CHEUNG CHI FAI v. WAN HANG PING

HCA 193/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 193 OF 2002

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J U D G M E N T

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Introduction

1.  The Plaintiff is an indigenous villager of the New Territories.  The Defendant is one of the two directors and shareholders of a limited company, Bright Wide Investment Limited – a company “specialising” in the development of small houses in the New Territories under the Government’s concessionary Small House Policy.

2.  The Policy has been described by the Court of Appeal in Chung Miu Teck v Hang Tak Buddhist Hall Association Ltd [2001] 2 HKLRD 471, 473E-I, in the following terms:

“The New Territories Small House Policy

         This policy, implemented since December 1972, is designed to allow male indigenous villagers of a village which has been in existence since 1 July 1898 to apply for permission to erect small houses for their own habitation.  Strict limitations apply to the building of such houses.  Under the Buildings Ordinance (Application to the New Territories) Ordinance (Cap. 121), a small house is to be no more than three storeys or 27 ft in height with a maximum roofed-over area of 700 sq ft but the building of such a house does not require the employment of an authorised person or approval of building plans under the Buildings Ordinance (Cap. 123) (hereinafter referred to as “special privileges”) which are significant privileges, quite apart from the concessionary terms mentioned below.”

         Where a villager owns his own piece of land either in the village or within 30 ft of it, he is entitled to apply for a free building licence on his land or the Government might agree to grant new building land in return for the surrender of land elsewhere.  If he does not own any land in the village, he may apply for a private grant of land from the Government at a concessionary rate, generally between $1,000 and $2,000.  Procedurally, a villager who wishes to make an application is required to complete a standard Small House Application Form.”

At trial, it was common ground that the above represents an accurate description of the Policy.

3.  In this action, the Plaintiff claims that the Defendant or his company, Bright Wide, has helped him to develop a piece of land registered in the Tai Po New Territories Land Registry as the Remaining Portion of Lot No. 1139 in Demarcation District No. 90 by the erection of a three-storey small house on it under the Small House Policy, that the Defendant as his attorney under a power of attorney that had been executed by the Plaintiff in the Defendant’s favour sold the individual floors in the building to separate purchasers, and that the Defendant has failed to account to him the proceeds of sale in the total sum of $4.45 million.  In final submission, counsel said on behalf of the Plaintiff that notwithstanding what has been claimed in the amended statement of claim, the Plaintiff is prepared to give credit for all the out-goings relating to the construction of the building and the sale of the building, including the building costs and the premium that has been paid to the Government for its consent to the sale of the building.

Defendant’s evidence

4.  The Plaintiff’s case is denied by the Defendant, who gave evidence at trial.  The Defendant said, in essence, that at the material time – 1994 and 1995, his company was planning to develop land in the relevant part of Tai Po.  It had entered into a number of agreements with landowners in that area for mutual cooperation in the development of their respective pieces of agricultural land; small houses were to be erected on their land, partly for sale and partly for retention by the landowners.  The development plan involved complicated sub-division, amalgamation and exchange of different pieces of land.  Amongst others, Bright Wide had entered into a Chinese agreement dated 13 July 1994 with the father of the Plaintiff (“the father”) for the development of the father’s land known as Lot No. 1109 in DD 19.  The agreement said that the lot would be developed into three buildings.  However according to the evidence and explanation of the Defendant in the box, given the elongated shape of Lot 1190, no small house could be erected on the lot without its amalgamation with other pieces of land.  That involved some sub-division, land exchange and amalgamation work.  Eventually, it was decided, so the Defendant said in evidence, that Lot 1190 would be divided into various sections, and Section F of it together with the adjacent Lot 1194B would be utilized for the erection of one small house, and Section G together with the adjourning Lot 1194C for the erection of a second small house, whereas a totally separate lot, i.e. Lot 1139RP (the subject lot) belonging to Bright Wide itself would be used for the construction of the third small house.  In fact, Lot 1194B and Lot 1194C belonged to another owner who had agreed with Bright Wide to participate in the development plan.  Land exchanges were thus effected and new lot numbers were given by the Government regarding the amalgamated Lots 1190F and 1194B (Lot 2451) and the amalgamated Lot 1190G and Lot 1194C (Lot 2453).

5.  The terms of cooperation between the father and Bright Wide, subject to the above explanation, were set out in the Chinese agreement, which is reproduced below:

“                                      合作協議

                                                                        1994年7月13日

Our ref 003.ks2

甲方（出資方）：明和投資有限公司

乙方（出地方）：張成福

合作地段號碼：林村新村 DD19 LOT NO：1190

雙方同意共同合作發展上述地段成一座西班牙式高級丁屋。

一；各自之責任1；甲方之責任：

a.         負責設計和策劃，以追求完美和最大利潤為原則，

b.        負責建築費，律師費，分割費，交際應酬費，廣告費，行政費，佣金及其他雜費。

c.         負責丁權費和補地價費之壹半。

d.        獲授以全權向政府申請所有手續。

e.         負責推銷樓宇，選擇適合時間和合理價錢出售。

2；乙方之責任：

a.         負責出地（即上述地段）。

b.        負責丁權費和補地價費之壹半，暫由甲方代為支付，直到資金回籠時才必須無息退還給甲方。

c.         協調和鄉民之關係。

d.        協助決定丁權人選，售價，交易條件和任何手續。

e.         因政府政策或人為影嚮阻止合作發展，則需把土地即時歸還給乙方，有關費用亦由甲方負責。

f.          甲方無權將乙方之地段業權作任何買賣。

二；利益分配：

         各平均分得樓宇銷售價總額之壹半，或者各分得樓宇壹半。

三．投資時間：

         甲方得乙方同意後即馬上委托律師，測量師做好土地轉名和分割，以及向政府入紙申請建屋牌照。批[准] 屋牌，動工紙後12個月內完成全部建築工程。

       [signed]                        [signed]                     [signed]

______________         _____________       _____________

      甲方簽名                  中間人簽名               乙方簽名”

6.  It is the Defendant’s evidence that further to the Chinese agreement, it was subsequently agreed between Bright Wide (represented by him) and the father that the father would provide the three indigenous villagers that were required for the erection of the three small houses under the Chinese agreement, namely his three sons including the Plaintiff.  The parties agreed that the three sons would become the owners of the three plots of land (after the divisions and land exchanges were effected) on which the three houses were to be built.  In their names and in their capacity as indigenous villagers eligible under the Government’s concessionary Small House Policy, they would apply, through Bright Wide, to the Government for building licences to erect their small houses on the three lots in question.  Upon completion of the houses, premiums would be paid to the Government for its consent to the sale or disposition of the houses, and either the profits or the retained houses (or storeys) could be divided amongst the father and Bright Wide in accordance with the terms of the Chinese agreement.  It was agreed between the father and Bright Wide that each of the three indigenous villagers would be paid $250,000.00 for so making available their indigenous rights under the Small House Policy for the benefit of the intended development under the Chinese agreement.  The money would be paid after completion of the three houses.

7.  The Defendant said in evidence that under those circumstances, he on behalf of Bright Wide came into contact with the Plaintiff, to whom Bright Wide, as part of the scheme, assigned Lot 1139RP (the subject lot), so as to make the Plaintiff the (paper) owner of the land.  The assignment named a price of $100,000.00, which was in fact not paid.  Rather, a declaration of trust was executed by the Plaintiff in favour of Bright Wide, acknowledging his trusteeship of Lot 1139RP.  A power of attorney was executed at the same time as the assignment and the declaration of trust, appointing the Defendant as the attorney of the Plaintiff to handle the sale and other dispositions of Lot 1139RP.  Further, to cater for the eventuality of the untimely death of the Plaintiff prior to the successful construction of the building and its sale, a will was executed by the Plaintiff appointing the Defendant as both his executor and beneficiary of Lot 1139RP, so as to protect Bright Wide’s interest in the deal.  All these documents were executed together on the same day in the office of a firm of solicitors, namely Messrs Kenneth Woo & Co. 

8.  The Defendant said that after the documents were executed, Bright Wide successfully applied to the Government for a building licence to erect a small house on Lot 1139RP, retained contractors to erect the small house which was completed, successfully obtained all necessary documents from the Government regarding the completion of the construction work, paid the premium and successfully obtained the Government’s consent to the alienation of the small house.  Moreover, the Defendant as attorney of the Plaintiff sold the three storeys in the small house to various purchasers, two in December 1999 and the remaining one in March 2000.

9.  According to the Defendant, the development of the other two houses under the Chinese agreement between the father and Bright Wide could not be completed, due to subsequent difficulties encountered relating to the site and disagreement between the two sides regarding their respective responsibilities, despite the grant of the Government building licences to the other two sons of the father for the erection of the respective small houses.

10.  The Defendant therefore says in the present action that the Plaintiff had no beneficial title or interest in the subject land (Lot 1139RP) or the building erected thereon, or the proceeds of sale of the same.  He was a mere trustee of the land and building, holding the same on trust for Bright Wide.  His only entitlement is the sum of $250,000.00 in respect of the “sale” of his indigenous right to Bright Wide for the erection of the house on Lot 1139RP.  After the commencement of proceedings, Bright Wide has through solicitors offered to pay the Plaintiff the sum of $250,000.00, which was rejected by the Plaintiff, who has been insisting that he was the legal and beneficial owner of the land and building erected thereon prior to its disposal (without his knowledge) by the Defendant, and there was no question of his selling his indigenous right to Bright Wide for any price.

Plaintiff’s evidence

11.  The Plaintiff alone gave evidence in support of his claim.  He said that although he was aware of the Chinese agreement entered into by his father and Bright Wide for the development of Lot 1190, and his father’s intention to include him as one of the three indigenous villagers that would provide their rights for the erection of the three houses, he did not agree to his father’s suggestion and actually was not aware of his father’s purported agreement with Bright Wide for the use of his indigenous right for the development of one of the three houses on Lot 1190.  In any event, he insisted in evidence that the Chinese agreement between his father and Bright Wide related to the development of Lot 1190, and Lot 1139RP had nothing to do with the development plan under the Chinese agreement.

12.  The Plaintiff, who was at the material time 24 or 25 years old with Form 5 education, said that it was his intention to deal with his own indigenous right separate from his father.  His idea was to acquire land for the building of a small house; he would sell off two storeys and keep the third one for his own occupation.  He said that the Defendant is the son of a well-known and respected gentleman in the Tai Po area and ran an estate agency business which was well known in the locality in connection with the development of small houses.  Through the introduction of a senior fellow villager who was also a director and shareholder of Bright Wide, he came to know the Defendant, who told him that there was a piece of land (Lot 1139RP), the owner of which wanted to sell the same urgently for cash.  He was interested – he had in fact applied to the Government for a concessionary grant of land for the erection of a small house which had thus far not been successful.  He thus agreed with the Defendant for the purchase of the land from the owner for the price of $100,000.00.  He also entered into an oral agreement with the Defendant (or his company) for the latter to help him to erect a small house on the land, with all out-goings (including building costs and premium) to be advanced by the Defendant’s side first.  The same would be deducted from the sale proceeds of two of the storeys of the building to be erected.  He said that no written agreement was signed.

13.  The Plaintiff said in evidence that through the introduction of the Defendant, Messrs Kenneth Woo & Co. were retained to prepare the necessary legal documents.  Prior to his attending the solicitors’ office for the execution of the documents, he had attended the Defendant’s office to pay him the purchase price in cash.  He explained in evidence that in fact the bulk of the money ($80,000.00) was advanced by his parents, whereas he made up the difference from his own savings – he having been working as a garment quality controller. He said that neither he nor his parents had any current accounts, although he had three savings accounts with three different banks at the time.  He thus paid the Defendant in cash, who did not issue him any receipt.  He said that receipt would be acknowledged in the legal documents to be executed.

14.  The Plaintiff said that on or about 22 February 1995 he attended Messrs Kenneth Woo & Co’s office, and there he met a male from the solicitors’ office (he could not be sure whether that person was Mr Kenneth Woo – the principal of the firm), who took out a stack of documents and told him to sign at various places (marked with a cross).  The gentleman did not interpret to him the English documents nor did he explain to him what they were; he was simply told to sign documents.  He said that he trusted both the Defendant and the lawyer and signed the documents accordingly, thinking that they were the necessary legal documents for his purchase of the subject lot.  He said that he noted that his name had been printed in the documents and the figure of $100,000.00 had been set out in the documents.  He said in evidence that he asked for a copy of the documents, but was told that no copy would be given to him.

15.  That notwithstanding, he was content with the arrangement, and thereafter he cooperated with the Defendant in making an application to the Government for the grant of a building licence and attending to other necessary procedures for the erection of a small house on his land.  Eventually to his knowledge the building was completed, but he was not aware of the sale of the building to purchasers until September 2000 when he received a letter from the Inland Revenue enquiring into the supposed profits that he had made on the sale of the small house.  He said in evidence that he had noticed that the building had been erected and persons had been occupying the premises, but not until the receipt of the letter from the Inland Revenue and the making of inquires by him thereafter did he find out that the building had been sold by the Defendant by using a power of attorney that he had apparently signed in favour of the Defendant (without his knowing about it).  He thus chased firstly Messrs Kenneth Woo & Co. for the documents that he had signed, and subsequently commenced the present action against the Defendant to recover the sale proceeds. 

Kenneth Woo’s evidence

16.  The sole proprietor of Messrs Kenneth Woo & Co, Mr Kenneth Woo, gave evidence on behalf of the Defendant.  He said that he was experienced in handling transactions involving the development of small houses in the New Territories.  He explained that in the transaction in question, he was instructed by the Defendant and Bright Wide to prepare legal documentation for the development of a small house on Lot 1139RP – with the land coming from the Defendant and indigenous right provided by the Plaintiff.  As per his instructions and his usual understanding of this type of transactions, the Plaintiff would only be a nominal owner of the land, which would (together with the building to be erected thereon) remain beneficially owned by Bright Wide.  Thus he prepared an assignment, which on the face of it said that the subject land was thereby sold and assigned by Bright Wide to the Plaintiff as purchaser for a consideration of $100,000.00 – the receipt of which was actually acknowledged in the assignment itself; a declaration of trust whereby the Plaintiff declared that he held the land on trust for Bright Wide, and that the purchase price was in fact provided by Bright Wide; a power of attorney by the Plaintiff in favour of the Defendant authorising the latter to sell or dispose of the land and building on his behalf; a will of the Plaintiff naming the Defendant as both the executor as well as the beneficiary of the land; and a statutory declaration whereby the Plaintiff declared that he was an indigenous villager with a right to apply for the erection of a small house.

17.  Mr Woo said in evidence that as per his usual practice, when the Plaintiff attended his office together with the Defendant to execute the documents, he explained the gist of the whole scheme to the Plaintiff, and interpreted the contents of the documents to him.  The Plaintiff expressed to him his agreement to entering into the scheme and executing the documents to effect the same.  The Plaintiff therefore executed the documents in his presence.  He denied that the Plaintiff ever asked him for a copy of the executed documents, but he said in evidence that he had in fact of his own volition explained to the Plaintiff that without his client’s instructions he could not release any copy to the Plaintiff.  Mr Woo said that according to what he had learned from his client and his own knowledge and observation, he was quite sure that the Plaintiff had never paid the Defendant the stated consideration in the assignment, i.e. the sum of $100,000.00.  He said that there was no reason for the Plaintiff to do so, for this was a case where the developer was merely making use of the Plaintiff’s indigenous right to apply for permission to erect a small house on a piece of land that was actually owned by the developer.  He accepted that he was not privy to the agreement between the Plaintiff and the developer or the terms thereof whereby the Plaintiff agreed with the developer for the latter to make use of his name to apply for permission to erect the small house.

Findings of fact

18.  So far as factual disputes are concerned, I have borne in mind the burden and standard of proof.  I have considered the content of the witnesses’ evidence as well as their demeanour in Court.  I have considered the inherent probabilities and improbabilities of the competing versions.  I have borne in mind not only the oral evidence, but also the documents as well as the background circumstances.  I have also borne in mind the submissions of counsel.

19.  Having done so, I have come to the conclusion that the Defendant’s evidence is to be preferred.  So far as demeanour is concerned, whilst the Defendant was cautious in his evidence and occasionally took his time in answering questions, I am satisfied that basically he was telling the truth in the box.  The Plaintiff, who was self-confident and slightly argumentative in the box, did not particularly impress me with his evidence.  Mr Woo, the solicitor, was by and large straightforward in his evidence, although understandably, he was slightly apprehensive when he was cross-examined on the legality of the documents that he had prepared for the parties to sign.  Pausing here, it should be pointed out that in the pleadings, a case of fraud has been pleaded on behalf of the Plaintiff not only against the Defendant, but also against Mr Woo, regarding their procuring the Plaintiff to sign the various documents, which the Plaintiff was allegedly led to believe to be mere documents to effect the sale and purchase of land.  However, no allegation of fraud was put to Mr Woo during cross-examination, and in final submission, Miss Ng appearing for the Plaintiff expressly disavowed any intention to pursue fraud against Mr Woo.  Her case against the solicitor was merely that he failed, negligently or carelessly, to interpret or explain the contents of the prepared documents to the Plaintiff, before asking the Plaintiff to sign them.

20.  But more importantly, I do find that in comparison, the Plaintiff’s story should not be believed.  According to his story, he bought the piece of land in question because the Defendant told him that the owner was in urgent need of money.  But the objective and undisputable fact was that the land was owned by Bright Wide, which was not in need of money.  Rather, Bright Wide was involved in a general development plan of the area, and there was no reason why Bright Wide should want to sell the land to the Plaintiff.  The more logical thing for Bright Wide to do was to persuade an indigenous villager to “sell” his right to Bright Wide so that it could make use of his name and right to develop the land.

21.  Moreover, the Plaintiff said that he paid the price of $100,000.00 in cash; he explained that neither he nor his parents had any cheque accounts.  Yet the Plaintiff admitted that he maintained three separate bank accounts (all savings accounts) at the time, saying that as he was not doing any business there was no need for him to maintain any current account.  I find the explanation doubtful.  There was no explanation as to why he did not procure the issue of a cashier order to pay for the purchase price.  A major part of the money in question ($80,000.00) was said to have been advanced or lent by the parents, yet neither the father nor the mother of the Plaintiff was called to give evidence in support of the Plaintiff’s case, and no explanation was offered for their absence.  In particular, apart from the advance of money to enable his son to acquire Lot 1139RP, the father, if called, would also have been in a good position to explain to the Court that the development of the small house on Lot 1139RP had nothing to do with the Chinese agreement involving Lot 1190 (as per the Plaintiff’s case) and that his nomination of the Plaintiff as one of the three indigenous villagers to Bright Wide was done by him unilaterally without the agreement and consent of the Plaintiff.  Yet the father, who is in his sixties and whose health has been said to be average, and who is apparently on good terms with the Plaintiff, was not called to give evidence.

22.  Not only was the money paid in cash, it was not paid to the supposed purchaser or the solicitors but to the Defendant at his office.  And not only so, when the payment was made, no receipt was given.  The Plaintiff was told that receipt would be acknowledged in the legal documents to be signed at the solicitors’ office later.  When the legal documentation was eventually signed, according to the Plaintiff’s own case, neither the assignment nor a copy thereof (which contained the receipt clause) was supplied to him.  Nor was he given any title documents to prove his acquisition and ownership of the land, although he had parted with $100,000.00 for the same.  I find all this rather strange and not easy to believe.

23.  The Plaintiff said that he had orally agreed with the Defendant that the Defendant would help him to deal with all necessary applications and procedures for the erection of a small house on his land thus acquired, would advance all the monies necessary to defray the building expenditure and the premium, and would help him to sell two storeys of the building to be erected.  He said all this remained an oral agreement and nothing was signed.  This supposed arrangement contrasted sharply with the situation involving the father, where a Chinese agreement setting out the terms of cooperation between the two sides were signed.  Moreover, even the Plaintiff’s counsel admitted in her final submission that under the alleged oral agreement between the Plaintiff and the Defendant, the Defendant was to derive very little benefit from the cooperation.  Apart from the commission to be earned in procuring the sale of two storeys in the building, no concrete benefit could be identified.  The Plaintiff said vaguely in evidence that the Defendant or Bright Wide was developing the whole area, and it helped the Defendant to assist him in erecting the small house on the lot in question.  He did not elaborate on his answer, and (leaving aside the question of fraud) I have difficulty in understanding how the arrangement would be commercially attractive or beneficial to the Defendant or Bright Wide, particularly bearing in mind the amount of money to be put up by Bright Wide or the Defendant in the first place and the time taken for the completion of the whole process of development.  Furthermore, the alleged oral agreement had never been mentioned in the Plaintiff’s witness statement or pleadings as such.

24.  The Plaintiff’s case of fraud against the Defendant does not impress me.  From the angle of the Defendant, he had already entered into an agreement with the father in connection with the development of Lot 1190, and the father, rightly or wrongly, had nominated the Plaintiff as one of the three indigenous villagers required in connection with the development.  There was no particular reason why the Defendant should have wanted to sell a piece of land already owned by it to the Plaintiff to help the Plaintiff personally to develop the land, with minimal benefit to himself (the Defendant) or Bright Wide.  Still less would there be any reason why the Defendant should have wanted to practise fraud on the Plaintiff by tricking him into signing documents which had a totally different meaning and effect from a straightforward sale and purchase of land for $100,000.00. 

25.  The abandonment of the case of fraud by the Plaintiff and his counsel against the solicitor made the Plaintiff’s remaining case of fraud against the Defendant an even less credible and awkward one to run.  This is because without the solicitor’s active and knowing participation, the success of the Defendant’s supposed plan of fraud would depend on the solicitor acting negligently or carelessly in failing to interpret the prepared documents to the Plaintiff, thereby causing the Plaintiff to sign something that did not reflect the true agreement that he had orally made with the Defendant – a result that was fraudulently intended by the Defendant (who had, ex hypothesi, deliberately given incorrect instructions to the lawyer to prepare the documents).  As Mr Ho, counsel for the Defendant, put it in final submission, the Plaintiff’s case on fraud is “a case of coincidence”. 

26.  I have listened carefully to the evidence of the solicitor.  I accept his evidence.  I find that there was no reason why he would have failed to explain and interpret, at least in gist, the legal documents to the Plaintiff before his execution of the documents, which also contained interpretation clauses signed by the solicitor himself.  Given the nature of the transaction, and the doubtful legality of the whole arrangement, the lawyer’s participation in the preparation of the documents was, professionally speaking, rather bother-line in nature, and there was every reason for the solicitor to explain clearly to the Plaintiff the nature of the deal and to ensure that he agreed to enter into the scheme in question, before asking him to execute the various documents.

27.  In any event, I have carefully compared the competing versions of the Plaintiff and the solicitor regarding execution, and I have no difficulty whatsoever in preferring the evidence of the solicitor to that of the Plaintiff’s, on a balance of probabilities. 

28.  The Plaintiff claimed that he only learned about the completion of the building and the sale of the same to various purchasers in September 2000 when he received an inquiry from the Inland Revenue.  I find all this rather strange, as the land and building in question were very near to where the Plaintiff and his family were residing.  The Plaintiff accepted that he had noticed that people were occupying the building.  I find it unconvincing that in those circumstances he and his family members would have been ignorant about the sale of the property by the Defendant and the moving in of the purchasers to the building.  After all, one is concerned with a village environment, and the Plaintiff did not live alone (although he was frequently out of Hong Kong) but resided together with his family members.  I find it odd the suggestion that the Defendant could have secretly sold the building in question, and purchasers could have moved into the building without the knowledge or information of those in the village or the family members of the Plaintiff.

29.  What happened subsequently is wholly inconsistent with the Plaintiff’s case.  As mentioned above, the father subsequently had disputes with Bright Wide, and both the father and the Plaintiff retained the same firm of solicitors, Messrs Laurence Pang & Co. to act for them.  Although in a first letter written by the solicitors on behalf of the Plaintiff, the solicitors asserted that the Plaintiff was the registered owner of the subject land (Lot 1139RP), in two subsequent letters dated 3 November 2000 and 7 May 2001 respectively, the solicitors, writing respectively on behalf of the father and on behalf of the father and three sons (including the Plaintiff), clearly asserted that the Plaintiff had offered his indigenous right to Bright Wide in connection with the development of Lot 1190, and alleged that Bright Wide had misapplied the Plaintiff’s indigenous right for the development of Lot 1139RP.  In particular, in the letter dated 5 May 2001 written by the solicitors on behalf of, amongst others, the Plaintiff, the solicitors asked the Defendant whether payment had been fully made for the use of the indigenous right concerned for the erection of the house – a clear reference to the house erected on Lot 1139RP, as there was no other house erected in connection with the father and sons by Bright Wide.  The Plaintiff was forced in cross-examination to say that these letters were written by the solicitors pursuant to instructions given by his father, who might have given very confusing and indeed wrong instructions to the solicitors.

30.  As I said, the father was not called to give evidence or to explain the situation; no satisfactory explanation for his absence was given.  Nor was anybody from Messrs Laurence Pang & Co. called to give evidence on what instructions had been received and why the two letters were written in the way they were written.

31.  Needless to say, the Plaintiff’s story is wholly inconsistent with the declaration of trust, which clearly said that he merely held the land as trustee for Bright Wide.

32.  I have carefully considered the story of the Defendant, in particular his explanation that notwithstanding what had been written in the Chinese agreement, the development of the three houses under the Chinese agreement would involve utilizing land other than Lot 1190.  That was supported by the fact that for two of the houses intended to be erected, they were to be erected on land comprising not only Lot 1190, but also land belonging to others.  It is true that in relation to Lot 1139RP, it was physically separate from Lot 1190.  The Defendant has given his explanation in the box, which I have borne in mind.  I do not find his explanation incredible or unbelievable.

33.  Having borne everything in mind, based on the entire evidence, as I say, I have no difficulty in preferring the Defendant’s story to that of the Plaintiff’s, and I accept the evidence of the Defendant and Mr Woo, in preference to the evidence of the Plaintiff, insofar as their evidence differed.  In particular, I find as a fact that the Plaintiff did not pay any consideration for the assignment of the subject lot (Lot 1139RP) to him; the land was assigned to him to hold as a mere trustee for Bright Wide, he having agreed to “sell” his indigenous right to Bright Wide so as to enable Bright Wide to develop the subject lot in his name, and that was why the land was assigned to him as part of the scheme. 

Plaintiff had no beneficial interest in land and building

34.  Given those findings, and subject to the question of illegality and a miscellaneous point raised by the Plaintiff, the Plaintiff’s claim must fail.  It should be remembered that in this action, the Plaintiff’s claim is for the return of the proceeds of sale.  That claim is based on the assertion or implied assertion that what has been sold (which resulted in the proceeds in the first place) was beneficially owned by the Plaintiff, since the Plaintiff is not suing as a trustee for somebody having a superior title than Bright Wide – the Plaintiff asserts he was the beneficial owner of the land and building.  Based on my above findings of fact, what has been sold – i.e. the land together with the building erected thereon – wholly belonged (beneficially speaking) to Bright Wide, which had the land transferred without consideration to the Plaintiff, and had paid for all outgoings including the building costs and premium relating to the erection of the house and its subsequent alienation, save for the Plaintiff’s indigenous right which he had allowed Bright Wide to make use of to obtain the necessary agreement of the Government to the erection of the house.  In relation to that latter aspect, however, the Plaintiff has, so I find, agreed to “sell” his indigenous right to Bright Wide for the price of $250,000.00.  The sale had been concluded, as per my finding, through the agency of the father.  The Plaintiff either authorised his father to make the deal with Bright Wide or has by his conduct ratified the act of his father.  In those circumstances, subject to counsel’s point on illegality, the indigenous right was also Bright Wide’s, and in other words, what has been sold had belonged beneficially to Bright Wide alone.  In those circumstances (subject to the matters discussed below), the Plaintiff’s claim for the proceeds must fail. 

35.  In the present action, the Plaintiff, does not make any claim for the sum of $250,000.00 regarding the sale of his indigenous right, or alternatively, the value of his indigenous right.  In any event, as per my finding, any such claim would have to be made by him against Bright Wide.  (As mentioned above, Bright Wide has offered to pay the sum of $250,000.00 to the Plaintiff.)

Illegality

36.  Turning to the question of illegality, the type of schemes in question has been the subject of judicial discussions and decisions, see for instance, Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84; Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866; and Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd, supra.  In short, the case law is to the effect that the making use of the name of an indigenous villager to apply for the necessary building licence under the concessionary Small House Policy from the Government to develop a piece of land beneficially owned by the developer is illegal in its performance in that under a typical scheme, a false statutory declaration will be made by the villager to the Government to the effect that he is the legal and beneficial owner of the land in question and he has not entered into any private arrangements for his right under the Small House Policy to be sold to another individual or developer, and the tort of misrepresentation to the Government that the indigenous villager is the legal and beneficial owner of the land to be developed will be committed.  Furthermore, according to the authorities, given the illegality of the contract in question, the court will not lend itself to the enforcement of the same by either party.  However, the illegality will not affect any party’s case if his case does not involve the assertion of any right or the enforcement of the illegal contract. 

37.  At trial, no issue was taken regarding the making of the necessary statutory declaration and representation to the Government, which as per my findings above, must have been false given the nominal role of the Plaintiff in the transaction.

38.  As I have analyzed above, the Plaintiff’s case depends on his establishing that prior to the sale of the land and building, the same was beneficially owned by him wholly or at least partially, since the Plaintiff is not suing as a trustee for somebody with a superior title.  As far as the land is concerned, the decision of Yuen J (as she then was) in Best Sheen is directly against the Plaintiff.  In that case, the learned judge made a declaration in favour of a developer regarding its beneficial ownership in the land as the grant of relief would not amount to enforcement of any illegal contract.  As the learned judge pointed out, as a general rule, a party to an illegality could recover his property by virtue of his legal or equitable property interest if he could establish his title without relying on his own illegality.  In that case, the developer was not forced to rely on the illegal contract for the declaration sought.  The illegal contract only explained why it came about that the indigenous villager was registered as the owner of the land.  The declaration of trust in that case, according to the learned judge, constituted an express trust which could be enforced by the developer irrespective of the illegality.  The judge relied on Tinsley v Milligan [1994] 1 AC 340.  The judge went on to hold that even if it might be argued that the declaration of trust was somehow invalid because in truth no payment was “provided” by the developer to fund the purchase of land (– in fact no payment was made, notwithstanding the wordings of the assignment and the declaration of trust), the developer would still be entitled to rely on his beneficial interest under a resulting trust, which might be implied where an attempted express trust failed.

39.  The position, so far as the land is concerned, in the present case, is exactly the same.  The declaration of trust in the present case was also incorrect in the sense that in fact the sum of $100,000.00 had never been “provided” by Bright Wide – the truth is that no such payment had ever been made by the Plaintiff for the “purchase” of the land from Bright Wide.  In my judgment, that is neither here nor there.  Whether under the express declaration of trust or the implied resulting trust, the land belonged beneficially to Bright Wide.  The Plaintiff did not own the land beneficially.  When it was sold, nothing belonging beneficially to the Plaintiff was sold.

40.  Miss Ng, counsel for the Plaintiff, drew a distinction between the present case and Best Sheen by arguing that in Best Sheen the court was only concerned with the land, the building not having been erected.  But in the present case, the illegal contract had been successfully performed and the building was indeed erected.  A distinction should therefore be drawn between the land and the building.

41.  Assume as valid the distinction for the time being for the sake of argument, notwithstanding the general rule of law that anything erected on land becomes part of it, the argument of counsel must fail.  For it is clear from the evidence that the Plaintiff has paid nothing for the construction of the building and the premium regarding the alienation of the same. 

42.  The Plaintiff’s only possible “contribution”, if any, was limited to his making the false declaration and misrepresentation to the Government so as to obtain the latter’s grant of the building licence etc. under the Small House Policy.  That, however, is not something that this Court can or should recognize as a legitimate “contribution” towards the building.  To do so would be to recognise and enforce the illegality.  Thus analysed, the Plaintiff had contributed nothing to the building itself.  Beneficially speaking, therefore, the Plaintiff owned nothing in the building; when it was sold, nothing belonging beneficially to the Plaintiff was sold. 

43.  Again the illegal contract explained why Bright Wide contributed to the construction costs and premium.  Yet in the analysis above, Bright Wide need not ask this Court to enforce any right arising out of the illegal contract in order to establish its contribution towards the construction costs and premium. 

44.  In any event, even if Bright Wide were not entitled to refer to the construction costs and premium that it had contributed towards the erection of the building and its subsequent sale, it would not mean that the Plaintiff had contributed anything (that is recognised by law) towards the same.  In the absence of any contribution from the Plaintiff, the Plaintiff would not be able to establish any beneficial ownership in the building itself, and that would equally be fatal to the Plaintiff’s claim.

45.  In those circumstances, even if one were to separate the land and building and analyse the same separately, the Plaintiff fails to establish any beneficial ownership in the same, and since he is not suing as a trustee, that failure must fatally defeat his claim for the proceeds of sale.  There is no question of this Court recognizing or enforcing any illegal contract as such, which only provided the factual explanation for the conduct of the parties. 

46.  For the above reasons, I reject the Plaintiff’s argument based on illegality.

Section 17 of the Conveyancing and Property Ordinance

47.  Finally, as regards section 17 of the Conveyancing and Property Ordinance (Cap. 219), referred to by Yuen J in Best Sheen (see page 875B-H) (“Unless a contrary intention is expressed in the assignment, an assignment shall operate to assign all the estate, right and interest in the land assigned which the assignor has in that land and which he has power to assign”), I do not believe that that section has the effect of precluding a resulting trust from arising, unless the intention should appear in the assignment itself. 

48.  Where land is conveyed to a party without any consideration, as a matter of law, a presumption of resulting trust would arise.  Almost by definition, in the assignment itself, there would not be any mention of any trust or a reservation of the beneficial interest in the assignor.  Yet there can be no doubt that a presumption of resulting trust would arise unless the assignor and assignee are husband and wife, father and son/daughter, and so forth, in which case a presumption of advancement would arise.  In my judgment, if section 17 were to have the effect of requiring an intention for the creation of a trust to be expressed in the assignment itself, it would preclude a resulting trust from ever arising in most cases.

49.  Although section 17 was not specifically mentioned, the discussion of Deputy Judge Lam (as he then was) in Ip Man Shan Henry v Ching Hing Construction Co. Ltd (No. 2) [2003] 1 HKC 256, 302A-H also supports my view.  According to the learned judge, there is a distinction between cases where the written document contains an expressed declaration of trust concerning the beneficial interest in the property and cases where the document does not contain such a declaration.  In the former class of cases, there is no room for the application of the doctrine of resulting, implied or constructive trust unless and until the conveyance is set aside or rectified.  The declaration in the document determines the vesting of the beneficial interest.  However, in the latter class of cases, the way is open for persons claiming a beneficial interest to rely on a resulting, implied or constructive trust.  There is no need for the document to be set aside or rectified. 

50.  In my judgment, neither section 17 of the local Ordinance nor section 63 of the Law of Property Act 1925 on which the local provisions are based has the effect of altering the above common law position.

51.  For those reasons, I do not believe that section 17 would prevent a presumption of resulting trust from arising in favour of Bright Wide when it assigned the subject lot in question to the Plaintiff without any consideration, notwithstanding the absence of the expression of an intention for such a trust to arise in the assignment itself.

Outcome

52.  For all these reasons, I order that the Plaintiff’s case be dismissed. 

53.  I make an order nisi that the Plaintiff pay to the Defendant his costs of the action; such costs are to be taxed if not agreed.  The same shall become absolute unless either party should apply to vary it within 14 days after this judgment is handed down.

54.  I thank counsel for their assistance.