LAI SHUI YIN v. JIANG GUO YING AND LEE KAI WAH IN THE CAPACITY OF CO ADMINISTRATORS OF THE ESTATE OF LEUNG WAI KAY, DECEASED

HCA 2414/2009

[2022] HKCFI 3768

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2414 OF 2009

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BETWEEN

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JUDGMENT

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INTRODUCTION

1.  This is a dispute over the beneficial ownership of a property known as Flat B on 1^st Floor of Block 14, Beacon Heights Phase 3 and car parking space No.31 on Level 2 of Beacon Heights Phase 2, Nos.1-19 and 2-14 Lung Ping Road, Kowloon, Hong Kong (“Property”).

2.  The Property is registered under the name of Leung Wai Kay (“Wai Kay”) and Leung Wai Hon (“Wai Hon”) as tenants-in-common in equal shares. They are the sons of the plaintiff (“Mother”).

3.  Mother’s case is that Wai Kay and Wai Hon hold the Property on a common intention constructive trust for their father Leung Yip Pui (“Father”) and herself who, as between themselves, have the sole right to decide its beneficial ownership. After Father passed away, Mother became the sole owner of the Property.

4.  Mother commenced this Action for a declaration that the half share in the Property registered under the name of Wai Kay was held at all times on trust for her and for a vesting order for such half share.

5.  Wai Kay passed away intestate on 16 January 2009. Letters of Administration of the estate of Wai Kay were granted to Jiang Guo Ying (“Jiang”), the widow of Wai Kay, and Lee Kai Wah. They are sued in this Action as the co-administrators of the estate of Wai Kay. Their case is that Wai Kay owns a half share in the Property. They further contend that in or around May or June 2009, Mother wrongfully ousted Jiang from the Property, and by commencing this Action she refuses to acknowledge Wai Kay’s half share in the Property. They counterclaim for mesne profits up to the date when they are allowed free access to the Property.

FAMILY BACKGROUND

6.  Father and Mother got married in Guangzhou in 1952. They moved to Hong Kong in 1955. After arriving in Hong Kong, Father made a living by repairing sewing machines. In about 1970, Father and Mother started trading in sewing machines and accessories in a sole proprietorship under the trade name of “瑞生針車行”. That business was taken over in 1990 by a limited company set up by them known as Sui Sang Sewing Machine Company Limited (瑞生針車行有限公司) (“Sui Sang”).

7.  At the same time, Father also bought and sold used sewing machines and components in his own name. He repaired and refurbished used sewing machines and sold them. The income derived was deposited in a bank account (“Family Account”) opened by Father in Wai Kay’s name with Sin Hua Trust and Savings Commercial Bank (now Bank of China Hong Kong). It was Father’s idea to open the Family Account in Wai Kay’s name. Household expenses, children’s tuition fees and monies used to acquire properties were paid out of that account. I accept Mother’s evidence that the funds in the Family Account were all derived from the family business and were joint assets of Father and Mother.

8.  Father and Mother have five children in the following order of seniority:

(1) Leung Luen Foon (“Luen Foon”);

(2) Wai Kay;

(3) Leung Wai Hung (“Wai Hung”);

(4) Leung Wai Chung (“Wai Chung”);

(5) Wai Hon.

9.  After Luen Foon completed her secondary education in 1975, she began to help in the family sewing machine business, mainly to handle the accounts. She got married in 1992 and emigrated to Canada and settled there in 1993. She returned to Hong Kong to help in the business of Sui Sang in around October 2000.

10.  After graduating from Form 2, Wai Kay started to work in the family sewing machine business as an apprentice. Of the five children, he spent the most time in the family business. Over time he took up a more active role, especially after Father’s health deteriorated in 1995. He was effectively the boss of Sui Sang after Father passed away in 2000. He earned a monthly salary at Sui Sang, starting from $400 and was adjusted over the years to about $20,000 by the time of his demise in 2009.

11.  Wai Hung, Wai Chung and Wai Hon all pursued their studies overseas after completing their secondary education. Wai Hung works and lives in Switzerland and did not participate in the family business. Wai Chung worked in Sui Sang from around January to July 2004. Wai Hon worked in Sui Sang from around June 1993 to April 1994.

12.  When Sui Sang was established, its shares were distributed to all family members: 30% to Father, 20% to Mother, and 10% to each of the five children. Father, Mother, Luen Foon, Wai Kay and Wai Chung were the directors. In 1999, Father transferred his 30% shares to Mother who distributed them equally to the five children in 2002 (6% to each). In 2002, Wai Chung transferred his 16% shares to Wai Kay, who since then owned 32% in Sui Sang. Wai Chung also resigned as director in 2006 and did not take part in Sui Sang’s affairs ever since.

13.  Jiang met Wai Kay in Shenzhen in about 1995 or 1996. She was a receptionist in a restaurant and he was a customer. They developed a romantic relationship and started living together in Shenzhen. They have three daughters, born in 1997, 1999 and 2004. Wai Kay only revealed his relationship with Jiang to his family when their second daughter was born. Wai Kay and Jiang got married in Hunan in 2001.

14.  In order to help Jiang and her eldest daughter to change their registered place of residence from Hunan to Guangzhou so as to facilitate their future relocation to Hong Kong, in around 2002, Mother bought a residential flat in Guangzhou with her own monies, and she named herself, Wai Hon, Wai Kay, Jiang and her eldest daughter as the five owners. There was a dispute over its ownership after Wai Kay passed away, resulting in a Court case in Guangzhou and Mother and Wai Ho getting back 42% of the ownership interest in the property. It is unnecessary for me to go into further details of the case to resolve the real issue in dispute.

15.  In September 2008, Jiang came to Hong Kong with the eldest and third daughters to reunite with Wai Kay. Their family resided in the Property with Mother and Wai Hon. In October 2008, Wai Kay bought a residential flat in Tsing Yi as his family’s new residence.

16.  In November 2008, Wai Kay got very ill for unknown cause. Whilst there was a short period of recovery, his health condition suddenly deteriorated in January 2009 and passed away in the same month.

17.  I note Jiang’s complaint that her relationship with Wai Kay’s family members deteriorated after Wai Kay passed away, and Wai Hon repeatedly demanded her to sign documents to transfer the shares in Sui Sang under Wai Kay’s name and Wai Kay’s half share in the Property, including an occasion in about May or June 2009 when Wai Hon forced his way into Jiang’s room in the Property. Jiang therefore left the Property and moved to the Tsing Yi flat (acquired by Wai Kay) with her daughters in fear of their safety. This is denied by Wai Hon. For reasons below, it is not necessary for me to make a finding in this regard.

PURCHASE OF FAMILY HOME

18.  In order to put matters in proper context, it is necessary to set out two property transactions leading to the purchase of the Property.

19.  In 1987, Father and Mother bought a residential flat in Block 4 of Beacon Heights Phase 4 (“Beacon Heights Block 4 Flat”) as joint tenants. The purchase price was $928,224. The initial deposit was paid with the profit of sale of a Yuen Long property in Mother’s name in 1986. The mortgage repayments were paid from the Family Account. The flat was the family home resided by Father, Mother, Luen Foon and Wai Kay. The other three children were at that time still studying abroad.

20.  In 1991, a residential flat in Lucky Court on Waterloo Road and a car parking space (“Lucky Court Flat”) were acquired under the names of Father, Luen Foon and Wai Kay as joint tenants. Father alone signed the provisional sale and purchase agreement. The purchase price was $3,070,000. I accept Mother’s evidence that:

(1) Father added the names of Luen Foon and Wai Kay in the formal sale and purchase agreement in order to facilitate the future handling of the Lucky Court Flat. At that time, Wai Hung and Wai Hon were still studying abroad. Wai Chung had returned to work in Hong Kong but did not work in Sui Sang. I am of the view that it made sense for Father to add Luen Foon and Wai Hon as the co-owners of the Lucky Court Flat, when they were the two children involved in Sui Sang and were all along residing in the family home.

(2) Mother said that she herself was not named as a registered owner of the Lucky Court Flat because she was getting old and she wanted her children to deal with the property.

(3) The funds for purchasing the Lucky Court Flat came mainly from bank mortgage. The mortgage repayments were paid from the Family Account. Since the funds in the Family Account were joint assets of Father and Mother, Father and Mother were the actual owners of the Lucky Court Flat. Luen Foon and Wai Kay had no interest in the flat, nor was there any mention of a gift to them.

21.  Luen Foon is the only surviving registered owner of the Lucky Court Flat, and her evidence corroborates Mother’s case. She accepted that she did not own any interest in the Lucky Court Flat even though she was named as one of the co-owners, and she did not even think that it was a gift to her. The Lucky Court Flat was purchased with monies belonging to Father and Mother who are its actual owner. She said that Wai Kay knew very well about that. For the same reason, she did not ask about the sale proceeds after the Lucky Court Flat was later sold in 1995.

22.  In this regard, the Defence pleaded that Wai Kay, being one of the three joint tenants, was a beneficial owner of a “one-third share” in the Lucky Court Flat. Given the unity of interest in a joint tenancy, it is difficult to see how Wai Kay could claim to own a one-third share in the Lucky Court Flat. Jiang did not know about the financial arrangements for buying the property. There is no evidence that Wai Kay had contributed to the purchase price for the Lucky Court Flat.

23.  The family only resided in the Lucky Court Flat for a short period of time because the air quality in that area was not good and it was noisy. They then moved back to the Beacon Heights Block 4 Flat.

24.  Luen Foon got married in 1992 and emigrated to Canada in 1993. Before emigrating, she signed a power of attorney authorizing Wai Kay to deal with the Lucky Court Flat in her absence.

25.  In 1995, the Lucky Court Flat was sold for obtaining cash to buy a larger flat than the Beacon Heights Block 4 Flat as the new family home. More space was required since Father was getting old and sick and was wheelchair-bound, and one extra domestic helper had to be employed to take care of him. Father signed a power of attorney authorizing Wai Chung to deal with the Lucky Court Flat on his behalf.

26.  The Lucky Court Flat was sold for $6,500,000. Completion took place in June 1995. It is not known to whom the initial deposit of $100,000 was paid. The further deposit of $550,000 was paid to Wai Kay by cheque. The balance of the purchase price was paid on 28 June 1995 to Wai Kay and Wai Chung in split cheques of $2,914,447.50 each. There is no evidence on who gave the instructions for the split cheques.

27.  The Defence pleaded that “half of the sale proceeds” of the Lucky Court Flat belonged to Wai Kay beneficially, or alternatively were intended to be “given” to Wai Kay. Mr Tommy Cheung who appeared for the estate of Wai Kay made clear that it was Father and Mother who made a gift of half of the sale proceeds of the Lucky Court Flat to Wai Kay as recognition of Wai Kay’s substantial devotion to the family business from 1971 from which he had only received modest salaries.

28.  As Ms Winnie Chan (who appeared for Mother) pointed out, any allegation of gift can only predicated upon acceptance of beneficial ownership of Father and Mother in the gift. Mr Cheung must therefore necessarily accept that Father and Mother were the beneficial owners of the sale proceeds of the Lucky Court Flat, and this is in line with the evidence of Mother and Luen Foon.

29.  That aside, the total amount which Wai Kay received from the sale proceeds was $3,464,447.50 (i.e. the sum under the split cheque and the further deposit), not half of the sale proceeds.

30.  There is no plausible reason why Father and Mother would make a gift of half of the sale proceeds of the Lucky Court Flat to Wai Kay, when the purpose of the sale was to obtain funds to purchase a larger family home and it is difficult to see how this could be achieved if half (or more) of the sale proceeds was gifted to Wai Kay. Likewise, there is no plausible reason for the same gift to be made to Wai Chung. There is equally no plausible reason for Father and Mother to make a gift to Wai Kay and Wai Chung only but not to their other children. The distribution of the shares in Sui Sang to the five children (see [12] above) demonstrated that Father and Mother treated all their children equally.

31.  The suggestion that the gift was a reward to Wai Kay for his contribution to the family business over the years was not pleaded. There is no plausible reason for Father and Mother to: (1) make a gift to him of a value of almost 150 times of his salary 14 years later in 2009; (2) choose the form of gift as half of the sale proceeds of the Lucky Court Flat rather than funds from other source or in any other form; and (3) decide to make a gift to Wai Kay in June 1995 and not at any other time, even though that might be the year in which Father’s health had deteriorated and Wai Kay had taken up a more active role in Sui Sang’s business. The claim that the half share of the Lucky Court Flat sale proceeds was a gift to Wai Kay in recognition of his devocation in Sui Sang’s business was also undermined by the fact that a gift of the other half share was made to Wai Chung, who had never participated in Sui Sang’s business.

32.  In this regard, I accept Mother’s evidence that:

(1) After Wai Chung received the sum under the split cheque, he transferred it to Mother who put it under a fixed bank deposit in her bank account. On maturity, she transferred the sum of $2,918,195.80 to the Family Account on 7 July 1995.

(2) Mother asked Wai Kay to transfer the further deposit and the balance of the purchase price he had received from the sale of the Lucky Court Flat into the Family Account. However, Wai Kay deposited the sale proceeds into his bank account, and on 7 July 1995 transferred $2,150,000 out of his bank account to the Family Account, and kept the rest of the sale proceeds.

(3) It follows that Father and Mother never intended to make a gift of the sale proceeds of the Lucky Court Flat to Wai Kay or Wai Chung. Both of them received the sale proceeds as the representatives of Father and Mother.

33.  The search for a new family home took place at the same time when the Lucky Court Flat was put up for sale. One suitable unit in Beacon Heights (where the family was then residing) was identified. That was the Property. The purchase price was $7,200,000. Completion took place in July 1995, shortly after the Lucky Court Flat was sold.

34.  There is no evidence on who paid the initial deposit of $80,000 and the agency commission of $45,000. The further deposit and stamp duty totaling $838,000 were paid from Sui Sang’s HSBC bank account. The balance of the purchase price was partly paid by a mortgage loan of $1,500,000 from HSBC, and repaid from the trading proceeds of the family sewing machine business or funds from the Family Account which were deposited into a joint mortgage account in the names of Wai Kay and Wai Hon. The remaining sum of $4,980,000 and solicitors’ fees ($27,000) were settled by two cashier orders ($2,500,000 and $2,507,000) purchased with funds from the Family Account on 7 July 1995.

35.  I accept Mother’s case that the monies under the two cashier orders were derived from the sale proceeds of the Lucky Court Flat. It was all along the plan of Father and Mother to use the sale proceeds to buy a new family home. There is no reason for them to resort to other source of funds. There is no direct or reliable evidence that Wai Kay had contributed his own funds to the $2,150,000 transferred into the Family Account on 7 July 1995, save that Jiang claimed Wai Kay told her he had contributed funds for purchasing the Property, but she did not know the situation in detail. The time proximity between Wai Kay’s transfer of $2,150,000 to the Family Account and his receipt of the split cheque suggested that the sum he transferred to the Family Account was part of the sale proceeds of the Lucky Court Flat received by him.

36.  As to why Wai Kay and Wai Hon were named as the owners of the Property as tenants-in-common in equal shares:

(1) Mother’s case is that they were named as owners because they were single at the time and they were living with Father and herself, and it would be more convenient to manage the sale and purchase of property through them. The actual owners of the Property are Father and Mother, and Wai Kay and Wai Hon have no interest. One added reason pleaded in the Reply is to avoid paying estate duty on the Property on the demise of Father and Mother. Mother’s witness statements made no reference to such a reason so I shall ignore it.

(2) On the other hand, the Defence pleaded that Wai Kay and Wai Hon were each gifted a half share in the Property:

(a) because they were the only children who were not yet married at the time;

(b) because Wai Kay had all along been working for the family business; and

(c) on the understanding that both of them would reside in the Property with Father and Mother.

37.  I reject the defendant’s case that Father and Mother intended to make a gift of half share of the Property to each of Wai Kay and Wai Hon, and prefer Mother’s case, for the following reasons:

(1) I have concluded above that Father and Mother did not intend to make a gift of the sale proceeds of the Lucky Court Flat to Wai Kay and Wai Chung. There is no plausible reason why they would nevertheless intend to make a gift of the Property acquired with such sale proceeds to Wai Kay and Wai Hon.

(2) The Property was purchased as a new family home. Gifting it to Wai Kay and Wai Hon outright put the parents at their mercy on whether they could continue to reside in it.

(3) Father and Mother did not make any gift in the previous two family home (Beacon Heights Block 4 Flat and Lucky Court Flat) to their children. There is no plausible reason why they would treat the Property any differently.

(4) There is no plausible reason for Father and Mother to make a gift to Wai Kay and Wai Hon, but not to their other children. It is difficult to see the connection between Wai Kay and Wai Hon being unmarried at the time, and gifting each of them a half share in the Property. Incidentally, Wai Kay and Wai Hon would be shackled with co-ownership with each other, and the gift could not be readily materialized.

(5) Wai Hon corroborates Mother’s case. He was never told that he was gifted with a half share in the Property, and he did not consider himself as owning any interest. It is unthinkable for Father and Mother not to tell Wai Hon of the gift of half share in the Property, if there indeed was such a gift.

LEGAL ANALYSIS

38.  I bear in mind the legal principles set out below in deciding whether Mother’s case has been made out on balance of probabilities.

39.  In a claim based on common intention constructive trust, the Court should always resolve it by reference to the common intention of the parties, beginning with the search for an express discussion on beneficial ownership resulting in an agreement or understanding. Common intention may also be inferred from the conduct of parties, based on the facts and circumstances of each case and against the background as to the dealings between the parties. The Court adopts a holistic approach having regard to the context. Equity generally follows the law so the party seeking to deviate from the legal ownership bears the burden of proof. If it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: Chin Nai Man v Chin Yat Keung Alex [2020] HKCFI 403 at [10]-[14].

40.  The finding of an oral agreement can be based on express discussions, however imperfectly remembered or imprecise their terms may have been: Lloyd’s Bank Plc v Rosset [1991] 1 AC 107 at 132F-G.

41.  In a Chinese setting, especially for older generations, where explicit discussions on property rights within the family are not that common, the Court has to pay more regard to circumstantial matters: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at [1.6].

42.  Financial contribution to the property is one factor which may enable the Court to decide on the parties’ common intention: Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 at [5.16].

43.  It is possible for parties to have a common intention on who are to have a beneficial interest in the property without quantifying the share distribution immediately, leaving that to be determined at a later stage: Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343 at [39].

44.  Where a claim is made against the estate of a deceased person, the Court has always approached the claim with some suspicion, since the deceased person cannot give his own version as to what took place: Yung Shu Wu v Vivienne Sung Wu (2011) 14 HKCFAR 39 at [73].

45.  In the context of the search for any common intention, where the parties have advanced their respective rival versions, the Court is not bound to accept either of them; but in the absence of a compelling third (or other) alternative(s) offered to the Court, the Court is likely to accept one of the versions put forward: Pang Ketian Sally v Tam Yuk Hung Annie (HCA 298/2012, unreported 11 June 2013) at [55].

46.  I have not lost sight of Mr Cheung’s criticisms in his closing submissions attacking the credibility and reliability of Mother, Luen Foon and Wai Hon. In my view, these criticisms pale into insignificance when the overall circumstances set out above in particular in [37] led me to conclude, on balance of probabilities, that there was no gift of a half share in the Property to Wai Kay, adopting a holistic assessment and based on the inherent plausibility of the parties’ rival contentions. Mother’s case made a great deal of sense in the overall Chinese family context. There is no compelling alternative contention to explain the reasoning behind the acquisition of the Property and the naming of Wai Kay and Wai Hon as its co-owners, other than the contention put forward by Mother.

47.  Mr Cheung argued that even if Wai Kay held his half share in the Property on trust for Father and Mother, Mother would not become the sole beneficial owner of such half share after Father’s demise, because Father’s beneficial interest in the half share (which he was enjoying with Mother) should be vested in his estate.

48.  The short answer is that in light of my finding that it was the parties’ common intention that Father and Mother could decide, as between themselves, who should be the beneficial owner in the Property (including the half share held by Wai Kay), she could alone decide (which she did) that she should be the sole beneficial owner after Father passed away.

49.  There was also detrimental reliance by Mother (and Father) who consented to the use of the funds in the Family Account (being their joint assets) to acquire the Property on the common understanding that it was to be held by Wai Kay and Wai Hon on trust for them. It is clear that they would not have done so if the Property were to belong to Wai Kay and Wai Hon absolutely in accordance with the legal title. Also, on the strength that the Property was to be the new family home rather than a gift to Wai Kay and Wai Hon, Mother sold the old family home i.e. the Beacon Heights Block 4 Flat in 2002. It would plainly be unconscionable for Wai Kay (now his estate) to claim that the half share in the Property under his name did not beneficially belong to Mother.

50.  In light of my findings, it is not necessary to resort to resulting trust. Nor is there a foundation for any presumption of advancement from Father and Mother to Wai Kay to arise, when I am able to conclude on the evidence that there was a common agreement and understanding between the parties as regards the beneficial interest of the Property.

DISPOSITION

51.  I make a declaration that the half share in the Property in the name of Wai Kay was held by Wai Kay, and after his demise by his estate, on trust for Mother. On or before 9 January 2023, parties are to submit to the Court a draft agreed Order setting out the manner and timing to effect the vesting of the said half share on Mother. Failing agreement, each party is to submit its own draft Order by the same date, which the Court shall consider and make a paper determination. I grant general liberty to apply for further directions to carry this Judgment into effect.

52.  I make no order on Mother’s claim against the estate of Wai Kay for contribution of half share of the management fees, Government rates and management fees of the Property, given such a claim is premised on Wai Kay being the beneficial owner of half share in the Property.

53.  I dismiss the defendant’s counterclaim for mesne profits. No issue of ouster arose when Wai Kay (and now his estate) was never the beneficial owner of half share in the Property.

54.  I make a costs order nisi that the estate of Wai Kay do pay the costs of Mother (including all costs reserved) in this Action, to be taxed if not agreed. Such costs order nisi will be made absolute in the absence of any application for variation by way of inter partes summons taken out within 28 days from the date of this Judgment.