CHAN CHI WAI also known as CHAN SAU PING AND ANOTHER v. CHAN SAU WAH AND OTHERS

HCA 2522/2016

[2019] HKCFI 177

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2522 OF 2016

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(By Original Action)

AND BETWEEN

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(By Counterclaim)

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JUDGMENT

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Introduction

1.  This is the plaintiffs’ action for possession of property and mesne profit.  The plaintiffs are the legal owners of House 13 of Sam Tung Uk Resite Village (“House 13”) situated on Lot 1380 in Demarcation District (“DD”) 449.  The 1^st and 2^nd defendants are occupiers of the second floor of House 13.  The 3^rd and 4^th defendants are occupiers of the first floor of House 13.  The plaintiffs’ pleaded case is that they are the legal owners of House 13, that the defendants are in occupation of the first and second floors of House 13 as bare licencees and that the licences have been revoked.  The defendants have no dispute that the plaintiffs are the legal owners of House 13, that they are in occupation of the first and second floors of House 13 and that they have been served notices purporting to revoke their licences to occupy the first and second floors of House 13.  Their defence is that the plaintiffs held the legal title of House 13 under an express or constructive trust (the “1959 Trust”) for themselves, the 1^st and 3^rd defendants and their brother Chan Sau Fat (“Sau Fat”) (collectively, the “five brothers”) as beneficial owners.  As such, the plaintiffs have no right to require them to move out of House 13.  The defendants counterclaim for a declaration of the trust to that effect and for a vesting order of their interest in House 13.

2.  On the pleading, the plaintiffs have no burden to prove.  The defendants bear the burden of proving the 1959 Trust.  Mr Tsui, counsel for the defendants accepts that if the defendants fail to discharge that burden, their licences to occupy House 13 have been revoked and they are trespassers.  The plaintiffs are entitled to judgment.  Quantum has also been agreed at the rate of $4,375 per month as against the 1^st defendant and $8,750 per month as against the 2^nd defendant from the date of termination of the licence until the date of delivery of vacant possession, such that the plaintiffs have absolutely no burden of proof.  In the circumstances, it is appropriate that the defendants should have the right to open the case first and to have the last words.  

The background

3.  The 1^st and 2^nd plaintiffs, the 1^st and 3^rd defendants and Sau Fat are brothers, ie collectively, the five brothers and sons of Chan Wing Kee (the “Father”).  The five brothers have two sisters.  They live in the family house in Sam Tung Uk Village (the “family house”), which was situated on Lots 1946A, 1946RP and 1570A of DD 449.  Their grandfather, Chan Yuk Cheung (“Grandfather”), had four sons; one named Chan Wing Shu (“Shu”) by his first wife and three, namely Father, Chan Wing Kwai (“Uncle Kwai”) and Chan Wing Kai (the “Uncle Kai”) by his second wife Madam Chan (“Grandmother”).  The first wife and Shu predeceased Grandfather.  

4.  Grandfather had a lot of landed properties, including the new family house which was held by him as trustee for Shu and Father and four cottages on Lots 1544 and 1939.  In his statement in a notebook, he expressed his wish to bequeath some of his property to Grandmother after his death and to divide the rest of his property into four approximately equal portions to be distributed to his four sons by way of drawing lots (the “Grandfather’s statement”). 

5.  Grandfather died in 1945.  The lots were drawn. Father and Uncle Kwai obtained the family house on Lots 1946RP and 1570A.  The four sons received substantially the same landholdings in accordance with Grandfather’s statement, although the landholdings were held by Grandmother as trustee for Shu (or his chilren) and Father.

6.  On 11 March 1947, Grandmother replaced Grandfather as the trustee for Shu and Father.  On 12 April 1955, Grandmother as trustee for Shu sold half share of Lot 1570A and 1946RP together with half shares of other lots to herself as trustee for Father.  Presumably, this was to give effect to the distribution as stated in Grandfather’s statement.  However, Uncle Kwai’s half share in Lot 1946RP was thus transferred to Father.  

7.  On 22 April 1955, Grandmother was removed as trustee of Father in respect of Lots 1570A and 1946RP on which the family house was built.  Thus, Father became the sole legal owner of these lots, including Uncle Kwai’s 50% interest in Lots 1946RP and 1570A.

8.  On 30 October 1958, Father sold Lot 1946RP to Dea Chau Sheung (“Dea”) for $10,000.  On 26 November 1959, Grandmother repurchased the lot back from Dea at a consideration of $8,000 and caused it to be assigned to Uncle Kai as trustee for the 1^st and 2^nd plaintiffs (the “1959 assignment” and “1959 Trust”).  That was to prevent Father from selling the lot again after she had purchased it back.  The plaintiffs’ case is that this trust was created by Grandmother as a gift to them, while the defendants’ case is that the plaintiffs are holding Lot 1946RP as trustees for the five brothers.

9.  Father had also repeatedly mortgaged Lot 1570A. Eventually, Grandmother redeemed it with her own funds by selling her own property.  On 10 June 1963, Grandmother caused Father to transfer half share in Lot 1570A to the Uncle Kai as trustee for the five brothers (the “1963 Trust”) and the other half share to Uncle Kwai as tenants in common.  Thus, Grandmother compensated Uncle Kwai’s loss in respect of Lot 1570A and this suggests that she had overlooked Uncle Kwai’s 50% interest in Lot 1946RP.  The 1963 Trust is relied on by the defendants as evidence of the family tradition and Grandmother’s intention that the plaintiffs were to hold Lot 1946RP as trustees for the five brothers.  

10.  Grandmother died in 1976.  At the time, Father and Uncle Kai were aged 51 and 42 respectively; while the five brothers were aged between 18 and 27.

11.  In 1979, the government offered to villagers of Sam Tung Uk Village houses in Sam Tung Uk Resite Village in exchange for their land in Sam Tung Uk Village (the “land exchange scheme”).  On 10 December 1979, Uncle Kai as trustee assigned Lot 1946RP to the 1^st and 2^nd plaintiffs (the “1979 Assignment”) who then surrendered the lot to the government pursuant to the land exchange scheme.  On the same day, Uncle Kai as trustee for the five brothers also surrendered their half share in Lot 1570A to the government pursuant to the land exchange scheme.

12.  On 9 April 1980, the government granted Lot 1373 in DD 451 on which House 14 Sam Tung Uk Resite Village is situated to Uncle Kai as trustee for the five brothers.

13.  On 12 April 1980, the government granted Lot 1380 in DD 451 on which House 13 Sam Tung Uk Resite Village is situated to 1^st and 2^nd plaintiffs.

14.  It can fairly be said that House 13 and House 14 had their origin from the family house.  These are three storey houses.  House 13 is located in the middle of a row of houses with windows at the front and back only.  House 14 is located at the corner of a row of houses with windows on three sides of the house.  Being a corner house, House 14 is obviously a property of higher value.

15.  At the direction of Grandmother, the brothers were to choose the flats in House 13 and House 14 according to their seniority.  The 1^st and 2^nd plaintiffs respectively chose the second and first floors of House 14.  The ground floor is at present rented to the eldest sister.  The 1^st defendant, 3^rd defendants and Sau Fat respectively chose to live in the second, first and ground floor of House 13.  Subsequently, the spouses of the 1^st and 3^rd defendants, ie the 2^nd and 4^th defendants moved in to live with them.  The youngest sister also moved into the 2^nd floor.

16.  Father and the Mother died in November 2000 and December 2009 respectively.  Dispute about the ownership in House 13 arose in 2014.  This litigation commenced in 2016.

17.  The dispute is about facts which the parties have no personal knowledge.  Uncle Kai is the only witness who can testify about the circumstances surrounding the making of the 1959 Trust and 1963 Trust. For reasons as given in my analysis of the evidence, I consider his evidence is not credible.  The evidence of the parties and the youngest sister called by the plaintiffs is of little probative value so far as the issues in dispute are concerned.

18.  The defendants have also produced tape recordings of their meetings with the plaintiffs and Uncle Kai and transcripts of those recordings.  Their counsel have made lengthy submission about the recordings and the inferences to be drawn.  I have listened to the recordings and read the transcripts.  In my view, they are equivocal and the inferences to be drawn are inconsistent.  It also contained multiple hearsay statements from the eldest sister who did not testify. I give no weight to the recordings and transcript. 

The parties’ case

19.  The defendants’ counterclaim is founded on the 1959 Trust which is either an express trust or constructive trust premised on the family tradition of having the eldest two sons to hold family property on trust for all their brothers.  Their case is that: (1) it was a term of the 1959 Trust that Uncle Kai was to hold Lot 1946RP on trust for the five brothers absolutely in equal shares with entitlement to reside in the lot with their respective families; (2) that Uncle Kai was to transfer the lot to the 1^st and 2^nd plaintiffs on trust for the five brothers absolutely in equal shares on the same terms after the 1^st and 2^nd plaintiffs reaching maturity; and (3) that the 1^st and 2^nd plaintiffs were informed of the terms of the 1959 Trust as early as November 1959 and they agreed to the terms.  They rely on the distribution of the family property by Grandfather and the 1963 Trust, as evidence of the family tradition.  They argue that the family house was given special treatment by the family and it would be absurd and inconsistent with the family tradition to treat the transfer of Lot 1946RP under the 1959 Trust as a gift to the plaintiffs solely.

20.  The plaintiffs, as I have said, have no burden of proving anything.  Their case is one of denial of the 1959 Trust and family tradition.  They asserted that they knew nothing about the 1959 Trust and had never consented to act as trustees for the five brothers including themselves.  They just rested on their legal title in respect of House 13.  They do not dispute the 1^st and 3^rd defendants’ entitlement to one-fifth each of the interest in House 14.  But the interest in House 14 is not the subject matter of this litigation.

21.  It should be noted that as result of the above background, the 1^st and 2^nd plaintiffs are legal owners of House 13 but the defendants are not.  Hence, it is the plaintiffs’ case that the defendants occupied House 13 as their bare licensees and that their licences have been revoked.  The plaintiffs sought possession of House 13 as against the defendants.  On the other hand, the 1^st and 3^rd defendants are co-owners of House 14 which is being occupied by the plaintiffs to their exclusion.

22.  Having heard the evidence, it is obvious to me that it is strongly arguable that the defendants’ licence to occupy House 13 is not a bare licence.  The five brothers had an arrangement orchestrated by Grandmother whereby the two plaintiffs lived in House 14 of which they are co-owners with the defendants and Sau Fat but to their exclusion.  The allocation of the flats in the two houses were inextricably related.  There must be an implied cross-licence given by the defendants to the plaintiffs to occupy House 14 to their exclusion, which is the consideration for the defendants occupying House 13.  But this issue was not pleaded.  

23.  If the defendants are unable to prove the 1959 Trust, the inequity of the plaintiffs’ claim is apparent.  Each of the 1^st and 3^rd defendants is entitled to one-fifth of House 14 or three-fifth of a flat in House 14.  Though the 1^st and 3^rd defendants’ right to House 14 is not the subject matter of this action, they are excluded from House 14 and are now being evicted from House 13 as well.  Regardless of my conclusion in this action, justice requires that the parties’ rights to House 13 and 14 should be resolved together.  Unless the parties are able to reach a settlement, the 1^st and 3^rd defendants might have to commence partition proceedings to enforce their undisputed rights to House 14.  Because House 14 commands a higher valuation than House 13, the 1^st and 3^rd defendants’ rights in three-fifths of a flat in House 14 is worth more than three-fifths of a flat in House 13 in which they are residing.  I therefore suggested the parties to come to settlement on the basis of allowing the 1^st and 3^rd defendants to trade their rights in House 14 for a flat in House 13 with or without topping up by cash supplement.  The amount of cash supplement depends on the parties’ assessment of their chances of success in this action, their assessment of the valuation of the two houses, the legal costs, the acrimony such settlement could save and natural love and affection.  But while blood is thicker than water, it is not as thick as money.  The parties were unable to come to settlement. 

The family tradition

24.  The defendants relied on family tradition and not Chinese custom.  Family tradition was not pleaded in the defence and counterclaim.  It only arose out of Uncle Kai’s witness statement.  Mr Tsui made no submission on the legal effects of the family tradition.  In Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat[1], Deputy High Court Judge Robert Tang QC (as he then was) held that a Chinese custom must be immemorial, certain in respect of its nature generally as well as in respect of the locality where it is alleged to obtain and the persons whom it is alleged to affect, and must have continued without interruption since its immemorial origin.  The rights under a Chinese custom is enforceable by law. It is clear that the family tradition relied on by the defendants is far from being a Chinese custom recognizable at law.  The term can only be given its ordinary meaning as the usual family practice.  I am not aware of nor have I been referred to any authority which suggests that family practice is binding within the family or has any legal effect.

25.  The family tradition, according to Uncle Kai, is just his personal belief that when holding property on trust for Shu and Father, it was not Grandfather’s intention to distribute the property to them solely but to give the property to them to hold on trust for all beneficiaries.  This belief is premised on the traditional trust existing between members of the indigenous families in the New Territories so that if a member holds landed property, he did so representing all beneficiaries.  He said:

「 我們一家是傳統的新界家庭。傳統的新界人著重家人間之互信，並認為雖然自已擁有田產，但在某種意義上只是代表所有受益人持有。」

His evidence is ambiguous and difficult to understand.  I have no quarrel with his statement that traditional indigenous people of the New Territories have a high respect for trust among family members.  But his statement that such a person considers the land he holds is in a sense held on behalf of all beneficiaries is ambiguous and difficult to understand.  He did not state in what sense that statement applies and it is not clear what he meant by ‘all beneficiaries’.  A statement as vague as that could not qualify as a custom or a tradition.  Construed literally, his statement is inconsistent with an individual’s right to own property.  I am aware of landholding by Tong and Tso on behalf of all members of the Tong or Tso, but I have not heard of any such Chinese custom or tradition as described by Uncle Kai.

26.  So far as family tradition is concerned, the only evidence offered by Uncle Kai is that Grandfather held his landed properties on the face on trust for his two eldest sons, Shu and Father, but in fact for all his sons in equal share as reflected in Grandfather’s statement.  The facts that Grandfather declared the trust over Lots 1946 and 1570 in favour of Shu and Father when he had four sons, that he expressed in his statement his wish to distribute his estate equally to his four sons and that the distribution was substantially in accordance with his statement lend support to the existence of a family tradition of one generation only, ie Grandfather’s generation.  Basically, it is evidence of Grandfather’s intention of how he wished to dispose of his property.  However, Grandfather’s wish was not followed to the letter.  After Grandfather’s death, Grandmother assumed the position as head of the family.  She disposed of some of the land lots at her discretion and not in accordance with Grandfather’s statement.  She replaced Grandfather as trustee for Shu and Father in respect of the property.  In that capacity, she sold or transferred Lot 1570A and 1946RP on which the family house stood and some other lots to herself as trustee for Father solely.  She sold Lot 1511 to one of her daughters in October 1952.  She transferred Lots 1758, 1576A and 1576B given to Shu and Uncle Kwai under Grandfather’s statement to Father.  While Grandmother’s conduct may be regarded as her breach of Grandfather’s trust imposed on her, it reflects that the so called tradition was not really established.

27.  There is no evidence that what Grandfather did was what his brothers did, or what his own father and his grandfather did so as to support an existing family tradition.  There is also no evidence to suggest that the so called tradition was followed by the next generation.  It was not observed by Father who sold and mortgaged his property derived from Grandfather’s estate to satisfy his spending habit.  There is no evidence from Uncle Kai that he held his share of the property devolved to him from Grandfather on trust for his two eldest sons for the benefit of all his sons or children.  There is also no evidence from Uncle Kwai as to how Uncle Kwai held his share of property devolved to him from Grandfather.  Uncle Kai’s evidence at best is evidence of his belief of how property should be held and what Grandfather did, but not evidence of a consistent practice existing among a few generations as to amount to a family tradition.  At the highest, it is evidence of one of the circumstances on which the inference of intention of the settlor of property or trustee may be drawn.  On the totality of the evidence, particularly given the very ambiguous, imprecise and equivocal nature of Uncle Kai’s evidence, I am not satisfied that the existence of the alleged family tradition may be drawn and the legal effect of such tradition.  Uncle Kai’s evidence has failed to prove any family tradition. 

The family house

28.  The defendants emphasised the significance of the special treatment given to the family house by Grandmother.  The family house is situated on two lots of land, namely Lots, 1946RP and 1570A.  House 13 and House 14 were derived from Lots 1946RP and 1570A respectively.

29.  Mr Tsui submits that it was significant that when setting out the distribution in his statement, Grandfather listed the family house separately from the other land lots.  With respect, I am unable to give that any significance.  Grandfather was probably a very organized person. He classified his estate into houses, cottages and fields.   He identified their lot numbers.  There was nothing peculiar in his categorising his property in that manner.  When dividing his estate into four portions, Grandfather placed two cottages in two of the portions and half share in the new family house in each of the other two portions to make up four approximately equal portions.  As result of the drawing of lots, Father and Uncle Kai obtained the two half shares in the family house and some other land lots including Lots 1570A, and 1946RP on which the family house was situated.  Thus, Father and Uncle Kwai were to share the family house and some land lots including those on which the family house stood.  Likewise, Uncle Kai and Shu obtained the cottages and other land lots on which those cottages stood.  The categorisation was just a neutral act of no particular significance.

30.  Mr Tsui argues that Grandmother’s purchasing back or redeeming Lots 1946RP and 1570A sold by Father with her own funds by selling her own property in Tsuen Wan was in stark contrast with her sale of the other land lots which were not purchased back. He submits that this is because the family house was given special treatment by Grandmother and it is more likely that the dealings in relation to the family house was in accordance with Grandfather’s wish and with the family tradition. With respect, I disagree.  It is accepted that Grandmother had to sell some land lots to maintain the family.  If there were funds to purchase those lots back, there would be no need to sell them in the first place and it would make no sense to sell some other property to repurchase them back.  Money was needed.  Something had to be sold to maintain the family.  As for Lots 1946RP and 1570A, they were the lots on which the family house was situated.  At the time, the family house was used as the residence for Grandmother, Father’s family and probably Uncle Kwai’s family as well.  If these lots were not purchased back or redeemed, they would all lose the roof over their heads.  There was a practical need to purchase back or redeem the lots even if Grandmother had to sell her own property.  If that practical need was what gave rise to the special treatment suggested by Mr Tsui, it had nothing to do with family tradition and does not support his argument of existence of a family tradition.  I am unable to draw any inference from those events that the family house was given special treatment by Grandmother.

The family house, Lots 1946RP and 1570A were treated as one unit

31.  One of the thrust of the defendants’ argument is that although the family house stood on two or three lots of land, it was used by the family and treated as one unit.  After Father sold Lot 1946RP to Dea, Grandmother purchased it back for use by the family thinking that she was purchasing back the family house which had been sold.  Then, when she learned about the mortgage of Lot 1570A in 1963, Grandmother and Uncle Kai were puzzled how Father could have mortgaged the family house again after Grandmother had purchased it back from Dea in 1959.  Thus, Grandmother redeemed Lot 1570A using her own funds by selling her own property in Tsuen Wan.  To prevent Father from mortgaging Lot 1570A again, she caused half share of the lot to be transferred to Uncle Kwai and the other half share to be transferred to Uncle Kai to hold on trust for the five brothers.  As Uncle Kwai was entitled to half share in the family house under the Grandfather’s statement, Mr Tsui relied on the transfer of this half share in Lot 1570A to Uncle Kwai as evidence of the Grandmother’s mistaken belief that the two land lots were one and treating them and the family house as one unit.  This argument is used as a spring board to launch the defendants’ ultimate argument that Grandmother could not have intended in 1959 to make a gift of Lot 1946RP to the 1^st and 2^nd plaintiffs only but intended to make a gift of the lot to the five brothers under the 1959 Trust just as she did in her redemption of Lot 1570A and creation of the 1963 Trust. 

32.  Mr Tsui’s argument is full of conjecture and speculation.  While Uncle Kai testified that he was mistaken and thought the two lots and the family house were one, there is no evidence that Grandmother was similarly mistaken.  Nor was there evidence for such an inference to be drawn.  I do not consider Uncle Kai a very reliable witness.  He said that Grandmother consulted him always because he was more educated amongst his siblings and he had much knowledge of what the Grandmother did.  Under cross-‌examination, he admitted he could not explain many of Grandmother’s transactions in relation to the land lots asked of him.  Grandmother appeared to be a capable woman and had control over the family and even her grandchildren.  In Grandfather’s statement, he had clearly described the family house and put down the two lot numbers on which the house stood.  Grandmother assumed the position as head of the family after Grandfather’s death.  She looked after and managed the land lots.  She could not have overlooked the fact that the family house stood on two land lots and when purchasing back what Father had sold she was only purchasing one land lot.  It was unlikely that Grandmother did not know that the purchase and redemption were related to different lots of lands.  Uncle Kai may be mistaken.  But there is no evidence that Grandmother was.

33.  Mr Tsui’s reliance on the 1963 redemption of Lot 1570A and the assignment of half of the lot to Uncle Kwai to infer Grandmother’s intention when purchasing back Lot 1946RP is, in my view, wholly misconceived.  If Grandmother had really thought back in 1959 that Lot 1946RP which she purchased back was the family house, she should have at that time caused half of that lot to be transferred to Uncle Kwai and half to be held by Uncle Kai on behalf of the plaintiffs.  If Grandmother only came to realise her mistake in 1963, she ought to have transferred the entirety of Lot 1570A to Uncle Kwai instead of just half share as she had already given Lot 1946RP to the plaintiffs. 

34.  Had Grandmother followed Grandfather’s wishes to the letter, there was no need to transfer half share of Lot 1570A to Uncle Kwai.  Grandmother might have done so to compensate Uncle Kwai for lots transferred from Uncle Kwai’s entitlement under Grandfather’s statement to Father, for example, Lot 1758 and 1576A.  There was no evidence why Grandmother did what she did.  The plaintiffs do not have to tender a reason why Grandmother caused half share of Lot 1570A to be transferred to Uncle Kwai. The burden is on the defendants to prove whatever facts they wish to rely on to support their proposition.  The defendants have failed to prove that Grandmother treated the three lots and the family house as one unit or the existence of any family tradition.  In any event, Grandmother must know in 1963 that she had been dealing with separate lots of land.  If she had intended to make equal distribution, she could have done so in 1963 by causing Uncle Kai to hold the half share in Lot 1570A solely for the defendants or to change the 1959 Trust.  She did neither then nor thereafter.  It must also be borne in mind that Grandmother purchased back or redeemed the lots with her own funds.  It was her intention and not the so called family tradition that matters.  The evidence is so diverse that it does not support the inference urged upon me by Mr Tsui.

Absurd distribution

35.  While accepting that there was nothing to prevent Grandmother from distributing Father’s half share in the family house and the land lots in whatever proportion she liked, Mr Tsui submits that it is inherently improbable that Grandmother would have intended to give Lot 1946RP to the plaintiffs solely because that would give them an absurdly larger share than the defendants.  In addition to Lot 1946RP, Grandmother had also transferred Lots 1481 and 1753 to Mother to hold on trust solely for the plaintiffs.  There is no evidence on the value of these five lots.  Assuming that the lots are of approximately equal value, each of the two plaintiffs was given two-fifths share plus one-fifth of the remaining one-fifth share of the land lots, ie 44% share each; while each of the defendants was given one-fifth of one-fifth share of the land lots, ie one-twenty-fifth or 4% share each.  Each of the plaintiffs has 11 times that of each of the defendants.

36.  The plaintiffs suggested that Grandmother favoured them as compensation for their having to live with Father and his cohabitee in Kowloon for some time.  This is not a credible reason as the 3^rd defendant had also lived with the Father and his cohabitee for some time, but was not given a share in Lot 1946RP.

37.  Miss Ho, counsel for the plaintiffs, suggests that Grandmother might have favoured the plaintiffs as the eldest grandson from her eldest child.  But this argument does not explain why the 2^nd plaintiff should also be favoured.

38.  The distribution proposed by the plaintiffs would produce absurd result.  While fairness suggests equal distribution, how to distribute one’s property is very much a personal choice of Grandmother.  Life is not logic but experience.  Equality is not necessarily the starting point.  Only Grandmother could explain her choice.  Unreasonableness or absurdity is one of the circumstances to be taken into account in considering what was in the mind of the person making the distribution.  It lends support to the family tradition.  But it carries little weight against the expressed intention as stated in the documents.  It must be borne in mind that the defendants bear the burden of proof of equal distribution or the 1959 Trust.

The 1959 Trust

39.  The defendants’ case is that: (1) under the 1959 Trust, Uncle Kai was to hold Lot 1946RP on trust for the five brothers absolutely in equal shares with entitlement to reside in the lot with their respective families; (2) that Uncle Kai was to transfer the lot to the 1^st and 2^nd plaintiffs on trust for the five brothers absolutely in equal shares on the same terms after the 1^st and 2^nd plaintiffs reaching maturity; and (3) that the 1^st and 2^nd plaintiffs were informed of the terms of the 1959 Trust as early as November 1959 and they agreed to the terms.  The defendants’ case is a “trust on trust”.

40.  In his witness statement, Uncle Kai said that the 1956 Trust was made under the following circumstances.  Grandmother was very angry upon learning that Father had secretly sold the family house, which on the evidence was Lot 1946RP.  She and Uncle Kai were under the belief that the entire family house had been sold.  Grandmother’s intention was to keep the family house so that it could be used as a residence for the family from generation to generation.  She purchased it back from Dea using her own funds.  To prevent Father from selling the family house again, she wanted to transfer the lot directly to Father’s sons, who were then between one to nine years old.  She appointed Uncle Kai as trustee to hold the lot on behalf of the five brothers and suggested having the eldest two, ie the 1^st and 2^nd plaintiffs as representatives for the five brothers.  She caused Dea to assign the lot to Uncle Kai on trust for the plaintiffs.  Then, Uncle Kai went to the then New Territories Administration and processed the documentation stating that he held Lot 1946RP as trustee for the 1^st and 2^nd plaintiffs.  Uncle Kai admitted that the documentation did not represent the true arrangement.

41.  Under cross-examination, Uncle Kai departed from his witness statement and the pleaded case.  He said that it was Grandmother’s instruction that he should hold the lot for the 1^st and 2^nd plaintiffs (先) provisionally and he did not raise the issue whether the lot should be transferred to all the five brothers.  He did not bring that to Grandmother’s attention.  The 1^st and 2^nd plaintiffs were not present during his discussion with Grandmother about the trust.  He never told the plaintiffs that they were to hold the lot on behalf of the five brothers.  He did not know if Grandmother had told the plaintiffs the same.  He never heard the 1^st and 2^nd plaintiffs agreeing to the terms of the trust and simply thought the five brothers would divide the lot among themselves, presumably under the family tradition.  His evidence under cross- examination negated what he said in his witness statement and the pleaded case about his holding the lot on undisclosed trust for all five brothers and that the plaintiffs knew about and consented to the terms of the trust in 1959.  There was absolutely no evidence about his holding the lot on trust for the five brothers, that he shall transfer the lot to the plaintiffs upon their attaining maturity and then the plaintiffs shall hold the lot on trust for all the five brothers thereafter.  There was also no evidence that the plaintiffs knew about the terms of the trust as early as November 1959 and agreed to the terms.

42.  It must be borne in mind that in 1959, the 1^st and 2^nd plaintiffs were respectively ten and seven years old.  It is really doubtful if Grandmother would have discussed serious matters such as landholding and trusteeship with them, let alone if they understood the obligation they were to assume in more than ten years later after they attained majority and if they had the capacity to give proper consent to such an agreement.  There is an element of improbability and artificiality in the defendants’ case.

43.  In 1979, Uncle Kai resigned as trustee and transferred the lot to the plaintiffs to enable them to take advantage of the land exchange scheme.  He said under cross-examination that he did not tell the plaintiffs that they should hold the lot for all the five brothers.  He said the plaintiffs should know that they were trustees for the five brothers.  That is an easy allegation to make, but it is inconsistent with his own evidence in the preceding paragraph that he had not told the plaintiffs that they were to hold the lot as trustees for the five brothers, that he did not know if Grandmother had told them the same, and that he never heard the plaintiffs agreeing to the terms of the trust.  If what he said in his witness statement was true, ie he was holding the lot on trust for all five brothers, when he resigned as trustee and transferred the lot to the plaintiffs, he should have reminded them that they were to hold the lot as trustees for the five brothers.  That admittedly was what he did not do.  Given that the transfer was to enable the plaintiffs to obtain a house in the Sam Tung Uk Resite Village, he must know that it was important for him to remind the plaintiffs of their obligation as trustee under an undisclosed trust for the five brothers.  On his own evidence, he just assumed, without any basis, that the plaintiffs knew they were trustees for the five brothers. 

44.  Earlier, I have indicated my reservation about Uncle Kai’s reliability.  He did not impress me as a dutiful trustee.  He just did what he was told by Grandmother.  I think what he said under cross-examination is not the whole truth but closer to the truth, while what he said in his witness statement is mostly untrue.  He was torn between the two parties and gave a statement to support the defendants by asserting what he thought a just distribution should be.  Then under cross-examination, in a slip of the tongue he let out the truth that Grandmother’s instruction to him was to hold the lot on behalf of the plaintiffs provisionally.  He also did not have the audacity to repeat in the presence of the plaintiffs the false assertion he made in his witness statement.  Then he chose the middle course of explaining himself away by saying that he did not tell the plaintiffs that they were to hold the lot on behalf of the five brothers and that he merely assumed that they knew that was the case.  The inconsistencies in Uncle Kai’s evidence reflected that his allegation of secret trust or “trust on trust” was just a concoction made for the purpose of this action.

45.  The plaintiffs are relying on their legal title as owners of the lot given to them by Grandmother which is evidenced by the conveyance and memorial registered with the Land Registry.  There is no dispute that the lot was re-purchased by Grandmother from Dea who conveyed it to Uncle Kai as trustee for the 1^st and 2^nd plaintiffs.  The defendants are alleging that contrary to the documentary evidence, Grandmother made a gift of the lot to all the five brothers under an undisclosed trust or secret trust. This is an allegation against a deceased person who is unable to answer the allegation.  Relying on Kwan So Ling v Woo Kee Yiu Harry[2], Miss Ho submits that the defendants have a “special burden” to overcome the court’s general suspicion as Grandmother can no longer give evidence as to what in fact had happened.  Mr Tsui distinguished that case from the present case on the ground that in Kwan So Ling, the principal witness was the donee who was claiming against the deceased donor, whereas in the present case the principal witness is Uncle Kai who was an independent witness.  I do not consider the distinction material.  A witness, even one described as an independent or dis-interested witness, is a witness presented by an interested party.  Where a witness makes an allegation against a deceased, whether a witness or a party, who is unable to answer the allegation, the court will always have to approach his evidence with suspicion. This is particularly so where the allegation is against undisputed documentary evidence.  The party making such an allegation not only bear the burden of proof but a higher standard of proof which is commensurate with the circumstances.  Although G Lam J called it a “special burden”, it is just that burden which is commensurate with the circumstances.

46.  Uncle Kai’s evidence under cross-examination negated his evidence in his witness statement and the pleaded case.  I give more weight to his evidence under cross-examination.  His evidence that Grandmother instructed him to hold the lot on trust for the plaintiffs provisionally suggests that Grandmother did not have in mind a trust for all five brothers as pleaded by the defendants.  At the highest, Grandmother might have intended Uncle Kai to hold the lot on trust provisionally for the plaintiffs leaving with her the discretion to add the other brothers in future.  But she never exercised that discretion.  Upon her death, what was provisional became permanent.  The fact that when Uncle Kai assigned the lot to the plaintiffs he did not remind them that they were to hold the lot on trust for the five brothers is evidence that no such trust for the five brothers ever existed.  Given the very high standard of proof required by the circumstances of this case, I am far from being satisfied that the defendants have discharged the burden of proving that the 1959 Trust over Lot 1946RP was in favour of the five brothers and the terms of the trust as pleaded and that the plaintiffs knew and agreed to the terms of the trust.  In view of the above finding, there is no need to consider the defendants’ alternative argument of constructive trust which is premised on Grandmother’s intention to have the lot held by Uncle Kai on trust for the five brothers. 

47.  In the circumstances, the plaintiffs are entitled to rely on the two express declarations in the 1959 conveyance, the 1979 assignment and the two memorials registered in the Land Registry as to their beneficial ownership of Lot 1946 RP and hence House 13.  In the 1959 conveyance, it was expressly stated that Dea as vendor assigned the lot to Uncle Kai as trustee for the 1^st and 2^nd plaintiffs.  Uncle Kai also signed on the memorial as trustee for the two plaintiffs.  In the 1979 assignment, Uncle Kai as trustee assigned the lot to the 1^st and 2^nd plaintiffs as beneficiaries and tenants in common in equal shares.  The memorial was signed by Uncle Kai and the plaintiffs as assignor and assignees respectively, and by Uncle Kwai as witness.  There was no mention in any of the above documents that the other three brothers have any interest in the lot.

48.  In Bhura v Bhura[3], Mostyn J summarised the legal principles held by the United Kingdom Supreme Court in Jones v Kernott[4] in relation to disputes over the ownership of family properties as follows:

“ 8. The applicable legal principles concerning a property dispute such as this are tolerably clear and have most recently been re-stated by the Supreme Court in Jones v Kernott [2011] UKSC 54, [2012] 1 AC 776. In summary I think they are as follows.

i) If there is an express declaration of beneficial interests then that is, almost invariably, the end of the matter. Such an express declaration can only be displaced if it has been procured by fraudulent conduct. …

ii) If there is no express agreement about the beneficial interests then there is likely to be (at least) a tacit understanding. …

iii) In the rare case where the evidence does not reveal a tacit understanding about ownership the court can reach for the presumptions. An obvious presumption is that beneficial ownership is the same as legal title (see Jones v Kernott at paras 17 and 51(1)).

…”

49.  Having rejected Uncle Kai’s evidence about the 1959 Trust in favour of the five brothers, the plaintiffs are well entitled to rely on the express declaration in the 1959 conveyance and the 1979 assignment as conclusive evidence of their exclusive legal and beneficial interest in Lot 1946RP and House 13 which is derived from that lot.

50.  Furthermore, the defendants’ reliance on the 1959 Trust must also fail as not being evidenced by any written document as required by section 5(1) of the Conveyancing and Property Ordinance which provides:

“ (1) Subject to section 6—

(a) no equitable interest in land can be created or disposed of except by writing signed by the person created 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.”

Conclusion

51.  The plaintiffs, being the legal and beneficial owners of House 13, are entitled as against the 1^st and 2^nd defendants to possession of that part of the second floor of House 13 occupied by them; and as against the 3^rd and 4^th defendant to possession of the first floor of that house.  The plaintiffs are also entitled to mesne profit and interest.

52.  I have mentioned the unfairness and unconscionable nature of the plaintiffs’ claim.  In short, they are occupying House 14 to the exclusion of the 1^st and 3^rd defendants who are co-owners of that house and entitled to use and occupation of that house.  They did so under a flat swapping arrangement agreed upon by the five brothers and that agreement was supported by consideration.  The alleged “bare licence” given to the 1^st and 3^rd defendant to occupy House 13 is not a bare licence, but a contractual licence.  This “bare licence” was conceded by the defendants.  Had they not so conceded, they would most probably succeed in their defence.  Now, to seek justice, the defendants would have to commence partition proceedings against the plaintiffs to recover their interest in House 14.  It is regrettable that the parties have refused my suggestion to have a global settlement of this action and their rights in relation to House 14.  Further costs are going to be incurred to bring the partition proceedings so that the parties’ dispute can be fully disposed of.  In view of the unfair and unconscionable nature of the plaintiffs’ claim, I shall order a stay of execution of the judgment for eight months for the 1^st and 3^rd defendants to consider commencing partition proceedings and making arrangement for delivering possession of the part of House 13 they occupied to the plaintiffs.  The interest rate I am going to award is also tied to this period. 

53.  Accordingly, I make the following order:

(i) the defendants shall deliver vacant possession of the part of House 13 occupied by them to the plaintiffs;

(ii) the 1^st and 2^nd defendants shall pay mesne profit to the plaintiffs at the rate of $4,375 per month from 11 April 2014 until delivery of vacant possession of that part of the second floor of House 13 occupied by them;

(iii) the 3^rd and 4^th defendants shall pay mesne profit to the plaintiffs at the rate of $8,750 per month from 18 April 2014 until delivery of vacant possession of the first floor of House 13 occupied by them;

(iv) the 1^st and 2^nd defendants shall pay the plaintiffs interest on the outstanding mesne profit at the rate of 1% above prime rate on the outstanding monthly sum due from 11 May 2014 until 23 September 2019 and thereafter at judgment rate until payment;

(v) the 3^rd and 4^th defendants shall pay the plaintiffs interest on the outstanding mesne profit at the rate of 1% above prime rate on the outstanding monthly sum due from 18 May 2014 until 23 September 2019 and thereafter at judgment rate until payment;

(vi) there be stay of execution of this judgment until 23 September 2019 with liberty to apply; and

(vii) there be cost order nisi that there be no order as to costs.

54.  I repeat my call to the parties to come to settlement of all their dispute concerning House 13 and House 14 during this eight months’ period of stay of execution.