WONG HO WING v. WONG HO KWAN

HCA 4823/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4823 OF 2001

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J U D G M E N T

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1. This is a sad and difficult case. It is sad because it is between two brothers, the Plaintiff being the younger and the Defendant being the elder. It is difficult because of the informal way in which things were done. Demeanour has played an important part in my findings of fact, but I have of course assessed demeanour in the context of my view of the inherent probabilities, and my assessment of demeanour is in harmony with my view of the inherent probabilities.

2. Two properties are involved. One is Flat B on the 1st Floor and the flat roof of Block 11, Wonderland Villas, No. 9 Wah King Hill Road, Kwai Chung in the New Territories (which I will call "the New Territories flat"). The other is Flat G on the 2nd Floor of Block 1, Prosperous Garden, No. 3 Public Square Street in Kowloon (which I will call "the Kowloon flat"). The dispute is over the New Territories flat, but the Kowloon flat is relevant to that dispute.

3. One-third of the New Territories flat stands in the younger brother's name, and his case is that the beneficial interest in that one-third is his. The elder brother, on the other hand, says that the younger brother is a constructive trustee for him of that one-third. Essentially the younger brother seeks mesne profits in respect of the New Territories flat, an order that it be sold and an order that he be given one-third of the sale proceeds. Essentially the elder brother seeks an order that the younger brother assign to him the one-third of the New Territories flat standing in the younger brother's name.

4. In 1986 the New Territories flat was assigned to these two brothers and their now deceased father as tenants-in-common in equal shares. It was purchased for $931,600. All the purchase money was provided by the father.

5. Initially the New Territories flat was the home of the two brothers and their parents. In 1988 the parents and younger brother went to live in Canada but would stay in the New Territories flat whenever they came back to Hong Kong for holidays. The elder brother continued to live in the New Territories flat. When the parents returned from Canada to make Hong Kong their ordinary place of residence again in 1992, they too lived in the New Territories flat. When the younger brother returned to Hong Kong from Canada to make Hong Kong their ordinary place of residence again in 1993, he and his wife lived in the New Territories flat along with the others until they i.e. the younger brother and his wife moved out after a short time. The parents continued to live in the New Territories flat although they also lived in a flat in Shanghai Street from time to time.

6. At the present time, the elder brother, his wife and their children live in the New Territories flat. The mother too lives in the New Territories flat quite regularly even though she has another home in Shanghai Street.

7. In 1993 the Kowloon flat was purchased and assigned to the younger brother and the father as joint tenants. It was purchased for $2.8 million. All the purchase money was provided by the father. The Kowloon flat is, and has throughout been, the home of the younger brother and his wife. The elder brother testified in effect, and I believe, that on an occasion when the parents and the two brothers were present, the younger brother and the father agreed that the Kowloon flat would be purchased by the father and that the younger brother would be made a joint tenant of the Kowloon flat along with the father in consideration of his i.e. the younger brother's promise to assign his one-third share in the New Territories flat to the father, thus giving the father a two-third share which the father would eventually transfer to the elder brother. The mother also testified on these matters. Her recollection was that the younger brother's promise to assign his one-third of the New Territories flat to the father was made prior to the purchase of the Kowloon flat but that it was after such purchase that there was mention of the fact that the father's two-third of the New Territories flat would be transferred to the elder brother. I accept the mother's honesty. But where her recollection differs from the elder brother's recollection, I consider the elder brother's recollection to be the accurate one. The elder brother testified, and I accept, that he had worked hard in the family business for little return. The younger brother testified that he never agreed to transfer anything to the father. I disbelieve him.

8. The elder brother also gave testimony, which I believe, to the following effect. In 1999, the father decided it was time to implement his plan to give his two-third share in the New Territories flat to the elder brother. The father formally assigned to the elder brother the one-third share in his i.e. the father's name, and wanted the younger brother to assign to the elder brother the one-third share which was still in the younger brother's name but which the younger brother had promised in 1993 to assign to the father in consideration of being made a joint tenant of the Kowloon flat without having paid any part of the purchase price for it.

9. As to demeanour, I was very favourably impressed by the elder brother and the mother whereas I was very unfavourably impressed by the younger brother.

10. I spoke earlier of the inherent probabilities. As to that, I think it reasonably obvious that the father was concerned to provide each of his sons with a roof over his head. Indeed the mother said as much. I do not think the father would go about things in such a way as to create a situation in which the elder brother would have to account to the younger brother in respect of his i.e. the elder brother's home or would have to sell that home. And yet that is in effect the situation which the younger brother is arguing for.

11. Before leaving the facts and turning to the law, I should mention that, before accepting the elder brother and the mother's account of the facts and rejecting the younger brother's account of the facts, I have of course given careful consideration to everything which the younger brother's counsel has urged in favour of his client's account and against the other side's account.

12. What are the consequences in law of the facts which I have found? This is the question which I now address.

13. Having found that the facts are as the elder brother contends, it would serve no useful purpose for me to discuss what the position might have been as a matter of law if I had found that the facts were as the younger brother contends. I should however just mention that after all the evidence had been taken, counsel for the younger brother launched but later abandoned an application to amend the younger brother's pleadings to plead reliance on the Partition Ordinance, Cap. 352, and seek relief thereunder rather than simply on the basis of the matters in his pleadings as they stand.

14. As for the elder brother, his pleadings certainly cover what he seeks, what he has always sought and what I think he is entitled to as a matter of law on the facts as I find them.

15. No court or academic has yet succeeded in giving a universally accepted definition of a trust. In Snell's Equity 30th ed. (2000) at p. 110, para. 6-01, the following definition given by Professors Sheridan and Keeton in their book The Law of Trusts, 12th ed. (1993) at p. 3 is offered as perhaps the most satisfactory definition of a trust which anybody has managed to formulate:

"A trust is the relationship which arises wherever a person (called the trustee) is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries or other objects of the trust."

That certainly captures the essence of what I believe a trust to be when one arises, but it leaves the question of how and why it arises. There are of course a variety of ways in which a trust can arise, and when a trust has arisen it tends to be named according to how and why it arises. So trusts are often spoken of as express, implied, resulting or constructive trusts.

16. In the present case, there arises in my view a constructive trust under which the younger brother is a trustee for the elder brother of the one-third interest in the New Territories flat presently standing in the younger brother's name. I arrive at this conclusion on traditional lines since I do not think that it is necessary for the elder brother to rely on what in Eves v. Eves [1975] 1 WLR 1338 at p. 1341F Lord Denning MR called "a constructive trust of a new model". A "new model" constructive trust is, as I understand the position, imposed as a result of merely inequitable conduct. It is observed in A. J. Oakley: Constructive Trusts, 3rd ed. (1997) at pp 59-60 that in more recent times the courts have returned to a more traditional approach even though the decisions on "new model" constructive trusts have not been formally overruled.

17. Traditionally a constructive trust is imposed on the basis of conduct which makes it unconscionable for a person to hold property otherwise than as a trustee. "Equity operates on the conscience of the owner of the legal interest ...", and in the case of a constructive trust, "the conscience of the legal owner requires him to carry out the purposes ... which the law imposes on him by reason of his unconscionable conduct ...": per Lord Browne-Wilkinson in Westdeutsche Bank v. Islington L B C [1996] AC 669 at p. 705C.

18. It has been said the law provides no clear and all-embracing definition of a constructive trust; that its boundaries have been left perhaps deliberately vague, so as not to restrict the court by technicalities in deciding what the justice of a particular case may demand; and that a possible definition is that a constructive trust is a trust which is imposed by equity in order to satisfy the demands of justice and good conscience: see per Edmund Davies LJ (as he then was) in Carl Zeiss Stiftung v. Herbert Smith (No. 2) [1962] 2 Ch 276 at pp 300E-301B. On the other hand, it has also been suggested that statements of that kind are of such generality that they do not provide an acceptable test for decision-making: see per Mahoney JA as quoted in the joint judgment of Mason CJ and Wilson and Deane JJ in Baumgartner v. Baumgartner (1987) 164 CLR 137 at p. 147. In borderline cases, therefore, the precise location of the boundaries of a constructive trust may be crucial. But there will be cases which must fall well within those boundaries whatever their precise location. I am satisfied that the present case is such a case. On the facts as I have found them and have set them out above, the younger brother has, in my view, so conducted himself that it would be unconscionable for him to hold the property in question otherwise than as a trustee for his elder brother, and the only conscionable thing for the younger brother to do is, in my view, to assign that property to the elder brother.

19. One more thing to mention is the younger brother's reliance on section 5 of the Conveyancing and Property Ordinance, Cap. 219. He relies on subsection (1) of this section which says that:

"Subject to section 6 -

(a) no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

(b) a declaration of trust respecting land or any interest therein shall be manifested and proved in writing signed by the person who is able to declare such trust or by his will."

This does not assist the younger brother or impede the elder brother because I decide in favour of the elder brother on the basis of a constructive trust, and subsection (2) of this section says that:

"This section does not affect the creation or operation of resulting, implied or constructive trusts."

Counsel for the younger brother accepts that section 5 would not assist the younger brother if I were to hold in favour of the elder brother on the basis of a constructive trust.

20. In the result, the younger brother's claim fails and the elder brother's counterclaim succeeds. I declare that the one-third interest in the New Territories flat presently standing in the younger brother's name is held on trust by the younger brother for the elder brother, and I order that the younger brother assign that interest to the elder brother. If there is any dispute as to the form of the assignment, its form will be settled by the Registrar with such assistance from the parties and their solicitors as the Registrar requires. If the younger brother does not execute the settled assignment within 21 days of being called upon to do so, the Registrar is directed to execute it on his behalf. The costs and expense of the assignment will be borne by the younger brother. I give both parties liberty to apply to the Registrar for directions in regard to the assignment.

21. As to the costs of this action, I make an order nisi awarding the elder brother costs against the younger brother.