LEE CHEUN KIN, deceased v. LEE CHAK SUM AND ANOTHER

HCA2684/95

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2684 OF 1995

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J U D G M E N T

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1. According to a certificate issued in China, the 2nd Defendant in these proceedings is 84 years old. In evidence she said she was "almost 90". Whatever her exact age, she is the venerable matriarch of the Lee family.

2. She bore seven children, all in China. Slowly but surely in the 1950s the family regrouped in Hong Kong and started working together, in the restaurant business, to make a living.

3. The sad chapter in the Lee family history is the fact that the 2nd Defendant has outlived all three of her sons. The death of Lee Cheuk Kin in 1994 was doubly sad because not only had a mother survived her favourite son but his death sparked off this unfortunate litigation.

4. There are two features in this litigation which are not uncommon in family disputes, namely, it has been expensive and avoidable. In 1995, after Lee Cheuk Kin's death at the age of 53, his widow, the Plaintiff, issued a writ against her deceased husband's brother (the 1st Defendant) and mother (the 2nd Defendant) seeking a declaration of interest in family property. Prior to her husband's death the relationship between her and the rest of her husband's family was poor. Since 1995 it has gone from poor to bad to irreparable. The parties positions have become polarized; intransigence has set in and the resulting litigation, which despite valiant attempts by the legal representatives has failed to reach any compromise on any aspect, has occupied six days.

5. I shall attempt to give a non-controversial thumb-nail sketch of the history of the matter prior to highlighting the primary matters in dispute.

6. In the 1950s the 2nd Defendant came to Hong Kong from China. Her husband and some of their seven children came with her. For most of the time since, it seems that the 2nd Defendant and her husband have not shared the same residence. In any event the role of the husband (now deceased) has not been a significant issue in this case.

7. Over the next few years all the children came to Hong Kong. Lee Cheuk Kin (the second son) came with his mother in about 1957. I shall refer to him as "the Deceased". He married the Plaintiff (Chow Suk Kwan) in 1976 when he was 35, sadly he died at the young age of 53 in 1994.

8. Of her seven children only three are still alive. Her eldest son, Lee Shu Hoi died in 1975. Her third son, Lee Chak Sum died in 1998 and one of her four daughters died in 1992.

9. After working as an amah in the late 1950s, the 2nd Defendant joined her younger brother in the restaurant business. In varying degrees all the children worked in the family restaurants business. The family worked in the "Tung Hing" restaurant in Shaukiwan (owned by the 2nd Defendant's brother) from the late 1950s to the mid 1960s. The "Tai Wah" restaurant where many of the family worked was set up in about 1966 and continued in business until about 1980. From an early time the eldest brother Lee Shu Hoi ran his own catering business called "Shu Kee" which was continued to be managed after his death in 1975 by members of the family, including the Deceased.

10. In 1976, shop/restaurant premises in Austin Road, Kowloon were purchased as an investment. The family never operated or ran it as a restaurant. It now still operates as the "369 Restaurant". It is this property which is at the centre of the dispute. In evidence it was called the "Tsim Sha Shui shop". I shall refer to it as the "TST shop".

11. The second property in dispute is the matrimonial home of the Plaintiff and her two sons (i.e. the 2nd Defendant's daughter-in-law and her two grandsons). It is situated in Grampian Road. The Plaintiff, the deceased (up to his death) and their two sons have lived there since it was purchased and conveyed into the deceased sole name in 1988. The sons were then aged 11 and 7. For 10 years prior to that the family had lived in a flat (referred to as the "Ho King" residence) which had also been purchased and conveyed into the deceased name. For a short period in the early 1980s, ending in 1983, the 2nd Defendant lived with the deceased's family at the Ho King flat.

12. The TST shop has produced a steady income since it was purchased in 1976. The shop was conveyed into the joint names of the deceased and his younger brother Lee Chak Sum (died 1998) as tenants-in-common. The rental income has been paid to the deceased up to his death, to the Plaintiff for a short time thereafter and into court since 1996. When he was alive the deceased treated the rent as his income out of which he paid a regular allowance to his mother for her living expenses.

The claims

(1) The Plaintiff's claim

13. The Plaintiff claims that at the time the TST shop was purchased and conveyed into the names of her husband and his younger brother as tenants-in-common, it was orally agreed that the younger brother (the 1st Defendant) held his share of the property on trust for three people, namely the Plaintiff, the 2nd Defendant and himself, in equal shares.

14. The Plaintiff also claims that it was agreed at the time that the deceased was responsible for all down payments, deposits and mortgage repayments (a mortgage representing just over 20% of the purchase price was arranged). The deceased was also entitled to all the rents received, from the property.

15. The Plaintiff's primary claim therefore is that she, as the deceased's personal representative owns one half of the TST shop plus a further one-sixth being held by the 1st Defendant on trust for her (a total therefore of two-thirds) plus a declaration of her entitlement to all the rent.

16. Her alternative claim is that she is beneficially entitled to the whole of the property. This alternative claim is based on her evidence that the purchase price for the TST shop came entirely from the deceased's savings and that he was entirely responsible for the fees and mortgage which was in fact repaid in full by 1982. She therefore seeks a declaration that the 1st Defendant is holding his share on a resulting trust for her and an order that he transfers the legal title to her forthwith.

(2) The Defendants' counterclaims

17. The Defendants deny the claim and make, in effect, four counterclaims. They contend that :

(a) The 2nd Defendant is the beneficial owner of the TST shop and that the half share vested in the deceased's estate be transferred to her forthwith. This claim is based on the contention that the money used to make the purchase in 1976 was in fact all the 2nd Defendant's money which the deceased held on trust for her.

(b) The 2nd Defendant is entitled to an account of all the rent derived from the shop since its purchase in 1976. This claim is based on the contention that the deceased received the rent solely as trustee for his mother.

(c) The 2nd Defendant further claims that she is the beneficial owner of the Plaintiff's and deceased's matrimonial home which they occupied from 1978 to 1988, the Ho King flat. The basis of this claim is the same, namely that the purchase price came from money held by the deceased on trust for his mother.

(d) The 2nd Defendant's final claim is that she is also the beneficial owner of the Plaintiff's present home. It was purchased with the proceeds of the sale of the Ho King flat plus a mortgage paid for by the deceased. Both the proceeds of sale and the money for the mortgage repayments, she contends, were hers.

Evidential difficulties

(a) Time

The court has heard evidence from four witnesses (the Plaintiff, the 2nd Defendant and two of her daughters) about matters going back 42 years. At that time the two daughters were not even teenagers. The deceased was 16. Memories, at the best of times and with the best of witnesses, fade. When memories are clouded not only by the passage of time but also by prejudices, bitterness and family acrimony it is difficult to make confident findings of fact.

(b) Documents

Where memories differ about events of long ago it is refreshing to be able to look at contemporary documents in the hope that they may shed light on the difference between the parties. Unfortunately, in this case such documents have been either sparse or non-existent. In cases such as this one, agreements were not put in writing, accounts were either not kept or have been lost, wages and salaries within the family were not recorded. Such documents as have been produced, particularly the deceased's bank account, have weighed heavily in the court's determination.

(c) Age

Much of the Defendant's case depended on the evidence of the 2nd Defendant. She was very elderly and in poor health. That is not her fault and the court made maximum allowances for her when assessing the reliability of her evidence. However, it would be dangerous to place too much reliance on it. It was necessary to have frequent breaks because she tired easily. She became distressed on occasions, particularly and not surprisingly, when the fact that her three sons and one daughter had pre-deceased her. She was unable to remember many things, particularly those which did not favour her case. She nonetheless entertained no doubts about one thing namely that all the profits made in the restaurant businesses from 1957 (approximately) to 1980 (approximately) were hers, as were the three properties in dispute, the TST shop and the Plaintiff's two homes. When giving evidence she was respectful and courteous throughout. Although these characteristics were admirable and a credit to her, her assessment of what was fair and reasonable left much to be desired.

(d) Death

Key witnesses had died. The saga spanned 40 years but the Plaintiff only became a member of the family by marriage half way through, in 1976. Her evidence about events before she met her husband in 1975 came from what he had told her over their 18 years marriage. They were very close and she had learnt a great deal about the Lee family's early days in Hong Kong. The fact remained, however, that the original source of the evidence was from a man who had died in 1994. The Defence were at a similar disadvantage because of the death of Lee Chak Sum in 1988. His witness statement was read. The court attached such weight to it as deemed appropriate in the circumstances.

Law

18. Counsel for both parties (Mr Raymond Chan for the Plaintiff and Ms Jennifer Tsui for the Defendants) were substantially in accord concerning matters of law.

19. It was correctly submitted that :

(i) where real or personal property is purchased in the name of another or in the name of the purchaser and another a resulting trust will be presumed to arise in favour of the person who is proved to have paid the purchase money. The beneficial interest results to the true purchaser.

(ii) Both the presumption of a resulting trust and the presumption of advancement can be rebutted by evidence of the actual intention of the purchaser ... The court puts itself in the position of a jury and considers all the circumstances of the case so as to arrive at the purchaser's true intention. It is only where there is no evidence to contradict it that the presumption of a resulting trust or advancement will prevail.

(iii) Evidence that a gift was intended can rebut the presumption of a resulting trust. The burden of proving a gift is on the party claiming it.

20. Counsel also did not argue about what were the main issues of fact to be determined by the court. They were :-

(a) Who paid for the TST shop? It was agreed the money came from a Bank account, but whose money was it in the Bank account?

(b) What was the intention of the parties at the time of purchase of the TST shop?

(c) Who was entitled to the rental income from the shop?

(d) Whose money paid for the Ho King flat and subsequently the Grampian Road flat? Was it the deceased's money absolutely or was it money held by the deceased on trust for the 2nd Defendant?

21. The court's approach to disputes such as this one was stated by Lord Russell of Killowen in Cheung So Yin Kay v. Chartered Bank (HK) Trustee [1980] HKC. At p.16 he stated :

"Their Lordships do not of course dispute the existence of a presumption of a resulting trust in favour of a person providing the purchase money : but whether in any case that presumption, which in the final analysis rests on presumed intention, is applicable to any particular case, must depend upon a review of all the circumstances of the particular case."

22. I therefore now review the circumstances of this particular case.

The Hong Kong Bank account

23. The Defence evidence purported to portray the deceased as a mere casual worker in the family restaurants, working merely for his food and lodgings without pay and certainly without any share of the profits. This may have been the case when he first came to Hong Kong as a teenage son but it was the Defence case that this remained his role up to and including the time of his marriage at the age of 35 in 1976 and also thereafter as a husband and father up to the time the restaurant business finally closed down in the 1980s.

24. The Plaintiff on the other hand suggested that when the Tai Wah Restaurant in Sai Kung was set up in about 1967 it was to all intents and purposes run by the deceased. He was then a hardworking, enterprizing ambitious young man of 26. He had learnt his trade in the Tung Hing Restaurant in Shaukiwan and now he had the responsibility of being substantially in charge of the family business. He was the head chef, he prepared the menus, he built up the trade with the local fishermen. His mother was the cashier. They shared the profits between them, 75% to the deceased and 25% to the 2nd Defendant.

25. The most important document which helped the court resolve this highly contentious and fundamental issue was the Hong Kong Bank passbook in relation to an account in the deceased's name containing transaction between 1968 and 1977. The Defence argued that this was the account into which all the profits of Tai Wah were paid. Tai Wah was 100% the 2nd Defendant's business, all the profits were hers, the children had no interest in the business it merely provided them with food and accommodation. Their evidence was that the business was entirely a cash business and cash was regularly paid into this account, albeit in the deceased's name, which was the restaurant's sole account. Sometimes, when business was brisk deposits would be made three times a week. Business was brisk throughout the 1970s, although it declined towards the end of the 1970s.

26. The Plaintiff's case, quite simply was that this was the Bank account into which her late husband paid his savings from his share of the profit of the business. It was his money. He withdrew $547,000 from this account in August 1976 to buy the TST shop. He arranged a mortgage of $150,000 in his name to pay the balance. He paid the mortgage installments, also from this account.

27. A brief analysis of the passbook reveals the Plaintiff's account to be eminently preferable. An analysis reveals : -

(i) Deposits were not made about three times a week at any period during the years accounted in the passbook. In the ten years from 1968-1977 a total of 55 cash deposits were made. Even if only one, not three a week had been made there would have been 500.

(ii) The Defence contended that this was the only bank account. However from November 1973 to April 1977 no cash deposits at all were made into it. The Restaurant was busy at this time. The Defence had no answer to the obvious question - where was the money going?

(iii) The Defence stated the business was entirely a cash business. However over the years 22 cheque deposits were made, sometimes for relatively large sums, such as $150,000 and $70,000 in 1976.

(iv) The account bears at the hallmarks of an individual's savings account. Sums are paid in from time to time without any particular pattern. Sometimes months go by with no deposits, then there are periods when about one deposit per month are made.

(v) The cash sums paid in are usually in round sums of a few thousand, usually less than $10,000, each time. This is more consistent with a man crediting his savings account than with a restaurant banking its daily or weekly takings.

28. Whilst I am not satisfied that there was a specific arrangement between the deceased and his mother that they would share profits on a 75/25 basis, I am quite satisfied that the deceased put his share of the profits, whatever they were, into this account, which was his savings account. The absence of any deposits into this account for almost four years must mean that there was another account which in all probability was the business account.

The intention of the parties at the time of purchase

29. The above finding of fact is fundamental to the outcome of this litigation. I am satisfied it was not the 2nd Defendant's money which purchased the TST shop and so no trust results to her. However I must still consider whether or not there was any oral agreement at the time which, if made, results in the beneficial ownership of the property being different from the legal ownership. The legal title is 50/50 shared by the two deceased sons of the 2nd Defendant. Was there an agreement that the 1st Defendant held one third of his half share for the Plaintiff?

30. I am driven to the conclusion that the evidence in support of this oral agreement is not sufficiently reliable. There may have been an agreement of some sort but the court cannot say that it is more likely than not that it was in the terms that the Plaintiff says she recalls. There is no documentary evidence. Two of the three parties to the alleged agreement have died. I have read the witness statement of the 1st Defendant which contradicts the Plaintiff's recollection.

31. I do not think that the Plaintiff has deliberately tried to mislead the court. However, given the passage of time and the intervening events which have soured the relationship between the parties it would be unsafe to make a finding in the terms of the Plaintiff's recollection which may have both become faded with time and also been coloured by acrimony.

32. The consequence is that the legal title remains unaltered by any oral trust agreements. Ironically, the 2nd Defendant's own firmly entrenched attitude, in some ways, enforces this determination. It was always her case that the shop was hers (which I have found it was not) and if she had predeceased her sons she would have left if to them equally. Had they survived her this argument would never have arisen. It is always sad when someone dies. The sadness here has been exacerbated by the fact that family members have died in an order inconsistent with nature's expectations.

33. It was consistently said by all witnesses who gave evidence that the 2nd Defendant was a conservative traditional Chinese lady who favoured sons ahead of daughters. I am satisfied that it was always intended that this property be in the joint ownership of her sons. The 2nd Defendant has only mounted her uncompromising counterclaim because she believes her daughter-in-law is wrongly claiming Lee family property when in fact she is rightly claiming a Lee family member's property - namely that of her deceased husband.

The rental income

34. From the date of purchase to the time of his death the rental income from the shop was always paid to the deceased for the benefit of himself and his immediate family. Even after his death the whole of the rental income was continued to be paid to his widow. Thus, for about 18 years no claim was ever suggested or made by any other member of the family.

35. The deceased used the rental income to provide for his family, to repay mortgage installments on the shop itself and on future matrimonial homes, to make payments to his mother for her living expenses to invest in stocks and shares and to save. It was never suggested that he was ever anything other than prudent and responsible with the money.

36. The owner of the other half of the shop, Lee Chak Sum, the 1st Defendant, consented by conduct to this arrangement. I decline to make any order that would have the effect of repaying rental income paid to the deceased or to the Plaintiff prior to the 1st Defendant's death.

37. However, by his death different considerations prevail. There is no reason why the 1st Defendant's estate should be bound by the arrangement which existed during his lifetime. I will make a declaration that upon the death of the 1st Defendant the rental income of the TST shop be split in accordance with the legal ownership, namely 50% to the deceased's estate and 50% to the 1st Defendant's estate. As far as the 2nd Defendant's entitlement to money from the shop rental income is concerned, the court can only express its confidence that the personal representatives of the deceased sons will continue to make contributions, as did the sons when they were alive, to the 2nd Defendant's welfare.

Grampian Road

38. I turn finally and briefly to the residential properties. Issues concerning the Plaintiff's home and her previous home, the Ho King flat in Shaukiwan, never formed part of her claim. They were both conveyed absolutely into the name of the deceased.

39. The issues of their ownership emerged for the first time in the Defendants' counterclaim. The Plaintiff when giving evidence stated that the purchase price of Ho King flat came from her husband's savings and the purchase price for the Grampian Road flat came from the proceeds of sale of Ho King plus a mortgage. It is appropriate at this stage to state the court's assessment of the Plaintiff's credibility. I found her to be a calm, straightforward and credible witness who did her best to give honest and accurate evidence. Some small parts of her evidence have not been relied on in this judgment. Where I have regarded some parts of her evidence as unreliable it was because of the passage of time and the bitterness between the parties and not because of deliberate dishonesty.

40. Returning to the evidence, I am satisfied that the deceased did have sufficient money of his own at the time to make the purchase of the premises. He had been able to save money from the rental income, he also made some profits from investments in the stock market, also in the early days he derived some profits from the restaurant businesses in which he worked (including the Shu Kee business, where I find he did work after the death of his brother Shu Hoi in 1975) and he also made some money from selling oil paintings which was both a hobby and a small source of income.

41. I am enforced in my decision that the family never, in truth, regarded these homes as belonging to anyone other than the deceased until the Plaintiff's writ was issued in 1995, by the circumstances in which the Grampian Road flat was purchased in 1988. The 2nd Defendant and other members of the family did not know the deceased had purchased the property until after they had moved. The 2nd Defendant herself was in China at the time. The Plaintiff's explanation about this, which I accept, was in effect, "it was our house, our decision, why should we have to tell anyone. We certainly did not have to ask permission of anyone".

42. In short, the Defendants' counterclaims in respect of the Shaukiwan flat and the Grampian Road flat fail.

Peripheral issues

43. A number of issues about which evidence was given have not been specifically referred to in this judgment. The sort of matters to which I refer are for example, the length of time that the Plaintiff and the deceased had known each other before they married (of some relevance to the Plaintiff's knowledge of the intention of the parties at the material time), evidence relating to the events at a family funeral in 1992 (which was of little relevance) and a loan by the deceased to one of his sisters for the purchase of a motor car. There were several more such matters. Simply because an issue has not been specifically referred should not be regarded as an indication that it has been overlooked.

44. Before concluding this judgment, reference should be made to the evidence given by Madam Lee Wai Chun, the 2nd Defendant's daughter. Her evidence was telling because it highlighted the cause of the insoluble rift between the parties. She was a perfectly pleasant lady but one whose evidence was given strictly in accordance with the family line. Her lack of memory seemed selective and when she did attempt to answer questions on matters which did not favour her case she became evasive. Some questions she could not avoid. When asked if she agreed with her mother that the Plaintiff had no interest in the TST shop or any rental income from it (and never had) or even in her own home in Grampian Road, she said she did agree. She said the Plaintiff's only entitlement was to food and accommodation while she lived there with her husband. She said the reason she believed that even that entitlement ended upon the death of her husband was because it was her mother's view and her mother had to be obeyed.

Conclusion

(1) I dismiss the claim and the counterclaim save that I make the following declarations pursuant to paragraphs (4)-(6) of the Re-amended Statement of Claim.

(2) I declare that the Plaintiff, as the Personal Representative of Lee Cheuk Kin, holds half the legal title in the shop as pleaded in paragraph 3 of the Re-amended Statement of Claim.

(3) I declare that the Plaintiff, as the Personal Representative of Lee Cheuk Kin, is entitled to one half of the rental income of "the shop" from the date of the death of Lee Chak Sum together with such interest as has accrued on the said monies in accordance with her declared entitlement herein, since the said rent has been paid into court.

(4) I declare that the Defendants have no claim to the rental income from "the shop" prior to the death of Lee Chak Sum.

Costs

45. The majority of the evidence, both in preparation for trial and at trial, was in relation to the counterclaim which has been dismissed. On the other hand the Plaintiff has not been entirely successful. However, bearing in mind that the Defendants have been unsuccessful and bearing in mind that the length of the case was primarily because of the counterclaim and bearing in mind the Court's discretion as to costs, the order nisi which I now make is intended to reflect the merits of the case :-

(5) Costs to the Plaintiff save that the Plaintiff is liable for 25% of her own costs, to be taxed if not agreed.