TANG HIN FAI AND ANOTHER v. TANG HIN LUNG AND OTHERS

HCMP 1610/2017

[2023] HKCFI 2637

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1610 OF 2017

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BETWEEN

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JUDGMENT

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A. INTRODUCTION

1.  This is the trial of Ps’ claim and Ds’ counterclaim against each other. Ps are the registered co-owners of Flat E, 10^th Floor, Block 2, Beverly Garden, 1 Tong Ming Street, Tseung Kwan O (“Property” or “Beverly Garden Property”). By Originating Summons issued in 2017 (which was later converted into an action as if begun by Writ), Ps seek vacant possession of the Property and mesne profits (since 1 May 2017) against Ds. On the other hand, Ds counterclaim a declaration that D1 and D2 are beneficial owners of the Property.

2.  In a nutshell, P1 and P2 are husband and wife who purchased the Property under the Home Ownership Scheme (“HOS”) with the assistance of a mortgage loan (“Mortgage Loan”) in 1998. D1 and D2 are also husband and wife but they were separated since 2011, and D3 and D4 are their daughters. D1 is the elder brother of P1, and D1 worked in the garage business of P since 2001 until July 2016, subject to D1’s claim that he has a half beneficial ownership of the company of the garage business (i.e. Simple Motors Limited (“Company”)) pursuant to an oral agreement with P1 in about early to mid 2003 (as more particularly pleaded in §4 of Ds’ Amended Defence and Counterclaim (“AD&CC”)) (“Business Agreement”).

3.  It is not in dispute that Ds have resided in the Property since late 2003/early 2004 up to today (or in the case of D1 up to 2011). It is also not in dispute that Ps paid the 10% down payment and the Mortgage Loan repayments for the Property from 1998 to November 2003, whilst D1 paid P1, by way of deduction from D1’s salary, an agreed monthly sum of HK$5,500 (although relevant records suggest that lower amounts were paid initially) to cover the Mortgage Loan repayments for the Property from November 2003 to July 2016 (“Deduction Arrangement”). All along, Ps settled the Mortgage Loan repayments directly through Ps’ bank account until the discharge of the mortgage in 2021.

4.  Both sides allege that the above arrangement was pursuant to an oral agreement, albeit in starkly different terms. In essence, Ps’ version is that, by an oral agreement between P1 (on behalf of himself and P2) and D1 in 2003, P1 permitted D1 and his immediate family members (D2-D4) to occupy the Property as licensees, on the express terms that Ds shall contribute to expenses in relation to the Property including the Mortgage Loan repayments, rates and rents, management fees and utility charges, and shall vacate the Property immediately upon request (as more particularly pleaded in §§3-4 of Ps’ Re-Amended Statement of Claim (“RASOC”)) (“Licence” or “Licence Agreement”). On Ps’ case, the Licence was revoked at the latest on 30 April 2017 by a letter dated 25 April 2017 from Ps’ former solicitors.

5.  On the other hand, Ds’ version is that, in the latter half of 2003, it was orally agreed between P1 (on behalf of himself and P2) and D1 (on behalf of himself and/or D2-D4) that (i) Ps agreed to transfer the ownership of the Property to D1 at the consideration of the outstanding Mortgage Loan which D1 agreed to repay as owner of the Property, (ii) Ds will move into the Property which will become D1 and D2’s matrimonial home, (iii) D1 and/or D2 shall pay for all expenses in relation to the Property, and (iv) upon the full repayment of the Mortgage Loan, Ps shall transfer the legal title of the Property to D1, upon D1 paying for the land premium to the Property (as more particularly pleaded in §6 of AD&CC) (“Oral Agreement”).

6.  Therefore, the main issue at trial is a factual one, namely whether the parties entered into the Licence Agreement or the Oral Agreement in the latter half of 2003. Depending on the factual finding, Ds rely on common intention constructive trust, proprietary estoppel or resulting trust in support of their counterclaim. Pausing here, it is of importance to note that both sides contend that there was express oral agreement pertaining to the arrangement (viz. the occupation of the Property by Ds, the Deduction Arrangement, payment of expenses of the Property by Ds, etc). It is common ground that there were discussions and agreement culminating in such arrangement, even though the parties’ cases as to what were discussed and agreed are diametrically opposed to each other. As such, there is little room for the operation of resulting trust, which normally can only be invoked in the absence of express intention of the parties.

7.  Another issue arising on the facts is that D1 no longer paid P1 the agreed sum of HK$5,500 after D1 ceased working in P’s garage business in July 2016. Ps contend that even if the Oral Agreement is proven, Ds’ counterclaim should fail by reason of non-compliance with the Oral Agreement. Ds contend otherwise by arguing that (i) P1 is still indebted to D1 (“Money Owed”) for his 50% interest in the Company (“Alleged Half Share”) and D1 agrees that any outstanding amounts of the Mortgage Loan can be fully offset by the Money Owed (“Offsetting Defence”) and (ii) D2 offered in September 2016 and March 2017 to repay and continue to pay the outstanding amount of the Mortgage Loan but this was wrongly rejected by P1 who should not be allowed to rely on his own wrong pursuant to the prevention principle (as enunciated in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at [91]).

8.  It is apparent that in order to run the Offsetting Defence, Ds must prove the existence of the Business Agreement in the first place. Although D1 has not sought any relief for his Alleged Half Share in these proceedings or commenced other proceedings to seek such relief, Ds have pleaded D1’s Alleged Half Share and the Money Owed in the AD&CC in support of the Offsetting Defence. To that extent, it appears necessary to deal with such pleas including the factual issue of whether the Business Agreement was entered into. Depending on the court’s factual finding, this may well have an impact on the credibility of the witnesses, particularly on the issue as to whether the Licence Agreement or the Oral Agreement was entered into.

B. SCOPE OF DISPUTES

B1. Agreed Issues

9.  The parties have submitted an Agreed List of Issues, which I set out in full here:

“1. What was the agreement P1 and D1 entered into in latter half of 2003 in respect of the Property – the contractual Licence as per Ps’ case (RASOC §§3-4) or the Oral Agreement as per Ds’ case (AD&CC §6);

2. If P1 and D1 are found to have entered into the Oral Agreement: -

(i) In respect of D1 and/or D2’s common intention constructive trust counterclaim: -

(a) whether D1 and/or D2 have reached a common intention (AD&CC §§18-19) with P1 and P2 as to the sharing of beneficial ownership of the Property?

(b) if the answer to Issue 2(i)(a) is yes, what is that common intention? In particular, within such common intention, was there any condition attached, or condition precedent, to D1 and/or D2’s acquisition of any beneficial interest in the Property?

(c) whether D1 and/or D2 had detrimentally relied upon the common intention as found above, including their compliance of any condition or condition precedent as part of the common intention;

(d) whether D1 and/or D2 own(s) the entire beneficial interest of the Property on common intention constructive trust (AD&CC §20)?

(ii) If D1 and/or D2 is or are not the entire beneficial owners of the Property under common intention constructive trust, in respect of D1 and/or D2’s resulting trust counterclaim (AD&CC §21): -

(a) as a result of the findings above, could a presumption of resulting trust arise or operate as a matter of law?

(b) if the answer to Issue 2(ii)(a) is yes, whether D1 and/or D2 had contributed to the purchase of the Property and if so the extent of contribution; and

(c) what is the extent of beneficial interest in the Property acquired by D1 and/or D2 by way of presumption of resulting trust, if any?

(iii) If D1 and D2 are found not to own any beneficial interest in the Property under common intention constructive trust and presumption of resulting trust, in respect of D1 and/or D2’s proprietary estoppel counterclaim: -

(a) in light of the findings under Issue 2(i), was there any actionable representation, promise or assurance from P1 and/or P2 to D1 and/or D2 as to D1 and/or D2’s beneficial ownership of the Property (AD&CC §§22, 24)?

(b) if the answer to Issue 2(iii)(a) is yes, whether D1 and/or D2 had detrimentally relied upon the representation, promise or assurance as found above;

(c) in the circumstances, whether it is unconscionable for Ps to renege on the said representation, promise or assurance as found above (AD&CC §25). If so, what is the appropriate relief to do minimum equity to D1 and/or D2?

3. In consideration of Issue 2 above: -

(i) Whether or not D1 presently “agreeing” to offset any outstanding amounts of the Mortgage by the “Money Owed” as alleged (the “Offsetting Defence”) (AD&CC,§§17, 29; F&BP Answer §3 cf. AR&DCC §35(ii)) bears any relevance, assuming for a moment it is a sustainable defence?

(ii) In particular, whether or not the Offsetting Defence is relevant in light of the fact that the Mortgage had already been discharged in October 2021?

(iii) If the Offsetting Defence is relevant to the determination of Issue 2 to any extent, on the assumptions that:-

(a) as alleged, the “Business Agreement” exists and that D1 has 50% beneficial interest in the Company (“Alleged Half Share”) (AD&CC §§4-5), and

(b) D1 has demanded P1 for payment of the Alleged Half Share after July 2016 (AD&CC §17),

whether the “Money Owed” as alleged could arise and is sustainable as a matter of law (AR&DCC §§34, 35(i))?

(iv) If answer to Issue 3(iii) is yes, whether D1 is able to prove the Offsetting Defence on the facts, namely: -

(a) the existence and terms of the Business Agreement;

(b) the existence of D1’s Alleged Half Share in Simple Motors Limited;

(c) the existence of the demand(s) made by D1 for payment of the Alleged Half Share; and

(d) the valuation of the Alleged Half Share (i.e. the quantum of the Money Owed) for the Offsetting Defence to operate.”

4. If the answer to Issue 1 is Licence and/or that neither D1 nor D2 had any beneficial interest in the Property: -

(i) whether Ps are entitled to recover vacant possession of the Property; and

(ii) what is the quantum of mesne profit recoverable by Ps from Ds for wrongful occupation of the Property, if any.”

B2. Main Issues for Determination

10.  As explained above, the main issue is whether the parties entered into the Licence Agreement or the Oral Agreement in latter half of 2003. It is clear from §2 of the Agreed List of Issues that the issues of common intention constructive trust, resulting trust and proprietary estoppel would only arise upon a factual finding that the Oral Agreement was entered into. It is also apparent that, if the Oral Agreement was not entered into, it is not strictly necessary to consider the Offsetting Defence and the Business Agreement.

11.  Having said that, the factual allegation of the Business Agreement is to some extent intertwined with the factual allegation of the Oral Agreement. On Ds’ case, both are oral agreements reached between P1 and D1 in 2003 (i.e. the Business Agreement in about early or mid 2003, followed by the Oral Agreement in latter part of 2003). Depending on the factual finding of the Business Agreement, it may have an impact on the credibility of the parties in relation to the Oral Agreement. Therefore, I consider it prudent to deal with both factual issues in this Judgment. Chronologically, it is convenient to deal with the Business Agreement first, before addressing the Oral Agreement.

12.  In the following Judgment, I will first outline the background and key facts which are undisputed or beyond reasonable dispute, after which I will set out a summary of key principles and my brief observations on the witnesses, followed by my analysis of the main issues.

C. BACKGROUND AND KEY FACTS

13.  The parties have submitted an Agreed Chronology. Further, the parties’ submissions have set out various facts which are said to be undisputed or beyond reasonable dispute (subject of course to the court’s assessment or analysis). There are also documentary evidence which are not in dispute. It is not my intention to set out each and every indisputable fact. Instead, I will focus on facts which help elucidate the background or may assist in the factual analysis in the latter part of this Judgment.

C1. Family background

14.  P1 and P2 were born in 1969. They were married in 1994. They have a daughter, who was born in 2002.

15.  P1 is involved in the trade of garage all along. P2 used to work as an assistant in a shipping company until about 2008, earning a monthly income of HK$10,000 odd. P2 started working at the vehicle examination centre operated by the Company in the latter part of 2016.

16.  D1 and D2 were born in 1967 and 1965 respectively. D1 is the elder brother of P1. D1 and D2 were married in 1992. They have two daughters, D3 and D4, who were born in 1993 and 1996 respectively. D1 and D2 are separated since 2011.

17.  D1 was involved in the trade of motor vehicles. In 2000, D1 started to work in P1’s garage business until he left in July 2016. During such time, D1 appeared to continue to be involved in the trade of motor vehicles on his own account. Separately, D2 has worked as an accounting clerk.

18.  P1 and D1 have a sister called Astor Tang (“Astor”). Astor worked in the garage business as an accounting staff. She was not called by either side to give evidence.

19.  P1 and D1 have an uncle (“Uncle”). It is not in dispute that the Uncle made a loan of HK$1 million for expansion of the garage business in 2003 which was subsequently repaid during the period up to 2014. However, D1 alleges that the loan was advanced to both P1 and D1. The Uncle was not called by either side to give evidence.

20.  It is suggested in Ps’ evidence that the mother of P1 and D1 (“Mother”) had tried to persuade D2-D4 to vacate the Property but without success. The Mother was not called by either side to give evidence.

21.  For the avoidance of doubt, no issue is taken by either side for the failure to call any witness. There is therefore no need for the court to draw any adverse inference against either side as a result.

C2. Dealings in properties by Ps

22.  After marriage, Ps made several applications for housing under the HOS. Eventually, by an Assignment dated 20 November 1998, Ps acquired the Beverly Garden Property as joint tenants under the HOS. The initial market value of the Beverly Garden Property was HK$1,514,900.00. Being a HOS flat, it was sold to Ps at a discounted price of HK$965,300.00. The discount percentage was 36.28%.

23.  Ps paid HK$96,530.00 as 10% down payment. They executed a Legal Charge in favour of Hang Seng Finance Limited (“HSF”) for the Mortgage Loan to cover the remaining 90% balance of HK$868,770.00 (“Mortgage”). The Mortgage Loan carried interest at a floating rate and was repayable by monthly instalments beginning from 20 December 1998, with an overall repayment period not exceeding 25 years.

24.  It is expressly provided under clauses 3(a) and (b) of the Mortgage that Ps, the borrowers, may prepay the whole or part of the Mortgage Loan by giving not less than 1 month’s prior written notice. No premium penalty or fee shall be charged by HSF in respect of any partial or full repayment other than reimbursement of reasonable administrative costs.

25.  As a HOS flat, the Beverly Garden Property contained alienation restrictions, unless and until land premium has been paid to the Housing Authority.

26.  The size of the Beverly Garden Property is about 566 square feet in terms of gross floor area, and about 484 square feet in terms of saleable/usable area.

27.  Ps incurred about HK$300,000.00 to renovate the Beverly Garden Property. They moved into and resided there in January 1999.

28.  At all material times, the Mortgage Loan repayments were settled by auto-transfer from the joint bank account of Ps held with Hang Seng Bank. The first payment was made on 21 December 1998, in the sum of HK$8,169.20. As the interest rate was floating, the amount of Mortgage Loan repayments also varied across time. During the period from 21 December 1998 to 21 November 2003, Ps had paid a total of HK$386,157.80 of instalments in repayment of the Mortgage Loan, inclusive of interest.

29.  Together with the down payment of HK$96,530.00, therefore, by November 2003 Ps had paid a total of HK$482,687.80 towards the purchase of the Beverly Garden Property. Of course, this amount is inclusive of payment of interests. By 21 November 2003, Ps still owed HSF the amount of about HK$700,000 odd.

30.  On 9 July 2003, Ps as joint tenants entered into a sale and purchase agreement for the purchase of a first-hand private property, namely Flat H, 31^st Floor, Tower 16, Ocean Shores, Tseung Kwan O (“Ocean Shores Property”) at a price of HK$2,708,000.00. Ps executed the Assignment for the Ocean Shores Property on 6 November 2003.

31.  Ps paid HK$270,800.00 as 10% down payment. They executed a first legal charge in favour of Hang Seng Bank (“HSB”) and a second mortgage (arranged by developer) in favour of Lindfield Limited (“LL”) for mortgage loans to pay for the remaining balance in the sums of HK$1,895,000.00 and HK$541,600.00 respectively (altogether HK$2,437,200.00).

32.  There was a “vacation” on mortgage repayments. During the first 2 years from the drawdown date, no repayments to the principal or interest part of the first loan with HSB was required. Ps were only required to make repayment of interest to the second mortgage loan with LL in the sum of about HK$3,000 per month in the interim.

33.  The size of the Ocean Shores Property is about 811 square feet in terms of gross floor area, and 600 square feet in terms of saleable/usable area. It is a 3-bedroom unit.

34.  After completion for the sale and purchase on 6 November 2003, Ps moved into the Ocean Shores Property and out of the Beverly Garden Property in late 2003.

35.  On 21 September 2005, Ps paid the 1^st instalment in the sum of HK$9,387.30 towards repayment of the first loan with HSB. Ps also began making repayments to the second loan with LL at the same time. According to P1’s evidence during cross-examination, the total mortgage repayments per month for the Ocean Shores Property at the time was about HK$13,000 per month.

36.  On about 15 June 2009, Ps sold the Ocean Shores Property at a price of HK$3,400,000.  After paying off also the first and second mortgage loans and other conveyancing costs, Ps received net sale proceeds of about HK$1 million.

37.  Since then, Ps had been residing at rented properties within the same Ocean Shores estate for some years until about 2020.

38.  On 20 July 2021, the last instalment of the Mortgage Loan repayments was made by Ps.

39.  On 20 October 2021, the Mortgage was discharged.

C3. Dealings in properties by Ds

40.  On 28 October 1989 , D2 in her own name acquired a HOS flat located in Tsing Yi (“Tsing Yi Property”) at a price of HK$222,800.00. This took place before D1 and D2 were married in 1992.

41.  The size of the Tsing Yi Property is about 501 square feet in terms of gross floor area, and 381 square feet in terms of saleable/usable area. Therefore, the Beverly Garden Property is about 100 square feet larger than the Tsing Yi Property in saleable/usable area.

42.  The acquisition of the Tsing Yi Property was financed by a mortgage loan with Standard Chartered Bank in the sum of HK$200,500, i.e. about 90% of the purchase price. According to §11 of D2’s witness statement (which is not challenged), the monthly mortgage repayment instalment for the Tsing Yi Property is HK$2,300.00.

43.  As a HOS flat, the Tsing Yi Property also contained alienation restrictions, unless and until land premium has been paid to the Housing Authority.

44.  After marriage, D1 and D2 (and also D3 and D4 after they were born) resided in the Tsing Yi Property as a family.

45.  By 2003, D3 and D4, who were then 9 and 6 years of age, used to study at a primary school in Tsing Yi. Since September 2003, they were enrolled into two primary schools located in Tseung Kwan O.

46.  In latter part of 2003, P1 (on behalf of himself and P2) and D1 orally came to an agreement as to the arrangement of the Beverly Garden Property (i.e. the Licence Agreement on Ps’ case, or the Oral Agreement on Ds’ case). Such agreement was concluded at the old shop of the garage business, in the absence of P2, D2, D3 and D4.

47.  Pausing here, it is suggested in §23 of Ds’ Closing Submissions that the parties entered into the Oral Agreement in or about November 2003. This does not sit well with the fact that D3 and D4 enrolled into primary schools in Tseung Kwan O in September 2003, which suggests that any discussion should have taken place before September 2003. Be that as it may, it seems to be common ground that any oral agreement was entered into at least after Ps executed the sale and purchase agreement for the Ocean Shores Property on 9 July 2003, i.e. after Ps already committed themselves to the purchase of the Ocean Shores Property. As I will explain later, this has some bearing on the inherent probabilities of the Oral Agreement.

48.  After Ps moved out of the Beverly Garden Property, D2 spent about HK$60,000 to renovate it, including repainting of the interior, installing wardrobes/cabinets in the bedroom and purchasing new furniture for the living room.

49.  In early 2004, Ds moved out of their previous residence in the Tsing Yi Property into the Beverly Garden Property pursuant to the arrangement reached between P1 and D1.

50.  It is the parties’ case that, during the period from November 2003 to July 2016, an agreed sum of HK$5,500 was deducted from D1’s monthly salary to cover the Mortgage Loan repayments of the Beverly Garden Property pursuant to the arrangement reached between P1 and D1 (i.e. the Deduction Arrangement). However, from the internal records of the Company as disclosed by Ps, it can be seen that the monthly deduction from D1’s salary was initially HK$4,300. It then fluctuated between HK$4,460 and HK$4,800, and eventually settled at HK$5,500 in May 2006. That said, the precise figures under the Deduction Arrangement do not seem to be material – rather the parties are in dispute as to the underlying purpose of the Deduction Arrangement.

51.  Further, pursuant to the arrangement reached between P1 and D1, Ds paid for the outgoings arising from their residence in the Beverly Garden Property, including rents and rates, management fees, gas, water and electricity, since about 2004. There is however evidence that, from time to time, part of the outgoings and expenses were paid by the Company on Ds’ behalf, and the same would later be deducted from D1’s salary.

52.  After Ds moved into the Beverly Garden Property in early 2004, the Tsing Yi Property was left vacant. About 2 years later, D2 sold the Tsing Yi Property at a price of HK$888,000.00 on 20 December 2005. D2 received net sale proceeds of HK$518,840.65, and she placed HK$500,000 thereof in time deposit on 22 December 2005.

53.  Since then, Ds did not purchase another property. Further, Ds did not explore the possibility of early repayment of the Mortgage Loan with Ps.

54.  Meanwhile, Ds continued to reside at the Beverly Garden Property. In 2011, D1 separated with D2 and moved out. Nevertheless, D1 would still return to the Beverly Garden Property from time to time.

55.  After 2011, most outgoings and expenses were paid by D2, but some still through deduction from D1’s salary from the Company.

56.  Since D1 left the Company in July 2016, the Deduction Arrangement ceased. During the operative period of the Deduction Arrangement, D2 is said to have paid D1, on average, a sum of HK$2,000 per month as her contribution.

C4. The garage business and the Company

57.  P1 received education up to Form 3 in secondary school. In about 1985, at the age of 16, P1 started working in a garage as a vehicle mechanics. He became a certified vehicle mechanics in about 1989.

58.  In 1992, P1 started his garage business together with two business partners in the name of Yau Tong Simple Motor (油塘森堡汽車) (“YTSM”). YTSM operated out of a ground floor shop at Yau Tong (“Old Shop” or “Yau Tong Shop”), with a size of about 1,000 square feet.

59.  Since about 1999, P1 became the sole proprietor of YTSM.

60.  On the other hand, D1 used to trade motor vehicles. In about 2000, D1 was investigated by the Inland Revenue Department (“IRD”).

61.  Having regard to their relationship as brothers and the manpower needs of YTSM, P1 invited D1 to work in YTSM. Since May 2001, D1 became employed by YTSM (i.e. P1 as the sole proprietor of YTSM) as a labourer (雜工). D1 was responsible for driving and collecting/returning customers’ vehicles, manual administrative tasks, and rendering assistance to repairers. He received a monthly income of HK$12,000 then.

62.  At or around Ps’ purchase of the Ocean Shores Property in 2003, P1 was contemplating the business expansion of YTSM.

63.  In mid 2004, P1, in his own name, rented a ground floor shop at Cheung Sha Wan (“New Shop” or “Cheung Sha Wan Shop”) for expansion of YTSM’s garage business. The size of the New Shop is about 6,000 square feet, which is 6 times of the Old Shop. The landlord of the New Shop was D2’s then employer.

64.  Meanwhile, in mid 2004, P1 and D1 were subject to criminal investigations by the police for suspected use of false car insurance documentation. It may be noted that:

(a) On 28 May 2004, P1 attended an interview with the police. According to the interview record, P1’s occupation was stated to be a garage proprietor (車房東主).

(b) On 5 June 2004, D1 attended an interview with the police. According to the interview record, D1’s occupation was stated to be a garage worker (車房工人).

65.  On 11 November 2004, P1 became the sole director and registered shareholder of a shell company named Time Creator Limited.

66.  On 19 November 2004, Time Creator Limited was renamed as Simple Motors Limited (i.e. the Company) and the Cheung Sha Wan Shop became its registered office. The business of YTSM was carried on through the Company since then.

67.  At the same time, D1 was employed as a driver of the Company and performed administrative tasks, at the same salary level as before; and P1 and D1 agreed that HK$5,500 be deducted from D1’s monthly salary from working for the Company (i.e. the Deduction Arrangement).

68.  D1’s initial salary remained at HK$12,000 per month. D1 was not responsible for vehicles repair or testing. Nevertheless, D1 was given the authority to purchase auto-parts from external suppliers (on credit) in the name of the Company, and it appeared that D1 continued to engage in the trade of vehicles on his own part.

69.  In the internal records of the Company, D1 was referred to as a staff (職員) or employee (僱員) of the Company, receiving salary (薪金) and making MPF employees’ contributions (強積金計畫僱員供款).

70.  The garage at Cheung Sha Wan Shop came into operation near the end of 2004. Meanwhile, P1 continued operating the garage at Yau Tong Shop.

71.  By end of 2005, the Yau Tong Shop was closed.

72.  The expansion of the garage business costed about HK$1.2 million. Ps’ evidence (which is not seriously challenged) is that HK$200,000 was paid out of the savings of P1. The remaining HK$1 million was funded by a personal interest-free loan by the Uncle. The loan was advanced by cheque, and presented and deposited into the bank account of YTSM.

73.  As security, P1 issued 10 personal undated cheques each of HK$100,000 to the Uncle. It is P1’s evidence that the Uncle agreed not to cash-in any of those cheques unless and until being notified.

74.  The Uncle’s loan was repaid by irregular payments in cash from the Company since 2005 and was fully repaid in 2014, without the use of the said personal cheques of P1.

75.  That said, it is Ds’ case that the Business Agreement was made in early or mid 2003, and the Uncle advanced the loan to both P1 and D1.

76.  The Company suffered from liquidity problem for several months during 2008-2009. It had fallen behind on rent and owed the landlord about 2-3 months’ rent in the sum of about HK$300,000, as a result of which the landlord commenced legal proceedings against the Company. It is Ps’ case that they sold the Ocean Shores Property during such period to raise cash and improve liquidity.

77.  The matter was eventually settled. It is not disputed that P1 had borrowed a personal loan of HK$100,000 to pay off the outstanding rents. Further, although Ps raised about HK$1 million from the sale of the Ocean Shores Property, it is ultimately not necessary to use such sale proceeds for the Company.

78.  D1, on the other hand, admitted that he could not and had not rendered financial assistance to the Company, other than accommodating delay in payment of his salary, and refraining from requesting the Company to pay for the outgoings and expenses of the Beverly Garden Property and recoup the same by way of deduction from D1’s salary.

79.  In about 2016, the Company set up森堡汽車驗車中心, a government designated car testing centre (“DCTC”) in Fo Tan. Two business partners joined in and invested through extending loans of about HK$5 million to the Company. According to a WhatsApp message from P1 to D1 on 22 July 2016, the gazetting of such DCTC already took place by that time. Presumably, preparatory works were undertaken earlier.

80.  There were discords between P1 and the new partners on one part and D1 on the other part. As a result, D1 left the Company on his own volition on 16 July 2016. D1 informed P1 of his intention by a WhatsApp message on 4 July 2016.

81.  On 22 July 2016, P1 sent a WhatsApp message to D1. Among others, P1 asked D1 to reflect on the Company’s future and reiterated that he would support him either way if D1 had a change of mind or another better opportunity (當然，如果你有另一個決定，或更好既機會，我都會支持你).

82.  The parties have made submissions on the contents of such message which can be addressed later. Suffice it to say that it is Ds’ case that D1 has 50% beneficial interest in the Company (i.e. the Alleged Half Share) and that such message allegedly lends support to Ds’ case.

C5. Disputes on the Property since 2016

83.  In about September 2016, P1 orally demanded D2 to vacate the Beverly Garden Property (“Sep 2016 Incident”). However, Ds did not vacate the Property. There is a dispute as to whether D2 offered to pay and continue to pay the Mortgage Loan repayments on such occasion. However, D2 did not claim ownership of the Property on such occasion.

84.  On 2 March 2017, D2 (together with D3 and D4) attended the Cheung Sha Wan Shop of the Company (“Mar 2017 Incident”). It is not in dispute that D2 offered to pay and continue to pay the Mortgage Loan repayments on such occasion, but that was rejected by P1. Again, D2 did not claim ownership of the Property on such occasion.

85.  On 25 April 2017, Ps issued a letter through Messrs. Yip, Tse & Tang, their former solicitors to D2-D4 (“April 2017 Letter”), demanding delivery of vacant possession of the Beverly Garden Property on or before 30 April 2017. According to the April 2017 Letter, Ps verbally agreed that D2-D4 may occupy the Beverly Garden Property temporarily, but should vacate the Property upon receiving notification from Ps. However, the April 2017 Letter did not mention other express terms of the Licence Agreement, even though it did request D2-D4 to settle all outstanding expenses in relation to the Beverly Garden Property.

86.  D2-D4 did not accede to such demand or otherwise respond to the April 2017 Letter in writing.

87.  Significantly, on 29 May 2017, P1 sent a WhatsApp message to D1 stating as follows:

“富康層樓我同老婆決定要收返自住，已通知你老婆，但佢唔肯。當初因為你哋話想住，所以無賣到，畀咗你哋住，但現在你老婆覺得係畀你哋住變咗畀咗你哋，我同老婆都無諗過結果係咁！公司有問題，我賣咗維景，都唔敢叫你哋搬，現在你哋啲女已經讀完書，有經濟能力，我哋先敢開口，但換來係話幫我供咗咁多年樓，要我哋畀返錢佢。

其實我都希望有能力，買過另一層樓，大家唔洗煩，可惜我未做到！現我無辦法，律師信已出，法律情序將會開始！希望你明白！”

88.  The message is of significance. First, P1 made clear that Ps only permitted Ds to occupy the Property. Second, P1 said that D2 had responded earlier that since they had assisted P1 in making Mortgage Loan repayments for so many years, she demanded Ps to pay money back to her. In other words, according to P1’s message, D2 demanded “compensation” for Ds’ contributions towards the Mortgage Loan repayments. This is somewhat different from a claim of ownership under the Oral Agreement.

89.  Despite such message, neither D1 nor D2 made any denial or response.

90.  Further, on one reading, it would appear that since the April 2017 Letter was only addressed to D2-D4 but not D1, P1 sent such message to his elder brother D1 in May 2017 as a matter of “courtesy” or “warning” before commencing formal legal proceedings. This helps explain why the message was sent after the April 2017 Letter. Be that as it may, D1 did not respond to such message. Nor did D1 write any message to state his stance on the Property.

91.  On 14 July 2017, Ps commenced formal legal proceedings by issuing the Originating Summons herein against Ds.

92.  In about November 2017, D1 and D2 visited the Cheung Sha Wan Shop of the Company in an attempt to speak to P1 and retrieve D1’s salary slips (“Nov 2017 Incident”). P1 refused to discuss with them on that occasion.

D. RELEVANT PRINCIPLES

D1. Common intention constructive trust

93.  The law on common intention constructive trust is well settled. The parties have little dispute that the relevant principles have been authoritatively stated by the Court of Appeal in Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 (see also Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1; Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9; Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327; Lewin on Trust (20^th Ed.), Vol. 1, Chapter 10).

94.  The relevant principles are summarised in the submissions of Ps and Ds, and may be conveniently set out below:

(a) The starting point is that equity follows the law. There is a presumption that the beneficial interest follows the legal interest. Where the property is registered in a defendant’s name, the plaintiff (or the counterclaiming plaintiff, as the case may be) bears the burden of showing, on the balance of probabilities, that the beneficial ownership differs from the legal ownership. There are two stages of inquiry. The first is whether it was intended that the plaintiff has any beneficial interest in the property at all. The onus is upon the plaintiff to show that he has any interest at all. If he does, the second issue is what that interest is. (See: Liu Wai Keung [44]; Mo Ying [5.5], [5.16]-[5.17]; Primecredit [17])

(b) The burden may be discharged by showing that: (i) there was a common intention held by the plaintiff and the property owner at the time of the purchase (or exceptionally, thereafter) that the beneficial ownership was to be different to the legal ownership; (ii) the plaintiff altered his or her position in detrimental reliance upon the common intention; and (iii) it is unconscionable for the property owner to assert ownership in reliance on the legal title. The constructive trust is constituted by the plaintiff’s detrimental reliance on the common intention and the unconscionability of the legal owner departing therefrom. (See: Luo Xing Juan [16], [38]; Liu Wai Keung [46]; Mo Ying [6.12]).

(c) The court is to take a holistic approach to ascertain the parties’ objective intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it. The relevant intention is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. More factors than financial contributions may be relevant to drawing inference on such intention, and there is no exhaustive list. (See: Liu Wai Keung [47]; Mo Ying [5.13]-[5.17], [6.1]-[6.2]).

(d) Relevant circumstances include any discussion between the parties concerned at the time of the conveyancing, reasons why the property was acquired in joint names or sole name, the purpose for which the property was acquired, the nature of the parties’ relationship, how the purchase was financed initially and subsequently, how the parties arranged their finances, the outgoings on the property and other household expenses. (See Mo Ying [39]; Primecredit [2.3]-[2.4])

(e) The doctrine is often described as having two limbs, i.e.:

(i) First limb, i.e. expressed intention which arises when, at any time prior to the 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;

(ii) Second limb: 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.

(See: Mo Ying [5.8]; Primecredit [2.3]-[2.4]; Lewin on Trust (20^th Ed.), Vol.1, [10-064], [10-066])

(f) For common intention that is said to have been formed post-acquisition of the property, conceptually it implies a change in the ownership and in the absence of an express post-acquisition agreement, compelling evidence is required to support an inference that there was a fresh agreement as to beneficial ownership before the court can give effect to the common understanding. In that situation, there must be some evidence to infer that the original beneficial owner has agreed to give up some of his interest in the property in favour of the other party. (See Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343, [34]-[36])

(g) The above principles equally apply to properties acquired under the HOS. (Cheuk Shu Yin v Yip So Wan and another (2012) 15 HKCFAR 344, [36])

95.  As clarified in Ds’ Closing Submissions, Ds’ position is that:

(a) By reason of the Oral Agreement reached by P1 and D1 in 2003, Ps hold the Property on a common intention constructive trust for D1 and D2 for the occupation by Ds. In this regard, Ds rely on an express common intention constructive trust.

(b) Nevertheless, if the court finds that there is no evidence or not enough evidence to support a finding of an agreement on the beneficial ownership of the Property, the court has to 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 (citing Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647, [12]).

D2. Proprietary estoppel

96.  The relevant principles on proprietary estoppel are trite. The doctrine can generally be described as having three main elements:

(a) a representation or assurance having been made;

(b) reliance on the representation; and

(c) detriment in consequence of the reasonable reliance.

(See: Snell’s Equity (34^th Ed.), [12-033]; Cheung Lai Mui v Cheung Wai Shing [2021] HKCFA 19 [23])

97.  As clarified in Ds’ Closing Submissions, Ds’ reliance on proprietary estoppel is primarily based on the premise that the Oral Agreement existed, that is, an estoppel by representation.

D3. Resulting trust

98.  It is common ground between Ps and Ds that the doctrine of resulting trust does not apply if the court is in a position to make a finding on the common intention of the parties. This is particularly relevant here, given that both sides allege there was express discussion and agreement.

99.  Such position finds support from the authorities. It has been observed that in a domestic context, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: Primecredit Ltd, [1.3]. In a similar vein, in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 (adopted by Cheung JA in WML v LCK [2015] HKCA 84, [41]), G Lam J (as he then was) said at [44]-[45]:-

“44. The principles of trust law applicable to the present case are not in dispute. The Property being registered in the defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the Property on trust for him absolutely.

45. The plaintiff seeks to achieve that by pleading both a resulting trust and a constructive trust. However, given that both parties allege there was express discussion and actual intention as to where the beneficial interest in the Property should lie, there is little scope for the operation of resulting trust: Re Superyield Holdings Ltd [2000] 2 HKC 90, 111. At the commencement of the trial, indeed, counsel agreed that constructive trust is the real issue, and that resulting trust is not relevant except perhaps if I should decide to reject both parties’ evidence on intention.”

100.  Turning to the principles of resulting trust, it is trite that a resulting trust arises where there was absence of intention on the part of the person providing the purchase price of the property to benefit the recipient or arises from the presumed intention of the parties: Primecredit [2.6]-[2.7], [2.15]. It has been said that the time to take stock of the respective interest taken by the parties, and the time at which the respective contributions are to be calculated for the purpose of fixing the parties’ respective interest, is the time of acquisition: Re Superyield Holdings [2000] 2 HKC 90, 106E-F.

D4. Witness credibility

101.  The general principles regarding assessment of credibility are trite and have been helpfully summarized in Hui Cheung Fai v Daiwa Development Ltd (unrep., HCA 1734/2009, 8 April 2014) at [77]-[83]. In short:

(a) Contemporaneous documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility.

(b) In deciding whether to accept a witness’ account, importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events.

(c) Regard should be had to the consistency of the witness’ evidence with the undisputed or indisputable evidence, and the internal consistency of the witness’ evidence.

(d) Care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character.

(e) Witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities.

102.  Further, where it is shown that a witness has been discredited over one or more matters to which he has given evidence, this is relevant to the assessment of his overall credibility: Lee Fu Wing v Yau Po Ting Paul [2009] 5 HKLRD 513, [53(3)].

E. WITNESSES

E1. Preliminary Observations

103.  Ps have called two witnesses, namely P1 and P2, whilst Ds have called three witnesses, namely D1, D2 and Mr Chan King Hong (“Mr Chan”).

104.  Among the witnesses, the evidence of P1 and D1 are most relevant. Notwithstanding some initial confusion, it seems clear after cross-examination that the relevant verbal agreement was reached by P1 and D1 at the Yau Tong Shop in the absence of P2 and D2. That said, the evidence of P2 and D2 would remain relevant, as naturally one would expect P1 and D1 to inform them of the agreement reached given the relationship of husband and wife.

105.  In contrast, Mr Chan is a friend of D1. Although Mr Chan used to be a business acquaintance of P1, their relationship was not close. Mr Chan had no personal knowledge of the matter and he accepted during cross-examination that he merely heard D1’s version during casual talks. The court must, therefore, exercise caution when considering and assessing Mr Chan’s hearsay evidence.

106.  In assessing the credibility of the witnesses, it is important to bear in mind that, although there are little documentary evidence available, there are various aspects of background and key facts which are beyond dispute, as set out in Section C above. The veracity of a party’s case should be viewed and tested against the context of such background and key facts. Moreover, whilst there are inconsistencies in the evidence given, one must not forget that the oral discussions took place 20 years ago in 2003, and it is not surprising that a witness may have difficulty giving a detailed and coherent account. To some extent this may also apply to the subsequent discussions in 2016 and 2017, which took place some time ago.

107.  In this section, I will make some brief observations on the witnesses, but without going into their evidence in full. I will then move on to analyse the main issues by reference to various evidence or inherent probabilities in the next section.

E2. P1 and P2

108.  P1 and P2 strike the court as straightforward witnesses. They answered most questions directly and without hesitation. Whilst Ds’ Counsel submit that whenever it came to certain key issues, Ps would try to evade the questions by saying they did not know or they did not remember, I do not think this is a fair description of their evidence, and Ds’ Closing Submissions do not condescend into particulars. Indeed, contrary to Ds’ submissions, Ps were prepared to make fair admissions when questioned by Ds’ Counsel from time to time. For instance, P1 readily accepted that he did bear various financial burden or responsibilities in the latter part of 2003, that he treated his elder brother D1 differently from other employees (e.g. with authority to purchase auto-parts on credit in the Company’s name), and that he used to be in good relationship/communications (有商有量) with D1.

109.  It is true that there are inconsistencies in Ps’ evidence. For example, P1 said in his witness statement that D2 did not offer to pay and continue to pay for the Mortgage Loan repayments in the September 2016 Incident, but he conceded that such offer was made by D2 during cross-examination. Nevertheless, it is worth noting that D2 was not consistent in her evidence in this aspect either. Contrary to Ds’ case now, D2 in fact suggested in her earlier affirmation dated 21 August 2017 that she only learnt of D1’s default in making repayments in March 2017 and then offered to P1 to pay for the Mortgage Loan repayments in the March 2017 Incident. As I have mentioned, it is not surprising that the witnesses may have difficulty giving a detailed and coherent account, and it does not appear to me that the matter should be decided predominantly by reference to such inconsistencies in their evidence.

110.  The main criticism of Ps’ evidence is that, although it was Ps’ case that it was impossible for them to have the intention to sell the Beverly Garden Property in 2003 (by reference to, for instance, §66 of P1’s witness statement), Ps accepted during cross-examination that selling the Beverly Garden Property was one of their plans or options (其中一個方案), and that Ps would sell the Property when the price is right or there would be profit. Riding on that, Ds’ Counsel further criticized Ps for being evasive because, when asked about whether at the end of 2003 they had ever planned to sell the Property, Ps just avoided answering the question directly by saying that there was no urgent need for selling the Property. The underlying premise of Ds’ submissions is that Ps must have intended to sell the Property, and then Ps would have realized it would be in negative value (or negative equity), and hence Ps entered into the Oral Agreement to get rid of the Property and relieve themselves of the burden of the Mortgage Loan repayments.

111.  In my view, the apparent inconsistency could be reconciled if one considers Ps’ evidence more carefully. In particular, at §66 of his witness statement, P1 stated as follows:

“本人與太太不可能同時間在樓市低迷時，一方面決定買維景31H，另一方面希望放售富康10E。而且，若本人與太太在購買維景31H之前，已明知沒有足夠經濟能力應付兩層物業的按揭供款，我們連首期也不會付出以強行買下維景31H。”

112.  Properly understood, Ps’ stance are twofold. First, back in 2003, Ps took the view that the property market was at its low point and since they decided it would be the right time to purchase the Ocean Shores Property then (which may, perhaps, be due to their optimism in the property market going forward, etc), they could not be harbouring an intention to sell the Beverly Garden Property at the same time. Naturally, they would wait for the property market to recover before selling the Beverly Garden Property. However, that does not mean that selling the Beverly Garden Property was not an option or possibility – but simply that it was not pressing or that they naturally would not want to sell it at the same time, as they could simply adopt a “wait and see” approach.

113.  Second, Ps had assessed that they would be in a position to meet the mortgage repayments for both properties before purchasing the Ocean Shores Property and paying for the down payment in July 2003, and they would not have done so if they knew they did not have the financial means to do so. This reinforces the above point in that Ps could afford to wait and see, and only sell the Beverly Garden Property when the price is right or there would be profit.

114.  As such, there is not much inconsistency to say that selling the Property was one of the plans or options but there was no urgency to sell. Indeed, it would be unrealistic for Ps, when questioned, to suggest that they never had in mind the possibility or option of selling the Beverly Garden Property. As admitted by P2 during cross-examination, as Ps were not inclined to pay land premium in order to rent out the Beverly Garden Property, the reality was that there were two options only, either to sell it or to leave it vacant. Be that as it may, the option of selling the Property was very much a theoretical one because, on Ps’ case, very soon afterwards the Licence Agreement was reached and so there was no need to explore such option further.

115.  Viewed in context, Ps’ evidence is that they would not have intended to purchase and sell properties at the same time, as naturally one would strive to purchase a new property when the market is low and sell the preexisting one later when the market has recovered, but that does not mean that selling the preexisting property was never one of the options. Realistically Ps only had the options of selling the Property or leaving it vacant but the point is that there was no urgency to sell, and Ps could afford to wait as they had assessed beforehand that they had the financial means to meet the mortgage repayments for both properties in the meantime. In other words, they could afford to leave the Property vacant for some time. For such reasons, it is also not necessary for Ps to enter into the Oral Agreement.

116.  Accordingly, the above also goes some way to support Ps’ case on the Licence Agreement as opposed to Ds’ case on the Oral Agreement. This could be addressed further in the next section. Suffice it to say that I do not agree with Ds’ submissions that the above points to inconsistency or evasiveness on the part of Ps.

E3. D1 and D2

117.  D1 and D2 also come across as relatively straightforward witnesses. There are occasions when D1 became irritated or even emotional when he was cross-examined, but that could be fairly attributed to his limited education and the fact that he was repeatedly asked about his understanding of legal concepts such as “owner” and “ownership” of the Property. Whilst such questioning is understandable as those are the concepts pleaded by Ds themselves (at §6 of the AD&CC), they are concepts which a layman may well have difficulties in explaining or articulating. In my view, it is probably not particularly fruitful to subject D1 to extensive questioning of his understanding of those concepts. Instead, one can perhaps grasp Ds’ understanding of those concepts by reference to the terms of the Oral Agreement alleged by Ds, in particular that upon full repayment of the Mortgage Loan, Ps shall transfer the legal title of the Property to D1 upon D1 paying for the land premium. This seems to suggest that D1 acknowledges that he is not yet the owner of the Property, but at the same time he is entitled to become an owner upon complying with the terms of the Oral Agreement.

118.  I also note that, when questioned by Ps’ Counsel, D1 said that, to his understanding, he was not the paper title owner (業主), and he only has some property rights (業權) in the meaning of use rights (使用權) akin to that of a tenant. However, I do not think D1’s answer should be viewed out of context. As mentioned, it appears that D1 acknowledges that he is not yet the owner of the Property, but at the same time he is entitled to become an owner upon complying with the terms of the Oral Agreement. Properly understood, D1 is merely saying that, pending compliance with the terms of the Oral Agreement, he has property rights akin to that of a tenant. This does not mean that D1 no longer maintains his pleaded case of the Oral Agreement.

119.  Ps’ Counsel also submit that there are inconsistencies particularly in D1’s oral evidence. Nevertheless, for similar reasons set out in relation to Ps’ evidence above, I do not think that the case would turn predominantly on such inconsistencies.

120.  That said, I accept Ps’ submissions that it is of some significance that D1 disavowed what he wrote in §18 of his 1^st witness statement that P1 did not have sufficient means to shoulder the burden of mortgage loan repayments for two properties and hence he intended to sell the Property (“沒有足夠能力負擔兩層物業...的供款壓力。因此他有意出售”), by clarifying that (i) what he meant was that he guessed (估計) that P1 was under some stress (要比錢供樓就有壓力) and (ii) P1 never represented to him that P1 was unable to meet the repayment obligations of both the Beverly Garden Property and the Ocean Shores Property. Moreover, it is also of significance that when it was put to D1 that Ps had no urgency to sell the Beverly Garden Property in 2003, D1 replied “十一月之前佢地賣唔賣樓, 唔係我問題”, and such answer seems to suggest that D1 was not told at the time that Ps intended to sell the Beverly Garden Property.

121.  On Ds’ case, the Oral Agreement was reached at the initiative of P1 and hence if Ds were right, one would expect P1 to explain his difficulties to D1, including any alleged lack of financial means and alleged intention to sell the Property. As such, D1’s concession that P1 never made such representation and what he stated in his witness statement was merely his personal guess, does militate against Ds’ case of the Oral Agreement.

E4. Mr Chan

122.  As mentioned above, Mr Chan merely gave hearsay evidence as to what he heard from D1 during casual talks.

123.  Significantly, on a fair reading of §9 of his witness statement, Mr Chan gave the impression that P1 had told him not only about the purchase of the Ocean Shores Property, but also that P1 agreed to “sell” the Beverly Garden Property to D1 because the price of selling it in the market would not enable P1 to recoup the down payment and renovation costs and pay for the outstanding balance under the Mortgage. However, upon being cross-examined, Mr Chan conceded that was only his personal guess, and he only learnt of the “sale” of the Property during casual talks with D1. This is a significant concession. As a result, it is doubtful if much weight could be attached to Mr Chan’s evidence.

124.  Moreover, in his witness statement, Mr Chan portrayed himself as a long-term friend of both P1 and D1. However, upon being cross-examined, it becomes clear that Mr Chan was no more than a business acquaintance of P1. He knew very little about P1’s family, and did not have social gathering with P1, except on one occasion when attending a meal in Cheung Chau with family members of P1, D1 and his. In contrast, he is admittedly a long-term close friend of D1. This is another reason for being cautious, having regard to the misleading impression given by Mr Chan, apparently in an attempt to lend some credence to what he allegedly heard from P1 (which Mr Chan disavowed subsequently).

125.  In the premises, I agree with Ps’ submissions that little weight should be attached to Mr Chan’s hearsay evidence.

F. ANALYSIS

F1. Business Agreement

126.  As accepted in Ds’ Closing, the Business Agreement according to Ds’ case is an oral agreement and there is nothing in writing. Having considered the evidence carefully, I find on balance that the Business Agreement was not entered into.

127.  First and foremost, there is simply no documentary evidence, let alone contemporaneous documents, in support of the existence of the Business Agreement.

128.  Second, the available contemporaneous documents contradict the Business Agreement. For instance:

(a) In the interview records with the police in mid 2004, P1 stated his occupation as the garage proprietor whereas D1 stated his occupation as the garage worker (see Section C above).

(b) In the tax return of D1 signed by both D1 and D2 on 4 September 2004 (i.e. after the Business Agreement) (produced as an exhibit to D2’s Affirmation dated 21 August 2017), it is stated that D1 was employed by YTSM as a driver.

(c) At all times since P1 became the director and registered shareholder of the Company in mid-November 2004, the declarations made in the Annual Returns submitted by the Company to the Companies Register have remained the same. D1 did not ask P1 to change the contents of such Annual Returns at any time.

(d) In the internal documents of the Company, D1 was referred to as the staff (職員) or employee (僱員) of the Company in receipt of monthly salary (月薪) and making MPF employees’ contributions (see Section C above). In particular, salary slips (薪金通知書) referring to D1 as staff (職員) were signed by D1 in that capacity; and the Company only has to make MPF contributions for D1 and also Astor, but not P1.

129.  Third, D1 is unable to produce any document to show that he has a beneficial interest in the Company, e.g. some sharing of profits, dividend pay-outs. As a matter of fact, it is D1’s case that he received a fixed salary all along.

130.  In contrast, P1’s testimony (which is not seriously challenged) is that, since operating YTSM and later as the owner of the Company, he had never been paid any fixed salary. Instead, he would withdraw funds from YTSM and later the Company from time to time, on average HK$20,000 to 30,000 per month, depending on his needs. According to P1’s oral evidence, such withdrawal was recorded as his share (or distribution) of profits of YTSM/Company. In this regard, Ds’ Counsel argue that there is no documentary evidence that the Company had ever formally declared dividends only payable to P1 himself. However, Ds never sought specific discovery of such documents. In any case, Ds accept that P1 got drawings from the Company from time to time. As such drawings were irregular and could be made by P1 according to P1’s needs whereas D1 was only paid a fixed salary, this suggests that P1 is the boss, whilst D1 is merely a staff working in the Company.

131.  Forth, according to D1, the Business Agreement was entered into in early or mid 2003. However, at that time, the Company was not yet acquired by P1 (which only took place in November 2004).

132.  Moreover, the reasons put forth by D1 for not adding his name as a co-owner (or shareholder) of the garage business are unconvincing. Insofar as the investigations by IRD in 2000 are concerned, D1 produces no documentary evidence in support. By 2003, there was already a lapse of 3 years from the investigation in 2000. Yet, D1 did not give any details of the investigations, whether the investigations remained active, or why that remained a concern after a lapse of 3 years. As such, the alleged concern is no more than a bare assertion by D1. In this regard, it may be noted that, despite the alleged concern, D1 had duly reported to the IRD for tax since working for YTSM in 2001 without any alleged issues.

133.  As regards the police investigation for suspected use of false car insurance documentation, that only happened afterwards in May and June 2004. In any event, that could not be a valid reason as both P1 and D1 were investigated by the police. In particular, the vehicle involved was purchased in the name of P1, and P1 was also the insured under the allegedly forged insurance policy.

134.  Further, even if the reasons put forth by D1 are valid, there is no compelling reason why D1 did not request for his name to be added as a co-owner or shareholder despite the long lapse of time from 2003 to 2016.

135.  Fifth, it is common ground that the Cheung Sha Wan Shop of the Company is an expansion of the garage business of YTSM. Given that P1 was the sole proprietor of YTSM in 2003, D1 has put forth no commercial basis (let alone compelling reason) why P1 would give away half of his garage business to D1 apparently for no valuable consideration.

136.  This is particularly the case given that D1 was employed as a labourer and driver of YTSM since May 2001. After he became employed by the Company, he was responsible for similar duties at the same salary level (HK$12,000 per month), with incremental increase in his salary thereafter (HK$13,000 per month since December 2004, and HK$16,000 per month in 2016). There is little (if any) evidence to suggest that D1 somehow had any change of role, added responsibility or other substantive contribution so as to justify P’s alleged giving away of half of his garage business in favour of D1.

137.  In contrast, there could be no quarrel that P1 was injecting his very own garage business (trading as YTSM) into the Company. It is also P1’s evidence (which is not challenged) that he personally incurred HK$200,000 for the expansion of the garage business. Further, there can be no challenge that P1 obtained a personal loan of HK$1 million from the Uncle, as the loan was deposited into YTSM’s account, which belonged to P1 as sole proprietor. In addition, P1 had provided security personally by writing 10 cheques of HK$100,000 each in P’s own name. Despite D1’s claim, there is no evidence whatsoever that the loan was booked as a loan to P1 and D1, or that any repayment of the loan was booked as payment by D1 (or deduction from D1’s salary). One simply fails to see what, if any, contributions were made by D1 to match P1’s contributions so as to justify the giving away of the Alleged Half Share by P1 in favour of D1.

138.  Sixth, when the Company was in financial difficulties in 2008-2009, D1 did not do much to assist the Company to overcome its financial crisis. The incontrovertible evidence is that P1 caused the sale of the Ocean Shores Property to raise cash and improve liquidity, and P1 also borrowed a personal loan of HK$100,000 to assist the Company. In contrast, D1 did not do much at all. For instance, D1 did not borrow a personal loan like P1 did. Nor did D1 ask D2 for help, bearing in mind that D2 had sold the Tsing Yi Flat in December 2005 with a net sale proceeds of over half a million, and it is also D2’s evidence that she was not in any financial difficulties before such sale – as a matter of fact D2 had placed such sale proceeds on time deposit to earn more interest.

139.  In short, D1 simply did not act like an owner or shareholder of the Company when the latter faced financial crisis. In this regard, it is of interest to note that, when D1 was asked by the court towards the end of his oral evidence whether he had discussed with P1 in 2009 how to resolve the financial issue of the Company, D1 replied candidly that he was a mere employee (“我打工㗎咋”), and there was nothing much he could do as his salary was low. This reinforces the above observations that D1 did not act like an owner or shareholder of the Company.

140.  Seventh, as mentioned, D1 had never asked P1 to transfer shares to him or appoint him as a director, or taken out any legal proceedings for the recovery of his alleged 50% interest, throughout the 13 years since the time of the Business Agreement in 2003 until (allegedly) the end of 2016. Worse still, even after his departure in 2016, D1 had never taken steps to recover (let alone taking out formal proceedings for) the alleged 50% interest in the Company. Such inaction on the part of D1 militates against the veracity of the Business Agreement.

141.  In considering this issue, I have borne in mind the contrary submissions made by Ds. Nevertheless, in my view, they could not outweigh the considerations above.

142.  First of all, Ds place emphasis on the low level of salary received by D1. In essence, D1 says that he would not have accepted such low level of salary if he had no interest in the Company. However, the level of salary on the part of D1 may be attributable to D1 being a driver without taking up vehicle repair works. Moreover, there is nothing to suggest that D1 was compelled to accept a lower level of salary because of having alleged interest in the Company; rather it would appear that the salary level was mutually agreed from time to time. Further, it should not escape one’s attention that D1 was allowed to obtain auto-parts on credit in the Company’s name apparently to pursue trading of vehicles on his own account, for which D1 could earn additional income.

143.  Second, Ds rely on the fact that D1 was treated differently from other employees, in that P1 gave authority to D1 to buy auto-parts on credit and in the name of the Company, and P1 did not terminate D1’s employment despite D1’s unsatisfactory work performance. However, one must not overlook the domestic context of the Company, in which family siblings including Astor and D1 were employed to work for the business. There is however no suggestion that Astor had any alleged interest in the Company. The mere fact that family members such as D1 might be treated differently from other employees is not surprising. After all, as acknowledged by P1, D1 is his brother. Understandably, more leeway or a wider margin of tolerance might be given but that does not, without more, turn an employee into the owner of a business.

144.  Third, much reliance was also placed on P1’s long WhatsApp message to D1 on 22 July 2016, inviting D1 to reflect on the future of the Company and seeking to persuade D1 to stay in the Company. However, one must not forget that D1 had been working for YTSM and later the Company for a long time. It has been a lengthy period of over 15 years since the joining of D1 in May 2001 and his departure in July 2016. Other than a longstanding employer-employee relationship, P1 and D1 are also siblings on good terms at the time. As such, I accept Ps’ submissions that there is nothing unnatural or unusual for P1 to have written a supportive message to D1, but that does not mean that D1 was a shareholder (let alone a 50% shareholder) of the Company.

145.  For all these reasons, I am satisfied on a balance of probabilities that the alleged Business Agreement was not entered into.

146.  In my view, such factual finding would have an impact on the credibility of D1 and, to some extent, D2 to the extent she aligned herself with D1’s case on the Business Agreement. If D1 was not telling the truth, it seems unrealistic to suggest that D2 was completely ignorant of the truth (or that D1 had not discussed and shared with D2 the truth of his position in the garage business throughout the years).

147.  I have considered whether D1 could be labouring under a misapprehension that he somehow had 50% interest in the Company (i.e. the Alleged Half Share), but ultimately I take the view there is little room for such misunderstanding. Ds’ case is that there was an express oral agreement, and it seems difficult to suggest that D1 was not telling a lie if, as I have found, the Business Agreement simply did not exist. This would have some bearing on the credibility of the witnesses on the issue of the Oral Agreement as well, as they both concern an alleged oral agreement entered into between P1 and D1 in 2003 (i.e. proximity in timing and involving identical parties).

F2. Licence Agreement or Oral Agreement

148.  As summarised in Section C above, the parties’ case as to the genesis of the arrangement for occupation of the Property by Ds and the Deduction Arrangement are diametrically opposed to each other.

149.  In gist, as Ps explained in their evidence, it was D1 who asked P1, after learning of Ps’ purchasing of the Ocean Shores Property, if Ds could live at the Beverly Garden Property. In response, P1 said he needed to discuss with P2. P1 told P2 that D1 asked if Ps could lend out (借) the Beverly Garden Property. P2 replied yes, but on condition that Ds would have to pay for the use of it (比番錢). P1 therefore agreed to D1’s proposal but on condition that D1 had to pay for all the outgoings and expenses arising out of their occupation, including the Mortgage Loan repayments.

150.  On the other hand, it is D1’s evidence that P1 said to D1 that the outstanding balance of the Mortgage Loan was about HK$800,000 or more and asked if D1 wanted it or not. If D1 wanted it, P1 would transfer it to him and D1 was to take up the Mortgage Loan (“層樓你要唔要，你要我讓比你，你接咗嗰按揭佢”). D1 then went home to discuss with D2, who considered that there was a need to buy the Beverly Garden Property (“覺得有需要”). About 8-10 days later, D1 orally agreed to P1’s proposal, and they also agreed that the transfer of the legal title be effected after full payment of the Mortgage.

151.  Having considered the evidence carefully, and adopting a holistic approach to ascertain the parties’ objective shared intention, I find on balance that P1 and D1 had entered into the Licence Agreement, and not the Oral Agreement, in the latter part of 2003. This is reinforced by the fact that, in a post-acquisition case, Ds bear the burden of showing, by compelling evidence, the existence of the Oral Agreement.

152.  First and foremost, there is no written note or documentary evidence in support of the Oral Agreement. Of course, one may equally say that the Licence Agreement is also a verbal agreement not evidenced in a written note or documentary evidence. However, the lack of written documentation is less objectionable or anomalous if one is concerned with a mere licence agreement which (i) was not permanent in nature and could be revoked at any time and (ii) did not involve any intention or agreement to confer any proprietary interest or change of ownership of the Property. In contrast, it would be more extraordinary and exceptional for an agreement to confer or transfer ownership in the Property to be made orally without any written documentation in support.

153.  Second, Ds’ case is that Ps are under financial pressure and hence P1 took the initiative to approach D1 to reach the Oral Agreement. However, if that were the case, logically Ps should have approached Ds before executing the Sale and Purchase Agreement on 9 July 2003, thereby committing themselves to the purchase of the Ocean Shores Property. It follows that, if Ds were right, the Oral Agreement should have been reached before the execution of the Sale and Purchase Agreement in early July 2003. Yet, on Ds’ case, the Oral Agreement was only reached after Ps have committed themselves to the purchase of the new flat. The timing of the agreement tends to support Ps’ case that Ds subsequently learnt of Ps’ purchase of the new flat and explored with Ps the possibility of borrowing the Flat for their use.

154.  Third, a main plank of Ds’ case is that Ps initiated the Oral Agreement because Ps were under financial pressure, had difficulties meeting the mortgage repayments for two properties and intended to sell the Beverly Garden Property, only to realise that it would be in negative value (or negative equity) (負資產) at the time – hence the resort to the Oral Agreement to bail themselves out. However, such case cannot withstand scrutiny for a number of reasons.

155.  The 1^st reason is that, as explained in Section E2 above, it is Ps’ evidence that they would not want to purchase the Ocean Shores Property and sell the Beverly Garden Property at the same time. Further, as P1 had said during cross-examination, he had chosen the largest unit in the estate they have viewed at the time of purchase. Simply put, Ps would unlikely be taking a dim view of the property market going forward, as they chose to purchase the largest flat they had viewed (and hence a more expensive property) at that time.

156.  Given Ps’ view that the property market is at a low point and it was the right time to purchase a new property in July 2003, it is inherently unlikely that Ps would seriously contemplate selling the Beverly Garden Property at the same time. Instead, Ps likely would adopt a “wait and see” approach and only sell the Beverly Garden Property when they could fetch a better price later, after the property market has recovered.

157.  The 2^nd reason is that, as explained in Section E2 above, it is also Ps’ evidence that they have assessed beforehand that they were in a financial position to meet the mortgage repayments of both properties, and had it been otherwise they would not have executed the sale and purchase agreement and paid the down payment for the Ocean Shores Property in the first place. This militates against Ds’ version in which Ps only sought to resolve their financial difficulties after they already committed themselves to the purchase of the new flat in July 2003.

158.  The 3^rd reason is that there is no cogent or proper evidence to suggest that Ps were under financial pressure or otherwise unable to meet the mortgage repayments of both properties at the time. The incontrovertible evidence is that, in 2003, Ps were in a financial position to make a down payment of HK$270,800 for the purchase of the Ocean Shores Property, and P1 was also able to invest HK$200,000 himself for the expansion of YTSM’s garage business. As D1 put it vividly in cross-examination, he would not have purchased the largest flat they had viewed if he and P2 did not have sufficient means to pay. Moreover, there is no evidence to suggest that YTSM was under any financial difficulty, or that its business was anything but profitable. The fact that P1 sought an expansion of business of YTSM suggests that P1 was rather optimistic towards his garage business.

159.  Whilst Ds suggest that P1 was under financial pressure because of the HK$1 million loan from the Uncle, one must not forget that, according to Ds’ case, such loan was to be repaid jointly by P1 and D1 (§11 of D1’s witness statement). On Ds’ case, if there were any financial pressure arising from such loan, it would apply equally to both P1 and D1 (and hence not a reason for D1 to take over financial pressure from P1 under the alleged Oral Agreement). In any case, P1’s evidence is that there was no fixed term for such loan and he could repay it from time to time, and this is echoed by §11 of D1’s witness statement that the Uncle did not stipulate a time by which the loan must be fully repaid. That the Uncle was quite willing to accommodate is also borne out by the fact that the loan was only repaid in full in 2014. Taking into account also the domestic relationship, it is fair to say that P1 (and D1) would have taken such loan as an assistance by the Uncle rather than a financial burden.

160.  Further, it is not in dispute that P1 had income of about HK$20,000 to HK$30,000 per month by drawings from YTSM, whilst P2 earned an income of HK$10,000 odd as a shipping clerk. In this regard, the undisputed evidence is that Ps enjoyed a “repayment vacation” of 2 years for mortgage repayment for the Ocean Shores Property, and hence Ps need not make repayment under the first legal charge with HSB until late 2005 and need only pay interests of about HK$3,000 per month for the second legal charge with LL in the meantime. Coupled with the Mortgage Loan repayments of HK$4,000 odd per month for the Beverly Garden Property, the financial burden was HK$7,000 odd per month. That was by no means a substantial amount compared to the aggregate monthly income of P1 and P2 (putting aside any savings of Ps).

161.  Indeed, Ps’ financial position at the time is also borne out by the fact that Ps must have demonstrated to the satisfaction of HSB that Ps had sufficient assets and earning capacity to pass the mortgage stress test, failing which Ps could not have secured the two mortgage loans from HSB and LL for the Ocean Shores Property in the first place.

162.  Taking into account Ps’ financial position and the limited repayment obligations for a period of 2 years, Ps can afford to adopt a “wait and see” approach and leave the Beverly Garden Property vacant in the meantime. As submitted by Ps, even if the Beverly Garden Property was in negative value (for which there is no direct evidence), Ps had a buffer at least until late 2015 to decide whether (i) they preferred residing at the Ocean Shores Property or the Beverly Garden Property more, and (ii) it is suitable to sell one of the properties in light of market conditions. Accordingly, there was no urgency for Ps to sell or dispose of the Property in the latter part of 2003. To the contrary, there is no reason why Ps should not adopt a “wait and see” approach, and see whether the property market would recover so that Ps could recoup their contributions and make a profit out of a sale.

163.  Indeed, putting Ds’ case to its highest, they are saying that Ps could already foresee, in the latter part of 2003, that there would be a monthly increase of HK$10,000 in mortgage repayments for the Ocean Shores Property beginning from late 2005. However, that does not do away with the fact that there was a buffer period of 2 years. Moreover, even taking into account such monthly increase in late 2005, it could not be said that the mortgage repayments are such that they could not be paid by the aggregate income of P1 and P2.

164.  The 4^th reason is that, as explained in Section E3 above, D1 has disavowed §18 of his 1^st witness statement by clarifying that (i) he was not told by P1 but only guessed that P1 was under some financial pressure because of the need to make mortgage repayments and (ii) P1 never represented to him that P1 was unable to meet the repayment obligations of both the Beverly Garden Property and the Ocean Shores Property. Moreover, during cross-examination, D1 conceded that P1 did not represent to D1 that the Beverly Garden Property was in negative value (or negative equity), and it was D1’s mere speculation, made without knowing its market value at the time.

165.  If Ps did not say all these during the discussions with D1, it would seem rather unlikely that the discussions would culminate in the making of the Oral Agreement, because the main plank of Ds’ case (that P1 told D1 he was under financial pressure, had difficulties meeting mortgage repayments of two properties, and intended to sell the Property which was in negative value) has simply gone missing.

166.  The 5^th reason is that the cost of adopting a “wait and see” approach is relatively minimal. As mentioned above, from the internal records of the Company as disclosed by Ps, it can be seen that the monthly deduction from D1’s salary was initially HK$4,300. That corroborates Ps’ evidence that, back in 2003, the Mortgage Loan repayments of the Beverly Garden Property was in the region of HK$4,000 odd. Hence, even if Ps were to wait for a period of 2 years and leave the Beverly Garden Property vacant, the financial burden could not be said to be very substantial.

167.  In particular, the magnitude of such financial exposure is incomparable with, for instance, the personal loan of HK$1 million to be repaid to the Uncle in the long term. In any event, if Ps allegedly did have difficulties meeting the repayment obligations for the Mortgage, there is little reason why Ps could not deal with that by seeking indulgence from the Uncle (i.e. Ps could make less repayment to the Uncle and use the monies for repayments under the Mortgage). All these tend to water down the alleged financial dilemma faced by Ps which allegedly led to the Oral Agreement.

168.  The 6^th reason is that there is no direct or proper evidence to suggest that Beverly Garden Property was in negative equity in the latter part of 2003. At the most, one may suspect such possibility but that could not be equated to a proof on balance of probabilities.

169.  The 7^th reason is that, if the Beverly Garden Property was indeed in negative equity, there would be even less reason for Ps to pursue a sale of it at the time. This is because such sale would not be able to generate net sale proceeds to benefit Ps financially. If Ps needed extra monies to complete the purchase of the Ocean Shores Property, then selling the Beverly Garden Property would not be a solution. Conversely, if Ps did not need extra monies to complete the purchase of the Ocean Shores Property, then there was even less reason to sell the Beverly Garden Property then. Either way, there was no need (and no rush) for Ps to sell the Beverly Garden Property.

170.  Forth, there was sound commercial basis for entering into the Licence Agreement. On the one hand, as Ps were not inclined to pay land premium in order to rent out the Beverly Garden Property, they could only leave it vacant whilst adopting a “wait and see” approach. Hence, there would be no harm for Ps to allow Ds to occupy the Property in the meantime – to the contrary Ps would have benefited by having D1 to pay an agreed monthly sum to P1 to cover the Mortgage Loan repayments. Of course, in the meantime, Ps would not be able to occupy the Property but that would not be a problem for Ps given that they were moving into a new flat.

171.  On the other hand, there would also be incentive for Ds to move into the Beverly Garden Property which is about 100 square feet bigger in terms of saleable/usable area, in order to provide a more spacious environment for Ds to live in (particularly for D3 and D4). Moreover, there should be little dispute that the agreed monthly sum to be paid (initially HK$4,300 and eventually HK$5,500) was plainly below the market rent of a similar flat in Tseung Kwan O. Whilst there is no direct evidence of the actual market rental value of the Beverly Garden Property during 2003 to 2016, it may be noted that the single joint expert, Mr Kenneth CY Cheung, had opined that the open market value of the Property was HK$14,600 per month as at 25 October 2019. Whilst it true that D2 would have to leave the Tsing Yi Flat vacant (because similarly D2 would unlikely pay land premium to rent it out), the monthly mortgage repayment amount was relatively small (at HK$2,300), and the exposure was temporary as D2 could sell the Tsing Yi Flat later when the price was right (as D2 did in December 2005).

172.  As such, the Licence Agreement would be of commercial benefit to both sides.

173.  Fifth, in contrast, the Oral Agreement would appear to be disproportionately beneficial and advantageous to Ds as compared with the position of Ps. It is not in dispute that Ps had contributed the 10% down payment of HK$96,530.00, incurred about HK$300,000.00 on renovations of the Property, and paid a total of HK$386,157.80 of instalments in repayment of the Mortgage Loan, inclusive of interest. Even if one were to disregard the payment of interest and assuming that the outstanding principal was HK$700,000 in November 2003, Ps would have made a total net contributions in the magnitude of about HK$565,000. If Ps were to enter into the Oral Agreement, Ps would have incurred a loss of HK$565,000 and could not recoup any of such sum. Unless (i) the Property was indeed in negative value (or negative equity) such that Ps could not recoup any money (for which there is no direct evidence) and (ii) Ps were to take the view that the property market would not recover (for which there is no evidence – to the contrary the fact that they saw fit to purchase the Ocean Shores Property suggests otherwise), it is inherently improbable that Ps would agree to the Oral Agreement. In any event, given that Ps could afford to wait and see, it is also inherently improbable that Ps would agree to the Oral Agreement in 2003 (thereby crystallising a substantial monetary loss), instead of adopting a “wait and see” approach.

174.  On the other hand, by entering into the Oral Agreement, Ds would have enjoyed a windfall because they would be able to acquire ownership of the Property in the end, but without having to pay or contribute towards the down payment, the renovations as well as the mortgage repayments made by Ps to date. Whilst it may be said that this begs the question whether the Property may be in negative value (or negative equity) to begin with, there is simply no direct evidence that this was indeed the case in the latter part of 2003. This is particularly the case bearing in mind that the Property was purchased by Ps in November 1998, after the Asian financial crisis in 1997.

175.  In the circumstances, I find force in Ps’ submissions that the logical explanation as to why Ps did not ask D1 for payment or compensation of the contributions made by Ps or at least part of it, is because P1 and D1 had entered into the Licence Agreement only, but not the Oral Agreement.

176.  Sixth, it is significant that on Ds’ case, neither D1 nor D2 had asked for the precise figure of the outstanding balance of the Mortgage Loan, and the precise amount of instalments payable (let alone seeking any documentation from P1) before and at the time of entering into the alleged Oral Agreement. If all that the parties entered into was the Licence Agreement, it may be said that the total outstanding balance of the Mortgage was not a matter of particular concern to Ds, since the arrangement was temporary and Ds need only ensure that they paid all the necessary expenses from time to time. It would however be otherwise if, as alleged, Ds were to take over the Mortgage and the ownership of the Property from Ps. This is because, on Ds’ case, such outstanding balance is the “purchase price” agreed to be paid by D1 for taking over the ownership of the Property. The fact that Ds never asked for the precise figures of the outstanding balance of the Mortgage (and thus the “purchase price”) thus militates against their case of the Oral Agreement.

177.  On top of the above, ever since the Oral Agreement was allegedly entered into, Ds never inquired with Ps as to the outstanding balance of the Mortgage during the period from 2003 to 2016.

178.  D1 tried to offer an explanation that it was the result of his trust reposed on his brother P1. However, even taking into account such trust, there is apparently no reason why D1 could not ascertain these information from P1, which would be relevant as to whether Ds should take over the Mortgage as alleged. Moreover, on D1’s evidence, he was allegedly told by P1 that the outstanding balance was HK$800,000 odd which is factually incorrect. It would appear that the reality is that D1 was never told of the outstanding balance by P1; nor did D1 ask for such information from P1 – and this tends to suggest that the arrangement was only the Licence, not the Oral Agreement.

179.  Seventh, there is also some force in Ps’ submissions that, if the Oral Agreement was entered into, it seems anomalous that D1 and D2 did not ever ask or explore with Ps if they could make early repayments to the Mortgage to save interest expenses and speed up the full repayment of the Mortgage, which would be in Ds’ financial interest. This is particularly the case upon the sale of the Tsing Yi Property on 20 December 2005, when D2 received a sum of HK$518,840.65. At the very least, Ds could explore the possibility of using part of it to reduce the outstanding balance of the principal of the Mortgage.

180.  Eighth, whilst there is no documentary evidence for the Licence Agreement or the Oral Agreement, it is significant that, after sending the April 2017 Letter to D2-D4 and prior to taking out formal legal proceedings in July 2017, P1 sent D1 a WhatsApp message as a matter of “courtesy” or “warning” on 29 May 2017 as follows:

“富康層樓我同老婆決定要收返自住，已通知你老婆，但佢唔肯。當初因為你哋話想住，所以無賣到，畀咗你哋住，但現在你老婆覺得係畀你哋住變咗畀咗你哋，我同老婆都無諗過結果係咁！公司有問題，我賣咗維景，都唔敢叫你哋搬，現在你哋啲女已經讀完書，有經濟能力，我哋先敢開口，但換來係話幫我供咗咁多年樓，要我哋畀返錢佢。

其實我都希望有能力，買過另一層樓，大家唔洗煩，可惜我未做到！現我無辦法，律師信已出，法律情序將會開始！希望你明白！” [emphasis added]

181.  As explained in Section C5 above, neither D1 nor D2 denied or responded to such message from P1. In the absence of contrary explanation by D1 and D2, this tends to corroborate Ps’ case of the Licence Agreement and suggests that the Oral Agreement was an excuse put forth by Ds subsequently in an attempt to resist Ps’ action for recovery of possession of the Property.

182.  Ninth, it is also significant that, as conceded by D2, she did not make any claim of ownership over the Property or request for the transfer of the Property during the September 2016 Incident and the March 2017 Incident. Instead, on D2’s evidence, she merely offered to pay and continue to pay for the Mortgage Loan repayments. This tends to militate against the Oral Agreement and suggests that it was an excuse put forth subsequently to resist Ps’ claim in these proceedings.

183.  Tenth, as mentioned above, my factual finding on the Business Agreement would also impact on the credibility of D1 (and to some extent D2) in relation to the issue of the Oral Agreement. In this regard, I accept Ps’ submissions that a factual finding that D1 has no interest in the Company means D1 would be discredited on a substantial part of Ds’ case. This seriously undermines his overall credibility and particularly the credibility to his assertion of the alleged Oral Agreement.

184.  For the avoidance of doubt, even putting aside the factual finding on the Business Agreement, I would have found in favour of Ps on the Licence Agreement and against Ds on the Oral Agreement given the reasoning set out above (and below).

185.  In considering this issue, I have borne in mind the contrary submissions made by Ds. Nevertheless, in my view, they could not outweigh the considerations above. Due to the length of this Judgment, I will focus on a few main arguments by Ds (although I have considered all the submissions holistically).

186.  First of all, Ds contend that there was a substantive change of case by Ps because, in the April 2017 Letter, Ps alleged that the had been no tenancy agreement between Ps and Ds, and that Ds were unlawfully occupying the Property since 2003, but Ps subsequently changed their case to the Licence Agreement in its RASOC dated 18 October 2019.

187.  I agree that Ps have not put forth a consistent case, but the discrepancy is not as material as it may appear at first sight. It may be noted that the April 2017 Letter did state that Ps verbally agreed that Ds may occupy the Property for the time being, and this is an assertion of an oral licence. It is also not incorrect for Ps to state that Ps did not enter into any tenancy agreement with Ds, as Ps merely accepted that an oral licence was granted. Whilst the letter wrongly alleged that D2-D4 unlawfully occupied the Property since 2003, it did mention that Ps had repeatedly requested D2-D4 to vacate the Property in 2017. Properly understood, given that Ps acknowledged that an oral licence was granted in 2003, D2-D4 could not be unlawfully occupying the Property until Ps requested them to vacate the same. Moreover, although the letter did not go into the terms of the oral licence, it did request D2-D4 to pay all outstanding expenses in relation to the Property, which is reflective of a major term of the Licence Agreement.

188.  In any case, in P1’s Affirmation dated 11 July 2017, P1 corrected the position and said that Ds have unlawfully occupied the Property since April 2017 when their licence to occupy the Property was revoked by the April 2017 Letter. Moreover, in P1’s Affirmation dated 16 May 2018, he has set out the terms of the Licence Agreement in more details. On the whole, whilst there is discrepancy in Ps’ case, I do not consider such factor alone to be fatal or determinative.

189.  Second, Ds emphasise that there are inconsistency in Ps’ witness statements and Ps’ oral testimonies, such as whether Ps made any profit from the Deduction Arrangement. As explained above, I do not consider it fruitful to focus on the inconsistency of evidence alone given that the events in question had taken place a long time ago. Moreover, on the question of making profit from the Deduction Arrangement, this seems to me to be an observation with the benefit of hindsight because the sum of HK$5,500 was agreed between P1 and D1 as a fixed amount, knowing that the actual figures of monthly repayments do vary from time to time depending on the floating interest rate. As a matter of fact, the monthly instalment used to be at a much higher amount of HK$8,169.20 from 1998 to July 2001, after which it dropped to HK$4,916.50 and fluctuated across time since then in the region of HK$4,000 to HK$5,000. One must also not forget that, although both parties say that HK$5,500 was agreed all along, this is in fact not the case as the amount deducted from D1’s salary was lower initially (starting with HK$4,300 initially).

190.  Third, Ds emphasise that there was no pressing demand for Ds’ family to move and they would not have taken the trouble to move from Tsing Yi to Tseung Kwan O, if all that was agreed was a Licence Agreement which may be revoked at any time by Ps. However, as analysed above, Ds would benefit by moving into a significantly bigger flat and paying a monthly sum below the market rent. Moreover, one should not ignore the domestic context. Whilst the Licence Agreement could be revoked at any time, it is not unreasonable for Ds to assume that, as siblings, P1 would not lightly revoke such licence unless there was a genuine need for Ps to recover possession of the Property – as a matter of fact Ps did not request Ds to vacate the Property until after a very long time in 2016.

191.  Forth, Ds say that D2 would not have sold the Tsing Yi Property if the Oral Agreement was not entered into. However, that presupposes that it was Ds’ intention that they must own a property, and could not simply resort to renting a property or a licence agreement. Moreover, assuming that Ds did enter into a Licence Agreement, given that Ds were leaving the Tsing Yi Flat vacant, there is no good reason why D2 would not see fit to sell the Tsing Yi Property if she felt that the price was right or there would be profit, which was what in fact happened when she sold it in December 2005 with net proceeds above HK$500,000.

192.  Viewed in such light, it may not be that extraordinary or anomalous (as Ds contend) that Ps did not raise any question to Ds after learning of the sale of the Tsing Yi Property by D2. Moreover, on Ps’ evidence, they only learnt of the sale after the event. In any case, such sale is after all a matter and decision solely for D2 which Ps are in no position to object or interfere with; and it is not itself a problem unless one presupposes that Ds had the intention of owning the property they occupied (which is not necessarily the case as one can well occupy a property as tenant or licensee) and Ps were aware of such intention.

193.  Fifth, Ds say that, but for the Oral Agreement, Ps would have requested Ds to vacate the Beverly Garden Property and sell the same to raise cash, without resorting to the sale of the Ocean Shores Property in 2009. However, there is force in P2’s explanation during cross-examination that selling the Ocean Shores Property, being a private property, would realise more sale proceeds. Further, as explained in §74 of P1’s witness statement, Ps did not request Ds to vacate the Beverly Garden Property because of (among other reasons) the young age of D3 and D4, and this is corroborated by P1’s WhatsApp message to D1 on 29 May 2017, which was never rebutted by D1 or D2.

194.  Whilst Ds argue that selling landed property in Hong Kong takes a number of steps, this does not necessarily assist Ds’ case. To the contrary, given the number of steps involved, it would appear to be easier to sell a private flat than a HOS flat, as the latter would either require payment of premium or could otherwise be sold to a limited market only. Moreover, the fact that time is required to undertake the steps for selling a landed property may well explain why, after taking the hassles of selling the Ocean Shores Property, it transpires that the net proceeds of HK$1 million raised were ultimately not required to be applied towards the repayment of the debts owed by the Company.

195.  Sixth, Ds rely on the fact that HK$60,000 was incurred by D2 for renovating the Beverly Garden Property before Ds moved into it in early 2004. Whilst I can see some force in Ds’ argument, as I have said it is not unreasonable for Ds to assume that Ps would not revoke the Licence lightly unless they had genuine need to recover possession of the Beverly Garden Property (which seemed unlikely given that Ps had just moved into the Ocean Shores Property), and hence Ds may take some comfort from this in incurring the renovation expenses. Moreover, the amount of HK$60,000 is relatively modest compared with the renovations of about HK$300,000 incurred by Ps previously.

196.  For all these reasons, I am satisfied on a balance of probabilities that P1 and D1 entered into the Licence Agreement (but not the Oral Agreement) in the latter part of 2003.

197.  In fairness, it may be said that Ds have resisted Ps’ claim because, with the benefit of hindsight, they might legitimately feel aggrieved that D1 had no share in the garage business or the Beverly Garden Property. This is because D1 had worked in the garage business with a relatively low salary for 15 years, and so it may be felt that D1 had contributed to the garage but the profits in the business were retained by P1 alone. Equally, it may be felt that throughout 2003 to 2016, Ds were paying for all the Mortgage Loan repayments and hence they were doing what an owner of the Property has to do financially in place of Ps, such that Ps seem to enjoy the fruit of such contribution. However, one cannot look at this with hindsight and this does not detract from the fact that the court should assess what was the parties’ agreement back in 2003, based on the relevant evidence and inherent probabilities at that time.

F3. Other Issues

198.  Since I have found that the parties entered into the Licence Agreement but not the Oral Agreement (under Issue 1 in the Agreed List of Issues), it follows that Issue 2 (concerning common intention constructive trust, resulting trust and proprietary estoppel) and Issue 3 (concerning the Offsetting Defence) do not arise. Therefore, it is not strictly necessary to go into such issues.

199.  In relation to Issue 2, it is clear that in the light of the factual finding of the Licence Agreement (which contradicts Ds’ claim of ownership of the Property), Ds could not establish the requisite common or shared intention (for common intention constructive trust) or representations by Ps (for proprietary estoppel).

200.  I should also emphasise that, in the present case, Ds are primarily relying on the first limb (i.e. expressed intention) of common intention constructive trust, given Ds’ pleaded case of the Oral Agreement. Insofar as Ds fail to establish the Oral Agreement, one may query whether there is still room for Ds to rely on the second limb of common intention constructive trust. In my view, this should not be open to Ds because the second limb only applies where there is no evidence to support a finding of an agreement, arrangement or understanding reached between the parties. As both sides have put forth evidence on the parties’ expressed intention and argued positively that the parties did reach an agreement, arrangement or understanding (albeit on starkly different terms according to Ps and Ds respectively), it does not seem to be right for the court to resort to inferred common intention, unless the court is to disbelieve both sides. As I have found that the parties did enter into the Licence Agreement, it would not be open to Ds to invite the court to infer any contrary common intention of the parties.

201.  As regards resulting trust, it is clear that given my finding that the parties entered into the Licence Agreement, there is no room for the presumption of resulting trust, which operates in the absence of evidence on actual intention of the parties. As I understand, both Ps and Ds also agree that, if the court finds in favour of the Licence Agreement, there is no scope for the operation of resulting trust (as reflected in the structure in the Agreed List of Issues).

202.  Ps argue in addition that the presumption of resulting trust only operates to presume the intention as at the time of the acquisition of the subject property and is inoperable in “post-acquisition” case, citing Lewin on Trust (20^th Ed.), Vol.1, [10-086] and [10-087] in support.

203.  Given my factual finding, it is not strictly necessary to consider such additional argument and I express no final view on it, although I am inclined to think it would be exceptional (if not impossible) to rely on payments under mortgage to invoke the presumption of resulting trust in a post-acquisition case. My tentative view is borne out by the fact that making payments under mortgage may not be an unequivocal act, particularly where the person making such payments is (i) not the mortgagor himself/herself and (ii) occupying the subject property. On the first point, it is the mortgagor (but not the payor) who remains legally obliged to pay under the mortgage – this is particularly the case where the payor only advances money to the mortgagor, as opposed to settling the mortgage repayments with the mortgagee directly. As to the second point, the act of making such payments could be seen as the “consideration” for occupying the subject property as licensee, and not necessarily as a contribution to the purchase money.

204.  As regards Issue 3, given my factual finding that the parties did not enter into the Oral Agreement, it is not necessary to consider whether Ds could rely on the Money Owed and the Offsetting Defence as a response to Ps’ argument on the breach or non-compliance with the Oral Agreement. Moreover, as I have found that the Business Agreement did not exist, there is no factual foundation for the Offsetting Defence anyway.

205.  Ps argue in addition that the Money Owed and the Offsetting Defence are unarguable as a matter of law. In gist, Ps contend that Ds only claim a 50% beneficial interest in the shares of the Company but unless and until there is a judgment entered in favour of D1 against P1 (particularly an order of buy-out of shares), P1 could not be owing any liability to D1 to pay for any sum of money, and it follows that the Money Owed could not exist as a matter of law and the Offsetting Defence is bound to fail. Given my factual findings, it is not strictly necessary to consider such additional argument but I am inclined to agree with Ps’ submissions, even though I express no final view on it.

206.  Further, whilst it is not strictly necessary to express a view, if, contrary to my factual findings, the Oral Agreement did exist, it would appear to me that the mere fact that the Deduction Arrangement ceased after July 2016 is not necessarily fatal to Ds’ case, given P1’s concession in cross-examination that D2 had offered in September 2016 to pay and continue to pay the Mortgage Loan repayments. In particular, as the Deduction Arrangement ceased because of D1’s departure from the Company, it is fair to say that reasonable time should be afforded to either side to approach each other to discuss and agree to a suitable method of payment in replacement of the Deduction Arrangement. The burden is probably not on Ds alone, as Ps could also take the liberty to approach Ds to come up with a suitable method (or simply demand payment), before Ps are to complain of breach of the Oral Agreement by Ds. Insofar as Ps refuse to accept D2’s offer to pay, it also appears to me that Ps should not be allowed to rely on such refusal having regard to the prevention principle. For the avoidance of doubt, I express no final views on such issue which does not strictly arise for determination.

207.  I should also mention that there are many factual matters covered by the parties’ witness statements, affirmations and submissions which have been considered by the court, but owing to the length of this Judgment and as a matter of proportionality, not all the points are canvassed in this Judgment.

F4. Mesne Profits

208.  By reason of my factual finding of the Licence Agreement, Ps were entitled to give notice to Ds to terminate the Licence and recover vacant possession of the Property from Ds. As the April 2017 Letter requested Ds to vacate the Property by 30 April 2017 but Ds refused to do so, Ps are entitled to an order for vacant possession of the Property against Ds.

209.  It follows from the above that Ds have been in wrongful occupation of the Property after 30 April 2017, and Ps are entitled to recover mesne profit against Ds for such wrongful occupation.

210.  Turning to the issue of quantum, Mr. Kenneth C Y Cheung, the single joint expert, had provided an expert report on the open market rental of the Property, being HK$14,600 per month as at 25 October 2019. Having regard to the nature of the Property as a HOS flat and that the discount percentage in Ps’ acquisition of the Property was 36.28%, Ps seek mesne profits at the same discount percentage of 36.28%, i.e. HK$14,600 x (100% - 36.28%), which equals HK$9,303.12 per month. I agree that Ps should be entitled to recover mesne profits at such rate.

G. CONCLUSION

211.  For the above reasons, I order that judgment be entered in favour of Ps’ claim for vacant possession of the Property and mesne profits at a rate of $9,303.12 per month accruing from 1 May 2017 until Ds’ actual delivery of vacant possession of the Property, and all of Ds’ counterclaims be dismissed.

212.  I also make a costs order nisi that costs of these proceedings (including Ps’ claims and Ds’ counterclaims) be paid by Ds to Ps, with certificate for counsel, to be taxed if not agreed; and that D1, D3 and D4’s own costs be taxed in accordance with Legal Aid Regulations.

213.  It remains for this Court to thank Mr Tam for Ps, Mr Chow for D1, D3 & D4 and Ms Chan for D2 for their submissions and assistance rendered to the court.