THE JOINT AND SEVERAL TRUSTEES OF THE PROPERTY OF YIP YAM YU ALEX v. YIP YAM YU ALEX AND ANOTHER

HCB 3926/2015

[2019] HKCFI 75

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3926 OF 2015

____________

____________

____________

____________

_________________

D E C I S I O N

_________________

INTRODUCTION

1.  The 1^st Respondent (“the Son”) is a bankrupt and the 2^nd Respondent is his Mother.  They are the registered tenants in common of the subject residential property at Flat C, 35/F, Tower 16, Crystal Cove, Caribbean Coast, Tung Chung (“the Property”).

2.  The Trustees apply under the Partition Ordinance for a declaration that the Trustees and the Mother hold the Property as tenants in common in equal shares; and that there be a sale of the Property.

3.  Both the Official Receiver and the Director of Lands have no comment on the Trustees’ application.

4.  The Son and the Mother claim that the Son has no beneficial ownership in the Property in that:

(1)   the Property has been held on resulting trust as all purchase money was provided by the Mother; or

(2)   there was a common intention constructive trust created at the time of purchase for the Son to hold on trust for the Mother.

THE FACTS

5.  The following in this section are facts that I find to be true.

6.  The Mother sold her restaurant business in the United Kingdom after living abroad with the Son for about 15 years.  She has retired since 2005.  She is now aged about 65.  The Father has passed away.

7.  The Mother had a considerable sum of savings resulting from operation of the restaurant and the proceeds of sale of the business.

8.  The Son and the Mother moved back to Hong Kong in about 2005.  The Son was then 25 years old. They decided to settle in Hong Kong by 2007.  They lived in rented accommodation.

9.  In about January 2007, the Mother purchased in cash an uncompleted property which was Flat A (“Flat A”) on the same floor of the Property in her sole name for HK$3,390,000.  Flat A has a size of about 1,000 sq ft.

10.  In about August 2007, the Son and the Mother purchased the uncompleted Property for HK$2,090,000 as joint tenants.  The Property has a size of about 570 sq ft.

11.  On 6 September 2007, the Son and the Mother executed a mortgage deed (“the BEA Mortgage”) in respect of the Property with the Bank of East Asia Limited (“BEA”).  The BEA Mortgage was to secure 2 loans granted to the Son and the Mother as joint borrowers.

(1)   A loan of HK$500,000 granted on 30 August 2007 to be repaid by 60 instalments (“First BEA Loan”). The interest rate was 4.6%.  Each instalment was for $9,344.20 (principal being about $8,200), and the last instalment was due in 2012;

(2)   A loan of HK$500,000 granted on 23 September 2008 to be repaid by 180 instalments (“Second BEA Loan”). The interest rate was 2.5%.   Each instalment was for $3,333.90 (principal about $2,350), and the last instalment was due in 2023. 

12.  Both BEA Loans were fully repaid in 2 years on 4 November 2009 by transferring two sums of HK$299,474.24 and HK$475,228.81 from the Mother’s bank account no. 194-33-00195-3 to the joint account no. 514-40-21589-9 maintained by the Mother and the Son for the repayment of the mortgage.  The BEA Mortgage was discharged on 23 November 2009.

13.  Four years later, on 31 October 2013, the Son issued a Notice of Severance to sever the joint tenancy.  Thereafter the Property has been held by the Son and the Mother as tenants in common in equal shares.  On the same day, the Son obtained a loan of HK$1.5 million from the China Yinsheng Finance (Holding) Limited (“China Yinsheng”) and charged his half share of the Property to China Yinsheng (“Yinsheng Mortgage”).  The interest rate was 25.02% and monthly instalment $33,073.

14.  On 23 July 2014, the Yinsheng Mortgage was discharged.  At the same time, the Son’s half share of the Property was mortgaged (“R1’s VC Mortgage”) to Victory Capital Holdings Limited (“Victory Capital”), to secure a loan of HK$1.65 million.  The interest rate was 18% per annum and monthly instalment $29,730.56.

15.  On 26 August 2015, the Son was adjudged bankrupt.

16.  On 4 September 2015, the Mother’s half share of the Property was also mortgaged to Victory Capital (“R2’s VC Mortgage”) and the credit facility granted to the Mother was capped at HK$2 million.

17.  On 3 November 2015, the Mother mortgaged Flat A to Hang Seng Bank (“Hang Seng Mortgage”) for lower interest rate.  The money was used to repay the VC Mortgages.

18.  Since 2011, the Son had been residing in the Property together with his wife and his son, but not the Mother.  The Son’s family had recently moved out.

19.  R1’s VC mortgage was fully settled on 11 December 2015 by the Mother and Yip Sze Wan Angela (“the Daughter”). R1’s VC Mortgage was discharged and the legal fees were settled from the bankruptcy estate. 

20.  The latest valuation (as at 7 November 2018) showed that the Property was worth about HK$7 million.

21.  The outstanding debts of the Son totalled HK$410,098.81.  In addition, the fees of the Trustees and their solicitors in the bankruptcy incurred up to this hearing are estimated to be HK$2.5 million.

THE TRUSTEES’ CASE

22.  The Trustees’ case is largely document based.  The land registration documents showed the joint tenancy to be severed by way of notice.  The Son has always been described as beneficial owner in the Property in the formal agreement for sale and purchase, the assignment, the Notice of Severance and all the deeds of Mortgages.

23.  With respect, the mere fact that an assignment, on the face of it, appears to be an assignment for value is no objection to asserting the existence of an implied, constructive or resulting trust. If the party is able to establish a case on an implied trust, the doctrine of estoppel by deed will not assist the other side. See Tsui Hoi Pan v Wong Chun Ling, unrep, CACV 150/1999, 1 December 1999, at §§9-10; Suen Shu Tai, at p449-451.

24.  The fact that the Son could mortgage his half share of the Property to China Yinsheng and Victory Capital was in the same vein.  Lenders relied on registered title whereas equity looked at the substance, sometimes unknown to the lenders.

25.  The Statement of Affairs dated 26 November 2015 was also relied on by the Trustees:

(a)   One question was, “Does any creditor of yours hold or claim any item(s) of your property?”  The Son answered “Yes”;

(b)   The asset held by Victory Capital as security was described as the Son’s 50% share of the Property;

(c)   The Son’s estimated excess value of the Property (ie after deducting the amount owed to the secured creditor from the estimated value of security) was HK$1,000,000.  This estimated excess value of HK$1,000,000 was included by the Son as part of his assets (the total of which was estimated by the Son to be not less than HK$1,036,000) in the statement of affairs;and

(d)   The Son has affirmed that the lists and appendix attached to his statement of affairs were to the best of his knowledge a full, true and complete statement of his affairs at the date of his bankruptcy order.

26.  Whilst denying the Mother and the Son’s case, Mr Tang, solicitors for the trustees, submits that the presumption of advancement applies in this case because the Son (even though an adult) considered himself still financially dependent on the Mother.

THE RESPONDENTS’ CASE

27.  It is the Son’s case that the Mother had funded the purchase.  Right from the start there had been an agreement for him to pay rent and maintenance money to the Mother.  His payments were in cash and were irregular.  Payments had become regular only in 2015.

28.  In 2014, he needed money for business.  His Mother was willing to lend but did not have funds.  He was told that the loan could be made by mortgaging his half-share of the Property.  He claimed that the Mother knew and had agreed to sever the joint tenancy.  He borrowed at high interest rates thinking that he could repay soon.

29.  In his oral evidence, the Son claimed not to know that the property was severed by the Notice of Severance until he went to VC Capital.  He could not recall when he told his Mother about the Notice of Severance.

THE ISSUES

30.  The core issues are therefore:

(1)   Who provided the purchase money for the Property?

(2)   Did the Mother intend to make a gift of 50% of the Property to the Son?

LEGAL PRINCIPLES

31.  The legal principles have been helpfully set out in the written submission of Mr Tang and I adopt the same.

Statutory provisions

32.  The Trustees’ application for sale was made pursuant to section 6 of the Partition Ordinance (Cap 352) and section 60 of the Bankruptcy Ordinance (Cap 6).

33.  Section 6 of the Partition Ordinance provides as follows:

“(1) In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of—

(a) the nature of the land to which the proceedings relate;

(b) the number of the persons interested or presumptively interested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances, the Court may make an order for the sale of the property.

(2)   The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.”

34.  Section 60 of the Bankruptcy Ordinance provides that the trustees may take into their custody all the property to which the bankrupt is or appears to be entitled and sell it.

Resulting Trust and Presumption of Advancement

35.  A rebuttable presumption of resulting trust arises where a person voluntarily transfers property to another for no consideration. In particular, where A pays (wholly or in part) for the purchase of a property which is vested in B alone or in the joint names of A and B, there is a rebuttable presumption that the property is held in trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B, in shares proportionate to their contributions. See Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 708A-B per Lord Browne-Wilkinson.

36.  The presumption may be rebutted in two ways. First, it may be rebutted by extraneous and/or direct evidence of A's intention to make a gift or outright transfer. The burden of proving a gift is on the party claiming that there is a gift. Second, it may be rebutted by the counter presumption of advancement, if the transferor is the parent of the transferee. The presumption of advancement may itself be rebutted by extraneous evidence that the transferor did not intend a gift. The burden is on the transferor to prove that he did not intend a gift.  See Westdeutsche Landesbank, at 708B; Lewin on Trusts (19^th ed) §9-003.

37.  The court puts itself in the position of a jury and considers all the circumstances of the case so as to arrive at the purchaser's true intention. It is only where there is no evidence to contradict it that the presumption of a resulting trust or advancement will prevail: Personal Representative of Lee Cheun Kin, deceased v Lee Chak Sam, HCA 2684/1995, unreported, 18 March 1999 at §19, per Burrell J; Lavelle v Lavelle [2004] EWCA Civ 223 at §14.

38.  The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration. Subsequent acts and declarations may only be admissible as evidence against the party who made them, and not in his favour. See Shephard v Cartwright [1955] AC 431 at 445 per Viscount Simonds.

39.  The presumption of advancement is a rather weak concept these days which can be rebutted on comparatively slight evidence.  It is even weaker where the child was over 18 years of age and managed his/her own affairs at the time of the transaction.  Suen Shu Tai v Tam Fung Tai [2014] 4 HKLRD 436, §10.17, Cheung JA; citing Laskar v Laskar [2008] 1 WLR 2695. 

40.  Traditionally the presumption of advancement is only available to relationships such as husband and wife and father and child but, it has been held in Hong Kong that in the light of socio-economic conditions in modern society, the presumption applies equally to mother and child: Lee Tso Fong v Kwok Wai Sun & anor [2008] 4 HKC 36, per Deputy Judge To, at §17; Suen Shu Tai, §10.16. 

41.  In Suen Shu Tai, the Court of Appeal has left open the question of whether that presumption applies to a mother and her independent adult child (per Cheung JA, at §10.16).  The Court of Appeal cited this passage from Pecore v Pecore [2007] 1 SCR 795 which held that it does not apply in Canada:

“[36] I am inclined to agree. First, given that a principal justification for the presumption of advancement is parental obligation to support their dependent children, it seems to me that the presumption should not apply in respect of independent adult children. As Heeney J. noted in McLear, at para. 36, parental support obligations under provincial and federal statutes normally end when the child is no longer considered by law to be a minor: see eg Family Law Act, s. 31. Indeed, not only do child support obligations end when a child is no longer dependent, but often the reverse is true: an obligation may be imposed on independent adult children to support their parents in accordance with need and ability to pay: see eg Family Law Act, s. 32. Second, I agree with Heeney J. that it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent's affairs.”

42.  On the other hand, Snell suggests that the presumption can apply even where the child is no longer a minor, since the rationale of the presumption is no longer confined to cases where the parent has a duty to provide for the child.  Even aside from the formal presumption, the inference would be readily drawn that a gift or a contribution to the child’s maintenance was intended, even when the child was an adult.  It would be particularly strong where a widowed mother was providing for her child.  See Snell’s Equity, 33^rd ed §25-009.

Common Intention Constructive Trust

43.  Where property is occupied in the domestic context, as a home for more than one party, the presumption of resulting trust has over the past decades gradually given way to changing social and economic conditions. The search is now to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.  A constructive trust arises in connection with the acquisition by one party of a legal title to property whenever that party has so conducted himself that it would be inequitable to allow him to deny to another party a beneficial interest in the property acquired.  Detriment remains a requirement.  See Lewin on Trust (19^th ed) §9‑062; Stack v Dowden [2007] 2 AC 432 at §60 per Baroness Hale; Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, §§6.2, 6.3, 6.12.

44.  Common intention constructive trust arises in two situations:

(1)   Where at any time prior to acquisition, or exceptionally at some later date, there was an agreement, arrangement or understanding reached between the parties on how the property was to be held beneficially;

(2)   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 payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust.

Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at §§2.3‑2.4, Cheung JA.

45.  However, the resulting trust approach has not been completely emasculated by the common intention constructive trust principles. Such a case may arise where a parent makes a contribution towards a property purchased in the name of a child, provided it does not provide a home for them both: Lewin on Trust (19^th ed) §9-085; Laskar v Laskar [2008] EWCA Civ 347 §16 per Lord Neuberger.

46.  When applying these authorities, I bear in mind that many of them involve properties held in the sole name of one person only, whereas in the present case, there was joint ownership right from the start.  Beneficial interest follows the legal title save where proved to the contrary.

ANALYSES OF THE RESPONDENTS’ CASE

47.  The burden is on the Mother to prove that she had funded the purchase and that the Property was to be held on trust for her.  The burden is on the Trustees to prove the intention of the Mother to make a gift and the Trustees rely on the rebuttable presumption of advancement.  

48.  Only the Son has filed affirmations.  The Mother did not, even though she asserted via her solicitor’ letter dated 20 June 2016 to the Trustees that she would take a strong opposition against the Trustees’ application on the ground that she is the sole beneficial owner of the Property and that she had ample documents to support her assertion that the purchase monies and the mortgage payments for the purchase of the Property were entirely her monies and paid by her.

49.  However, on reading the Son’s evidence, there was a case of the Mother paying an overwhelming amount of the purchase price and mortgage monies.  To clarify the case and in the interest of justice, so that a person entitled to property rights should not be lightly deprived of it, I have taken the liberty of hearing the Mother’s oral evidence.  Her credibility was crucial. Both she and the Son have been subject to cross-examination.

50.  I bear in mind that it is easy to allege that some agreement had been made with cash payments made as a result, but it is difficult to prove.  The events in question happened over 7 years ago and it was understandable that no records could be recovered from the bank.

51.  Inherent probabilities and contemporaneous documents are what the court will take into account: Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at §135, Stock JA (as he then was).

52.  The Son’s affirmations contained minimal documentary proof and did not show the source of the downpayment of the Property and repayment of the BEA Loans.  It was only at the trial that the Son provided some documents, clearly coming from the Mother.  He did not produce (i) proof of his income at all relevant times; (ii) statements of the joint bank account with the Mother opened for the purpose of repaying the mortgage; (iii) anything to prove that he had paid cash to his Mother, whether in respect of the BEA Loans or maintenance money, except after the present summons was issued.

53.  The Son explained that the phrase “My 50% share” of the Property as stated in List B to his statement of affairs was due to a poor choice of word.  He claimed that it was not his intention to declare that the half share of the Property was beneficially owned by him. What he tried to convey was that the security was the half share of the Property under his name.  I find this explanation to be naïve. 

54.  Further, in item (C) in the Statement of Affairs for “property acquired by or given to”, the Son filled in the Property.  He claimed to have asked an officer of the Official Receiver whether he needed to fill in the Property “in his name but not owned by him”.  The officer said yes and so the Son filled that in. This piece of evidence appeared nowhere in the Son’s affirmation.  I find this to be his recent invention.

55.  The Son’s version was not entirely reliable and I place little weight on it, save where otherwise stated.

56.  On the other hand, the Mother’s evidence was, as will be demonstrated, logical and supported by circumstantial evidence.  I prefer her evidence to that of the Son’s.

ISSUE 1: WHO PROVIDED THE PURCHASE MONEY?

57.  The Mother used cash to buy Flat A with the intention to use it as residence for a family of three (she, the Son and the Daughter). 

58.  Later, an agent invited her to buy the Property.  As the Mother had already used up a significant amount of her savings in the purchase of Flat A and wanted to keep some savings, she decided to buy the Property with a mortgage.  The Son’s name was used as a joint owner for the purpose of raising a mortgage. 

59.  The Mother’s intention was to lease out the Property for rental income. She expected to repay the mortgage with rental and maintenance money from her children.

60.  The Son was in his first job with a monthly income of $15,000.  I am unable to see how he could have afforded the downpayment.  According to the then solicitors’ receipts, just the further deposit and stamp duty for the Property were already $188,620 + 1,387,870.

61.  Mr Tang submits that:

(a)   The Mother could have mortgaged Flat A if she needed HK$500,000 instead of using the Son as a nominee to arrange a bank loan and mortgage; and

(b)   According to the Trustees’ calculations, the Son’s application for the BEA Mortgage and BEA Loans with his monthly income of HK$15,000 would have been rejected.  That was because thethen debt servicing ratio was 50-60% of the borrower’s income but the 2 BEA Loans constituted 62.3%.

62.  With respect, submission (a) begs the question of how the Mother could have convinced the bank to grant a retiree a mortgage; and submission (b) begs the question of how the Son alone could have managed to repay the mortgage ($9,344.20 + $3,333.90) without the Mother’s financial assistance. In fact, the Mother testified that she did not know his income and she was not challenged.  Plainly, the Mother could have afforded to repay the BEA Loans on her own with rental income and maintenance.

63.  I accept the Mother’s evidence as inherently probable and logical as reflecting the mind of a retiree and in line with the circumstances at the time of purchase.

64.  Subsequent to the purchase, according to the Mother, the Son defaulted after two mortgage instalments. She was not challenged in cross-examination. The BEA Mortgages were redeemed in 2009, with 2 lump sums clearly coming from the Mother’s personal bank account. 

65.  The Mother explained that it was better to reduce mortgage interest outlay than to keep the cash in the bank with little interest income due to the 2008 financial turmoil.  Again, I find this move to be logical of a retiree. 

66.  The evidence shows overwhelmingly that the bulk of the purchase price came from the Mother, save for 2 payments involving capital of $8,200 under the First BEA Loan.  The situation pointed to a resulting trust in favour of the Mother. 

67.  The best scenario for the Trustees was that the Son had been repaying the BEA Loans before the Mother redeemed them with cash.  The total amount of capital repaid under the First BEA Loan for about 2 years from October 2007 to November 2009 was about $208,000; and that for the 2^nd BEA Loan was for about a year from October 2008 to November 2009 was only about $33,320.  The total capital repaid ($241,320) was only about 11.5% of the purchase price. That was the most interest that the Trustees could have in respect of the Property. However, I reject that as improbable in the light of the Son’s income.

68.  Further, when one bears in mind the Mother’s expectation to receive rental income and maintenance, the repayment of 2 instalments could not even cover rent for the Son’s occupation period up to redemption.  That negligible repayment would not make it inequitable to deny the Son interest in the Property. It was more probable that the Mother allowed him to have occupation for free but that he was to hold his half share on constructive trust for the Mother under the second limb of Primecredit.  See paragraph 44(2) above.

ISSUE 2: WHETHER THE MOTHER INTENDED TO MAKE A GIFT OF 50% OF THE PROPERTY TO THE SON?

69.  The answer to this issue turns on whether or not the presumption of advancement applied.  The court needs to consider the general background of the Mother and the Son, initial position until the BEA Mortgage was redeemed, the alleged payment of rent and the severance of joint tenancy.

70.  First and foremost, I doubt if there should be a presumption of advancement where the child is an adult, without disability and has finished full-time education.  The law does not, in general, view a parent as having the obligation to financially support such a child.  If there really is such a presumption, should it apply for as long as the parent lives, regardless of the age of the child?

71.  In Hong Kong, the socio-economic condition is such that young working adults find it hard to buy a property.  They often need the financial support of their parents – to provide free accommodation, make a gift of the purchase price in whole or in part, provide a loan for the purchase price in whole or in part.  Many parents have to resort to their life-time savings.  And they may have more than one child who would want financial assistance to buy a property. 

72.  It would be harsh on a parent if a child could expect that by eg receiving free accommodation from the parent, the parent is presumed to have made a gift of a property to the child. 

73.  I find the preferable course to be for the court to ascertain if there was any agreement or circumstances which expressly or by implication indicate the parent’s intention to make a gift than relying on any presumption of advancement.

74.  In the present case, the facts show that it is entirely inappropriate to apply any presumption of advancement.  The Mother is a widow and retired. She has lived on savings.  She expected rental income and to receive maintenance from her children.  The Son had graduated from university and was working when the Property was purchased.  The Mother had already made available Flat A for his occupation.  There was not even evidence to show that the Mother bought the Property as marriage gift for the Son.

75.  The Trustees rely on a letter dated 20 June 2016 before this summons from the Respondents’ solicitors to the Trustees as containing the Mother’s admission to make provision for the Son:

“The purpose of entering the [Son’s] name in the Agreement for Sale and Purchase and the subsequent Assignment was for the convenience of taking a mortgage and [the Mother’s] wish to make provision for her child.”

76.  With respect to the Trustees, that letter was issued in the context of a negotiation for settlement and should not be adduced in evidence.

77.  I have, however, considered the position if I am wrong in my view of that letter.  The Mother’s wish to make provision for her child, even an adult child, was understandable, normal, and in accordance with human nature, such that she would be prepared to make the Son co-owner of the Property which the parent paid for, without any contribution from the child: Re Leung Wang Fai, HCB 15328 of 2003, 17 March 2014, Mimmie Chan J, at §21.  However, that must be considered in the light of paragraph 74 above and paragraph 80 below.

78.  Secondly, the initial position was that the Son’s name was used to obtain a mortgage.  Being a mortgagor and using the Property for the Son’s family (but not the Mother as well) could be some ground for inferring that the Son was to be beneficially interested.  As stated in Re Lau Hiu Tuen, a bankrupt, HCB 8430 of 2006; 20 August 2015, G Lam J, at §11, following Russell LJ in Crisp v Mullings [1976] 2 EGLR 103:

“The crucial point in the judgment appealed from is that the judge, having quite correctly said that the plaintiff started, so to speak, with the advantage of being a joint tenant in law, concluded that this was entirely explained—and explained away—by the fact that her participation was necessary in order to persuade the building society to advance the £5,700. The judge said:

‘The plaintiff was accordingly made a party to the contract, the mortgage and the transfer in order to enable a sufficient loan to be obtained, and not with the object of making a gift to the plaintiff of any share of the beneficial interest.’

With all respect, we do not think that that demonstrates that the plaintiff was to be a mere nominee.  It is, we think, a non sequitur.  On the contrary, the fact that the house for the ‘family’ could not be bought without the plaintiff incurring liability, or potential liability, would be some ground for inferring that the plaintiff was to be beneficially interested.”

79.  If, contrary to the Mother’s evidence, the mortgage was tied in with beneficial interest, then plainly it was not a gift of half share to the Son. The Son was expected to bear the mortgage.

80.  Further, it was her evidence that if the Son could repay, she treated it as his payment of rent.  If he was willing to repay the mortgage, she would not have required him to pay maintenance money to her.  This showed an informal arrangement between family members and not a firm intention to make a gift.

81.  It is true that after the Property was redeemed, nothing was done to put the Property into the sole name of the Mother.  I bear in mind that this is in a domestic context and the legal implications of a resulting trust or common intention constructive trust might not have been obvious to the Mother and the Son.  A Mother would hardly evict a married son who needed accommodation.  But when he defaulted, the second limb of Primecredit operated to the Mother’s advantage.

82.  Thirdly, the Son alleged that from the start there had been an agreement for him to pay rent since 2007 but it was irregular cash payments. It became regular in 2015 and that was probably after his bankruptcy.

83.  The Son has produced some documents in proof but Mr Tang has demonstrated that his evidence was not believable:

(1)   There were only 3 payment receipts of HK$25,000.  In all of them, the transferor could not be identified.  It was in his oral evidence that the Son disclosed that the transferor was his present employer with whom he had worked since January 2017.  It was direct payment from his employer to the Mother, starting from August/September 2017 and the deposits slips would be given to him.  Before that, payments of salary were into the Son’s bank account. 

(2)   The 3 payment receipts were dated October 2017, December 2017 and January 2018 respectively, all of which were after the date of this application issued on 14 September 2017, hence self-serving.

(3)   The alleged monthly rent far exceeded the market monthly rent of an apartment similar to the Property at the material time (about $14,000 to $16,800).  According to the Son, the initial agreed rental was only HK$8,000 per month.  There was no explanation for the escalation to HK$25,000. He then said the HK$25,000 included arrears of rent.  At one point he said that HK$25,000 included HK$3,000 for maintenance of the Mother.

(4)   The alleged monthly payments to the Mother would have far exceeded the Son’s financial ability.  By way of example:

(a)   The Son’s monthly payment under the R1’s VC Mortgage was HK$29,730.56. Adding HK$25,000 made the Son’s monthly expenses at least HK$ 54,730.56;

(b)   The monthly expenses would have far exceeded his monthly income declared in his Statement of Affairs, which was HK$50,000.  The Son testified that his wife earned about $35,000 and had helped him out. However, there was no proof of his wife’s income. 

84.  I do not accept that the Son has paid rent to the Mother.  I find that payment of rental was his recent invention to embellish the evidence.

85.  Fourthly, as to severance, there was discrepancy between the Son and the Mother’s version.  The Son claimed on affirmation that severance of the joint tenancy would enable the Mother to “lend money” to him.  However, he testified that the borrowing was his own liability and he did not think it was a mortgage.   The Mother testified that she did not want to lend the Son money because if he were to lose money, she would not know what to do.

86.  The Son claimed that he did not know that the Property rights were severed until he went to Victory Capital and that he was a victim of mal-practice by finance companies who lent money on the strength of a notice of severance.  It was naïve for a degree holder in finance to say so.

87.  He said he had told the Mother about the severance before his bankruptcy but could not be sure about when.  He said that the Mother was angry on learning of the loan from Victory Capital. 

88.  On the other hand, the Mother testified that she did not know about the Notice of Severance until 2015 when the Son told her to go to a solicitor’s firm to change the mortgage to one with lower interest.  She could remember this year because the daughter’s expected delivery date was September 2015. The Daughter accompanied the Mother to the solicitors’ firm to assist her. Within a month, the Mother managed to arrange with a bank for a mortgage with much lower interest.  The court was told for the first time in evidence that the Daughter acted as guarantor because the Mother was a retiree. 

89.  In my view, it was highly important that the Mother had kept the title deeds all along and the Son confirmed that he was not asked to provide the title deeds to the finance companies. 

90.  The Mother had had the experience of taking out a BEA Mortgage.  There was no reason why she could not raise another mortgage to help the Son if she was minded to lend him money. Plainly, she wanted him to be responsible for his own loan without touching her Property.

91.  The Mother would not even bear incurring interest at 4.6% per annum on the BEA Mortgage.  It was improbable that she would have agreed to the double digit interest rates charged by China Yinsheng and Victory Capital.  Soon after the Son was adjudged bankrupt, the Mother promptly took out a mortgage from Hang Seng for lower interest.  These circumstances were consistent with her concern to minimize interest. 

92.  The Mother’s evidence was detailed as to time and supported by reasons. I prefer her evidence to the Son’s.  I find that she had no prior notice of the severance or any of the mortgages taken out by the Son. 

93.  The severance came way after redemption of the BEA Mortgage.  It could not assist in deciding whether the Mother had the intention to make a gift to the Son.  At best it only showed the Son’s belief that he had rights in the Property, which did not bind the Mother.  The Mother’s reaction to the severance was more consistent with her view that the Son’s half share Property was held on trust for her, otherwise she would have left it to the Son to deal with the debts.

94.  Having considered all the factors under this section, I am not satisfied that the presumption of advancement applied at all.  If it did apply, the Mother had rebutted it. 

95.  In conclusion, I find that the Mother has been the true beneficial owner of the 50% interest registered in the name of the Son and that it did not fall into the bankrupt’s estate.  I dismiss the Trustees’ application.

HARDSHIP ON THE MOTHER

96.  I deal with the issue of hardship just in case I am wrong in my conclusion on the Mother’s beneficial interest.  The Mother has not alleged any hardship if an order for sale were made.  She has not lived at the Property until the Son moved out recently.  She had to let out Flat A for rental to repay the Hang Seng Mortgage.  She is supported by the Daughter.  If the Property is sold, she will receive about HK$3,455,000 for settling any money she owes Hang Seng Bank.  All the unsecured creditors will be paid in full from the Son’s share of the sale proceeds.  I see no reason for refusing to order a sale.

CONCLUSION

97.  On the court’s finding that the Mother has beneficial interest in the whole Property, I dismiss the Trustees’ summons.

98.  In principle, costs should follow the event and be to the Mother. However, it was the late production of documentary proof and her oral evidence in court which caused the court to come to the present conclusion.  The Trustees should not be penalized for taking out the summons.  Accordingly, I order nisi that there shall be no order as to costs as between the Trustees and the Mother and the Trustees’ own costs be recoverable from the bankrupt’s estate.

99.  Some of the work in relation to this summons was in 2017 before the new solicitors’ hourly rates came into effect.  The facts were not complicated.  I note that the Trustees and their solicitors have agreed upon a rate lower than the standard rates.  As a matter of principle, costs for preparing a costs statement and reviewing it are not recoverable.  On a nisi basis, I summarily assess the Trustee’s costs at $200,000 payable out of the estate.