HONG KONG HUA QIAO CO LTD v. CHAM KA TAI

CACV 178/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 178 OF 2013

(ON APPEAL FROM HCA NO. 2619 OF 2005)

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AND

BETWEEN

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REASONS FOR JUDGMENT
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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1. This is an appeal against the judgment of Deputy High Court Judge Saunders given on 30 July 2013 after a five-day trial in June. The appellants are Hong Kong Hua Qiao Company Limited (“the Company”) and Madam Wong Tin Tai (“Madam Wong”), who is the widow and administratrix of Lee Law Dai, deceased (“Mr Lee” or “the Deceased”). The Company is the plaintiff in an action against Madam Cham Ka Tai (“Madam Cham”) claiming vacant possession of a property registered in its name at Flat F on 1^st Floor and Flat Roof, Foon Lok Mansions in Tai Po, New Territories (“Foon Lok Mansions”). Madam Cham counterclaimed against the Company and Madam Wong asserting her entitlement to Foon Lok Mansions, another property in Tai Po at Flat B on 23^rd Floor, Yuet Fat Mansions (“Yuet Fat Mansions”) that was registered in the name of the Deceased and 300 shares in the Company.

2. The judge was satisfied that Madam Cham made out a case of promissory estoppel in respect of Foon Lok Mansions and 300 shares in the Company, applying the law in Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1.  He gave judgment that she is entitled to an order transferring the legal title of Foon Lok Mansions to her as well as the 300 shares.  He was not satisfied that she made out a case of promissory estoppel or common intention constructive trust in respect of Yuet Fat Mansions and dismissed her counterclaim as regards that property.  He awarded her 80% of the costs of the claim and the counterclaim.

3. The outcome of the judgment below is that Madam Cham is entitled to Foon Lok Mansions and Madam Wong (as the administratrix of the Deceased) is entitled to Yuet Fat Mansions.  Madam Wong is not content with having just one property and so brought this appeal.  Madam Cham brought a cross-appeal against the dismissal of her counterclaim as regards Yuet Fat Mansions but made clear in an open letter to the appellants’ solicitors in September 2013 that she would only pursue her cross-appeal in the event the appeal is allowed.  Her cross-appeal was taken out with the view to safeguard her position that she might not be made homeless if the appeal should be allowed.

4. As the appeal was dismissed at the conclusion of the hearing, the cross-appeal was not pursued and it was also dismissed.  We ordered the appellants to pay Madam Cham’s costs of the appeal and made no order as to costs for the cross-appeal.  These are the reasons for our judgment.

The background and the judgment below

5. The background for present purpose may be summarised as follows.

6. Madam Wong was married to the Deceased at all times.  The Deceased passed away in an accident in the Mainland on 3 June 1997.  Madam Cham met the Deceased in October 1988 and they soon began an intimate relationship, when both were married at the time.  They made several trips abroad and exchanged rings in 1989.

7. In 1990 or 1991, the Deceased closed his restaurant business in the United Kingdom.  On his return to Hong Kong, he continued to operate his business conducted through the Company at Foon Lok Mansions.  The Company’s business was similar to that of a fraternal association, providing premises to overseas Chinese to play mah-jong and offering services like booking plane tickets and organising pleasure trips.  The Deceased bought out other shareholders in the Company in 1992.  Since then and up to the date of his death, he held 999 of the 1,000 issued shares and the remaining share was held by Madam Wong.

8. Madam Cham started to help out the Deceased in the business of the Company as from 1990 or 1991.  Although she was offered a salary of $3,000 per month initially by the Deceased, she had only received tips from customers.

9. In 1992 or 1993, Madam Cham separated from her husband.  At around that time, construction of a small house at Wai Ha Village was completed for the Deceased.  Madam Wong moved to the small house and Madam Cham and the Deceased began to cohabit at Yuet Fat Mansion, effectively as husband and wife, until the Deceased passed away.

10. Madam Cham testified at the trial and called witnesses to support her case, including her brother Cham Kam Sang (“Mr Cham”) and a neighbour Ho Kei Chun (“Mr Ho”).  The judge accepted the evidence of Madam Cham and her witnesses.

11. Madam Wong did not testify, and no satisfactory explanation was given why she or her brother Wong Tin Choi (who had played a part in demanding Madam Cham to vacate Yuet Fat Mansions in March 1998) was not called to give evidence.  Only Madam Wong’s son and daughter-in-law gave evidence for her, but they were found by the judge to have very little contact with the Deceased over the relevant period and their evidence, which was “unsubstantiated assertions of a denial of Ms Cham’s evidence”, was not accepted by the judge.

12. In gist, Madam Cham’s evidence as accepted by the judge was that since she and the Deceased started cohabiting, the Deceased had made promises to her from time to time that the two properties and the shares in the company would belong to her in future.  Apart from working at the Company without salary, on many occasions, she had paid rates, government rent, management fees and utility charges in respect of both properties, other household expenses, and lent money to the Deceased when he was in need of cash.  Over the years, she had given about $800,000 to the Deceased for various purposes as stated above.  In 1996, she, the Deceased and Mr Ho decided to make an investment in small houses and the Deceased promised to transfer 300 shares in the Company to her so that their share of the investment would be made through the Company.  Also in 1996, the Deceased gave her the title deeds of Foon Lok Mansions to hold, with the assurance that the property was hers, and that he would transfer it to her as well as Yuet Fat Mansions when profit was generated from the small houses so that he could redeem the mortgage of Yuet Fat Mansions from the bank.  Madam Cham has had custody of the title deeds of Foon Lok Mansions ever since.  In May 1997, a corporate service company sent a letter to the Deceased enclosing draft documents prepared on his instructions for the transfer of 300 shares in the Company to Madam Cham.  The Deceased had not attended to the execution of the documents when he died unexpectedly less than a month later.  Madam Cham moved out of Yuet Fat Mansions in March 1998 to live in Foon Lok Mansions when Madam Wong’s brother and son proposed to her they would rent out Yuet Fat Mansions to pay the outstanding mortgage.

13. The judge made these pertinent findings in §§88 to 91 and 105:

“88. Having regard to the whole of the evidence I find it more likely than not that from about 1992, for a period of 5 years, Mr Lee and Ms Cham lived as husband and wife in circumstances in which she was known as Mrs Lee. I accept the evidence of Ms Cham as to the promises that were made to her, and the circumstances in which they were made. I accept that throughout the whole of this period, and continuing after his death, Ms Cham provided significant funds to Mr Lee to enable him to support the properties and themselves.

89. I accept Ms Cham’s evidence that Mr Lee gave her the title deeds to the Foon Lok Mansions property in the way in which she described. Although there was a paucity of evidence to substantiate the extent of the payments made by Ms Cham over the years I find it more likely than not that, in the absence of evidence to the contrary, that Ms Cham contributed a substantial sum to Mr Lee, principally for the purpose of maintaining the two properties and their lifestyle. I accept Ms Cham’s evidence that documentation, which might otherwise have substantiated payments made by her, was removed from the Foon Lok Mansions property and so was not available to her.

90. I accept Ms Cham’s evidence that Mr Lee told her that when he became owner of all of the shares in the company but one, he had signed his wife’s signature on the documents for that one share and that accordingly he was able to transfer all the shares in the company if he wished.

91. It is right that Mr Lee could have taken steps to transfer the shares in the company to Ms Cham, and two properties to her during his lifetime, or that he could have made a will in her favour. The fact that he had not taken any steps to do so does not detract in any way from the conclusion I have reached as to the making of the promises, the delivery of the title deeds, and the payment of funds made by Ms Cham.

…

105. It is beyond argument that Ms Cham relied upon the promises. She remained living with Mr Lee in a de facto relationship, one which Mr Lee could end at any time. Having left her husband, without the support of Mr Lee, Ms Cham would have to have relied upon her own assets for accommodation and support. Instead she applied her own assets, in part at least, in the support of Mr Lee and both properties. Just as similar acts were found in Luo Xing Juan, at §64 E.5, to be “significant acts and omissions of detrimental reliance”, so am I satisfied that Ms Cham has established sufficient significant acts and omissions of detrimental reliance.”

14. We now turn to the four grounds of appeal raised by Madam Wong.

Ground 1

15. A number of points were taken under this composite ground by Mr H Y Wong, who appeared for the appellants in this appeal but not below.

16. Firstly, counsel took a pleading point.  The judge made a remark in §10 that Madam Cham’s pleadings are “repetitive and prolix” and distilled her counterclaim to four bases, one of them being proprietary estoppel.  In the latter parts of the judgment, he considered her case not on the basis of proprietary estoppel but promissory estoppel, applying the law in Luo Xing Juan.  The complaint here is that the judge had conflated the concepts of proprietary estoppel and promissory estoppel, and had thereby changed and improved Madam Cham’s case in applying promissory estoppel, when promissory estoppel was not mentioned in her pleadings at all.  Luo Xing Juan was cited by Mr Alan Kwong (who appeared for Madam Cham at trial and on appeal) only in his closing submissions, to deal with the point that the legal owner of Foon Lok Mansions was not the Deceased but the Company.  The judge did not invite the appellants’ counsel to address him on promissory estoppel, so the ruling against them based on promissory estoppel is unjust and unfair.  In his oral submissions, Mr Wong stressed this was more than a pleading point.  As the judge had found in favour of Madam Cham on the basis of promissory estoppel not proprietary estoppel, this would give rise to a mere or personal equity, not a proprietary interest.  He submitted that the judge had failed to appreciate the difference between the two concepts when relief was given that Madam Cham is entitled to have the legal interest of the property transferred to her.

17. Secondly, Mr Wong submitted that the judge was wrong in ruling in favour of Madam Cham on promissory estoppel as the promises allegedly made by the Deceased were not unequivocal.  The judge should have looked for corroborating evidence to substantiate the alleged promises of the Deceased having regard to the obvious danger of relying on uncorroborated evidence of a claimant in a claim against the estate of a deceased person.  Counsel contended it was unclear from the alleged promises whether Madam Cham was meant to have only a life interest or an absolute gift, whether she was only to have a half share or the entirety, and whether the transfer was to be made to her in the lifetime of the Deceased or only upon his death.

18. Thirdly, as to reliance on the alleged promises, Mr Wong submitted there was no evidence that but for the Deceased’s promises, Madam Cham would not have given out the money or worked for the Company without receiving salary.  Furthermore, payment for household expenses and outgoings for the enjoyment of the Deceased and Madam Cham did not amount to detriment.

19. We agree with Mr Kwong there is no substance in any of the above submissions.

20. Although the words used in Madam Cham’s pleadings were “proprietary estoppel” and not “promissory estoppel”, the words “estoppel by representation” had appeared quite a number of times in her pleadings.  So strictly speaking, it is not correct that promissory estoppel was not pleaded by Madam Cham.  Besides, the factual matters relied on in this instance for establishing promissory estoppel are really no different from those factual matters that would be required to mount a case of proprietary estoppel.  A pleader is required only to plead the material facts.  It is not necessary for him to state the legal result.  And if he does so, he is not bound by, or limited to the legal result stated in the pleading.  He is at liberty to present in argument any legal consequence of which the facts permit (In re Vandervell’s Trust (No 2) [1974] 1 Ch at 269 at 321H to 322A).

21. We see no injustice or unfairness in the judge finding for Madam Cham on the basis of promissory estoppel.  Mr Kwong addressed the judge at some length on the case of Luo Xing Juan in his written and oral submissions at closing, to deal with an indication of the appellants’ counsel during the cross-examination of Madam Cham that he would make submissions based on the “separate corporate personality” of the Company in that the property was not owned by the Deceased but by the Company.  No complaint or objection was made by the appellants’ counsel at any time to Mr Kwong’s reliance on Luo Xing Juan and promissory estoppel.  Nor could it be said he was taken by surprise.  That the judge did not specifically ask the appellants’ counsel to address him on promissory estoppel was of no consequence.  Counsel was at liberty to deal with this point at any stage of his oral submissions.

22. Ribeiro PJ stated in Luo Xing Juan at §54:

“The doctrine of estoppel continues to represent a developing area of the law and aspects of the applicable principles are subject to debate. Thus, there is discussion as to the extent to which promissory estoppel and proprietary estoppel overlap, with a body of opinion inclining towards the view that there is no real difference between them. In the present context, proprietary estoppel is inapplicable because the deceased, not being the owner of the Property, was not in a position to confer on Miss Luo a proprietary interest in it. However, as Maharaj v Chand[1] establishes, this does not prevent recourse to promissory estoppel. The doctrines therefore differ at least to that extent. However, it is at the same time clear that many of the constituent elements of the two forms of estoppel are shared and where that is so, authorities on proprietary estoppel provide guidance in cases involving promissory estoppel.”

23. In the present case, the constituent elements of promissory estoppel overlap with those of proprietary estoppel.  As in Luo Xing Juan, the only reason why proprietary estoppel is not applicable in the present situation was because the Deceased was not the legal owner of Foon Lok Mansions and so could not confer a proprietary interest of the property on Madam Cham.

24. Nor do we accept the judge was not aware of the difference between the two concepts when he came to consider the appropriate relief for promissory estoppel, as opposed to granting relief for proprietary estoppel.  He was referred to Luo Xing Juan and clearly had the case in mind when he dealt with relief in §§117 and 118.  The relevant passages in Luo Xing Juan regarding the question of relief were fully canvassed in Mr Kwong’s written closing submissions at §§152 to 155.

25. The judge ruled that the promise in respect of Yuet Fat Mansions was equivocal but held that the promise in respect of Foon Lok Mansions and the 300 shares was entirely different for it was accompanied by the Deceased’s acts of delivery of the title deeds and instructing the corporate services company to draft necessary documents (at §§101 and 102).  He is clearly entitled to hold that these acts clearly and unequivocally demonstrated the Deceased’s intention to transfer absolutely the title of Foon Lok Mansions and the shares to Madam Cham and that the essential meaning of the Deceased’s promise was plain and unambiguous.

26. As stated in Luo Xing Juan at §60:

“The court will seek to ascertain the meaning in substance of the promise. It is the substance of its meaning that must be clear and unequivocal. A promisor may make his intentions perfectly plain but, not being a lawyer, may express himself in terms which are legally imprecise or inaccurate. A promisee may likewise clearly understand the substance of what is being promised without any knowledge of the legal rights or powers within which the promise is framed.”

27. In §61, Ribeiro PJ cited the statement of Gleeson CJ in Green v Green (1989) 17 NSWLR 343 at 358 on how to ascertain the substance of the mutual intentions of a cohabiting couple regarding the sharing of interest in property.  The proper approach “is to seek a result which will most closely give effect to the common intention of the parties bearing in mind, first, that they did not themselves specifically address the matter of legal form which would be conducted to give effect to their intention, and secondly, that this is an area in which equity is at its most flexible.”

28. We see no basis to interfere with the judge’s findings of fact, particularly when the various possibilities put forward by Mr Wong of what the Deceased’s promise could mean had not even been canvassed with Madam Cham in cross-examination.

29. As for the need of caution in acting on uncorroborated evidence in a claim against the estate of a deceased person, the judge had reminded himself of this in §33.  Besides, he found that Madam Cham’s evidence was corroborated by the evidence of Mr Cham (at §§71 and 80).

30. Mr Kwong correctly pointed out that the “but for” test propounded by Mr Wong is wrong in law.  It suffices so long as the Deceased’s promises were an inducement.  It is not necessary to establish but for the promises, Madam Cham would not have acted in the way she did.  The correct legal position is as stated by Balcombe LJ in Wayling v Jones (1993) 69 P&CR 170 at 173:

“(2) The promises relied upon do not have to be the sole inducement for the conduct: it is sufficient if they are an inducement – Amalgamated Property Co v Texas Bank [1982] QB 84 at 104-105.

(3) Once it has been established that promises were made, and that there has been conduct by the plaintiff of such a nature that inducement may be inferred then the burden of proof shifts to the defendants to establish that he did not rely on the promises – Greasley v Cooke [1986] 1 WLR 1306; Grant v Edwards [1986] Ch 638 at 657.”

31. Here, the judge accepted Madam Cham’s evidence that the Deceased had made promises to her and it is “beyond argument that Ms Cham relied upon the premises” (at §105).  Madam Wong has not adduced any evidence to establish that Madam Cham did not rely on the promises.  Reliance and detriment are often intertwined, and the constituent elements of promissory estoppel do not exist in watertight compartments.  The meaning of the words or conduct constituting the promise has to be understood in the light of the parties’ relationship and the legal rights or powers exercisable, and known to be exercisable, by the promisor (Luo Xing Juan at §§56 and 57).

32. On the evidence of Madam Cham, which the judge accepted, what she had paid out, in reliance on the mutual understanding that she and the Deceased were living as one in a de facto relationship was far more than household expenses and outgoings for the enjoyment of both.  The judge is clearly entitled to find she has established “sufficient significant acts and omissions of detrimental reliance” (at §105).

Ground 2

33. Under this ground, Mr Wong sought to cast doubt on Madam Cham’s evidence that over the years, she had given the deceased as much as $800,000.  He pointed to an undated handwritten note of Mr Lee setting out various sums he owed to Madam Cham on five occasions between 10 February 1994 and 6 March 1996, making a total of $35,000.  This handwritten note was not mentioned in the judgment.  Mr Wong submitted that the judge had failed to take this document into account and it showed that the amount owed by the Deceased was $35,000 only.

34. This is a patently bad point.  The handwritten note was disclosed by Madam Cham and explained in her witness statement.  She was cross-examined extensively on this and gave a more detailed account for its provenance.  The note did not purport to say the Deceased was indebted to her only for the sums stated.  The fact that the judge did not mention it in his judgment did not mean he had overlooked this note or Madam Cham’s explanation of it.  There is no basis to disturb the judge’s finding of fact that Madam Cham had contributed a substantial sum to the Deceased, principally for maintaining the two properties and their lifestyle (at §89).

Ground 3

35. Mr Wong contended the judge was in error in holding that the intended transfer of 300 shares to Madam Cham was corroborated by a letter dated 6 May 1997 from the corporate services company.  He submitted the judge failed to take into account the promise to transfer the shares was made to Madam Cham half a year ago and the Deceased did not even act on the letter up to the time of his death in June 1997.  He also submitted that the promise to transfer only 300 shares to Madam Cham did not sit well with her claim she was to be given the whole of the Company’s interest in Foon Lok Mansions.

36. There is no merit in Mr Wong’s submissions.  The judge had found that the corporate services company was acting on the Deceased’s instructions when it sent the letter to him with the draft documents to effect the transfer of 300 shares to Madam Cham (at §102).  Madam Cham gave evidence that in May or June 1997, the Deceased was busy in organizing a trip for customers to go to Fujian and it was on this trip that he had a fatal accident.  There was no pressing urgency for him to execute the documents before he made the trip.

37. We agree with Mr Kwong that the intended transfer of 300 shares to Madam Cham was not contradictory to her case that the Deceased had promised to transfer the whole of Foon Lok Mansions to her.  As the judge had inferred and held, the Deceased’s intention in giving her 300 shares was that she should have a 30% interest in the investments in small houses that might be made by the Company (at §§56 and 103).  This was a separate promise of the Deceased that had no direct correlation with Foon Lok Mansions.

Ground 4

38. Mr Wong submitted that some of the acts which could constitute detrimental reliance, such as working with no salary for the Company and giving certain moneys to the Deceased, had preceded the Deceased’s promises and so could not have been acts in reliance on the promises.  Further, the judge should have taken into account part of the acts could not constitute detrimental reliance in considering the extent of the relief which should be granted to Madam Cham under promissory estoppel.

39. Another matter the judge had failed to consider in granting relief was the “countervailing” benefits received by Madam Cham over the years in that she and her son have been residing in Foon Lok Mansions rent free since March 2008, so any detriment she suffered had been offset by the benefits.

40. A further complaint was that the judge failed to give any reason why the relief he ordered is appropriate, in that promissory estoppel gives rise to a “mere equity” and it is to be satisfied “by the minimum award necessary to do justice” (Crabb v Arun District Council [1976] Ch 179 at 198G; Stack v Dowden [2007] 2 AC 432 at 448 §37).  Mr Wong postulated the judge should have considered whether Madam Cham should be given only a life interest or only part of the interest in Foon Lok Mansions as a tenant-in-common.

41. We do not think there is substance in any of the above contentions.

42. On the evidence accepted by the judge, the Deceased’s promises to Madam Cham were made and repeated to her over a period of time ever since they started cohabitation in 1992 or 1993 and it was in 1996 that he took positive steps towards acting on his promises by delivering the title deeds of Foon Lok Mansions to her and later instructing the corporate services company to prepare documents to transfer the shares to her.  The judge held nothing could be more clear and unequivocal than these acts, coupled with all the promises, that the intention was to transfer to Madam Cham the title of Foon Lok Mansions absolutely and 300 shares in the Company and both of them had understood clearly what was being done (at §101).  The judge also found Madam Cham has established “sufficient significant acts and omissions of detrimental reliance” (at §105) and she has established “all of the criteria to entitle the court to hold that relief should be granted to her to give effect to the equity to which she is entitled, in respect of both Foon Lok Mansions and 300 shares in the company” (at §107).

43. As Ribeiro PJ had stated in §67 in Luo Xing Juan, the disparaging-sounding epithet in “mere” equity is to indicate that no proprietary interest accrues to the claimant.  It does not mean that the relief which may be granted is insignificant.  In deciding upon the relief, the court determines the extent of the equity raised and the relief needed to satisfy it, “to enable the claimant to have the benefit of the equitable right which he is held to have” (at §68).  The court has “great flexibility and addresses the substance of the equity raised in determining its extent.  It is not constrained, for instance, by the lack of legal precision in the way the promise or assumption founding the estoppel was expressed” (at §69).  Whilst the court does not grant relief beyond the minimum necessary to do justice, this does not require the court to be parsimonious although it recognises justice must also be done to the defendant.  Where the equity is raised by promissory estoppel in relation to a clear-cut promise that can readily be given effect, the court’s natural response is to fulfil the claimant’s expectations, subject to the remedy not being disproportionate to the detriment which its purpose is to avoid.  If realising the claimant’s expectations in full would result in such a disproportion, the court will seek to satisfy the equity in a more limited way, while not abandoning its attempt to fulfil those expectations to an appropriate degree (at §70).

44. In the present case, the equity raised was the promises that Madam Cham would have the whole of Foon Lok Mansions and 300 shares in the Company.  They were clear-cut promises that could readily be given effect, so in granting relief the court’s natural response would be to fulfil her expectations, subject to the relief not being disproportionate to the detrimental reliance.  That some of the acts of Madam Cham to her detriment had taken place before some of the repeated promises could not be said to have rendered the full realisation of her expectations disproportionate, bearing in mind that she had continued to conduct herself in the same way to her detriment throughout the time she lived with the Deceased as de facto man and wife and even well after the Deceased had passed away.  Nor is there anything of substance in the contention about “countervailing” benefits, which seems to be a circular argument.

45. There is no basis to interfere with the judge’s exercise of discretion in granting the relief to Madam Cham to enable her to have the full benefit of the equity she is held to have.

46. For all the above reasons, we have dismissed the appeal with costs.