CHIK CHI SHING v. CHEUNG KUI YIN

HCA 2294/2019

[2021] HKCFI 2520

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2294 OF 2019

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D E C I S I O N

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Introduction

1.  Madam Yuen War (“the Deceased”) was the mother-in-law of the Plaintiff and mother of the Defendant.  The Defendant is the executor of her estate.

2.  Before she died, the Deceased was the sole owner of the subject property (“the Property”).  The Plaintiff asserts an express agreement whereby the Property was held by the Deceased on behalf of him and his wife (collectively “the Couple”) as joint tenants.  The mortgage of the Property had been redeemed and the title deeds have since remained in the possession of the Couple.  The wife had passed away and so the Plaintiff became the sole beneficial owner.  After the Deceased died, the Defendant sold the Property. The Plaintiff therefore sues the Defendant for breach of trust.

3.  The Defendant denies the claim and counterclaims for a declaration that the Property shall be vested solely in the estate of the Deceased and an order for the Plaintiff to return the title deeds to the Defendant.

4.  The Plaintiff applies to strike-out parts of the amended defence and counterclaim (“ADCC”) on the ground that those parts are irrelevant to the issues in dispute and would embarrass or delay the fair trial.  If not struck out, the Plaintiff would have to respond by way of pleading and evidence, which would unnecessarily increase costs.  It would also prejudice and delay the fair trial of the real dispute.

5.  Master Sara Tong struck out some parts relating to (i) some money transactions and (ii) part of the relief which asserted that a loan made by the Plaintiff to the Deceased was time-barred (“disputed pleas”).  This is the Defendant’s appeal against the learned Master’s decision.  The Defendant submits that the disputed pleas are necessary to enable the Court to take a holistic approach of the relevant circumstances to decide if the Agreement existed.

6.  An appeal against a Master’s decision operates by way of rehearing.  The judge considers the matter afresh.

7.  Meanwhile, the Defendant has filed the re-amended defence and counterclaim pursuant to the learned Master’s order.

Undisputed facts

8.  The subject Property was located at 20G, Block 10, Saddle Ridge Garden, 6 Kam Ying Road, Ma On Shan, Shatin, New Territories, under the Home Ownership Scheme.  The purchase price was $951,000.  Since about completion in August 1993, the Couple had resided at the Property for the first 7 years.  The Couple had been paying the “mortgage instalments” both during the time they were residing there and even after they had moved out.  They had borrowed $200,000 from the father of the Plaintiff’s wife (“Father”) in May 2001.

9.  The mortgage was discharged on 29 June 2001. Since then, the title deeds have been kept by the Couple, and then by the Plaintiff after the death of his wife.

10.  The Father died in 2007.  The Plaintiff’s wife died in 2010.

11.  The Deceased made a first will on 21 September 2010 devising the Property to the Plaintiff’s son, and appointing him as executor.

12.  The Deceased later made a second will on 14 March 2012, devising the Property to the Defendant’s son, and appointing the Defendant as executor.  On the same day, the Deceased made a statutory declaration to the effect that she was unable to locate the whereabouts of the title deeds after making all necessary enquiries with members of the family and she believed that the title deeds had been lost and could not be found.

13.  By 2 demand letters issued by Deacons to the Deceased on 9 July and 1 August 2012 respectively, the Plaintiff demanded for repayment of a sum of $1,476,851.86, being the loan to the Deceased (“the Loan”) in respect of the deposit and mortgage repayments of the Property.

14.  The Loan had not been repaid.  On 10 August 2012, the Deceased replied to Deacons’ letter, condemning the Couple for taking advantage of parental love and trust to obtain the Parents’ savings by deception and to take away their property.

15.  On 5 October 2012, the Deceased made a statutory declaration stating that the Plaintiff’s wife had on multiple occasions borrowed money from the Parents for the purpose of purchasing properties and investment but had never repaid the money.

16.  The Deceased died on 19 September 2013.

17.  As executor of the Deceased, the Defendant assigned the Property on 30 June 2015 to a purchaser for a consideration of $3,128,000.

18.  The writ was issued on 12 December 2019.

Plaintiff’s case

19.  In about 1992, the Plaintiff and his late wife intended to purchase a property for the purpose of providing a better residence for the Parents.

20.  In about March 1992, the Couple and the Parents agreed that the Deceased would submit an application for the purchase of a flat under the Home Ownership Scheme.  If the application was successful, the Couple would be responsible for the financial contributions towards the purchase, which would be treated as a loan to the Parents.  However, the loan would not have to be repaid if the Parents decided not to beneficially own the flat but to treat the Couple as beneficial owner.  In such event, the Parents would hold the flat on trust for the Couple.  (The arrangement in this paragraph will be referred to as the “Agreement”.)

21.  The Deceased successfully applied for a flat.  On 31 August 1993, the Property was assigned to her.  On the completion date, the Parents decided not to beneficially own the Property and decided to treat it as owned by the Couple.

22.  The Couple had borne all the purchase price, including the initial deposit and the mortgage repayments.  They borrowed $200,000 from the Father and used it to redeem the mortgage.  By November 2005, the Couple had fully repaid the Father.

23.  After the Plaintiff’s wife passed away in 2010, the relationship between the Plaintiff and the Deceased turned sour.

24.  Allegedly through some family meetings between the Plaintiff, the Deceased and the Defendant, between March 2011 and March 2012, the Defendant acquired knowledge that the Deceased was holding the Property on trust and the title deeds were in the Plaintiff’s possession.

25.  The Plaintiff discovered the sale of the Property in about 2018, whereupon he filed the writ in this action on 12 December 2019.  The Plaintiff seeks (i) a declaration that prior to the sale in 2015, he was the beneficial owner of the Property; (ii) a declaration that the Defendant held the Property on trust for the Plaintiff; (iii) equitable compensation for breach of trust; and (iv) account of the sale proceeds.

26.  The Plaintiff’s case is thus wholly premised on the oral Agreement which gave rise to a constructive trust or resulting trust.  Despite the prior demand letters of Deacons, the Plaintiff does not seek repayment of the Loan in this action.

Defendant’s case

27.  The Defendant puts the Plaintiff to strict proof of his case.

28.  The Defendant says that his Parents were the registered tenants of a public housing unit and they gave it up in order to make the application under the Home Ownership Scheme. The Deceased had contributed $300,000 towards the purchase price and decoration expenses of the Property.  

29.  The Plaintiff’s wife had told the Deceased that the Couple would pay the mortgage instalments as rent to the Deceased, although they had continued to pay the mortgage instalments even after they had moved out, until the mortgage was redeemed.

30.  The Defendant denies that the Couple had repaid the $200,000 to the Father.

31.  In the first 2 family meetings, the ownership of the Property was not discussed.  In the 3^rd family meeting, the Deceased asserted that she had invested so much money in the Property that she had beneficial interest in it.

32.  The Defendant claims that the Couple (and now the Plaintiff) have wrongfully retained the title deeds till today.

33.  The Defendant counterclaims for a declaration that the Property be vested solely in the estate of the Deceased, and return of the title deeds to the Defendant.

Core issues disclosed on the pleading

34.  The core issues are as follows:

(1)  Whether the Agreement existed;

(2)  Whether at the time of completion of the purchase in 1993, the Deceased decided to treat the Couple as beneficial owner of the Property;

(3)  Whether the Couple or the Deceased had paid the deposit;

(4)  What was the purpose of the Couple’s monthly payments – to discharge their own obligation towards mortgage instalments, or as rent to the Deceased for the Property;

(5)  Whether the $200,000 loan had been repaid to the Father;

(6)  Whether the Defendant had knowledge that the Deceased was holding the Property on trust for the Plaintiff; and

(7)  Whether the Defendant accepted the office of trustee of the Plaintiff prior to the sale in 2015.

The disputed pleas

35.  The disputed pleas can be classified into 2 limbs:

(1)  Money transactions involving the Plaintiff and/or his wife on the one part and some family members on the other (“money transaction pleas”); and

(2)  In terms of relief, that the Plaintiff’s demands for repayment of the Loan was time-barred (“time-bar defence”).

Legal principles for striking out

36.  An applicant (the Plaintiff in this case) bears the burden of showing that it is a plain and obvious case for striking out a pleading.  There should be no trial upon affidavits.  Disputed facts are taken in favour of the party whose pleading is sought to be struck out.  The claim must be obviously unsustainable, the pleadings unarguably bad.  It must be impossible, not just improbable for the claim to succeed before the court will strike it out.  See Hong Kong Civil Procedure 2021, Vol 1, §18/19/8,at p522.

37.  The mere fact that an opponent’s pleading contains some unnecessary matter is not sufficient ground for an application to strike out as tending to prejudice, embarrass or delay the fair trial of the action.  A statement will not be struck out merely because it is unnecessary, so long as it is otherwise harmless.  A pleading will not be struck out unless it is clear on the face of the allegations that they are irrelevant.  It is no duty of a party to reform the opponent’s pleading, but if wholly irrelevant matter is set out in such a way that the applicant must plead to it, and so raise irrelevant issues which may involve expense, trouble, and delay, then the irrelevant matter will be struck out, as it will prejudice the fair trial of the action. See Hong Kong Civil Procedure 2021, Vol 1, §18/19/8.

38.  It is in every case a question of fact and degree how the Court responds to a set of pleading.  Assuming the pleading discloses a reasonable cause of action or defence, the question is whether, looking at the pleading as a whole, it is scandalous, frivolous or vexatious, may prejudice, embarrass or delay the fair trial of the action, or is otherwise an abuse of the process of the court: Ma Toi Ling v Lam Man Kwong, HCA 2208/2014, 5 January 2016, §23.  Chow J (as he then was) explained the rationale as follows:

“… I accept that it may be possible to delete some of the references to, or pleas relating to Madam Ngai, in the draft re-amended statement of claim without affecting the completeness of the 1st plaintiff's pleaded cause of action against the defendant, and that the draft re-amended statement of claim can be improved or shortened in some way. However, the court cannot insist on perfect pleadings in every case. Very often, parties include some non-essential facts or averments in their pleadings, and in many cases the pleadings would be allowed to stand, because it would not be realistic or practicable for the court to micro-examine every pleading and strike out those parts which are not strictly necessary for that pleading. …

Looking at the draft re-amended statement of claim as a whole, I do not consider that the various references to Madam Ngai therein would be objectionable on any one or more of the above grounds, or are such as would justify a standalone striking out application.”

Legal principles for constructive trust

39.  For constructive trust, the plaintiff has to prove that (i) there was a common intention that the plaintiff was to have a share in the beneficial interest in the property notwithstanding it was acquired in the name of the defendant; (ii) the plaintiff altered his position in detrimental reliance on such common intention; and (iii) it would have been unconscionable for the defendant to assert ownership in reliance on his legal title to the property.

40.  The court assesses the common intention of the parties by taking a holistic approach having regard to the context: Prime Credit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, Lam VP (as he then was), §1.6.

41.  In ascertaining whether there was a common intention, it is the objective intention of each party, which was reasonably understood by the other party to be manifested by that party’s words and conduct that one must examine. Such intention is to be found from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussion.  It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention.  Even where reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.  Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9, G Lam J (as he then was), at §§46-50.

42.  In a domestic context, particularly in relation to the matrimonial home, the court is not constrained in that exercise by pure direct monetary contributions to the purchase price. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family was not that common, the court has to pay more regard to circumstantial matters. See Prime Credit v Yeung Chun Pang Barry, §1.6.

43.  Similarly, in a conventional Chinese family, children may pay money to the parents for a variety of reasons.  Such children’s contributions may or may not be used to support the inference of an intention to share the beneficial interest of the parents’ property if such contributions happened to be applied towards the mortgage of a property: Fung Oi Ha v Fung Pui On, HCA 17/2012, 6 June 2016, Recorder Lisa Wong (as she then was), §102.

Money transaction pleas

44.  The money transaction pleas pertain to the following matters:

(1)  §§30-33 are about dealings between the Plaintiff’s wife and the Parents in respect of a Shanghai Street Property in 1997 to 1998; that property was supposed to house the Parents but eventually did not;

(2)  §34 concerns a loan of $1,118,000 from the Parents to the Couple to purchase a Monte Vista Property in October 1999 so that the Couple could reside there after moving out of the Property;

(3)  §35 concerns a repayment of $618,000 by the Plaintiff’s wife to the Parents in March 2000;

(4)  §38 concerns the repayment of $282,000 by the Plaintiff’s wife to the Father or the Father’s estate from July 2001 to April 2009;

(5)  §39 concerns a loan of A$10,000 from the Defendant to the Plaintiff’s son in 2005 for college tuition in Australia, which had been repaid;

(6)  §41 concerns repayment of $78,760 by the Plaintiff to the Deceased for the salary of her domestic helpers, from May 2009 to February 2011; and

(7)  §§42-43 concern a cheque dated 19 March 2011 for $339,240 issued by the Plaintiff to the Deceased (through the Defendant), and the Defendant’s refusal to accept it as the amount failed to account for the loss of $200,000 relating to the Shanghai Street Property.

45.  These money transaction pleas are irrelevant for the following reasons.

46.  Firstly, the money transactions covered a period way beyond 1993:

(1)  The Court is to make a holistic assessment of the family setting, the context of money transactions and the circumstantial evidence to decide if the Agreement existed.  It should not just focus on the financial contribution of the parties.  However, the relevant period was the time when the Agreement came into existence in 1992/1993.

(2)  None of the money transactions could assist the Court in deciding any of the core issues, in particular who paid the deposit in 1992/1993.

(3)  As the Couple had factually paid for the “mortgage repayments”, there is no question of their financial capability to make the mortgage repayments subsequent to the Agreement.

(4)  After redemption of the mortgage in 2001, there could simply be no issue on financial capability to bear the purchase price of the Property any more.  And yet the disputed pleas went on for another 10 years into 2011.

47.  Secondly, the money transactions involved persons who are not parties to these proceedings, eg the estate of the Father, the estate of the Plaintiff’s wife and the Plaintiff’s son.  It is not clear what the Defendant wants to make out of those persons’ involvement.

48.  Thirdly, the Defendant and/or each of the Parents’ estates are not counterclaiming for repayment of any loan from the Plaintiff and/or his wife and/or their son.  Nor are the Defendant or the Father’s estate alleging that those loans gave rise to any beneficial interest in the Property.  The pleaded loans and accounting of repayments are simply irrelevant. 

49.  Fourthly, the pleas about the Shanghai Street Property (§§30-32 ADCC) are internally inconsistent.  Allegedly, the Plaintiff’s wife borrowed money from the Parents to purchase the Shanghai Street Property and became the sole owner.  But after the Plaintiff’s wife sold this property at a loss of $200,000, she then became indebted to the Parents for $200,000 for incurring a loss “on his and/or her behalf contrary to his and/or her express consent and/or authorization”. 

50.  It is incomprehensible why the loss suffered by the Plaintiff’s wife personally in selling her own property would become a debt to the Parents.  Similarly, the words in quote in the preceding paragraph are incomprehensible.

51.  I find that the money transaction pleas are plainly irrelevant to either party’s case.  They are not curable by amendment or particulars and ought to be struck out.

Time-bar defence

52.  This covers §47 of the ADCC and prayer (1).  The Plaintiff relies on the Agreement to claim beneficial interest in the Property.  He does not seek repayment of the Loan (as confirmed by §14 of his affirmation filed on 8 May 2020).  Accordingly, whether the claim for repayment of the Loan was time-barred is irrelevant to the core issues or any relief sought.  To seek a declaration on a matter which is not disputed is an abuse of process.

53.  Mr Simon Wong, counsel for the Plaintiff, concedes though, that at the trial, the Defendant is entitled to cross-examine and make submissions on Deacons’ letters.

Conclusion

54.  For the reasons given, the disputed pleas were irrelevant.  Master Sara Tong had correctly struck them out.  I therefore dismiss the appeal.

55.  The matter has no complexity and is probably a re-run of the arguments before the learned Master.  The appeal is unmeritorious.  The Plaintiff’s solicitors did not submit the costs statement with the Plaintiff’s submission. I reduce the costs of the solicitors to mark the disapproval of late submission of a costs statement.  Accordingly, I make an order nisi that the Defendant should bear the Plaintiff’s costs of the appeal on indemnity basis, summarily assessed at $110,000.

Way forward

56.  The Property was sold at $3,128,000.  There are 6 years’ interest up to now.  Unless there is evidence of the Defendant investing the money elsewhere, the claim is in the region of less than $5 million.  The parties have been alerted to the fact that neither of them has a cast-iron case.  Judging from the costs statements on both sides, by now, the Defendant would have incurred about $600,000 on his and the Plaintiff’s costs just for the strike-out application, an amount wholly disproportionate to the amount at stake.  Given the family context, it is highly desirable for the parties to adopt ADR after close of pleadings or discovery, when they are at liberty to take into account the money transactions between the Couple and the family members in the ADR exercise to achieve a global settlement.

57.  I thank counsel for their assistance.