NOVEL DAY CREDIT LTD (formerly known as I-ACCESS FINANCE LTD) v. CHEN JIANREN AND OTHERS

HCA 1117/2020

[2025] HKCFI 2924

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1117 OF 2020

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JUDGMENT

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A.  The Question

1.  The question for determination at this trial is whether the Intervener, Li Dan (“Madam Li”) beneficially owns the whole of Flat G, 59^th Floor, Tower 3, Sorrento, No. 1 Austin Road West, Kowloon, Hong Kong (the “Property”) despite the fact that she and her husband, Mr Fan Xinpei, who is the 2^nd Defendant and the Judgment Debtor (the “Judgment Debtor”) in these proceedings, are the registered owners in joint tenancy.

2.  If Madam Li’s claim is successful, this means that the Judgment Debtor does not have any beneficial interest in the Property, and the Plaintiff and the Judgment Creditor shall have no entitlement to pursue a charge over Mr Fan’s interest in the Property by way of a charging order from the Court for satisfaction of the judgment debt.  Accordingly, the Charging Order Nisi must be discharged.  To the contrary, if Madam Li fails in her claim, the Charging Order should be made absolute.

B.  The Undisputed Facts

3.  In 1998, Madam Li married the Judgment Debtor.

4.  By an Assignment dated 19 December 2003, Madam Li and the Judgment Debtor purchased the Property. They have remained as the registered co-owners of the Property for more than 20 years.  The purchase was financed by the Standard Chartered Bank (Hong Kong) Limited (“SCB”) and the loan was secured by a mortgage of the same date executed by both Madam Li and the Judgment Debtor in favour SCB (the “2003 SCB Mortgage”).

5.  By a Receipt of Discharge of a Charge dated 28 July 2007, the 2003 SCB Mortgage was discharged.

6.  After the 2003 SCB Mortgage, Madam Li and the Judgment Debtor have further executed several mortgage deeds for further finance:

(1)  a mortgage in favour of SCB dated 15 January 2015 (the “2015 SCB Mortgage”) as security for all money owed by the two of them to SCB, which was discharged by a Receipt on Discharge of a Charge dated 6 June 2017;

(2)  a mortgage in favour of Hong Kong and Shanghai Banking Corporation Limited (“HSBC”) dated 6 June 2017 (the “2017 HSBC Mortgage”) as security for all money owed by the two of them to HSBC, which has not been discharged according to the evidence; and

(3)  a Second Legal Charge dated 5 December 2022 in favour of Leung Kai Pui Mickey (the “2022 Second Legal Charge”) as security for a loan of $13,180,395, interest thereon and other moneys which may be due from time to time, which has not been discharged according to the evidence.

7.  On 19 August 2022, a Judgment was entered against the Judgment Debtor for the sum of HK$20,000,000, contractual interest of HK$6,282,889.67, and further interest on both sums (the “Judgment”).

8.  On 17 October 2022, a Charging Order: Notice to show Cause (the “Charging Order Nisi”) was granted in favour of the Plaintiff against the Judgment Debtor’s interest in the Property.

9.  By an Order of Master K. W. Wong dated 18 July 2023, Madam Li was allowed to join in this action as the Intervener and the following issue is to be tried:

“whether the Intervener is entitled solely to the beneficial ownership of the property in question pursuant to the common intention constructive trust and/or resulting trust alleged by the Intervener in her Affirmation filed on 18^th January 2023”

C.  The Issues

10.  Accordingly, the issues are:

(1)  Issue 1:   Whether Madam Li is entitled solely to the beneficial interest of the Property by virtue of common intention constructive trust?

(2)  Issue 2:   Whether Madam Li is entitled solely to the beneficial interest of the Property by virtue of resulting trust?

D.  The Law

11.  I adopt following summary of Madam Recorder Sit in Woo Tat Huen v Lee Wai Ping [2021] HKCFI 576, §§42-47:

“42. The starting point where there is sole legal ownership (as is the present case) is sole beneficial ownership, and the onus is on the person seeking to show that beneficial ownership is different from the legal ownership; in other words, it is for the non-owner to show that he has any interest at all: Stack v Dowden [2007] 2 AC 432, §56.

43. The relevant principles have been conveniently summarized recently by Coleman J in Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647; HCA 537/2017 (unrep., 23 October 2020), §§8-16:-

(1) Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership. The trustee holds the legal title on trust for the beneficiary.

(2) Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the plaintiff regarding their shared beneficial interests in the property that matters. The trust is constituted by the three elements of (i) the common intention, (ii) the plaintiff's detrimental reliance on their common intention, and (iii) the unconscionability of the property owner departing from it.

(3) The burden of proving each element of common intention, detrimental reliance and unconscionability is on the person seeking to show that the beneficial ownership is different from the legal ownership. The focus is on the intention of the parties at the time of acquisition of the asset. Contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event.

(4) Common intention can be expressed or implied. It can be deduced or inferred objectively from the parties' conduct. As a matter of common sense, it is easier to infer such an intention prior to the acquisition of property which results in an obvious change in legal ownership (rather than after such an acquisition where there is no change in legal ownership and a change in beneficial ownership is not otherwise apparent).

(5) In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, §§2.3-2.4, Cheung JA identified two situations where a common intention constructive trust may arise.

(a) The first is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially. The finding of such an agreement or arrangement can only be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been.

(b) The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property, and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation, direct contributions to the purchase price by the party who is not the legal owner, whether initially or by mortgage instalment payments, will readily justify the inference necessary to the creation of a constructive trust.

(6) A resulting trust arises by virtue of the plaintiff's contribution in money or in some other way towards the property's acquisition. Equity holds the legal owner to be a trustee of that property for the plaintiff in an appropriate share, giving effect to the parties presumed intention. Particularly in a domestic context, but also generally, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust.

(7) As emphasized in Stack v Dowden §§68-69, an intention to have beneficial interest different from legal interest in property is unlikely, and the task of showing that should not be lightly embarked upon. It was recognized that, in family disputes, strong feelings are aroused when couples split up which can often lead the parties, honestly but mistakenly, to reinterpret the past in self exculpatory or even vengeful terms. If a difference is to be found between the beneficial and legal interest, clear evidence will be required. Unequal contributions to the purchase price of property will not likely be enough to move away from the starting point that equity follows the law.

44. As can be seen from the above, ultimately it is a question of intention in the case of constructive trust, the common intention of the property owner and the plaintiff; and in the case of resulting trust, the intention of the person who provided the purchase price at the time the property was acquired. Between the two, and particularly in a domestic context, if it is possible to resolve the matter by reference to common intention, it would not be necessary to resort to resulting trust at all: Primecredit §1.3.

45. The modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context. In a domestic context (particularly in relation to a matrimonial home), the court is not constrained in that exercise by pure direct monetary contributions to the purchase price: Primecredit §1.6.

46. Moreover, in the assessment (whether on constructive trust or resulting trust), the court should have regard to inherent probabilities in light of the surrounding circumstances at the time the property was acquired: Primecredit §1.4.

47. Whilst the authorities cited above are mostly concerned with matrimonial homes or residences of cohabitating couples, whereas the Property in this case is an industrial premise and not a home, in my view the same approach applies. The matrimonial home / residence is just an additional context which may be taken into account in an appropriate case (whether for the assessment of intention or inherent probabilities) which does not feature in this case.” 

12.  Of particular relevance to the facts of the present case, when assessing whether a constructive trust or resulting trust exists, holistic context is crucial; in domestic cases, the Court would look into many more factors than financial contributions to divining the parties’ true intention, such as conducts and discussions at the time of purchase, the reasons for holding title, any advice received, and subsequent dealings with the property: see the English House of Lords in Stack v Dowden [2007] 2 AC 432 at §§69-70 per Baroness Hale of Richmond: 

“69  In law, “context is everything” and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties' true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties' relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.

70  This is not, of course, an exhaustive list. There may also be reason to conclude that, whatever the parties’ intentions at the outset, these have now changed. An example might be where one party has financed (or constructed himself) an extension or substantial improvement to the property, so that what they have now is significantly different from what they had then.”

13.  A noteworthy aspect of this case is that the dispute does not arise between the spouses.  Instead, the husband (the Judgment Debtor) fully supports the wife’s (Madam Li’s) position, and together they oppose the judgment creditor’s application for a charging order.  Both are represented by the same legal team.  Applying the above-mentioned principles, I will assess the evidence to determine whether the burden of proof has been met.

E.  Madam Li’s case

14.  In gist, Madam Li’s case is that around March 2003, she considered the price of real properties in Hong Kong to be attractive due to steep and widespread decline in property prices caused by the SARS pandemic.  Eventually, she decided to purchase the Property.  

15.  At that time, she and the Judgment Debtor were married.  She naturally thought the Property should be registered in their joint names so that her husband might be able to help her, if needed, in his capacity as a co-owner, with the relevant procedure associated with the sale and purchase of the Property.

16.  She asserts that it has always been the common intention and understanding between her and the Judgment Debtor that she was the sole beneficial owner of the Property, and their financial affairs have been arranged in accordance with and in reliance of this common understanding from the outset. 

17.  Further, Madam Li asserts that she is the sole beneficial owner of the Property because she provided the entire purchase price for the acquisition of the Property. The total purchase price at the time was HK$4.5 million. In line with the common intention and understanding, she provided about 60% (approximately HK$2.7 million) of the total purchase price of the Property from her savings and the remaining 40% of the purchase price was funded by a loan obtained from the 2003 SCB Mortgage.

18.  Only two witnesses gave evidence at trial: Madam Li and the Judgment Debtor.

F.  The Plaintiff’s case

19.  The plaintiff is a moneylender.  In response to Madam Li’s case, it advances no substantive case. It appropriately puts Madam Li to strict proof.  It calls no witnesses.

G.  Discussion

20.  The first point to note is that Madam Li and the Judgment Debtor have been married for over 25 years.  They are husband and wife.  If the wife’s claim succeeds, half of the jointly owned property would be beyond the reach of judgment enforcement.  On the evidence, one cannot entirely discount the possibility given their relationship, the wife has brought the claim to shield her husband.

21.  Secondly, no independent witness has provided corroborating evidence.  As such, I should treat the evidence of Madam Li and the Judgment Debtor with caution, mindful of its potentially self-serving character, albeit this should be balanced against the fact that the purchase occurred more than 20 years ago, and some lapses in recollection are inevitable. 

22.  Thirdly, regarding the purpose of naming the Judgment Debtor as a co-owner, Madam Li’s evidence is internally inconsistent.  In her witness statement (paragraph 15), she stated that the Property was registered in their joint names so that he could assist with the purchase formalities.  Yet on cross-examination she conceded that her husband, who was employed as a full-time General Manager of a listed company, played no part in the acquisition or management of the Property.  Instead, she relied on a friend in Hong Kong to handle tenancy and administrative tasks, as evidenced by monthly transfers of HK$32,700 from Choa Kin Mei (her friend) into her HSBC Jade Account between June 2021 and October 2022 (save for two months).  That evidence significantly undermines her stated rationale: contrary to her assertion, the Judgment Debtor never assisted with the Property whatsoever.

23.  Moreover, the Judgment Debtor, a busy General Manager with no prior experience in Hong Kong property transactions, would have been an unlikely choice to assist.  By contrast, Madam Li holds a university degree, speaks English and has a history of investing independently.  It is therefore implausible that she needed her husband’s help to complete the purchase.

24.  Later on during cross-examination, Madam Li sought to justify the joint tenancy by reference to a purported joint bank account with the Judgment Debtor, alleging that Deacons, the conveyancing solicitors, advised her that joint tenancy or tenancy in common were the only options available due to the existence of that joint account. That explanation, however, lacks any credible foundation:

(1)  neither Madam Li nor the Judgment Debtor mentioned the joint account in their witness statements;

(2)     the alleged advice from the conveyancing solicitors contradicts standard conveyancing law and practice (How could a joint bank account necessitate or compel a joint tenancy or tenancy in common and exclude a sole ownership pf a property?);

(3)  no bank statements or other documents were produced to the joint account’s existence or operation; and

(4)  when instructing her solicitors to obtain bank records from SCB, it is perplexing that Madam Li asked only for her personal account, not a joint one.

25.  Even if such a joint account existed, any payment of HK$2.7 million from it could have consisted partly of the Judgment Debtor’s funds.  Madam Li has produced no evidenced tracing the origin or ownership of those monies, which further weakens her claim of sole beneficial ownership and financial separation.

26.  Further, on cross-examination, Madam Li mentioned her understanding of Mainland Chinese law that property registered in one spouse’s name is deemed jointly owned.  This Mainland legal position as understood by her sharply diverges from the position under Hong Kong law, which presumes that beneficial interest follows legal title in the absence of clear contrary evidence.  Yet she has offered no explanation of how or when she came to the understanding that, under Hong Kong law, the beneficial interest remained solely hers despite joint-tenancy registration.  That omission is particularly significant given her evidence that she did not disclose such intention to Deacons when she and the Judgment Debtor decided to purchase the Property as joint tenants.  These contradictions further erode the credibility of her claim. 

27.  The Judgment Debtor’s evidence does not assist Madam Li’s case.  It is equally implausible. A lifelong Mainland resident with no proficiency in English, no Hong Kong property experience and full-time duties as General Manager of Yi Hua, he could not have meaningfully participated in the purchase or management of the Property.

28.  When questioned by the Plaintiff's counsel regarding the signing of the Sale and Purchase Agreement, the Judgment Debtor initially stated that he had not informed the conveyancing solicitor of any arrangement under which he would hold the Property on trust for Madam Li.  He later shifted his position, claiming that he could not recall whether he had consulted the solicitor in this regard. 

29.  Upon being directed to review paragraph 7 of his Second Affirmation – where he described the purpose of naming him as a joint tenant, specifically with the phrase “並 根 據 律 師 的 法 律 意 見” (“according to the solicitor's legal advice”) – in which that phrase was conspicuously absent from his Second Witness Statement, the Judgment Debtor insisted that his Second Affirmation was accurate.  He claimed that, on legal advice, although Madam Li alone would fund and own the Property, registering it jointly under his name would facilitate handling various matters related to the Property. He further alleged that he had informed the solicitor that the joint ownership was due to the existence of a joint bank account with Madam Li.  When the Court sought clarification on whether he had communicated the parties’ alleged common intention to the solicitor, he confirmed he had and insisted that joint tenancy registration was required because of the joint account. 

30.  However, the Judgment Debtor’s account is self-contradictory and at odds with Madam Li’s evidence that neither of them informed the solicitor that the joint tenancy arose from a joint account or from any alleged common intention that the Judgement Debtor would hold the Property on trust for her. This highly material allegation appears in neither witness statement and only surfaced at cross-examination, significantly undermining its reliability and indeed their entire case.

31.  After all, it remains inexplicable that why a joint bank account necessitated a joint tenancy.  If the purchase was to be solely funded by Madam Li, it remains inexplicable why a bank account in her sole name could not be open, with the purchase be made in her sole name. 

32.  Fourthly, Madam Li’s case on her independent financial capacity unravels in light of the stark divergence between her evidence and the Judgment Debtor’s evidence.

33.  In her witness statement, she professes:  

“6. I am the career woman, I have been working in managerial positions as my occupation. I had worked at Yi Hua Holdings Limited (In liquidation) which was a listed company (SEHK stock code: 2213) as a manager for many years, receiving remuneration of about HK$30,000 a month. From about end of 2016 to April 2019, I worked in Mei Fung Technology (HK) Limited, receiving remuneration of around HK$30,000 a month.”

34.  However, on cross-examination, the Judgment Debtor – himself General Manager of Yi Hua – flatly denied Madam Li’s employment there, asserting instead that she had only invoked the company’s name for travelling purposes before she was admitted as an emigrant by investment (“未投資移民，用溢華的名來做通行證”).  Only on re-examination did he retreat, stating she had occasionally given piano lessons at Yi Hua but had not held a formal managerial post.

35.  That flip-flop seriously, if not completely, undermines her claim of managerial standing and remuneration.  If Madam Li truly occupied a full-time, HK$30,000-a-month managerial role at Yi Hua, her husband – the company’s own General Manager – could not plausibly have been unaware, much less initially deny it.  This material inconsistency erodes, substantially if not decisively, her credibility on financial capacity.

36.  This material inconsistency is particularly fatal given the absence of any documentary evidence of Madam Li’s financial capacity.  Although I accept that due to the long history of her marriage and the purchase of the Property, recollection may have lapsed and records may be incomplete, not a single piece or page of documents – such as payslips, employment contracts, bank statements, tax returns, business cards, payroll records, or company directories – have been produced.  In the face of zero documentary support, the above-explained conflicting oral evidence dooms her case.

37.  I should also mention that again, Madam Li could not produce a single piece or page of documents to support her oral assertions that (a) she was largely financially independent of her husband, and (b) by 2003, she had accumulated assets exceeding RMB 10 million, generated through her work and investments, including Mainland properties and shares, which had since been traded and converted into other assets.  There is no documentation evidencing her ownership of any properties or shares that she said she had ever held.

38.  The Judgment Debtor’s other oral evidence likewise fails to bolster Madam Li’s case.  When questioned about her financial position at the time of the Property’s acquisition, he offered no specifics, noting only that his wife was an only child, the daughter of a professor, and worked as a piano teacher – “so she has her own money”.  Such vague, generalized remarks shed no light on her financial capacity during the acquisition.

39.  Fifthly, the Property was repeatedly mortgaged.  Madam Li insisted she alone repaid those loans.  Under cross-examination, however, she conceded that every repayment was drawn from the Property’s rental income – first paid into the alleged joint account and then used to pay the mortgage instalments and related expenses. Therefore, these repayments shed no light on the beneficial ownership.

40.  In her witness statement, Madam Li stated that in January 2015 she obtained a HK$8 million SCB mortgage to invest in Mei Fung Technology (HK) Limited via Jin Tong (HK) Trading Company Limited, in which she held a 28%shareholding and served as director.

41.  The only documentary support for that investment consists of the December 2022 annual returns of Mei fung Technology (HK) Limited and Jin Tong (HK) Trading Company Limited, which only confirm her shareholding and directorship – nothing evidences a loan or its stated purpose.  

42.  No contemporaneous loan agreements, shareholder ledger, accounting record, board resolution or financial statement has been produced to substantiate her investment claim. In the absence of these routinely available documents, the Court cannot accept her explanation of the loan’s purpose as credible or proven. 

43.  She further alleges that in June 2017, the 2015 SCB Mortgage was transferred to HSBC and partially redeemed with personal investment assets.  However, the only evidence tendered – HSBC Jade account statements from 2020 to 2022 showing roughly HK$160,000 of repayment – is both remote in time and insignificant in amount, falling far short of demonstrating that she alone funded the Property’s acquisition.

44.  When questioned about the mortgage and charge documents associated with the Property, the Judgment Debtor admitted that he understood he was and remains liable for the repayment of the loan.  Nonetheless, he asserted that he did not read the documents prior to signing them.  In this connection, I should mention that every mortgage contains a representation and warranty that both Madam Li and the Judgment Debtor “are the sole beneficial owner of the Property”.  Every mortgage is accompanied with a Chinese translation, likewise describing them as “實益擁有人” (beneficial owner).  According to their own case, had they actually read these terms, even only in its Chinese version, they would have known they were falsely representing their beneficial ownership to the bank.  In my view, that admission delivers another, if not the final, blow to their case before this Court.

H.  Conclusion & Disposal

45.  Madam Li’s case is riddled with inconsistencies and completely devoid of contemporaneous documentary support.  Her assertions about her employment history, financial capacity, and intentions regarding property ownership are either implausible or unsubstantiated by a single page of documentary record, thus failing to meet the burden of proof.

46.  For the above reasons, having carefully considered the evidence in its totality, including the oral testimony, inherent probabilities, the logic of events and the limited documents adduced, I find that Madam Li has not established sole beneficial ownership of the Property.  The evidence before the Court does not support the conclusion that she possessed the financial means to acquire the Property at the relevant time, or that she and the Judgment Debtor shared any common intention inconsistent with their registered co-ownership of joint tenancy.  

47.  Nor can the presumption of resulting trust avail her.  In the absence of any documented financial contribution to the purchase price by her, and in light of the implausibility and inconsistency of Madam Li’s evidence and the Judgment Debtor’s, I find that Madam Li was not the sole contributor to the purchase price of the Property.  Consequently, there is no basis for a resulting trust in her favour.

48.  In the premises, Madam Li’s claim is rejected and dismissed.

49.  I order that the Charging Order Nisi be made absolute as against the Judgment Debtor’s interests as a joint tenant of the Property. 

50.  Madam Li’s counsel requested me to record that the order is made without prejudice to Madam Li’s interests as the other joint tenant. That is the necessary nature of the order.

51.  Regarding costs, there is no reason why costs should not follow the event.  I therefore make an order nisi that costs of the Plaintiff’s application for charging order (including this trial) be paid by (a) Madam Li to the Plaintiff on a party-and-party basis and (b) the Judgment Debtor to the Plaintiff on a full indemnity basis (pursuant to Clause 8.2.3 of the Loan Agreement between the Plaintiff as the lender and the Judgment Debtor as the guarantor).