WONG SING v. WONG CHUN WAI

HCA 1872/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1872 OF 2005

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BETWEEN

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J U D G M E N T

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Introduction

1.  This action concerns the property known as the 2^nd floor and the roof of the small house at No. 335A Sun Fung Wai, Tuen Mun, New Territories, Hong Kong (“the property”). The building at No. 335A Sun Fung Wai (“the building”) consists of three floors namely, the ground floor and garden, the 1^st floor and the property.

2.  The plaintiff is an elderly gentleman who was about 80 years old in 2003. He has two wives with a total of six sons and seven daughters. The defendant is the eldest son from the plaintiff’s second wife and is the third child in the family.

3.  The ground floor and garden of the building were registered in the name of the plaintiff. The 1^st floor was registered in the name of Wong Wai Lok (“Wai Lok”), the plaintiff’s grandson. He is the son of Wong Wai Yau (“Wai Yau”) who is the second son of the plaintiff. The 2^nd floor and the roof were registered in the name of the defendant by an assignment dated 9 December 2003 whereby the vendor assigned the property to the defendant for the consideration of $1,000,000. Stamp duty of $100 was paid for this assignment.

4.  It is common ground that the total consideration for the building was $2,650,000 and that the plaintiff provided the full purchase price for the purchase of the building from the vendor.

5.  The plaintiff’s pleaded case is that the defendant advised him that the purchase of the building should be made by separate deeds of assignment rather than by one assignment to save stamp duty. The defendant denies that he gave this advice to the plaintiff.

6.  It is also common ground that in November 2003 the calculation of stamp duty under Schedule 1 of the Stamp Duty Ordinance Cap. 117 in force at that time was that for assignments where the amount or value of the consideration does not exceed $1,000,000 only $100 was payable as stamp duty and that for assignments where the amount or value of the consideration was $2,650,000 stamp duty would have been charged at 1.5% of the value which was equivalent to $39,750. There were in fact three assignments for the three floors of the building with stamp duty of $100 paid for each assignment thereby resulting in a saving of $39,450 ($39,750 - $300).

7.  The plaintiff’s case is that the defendant holds the beneficial interest in the property in trust for him. Mr Ho, for the plaintiff, made it plain that the plaintiff’s case was on the sole basis that the defendant held the property on a resulting trust in favour of the plaintiff.

8.  The defendant denies that he held the property on a resulting trust for the plaintiff. His case is that the property was given by the plaintiff as a gift to him. He relies on the presumption of advancement.

9.  The plaintiff claims a declaration that the property is held by the defendant on trust for him. He also claims an order that the defendant do transfer the property to him or to such other person as he shall direct together with the costs and expenses for the transfer of the property and the costs of the action. Although there was also a claim by the plaintiff for damages and interest, this was not pursued at trial.

10.  The defendant denies that the plaintiff is entitled to the relief claimed. He counterclaims a declaration that he holds the property as sole beneficial owner. The plaintiff has registered the writ as a lis pendens against the property at the Land Registry and the defendant also counterclaims for an order that the plaintiff do vacate the registration of the writ at the Land Registry alternatively, for an order that the registration of the writ against the property at the Land Registry do stand to be vacated. He also claims damages for the wrongful registration of the writ of summons in the total sum of $115,500 with costs.

The main issues

11.  The main issues are:

(1)  whether the presumption of advancement applies in favour of the defendant;

(2)  whether the plaintiff is entitled to raise the presumption of resulting trust;

(3)  whether, as a question of fact, at the time of the purchase in November 2003 the plaintiff intended to make a gift of the property to the defendant or for the defendant to hold the property on trust for him.

Issue (1)

12.  Where a person purchases a property in the name of another, then, as a rule, unless there is some further indication of an intention at the time to benefit the other person or some presumption of such an intention, such property is deemed in equity to be held on a resulting trust for the purchaser (paragraph 400.104 Vol 26 Halsbury’s Laws of Hong Kong).

13.  Where a father purchases property in the name of a child the transaction does not create a resulting trust for the purchaser but is an advancement or gift to the child unless there is evidence of a contrary intention at the time of the transaction or the circumstances are such as to raise a presumption against the advancement or gift (paragraph 400.106 Vol 26 Halsbury’s Laws of Hong Kong).

14.  The undisputed fact is that the defendant is a natural son of the plaintiff. That being so, I find that the presumption of advancement applies in favour of the defendant. Although Mr Ho submitted that under modern conditions the presumption of advancement was weakened, it was not disputed that in respect of the purchase of the property the presumption of advancement applies in favour of the defendant.

15.  Issue (1) is resolved in favour of the defendant.

Issue (2)

16.  The question to consider is whether the plaintiff is entitled to rebut the presumption of advancement in favour of the defendant by relying on the presumption of resulting trust in this case where the full purchase price of the property was paid by the plaintiff.

17.  Deputy Judge To (as he then was) succinctly stated in Lee Tso Fong v Kwok Wai Sun [2008] 4 HKLRD 270 at paragraph 24 of his judgment at page 282 that

“  Where a parent purchases property and transfers it to hischild, it is capable of raising both the presumption of resulting trustand the presumption of advancement by reason of the parent andchild relationship.  Bearing in mind that the legal burden is on the party seeking to prove his equitable right which is inconsistent with the undisputed legal title, the parent who purchasedthe propertyand transferred it to his child must bear the evidential burden ofrebutting the presumption of advancement, which is part of his legalburden of proving the resulting trust.  Thus, the legal burden is on the parent whether he is relying on the presumption ofresultingtrust or whether the presumption of advancement is raised against him.”

18.  The Court of Appeal (Huggins V.P., Silke J.A. and Fuad J.A.) held in Yim Bo-Ying v Chung Iu-Warm [1985] HKLR 354 that it would be against public policy to permit the presumption of a resulting trust to arise in the defendant’s favour where the defendant himself disclosed the improper purpose for which the property he said he had paid for was conveyed into another’s name. The situation was different where the plaintiff had no reason to disclose any illegality and did not do so.

19.  In Yim Bo-Ying the plaintiff was the mother-in-law of the defendant. The plaintiff was the registered owner of certain premises and claimed possession and mesne profits. The defendant, who had purchased the entire building in which the suit premises were situate, alleged that he had directed the suit premises to be conveyed into the name of the plaintiff merely in order to effect a stamp duty saving and that it was the common intention of both parties that the plaintiff should hold the premises on trust for the benefit of the defendant.

20.  At first instance the judge found that the plaintiff had not provided the money for the purchase as alleged by her and held for the defendant. At the hearing of the appeal, the main issue was whether it was against public policy to allow the presumption of resulting trust to arise when the defendant’s purpose in vesting the suit premises in the plaintiff’s name was improper and illegal namely, the evading of stamp duty which was otherwise payable to the Government.

21.  As Fuad J.A. said at page 361

“  Gascoigne v Gasgoine [1918] 1 KB 223 established the proposition that where a person puts property into the name of his wife or child, he is not permitted to rebut the presumption of advancement thereby raised by leading evidence that his motive was not one of advancement but in reality to effectuate an illegal or immoral purpose.  There a man took a lease of land in his wife’s name and built a house on it with his own money.  This he did to save his property from his creditors, and his wife knew about the motive and connived in the transaction.  When the man later claimed the beneficial interest, Lawrence, J. and Lush, J. held that he could not be allowed to rebut the presumption of advancement by setting up his own “illegality and fraud”―whether or not the point had been taken at the trial.

The same principle was applied in Re Emery’s Investment Trust [1959] Ch 410 by Wynn-Parry, J.  In that case a husband bought American bonds in the name of his wife, who was a citizen of the U.S.A., to evade American Federal tax.  The intention found by the judge was that the spouses should own the bonds in equal proportions in equity.  It was held that the presumption of advancement could only be rebutted by proof of the intent to evade tax, and the husband would not be permitted to prove this intent.  And so, despite the fact that the wife was a party to the design, she was entitled to retain the whole.

This line of authority was approved in Tinker v. Tinker [1970] P 136 where a husband conveyed property into his wife’s name so that it could be protected from his creditors if his new garage business failed.  His attempt to rebut the presumption of advancement failed.  Lord Denning, M.R. said this at page 141:―

“…I am quite clear that the husband cannot have it both ways.  So he is on the horns of a dilemma.  He cannot say that the house is his own and, at one and the same time, say that it is his wife’s.  As against his wife, he wants to say that it belongs to him.  As against his creditors, that it belongs to her.  That simply will not do.  Either it was conveyed to her for her own use absolutely: or it was conveyed to her as trustee for her husband.  It must be one or other.  The presumption is that it was conveyed to her for her own use: and he does not rebut that presumption by saying that he only did it to defeat his creditors.  I think it belongs to her.”  ”

22.  After reviewing the authorities mentioned, Fuad J.A. said at page page 362

“  It seems to me that all the cases are founded on the basic principle that he who seeks equity must come with clean hands to receive it.  I respectfully agree with the learned editors of SNELL (28th Edition) p. 182 where it is said “There is no resulting trust where it would be against public policy to permit the presumption”, relying on Groves v. Groves.”

23.  As Fuad J.A. observed at page 363 the defendant himself revealed the purpose for which the plaintiff’s name had been used namely, to save stamp duty. The saving in stamp duty had amounted to $6,400.

24.  Huggins V.P. also said at page 365

“In asking the court to declare a resulting trust in his favour the defendant seeks equity.  He comes before us admitting that his object in taking an assignment of the suit premises in the name of the plaintiff was to evade stamp duty.  Fuad J.A. has reviewed all the authorities cited to us and I respectfully agree with the broad statement of principle which he has adopted from Snell’s Principles of Equity (28th Ed.) 182:―

“There is no resulting trust where it would be against public policy to permit the presumption.”  ”

25.  And as Silke J.A. said at page 367

“ It is clearly established that there can be no resulting trust where it would be against public policy to permit of the presumption.”

26.  As clearly found by the Court of Appeal in Yim Bo-Ying a party cannot rely on his own illegality such as evasion of stamp duty to permit the presumption of resulting trust.

27.  By his statement of claim the plaintiff pleaded and relied on the fact that the purpose of purchasing the building in the names of three separate owners for the three floors rather than in his own name for the entire building for the total consideration of $2,650,000 was to pay less stamp duty resulting in a saving to him (paragraphs 3 and 4). The plaintiff also gave evidence to this effect in his witness statement which stood as his evidence in chief (paragraphs 7 and 8 of his witness statement).

28.  Although there is an issue of fact as to whether it was the defendant or the plaintiff’s estate agent who advised him to purchase the building in three separate names for each floor, it is clear that the plaintiff’s case is that the purpose of splitting the purchase of the building into three separate names by three separate assignments for the three floors was for the plaintiff to save stamp duty. On the binding authority of Yim Bo-Ying the plaintiff is not permitted to rely on this to raise the presumption of resulting trust to defeat the presumption of advancement in favour of the defendant.

29.  Mr Ho relied on Tinsley v Milligan [1993] 3 WLR 126 where it was held that a claimant to an interest in property was entitled to recover it if he was not forced to plead or rely on an illegality. However, that case provides no assistance to the plaintiff as he has relied on the illegal purpose of evading stamp duty to raise the presumption of resulting trust. The plaintiff seeks to rebut the presumption of advancement by relying on the presumption of resulting trust which in my judgment he is not entitled to do. On the binding authority of Yim Po-Ying he is not entitled to raise the presumption of resulting trust.

30.  Issue (2) is resolved in favour of the defendant.

31.  As the plaintiff is not entitled to raise the presumption of resulting trust to rebut the presumption of advancement the plaintiff’s claim must fail. However, I go on to consider Issue (3).

Issue (3)

32.  I have had the advantage of hearing evidence of what transpired at the time of the purchase of the building and shortly thereafter. Both the plaintiff and the defendant gave evidence of the plaintiff’s intention at the time of the purchase and what was said.

33.  I also heard evidence from Tai Yau, Wai Lok and his mother Ng Mei Fong, who were called on behalf of the plaintiff.

34.  Apart from the defendant who gave evidence, the other witnesses who gave evidence on behalf of the defendant were Cindy Hung Suet Ching (“Cindy”) a friend of the defendant’s daughter, Ng Moon Tong, a brother of the defendant’s wife, Ng Chi Keung, a nephew of the defendant’s wife, Tsang Wai Chung, the defendant’s son-in-law and Ip Wai Man, a friend of the defendant and his wife and a customer of the plaintiff.

35.  The plaintiff is a necromancer and has been practicing as such for many years. Apart from his practice of necromancy at his shop premises, which the plaintiff himself carried out, he has also been running a business of selling candles and joss sticks for ancestral worship for many years. The plaintiff has had the assistance of his family members in the running of the business of selling candles and joss sticks over the years.

36.  The undisputed evidence is that the defendant started working for the plaintiff at a young age. In 1980 he was married to his wife in a marriage arranged by his parents. Thereafter the defendant and his wife lived with the plaintiff and they both worked in the plaintiff’s shop.

37.  According to the defendant, the plaintiff is very arrogant and never listens to or accepts views and opinions from others. His decisions, whether right or wrong, have to be followed by the family members who would not dare to go against his wishes. The defendant said that from the time he was young he was afraid of his father and dared not express his own opinions to him. The defendant has gradually developed an introverted personality. I accept the evidence of the defendant whom I believe.

38.  Although the plaintiff denied this, I prefer the evidence of the defendant to that of the plaintiff and find that the plaintiff was a particularly strict parent who expected his family members to comply with his decisions and that the family members would be expected to and did comply with his decisions whether such were right or wrong.

39.  It is clear from the evidence of the defendant, which I accept, that the defendant and his wife have been helping the plaintiff run his business on and off, for many years. I find that in about 1980 the defendant and his wife after their marriage assisted the plaintiff in running his shop until about 1982 when they left because they were not treated well by the plaintiff. In about 1985 the defendant and his wife came back to work in the plaintiff’s shop when the plaintiff asked them to return. He and his wife left again as they were not satisfied with the way the plaintiff were treating them. It is not necessary to set out the defendant’s evidence in this respect in detail. I accept the defendant’s evidence and believe him.

40.  I also find that from about 1996 to the time they left again in early 2004 the defendant and his wife were again managing the plaintiff’s business at his shop.

41.  There is no dispute that in about September 2003 the plaintiff sold his shop premises for $3,000,000. He then purchased the building for $2,650,000.

42.  On the issue of fact as to whether it was the defendant or the plaintiff’s estate agent who advised him to purchase the building in three names to save stamp duty, I prefer the evidence of the defendant to that of the plaintiff. The defendant gave evidence that it was the estate agent who mentioned this to the plaintiff. I believe him.

43.  Although in his witness statement the plaintiff said that it was the defendant and not the estate agent who advised him of this, he recanted this in cross-examination. He said in cross-examination that in fact the defendant never made the suggestion to purchase the building in three names to save stamp duty.

44.  I find as a fact that it was the plaintiff’s estate agent and not the defendant who advised the plaintiff to purchase the building in three names by three separate agreements.

45.  The plaintiff gave evidence that he caused the property to be purchased in the name of the defendant and caused the same to be assigned to him so that the defendant could hold the same on trust for him. He never intended to make a gift of the property to the defendant. He also said that he caused the 1^st floor of the building to be purchased in the name of Wai Lok and caused the same to be assigned to him so that the same could be held on trust for him by Wai Lok. The ground floor was purchased and assigned to the plaintiff in his own name.

46.  Wai Lok also gave evidence in support of the plaintiff’s case that the 1^st floor was purchased by the plaintiff and assigned to Wai Lok to be held on trust for the plaintiff and that the 2^nd floor and roof was purchased and assigned to the defendant to be held on trust for the plaintiff. He denied that the purchase of the 1^st floor and assignment thereof was a gift to him by his grandfather and he also denied that the plaintiff had made a gift of the 2^nd floor and roof to the defendant.

47.  The defendant denied that there was ever any agreement to hold the property on trust for the plaintiff. He said that when purchasing the building the plaintiff made it clear that he was giving the 1^st floor of the building to Wai Lok and the 2^nd floor and roof to him as a gift.

48.  The defendant also said in evidence that the plaintiff told him that given the character of the defendant, he would not be capable of claiming a share in the plaintiff’s estate in the event that he would pass away later on and that was why he was making a gift of the property to him at that time. I believe the defendant.

49.  There is no dispute that the defendant kept the title deeds of the property at all times after the purchase.

50.  On the dispute of fact as to the intention of the plaintiff at the time of the purchase of the building including the property, I have no hesitation in preferring the evidence of the defendant to the evidence of the plaintiff and his grandson Wai Lok.

51.  I found the plaintiff to be an untruthful and an unreliable witness unlike the defendant whom I found to be truthful, honest and reliable. Where their evidence is at variance, I much prefer the evidence of the defendant to that of the plaintiff.

52.  I also prefer the evidence of the defendant to the evidence of Wai Lok where their evidence is at variance.

53.  I would also observe that although Wai Lok said in evidence when questioned by the Court at the end of his evidence that he had heard the defendant agreeing in effect to hold the property in trust for the plaintiff in November 2003, this was never mentioned in his witness statement. I do not believe Wai Lok’s evidence on this.

54.  The plaintiff admitted in cross-examination that he had told untruths in his witness statement which stood as his evidence in chief. He admitted that what was contained at paragraph 6 of his witness statement that he felt discontent with the defendant was untrue. He went on to say at paragraph 6 of his witness statement that he had no alternative but to sell his shop and purchase a new one so as to prevent the defendant and his wife from participating in his business. He added that his intention to purchase the building was solely to prevent the defendant and his wife from participating in his business. This evidence was, as he admitted in cross-examination, untrue. He said in cross-examination that he was not discontented with the defendant. He also admitted that he had made up the contents of paragraph 6 of his witness statement as he was keen to get back the property from the defendant so he made up the contents of paragraph 6 to paint a bad picture between him and the defendant.

55.  Tai Yau gave evidence that at the plaintiff’s request he had telephoned the defendant twice in March and April 2005 to ask the defendant to transfer the property back to the plaintiff. According to Tai Yau the defendant agreed to do so but as he had failed to do so he kept calling him but the defendant refused to answer his calls.

56.  The defendant agreed that Tai Yau had called him asking him to transfer the property to the plaintiff but he denied that he ever agreed to transfer the same to the plaintiff.

57.  On this dispute of fact, I prefer the evidence of the defendant to that of Tai Yau and find that the defendant never agreed to transfer the property to the plaintiff.

58.  Cindy gave evidence that in about November 2003 she went to the plaintiff’s shop to make a purchase. She was a friend of the defendant’s daughter. She heard the plaintiff happily telling his customers at the shop that he had bought a village house in Sun Fung Wai and that he gave the 2^nd floor and roof to the defendant as a gift and the 1^st floor to Wai Lok as a gift and that he would live on the ground floor. I believe her and accept her evidence.

59.  Ip Wai Man, a customer of the plaintiff and also a friend of the defendant and his wife, gave evidence that in or around 2003 when she was at the plaintiff’s shop the plaintiff told her that he had purchased the building and that he gave the 2^nd floor with the roof to the defendant and the 1^st floor to Wai Lok as a gift and that he would live on the ground floor. At that time she did not know who Wai Lok was and only later on did she find out from the defendant’s wife that Wai Lok was the plaintiff’s grandson. She also said that after that the plaintiff repeated this in front of other customers on several occasions. I believe her and accept her evidence.

60.  There was also evidence from Ng Chi Keung, a nephew of the defendant’s wife who assisted the defendant and his family in moving things into the building on a day in or around December 2003. He was invited to dinner that evening and when there was a discussion about renovating the property, he heard the plaintiff say to the defendant that the flat, referring to the property, had been given to him so he should get some renovation workers to do better renovation works for the property.

61.  Tsang Wai Chung, also a friend of the defendant’s daughter at that time but now his son-in-law, was also present at the same dinner on the day of removal. He confirmed the evidence of Ng Chi Keung that the plaintiff has said to the defendant that the property had been given to him so he should get renovation workers to do better renovation works for the property.

62.  I have no hesitation in accepting the evidence of Cindy, Ip Wai Man, Ng Chi Keung and Tsang Wai Hung whom I found to be honest, truthful and reliable witnesses. On their evidence, which I accept, the plaintiff made admissions at the time of the purchase of the property or shortly thereafter that he had made a gift of the property to the defendant. The plaintiff denied this. However, I prefer their evidence to the evidence of the plaintiff.

63.  It is plain that Wai Lok is very close to the plaintiff having lived with him since he was very young. It is not surprising that the plaintiff would make a gift of the 1^st floor of the building to Wai Lok. Wai Lok has, on the undisputed evidence, lived with the plaintiff almost all his life and for the last few years he has also been working for him in his shop. He still lives with and works with the plaintiff at his shop. His parents have also been working for the plaintiff for some time. So hasthe defendant and his wife. Although Wong Kam Moon, another son of the plaintiff, has also worked for him from about 1989 to 1994, I find that in or about November 2003 Wai Lok and his parents and the defendant with his wife were the members of the plaintiff’s family who were around him most of the time and were closest to him for a number of years up to the time of the purchase of the building in about November 2003. That being so, in my view, there is nothing remarkable in the plaintiff making a gift of the 1^st floor of the building to Wai Lok and the 2^nd floor and roof to the defendant and not to the other members of his family. I so find.

64.  I am satisfied and find that the purchase of the property in the name of the defendant was intended by the plaintiff to be a gift to the defendant and not to be property to be held on trust for the plaintiff.

65.  Issue (3) is resolved in favour of the defendant.

66.  I dismiss the plaintiff’s claim.

67.  I find for the defendant on the claim and counterclaim.

68.  The defendant entered into a sale and purchase agreement dated 8 July 2005 to sell the property to Eastford (China) Development Ltd (“the purchaser”) for $770,000 through an estate agent.

69.  The defendant said, and I accept, that he first offered to sell the property in 2004 for $1,000,000 but later lowered the price to $880,000 as he was unable to sell it for $1,000,000. He agreed that he eventually sold it for $770,000 which was less than the market price as he was in urgent need of money. I believe him.

70.  I am satisfied that the defendant sold the property for $770,000 which was less than the market value at the time as he was in urgent need of money and not because he wanted to put the property out of the plaintiff’s reach.

71.  There is no dispute that the plaintiff has registered the writ of summons as a lis pendens against the property at the Land Registry. The sale to the purchaser has fallen through because of this. In my judgment the plaintiff has wrongfully registered the writ of summons against the property at the Land Registry and the defendant is entitled to damages. There is also no dispute that the defendant has had to pay $38,500 to the estate agent.

72.  I grant a declaration that the defendant holds the property as sole beneficial owner.

73.  As sought in the closing submissions of Mr Shum, for the defendant, I also grant an order that the registration of the writ of summons against the property at the Land Registry do stand to be vacated.

74.  I also order the plaintiff to pay damages in the sum of $38,5000 to the defendant.

75.  The defendant is also entitled to an indemnity for the liquidated damages which he has paid to the purchaser. Mr Ho accepted that if the defendant should succeed on the counterclaim the plaintiff would be liable to indemnify the defendant for his loss of $77,000 for the liquidated damages which he has paid to the purchaser upon proof of payment being supplied. I order that the plaintiff do indemnify the defendant for its loss of $77,000 upon proof of payment to the purchaser.

76.  I also make an order nisi that the plaintiff do pay the defendant his costs of the action and the counterclaim such costs to be taxed in accordance with Legal Aid Regulations.