence which I have alluded to earlier. I bear in mind that Arnold did not have the chance to cross-examine ICP and when these documents were prepared, ICP was very angry with Henry. Because of that, I would primarily rely on the other evidence in the case to resolve the matter. However, I also find that the evidence of ICP was consistent with my conclusions reached on the basis of the other evidence. On the three points highlighted in Paragraph 168 above, I am satisfied that, subject to the point in relation to admissibility, I can safely accept the evidence of ICP.

The rule in Shepard v Cartwright

178. In Shepard v Cartwright [1955] AC 431 at 445-6, Viscount Simonds discussed the restriction on admissibility of evidence to rebut the presumption of advancement.

"It must then be asked by what evidence can the presumption be rebutted, and it would, I think, be very unfortunate if any doubt were case ... upon the well-settled law on this subject. It is, I think, correctly stated in substantially the same terms in every textbook that I have consulted and supported by authority extending over a long period of time. I will take, as an example, a passage from Snell's Equity, 24th Edn, p. 153, which is as follows,

'The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration ... But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.'

I do not think it necessary to review the numerous cases of high authority upon which this statement is founded. It is possible to find in some earlier judgments reference to 'subsequent' events without the qualifications contained in the textbook statement: it may even be possible to wonder in some cases how in the narration of facts certain events were admitted to consideration. But the burden of authority in favour of the broad proposition as stated in the passage I have cited is overwhelming and should not be disturbed."

179. In that case, the children sued the executors of the estate of a deceased father in respect the proceeds of certain shares put into their names by their father. There was no evidence as to the circumstances in which the shares were allotted into their names. By virtue of the presumption of advancement, the shares were prima facie a gift in favour of the children. The executors tried to rely on some transactions 5 years after the allotment to rebut the presumption. The House of Lords held that those transactions could not be regarded as subsequent events forming part of the original transaction. Nor could they be regarded as admissions by the children against interest. Hence those subsequent events could not be relied upon to rebut the presumption.

180. This rule has recently been referred to by our Court of Appeal in Watson v Smith [1998] 3 HKC 461 at p. 465 and Overseas Trust Bank v Lee See Ching [1999] 3 HKC 197 at p. 201-2. I acknowledge that I am bound by these decisions. Hence, I should not admit the declarations and statement of ICP as evidence unless I am satisfied that the admission of such evidence in the present case is outside the scope of the rule. In these cases (as in Shepard v Cartwright), the court was not concerned with the admissibility of statutory declarations concerning his intention made the by father before his death. However, one might say that in substance, a statutory declaration is nonetheless a subsequent declaration concerning intention. But so is the testimony of such a person given at a trial in which his intention is a relevant issue.

181. In view of the submissions of counsel, it is important to identify the rationale of the rule. Mr Yu submitted that the rule only applied when a person sought to rebut the presumption of advancement and in the present case, the issues spanned much wider than that. He further submitted that the rule should be modified nowadays in view of the changes in respect of admission of hearsay evidence in civil cases. In this connection, he referred to Cross on Evidence, 5th Edn p. 24, Underhill and Hayton, The Law of Trusts and Trustees, 15th Edn p. 329-330 and the New South Wales case of Damberg v Damberg [2001] NSWCA 87. In the latter case, Heydon JA said at p. 16 of the Lexis copy of the judgment,

"...However, Viscount Simonds' formulation does not exclude testimonial evidence of intention. The reference to 'declarations' is a reference to out of court declarations. In truth the propositions enunciated by Viscount Simonds are not peculiar to this field, nor are they an exhaustive statement: they merely summarise parts of the common law rules relating to res gestae evidence and admissions. 'Questions ... as to the relevancy and admissibility of evidence ... can best be considered ... by reference to the principles and authorities to be found in a textbook on evidence. There are no special rules relating to cases of this kind; such cases merely illustrate general evidentiary principles': Davies v The National Trustees Executors & Agency Co. of Australasia Ltd [1912] VLR 397 at 402 per Cussen J. In general a person whose intention at an earlier time is in issue may give evidence of it, and the position is the same here, even though the weight of the evidence, coming as it does from an interested witness, must be scrutinized with care: Devoy v Devoy (1857) 3 Sim & Giff 403 at 406; 65 ER 713 at 714 per Stuart VC; Dumper v Dumper (1862) 3 Giff 583 at 590; 66 ER 540 at 543 per Stuart VC; Davies v The National Trustees Executors & Agency Co. of Australasia Ltd [1912] VLR 397 at 403; Drever v Drever [1936] ALR 446; and Martin v Martin (1959) 110 CLR 297 at 304 per Dixon CJ, McTiernan, Fullagar and Windeyer JJ. It follows from the proposition that the rules for admissibility of evidence tendered to rebut the presumption are simply those of the general law that any modifications effected by the Evidence Act 1995 are applicable."

That was said in a case where the person whose intention was in issue was still alive and gave evidence at the trial. The New South Wales Court of Appeal did not address the issue whether a statutory declaration of an alleged donor could be admitted as evidence if he died before trial under the modified rule. Hence, Mr Yu can only derive limited support from this decision. He argued on the basis, inter alia, of this dicta that the rule is merely a manifestation of the general rules as to res gestae and admission. Provided that he could satisfy the court that the relevant parts of the declarations and statement do not infringe the modern rules in those regards, Mr Yu relied on the general law as to admissibility of hearsay statements to support the admissibility of such evidence. The requisite hearsay notices have been served.

182. At the same time Heydon JA acknowledged that Shepard v Cartwright might still has its residual effect. At p. 32 of the judgment, the learned judge said,

"The husband relied on his conduct in developing the properties and working on them even after they were in the names of the children. Use of the evidence about that conduct for that business offends the principles laid down in Shepard v Cartwright so far as they survive the Evidence Act 1995: the conduct was not an admission, was not part of the transaction, and was self-serving. ..."

The two Hong Kong Court of Appeal decisions referred to earlier were consistent with this modern reformulation of the rule. In fact, in Watson v Smith [1998] 3 HKC 461, the mother whose intention was in issue gave evidence at the trial.

183. Mr Chan argued that the rule of Shepard v Cartwright is a separate rule from the rule against hearsay evidence. In the course of his closing submissions¹, he accepted that if ICP were alive and went into the witness box to give evidence about what he had told Henry about his intention at the time of the transaction, that would not infringe the rule of Shepard v Cartwright and such evidence would be admissible. Likewise, if that evidence was reduced into writing, even though contained in a statement prepared some time afterwards, it would also be admissible. What the rule prohibited, according to Mr Chan, is the admission of evidence of subsequent acts or declarations which did not constitute part of the transaction. He also emphasized that even if ICP were still alive, he could not go into the witness box to give evidence about his intention which had not been communicated to Henry at the time of the transaction. In this connection, he relied on Williams v Williams (1863) 32 Beav 370.

184. On this last point, in the context of rebutting presumption of advancement, I must disagree with Mr Chan. As pointed out by Mr Yu, that decision is inconsistent with a long line of subsequent authorities, most of those have been referred to in the dicta of Heydon JA in Damberg v Damberg cited in Paragraph 181 above. In addition, the same view was endorsed by Deane J in Calverley v Green (1984) 155 CLR 242 at p. 269-270. Evidence of such intention was admitted, as I have said, in the local case of Watson v Smith [1999] 3 HKC 197. However, there is a rider to this. Mr Chan is correct about the inadmissibility of evidence of subjective uncommunicated intention if the only question is whether there is any common intention, see Calverley v Green (1984) 155 CLR 242 Deane J at p. 270 and the dicta of Lord Diplock in Gissing v Gissing cited in Paragraph 72 above.

185. I agree with Mr Chan that the rule of Shepard v Cartwright is independent from the rule against hearsay evidence. In fact, Heydon JA was of the same opinion. Hence, the question does not depend on whether ICP is dead or alive. The crucial issue is whether the evidence contained in the declarations and statement pertained to acts and declarations contemporaneous with the transaction in question.

186. Applying this test, I am not persuaded that Arnold could rely on the rule of Shepard v Cartwright to exclude the evidence in ICP's declarations and statement, in particular in respect of the evidence relating to (a) to (c) set out in Paragraph 168 above. I do not think this is a case of uncommunicated intention. Regarding the acquisition of the land, Paragraph 3 of the statement and paragraph 6 of the draft declaration referred to discussion with Henry prior to the auction. Regarding the 1958 Power of Attorney, Paragraph 8 of the statement referred to conversations with Henry at the material time. Regarding the Lease, Paragraph 10 of the statement and Paragraph 15 of the draft declaration stated that the position had been discussed with Henry. In my view, ICP's evidence in these paragraphs was in respect of matters contemporaneous with these transactions and as I have said, the evidence about Henry's nomination, knowledge and understanding must be viewed in this light. Reading these declarations and statement as a whole, ICP's evidence on the common intention was that the Property was not a gift to Henry and this was made known to him through discussions and conversations.

187. In respect of the explanations as to the notes in the account, they were not contemporaneous with the transactions. However, insofar as Arnold relied on these notes to support his case of gift, he is treading beyond the presumption of advancement. In such circumstances, although Ching Hing and the Estate could not rely on this piece of evidence to rebut the presumption, they are entitled to rely on this piece of evidence to rebut Arnold's reliance on the notes.

188. The same analysis could be applied in respect of Mr Chan's reliance on the 1958 Power of Attorney and the Lease. One possible way to look at these two documents is to treat them as part and partial of the composite transaction in the acquisition of the Property as a whole. I have already discussed about the nature of the Property and the relevant intention of the parties prior to its acquisitions in earlier sections. On that view, the evidence of ICP regarding conversations and discussions around the time of the execution of these documents were contemporaneous to the composite transaction. Another possibility is to treat the three stages separately. In that case, such evidence of ICP would be admissible, not by way of rebutting the presumption of advancement, but by way of response to Mr Chan's reference to the 1958 Power of Attorney and the Lease in his contention as to graduation gift.

189. For reasons given in Paragraph 174 above, I would exclude from my consideration the references to the transactions concerning the other children in the declarations.

Conclusions in respect of Stage I

190. I am therefore satisfied that there were discussions amongst the parents, Henry and Ching Hing (through the parents) prior to the acquisition of the land that Henry would only be holding the legal title as a nominee. The Property was not a gift to Henry. It was intended that Ching Hing would have a beneficial interest in the Property. By reason of the evidence of Madam Koo and ICP (as set out in his statement and declarations), which I accept to be truthful and reliable insofar as they are pertinent to this issue, the common intention in this regard was established. Alternatively, the same conclusion could be reached by inference drawn from the contribution by ICP and Ching Hing to the acquisition of the Property, including the construction costs.

191. Since the Property was not intended by those contributed to its purchase price, including the construction costs, to be a gift to Henry, Henry did not acquire any beneficial interest in the Property. He held the legal title to the Property as trustee.

192. To ascertain the extent of Ching Hing's beneficial interest in the Property, I will adopt the approach of Waite LJ in Midland Bank v Cooke [1995] 4 All ER 562 at p. 574d to f,

"When the court is proceeding, in cases like the present where the partner without legal title has successfully asserted an equitable interest through direct contribution, to determine (in the absence of express evidence of intention) what proportions the parties must be assumed to have intended for their beneficial ownership, the duty of the judge is to undertake a survey of the whole course of dealing between the parties relevant to their ownership and occupation of the property and their sharing of its burdens and advantages. That scrutiny will not confine itself to the limited range of acts of direct contribution of the sort that are needed to found a beneficial interest in the first place. It will take into consideration all conduct which throws light on the question what shares were intended. Only if that search proves inconclusive does the court fall back on the maxim that 'equality is equity'."

193. In my judgment, whilst it is clear that the common intention was that Ching Hing would have a beneficial interest, the extent of such interest had not been precisely agreed upon. In view of my conclusion as to the identity of the payer of $121,000 and the references to both Ching Hing and ICP himself as owner of the Property in ICP's declaration and statements, I do not think one can conclude ICP intended that Ching Hing would be the sole beneficial owner of the Property. On the evidence, it seems to me to be more probable that both ICP and Ching Hing were beneficial owners of the Property. This conclusion is also consistent with some subsequent events: the fact that the land (as opposed to the building) was not included as asset of Ching Hing in its accounts, the retention of title deeds by ICP and WMS instead of Ching Hing, the payment of rent by Ching Hing to WMS and after her death, ICP.

194. In the absence of evidence as to precise agreement on the proportion in which the beneficial interest in the Property was to be shared between ICP and Ching Hing, I think a fair inference in the circumstances of the present case is that each party held a beneficial interest in proportion to his contribution to the acquisition of the Property, including the construction costs of the building. That proportion was crystallized upon the completion of the construction in 1965.

195. It follows from my conclusion as to the intention of the parents that ICP did not intend to make a gift of his beneficial interest in the Property to Henry.

196. As I explained in the earlier section, I have considered the matter primarily by way of constructive trust. However, even if the case is analysed from the perspective of resulting trust, the same conclusion could be reached. In short, the presumption of advancement in favour of Henry, insofar as he could rely on the same, is rebutted by evidence as to the intention of the parents.

Stages II and III

197. On my findings, Stage II enquiry, which is premised on the absence of common intention prior to the acquisition of the land, is unnecessary.

198. As to Stage III, I have already dealt with the arguments of Mr Chan in Paragraphs 139 to 141 above. I do not think one could interpret the Lease as the abandonment of beneficial interest by Ching Hing. In any event, given my finding as to the lack of beneficial interest on the part of Henry, even if Ching Hing abandoned its beneficial interest, that would only benefit the other beneficial owner, ICP. One certainly cannot construe the Lease as a conveyance of beneficial interest by Ching Hing to Henry.

199. Hence, my overall conclusion as to the beneficial ownership of the Property is that all along Henry was merely a trustee. He held that legal title on trust for ICP and Ching Hing. In accordance with the reckoning of Mr Yu, ICP's beneficial interest in the Property was 121,000/1,135,566 whilst Ching Hing's beneficial interest was 1,014,566/1,135,566.

The Lease

200. In the light of my conclusion on the main dispute in these actions, it is unnecessary for me to dwell on the arguments of the parties regarding the effect of the Covenant. I would only make a few observations on this aspect of the case. That would not deal with all the issues raised by the parties.

201. In the course of his submission, Mr Chan inform this court that Arnold would not ask for mesne profit prior to July 1997 in excess of the $500 per month, viz. at the rent commensurate with the terms of the Lease. The main issue is the position after 1 July 1997. As mentioned, the leasehold interest over the Property, even taking the deemed renewal in 1973 into account, expired on 30 June 1997. It was extended up to 2047, not by virtue of any option to renew but by virtue of an extension granted by the Government pursuant to Section 6 of the New Territories Leases (Extension) Ordinance Cap. 150.

202. I agree with Mr Chan that on proper construction, even assuming that it was not void for uncertainty, the Covenant did not impose an obligation on Henry or his successor in title to offer a renewal of the Lease upon the extension being granted pursuant to Section 6. In the first place, the Covenant only applied in the context of renewal of the leasehold interest under the Government Lease. What we have is a statutory extension. For reasons which I have set out in my judgment in Mutual Luck Investment Limited v Yeung Chi Kuen, HCMP 6047 of 1998, 25.11. 2002, at Paras. 46 to 51 in Part II of my judgment, I am of the view that the extension operated by way of a surrender and re-grant in 1988. It was not a renewal. Neither was it something which Henry could apply for or take steps to acquire.

203. Further, in the absence of a very clear provision, the court will not construe an option to renew as giving rise to a right of perpetual renewal. The option would be spent once it is exercised once, see Caerphilly Concrete Products Ltd v Owen [1972] 1 WLR 372 at 374G to 375A. I do not think the Covenant is clear enough to confer upon Ching Hing a right to a second renewal. I do not regard the words "are or shall be held from the Crown" in the Covenant as plainly referable to a perpetual renewal.

204. Mr Yu relied on similar words in Clause 1 of the Lease to argue that the duration of the Lease would be as long as the leasehold interest of Henry. In effect, he was arguing that this amounted to a perpetual renewal because upon each renewal from the Government, Henry acquired a new leasehold interest. If that argument were sound, there would not be any need for the Covenant to be inserted in the Lease. I reject this argument.

205. Mr Yu also relied upon Section 7 of the New Territories Leases (Extension) Ordinance Cap. 150. He argued that the Lease as renewed (or deemed renewed either by conduct or by operation of equity) in 1973 is an interest or encumbrance the leasehold interest of Henry was subject to before the extension and hence, preserved or deemed to continue during the extended period under Section 7(1)(a)(iii) and (2).

206. I accept that the Lease could be classified as an encumbrance or interest to which Henry's leasehold was subject. However, even assuming that there had been a renewal in 1973, the renewed Lease would, according to the Covenant, only run up to the day before the last date of the renewed leasehold, viz. 29 June 1997. Section 7(1)(a) only applies to "encumbrances and interests as applied immediately before the period of extension [viz. 1 July 1997]". Although there was only a lapse of one day, that was in my judgment fatal to Mr Yu's argument. I therefore hold that Ching Hing could not benefit from Section 7.

207. Another point taken by Mr Yu is the CR 101 point. In the end, it boils down to the question of whether Arnold could rely on a CR 101 served on 26 September 1995. The argument is that since that CR 101 only terminated the tenancy on 31 March 1996, Arnold could not rely on such termination in this action because the cause of action had not yet accrued when the writ was issued on 16 November 1995. This argument is based on the observation of Keith JA in Lark International Finance Ltd v Lam Kim Marisa [2000] 4 HKC 688 at p. 699I to 700 A, which was recently followed by Ma J (as he then was) in Wing Sui Co. v Goldquest International Ltd, HCA No. 4145 of 2001, 23.4.2002.

208. Mr Chan argued that those were only obiter and not binding on this court. He urged me to follow another line of authorities instead, namely the decision of Waung J in Woo Suk King v Lam Lee Yuet Ha [1995] 3 HKC 701, Suffiad J in Chau Chik Yee v New Artic Properties Ltd HCA No. 14305 of 1997, 18.1.1999. He also referred to the English cases of "The Fairport" (No. 2) [1966] 2 Ll Rep 7 and Vax Appliances Ltd v Hoover Plc [1990] RPC 656. These cases supported the view that one can rely on a cause of action arose after the issue of the writ. He submitted that this approach was more consistent with the rejection of the relation back theory by the House of Lords in Kettleman v Hansel Properties Ltd [1987] AC 189.

209. Since whatever I am going to say on this topic would probably be regarded as obiter, I do not wish to prolong this judgment by saying much on this issue. My tentative view is the same as that of Ma J, viz. I am probably bound by Lark International Finance Ltd v Lam Kim Marisa [2000] 4 HKC 688.

The results

210. For the reasons given, I grant the following relief in High Court Action No. 11768 of 1995. Arnold's claims are dismissed. In respect of the counterclaim of Ching Hing and the Estate, I grant a declaration that Arnold holds the Property as trustee in favour of Ching Hing and the Estate in the proportion set out in Paragraph 199 above. As to the vesting of the legal title, in view of the agreement between the Estate and Ching Hing as to the assignment of the former's interest to the latter, I would invite parties to submit an agreed form of order for the court's approval, with liberty to apply for that purpose.

211. In High Court Action No. 3675 of 1985, I dismiss the claim of Henry. I also grant a similar declaration in favour of Ching Hing and the Estate vis-à-vis Henry as in the other action. I am not sure if Ching Hing is pursuing the other relief set out in their Counterclaim in this action. If they are, parties are at liberty to submit an agreed order for the court's approval and again there will be liberty to apply for that purpose.

212. On the question of costs, instead of making a cost order nisi, due to the complexity of this case, I would invite the parties to see if they can come to an agreement on the appropriate cost order in the light of my judgment. If not, they can restore the matter for argument.

213. Lastly, I wish to thank counsel again for their assistance and good sense in the conduct of this trial. But for that, I am sure that this trial would last much longer in view of the allegations raised in the witness statements.